GKN HOLDING CORP, S-1/A, 1996-07-18

GKN HOLDING CORP
S-1/A, 1996-07-18
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996.

REGISTRATION NO. 333-05273

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------

GKN HOLDING CORP.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 6211 13-3414302
(State of Incorporation) (Primary Standard Industrial (IRS Employer I.D. No.)
Classification Code Number)
</TABLE>

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61 BROADWAY
NEW YORK, NEW YORK 10006
(212) 509-3800
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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DAVID M. NUSSBAUM
CHAIRMAN OF THE BOARD
GKN HOLDING CORP.
61 BROADWAY
NEW YORK, NEW YORK 10006
(212) 509-3800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copy to:

<S> <C>
DAVID ALAN MILLER, ESQ. ALAN R. DYNNER, ESQ.
GRAUBARD MOLLEN & MILLER KIRKPATRICK & LOCKHART
600 THIRD AVENUE 1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10016 NEW YORK, NEW YORK 10020
(212) 818-8800 (212) 536-3900
FAX: (212) 818-8881 FAX: (212) 536-3901
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the
effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended ("Act"), check the following box. X

Shares of Common Stock have also been registered on Registration Statement
No. 33-80224 on Form S-1 pursuant to Rule 429 of the Act.

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<PAGE>
SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JULY 18, 1996

PROSPECTUS

2,500,000 SHARES

[LOGO] HOLDING CORP.

COMMON STOCK
-------------------

Prior to this Offering, there has been no public market for the Common Stock
of GKN Holding
Corp. (the "Company") and there can be no assurance that any such market will
develop. The Company has applied for the Common Stock to be quoted on the Nasdaq
National Market under the symbol "GKNS". It is currently anticipated that the
initial public offering price of the shares will be between $6.00 and $8.00. For
information regarding the factors considered in determining the initial public
offering price of the Common Stock, see "Underwriting."

-------------------

SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS PROCEEDS TO
TO PUBLIC AND COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
Per Share........................ $ $ $
Total(2)......................... $ $ $
</TABLE>

(1) Before deducting expenses payable by the Company, estimated at $ .

(2) The Company has granted the Underwriters an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 375,000 additional
shares on the same terms set forth above solely to cover over-allotments, if
any. If such over-allotment option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."

-------------------

The shares of Common Stock are offered, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to the approval of
certain legal matters by counsel and certain other conditions. The Underwriters
reserve the right to withdraw, cancel or modify this Offering and to reject any
order in whole or in part. It is expected that delivery of certificates will be
made against payment therefor, at the offices of Pennsylvania Merchant Group Ltd
in Radnor, Pennsylvania on or about , 1996.

PENNSYLVANIA MERCHANT GKN SECURITIES

GROUP LTD

, 1996.
<PAGE>
THIS REGISTRATION STATEMENT AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY AN OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. UNDER NO CIRCUMSTANCES SHALL THIS
REGISTRATION STATEMENT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
<PAGE>

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON NASDAQ, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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FURTHER INFORMATION

The Company intends to furnish to its stockholders annual reports containing
audited financial statements, quarterly reports containing unaudited financial
information and such other periodic reports as the Company may determine to be
appropriate or as may be required by law.

2
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
financial statements (including the notes thereto) appearing elsewhere in this
Prospectus. Certain of the information contained in this summary and elsewhere
in this Prospectus, including under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
For a discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors" and
"Management's Discussion and Anaylsis of Financial Condition and Results of
Operations." Each prospective investor is urged to read this Prospectus in its
entirety.

THE COMPANY

GKN Holding Corp. (the "Company") is primarily engaged in securities
brokerage, securities trading and investment banking through GKN Securities
Corp. ("GKN"), its principal operating subsidiary. GKN is a full service
securities brokerage and investment banking firm which is a registered
broker-dealer with the Securities and Exchange Commission ("Commission"), in all
50 states, the District of Columbia and Puerto Rico and a member firm of the
National Association of Securities Dealers, Inc. ("NASD"). GKN's principal
office is located in New York City, New York and its branch offices are located
in Great Neck, New York, Boca Raton, Florida, Miami, Florida, and Stamford,
Connecticut.

The Company began operations in 1987 following the October stock market
decline, at which time the founders perceived an opportunity for the creation of
a high quality investment bank serving emerging growth and small capitalization
corporate clients and investors. From its inception, the Company's plan has been
to develop a high quality firm serving this market niche. Since October 1990,
when GKN managed its first underwriting, GKN has acted as managing or
co-managing underwriter in a total of 43 public offerings, raising approximately
$430 million. GKN also regularly participates as a selling group member or
participating underwriter in public offerings managed by other underwriters,
including national and regional firms. Thirteen of the offerings managed or
co-managed by GKN (raising approximately $170 million) were for Specified
Purpose Acquisition Companies(R) ("SPAC(R)"), a new publicly-traded financing
vehicle developed and introduced by GKN in 1993. A SPAC combines the
characteristics of a traditional acquisition or buyout fund and a more liquid,
publicly traded industry-specific investment vehicle. The Company believes that
the number and dollar amount of GKN's underwritings and the introduction of
SPACs have contributed significantly to increased public and industry awareness
of the Company and has resulted in increased demand for GKN's investment banking
services. See "Business--Investment Banking Activities."

The Company has grown significantly over the last five years, primarily
through increasing the size of its sales force, but more recently by acquisition
and expansion into new areas of business. In March 1995, GKN Fund Management,
Inc., a wholly-owned subsidiary of the Company, entered the money management
business by becoming the general partner and administrator of Kaleidoscope
Partners, L.P., a "fund of funds" with approximately $8.1 million in assets at
April 30, 1996. In November 1995, the Company acquired all of the outstanding
stock of Shochet Securities, Inc. ("Shochet"), a full-service discount brokerage
firm with four branches operating in Southern Florida. In February 1996, GKN
Securities AG ("GKN AG"), a wholly-owned subsidiary of the Company, commenced
operations in Zurich, Switzerland, distributing securities and providing
brokerage services to European institutional money managers.

As of April 30, 1996, the Company, through its three brokerage subsidiaries,
employed 260 registered representatives, serving primarily retail and, to a
lesser extent, institutional customers, representing, in the aggregate, more
than 27,000 active accounts.

3
<PAGE>
The Company was incorporated under the laws of the State of Delaware on
January 30, 1987. GKN was incorporated under the laws of the State of New York
on May 31, 1985. The Company and GKN maintain their principal offices at 61
Broadway, New York, New York 10006, and their telephone number is (212)
509-3800.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered......................... 2,500,000 Shares

Common Stock Outstanding Prior
to the Offering............................ 5,559,125 Shares

Common Stock to be Outstanding
After the Offering......................... 8,059,125 Shares

Use of Proceeds.............................. The Company intends to apply the net
proceeds of this Offering to expand its
existing business by: (i) increasing GKN's
equity capital to permit it to underwrite
larger offerings and increase its principal
trading and market making activities; (ii)
expanding GKN's retail and institutional
sales forces and Shochet's retail sales
force; (iii) enhancing GKN's investment
banking and research capabilities; (iv)
expanding the Company's money management
operations and commencing merchant banking
activities; and (v) expanding the Company's
international operations.

Proposed Nasdaq National Market Symbol....... GKNS
</TABLE>

4
<PAGE>
SUMMARY FINANCIAL DATA

The summary financial information set forth below is derived from the
financial statements appearing elsewhere in this Prospectus. This information
should be read in conjunction with such financial statements, including the
notes thereto.

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
JANUARY 31, APRIL 30,
------------------------------------- -----------------------
1996 1995 1994 1996 1995
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues..................... $43,019,000 $32,410,000 $32,956,000 $18,444,000 $7,157,000
Total expenses..................... 36,732,000 31,516,000 25,534,000 14,449,000 7,526,000
Income (loss) before provision for
income taxes....................... 6,287,000 894,000 7,422,000 3,995,000 (369,000)
Net income (loss).................. $3,469,000 $381,000 $4,006,000 $2,246,000 $(256,000)
Primary earnings (loss)
per share(1)..................... $0.61 $0.07 $0.72 $0.40 $(0.04)
Primary weighted average number of
shares outstanding(1).............. 5,729,000 5,695,000 5,530,000 5,638,000 5,784,000

OTHER FINANCIAL DATA:
Ratio of total assets to
stockholders' equity............. 1.89 1.37 1.43 1.95 1.35
Pre-tax return on average
equity........................... 47.4% 7.8% 80.3% 25.1% (3.2)%
Book value per common share
outstanding........................ $3.02 $2.30 $2.27 $3.40 $2.25
Registered Representatives(2)...... 224 163 126 260 175
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
APRIL 30, 1996
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
Total assets..................................................... $33,117,000 $ 46,117,000
Total liabilities (excluding subordinated debt).................. 15,348,000 15,348,000
Subordinated debt................................................ 868,000 868,000
Total stockholders' equity....................................... $16,901,000 $ 29,901,000
</TABLE>

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(1) Fully diluted earnings per share and fully diluted average number of shares
outstanding are not materially different from the primary numbers indicated
above.

(2) The Registered Representatives data is based upon unaudited personnel
records of the Company.

(3) Gives effect to the sale of the shares of Common Stock offered hereby
("Shares") at an assumed price of $6.00 per Share and the application of net
proceeds therefrom.

Unless otherwise indicated, the information in this Prospectus does not give
effect to the exercise of the Underwriters' over-allotment option and does not
include (i) 5,000,000 shares of Common Stock reserved for issuance under the
Company's 1991 Employee Incentive Plan ("1991 Plan"), of which options to
purchase 998,506 shares of Common Stock have been granted and are outstanding as
of June 30, 1996; (ii) 125,000 shares of Common Stock issuable upon exercise of
options and warrants issued outside of the 1991 Plan; or (iii) any shares of
Common Stock which may be issued under the Company's 1996 Incentive Compensation
Plan ("IC Plan").

5
<PAGE>

RISK FACTORS

The Shares offered hereby involve risk. Prospective purchasers of the Shares
should consider carefully the risk factors set forth below as well as the other
information set forth in this Prospectus.

INDUSTRY FACTORS; ECONOMIC AND MARKET CONDITIONS

The securities business is, by its nature, subject to various risks,
particularly in volatile or illiquid markets, including the risk of losses
resulting from the underwriting or ownership of securities, customer fraud,
employee errors and misconduct, failures in connection with the processing of
securities transactions and litigation. The Company's business and its
profitability are affected by many factors, including the volatility and price
level of the securities markets; the volume, size and timing of securities
transactions; the demand for investment banking services; the level and
volatility of interest rates; the availability of credit; legislation affecting
the business and financial communities; and the economy in general. Markets
characterized by low trading volumes and depressed prices generally result in
reduced commissions and investment banking revenues as well as losses from
declines in the market value of securities positions. Moreover, since a portion
of the Company's revenues are derived from underwriting the initial public
offerings ("IPOs") of companies, any decline in the overall IPO market, among
other factors, could have a material adverse effect on the operations of the
Company. See "Business-- Brokerage and Distribution Activities," "--Investment
Banking Activities" and "--Principal Transactions."

SMALL CAPITALIZATION COMPANIES

The Company's business is focused on the underwriting, brokerage and trading
of securities of small capitalization companies, a segment of the securities
industry which may be subject to greater risks than the securities industry as a
whole and, consequently, may be marketable to only a limited segment of the
investing public. The Company believes that certain small capitalization
companies have significant potential for growth, although such companies
generally have limited product lines, markets, market shares and financial
resources and their securities may trade less frequently and in more limited
volume than those of more established companies. Additionally, in recent years,
the stock market has experienced a high degree of price and volume volatility
for the securities of many small capitalization companies. In particular, small
capitalization companies that trade in the over-the-counter markets have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. See "Business--Brokerage and Distribution
Activities," "--Investment Banking Activities" and "--Principal Transactions."

INVESTMENT BANKING

The Company's investment banking activities subject the Company's capital to
certain risks. Such risks include market, credit and liquidity risks, which
risks arise primarily when underwritten securities cannot be resold, for any
reason, at anticipated price levels. Further, under applicable securities laws
and court decisions with respect to underwriters' liability and limitations on
indemnification by issuers, an underwriter may be exposed to substantial
securities liability arising out of public and private offerings of equity and
debt instruments. See "Business--Investment Banking Activities" and "--Legal
Proceedings."

PRINCIPAL TRANSACTIONS

As a market maker, the Company uses its capital to maintain substantial
inventories of long and/or short positions in securities in order to engage in
principal transactions with customers as well as with other broker-dealers.
These securities are marked to market with resulting unrealized gains and

6
<PAGE>
losses reported as revenue from principal transactions. The maintenance of such
positions exposes the Company to the possibility of significant losses when
market prices of the securities comprising such positions change. See
"Business--Principal Transactions."

INVESTMENT ACCOUNT

The Company maintains an investment account in which securities are held for
potential long-term appreciation. Securities in this account consist principally
of common stock and warrants and rights to purchase same, most of which are
restricted and non-marketable for varying periods of time. As required by
generally accepted accounting principles for broker-dealers, these securities
are marked to market with resulting unrealized gains and losses being reported
as revenue from the investment account. Values of the securities in the
investment account are volatile. Fluctuations due to general market conditions,
the fundamentals of the issuer of such securities, or otherwise, may have a
material effect on the Company's earnings. The recent increase in the value of
the securities in the investment account represented a substantial portion of
the Company's earnings for the year ended January 31, 1996 and quarter ended
April 30, 1996. See "Business--Principal Transactions."

GOVERNMENT REGULATION; NET CAPITAL REQUIREMENTS

The Company's business, and the securities industry generally, are subject
to extensive regulation at both the federal and state levels. In addition,
self-regulatory organizations, such as the NASD, require strict compliance with
their rules and regulations. Among other things, these regulatory authorities
impose restrictions on sales methods, trading practices, use and safekeeping of
customer funds and securities, record keeping and the conduct of principals and
employees. The extensive regulatory framework applicable to broker-dealers, the
purpose of which is to protect customers and the integrity of the securities
markets, imposes significant compliance burdens on the Company. Failure to
comply with any of the laws, rules or regulations of any independent, state or
federal regulatory authority could result in a fine, injunction, suspension or
expulsion from the industry, which could have a material adverse impact upon the
Company. The Commission and the NASD also have stringent provisions with respect
to net capital requirements applicable to the operation of securities firms. A
significant operating loss or any charge against the net capital of the Company
could adversely affect its ability to operate, expand or, depending upon the
magnitude of the loss or charge, maintain its present level of business.
Furthermore, amendments to existing statutes and regulations or the adoption of
new statutes and regulations could require the Company to alter its methods of
operation at costs which could be substantial. See "Business--Government
Regulation," "--Net Capital Requirements" and "--Legal Proceedings."

CREDIT RISKS

The Company's brokerage subsidiaries clear all transactions for their
customers on a fully disclosed basis with their clearing agent, which carries
and clears all customer securities accounts. The clearing firm also lends funds
to customers of the Company's brokerage subsidiaries through the use of margin
credit. These loans are made to customers on a secured basis, with the clearing
firm maintaining collateral in the form of saleable securities, cash or cash
equivalents. Pursuant to the terms of the agreement between the Company's
brokerage subsidiaries and the clearing agent, in the event that customers fail
to pay for their purchases, to supply the securities that they have sold, or to
repay funds they have borrowed, and the clearing agent satisfies any customer
obligations, the Company's brokerage subsidiaries would be obligated to
indemnify the clearing agent for any resulting losses. See "Business--Clearing
Agent."

7
<PAGE>
LEGAL PROCEEDINGS

Many aspects of the Company's business involve substantial risks of
potential liability and regulatory enforcement by state and federal regulators.
In recent years, there has been an increasing incidence of litigation involving
participants in the securities industry. Underwriters and agents are subject to
substantial potential liability for material misstatements and omissions in
prospectuses and other communications with respect to underwritten offerings of
securities. Claims by dissatisfied customers for fraud, unauthorized trading,
churning, mismanagement and breach of fiduciary duty are regularly made against
broker-dealers.

GKN is the subject of an investigation by the Commission arising primarily
from certain sales practices of GKN's registered representatives in 1991 and
1992. GKN is also the subject of an investigation by the NASD staff arising
primarily from mark-ups and mark-downs taken on customer transactions in
warrants of certain issuers whose offerings were underwritten by GKN, and sales
practices in connection with such transactions. There can be no assurance that
any such proceedings will not have a material adverse legal or economic effect
on the Company. Moreover, as a result of increased publicity regarding legal
proceedings against broker-dealers and the resulting heightened public awareness
of such matters, it is possible that certain legal proceedings which can be
settled or otherwise resolved without a material adverse economic effect on the
Company, could generate adverse publicity which in turn could have a material
adverse effect on the Company's operations. See "Business--Legal Proceedings."

CURRENT AND POTENTIAL REFORMS IN THE NASDAQ MARKET

The Nasdaq market has come under intense scrutiny in the media and political
arenas during the past few years and has been the subject of SEC investigations
into its operations. Concerns have been raised with respect to the size of the
spreads between the price paid by investors purchasing Nasdaq-listed securities
and the dealers who process the transactions. Concerns also have been raised
with respect to whether Nasdaq's listing requirements are sufficiently stringent
and whether the NASD, the trade organization controlling the Nasdaq market,
carefully polices Nasdaq-listed companies. In response, the NASD has begun to
boost its internal compliance and monitoring programs, including establishing a
new separate regulatory unit, NASD Regulation, Inc. ("NASDR"). More
specifically, the NASDR has been hiring numerous new enforcement aides to better
monitor trading activities among dealers and to scrutinize companies' compliance
with applicable listing standards, and heightening its overall monitoring of
small capitalization companies. Additionally, Nasdaq is in the process of
developing an electronic audit system, expected to be in place by 1997, that
will enable it to detect possible price manipulation and front running by
brokerage firms almost instantaneously. Nasdaq is also currently evaluating the
thorough revision of its listing standards for inclusion on the Nasdaq Market to
possibly make such requirements more stringent.

The effects of current and proposed Nasdaq reform on the operations of
brokerage firms, especially those specializing in the securities of small
capitalization companies, cannot be fully anticipated. The cost of compliance
with any new rules, regulations and procedures instituted by the NASDR could be
significant. Additionally, the implementation of stricter standards for initial
and continued inclusion of companies on Nasdaq could adversely affect the
prospects of small capitalization companies, the stock performance of such
companies, and the liquidity of investors' investments in such companies.
Increased compliance costs or the inability to attain or maintain the listing of
underwriting clients on the Nasdaq system, or a combination thereof, could
adversely affect the financial performance of the Company.

8
<PAGE>
INTERNATIONAL OPERATIONS

The Company, through GKN AG, has established an office in Zurich,
Switzerland, to facilitate the provision of the Company's financial services and
products in Europe. Although the Company attempts to structure its international
sales in dollar-denominated transactions only, certain transactions may be
denominated in the local currency. The Company's foreign revenues may be
disrupted by currency fluctuations or other events beyond the Company's control,
including political or regulatory changes. GKN AG is also subject to local rules
and regulations which can substantially affect the profitability or ability of
the Company to operate internationally. These rules and regulations could have
the effect of delaying the introduction of new services or products to European
customers, and increase the cost of the Company's operations in Europe. See
"Business--Government Regulation."

COMPETITION

POTENTIAL CONFLICTS CAUSED BY SELF-UNDERWRITING; NEED FOR QUALIFIED INDEPENDENT
UNDERWRITER

Pennsylvania Merchant Group Ltd and GKN (which is a wholly-owned subsidiary
of the Company) are acting as Underwriters of this Offering. As a wholly-owned
subsidiary of the Company, GKN's role as an Underwriter may involve certain
conflicts of interest. Pursuant to the by-laws of the NASD, the Shares are being
offered at a price no higher than that recommended by Pennsylvania Merchant
Group Ltd, which, in addition to being an Underwriter of this Offering, is also
acting as a "qualified independent underwriter." Although Pennsylvania Merchant
Group Ltd has participated in the preparation of the Registration Statement of
which this Prospectus forms a part and is required to exercise the usual
standards of "due diligence" with respect thereto, there can be no assurance
that certain conflicts will not arise with respect to this Offering, or if
conflicts do arise, that they will be resolved in a manner favorable to
investors. See "Underwriting."

NO PRIOR PUBLIC MARKET FOR AND POSSIBLE PRICE VOLATILITY OF THE SHARES;
LIMITATIONS ON MARKET MAKING ABILITIES

Prior to this Offering, there has been no public trading market for the
Shares and there is no assurance that an active public market for the Shares
will develop or, if developed, that it will continue after the Offering. In the
absence of an active public trading market, an investor may be unable to
liquidate his investment. The trading prices of the Shares could be subject to
wide fluctuations in response to quarterly variations in operating results,
announcements of material business events by the Company or its competitors and
other events or factors. Moreover, due to regulatory stances of both the
Commission and the NASD relating to the circumstances under which a company may
engage in market making transactions in its own securities, GKN will not be
able, in the absence of a current market making prospectus, to engage in trading
or market making activities relating to the Shares following consummation of
this Offering. GKN has no present intention of maintaining a current market
making prospectus. The Underwriters believe that there will be sufficient
additional market makers to sustain an orderly and liquid market for the Shares.
No firms, however, are under any obligation to make a market in the Shares and
any firm which commences market making activities may cease such activities at
any time. Further, other rules, including those relating to the use of
"insider information," may prevent GKN's registered representatives from
recommending the Shares to its customers. To the extent that GKN is unable to
make a market in, or recommendations regarding,

9
<PAGE>
the Shares following this Offering, the ability of investors to sell the Shares
in the secondary market may be limited and the price of the Shares may be
adversely affected. See "Underwriting."

RECENT AND PROPOSED EXPANSION

The Company recently expanded through the acquisition of Shochet and the
opening of GKN AG's office in Zurich, Switzerland. Although Shochet has been an
established business for over 16 years, there can be no assurance that the
business of Shochet will be successfully integrated with that of the Company.
GKN AG's business commenced in February 1996. Accordingly, GKN AG has only a
limited operating history upon which an evaluation of future performance can be
made. GKN AG's prospects must be considered in light of the risks, expenses,
delays and difficulties frequently encountered in the establishment of a new
business in an industry characterized by intense competition. See
"Business--Brokerage and Distribution."

The Company intends to apply a portion of the net proceeds of this Offering
to further expand its operations. There can be no assurance that the Company
will be able to expand its operations successfully. Moreover, the proposed
expansion of the Company's operations may materially increase the Company's
operating expenses and could adversely affect the Company's profits.

The Company may seek to expand its operations by acquiring suitable
broker-dealers, research and/or trading firms or other complementary businesses,
or by establishing or acquiring additional branch offices. As of the date of
this Prospectus, the Company has no agreements, understandings or commitments,
and is not engaged in any negotiations, relating to potential acquisitions.
There can be no assurance that the Company will effect any acquisitions or that
the Company will be able to successfully integrate into its operations any
acquired business or branch office.

DEPENDENCE ON KEY PERSONNEL

For the foreseeable future, the Company will place substantial reliance upon
the personal efforts and abilities of David M. Nussbaum, Chairman of the Board
of the Company and GKN, Roger N. Gladstone, President of the Company and GKN,
and Peter R. Kent, Chief Operating and Financial Officer of the Company and GKN.
The loss of the services of any of them likely would have a material adverse
effect on the business, operations, revenues and/or prospects of the Company.
The Company maintains key man life insurance on each of Messrs. Nussbaum and
Gladstone in the amount of $1,000,000. The success of the Company is also
dependent upon its ability to retain and hire additional highly skilled
personnel. Competition among broker-dealers for experienced personnel is
intense. There can be no assurance that the Company will be able to retain such
personnel or hire and retain additional qualified and skilled personnel. See
"Business--Competition" and "Management."

CONTROL BY PRINCIPALS

David M. Nussbaum, Roger N. Gladstone and Robert Gladstone will beneficially
own in the aggregate approximately 36% of the outstanding shares of Common Stock
immediately after this Offering (assuming all options held by them are exercised
and no other options or warrants are exercised) and, accordingly, will have
significant influence over the outcome of all matters submitted to the
stockholders for approval, including the election of directors of the Company.
See "Management" and "Principal Stockholders."

AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK

The Company's Certificate of Incorporation authorizes the issuance of "blank
check" preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to

10
<PAGE>
issue preferred stock with dividend, liquidation, conversion, voting or other
rights that could adversely affect the voting power or other rights of the
holders of the Company's Common Stock. In the event of issuance, the preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company, which
could have the effect of discouraging bids for the Company and thereby prevent
stockholders from receiving the maximum value for their shares. Although the
Company has no present intention to issue any shares of its preferred stock,
there can be no assurance that the Company will not do so in the future. See
"Description of Capital Stock--Preferred Stock."

SHARES ELIGIBLE FOR FUTURE SALE

All of the shares of Common Stock outstanding prior to the date of this
Prospectus are "restricted securities", as that term is defined under Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
Substantially all of the shares outstanding prior to this Offering will be
available for resale in the public market under Rule 144 commencing on the date
of this Prospectus. Sales of a significant number of shares of Common Stock in
the public market could have an adverse effect on the market price of the Common
Stock. All of the officers and directors of the Company have agreed not to sell
the shares of Common Stock they currently own (an aggregate of 3,224,250 shares
of Common Stock) for a period of fifteen months from the date of this Prospectus
without the consent of Pennsylvania Merchant Group Ltd. See "Shares Eligible for
Future Sale."

DILUTION

This Offering involves immediate and substantial dilution of $2.49 per
share, or 41.5%, to investors because the net tangible book value per share of
Common Stock after completion of this Offering will be substantially less than
the per-share offering price, assuming a $6.00 per-share offering price. See
"Dilution."

OUTSTANDING OPTIONS

At June 30, 1996, options to purchase 998,506 shares of Common Stock at an
average exercise price of $4.62 per share were outstanding, of which options to
purchase 132,222 shares are presently exercisable, options to purchase an
additional 246,429 shares will become exercisable during the balance of 1996,
and options to purchase 263,178 shares will become exercisable during 1997. To
the extent that such options are exercised, dilution to the ownership interests
of the Company's stockholders will occur. Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected since the holders of the outstanding options can be expected to
exercise them, to the extent they are able, at a time when the Company would, in
all likelihood, be able to obtain any needed capital on terms more favorable to
the Company than those provided in the options. See "Management--Executive
Compensation--1991 Employee Incentive Plan."

NO DIVIDENDS

To date, the Company has not paid any cash dividends on its Common Stock and
does not expect to declare or pay any cash dividends in the foreseeable future.
The Company intends to retain all earnings in the foreseeable future for the
Company's continued growth. Moreover, the Company's ability to pay dividends in
the future may be restricted by its brokerage subsidiaries' obligations to
comply with the net capital rules applicable to broker-dealers. See "Dividend
Policy" and "Business--Net Capital Requirements."

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby,
assuming a $6.00 per share offering price, are estimated to be $13,000,000
($15,025,000 if the Underwriters' over-allotment option is exercised in full).
The Company expects to use the net proceeds principally to expand its existing
business, approximately as follows: (i) $4,000,000 to increase GKN's equity
capital to permit it to underwrite larger offerings of securities and increase
its principal trading and market making activities; (ii) $3,000,000 to expand
GKN's retail and institutional sales forces and Shochet's retail sales force;
(iii) $2,000,000 to expand GKN's investment banking and research capabilities;
(iv) $2,000,000 to expand the Company's money management operations and commence
merchant banking activities; and (v) $1,000,000 to expand the Company's
international operations. The balance of $1,000,000 of the net proceeds of this
Offering will be used by the Company for working capital and general corporate
purposes of the Company and its subsidiaries. If the Underwriters exercise their
over-allotment option in full, the Company will realize additional net proceeds
of $2,025,000, which will be added to the Company's working capital.

The Company may seek to expand its operations by acquiring suitable
broker-dealers, research and/or trading firms or other complementary businesses,
or by establishing or acquiring additional branch offices. As of the date of
this Prospectus, the Company has no agreements, understandings or commitments
and is not engaged in any negotiations relating to potential acquisitions. There
can be no assurance that the Company will effect any acquisitions or that the
Company will be able to successfully integrate into its operations any acquired
business or branch office.

The allocation of net proceeds of this Offering represents the Company's
best estimates based upon its current plans and certain assumptions regarding
industry and general economic conditions and the Company's future revenues and
expenditures. If any of these factors change, the Company may find it necessary
or advisable to reallocate some of the proceeds within the above-described
categories or to use portions thereof for other purposes or may be required to
seek additional financing. There can be no assurance that additional financing
will be available to the Company on acceptable terms, or at all. Any failure to
obtain additional financing, if required, could have an adverse effect on the
Company, including possibly requiring the Company to curtail its operations.

Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest-bearing
investments.

12
<PAGE>
DILUTION

The difference between the public offering price per share of Common Stock
and the net tangible book value per share of Common Stock after this Offering
constitutes the dilution to investors in this Offering. Net tangible book value
per share is determined by dividing the net tangible book value (total tangible
assets less total liabilities) by the number of outstanding shares of Common
Stock.

At April 30, 1996, and after giving effect to subsequent exercise of
options, the Company had a net tangible book value of $15,320,000 or $2.76 per
share of Common Stock (based on 5,559,125 shares outstanding). After giving
effect to the sale of the Shares offered hereby at an assumed offering price of
$6.00 per share (less underwriting discounts and estimated expenses of this
Offering) the pro forma net tangible book value at that date would have been
$28,320,000 or $3.51 per share. This represents an immediate increase in net
tangible book value of $0.75 per share to existing stockholders and an immediate
dilution of $2.49 per share to new investors.

The following table illustrates the per share dilution without giving effect
to results of operations of the Company subsequent to April 30, 1996:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $6.00

Net tangible book value before this Offering.............. $2.76

Increase attributable to new investors.................... 0.75
-----

Pro forma net tangible book value after this Offering....... 3.51
-----

Dilution to new investors................................... $2.49
-----
-----
</TABLE>

The following table summarizes the number and percentage of shares of Common
Stock purchased from the Company, the amount and percentage of consideration
paid and the average price per share paid by existing stockholders and by new
investors pursuant to this Offering, assuming a $6.00 per share offering price:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- --------- ----------- --------- ---------

<S> <C> <C> <C> <C> <C>
Existing stockholders........ 5,559,125 69.0% $ 3,636,000 19.5% $0.65

New investors................ 2,500,000 31.0% 15,000,000 80.5% $6.00
--------- --------- ----------- ---------

Total.................. 8,059,125 100.0% $18,636,000 100.0%
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>

13
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at April
30, 1996, and as adjusted to give effect to the exercise of options after April
30, 1996, the sale of the Shares offered hereby at an assumed price of $6.00 per
share and the application of the estimated net proceeds therefrom:

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>

Long Term Borrowings:

Subordinated seller notes............................... $ 868,000 $ 868,000

Stockholders' equity:

Preferred stock--$.10 par value; 5,000,000 shares
authorized, 0 shares issued or outstanding.................. -- --

Common stock--$.0001 par value; 35,000,000 shares
authorized, 5,602,875 shares issued (5,054,125 shares
outstanding); 8,842,875 shares issued (8,059,125
shares outstanding), as adjusted...................... 1,000 1,000

Additional paid-in capital.............................. 3,487,000 16,691,000

Retained earnings....................................... 14,164,000 14,164,000

Cumulative translation adjustment....................... (18,000) (18,000)

Less cost of treasury stock (548,750 shares; 783,750
shares as adjusted)................................... (733,000) (937,000)
----------- -----------

Total stockholders' equity............................ 16,901,000 29,901,000
----------- -----------

Total capitalization................................ $17,769,000 $30,769,000
----------- -----------
----------- -----------
</TABLE>

DIVIDEND POLICY

The Company has never declared or paid cash or other dividends on its Common
Stock and does not anticipate doing so in the foreseeable future. The payment of
dividends, if any, in the future is within the discretion of the Board of
Directors and will depend upon the Company's earnings, its capital requirements
and financial condition, and other relevant factors. The Company intends to
retain all earnings in the foreseeable future for the Company's continued
growth. The Company's ability to pay dividends in the future also may be
restricted by its brokerage subsidiaries' obligation to comply with the net
capital requirements imposed on broker-dealers under regulations and rules
promulgated by both the Commission and the NASD.

14
<PAGE>
SELECTED FINANCIAL DATA

The selected financial data presented below, as of and for the years ended
January 31, 1996, 1995, 1994, 1993 and 1992 have been derived from the Company's
Financial Statements which have been audited by KPMG Peat Marwick LLP for 1996
and 1995, and Goldstein Golub Kessler & Company, P.C. for 1994, 1993 and 1992,
each independent certified public accountants. The data for the three months
ended April 30, 1996 and 1995 has been derived from unaudited financial
statements of the Company. In the opinion of management, the unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the results of these periods.
This data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements, including the notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:

YEAR ENDED THREE MONTHS ENDED
JANUARY 31, APRIL 30,
------------------------------------------------------------------- ------------------------
1996 1995 1994 1993 1992 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues...... $43,019,000 $32,410,000 $32,956,000 $25,278,000 $18,284,000 $18,444,000 $7,157,000
Total expenses...... 36,732,000 31,516,000 25,534,000 21,657,000 13,590,000 14,449,000 7,526,000
Income (loss) before
income taxes and
extraordinary
item................ 6,287,000 894,000 7,422,000 3,621,000 4,694,000 3,995,000 (369,000)
Net income (loss)... $3,469,000 $381,000 $4,006,000 $2,189,000 $2,779,000(1) $2,246,000 $(256,000)
Primary earnings
(loss) per
share(2)............ $0.61 $0.07 $0.72 $0.42 $0.58 $0.40 $(0.04)
Primary weighted
average number of
shares
outstanding(2)..... 5,729,000 5,695,000 5,530,000 5,153,000 4,820,000 5,638,000 5,784,000

OTHER FINANCIAL
DATA:
Ratio of total
assets to total
stockholder equity.. 1.89 1.37 1.43 1.81 2.95 1.95 1.35
Pre-tax return on
average equity..... 47.4% 7.8% 80.3% 65.6% 223.3% 25.1% (3.2)%
Book value per
Common Share
outstanding......... $3.02 $2.30 $2.27 $1.46 $0.81 $3.40 $2.25
Registered
Representatives(3).... 224 163 126 108 75 260 175

BALANCE SHEET DATA:
</TABLE>

<TABLE>
<CAPTION>
JANUARY 31, APRIL 30, 1996
------------------------------------------------------------------- ----------------------------
1996 1995 1994 1993 1992 ACTUAL AS ADJUSTED(4)
----------- ----------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets....... $27,853,000 $16,096,000 $16,123,000 $13,055,000 $11,278,000 $33,117,000 $ 46,117,000
Total liabilities
(excluding
subordinated
debt).............. 12,143,000 4,339,000 4,685,000 5,683,000 7,224,000 15,348,000 15,348,000
Subordinated
debt............... 934,000 -0- -0- -0- -0- 868,000 868,000
Convertible
subordinated
notes.............. -0- -0- 162,000 162,000 225,000 -0- -0-
Total stockholder's
equity............. $14,776,000 $11,757,000 $11,276,000 $ 7,210,000 $ 3,829,000 $16,901,000 $ 29,901,000
</TABLE>

- ------------

(1) Includes an extraordinary item of income tax benefits of $271,000 arising
from the utilization of net operating loss carryforwards.

(2) Fully diluted earnings per share and fully diluted average number of shares
outstanding are not materially different from the primary numbers indicated
above.

(3) The Registered Representatives data is based upon unaudited personnel
records of the Company.

(4) Gives effect to the sale of the Shares offered hereby at an assumed price of
$6.00 per share and the application of net proceeds therefrom.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial
statements, including the notes thereto, and the Selected Financial Data
included elsewhere in this Prospectus.

OVERVIEW AND GENERAL INDUSTRY CONDITIONS

The Company, which was incorporated in 1987, began meaningful operations
through GKN in the fiscal year ended January 31, 1991. That year, GKN underwrote
one public equity offering, raising $2.8 million for the issuer, and the
Company's financial results reflected $2.6 million of revenues and a net loss of
$511,000. As of June 30, 1996, GKN has managed or co-managed a total of 43
public offerings, raising approximately $430,000,000 for the issuers. In the
fiscal year ended January 31, 1996, the Company generated revenues of
$43,019,000, net income of $3,469,000, and a pre-tax return on average equity of
47.4%.

As did many firms in the investment banking and securities brokerage
industry, the Company has experienced a significant increase in the volume of
activity during the quarter ended April 30, 1996, primarily as a result of
declining interest rates and improving economic conditions. There is no
assurance that this environment will continue. During the quarter, the Company
experienced record revenues, income and returns on equity. First quarter
financial results reflected revenues of $18,444,000, net income of $2,246,000,
and a pre-tax return on average equity of 25.1%. As experienced during June and
July 1996, the securities market can be highly volatile. The Company's revenues,
including revenues from commissions, investment banking and principal
transactions could be adversely affected by the volatility and related price
level of the securities markets, which in turn would adversely affect the
business and profitability of the Company. See "Risk Factors--Industry Factors;
Economic and Market Conditions."

The Company's primary sources of revenues are commissions earned on the
brokerage of securities, investment banking fees, and gains and losses in the
investment account. The Company's principal business activities are, by their
nature, affected by many factors, including general economic and financial
conditions, the level and volatility of interest rates, security valuations in
the marketplace, competitive conditions, transactional volume and market
liquidity. Consequently, commission revenues, investment banking fees and
investment account results can be volatile. While the Company maintains
stringent cost controls, a significant portion of the Company's expenses are
fixed and do not vary with market activity. As a result, substantial
fluctuations can occur in the Company's revenues and net income from period to
period.

16
<PAGE>
RESULTS OF OPERATIONS

The following table reflects items in the Statements of Operations as dollar
amounts and as percentages of total revenues.

<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
-----------------------------------------------------------------------------------------------
QUARTER ENDED QUARTER ENDED
FISCAL 1996 FISCAL 1995 FISCAL 1994 4/30/96 4/30/95
---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Commissions........ $30,418 70.6% $21,804 67.4% $19,803 60.1% $12,068 65.5% $5,268 73.6%
Investment
banking............. 6,003 14.0% 9,607 29.6% 10,027 30.4% 3,413 18.5% 1,431 20.0%
Principal
transactions........ 5,683 13.2% 433 1.3% 2,739 8.3% 2,477 13.4% 266 3.7%
Interest........... 717 1.7% 262 0.8% 203 0.6% 337 1.8% 126 1.8%
Other.............. 198 0.5% 304 0.9% 184 0.6% 149 0.8% 66 0.9%
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
Total.......... 43,019 100.0% 32,410 100.0% 32,956 100.0% 18,444 100.0% 7,157 100.0%
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
Expenses
Compensation &
benefits............ 27,121 63.0% 22,856 70.5% 18,819 57.1% 10,728 58.2% 5,241 73.2%
Communications..... 2,631 6.1% 2,563 7.9% 1,990 6.0% 839 4.5% 619 8.6%
Brokerage, clearing
and exchange fees... 1,350 3.1% 908 2.8% 695 2.1% 631 3.4% 267 3.7%
Occupancy and
equipment........... 2,180 5.1% 1,711 5.3% 1,260 3.8% 655 3.6% 519 7.3%
Business
development......... 851 2.0% 780 2.4% 702 2.1% 273 1.5% 208 2.9%
Professional
fees................ 703 1.6% 1,251 3.9% 917 2.8% 733 4.0% 237 3.3%
Other.............. 1,896 4.4% 1,447 4.5% 1,151 3.5% 590 3.2% 435 6.1%
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
Total.......... 36,732 85.3% 31,516 97.3% 25,534 77.4% 14,449 78.4% 7,526 105.1%
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
Income (loss) before
income taxes........ 6,287 14.7% 894 2.7% 7,422 22.6% 3,995 21.6% (369) (5.1)%
Income taxes........ 2,818 6.6% 513 1.6% 3,416 10.4% 1,749 9.5% (113) (1.6)%
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
Net income (loss)... $ 3,469 8.1% $ 381 1.1% $ 4,006 12.2% $ 2,246 12.1% $ (256) (3.5)%
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
------- ------ ------- ------ ------- ------ ------- ------ ------ ------
</TABLE>

Three Months Ended April 30, 1996 Compared to Three Months Ended April 30,
1995

Total revenues for the first three months of fiscal 1997 increased by 157.7%
to $18,444,000 from $7,157,000, or an increase of $11,287,000. Revenues
increased in all of the Company's major areas of activity during the first three
months of fiscal 1997.

Commission revenues increased by $6,800,000, or 129.1%, to $12,068,000 over
the first three months of fiscal 1996 as a result of increased business with the
Company's retail customers. The Company's total volume of trades processed
during the three months increased by 147.6% over the same period in fiscal 1996.

Investment banking revenues increased to $3,413,000 from $1,431,000, an
increase of $1,982,000, or 138.5%. During the first three months of fiscal 1997,
the Company raised $31,900,000 for corporate clients through two public
offerings and three private placements. During the same period of the prior year
the Company raised $12,700,000 for corporate clients through one public offering
and one private placement.

Principal transaction revenues increased by $2,211,000 from $266,000 to
$2,477,000. This increase was primarily generated through market making
activities for over-the-counter equity securities, which increased by $1,437,000
to $1,553,000. This increase was generated by widespread gains across the
Company's market making universe and is reflective of general market conditions.
During the

17
<PAGE>

same periods, the Nasdaq Composite Index and Russell 2000 Index increased by
41.1% and 30.8%, respectively, year over year. Additionally, revenue from the
Company's investment account was $924,000 during the quarter, reflecting a
$774,000 increase over the same period in the prior year. The increase was
directly reflective of the increases in the prices of the shares underlying the
underwriter warrants the Company holds, all of which are issued by companies
which are or were investment banking clients.

Interest income increased by $211,000 to $337,000. The increase is due to
the Company's increased cash balances, the increased utilization of margin loans
by the Company's customers, and a renegotiated interest sharing arrangement with
the Company's clearing firm.

Total expenses for the first three months of fiscal 1997 were $14,449,000,
representing an increase of $6,923,000, or 92.0%, over the same period in fiscal
1996. As a percentage of revenues, total expenses for the period decreased to
78.4% of revenues as compared to 105.1% of revenues for the same period in the
prior year.

Compensation and benefit expenses increased by $5,487,000, or 104.7%, to
$10,728,000. These expenses decreased to 58.2% of revenues from 73.2% for the
prior period. Compensation expenses are largely variable in nature, as they
represent percentage payments on commissions generated. Commissions generated,
including sales commissions on underwritings and private placements, increased
by 118.3% and the percentage of commissions paid to brokers increased to 47.5%
from 42.2%, accounting for the majority of the change in compensation and
benefit expense. The remainder of the increase was due to the higher number of
employees. As of April 30, 1996, the Company had 469 employees, of which 260, or
55.4%, were registered representatives who were paid on commission. As of April
30, 1995, the Company had 336 employees, of which 175, or 52.1%, were registered
representatives.

Communications expenses increased by 35.5% to $839,000, from $619,000. This
was caused by the 39.6% increase in the number of employees and the 147.6%
increase in the number of trades processed for the comparable periods.

Brokerage, clearing and exchange fees increased by 136.3% to $631,000, from
$267,000. This increase is attributable to the aforementioned increase in the
number of trades processed and registered representatives employed by the
Company.

Occupancy and equipment expenses increased by 26.2%, to $655,000 from
$519,000, due to the four new locations acquired in the Shochet acquisition.

Business development expenses increased by $65,000, or 31.3% due to
increased promotional activities.

Professional fees increased to $733,000 from $237,000, or by $496,000, as
the result of increased legal fees and reserves provided for potential
settlement of the SEC and NASD investigations. Management believes that the
Company has adequately provided for any financial exposure related to these
matters. See "Business--Legal Proceedings."

Other expenses increased by $155,000 to $590,000, or by 35.6%. This increase
was attributable to the first two months of operation of GKN AG and interest
expense of $26,000 recognized on the note issued in the Shochet acquisition.

The Company's income tax provision for the first three months of fiscal 1997
was $1,749,000, representing an effective income tax rate of 43.8%, compared to
an income tax benefit of $113,000 recognized in the same period of the prior
year.

Net income for the first three months of fiscal 1997 was $2,246,000, an
increase of $2,502,000 over a loss of $256,000 for the first three months of
fiscal 1996.

18
<PAGE>

Fiscal Year Ended January 31, 1996 Compared to Fiscal Year Ended January 31,
1995

Revenues for the twelve months ended January 31, 1996 totaled $43,019,000
versus $32,410,000 for the twelve months ended January 31, 1995, representing an
increase of $10,609,000, or 32.7%. The overall increase is entirely attributable
to an increase in commission revenue of $8,614,000 and increases in revenue from
the investment account of $4,873,000.

Commissions increased by $8,614,000, or 39.5%, from $21,804,000 to
$30,418,000. The increase reflects an overall change in general market
conditions, a 37.4% increase in the number of registered representatives
employed by the Company, and a 35.3% increase in the volume of trades processed
by the Company.

Revenues from investment banking decreased from $9,607,000 to $6,003,000, or
$3,604,000 and 37.5%. During fiscal 1996 the Company raised $72,728,000 for its
investment banking clients through five public underwritings and five private
placements, representing a significant decrease from fiscal 1995 when the
Company raised $122,032,000 for its investment banking clients through eleven
public underwritings and six private placements. The decrease in underwriting
activity was the result of general market conditions and the reorientation of
the Company's underwriting efforts from the SPAC program to operating companies.
See "Business--Investment Banking Activities."

Revenues associated with principal transactions increased by $5,250,000,
from $433,000. Market making activities contributed to the increase by $377,000,
or 85.5%, from $441,000 to $818,000. The increase was attributable to an
increased capital commitment by the Company to market making activities and a
general improvement in market conditions in fiscal 1996 versus fiscal 1995. More
significantly, the Company's investment account generated revenues of $4,865,000
in fiscal 1996 versus a loss of $8,000 in fiscal 1995. The increase was due to
the general stock price performance of the Company's underwriting clients during
the year, which, in turn, was reflected in the valuation of the underwriter
warrants contained in the Company's investment account.

Interest income increased by $455,000, from $262,000 to $717,000. The
increase was due to increased cash and cash equivalent positions held by the
Company and increased utilization of margin loans by the Company's customers.

Other revenues decreased by $106,000, from $304,000 to $198,000.

Total expenses for fiscal 1996 were $36,732,000 versus $31,516,000 for
fiscal 1995, an increase of $5,216,000, or 16.6%. As a percentage of total
revenues, total expenses for the period decreased to 85.3% as compared to 97.3%
of revenues.

Compensation and benefit expenses increased $4,265,000, or 18.7%, from
$22,856,000 to $27,121,000. As a percent of revenues, compensation and benefit
expenses decreased from fiscal 1995 to fiscal 1996, from 70.5% to 63.0%.
Compensation expenses are largely variable in nature as they represent
percentage payments on commissions generated. Although the percentage of
commissions paid to brokers decreased slightly by 1.4%, the total amount of
commissions paid increased by 25.8%, as a result of commissions generated which
increased by $7,831,000 or 29.7% (including sales concessions on underwritings
and private placements).

Communications expenses for fiscal 1996 were $2,631,000, compared to
$2,563,000 for fiscal 1995, reflecting an increase of $68,000, or 2.7%. During
fiscal 1996, the Company negotiated an improved cost structure with its long
distance voice communications carrier.

Brokerage, clearing and exchange fees increased by $442,000, or 48.7%, from
$908,000 to $1,350,000. This was caused by a 35.3% increase in the volume of
trades processed by the Company and an overall decrease in the amounts charged
to brokers for processing trades.

19
<PAGE>

Occupancy and equipment expenses increased by 27.4%, or $469,000, from
$1,711,000 to $2,180,000. Contractual increases in the per square foot lease
rate in the Company's New York location and the impact of a full year's lease
expense for the Company's Stamford, Connecticut location caused the majority of
the increase.

Business development expenses were $851,000 in fiscal 1996 versus $780,000
in fiscal 1995, an increase of $71,000, or 9.1%. The increase was due to
additional promotional expenses.

Professional fees decreased by $548,000, or 43.8%, from $1,251,000 to
$703,000. This was primarily caused by the higher costs incurred during fiscal
1995 related to the filing of documents for an initial public offering of the
Company's securities, which was postponed until market conditions improved.

Other expenses increased from $1,447,000 to $1,896,000, an increase of
$449,000, or 31.0%, reflecting the recognition of recruiting payments made to
new registered representatives.

The Company's fiscal 1996 income tax provision was $2,818,000 and
represented an effective tax rate of 44.8%. In fiscal 1995, the income tax
provision was $513,000 and represented an effective tax rate of 57.4%. The
higher effective rate in fiscal 1995 was the result of minimum taxes due.

Net income for fiscal 1996 was $3,469,000, an increase of $3,088,000
compared to fiscal 1995.

Fiscal Year Ended January 31, 1995 Compared to Fiscal Year Ended January 31,
1994

Revenues for the twelve months ended January 31, 1995 totaled $32,410,000
versus $32,956,000 for the twelve months ended January 31, 1994, representing a
decrease of $546,000, or 1.7%. The decrease is entirely attributable to a
decrease in revenue generated from principal transactions and the investment
account.

Commissions increased by $2,001,000, or 10.1%, from $19,803,000 to
$21,804,000. The increase represents the impact of a 29.4% increase in the
number of registered representatives and a 7.1% increase in the volume of trades
processed by the Company.

Revenues from investment banking activities decreased from $10,027,000 to
$9,607,000, a change of $420,000, or 4.2%. In fiscal 1995, the Company raised
$122,032,000 for its investment banking clients through eleven public offerings
and six private placements, while in fiscal 1994 the Company raised $115,196,000
for its investment banking clients through eleven public offerings. While the
gross amounts raised for clients increased, the average underwriting discount
decreased, thereby causing the decrease in the associated revenue.

Principal transactions generated revenues of $433,000 in fiscal 1995 and
$2,739,000 in fiscal 1994, a decrease of $2,306,000, or 84.2%. This decrease was
in part attributable to a decrease in revenues generated by market making
activities of $1,266,000 from fiscal 1994 to fiscal 1995. Similarly, the
investment account generated a loss of $8,000 in fiscal 1995 versus gains of
$1,032,000 in fiscal 1994. These significant decreases were caused by weak
general market conditions, particularly as they applied to small capitalization
stocks. The Nasdaq Composite Index and the Russell 2000 each decreased by 5.7%
and 7.4%, respectively, during the relevant fiscal periods.

Interest income increased by $59,000, or 29.1%, from $203,000 to $262,000.
This increase was primarily due to higher average cash balances held by the
Company during fiscal 1995 versus fiscal 1994.

Other income increased from $184,000 to $304,000.

Total expenses increased to $31,516,000 in fiscal 1995 from $25,534,000 in
fiscal 1994, an increase of $5,982,000, or 23.4% and represented 97.3% of
revenues as compared to 77.4% of revenues.

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<PAGE>

Compensation and benefit expenses increased from $18,819,000 to $22,856,000,
an increase of $4,037,000, or 21.5%. Fiscal 1995 was a year in which the Company
experienced substantial growth. Employees increased from 231 at January 31, 1994
to 335 at January 31, 1995, an increase of 45.0%. The increase in the employee
base and a 4% increase in the percentage of commissions paid to brokers were the
primary causes for the increase in the compensation and benefit expenses.

During fiscal 1994 and fiscal 1995, the Company significantly expanded its
physical facilities, through the opening of its Great Neck, New York office in
June 1993, a doubling of its office space in Boca Raton, Florida in November
1993, and the opening of its Stamford, Connecticut office in June 1994. This
expansion, in conjunction with the aforementioned increase in employees, was the
direct cause of the increases in communication expenses and occupancy expenses.
Communication expenses increased from $1,990,000 to $2,563,000, an increase of
$573,000, or 28.8%, while occupancy and equipment expenses increased by
$451,000, or 35.8%, from $1,260,000 to $1,711,000.

Brokerage, clearing and exchange fees increased from $695,000 to $908,000,
an increase of $213,000, or 30.6%. This was directly related to the 7.1%
increase in the volume of trades processed by the Company.

Business development expenses stayed relatively constant as a percentage of
revenues from fiscal 1994 to fiscal 1995, as the absolute dollar amounts
increased by $78,000, or 11.1%, from $702,000 to $780,000.

Professional fees increased significantly in fiscal 1995 to $1,251,000 from
$917,000 in fiscal 1994, an increase of $334,000, or 36.4%. This increase was
primarily caused by the costs incurred during fiscal 1995 related to the filing
of documents for an initial public offering of the Company's securities, which
was postponed until market conditions improved.

Other operating expenses remained relatively constant as a percentage of
revenues, from $1,151,000, or 3.5% of revenues to $1,447,000 or 4.5% of
revenues.

The Company's income tax provision for fiscal 1995 was $513,000,
representing an effective tax rate of 57.4%, while its income tax provision for
fiscal 1994 was $3,416,000, representing an effective tax rate of 46.0%. The
high effective rate in fiscal 1995 was the result of minimum taxes due on a
significantly lower tax base.

Net income for fiscal 1995 was $381,000, a decrease of $3,625,000 from
results in fiscal 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company's assets are highly liquid with the majority consisting of
securities inventories, receivables from other broker-dealers and the Company's
clearing firm, and cash and cash equivalents, all of which fluctuate depending
upon the levels of customer business and trading activity. Receivables from
broker-dealers and the Company's clearing firm turn over rapidly. As a
securities dealer, the Company may carry significant levels of trading
inventories to meet customer needs. The Company's inventory of market making
securities is readily marketable; however, holding large blocks of the same
security may limit liquidity and prevent realization of full market value for
the securities. Securities owned, but not readily marketable, represent
underwriter warrants and the securities underlying such warrants. The liquidity
of these securities is limited. A relatively small percentage of the Company's
total assets are fixed. The Company's total assets or the individual components
of total assets may vary significantly from period to period because of changes
relating to customer demand, economic and market conditions, and proprietary
trading strategies. The Company's total assets at April 30, 1996, January 31,
1996, and January 31, 1995, were $33,117,000, $27,853,000, and $16,096,000,
respectively.

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GKN and Shochet, the Company's operating broker-dealer subsidiaries, are
subject to the net capital rules of the NASD. As such, they and the Company are
subject to certain restrictions on the use of capital and its related liquidity.
GKN's and Shochet's respective net capital positions as of April 30, 1996 were
$10,807,000 and $491,000, which were $10,557,000 and $391,000 in excess of their
respective net capital requirements. See "Business--Government Regulation."

Historically, the Company has financed its operations through the private
placement of debt and equity securities and cash flow from operations. The
Company has not employed any significant leverage or debt. In conjunction with
the Company's acquisition of Shochet, the Company issued the seller a
subordinated note for $934,000 as part of the purchase price. The Company
intends to use debt prudently in the future and intends to arrange for lines of
credit following this Offering. During the twelve months ended April 30, 1996,
the Company repurchased 261,250 shares at a price of $2.00 per share, resulting
in a total repurchase of $522,500. These repurchases were funded from cash flow
from operations.

The Company's overall capital and funding needs are continually reviewed to
ensure that its capital base can support the estimated needs of its business
units. These reviews take into account business needs as well as regulatory
capital requirements of the subsidiaries. Based upon these reviews, management
believes that the Company's capital structure is adequate for current
operations.

CASH FLOWS

The Company's statements of consolidated cash flows classify cash flow into
three broad categories: cash flows from operating activities, investing
activities and financing activities. The Company's net cash flows are
principally associated with operating and investing activities, which support
the Company's brokerage and distribution, investment banking and principal
transactions activities.

Three Months Ended April 30, 1996 and 1995

Cash and cash equivalents at April 30, 1996 and 1995 totaled $10,923,000 and
$5,358,000, respectively, an increase of $3,050,000 and $2,235,000,
respectively, for the comparable three month periods. The increases are all
primarily the result of cash provided by operating activities.

Cash provided by operating activities totaled $3,381,000 in the three months
ended April 30, 1996. This was primarily generated from net income, adjusted for
non cash items, of $2,026,000, a decrease in securities owned, at market value,
of $2,460,000, and increases in securities sold, not yet purchased, of
$2,152,000, commissions payable of $657,000, and income taxes payable of
$1,790,000. These amounts were partially offset by an increase in receivables
due from the Company's clearing firm of $5,388,000 and a decrease in accrued
expenses and liabilities of $1,500,000. For the three months ended April 30,
1995, cash provided from operating activities totaled $2,277,000. This was
primarily generated by decreases in receivables from the Company's clearing firm
of $543,000, securities owned, at market value, of $3,155,000, and an increase
in deferred compensation of $684,000. These amounts were partially offset by a
decrease in net cash from a net loss, adjusted for non cash items, of $163,000,
increases in loans receivable of $460,000 and other assets of $754,000, and a
decrease in accrued expenses and other liabilities of $585,000.

Cash used in investing activities was $162,000 and $42,000 in the periods,
respectively. Both of these amounts represent purchases of office furniture,
equipment and leasehold improvements.

For the three months ended April 30, 1996, cash used in financing activities
totaled $169,000. This amount primarily reflects the repayment of promissory
notes. No cash was generated or used in financing activities during the three
months ended April 30, 1995.

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<PAGE>
Fiscal Years 1996, 1995 and 1994

Cash and cash equivalents at January 31, 1996, 1995, and 1994 totaled
$7,873,000, $3,123,000, and $2,922,000, respectively, reflecting increases of
$4,750,000, $201,000, and $208,000 in each of the respective years. The
increases are all the result of cash provided by operating activities, partially
offset by the use of cash in investing activities.

Cash provided by operating activities totaled $6,078,000, $909,000, and
$528,000 in fiscal 1996, 1995, and 1994, respectively. In fiscal 1996, cash
provided by operating activities was primarily generated from net income,
adjusted for non cash items, of $5,090,000, and increases in securities sold,
not yet purchased, of $2,222,000, commissions payable of $788,000, and accrued
expenses and other liabilities of $3,418,000. These were partially offset by
increases in amounts due from the Company's clearing firm of $1,209,000,
securities owned, at market value, of $2,712,000, and securities owned, not
readily marketable, of $1,270,000. In fiscal 1995, cash provided by operating
activities was primarily generated through a decrease in securities purchased
under agreements to resell of $3,057,000, which was partially offset by
increases in securities owned, at market value, of $1,867,000 and loans
receivable of $1,205,000, and a decrease in accrued expenses and other
liabilities of $568,000. In fiscal 1994, cash provided by operating activities
was generated from net income, adjusted for non cash items, of $4,349,000, a
decrease in the receivable from the Company's clearing firm of $1,888,000, and
an increase in accrued expenses and liabilities of $598,000. These amounts were
offset by increases in securities purchased under agreements to resell of
$3,057,000, securities owned, not readily marketable, of $550,000, and other
assets of $645,000, and a decrease in securities sold, not yet purchased, of
$1,993,000.

In fiscal 1996, 1995, and 1994, the Company used cash in investing
activities of $1,812,000, $646,000, and $380,000, respectively. All of these
amounts represent the purchase of office furniture, equipment, and leasehold
improvements, except that in fiscal 1996 the Company used cash of $1,606,000 in
its acquisition of Shochet resulting in goodwill.

The Company generated cash from financing activities of $484,000 in fiscal
1996 and $60,000 in fiscal 1994, while it used cash in financing activities of
$62,000 in fiscal 1995. In fiscal 1996, the Company generated cash through the
issuance of a subordinated note of $934,000, in conjunction with its acquisition
of Shochet, which was partially offset by the purchase of stock into treasury.
The amounts provided by, or used in financing activities for fiscal 1995 and
1994, represent the issuance or retirement of common shares.

EFFECTS OF INFLATION

The Company's assets are, to a large extent, liquid in nature, and, as a
result, are not significantly affected by inflation. To the contrary, market
prices of securities are generally influenced by changes in inflation. Moreover,
the rate of inflation affects the Company's expenses, such as employee
compensation, occupancy expenses and communications costs, which may not be
readily recoverable in the prices of services offered to the Company's
customers. To the extent inflation results in rising interest rates or has
adverse effects upon the securities markets, it may adversely affect the
Company's financial position and results of operations.

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<PAGE>
BUSINESS

GENERAL

The business of GKN Holding Corp. (the "Company") is transacted primarily
through four operating subsidiaries: GKN Securities Corp. ("GKN"), Shochet
Securities, Inc. ("Shochet"), GKN Securities AG ("GKN AG") and GKN Fund
Management, Inc. ("GKN Fund"). Collectively, GKN, Shochet and GKN AG are all
involved in various aspects of the investment banking and stock brokerage
business. GKN Fund is involved in money management.

The Company anticipates that acquisitions will be an integral part of its
future growth. In November 1995, the Company acquired all of the outstanding
stock of Shochet, a full-service discount brokerage firm with four branches
operating in Southern Florida. Shochet has been in business since 1980. During
the twelve-month period ended January 31, 1996, Shochet generated approximately
$5.5 million in revenue (only $1,128,000 of which is included in the Company's
financial statements for the year ended January 31, 1996). The Shochet
acquisition was the Company's first in the investment banking and securities
brokerage business.

The Company has also grown recently by expanding into other areas of
business. In March 1995, GKN Fund entered the money management business by
becoming the general partner and administrator of Kaleidoscope Partners, L.P., a
"fund of funds" with approximately $8.1 million in assets at April 30, 1996. In
February 1996, GKN AG commenced operations in Zurich, Switzerland, distributing
securities and providing brokerage services to European institutional money
managers.

The Company intends to continue its emphasis on investment banking
opportunities for emerging growth and small capitalization companies. While
enhancing this core capability, the Company plans to further expand its related
distribution, brokerage, research, money management and merchant banking
functions, either through internal growth or by acquisition.

BROKERAGE AND DISTRIBUTION ACTIVITIES

A significant portion of the Company's revenues are derived from
commissions, concessions, mark-ups and mark-downs (collectively "commissions").
For the fiscal year ended January 31, 1996, commissions accounted for
approximately 70.6% of the Company's revenues. Commissions are charged to the
Company's individual and institutional clients for executing buy and sell orders
of securities on national and regional exchanges and in the over-the-counter
("OTC") markets. When a buy or sell order for a security in which GKN makes a
market or has inventory is received, GKN may act as a principal and purchase
from, or sell to, its customers the desired security on a disclosed basis at a
price set in accordance with applicable securities regulations. The Company's
brokerage and distribution activities are performed through GKN, Shochet and GKN
AG, its brokerage subsidiaries. As of April 30, 1996, these brokerage
subsidiaries employed an aggregate of 260 registered representatives and
serviced more than 27,000 active customer accounts. Each of these brokerage
subsidiaries serves a diverse clientele with different investment
characteristics.

GKN

As of April 30, 1996, GKN had 214 registered representatives located in five
offices in New York City and Great Neck, New York, Stamford, Connecticut, and
Boca Raton and Miami, Florida. During fiscal 1996, GKN's registered
representatives generated approximately $29,500,000 in commissions on

24
<PAGE>

secondary trades and $6,000,000 in sales concessions on public offerings and
private placements (such $6,000,000 are included in Investment Banking Revenues
on the Company's Financial Statements). GKN's sales force serves a clientele
which is primarily composed of individuals who invest primarily in OTC equity
securities. GKN intends to expand its brokerage business through the continued
recruitment and hiring of additional registered representatives for existing
offices, as well as potentially opening or acquiring additional offices in new
geographic locations. GKN believes that it can add an aggregate of approximately
45 brokers in its various branch offices without acquiring any additional space.

Shochet

As of April 30, 1996, Shochet had 45 registered representatives located in
four offices in Hallandale, Miami Beach, South Miami and Tamarac, Florida.
During fiscal 1996, Shochet's registered representatives generated approximately
$5 million in commissions, primarily on secondary trades. Shochet sets
commissions to its customers on a discounted basis. The clientele served by
Shochet's registered representatives is generally older, retired individuals who
invest in exchange-listed equity securities, fixed income securities and mutual
funds. The Company intends to expand Shochet's business through the recruitment
and hiring of additional registered representatives for existing offices, as
well as potentially opening or acquiring additional offices in new geographic
locations.

GKN AG

In February 1996, the Company opened its first international office in
Zurich, Switzerland, through GKN AG. The primary emphasis of this office is to
serve European institutional money managers and clients investing in U.S.-traded
small capitalization equity securities. GKN AG currently has one registered
representative. The Company plans to expand its international operations through
the recruitment and hiring of additional registered representatives and
potentially opening additional international offices.

Institutional Sales

Historically, institutional sales have represented an insignificant source
of revenue for GKN. During 1995, GKN established an Institutional Sales
Department to develop and service institutional money manager clients. The firm
intends to expand this business through the recruitment and hiring of additional
registered representatives, the development of new institutional client
relationships and the potential acquisition of brokerage firms whose primary
emphasis is serving institutional clients.

INVESTMENT BANKING ACTIVITIES

Corporate Finance

GKN's investment banking revenues are principally derived from managing or
co-managing public offerings of equity securities, although the private
placement of equity or equity-related securities for both private and
publicly-held companies has recently become an increasingly important source of
investment banking revenues. For the fiscal year ended January 31, 1996,
investment banking activities, including sales concessions, accounted for
approximately 14.0% of the Company's revenues. The Company's underwriting
activities have historically focused on public equity underwritings for small
capitalization, emerging growth companies in a variety of industries. GKN
believes that its expertise and proven ability to assist emerging growth
companies (which often have limited access to other sources of capital) has
created a significant source of ongoing and potential new investment banking
clients. GKN intends to continue this small capitalization emphasis,
concentrating its activities on certain core industries, initially the
communications/technology and leisure/ entertainment/recreation industries.

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<PAGE>

In 1993, GKN developed and introduced a new publicly-traded financing
vehicle known as the Specified Purpose Acquisition Company(R) ("SPAC(R)"). A
SPAC combines the characteristics of a traditional acquisition or buyout fund
and a more liquid, publicly traded industry-specific investment vehicle. The
purpose of a SPAC is to acquire an operating business in a specified target
industry. Each SPAC is managed by a management team combining operating
experience and mergers and acquisitions expertise in the specified target
industry. SPACs feature important investor safeguards, including (i) a
conversion right which entitles SPAC common stock investors to the return of a
substantial portion of their initial investment (81%, plus interest) should a
target acquisition not be made within 24 months from the closing of the SPAC's
public offering, (ii) a requirement that 90% of the net proceeds of the SPAC
offering be placed in trust and invested in short-term government securities and
released only upon the successful consummation by the SPAC of the acquisition of
a target business or the liquidation of the SPAC (the balance of the net
proceeds are used to pay the costs incurred in connection with identifying and
evaluating prospective acquisition candidates, and structuring, negotiating and
consummating a business combination), (iii) a requirement for stockholder
approval by the outside stockholders of the target acquisition and (iv) various
other requirements eliminating or reducing potential conflicts of interests
between SPAC management and the investors in SPAC offerings. Since the
introduction of the SPAC, GKN has lead-managed public offerings for thirteen
SPACs, raising approximately $170 million in aggregate gross proceeds. As of the
date of this Prospectus, nine of the 13 SPACs have consummated their mergers,
one SPAC is in the process of liquidation, two mergers are pending and one SPAC
management team continues its acquisition search.

The Company is not currently involved in any new SPAC offerings and
currently does not expect that future SPAC offerings, if any, will represent a
material portion of its revenues from investment banking activities in
subsequent periods.

Corporate Advisory

To date, the Company has not derived significant revenues from corporate
advisory services. Through its relationships with its investment banking
clients, GKN intends to expand this business with a concentration on mergers and
acquisitions, strategic partnering, fairness opinions and corporate
recapitalizations.

Syndicate

GKN has a Syndicate Department which has historically served as an
additional source of product (through selling group or underwriter
participation) for distribution through the Company's various distribution
channels. GKN anticipates that the emphasis of this department will shift to
enhance the marketing and distribution of GKN's underwritings to other
broker-dealers. To date, revenues generated by the Syndicate Department have
been insignificant.

PRINCIPAL TRANSACTIONS

A portion of GKN's revenue is derived from various principal trading
activities, including making markets in equity securities, proprietary position
trading, and the results of an investment account. For the fiscal year ended
January 31, 1996, these activities accounted for 13.2% of the Company's
revenues.

Market Making

GKN's market making activities have been primarily an accommodation to its
retail customers. Inventories of securities are carried to facilitate brokerage
transactions with customers and other dealers and principal transactions with
customers are effected at prices in accordance with applicable security
regulations. As of April 30, 1996, GKN made markets in more than 80 securities.
For the fiscal year ended January 31, 1996, principal transactions related to
securities in which GKN makes a market, including realized and unrealized gains
and losses, accounted for $818,000, or 1.9%, of the Company's revenues.

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<PAGE>
Proprietary Trading

Historically, GKN has devoted insignificant amounts of capital and derived
insignificant revenues from taking proprietary trading positions. During fiscal
1996, GKN employed a maximum of $1 million of capital at any one time to
proprietary trading positions. GKN intends to increase its capital allocation to
principal trading activities after this Offering.

Investment Account

In connection with its investment banking activities, GKN usually receives
warrants which entitle it to purchase securities of the companies for which GKN
raises capital or provides advisory services. These warrants, which are placed
in GKN's investment account, vary in value based upon the market prices of the
underlying securities. Warrants are usually exercisable for four years beginning
one year after issuance and are valued by management based on a significant
discount to the current market values of the underlying securities. As of April
30, 1996, GKN owned warrants to purchase securities of 45 companies for which it
has performed investment banking services. These warrants had an underlying
market value of $3,143,000, as of April 30, 1996, of which GKN recognized
$1,779,000 in value, or 56.6%. During the fiscal year ended January 31, 1996 and
quarter ended April 30, 1996, GKN recognized gains (both realized and
unrealized) on such warrants of $4,865,000, or 11.3% of revenues, and $924,000,
or 5.0% of revenues, respectively. From inception through April 30, 1996, GKN
has recognized, in the aggregate, more than $9,100,000 in realized and
unrealized gains from such warrants.

RESEARCH SERVICES

GKN's research activities are an integral part of, and provide significant
support to, its investment banking, and securities brokerage activities.
Research services are directed primarily towards creating support, sponsorship
and independent analysis for the securities of companies which have been
underwritten by GKN and identifying attractive investment opportunities in the
securities of other companies. The research department conducts a review and
analysis of fundamental elements of individual company performance, industry
trends and economic events and incorporates its findings into published reports.
GKN distributes its research publications through each of its brokerage
subsidiaries--GKN, Shochet and GKN AG.

OTHER RETAIL PRODUCTS AND SERVICES

GKN is a registered Investment Adviser under the Investment Advisers Act of
1940 and provides retirement planning and mutual fund investment services
through its Retirement Services department. This department assists clients with
establishing retirement plans tailored to their specific needs, solving problems
with their existing plans, locating appropriate plan administrators, and
performing asset allocation studies for investment allocations. Retirement
services also sources and administers the relationships with third party mutual
funds, as well as advising customers concerning such investments. In February
1996, GKN introduced a "wrap-investment" product known as "NavigatorTM."
Navigator performs asset allocation models for customers based on their
individual risk profiles. Based upon each investor's specific model results,
investments are made in a number of specified third party mutual funds. To date,
revenues generated by retirement services and mutual fund investments have been
insignificant.

Both Shochet and GKN source and execute buy and sell orders for fixed income
securities, which are purchased on an agency or principal basis. Amounts
retained in inventory overnight and on an intraday basis are not significant.
During fiscal 1996, the execution of buy and sell orders for fixed income
securities accounted for 12% of Shochet's revenues and an insignificant
percentage of GKN's revenues.

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<PAGE>
MONEY MANAGEMENT

In 1995, the Company entered the money management business through the
establishment of GKN Fund Management, Inc., which serves as the general partner
and administrator of Kaleidoscope Partners, L.P. ("Kaleidoscope"), a "fund of
funds" investment partnership which invests its capital in other funds managed
by independent money managers. The primary investment objective of Kaleidoscope
is to achieve superior investment returns and diversification by placing its
capital in a number of different carefully selected investment funds. As of
April 30, 1996, Kaleidoscope had total assets of approximately $8.1 million
invested in eight independent funds. GKN intends to expand its money management
activities after this Offering.

MERCHANT BANKING

The Company intends to enter into the merchant banking business by using a
portion of the proceeds of this Offering to invest in development-stage and
operating companies. Such investments may represent a minority or controlling
interest in the subject companies. It is anticipated that most companies in
which investments would be made will be privately-held at the time of the
investment. The Company will attempt to focus on those companies for which GKN
might be willing to manage offerings sometime after the Company's original
investment. As of the date of this Prospectus, the Company has no specific plans
with respect to any particular investment opportunity.

MARKETING STRATEGY

In October 1987, after the stock market decline, the founders of the Company
perceived an opportunity for the creation of a high-quality investment bank
serving emerging growth and small capitalization corporate clients and
investors. Since its inception, the Company's plan has been to develop a
high-quality firm serving this market niche. The Company's marketing strategy is
to capitalize on this positioning within this market niche.

When marketing its services to prospective investment banking clients, GKN
highlights the success of its prior underwritings and refers the principals of
the prospective clients to principals of existing and prior investment banking
clients. When marketing to prospective brokerage clients, GKN promotes its small
capitalization market niche and attempts to distinguish itself from other
similar investment banks through its research and other services.

CLEARING AGENT

The Company's brokerage subsidiaries currently utilize, on a fully disclosed
basis, the services of Schroder Wertheim & Co. Incorporated as its clearing
agent, which, on a fee basis, processes all securities transactions and
maintains the accounts of its customers. Customer accounts are protected through
the Securities Investor Protection Corporation for up to $500,000, of which
coverage for cash balances is limited to $100,000. Additional protection is
provided by the clearing agent through Aetna Casualty and Surety Co. for up to
$25,000,000 per account. The services of the clearing agent include billing,
credit control, receipt, and custody and delivery of securities. The clearing
agent provides operational support necessary to process, record, and maintain
securities transactions for the Company's brokerage and distribution activities.
The clearing agent provides these services to the Company and its customers at a
total cost which is less than it would cost the Company to process such
transactions on its own.

CUSTOMER CREDIT

The clearing firm for the Company's brokerage subsidiaries lends funds to
the Company's customers through the use of margin credit. These loans are made
to customers on a secured basis, with the clearing firm maintaining collateral
in the form of saleable securities, cash or cash equivalents.

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<PAGE>

Under the terms of the clearing agreements, the Company's brokerage subsidiaries
indemnify the clearing firm for any loss on these credit arrangements. As of
April 30, 1996, the Company had $52 million of margin credit outstanding to its
customers through its clearing firm. In the fiscal year ended January 31, 1996,
the Company's losses from the margin credit activity were de minimus, while net
interest earned totaled $199,000.

RISK MANAGEMENT/CONTROL STRUCTURE

The Company maintains a management structure which includes an Operating
Committee, which meets weekly to monitor the results of operations, levels of
risk exposure and other key management decisions. Additionally, the Company
maintains a rigorous and comprehensive risk management and control structure for
all three operating brokerage subsidiaries through its risk management group,
legal and compliance departments, and financial control mechanisms.

Risk Management Group

In conjunction with the staff of the clearing agent, the Company monitors
and maintains firm-wide and customer margin credit and securities concentration
exposure, and monitors firm adherence to the appropriate securities and lending
regulations. Position limits in trading and inventory accounts are established
and monitored on an ongoing basis. Current and proposed underwriting, corporate
development and other commitments are subject to due diligence reviews by senior
management and, if appropriate, professionals in the appropriate industry.

Legal and Compliance

The Company currently maintains a full time staff of seven individuals,
including two attorneys, in its legal and compliance departments to monitor the
Company's compliance position. These individuals are supplemented by the daily
compliance and control functions of the local branch managers. As the Company
continues to expand, it intends to appropriately increase the relative size of
these departments.

Financial Control Group

The Company's finance and accounting department, consisting of nine
full-time staff, maintains a comprehensive system of internal controls
concerning its financial, operational and trading activities.

GOVERNMENT REGULATION

The securities business is subject to extensive and frequently changing
federal and state laws and substantial regulation under such laws by the
Commission and various state agencies and self-regulatory organizations, such as
the NASD. GKN and Shochet are registered as broker-dealers with the Commission
and are member firms of the NASD. Much of the regulation of broker-dealers has
been delegated to self-regulatory organizations, principally the NASD, which has
been designated by the Commission as the Company's primary regulator. The NASD
adopts rules (which are subject to approval by the Commission) that govern its
members and conducts periodic examinations of member firms' operations.
Securities firms are also subject to regulation by state securities
administrators in those states in which they conduct business. GKN is registered
as a broker-dealer in all 50 states, the District of Columbia and Puerto Rico.
Shochet is registered as a broker-dealer in 15 states.

Broker-dealers are subject to regulations which cover all aspects of the
securities business, including sales methods and supervision, trading practices
among broker-dealers, use and safekeeping of customers' funds and securities,
capital structure of securities firms, record keeping and the conduct of
directors, officers and employees. Additional legislation, changes in rules
promulgated by the Commission and self-regulatory organizations, or changes in
the interpretation or enforcement of existing laws and rules, may directly
affect the mode of operation and profitability of broker-dealers.

29
<PAGE>
The Commission, self-regulatory organizations and state securities commissions
may conduct administrative proceedings which can result in censure, fine, the
issuance of cease-and-desist orders or the suspension or expulsion of a
broker-dealer, its officers or employees. The principal purpose of regulation
and discipline of broker-dealers is the protection of customers and the
integrity of the securities markets.

GKN AG is subject to certain Swiss Federal and Cantonal (State) laws.
Securities trading and brokerage in Switzerland is currently governed by the
provisions of Cantonal law. Residing in Zurich, Switzerland, GKN AG is regulated
by The Law on Professional Trading of Securities in the Canton of Zurich. In
order to transact security trades in Switzerland, GKN AG must be granted a
"B-license." GKN AG has made application for such license and believes that it
will be granted the license in the near future; however, there can be no
assurances that GKN AG will receive the license. In the interim, the brokerage
of securities are executed and settled through GKN's principal office in New
York City.

Under The Law on Professional Trading of Securities, GKN AG must initially
have equity capital equal to 500,000 Swiss francs (approximately $400,000).
According to the draft of the Ordinance to the Federal Stock Exchange and
Security Dealer's Law, the equity capital will have to be increased to the
amount of 1,500,000 Swiss francs (approximately $1,200,000). Distributions of
equity capital by GKN AG are governed by the Swiss Code of Obligations, wherein
any distributions are limited to profits or reserves created for such purpose.
GKN AG was initially capitalized in February 1996 with 500,000 Swiss francs
(approximately $400,000). If the equity capital of GKN AG and its legal reserves
fall to less than half the initial requirement, it must be recapitalized. (Swiss
francs have been converted to U.S. dollars in the foregoing parentheticals
utilizing the July 1, 1996 spot rate.)

Net Capital Requirements

As registered broker-dealers and member firms of the NASD, GKN and Shochet
are subject to the Commission's net capital rule. The net capital rule, which
specifies minimum net capital requirements for registered brokers and dealers,
is designed to measure the general financial integrity and liquidity of a
broker-dealer and requires that at least a minimum part of its assets be kept in
relatively liquid form. Net capital is essentially defined as net worth (assets
minus liabilities), plus qualifying subordinated borrowings and less certain
mandatory deductions that result from excluding assets not readily convertible
into cash and from valuing certain other assets, such as a firm's positions in
securities, conservatively. Among these deductions are adjustments in the market
value of securities to reflect the possibility of a market decline prior to
disposition.

GKN has elected to compute its net capital using the alternative method
permitted by the Rule, which requires that GKN maintain minimum net capital, as
defined, to be greater than or equal to, $250,000. At April 30, 1996, GKN had
net capital of $10,807,000, which was $10,557,000 in excess of required net
capital of $250,000.

Shochet has elected to compute net capital under the standard aggregate
indebtedness method permitted by the Rule, which requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not exceed
15-to-1. At April 30, 1996, Shochet had net capital and a net capital
requirement of $491,000 and $100,000, respectively. Shochet's net capital ratio
was 0.75-to-1.

Failure to maintain the required net capital may subject a firm to
suspension or expulsion by the NASD, the Commission and other regulatory bodies
and ultimately may require its liquidation. The net capital rule also prohibits
payments of dividends, redemption of stock and the prepayment or payment in
respect of principal of subordinated indebtedness if net capital, after giving
effect to the payment, redemption or repayment, would be less than specified
percentage (120%) of the minimum net capital requirement. Compliance with the
net capital rule could limit those operations of the Company's brokerage
subsidiaries that require the intensive use of capital, such as underwriting and
trading activities, and also could restrict the Company's ability to withdraw
capital from its operating

30
<PAGE>
subsidiaries, which in turn, could limit the Company's ability to pay dividends,
repay debt and redeem or purchase shares of its outstanding capital stock.

COMPETITION

The Company encounters intense competition in all aspects of the securities
business and competes directly with other securities firms, a significant number
of which have greater capital and other resources. In addition to competition
from firms currently in the securities business, there has recently been
increasing competition from other sources, such as commercial banks and
insurance companies offering financial services, and from other investment
alternatives. The Company believes that the principal factors affecting
competition in the securities industry are the quality and abilities of
professional personnel, including their ability to effectuate a firm's
commitments, and the quality, range and relative prices of services and products
offered.

OTHER OPERATIONS

Historically, the Company has maintained limited operations in the
acquisition, management, syndication and operation of real estate projects,
through its subsidiaries, GKN Realty Corp. and GKN Property Management, Inc. To
date, the operations of GKN Realty and GKN Property have had no significant
impact on the Company. The Company intends to wind down its real estate
operations over the next several years.

PERSONNEL

At April 30, 1996, the Company had 469 full-time employees, including 260
registered representatives. None of the Company's personnel is covered by a
collective bargaining agreement. The Company considers its relationships with
its employees to be very good.

PROPERTIES

The principal executive offices of the Company and GKN are located at 61
Broadway, New York, New York 10006 where the Company leases or subleases
approximately 25,000 square feet of office space. The sublease and leases for
these premises all expire in February 1998. The following information relates to
the branch offices of GKN and Shochet:

GKN

<TABLE>
<CAPTION>
OFFICE LOCATION APPROXIMATE SQUARE FOOTAGE EXPIRATION
- --------------------------------------------------- -------------------------- ---------------
<S> <C> <C>

Boca Raton, Florida................................ 10,000 October 1999
1,500 October 1997

Great Neck, New York............................... 5,000 September 1998

Stamford, Connecticut.............................. 5,000 November 2004

Miami, Florida..................................... 4,000 June 2003
</TABLE>

Shochet

<TABLE>
<CAPTION>
OFFICE LOCATION APPROXIMATE SQUARE FOOTAGE EXPIRATION
- --------------------------------------------------- -------------------------- ---------------
<S> <C> <C>

Hallandale, Florida................................ 5,000 February 2006

Miami Beach, Florida............................... 3,000 April 1998

South Miami, Florida............................... 3,000 November 1998

Tamarac, Florida................................... 3,000 June 2001
</TABLE>

31
<PAGE>
LEGAL PROCEEDINGS

Many aspects of the Company's business involve substantial risks of
liability, including exposure under federal and state securities laws in
connection with the underwriting and distribution of securities. The Company
does not presently maintain an errors and omissions insurance policy insuring it
against these risks. In recent years, there has been an increasing incidence of
litigation involving the securities industry, including class actions which
generally seek rescission and substantial damages. Additionally, securities
brokerage firms, including the Company, become parties to arbitrations brought
by dissatisfied customers in the general course of business.

GKN is the subject of an SEC staff investigation that arose primarily from
certain sales practices and the supervision of certain registered
representatives in 1991 and 1992. GKN expects to submit to the Commission
shortly an Offer of Settlement that has been discussed with the SEC staff. There
is no assurance that the SEC staff will support the proposed settlement nor that
the Commission will agree to it. Under the proposed Offer of Settlement, without
admitting or denying the findings, GKN would agree to the entry of an Order
finding that, during 1991 and 1992, GKN and Robert Gladstone failed reasonably
to supervise a number of registered representatives with a view to preventing
certain securities law violations. The proposed Order would recite that from
1990 through 1992, GKN hired a large number of registered representatives and
that the number of customer complaints received by GKN rose substantially and
included multiple complaints against certain of the registered representatives.
The proposed Order would also contain GKN's representation that, since the
latter part of 1992, it has undertaken a number of specific efforts to improve
its supervisory and compliance systems and its undertaking to maintain these
policies and procedures. Under the terms of the proposed settlement, GKN would
pay a penalty of $100,000, implement and maintain the policies and procedures
previously undertaken, and retain an independent consultant to conduct a review
of the firm's policies and procedures and report its recommendations to GKN and
the SEC staff. GKN has agreed (subject to certain safeguards) to adopt the
independent consultant's recommendations. Under the proposed settlement, Robert
Gladstone would pay a $50,000 penalty and agree not to be associated in a
supervisory capacity with any broker-dealer, municipal securities dealer,
investment company or investment adviser (with a right to reapply after 18
months). Mr. Gladstone would remain an officer and principal stockholder of the
Company. The terms of the Offer of Settlement, are the subject of continuing
discussions with the SEC staff and there is no assurance that any proposed
settlement will be accepted by the SEC staff.

GKN is the subject of an NASD staff investigation which, the Company
believes, arises primarily from mark-ups and mark-downs taken on customer
transactions in warrants of certain issuers whose offerings were managed by GKN,
and sales practices in connection with such transactions. The purpose of the
investigation is to determine whether GKN or any persons associated with the
firm have engaged in any violation of the federal securities laws or the NASD
Rules of Fair Practice. The NASD staff has not advised GKN whether it intends to
recommend any enforcement action and GKN cannot predict when the investigation
might end, or its outcome. GKN is cooperating fully with the NASD staff in the
investigatory process. The NASD has broad authority to sanction persons subject
to its jurisdiction, including the levying of financial penalties, disgorgement,
the imposition of censures, suspensions or bars on its supervisors and
principals, and the imposition of sanctions. Accordingly, the outcome of the
NASD investigation could restrict GKN's business activities, have a substantial
adverse financial impact on GKN and otherwise have a material adverse effect on
the Company.

In addition, the outcome of the SEC and NASD investigations could generate
adverse publicity which in turn could have a material adverse effect on the
Company's operations.

32
<PAGE>
MANAGEMENT

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -----------------------------------------------
<S> <C> <C>
David M. Nussbaum................. 42 Chairman of the Board and Chief Executive
Officer of the Company and GKN
Roger N. Gladstone................ 42 President and Director of the Company and GKN
Peter R. Kent..................... 43 Chief Operating Officer, Chief Financial
Officer and Director of the Company and GKN
Lester Rosenkrantz................ 55 Executive Vice President and Director of the
Company and GKN
Robert H. Gladstone............... 38 Executive Vice President of the Company and GKN
James I. Krantz................... 41 Director of the Company
John P. Margaritis................ 47 Director of the Company*
Arnold B. Pollard................. 53 Director of the Company*
</TABLE>

- ------------

* Will become a Director upon consummation of the Offering.

DAVID M. NUSSBAUM has been Chairman of the Board and Chief Executive Officer
of the Company since September 1990 and a Director of the Company since January
1987. He is also Chairman of the Board and Chief Executive Officer of GKN and is
the principal executive officer of GKN's New York operations. He is also a
director of Shochet and a director and executive officer of GKN Fund. Mr.
Nussbaum serves on the Board of Arbitrators of the National Association of
Securities Dealers, Inc. He is also a member of the Young Presidents
Organization and a member of the Board of Directors of the Sid Jacobson Jewish
Community Center in Roslyn, New York. From 1984 through 1986, Mr. Nussbaum was
engaged primarily in the acquisition, management, syndication and operation of
real estate projects. In connection with Mr. Nussbaum's real estate activities,
he was an executive officer and director of the corporate general partners of
River Village Associates ("River Village") and Frontage Realty Limited
Partnership ("Frontage"), limited partnerships formed to acquire real estate.
River Village and Frontage filed for protection under Chapter 11 of the
bankruptcy law in 1992 and 1993, respectively. From 1980 through 1984, Mr.
Nussbaum was engaged in the private practice of law at the firm of Rosenman
Colin Freund Lewis & Cohen in New York. Mr. Nussbaum graduated from the
University of Michigan, magna cum laude. He received his law degree (cum laude;
Order of the Coif) from New York University School of Law.

ROGER N. GLADSTONE has been President and a Director of the Company since
January 1987. He is also President and a Director of GKN and is the principal
executive officer of GKN's Florida operations. He is also a director and
executive officer of Shochet, GKN AG and GKN Fund. Mr. Gladstone serves on the
Board of Arbitrators of the National Association of Securities Dealers, Inc. He
is also a member of the Young Presidents Organization and a member of the Board
of Directors of the Sid Jacobson Jewish Community Center in Roslyn, New York.
Mr. Gladstone is the Director of No Small Affair South, a charitable foundation
which provides positive experiences for disadvantaged children. From 1984
through 1986, Mr. Gladstone was engaged primarily in the acquisition,
management, syndication and operation of real estate projects. Mr. Gladstone was
an executive officer and director of the corporate general partners of River
Village and Frontage. River Village and Frontage filed for protection under
Chapter 11 of the Bankruptcy law in 1992 and 1993, respectively. From 1980
through 1984, Mr. Gladstone was engaged in the private practice of law in New
York. Mr. Gladstone graduated from Stanford University. He received his Masters
Degree in Business Administration from New York University and his law degree
from the Benjamin N. Cardozo School of Law, Yeshiva University.

33
<PAGE>

PETER R. KENT has been Chief Financial Officer of the Company and GKN since
July 1995, Chief Operating Officer of the Company and GKN since February 1996
and a Director of the Company and GKN since May 1996. He has also served as
Chief Financial Officer and director of Shochet since its acquisition in
November 1995. From September 1991 through February 1995, Mr. Kent served
initially as Chief Financial Officer, and subsequently as President, Chairman of
the Board, and Chief Executive Officer, of Consolidated Waste Services of
America, Inc., a solid waste management and recycling company. From 1988 until
1991, Mr. Kent was employed by the securities firm of Wessels, Arnold &
Henderson, where he served as a member of the Corporate Finance Department in
charge of its Environmental Services Group. From 1984 to 1988, Mr. Kent was
employed by Henry Ansbacher, Inc., a firm involved in the field of media mergers
and acquisitions, initially as Chief Financial Officer and subsequently, as its
President and Chief Operating Officer. Previous to 1984, Mr. Kent had been
employed by Sutro & Co. Incorporated, Wells Fargo Bank, and Arthur Andersen &
Co. Mr. Kent is a Certified Public Accountant. Mr. Kent graduated from the
University of California at Berkeley, where he also received his Masters in
Business Administration.

LESTER ROSENKRANTZ has been a Director and Executive Vice President of the
Company and GKN since February 1994. Mr. Rosenkrantz was Vice Chairman and
Director of Corporate Finance of Reich & Co., Inc. (formerly Vantage
Securities), a member of the New York Stock Exchange ("NYSE"), from November
1990 until January 1994. He has also served in various management positions at
Rosenkrantz, Lyon and Ross, Incorporated, a NYSE member firm from 1973 to 1990,
serving as Vice Chairman at the time of completion of his tenure. Mr.
Rosenkrantz was employed by Andresen & Company from 1963 to 1973, lastly as a
General Partner and head of institutional and retail sales. Mr. Rosenkrantz
graduated from Pennsylvania State University.

ROBERT H. GLADSTONE has been the Executive Vice President of the Company
since November 1993 and a Director of the Company from January 1992 to May 1996.
He has also been an executive officer of GKN since January 1990 and is now
Executive Vice President of GKN. Mr. Gladstone was employed by Stuart James &
Co. from July 1984 until December 1989, starting as an account executive,
becoming Branch Manager of the Darien, Connecticut office in January 1986 and
Area Manager supervising four branch offices employing more than 100 registered
representatives in 1989. Prior to July 1984, Mr. Gladstone was an account
executive at Ladenburg, Thalmann & Co. (October 1983 to June 1984) and at
Advest, Inc. (October 1980 to September 1983). Mr. Gladstone graduated from
Boston University. Mr. Gladstone is involved in an SEC Staff investigation of
GKN. Under a proposed settlement, which has been discussed with the SEC Staff,
Mr. Gladstone would pay a $50,000 penalty and agree not to be associated in a
supervisory capacity with any broker-dealer, municipal securities dealer,
investment company or investment advisor (with a right to reapply after 18
months). The proposed settlement remains under discussion with the SEC and may
be modified with respect to Mr. Gladstone. Mr. Gladstone would remain an officer
and principal stockholder of the Company. See "Business--Legal Proceedings."

JAMES I. KRANTZ has been a Director of the Company since September 1990.
Since 1977, Mr. Krantz has served as a Property, Casualty and Life Insurance
Broker and has been engaged in real estate management and investment. Mr. Krantz
was an executive officer and director of the corporate general partner of River
Village. River Village filed for protection under Chapter 11 of the bankruptcy
law in 1992. Mr. Krantz is currently President and Chief Executive Officer of
York International Agency, Inc., a full service insurance agency located in
Westchester, New York. Mr. Krantz graduated from Syracuse University. He
received his Chartered Property Casualty Underwriter (CPCU) designation in 1989.

JOHN P. MARGARITIS will become a Director of the Company upon consummation
of this Offering. Mr. Margaritis has been the President and Chief Executive
Officer of Ogilvy Adams & Rinehart, a public relations firm, since January 1994,
and was the President and Chief Operating Officer from January 1992 to January
1994. From July 1988 until January 1992, Mr. Margaritis was

34
<PAGE>
Chairman and Chief Executive Officer of Ogilvy & Mathers, Public Relations. Mr.
Margaritis is a director of the Young President's Organization/Metro Chapter,
the Arthur Ashe Institution for Urban Health and Research America, a non-profit
organization to promote government's support of medical research. Mr. Margaritis
is a member of the President's Advisory Counsel for the Museum of Television and
Radio. Mr. Margaritis is also a trustee of Washington and Jefferson College. Mr.
Margaritis graduated from Washington and Jefferson College and received his
masters degree from the New School for Social Research.

ARNOLD B. POLLARD will become a Director of the Company upon consummation of
this Offering. Since 1993, he has been the President and Chief Executive Officer
of Chief Executive Group, which publishes "Chief Executive" magazine. For nearly
20 years, he has been President of Decision Associates, a management consulting
firm specializing in organizational strategy and structure. Mr. Pollard was a
founding member of the Strategic Decision Analysis Group of SRI, a company
engaged in management consulting and contract research. From 1989 to 1991, Mr.
Pollard served as Chairman and Chief Executive Officer of Biopool International,
a biodiagnostic company focusing on blood related testing. From 1970 to 1973,
Mr. Pollard served as an adjunct professor at the Columbia Graduate School of
Business. Mr. Pollard graduated from Cornell University (Tau Beta Pi) and
received his Masters and Ph.D degrees from Stanford University.

The Board of Directors of the Company is divided into three classes, each of
which generally serves for a term of three years, with only one class of
directors being elected in each year. The term of the office of the first class
of directors (Class I), presently consisting of Lester Rosenkrantz , James
Krantz and Arnold Pollard will expire in 1997; the term of the second class of
directors (Class II), presently consisting of Peter R. Kent and John Margaritis,
will expire in 1998; and the term of office of the third class of directors
(Class III), presently consisting of David M. Nussbaum and Roger N. Gladstone,
will expire in 1999. In each case, each director will hold office until the next
meeting of stockholders at which his/her class of directors is to be elected or
until his/her successor is duly appointed and qualified. Roger N. Gladstone is
the brother of Robert H. Gladstone and the brother-in-law of David M. Nussbaum.
No other family relationships exist between any executive officers or directors
of the Company or its subsidiaries.

The Board of Directors has designated an Audit Committee of the Board of
Directors consisting initially of Mr. Peter R. Kent, Mr. John P. Margaritis and
Mr. Arnold B. Pollard, which will review the performance of the independent
accountants as auditors for the Company, discuss and review the scope and the
fees of the prospective annual audit and review the results with the auditors.
The Board of Directors has designated a Compensation Committee of the Board of
Directors consisting initially of Mr. David M. Nussbaum, Mr. John P. Margaritis
and Mr. Arnold B. Pollard, which will review and make recommendations to the
Board regarding salaries, compensation and benefits (other than with respect to
the 1991 Plan and IC Plan) of executive officers and key employees of the
Company. The Board of Directors has also designated an Employee Incentive
Committee of the Board of Directors consisting initially of Mr. James Krantz,
Mr. John P. Margaritis and Mr. Arnold B. Pollard, which will administer and make
all decisions with respect to the grant of awards under, the 1991 Plan and IC
Plan. The responsibilities of the aforementioned committees will commence upon
the consummation of this Offering.

It is anticipated that Messrs. Margaritis and Pollard will be paid $2,500
per fiscal quarter during their terms as directors.

35
<PAGE>
EXECUTIVE COMPENSATION

The following table shows the cash compensation paid by the Company and its
subsidiaries, as well as certain other compensation paid or accrued, during the
fiscal years ended January 31, 1996, 1995 and 1994, to the Chief Executive
Officer of the Company and the four most highly compensated executive officers
(other than the Chief Executive Officer) whose compensation was $100,000 or
greater during the fiscal year ended January 31, 1996 ("Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION (1)
- ------------------------------------ ------ -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>

David M. Nussbaum................... 1996 $240,000 $250,000 20,000 $521,000
Chairman of the Board and Chief 1995 240,000 50,000 -0- 482,000
Executive Officer of the 1994 163,000 -0- -0- 811,000
Company and GKN

Roger N. Gladstone.................. 1996 240,000 250,000 20,000 534,000
President of the Company and GKN 1995 240,000 50,000 -0- 505,000
1994 163,000 -0- -0- 775,000

Peter R. Kent (2)................... 1996 92,000 85,000 70,000 -0-
Chief Operating and Financial 1995 -0- -0- -0- -0-
Officer of the Company 1994 -0- -0- -0- -0-
and GKN

Lester Rosenkrantz (3).............. 1996 150,000 20,000 -0- 19,000
Executive Vice President of the 1995 150,000 15,000 25,000 26,000
Company and GKN 1994 -0- -0- -0- -0-

Robert H. Gladstone................. 1996 240,000 250,000 20,000 549,000
Executive Vice President of the 1995 240,000 50,000 -0- 553,000
Company and GKN 1994 $138,000 $ -0- -0- $829,000
</TABLE>

- ------------

(1) Primarily commissions paid on the brokerage of securities.

(2) Mr. Kent began employment with the Company on July 24, 1995.

(3) Mr. Rosenkrantz began employment with the Company on February 1, 1994.

36
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth each grant of stock options made by the
Company during the fiscal year ended January 31, 1996 to each of the Named
Officers.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARS GRANTED TO EXERCISE PRICE
OPTION/SARS EMPLOYEES IN OR BASE PRICE EXPIRATION 5% 10%
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE (1) (1)
- ---------------------------- ----------- --------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David M. Nussbaum........... 20,000(2) 5.42% $ 4.95 1/31/00 $ 27,400 $ 60,800
Chairman of the Board and
Chief Executive Officer
of the Company and GKN
Roger N. Gladstone.......... 20,000(2) 5.42% $ 4.95 1/31/00 $ 27,400 $ 60,800
President of the Company
and GKN
Peter R. Kent............... 70,000(3) 18.98% $ 4.50 7/23/05 $198,800 $504,000
Chief Operating and
Financial Officer of the
Company and GKN
Lester Rosenkrantz.......... -0- 0% -0- -- -0- -0-
Executive Vice President
of the Company and GKN
Robert H. Gladstone......... 20,000(4) 5.42% $ 4.50 1/31/05 $ 56,800 $144,000
Executive Vice President
of the Company and GKN
</TABLE>

- ------------

(1) Represents potential realizable value at the indicated assumed annual rates
of stock price appreciation for the term of the options.

(2) Options become exercisable in three equal annual installments on December
31, 1996, December 31, 1997, and December 31, 1998.

(3) 22,222 of these options are exercisable. 22,222 become exercisable on each
of July 23, 1996 and July 23, 1997. The remainder become exercisable on July
23, 1998.

(4) Options become exercisable on February 1, 2000. However, in May 1996 these
options were converted into 6,666 options which become exercisable in three
equal annual installments on December 31, 1996, December 31, 1997, and
December 31, 1998. The exercise price and expiration date remain the same.

37
<PAGE>

OPTION EXERCISES AND HOLDINGS

The following table sets forth information concerning the number and value
of unexercised options held by each of the Named Officers as of January 31,
1996.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED IN-THE-
ACQUIRED UNEXERCISED OPTIONS/SARS MONEY OPTIONS/SARS
ON AT FISCAL YEAR-END (#)(1) FISCAL YEAR-END (2)
EXERCISE ------------------------------ ---------------------------
NAME (#) EXERCISABLE(3) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- -------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
David M. Nussbaum....................... -0- 250,000 20,000 $1,280,000 $21,000
Chairman of the Board and Chief
Executive Officer of the Company and
GKN
Roger N. Gladstone...................... -0- 250,000 20,000 $1,280,000 $21,000
President of the Company and GKN
Peter R. Kent........................... -0- 22,222 47,778 $33,333 $71,667
Chief Operating and Financial Officer
of the Company and GKN
Lester Rosenkrantz...................... -0- -0- 25,000 -0- -0-
Executive Vice President of the
Company
and GKN
Robert H. Gladstone..................... -0- 125,000 20,000 $650,000 $30,000
Executive Vice President of the
Company
and GKN
</TABLE>

- ------------

(1) Represents shares issuable upon exercise of options granted under the 1991
Plan. See "Management--1991 Employee Incentive Plan."

(2) Based on the difference between the $6.00 assumed initial offering price of
the Shares and the exercise price of the option multiplied by the number of
shares of Common Stock subject to the option.

(3) In May 1996, David M. Nussbaum, Roger N. Gladstone and Robert H. Gladstone
exercised options to purchase 250,000, 250,000 and 125,000 shares,
respectively, at an exercise price of $0.88 per share for David Nussbaum and
Roger Gladstone, and $0.80 per share for Robert Gladstone.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements, dated as of May 1, 1996,
with each of David M. Nussbaum, Roger N. Gladstone and Robert H. Gladstone,
which expire on April 30, 1999. The agreements provide for an annual salary of
$240,000 to each and the issuance to each of up to 15% of any underwriter
warrants issuable to the Company in connection with its corporate finance and
investment banking activities. Messrs. Nussbaum, Gladstone and Gladstone each
receive payments of 20% of the gross brokerage commissions generated under any
of his or each other's customer accounts and they are also entitled to bonuses
under the IC Plan, described below. The Company has entered into an employment
agreement, dated as of May 1, 1996, with Peter R. Kent, which expires April 30,
1999. The agreement provides for an annual salary of $200,000. Mr. Kent is also
entitled to bonuses under the IC Plan. The agreements with Messrs. David
Nussbaum, Roger N. Gladstone, Robert H. Gladstone and Peter R. Kent contain
non-compete provisions which expire one year after termination of employment.
The Company has entered into an employment agreement, dated as of July 1, 1996,
with Lester Rosenkrantz, which expires June 30, 1997. The agreement provides for
an annual salary of $157,500, plus commissions earned. Mr. Rosenkrantz is also
entitled to bonuses under the IC Plan.

38
<PAGE>
UNDERWRITER WARRANTS

As discussed under "Employment Agreements" above, each of David M. Nussbaum,
Roger N. Gladstone and Robert H. Gladstone are issued up to 15% of the
underwriter warrants issuable to GKN in connection with its corporate finance
and investment banking activities (prior to May 1996, each were issued between
15% and 20% of such warrants). Generally, the balance of the underwriter
warrants (55%) are held by GKN, except that in certain circumstances, up to 20%
of the aggregate number of underwriter warrants issued by a client, issued on a
particular deal, may be issued to certain GKN employees involved in the
transaction.

1996 INCENTIVE COMPENSATION PLAN

The Company has established its 1996 Incentive Compensation Plan ("IC Plan")
effective August 1, 1996. The IC Plan establishes an incentive compensation pool
equal to 25% of all pre-tax, pre-incentive compensation profits, once a 10%
pre-tax, pre-incentive return on beginning equity has been achieved. The pool
will be distributed to executive management and business unit managers on the
basis of business unit and individual performance, as determined by the Employee
Incentive Committee of the Board of Directors. It is currently anticipated that
approximately 25% of all awards will be paid in shares of Common Stock.

1991 EMPLOYEE INCENTIVE PLAN

In June 1991, the Company adopted and its stockholders approved the 1991
Plan which, as amended, provides for the issuance of stock, stock options and
other stock purchase rights to executive officers and other key employees and
consultants who render significant services to the Company and its subsidiaries.
The 1991 Plan was adopted to provide the Board of Directors with sufficient
flexibility regarding the forms of incentive compensation which the Company will
have at its disposal to reward these persons. Under the 1991 Plan, both options
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified options may be granted.
Directors of the Company who are not employees of the Company or its
subsidiaries are not eligible to receive any awards under the 1991 Plan. The
Employee Incentive Committee of the Board of Directors determines the
distribution of awards under the 1991 Plan.

Management believes that, in view of the anticipated expansion of the
Company's operations over the next several years, the Company will be faced with
an increasing need for additional qualified personnel. The Company believes that
its ability to offer employees potential equity ownership through the grant of
stock, stock options and other stock purchase rights will enhance the Company's
ability to attract and retain qualified personnel, without unnecessarily
depleting the Company's cash reserves.

A total of 5,000,000 shares of Common Stock is currently reserved for
issuance under the Plan. At June 30, 1996 there were outstanding options under
the 1991 Plan to purchase an aggregate of 998,506 shares, exercisable at an
average exercise price of $4.62 per share, of which more than half are held by
non-executive officers and other employees of the Company. The Company's
executive officers and directors own options to purchase an aggregate of 152,666
shares of Common Stock at exercise prices ranging from $2.20 per share to $6.00
per share, with expiration dates ranging from January 2000 through July 2005.

OTHER OPTIONS AND WARRANTS

Messrs. Margaritis and Pollard, each of whom will become a director upon the
consummation of this Offering, were awarded options to purchase 10,000 shares of
Common Stock at a price equal to the per share offering price. These options
become exercisable on the day the optionees become directors of the Company and
remain exercisable for a period of ten years.

In connection with the Company's acquisition of Shochet, the Company agreed
to issue to the sellers, upon consummation of this Offering, five-year warrants
to purchase 25,000 shares of Common Stock at an exercise price equal to the
per-share Offering price.

39
<PAGE>

In February 1996, the Company issued warrants to purchase 80,000 shares of
the Company's Common Stock to Mr. Joachim Stahler, the Managing Director of GKN
AG, in connection with his employment by GKN AG. These warrants are exercisable
until January 30, 2001 at the per-share Offering price.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware General Corporation Law ("DGCL"), the Company's
Restated Certificate of Incorporation limits the personal liability of a
director of the Company for monetary damages for breach of fiduciary duty of
care as a director. Liability is not eliminated for (i) any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payment of dividends or stock purchases or
redemptions pursuant to Section 174 of the DGCL, or (iv) any transaction from
which the director derived an improper personal benefit.

The Company's Restated Certificate of Incorporation permits the Company to,
and the Company will, indemnify a director and/or officer of the Company against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
any civil, criminal, administrative or investigative action, suit or proceeding,
including a derivative action, if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interest of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his conduct was unlawful. The Company also has
entered into indemnification agreements with each of its directors and executive
officers. The indemnification agreements provide that the directors and
executive officers will be indemnified to the fullest extent permitted by
applicable law against all expenses (including attorneys' fees), judgments,
fines and amounts reasonably paid or incurred by them for settlement in any
civil, criminal, administrative or investigative action, suit or proceeding,
including a derivative action. No indemnification will be provided under the
indemnification agreements, however, to any director or executive officer in
certain limited circumstances, including on account of knowingly fraudulent,
deliberately dishonest or willful misconduct. To the extent the provisions of
the indemnification agreements exceed the indemnification permitted by
applicable law, such provisions may be unenforceable or may be limited to the
extent they are found by a court of competent jurisdiction to be contrary to
public policy.

40
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Common Stock as of June 30, 1996, and as
adjusted to reflect the sale of the Shares offered hereby by (i) each person
known by the Company to own beneficially 5% or more of its outstanding shares of
Common Stock, (ii) each director and director-nominee, (iii) the Chief Executive
Officer and each of the Company's next four most highly compensated executive
officers whose individual compensation exceeded $100,000 in the fiscal year
ended January 31, 1996, and (iv) all directors and executive officers of the
Company as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares, subject to community property laws where applicable.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
SHARES BENEFICIALLY ------------------------
OWNED BEFORE BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OFFERING(2) OFFERING OFFERING
- ------------------------------------------------------------------------ -------- --------
<S> <C> <C> <C>

David M. Nussbaum(3)................................. 1,226,111(4) 21.7% 15.0%

Roger N. Gladstone(3)................................ 1,226,111(4) 21.7% 15.0%
c/o GKN Securities Corp.
433 Plaza Real
Suite 245
Boca Raton, Florida 33432

Peter R. Kent........................................ 44,444(5) * *

Lester Rosenkrantz................................... -0-(6) * *

Robert H. Gladstone(3)(7)............................ 452,778(7) 8.0% 5.5%

James I. Krantz...................................... 152,375(8) 2.7% 1.9%
c/o York International Agency, Inc.
1 Executive Boulevard
Yonkers, NY 10701

John P. Margaritis................................... 10,000(9) * *
c/o Ogilvy, Adams & Rinehart
708 Third Avenue
New York, NY 10017

Arnold B. Pollard.................................... 10,000(9) * *
c/o Chief Executive Magazine
733 Third Avenue
New York, NY 10017

All Executive Officers and Directors (8 persons) 3,121,819 54.9% 38.1%
(10).................................................
</TABLE>

- ------------

* Represents beneficial ownership of less than 1% of the Common Stock.

(1) Unless otherwise indicated, the holders' address is c/o GKN Holding Corp.,
61 Broadway, New York, New York 10006.

(2) Each stockholder has sole voting and sole investment power with respect to
all shares for which beneficial ownership is shown, except where otherwise
indicated.

(3) Roger N. Gladstone and Robert H. Gladstone are brothers. David M. Nussbaum
is Roger N. Gladstone's brother-in-law.

(Footnotes continued on following page)

41
<PAGE>
(Footnotes continued from preceding page)
(4) Does not include shares issuable upon exercise of options to purchase 20,000
shares at $4.95 per share, which become exercisable in three annual
installments commencing December 31, 1996.

(5) Represents shares issuable upon exercise of options at $4.50 per share. Does
not include 25,556 shares issuable upon exercise of options exercisable at
$4.50 per share, which become exercisable in two annual installments
beginning in July 1997.

(6) Does not include 25,000 shares issuable upon exercise of options exercisable
at $6.00 per share, which become exercisable in three equal annual
installments beginning in January 1997.

(7) Includes 50,000 shares issuable upon exercise of options held by Shawn
Gladstone, Robert H. Gladstone's wife, at $2.20 per share. Does not include
2,500 shares issuable upon exercise of other options held by Mrs. Gladstone,
which do not become exercisable until December 1996, and options to purchase
6,666 shares at $4.50 per share, which become exercisable in three annual
installments commencing December 31, 1996.

(8) Includes 3,125 shares held by Mr. Krantz' wife and 10,000 shares issuable
upon exercise of options, 5,000 of which are exercisable at $2.20 per share
and 5,000 of which are exercisable at $6.00 per share. Does not include
shares issuable upon exercise of options to purchase 1,000 shares at $4.50
per share, which become exercisable February 2000.

(9) Includes 10,000 shares issuable upon exercise of options at $6.00 per share.

(10) Includes the shares subject to options and included in the table, as set
forth in footnotes (5), (7), (8), and (9), and excludes those shares
indicated in footnotes (4), (5), (6), (7) and (8) as being excluded
therefrom.

CERTAIN TRANSACTIONS

In March 1991, the Company agreed to lend to Messrs. David M. Nussbaum,
Roger N. Gladstone, James I. Krantz and Jonathan Krantz (James Krantz' brother)
up to an aggregate of $250,000 to cover capital calls made on them in their
capacity as limited partners of Heather Croft Associates Limited Partnership
("Heather Croft"). All such loans are due and payable three years from the date
each loan was made, together with interest at 10% per annum. All such loans had
been repaid as of January 31, 1996. Prior to such repayment, the maximum amount
outstanding under this arrangement, including accrued interest was $305,000.
Messrs. Nussbaum, Gladstone, Krantz and Krantz, in the aggregate, own 66% of the
limited partnership interests of Heather Croft. In consideration of the Company
agreeing to make the above-described loans, each of Messrs. Nussbaum and
Gladstone agreed to pay to the Company, when and as received by him, 25% of any
distributions from Heather Croft (other than repayment of indebtedness) over and
above his original capital contribution to Heather Croft ("Partner's Profits")
and each of James Krantz and Jonathan Krantz agreed to pay 10% of his Partner's
Profits to the Company. As of the date hereof, no Partner's Profits have been
distributed.

The Company has purchased and continues to purchase insurance using York
International Agency, Inc. ("York") as its agent. James Krantz, a director of
the Company, is President and Chief Executive Officer, a director and a
stockholder of York. In the years ended January 31, 1994, 1995 and 1996, the
Company paid premiums for insurance policies purchased through York (a portion
of which amounts are paid by the insurer to York) of $92,000, $114,000 and
$98,000, respectively.

In the fiscal year ended January 31, 1995, the Company loaned Mr. Lester
Rosenkrantz, Executive Vice President and a Director of the Company, an
aggregate of $99,000. An additional $25,000 loan was made in the year ended
January 31, 1996. Mr. Rosenkrantz repaid $10,000 in December 1995 and $20,000 in
March 1996, leaving an aggregate outstanding principal balance as of May 31,
1996 of $94,000. These loans are payable without interest and are collateralized
through the pledge by Mr. Rosenkrantz of his interest in certain underwriter
warrants.

42
<PAGE>
In March 1995, the Company loaned Mr. Roger Gladstone $200,000, which was
repaid by Mr. Gladstone by offset against his salary over a period of ten
months, without interest.

In October 1995, the Company repurchased from the mother of Messrs. Roger
and Robert Gladstone an aggregate of 100,000 shares of Common Stock for
$200,000, or $2.00 per share. The shares were originally purchased in 1991 at a
price of $.80 per share.

In May 1996, David Nussbaum, Roger Gladstone and Robert Gladstone exercised
stock options to purchase 250,000 shares, 250,000 shares and 125,000 shares of
Common Stock, respectively, at purchase prices of $.88, $.88 and $.80,
respectively, which purchase prices were paid by delivery to the Company of
shares of the Company's Common Stock owned by optionholders, valued for this
purpose at $4.50 per share.

In connection with its corporate finance and investment banking activities,
GKN is often issued warrants to purchase securities of the issuer for whom its
services are rendered ("Underwriter Warrants"). Generally, a portion of the
Underwriter Warrants issuable to GKN are issued to its executive officers and,
in certain circumstances, to other personnel involved in the transaction
(collectively the "Individual Holders"). GKN has, in the past, and may, in the
future, purchase Underwriter Warrants from the Individual Holders at a price
equal to the market price of the underlying securities less the exercise price
of the Underwriter Warrants. Additionally, GKN has, in the past, and may, in the
future, lend to the Individual Holders funds to pay the exercise price of the
Underwriter Warrants, which loans are repaid, without interest, within a period
of no more than two weeks.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 35,000,000 shares of
Common Stock, par value $.0001 per share, and 5,000,000 shares of Preferred
Stock, par value $.10 per share ("Preferred Stock").

COMMON STOCK

There are currently 5,559,125 shares of Common Stock issued and outstanding
(excluding 783,750 shares held in the Company treasury), held of record by 78
stockholders. After completion of this Offering, there will be 8,059,125 shares
of Common Stock issued and outstanding.

Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Stockholders do not
have cumulative voting rights. Subject to preferences that may be applicable to
any then outstanding Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor. See "Dividend Policy." In
the event of a dissolution, liquidation or winding-up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no right to convert their Common Stock into
any other securities. The Common Stock has no preemptive or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and the Common Stock
to be outstanding upon completion of this Offering will be, duly authorized,
validly issued, fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption,

43
<PAGE>
liquidation preferences and the number of shares constituting any series or the
designation of such series. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and could have the effect of
delaying, deferring or preventing a change in control of the Company.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

Upon the closing of this Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law. In general,
this statute prohibits a publicly-held Delaware corporation from engaging, under
certain circumstances, in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless either (i) prior to
the date at which the stockholder became an interested stockholder the Board of
Directors approved either the business combination or the transaction in which
the person becomes an interested stockholder, (ii) the stockholder acquires more
than 85% of the outstanding voting stock of the corporation (excluding shares
held by directors who are officers or held in certain employee stock plans) upon
consummation of the transaction in which the stockholder becomes an interested
stockholder or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent) held on or subsequent to the date of
the business combination. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset based transactions and other transactions
resulting in a financial benefit to the interested stockholder.

The Company's Amended and Restated Certificate of Incorporation and its
By-laws also contain provisions relating to corporate governance and to the
rights of stockholders. Certain of these provisions may be deemed to have a
potential "anti-takeover" effect, in that such provisions may delay, defer or
prevent a change of control of the Company. These provisions include the
authority of the Board of Directors to issue series of Preferred Stock with such
voting rights and other powers as the Board of Directors may determine, a
staggered board of directors consisting of three classes, such that after the
next annual meeting of stockholders only one class of directors is elected at
any one annual meeting of stockholders, and a provision requiring that
notification of nominations for directors made by stockholders be furnished to
the Company at least 90 days prior to the date of the meeting at which the
election of such nominees is to be considered and voted upon by the stockholders
of the Company. See "Management."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company, New York, New York.

44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
8,059,125 shares of Common Stock. All shares acquired in this Offering, other
than shares that may be acquired by "affiliates" of the Company as defined by
Rule 144 under the Act, will be freely transferable without restriction or
further registration under the Act.

All of the shares of Common Stock outstanding prior to the date of this
Prospectus are "restricted securities," as that term is defined under Rule 144
promulgated under the Act. Substantially all of the 5,559,125 shares outstanding
prior to this Offering will be available for resale in the public market under
Rule 144 commencing on the date of this Prospectus; however, all of the officers
and directors of the Company have agreed not to sell the shares they currently
own (an aggregate of 3,224,250 shares of Common Stock) for a period of fifteen
months from the date of this Prospectus without the prior written consent of
Pennsylvania Merchant Group Ltd. No prediction can be made as to the effect, if
any, that sales of shares of Common Stock or the availability of such shares for
sale will have on the market prices prevailing from time to time. Nevertheless,
the possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect the prevailing market price for the Common
Stock and could impair the Company's ability to raise capital through the sale
of its equity securities.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including any affiliate of the
Company, who beneficially owns "restricted shares" for a period of at least two
years is entitled to sell within any three-month period, shares equal in number
to the greater of (i) 1% of the then-outstanding shares of Common Stock
(approximately 80,591 shares immediately after this Offering) or (ii) the
average weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of the required notice of sale with the Securities and
Exchange Commission. The seller also must comply with the notice and manner of
sale requirements of Rule 144, and there must be current public information
available about the Company. In addition, any person (or persons whose shares
are aggregated) who is not, at the time of the sale, nor during the preceding
three months, an affiliate of the Company, and who has beneficially owned
restricted shares for at least three years, can sell such shares under Rule 144
without regard to notice, manner of sale, public information or the volume
limitations described above.

UNDERWRITING

Pennsylvania Merchant Group Ltd and GKN (collectively, the "Underwriters")
have severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company a total of 2,500,000 Shares. Each of
Pennsylvania Merchant Group Ltd and GKN has agreed to purchase one-half of the
Shares offered hereby. The Underwriting Agreement provides that the obligations
of the Underwriters are subject to approval of certain legal matters by counsel
and various other conditions precedent, and that the Underwriters are obligated
to purchase all of the Shares offered by this Prospectus (other than the Shares
covered by the over-allotment option described below), if any are purchased.

The Underwriters have advised the Company that they propose to offer the
Shares to the public at the initial offering price set forth on the cover page
of this Prospectus and to certain dealers at that price less a concession not in
excess of $ per Share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per Share to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the Underwriters.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act. The Company has also agreed to
pay to the Underwriters an expense allowance on a nonaccountable basis equal to
2% of the gross proceeds derived from the sale of the Shares underwritten
(including the sale of any Shares subject to the Underwriters' over-allotment

45
<PAGE>
option). The Company also has agreed to pay all expenses in connection with
qualifying the Shares offered hereby for sale under the laws of such states as
the Underwriters may designate, including fees and expenses of counsel retained
for such purposes by the Underwriters.

The Company has granted to the Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase from the
Company at the offering price, less underwriting discounts and the
nonaccountable expense allowance, up to an aggregate of 375,000 additional
Shares for the sole purpose of covering over-allotments, if any.

DETERMINATION OF PUBLIC OFFERING PRICE

Under Schedule E of the By-Laws of the NASD, when a member of the NASD, such
as GKN, participates in the public distribution of securities of an "affiliate,"
such as the Company, the public offering price can be no higher than recommended
by a qualified independent underwriter. In accordance with this requirement,
Pennsylvania Merchant Group Ltd has agreed to act in such role and to recommend
an initial public offering price in compliance with the requirements of Schedule
E. Pennsylvania Merchant Group Ltd, in its role as qualified independent
underwriter, has participated in the preparation of the Registration Statement
of which this Prospectus forms a part and has performed "due diligence" with
respect thereto. Pennsylvania Merchant Group Ltd has agreed to undertake the
legal responsibilities and liabilities of an underwriter under the Act,
specifically including those inherent in Section 11 thereof. The Company and GKN
have agreed to indemnify Pennsylvania Merchant Group Ltd against certain
liabilities under the Act.

Prior to this Offering, there has been no public market for the Common
Stock. The initial price to the public for the shares of Common Stock offered
hereby has been determined by negotiation between the Company and Pennsylvania
Merchant Group Ltd. The factors considered in determining the initial price to
the public include the history of and the prospects for the industry in which
the Company and its subsidiaries compete, the past and present operations of the
Company, the historical results of operations of the Company, the prospects for
future earnings of the Company, market valuations of other companies engaged in
activities similar to the Company, the Company's management and the general
condition of the securities market at the time of the Offering.

LEGAL MATTERS

The legality of the securities offered hereby has been passed upon for the
Company by Graubard Mollen & Miller. Kirkpatrick & Lockhart has acted as counsel
for the Underwriters in connection with this Offering. Graubard Mollen & Miller
represents GKN, one of the Underwriters, in other matters.

EXPERTS

The financial statements of the Company as of January 31, 1995 and 1996 and
for each of the two years in the period ended January 31, 1996 have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The financial
statements of the Company for the year ended January 31, 1994 have been included
herein in reliance upon the report of Goldstein Golub Kessler & Company, P.C.,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

46
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Commission in Washington, D.C., a
Registration Statement under the Act with respect to the Shares offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and this Offering, reference is made to the Registration
Statement, including the exhibits filed therewith, copies of which may be
obtained at prescribed rates from the Commission at the public reference
facilities maintained by the Commission at Judiciary Plaza Building, 450 Fifth
Street, N.W., Washington, D.C. 20549; and its regional offices located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661, and Seven World Trade Center, 13th Floor, New York, New York 10048.
Descriptions contained in this Prospectus as to the contents of any contract or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
contract or document.

47
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGES
-----
<S> <C>

Consolidated Statements of Financial Condition as of January 31, 1996 and 1995, and
as of April 30, 1996 (Unaudited)................................................... F-2

Consolidated Statements of Operations for the years ended January 31, 1996, 1995 and
1994, and the three months ended April 30, 1996 and 1995 (Unaudited)................. F-3

Consolidated Statements of Changes in Stockholders' Equity for the years ended
January 31, 1994, 1995 and 1996, and the three months ended April 30, 1996
(Unaudited).......................................................................... F-4

Consolidated Statements of Cash Flows for the years ended January 31, 1996, 1995 and
1994, and the three months ended April 30, 1996 and 1995 (Unaudited)................. F-5

Notes to Consolidated Financial Statements........................................... F-6

Independent Auditors' Report (KPMG Peat Marwick LLP)................................. F-13

Independent Auditor's Report (Goldstein Golub Kessler & Company, P.C.)............... F-14
</TABLE>

F-1
<PAGE>

GKN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
--------------------------
1996 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Cash and cash equivalents............................ $ 7,873,000 $ 3,123,000 $10,923.000
Due from clearing firm............................... 4,338,000 3,129,000 9,726,000
Commissions receivable............................... 106,000 128,000 152,000
Syndicate fees receivable............................ 369,000 -- 43,000
Securities owned, at market value.................... 8,152,000 5,440,000 5,692,000
Securities owned, not readily marketable, at fair
value................................................ 1,744,000 474,000 1,781,000
Investments, at cost................................. 292,000 -- 160,000
Office furniture, equipment and leasehold
improvements
(net of accumulated depreciation and amortization
of $1,027,000, $690,000 and $1,109,000,
respectively)........................................ 964,000 1,162,000 1,008,000
Goodwill (net of accumulated amortization of $11,000
at January 31, 1996 and $27,000 at April 30,
1996)................................................ 1,595,000 -- 1,581,000
Loans receivable..................................... 1,435,000 1,566,000 761,000
Income taxes receivable (including deferred taxes of
$22,000 at January 31, 1995)......................... -- 448,000 --
Other assets......................................... 985,000 626,000 1,290,000
----------- ----------- -----------
Total assets................................... $27,853,000 $16,096,000 $33,117,000
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Securities sold, not yet purchased, at market
value................................................ $ 4,015,000 $ 1,793,000 $ 6,167,000
Commissions payable................................ 1,992,000 1,204,000 2,649,000
Deferred compensation.............................. 331,000 144,000 789,000
Income taxes payable (including deferred taxes of
$1,292,000 and $940,000 at January 31, 1996
and April 30, 1996).............................. 1,610,000 -- 3,048,000
Accrued expenses and other liabilities............. 4,195,000 1,198,000 2,695,000
----------- ----------- -----------
12,143,000 4,339,000 15,348,000
Liability subordinated to the claims of general
creditors............................................ 934,000 -- 868,000
----------- ----------- -----------
Total liabilities.............................. 13,077,000 4,339,000 16,216,000
----------- ----------- -----------
Stockholders' equity:
Series A preferred stock $.10 par value; 5,000,000
shares authorized, 1,000 shares issued and
outstanding at January 31, 1995 (liquidation
value $1 per share).................................. -- -- --
Common stock, $.0001 par value; 35,000,000 shares
authorized, 5,397,875, 5,397,875 and 5,602,875
shares issued, respectively, and 4,885,375,
5,110,375 and 5,054,125 shares outstanding,
respectively......................................... 1,000 1,000 1,000
Additional paid-in capital......................... 3,487,000 3,487,000 3,487,000
Retained earnings.................................. 11,918,000 8,449,000 14,164,000
Cumulative translation adjustment.................. -- -- (18,000)
----------- ----------- -----------
15,406,000 11,937,000 17,634,000
Less treasury stock--at cost; 512,500, 287,500 and
548,750 shares, respectively......................... (630,000) (180,000) (733,000)
----------- ----------- -----------
Total stockholders' equity..................... 14,776,000 11,757,000 16,901,000
----------- ----------- -----------
Total liabilities and stockholders' equity..... $27,853,000 $16,096,000 $33,117,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-2
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
----------------------------------------- -------------------------
1996 1995 1994 1996 1995
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions............. $30,418,000 $21,804,000 $19,803,000 $12,068,000 $5,268,000
Investment banking...... 6,003,000 9,607,000 10,027,000 3,413,000 1,431,000
Principal
transactions.............. 5,683,000 433,000 2,739,000 2,477,000 266,000
Interest................ 717,000 262,000 203,000 337,000 126,000
Other................... 198,000 304,000 184,000 149,000 66,000
----------- ----------- ----------- ----------- ----------
Total revenues...... 43,019,000 32,410,000 32,956,000 18,444,000 7,157,000
----------- ----------- ----------- ----------- ----------
Expenses:
Compensation and
benefits.................. 27,121,000 22,856,000 18,819,000 10,728,000 5,241,000
Communications.......... 2,631,000 2,563,000 1,990,000 839,000 619,000
Brokerage, clearing and
exchange fees............. 1,350,000 908,000 695,000 631,000 267,000
Occupancy and
equipment................. 2,180,000 1,711,000 1,260,000 655,000 519,000
Business development.... 851,000 780,000 702,000 273,000 208,000
Professional fees....... 703,000 1,251,000 917,000 733,000 237,000
Other................... 1,896,000 1,447,000 1,151,000 590,000 435,000
----------- ----------- ----------- ----------- ----------
Total expenses...... 36,732,000 31,516,000 25,534,000 14,449,000 7,526,000
----------- ----------- ----------- ----------- ----------
Income (loss)
before provision
(benefit) for
income taxes.............. 6,287,000 894,000 7,422,000 3,995,000 (369,000)
----------- ----------- ----------- ----------- ----------
Income tax expense
(benefit):
Current................. 1,612,000 747,000 3,262,000 2,101,000 (117,000)
Deferred................ 1,206,000 (234,000) 154,000 (352,000) 4,000
----------- ----------- ----------- ----------- ----------
Provision (benefit)
for income taxes.......... 2,818,000 513,000 3,416,000 1,749,000 (113,000)
----------- ----------- ----------- ----------- ----------
Net income
(loss).................... $ 3,469,000 $ 381,000 $ 4,006,000 $ 2,246,000 $ (256,000)
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
Income (loss) per common
share*.................... $ .61 $ .07 $ .72 $ .40 $ (.04)
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
Weighted average common
shares outstanding........ 5,729,360 5,694,966 5,529,684 5,638,260 5,784,300
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
</TABLE>

- ------------

* Represents primary earnings per share. The difference between primary and
fully diluted earnings per share is not material.

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1994, 1995 AND 1996 AND THREE MONTHS ENDED APRIL 30,
1996 (UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL CUMULATIVE TREASURY STOCK
------------------- ---------------- PAID-IN RETAINED TRANSLATION --------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January
31, 1993........... 5,241,000 $1,000 1,000 $-- $3,327,000 $ 4,062,000 $ -- 287,500 $(180,000)
Net income......... -- -- -- -- -- 4,006,000 -- -- --
Stock issued....... 10,000 -- -- -- 60,000 -- -- -- --
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------
Balance at January
31, 1994........... 5,251,000 1,000 1,000 -- 3,387,000 8,068,000 -- 287,500 (180,000)
Net income......... -- -- -- -- -- 381,000 -- -- --
Stock issued in
conversion of
subordinated debt.. 162,500 -- -- -- 162,000 -- -- -- --
Retirement of
shares issued...... (15,625) -- -- -- (62,000) -- -- -- --
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------
Balance at January
31, 1995........... 5,397,875 1,000 1,000 -- 3,487,000 8,449,000 -- 287,500 (180,000)
Net income......... -- -- -- -- -- 3,469,000 -- -- --
Expiration of
preferred shares... -- -- (1,000) -- -- -- -- -- --
Purchase of
treasury shares.... -- -- -- -- -- -- -- 225,000 (450,000)
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------
Balance at January
31, 1996........... 5,397,875 1,000 -- -- 3,487,000 11,918,000 -- 512,500 (630,000)
Net income......... -- -- -- -- -- 2,246,000 -- -- --
Stock issued....... 205,000 -- -- -- 342,000 -- -- -- --
Subscription
receivable......... -- -- -- -- (121,000) -- -- -- --
Notes receivable... -- -- -- -- (221,000) -- -- -- --
Purchase of
treasury shares.... -- -- -- -- -- -- -- 36,250 (103,000)
Translation
adjustment......... -- -- -- -- -- -- (18,000) -- --
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------
Balance at April
30, 1996........... 5,602,875 $1,000 -- $-- $3,487,000 $14,164,000 $ (18,000) 548,750 $(733,000)
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------
--------- ------ ------ ------ ---------- ----------- ----------- ------- ---------

TOTAL
-----------
<S> <C>
Balance at January
31, 1993........... $ 7,210,000
Net income......... 4,006,000
Stock issued....... 60,000
-----------
Balance at January
31, 1994........... 11,276,000
Net income......... 381,000
Stock issued in
conversion of
subordinated debt.. 162,000
Retirement of
shares issued...... (62,000)
-----------
Balance at January
31, 1995........... 11,757,000
Net income......... 3,469,000
Expiration of
preferred shares... --
Purchase of
treasury shares.... (450,000)
-----------
Balance at January
31, 1996........... 14,776,000
Net income......... 2,246,000
Stock issued....... 342,000
Subscription
receivable......... (121,000)
Notes receivable... (221,000)
Purchase of
treasury shares.... (103,000)
Translation
adjustment......... (18,000)
-----------
Balance at April
30, 1996........... $16,901,000
-----------
-----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4

<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
--------------------------------------- ------------------------
1996 1995 1994 1996 1995
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $ 3,469,000 $ 381,000 $ 4,006,000 $ 2,246,000 $ (256,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred taxes..................... 1,206,000 (234,000) 154,000 (352,000) 4,000
Depreciation....................... 138,000 287,000 189,000 68,000 33,000
Amortization....................... 277,000 -- -- 64,000 56,000
----------- ----------- ----------- ----------- ----------
5,090,000 434,000 4,349,000 2,026.000 (163,000)
(Increase) decrease in operating
assets:
Securities purchased under
agreements to resell............. -- 3,057,000 (3,057,000) -- --
Due from clearing firm............. (1,209,000) 404,000 1,888,000 (5,388,000) 543,000
Commissions receivable............. 22,000 (20,000) -- (46,000) (17,000)
Syndicate fees receivable.......... (369,000) -- -- 326,000 --
Securities owned, at market
value................................. (2,712,000) (1,867,000) (303,000) 2,460,000 3,155,000
Securities owned, not readily
marketable............................ (1,270,000) 277,000 (550,000) (37,000) (127,000)
Investments........................ (292,000) -- -- 132,000 --
Loans receivable................... 131,000 (1,205,000) -- 674,000 (460,000)
Income taxes receivable............ 448,000 (448,000) -- -- 448,000
Other assets....................... (359,000) 387,000 (645,000) (305,000) (754,000)
Increase (decrease) in operating
liabilities:
Securities sold, not yet
purchased............................. 2,222,000 171,000 (1,993,000) 2,152,000 (137,000)
Commissions payable................ 788,000 178,000 156,000 657,000 (306,000)
Deferred compensation.............. 187,000 (27,000) -- 458,000 684,000
Income taxes payable............... (17,000) 136,000 85,000 1,790,000 (4,000)
Accrued expenses and other
liabilities........................... 3,418,000 (568,000) 598,000 (1,500,000) (585,000)
Translation adjustment............. -- -- -- (18,000) --
----------- ----------- ----------- ----------- ----------
Net cash provided by operating
activities............................ 6,078,000 909,000 528,000 3,381,000 2,277,000
----------- ----------- ----------- ----------- ----------
Cash flows from investing activities:
Purchase of office furniture,
equipment and leasehold
improvements.......................... (206,000) (646,000) (380,000) (162,000) (42,000)
Goodwill resulting from
acquisition........................... (1,606,000) -- -- -- --
----------- ----------- ----------- ----------- ----------
Net cash used in investing
activities............................ (1,812,000) (646,000) (380,000) (162,000) (42,000)
----------- ----------- ----------- ----------- ----------
Cash flows from financing activities:
Issuance (retirement) of common
shares................................ -- (62,000) 60,000 -- --
Purchase of treasury stock........... (450,000) -- -- (103,000) --
Issuance in subordinated debt........ 934,000 -- -- -- --
Repayment of subordinated debt....... -- -- -- (66,000) --
----------- ----------- ----------- ----------- ----------
Net cash provided by (used) in
financing activities.................. 484,000 (62,000) 60,000 (169,000) --
----------- ----------- ----------- ----------- ----------
Net increase in cash and cash
equivalents........................... 4,750,000 201,000 208,000 3,050,000 2,235,000
Cash and cash equivalents at beginning
of period............................ 3,123,000 2,922,000 2,714,000 7,873,000 3,123,000
----------- ----------- ----------- ----------- ----------
Cash and cash equivalents at end of
period................................ $ 7,873,000 $ 3,123,000 $ 2,922,000 $10,923,000 $5,358,000
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
Supplemental disclosures of cash flow
information:
Cash paid during the period for
income taxes....................... $ 900,000 $ 1,456,000 $ 2,837,000 $ 1,551,000 $ --
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
Cash paid during the period for
interest.............................. $ -- $ -- $ 25,000 $ 17,000 $ --
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
Non cash financing activities:
Conversion of subordinated notes to
common shares......................... $ -- $ 162,000 $ -- $ -- $ --
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF APRIL 30, 1996 AND FOR THE THREE MONTHS
ENDED APRIL 30, 1996 AND 1995 IS UNAUDITED)

(1) ORGANIZATION AND BUSINESS

GKN Holding Corp. and subsidiaries (the "Company") are primarily engaged in
securities brokerage, investment banking and trading. The Company's principal
wholly owned subsidiaries, GKN Securities Corp. ("GKN Securities") and Shochet
Securities, Inc. ("Shochet"), are both broker-dealers registered with the
Securities and Exchange Commission. Through its broker-dealer subsidiaries, the
Company executes principal and agency transactions, makes markets in
over-the-counter securities and performs underwriting and investment banking
services. GKN Securities' and Shochet's customers are located throughout the
United States. Both companies execute and clear all customer transactions with
the same unaffiliated broker-dealer on a fully disclosed basis. As discussed in
note 12, Shochet was acquired at the close of business, November 30, 1995.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of GKN Holding
Corp. and its subsidiaries. All intercompany accounts and transactions are
eliminated in consolidation. These consolidated financial statements reflect, in
the opinion of management, all adjustments (consisting of normal, recurring
accruals) necessary for a fair presentation of the consolidated financial
position of the Company.

The Company records securities transactions, including due from clearing
firm, income from security transactions and commission revenue and expense on a
trade-date basis.

Securities owned and securities sold, not yet purchased, principally
comprised of equities, are stated at quoted market values. Securities owned, not
readily marketable, principally comprised of warrants, are carried at
management's estimate of fair value based on a percentage of the market value of
the underlying securities. Changes in unrealized appreciation (depreciation)
arising from fluctuations in market value or upon realization of security
positions are reflected in the statements of operations. Included in revenues
from principal transactions is unrealized appreciation (depreciation) of
$3,130,000, ($250,000) and $472,000 for the years ended January 31, 1996, 1995
and 1994, respectively, and ($816,000) and $64,000 for the quarters ended April
30, 1996 and 1995, respectively.

Investment banking revenues from management fees and underwriting fees are
recognized on a trade-date basis. Advisory fee revenues are recorded when
services are substantially completed and the revenues are reasonably
determinable.

Primary income per common share is calculated based on the weighted average
number of shares of common stock and common stock equivalents outstanding.
Common stock equivalents represent the dilutive effect of the assumed exercise
of certain outstanding stock options. All assumed exercises of the outstanding
stock options were done using the treasury stock method.

Investments primarily represent the Company's investment in limited
partnerships which are shown at cost.

Office furniture and equipment is depreciated using the modified accelerated
cost recovery method over their estimated useful lives. Leasehold improvements
are amortized over the terms of the applicable leases or the useful lives of the
assets, whichever is less. Goodwill, representing the difference

F-6
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

between the purchase price of Shochet and the underlying net assets at the date
of acquisition, is amortized over 25 years on a straight-line basis.

For purposes of the consolidated statements of cash flows, the Company
considers all demand deposits held in banks and highly liquid investments with
maturities of 90 days or less to be cash equivalents.

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

Certain reclassifications have been made to prior year financial statements
to conform to the 1996 presentation.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 ("FAS 123"), Accounting for Stock Based
Compensation, in October, 1995. The adoption of FAS 123, which will become
effective for fiscal years beginning after December 15, 1995, would not have a
material effect on the Company's consolidated financial statements.

(3) DUE FROM CLEARING FIRM

The clearing and depository operations for brokerage transactions are
provided by an unaffiliated broker-dealer. At January 31, 1996 and 1995,
substantially all of the securities owned, securities sold, not yet purchased,
and the amount due from the clearing firm reflected in the consolidated
statements of financial condition are positions with and amounts due from this
firm.

The Company's broker-dealer subsidiaries have agreed to indemnify its
clearing firm for losses that the clearing firm may sustain from the customer
accounts introduced by the broker-dealers. As of January 31, 1996 and 1995,
substantially all of the amounts owed to the clearing firm by these customers
are collateralized by securities owned by the customers.

(4) RELATED PARTY TRANSACTIONS

Included in loans receivable, at January 31, 1996 and 1995, and at April 30,
1996, are amounts due from officers of the Company amounting to approximately
$198,000, $186,000 and $94,000, respectively. At January 31, 1996 and 1995, and
at April 30, 1996, $557,000, $939,000 and $382,000, respectively, included in
loans receivable represent payments made to brokers in anticipation of these
brokers generating commission revenue in accordance with the loan agreement over
the life of the agreement. Until the specified amount of commission revenue is
generated, the broker is liable to the Company for all amounts advanced to the
broker. These advances are not collateralized, nor do they bear interest. All
amounts are amortized on a monthly basis over the time period specified in the
agreement. At January 31, 1996 advances were being amortized over a period of
five months to three years.

F-7
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(5) NET CAPITAL REQUIREMENTS

The broker-dealers are subject to the Securities and Exchange Commission's
Uniform Net Capital Rule 15c3-1 (the "Rule"), which requires the maintenance of
minimum net capital.

GKN Securities has elected to compute its net capital using the alternative
method permitted by the Rule, which requires that GKN Securities maintain
minimum net capital, as defined, to be greater than or equal to $250,000. At
January 31, 1996, GKN Securities had net capital of $9,407,000, which was
$9,157,000 in excess of required net capital of $250,000. At January 31, 1995,
GKN Securities had net capital of $4,327,000, which was $4,077,000 in excess of
required net capital of $250,000. At April 30, 1996, GKN Securities had net
capital of $10,807,000, which was $10,557,000 in excess of required net capital
of $250,000.

Shochet has elected to compute net capital under the standard aggregate
indebtedness method permitted by the Rule, which requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not exceed 15 to
1. At January 31, 1996, Shochet had net capital of $314,000 and a net capital
requirement of $100,000. Shochet's net capital ratio at January 31, 1996 was 1.4
to 1.

(6) COMMITMENTS AND CONTINGENCIES

The Company is obligated under noncancelable leases or subleases for office
facilities. The leases are subject to escalations for the Company's share of
increases in operating costs. Rent expense included in occupancy and equipment
expense for the years ended January 31, 1996, 1995 and 1994, and for the three
months ended April 30, 1996 and 1995, totaled $1,218,000, $977,000, $752,000,
$362,000 and $319,000, respectively.

The future aggregate minimum rental commitments under these leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31, AMOUNT
- --------------------------------------------------------------- ----------
<S> <C>
1997........................................................... $1,146,000
1998........................................................... 1,089,000
1999........................................................... 482,000
2000........................................................... 243,000
2001........................................................... 127,000
Thereafter..................................................... 506,000
----------
$3,593,000
----------
----------
</TABLE>

Various legal proceedings are pending against the broker-dealers. Management
believes that, other than as reflected in the consolidated financial statements,
the aggregate liability resulting from these proceedings will not be material.

(7) STOCKHOLDERS' EQUITY

Effective May 31, 1994, the Company approved a 1-for-2 reverse stock split
of its common stock (the "Reverse Split") and amended and restated the
Certificate of Incorporation to effect such Reverse Split and to reduce the
number of authorized shares to 40,000,000, consisting of 35,000,000 shares of
common stock, $.0001 par value ("Common Stock") and 5,000,000 shares of
preferred stock, $.10 par value ("Preferred Stock"). All references in the
consolidated financial statements and related notes to

F-8
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(7) STOCKHOLDERS' EQUITY--(CONTINUED)

number of shares and exercise, conversion and purchase prices have been restated
to reflect the Reverse Split on a retroactive basis.

The 1991 Employee Incentive Plan of the Company (the "Incentive Plan")
currently provides for the granting of up to 5,000,000 shares of common stock by
the Board of Directors, at its discretion, in the form of incentive stock
rights, stock options, stock appreciation rights, limited stock appreciation
rights or the sale of shares of common stock pursuant to restricted stock
purchase agreements (collectively such rights, options and shares are referred
to herein as "Awards"). Stock options granted under the Incentive Plan may
qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue
Code of 1986, as amended. Awards may be granted to executive officers, employees
and consultants of the Company and its subsidiaries.

The exercise price of all stock options granted under the Incentive Plan is
determined by the Board of Directors of the Company at the time of grant.
However, the exercise price of all Incentive Stock Options granted under the
Incentive Plan must be at least equal to the fair market value of the common
stock on the date of grant or, in the case of Incentive Stock Options granted to
a holder of more than 10% of the Company's common stock, at least 110% of the
fair market value of such shares on the date of the grant. In the case of other
options granted under the Incentive Plan, the exercise price must be at least
equal to 65% of the fair market value of the common stock on the date of grant.
The maximum exercise period for which options may be granted under the Incentive
Plan is ten years from the date of grant for Incentive Stock Options (five years
in the case of Incentive Stock Options granted to an individual owning more than
10% of the Company's common stock) and 13 years for other options. At January
31, 1996, the Company had 1,896,673 stock options outstanding, of which
1,813,173 are Incentive Stock Options and 83,500 are nonqualified stock options.
At January 31, 1995, the Company had 1,662,086 stock options outstanding, of
which 1,579,586 are Incentive Stock Options and 82,500 are nonqualified stock
options.

The following table summarizes activity in the Company' s stock options:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Balance at January 31, 1994....................... 1,814,249 $ .80-$6.00
Options granted during the year................... 105,000 $6.00
Options canceled during the year.................. (257,163) $ 2.20-$6.00
---------
Balance at January 31, 1995....................... 1,662,086 $ .80-$6.00
Options granted during the year................... 368,825 $ 2.00-$2.30
Options canceled during the year.................. (134,238) $ 2.20-$6.00
---------
Balance at January 31, 1996....................... 1,896,673 $ .80-$6.00
---------
---------
</TABLE>

Note 13, Subsequent Events, discusses a subsequent event related to the
change in terms of certain options previously granted.

At January 31, 1995, the Company had outstanding 1,000 shares of Preferred
Stock designated as Series A Preferred Stock, which were held by the two largest
common stockholders of the Company, and are entitled to one vote per share. All
of the shares of Series A Preferred Stock expired on October 4, 1995.

F-9
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(8) INCOME TAXES

The Company files consolidated Federal income tax returns and combined New
York State and New York City income tax returns.

The deferred income tax asset of $22,000 at January 31, 1995, included in
income taxes receivable, principally results from depreciation expense. No
valuation allowance was recorded as management has established a plan by which
the Company will be able to utilize the deferred tax asset. The deferred tax
liability of $1,292,000 and $940,000 at January 31, 1996 and April 30, 1996,
included in income taxes payable, results primarily from unrealized gains on
securities.

The provision for income taxes consists of:

<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- ----------
<S> <C> <C> <C>
Current:
Federal.............................................. $1,110,000 $492,000 $2,011,000
State and local...................................... 502,000 255,000 1,251,000
---------- -------- ----------
Total current.................................... 1,612,000 747,000 3,262,000
Deferred tax expense (benefit)........................... 1,206,000 (234,000) 154,000
---------- -------- ----------
Total............................................ $2,818,000 $513,000 $3,416,000
---------- -------- ----------
---------- -------- ----------
</TABLE>

The difference between income taxes computed at the statutory Federal rate
of 34% for the years ended January 31, 1996, 1995 and 1994 and the provision for
income taxes relates to the following:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- --------------------- -----------------------
PERCENT PERCENT PERCENT
OF PRE-TAX OF PRE-TAX OF PRE-TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Provision at Federal statutory
rate............................... $2,138,000 34% $304,000 34% $2,523,000 34%
State income taxes, net of Federal
income tax benefit................. 326,000 5 166,000 18 853,000 11
Other.............................. 354,000 6 43,000 5 40,000 1
---------- --- -------- --- ---------- ---
Total...................... $2,818,000 45% $513,000 57% $3,416,000 46%
---------- --- -------- --- ---------- ---
---------- --- -------- --- ---------- ---
</TABLE>

(9) CONCENTRATION OF CREDIT RISK AND OFF-BALANCE-SHEET RISKS

In the normal course of business, the broker-dealers execute securities
transactions on behalf of customers through a clearing broker. The execution of
these transactions includes the purchase and sale (including "short sales") of
securities. These activities may expose the Company to off-balance-sheet risk in
the event the customer is unable to fulfill its contractual obligations and
margin requirements are not sufficient to fully cover losses. In these
situations, the Company may be required to purchase or sell financial
instruments at prevailing market prices which may not fully cover the
obligations of its customers. Subsequent market fluctuations may require
purchasing the securities sold, not yet purchased, at prices that differ from
the market value that is reflected on the statements of financial condition. The
Company limits its risk by requiring customers to maintain margin collateral
that is in compliance with regulatory and internal guidelines and by making
credit inquiries when establishing customer relationships.

F-10
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(9) CONCENTRATION OF CREDIT RISK AND OFF-BALANCE-SHEET RISKS--(CONTINUED)

Additionally, securities sold, not yet purchased, expose the broker-dealers
to off-balance-sheet market risk, in that subsequent market fluctuations may
require purchasing the securities at prices which differ from the market value
reflected in the consolidated statements of financial condition.

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 107, Disclosures About Fair Value of Financial
Instruments, which requires that all entities disclose the fair value of
financial instruments, as defined, for both assets and liabilities recognized
and not recognized in the statement of financial condition. Virtually all of the
Company's financial instruments, as defined, are carried at, or approximate,
fair value because of their short-term nature. Fair value for these financial
instruments is based on quoted market prices for similar financial instruments.

(11) 401(K) PLAN

The Company, excluding Shochet, is covered under the GKN Securities Corp.
401(k) Plan (the "Plan"). Under the provisions of the Plan, all covered
employees who have attained the age of 21 are eligible to participate in the
plan after one full year of employment. Contributions to the Plan by employees
are determined based on an elected percentage of annual compensation, subject to
an annual limit prescribed by the Internal Revenue Service. GKN Securities may
make contributions on behalf of the employees, which are determined on an annual
basis, but in no event can such contributions exceed 1% of a participant's
annual compensation or 25% of the elected deferral, as defined, of a
participant. GKN Securities has reserved the right to terminate the Plan at its
discretion. For the years ended January 31, 1996, 1995 and 1994 and for the
three months ended April 30, 1996 and 1995, GKN Securities made contributions of
approximately $62,000, $31,000, $20,000, $16,000 and $15,000 to the Plan,
respectively.

(12) ACQUISITION OF SHOCHET

As of the close of business, November 30, 1995, the Company acquired 100% of
the issued and outstanding shares of Shochet for approximately $2,099,000. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the Company's results of operations include the results of Shochet
from the acquisition date. The Company recognized $1,605,000 of goodwill in
connection with the acquisition, which will be amortized on a straight line
basis over 25 years.

In connection with the purchase of Shochet, the Company has signed a 7%
$1,000,000 subordinated note due in three years. Payments are made quarterly.
The estimated fair value of the subordinated note is $934,000 and $868,000 at
January 31, 1996 and April 30, 1996, respectively.

Pro forma information with respect to this acquisition has not been
presented in the accompanying consolidated financial statements as it would not
differ materially from historical information.

F-11
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(13) SUBSEQUENT EVENTS

Commitments and Contingencies

The Company has entered into employment arrangements with three officers of
the Company who are also stockholders of the Company. These arrangements provide
for annual salaries and bonuses at the discretion of the Board of Directors, up
to 18% each of the stock purchase warrants or options that may be issued to GKN
Securities in connection with any public offering and private placement or other
transactions, as well as certain other benefits. In May 1996, the percentage was
changed to 15%.

Stockholders' Equity

In May 1996, the Board of Directors set the exercise price of options
granted during the year ended January 31, 1996 at $4.50 per share.

At April 30, 1996, the Company had 1,758,673 stock options outstanding, of
which 1,675,173 are Incentive Stock Options and 83,500 are nonqualified stock
options.

During May 1996, the Company offered certain of its option holders the
opportunity to swap their options for new options. Option holders could receive
one new option for every two or three options exchanged, depending upon the
original grant date. The new options have accelerated vesting dates and strike
prices equal to the estimated fair value of $4.50 at April 30, 1996.

During May 1996, 625,000 options were exercised by certain of the firm's
principals. 120,000 shares of previously owned stock were delivered as payment
for the option exercise. The shares accepted as payment were valued at $4.50 per
share.

The following table summarizes activity in the Company's stock options
during the first quarter of fiscal year 1997 and to May 28, 1996, the last day
of the option swap offer:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Balance at January 31, 1996....................... 1,896,673 $ .80-$6.00

Options granted during the period................. --
Options canceled during the period................ (13,000) $ 2.20-$6.00
Options exercised during the period............... (125,000) $.80
---------
Balance at April 30, 1996......................... 1,758,673 $ .80-$6.00

Options granted during the period................. 184,845 $4.50
Options canceled during the period................ (444,380) $ 4.50-$6.00
Options exercised during the period............... (625,000) $ .80-$ .88
---------
Balance at May 28, 1996........................... 874,138 $ 2.20-$6.00
---------
---------
</TABLE>

401(k) Plan

On May 1, 1996, the Shochet 401(k) Plan merged into the GKN Securities Corp.
401(k) Plan. All account balances of former participants in the Shochet 401(k)
Plan were transferred into the GKN Securities Corp. 401(k) Plan.

F-12
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of
GKN Holding Corp.:

We have audited the accompanying consolidated statements of financial
condition of GKN Holding Corp. and subsidiaries as of January 31, 1996 and 1995
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the two-year period ended January
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The accompanying
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year ended January 31, 1994 were audited by other auditors whose
report thereon dated March 29, 1994 expressed an unqualified opinion on those
financial statements. A copy of the report of the other auditors is attached
hereto.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 1996 and 1995 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of GKN
Holding Corp. and subsidiaries as of January 31, 1996 and 1995 and the results
of their operations and their cash flows for each of the years in the two-year
period ended January 31, 1996 in conformity with generally accepted accounting
principles.

/s/ KPMG Peat Marwick LLP

New York, New York
April 12, 1996,
except as to Note 13, which is
as of May 28, 1996

F-13
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of
GKN Holding Corp.

We have audited the accompanying consolidated statements of income, changes
in stockholders' equity, and cash flows of GKN Holding Corp. and Subsidiaries
for the year ended January 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of GKN Holding Corp. and Subsidiaries for the year ended January 31, 1994
in conformity with generally accepted accounting principles.

/s/ GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.

New York, New York
March 29, 1994

F-14
<PAGE>
========================================= ====================================
- ----------------------------------------- ------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER
PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS
IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION 2,500,000 SHARES
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. [LOGO] HOLDING CORP.
THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN
THE SECURITIES OFFERED BY THIS
PROSPECTUS, OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IS UNLAWFUL. THE COMMON STOCK
DELIVERY OF THIS PROSPECTUS SHALL NOT,
UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
-------------------

TABLE OF CONTENTS

PAGE
----

----------------
Prospectus Summary............. 3 PROSPECTUS
Risk Factors................... 6 ----------------

Use of Proceeds................ 12

Dilution....................... 13
Capitalization................. 14
Dividend Policy................ 14
Selected Financial Data........ 15
Management's Discussion
and Analysis of Financial
Condition and Results
of Operations................ 16
Business....................... 24
Management..................... 33
Principal Stockholders......... 41
Certain Transactions........... 42
Description of Capital
Stock........................ 43
Shares Eligible for
Future Sale.................. 45

Underwriting................... 45 PENNSYLVANIA MERCHANT

GROUP LTD
Legal Matters.................. 46
Experts........................ 46
Additional Information......... 47
Index to Financial
Statements................... F-1

GKN SECURITIES

-------------------

UNTIL , 1996 (25 DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
SHARES OF COMMON STOCK OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THE
DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN , 1996
ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ---------------------------------------- -------------------------------------
======================================== =====================================

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Registrant estimates that expenses payable by it in connection with the
offering described in this registration statement (other than the underwriting
discount and commissions and reasonable expense allowance) will be as follows:

<TABLE>
<CAPTION>
EXHIBIT NO.
- ----------------------------------------------------------------------------
<S> <C>
SEC registration fee.......................................... $ 4,124.14
NASD filing fee............................................... 1,696.00
Printing and engraving expenses............................... 75,000.00
Accounting fees and expenses.................................. 90,000.00
Legal fees and expenses (including Blue Sky).................. 185,000.00
Miscellaneous................................................. 44,179.86
-----------
Total................................................... $400,000.00
-----------
-----------
</TABLE>

- ------------

* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Restated Certificate of Incorporation eliminates, to the
fullest extent permitted by Delaware law, personal liability of directors to the
Registrant and its stockholders for damages arising out of certain alleged
breaches of the directors' duty to the corporation.

The Registrant's Restated Certificate of Incorporation also provides that
the Registrant shall, to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law ("DGCL"), as the same may be amended and
supplemented, indemnify any and all persons whom it shall have the power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by Section 145 of the
DGCL. Section 145(a) of the DGCL provides in relevant part that "a corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful." With respect to
derivative actions, Section 145(b) of the DGCL provides in relevant part that
"[a] corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor ... [by
reason of his service in one of the capacities specified in the preceding
sentence] against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but

II-1
<PAGE>
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnify for such expenses which the Court of Chancery
or such other court shall deem proper."

The Company also has entered into indemnification agreements with each of
its directors and executive officers. The indemnification agreements provide
that the directors and executive officers will be indemnified to the fullest
extent permitted by applicable law against all expenses (including attorney's
fees), judgments, fines and amounts reasonably paid or incurred by them for
settlement in any civil, criminal, administrative or investigative action, suit
or proceeding, including any derivative action. No indemnification will be
provided under the indemnification agreements, however, to any director or
executive officer in certain limited circumstances, including on account of
knowingly fraudulent, deliberately dishonest or willful misconduct. To the
extent the provisions of the indemnification agreements exceed the
indemnification permitted by applicable law, such provisions may be enforceable
or may be limited to the extent they are found by a court of competent
jurisdiction to be contrary to the public policy.

Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Registrant has agreed to indemnify the Underwriters
and the Underwriters have agreed to indemnify the Registrant and its directors,
officers and controlling persons against certain civil liabilities that may be
incurred in connection with this offering, including certain liabilities under
the Securities Act of 1933, as amended (the "Securities Act").

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

During the past three years, the following securities were issued by the
Registrant without registration under the Securities Act:

From February 1, 1993 to April 30, 1996, the Registrant, in the usual course
of its business, issued options to purchase 948,243 shares of its Common Stock
to its employees and consultants under its 1991 Employee Incentive Plan at
prices ranging from $4.50 to $6.00 per share. A number of such options were
terminated and in May 1996, the Registrant offered employees the opportunity to
convert their options into options for a fewer number of shares, but with lower
exercise prices and/or shorter vesting periods. As a result of such offer, the
aggregate number of outstanding options under the Plan decreased (after giving
effect to the exercises described below) from 1,758,673 (the aggregate amount of
shares, subject to options issued since inception of the plan) to 866,388. In
May and June 1996, additional options to purchase 145,000 shares were granted to
employees in the usual course of business at exercise prices of $4.50 per share
and options to purchase 12,882 shares were forfeited by terminated employees. At
June 30, 1996, options to purchase 998,506 shares of Common Stock were
outstanding. The exemptions claimed for these issuances are Rule 701 and Section
3(a)(9) of the Securities Act. Rule 701 of the Securities Act provides an
exemption for offers and sales of securities pursuant to certain compensatory
benefit plans and contracts relating to compensation. Four conditions must be
satisfied in order to claim the Rule 701 exemption, (1) the issuer cannot be a
reporting or investment company, (2) the securities were issued pursuant to the
terms of (a) a written compensatory benefit plan, or (b) a written contract, (3)
offerees and purchasers must be an employee, officer, director, partner,
consultant or advisor of the Company, and (4) the aggregate amount of securities
offered and sold during any twelve-month period pursuant to Rule 701 is a
minimum of $500,000 and a maximum of $5,000,000. Section 3(a)(9) of the
Securities Act exempts from the registration requirements any security that a
company exchanges voluntarily and exclusively for its outstanding
securities--with no commission or other remuneration for soliciting such an
exchange.

In February 1993, the Registrant issued 10,000 shares of Common Stock
pursuant to a private offering in the aggregate amount of $60,000. In June 1994,
the Registrant issued 162,500 shares of Common Stock in the conversion of
$162,500 of subordinated debt. The exemptions claimed for this issuance is
Section 4(2) under the Securities Act and Regulation D promulgated under the
Securities

II-2
<PAGE>

Act. Section 4(2) provides an exemption from the registration requirements of
the Securities Act for "private" offerings. Specific objective criteria for
determining whether an offering is "private" and therefore outside the
registration requirements of the Securities Act, includes, whether the number of
purchasers in the transaction are limited, a prohibition against general
solicitation or general advertising and whether the purchaser or purchaser's
representative has a certain level of financial and business sophistication.
Regulation D promulgated under the Securities Act provides an exemption for
private offerings. There are several general conditions that apply to all offers
and sales effected pursuant to Regulation D, including, availability of
information, prohibition against general solicitation and general advertising
and limitation on resale. Regulation D provides an exemption for limited offers
and sales of securities (1) not exceeding an annual aggregate amount of $1
million, (2) to a limited number of people in an aggregate amount not exceeding
$5 million, and (3) in an unlimited amount to an unlimited number of accredited
investors (as such term is defined in Rule 501 of Regulation D) and a limited
number of nonaccredited investors.

In connection with Registrant's acquisition of Shochet in November 1995,
Registrant agreed to issue to the sellers of the Shochet business, upon
consummation of this Offering, five-year warrants to purchase 25,000 shares of
Common Stock at an exercise price equal to the per-share offering price. The
exemption claimed for this issuance was Section 4(2) of the Securities Act.

In January 1996, in connection with Mr. Joachim Stahler's employment with
the Registrant, the Registrant agreed to sell 80,000 shares of Common Stock to
Mr. Joachim Stahler, the Managing Director of GKN AG, at a purchase price of
$3.02 per share, payable 50% in cash and 50% by promissory note. The shares were
issued in April 1996. The Registrant also issued to Mr. Stahler, in connection
with his employment, warrants to purchase 80,000 shares of Common Stock,
exercisable until January 30, 2001, at a purchase price equal to the per-share
offering price. The exemption claimed for these issuances is Section 4(2) of the
Securities Act.

In February 1996, Richard Buonocore, a Vice President and the head trader of
GKN, exercised an option to purchase 125,000 shares of Common Stock at $.80 per
share, which purchase price was paid by promissory note. The exemption claimed
for the issuance of the shares pursuant to the option exercise is Section 4(2)
of the Securities Act.

In May 1996, David Nussbaum, Roger Gladstone and Robert Gladstone exercised
stock options to purchase 250,000 shares, 250,000 shares and 125,000 shares of
Common Stock, respectively, at purchase prices of $.88, $.88 and $.80,
respectively, which purchase prices were paid by delivery to Registrant of
shares of Registrant's Common Stock owned by optionholders, valued for this
purpose at $4.50 per share. The exemption claimed for the issuance of the shares
pursuant to the option exercises is Section 4(2) of the Securities Act.

In May 1996, the Company agreed to issue to Messrs. Margaritis and Pollard,
each of whom will become a director upon the consummation of this Offering,
options to purchase 10,000 shares of Common Stock, at a price equal to the
per-share offering price. The exemption claimed for these issuances is Section
4(2) of the Securities Act.

All of the foregoing securities were issued under exemption from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act and the rules and regulations promulgated under Section 4(2),
Regulation D promulgated under the Securities Act, Rule 701 promulgated under
the Securities Act, and/or Section 3(a)(9) of the Securities Act.

II-3
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------
<S> <C> <C>

1.1 * Form of Underwriting Agreement.

1.2 * Form of Selected Dealers Agreement.

3.1 + Registrant's Restated Certificate of Incorporation.

3.1 (a)+ Amendment, effective as of May 31, 1994, to Registrant's Restated Certificate of
Incorporation.

3.2 + Registrant's By-laws.

3.2 (a) * Amendment to Registrant's By-laws.

4.1 * Form of Common Stock Certificate.

5.1 * Opinion of Graubard Mollen & Miller.

10.1 + Lease for 61 Broadway, New York, New York 10006.

10.2 + Lease for Mizner Park (Suite 245), Boca Raton, Florida office space.

10.3 + Lease for Mizner Park (Suite 405), Boca Raton, Florida office space.

10.4 + Lease for Great Neck, New York office space.

10.5 + Lease for Stamford, Connecticut office space.

10.6 + Lease for Hallandale, Florida office space.

10.7 + Lease for Miami Beach, Florida office space.

10.8 + Lease for South Miami Beach, Florida office space.

10.9 + Agreement between GKN Securities Corp. and managers of Miami, Florida branch
office.

10.10 * Employment Agreement between the Company and David M. Nussbaum.

10.11 * Employment Agreement between the Company and Roger N. Gladstone.

10.12 * Employment Agreement between the Company and Robert H. Gladstone.

10.13 * Employment Agreement between the Company and Peter R. Kent.

10.14 + Warrant Agreement with Joachim Stahler.

10.15 + Stock Purchase Agreement with Marvin and Sally Shochet, including form of Option
Agreement.

10.16 * Option Agreement with director nominees.

10.17 + 1991 Employee Incentive Plan.

10.18 + Clearing Agent Agreement.

10.19 + Form of Stock Option Agreement.

10.20 * 1996 Incentive Compensation Plan

10.21 * Form of Indemnification Agreement.

21 / / Subsidiaries of the Registrant.

23.1 + Consent of KPMG Peat Marwick LLP.

23.2 + Consent of Goldstein Golub Kessler & Company, P.C.

23.3 * Consent of Graubard Mollen & Miller (included in Exhibit 5.1).

23.4 + Consent of John P. Margaritis.

23.5 + Consent of Arnold B. Pollard.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------
<S> <C> <C>
24 / / Power of Attorney [Reference is made to the signature page of the Registration
Statement]

27 / / Financial Data Schedule.
</TABLE>

- ------------

* To be filed by amendment.

+ Filed herewith.

/ / Previously filed (unless otherwise indicated) as the same number of exhibit
included in the Company's Registration Statement on Form S-1 filed on June
5, 1996 (Reg. No. 333-05273).

(b) Financial Statement Schedules: None

Other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are not applicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and
any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate Offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the Offering.

(b) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

II-5
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(d) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"Act"), the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on July 17, 1996.

GKN HOLDING CORP.

By: /s/ DAVID M. NUSSBAUM
..................................

David M. Nussbaum, Chief Executive
Officer

Pursuant to the requirements of the Act, the Amendment No. 1 to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S> <C> <C>
/s/ DAVID M. NUSSBAUM Chairman of the Board, Chief July 17, 1996
...................................... Executive Officer and Director
David M. Nussbaum (Principal Executive Officer)

/s/ ROGER N. GLADSTONE* President and Director July 17, 1996
......................................
Roger N. Gladstone

/s/ PETER R. KENT* Chief Operating Officer, Chief July 17, 1996
...................................... Financial Officer and Director
Peter R. Kent (Principal Accounting and
Financial Officer)

/s/ LESTER ROSENKRANTZ* Executive Vice President and July 17, 1996
...................................... Director
Lester Rosenkrantz

/s/ JAMES KRANTZ* Director July 17, 1996
......................................
James Krantz

*By /s/ DAVID M. NUSSBAUM Attorney-in-Fact July 17, 1996
..................................
David M.
Nussbaum
</TABLE>

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT PAGE NO.
- ---------- ---------------------------------------------------------------------- --------
<S> <C> <C> <C>
3.1 Registrant's Restated Certificate of Incorporation.
3.1 (a) Amendment, effective as of May 31, 1994, to Registrant's Restated
Certificate of Incorporation.
3.2 Registrant's By-laws.
10.1 Lease for 61 Broadway, New York, New York 10006.
10.2 Lease for Mizner Park (Suite 245), Boca Raton, Florida office space.
10.3 Lease for Mizner Park (Suite 405), Boca Raton, Florida office space.
10.4 Lease for Great Neck, New York office space.
10.5 Lease for Stamford, Connecticut office space.
10.6 Lease for Hallandale, Florida office space.
10.7 Lease for Miami Beach, Florida office space.
10.8 Lease for South Miami Beach, Florida office space.
10.9 Agreement between GKN Securities Corp. and managers of Miami, Florida
branch office.
10.14 Warrant Agreement with Joachim Stahler.
10.15 Stock Purchase Agreement with Marvin and Sally Shochet, including form
of Option Agreement.
10.17 1991 Employee Incentive Plan.
10.18 Clearing Agent Agreement.
10.19 Form of Stock Option Agreement.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Goldstein Golub Kessler & Company, P.C.
23.4 Consent of John P. Margaritis.
23.5 Consent of Arnold B. Pollard.
</TABLE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of
GKN HOLDING CORP.:

We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
Prospectus.

/s/ KPMG Peat Marwick LLP

New York, New York
July 16, 1996

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of
GKN HOLDING CORP.:

We hereby consent to the use in the Prospectus constituting part of the
Registration Statement of our report dated March 29, 1994 relating to the
consolidated statements of income, changes in stockholders' equity, and cash
flows for the year ended January 31, 1994 of GKN Holding Corp. and Subsidiaries
which appears in such Prospectus. We also consent to the reference of our firm
under the caption "Experts" which also appears in such Prospectus.

/s/ GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.

New York, New York
July 16, 1996