FIRST MONTAUK FINANCIAL CORP, S-3/A, 1997-07-29

FIRST MONTAUK FINANCIAL CORP
S-3/A, 1997-07-29
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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As filed with the Securities and Exchange Commission on July 29, 1997

Registration No. 333-28907

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

Pre-Effective Amendment #1
To

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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FIRST MONTAUK FINANCIAL CORP.
(Exact name of Registrant as specified in charter)

New Jersey 22-1737915
(State of Incorporation) (I.R.S. Employer Identification Number)

Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
(908) 842-4700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

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

Herbert Kurinsky, President
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
(908) 842-4700
(Name and address, including zip code, and telephone number,
including area code, of agent for service)

-----------------
With copies to:
VICTOR J. DIGIOIA, ESQ.
GOLDSTEIN & DIGIOIA, LLP
369 Lexington Avenue
New York, New York 10017

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plan, please check the following box. [ ]

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 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

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<PAGE>

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________________.

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |X|

CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Offering Aggregate Registra-
Securities Being Amount Being Price per Offering tion
Registered Registered Share(1) Price(1) Fee(1)
- --------------------------------------------------------------------------------

Common Stock, no par
value (2)................ 150,000 $1.25 $ 187,500 $65.00
- --------------------------------------------------------------------------------
Common Stock, no par
value (3)................ 2,000,000 2.71875 (5) 5,437,500 (5) 1,875.00
- --------------------------------------------------------------------------------
Common Stock, no par
value (4)................ 3,500,000 (5) 2.71875 (5) 9,515,625 (5) 2,591.00
- --------------------------------------------------------------------------------
Common Stock, no par
value (6)................ 37,500 2.71875 101,953 36.00
- --------------------------------------------------------------------------------
Total..................... 5,687,500 (5) $15,140,625 $4,567.00
================================================================================

(1) Estimated solely for the purpose of determining the registration fee
based on the average of the bid and asked prices of a share of
Common Stock as quoted on the OTC Bulletin Board on July 25, 1997 ($2.6875
per share). With respect to the shares of Common Stock underlying Warrants
being reqistered herewith, the offering price has been based upon the
exercise price of the Warrants. The sum of $1,789 was previously paid.

(2) Represents shares of Common Stock issuable in connection with the exercise
150,000 common stock purchase warrants issued on January 31, 1997. The
warrants are exercisable at an exercise price of $1.25 per share. Pursuant
to Rule 416 there are also being registered such additional numbers of
shares of Common Stock as may become issuable pursuant to the anti-dilution
provisions of the warrants.

(3) Represents shares of Common Stock issuable upon exercise of options to
purchase Common Stock issuable under the 1996 Senior Management Incentive
Plan. Pursuant to Rule 416 there are also being registered such additional
numbers of shares of Common Stock as may become issuable pursuant to the
anti-dilution provisions of any options granted under the 1996 Senior
Management Incentive Plan.

(4) Represents shares of Common Stock issuable upon exercise of Options to
purchase Common Stock issuable under the 1992 Incentive Stock Option Plan.
Pursuant to Rule 416 there are also being registered such additional
numbers of shares of Common Stock as may become issuable pursuant to the
anti-dilution provisions of any options granted under the 1992 Incentive
Stock Option Plan.

(5) Pursuant to Rule 429, this Registration Statement and the Prospectus
contained herein includes 2,000,000 shares of Common Stock previously
registered by the Registrant (Registration Statement No. 33-89348). The
Registrant has previously filed paid a registration fee of $690 with
respect to the 2,000,000 shares previously registered.

(6) Represents shares of Common Stock held by certain selling security holders.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(A) MAY
DETERMINE.

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<PAGE>

PART I

This Registration Statement relates to (i) 150,000 shares of Common Stock,
no par value, of FIRST MONTAUK FINANCIAL CORP. (the "Company") issuable upon
exercise of certain common stock purchase warrants ("Warrants") of the Company
issued in connection with a settlement agreement dated January 31, 1997 between
the Company and a former client (ii) 2,000,000 shares of Common Stock, no par
value, of the Company authorized for issuance in connection with the grant of
options to senior management of the Company under the Company's 1996 Senior
Management Incentive Stock Option Plan (the "Senior Management Plan") (iii)
3,500,000 shares of Common Stock, no par value, of the Company authorized for
issuance in connection with the grant of options to employees and other eligible
persons under the Company's 1992 Incentive Stock Option Plan as amended ("1992
Incentive Plan") and (iv) 37,500 issued and outstanding shares of Common Stock
owned certain selling stockholders.

The Company had previously registered 2,000,000 shares as with respect to
the 1992 Incentive Plan on Registration Statement No. 33-89348 filed with the
Securities and Exchange Commission (the "Commission"). At its Annual Meeting of
Stockholders held on June 28, 1996, the shareholders of the Company approved an
increase in the number of shares under the 1992 Incentive Plan from 2,000,000
shares to 3,500,000 shares. Pursuant to Rule 429 of the Commission, holders of
shares issuable upon exercise of options under the 1992 Incentive Plan including
the previously registered 2,000,000 shares, may utilize this Prospectus forming
a part of the Registration Statement.

There is also as part of Part I of this Registration Statement, a re-offer
prospectus (the "Re-Offer Prospectus") relating to and to be used in connection
with any re-offer and resale of an aggregate of 5,500,000 shares of the
Company's Common Stock by persons who may be deemed affiliates of the Company
and any shares of Common stock issued or to be issued to such persons pursuant
to the exercise of the options granted or shares issued under the Senior
Management Plan and 1992 Incentive Plan; all as permitted by General Instruction
C of Form S-8. The documents containing the information specified in Part I for
Form S-8 will be sent or given to participants in the Senior Management Plan, as
specified by Rule 428(b)(1). In accordance with the instructions to Part I of
Form S-8, both the Senior Management Plan and 1992 Incentive Plan and related
documents are not being filed with the Securities and Exchange Commission as
part of the registration statement or as prospectuses or prospectus supplements
pursuant to Rule 424. The foregoing documents and the documents incorporated by
reference in this Registration Statement, taken together, constitute a
Prospectus that meets the requirements of Section 10(a) of the Securities Act of
1933, as amended.

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<PAGE>

Subject to Completion, dated July 29, 1997
------------------------------------------

P R O S P E C T U S

5,687,500 Shares of Common Stock

FIRST MONTAUK FINANCIAL CORP.

This Prospectus relates to the offer and sale of an aggregate of 5,687,500
shares (the "Shares") of Common Stock, no par value ("Common Stock") of First
Montauk Financial Corp. (the "Company"), to be sold from time to time for the
account of certain securities holders ("Selling Security Holders") of the
Company certain of which persons may be deemed to be "affiliates" of the Company
(as defined under Rule 405 of the General Rules and Regulations of the
Securities Act of 1993, as amended), or by pledgees, donees, transferees or
other successors in interest of the Selling Security Holders. The Shares are
issuable to the Selling Security Holders (i) in connection with the 2,000,000
shares of Common Stock reserved for issuance upon exercise, if any, of the
options granted to such persons under the Company's 1996 Senior Management
Incentive Plan (the "Senior Management Plan") (ii) 150,000 shares of Common
Stock issuable in connection with the exercise of Common Stock Purchase
Warrants, held by certain Selling Shareholders (the "Warrants") (iii) 3,500,000
shares of Common Stock issuable in connection with the exercise, if any, of
options granted to employees and other eligible persons under the Company's 1992
Incentive Stock Option Plan ("1992 Incentive Plan") and (iv) 37,500 issued and
outstanding shares of Common Stock owned by certain Selling Security Holders.

The Company had previously registered 2,000,000 shares of Common Stock as
with respect to the 1992 Incentive Plan on Registration Statement No. 33-89348
filed with the Securities and Exchange Commission (the "Commission"). Pursuant
to Rule 429 of the Commission, holders of shares issuable upon exercise of
options under the 1992 Incentive Plan including the previously registered
2,000,000 shares, may utilize this Prospectus in connection with the resale of
such securities.

The Shares may be sold from time to time by the Selling Security Holders,
or by the pledgees, donees or transferees of the Shares. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders and/or their
transferees may be effected in one or more transactions that may take place on
the over the counter market, including ordinary brokers transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
the Shares as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Security Holders in connection with such sales. The Selling
Security Holders and intermediaries through whom such Shares are sold may be
deemed "underwriters" within the meaning of the Act, with respect to the Shares
offered.

The Company will not receive any proceeds from the sale of the Shares by
the Selling Security Holders but will receive proceeds from the exercise of
options granted under either the Senior Management Plan or 1992 Incentive Plan
at the time of exercise, and from the exercise of the Warrants all of which
funds will be used by the Company for working capital purposes.

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" PAGE 10 OF THIS PROSPECTUS

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.

The date of this Prospectus is July 31, 1997

<PAGE>

The Company's Common Stock is traded in the over-the-counter market and
reported on the NASD OTC Bulletin Board System and by the National Daily
Quotation Service published by the National Quotation Bureau. On July 25, 1997
the bid and asked prices of the Company's Common Stock as reported by a market
maker were $2.625 and $2.75, respectively. See "Price Range of Common Stock
and Certain Market Information," as set forth in the Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices
of the Commission: New York Regional Office, 7 World Trade Center, New York, New
York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661. Copies of such material may be
obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Website that contains reports, proxy statements and other
information regarding issuers that file electronically with the Commission. The
address of that Website is: //www.sec.gov.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:

1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996; and

2. The Company's Quarterly Report on Form 10-QSB for the three months
ended March 31, 1997.

3. The Company's Proxy Statement for its Annual Meeting of Shareholders
held on June 27, 1997.

All documents filed by the Company subsequent to the date of this
Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and
prior to the filing of a post-effective amendment which indicates that all
Shares offered hereby have been sold or which deregisters all Shares then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be

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<PAGE>

deemed modified or superseded for purposes of this Registration Statement and
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement of which this Prospectus
forms a part.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Robert Rabinowitz, Esq., First Montauk
Financial Corp., Parkway 109 Office Center, 328 Newman Springs Road, Red Bank,
New Jersey 07701, telephone (908) 842-4700.

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<PAGE>

PROSPECTUS SUMMARY

The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus. The summary
is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus.

THE COMPANY

First Montauk Financial Corp. ("FMFC") is a holding company, which, through
its principal wholly-owned subsidiary, First Montauk Securities Corp. ("FMSC"),
is primarily engaged in the operation of an investment banking and securities
brokerage firm. FMFC also sells insurance products through its subsidiary
Montauk Insurance Services, Inc., ("MISI") and equipment leases through Montauk
Advisors, Inc. ("MAI"). FMFC, MISI, FMSC, and MAI are sometimes collectively
referred to herein as the "Company". FMSC is a broker-dealer registered with the
Securities and Exchange Commission ("SEC"), a member of the National Association
of Securities Dealers Regulation, Inc. ("NASDR"), the Municipal Securities
RuleMaking Board ("MSRB"), and the Securities Investor Protection Corporation
("SIPC"). FMSC's business activities consist primarily of retail sales and
trading of listed and unlisted equity and fixed-income securities; sales of
government, municipal and corporate securities; options; commissions earned from
individual and institutional securities transactions; and market making
activities. FMSC also provides investment banking activities such as private and
public securities offerings. In fiscal 1995, FMSC became a registered advisor
under the Investment Advisors Act of 1940 and began offering investment advisory
services.

FMSC is currently licensed to conduct its broker-dealer business in 49
states and the District of Columbia. FMSC maintains approximately 117 branch
and/or satellite offices, all of which are maintained by affiliates. FMSC has
approximately 356 registered representatives and services approximately 25,000
retail customer accounts.

FMSC's primary method of operation is through its affiliate program. The
affiliate program is designed to attract experienced brokers with existing
clientele who desire to operate their own office. It is through this affiliate
program that FMSC has expanded its customer base and retail activities by adding
brokers with established clientele. In order to become an affiliate of FMSC, the
registered representative must enter into an affiliate agreement with FMSC. The
Company believes that one of the primary reasons its affiliate program is
attractive to such individuals is because the affiliate arrangement entitles the
affiliate representative to obtain a significantly higher percentage of the
commissions generated by his sales than a registered representative would
normally receive. Based on the experience of FMSC's management, and information
derived from professional associations, FMSC believes that the range of standard
commission payout rates for registered representatives of retail forms is
approximately 40%- 50%, whereas the Company's affiliates receive commissions of
approximately 80%-85%. The terms of the affiliate agreement provide that the
Company's affiliate establishes his own office and is solely responsible for the
payment of all expenses associated with the operation of the branch office,

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including rent, utilities, furniture, equipment, stock quotation machines, and
general office supplies. All securities transactions are cleared through FMSC's
clearing firm on a fully disclosed basis. FMSC receives a percentage (generally
15%-20% after deduction of clearing costs) of the affiliates' commissions with
no operating expenses directly attributable to the maintenance of the specific
affiliate office.

FMSC has also expanded its general securities business by adding registered
representatives to its main corporate office. FMSC is continuously seeking to
establish additional branch offices at sites and locations to be selected, the
timing and location of which will be based upon prevailing business and economic
conditions.

In 1991, MISI was formed for the purpose of offering and selling variable
annuity, variable life as well as traditional life and health insurance
products. Currently, MISI is licensed in the states of Alabama, Alaska, Arizona,
California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana,
Kentucky, Maine, Maryland, New Jersey, New York, North Carolina, Pennsylvania,
Rhode Island, South Carolina, Virginia, Washington and Wisconsin. MISI derives
revenue from insurance-related products and services from the existing base of
FMSC's Registered Representatives who are insurance licensed. In fiscal year
1996 MISI earned $523,868 in gross commissions from the sale of insurance.

In 1993, the Company formed Montauk Advisors, Inc., ("MAI") as a
wholly-owned subsidiary. MAI engages in the sale of equipment leasing contracts
on an agency basis. The equipment financed to date includes copiers, facsimile
machines and other business machines. These leases are sold to various customers
from which MAI derives a commission. In fiscal year 1996 MAI earned $373,216 in
gross commissions from the sale of leases.

In early 1995, FMSC became registered with the Securities and Exchange
Commission as an Investment Advisor under the Investment Advisors Act of 1940
for the purpose of providing investment advisory services and fee-based managed
accounts to clients of FMSC. Currently, FMSC is licensed as an Investment
Advisor in the States of Alaska, Arizona, California, Connecticut, Florida,
Hawaii, Indiana, New Jersey, New York, North Carolina, Pennsylvania, Texas, and
West Virginia. Although to date FMSC has received minimal revenues from its
advisory services, management's goal is to derive revenue by providing
investment advisory services to FMSC's existing client based as well as to
additional clientele seeking fee-based managed accounts.

FMFC and its subsidiaries (with the exception of MISI) each maintain
their principal executive offices at Parkway 109 Office Center, 328 Newman
Springs Road, Red Bank, New Jersey 07701, telephone (908) 842-4700. MISI
maintains its principal offices at One Mack Centre Drive, Paramus, New Jersey.

RECENT EVENTS

Increase Authorized Common Stock. The Board of Directors of the Company
unanimously approved a proposal (the "Proposal") to amend

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the Company's Amended and Restated Certificate of Incorporation ("Restated
Certificate") to authorize an increase in the authorized Common Stock of the
Corporation to 30,000,000 shares from 15,000,000 shares of Common Stock. There
shall be no change in the par value of the Common Stock. The Proposal was
approved by the shareholders of the Company at its Annual Meeting on June 27,
1997. As of July 24, 1997, there were 9,006,154 shares of Common Stock issued
and outstanding and approximately 2,137,756 reserved for issuance upon the
exercise of issued and outstanding options, warrants, convertible promissory
notes and other contractual commitments. The Restated Certificate also continues
to authorize the Board of Directors to issue up to 5,000,000 shares of Preferred
Stock in such classes and with such voting rights, dividend rights and powers as
the Board may determine. As of June 8, 1997, there were no classes of Preferred
Stock authorized and no shares of Preferred Stock issued and outstanding.

The Proposal was deemed necessary because the Board of Directors has
determined it to be in the best interests of the Company and its stockholders to
undertake a "rights offering" ("Rights Offering"). As presently conceived, the
Rights Offering will consist of an offering to the Company's shareholders of one
right for each share of common stock owned by the Company's shareholders. Three
rights will entitle the holder thereof to subscribe for one unit at a price of
$.45 per unit. An aggregate of 2,640,035 units will be issued to shareholders
assuming all of the rights are exercised. Each unit is comprised of one Class A
Redeemable Common Stock Warrant, one Class B Redeemable Common Stock Warrant and
one Class C Redeemable Common Stock Warrant. the Class A Redeemable Common Stock
Purchase Warrants (the "Class A Warrants"), entitle the holder thereof to
purchase during the three years commencing on the date of initial issuance one
share of Common Stock of the Company (the "Class A Warrant Shares"), at an
exercise price of $3.00 per share, subject to adjustment in certain
circumstances. Second, the Class B Redeemable Common Stock Purchase Warrants
(the "Class B Warrants"), entitle the holder thereof to purchase during the five
years commencing on the date of initial issuance one share of Common Stock of
the Company (the "Class B Warrant Shares"), at an exercise price of $5.00 per
share, subject to adjustment in certain circumstances. Last, the Class C
Redeemable Common Stock Purchase Warrants (the "Class C Warrants"), entitle the
holder thereof to purchase during the seven years commencing on the date of
initial issuance one share of Common Stock of the Company (the "Class C Warrant
Shares"), at an exercise price of $10.00 per share, subject to adjustment in
certain circumstances. The Warrants will be separately transferable immediately.
No separate securities for the Units will be issued.

There can be no assurance that the Rights Offering will be consummated, or
if consummated, will be on the terms described above. The Rights Offering is
subject to registration with the Securities and Exchange Commission ("SEC") and
the various states. The Company has filed a registration statement with the SEC
with respect to the Rights Offering (Registration Statement No. 333-30135).
There can be no assurance that the registration statement to be filed with the
SEC for the transaction will be approved by the SEC, or if approved, will not
require alteration of the terms. None of the securities to be issued in
connection with the Rights Offering are being registered herewith as part of
this Prospectus.

Settlement of Certain Claims. In January 1997 the Company entered into a
settlement agreement with a former client who had commenced an arbitration
proceeding against the Company seeking damages for investments

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made in her account at the Company. Under the terms of the settlement, the
Company issued to the client and her assignees warrants to purchase 150,000
shares of the Company's Common Stock. The Warrants have an exercise price of
$1.25 per share and are exercisable through January 2002. The settlement
agreement also provided that the Company would register the underlying shares of
Common Stock for offer and sale under the Securities Act of 1933, as amended.
The Registration Statement of which this Prospectus forms a part has been filed
to register for offer and sale the 150,000 shares of Common Stock underlying the
Warrants.

Settlement of Administrative Action. In June 1997 FMSC entered into an
agreement with the SEC in order to settle certain claims brought by the SEC
against the Company and a principal of the Company. The settlement regarding
FMSC is contained in SEC Release No. 34-38775 (June 25, 1997). The principal has
proposed a separate offer of settlement which has not been accepted by the SEC
as of the date of this Prospectus. The SEC had instituted proceedings against
FMSC under Sections 15(b), 19(h) and 21C of the Securities and Exchange Act of
1934, as amended. The charges brought by the SEC were the result of activities
of FMSC's Houston branch office which occurred between 1990 and 1994. The
Houston branch was closed in December 1995.

Without admitting or denying the findings of the SEC, FMSC agreed to the
terms of an order determining that FMSC had (i) willfully violated Sections
15(c) and 17(a) of the Exchange Act and SEC Rules 15C3-1, 17a-3, 17a-5 and
17a-11 and (ii) had failed to properly supervise one or more of its employees in
accordance with Section 15(b) of the Exchange Act.

Pursuant to the settlement, FMSC agreed to a censure by the SEC. In
addition, FMSC agreed to several remedial undertakings including requirements to
(i) revise and supplement FMSC's compliance and supervisory proceedings relating
to its branch and affiliate programs (ii) appoint an independent consultant to
conduct a review of, and to report and make recommendations with respect to
FMSC's supervisory and compliance procedures and (iii) implement the
recommendations of the Independent Consultant. FMSC also agreed to disgorge
profits of $175,458 and pay interest of $51,584 and pay a civil fine of $50,000.

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THE OFFERING

Common Stock Outstanding
Prior to Offering (1)(2)...... 9,006,154 shares

Common Stock Outstanding
After the Offering (3) ....... 11,181,404 shares

Risk Factors .......................... This Offering involves a high
degree of risk. See "Risk
Factors."

Use of Proceeds ....................... All of the proceeds of this
Offering will be paid to the
respective Selling Security
Holders and none of the
proceeds will be received by
the Company. The Company
will receive proceeds from
the exercise of options and
warrants which shall be used
for working capital purposes.
If all of the 2,137,750 shares
underlying all outstanding
options were exercised, the
Company would receive proceeds
of approximately $2,244,027.
If all of the 150,000
Shares being registered
herein with respect to the
Warrants were exercised, the
Company would receive
$187,500 in proceeds. See
"Use of Proceeds."

OTC Bulletin Board Symbol.............. "FMFK"

- ----------

(1) Figures reflect shares outstanding as of July 24, 1997.

(2) Does not include (i) 3,500,000 shares of Common Stock reserved for issuance
under the Company's Incentive Stock Option Plan, of which 2,321,500 shares
have been reserved for currently outstanding options and 1,168,500 are
available for future issuances, and (ii) 1,000,000 shares of Common Stock
reserved for issuance under the Company's Non-Executive Director Stock
Option Plan of which 240,000 shares are reserved for currently outstanding
options and 760,000 shares are reserved for future issuances, (iii)
2,000,000 shares of Common Stock reserved for issuance under the Senior
Management Plan of which options to purchase 235,000 shares have been
issued and are outstanding, and (iv) 150,000 reserved for exercise of the
Warrants which were not issued under any of the Company's incentive stock
plans.

<PAGE>

(3) Assumes exercise of all of the shares underlying: (A) issued and
outstanding options granted under the Senior Management Plan and the 1992
Incentive Plan. Does not include (i) 1,168,500 shares that have been
reserved for and are available for future issuances, and (ii) 1,000,000
shares of Common Stock reserved for issuance under the Company's
Non-Executive Director Stock Option Plan of which 240,000 shares are
reserved for currently outstanding options and 760,000 shares are reserved
for future issuances.

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<PAGE>

CERTAIN OTHER MATTERS

This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. The Registration Statement may be
inspected without charge at the principal office of the Commission in
Washington, D.C. and copies of all or part of them may be obtained from the
Commission upon payment of prescribed fees.

No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy to any person in any jurisdiction where such offer would be
unlawful.

<PAGE>

RISK FACTORS

THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
FOLLOWING RISK FACTORS AND SPECULATIVE FACTORS INHERENT IN AND AFFECTING THE
BUSINESS OF THE COMPANY AND THIS OFFERING.

SAFE HARBOR STATEMENT

Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). The Company desires to avail itself of certain "safe
harbor" provisions of the Reform Act and is therefore including this special
note to enable the Company to do so. Forward-looking statements in this
Prospectus or hereafter included in other publicly available documents filed
with the Securities and Exchange Commission, reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance (financial or
operating) or achievements expressed or implied by such forward looking
statements. Such future results are based upon management's best estimates based
upon current conditions and the most recent results of operations. These risks
include, but are not limited to risks associated with the intense competition in
the brokerage industry, potential litigation, regulatory matters and the
volatility of the securities markets as well as other risks which may detailed
in the Company's Securities and Exchange Commission filings, including its
Annual Report on Form 10-KSB for the year ended December 31, 1996, each of which
could adversely affect the Company's business and the accuracy of the
forward-looking statements contained herein.

1. ORGANIZATIONAL AND OPERATING HISTORY

For the years ended December 31, 1996 and 1995, the Company had revenues of
$35,089,688, and $28,342,203, respectively and had net income of $32,789 and
$768,088 for the years ended December 31, 1996 and 1995, respectively. No
assurance is given that the Company will not incur losses in the future, and
such losses would necessarily affect the nature, scope and level of the
Company's future operations. The results of operations to date are not
necessarily indicative of the result of future operations. The Company's
securities business, by its very nature, is subject to various risks and
contingencies, many of which are beyond the ability of the Company to control.
These include economic conditions generally and in particular those affecting
securities markets, interest rates, discretionary income available for
investment; losses which may be incurred from underwriting and trading
activities; customer inability to meet commitments (such as margin obligations);
customer fraud; and employee misconduct and errors. Further, the nature and
extent of the Company's underwriting, trading and market activities, and hence
the volume and scope of its business is directly affected by its available "Net
Capital".

11
<PAGE>

2. FLUCTUATING SECURITIES VOLUME AND PRICES

The Company and the securities industry in general are directly affected by
national and international economic and political conditions, broad trends in
business and finance, the level and volatility of interest rates, changes in and
uncertainty regarding tax laws and substantial fluctuations in the volume and
price levels of securities transactions. The Company and the securities industry
in general are subject to other risks, including risks of loss from the
underwriting of securities, counterparty (a party to which the Company has
credit or performance exposure) failures to meet commitments, customer fraud,
employee errors or misconduct and litigation. In addition, price fluctuations
may cause losses on securities positions. As the Company expands its investment
banking activities and more frequently serves as manager or co-manager of public
offerings of securities, it expects to make increased commitments of capital to
market-making activities in securities of those issuers. The expected additional
concentration of capital in the securities of those issuers held in inventory
will increase the risk of loss from reductions in the market price. Low trading
volume or declining prices generally result in reduced revenues. Under these
conditions, profitability is adversely affected since many costs, other than
commission compensation and bonuses, are fixed. Heavy trading volume has caused
serious operating problems, including delays in clearing and processing, for
many securities firms in the past and may do so in the future.

3. COMPETITION AND OTHER DEVELOPMENTS

The Company encounters intense competition in all aspects of its business
and competes directly with many other securities firms, a significant number of
which offer their customers a broader range of financial services, have
substantially greater resources and may have greater operating efficiencies. In
addition, a number of firms offer discount brokerage services to individual
retail customers and generally effect transactions at lower commission rates on
an "execution only" basis without offering other services such as investment
recommendations and research. The further expansion of discount brokerage firms
could adversely affect the Company's retail business. Moreover, there is
substantial commission discounting by full-service broker-dealers competing for
institutional and individual brokerage business. The possible increase of this
discounting could adversely affect the Company. Other financial institutions,
notably commercial banks and savings and loan associations, offer customers some
of the services and products presently provided by securities firms. In
addition, certain large Companies have entered the securities industry by
acquiring securities firms. While it is not possible to predict the type and
extent of competitive services which banks and other institutions ultimately may
offer to customers, the Company may be adversely affected to the extent those
services are offered on a large scale.

4. RISKS OF PRINCIPAL AND BROKERAGE TRANSACTIONS AND LENDING ACTIVITIES

The Company's trading, market making and underwriting activities involve
the purchase, sale or short sale of securities as a principal and, accordingly,
involve the risk of changes in the market prices of those securities and the
risk of a decrease in the liquidity of markets which

12
<PAGE>

would limit the Company's ability to resell securities purchased or to
repurchase securities sold in principal transactions. The Company's brokerage
activities and its principal transactions are subject to credit risks. For
example a customer may not respond to a margin call, and since the securities
being held as collateral have diminished in value, there is a risk that the
Company may not recover the funds it loaned to the customer.

5. LITIGATION

Many aspects of the Company's business involve substantial risk of
liability, including exposure to substantial liability under federal and state
securities laws in connection with the activity of its sales people as well the
underwriting and distribution of securities. 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. See
"Legal Proceedings" in Form 10-KSB.

6. PERSONNEL; DEPENDENCE UPON REGISTERED REPRESENTATIVES

Most aspects of the Company's business are dependent on highly skilled and
experienced individuals. The Company has devoted considerable efforts to
recruiting and compensating those individuals and provides incentives to
encourage them to remain with the Company. Individuals associated with the
Company may in the future leave the Company at any time to pursue other
opportunities.

7. DEPENDENCE UPON PRESENT MANAGEMENT

For the foreseeable future, the Company will be substantially dependent
upon the personal efforts and abilities of its President, Mr. Herbert Kurinsky
and its Vice-President, Mr. William Kurinsky to coordinate, implement and manage
its business plans and programs. The loss or unavailability of the services of
either of them would likely have a material adverse affect on the business,
operations and prospects of the Company. The Company has obtained, for its
benefit, a policy of life insurance on the lives of Messrs. Herbert Kurinsky and
William Kurinsky in the amount of $250,000 and $500,000, respectively. The
Company has entered into a three year Employment Agreement with each of these
employees.

8. REGULATION

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. Failure to comply with any of these laws, rules or
regulations could result in fines, suspension or expulsion, which could have a
material adverse affect upon the Company.

9. NET CAPITAL REQUIREMENTS

The Company's business, like that of other securities firms, is capital
intensive. The SEC and the NASD have stringent provisions with respect to net
capital requirements applicable to the operation of securities firms. A
significant operating loss or any charge against net capital that could

13
<PAGE>

adversely affect the ability of the Company to expand or, depending upon the
magnitude of the loss or charge, to maintain its present level of business.

10. RISKS ASSOCIATED WITH INVESTMENT BANKING ACTIVITIES

Participation in an underwriting syndicate or a selling group involves both
economic and regulatory risks. An underwriter may incur losses if it is unable
to resell the securities it is committed to purchase, or if it is forced to
liquidate its commitment at less than the purchase price. In addition, under
federal securities laws, other laws and court decisions with respect to
underwriters' liabilities and limitations on the indemnification of underwriters
by issuers, an underwriter is subject to substantial potential liability for
misstatements or omissions of material facts in Prospectuses and other
communications with respect to such offerings. Acting as a managing underwriter
increases these risks. Underwriting commitments constitute a charge against net
capital and the Company's ability to make underwriting commitments may be
limited by the requirement that it must at all times be in compliance with the
Net Capital Rule.

11. DIVIDEND POLICY

Anticipated capital requirements of the Company make it unlikely that any
dividends will be declared in the foreseeable future on the Shares. Further,
applicable statutory regulations under the Securities Act of 1933, as amended,
as well as regulations of the NASDR may affect the ability of the Company to
declare and pay dividends. See "Dividend Policy".

12. POTENTIAL ADVERSE IMPACT ON MARKET PRICE OF SALES OF COMMON STOCK AND
RULE 144 SALES

Sales of substantial amounts of the Company's Common Stock in the public
market after this Offering, or the perception that such sales may occur, could
adversely affect the market prices of the Company's Common Stock and may impair
the Company's ability to raise additional capital by the sale of its equity
securities.

Of the 9,006,154 issued and outstanding shares of the Company's Common
Stock, approximately 2,092,941 shares may be deemed "restricted shares" and, in
the future, may be sold in compliance with Rule 144 under the Securities Act of
1933, as amended. Rule 144 provides that a person holding restricted securities
for a period of one year may sell in brokerage transactions an amount equal to
1% of the Company's outstanding Common Stock every three months. A person who is
a "non-affiliate" of the Company and who has held restricted securities for over
three years is not subject to the aforesaid volume limitations as long as the
other conditions of the Rule are met. Possible or actual sales of the Company's
Common Stock by certain of the Company's present shareholders under Rule l44
may, in the future, have a depressive effect on the price of the Company's
Common Stock in any market which may develop for such shares. Such sales at that
time may have a depressive effect on the price of the Company's Common Stock in
the open market. See "Certain Transactions" and "Description of Capital
Stock--Shares Eligible for Future Sale".

14
<PAGE>

13. LIMITED PUBLIC MARKET.

The Company's Common Stock is traded in the over-the-counter market and
reported by the National Daily Quotation Service ("Pink Sheets") published by
the National Quotation Bureau, Inc and the Electronic Bulletin Board maintained
by the NASD. Although the Company is applying for inclusion of its Common Stock
in the Nasdaq SmallCap Market, there an be no assurance that the Company's
application will be accepted. Additionally, there can be no assurance that the
Company will be able to maintain its Nasdaq listing nor be delisted in the
future as Nasdaq has the authority to delist companies for various reasons.

14. LIMITATIONS ON TRADING AND MARKET-MAKING ACTIVITIES ON THE COMPANY'S
BROKER-DEALER SUBSIDIARY IN THE COMPANY'S SECURITIES

Due to regulatory positions and requirements of both the SEC and the NASDR
relating to the circumstances and extent to which a registered broker-dealer and
NASDR member may engage in market-making transactions in the securities of its
parent company, FMSC does not engage in trading or market-making activities
relating to the Company's Common Stock where it would speculate in, purchase or
sell the Company's securities for its own account. The purpose and effect of
such limitation restrict FMSC from being a factor in the determination of the
market or price of the Company's securities. FMSC does, however, execute
transactions for its customers on an "agency basis" where it does not acquire
the Company's securities for its own trading account. FMSC will, however, earn
usual and customary brokerage commissions in connection with the execution of
such brokerage transactions. If, under current or future regulations of both the
SEC and NASDR, the Company is permitted to participate as a market-maker, it may
do so on the basis of showing a bid and offer for the Company's securities at
specified prices representing customer interest.

15. LIMITATION OF DIRECTOR LIABILITY; INDEMNIFICATION

The Company has amended its Certificate of Incorporation to include
provisions eliminating the personal liability of directors, except for breach of
a director's duty of loyalty to the Company or to its shareholders, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, and in respect of any transaction in which a director
receives an improper personal benefit. These provisions pertain only to breaches
of duty by directors as such, and not in any other corporate capacity, e.g., as
an officer. As a result of the inclusion of such provisions, if adopted, neither
the Company nor shareholders may be able to recover monetary damages against
directors for actions taken by them which are ultimately found to have
constituted negligence or gross negligence, or which are ultimately found to
have been in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to shareholders in any
particular case, shareholders may not have an effective remedy against the
challenged conduct.

The Company believes that, based upon recent developments in the market for
directors' and officers' liability insurance, such provisions are necessary to
attract and retain qualified individuals to serve as directors.

15
<PAGE>

In addition, such provisions will allow directors to perform their duties in
good faith without concern for the application of monetary liability on a
retroactive basis in the event that a court determines their conduct to have
been negligent or grossly negligent. On the other hand, the potential remedies
available to the Company or a Company stockholder are significantly limited by
such provisions, and it is possible that the protection afforded by such
provisions may reduce the level of diligence or care demonstrated by such
directors.

16
<PAGE>

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby, but will receive proceeds from the exercise of
options and the Warrants. In the event that all of the issued and outstanding
235,000 options under the Senior Management Plan are exercised, the Company will
receive proceeds of $255,106. In the event all of the issued and outstanding
2,137,750 options under the 1992 Incentive Plan are exercised, the Company will
receive proceeds of approximately $2,244,027. In the event that all of the
issued and outstanding 150,000 Warrants outstanding are exercised, the Company
will receive proceeds of $187,500. The options have exercise prices ranging
between $.56 and $2.50 per share.

MARKET FOR COMPANY'S COMMON STOCK

The Common Stock is traded in The NASD's Over-the-Counter Bulletin Board,
trading symbol "FMFK". Although the Company is applying for inclusion of its
Common Stock in the Nasdaq SMALLCAP Market, there can be no assurance that the
Company's application will be accepted.

The following table presents, on a quarterly basis, the high and low bid
quotations for the Common Stock as reported by the Nasdaq National Market for
the period from January 1, 1995 through June 30, 1997. Such quotations reflect
inter-dealer prices, without retail markup, markdown or commission and do not
necessarily represent actual transactions. On June 24, 1997, the bid and ask
bid quotations were $2.625 and $2.75, respectively.

Period High Low
- ------ ---- ---

1997
- ----

First Quarter $3.125 $ .96
Second Quarter
(through June 30, 1997) $2.78125 $2.4375

1996:
- -----

First Quarter $1.0625 $ .84375
Second Quarter $2.1875 $ .8125
Third Quarter $1.53 $1.03125
Fourth Quarter $1.13 $ .80

1995:
- -----

First Quarter $ .56 $ .22
Second Quarter $ .91 $ .19
Third Quarter $1.06 $ .50
Fourth Quarter $1.19 $ .50

The number of shares of the Common Stock of the Company held of record as
of the close of business on July 24, 1997 was 9,006,154.

17
<PAGE>

SELLING SECURITY HOLDERS AND
TRANSACTIONS WITH SELLING SECURITY HOLDERS

This Prospectus relates to the offer and sale by members of Senior
Management of the Company who may be deemed affiliates of the Company who have
acquired or will acquire shares of Common Stock under the Senior Management Plan
or the 1992 Incentive Plan. This Prospectus also relates to the offer and sale
of 150,000 shares of Common Stock which may be issued upon exercise of the
Warrants. All of the security holders referred to herein are collectively
referred to as the "Selling Security Holders". As of the date of this
Prospectus, options to purchase 235,000 shares of Common Stock have been issued
under the Senior Management Plan. The options have exercise prices ranging
between $1.02 and $1.16875 per share. As of the date of the Prospectus, options
to purchase 2,137,750 shares have been issued under the 1992 Incentive Plan.

The information set forth below has been provided to the Company by the
Selling Security holders. The percentages indicated are based upon 9,006,154
shares of Common Stock issued and outstanding as of June 24, 1997.

Number of Shares Number of Percentage of Number of
held prior to Shares Shares owned Shares owned
Name Offering Offered After Offering After Offering
- ---- ---------------- ----------- ----------------- --------------
<S> <C> <C> <C> <C>
A. Warrants

Berta Weitz 100,000 (1) 100,000 0 0
37-19 89th Street
Jackson Heights, NY
11372

Gary N. Moss, Esq. 25,000 (2) 25,000 0 0
c/o Moss & Kalish
122 East 42nd Street
New York, NY 10168

B. Senior Management Plan

Mark L. Kalish, Esq. 25,000 (2) 25,000 0 0
c/o Moss & Kalish
122 East 42nd Street
New York, NY 10168

Herbert Kurinsky 361,518 (3) 50,000 3.4 311,518 (3)
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
President/Director/
Chief Executive Officer

William J. Kurinsky 1,368,423 (4) 75,000 14.17 1,293,423 (4)
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Director/Exec. V.P./Chief
Financial Officer

Brian M. Cohen 76,000 (5) 50,000 * 16,000 (5)
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
General Securities
Principal of FMSC

</TABLE>

18
<PAGE>

<TABLE>

Edward Bayarski
<S> <C> <C> <C> <C>
One Mack Centre Drive 72,000 (6) 60,000 * 12,000
Paramus NJ 07652

C. 1992 Incentive Plan

Jeffrey A. Baber 20,800 20,000 * 800
68 Hopkins Road
New Egypt, NJ 08533

Craig Bernstein 5,000 4,000 * 1,000
48 Wegewood Circle #48
Eatontown, NJ 07724

Allison Berry 3,000 3,000 0 0
66 Lafayette Street
Rumson, NJ 07760

Joseph Besecker 32,500 32,500 0 0
1857 William Penn Way #203
Po Box 10666
Lancaster, PA 17603

</TABLE>
19
<PAGE>

<TABLE>

<S> <C> <C> <C> <C>
Kenneth Bock 15,000 15,000 0 0
407 Cook Road
Jackson, NJ 08527

David Bock 15,000 15,000 0 0
4 Denise Drive
Jackson, NJ 08527

Lisa M. Borenstein 5,000 4,000 0 0
718 Harrison Avenue
Oakhurst, NJ 07755

Gaetano V. Bracco 9,000 4,000 * 5,000
1171 Mill Creek Road
Manahawkin, NJ 08050

Olga Carmen 2,500 2,500 0 0
524 Morris Boulevard
Toms River, NJ 08753

Louise Carpineta 13,000 4,000 * 9,000
302 Cutty Court
Toms River, NJ 08753

Danielle Cartotenuto 5,000 4,000 * 1,000
270 Newark Avenue Apt A
Bloomfield, NJ 07003

Paula Costagliola 2,500 2,500 0 0
14 St. Georges Road
East Brunswick, NJ 08816

Paul Coviello 2,500 2,500 0 0
Box 16
Waverly, PA 18471

William Crow 25,000 25,000 0 0
3 Ivins Place
Rumson, NJ 07760

John Cullen 3,000 3,000 0 0
511 7th Avenue
Asbury Park, NJ 07712

Barbara Dalto 5,000 4,000 * 1,000
84 Secretariat Court
Tinton Falls, NJ 07724

</TABLE>
20
<PAGE>

<TABLE>

<S> <C> <C> <C>
Josephine Deblasio 13,446 2,000 * 11,446
11 Page Drive
Red Bank, NJ 07701

Rosemarie Domaratius 2,000 2,000 0 0
7 Braeside Avenue
Leonardo, NJ 07737

Norma L. Doxey 55,000 30,000 * 25,000
45 Tulip Lane
Red Bank, NJ 07701

Milton Eidelman 5,000 5,000 0 0
C/O Milton's
1206 Highway 35
Ocean, NJ 07712

Sean Fitzpatrick 2,500 2,500 0 0
4113 Huckleberry Road
Allentown, PA 18104

Danielle Florio 1,500 1,500 0 0
49 Harmony Avenue
Middletown, NJ 07748

Daniel Flynn 2,500 2,500 0 0
38 Chapin Avenue
Red Bank, NJ 07701

Joanne M. Frazee 5,000 4,000 * 1,000
45 Coleman Avenue
Red Bank, NJ 07701

Arlene Frazee 1,500 1,500 0 0
17 St. John's Place
Keansburg, NJ 07734

Carol Freda 5,400 5,000 * 400
388 Harper Avenue
Brick, NJ 08723

John Gazzola 26,000 25,000 * 1,000
17 Kastor Lane
West Long Branch, NJ 07764

</TABLE>
21
<PAGE>

<TABLE>

<S> <C> <C> <C>
Bruce Guest 53,500 50,000 * 3,500
681 River Avenue, Suite 1C
Lakewood, NJ 08701

Eleanor Harvey 6,000 6,000 0 0
214 E. 84th Street
New York, NY 10028

Mindy A. Horowitz 34,000 20,000 * 14,000
1606 F Street Unit 5-2
South Belmar, NJ 07718

Richard D. Jacaruso 2,500 2,500 0 0
765 Bunker Road
No. Woodmere, NY 11581

Dwight Sean Jones 2,500 2,500 0 0
1155 Hilary Lane
Beverly Hills, CA 90210

Corrine Kanterman 6,000 4,000 * 2,000
820 Constitution Drive
Brick, NJ 08724

Patricia Kenny 5,000 4,000 * 1,000
1245 Old Country Line Rd East
Lakewood, NJ 08701

John Koenigsberg 12,000 10,000 * 2,000
170 Grand Avenue
Atlantic Highlands, NJ 07716

Leon Kurinsky 105,000 75,000 * 13,000
185 Old Orchard Lane
Ocean, NJ 07721

Scott Lanham 100,000 100,000 0 0
467 Navesink River Road
Red Bank, NJ 07701

William A. Levy 50,000 50,000 0 0
8117 SE 76th Street
Mercer Island, WA 98040

Paul A. Lieberman 50,000 50,000 0 0
44 Doherty Drive
Middletown, NJ 07748

</TABLE>
22
<PAGE>

<TABLE>

<S> <C> <C> <C> <C>
Gregory Long 25,000 25,000 0 0
20154 Ocean Key Drive
Boca Raton, FL 33498

George B. Lucas 57,500 2,500 0 0
900 Barnegat Lane
Mantoloking, NJ 08738

Russell J. Lucas 46,500 2,500 * 55,000
18 Rustic Terrace
Little Silver, NJ 07739

F. Joseph Marsh 2,500 2,500 * 44,000
101 St. Andrews Drive
Pittsburgh, PA 15205

Donna Mastropasqua 1,500 1,500 0 0
1544 Berkeley Avenue
Beachwood, NJ 08722

Vicki Sorento 3,000 3,000 0 0
101 Buckingham Circle
Middletown, NJ 07748

Dave McCoy 27,500 27,500 0 0
20197 Ocean Key Drive
Boca Raton, FL 33498

Suzanne A. Montenero 4,600 4,000 * 600
1 Ann Court
Tinton Falls, NJ 08753

Patricia Pampel 5,800 5,000 * 800
234 Garden Road
Shrewsbury, NJ 07702

Kathleen Paul 3,000 40,000 0 0
28 East Avenue
Atlantic Highlands, NJ 07166

Robert I. Rabinowitz 132,500 75,000 * 57,500
10 Century Drive
West Long Branch, NJ 07764

Judy Rabinowitz 45,000 25,000 * 20,000
10 Century Drive
West Long Branch, NJ 07764

</TABLE>
23
<PAGE>

<TABLE>

<S> <C> <C> <C> <C>
Cynthia Rady 2,500 2,500 0 0
524 Batchelor Street
Toms River, NJ 08753

Christine Reinhold 2,500 2,500 0 0
203 5th Avenue
Avon, NJ 07717

Thomas Riccoboni 7,500 5,000 * 2,500
217 Balsam Place
Staten Island, NY 10309

Paul Rodrigues 3,000 3,000 0 0
468 West End Avenue #4H
North Plainfield, NJ 07060

Kevin Spencer 5,000 5,000 0 0
1 Judith Road
Little Silver, NJ 07739

Joyce A. Tomasello 4,000 4,000 0 0
103 Atlantic Street
Keyport, NJ 07735

Marissa Von Bargen 2,500 2,500 0 0
28 S. Gateway
Toms River, NJ 08753

Arlene Wasileski 10,700 5,000 * 5,700
25 Yellow Brook Drive
Colts Neck, NJ 07722

Jackson Warfield 2,500 2,500 0 0
7835 SE 75th Place
Mercer Island, WA 98040

Rebecca L. Wechkus 6,000 4,000 * 2,000
1804 Lake Avenue
Seaside Park, NJ 08752

Kimberly C. Yuhas 3,060 3,000 * 60
681 Vaughn Avenue
Toms River, NJ 08753

</TABLE>
24
<PAGE>

<TABLE>

D. Shares

<S> <C> <C> <C> <C>
Rosenman & Colin (7) 37,500 37,500 0 0
575 Madison Avenue
New York, NY 10022

</TABLE>

- ----------------------------
* Denotes less than 1%

(1) Includes 100,000 shares issuable upon the exercise of a Stock Purchase
Warrant.

(2) Includes 25,000 shares issuable upon the exercise of a Stock Purchase
Warrant.

(3) Includes vested and presently exercisable options of Mr. Herbert Kurinsky,
to purchase 360,000 shares of Common Stock.

(4) Includes vested and presently exercisable options of Mr. William J.
Kurinsky to purchase 515,000 shares of Common Stock.

(5) Includes 75,000 shares of Common Stock reserved for issuance upon
the exercise of vested and presently exercisable stock options.

(6) Includes 72,000 shares of Common Stock reserved for issuance upon
the exercise of 8,000 vested and presently exercisable stock options and
64,000 shares non-vested stock option.

(7) Includes shares of Common Stock held by the law firm of Rosenman & Colin
which serves as special counsel to the Company from time to time.

25
<PAGE>

PLAN OF DISTRIBUTION

The Shares covered by this Prospectus may be sold from time to time by the
Selling Security Holders, or by their transferees. No underwriting agreement or
arrangements have been entered into by the Company or by the Selling Security
Holders. The distribution of the Shares by the Selling Security Holders may be
effected in one or more transactions that may take place on the NASD OTC
Bulletin Board, including ordinary broker transactions, in the over-the-counter
market through broker-dealers, privately negotiated transactions or through
sales to one or more dealers for resale of the Shares as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling Security
Holders in connection with such sales. The Selling Security Holders and
intermediaries through whom the Shares may be sold may be deemed "underwriters"
under the Securities Act of 1933, as amended, with respect to the Shares sold.
The distribution by the Selling Security Holders will be required to comply with
the provisions of Regulation M promulgated by the SEC.

DESCRIPTION OF SECURITIES

The Company is authorized to issue 15,000,000 shares of Common Stock, no
par value, and 5,000,000 shares of Preferred Stock, par value $.10 per share. As
of July 24, 1997, there were 9,006,154 shares of Common Stock issued and
outstanding. See "Recent Events to Increase Authorized Common Stock."

COMMON STOCK

Subject to the rights of the holders of any shares of Preferred Stock which
may be issued in the future, holders of shares of Common Stock of the Company
are entitled to cast one vote for each share held at all shareholders' meetings
for all purposes, including the election of directors. Directors are elected
each year at the Company's annual meeting of shareholders to serve for a period
of one year and until their respective successors have been duly elected and
qualified.

Common shareholders have the right to share ratably in such dividends on
shares of Common Stock as may be declared by the Board of Directors out of funds
legally available therefor. Upon liquidation or dissolution, each outstanding
share of Common Stock will be entitled to share equally in the assets of the
Company legally available for distribution to shareholders after the payment of
all debts and other liabilities, subject to any superior rights of any future
holders of Preferred Stock.

Common shareholders have no pre-emptive rights. There are no conversion or
redemption privileges or sinking fund provisions with respect to the Common
Stock. All of the outstanding shares of Common Stock are, and all of the shares
of Common Stock offered hereby will be, validly issued, fully paid and
nonassessable. The common Stock does not have cumulative voting rights so
holders of more than 50% of the outstanding Common Stock can elect 100% of the
Directors of the Company if they choose to do so.

26
<PAGE>

PREFERRED STOCK

The Board of Directors is authorized to issue 5,000,000 shares of Preferred
Stock, $.10 par value per share, from time to time in one or more series. The
Board may issue a series of Preferred Stock having the right to vote on any
matter submitted to shareholders, including, without limitation, the right to
vote by itself as a series, or as a class together with any other or all series
of Preferred Stock. The Board of Directors may determine that the holder of
Preferred Stock voting as a class will have the right to elect one or more
additional members of the Board of Directors, or the majority of the members of
the Board of Directors.

WARRANTS

The Company has issued and outstanding 150,000 Common Stock Purchase
warrants which were issued in connection with a settlement agreement dated
January 31, 1997 between the Company and a former customer. The Registration
Statement of which this Prospectus forms a part includes the 150,000 shares of
Common Stock, subject to adjustment, underlying the Warrants.

The Warrants are exercisable at any time until January 31, 2002 at an
exercise price of $1.25 per share. The Company agreed to file on or before June
10, 1997 a registration statement with the Securities and Exchange Commission to
register the sale of the 150,000 shares of Common Stock underlying the Warrants.
The Registration Statement of which this Prospectus forms a part has been filed
in satisfaction of this obligation.

EXPERTS

The financial statements of the Company as of and for the years ended
December 3l, 1996 and December 31, 1995 have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of
Schneider Ehrlich & Wengrover LLP, independent certified public accountants, and
upon the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement under the Act with the
Securities and Exchange Commission (the "Commission"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to the Company and such securities, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. Each
statement made in this Prospectus referring to a document filed as an exhibit to
the Registration Statement is qualified by reference to the exhibit for a
complete statement of its terms and conditions. The Registration Statement,
including exhibits thereto, may be inspected without charge to anyone at the
office of the Commission, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.

27
<PAGE>

No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy, by anyone
in any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof.

5,687,500 Shares

FIRST MONTAUK FINANCIAL CORP.

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

PROSPECTUS

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

August __, 1997

<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Expenses in connection with the issuance and distribution of the securities
being registered herein are estimated.

Amount
------
Securities and Exchange Commission Registration
Fee........................................................ $ 4,567
Printing and Engraving Expenses..................................... 8,000
Accounting Fees and Expenses........................................ 10,000
Legal Fees and Expenses............................................. 15,000
Blue Sky Fees and Expenses.......................................... 1,000
Transfer Agent and Registrar Fees................................... 1,000
Miscellaneous Fees and Expenses..................................... 200
-------
Total........................................... $39,767
=======

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's By-Laws require the Company to indemnify, to the full extent
authorized by Section 14A:3-5 of the New Jersey Business Company Act, any person
with respect to any civil, criminal, administrative or investigative action or
proceeding instituted or threatened by reason of the fact that he, his testator
or intestate is or was a director, officer or employee of the Company or any
predecessor of the Company is or was serving at the request of the Company or a
predecessor of the Company as a director, officer, employee or agent of another
Company, partnership, joint venture, trust or other enterprise.

Section 14A:3-5 of the New Jersey Business Company Act authorized the
indemnification of directors and officers against liability incurred by reason
of being a director or officer and against expenses (including attorneys fees)
in connection with defending any action seeking to establish such liability, in
the case of third-party claims, if the officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and if such officer or director shall not have been
adjudged liable for negligence or misconduct, unless a court otherwise
determines. Indemnification is also authorized with respect to any criminal
action or proceeding where the officer or director had no reasonable cause to
believe his conduct was unlawful.

In accordance with Section 14A:2-7 of the New Jersey Business Company Act,
the Company's Certificate of Incorporation eliminates the personal liability of
officers and directors to the Company and to shareholders for monetary damage
for violation of a director's duty owed to the Company or its Shareholders,
under certain circumstances.

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<PAGE>

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable.

ITEM 16. EXHIBITS

The exhibits designated with an asterisk (*) have previously been filed
with the Commission in connection with the Company's Registration Statement on
Form S-l, File No. 33-24696, those designated (**) have been filed with the
Company's Form 10-KSB for the fiscal year ended December 31, 1993, those
designated (***) have been previously filed with the Company's Registration
Statement on Form S-3, File No. 33-65770, and pursuant to 17 C.F.R. Sections
201.24 and 240.12b-32, are incorporated by reference to the document referenced
in brackets following the description of such exhibits. Those designated (****)
denotes exhibits which have been filed with the Company's Form 10-KSB for the
fiscal year ended December 31, 1994, and (*****) denotes exhibits filed
herewith. Those designated (******) denotes exhibits which have been filed with
the Company's Proxy Statement dated May 30, 1996. All exhibits appearing with a
footnote (1) are filed herewith. Those exhibits appearing with a footnote (2)
were filed with the Company's Report on Form 10KSB for the fiscal year ended
December 31, 1996. Those exhibits appearing with a footnote (3) were previously
filed.

Exhibit No. Description
- ----------- -----------

3.1* Amended and Restated Certificate of Incorporation adopted at
1989 Special Meeting in lieu of Annual Meeting of
Shareholders.

3.2* Amended and Restated By-Laws.

3.3(1) Amendment to Amended and Restated Certificate of Incorporation
adopted at Annual Meeting held on June 27, 1997.

4.1* Form of Common Stock Certificate.

4.2* Form of Underwriter's Warrant.

4.3(1) Form of Warrant issued to Berta Weitz and assignees, dated
January 31, 1997.

5 (1) Opinion of Goldstein & DiGiola LLP re: Legality of Shares and
consent.

10.7* Sublease between Prime Asset Management Corp. and the
Registrant dated December 6, 1989.

10.8* Clearing Agreement between the Registrant and Wertheim
Schroder & Co., Incorporated dated January 21, 1991.

10.10* Lease Agreement between the Registrant and Hovchild dated May
25, 1990.

10.11*** Employment Agreement between First Montauk Financial Corp. and
Herbert Kurinsky dated January 1, 1993.

II-2

<PAGE>

10.12*** Employment Agreement between First Montauk Financial Corp. and
William Kurinsky dated January 1, 1993.

10.13*** Lease Agreement between First Montauk Securities Corp. and
River Office Equities dated September 7, 1993.

10.14**** Lease Addendum Agreement between First Montauk Securities
Corp. and River Office Equities dated June 21, 1994.

10.15***** Sublease Agreement between First Montauk Securities Corp. and
Pilot Laboratories, Inc. dated September 19, 1995, and Master
Lease Agreement between River Office Equities and Pilot
Laboratories, Inc. dated August 31, 1987.

10.16***** Office Lease Agreement between First Montauk Securities Corp.
and River Office Equities dated January 31, 1996.

10.17 (2) Office Lease Agreement between First Montauk Securities Corp.
and River Office Equities dated March 5, 1997.

11 Computation of Earnings per share - Not applicable

23.1 (3) Consent of Schneider Ehrlich & Wengrover LLP.

23.2 (1) Consent of Goldstein & DiGiola LLP contained in Exhibit 5.

27 Financial Data Schedule - Not Required.

28.1* 1992 Incentive Stock Option Plan.

28.2* 1992 Non-Executive Director Stock Option Plan.

28.3****** Amended and Restated 1992 Incentive Stock Option Plan.

28.4****** Non-Executive Director Stock Option Plan - Amended and
Restated June 28, 1996

28.5****** 1996 Senior Management Incentive Stock Option Plan.

28.6 (3) Employment Agreement between First Montauk Financial Corp. and
Herbert Kurinsky dated January 1, 1996.

28.7 (2) Employment Agreement between First Montauk Financial Corp. and
William J. Kurinsky dated January 1, 1996.

II-3
<PAGE>

ITEM 17. UNDERTAKINGS.

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 (a) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (b) to
reflect in the prospectus any fact 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, and (c) 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; provided, however, that paragraphs
(a) and (b) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13, or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.

(2) For purpose of determining any liability under the Securities Act of
1933, each 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 post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

(4) 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 following provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against pubic 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 begin
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.

(5) 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

II-4
<PAGE>

(4) or 497(h) under the Securities Act 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,
each posteffective 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-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Borough of Red Bank, State of Jersey, on the 24th day of
July, 1997.

FIRST MONTAUK FINANCIAL CORP.

By:/s/ HERBERT KURINSKY
-----------------------------
Herbert Kurinsky, President

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below substitutes and appoints Herbert Kurinsky and William J. Kurinsky, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be don in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitute, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

Signature Capacity Date
--------- -------- ----

/s/ HERBERT KURINSKY President July 24, 1997
- ----------------------------- Chief Executive Officer
Herbert Kurinsky and Director

/s/ WILLIAM J. KURINSKY Vice President, Chief July 24, 1997
- ----------------------------- Operating and Chief
William J. Kurinsky Financial Officer,
Secretary and Director

/s/ NORMA DOXEY
- ----------------------------- Director July 24, 1997
Norma Doxey

/s/ WARD R. JONES, JR.
- ----------------------------- Director July 24, 1997
Ward R. Jones, Jr.

/s/ DAVID I. PORTMAN
- ----------------------------- Director July 24, 1997
David I. Portman

II-6
<PAGE>

EXHIBIT INDEX
Exhibit No.
- -----------