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

                                    FORM 10-Q


[X]      Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

For the quarterly period ended October 31, 1997

                                       or

[ ]      Transition report pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934

For the transition period from ________ to ________


                         Commission file number 0-21105

                                GKN HOLDING CORP.
             (Exact name of registrant as specified in its charter)


Delaware                                                     13-3414302
-------------------------------                             -------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)

61 Broadway, New York, New York                                 10006
---------------------------------------                    ---------------
(Address of principal executive offices)                      (Zip Code)

(212)509-3800
----------------------------------------------------
(Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes   X    No


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Class                                      Outstanding at December 11, 1997
Common Stock, $.0001 par value             8,095,899 shares

                            Exhibit index on page 15.



<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                                      Index

<TABLE>
<CAPTION>



Part I - Financial Information                                                                Page
<S>                                                                                            <C>  
Item 1.   Financial Statements

     Consolidated Statements of Financial Condition as of
     October 31, 1997 (Unaudited) and January 31, 1997                                          3

     Consolidated Statements of Income for the three and nine
     months ended October 31, 1997 and 1996 (Unaudited)                                         4

     Consolidated  Statements  of Changes in  Stockholders'
     Equity for the year ended January 31, 1997 and the nine
     months ended October 31, 1997 (Unaudited)                                                  5

     Consolidated Statements of Cash Flows for the nine months
     ended October 31, 1997 and 1996 (Unaudited)                                                6

     Notes to Consolidated Financial Statements                                                 7

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                                   9


Part II - Other Information

Item 2.   Changes in Securities and Use of Proceeds                                            13

Item 6.   Exhibits and Reports on Form 8-K                                                     13
</TABLE>

                                       2

<PAGE>


Part I - FINANCIAL INFORMATION
Item 1.  Financial Statements

                       GKN HOLDING CORP. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>

                                                                             October 31,           January 31,
                                                                                 1997                 1997
                                                                           ---------------          -----------
                                                                             (Unaudited)
<S>                                                                              <C>                   <C>   
Assets
Cash and cash equivalents                                                 $    5,813,000         $   17,856,000
Receivable from brokers and dealers                                            6,219,000              9,357,000
Securities owned, at market value                                             12,994,000             14,610,000
Securities owned, not readily marketable, at fair value                        1,548,000              1,365,000
Investments                                                                    3,149,000              2,692,000
Office furniture, equipment and leasehold improvements, net                    1,122,000              1,251,000
Goodwill, net                                                                  3,747,000              1,619,000
Loans receivable                                                               3,739,000              1,451,000
Income taxes receivable                                                        2,408,000                     --
Other assets                                                                   3,170,000              1,432,000
                                                                          --------------         --------------
Total assets                                                              $   43,909,000         $   51,633,000
                                                                          ==============         ==============

Liabilities and Stockholders' Equity
Liabilities:
   Securities sold, not yet purchased, at market value                     $   4,617,000          $   6,997,000
   Commissions payable                                                         2,540,000              2,186,000
   Deferred compensation                                                       1,057,000              1,409,000
   Income taxes payable                                                               --                238,000
   Deferred tax liability                                                      1,088,000                636,000
   Accrued expenses and other liabilities                                      2,654,000              4,403,000
                                                                           -------------          -------------
                                                                              11,956,000             15,869,000
   Liability subordinated to the claims of general creditors                     571,000                738,000
                                                                           -------------          -------------
   Total liabilities                                                          12,527,000             16,607,000
                                                                           -------------          -------------

Stockholders' equity:
   Series A preferred stock,  $.10 par value;  1,200,000
     authorized,  1,140,000 shares issued and outstanding; and
     no shares authorized, issued, and outstanding                               114,000                     --
   Common stock, $.0001 par value; 35,000,000 shares
     authorized; 9,209,875 shares issued; 8,095,899 and
     8,225,512 shares outstanding                                                  1,000                  1,000
   Additional paid-in capital                                                 20,449,000             19,931,000
   Retained earnings                                                          15,741,000             18,247,000
   Cumulative translation adjustment                                             (21,000)                (3,000)
                                                                           -------------          -------------
                                                                              36,284,000             38,176,000
   Less treasury stock, at cost; 1,113,976 and 992,363 shares                 (4,902,000)            (3,150,000)
                                                                           -------------          -------------
   Total stockholders' equity                                                 31,382,000             35,026,000
                                                                           -------------          -------------
Total liabilities and stockholders' equity                                 $  43,909,000          $  51,633,000
                                                                           =============          =============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3

<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                        Consolidated Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                    Three Months                                   Nine Months
                                                   Ended October 31,                             Ended October 31,
                                                1997                1996                      1997               1996
                                             ----------          -----------               -----------        ------------
<S>                                            <C>                 <C>                     <C>                  <C>  
Revenues:
   Commissions                             $12,513,000            $10,573,000              $30,247,000        $39,740,000
   Investment banking                          914,000              1,977,000                4,643,000          7,544,000
   Principal transactions                      913,000                914,000                1,605,000          4,418,000
   Interest                                    327,000                462,000                1,063,000          1,176,000
   Other                                       450,000                 78,000                  903,000            130,000
                                          ------------           ------------              -----------        -----------
Total revenues                              15,117,000             14,004,000               38,461,000         53,008,000
                                          ------------           ------------              -----------        -----------
Expenses:
   Compensation and benefits                 9,968,000              8,970,000               26,796,000         32,665,000
   Communications                            1,277,000                997,000                3,704,000          2,906,000
   Brokerage, clearing and
      exchange fees                            931,000                537,000                2,442,000          1,742,000
   Occupancy and equipment                     943,000                751,000                2,501,000          2,067,000
   Business development                        419,000                429,000                1,606,000          1,051,000
   Professional fees                           271,000                145,000                  756,000            786,000
   Investigations and settlements              204,000                141,000                2,192,000            627,000
   Other                                       965,000                667,000                2,438,000          1,829,000
                                          ------------           ------------              -------------      -----------
Total expenses                              14,978,000             12,637,000               42,435,000         43,673,000
                                          ------------           ------------              ------------       -----------
Income (loss) before income taxes              139,000              1,367,000               (3,974,000)         9,335,000

Income taxes                                   196,000                552,000               (1,468,000)         3,993,000
                                          ------------           ------------              ---------------    -----------
Net (loss) income                         $    (57,000)          $    815,000              $(2,506,000)      $  5,342,000
                                          ============           ============              =============      ===========

Earnings (loss) per common share          $      (0.01)          $       0.09              $     (0.31)      $       0.80
                                          ============           ============              =============      ===========
Weighted average common
   shares outstanding                        8,096,769              8,694,355                8,120,427          6,667,294
                                          ============           ============              =============      ===========

</TABLE>



          See accompanying notes to consolidated financial statements.

                                       4

<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
           Consolidated Statements of Changes in Stockholders' Equity
          For the Year Ended January 31, 1997 and the Nine Months Ended
                          October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>

                                                     Additional                    Cumulative
                            Preferred    Common       Paid-in        Retained      Translation   Treasury     Unearned
                              Stock       Stock       Capital        Earnings      Adjustment     Stock     Compensation    Total
                           ----------   --------   --------------  --------------  ----------  ----------- ------------- -----------
<S>                             <C>       <C>            <C>            <C>            <C>         <C>          <C>          <C>
Balance at
   January 31, 1996        $       -    $  1,000    $  3,487,000   $ 11,918,000    $      -    $ (630,000)  $        -  $14,776,000
Net income                         -           -               -      6,329,000           -             -            -    6,329,000
Stock issued                       -           -      16,011,000              -           -             -            -   16,011,000
Warrants issued                    -           -           1,000              -           -             -            -        1,000
Stock options
   granted                         -           -          36,000              -           -             -            -       36,000
Notes receivable                   -           -        (221,000)             -           -             -            -     (221,000)
Stock options exercised            -           -         617,000              -           -        95,000            -      712,000
Purchase of
   treasury stock                  -           -               -              -           -    (2,615,000)           -   (2,615,000)
Translation adjustment             -           -               -              -      (3,000)            -            -       (3,000)
                           ----------   --------   --------------  --------------  ----------  ----------- ------------- -----------
Balance at
   January 31, 1997                -       1,000      19,931,000     18,247,000      (3,000)   (3,150,000)           -   35,026,000
Net income (loss)                  -           -               -     (2,506,000)          -             -            -   (2,506,000)
Stock issued for
   acquisition               114,000           -       1,376,000              -           -       517,000            -    2,007,000
Stock options exercised            -           -         (45,000)             -           -       124,000            -       79,000
Stock issued
   under incentive
   compensation plans              -           -         541,000              -           -     1,193,000   (1,734,000)           -
Amortization of
   unearned
   compensation                    -           -               -              -           -             -      385,000      385,000
Purchase of
   treasury stock                  -           -               -              -           -    (3,586,000)           -   (3,586,000)
Change in trans-
   lation adjustment               -           -               -              -     (18,000)            -            -      (18,000)
Other                              -           -          (5,000)             -           -             -            -       (5,000)
                           ----------    --------  --------------  --------------  ----------  ----------- ------------- -----------
Balance at
   October 31, 1997        $ 114,000     $ 1,000   $  21,798,000   $ 15,741,000    $(21,000)  $(4,902,000) $(1,349,000) $31,382,000
                           ==========    ========  ==============  ==============  ==========  =========== ============= ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5

<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                           Nine Months Ended Oct 31,
                                                                           1997                1996
                                                                     ---------------        ----------
<S>                                                                         <C>                 <C>    
Operating activities:
   Net (loss) income                                                  $ (2,506,000)         $ 5,342,000
   Adjustments to reconcile net (loss) income to net
     cash provided by (used in) operating activities:
      Deferred taxes                                                       909,000             (114,000)
      Depreciation                                                         334,000              178,000
      Amortization                                                         202,000              229,000
                                                                     -------------         ------------
                                                                        (1,061,000)           5,635,000
   (Increase) decrease in operating assets:
     Receivable from brokers and dealers                                 3,793,000            4,139,000
     Securities owned, at market value                                   1,783,000           (7,332,000)
     Securities owned, not readily marketable                             (183,000)             481,000
     Investments                                                                             (2,957,000)
     Loans receivable                                                   (2,284,000)             266,000
     Income taxes receivable                                            (2,408,000)          (1,352,000)
     Other assets                                                       (1,287,000)            (177,000)
   Increase (decrease) in operating liabilities:
     Securities sold, not yet purchased                                 (2,390,000)           1,888,000
     Commissions payable                                                  (283,000)             166,000
     Deferred compensation                                                (353,000)           1,534,000
     Income taxes payable                                                 (229,000)            (328,000)
     Accrued expenses and other liabilities                             (2,575,000)             507,000
     Translation adjustment                                                (18,000)             (17,000)
                                                                     -------------         ------------
Net cash (used in) provided by operating activities                     (7,495,000)           2,453,000
                                                                     -------------         ------------
Investing activities:
   Purchase of office furniture, equipment
     and leasehold improvements                                           (160,000)            (640,000)
   Limited partnerships                                                   (457,000)                   -
   Acquisition, net of cash acquired                                      (302,000)                   -
   Goodwill resulting from acquisition                                      68,000              (30,000)
                                                                     -------------         ------------
Net cash used in investing activities                                     (851,000)            (670,000)
                                                                     -------------         ------------
Financing activities:
   Issuance of common shares                                                75,000           16,112,000
   Issuance of common stock warrants                                             -                1,000
   Purchase of treasury stock                                           (3,586,000)            (928,000)
   Repayment of subordinated debt                                         (186,000)            (203,000)
                                                                     -------------         ------------
Net cash (used in) provided by financing activities                     (3,697,000)          14,982,000
                                                                     -------------         ------------

Net change in cash and cash equivalents                                (12,043,000)          16,765,000
Cash and cash equivalents at beginning of year                          17,856,000            7,873,000
                                                                     -------------         ------------
Cash and cash equivalents at end of period                           $   5,813,000          $24,638,000
                                                                     =============         ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6

<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


1.  Basis of Presentation

The consolidated  financial statements include the accounts of GKN Holding Corp.
and its subsidiaries (the Company).  All significant  intercompany  accounts and
transactions are eliminated in consolidation.  In the opinion of management, the
consolidated  financial  statements reflect all adjustments,  which are all of a
normal  recurring  nature,  necessary  for a fair  statement  of  the  Company's
financial  position and results of operations for the interim periods presented.
These consolidated  financial  statements should be read in conjunction with the
Company's consolidated financial statements and notes thereto for the year ended
January 31, 1997, in its annual report on Form 10-K.
Certain reclassifications have been made to the prior year amounts to conform to
the current presentation.

The financial  statements conform with generally accepted accounting  principles
(GAAP). The preparation of financial statements in conformity with GAAP requires
the Company to make estimates and assumptions  that affect the reported  amounts
of assets and liabilities  and disclosures of contingent  assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues and expenses  during the reporting  period.  Actual  results could vary
from these estimates.

The  Company's  principal  business  activities  are  affected by many  factors,
including  general  economic  and  market   conditions,   which  can  result  in
substantial  fluctuations in the Company's  revenues and net income.  Therefore,
the results of operations  for the nine months ended  October 31, 1997,  are not
necessarily  indicative  of the  results  which may be  expected  for the entire
fiscal year.

2.  Acquisition

On  March  13,  1997,  the  Company  acquired  all of the  outstanding  stock of
Southeast  Research  Partners,  Inc.  ("Southeast")  for $520,000 cash,  152,000
shares of common stock, and 1,140,000  shares of Series A Preferred Stock.  This
preferred  stock was authorized by the Company's  Board of Directors on March 3,
1997. Southeast is a research and institutional  brokerage boutique,  located in
Boca Raton,  Florida,  which maintains  research  coverage  primarily focused on
small  and mid  capitalization  companies  located  in the  Southeastern  United
States.

3.  Net Capital Requirements

GKN Securities Corp. ("GKN"), Southeast, and Shochet Securities, Inc. (Shochet),
all wholly-owned subsidiaries of the Company, are registered broker-dealers with
the  Securities  and  Exchange  Commission  (the  SEC) and  member  firms of the
National  Association  of  Securities  Dealers,   Inc.  (NASD).  As  such,  GKN,
Southeast, and Shochet are subject to the SEC's net capital rule, which requires
the maintenance of minimum net capital.

GKN has elected to compute net capital using the alternative method permitted by
the net capital rule,  which requires that it maintain  minimum net capital,  as
defined,  to be greater than or equal to $250,000.  At October 31,1997,  GKN had
excess net capital of $5,006,000.

Southeast  has  elected to compute  net  capital  under the  standard  aggregate
indebtedness  method  permitted by the net capital rule, which requires that the
ratio of  aggregate  indebtedness  to net  capital,  both as defined,  shall not
exceed 15 to 1. At October 31, 1997, Southeast had net capital of $1,559,000 and
a net capital requirement of $100,000.  Southeast's net capital ratio at October
31, 1997, was 0.62 to 1.

Shochet has also  elected to compute net capital  under the  standard  aggregate
indebtedness  method  permitted  by the net capital  rule.  At October 31, 1997,
Shochet had net capital of $701,000 and a net capital  requirement  of $100,000.
Shochet's net capital ratio at October 31, 1997, was 0.80 to 1.

                                       7

<PAGE>

4.    Earnings Per Share

Weighted  average common shares  outstanding used in the calculation of earnings
per common share reflects common stock equivalents,  consisting of stock options
and warrants,  when their effect is dilutive. The difference between primary and
fully diluted  earnings per share is not material.  In March 1997, the Financial
Accounting  Standards Board issued Statement of Financial  Accounting  Standards
No. 128, Earnings per Share (SFAS 128),  effective  beginning in the fiscal year
ending January 31, 1998. This statement changes the calculation and presentation
of earnings per common share (EPS). The new  presentation  will consist of basic
EPS,  which  includes no dilution  and is computed by dividing net income by the
weighted-average number of common shares outstanding for the period, and diluted
EPS,  which is similar to the current  fully  diluted EPS. The disclosed EPS for
the current quarter would be the same under the new pronouncement.

5.    Supplemental Cash Flow Information
<TABLE>
<CAPTION>

                                                                            Nine Months Ended Oct 31,
                                                                           1997                1996
                                                                      ---------------       -----------
<S>                                                                          <C>                  <C>    
Cash paid for:
Income taxes                                                          $     731,000       $  1,551,000
Interest                                                                     26,000             17,000

Non-cash financing activities:
Treasury stock issued for Incentive Compensation Plan                 $   3,586,000       $          -

Details of acquisition:
Fair value of assets acquired                                         $   1,479,000       $          -
Liabilities assumed                                                      (1,474,000)                 -
Common stock issued in acquisition                                         (912,000)                 -
Preferred stock issued in acquisition                                    (1,095,000)                 -
Goodwill                                                                  2,304,000                  -
                                                                          ---------         -----------
Net cash used for acquisition                                               302,000                  -

</TABLE>

6.   Commitments and Contingencies

On June 24, 1997, GKN entered into a lease  agreement for  approximately  48,000
square  feet  of  office  space  in  Downtown  New  York  City.   The  Company's
headquarters  and New York branch are  expected  to  relocate  to this  facility
during the fourth quarter of this year.

                                       8

<PAGE>


                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations

Results of Operations

Three Months Ended October 31, 1997  vs. Three Months Ended October 31, 1996
----------------------------------------------------------------------------

Net income  (loss) for the three months ended  October 31, 1997 was $(57,000) as
compared to $815,000  for the three  months  ended  October 31,  1996.  Earnings
(loss) per share of common stock for the three  months  ended  October 31, 1997,
were $(0.01) as compared to $0.09 for the three  months ended  October 31, 1996.
The decrease in earnings was  attributable  to losses  suffered  through  market
making  activities,  and the execution of fewer investment  banking deals. These
results  reflect the  settlements  of  investigations  by NASDR and the SEC. Net
income  excluding  investigations  and  settlements  for the three  months ended
October 31, 1997 and 1996, was $59,000 and $896,000, respectively.  Earnings per
share  excluding  investigations  and  settlements  for the three  months  ended
October 31, 1997 and 1996 were $0.01 and $0.10, respectively.

The  Company's  principal  business  activities  are  affected by many  factors,
including  general  economic  and  market   conditions,   which  can  result  in
substantial  fluctuations in the Company's  revenues and net income.  Therefore,
the results of operations for the quarter are not necessarily  indicative of the
results which may be expected for the entire fiscal year.

Revenues

Total revenues  increased by 8% to  $15,117,000  for the third quarter of fiscal
1998, mainly as a result of higher commission revenues.

Commission  revenues  increased by  $1,940,000,  or 18%, for the third  quarter,
reflecting the strong market conditions in the small capitalization stock sector
during the month of October.  The Company  executed  29% more trades  during the
quarter as compared to the same quarter in the prior year.

Investment  banking revenues  decreased by $1,063,000,  or 54%. During the third
quarter of fiscal 1998 the Company  raised $2.7  million for  corporate  clients
through two private  placements.  In the same period in fiscal 1997, the Company
raised  $26.9  million for its  clients  through  two public  offerings  and two
private placements. There were no public offerings in the current quarter.

Principal  transactions  generated  income of $913,000  in the third  quarter of
fiscal  1998.   Revenues   generated   through  market  making   activities  for
over-the-counter  equity securities decreased $1,623,000 to $(1,293,000) for the
quarter  while  revenues  from  the  Company's   investment   account  increased
$1,623,000 to $2,206,000.

Expenses

Total  expenses  for the third  quarter in fiscal 1998 were  $14,978,000,  a 19%
increase  over the third  quarter in fiscal 1997.  This  increase is tied to the
increase in revenues,  as  compensation  expenses are directly  correlated  with
commission revenues, and the acquisition of Southeast.

Compensation  and benefits expense  increased 11% to $9,968,000.  These expenses
are  primarily  variable as  commissions  to brokers are paid as a percentage of
commission revenues generated and incentive  compensation is directly related to
net income. The expense increase in fiscal 1998 is consistent with the increases
in commission revenues.

                                       9

<PAGE>

Communications  expense  increased  by  $280,000,  or 28%,  as a  result  of the
Company's expansion.

Brokerage,  clearing and exchange  fees and  occupancy  and  equipment  expenses
increased by 73% and 26%,  respectively.  These  increases were primarily due to
the March 1997 acquisition of Southeast and the growth of existing offices.

Investigations  and settlements  expense relates to costs incurred resolving the
SEC and NASDR investigations.

Other expenses increased $298,000 primarily due to increased expenses associated
with the Company's growth.

Weighted average common shares outstanding

The average  number of common  shares and common stock  equivalents  outstanding
used in the  computation of earnings per common share was 8,096,769 in the third
quarter of fiscal 1998, compared with 8,694,355 in fiscal 1997.

Nine Months Ended October 31, 1997  vs. Nine Months Ended October 31, 1996
--------------------------------------------------------------------------

Net income (loss) for the nine months ended October 31, 1997 was $(2,506,000) as
compared to  $5,342,000  for the nine months ended  October 31,  1996.  Earnings
(loss) per share of common  stock for the nine months  ended  October 31,  1997,
were  $(0.31) as compared to $0.80 for the nine months  ended  October 31, 1996.
The decrease in earnings was directly  attributable to the weakness in the small
cap market,  although the month of October  posted strong  results.  The Company
experienced lower commission revenues,  executed fewer investment banking deals,
and suffered  losses  through  market  making  activities  for  over-the-counter
securities. These results reflect the settlements of investigations by NASDR and
the SEC. Net income (loss) excluding investigations and settlements for the nine
months  ended  October  31,  1997 and 1996,  was  $(1,258,000)  and  $5,701,000,
respectively. Earnings (loss) per share excluding investigations and settlements
for the nine months  ended  October 31, 1997 and 1996,  were  $(0.15) and $0.86,
respectively.  The results of operations for the nine months are not necessarily
indicative of the results which may be expected for the entire year.

Revenues

Total  revenues  decreased by 27% to $38,461,000  for the nine months.  Revenues
decreased  in  all  the  Company's  major  areas  of  activity  for  the  fiscal
year-to-date.

Commission  revenues  decreased  by  $9,493,000,  or 24%,  for the  year-to-date
period.  The decrease  reflects the weakness in the small  capitalization  stock
sector  through the first eight months of this year. The month of October posted
a strong rebound in the small  capitalization stock sector. The Company executed
10% more  trades  during the  period as opposed to the same  period in the prior
year.

Investment banking revenues decreased by $2,901,000,  or 38%. The Company raised
$54.9  million for its clients in the fiscal  1998  period  through  four public
offerings and seven private  placements,  a decrease from the comparable  fiscal
1997 period when the Company raised $85.8 million  through six public  offerings
and seven  private  placements.  The decrease in  underwriting  activity was the
result of general market conditions on the small capitalization market.

Revenues from principal  transactions  decreased by $2,813,000,  or 64%, for the
nine  months.   Revenues   generated   through  market  making   activities  for
over-the-counter  equity securities decreased $4,406,000 to $(1,689,000) for the
period  while  revenues  from  the  Company's   investment   account   increased
$1,593,000.  The lower  revenues  generated  through  market  making  activities
resulted from weakened market conditions for small capitalization  stocks during
the fiscal 1998 period.

                                       10

<PAGE>

Expenses

Total expenses for the first nine months of fiscal 1998 were  $42,435,000,  a 3%
decrease from the same period in fiscal 1997. As a percentage of revenues, these
expenses increased to 110% in the fiscal 1998 period from 82% in the fiscal 1997
period.

Increases in the Company's expense categories for the nine month period resulted
from the same factors causing  increases in expenses for the third quarter.  The
primary factors  resulting in higher  expenses were the significant  increase in
the level of business  activities,  the addition of wholly  owned  subsidiaries,
settlements  of the  NASDR and SEC  investigations,  and  increased  promotional
activities.

Liquidity and Capital Resources

Most of the Company's assets are highly liquid,  with the majority consisting of
cash and cash equivalents,  securities  inventories,  and receivables from other
broker-dealers and the Company's clearing firm, all of which fluctuate depending
upon the levels of customer business and trading activity.  Approximately 57% of
the Company's  assets at October 31, 1997, were highly liquid.  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.

GKN, Southeast, and Shochet, the Company's operating broker-dealer subsidiaries,
are subject to the net capital rules of the NASD and the SEC. As such,  they and
the Company are  subject to certain  restrictions  on the use of capital and its
related  liquidity.  GKN's,  Southeast's,  and Shochet's  respective net capital
positions as of October 31, 1997,  were  $5,256,000,  $1,559,000  and  $701,000,
which were  $5,006,000,  $1,459,000,  and $601,000 in excess of their respective
net capital requirements.

Prior to its initial  public  offering,  the  Company  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 November 1995 acquisition of Shochet, the Company
issued the seller a subordinated  note as part of the purchase  price,  of which
$571,000 was  outstanding at October 31, 1997.  The Company  intends to use debt
prudently  in the future and to arrange for lines of credit in the near  future.
On March 12, 1997,  the Company  authorized  the  repurchase of up to 10% of the
current outstanding  shares, or approximately  825,000 shares. As of October 31,
1997, 385,000 shares had been repurchased. All repurchases were funded from cash
flow from operations.

During the fourth quarter of this year, the Company's  headquarters and New York
branch are expected to relocate to a new 48,000 square foot facility in Downtown
Manhattan. Concurrent with this move, the Company is making an investment in its
technological   infrastructure.   The  combined  cost  of  this  relocation  and
technological  investment  amounts  to  approximately  $5  million  and  will be
financed mainly with operating leases.

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
and reasonably foreseeable future needs.

                                       11

<PAGE>

Safe Harbor Cautionary Statement

The Company occasionally makes forward-looking  statements such as forecasts and
projections  of  expected  future  performance  or  statements  of its plans and
objectives.  When used in this  quarterly  report  and in future  filings by the
Company with the SEC, in the  Company's  press  releases and in oral  statements
made with the approval of an authorized  executive  officer of the Company,  the
words or phrases "will likely result," "the Company  expects," "will  continue,"
"is anticipated,"  "estimated,"  "project," or "outlook" or similar  expressions
(including  confirmations by an authorized  executive  officer of the Company of
any such  expressions  made by a third party with  respect to the  Company)  are
intended  to  identify  forward-looking  statements  within  the  meaning of the
Private Securities  Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made.  Such statements are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from historical earnings and those presently  anticipated or projected.  Factors
which could affect the Company's  results of operations and cause its results to
differ  from these  statements  include  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.  For  a  more  complete
discussion of these and other factors, see the Company's  registration statement
filed on Form S-1, as amended (No. 333-05273).  The Company has no obligation to
publicly  release  the  result  of  any  revisions  which  may  be  made  to any
forward-looking  statements to reflect  anticipated or  unanticipated  events or
circumstances occurring after the date of such statements.


                                       12


<PAGE>


Part II - OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         On July 30, 1996, the Securities and Exchange  Commission  declared the
Company's registration statement on Form S-1, File No. 333-05273, effective, and
the offering commenced on that date. Such registration  statement registered the
sale at an offering price of $6.00 per share of 2,875,000 shares of common stock
by the Company,  for an aggregate  offering price of  $17,250,000.  On August 2,
1996, the Company sold 2,875,000 shares of common stock receiving total proceeds
of $17,250,000. Pennsylvania Merchant Group Ltd. was the managing underwriter of
the offering, and GKN Securities Corp was the co-managing underwriter.

         Total  expenses  incurred  to  date  are  approximately  $2.5  million,
consisting of $1.4 million of  underwriting  discounts and  commissions,  and an
estimated $1.1 million of accounting, legal, and other expenses. After deducting
the Company's  underwriting  commissions and other expenses, the net proceeds to
the Company were approximately  $14.7 million.  None of such expenses were paid,
directly or indirectly, to directors or officers of the Company or to any person
owning 10% or more of any class of equity  securities  of the  Company or to any
affiliates of the Company.

         The $14.7  million  of net  proceeds  to the  Company  was  applied  as
follows:

   Working capital                                               $  1,700,000
   Money market account                                             1,400,000
   Increase in equity capital of GKN Securities                     1,200,000
   Retail sales force expansion                                     3,600,000
   Expand investment banking and research capabilities              5,000,000
   Money management and merchant banking                            1,800,000
                                                                 -------------
                                                                 $ 14,700,000

         The Company had previously  intended to allocate $4 million to increase
equity  capital of GKN  Securities  Corp.  The Company has used $1.2  million to
increase  equity capital and has  reallocated the remaining $2.8 million for the
expansion of investment banking and research capabilities.

Item 6.  Exhibits and Reports on Form 8-K

       (a)    Exhibits:

              27        -  Financial Data Schedule BD

       (b) Reports on Form 8-K:

              On August 21,  1997,  the Company  filed a Current  Report on Form
8-K, dated August 13, 1997, reporting under Item 5, Other Events, the settlement
of a previously disclosed investigation by NASDR.

                                       13

<PAGE>


                                   Signatures


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


                                                              GKN HOLDING CORP.


Date:  December 12, 1997                            /s/ David M. Nussbaum
                                                  ----------------------------
                                                  David M. Nussbaum
                                                  Chairman of the Board and
                                                  Chief Executive Officer



                                                   /s/ Peter R. Kent
                                                  ----------------------------
                                                  Peter R. Kent
                                                  Chief Operating Officer and
                                                  Chief Financial Officer


                                       14


<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                                  Exhibit Index



Number                     Description


27                         Financial Data Schedule BD (10/31/97)


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