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 April 30, 1998

                                       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.)

One State Street Plaza, New York, NY                            10004
---------------------------------------                    --------------- 
(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 June 1, 1998
-------------------------------                    ---------------------------
Common Stock, $.0001 par value                        8,095,899 shares




<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                                      Index



Part I - Financial Information                                        Page

Item 1.   Financial Statements

     Consolidated Statements of Financial Condition as of
     April 30, 1998 (Unaudited) and January 31, 1998                    3

     Consolidated Statements of Income for the three
     months ended April 30, 1998 and 1997 (Unaudited)                   4

     Consolidated  Statements  of Changes in  Stockholders'
     Equity for the year ended January 31, 1998 and the three
     months ended April 30, 1998 (Unaudited)                            5

     Consolidated Statements of Cash Flows for the three months
     ended April 30, 1998 and 1997 (Unaudited)                          6

     Notes to Consolidated Financial Statements                         7

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                          10


Part II - Other Information

Item 2.   Changes in Securities and Use of Proceeds                    14

Item 6.   Exhibits and Reports on Form 8-K                             14

                                       2

<PAGE>


Part I - FINANCIAL INFORMATION
Item 1.  Financial Statements

                       GKN HOLDING CORP. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
                                                                              April 30,          January 31,
                                                                                1998                1998
                                                                           ---------------       -----------
                                                                           (Unaudited)
<S>                                                                      <C>                    <C>
Assets
Cash and cash equivalents                                                 $    6,555,000         $    8,111,000
Receivable from brokers and dealers                                            8,240,000                896,000
Securities owned, at market value                                              7,047,000             10,154,000
Securities owned, not readily marketable, at fair value                        1,728,000              1,443,000
Investments                                                                    3,537,000              3,640,000
Office furniture, equipment and leasehold improvements, net                    1,119,000              1,043,000
Goodwill, net                                                                  3,645,000              3,684,000
Loans receivable                                                               1,498,000              1,404,000
Income taxes receivable                                                        3,157,000              3,544,000
Other assets                                                                   3,290,000              3,053,000
                                                                          --------------         --------------

Total assets                                                              $   39,816,000         $   36,972,000
                                                                          ==============         ==============

Liabilities and Stockholders' Equity
Liabilities:
   Securities sold, not yet purchased, at market value                     $   6,830,000          $   2,320,000
   Commissions payable                                                         2,240,000              1,441,000
   Deferred compensation                                                          11,000              1,796,000
   Deferred tax liability                                                         71,000                236,000
   Accrued expenses and other liabilities                                      2,046,000              2,982,000
                                                                           -------------          -------------
                                                                              11,198,000              8,775,000
   Liability subordinated to the claims of general creditors                     579,000                576,000
                                                                           -------------          -------------
   Total liabilities                                                          11,777,000              9,351,000
                                                                           -------------          -------------

Stockholders' equity:
   Preferred stock, $.10 par value; 1,200,000 shares authorized;
      1,140,000 shares issued and outstanding                                    114,000                114,000
   Common stock, $.0001 par value; 35,000,000 shares
     authorized; 9,209,875 shares issued; 8,095,899
      shares outstanding                                                           1,000                  1,000
   Additional paid-in capital                                                 20,839,000             20,710,000
   Retained earnings                                                          12,034,000             11,734,000
   Accumulated other comprehensive income                                        (47,000)               (36,000)
                                                                           -------------              ----------
                                                                              32,941,000             32,523,000
   Less treasury stock, at cost; 1,113,976 shares                             (4,902,000)            (4,902,000)
                                                                           -------------             ----------
   Total stockholders' equity                                                 28,039,000             27,621,000
                                                                           -----------            -------------

Total liabilities and stockholders' equity                                $   39,816,000          $  36,972,000
                                                                          ==============          =============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                        Consolidated Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                 Three Months Ended April 30,
                                                            ---------------------------------------  
                                                                   1998                    1997
                                                            ---------------         ---------------
<S>                                                        <C>                     <C>
Revenues:
     Commissions                                            $    11,009,000         $     8,104,000
     Investment banking                                           2,353,000                 676,000
     Principal transactions                                       1,132,000                (754,000)
     Interest                                                       352,000                 425,000
     Other                                                          542,000                  98,000
                                                            ---------------         ---------------
Total revenues                                                   15,388,000               8,549,000
                                                            ---------------         ---------------

Expenses:
     Compensation and benefits                                    9,855,000               7,754,000
Communications                                                    1,101,000               1,225,000
     Brokerage, clearing and
         exchange fees                                              852,000                 673,000
     Occupancy and equipment                                      1,366,000                 700,000
     Business development                                           533,000                 654,000
     Professional fees                                              270,000                 228,000
     Investigations and settlements                                       -                 800,000
     Other                                                          800,000                 656,000
                                                            ---------------         ---------------
Total expenses                                                   14,777,000              12,690,000
                                                            ---------------         ---------------

Income (loss) before income taxes                                   611,000              (4,141,000)

Income tax (benefit)                                                311,000              (1,688,000)
                                                            ---------------         ---------------

Net income (loss)                                           $       300,000         $    (2,453,000)
                                                            ===============         ================

Basic earnings (loss) per common share                      $          0.04         $         (0.30)
                                                            ===============         ================

Diluted earnings (loss) per common share                    $          0.04         $         (0.30)
                                                            ===============         ================

Weighted average common
   shares outstanding - basic                                     8,095,899               8,171,856
                                                            ===============         ================
Weighted average common
   shares outstanding - diluted                                   8,309,022               8,171,856
                                                            ===============         ================
</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, 1998 and the Three Months Ended April 30, 1998 
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                    Accumulated            
                                            Peferred             Addi-                 Other   
                        Common Stock          Stock              tional                Compre-     Treasury Stock
                     -----------------  --------------------     Paid-in    Retained   hensive   ---------------------
                      Shares     Amt.     Shares       Amt.      Capital    Earnings   Income     Shares       Amount      Total
                     ---------  ------  ----------  --------   ----------  ----------   -------  ---------   ----------  ----------
<S>                 <C>        <C>      <C>         <C>       <C>          <C>          <C>      <C>         <C>         <C>       
Balance at
   January 31, 1997  9,217,875  1,000            -         -   19,931,000  18,247,000   (3,000)  (992,363)   (3,150,000) 35,026,000
Net loss                     -      -            -         -            -  (6,513,000)                  -             -  (6,513,000)
Stock issued - 
  acquisition                -      -    1,140,000   114,000    1,376,000           -             152,000       482,000   1,972,000
Stock issued - 
  compensation plan          -      -            -         -   (1,193,000)          -             288,944     1,193,000           -
Amortization of 
  unearned 
  compensation               -      -            -         -      545,000           -                   -            -      545,000
Stock options 
  exercised                  -      -            -         -      (45,000)          -              34,443      124,000       79,000
Note receivable 
  forgiven                   -      -            -         -      100,000           -                   -           -       100,000
Retirement of 
  stock                 (8,000)     -            -         -            -           -               8,000       35,000       35,000
Purchase of 
  treasury stock             -      -            -         -            -           -            (605,000)  (3,586,000)  (3,586,000)
Translation 
  adjustment                 -      -            -         -            -           -  (33,000)         -            -      (33,000)
Other                        -      -            -         -       (4,000)          -                                        (4,000)
                      ---------  ------  ---------- --------  ------------ ---------- --------  ---------  -----------   ----------

Balance at
 January 31, 1998    9,209,875 $ 1,000   1,140,000 $ 114,000 $ 20,710,000 $11,734,000 $(36,000)(1,113,976) $(4,902,000) $27,621,000
                      ---------  ------  ---------- --------  ------------ ---------- --------  ---------  -----------   ----------

Net income                  -       -           -          -            -     300,000                  -            -      300,000
Amortization of 
  unearned
  compensation              -       -           -          -      129,000           -                  -            -      129,000
Translation 
  adjustment                -       -           -          -            -           - (11,000)                            (11,000)
                     ---------  ------- ---------- --------- -----------  -----------  ------- ---------  ----------- ------------

Balance at
  April 30, 1998     9,209,875 $ 1,000  1,140,000 $ 114,000 $ 20,839,000 $12,034,000 $(47,000) (1,113,976) $(4,902,000) $28,039,000
                     ========= ======= ========== ========= ============ =========== ========= =========== ===========  ===========

</TABLE>


          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                         Three Months Ended April 30,
                                                                      ----------------------------------
                                                                           1998                1997
                                                                      --------------     ---------------
<S>                                                                   <C>                  <C>          
Operating activities:
   Net income/(loss)                                                  $    300,000         $ (2,453,000)
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
      Depreciation and amortization                                        (31,000)             163,000
      Deferred taxes and other                                             164,000             (537,000)
                                                                   ---------------       --------------
                                                                           433,000           (2,827,000)
   (Increase) decrease in operating assets:
     Receivable from brokers and dealers                                (7,344,000)           7,575,000
     Securities owned, at market value                                   3,107,000            2,219,000
     Securities owned, not readily marketable                             (286,000)             725,000
     Loans receivable                                                      (94,000)          (1,368,000)
     Income taxes receivable                                               386,000           (1,457,000)
     Other assets                                                         (266,000)             127,000
   Increase (decrease) in operating liabilities:
     Securities sold, not yet purchased                                  4,510,000           (4,456,000)
     Commissions payable                                                   799,000           (1,788,000)
     Deferred compensation                                              (1,785,000)          (1,148,000)
     Income taxes payable                                                   (1,000)            (229,000)
     Accrued expenses and other liabilities                               (937,000)          (2,359,000)
     Translation adjustment                                                (11,000)              (9,000)
                                                                   ----------------       -------------
Net cash used in operating activities                                   (1,489,000)          (4,995,000)
                                                                   ----------------       -------------

Investing activities:
   Purchase of office furniture, equipment
     and leasehold improvements                                           (171,000)             (51,000)
   Limited partnerships                                                    104,000                3,000
   Acquisition, net of cash acquired                                             -             (197,000)
   Goodwill resulting from acquisition                                           -              (33,000)
                                                                   -----------------      --------------
Net cash used in investing activities                                      (67,000)            (278,000)
                                                                   -----------------      -------------

Financing activities:
   Issuance of common shares                                                     -               53,000
   Purchase of treasury stock                                                    -           (3,586,000)
   Repayment of subordinated debt                                                -             (114,000)
                                                                   ----------------      --------------
Net cash provided by (used in) financing activities                              -           (3,647,000)
                                                                   ----------------     ----------------

Net change in cash and cash equivalents                                 (1,556,000)          (8,920,000)
Cash and cash equivalents at beginning of year                           8,111,000           17,856,000
                                                                   ----------------       -------------
Cash and cash equivalents at end of period                           $   6,555,000        $   8,936,000
                                                                     =============        =============
</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, 1998, 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 three months  ended April 30, 1998,  are not
necessarily  indicative  of the  results  which may be  expected  for the entire
fiscal year.

2.  Net Capital Requirements

GKN Securities Corp. (GKN), Southeast Research Partners,  Inc. (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 April 30,1998, GKN had net
capital of $4,499,000.

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 April 30, 1998,  Southeast had net capital of $ 1,003,000 and
a net capital  requirement of $100,000.  Southeast's  net capital ratio at April
30, 1998, was 1.20 to 1.

Shochet has also  elected to compute net capital  under the  standard  aggregate
indebtedness  method  permitted  by the net  capital  rule.  At April 30,  1998,
Shochet had net capital of $ 665,000 and a net capital  requirement of $100,000.
Shochet's net capital ratio at April 30, 1998, was 0.98 to 1.

                                       7
<PAGE>

3.  Earnings Per Share

Effective for the fiscal year ended January 31, 1998,  the Company  adopted SFAS
No. 128,  Earnings per Share (SFAS 128),  which  established  new  standards for
computing and presenting  earnings per share (EPS).  This statement  changes the
calculation and presentation of EPS. The new presentation consists 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 previously  disclosed  fully diluted EPS. SFAS 128
will  result  in basic  EPS  results  higher  than EPS as  calculated  under the
previous  method.  All  earnings  per share  amounts for all  periods  have been
presented  and,  where  appropriate,   restated  to  conform  to  the  SFAS  128
requirements.  For the quarter ended April 30, 1997,  common stock  equivalents,
consisting of stock options and warrants,  were not included in the  computation
of diluted EPS, as the  inclusion of such shares would be  anti-dilutive  due to
the Company's net loss for the quarter.

The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
                                                                     Three Months ended April 30,
                                                                     ----------------------------
                                                                       1998               1997
                                                                     ----------        ----------
<S>                                                                  <C>              <C>
     Numerator for basic and diluted EPS:
               Net income (loss)                                      $300,000        $(2,453,000)

     Denominator for basic EPS:
               Weighted-average common shares                        8,095,899          8,171,856
               Dilutive common stock equivalents                       213,123                  -
               Denominator for diluted EPS:                          8,309,022          8,171,856

     Basic EPS                                                           $0.04            $ (0.30)
     Diluted EPS                                                         $0.04            $ (0.30)
</TABLE>

5.    Supplemental Cash Flow Information
<TABLE>
<CAPTION>
                                                                       Three Months Ended April 30,
                                                                     -------------------------------
                                                                            1998              1997
                                                                     -------------    -------------- 
<S>                                                                <C>                <C>   
Cash paid for:
Income taxes                                                       $     109,000      $       731,000
Interest                                                                       -               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                                             -           (  960,000)
Preferred stock issued in acquisition                                          -           (1,152,000)
Goodwill                                                                       -            2,304,000
                                                                  --------------      -----------------
Net cash used for acquisition                                      $           -      $       197,000
                                                                  ===============     =================
</TABLE>

6.   Commitments and Contingencies

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

                                       8
<PAGE>


7.   Comprehensive Income

The Company has adopted  SFAS No. 130,  Reporting  Comprehensive  Income,  which
establishes  standards for the reporting and display of comprehensive income and
its components. Total comprehensive income measures all changes in stockholders'
equity resulting from  transactions of the period,  other than transactions with
stockholders.

The components of comprehensive income for the three months ended April 30, 1998
and 1997 are as follows:

                                                         Three Months Ended
                                                             April 30,
                                                       1998            1997
                                                    -------------  ------------

Net income                                           $  300,000    $(2,453,000)
  Other comprehensive income:
  Foreign currency translation adjustments              (11,000)        (9,000)
                                                     ------------  ------------
Total comprehensive income                           $  289,000    $(2,462,000)
                                                     ============  ============



                                       9
<PAGE>


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


Results of Operations

Three Months Ended April 30, 1998  vs. Three Months Ended April 30, 1997
------------------------------------------------------------------------

Earnings  per share of common  stock for the three  months ended April 30, 1998,
were $0.04 as compared to $(0.30) for the three months ended April 30, 1997. The
increase  in  earnings  was  directly  attributable  to  revenue  gains  through
increased trading volume,  greater investment banking activity, and gains in the
investment  account,  and expense  reductions  resulting from the Company's cost
reduction program. During January and February of 1998, the Company engaged in a
cost reduction program aimed at significantly  reducing the Company's  breakeven
point. This program,  along with the revenue increases,  decreased the Company's
fixed  costs as a  percentage  of revenue  from 82% to 45%.  The cost  reduction
program  is  ongoing  and as a result,  the  Company  expects  further  positive
enhancements to profitability.

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 80% to $15,388,000  for the first quarter of fiscal
1999, mainly as a result of higher  commission  revenues,  increased  investment
banking fees, and investment account gains.

Commission revenues increased by $2,905,000,  or 36%, for the first quarter. The
Company executed 77% more trades during the period at an average  commission 23%
lower as compared to the same period in the prior year.

Investment banking revenues  increased by $1,677,000,  or 248%. During the first
quarter of fiscal 1999 the Company  raised $8.0  million for  corporate  clients
through  one public  offering.  In the same  period in fiscal  1998 the  Company
raised $5.8 million for its clients through two private placements.  The Company
is  transitioning  from being the sole manager on micro-cap  underwritings  to a
co-manager on small and mid-cap  issues.  The Company is also  participating  in
selling groups of other underwriters on a greater number of transactions.

Principal  transactions  generated  gains of  $1,132,000 in the first quarter of
fiscal  1999,  as  opposed  to a  $754,000  loss  in the  fiscal  1998  quarter.
Investment  account gains  totaled  $1,370,000,  while market making  activities
generated a loss of $238,000.

Interest  income  decreased  $73,000  due mainly to a decrease  in average  cash
balances.

Other revenues  increased 453% to $542,000,  mainly as a result of the Company's
new merchant banking and asset management activities.


                                       10
<PAGE>

Expenses

Total expenses for the quarter in fiscal 1999 were  $14,777,000,  a 16% increase
over the first quarter in fiscal 1998.  This increase is tied to the increase in
commission  revenues,  as  compensation  expenses are directly  correlated  with
commissions generated.

Compensation  and benefits expense  increased 27% to $9,855,000.  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 1999 is consistent with the increase
in  commission  revenue  which is partially  offset by the decrease in number of
employees effectuated through staff reductions in January and February of 1998.

Communications  expense  decreased  by  $124,000,  or 10%,  as a  result  of the
Company's  consolidation of its departments in line with its new mission.  While
there are certain fixed market data service expenses,  many communications costs
vary  directly  with  the  number  of  employees,  particularly  the  number  of
registered  representatives.  The 238 registered representatives employed by the
Company at April 30, 1998,  represent a 27% decrease from April 30, 1997. During
the same period total employees decreased by 26% to 401.

Brokerage,  clearing  and  exchange  fees  increased  by $179,000  or 27%.  This
increase was attributable to the increase in trade volume.

Occupancy and equipment  expenses increased $666,000 as a result of the addition
of the  Southeast's  offices for the entire  period,  the move of the  Company's
corporate  headquarters,  and the  investment  made  to  upgrade  the  Company's
technological infrastructure.

Business  development  expenses  decreased  by 19% to $533,000  due to decreased
promotional activities.

Professional  fees  increased  by $42,000,  or 18%,  mainly as a result of costs
associated with implementing the Company's new mission.

Investigations   and  settlements  were   eliminated,   as  the  SEC  and  NASDR
investigatory matters are settled and have been completed.

Other expenses increased $144,000 primarily due to expenses  associated with the
Company's development plan.

Weighted average common shares outstanding

The average  number of common  shares and common stock  equivalents  outstanding
used in the computation of basic earnings per common share was 8,095,899 for the
first  quarter  of  fiscal  1999,   compared  with  8,171,856  in  fiscal  1998.
Correspondingly,  the number of shares  outstanding used in the diluted earnings
per share  computation was 8,309,022 in fiscal 1999,  compared with 8,171,856 in
fiscal 1998.


                                       11

<PAGE>


Liquidity and Capital Resources

Approximately  55% of the Company's  assets at April 30, 1998 are highly liquid,
consisting primarily of cash and cash equivalents,  securities inventories,  and
receivables from other broker-dealers, all of which fluctuate depending upon the
levels of customer  business and trading  activity.  Additionally,  at April 30,
1998, the Company had  recognized  income taxes  receivable of  $3,157,000.  The
income tax  receivable  is expected to be received upon  processing  the current
year's tax  returns,  which have been filed.  Receivables  from  broker-dealers,
which are primarily from the Company's clearing broker,  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 domestic  operating  broker-dealer
subsidiaries,  are subject to the net capital rules of the National  Association
of Securities  Dealers,  Inc. (NASD) and the Securities and Exchange  Commission
(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  April  30,  1998,  were  $4,499,000,
$1,003,000,  and  $665,000,  which  were  $4,249,000,   $903,000  and  $565,000,
respectively, in excess of their respective net capital requirements.

In conjunction with the Company's move of its corporate headquarters in New York
City the Company has significantly  upgraded its  technological  infrastructure.
The combined costs of the move and the  technological  investment  were financed
through a series of  operating  leases.  These  leases  total $4.8  million.  As
security for these leases,  the Company arranged for a standby letter of credit.
As  collateral  for the  standby  letter of credit,  the Company has placed $2.4
million in a  restricted  cash escrow  account  with the  provider.  The Company
intends to use debt and lease financing prudently in the future.

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.

Other Matters

Year 2000 Computer Issue

Based upon a preliminary  study,  the Company expects a minimal  internal impact
from the "Year 2000 Computer Issue".  All of the Company's computer programs are
provided by third-party vendors and service providers. Most of the programs were
purchased  after the Year 2000  Computer  Issue became  widely  recognized.  The
Company  has  sought,  and expects to  receive,  written  confirmation  from its
third-party  program and service providers that the Year 2000 Computer Issue has
been appropriately managed.  Schroder & Co., the Company's clearing firm, is the
Company's largest and most important computer services related vendor.  Schroder
& Co. has provided the Company with assurances that they expect to appropriately
manage  the Year 2000  Computer  Issue on a timely  basis.  Management  does not
expect the Year 2000 Computer  Issue to have a material  effect on the Company's
earnings. However, there can be no assurance that the systems of other companies
or third-party vendors and service providers on which the Company's systems rely
also will be  appropriately  examined on a timely basis.  The Year 2000 Computer
Issue creates risk for the Company from unforeseen  problems in its own computer
systems,  third-party vendors and service providers, and from third parties with
whom the Company deals on financial transactions worldwide.  Such failures could
have a material impact on the Company's ability to conduct business.

                                       12

<PAGE>

New Accounting Pronouncement

In March 1997 the Financial  Accounting  Standards Board (FASB) 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  consists 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 previous
fully diluted EPS. The financial  statements  reflect the implementation of SFAS
128.

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
130,  Reporting  Comprehensive  Income  (SFAS 130),  effective  beginning in the
fiscal year ending January 31, 1999.  This statement  establishes  standards for
the  reporting and display of  comprehensive  income and its  components.  Total
comprehensive income measures all changes in stockholders' equity resulting from
transactions  of the period,  other than  transactions  with  stockholders.  The
financial statements reflect the implementation of SFAS 130.


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 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
speaks 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 that
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),  and the Company's periodic Form 10-K, 10-Q, and 8-K
filings  with the SEC.  The Company has no  obligation  to publicly  release the
result of any revisions  that may be made to any  forward-looking  statements to
reflect anticipated or unanticipated events or circumstances occurring after the
date of such statements.

                                       13

<PAGE>


Part II - OTHER INFORMATION


Item 2.  Changes in Securities and Use of Proceeds

         During April 1998,  the Company  offered  certain of its option holders
         the  opportunity to swap their options for new options.  Option holders
         could  receive  one new  option  for  every two  exchanged,  or two new
         options for every three  exchanged,  depending  upon the original grant
         date. The new options all have at least a one year vesting period and a
         strike price equal to $3.125,  the closing  price on the date of grant.
         Option holders elected to swap 186,641  outstanding options for 102,792
         new  options.  The  exemption  claimed for these  issuances  is Section
         3(a)(9) of the Securities Act of 1933, as amended.


Item 6.  Exhibits and Reports on Form 8-K

              (a) Exhibits:

              27    -  Financial Data Schedule BD

       (b) Reports on Form 8-K:

              None
                                       14

<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:  June 4, 1998                               /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


                                       15


<PAGE>


                       GKN HOLDING CORP. AND SUBSIDIARIES
                                  Exhibit Index



Number                     Description

27                         Financial Data Schedule BD (4/30/98)


<PAGE>