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 July 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 August 31, 1997
Common Stock, $.0001 par value                        8,103,899 shares

                            Exhibit index on page 15.

                                       1



<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
     July 31, 1997 (Unaudited) and January 31, 1997                                             3

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

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

     Consolidated Statements of Cash Flows for the six months
     ended July 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 1.   Legal Proceedings                                                                    13

Item 4.   Submission of Matters to a Vote of Security Holders                                  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>

                                                                               July 31,             January 31,
                                                                                 1997                  1997
                                                                           ---------------          -----------
                                                                             (Unaudited)
<S>                                                                              <C>                     <C>  
Assets
Cash and cash equivalents                                                 $   11,171,000         $   17,856,000
Receivable from brokers and dealers                                            5,338,000              9,357,000
Securities owned, at market value                                             14,262,000             14,610,000
Securities owned, not readily marketable, at fair value                        1,126,000              1,365,000
Investments                                                                    3,064,000              2,692,000
Office furniture, equipment and leasehold improvements, net                    1,195,000              1,251,000
Goodwill, net                                                                  3,846,000              1,619,000
Loans receivable                                                               3,638,000              1,451,000
Income taxes receivable                                                        2,017,000                   --
Other assets                                                                   2,218,000              1,432,000
                                                                               ---------              ---------

Total assets                                                              $   47,875,000         $   51,633,000
                                                                              ==========             ==========

Liabilities and Stockholders' Equity
Liabilities:
   Securities sold, not yet purchased, at market value                     $   5,778,000          $   6,997,000
   Commissions payable                                                         1,717,000              2,186,000
   Deferred compensation                                                         894,000              1,409,000
   Income taxes payable                                                                -                238,000
   Deferred tax liability                                                        497,000                636,000
   Accrued expenses and other liabilities                                      7,023,000              4,403,000
                                                                               ---------              ---------
                                                                              15,909,000             15,869,000
   Liability subordinated to the claims of general creditors                     567,000                738,000
                                                                                 -------                -------
   Total liabilities                                                          16,476,000             16,607,000
                                                                              ----------             ----------

Stockholders' equity:
   Series A preferred stock, $.10 par value; 1,200,000
     authorized, issued, and outstanding; and no shares
     authorized, issued, and outstanding                                       1,152,000                    --
   Common stock, $.0001 par value; 35,000,000 shares
     authorized; 9,217,875 shares issued; 8,103,899 and
     8,225,512 shares outstanding                                                  1,000                  1,000
   Additional paid-in capital                                                 19,372,000             19,931,000
   Retained earnings                                                          15,798,000             18,247,000
   Cumulative translation adjustment                                             (22,000)                (3,000)
                                                                                 -------                 ------
                                                                              36,301,000             38,176,000
   Less treasury stock, at cost; 1,113,976 and 992,363 shares                 (4,902,000)            (3,150,000)
                                                                              ----------             ----------
   Total stockholders' equity                                                 31,399,000             35,026,000
                                                                              ----------             ----------

Total liabilities and stockholders' equity                                 $  47,875,000          $  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                                 Six Months
                                                      Ended July 31,                              Ended July 31,
                                            --------------------------------                 -----------------------
                                              1997                  1996                      1997             1996
                                            ------------       -------------             --------------     ------------
<S>                                            <C>                  <C>                    <C>               <C> 
Revenues:
   Commissions                            $  9,630,000            $16,951,000              $17,734,000        $29,167,000
   Investment banking                        3,053,000              2,154,000                3,729,000          5,567,000
   Principal transactions                    1,445,000              1,027,000                  691,000          3,504,000
   Interest                                    310,000                377,000                  735,000            715,000
   Other                                       357,000                 95,000                  455,000             51,000
                                            ----------             ----------               ----------         ----------
Total revenues                              14,795,000             20,604,000               23,344,000         39,004,000
                                            ----------             ----------               ----------         ----------

Expenses:
   Compensation and benefits                 8,624,000             12,966,000               16,378,000         23,694,000
   Communications                            1,205,000              1,070,000                2,430,000          1,910,000
   Brokerage, clearing and
      exchange fees                            840,000                574,000                1,513,000          1,205,000
   Occupancy and equipment                     809,000                704,000                1,509,000          1,359,000
   Business development                        522,000                349,000                1,176,000            625,000
   Professional fees                           267,000                237,000                  495,000            637,000
   Investigations and settlements            1,188,000                 88,000                1,988,000            486,000
   Other                                     1,312,000                643,000                1,968,000          1,120,000
                                            ----------             ----------               ----------         ----------
Total expenses                              14,767,000             16,631,000               27,457,000         31,036,000
                                            ----------             ----------               ----------         ----------

Income (loss) before income taxes               28,000              3,973,000               (4,113,000)         7,968,000

Income taxes                                    24,000              1,692,000               (1,664,000)         3,441,000
                                            ----------             ----------               ----------         ----------

Net income (loss)                               $4,000            $ 2,281,000             $ (2,449,000)       $ 4,527,000
                                            ==========             ==========               ===========        ==========

Earnings (loss) per common share              $   0.00            $      0.40             $      (0.30)       $      0.83
                                            ==========             ==========               ===========        ==========

Weighted average common
   shares outstanding                        8,094,334              5,716,918                8,132,452          5,450,014
                                            ==========             ==========               ===========        ==========
</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
                   Six Months Ended July 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)           -             -         -       (2,449,000)      -              -             -           (2,449,000)
Stock issued for
   acquisition          1,152,000         -      443,000          -          -           517,000          -            2,112,000
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             -             -         -             -          -              -          241,000           241,000
Purchase of
   treasury stock           -             -         -             -          -        (3,586,000)         -           (3,586,000)
Change in trans-
   lation adjustment        -             -         -             -       (19,000)          -             -              (19,000)
Other                       -             -       (5,000)         -          -              -             -               (5,000)
                         ---------    -----   ----------  ------------     ------     ----------    ----------        ----------
Balance at
   July 31, 1997       $ 1,152,000   $1,000  $20,865,000   $15,798,000   $(22,000)   $(4,902,000)  $(1,493,000)     $ 31,399,000
                         =========    =====   ==========    ==========    =======     ==========    ==========        ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5



<PAGE>

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

                                                                          Six Months Ended July 31,
                                                                          1997                  1996
                                                                     ---------------       --------------
<S>                                                                        <C>                 <C> 
Operating activities:
   Net (loss) income                                                  $ (2,449,000)         $ 4,527,000
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
      Deferred taxes                                                       169,000             (260,000)
      Depreciation                                                         223,000              111,000
       Amortization                                                        131,000              117,000
                                                                       -----------          -----------
                                                                        (1,926,000)           4,495,000
   (Increase) decrease in operating assets:
     Receivable from brokers and dealers                                 4,673,000            2,717,000
     Securities owned, at market value                                     515,000           (3,578,000)
     Securities owned, not readily marketable                              239,000              439,000
     Loans receivable                                                   (2,182,000)             389,000
     Income taxes receivable                                            (2,017,000)                   -
     Other assets                                                         (308,000)            (671,000)
   Increase (decrease) in operating liabilities:
     Securities sold, not yet purchased                                 (1,229,000)            (474,000)
     Commissions payable                                                (1,106,000)             611,000
     Deferred compensation                                                (516,000)           1,313,000
     Income taxes payable                                                 (229,000)             568,000
     Accrued expenses and other liabilities                              1,794,000              698,000
     Translation adjustment                                                (19,000)             (28,000)
                                                                       -----------          -----------
Net cash (used in) provided by operating activities                     (2,311,000)           6,479,000
                                                                       -----------          -----------
Investing activities:
   Purchase of office furniture, equipment
     and leasehold improvements                                           (117,000)            (239,000)
   Limited partnerships                                                   (372,000)                   -
   Acquisition, net of cash acquired                                      (197,000)                   -
   Goodwill resulting from acquisition                                       9,000              (30,000)
                                                                       -----------          -----------
Net cash used in investing activities                                     (677,000)            (269,000)
                                                                       -----------          -----------

Financing activities:
   Issuance of common shares                                                75,000              608,000
   Issuance of common stock warrants                                             -                1,000
   Purchase of treasury stock                                           (3,586,000)            (612,000)
   Repayment of subordinated debt                                         (186,000)            (137,000)
                                                                       -----------          -----------
Net cash used in financing activities                                   (3,697,000)            (140,000)
                                                                       -----------          -----------

Net change in cash and cash equivalents                                 (6,685,000)           6,070,000
Cash and cash equivalents at beginning of year                          17,856,000            7,873,000
                                                                       -----------          -----------
Cash and cash equivalents at end of period                             $11,171,000          $13,943,000
                                                                       ===========          ===========
</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 six months  ended  July 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,  160,000
shares of common stock, and 1,200,000  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 July  31,1997,  GKN had
excess net capital of $2,950,000.

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 July 31, 1997,  Southeast had net capital of $1,586,000 and a
net capital  requirement of $100,000.  Southeast's net capital ratio at July 31,
1997, was 0.34 to 1.

Shochet has also  elected to compute net capital  under the  standard  aggregate
indebtedness method permitted by the net capital rule. At July 31, 1997, Shochet
had net capital of $684,000 and a net capital requirement of $100,000. Shochet's
net capital ratio at July 31, 1997, was 0.65 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>

                                                                          Six Months Ended July 31,
                                                                            1997           1996
                                                                         -------         -------
<S>                                                                        <C>             <C> 
Cash paid for:
Income taxes                                                           $   731,000     $ 1,551,000
Interest                                                                    34,000          34,000

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

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

Net income for the three  months  ended July 31,  1997 was $4,000 as compared to
$2,281,000  for the three  months  ended July 31,  1996.  Earnings  per share of
common stock for the three months ended July 31, 1997, were $0.00 as compared to
$0.40 for the three  months  ended July 31,  1996.  The decrease in earnings was
directly  attributable to the impact of the continued  weakness in the small cap
market  on  commission  revenues.  These  results  reflect  the  settlements  of
investigations  by NASDR and the SEC. Net income  excluding  investigations  and
settlements  for the three months ended July 31, 1997 and 1996, was $681,000 and
$2,331,000,  respectively.  Earnings  per  share  excluding  investigations  and
settlements  for the three months  ended July 31, 1997 and 1996,  were $0.08 and
$0.41, 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  decreased by 28% to $14,795,000 for the second quarter of fiscal
1998, mainly as a result of lower commission revenues.

Commission  revenues  decreased by $7,321,000,  or 43%, for the second  quarter,
reflecting the weak market conditions in the small  capitalization  stock sector
during the period.  The Company  executed 16% fewer trades  during the period as
compared to the same period in the prior year.

Investment  banking  revenues  increased by $899,000,  or 42%. During the second
quarter of fiscal 1998 the Company  raised $46.4 million for  corporate  clients
through four public offerings and three private  placements.  In the same period
in fiscal 1997,  the Company  raised $27.1  million for its clients  through two
public offerings and two private placements.

Principal  transactions  generated income of $1,445,000 in the second quarter of
fiscal 1998, a 41% increase  from the fiscal 1997  quarter.  Revenues  generated
through  market  making  activities  for   over-the-counter   equity  securities
decreased  $789,000 to $45,000 for the quarter while revenues from the Company's
investment  account increased  $1,207,000 to $1,400,000.  The investment account
revenue  increase was directly  related to increases in the prices of the shares
underlying underwriter warrants held by the Company, all of which were issued by
investment banking clients.

Expenses

Total  expenses for the second quarter in fiscal 1998 were  $14,767,000,  an 11%
decrease  over the second  quarter in fiscal 1997.  This decrease is tied to the
decrease in revenues,  as  compensation  expenses are directly  correlated  with
commission revenues.


                                       9




<PAGE>



Compensation  and benefits expense  decreased 33% to $8,624,000.  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 decrease in fiscal 1998 is consistent with the decreases
in commission revenues.

Communications  expense  increased  by  $135,000,  or 13%,  as a  result  of the
Company's expansion.

Brokerage,  clearing and exchange  fees and  occupancy  and  equipment  expenses
increased by 46% and 15%,  respectively.  These  increases were primarily due to
the March 1997 acquisition of Southeast Research  Partners,  Inc. and the growth
of existing offices.

Business  development  expenses  increased  by 50% to $522,000  due to increased
promotional  activities and expenses  incurred directly related to the growth of
the Company.

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

Other expenses increased $669,000 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 8,094,334 in the second
quarter of fiscal 1998, compared with 5,716,918 in fiscal 1997. The 42% increase
in the weighted average in fiscal 1998 resulted mainly from the 2,875,000 shares
of common  stock issued in the  Company's  initial  public  offering on July 30,
1996.

Six Months Ended July 31, 1997  vs. Six Months Ended July 31, 1996
------------------------------------------------------------------

Net income for the six months ended July 31, 1997 was  $(2,449,000)  as compared
to  $4,527,000  for the six months  ended July 31,  1996.  Earnings per share of
common stock for the six months ended July 31, 1997, were $(0.30) as compared to
$0.83 for the six months  ended July 31,  1996.  The  decrease in  earnings  was
directly  attributable  to the continued  weakness in the small cap market:  the
Company  experienced  lower trade  volumes,  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  excluding
investigations  and settlements for the six months ended July 31, 1997 and 1996,
was  $(1,317,000)  and  $4,805,000,  respectively.  Earnings per share excluding
investigations  and settlements for the six months ended July 31, 1997 and 1996,
were  $(0.16) and $0.88,  respectively.  The results of  operations  for the six
months are not  necessarily  indicative of the results which may be expected for
the entire year.

Revenues

Total  revenues  decreased by 40% to  $23,344,000  for the six months.  Revenues
decreased  in  all  the  Company's  major  areas  of  activity  for  the  fiscal
year-to-date.

Commission  revenues  decreased by  $11,433,000,  or 39%,  for the  year-to-date
period. The decrease reflects the continued weakness in the small capitalization
stock sector. The Company executed 17% fewer trades during the period as opposed
to the same period in the prior year.

                                       10



<PAGE>



Investment banking revenues  decreased by $1,838,000,  or 33%. In both years the
Company  executed  four public  offerings and five private  placements,  raising
$52.2 million for its clients in fiscal 1998,  and $59.0 million in fiscal 1997.
The decrease was the result of more  investment  banking deals being  co-managed
rather than sole-managed in fiscal 1998, compared to fiscal 1997.


Revenues from principal  transactions  decreased by $2,813,000,  or 80%, for the
six  months.   Revenues   generated   through   market  making   activities  for
over-the-counter  equity securities  decreased  $2,783,000 to $(396,000) for the
quarter while revenues from the Company's  investment account decreased $30,000.
The  lower  revenues   resulted  from  weakened  market   conditions  for  small
capitalization stocks during the fiscal 1998 period.

Expenses

Total expenses for the first six months of fiscal 1998 were  $27,457,000,  a 12%
decrease from the same period in fiscal 1997. As a percentage of revenues, these
expenses increased to 118% in the fiscal 1998 period from 80% in the fiscal 1997
period.

Increases in the Company's expense  categories for the six month period resulted
from the same factors causing increases in expenses for the second 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

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 64% of
the Company's  assets at July 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 July 31, 1997, were $3,200,000,  $1,586,000 and $684,000,  which
were  $2,950,000,  $1,486,000,  and $584,000 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

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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 $567,000 was outstanding at July 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 July 31, 1997,  385,000 shares had been  repurchased.  All
repurchases were funded from cash flow from operations.




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

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.

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<PAGE>



Part II - OTHER INFORMATION

Item 1.  Legal Proceedings

     On August  13,  1997,  the  Company's  primary  operating  subsidiary,  GKN
Securities Corp.  (GKN),  seven of GKN's executive  officers and senior managers
and twenty-two of its current or former brokers  reached  settlements  with NASD
Regulation,  Inc. (NASDR) resolving a previously  disclosed NASDR investigation.
The settlements are described in the Company's Current Report on Form 8-K, dated
August 13, 1997 and filed with the Securities and Exchange  Commission on August
21, 1997, the contents of which are hereby incorporated by reference thereto.

Item 4.  Submission of Matters to a Vote of Security Holders

     The Company held its Annual Meeting of Stockholders on June 4, 1997. At the
meeting,  the three  directors  nominated  for  re-election  were  re-elected to
three-year terms, receiving the number of votes set forth below:

Director               Votes For Re-Election            Authority Withheld

Lester Rosenkrantz          5,006,929                         8,250
James I. Krantz             5,003,726                        11,453
Arnold B. Pollard           5,008,429                         6,750

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:  September 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 (7/31/97)



                                       15


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