SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
     |X|  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 or 15(d)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 2000               -----------------
                                       OR

     |_|  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For                        the transition period from _______________________ to
                           Commission File No. 0-6729

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

           New Jersey                                             22-1737915
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(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

328 Newman Springs Road, Red Bank, NJ                              07701
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 (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code             (732) 842-4700
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Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each exchange on
       Title of each class                               which registered

             None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value

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                                (Title of class)

                            [Cover Page 1 of 2 Pages]

<PAGE>



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(D) of the  Exchange  Act during the past 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 ___

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

     The issuer's revenues for its most recent fiscal year: $59,330,000

The aggregate market value of the voting stock held by  non-affiliates  computed
by  reference  to the price at which the stock was sold,  or the average bid and
asked  prices of such stock,  as of bid and asked  prices of such  stock,  as of
April 12, 2001 was $4,344,993.

The number of shares of Common Stock outstanding, as of April 12, 2001 was
8,862,035.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                 Not Applicable

                            [Cover Page 2 of 2 Pages]

<PAGE>


                                     PART I

Item 1.   Business

Introduction

     First  Montauk  Financial  Corp.   ("FMFC"  or  the  "Company")  is  a  New
Jersey-based  financial  services  holding company whose  principal  subsidiary,
First Montauk Securities Corp.  ("FMSC"),  has operated as a full service retail
and  institutional  securities  brokerage firm since 1987. FMSC provides a broad
range of securities  brokerage and  investment  services to a diverse retail and
institutional  clientele,  as well as corporate  finance and investment  banking
services to corporations  and  businesses.  In 1997,  FMSC  established  Century
Discount Investments, a discount brokerage division through which it operates an
online  brokerage  operation.  FMFC also sells  insurance  products  through its
subsidiary Montauk Insurance Services, Inc. ("MISI").

     FMSC has  approximately  440 registered  representatives  and services over
50,000  retail and  institutional  customer  accounts.  All of FMSC's 162 branch
offices,  located  in 28 states  and Saudi  Arabia,  are owned and  operated  by
affiliates;  independent  owners who maintain all  appropriate  licenses and are
responsible for all office overhead and expenses.  FMSC also employs  registered
representatives directly at its corporate office.

     FMSC is  registered as a  broker-dealer  with the  Securities  and Exchange
Commission ("SEC"),  the National  Association of Securities Dealers Regulation,
Inc.  ("NASDR"),  the Municipal  Securities Rule Making Board ("MSRB"),  and the
Securities Investor Protection  Corporation  ("SIPC") and is licensed to conduct
its  brokerage  activities in all 50 states,  the District of Columbia,  and the
Commonwealth  of Puerto Rico. All securities  transactions  are cleared  through
Fiserv Securities, Inc. of Philadelphia, PA. and execution services are provided
by various floor brokerage and specialist firms. These arrangements provide FMSC
with back office  support,  transaction  processing  services on all  principal,
national  and  international  securities  exchanges,  and  access to many  other
financial services and products which allows FMSC to offer products and services
comparable to large brokerage firms.

     FMSC's  revenues  consist  primarily  of  commissions  and fee income  from
individual and institutional securities  transactions,  market making activities
and  investment  banking  services,   such  as  private  and  public  securities
offerings.  The following table represents the percentage of revenues  generated
by each of these activities during the last fiscal year:

Equities:
  Listed                             15%
  Over-The-Counter                   41%
Municipal and Government Bonds        1%
Corporate Bonds                       4%
Unit Investment Trusts                2%
Mutual Funds                         13%
Options                               6%
Insurance and Annuities               9%
Corporate Finance                     4%
                                    ----
Total(1)                             95%

-------------------
(1)  Does not include interest and other income.
<PAGE>

     The following  table reflects  FMSC's  various  sources of revenues and the
percentage of total revenues for fiscal 2000.  Revenues from agency transactions
in  securities  for  individual  customers  of FMSC are  shown  as  commissions.
Revenues from  transactions  in securities for individual  customers  where FMSC
acted in a principal  capacity are  reflected in  principal  transactions.  Also
reflected in principal  transactions  are trading profits from market making and
proprietary trading activities.

                                              Year Ended December 31, 2000
                                              Amount               Percent
                                              ------               -------
         Agency commissions from
          Equity Securities,
          Options and Mutual Funds           $46,529,771                78%

         Principal Transactions in
          Equity Securities, Municipal,
          Government and Corporate Bonds     $ 7,131,079                12%

         Interest and other Income           $ 3,252,325                 6%

         Investment Banking(1)               $ 2,416,711                 4%
                                              ----------               ---
         Total Revenues                      $59,329,886               100%


     (1)  Investment   banking   revenues   consist  of  commissions,   selling
concessions;  consulting fees and other income from  underwriting  and syndicate
activities and placement agent fees.

The Affiliate Program

     FMSC's primary method of operation is through its affiliate program,  which
allows  registered  representatives  to operate as  independent  contractors.  A
registered  representative  who becomes an affiliate of FMSC establishes his own
office and is solely responsible for the payment of all expenses associated with
the  operation  of the branch  office,  including  rent,  utilities,  furniture,
equipment, stock quotation machines, and general office supplies. In return, the
affiliate representative is entitled to retain a significantly higher percentage
of the commissions generated by his sales than a registered  representative in a
traditional brokerage arrangement.  The affiliate program is designed to attract
experienced  brokers with  existing  clientele  who desire to operate  their own
offices,  as well as other professionals in all facets of the financial services
industry.

     Affiliates must possess a sufficient level of commission brokerage business
and experience to enable the  individual to  independently  support  his/her own
office.  Financial  professionals such as insurance agents, real estate brokers,
financial planners,  and accountants,  who already provide financial services to
their  clients,  can  affiliate  with FMSC and obtain the  required  licenses to
become registered  representatives.  Affiliation  enables these professionals to
offer  securities  products  and services to their  clients  through  FMSC,  and
insurance  products  through  MISI,  and earn  commissions  and  fees for  these
transactions.

     FMSC provides full support  services to each of the  affiliates,  including
access  to stock and  options  execution  and  over-the-counter  stock  trading;
products such as insurance,  mutual funds and investment advisory programs;  and
research, compliance, supervision and related services.

     Each  affiliate  is required to obtain and maintain in good  standing  each
license required by the SEC and NASDR to conduct the type of securities business
in which the  affiliate  will engage,  and to register in the various  states in
which he/she intends to service  customers.  FMSC is ultimately  responsible for
supervising each affiliate and related registered representative. FMSC can incur
substantial   liability   from   improper   actions  of  any  of  the  affiliate
representatives.  The Company  maintains  a  professional  liability  errors and
omissions  insurance policy which provides coverage for certain actions taken by
the  Company's  registered  representatives,   employees  and  other  agents  in
connection  with the purchase and sale of securities and the  administration  of
individual retirement plans.

<PAGE>

Century Discount Investments

     In June 1997,  FMSC  established a discount  brokerage  division,  "Century
Discount Investments", to offer investors convenient and prompt retail brokerage
services at significantly reduced commission rates. Century is designed to serve
investors  who do their own  research and make their own  investment  decisions.
These  customers seek to avoid the higher  brokerage  commissions for securities
research,  investment  recommendations or portfolio  management  associated with
full service  brokerage  accounts.  FMSC believes  that this market  segment has
become  increasingly  significant to the brokerage industry and will continue to
grow  in  the  future.  Century's  business  concentrates  on the  execution  of
unsolicited transactions,  on an agency basis, from retail customers. Century is
able to offer  customers  reduced  commission  rates  since its  service  is not
dependent  on  individual  broker-customer  relationships  to  generate  orders.
Century does not assign customer accounts to individual  brokers and all Century
registered representatives have immediate access to customer accounts and market
information necessary to respond to any customer inquiry and order.

     Century,  through its clearing  firm, has developed the capability to offer
online,  discount brokerage and related investment services. The online services
provide customers with automated securities order placement,  market information
and research capabilities through the Internet.  In the future,  Century intends
to  offer  a  broader  range  of  investment  services  to the  self-  directed,
sophisticated retail customer.

Montauk Insurance Services

     In 1991,  FMFC formed  Montauk  Insurance  Services,  Inc  ("MISI") for the
purpose of  offering  and selling  variable  annuity,  variable  life as well as
traditional life and health insurance products.  Currently,  MISI is licensed in
28 states. MISI derives revenue from the sale of insurance-related  products and
services to the  customers of FMSC's  registered  representatives,  who are also
licensed to sell certain  insurance  products.  In fiscal year 2000, the Company
earned gross  commissions of $5.1 million from the sale of insurance and annuity
policies.

Asset Management and Portfolio Advisory Services

     FMSC is a SEC Registered Investment Adviser,  providing investment advisory
services to clients through independent, third-party sponsored advisory programs
offered to individual and institutional clients.  FMSC is registered or eligible
to conduct business as an investment adviser in 31 states.

     Managed account programs  generally  require the client to pay a single fee
for portfolio  advisory services,  brokerage  execution and custody and periodic
account  performance  evaluation,  rather than a fee plus commissions.  Revenues
from  asset-managed  accounts and portfolio advisory services are generated from
accounts that charge a fee based on a percentage of assets under management.

Investment Banking

     FMSC  participates in private and public offerings of equity securities and
provides general investment  banking  consulting  services to various public and
private corporations. Historically, FMSC has not derived a significant amount of
its revenues from investment banking. However, the Company did complete a public
offering of Common  Stock of Jeremy's  MicroBatch  Ice Creams,  Inc. in February
2000 in which FMSC acted as the managing underwriter.  The offering consisted of
1,200,000  shares of Common Stock at an offering price of $6.00 per share.  FMSC
received gross  commissions of $720,000 as well as warrants to purchase  120,000
shares of Jeremy's  Common  Stock at an exercise  price of $9.00 per share.  The
Company continues to review other  underwriting  candidates and anticipates that
it will engage in additional public and private offerings in the future.

Strategic Relationships

     During the year, the Company  formulated  several  strategic  relationships
with financial product vendors and other companies.  These relationships provide
cross-marketing opportunities as well as new product offerings to its customers.
One such  relationship  is with a  nationally  recognized  residential  mortgage
provider.  Another,  involves a relationship  with an  Internet-based  financial
planning firm. The Company expects to expand these  relationships in the current
fiscal year to provide for additional sources of revenue and lead generation for
its registered representatives.

<PAGE>

Recent Developments

New Clearing Arrangement

     In May 2000,  FMSC entered into a 10-year  clearing  agreement  with Fiserv
Securities,  Inc. under which Fiserv will act as FMSC's primary clearing broker.
In connection with the clearing  agreement,  FMSC and Fiserv also entered into a
financial agreement under which Fiserv has provided a cash advance of $4,000,000
to FMSC on the date of conversion to Fiserv. The funds, net of federal and state
income  taxes,  will be used  primarily  to  enable  FMSC to pay for the cost of
conversion  to Fiserv  and  expand  FMSC's  business.  For  financial  reporting
purposes,  the Company will earn the advance in accordance  with an amortization
schedule  established  by the  parties;  however,  FMSC will incur an income tax
liability at its effective  tax rate on the entire  advance in the year in which
it is received. FMSC is required to repay any unearned portion of the $4,000,000
in the  event it fails to  achieve  certain  minimum  performance  criteria,  or
terminates  the agreement  under certain  circumstances  prior to the expiration
date,  as well as  penalties  for early  termination.  Fiserv has also agreed to
provide  certain  additional  advances to FMSC in the  second,  third and fourth
years of the agreement under similar conditions,  provided FMSC achieves certain
performance criteria,  and subject to certain other conditions.  These advances,
if received,  will also be amortized to income as earned  during the term of the
clearing agreement.

     As of February 1, 2001,  FMSC and FMFC amended and  restated the  financial
agreement with Fiserv. Under the restated terms, FMFC, rather than FMSC, will be
the  recipient of any  additional  cash  advances  payable  under the  financial
agreement.  FMFC has  further  assumed  FMSC's  obligation  with  respect to the
initial  payment  received in November 2000, and will be solely  responsible for
any performance and early  termination  penalties.  In  consideration  of FMSC's
release  from its  obligations  under  the  financial  agreement  and to  secure
Fiserv's  interest,  FMFC has granted to Fiserv a first  priority lien in all of
the outstanding shares of FMSC stock that it owns.

New Trade Name

     In July 2000 the broker/dealer  adopted a new trade name and logo, "Montauk
Financial Group" to be used in advertising,  marketing and  communications  with
customers.  The new trade name was designed in connection  with the expansion of
financial services from the general  securities  products and services which had
been  the  Company's  core  offering.  It is  anticipated  that the new name and
modernized  ship logo,  will reflect the growth in all aspects of the  Company's
financial  services,  including asset management,  financial and estate planning
and insurance, in addition to general securities products and services.

Common Stock Repurchase Program

     In August 1999, the Company's board of directors  authorized the repurchase
of an unspecified  number of the Company's  outstanding  common shares in market
transactions.  From that time  until the end of fiscal  2000,  the  Company  has
purchased  an  aggregate  of  1,285,534  shares of  common  stock for a total of
$1,695,560.  In fiscal 2000, repurchases of 1,105,034 shares were made at a cost
of $1,460,740. The repurchase of common shares on the open market has the effect
of reducing the number of outstanding common shares.

Extension of Class A Warrants

     In December 2000, the Company's Board of Directors authorized the extension
of the Company's Class A Warrants for an additional two year period. The Class A
Warrants  originally provided the holder with the right to purchase one share of
the  Company's  Common  Stock at an  exercise  price of $3.00  per  share  until
February 17, 2001. With the two year extension,  holders of Class A Warrants now
have the right to purchase  one share of Common  Stock at an  exercise price of
$3.00 per share until February 17, 2003.

<PAGE>



     Competition

     FMSC  encounters  intense  competition  in all aspects of its  business and
competes  directly  with many other  securities  firms for  clients,  as well as
registered representatives. A significant number of such competitors offer their
customers a broader range of financial services and have  substantially  greater
resources.   Retail  firms  such  as  Merrill   Lynch  Pierce   Fenner  &  Smith
Incorporated, Salomon Smith Barney, Inc. and Morgan Stanley/Dean Witter dominate
the industry;  however,  the Company also  competes  with numerous  regional and
local  firms.  FMSC also  competes  for  experienced  brokers  with other  firms
offering an independent  affiliate  program such as Corporate  Securities Group,
Inc., Raymond James Financial Services, Inc. and Linsco/Private Ledger Corp.

     In  addition,  a number  of firms  offer  discount  brokerage  services  to
individual  retail customers and generally effect  transactions at substantially
lower  commission  rates on an "execution  only" basis,  without  offering other
services such as investment  recommendations  and research.  Moreover,  there is
substantial commission discounting by full-service  broker-dealers competing for
institutional  and  individual  brokerage  business.  The Company  has  recently
entered the discount  brokerage arena through its Century  Discount  Investments
division.  Additionally,  the recent  emergence  of online  trading  has further
intensified the competition for brokerage customers.  The continued expansion of
discount brokerage firms and online trading could adversely affect the Company's
retail business.

     Other financial institutions, notably commercial banks and savings and loan
associations,  offer customers some of the same services and products  presently
provided by  securities  firms.  In addition,  certain large  corporations  have
entered the securities  industry by acquiring  securities firms. While it is not
possible to predict the type and extent of competitive  services which banks and
other  institutions  ultimately  may offer to  customers,  FMSC may be adversely
affected to the extent those services are offered on a large scale basis.

     FMSC  competes   through  its  advertising  and  recruiting   programs  for
registered  representatives  interested in joining its affiliate  program.  FMSC
often offers  incentives  to qualified  registered  representatives  to join the
Company.  These  incentives  can include cash loans,  both  forgivable  based on
duration of association  and/or production  levels,  as well as  non-forgivable,
incentive stock options and a higher payout during a transitional  period.  FMSC
has recently  implemented  new programs to better  service its affiliates and to
attract new brokers.  The systems will enable brokers at any office to instantly
access customer accounts,  determine cash positions, send and receive electronic
mail,  and receive  research  reports and  compliance  memoranda  via the firm's
intranet component of its newly redesigned website.

     Government Regulation

     The  securities  industry  in the United  States is  subject  to  extensive
regulation under various federal and state laws and regulations.  The SEC is the
federal agency charged with the administration of most of the federal securities
laws.  Much of the  regulation of the  securities  industry,  however,  has been
assigned to various self  regulatory  organizations  ("SROs"),  principally  the
NASDR, and in the case of New York Stock Exchange,  Inc.  ("NYSE") member firms,
the NYSE.  The SROs,  among other  things,  promulgate  regulations  and provide
oversight  in  areas  of  (i)  sales  practices,   (ii)  trade  practices  among
broker-dealers,  (iii) capital requirements, (iv) record keeping and (v) conduct
of employees and affiliates of member organizations. In addition to promulgating
regulations  and  providing  oversight,  the  Commission  and the SROs  have the
authority to conduct administrative proceedings which can result in the censure,
fine,  suspension  or expulsion of a  broker-dealer,  its officers or employees.
Furthermore,  new legislation,  changes in the rules and regulations promulgated
by the Commission and SROs, or changes in the  interpretation  or enforcement of
existing laws and rules often directly affect the operation and profitability of
broker-dealers.  The stated purpose of much of the regulation of  broker-dealers
is the  protection  of  customers  and the  securities  markets  rather than the
protection of creditors and shareholders of broker-dealers.

     Employees

     The Company currently has approximately 440 registered  representatives  of
which 390 are  associated  with  affiliate  offices.  In  addition,  the Company
employs  120  support   personnel  in  the  areas  of  operations,   compliance,
accounting,  and  administration.   FMFC  believes  its  relationship  with  its
employees is satisfactory.
<PAGE>


     Fidelity Bond

     As required  by the NASDR and certain  other  authorities,  FMSC  carries a
fidelity bond covering loss or theft of securities,  as well as embezzlement and
forgery.  The  bond  provides  total  coverage  of  $5,000,000  (with a  $10,000
deductible provision per incident).  In addition,  the accounts of its customers
are protected by the Securities Investor Protection  Corporation ("SIPC") for up
to $500,000 for each  customer,  subject to a limitation  of $100,000 for claims
for cash balances,  with an additional  $99,000,000 of protection  provided by a
private  insurance  company  for the  benefit of each  customer.  SIPC is funded
through assessments on registered broker-dealers. SIPC charges a flat annual fee
of $150.

Item 2.   Properties

Offices and Facilities

     In March 1997, the Company entered into a new seven year lease (the "Master
Lease"),  commencing  February 1, 1998 for 22,762 square feet of gross  rentable
area at its executive  offices  which are located at Parkway 109 Office  Center,
328 Newman  Springs  Road,  Red Bank,  New Jersey.  The rent for the premises is
$35,850  per month,  and in  addition  to the base  rent,  the  Company  pays as
additional  rent,  a  proportional  share of any  increases in real estate taxes
above the amount paid during the 2000 calendar year, insurance premiums relating
to the premises, and all utility charges relating to the use of the premises. In
March  1998,  the  Company  signed  a  First   Amendment  to  the  Master  Lease
incorporating  all of the other rented space in the Red Bank  facility  into the
March 1997 Master Lease. The First Amendment to the Lease covers an aggregate of
32,442 gross rentable square feet at a monthly rental payment of $52,000 through
January  2005.  The Master  Lease and First  Amendment  also  contain a six-year
option to renew providing for a base rental payment of approximately $65,000 per
month.

     In  June  1996,  Montauk  Insurance   Services,   the  Company's  insurance
subsidiary,  leased  3,150  square  feet in  Paramus,  New  Jersey  to house its
administrative  offices.  In September 1997 the insurance  division relocated to
the Company's  corporate offices in Red Bank, New Jersey, and the Paramus office
became  the  home  of  Century  Discount  Investments,  the  Company's  discount
division.  The three year lease provides for monthly base rent of $5,053 for the
first year,  $5,315 for the second year,  and $5,578 for the third year. In 1999
MISI  extended the term of this lease for an  additional  one year.  In February
2000, MISI again extended the lease term for an additional  three years at a
monthly base rent of $6,890.

     In December 1999 FMSC entered into a 3-year lease  commencing  December 31,
1999 for 3,254 square feet of gross rentable area in the Vantage Ponte Building,
Glen Allen, Virginia for offices for its former Montauk Affinity Marketing Corp.
and for an  affiliate  retail  brokerage  office.  The rent for the  premises is
$4,474.25 per month and in addition to the base rent, the company is responsible
for   additional   rent   comprising  an  operating   expense  pass  through  of
approximately  5% annually.  During  October 2000,  the company  terminated  its
affiliation with Montauk Affinity  Marketing Corp. and the lease premises became
entirely used by an affiliate for retail brokerage. Effective June 1, 2001, this
lease will be assigned to and assumed by an FMSC  affiliate,  Millenium  Capital
Management Co. This  affiliate  will then be responsible  for the complete lease
obligations.

     On  March  31,  2001,  the  Company  entered  into a lease  assignment  and
assumption  agreement for a 3-year lease for 3,272 gross rentable square feet at
a new branch office at 2250 Glades Road, Boca Raton,  Florida.  The rent for the
premises  is $7,433 per month,  which  includes  in the base rate  common  area,
maintenance  charges,  and taxes.  This office will maintain a portion of leased
space for  administrative  offices,  with the balance of the space for affiliate
retail offices.

Item 3.   Legal Proceedings

     Many  aspects  of the  Company's  business  involve  substantial  risks  of
liability. In recent years, there has been an increasing incidence of litigation
and arbitration involving the securities industry.

     FMSC  is a  respondent  in a  customer  arbitration  seeking  rescissionary
damages of approximately $19 million plus punitive damages. The claimant alleges
violations of various  provisions of the federal and state securities laws. FMSC
has filed its answer to the claims and is vigorously  defending the action. FMSC
is  also  a  defendant  or  co-defendant  in  various  other  legal  proceedings
incidental to its securities  business.  FMSC is contesting  the  allegations of
these claims and believes that there are meritorious defenses in each case.

     In view of the inherent difficulty of predicting the outcome of litigation,
management  is unable to derive a meaningful  estimate of the amount or range of
possible loss that may arise out of pending legal  proceedings in any particular
quarterly or annual period,  or in the aggregate.  However,  it is possible that
the ultimate  outcome of these matters could have a material  adverse  impact on
the Company's financial condition,  results of operations, and cash flows. As of
December  31,  2000,  the Company has not  established  a loss  provision in the
accompanying  financial  statements for any liability that may result from these
contingencies.
<PAGE>


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

                           Not Applicable.




<PAGE>


                                     PART II

Item 5.   Market of and Dividends on the Company's Common Equity and
          Related Stockholder Matters

A.      Principal Market

     The  Company's  Common  Stock is  traded  in the  over-the-counter  market.
Trading in the Company's  Common Stock is reported on the NASDR  Bulletin  Board
system and in the pink sheets published by Pink Sheets LLC. The Company believes
that there is an  established  public  trading  market for the Company's  Common
Stock  based on the  volume of  trading in the  Company's  Common  Stock and the
existence of market makers who regularly  publish  quotations  for the Company's
Common  Stock.  The  Company's  Class A, Class B and Class C Warrants  commenced
trading in the over-the-counter market upon their issuance in March 1998.

B.      Market Information

     The Company's Common Stock commenced trading in the over-the-counter market
in 1987. On April 12, 2001,  the  Company's  common stock had a high and low bid
price of $.55 and $.53, respectively.

     The  following is the range of high and low bid prices for such  securities
for the periods indicated below:

Common Stock


Fiscal Year 2000                    High Bid        Low Bid

     1st Quarter                    $ 1.97          $ 1.13
     2nd Quarter                      1.75            1.25
     3rd Quarter                      1.56            1.00
     4th Quarter                      1.22            0.60

Fiscal Year 1999                    High Bid        Low Bid

     1st Quarter                    $ 3.75          $ 1.4375
     2nd Quarter                      3.00            1.5938
     3rd Quarter                      2.7188          1.5313
     4th Quarter                      1.9375          1.1250

Fiscal Year 1998                    High Bid        Low Bid

     1st Quarter                    $ 2.875         $ 2.00
     2nd Quarter                      3.28            2.41
     3rd Quarter                      2.53            1.01
     4th Quarter                      1.875           1.125




<PAGE>


Item 6.  Selected Financial Data
<TABLE>
<CAPTION>
<S>                                      <C>              <C>               <C>               <C>           <C>
                                                         Year ended December 31,
                                         2000            1999            1998          1997             1996
                                         ----            ----            ----          ----             ----

Operating results:

Revenues:
Commissions                          $46,529,771       $40,516,625     $30,741,404   $ 27,018,244    $ 25,749,690
Principal transactions                 7,131,079        14,000,680       8,795,599      7,257,576       7,660,700
Investment banking                     2,416,711           439,065         767,312      1,433,100         634,329
Insurance recovery                          -                 -               -           650,000            -
Interest and other income              3,252,325         2,628,246       1,572,063      1,383,713       1,044,969
                                       ---------        ---------       ---------      ---------      -----------
Total revenues                        59,329,886        57,584,616      41,876,378     37,742,633      35,089,688
                                      ----------        ----------      ----------     ----------     -----------

Expenses:
Commissions, employee
 compensation and
 benefits                             46,800,661        42,137,968      31,766,060     26,785,205      25,428,184
Clearing and floor
 brokerage                             4,003,345         4,109,961       3,674,859      3,021,709       3,139,142
Communications and
 occupancy                             2,731,681         2,697,433       2,557,313      1,860,350       1,662,936
Legal matters and
 related costs                         1,181,115         1,395,008       2,377,336      1,452,001       2,731,997
Write-down of Note
 Receivable - Global
 Financial Corp.                         239,183           100,000       1,775,000          --              --
Loss on Global lease
 Settlements                                --             600,416           3,524          --              --
Other operating expenses               4,862,158         3,545,308       2,958,450      2,093,670       2,006,615
Interest                                 160,230           166,104         131,215         84,695         105,772
                                      ----------         ---------       ---------     ----------       ---------

Total expenses                        59,978,373        54,752,198      45,243,757     35,297,630      35,074,646
                                                        ----------      ----------     ----------      ----------
Income (loss) before
 income taxes                           (648,487)        2,832,418      (3,367,379)     2,445,003          15,042
Provision for income taxes
 (income tax benefit)                      6,721           549,140        (604,532)       968,178         (17,747)
                                      ----------        ----------       ---------     ----------      ----------
Income (loss) before extraordinary
 loss                                   (655,208)        2,283,278     $(2,762,847)  $  1,476,825    $     32,789
                                      ==========        ==========      ===========    ==========      ===========
Extraordinary loss -
 extinguishment of debt, net of tax      (34,200)           --               --             --              --
                                      ----------        ----------       ----------     ----------     -----------
Net income (loss)                   $   (689,408)  $    2,283,278   $   (2,762,847)  $  1,476,825    $     32,789
                                      ==========        ==========       ==========    ===========     ===========
Net income (loss)
 available to
 common stockholders                 $  (792,136)       $2,215,528     $(2,762,847)  $   1,476,825   $     32,789
                                      ==========         =========      ===========    ===========     ===========
Per share of
 Common Stock:
    Basic                            $      (.08)       $      .22     $      (.28)  $         .17   $        .01
    Diluted                          $      (.08)       $      .21     $      (.28)  $         .14   $        .01

</TABLE>

<PAGE>


Item 6.  Selected Financial Data
          (continued)
<TABLE>
<CAPTION>

<S>                                    <C>            <C>             <C>           <C>              <C>
                                                         Year ended December 31,
                                        2000             1999            1998          1997             1996
Weighted average  common shares
 outstanding -     Basic               9,450,055      9,878,129       9,725,116     8,788,734        7,767,224
                                      ==========      =========       =========     =========        =========
Weighted average
 common and common
 equivalent shares
 outstanding -
    Diluted                            9,450,055     11,262,708       9,725,116    10,351,032        8,623,538
                                      ==========     ==========       =========    ==========        =========

Financial condition:
Total assets                         $16,913,063    $17,059,184     $11,543,734   $11,971,934       $8,742,039
Total liabilities                    $ 9,203,672    $ 7,429,046     $ 5,320,107   $ 4,732,467       $4,625,260
Common Stock issued
 with guaranteed
  selling price                      $     6,500    $    36,500     $    36,500   $   346,500       $  421,500
Stockholders' equity                 $ 7,702,891    $ 9,593,638     $ 6,187,127   $ 6,892,967       $3,695,279



</TABLE>


<PAGE>

Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations

Results of Operations - Three Years Ended December 31, 2000

     Fiscal 2000 was the Company's twelfth  consecutive year of record revenues,
with total  revenues  exceeding $59 million.  The year began strong as Y2K fears
were  eliminated by a smooth  transition  into the new  millennium  and the U.S.
stock  market  came  roaring  into  2000.  As the year  progressed,  diminishing
investor  confidence  in the  financial  markets,  coupled  with more  realistic
valuations  in the  technology  sector and a general  slow down in the  economy,
reflected poorly on the Company's  results of operations  during the second half
of the year, as trading volume dropped significantly.

<TABLE>
<S>                                <C>             <C>               <C>           <C>         <C>

                                                             Year Ended December 31,
                                             2000                            1999               1998
                                    (000's)        % Change           (000's)     Change       (000's)
                                    ------------------------------------------------------------------
Revenues:
Commissions                        $46,530             15            $40,517        32         $30,741
Principal transactions               7,131            (50)            14,001        59           8,796
Investment banking                   2,417            450                439      ( 43)            767
Interest and other income            3,252             24              2,628        67           1,572
                                    ------------------------------------------------------------------
Total Revenues                     $59,330              3            $57,585        38         $41,876
                                    ------------------------------------------------------------------
</TABLE>

     The  year-to-year  revenue growth resulted from increased  commissions from
general  securities  transactions and insurance related  products,  particularly
from the sale of variable annuities. This overall increase in commission revenue
was due primarily to the addition of new  affiliated  representatives,  a direct
result of the increase  in, and  maturation  of, our  recruiting  and  marketing
efforts.  The Company also  benefited  from the  exceptional  performance in the
equities markets of the first quarter of 2000, during which we earned 41% of our
total revenues for the year.

     The insurance segment,  consisting  primarily of variable annuity products,
increased $2,180,000, or 73%, from 1999 to 2000. Through training, education and
marketing,  the Company has succeeded in increasing its insurance sales with its
existing  base of financial  professionals.  The rise in revenues in fiscal 1999
when  compared  with 1998  resulted  from  increased  commissions  from  general
securities transactions (stocks, bonds and options). That increase was primarily
attributable  to the addition of new affiliated  representatives,  as well as an
increase  in  the  production  from  existing  affiliated  representatives  on a
year-to-year comparative basis.

     Market-making  and  principal  trading  activities  accounted  for the only
decrease in the Company's revenues for fiscal 2000.  Revenues for 2000 were $7.1
million,  down from $14 million in 1999,  a decrease of 50%. The decrease is due
to investment and trading losses  primarily in Nasdaq and other  securities held
in the firm's proprietary  accounts.  The firm has taken steps in 2001 to reduce
market exposure by closely monitoring inventory position limits and implementing
stop loss levels.

     In 1999,  the  largest  increase  as a  percentage  of  revenues  over 1998
resulted from increased  principal  transactions  and trading  profits in equity
securities.  Revenues from these areas  increased 59% in 1999 when compared with
1998. Several of the firm's  proprietary  equity traders achieved  significantly
improved profitability in 1999 over 1998.
<PAGE>



     The Company also  realized a  significant  increase in  investment  banking
revenues  as a result of the  completion  of an initial  public  offering in the
first  quarter  of  2000.  The  investor  market  for  new  offerings   declined
substantially  in the latter part of the year,  with the trend  continuing  into
fiscal 2001.  Therefore,  it is  anticipated  that the Company will be unable to
sustain these revenue levels in this business sector for 2001.

<TABLE>
<S>                                     <C>               <C>              <C>            <C>            <C>

                                                                    Year Ended December 31,
                                                   2000                            1999                  1998
                                        (000's)            % Change        (000's)        % Change      (000's)
                                        -----------------------------------------------------------------------

Expenses:
Commissions, employee
 compensation and
 benefits                               $46,801               11           42,138            33        $ 31,766
Clearing and floor
 brokerage                                4,003               (3)           4,110            12           3,675
Communications and
 occupancy                                2,732                1            2,697             5           2,557
Legal matters and
 related costs                            1,181              (15)           1,395           (41)          2,377
Write-down of Note
 receivable - Global
 Financial Corp.                            239                1              100           (94)          1,775
Loss on lease
 settlements                                 --             (100)             600            50             100
Other operating expenses                  4,862               37            3,546            24           2,862
Interest                                    160               (4)             166            27             131
                                         ----------------------------------------------------------------------
Total expenses                          $59,978               10         $ 54,752            21         $45,243
                                         ----------------------------------------------------------------------
</TABLE>


     Total expenses increased by $5,226,000,  or 10% to $59,978,000 for 2000, up
from $54,752,000 for 1999. Expenses increased in most areas due to the Company's
continued expansion of operations,  enhanced marketing efforts and staffing, and
increased commission payouts to a greater number of registered representatives.

     During  2000,  the Company  paid  commissions,  employee  compensation  and
employee  benefits  of  $46,801,000  (79% of  total  revenues)  as  compared  to
$42,138,000  (73% of total revenues) in 1999. This category  includes  salaries,
commission  expense,  and benefits for salaried  employees.  Commissions paid to
registered  representatives  for fiscal 2000 totaled  $39,289,000  (66% of total
revenues) compared to $35,502,000 (62% of total revenues) in 1999, and accounted
for almost  $4,000,000,  or 80% of the total  increase in this expense  category
over fiscal 1999. The dollar  increase in  commissions  paid is due primarily to
the  increase in  commission  revenues,  as well as the  increase in  commission
payout  percentages,  which is required to remain competitive in the independent
brokerage arena.

     For 2000, the Company paid salaries, bonuses and benefits of $7,512,000 for
management, operations and clerical personnel, as compared to $6,636,000 in 1999
and  $5,294,000  in 1998.  During the second  half of 2000,  the  Company  hired
additional  management and support staff for various  departments,  primarily in
sales,  recruiting and compliance.  In 2000, the Company also added employees to
its mutual fund and insurance departments,  as well as on the equity order desk.
The Company  employed  approximately  120 salaried  employees as of December 31,
2000, 78 salaried employees as of December 31, 1999 and 68 salaries employees as
of December 31, 1998.  These increases in personnel were required to service and
support the Company's growing network of affiliated registered representatives.

<PAGE>



     Clearing costs,  which are associated with the level of transaction  volume
and type, remained fairly constant during 2000. For 2000, clearing costs were $4
million  (7% of  total  revenues)  as  compared  to $4.1  million  (7% of  total
revenues) in 1999. In 1999,  clearing costs increased by $435,000 from 1998. The
dollar   increase  in  1999   reflected  the  increased   volume  in  securities
transactions,  which carry clearance and floor brokerage charges. The percentage
of clearing costs to gross revenues can, and does,  fluctuate depending upon the
product  mix.  Certain  transactions,  such as options and bonds,  have a higher
execution  and  clearing  cost than  others.  In 1998  clearing  costs were $3.6
million (9% of total  revenues).  Clearing costs as a percentage of revenues has
decreased  over the  period  from 1998 to 2000 due in part to  volume  discounts
negotiated with the Company's clearing firm.

     Communications  and occupancy  costs remained  relatively  constant  during
fiscal 2000,  increasing  only slightly from $2,697,000 in 1999 to $2,732,000 in
2000.  Communications  and occupancy costs rose by $140,000 in 1999, an increase
of 5% from  1998.  The  largest  increase  in this  category  was in the area of
technology  support and software  enhancements.  In 1999, the Company contracted
with a data management  consultant to upgrade the existing  database and provide
management with better information retrieval systems and reporting capabilities.

     For the third  consecutive  year, legal matters and related costs decreased
as a result of the enhanced  supervision and compliance measures  implemented in
1999.  These costs totaled  $1,181,000 in 2000,  down 15% from 1999 and 50% from
1998.  FMSC  is  a  respondent  in  a  new  customer   arbitration   (See  Legal
Proceedings).  FMSC is also a defendant or  co-defendant  in various other legal
proceedings  incidental  to its  securities  business.  FMSC is  contesting  the
allegations of these claims and believes that there are meritorious  defenses in
each case.  In view of the  inherent  difficulty  of  predicting  the outcome of
litigation,  management is unable to derive a meaningful  estimate of the amount
or range of possible loss that may arise out of pending legal proceedings.

     In  December  1999,  the  Company  accepted  a  $500,000  cash  payment  in
settlement  of an  arbitration  against  another  securities  firm.  The Company
commenced the arbitration in an effort to recover  customer  settlements that it
had previously paid on claims arising from the activities of a former  affiliate
office. The settlement was received in February 2000.

     The  Company  has also filed suit  against  one of its  insurers  to compel
coverage of several settled  claims.  There can be no assurance that the Company
will be successful in its efforts to recover  additional funds from its insurers
on  settled  claims,  or that  monetary  losses,  if any,  from  future  claims,
settlements or adverse  judgments  will be covered under the Company's  existing
insurance policies.

     Other operating expenses increased from $3,546,000 in 1999 to $4,861,000 in
2000,  an increase of 37%. The increase is due primarily to the write-off of the
balance of the receivable  from Global  Financial  Corp. and various broker loan
receivables,  costs associated with the conversion to the new clearing firm, and
increased sales and marketing  initiatives.  Other operating  expenses increased
from $2,862,000 in 1998 to $3,546,000 in 1999, an increase of 24%. That increase
was due primarily to higher bad debts,  depreciation expense and increased sales
and marketing initiatives.

     The Company's  effective tax rate in 2000 was 1% as compared to 19% in 1999
and (18)% in 1998.  The rate in 2000 was  higher  than  expected  because of the
effect of non-deductible expenses and an increase in the tax valuation allowance
during the year.  Management  increased the tax  valuation  allowance in 2000 to
offset tax benefits  arising from state tax loss  carryforwards  and stock-based
compensation because their realization is uncertain.  The rate in 1999 was lower
than  expected  because  income  tax  expense  was offset by the  reversal  of a
valuation  allowance   established  against  deferred  tax  assets  (principally
reserves  and net  operating  losses)  in 1998.  Based on an  assessment  of all
available evidence,  including improved operating results,  management concluded
that it was more likely  than not that  deferred  tax assets as of December  31,
1999 would be realized.  Accordingly,  the balance of the valuation allowance at
December  31, 1999  ($542,000)  was  reversed.  The rate in 1998 was higher than
expected  because the existence of  uncertainties  regarding  the  resolution of
various pending claims and the previously discussed Global matter led management
to record a valuation allowance of $731,000 to offset deferred tax benefits.

     For the year 2000, the Company  reported a net loss of $792,000 or $.08 per
basic and diluted share,  as compared to net income of  $2,216,000,  or $.22 per
basic share and $.21 per diluted share, for 1999. For 1998, the Company reported
a net loss of $2,763,000, or $.28 per basic and diluted share.

<PAGE>



Liquidity and Capital Resources

     The  Company  maintains  a  highly  liquid  balance  sheet  with 60% of the
Company's assets consisting of cash and cash equivalents,  securities owned, and
receivables from the Company's  clearing firm and other  broker-dealers.  Market
making and other  securities  dealer  activities  require  the  Company to carry
significant  levels of  securities  inventories  in order to meet  customer  and
internal  trading  needs.  The balances in the  Company's  cash,  inventory  and
clearing  firm  accounts  can and do  fluctuate  significantly  from day to day,
depending  on  market  conditions,   daily  trading  activity,   and  investment
opportunities.  The Company monitors these accounts on a daily basis in order to
ensure  compliance  with  regulatory   capital   requirements  and  to  preserve
liquidity.

     Net cash provided by operating activities during 2000 was $5,333,000.  Cash
was generated in part from the $4 million  advance  received under the financial
agreement with Fiserv in November 2000. For financial  reporting  purposes,  the
Company  will earn the  advance  on a  straight-line  basis over the term of the
clearing  agreement.  Amortization can be accelerated based on performance.  The
entire  advance is subject to income  taxes in the year of  receipt.  Fiserv has
agreed to provide  additional  advances of  $1,750,000 in each of the next three
years of the  agreement,  provided  FMSC  meets  certain  performance  and other
criteria.  Operating  cash flows were also  provided  by funds drawn from FMSC's
clearing firms of  $4,057,000.  These  increases were partially  offset by a net
loss in 2000,  increases  in  employee  and broker  receivables  of  $1,157,000,
increases in deferred  income taxes of $1,057,000,  and decreases in commissions
payable of  $1,073,000.  In an effort to compete with other  broker-dealers  for
registered  representatives,  FMSC has increasingly  made loans to brokers as an
inducement  to join the  Company.  Some of these  loans  are  forgivable  if the
registered  representative  remains licensed with the Company for an agreed upon
period of time,  generally 1-2 years,  and/or meets specified  production goals.
The unamortized balance of these loans at December 31, 2000 was $606,473.  Other
loans to registered representatives are payable in installments,  generally over
periods from 1-2 years, with interest rates ranging from 0% to 8% per annum.

     Investing  activities  required cash of $37,000  during 2000.  Additions to
fixed assets consumed $722,000,  primarily for the purchase of computers, office
furniture and  equipment.  The collection of Global leases  receivable  provided
cash of  $650,000.  The Global  leases  were  assigned to the Company in various
settlement  transactions  with Global  customers during 1999 (See Note 11 to the
consolidated financial statements).

     In 1999, the Company  completed a private  offering of Series A Convertible
Preferred Stock with the majority of the Global lease investors. Under the terms
of the offering,  each Global lease  investor who  participated  in the offering
received  one  share  of  Preferred  Stock  in  exchange  for  every $5 of lease
investment  value that the  investor  was  entitled to receive from Global after
certain  adjustments.  Each leaseholder was required to assign their interest in
all lease  payments  to which they were  entitled.  Each share of the  Preferred
Stock is  convertible  into two shares of the Company's  Common Stock and pays a
quarterly dividend of $.075 per Preferred Share.

     Financing activities used cash of $2,282,000 in 2000. A total of $1,461,000
was used to  repurchase  1,105,034  shares of the Company's  outstanding  shares
pursuant to a stock repurchase  program  authorized by the board of directors in
August 1999. In addition,  the Company made note and capital lease repayments of
$1,019,000 and dividend payments to preferred  stockholders of $103,000. A total
of $56,000 was received  from the  exercise of 57,000  stock  options by various
individuals during the year.

     At December  31,  2000,  the  Company's  broker-dealer  subsidiary  had net
capital of $1,194,000,  which was $682,000 in excess of its required net capital
of $512,000,  and the ratio of aggregate indebtedness to net capital was 6.43 to
1.

     The Company  has  various  bank notes  totaling  $53,000.  These notes bear
interest at the prime rate (9.5% at December 31, 2000),  and are  collateralized
by equipment owned by the Company. The loans are payable in monthly installments
of $7,994.

     In 1998, the Company issued  convertible  promissory notes in the aggregate
amount  of  $570,000  to a  private  investor  and his  affiliated  entities  in
connection with a Global lease  settlement.  The principal amount was originally
due in October  2003.  In 2000,  the Company  redeemed the notes for 110% of the
note  principal,  and recorded an  extraordinary  loss of $57,000  before income
taxes from the early extinguishment.
<PAGE>



     In 1999, the Company issued  additional  convertible  notes in the original
aggregate  amount of $690,526 to several private  investors in connection with a
Global  lease   settlement.   The  notes  are  payable  in  thirty-six   monthly
non-interest bearing installments of $16,404, plus balloon payments of $112,000,
which include  interest of $12,000  calculated on the basis of 8% of the balloon
amount  beginning in month nineteen of the note term. The Company had recorded a
loan discount on the notes of $64,609,  which is being  amortized  over the note
terms using the interest  method.  The notes are convertible into 345,263 shares
of the  Company's  common stock based on a conversion  price of $2.00 per share.
Once the  underlying  shares are  registered,  the Company can request  that the
noteholders  convert their shares.  Proceeds from the sale of the shares must be
applied towards the unpaid principal of the notes. Any excess proceeds or unsold
shares will be returned to the Company.

     As of  December  31,  2000,  the Company  had an  aggregate  of $100,000 of
subordinated notes outstanding.  The notes are payable in annual installments of
$50,000 plus interest at 8% per annum.  The notes are subordinated to the claims
of FMSC's general  creditors  under a  subordination  agreement  approved by the
NASDR.

Impact of Inflation

     Management  of the Company  believes  that the impact of  inflation  has an
effect upon the amount of capital  generally  available for investment  purposes
and also may affect the  attitude or  willingness  of  investors to buy and sell
securities. The nature of the business of the Company's broker-dealer subsidiary
and the  securities  industry  in general is directly  affected by national  and
international  economic and political  conditions,  broad trends in business and
finance and volatility of interest rates,  changes in and uncertainty  regarding
tax  laws,  and  substantial  fluctuation  in the  volume  and  price  levels of
securities  transactions  and the securities  markets.  To the extent  inflation
results in higher interest rates and has other adverse effects on the securities
markets and the value of securities held in inventory,  it may adversely  affect
the Company's financial position and results of operations.

Factors Affecting "Forward-Looking Statements"

     From time to time,  the Company may  publish  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, or make oral
statements that constitute  forward-looking  statements.  These  forward-looking
statements  may relate to /such matters as  anticipated  financial  performance,
future  revenues  or  earnings,  business  prospects,  projected  ventures,  new
products,  anticipated  market  performance,  and similar  matters.  The Private
Securities   Litigation   Reform  Act  of  1995   provides  a  safe  harbor  for
forward-looking  statements.  In order  to  comply  with  the  terms of the safe
harbor,  the Company  cautions readers that a variety of factors could cause the
Company's  actual results to differ  materially from the anticipated  results or
other expectations expressed in the Company's forward-looking statements.  These
risks  and  uncertainties,  many of which  are  beyond  the  Company's  control,
include,  but are not  limited  to:  (i)  transaction  volume in the  securities
markets,  (ii) the volatility of the securities  markets,  (iii) fluctuations in
interest rates, (iv) changes in regulatory  requirements  which could affect the
cost of doing  business,  (v)  fluctuations  in  currency  rates,  (vi)  general
economic conditions, both domestic and international,  (vii) changes in the rate
of inflation and related impact on securities  markets,  (viii) competition from
existing  financial  institutions and other new participants in competition from
existing  financial  institutions  and other new  participants in the securities
markets,  (ix) legal  developments  affecting the  litigation  experience of the
securities  industry,  and (x) changes in federal and state tax laws which could
affect the  popularity  of products  sold by the  Company.  The Company does not
undertake  any  obligation  to  publicly  update or revise  any  forward-looking
statements.

Effects of Recently Issued Accounting Pronouncement

     In June 1998 and June 2000, the FASB issued SFAS No. 133,  "Accounting  for
derivative instruments and hedging activities" and SFAS No. 138, "Accounting for
certain derivative  instrument and certain hedging activities." These statements
establish  accounting and reporting  standards  requiring that every  derivative
instrument  be  recorded on the  balance  sheet as either an asset or  liability
measured at its fair value.  SFAS No. 133 and 138 also  require  that changes in
the derivative's fair value be recognized  currently in earnings unless specific
hedge  accounting  criteria are met. The Company will adopt SFAS No. 133 and No.
138 in the first  quarter of fiscal 2001,  and does not expect that the adoption
of these new standards will have a material  impact on its earnings or financial
positions.

<PAGE>



Market Risk

     Certain of the Company's business activities expose it to market risk. This
market risk  represents  the potential for loss that may result from a change in
value of a financial  instrument as a result of  fluctuations in interest rates,
equity prices or changes in credit ratings of issuers of debt  securities.  This
risk relates to financial  instruments held by the company as investment and for
trading.

     The  Company's  securities  inventories  are exposed to risk of loss in the
event of unfavorable price movements.  The Company's securities  inventories are
marked to market on a daily basis.  The Company's  market-making  activities are
client-driven,  with the  objective of meeting  clients'  needs while  earning a
positive spread. At December 31, 2000 and December 31,1999,  the balances of the
Company's equity securities  positions owned and sold but not yet purchased were
approximately $3,689,000 and $386,000 and $2,931,000 and $99,000,  respectively.
In the opinion of  management,  the potential  exposure to market risk,  trading
volatility  and  the  liquidity  of  securities  held  in the  firm's  inventory
accounts,  could  potentially have a material effect on the Company's  financial
position.

     The Company's  client  activities  involve the execution,  settlement,  and
financing of various  transactions on behalf of its clients.  Client  activities
are transacted on either a cash or margin basis. The Company's client activities
may expose it to off-balance sheet credit risk. The Company may have to purchase
or sell financial instruments at the prevailing market price in the event of the
failure of a client to settle a trade on its original terms or in the event that
cash and  securities in the client margin  accounts are not  sufficient to fully
cover the client losses.  The Company seeks to control the risks associated with
client activities by requiring clients to maintain collateral in compliance with
various regulations and Company policies.

Item 8.    Financial Statements

     See Financial Statements attached hereto.

Item 9.    Disagreements on Accounting and Financial Disclosure

     Not Applicable.

<PAGE>

                                  PART III

Item 10. Directors and Executive Officers

     The Directors and  Executive  Officers of the Company and its  subsidiaries
are as follows:
<TABLE>
<CAPTION>
<S>                                 <C>              <C>

         Name                       Age              Position
         ----                       ---              --------

Herbert Kurinsky                    69               Director,  President and Chief  Executive
                                                     Officer of FMFC and of FMSC and Registered
                                                     Options Principal of FMSC

William J. Kurinsky                 40               Director, Vice   President,   Chief
                                                     Operating and Chief Financial  Officer
                                                     and  Secretary  of FMFC  and of  FMSC  and
                                                     Financial/Operations Principal of FMSC

Robert I. Rabinowitz, Esq.          43               General Counsel,  FMFC,  Chief
                                                     Administrative  Officer,  Vice President
                                                     and General Securities Principal of FMSC

Norma Doxey                         61               Director, Vice President of Operations, FMSC

Ward R. Jones, Jr.                  70               Director

David I. Portman                    60               Director

Barry D. Shapiro, C.P.A.            58               Director

</TABLE>

     The Company's Certificate of Incorporation  provides for the classification
of the Board of Directors into three classes of Directors,  each class as nearly
equal in number as possible  but not less than one  Director,  each  director to
serve  for  a  three-year   term,   staggered  by  class.   The  Certificate  of
Incorporation  further provides that a Director or the entire Board of Directors
may be removed only for cause and only by the affirmative vote of the holders of
at least 70% of the combined  voting power of the Company's  voting stock,  with
vacancies  on the Board being  filled only by a majority  vote of the  remaining
Directors  then in  office.  "Cause"  is  defined  as the  willful  failure of a
director to perform in any  substantial  respect such  Director's  duties to the
Corporation  (other  than any such  failure  resulting  from  incapacity  due to
physical  or  mental  illness),   willful  malfeasance  by  a  Director  in  the
performance  of  his  duties  to  the   Corporation   which  is  materially  and
demonstrably  injurious to the  Corporation,  the commission by a Director of an
act of fraud in the performance of his duties,  the conviction of a Director for
a felony  punishable by  confinement  for a period in excess of one year, or the
ineligibility  of a Director for  continuation  in office  under any  applicable
rules, regulations or orders of any federal or state regulatory authority.

     All officers  serve at the  discretion  of the Board of  Directors.  Family
relationships  exist among the following  officers and  directors:  Mr.  Herbert
Kurinsky is the uncle of Mr.  William J. Kurinsky.  Mr. Robert I.  Rabinowitz is
the brother-in-law of Mr. William J. Kurinsky.
<PAGE>

     Herbert  Kurinsky  became a Director  and the  President  of the Company on
November 16, 1987.  Mr.  Kurinsky is a co-founder  of First  Montauk  Securities
Corp.  and has been  its  President,  one of its  Directors  and its  Registered
Options  Principal  since September of 1986. From March 1984 to August 1986, Mr.
Kurinsky  was  the  President  of  Homestead  Securities,  Inc.,  a  New  Jersey
broker/dealer.  From April 1983 to March 1984, Mr.  Kurinsky was a branch office
manager for Phillips, Appel & Waldon, a securities broker/dealer.  From February
1982 to March  1983,  Mr.  Kurinsky  was a branch  office  manager  for  Fittin,
Cunningham  and  Lauzon,  a  securities  broker/dealer.  From  November  1977 to
February  1982,  he was a branch  office  manager for Advest  Inc., a securities
broker/dealer.  Mr.  Kurinsky  received  a B.S.  degree  in  economics  from the
University of Miami, Florida in 1954.

     William J.  Kurinsky  became Vice  President,  a Director and Financial and
Operations  Principal of the Company on November 16, 1987. He is a co-founder of
First Montauk Securities and has been one of its Vice Presidents, a Director and
its Financial/Operations  Principal since September of 1986. Prior to that date,
Mr.  Kurinsky  was  Treasurer,  Chief  Financial  Officer and Vice  President of
Operations  of  Homestead  Securities,  Inc., a  securities  broker/dealer.  Mr.
Kurinsky  received a B.S.  from Rutgers  University in 1984. He is the nephew of
Herbert Kurinsky.

     Robert I. Rabinowitz, Esq. is General Counsel of the Company since 1987. He
concurrently  served as General  Counsel of First Montauk  Securities  from 1986
until 1998 when a new general counsel was named. Thereafter, he became the Chief
Administrative  Officer of FMSC as well as a General Securities Principal.  From
January 1986 until  November  1986,  he was an  associate  attorney for Brodsky,
Greenblatt & Renahan,  a private practice law firm in Rockville,  Maryland.  Mr.
Rabinowitz  is an attorney at law  licensed to practice in New Jersey,  Maryland
and the District of Columbia,  and is a member of the Board of  Arbitrators  for
the National Association of Securities Dealers,  Department of Arbitration.  Mr.
Rabinowitz's wife is a niece of Mr. Herbert Kurinsky and a sister of Mr. William
Kurinsky.

     Norma L. Doxey has been a Director of the Company  since  December 6, 1988.
Ms.  Doxey  has  been  a  Vice   President  of   Operations   and  a  Registered
Representative  with First Montauk  Securities  Corp. since September 1986. From
August through  September,  1986, she was  operation's  manager and a Registered
Representative  with  Homestead  Securities,  Inc. From July 1984 through August
1985 she held the same position with Marvest Securities.

     Ward R. Jones, Jr. has been a director of the Company since June 1991. From
1955  through  1990,  Mr. Jones was  employed by Shearson  Lehman  Brothers as a
registered representative,  eventually achieving the position of Vice President.
Mr. Jones is currently a registered  representative of First Montauk  Securities
Corp., but does not engage in any securities business.

     David I.  Portman has been a director of the Company  since June 15,  1993.
From 1978 to the present,  Mr. Portman served as the President of Triad Property
Management,  Inc., a private  corporation  which builds,  invests in and manages
real estate properties in the State of New Jersey. Mr. Portman was a Director of
Ultra Med, Inc. from 1986 to 1991, a high tech medical  equipment  manufacturer.
Mr.   Portman  also  serves  as  a  director  and  officer  of  Pacific   Health
Laboratories,  Inc.,  a position he has held since August  1995.  In 1997,  FMSC
underwrote  an initial  public  offering of the common  stock of Pacific  Health
Laboratories, Inc., and is currently a market maker in the stock.

     Barry D. Shapiro,  C.P.A. has been a director of the Company since December
6, 2000.  From October 2000 to the present,  Mr. Shapiro is a shareholder of the
accounting firm, Withum, Smith + Brown in its Red Bank office. Mr. Shapiro was a
partner of Shapiro & Weisman  C.P.A.'s P.A. from 1976 thru 1996 when he became a
partner of Rudolf, Cinnamon & Calafato, P.A. until joining Withum Smith + Brown.
Mr. Shapiro was previously  employed with the Internal Revenue Service from 1965
thru 1971, where he was responsible for audit, review and conference  functions.
Mr.  Shapiro  is a  member  of  the  New  Jersey  Society  of  Certified  Public
Accountants,  where he  currently  participates  on the IRS  Co-Op and State Tax
Committees.  Mr. Shapiro is a past Trustee,  Treasurer and Vice President of the
NJSCPA. He has been involved and is in many civic and community  activities,  as
well as  charitable  organizations,  including  the  Monmouth  County New Jersey
Chapter of the American  Cancer  Society and the Ronald  McDonald  House of Long
Branch,  New  Jersey.  Mr.  Shapiro  received a B.S.  in  accounting  from Rider
University in 1965.
<PAGE>

Significant Employees

     Dave M. McCoy, 39, has been director of retail sales since June 2000. Prior
to  that  he was an  affiliate  registered  representative  with  First  Montauk
Securities  Corp.  in the Boca Raton,  Florida  branch office since August 1992.
From October 1991 through August 1992, Mr. McCoy was a Manager at Chelsea Street
Securities,  and from October 1990 through October 1991, he was a trader/manager
in  Biltmore  Securities,  both in Boca  Raton,  FL. Mr.  McCoy  holds a General
Securities Agent and Principal licenses.

     Mark D. Lowe, 41, has been President of Montauk  Insurance  Services,  Inc.
since  October  1998.  From 1982 to 1998 Mr. Lowe was a Senior  Consultant  with
Congilose & Associates,  a financial services firm specializing in insurance and
estate  planning.  Mr. Lowe became a Certified  Financial  Planner (CFP) in July
1991. Mr. Lowe attended Ocean County College in Toms River,  NJ. Mr. Lowe is the
Treasurer of the Estate and Financial Planning Council of Central New Jersey.

Certain Reports

     No person  who,  during the fiscal  year ended  December  31,  2000,  was a
Director,  officer or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of  securities  of the Company  registered
under  Section  12 of  the  Securities  Exchange  Act of  1934  (the  "Act")  (a
"Reporting  Person")  failed  to file on a timely  basis,  reports  required  by
Section 16 of the Act during the most  recent  fiscal year or prior  years.  The
foregoing  is based  solely upon a review by the Company of Forms 3 and 4 during
the most recent  fiscal year as  furnished  to the Company  under Rule  16a-3(d)
under the Act, and Forms 5 and amendments  thereto furnished to the Company with
respect to its most recent fiscal year, and any  representation  received by the
Company from any reporting person that no Form 5 is required.

<PAGE>



Item 11. Executive Compensation

Summary of Cash and Certain Other Compensation

     The following table provides  certain  information  concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-K) compensation awarded
to,  earned by, paid or accrued by the Company  during the years ended  December
31, 2000, 1999 and 1998 to each of the named executive officers of the Company.

<TABLE>
<CAPTION>
<S>                           <C>       <C>            <C>                 <C>                   <C>

                                               SUMMARY COMPENSATION TABLE

                                        Annual Compensation                           Long Term
                                                                                    Compensation

                                                                                                 Securities
                                                                                                 Underlying
Name & Principal                                                           Other Annual          Options/ SARs
Position                      Year       Salary        Bonus               Compensation          Granted
----------------              ----       ------        -----               ------------          -------------

Herbert Kurinsky              2000      $256,217.78    $ 29,306.21        $   2,000 (4)           125,000(1)
 Chairman, Chief              1999      $232,925       $100,000           $     925(4)                0
 Executive Officer (7)        1998      $175,000       $ 0                $  10,096(4)            100,000(1)

William J. Kurinsky           2000      $256,217.78    $ 0                $  2,000  (5)           125,000(2)
Vice President,               1999      $232,925       $100,000           $  1,925(5)                   0
 Chief Operating and          1998      $175,000       $ 0                $ 10,221(5)             100,000(2)
 Financial Officer
 and Secretary (8)

Robert I. Rabinowitz          2000      $150,000       $24,234.64         $  2,000 (6)              60,000(3)
General Counsel, FMFC,        1999      $125,000       $25,000            $  1,200(6)                   0
 Chief Administrative         1998      $125,000       $15,000            $    295(6)              100,000(3)
 Officer, FMSC (9)

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

</TABLE>

     1) In 2000,  the  Compensation  Committee  of the Board of  Directors  (the
"Committee")  authorized  an option  grant to Mr.  Herbert  Kurinsky to purchase
125,000 shares of Common Stock at an exercise price of $2.00 per share. In 1998,
the Board of  Directors  authorized  a grant to  purchase  100,000  shares at an
exercise  prices of $1.9375 to Herbert  Kurinsky.  See  "Aggregated  Options/Sar
Exercises in Last Fiscal Year and Fy-End Option/Sar Values."

     2) In 2000,  the  Compensation  Committee  of the Board of  Directors  (the
"Committee")  authorized an option grant to Mr.  William J. Kurinsky to purchase
125,000 shares of Common Stock at an exercise price of $2.00 per share. In 1998,
the Board of  Directors  authorized  a grant to  purchase  100,000  shares at an
exercise  prices of $2.13 to William J. Kurinsky.  See  "Aggregated  Options/Sar
Exercises in Last Fiscal Year and Fy-End Option/Sar Values."
<PAGE>

     3) In 2000, the Board of Directors authorized an option grant to Mr. Robert
Rabinowitz  to purchase  60,000  shares of Common Stock at an exercise  price of
$2.00 per share. In 1998, the Board of Directors  authorized a grant to purchase
100,000  shares at an  exercise  prices of  $1.9375  to Robert  Rabinowitz.  See
"Aggregated  Options/Sar  Exercises  in Last Fiscal  Year and Fy-End  Option/Sar
Values."

     4) Includes (i) for 2000,  automobile  allowance  of $2000;  (ii) for 1999,
auto allowance of $925; (iii) for 1998, vacation pay of $10,096.

     5) Includes:  (i) for 2000,  automobile allowance of $2,000; (ii) for 1999,
auto allowance of $1928; (iii) for 1998, commissions of $125 and vacation pay of
$10,096.

     6) Includes (i) for 2000,  automobile  allowance of $2,000;  (ii) for 1999,
automobile allowance of $1200; (iii) for 1998, commissions of $295.

     7) Mr.  Herbert  Kurinsky is the  beneficial  owner of 51,518 shares of the
Company's  Common Stock as of December 31, 2000, which shares had a market value
of $36,578 as of that date,  without  giving  effect to the  diminution in value
attributable to the restriction on said shares.

     8) Mr. William  Kurinsky is the beneficial owner of 1,065,823 shares of the
Company's  Common Stock as of December 31, 2000, which shares had a market value
of $756,734 as of that date,  without  giving effect to the  diminution in value
attributable to the restriction on said shares.

     9) Mr. Robert I. Rabinowitz is the beneficial owner of 29,500 shares of the
Company's  Common Stock as of December 31, 2000, which shares had a market value
of $20,945 as of that date,  without  giving  effect to the  diminution in value
attributable to the restriction on said shares.

Compensation of Directors

     The  Company  pays  directors,  who are not  employees  of the  Company,  a
retainer of $250 per  meeting of the Board of  Directors  attended  and for each
meeting of a committee of the Board of Directors not held in conjunction  with a
Board of Directors  meeting.  Directors employed by the Company are not entitled
to any additional  compensation  as such.  During fiscal year 2000, the Board of
Directors met on four (4) occasions  and all directors  were present,  either in
person or by telephonic conference call.

Committees of the Board of Directors

     The Board of Directors has established an Audit Committee comprised of Ward
R. Jones,  David Portman and Barry Shapiro.  The Audit  Committee met on one (1)
occasion during fiscal year 2000. The Audit Committee  reviews (i) the Company's
audit functions,  (ii) the finances,  financial condition, and interim financial
statements  of the Company with  management,  and (iii),  the year end financial
statements of the Company with the Company's  independent  auditors.  Members of
the Audit Committee do not receive additional compensation for such service.

<PAGE>


                                   OPTION/SAR GRANTS IN LAST FISCAL YEAR

     The  following  table  contains  information  with  respect  to  the  named
executive officers concerning options granted during the year ended December 31,
2000.
<TABLE>
      <S>                   <C>           <C>             <C>         <C>


                                          INDIVIDUAL GRANTS

                            Number of     % of Total
                            Underlying    Granted to      Exercise
                            Options/SARs  Employees in    or Base     Expiration
      Name                  Granted(#)    Fiscal Year     Price ($Sh)     Date
      ----                  ------------  ------------    ----------- ----------

Herbert Kurinsky              125,000         6.3%           $2.00      3/27/05
William J. Kurinsky           125,000         6.3%           $2.00      3/27/05
Robert I. Rabinowitz           60,000           3%           $2.00      3/27/05

</TABLE>



<TABLE>
<CAPTION>
<S>                         <C>            <C>            <C>          <C>    <C>    <C>

                                              AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                                                         AND FY-END OPTION/SAR VALUES
                                                                                    Value of
                             Shares                 Number of                       Unexercised
                             Acquired               Unexercised                     In-the-money
                             on        Value        Options as of                   Options at
              Name           Exercise  Realized     December 31,2000                December 31, 2000(1)
              ----           --------  --------     ----------------                --------------------

                                                  Exercisable/Unexercisable     Exercisable/Unexercisable
     Herbert Kurinsky          --        $0              475,000/0                      $0/$0
     William J. Kurinsky       --        $0              500,000/0                      $0/$0
     Robert I. Rabinowitz      --        $0              328,750/0                      $0/$0

</TABLE>

     (1) Based  upon the  closing  bid price of the  Company's  Common  Stock on
December 31, 2000 ($.71 per share),  less the exercise  price for the  aggregate
number of shares subject to the options.
<PAGE>


Employment Agreements

     In  January  2000,  the  Company  entered  into new  three-year  employment
contracts  with Herbert  Kurinsky,  as  President  and William J.  Kurinsky,  as
Executive Vice  President.  The contracts  provide for base salaries of $256,218
for the first year of the  agreement  for each,  increasing  in each case at the
rate of 10% per year. Each will also be entitled to receive a portion of a bonus
pool consisting of 10% of the pre-tax  profits of the Company,  to be determined
by the executive management (e.g. Herbert Kurinsky and William J. Kurinsky). The
bonus pool would  require a minimum of $500,000  pretax profit per year in order
to become  effective.  Each is also entitled to receive  commissions at the same
rate as paid to other non-affiliate  registered  representatives of the Company.
They are also  entitled to  purchase  from FMSC,  up to 20% of all  underwriters
and/or  placement  agent  warrants or options which are granted to FMSC upon the
same  price,  terms  and  conditions  afforded  to  FMSC as the  underwriter  or
placement agent. Each employee also receives health insurance  benefits and life
insurance as generally  made  available  to regular  full-time  employees of the
Company,  and  reimbursement  for expenses incurred on behalf of the Company and
the use of an automobile,  or in the alternative,  an automobile allowance.  The
contracts also provide for severance  benefits equal to three times the previous
year's salary in the event either of the employees is terminated or their duties
significantly  changed after a change in management of the Company as defined in
the agreement.

Incentive Stock Option Plan

     In 1992,  the Company  adopted the 1992  Incentive  Stock  Option Plan (the
"1992 Plan") which provides for the grant of options to purchase up to 6,000,000
shares  of  the  Company's   Common  Stock  by  employees  of  the  Company  and
consultants.  Under the terms of the Plan,  options  granted  thereunder  may be
designated  as options  which  qualify  for  incentive  stock  option  treatment
("ISOs")  under  Section  422A of the Code,  or options  which do not so qualify
("Non-ISOs").

     The Plan is administered by the Board of Directors which has the discretion
to  determine  the eligible  employees  to whom,  and the times and the price at
which, options will be granted;  whether such options shall be ISOs or Non-ISOs;
the periods  during  which each option  will be  exercisable;  and the number of
shares  subject to each option.  The Board has full  authority to interpret  the
Plan and to establish and amend rules and regulations relating thereto.

     Under the Plan, the exercise price of an option  designated as an ISO shall
not be less  than the fair  market  value  of the  Common  Stock on the date the
option is  granted.  However,  in the event an  option  designated  as an ISO is
granted to a ten  percent  stockholder  (as  defined in the  Amended  Plan) such
exercise price shall be at least 110% of such fair market value. Exercise prices
of Non-ISO  options may be less than such fair market value.  The aggregate fair
market value of shares  subject to options  granted to a  participant  which are
designated as ISOs which become  exercisable in any calendar year may not exceed
$100,000.

     The Board may, in its sole discretion,  grant bonuses or authorize loans to
or guarantee  loans  obtained by an optionee to enable such  optionee to pay any
taxes that may arise in  connection  with the  exercise  or  cancellation  of an
option. Unless sooner terminated, the Plan will expire in 2002.

     In June 2000 at the Company's Annual Meeting of Shareholders,  a resolution
was passed  amending the  Incentive  Stock Option Plan to increase the number of
shares  reserved for issuance from 6,000,000 to 8,000,000.  To date,  options to
purchase a total of  6,504,998  shares of the  Company's  Common Stock have been
issued under the 1992 Plan.

Director Plan

     In September  1992, the Company  adopted the  Non-Executive  Director Stock
Option Plan (the "Director Plan").  The Director Plan provides for issuance of a
maximum of 1,000,000  shares of Common Stock upon the exercise of stock  options
granted  under the Director  Plan.  Options are granted  under the Director Plan
until 2002 to  non-executive  directors  who are not full time  employees of the
Company  or any of its  subsidiaries.  The  Director  Plan  provides  that  each
non-executive  director  will  automatically  be granted  an option to  purchase
20,000  shares each  September 1,  provided such person has served as a director
for the 12 months immediately prior to such September 1st.
<PAGE>

     The exercise  price for options  granted  under the Director  Plan shall be
100% of the fair market  value of the Common  Stock on the date of grant.  Until
otherwise  provided  in the Stock  Option  Plan the  exercise  price of  options
granted under the Director Plan must be paid at the time of exercise,  either in
cash, by delivery of shares of Common Stock of the Company or a  combination  of
both.  The term of each  option  commenced  on the date it is granted and unless
terminated sooner as provided in the Director Plan,  expires five years from the
date of grant.  The Director Plan is administered by a committee of the board of
directors  composed  of not fewer than three  persons  who are  officers  of the
Company (the  "Committee").  The Committee has no discretion to determine  which
non-executive  director will receive  options or the number of shares subject to
the option, the term of the option or the exercisability of the option. However,
the Committee will make all determinations of the interpretation of the Director
Plan.  Options  granted  under the Director Plan are not qualified for incentive
stock option treatment. To date, a total of 380,000 options have been granted to
the Company's Non-Executive members of the Board of Directors.

Senior Management Plan

     In 1996, the Company adopted the 1996 Senior Management Incentive Plan (the
"Management  Plan").  The  Management  Plan  provides  for the issuance of up to
2,000,000  shares of Common Stock either upon  issuance of options  issued under
the Plan or grants of restricted stock or incentive stock rights.  Awards may be
granted under the Management Plan to executive management employees by the Board
of Directors or a committee of the board,  if one is appointed for this purpose.
The Management Plan provides for four types of awards: stock options,  incentive
stock rights, stock appreciation rights ("SARs"),  and restricted stock purchase
agreements.  The stock options  granted under the Management  Plan can be either
ISOs or non-ISOs  similar to the options granted under the Employee Stock Option
Plan,  except that the exercise  price of non-ISOs shall not be less than 85% of
the fair market value of the Common Stock on the date of grant.  Incentive stock
rights consist of incentive stock units  equivalent to one share of Common Stock
in  consideration  for services  performed  for the Company.  If services of the
holder terminate prior to the incentive period,  the rights become null and void
unless termination is caused by death or disability.  Stock appreciation  rights
allow a Grantee to receive an amount in cash equal to the difference between the
fair market value of the stock and the exercise price, payable in cash or shares
of Common Stock.  The Board or committee  may grant  limited SARs,  which become
exercisable  upon a "change  of  control"  of the  Company.  A change of control
includes  the  purchase by any person of 25% or more of the voting  power of the
Company's  outstanding  securities,  or a change in the majority of the Board of
Directors.

     Awards  granted  under the  Management  Plan are also  entitled  to certain
acceleration  provisions that cause awards granted under the Plan to immediately
vest in the event of a change of control or sale of the  Company.  Awards  under
the Management Plan may be made until 2006.

     In June 2000 at the Company's Annual Meeting of Shareholders,  a resolution
was passed  amending  the Senior  Management  Stock  Option Plan to increase the
number of shares  reserved for issuance from  2,000,000 to  4,000,000.  To date,
options to purchase a total of 2,375,000  shares of the  Company's  Common Stock
have been issued under the Senior Management Plan.

<PAGE>

Item 12.          Security Ownership of Certain
                  Beneficial Owners and Management

     The  following  table  sets  forth,  as of April 12,  2001,  the number and
percentage  of  outstanding  shares of Common Stock  beneficially  owned by each
person known by the Company to own  beneficially  more than 5% of the  Company's
outstanding  shares of Common Stock and Common Stock Warrants,  by each director
of the Company, and by all directors and officers of the Company as a group.

Directors, Officers                    Amount and Percentage
and 5% Shareholders (1)                of Beneficial Ownership (1)
                                       Number of Shares              Percent

Herbert Kurinsky                           526,518(2)                  5.6
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

William J. Kurinsky                      1,925,823(3)                 19.8
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

Robert I. Rabinowitz, Esq.                 375,749(4)                  4.0
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

Ward R. Jones                              110,000(5)                  1.2
7 Leda Lane
Guilderland, NY 12084

Norma Doxey                                 74,900(6)                   *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

David I. Portman                           219,800(7)                  2.4
300 Ocean Avenue, Apt. 6A
Long Branch, NJ 07740

Barry Shapiro, C.P.A.                         0                       N/A
------------
------------


All Directors and                        3,232,790                    29.8
Officers as a group
(7 persons in number)

* Indicates less than 1%
_____________________
<PAGE>

     (1)  Unless  otherwise  indicated  below,  each  director,  officer  and 5%
shareholder has sole voting and sole investment power with respect to all shares
that he beneficially owns.

     (2)  Includes  vested and  presently  exercisable  options  of Mr.  Herbert
Kurinsky to purchase 475,000 shares of Common Stock.

     (3) Includes  vested and presently  exercisable  options of Mr.  William J.
Kurinsky  to  purchase  500,000  shares of Common  Stock,  and  120,000  Class A
Warrants, 120,000 Class B Warrants and 120,000 Class C Warrants.

     (4)  Includes  vested  and  presently  exercisable  options  of Mr.  Robert
Rabinowitz to purchase 328,750 shares of Common Stock; 50,000 of which are owned
by Mr. Rabinowitz's wife. Mr.  Rabinowitz's  children own 2,000 shares of Common
Stock. Mr.  Rabinowitz also owns 5,833 Class A Warrants,  5,833 Class B Warrants
and 5,833 Class C Warrants.

     (5) Includes vested and presently  exercisable options of Mr. Ward Jones to
purchase 100,000 shares of Common Stock.

     (6) Includes vested and presently exercisable options of Ms. Norma Doxey to
purchase 44,500 shares of Common Stock, and 18,000 non-vested stock options.

     (7) Includes vested and presently  exercisable options of Mr. David Portman
to purchase 100,000 shares of Common Stock. Mr. Portman also owns 16,600 Class A
Warrants, 16,600 Class B Warrants and 16,600 Class C Warrants.

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

     NOTE: All Class A Warrants are  exercisable at $3.00 per share for a period
of five (5) years from February 17, 1998.

     All Class B  Warrants  are  exercisable  at $5.00 per share for a period of
five (5) years from February 17, 1998.

     All Class C  Warrants  are  exercisable  at $7.00 per share for a period of
seven (7) years from February 17, 1998.


<PAGE>


Item 13.   Certain Relationships and Related Transactions

     For information  concerning the terms of the employment  agreements entered
into between the Company and Messrs.  Herbert  Kurinsky and William J. Kurinsky,
see "Executive Compensation".


<PAGE>

                                     PART IV


Item 14.          Exhibits, Financial Statements
                    and Reports on Form 8-K

(A)      1.   Financial Statements

     See Financial Statements Attached Hereto.

         2.   Exhibits

     Incorporated by reference to the Exhibit Index at the end of this report.

(B)      Reports on Form 8-K

     During the last quarter of the period covered by this Report, there were no
reports filed on Form 8-K.


<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            FIRST MONTAUK FINANCIAL CORP.

                                            By /s/ Herbert Kurinsky
                                               ---------------------------------
                                               Herbert Kurinsky, President
Dated:  April 12, 2001

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report has been signed below by the  following  persons on behalf of the Company
and in the capacities and on the dates indicated.

/s/ Herbert Kurinsky                                             April 12, 2001
-------------------------------
Herbert Kurinsky
President, Chief Executive
Officer and Director

/s/ William J. Kurinsky                                          April 12, 2001
--------------------------------
William J. Kurinsky
Vice-President, Chief Operating
and Chief Financial Officer, and
Principal Accounting Officer,
Secretary and Director

/s/ Norma Doxey
--------------------------------                                 April 12, 2001
Norma Doxey, Director


/s/ Ward R. Jones, Jr.
--------------------------------                                 April 12, 2001
Ward R. Jones, Jr., Director

/s/ David I. Portman
--------------------------------                                 April 12, 2001
David I. Portman, Director

/s/ Barry Shapiro
--------------------------------                                 April 12, 2001
Barry Shapiro, Director

<PAGE>

                                 EXHIBITS INDEX

     The exhibits  designated  with an asterisk (*) have  previously  been filed
with the Commission in connection with the Company's  Registration  Statement on
Form S-l,  File No.  33-24696,  those  designated  (**) have been filed with the
Company's  Form  10-KSB  for the fiscal  year ended  December  31,  1993,  those
designated  (***) have been  previously  filed with the  Company's  Registration
Statement on Form S-3,  File No.  33-65770,  and pursuant to 17 C.F.R.  Sections
201.24 and 240.12b-32,  are  incorporated  by reference to this document.  Those
designated (****) denotes exhibits which have been filed with the Company's Form
10-KSB for the fiscal year ended December 31, 1994.  Those  designated  (******)
denotes  exhibits which have been filed with the Company's Proxy Statement dated
May 30, 1996. Those designated  (*******) denotes exhibits which have been filed
with the  Company's  Form 10-KSB for the fiscal year ended  December  31,  1996.
Those  designated  (*******)  denotes  exhibits  which  have been filed with the
Company's Form 10-KSB for the fiscal year ended December 31, 1997,  (++) denotes
exhibits  filed with the Company's  Form 10-K for the fiscal year ended December
31, 1998. Those designated (+++) denotes exhibits which have been filed with the
Company's Proxy  Statement dated May 23, 2000 and are  incorporated by reference
herewith. Those designated (++++) denotes exhibits filed with herewith.

Exhibit No.                               Description

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

   3.2*           Amended and Restated By-Laws.

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

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

  10.17.1         First  Amendment  to Office Lease  Agreement  dated March 5,
                  1997 between  First  Montauk  Securities Corp. and River
                  Office Equities dated March 3, 1998 (previously filed under
                  28.8 in Form 10-K for the fiscal year ended December 31,
                  1998).

  10.18++         Employment Agreement between First Montauk Securities Corp.
                  and Mark Lowe dated October 15, 1998.

  10.19++         Employment Agreement between First Montauk Securities Corp.
                  and Seth Rosen dated January 25, 1999.

  10.20++++       Employment Agreement between First Montauk Financial Corp.
                  and Herbert Kurinsky dated January 1, 2000.

  10.21++++       Employment Agreement between First Montauk Financial Corp.
                  and William J. Kurinsky dated January 1, 2000.

  10.22++++       Clearing Agreement dated May 8, 2000 between Fiserv
                  Securities, Inc. and First Montauk Securities Corp.

  10.23++++       Financial Agreement dated May 8, 2000 between Fiserv
                  Securities, Inc. and First Montauk Securities Corp.

  10.24++++       Amended and Restated Financial Agreement dated February 1,
                  2001 between Fiserv Securities,  Inc., First Montauk Financial
                  Corp. and First Montauk Securities Corp.

  10.25++++       Security Agreement dated February 1, 2001 between Fiserv
                  Securities, Inc. and First Montauk Financial Corp.

  11++++          Computation of Earnings Per Share.

  27++++          Financial Data Schedule.

  28.1*           1992 Incentive Stock Option Plan.

  28.2*           1992 Non-Executive Director Stock Option Plan.

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

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

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

  28.6+++         Second Amended and Restated 1992 Incentive Stock Option Plan.

  28.7+++         1996 Senior Management Incentive Plan Amended as of June 23,
                  2000.



<PAGE>






                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Stockholders
First Montauk Financial Corp.

     We have  audited the  accompanying  consolidated  statements  of  financial
condition of First Montauk  Financial Corp. and  subsidiaries as of December 31,
2000 and 1999, and the related consolidated statements of income (loss), changes
in  stockholders'  equity,  and cash  flows for each of the  three  years in the
period ended December 31, 2000. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
First Montauk Financial Corp. and subsidiaries as of December 31, 2000 and 1999,
and the  consolidated  results of their operations and their cash flows for each
of the three years in the period  ended  December  31, 2000 in  conformity  with
accounting principles generally accepted in the United States of America.



                                                 Schneider & Associates LLP

Jericho, New York
March 19, 2001


<PAGE>
<TABLE>
<CAPTION>



                               FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<S>                                                                   <C>                      <C>
                                                                           December 31,
                                                                     2000                 1999
ASSETS
Cash and cash equivalents                                        $ 3,701,010         $   686,980
Due from clearing firms                                            2,405,666           6,462,346
Commissions receivable                                                39,200             345,996
Trading and investment account securities                          3,975,309           3,475,891
Employee and broker receivables                                    1,609,666             452,285
Global leases receivable                                             174,661             824,313
Notes receivable                                                      18,000             482,531
Due from officers                                                    175,068             132,754
Property and equipment - net                                       2,304,533           2,193,506
Deferred income taxes - net                                        1,721,262             664,256
Other assets                                                         788,688           1,338,326
                                                                  ----------          ----------
     Total assets                                                $16,913,063         $17,059,184
                                                                  ==========          ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deferred income                                                  $ 3,933,333         $    --
Securities sold, but not yet purchased, at market                    386,459             180,280
Notes payable                                                        559,179           1,477,428
Commissions payable                                                1,637,733           2,710,736
Accounts payable                                                     450,974             525,809
Accrued expenses                                                     840,578           1,072,552
Income taxes payable                                                 875,786             510,226
Other liabilities                                                    519,630             952,015
                                                                   ---------           ---------
     Total liabilities                                             9,203,672           7,429,046
                                                                   ---------           ---------
Temporary equity - stock subject to redemption                         6,500              36,500

Commitments and contingencies (See Notes)

STOCKHOLDERS' EQUITY
Preferred Stock, 4,375,000 shares authorized, $.10 par
     value, no shares issued and outstanding                            --                  --
Series A Convertible Preferred Stock, 625,000 shares
     authorized, $.10 par value, 349,511 shares
     issued and outstanding; liquidation
     preference:  $1,747,555                                          34,951              34,951
Common Stock, no par value, 30,000,000 shares
     authorized, 9,309,309 and 10,035,943 shares issued,
     8,822,409 and 9,855,443 shares outstanding, respectively      4,063,397           5,185,818
Additional paid-in capital                                         4,253,765           4,080,730
Retained earnings                                                    230,921           1,023,057
Less:  Deferred compensation                                        (393,120)           (508,294)
Less:  Treasury stock, at cost (486,900 and 180,500
     shares, respectively)                                          (487,023)           (222,624)
                                                                  ----------          ----------
     Total stockholders' equity                                    7,702,891           9,593,638
                                                                  ----------          ----------
     Total liabilities and stockholders' equity                  $16,913,063         $17,059,184
                                                                  ==========          ==========







                                  See notes to consolidated financial statements.

</TABLE>

<PAGE>


<TABLE>
<CAPTION>


                              FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<S>                                                     <C>              <C>              <C>

                                                                   Years ended December 31,
                                                            2000              1999         1998

Revenues:

Commissions                                             $46,529,771       $40,516,625     $30,741,404
Principal transactions                                    7,131,079        14,000,680       8,795,599
Investment banking                                        2,416,711           439,065         767,312
Interest and other income                                 3,252,325         2,628,246       1,572,063
                                                         ----------       -----------      ----------
                                                         59,329,886        57,584,616      41,876,378
                                                         ----------       -----------      ----------
Expenses:

Commissions, employee compensation
     and benefits                                        46,800,661       42,137,968       31,766,060
Clearing and floor brokerage                              4,003,345        4,109,961        3,674,859
Communications and occupancy                              2,731,681        2,697,433        2,557,313
Legal matters and related costs                           1,181,115        1,395,008        2,377,336
Write down of Notes Receivable - Global
 Financial Corp.                                            239,183          100,000        1,775,000
Loss on Global lease settlements                              --             600,416           99,899
Other operating expenses                                  4,862,158        3,545,308        2,862,075
Interest                                                    160,230          166,104          131,215
                                                         ----------       ----------       ----------
                                                         59,978,373       54,752,198       45,243,757
                                                         ----------       ----------       ----------
Income (loss) before income taxes                          (648,487)       2,832,418       (3,367,379)

Provision for income taxes (income tax benefit)               6,721          549,140         (604,532)
                                                         ----------       ----------       ----------
Income (loss) before extraordinary loss                    (655,208)       2,283,278       (2,762,847)
Extraordinary loss - extinguishment of debt,
     net of tax                                             (34,200)           --               --
                                                         ----------       ----------       ----------
Net income (loss)                                      $   (689,408)  $    2,283,278   $   (2,762,847)
                                                         ==========       ==========       ==========
Net income (loss) available to common stockholders     $   (792,136)  $    2,215,528   $   (2,762,847)
                                                         ==========       ==========       ==========

Per share of Common Stock:
     Basic:
     Before extraordinary loss                         $      (0.08)  $         0.22   $        (0.28)
     Extraordinary loss                                        --              --               --
                                                          ---------       ----------       ----------
     Net income (loss) available to common
      stockholders                                     $      (0.08)  $         0.22   $        (0.28)
                                                          =========       ==========       ==========
     Diluted:
     Before extraordinary loss                         $      (0.08)  $         0.21   $        (0.28)
     Extraordinary loss                                        --              --                --
                                                          ---------       ----------       ----------
     Net income (loss) available to common
      stockholders                                     $      (0.08)  $         0.21   $        (0.28)
                                                          =========       ==========       ==========
Weighted average common shares
     outstanding - basic                                  9,450,055        9,878,129        9,725,116
                                                          =========       ==========       ==========
Weighted average common and common
     equivalent shares outstanding - diluted              9,450,055       11,262,708        9,725,116
                                                          =========       ==========       ==========


                                  See notes to consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                      FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   FOR THE PERIOD FROM JANUARY 1, 1998 TO DECEMBER 31, 2000

<S>                                              <C>           <C>                    <C>         <C>        <C>



                                                                                   Series A Convertible     Additional
                                                      Common Stock                    Preferred Stock         Paid-in
                                                 Shares          Amount            Shares          Amount     Capital

Balances at January 1, 1998                      9,198,444     $4,334,173              --           --      $1,173,437

Proceeds from rights offering                           --             --              --           --       1,382,751
Registration costs                                      --             --              --           --        (236,317)
Exercise of stock options                          432,050        342,419              --           --              --
Exercise of common stock
 purchase warrants                                     999          4,995              --           --              --
Deferred compensation                                   --             --              --           --         544,179
Amortization of deferred
  compensation                                          --             --              --           --              --
Transfer from temporary equity                     170,000        299,390              --           --              --
Tax benefit related to exercise of
 stock options                                          --             --              --           --         115,781
Net loss for the year                                   --             --              --           --              --
                                                 ---------      ---------           --------    ---------    ---------
Balances at December 31, 1998                    9,801,493      4,980,977              --           --       2,979,831

Exercise of stock options                          234,450        204,841              --           --              --
Deferred compensation                                   --             --              --           --         122,925
Amortization of deferred
  compensation                                          --             --              --           --              --
Repurchase of common stock                              --             --              --           --              --
Issuance of common stock
  purchase warrants                                     --             --              --           --          27,382
Issuance of preferred stock                             --             --         349,511       34,951         950,592
Payment of dividends                                    --             --              --           --              --
Net income for the year                                 --             --              --          --               --
                                                ----------      ---------         -------       ------       ---------
Balances at December 31, 1999                   10,035,943      5,185,818         349,511       34,951       4,080,730


Exercise of stock options                           57,000         55,920              --           --              --
Transfer from temporary equity                      15,000         18,000              --           --              --
Deferred compensation                                   --             --              --           --         173,035
Amortization of deferred
   compensation                                         --             --              --           --              --
Repurchase of common stock                              --             --              --           --              --
Cancellation of treasury shares                   (798,634)    (1,196,341)             --           --              --
Payment of dividends                                    --             --              --           --              --
Net loss for the year                                   --             --              --           --              --
                                                 ---------      ---------         -------       ------       ---------
Balances at December 31, 2000                    9,309,309     $4,063,397         349,511      $34,951      $4,253,765
                                                 =========      =========         =======       ======       =========


                                                  See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                            FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                       FOR THE PERIOD FROM JANUARY 1, 1998 TO DECEMBER 31, 2000

<S>                                       <C>               <C>               <C>            <C>            <C>

                                            Retained
                                            Earnings
                                          (Accumulated        Deferred                 Treasury Stock       Stockholders'
                                            Deficit)        Compensation           Shares         Amount       Equity

Balances at January 1, 1998                $1,570,376          $(185,019)            --             --       $6,892,967

Proceeds from rights offering                      --                 --             --             --        1,382,751
Registration costs                                 --                 --             --             --         (236,317)
Exercise of stock options                          --                 --             --             --          342,419
Exercise of common stock
 purchase warrants                                 --                 --             --             --            4,995
Deferred compensation                              --           (544,179)            --             --               --
Amortization of deferred
  compensation                                     --            147,988             --             --          147,988
Transfer from temporary equity                     --                 --             --             --          299,390
Tax benefit related to exercise of
 stock options                                     --                 --             --             --          115,781
Net loss for the year                      (2,762,847)                --             --             --       (2,762,847)
                                            ---------            -------      ---------      ---------        ---------
Balances at December 31, 1998              (1,192,471)          (581,210)            --             --        6,187,127

Exercise of stock options                          --                 --             --             --          204,841
Deferred compensation                              --           (122,925)            --             --               --
Amortization of deferred
  compensation                                     --            195,841             --             --          195,841
Repurchase of common stock                         --                 --       (180,500)      (222,624)        (222,624)
Issuance of common stock
  purchase warrants                                --                 --             --             --           27,382
Issuance of preferred stock                        --                 --             --             --          985,543
Payment of dividends                          (67,750)                --             --             --          (67,750)
Net income for the year                     2,283,278                 --             --             --        2,283,278
                                            ---------            -------      ---------      ---------        ---------
Balances at December 31, 1999               1,023,057           (508,294)      (180,500)      (222,624)       9,593,638

Exercise of stock options                          --                 --             --             --           55,920
Transfer from temporary equity                     --                 --             --             --           18,000
Deferred compensation                              --           (173,035)            --             --               --
Amortization of deferred
   compensation                                    --            288,209             --             --          288,209
Repurchase of common stock                         --                 --     (1,105,034)    (1,460,740)      (1,460,740)
Cancellation of treasury shares                    --                 --        798,634      1,196,341               --
Payment of dividends                         (102,728)                --             --             --         (102,728)
Net loss for the year                        (689,408)                --             --             --         (689,408)
                                            ---------            -------      ---------      ---------        ---------
Balances at December 31, 2000             $   230,921          $(393,120)      (486,900)   $  (487,023)     $ 7,702,891
                                            =========            =======      =========      =========        =========

                                           See notes to consolidated financial statements.
</TABLE>




<PAGE>
<TABLE>
<CAPTION>

                                            FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
<S>                                                              <C>               <C>              <C>

                                                                             Years ended December 31,
                                                                     2000              1999            1998

Cash flows from operating activities:
     Net income (loss)                                           $  (689,408)     $ 2,283,278      $(2,762,847)
Adjustments to reconcile net income (loss) to
     net cash provided by (used in) operating activities:
     Common stock issued with guaranteed
      selling price                                                       --               --           30,000
     Tax benefit related to exercise of stock options                     --               --          115,781
     Depreciation and amortization                                   600,626          539,306          357,831
     Amortization of deferred compensation                           288,209          195,841          147,988
     Amortization of bond discount                                    31,736           10,988               --
     Loan reserves and write-offs                                    389,823          100,000        1,775,000
     Loss on Global lease settlements                                     --          377,667               --
     Other                                                           (1,448)               --          (15,086)
     Increase (decrease) in cash attributable to
      changes in assets and liabilities:
     Due from clearing firms                                       4,056,680       (3,586,144)        (168,420)
     Commissions receivable                                          306,796          (95,193)          (4,553)
     Trading and investment account securities                      (499,418)        (742,631)         924,244
     Employee and broker receivables                              (1,157,381)         145,927          328,983
     Due from officers                                               (42,314)          (1,253)          15,190
     Deferred income taxes - net                                  (1,057,006)          36,499         (664,787)
     Other assets                                                    344,209         (152,692)          22,224
     Deferred income                                                3,933,333              --               --
     Securities sold, but not yet purchased                          206,179         (146,767)        (482,476)
     Commissions payable                                          (1,073,003)       1,179,092          (92,672)
     Accounts payable                                                (74,835)        (276,689)         301,229
     Accrued expenses                                               (231,974)         167,398           70,564
     Income taxes payable                                            365,560          510,226               --
     Other liabilities                                              (363,337)         378,631           67,715
                                                                   ---------        ---------        ---------
         Total adjustments                                         6,022,435       (1,359,794)       2,728,755
         Net cash provided by (used in)                            ---------        ---------        ---------
          operating activities                                     5,333,027          923,484          (34,092)
                                                                   ---------        ---------        ---------
Cash flows from investing activities:
     Issuance of notes receivable                                         --         (207,000)      (2,091,704)
     Collection of notes receivable                                   74,708          102,197          777,029
     Payment for Global leases receivable                                 --          (12,532)              --
     Collection of Global leases receivable                          649,652          619,497               --
     Additions to property and equipment                            (722,205)        (658,342)        (986,315)
     Other assets                                                    (39,150)         (23,867)         109,344
                                                                   ---------        ---------        ---------
         Net cash used in investing activities                       (36,995)        (180,047)      (2,191,646)
                                                                   ---------        ---------        ---------
Cash flows from financing activities:
     Proceeds from notes payable                                          --               --          300,000
     Payments of notes payable                                      (896,364)        (227,943)        (145,925)
     Proceeds from capital lease financing                                --               --          304,068
     Repurchase of common stock                                   (1,460,740)        (222,624)              --
     Payments of capital leases payable                             (122,669)        (111,915)         (18,621)
     Payment of preferred stock dividends                           (102,728)         (67,750)              --
     Proceeds from rights offering                                        --               --        1,382,751
     Registration costs                                                   --               --         (120,320)
     Proceeds from exercise of stock
      options and warrants                                            55,920          204,841          347,415
     Other assets                                                    244,579         (244,579)              --
                                                                   ---------         --------        ---------
         Net cash provided by (used in)
         financing activities                                     (2,282,002)        (669,970)       2,049,368
                                                                   ---------         --------        ---------
Net increase (decrease) in cash and
     cash equivalents                                              3,014,030           73,467         (176,370)
Cash and cash equivalents at beginning of year                       686,980          613,513          789,883
                                                                   ---------         --------        ---------
Cash and cash equivalents at end of year                         $ 3,701,010       $  686,980      $   613,513
                                                                   =========         ========        =========



                                          See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                          FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             (continued)

<S>                                                              <C>               <C>              <C>

                                                                             Years ended December 31,
                                                                     2000              1999            1998

Supplemental disclosures of cash flow
information:
     Cash paid (refunded) during the period for:
         Interest                                               $    160,230    $     166,104      $   131,215
         Income taxes                                           $    725,800    $       5,232      $  (223,871)

Debt issued in exchange for Global leases
     receivable                                                 $         --    $     266,054      $   170,101

Preferred stock issued in exchange for
     Global leases receivable                                   $         --    $     985,543      $        --

Common stock purchase warrants issued in
     exchange for Global leases receivable                      $         --    $      27,382      $        --

Equipment financed under capital leases                         $         --    $          --      $    88,132

Transfer of temporary equity to permanent capital               $     18,000    $          --      $   299,390




















                                              See notes to consolidated financial statements.
</TABLE>
<PAGE>




NOTE 1 -        NATURE OF BUSINESS

     First Montauk  Financial  Corp.  (the  Company) is a holding  company whose
principal  subsidiary,  First  Montauk  Securities  Corp.  (FMSC),  is primarily
engaged in  securities  brokerage,  investment  banking and  trading.  FMSC is a
broker-dealer  registered  with the Securities  and Exchange  Commission and the
National  Association  of Securities  Dealers,  Inc.  Through FMSC,  the Company
executes principal and agency  transactions,  makes markets in  over-the-counter
securities, and performs underwriting and investment banking services. Customers
are located  throughout  the United States.  Montauk  Insurance  Services,  Inc.
(MISI)  sells a range  of  insurance  products.  Montauk  Advisors,  Inc.  (MAI)
previously sold investments in equipment  leases,  but is no longer active.  The
Company operates in one business segment.

     FMSC clears all customer transactions on a fully disclosed basis through an
independent clearing firm. Accordingly,  FMSC does not carry securities accounts
for  customers  nor  does  it  perform  custodial  functions  related  to  those
securities.


NOTE 2 -        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The consolidated  financial  statements include the accounts of the Company
and its  subsidiaries.  All  intercompany  accounts and  transactions  have been
eliminated in consolidation.

     Reclassification

     Certain  items  in  the  1998  and  1999  financial  statements  have  been
reclassified   to  conform   with  the  current   year's   presentation.   These
reclassifications are not material to the consolidated financial statements.

     Revenue Recognition

     Securities  transactions,   commission  income  and  related  expenses  are
recorded on a trade date basis.  Underwriting  fees are recorded at the time the
underwriting  is  completed  and the income is  reasonably  determinable.  Sales
concessions  from   participation  in  syndicated   offerings  are  recorded  on
settlement date.

     Securities  owned and securities sold but not yet repurchased are stated at
quoted  market  value with  unrealized  gains and losses  included in  earnings.
Investment  account  securities not readily  marketable are carried at estimated
fair value as determined by management with unrealized gains and losses included
in earnings.

     Advertising

     Advertising costs are expensed as incurred and totaled $348,000,  $398,000,
and $230,000 in 2000, 1999, and 1998, respectively.

     Depreciation and Amortization

     Furniture  and equipment  and  leasehold  improvements  are stated at cost.
Depreciation  of furniture and equipment and  amortization of capital leases are
computed  generally on a straight-line  basis over the estimated useful lives of
the  assets,  ranging  from  three  to  seven  years  or  terms  of the  leases,
respectively.  Leasehold  improvements  are amortized over the shorter of either
the asset's useful life or the related lease term.

     Cash Equivalents

     For purposes of the  Statement  of Cash Flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash equivalents.  Cash equivalents consist of money market
funds.
<PAGE>



     Net Income (Loss) per Share

     Basic  EPS  is  computed  by  dividing  net  income  or  net  loss  by  the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects  the  potential  dilution  from the  exercise  or  conversion  of other
securities  into common stock,  but only if dilutive.  The following  securities
have  been  excluded  from  the  dilutive  per  share  computation  as they  are
antidilutive:

                                               Years ended December 31,
                                          2000          1999           1998
                                          ----          ----           ----

     Stock options                     4,509,698         --         3,253,300
     Warrants                          9,242,338     9,242,338      9,217,338
     Convertible debt                    345,263         --           380,000
     Convertible preferred stock         699,022         --           699,022

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the reported  amounts of revenues and expenses  during the year.
Actual results could differ from those estimates.

     Long-lived assets

     In  accordance  with  SFAS  No.  121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed  of",  the Company
records  impairment losses on long-lived assets used in operations,  when events
and   circumstances   indicate  that  the  assets  might  be  impaired  and  the
undiscounted  cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets.

     Income Taxes

     The Company uses the  liability  method to determine its income tax expense
as required  under  Statement of Financial  Accounting  Standards  No. 109 (SFAS
109). Under SFAS 109,  deferred tax assets and liabilities are computed based on
differences between financial reporting and tax basis of assets and liabilities,
and are  measured  using the  enacted  tax rates and laws that will be in effect
when the differences are expected to reverse.

     Deferred tax assets are reduced by a valuation  allowance  if, based on the
weight of the  available  evidence,  it is more likely than not that all or some
portion  of  the  deferred  tax  assets  will  not  be  realized.  The  ultimate
realization  of the  deferred  tax asset  depends  on the  Company's  ability to
generate sufficient taxable income in the future.

     The Company and its  subsidiaries  file a  consolidated  federal income tax
return and separate state returns.

     Stock-based compensation

     The Company uses the intrinsic  value method to value stock options  issued
to  employees  and  directors,  as permitted  by SFAS No. 123,  "Accounting  for
Stock-Based Compensation". Stock options granted to nonemployees are recorded at
their  fair  value,  which is  measured  initially  at the grant  date using the
Black-Scholes  options  pricing model,  and recognized  over the related service
period. These options are periodically remeasured during the vesting period.

     Comprehensive Income

     In January  1998,  the  Company  adopted  SFAS No. 130,  which  establishes
requirements  for the  reporting  and  display of  comprehensive  income and its
components in a full set of general purpose financial statements.  Comprehensive
income is the total of net income and all other nonowner changes in equity.  The
Company  has no  comprehensive  income  components  to  report  for  any  period
presented.

        Accounting Pronouncements

     In June 1998 and June 2000, the FASB issued SFAS No. 133,  "Accounting  for
derivative instruments and hedging activities" and SFAS No. 138, "Accounting for
certain derivative  instrument and certain hedging activities." These statements
establish  accounting and reporting  standards  requiring that every  derivative
instrument  be  recorded on the  balance  sheet as either an asset or  liability
measured at its fair value.  SFAS No. 133 and 138 also  require  that changes in
the derivative's fair value be recognized  currently in earnings unless specific
hedge  accounting  criteria are met. The Company will adopt SFAS No. 133 and No.
138 in the first  quarter of fiscal 2001,  and does not expect that the adoption
of these new standards will have a material  impact on its earnings or financial
positions.

<PAGE>



NOTE 3 -        TRADING AND INVESTMENT SECURITIES

<TABLE>
<CAPTION>
<S>                                      <C>                  <C>                 <C>              <C>

                                                                          December 31,
                                                          2000                                 1999
                                                                 Sold but                            Sold but
                                                                  not yet                             not yet
                                                  Owned          Purchased              Owned        Purchased
                                                  -----          ---------              -----        ---------
Marketable:
   Municipal obligations                   $     5,995        $        --         $   73,310       $       --
   Stocks                                    3,490,353            110,113          2,922,437           97,204
   Corporate obligations                       191,362                --             346,420           80,952
   Options                                     163,867            276,346                 --               --
   Other                                        35,249                --               8,500            2,124
Nonmarketable securities                        88,483                 --            125,224               --
                                             ---------            -------          ---------          -------
                                            $3,975,309           $386,459         $3,475,891         $180,280
                                             =========            =======          =========          =======

</TABLE>

     Securities  owned,  and securities  sold, but not yet purchased  consist of
trading securities at quoted market values.  Nonmarketable securities consist of
investment  securities  recorded at estimated fair value that cannot be publicly
offered or sold unless  registration  has been effected under the Securities Act
of 1933.


NOTE 4 -        EMPLOYEE AND BROKER RECEIVABLES

                                                            December 31,
                                                       2000              1999

                Commission advances               $  251,512          $ 28,880
                Forgivable loans                     606,473            82,634
                Other loans                          751,681           340,771
                                                   ---------           -------
                                                  $1,609,666          $452,285

     The Company has an arrangement with certain  registered  representatives to
forgive their loans if they remain  licensed with the Company for an agreed upon
period of time,  generally  one to two  years,  and/or  if they  meet  specified
production  goals.  The loans are  being  amortized  to  expense  for  financial
reporting  purposes  over the term of the loan.  Loan  amortization  expense was
$129,986, $88,253 and $206,851 in 2000, 1999 and 1998, respectively.

     Other loans to  employees  and  registered  representatives  are payable in
installments  generally  over periods from one to two years with interest  rates
ranging from 0% to 8% per annum.
<PAGE>



NOTE 5 -        PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
               <S>                                                    <C>             <C>
                                                                              December 31,
                                                                          2000             1999

                Computer and office equipment                         $ 2,793,518      $ 2,359,275
                Furniture and fixtures                                  1,140,170          929,373
                Leasehold improvements                                    785,190          728,797
                                                                        ---------        ---------
                                                                        4,718,878        4,017,445
                Less:  Accumulated depreciation and amortization       (2,414,345)      (1,823,939)
                                                                        ---------        ---------
                                                                      $ 2,304,533      $ 2,193,506
                                                                        =========        =========

</TABLE>


     Depreciation expense was $600,626,  $539,306 and $357,831 in 2000, 1999 and
1998, respectively.


NOTE 6 -        NOTES RECEIVABLE
<TABLE>
<CAPTION>
               <S>                                                <C>             <C>
                                                                           December 31,
                                                                       2000           1999
                                                                      ----           ----

                a) Environmental Coupon Marketing, Inc. (ECM)     $    --         $149,640
                b) Global Financial Corp. (Global)                   18,000        332,891
                                                                     ------        -------
                                                                    $18,000       $482,531
                                                                     ======        =======

</TABLE>

     a) ECM is a  closely-held  marketer of  recycling  programs  to  retailers.
During  2000,  the  Company  wrote  off the ECM note  balance  after  evaluating
prospects for collection,  including a review of ECM's  financial  condition and
the note's default status.

     b) From 1997 through 1999, the Company  provided  working  capital loans of
approximately  $2.3 million to Global, an independent  company that packaged and
sold  lease  investments  through  MAI.  The MAI  loans are  evidenced  by notes
guaranteed by Global,  FCS, Global's  affiliated  equipment vendor,  and Biblio,
Inc.,  an  affiliate of FCS.  The notes are further  collateralized  by mortgage
liens on real estate owned by the shareholder of FCS and Biblio, a pledge of all
of the outstanding shares in Global, and various recorded liens on the assets of
FCS and Biblio.
<PAGE>



     During  1998,  the Company  undertook a full review of the Global  loans to
evaluate their collectability,  and determined that, based on various events and
circumstances,  including  the  insolvency  of  Global  and  FCS,  and  steadily
declining  collections on the lease portfolio  serviced by Global,  the loans to
Global were impaired.  Accordingly,  the Company  recorded an impairment loss of
$1,775,000 in its financial  statements  for 1998,  and increased the reserve by
$100,000 in 1999 after further review.  During 2000, the Company applied $75,000
from a property sale to the note, and recorded an additional  impairment  charge
of $239,000 due to  uncertainty as to the timing and the amount of proceeds that
might be realized from future asset sales. The balance of the note ($18,000) was
subsequently collected.

NOTE 7 -        DUE FROM OFFICERS

     Advances to officers are unsecured and currently  bear interest at the rate
of 6% per annum. These loans are due on demand.

NOTE 8 -         NEW CLEARING/FINANCIAL AGREEMENTS

     In May 2000,  FMSC entered into a 10-year  clearing  agreement  with Fiserv
Securities,  Inc.  ("Fiserv")  under  which  Fiserv  will act as FMSC's  primary
clearing  broker.  In connection with the clearing  agreement,  the parties also
entered into a financial  agreement  under which Fiserv agreed to provide a cash
advance  of  $4,000,000  (the  "initial  payment")  to  FMSC  upon  the  date of
conversion of customer accounts to Fiserv.  The conversion  occurred in November
2000, at which time the advance was paid. For financial reporting purposes,  the
Company  will earn the  advance  on a  straight-line  basis over the term of the
clearing agreement.  Amortization can be accelerated based on performance.  FMSC
is obligated to repay any unearned  portion of the initial  payment in the event
it fails to  achieve  certain  minimum  performance  criteria  by the end of the
agreement,  or terminates  the agreement  under certain  circumstances  prior to
expiration. FMSC could also be subject to monetary penalties for nonperformance.

     Fiserv has agreed to provide  additional  advances  to FMSC in the  second,
third and fourth years of the clearing agreement under conditions similar to the
initial  payment,  provided FMSC meets certain  performance  and other criteria.
These advances,  if received,  will also be amortized to income as earned during
the term of the clearing agreement.

     Subsequent to December 31, 2000,  the Company and FMSC amended and restated
the financial agreement with Fiserv (see Note 22).


NOTE 9 -        NOTES PAYABLE
<TABLE>
<CAPTION>
               <S>                                                                 <C>             <C>
                                                                                           December 31,
                                                                                      2000             1999
                                                                                     ----             ----

                a)    Notes payable - bank                                        $  52,994        $  148,919
                b)    10% convertible promissory notes payable                           --           570,000
                c)    Convertible promissory notes, net of discount                 406,185           608,509
                d)    Subordinated notes payable                                    100,000           150,000
                                                                                    -------         ---------
                                                                                   $559,179        $1,477,428

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

</TABLE>

<PAGE>

     a) Term loans  bearing  interest  at the prime rate (9.5% at  December  31,
2000); payable in monthly installments of $7,994, plus interest;  collateralized
by equipment.

     b) Notes in the aggregate  amount of $570,000 issued to a private  investor
and his affiliated  entities in connection  with a Global lease  settlement (see
Note 10); interest was payable semiannually at 10% per annum.  Principal was due
in October 2003.  The notes were  callable at the  Company's  option upon thirty
days' written notice at a redemption price of 105% of outstanding principal plus
accrued  interest.  The noteholder had the right to convert the notes into up to
380,000  shares of the  Company's  common stock based on a  conversion  price of
$1.50 per share.  During  2000,  the Company  redeemed the loans for 110% of the
note  principal,  and recorded an  extraordinary  loss of $57,000  before income
taxes from the early extinguishment.

     c) Notes in the  original  aggregate  amount of $690,526  issued to private
investors in connection with a Global lease  settlement (see Note 10). The notes
are payable in thirty-six monthly  non-interest bearing installments of $16,404,
plus balloon payments of $112,000,  which include interest of $12,000 calculated
on the basis of 8% of the balloon amount beginning in month nineteen of the note
term. The Company has recorded a loan discount on the notes of $64,609, which is
being  amortized  over the note terms using the interest  method.  The notes are
convertible  into 345,263 common shares of the Company's common stock based on a
conversion  price of $2.00.  Once the  underlying  shares  are  registered,  the
Company can request that the noteholders convert their shares. Proceeds from the
sale of the shares must be applied  towards the unpaid  principal  of the notes.
Any excess proceeds or unsold shares will be returned to the Company.

     d) Notes payable in annual  installments of $50,000 plus interest at 8% per
annum.  The notes are  subordinated  to the claims of FMSC's  general  creditors
under a subordination agreement approved by the NASD.

     Aggregate annual maturities of long-term debt are as follows:

          2001                          $281,803
          2002                           277,376
                                         -------
                                        $559,179
                                         =======


NOTE 10 -        ACCRUED EXPENSES

                Accrued expenses consist of the following:

                                                          December 31,
                                                     2000           1999
                                                     ----           ----

                Reserves for legal matters      $     --       $  595,476
                Other                              840,578        477,076
                                                   -------        -------
                                                  $840,578     $1,072,552

     In 1999, the Company  established an allowance of $595,476 to absorb losses
from  customer  claims and other legal  matters that were  probable and could be
reasonably estimated.


NOTE 11 -       GLOBAL LEASE SETTLEMENTS

     During 1998 and 1999, the Company entered into  settlement  agreements with
various  Global  lease  investors.  In 1998,  the  Company  issued  a series  of
convertible  promissory  notes  aggregating  $570,000  to a  lease  investor  in
consideration  of  $300,000  in cash  and the  assignment  of his  Global  lease
investments  (see Note 8).  In 1999,  the  Company  exchanged  $235,282  in cash
payments,   25,000  common  stock  purchase  warrants  valued  at  $27,382,  and
convertible note principal of $690,526 (see Note 8) for the assignment of Global
leases. The difference between the cash, debt and warrant  consideration  issued
by the Company,  and the present value of the lease receivables  assigned in the
exchange was  accounted for as a charge to operations of $600,416 and $99,899 in
1999 and 1998, respectively.

     Also in 1999,  the  Company  completed  a private  offering of its Series A
Convertible  Preferred  Stock  (see Note 17 for  rights  and  privileges  of the
preferred shares). Under terms of the offering,  each Global lease investor that
subscribed to the offering received one share of Preferred Stock in exchange for
every $5.00 of lease  investment value that the investor was entitled to receive
from Global after  certain  adjustments.  The Company  issued a total of 349,511
preferred shares,  which have been valued at $985,543,  the present value of the
lease receivables assigned in the offering.
<PAGE>



NOTE 12 -       INCOME TAXES

     The  provision  for income  taxes  (income  tax  benefit)  consists  of the
following:
<TABLE>
<CAPTION>
                <S>                                             <C>              <C>           <C>

                                                                                 December 31,
                                                                      2000          1999               1998
                                                                      ----          ----               ----
                Currently payable:
                      Federal                                   $   838,225      $ 301,058       $        --
                      State                                         225,502        211,583            60,255
                                                                  ---------        -------           -------
                                                                  1,063,727        512,641            60,255
                                                                  ---------        -------           -------
                Deferred:
                      Federal                                      (817,223)        138,673         (727,531)
                      State                                        (239,783)       (102,174)          62,744
                                                                  ---------         -------          -------
                                                                 (1,057,006)         36,499         (664,787)
                                                                  ---------         -------          -------
                                                               $      6,721       $ 549,140      $  (604,532)
                                                                  =========         =======         ========
</TABLE>

     Following is a  reconciliation  of the income tax provision  (benefit) with
income taxes based on the federal statutory rate:
<TABLE>
<CAPTION>
                 <S>                                             <C>              <C>            <C>

                                                                                 December 31,
                                                                    2000            1999               1998
                                                                    ----            ----               ----

                Expected federal tax at statutory rate            $(220,319)      $ 963,421      $(1,144,909)
                Non-deductible expenses                              32,219          20,998           11,456
                State taxes, net of federal tax effect              (44,355)        172,956         (200,021)
                Other                                                  --           (66,395)          (2,527)
                Change in valuation allowance                       239,176        (541,840)         731,469
                                                                   --------         -------        ---------
                                                                  $   6,721       $ 549,140      $  (604,532)
                                                                   ========         =======        =========
</TABLE>


     The tax effects of the temporary  differences that give rise to significant
portions of the deferred tax assets and  liabilities as of December 31, 2000 and
1999 are:

                                                           December 31,
                                                       2000            1999
                                                       ----            ----
                Deferred tax assets:
                      Deferred income            $1,573,333        $      --
                      Accrued expenses               75,188          500,936
                      Tax loss carryforwards        180,986          189,629
                      Stock-based compensation      247,819          146,272
                      Other                          72,741           33,993
                                                  ---------          -------
                                                  2,150,067          870,830
                                                  ---------          -------

                Deferred tax liabilities:
                      Property and equipment          --              14,855
                      Other                           --               2,090
                                                  ---------          -------
                                                      --              16,945
                                                  ---------          -------
                                                      --             853,885
                Valuation allowance               (428,805)         (189,629)
                                                  --------           -------
                Net deferred tax assets         $1,721,262         $ 664,256
                                                 =========           =======

     The  Company  has  recorded  valuation  allowances  to offset tax  benefits
arising from state tax loss carryforwards and stock-based  compensation  because
their realization is uncertain.
<PAGE>



NOTE 13 -       COMMITMENTS AND CONTINGENT LIABILITIES

     Leases

     The Company leases office  facilities and equipment under operating  leases
expiring at various dates through 2005. The lease for the Company's headquarters
has a six-year  renewal  option  through 2011. The Company has also entered into
various agreements classified as capital leases.

     Future minimum lease payments as of December 31, 2000 are as follows:

                                                 Capital        Operating
                                                 Leases           Leases
                                                 -------        ---------

            2001                                $146,986       $  828,003
            2002                                   --             773,173
            2003                                   --             666,150
            2004                                   --             641,071
            2005                                   --              53,333
                                                 -------          -------
       Total minimum lease payments              146,986       $2,961,730
       Less:  Amount representing interest on                   =========
              capital leases                       7,991
                                                 -------
        Present value of minimum lease
         payments                               $138,995
                                                 =======

     Operating lease expense for 2000, 1999 and 1998 totaled $955,866,  $947,732
and $857,715, respectively.

     Employment agreements

     In January 2000, the Company  entered into new employment  agreements  with
its president and vice-president. The agreements run for three years and provide
for 10% annual increases in base salaries,  and customary  fringe benefits.  The
officers  will also be entitled to share in a bonus pool equal to 10% of the net
pre-tax profit of the Company, as defined.

     Legal matters

     FMSC  is a  respondent  in a  customer  arbitration  seeking  rescissionary
damages of approximately $19 million plus punitive damages. The claimant alleges
violations of various  provisions of federal and state securities laws. FMSC has
filed its answer to the claims and is vigorously  defending the action.  FMSC is
also a defendant or co-defendant in various other legal  proceedings  incidental
to its securities  business.  The Company is contesting the allegations of these
claims and believes that there are meritorious defenses in each case. In view of
the inherent  difficulty of predicting the outcome of litigation,  management is
unable to derive a meaningful  estimate of the amount or range of possible  loss
that may arise out of pending legal  proceedings in any particular  quarterly or
annual period,  or in the aggregate.  However,  it is possible that the ultimate
outcome of these matters could have a material  adverse  impact on the Company's
financial condition,  results of operations,  and cash flows. As of December 31,
2000,  the Company has not  established  a loss  provision  in the  accompanying
financial statements for any liability that may result from these contingencies.

     In December  1999,  the Company agreed to accept a $500,000 cash payment in
settlement  of an  arbitration  against  another  securities  firm.  The Company
commenced the arbitration in an effort to recover  customer  settlements that it
had previously paid on claims arising from the activities of a former  affiliate
office.

     Income tax audits

     The Internal  Revenue Service is currently  conducting a field audit of the
Company's  federal income tax returns for the years 1995 through 1998.  Based on
discussions with its representatives,  management does not expect the outcome of
these audits to have a material impact on the Company's financial statements.

NOTE 14 -       FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK and
                CONCENTRATIONS OF CREDIT RISK

     The Company executes securities transactions on behalf of its customers. If
either the customer or a counter-party fail to perform, the Company by agreement
with its clearing  broker may be required to discharge  the  obligations  of the
non-performing  party. In such circumstances,  the Company may sustain a loss if
the market  value of the security is  different  from the contract  value of the
transaction.

<PAGE>

     The  Company  seeks to control  off-balance-sheet  risk by  monitoring  the
market  value of  securities  held or given as  collateral  in  compliance  with
regulatory and internal guidelines.  Pursuant to such guidelines,  the Company's
clearing firm  requires  additional  collateral or reduction of positions,  when
necessary.  The Company also completes credit evaluations where there is thought
to be credit risk.

     The Company has sold  securities  that it does not  currently  own and will
therefore be required to purchase such  securities at a future date. The Company
has recorded these  obligations in the financial  statements at market values of
the related  securities  ($386,459  and  $180,280 at December 31, 2000 and 1999,
respectively)  and  will  incur a loss if the  market  value  of the  securities
increases subsequent to year-end.

     Financial  instruments that potentially  subject the Company to significant
concentrations  of  credit  risk  consist  principally  of cash  and  securities
inventories.  The Company  maintains all  inventory  positions and a significant
portion  of  its  cash  balances  at  its  clearing  firm.  Asset  balances  may
periodically exceed insurance coverage.

NOTE 15 -       DEFINED CONTRIBUTION PLAN

     The Company sponsors a defined  contribution pension plan [401(k)] covering
all participating  employees.  The Company may elect to contribute up to 100% of
each participant's  annual contribution to the plan. Employer  contributions for
2000, 1999 and 1998 were $-0-, $74,132 and $38,077, respectively.

NOTE 16 -       TEMPORARY EQUITY - STOCK SUBJECT TO REDEMPTION

     From time to time, the Company has issued unregistered shares of its Common
Stock in settlement of various  customer claims and invoices for legal services.
With  respect to these  shares,  the Company  provides a guarantee to pay to the
selling stockholder the difference between a target price and the actual selling
price of the shares upon expiration of the statutory holding period. The holders
of the shares may elect to retain the shares  once the  holding  period  lapses.
Such an election  will  release the Company from any further  obligation  to the
stockholders.

     The  Company  has  established  a  temporary  equity  account to record its
maximum  liability from the  guarantees.  Payment of any shortfall is charged to
this account. Any balance remaining at the end of the respective holding periods
is credited to  permanent  capital.  Following is a schedule of activity in this
account for the year ended  December  31,  2000  (there was no  activity  during
1999):

                                                   Shares            Amount
                                                   ------            ------

                Balances, December 31, 1999        18,000         $ 36,500
                Payments                             --            (12,000)
                Transfer to permanent capital     (15,000)         (18,000)
                                                   ------           ------

                Balances, December 31, 2000         3,000         $  6,500
                                                   ======           ======

NOTE 17 -       STOCK OPTION PLANS

     The Company  currently has three option plans in place:  The 1992 Incentive
Stock  Option Plan (the "1992  Plan"),  the 1992  Non-Executive  Director  Stock
Option Plan (the "Director Plan"), and the 1996 Senior Management Incentive Plan
(the "1996 Plan").

     In June 2000, the Company's  stockholders approved an amendment to the 1992
Plan to increase the number of shares  reserved for issuance  from  6,000,000 to
8,000,000  shares.  Under the 1992 Plan,  options  may be granted to  employees,
consultants  and  registered  representatives  of the Company,  but only options
issued to employees will qualify for incentive  stock option  treatment  (ISOs).
The exercise  price of an option  designated  as an ISO may not be less than the
fair  market  value of the  Common  Stock on the date of  grant.  However,  ISOs
granted to a ten percent  stockholder  must have an  exercise  price of at least
110% of such fair market value.  At the time an option is granted,  the Board of
Directors  will fix the period within which it may be  exercised.  Such exercise
period  may not be less than one year nor more  than ten years  from the date of
grant. The 1992 plan will expire in May 2002.
<PAGE>



     The Company has reserved  1,000,000 shares of its Common Stock for issuance
under the Director Plan.  Options to purchase  20,000 shares of Common Stock are
granted to each Non-Executive  Director on August 1 of each year,  provided such
individual  has  continually   served  as  a  Non-Executive   Director  for  the
twelve-month  period  immediately  preceding the date of grant. The options will
expire in five years from the date of grant.  The exercise price of such options
shall be equal to the fair market  value of the  Company's  Common  Stock on the
date of grant. The Director Plan will terminate in May 2002.

     In June 2000, the Company's  stockholders approved an amendment to the 1996
Plan to increase the number of shares  reserved  for issuance to key  management
employees from 2,000,000 to 4,000,000 shares.  Awards can be granted through the
issuance of incentive stock rights,  stock options,  stock appreciation  rights,
limited stock  appreciation  rights,  and shares of restricted Common Stock. The
exercise  price of an option  designated  as an ISO may in no event be less than
100% of the then  fair  market  price of the stock  (110%  with  respect  to ten
percent  stockholders),  and not less than 85% of the fair  market  price in the
case of other options. The 1996 Plan will terminate in June 2006.

     A summary of the  activity  in the  Company's  stock  option  plans for the
three-year period ended December 31, 2000 is presented below:


                                                               Weighted Average
                                                                  Exercise
                                                  Shares           Prices
                                                  ------           ------

     Options outstanding, December 31, 1997       2,624,100       $1.34
        Granted                                   1,442,500        1.99
        Canceled                                  (381,250)        2.17
        Exercised                                 (432,040)         .79


     Options outstanding,  December 31, 1998     3,253,300         1.61
        Granted                                    710,000         2.01
        Canceled                                  (209,150)        2.45
        Exercised                                 (234,450)         .91


     Options outstanding, December 31, 1999      3,519,700         1.68
        Granted                                  2,014,498         1.87
        Canceled                                  (967,500)        1.37
        Exercised                                  (57,000)         .98


     Options outstanding, December 31, 2000      4,509,698        $1.84



     Additional  information  with respect to options under the Company's option
plans is as follows:


           Shares of common stock available
            for future grant                                        6,582,702
           Weighted-average grant date fair value of options
            granted during each year using the Black-Scholes
            option pricing model
                  1998                                                   $.71
                  1999                                                   $.70
                  2000                                                   $.49

     Compensation  is recognized in the financial  statements  only for the fair
value of options issued to consultants and affiliate brokers.  Such compensation
is amortized to expense over the related options' vesting periods.  Compensation
expense  recognized  in 2000,  1999  and 1998  totaled  $288,209,  $195,840  and
$147,988, respectively.

<PAGE>



     Pro forma net income  (loss) and EPS  information,  as required by SFAS No.
123, have been  determined  as if the Company had  accounted for employee  stock
options  under  the fair  value  method.  The fair  value of these  options  was
estimated  at grant date using a  Black-Scholes  option  pricing  model with the
following weighted-average assumptions for 2000, 1999 and 1998:
<TABLE>
<CAPTION>
                <S>                                               <C>            <C>                <C>

                                                                       2000           1999               1998
                                                                       ----           ----               ----

                Risk free interest rates                              6.07%          5.76%              5.03%
                Expected option lives                             2.4 years      2.5 years          2.4 years
                Expected volatilities                                   72%          48.5%              46.5%
                Expected dividend yields                                 0%             0%                 0%

                The Company's pro forma information follows:

                Net income (loss)                                   2000            1999               1998
                                                                    ----            ----               ----

                As reported                                    $  (689,408)     $2,283,278       $(2,762,847)
                Pro forma                                       (1,152,958)      2,109,706        (3,292,291)

                Basic income (loss) per share
                      As reported                                    $(.08)           $.22             $(.28)
                      Pro forma                                      $(.13)           $.21             $(.34)

                Diluted income (loss) per share
                      As reported                                    $(.08)           $.21             $(.28)
                      Pro forma                                      $(.13)           $.19             $(.34)
</TABLE>

     The full impact of calculating compensation expense for stock options under
SFAS No. 123 is not  reflected  in pro forma net income,  since such  expense is
amortized over the vesting period of those options as they vest.

     Additional  information  as of  December  31,  2000  with  respect  to  all
outstanding options is as follows:

<TABLE>
<CAPTION>
            <S>                   <C>                <C>              <C>              <C>             <C>

                                             Options Outstanding                         Options Exercisable
                                                    Weighted
                                                     Average       Weighted                           Weighted
                                                    Remaining       Average                            Average
                                    Number         Contractual     Exercise            Number         Exercise
             Range of prices      Outstanding         Life           Price           Exercisable        Price
             ---------------      -----------         ----           -----           -----------      --------

             $.75 -  1.09            520,000          2.03  years     $1.02             423,400         $1.04
              1.20 - 1.80          1,282,698          3.11             1.52             634,160          1.49
              1.94 - 2.75          2,707,000          3.53             2.16           1,467,400          2.17


                                   4,509,698          3.24            $1.84           2,524,960         $1.81
</TABLE>

NOTE 18 -       STOCKHOLDERS' EQUITY

     Rights offering

     In February  1998,  the Company  completed an offering of 3,072,779  Units,
each Unit  consisting of one Class A Redeemable  Common Stock Purchase  Warrant,
one Class B Redeemable Common Stock Purchase Warrant, and one Class C Redeemable
Common Stock Purchase Warrant.  The Warrants have the following  exercise prices
and terms:

                          Exercise Price                 Exercise Period
   Warrant                   Per Share                from Date of Issuance
   -------                --------------              ---------------------

   Class A                   $3.00                 Three years (see below)
   Class B                    5.00                       Five years
   Class C                    7.00                       Seven years

     Each  shareholder  of record as of December 15, 1997 received  three rights
for each share of Common  Stock held as of the record  date,  with three  rights
required  to  subscribe  for a  single  Unit at a price of $.45  per  Unit.  The
offering raised gross proceeds of $1,382,750 before deducting registration costs
of approximately  $236,000.  There are currently  3,072,446 Class A, Class B and
Class C warrants outstanding, respectively.
<PAGE>



     In December  2000,  the  Company's  board of directors  approved a two-year
extension of the Class A Warrants to February 17, 2003.

     Preferred Stock

     In 1999, the Company's board of directors  authorized the issuance of up to
625,000  shares of a Series A  Convertible  Preferred  Stock with the  following
features:

     Par value:               $.10 per share
     Dividends:               6% payable quarterly at the rate of $.075 per
                              share until conversion
     Voting rights:           None
     Liquidation preference:  $5.00 per share
     Conversion:              Automatic  conversion  into two shares of Common
                              Stock at $2.50 per share once the closing price
                              for the Common  Stock is $3.50 or above for 20
                              consecutive trading days, and the shares are
                              registered for public sale.

     During  1999,  the  Company  issued  349,511  Series A shares  in a private
exchange  offering  to Global  lease  investors  (see Note 10).  The shares were
valued at  $985,543,  the present  value of the lease  payments  assigned to the
Company in the exchange.

     The Company is presently authorized to issue 4,375,000 shares of Preferred
Stock,  none of which has been  issued at  December  31,  2000.  The  rights and
preferences, if any, to be given to these preferred shares will be determined at
the time of issuance.

     Stock Repurchase Program

     On  August  5,  1999,  the  Company's  board of  directors  authorized  the
repurchase of an unspecified number of the Company's  outstanding common shares.
During 1999, the Company repurchased  180,500 shares for $222,624.  During 2000,
the Company repurchased 1,105,034 shares for $1,460,740.

     Warrants

     During 1999, the Company  issued 25,000 common stock  purchase  warrants in
connection with a Global lease settlement. The warrants are exercisable at $1.75
per share for a five-year  period.  The Company  valued the  warrants at $27,382
using the Black-Scholes option pricing model.

NOTE 19 -       FAIR VALUE OF FINANCIAL INSTRUMENTS

     Substantially  all of the Company's  financial  instruments at December 31,
1999 and 2000, consisting primarily of marketable equity securities, amounts due
from FMSC's  clearing  firms,  and notes payable are carried at, or  approximate
fair value due to their short-term nature, the use of mark-to-market  accounting
for marketable securities,  or in the case of notes payable,  because they carry
market rates of interest,  or rates that management  estimates are comparable to
those   available  for  issuance  of  debt  with  similar  terms  and  remaining
maturities.

NOTE 20 -       NET CAPITAL REQUIREMENTS

     FMSC is subject to the  Securities  and  Exchange  Commission  Uniform  Net
Capital Rule (Rule 15c3-1), which requires FMSC to maintain minimum net capital,
as defined. At December 31, 2000, FMSC had net capital of $1,193,770,  which was
$682,041 in excess of its  required  net capital of  $511,729.  FMSC's  ratio of
aggregate indebtedness to net capital was 6.43 to 1.

<PAGE>



NOTE 21 - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<S>                                                <C>           <C>           <C>          <C>                 <C>

                                                                        Additions
                                                   Balance at    Charged to    Charged to                       Balance at
                                                   beginning     costs and     other                            end
                                                   of period     expenses      accounts     Deductions          of period
                                                   ----------    ----------    ----------   ----------          ---------
Valuation allowance for deferred tax assets:
     Year ended December 31, 2000                  $189,629      $  239,176   $   --        $      --           $   428,805
     Year ended December 31, 1999                   731,469           --          --            (541,840)           189,629
     Year ended December 31, 1998                      --           731,469       --               --               731,469
Reserve for notes receivable:
     Year ended December 31, 2000                   $  --         $ 239,000   $   --        $   (239,000) (a)   $     --
     Year ended December 31, 1999                      --           100,000       --          (1,875,000) (a)         --
     Year ended December 31, 1998                      --         1,775,000       --               --             1,775,000

(a) Amounts determined not to be collectible.

</TABLE>


NOTE 22 -        UNAUDITED QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
<S>                                          <C>               <C>             <C>                <C>

                                               March 31,        June 30,       September 30,       December 31,
                                                 2000             2000             2000                2000
                                                 ----             ----             ----                ----
Revenues                                      $24,486,906      $13,346,260     $12,671,033        $ 8,825,687
Income (loss) before extraordinary loss         1,888,320          143,847        (390,173)        (2,297,202)
Net income (loss) available to
   common stockholders                          1,862,781           84,107        (414,876)        (2,324,148)

Income (loss) per common share:
   Basic:
      Income (loss) before extraordinary
        loss                                          .19              .01            (.04)              (.25)
      Net income (loss) available
        to common stockholders                        .19              .01            (.04)              (.25)

   Diluted:
      Income (loss) before extraordinary
        loss                                          .17              .01            (.04)              (.25)
      Net income (loss) available
        to common stockholders                        .17              .01            (.04)              (.25)


                                               March 31,        June 30,       September 30,       December 31,
                                                 1999             1999             1999                1999
                                                 ---              ----             ----                ----
Revenues                                      $12,521,300      $15,068,415      $12,146,742        $17,848,159
Net income available to common
   stockholders                                   647,969          709,069           56,955            801,535

Income per common share:

   Net income available to common
      stockholders - basic                            .07              .07              .01                .08
   Net income available to common
      stockholders - diluted                          .06              .07              .01                .07
</TABLE>


NOTE 22 -       SUBSEQUENT EVENT

     As of February  1, 2001,  the Company  and FMFC  amended and  restated  the
financial agreement with Fiserv.  Under the restated terms, the Company,  rather
than FMSC, will be the recipient of any additional  cash advances  payable under
the financial agreement.  The Company has further assumed FMSC's obligation with
respect to the initial  payment  received in November  2000,  and will be solely
responsible   for  any   performance  and  early   termination   penalties.   In
consideration  of  FMSC's  release  from its  obligations  under  the  financial
agreement and to secure Fiserv's  interest,  the Company has granted to Fiserv a
first priority lien in all of the outstanding shares of FMSC that it owns.

<PAGE>