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, 2001               -----------------
                                       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. [ X ]

     The issuer's revenues for its most recent fiscal year: $51,220,000.

     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, 2002, was $1,664,290.

     The number of shares of Common Stock outstanding,  as of April 15, 2002 was
8,625,284.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                 Not Applicable


                            [Cover Page 2 of 2 Pages]

<PAGE>
1




                                     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  570 registered  representatives  and services over
60,000 retail and  institutional  customer  accounts.  With the exception of two
Company-leased  branch  offices,  all of FMSC's  200  other  branch  office  and
satellite  locations  in  33  states  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 and the Company-leased branch offices.

     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                                        16%
  Over-The-Counter                              29%
  Municipal and Government Bonds                 3%
  Corporate Bonds                                2%
  Unit Investment Trusts                         2%
  Mutual Funds                                  18%
  Options                                        8%
  Insurance and Annuities                       19%
  Corporate Finance                              3%
                                               ---
Total (1)                                      100%


(1)      Does not include interest and other income.

<PAGE>
2


     The following  table reflects  FMSC's  various  sources of revenues and the
percentage of total revenues for fiscal 2001.  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.
<TABLE>
<S>                                                     <C>                     <C>

                                                          Year Ended December 31, 2001
                                                          ----------------------------
                                                          Amount               Percent
                                                          ------               -------
Agency commissions from
          Equity Securities,
          Options and Mutual Funds,
           Variable insurance and management fees       $37,808,000              74%

         Principal Transactions in
          Equity Securities, Municipal,
          Government and Corporate Bonds                $ 8,022,000              16%

         Interest and other Income                      $ 3,907,000               7%

         Investment Banking(1)                          $ 1,483,000               3%
                                                        -----------             ---
         Total Revenues                                 $51,220,000             100%
</TABLE>


     (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 is 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>
3


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. (see Competition").

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 to
sell life  insurance and annuities in 49 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 2001,  the Company  earned  gross  commissions  of $8
Million from the sale of insurance and annuity products.

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 33 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.  The Company  continues to review other
underwriting candidates and anticipates that it will engage in additional public
and private offerings in the future.

Recent Developments

Montauk Capital Markets Group

     In March 2002, FMSC formed a new institutional brokerage division,  Montauk
Capital Markets Group, which offers  institutional  clients  specialized trading
and brokerage services and equity research. An institutional trader and research
analysist  with  over 20  years of  experience  who  holds  an MBA from  Harvard
Business School,  heads the division.  Additional  research analysts and traders
with substantial  institutional  experience  assist him. In order to accommodate
this new  division,  the Company  entered into a new sub-lease  arrangement  for
office space in Mid-town Manhattan. (See Item 2. "Properties")

<PAGE>
4


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 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,  were  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.

     In February 2001 FMSC and FMFC amended and restated the financial agreement
with  Fiserv.  Under the restated  terms,  FMFC,  rather than FMSC,  is and will
continue to be the recipient of any additional  cash advances  payable under the
financial  agreement.  In November 2001,  FMFC received  another  scheduled cash
advance of $1,250,000 from Fiserv.  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. In fiscal 2001, repurchases of 236,767 shares were made at a total
cost of $143,564.  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>
5


 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 National  Securities  Corp.,
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. In 1997 the Company entered the
discount  brokerage  arena through its Century  Discount  Investments  division.
Additionally,  the  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 and savings banks 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  that  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.  Through its clearing relationship,
FMSC has implemented  on-line  information systems to 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.

<PAGE>
6

    Employees

     The Company currently has approximately 570 registered  representatives  of
which 490 are  associated  with  affiliate  offices.  In  addition,  the Company
employs  105  support   personnel  in  the  areas  of  operations,   compliance,
accounting,  and  administration.   FMFC  believes  its  relationship  with  its
employees is satisfactory.

     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.

     Securities Broker/Dealer Professional Liability Insurance

     FMSC carries a securities  Broker/Dealer  professional  liability insurance
policy (the "Policy")  underwritten by National Union First Insurance Company of
Pittsburgh,  PA, a subsidiary of American  International  Companies.  The Policy
provides  coverage  for any  negligent  act,  error or  omission  by an  insured
individual acting on behalf of the insured Broker/Dealer in providing securities
trading,  investment  management  services,  the giving of financial  investment
advise and the purchase  and/or sale of  securities.  The Policy  excludes  from
coverage  certain  types of  business  activity,  including  but not limited to,
claims  involving  the sale of penny stocks and limited  partnerships,  accounts
handled on a discretionary  basis and  deliberately  fraudulent  and/or criminal
acts.  The Policy term is from January 31, 2001 to January 31,  2003,  with a $1
Million  limit of liability  for each covered  event and a $5 Million  aggregate
liability limit. The Company is responsible for a $50,000 deductible payment per
claim, of which $10,000 is offset to the registered  representative  involved in
the claim.  Our agent has advised us that the market for this type of  insurance
coverage is contracting.  We therefore have no assurance that the Policy will be
renewed when it expires next year, or that acceptable  replacement  coverage can
be obtained at an  affordable  price.  It is therefore  possible  that after the
termination  of this Policy  period,  that the Company may not have this type of
insurance  protection which may adversely impact the financial  condition of the
Company in the event of material  claims in the future  which may not be covered
by existing polices.

     Executive and Organization Liability Insurance Policy

     FMFC carries an executive and organization liability insurance policy (also
known as Directors and Officers liability insurance), which covers the Company's
executive  officers,  directors  and  counsel  against  any claims for  monetary
damages arising from the covered  individuals  actual or alleged breach of duty,
neglect,  error,  misstatement,  misleading statement or omission when acting in
the  capacity  of his/her  position as an  executive  officer,  director  and/or
counsel on behalf of the Company. Policy exclusions include, but are not limited
to, claims made against  covered  individuals  attributable to the committing of
any deliberate  criminal or fraudulent acts, illegal or improper  payments,  and
others.  The policy,  underwritten by National Union First Insurance  Company of
Pittsburgh,  PA, a subsidiary of American International Companies,  provides for
coverage  in  the  amount  of $3  Million  with a  deductible  of  $250,000  for
securities  claims and $150,000 for all other  claims,  during the policy period
which  runs from  March 30,  2001 to March 30,  2002.  The  Company  has  excess
coverage  for  an  additional  $  2  Million  through  Lloyd's  of  London  that
supplements  the primary  policy.  In March 2002 the Company  purchased  renewal
insurance  through the Greenwich  Insurance Company to take effect following the
conclusion of the current policy period.

<PAGE>
7


Additional Considerations

The Company's business is inherently risky and it has suffered losses

     For the years ended December 31, 2001, 2000 and 1999, the Company  reported
revenues of $51,220,000, $59,330,000 and $57,585,000,  respectively. It suffered
net losses of  $5,208,000  and $689,000 for the fiscal years ended  December 31,
2001 and 2000,  respectively.  The Company reported net income of $2,283,000 for
the year ended  December 31, 1999.  The Company may incur further  losses in the
future, and such losses would necessarily affect the nature,  scope and level of
the  Company's  future  operations.  The results of  operations  to date are not
necessarily  indicative  of the  results of future  operations.  The  securities
business,  by its very nature,  is subject to various  risks and  contingencies,
many of which are beyond the  ability of the  Company's  management  to control.
These  contingencies  include  economic  conditions  generally and in particular
those  affecting  securities  markets,  interest  rates,   discretionary  income
available for  investment;  losses which may be incurred from  underwriting  and
trading  activities;  customer  inability  to meet  commitments,  such as margin
obligations;  customer fraud; and employee misconduct and errors.  Further,  the
nature and extent of  underwriting,  trading and market making  activities,  and
hence the volume and scope of the Company's business is directly affected by its
available net capital.

Fluctuations  in  securities  volume and prices  increase the potential for
future losses

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

     The Company's  trading,  market making and underwriting  activities involve
the purchase,  sale or short sale of securities as a principal and, accordingly,
involve  the risk of changes in the market  prices of those  securities  and the
risk of a decrease in the  liquidity of markets  which would limit the Company's
ability to resell  securities  purchased  or to  repurchase  securities  sold in
principal  transactions.  FMSC's brokerage activities and principal transactions
are subject to credit risks. For example, a customer may not respond to a margin
call,  and since the  securities  being held as  collateral  have  diminished in
value,  there is a risk that the Company may not recover the funds loaned to the
customer.

<PAGE>
8


FMSC must comply with Net Capital Requirements

     FMSC's business, like that of other securities firms, is capital intensive.
The SEC and the NASDR have  stringent  provisions  with  respect to net  capital
requirements  applicable  to the operation of  securities  firms.  A significant
operating  loss or any charge  against net capital  could  adversely  affect the
Company's  ability to  significantly  expand or, depending upon the magnitude of
the loss or charge, to maintain our present level of business.

There is a limited public market for the Company's securities

     The Company's common stock and warrants are traded in the  over-the-counter
market and reported by the National  Daily  Quotation  Service  published by the
National Quotation Bureau,  Inc and the Electronic  Bulletin board maintained by
the NASDR.  Although the Company may apply for  inclusion of its common stock in
the Nasdaq Smallcap  Market and/or on the American Stock  Exchange,  it does not
currently satisfy the minimum listing requirements. Accordingly, there can be no
assurance that the Company will be successful in obtaining  listing on Nasdaq or
on the Amex, or if obtained, that it will be able to maintain the Nasdaq or Amex
listing.   The  Broker-Dealer   subsidiary  faces  limitations  on  trading  and
market-making activities in the Company's securities

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

The Company has limited the liability of our directors

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

     The Company believes that, based upon recent developments in the market for
directors' and officers' liability  insurance,  such provisions are necessary to
attract and retain  qualified  individuals  to serve as directors.  In addition,
such  provisions  will allow  directors  to perform  their  duties in good faith
without concern for the application of monetary liability on a retroactive basis
in the event that a court  determines  their  conduct to have been  negligent or
grossly negligent.  On the other hand, such provisions  significantly  limit the
potential remedies available to the company or a shareholder, and it is possible
that  the  protection  afforded  by such  provisions  may  reduce  the  level of
diligence or care demonstrated by such directors.  The Company's  Certificate of
Incorporation  and By-Laws contain  provisions  which may have an  anti-takeover
effect

<PAGE>
9


     The Company's amended and restated certificate of incorporation and by-laws
contain  provisions which may discourage  certain  transactions which involve an
actual or threatened change in control of the company.  These provisions include
a classified  or staggered  board of  directors.  As permitted by the New Jersey
Corporation  Law, the certificate of  incorporation  provides that a director or
officer  of our  company  will not be  personally  liable to the  company or its
stockholders  for monetary damages for breach of the fiduciary duty of care as a
director,   except  under  certain  circumstances  including  a  breach  of  the
director's duty of loyalty to the company or our stockholders or any transaction
from which the director  derived an improper  personal  benefit.  The provisions
referred to above may make the company a less attractive  acquisition candidate.
They may also  discourage  or impede offers to acquire the business not approved
by the board of directors, including offers for some or all of the shares of any
class or series of capital stock at substantial  premiums above the then current
market value of such shares.

Item 2.   Properties

Offices and Facilities

The Corporate Headquarters

     The Company  maintains its corporate  headquarters and executive offices at
Parkway 109 Office Center,  328 Newman  Springs Road,  Red Bank, New Jersey.  In
March 1997, the Company  entered into a seven-year  lease (the "Master  Lease"),
commencing  February 1, 1998 for 22,762 square feet of gross rentable  space. 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 Company pays as additional  rent, a  proportional
share of any  increases  in real  estate  taxes above the amount paid during the
2001 calendar year, insurance premiums relating to the premises, and all utility
charges  relating to the use of the premises.  The First  Amendment to the Lease
covers an  aggregate of 32,442 gross  rentable  square feet at a monthly  rental
payment of $63,685,  which  includes all of the additional  rent items,  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.

          Company Leased Branch Offices

     Commencing  in June 1996 the  Company  leased  3,150  square feet of office
space in  Paramus,  New  Jersey.  Initially  this  office  housed the  Company's
insurance  subsidiary,  Montauk  Insurance  Service,  Inc. In September 1997 the
insurance division relocated from Paramus to the Company's  corporate offices in
Red Bank,  New  Jersey,  and the Paramus  office  became the new home of Century
Discount  Investments,  the Company's discount brokerage  division.  In February
2000,  the Company  extended the lease term for an  additional  three years at a
monthly base rent of $6,890. In September 2001 Century Discount was relocated to
the Company's  corporate offices in Red Bank, New Jersey, and the Paramus office
was sub-let to one of the Company's affiliates at the monthly rent of $4,500 for
the balance of the lease term.  The Company pays the balance of the monthly rent
for this office.

     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 base rent for the premises is
$4,474 per month and in  addition to the base rent,  the company is  responsible
for additional rent escalators comprised of 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.  The  Company  recoups a
portion of the rental  payment  from a  percentage  of the  affiliates'  monthly
commissions.

     In March 2001, the Company  entered into a lease  assignment and assumption
agreement for a 3-year lease for 3,272 gross  rentable  square feet for a branch
office in 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. The
affiliated registered representatives who utilize this office contribute towards
the office expenses.

<PAGE>
10


     In June 2001 the  Company  entered  into a  sub-lease  agreement  for 4,269
square feet of office  space on Wall Street in New York City that is utilized by
registered representatives.  The sub-lease term runs until January 31, 2005 with
a monthly rent payment of $16,009.

     In January 2002 the Company  entered into a sub-lease  agreement  for 4,520
square  feet  of  office  space  in  Midtown  Manhattan  which  is  utilized  by
institutional and retail sales  representatives,  as well as a new institutional
research  group.  The sub-lease term runs until  September 29, 2006 and provides
for a monthly  rent  payment of $18,830  until  January 31, 2004 and  thereafter
increases to $19,963 for the balance of the sub-lease term.

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 filed in 2001 with the NASDR
department of arbitration that seeks rescissionary damages of approximately $9.5
million  including  statutory  interest,  plus  punitive  damages.  The claimant
alleges  violations of various  provisions  of the federal and state  securities
laws.  FMSC  believes  it  has  meritorious  defenses  to  these  claims  and is
vigorously  defending  against the action.  FMSC is also a respondent in several
claims  arising  from  customer  purchases of high yield  corporate  bonds which
declined in market value after the purchases were made, and which include claims
for  alleged  unsuitable  recommendations  and/or  improper  use of margin.  The
Company intends to vigorously defend these actions.

     FMSC  is  also  a  respondent  or  co-respondent  in  various  other  legal
proceedings which it believes are incidental to its securities business. FMSC is
contesting 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.
Therefore, as of December 31, 2001, the Company has established a loss provision
in the accompanying  financial statements for any liability that may result from
these contingencies.

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

                           Not Applicable.

<PAGE>
11


                                     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, 2002,  the  Company's  common stock had a high and low bid
price of $.22 and $.18, respectively.

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

Common Stock

Fiscal Year 2001                    High Bid        Low Bid

     1st Quarter                     $ .85           $  .60
     2nd Quarter                       .64              .45
     3rd Quarter                       .60              .45
     4th Quarter                       .44              .45

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


C.       Number of Record Holders.

     The approximate  number of record holders of the Company's  common stock as
of April 15, 2002 was 478. Such number of record holders was determined from the
Company's  stockholder  records,  and does not include  beneficial owners of the
Company's  common stock whose  shares are held in the names of various  security
holders, dealers and clearing agencies. The Company believes there are in excess
of 2,700 beneficial holders of the Company's common stock.

<PAGE>
12


D.       Dividend Policy

     We have not paid any dividends  upon our Common Stock since our  inception.
We do not expect to pay any dividends  upon our Common Stock in the  foreseeable
future and plan to retain  earnings,  if any,  to finance  the  development  and
expansion of our business.

E.      Sales of Unregistered Securities

     In 1999, the Company  completed a private  offering of Series A Convertible
Preferred  Stock in  connection  with the  settlement  with holders of leases of
Global  Financial  Corp.  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.  Pursuant to the  offering,  the Company  issued an  aggregate of 349,511
shares of Series A Preferred  Stock.  The offering was exempt from  registration
pursuant to Sections  4(2) and 4(6) of the  Securities  Act of 1933, as amended,
and Regulation D,  promulgated  thereunder.  In 1999, the Company also issued an
aggregate  of $690,526  principal  amount of  convertible  promissory  notes and
warrants to purchase 25,000 shares of its Common Stock, exercisable at $1.75 per
share, to certain investors holding Global leases.  The convertible notes issued
by  the  Company  are  payable  in  thirty-six  monthly   non-interest   bearing
installments of $16,404,  plus balloon payments of $112,000,  including interest
calculated on the basis of 8% of the balloon amount  beginning in month nineteen
of the note term. For more information see the discussion provided in "Liquidity
and Capital Resources."

<PAGE>
13


Item 6.  Selected Financial Data
<TABLE>
<S>                       <C>               <C>               <C>                 <C>            <C>

                                                     Year ended December 31,
                           2001             2000              1999                 1998              1997
                           ----             ----              ----                 ----              ----
Operating results:

Revenues:
Commissions               $37,807,870        $46,529,771       $40,516,625        $30,741,404    $ 27,018,244
Principal transactions      8,021,887          7,131,079        14,000,680          8,795,599       7,257,576
Investment banking          1,483,210          2,416,711           439,065            767,312       1,433,100
Insurance recovery             --                 --                --                650,000          --
Interest and other income   3,907,448          3,252,325         2,628,246          1,572,063       1,383,713
                            ---------          ---------         ---------          ---------       ---------
Total revenues            $51,220,415        $59,329,886       $57,584,616        $41,876,378    $ 37,742,633
                           ----------         ----------        ----------         ----------      ----------

Expenses:
Commissions, employee
 compensation and
 benefits                  42,356,207         46,800,661        42,137,968         31,766,060      26,785,205
Clearing and floor
 brokerage                  3,247,219          4,003,345         4,109,961          3,674,859       3,021,709
Communications and
 occupancy                  3,249,389          2,731,681         2,697,433          2,557,313       1,860,350
Legal matters and
 related costs              2,415,374          1,181,115         1,395,008          2,377,336       1,452,001
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    5,076,806          4,862,158         3,545,308          2,958,450       2,093,670
Interest                      174,632            160,230           166,104            131,215          84,695
                           ----------         ----------        ----------         ----------      ----------
Total expenses             56,519,627         59,978,373        54,752,198         45,243,757      35,297,630
                           ----------         ----------        ----------         ----------      ----------
Income (loss) before
 income taxes              (5,299,212)          (648,487)        2,832,418         (3,367,379)      2,445,003
Provision for income taxes
 (income tax benefit)         (90,989)             6,721           549,140           (604,532)        968,178
                           ----------         ----------        ----------         ----------      ----------
Income (loss) before
  extraordinary loss     $ (5,208,223)      $   (655,208)       $2,283,278        $(2,762,847)   $  1,476,825

Extraordinary loss -
 extinguishment of debt,
 net of tax                    --                 34,200            --                 --              --
                           ----------         ----------        ----------         ----------      ----------
Net income (loss)        $ (5,208,223)      $   (689,408)      $ 2,283,278        $(2,762,847)    $ 1,476,825
                           ==========         ===========       ==========         ==========      ==========
Net income (loss)
 available to
 common stockholders     $ (5,306,976)      $ (  792,136)      $ 2,215,528        $(2,762,847)    $ 1,476,825
                           ==========         ===========       ==========         ==========      ==========

</TABLE>

<PAGE>
14


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

                                                     Year ended December 31,
                           2001             2000              1999                 1998              1997
                           ----             ----              ----                 ----              ----
Per share of
 Common Stock:
    Basic         $        (.61)    $       (.08)           $  .22        $        (.28)       $      .17
    Diluted       $        (.61)    $       (.08)           $  .21        $        (.28)       $      .14

Weighted average
 common shares
 outstanding
 - Basic              8,704,355        9,450,055         9,878,129            9,725,116         8,788,734
                      =========        =========         =========            =========         =========
Weighted average
 common and common
 equivalent shares
 outstanding
 - Diluted            8,704,355        9,450,055        11,262,708            9,725,116        10,351,032
                      =========        =========        ==========            =========        ==========
Financial condition:
Total assets      $  14,227,562     $ 16,913,063       $17,059,184          $11,543,734       $11,971,934
Total liabilities $  11,934,884     $  9,203,672       $ 7,429,046          $ 5,320,107       $ 4,732,467
 Common Stock issued
 with guaranteed
  selling price   $       6,500     $      6,500       $    36,500          $    36,500       $   346,500
Stockholders'
 equity           $   2,286,181     $  7,702,891       $ 9,593,638          $ 6,187,127       $ 6,892,967

</TABLE>

<PAGE>
15


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

Results of Operations-Three Years Ended December 31, 2001

     Fiscal  year 2001  proved to be a  difficult  year for the  Company and the
securities industry in general. The decline in investor confidence that began in
2000  continued  through 2001 as corporate  earnings  continued to fall short of
Wall Street expectations,  unemployment continued to rise and the global economy
remained  sluggish.  As a result,  the Company's  results  reflect the declining
trading volume in the U.S.  financial markets and the generally bearish investor
sentiment.  Total  revenues  for the  twelve  months  ended  December  31,  2001
decreased  $8,025,000 or 13.5% to  $51,220,000  as compared to the twelve months
ended December 31, 2000.

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

                                                            Year Ended December 31,
                                     ----------------------------------------------------------------------
                                                 2001                         2000                1999
                                     ----------------------------------------------------------------------
                                     -------------  ------------  ------------- ------------- -------------
 Revenues:                                (000's)        Change        (000's)        Change       (000's)
                                     -------------  ------------  ------------- ------------- -------------
 Commissions
                                           37,808          (19)         46,530            15        40,517
 Principal Transactions
                                            8,022           12           7,131           (49)       14,001
 Investment Banking
                                            1,483          (39)          2,417           451           439
 Interest/Other
                                            3,907           20           3,252            24         2,628
                                     -------------                -------------               -------------
 Total Revenues
                                           51,220          (14)         59,330             3        57,585
                                     =============                =============               =============
</TABLE>

     The  Company's  primary  source of  revenue  is  derived  from  commissions
generated  from  listed  and  over-the  counter   securities  and  other  agency
transactions.  The decline in  commissions  from 2000 to 2001  resulted  from an
$11,063,000 or 29% decrease in revenues related to general securities and mutual
fund  transactions that were partially offset by a $3,253,000 or 55% increase in
insurance  products and management fee income.  Insurance  revenues increased in
2001 primarily due to annuity sales of one registered  representative,  which is
not expected to continue.

     Comparing  2000  to  1999,  the  revenue  growth  resulted  from  increased
commissions from general securities transactions and insurance related products,
particularly  from the sale of  variable  annuities.  The  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.

<PAGE>
16


     Gains from proprietary trading and market-making  activities increased 12%,
or $891,000,  over the 2000 period.  Decreased  revenues from principal sales of
corporate bonds offset unrealized gains in the Company's  proprietary  accounts.
During  2001,  the  Company  reduced  and  consolidated  its  market-making  and
proprietary accounts, thereby reducing personnel costs and market data services.
The Company also reduced its inventory by almost $2.8 Million during 2000,  thus
significantly reducing the Company's regulatory capital charges and its exposure
to market volatility. The Company has taken steps to reduce its risk exposure in
this area, which has improved the management of risk during the 2001 period. The
50%  decrease in revenues  from $14 million in 1999 to $7.1  million in 2000 was
due to investment  and trading losses  primarily in Nasdaq and other  securities
held in the firm's proprietary accounts.

     Investment banking revenues for 2001 decreased $934,000 to $1,483,000, down
from  $2,417,000 in 2000.  Revenues for 1999 were  $439,000.  For the year 2000,
investment banking revenues included commissions and fees from an initial public
offering completed in the first quarter of 2000. The decline in revenues in 2001
reflects the absence of new offerings  coming to the market in which the Company
may participate. In an effort to mitigate this decline, the Company has enhanced
the corporate finance department by creating  investment  banking  relationships
with  corporations  to act as a consultant  in exchange for  investment  banking
fees.  Although still in its development stage, the Company continues to support
this effort. Also included in this category are commissions earned from the sale
of registered offerings of collateralized medical receivables, which the Company
began selling during the second half of 2001.

     Interest and other income  increased  $655,000 to  $3,907,000  in 2001 from
$3,252,000  in 2000.  In 1999  interest  and other  income was  $1,572,000.  The
increase  in  interest  revenue  is  consistent  with  large cash and money fund
balances  being  maintained by customers in reaction to the  uncertainty  of the
market. This, combined with the more favorable interest sharing arrangement with
the Company's  clearing  firm (see below for a more  detailed  discussion of the
Fiserv  agreement),  contributed to the overall increase in this category.  Also
reflected in this category is the  amortization  of deferred  revenue  resulting
from the financial agreement with the clearing firm.

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

                                                               Year Ended December 31,
                                           ----------------------------------------------------------------
                                                      2001                      2000               1999
                                           ----------------------------------------------------------------
                                           -----------  -----------  ------------ ------------ ------------
                                              (000's)     % Change       (000's)     % Change      (000's)
                                           -----------  -----------  ------------ ------------ ------------
 Expenses:
 Commissions, employee
       compensation and benefits
                                               42,356          (9)        46,801           11       42,138
 Clearing and floor brokerage
                                                3,247         (19)         4,003           (3)       4,110
 Communications and occupancy
                                                3,249          19          2,732            1        2,697
 Legal matters and related costs
                                                2,416         105          1,181          (15)       1,395
 Write-down on Note receivable-
       Global Financial Corp.                     ---
                                                             (100)           239          139          100
 Loss on lease settlements                        ---                        ---
                                                             (100)                       (100)         600
 Other operating expenses
                                                5,077           4          4,862           37        3,546
 Interest
                                                  175           9            160           (4)         166
                                           -----------               ------------              ------------
 Total expenses
                                               56,520          (6)        59,978           10       54,752
                                           ===========               ============              ============
</TABLE>


<PAGE>
17


     Total expenses  decreased by $3,458,000 or 6% to $56,520,000 for 2001, down
from  $59,978,000  in 2000.  Commission  expense  has a direct  relationship  to
commission  revenue  and  subsequently   represented  the  largest  decrease  in
expenses.  Although  commissions  as a  percentage  of total  revenues  remained
constant,  averaging  66% in  both  2000  and  2001,  the  dollar  decrease  was
$5,231,000 or 13%. Commissions in 2000 increased  approximately  $4,000,000 over
1999  due to the  increase  in  commission  revenue  as well as an  increase  in
commission payout percentages.  For 2001, the Company paid salaries and benefits
of  $8,267,000  (16%  of  revenues)  for  management,  operations  and  clerical
personnel,  as compared to $7,512,000  in 2000 (13% of revenues) and  $6,636,000
(12% of revenues)  in 1999.  During the second half of 2000,  the Company  hired
additional  management and support staff for various  departments,  primarily in
sales,  recruiting and compliance as well as adding employees to its mutual fund
and insurance  departments,  and on the equity order desk. In 2001,  the Company
implemented  certain  cost  cutting  measures  in  response  to the  decrease in
revenues and trading activity.  These measures included a reduction in executive
officers'   salaries  and  personnel  layoffs  in  the  trading  and  operations
departments. The full extent of these cost reductions will not be realized until
the second  quarter of 2002.  The Company  employed  approximately  106 salaried
employees  as of December 31,  2001,  120 salaried  employees as of December 31,
2000, and 78 salaried employees as of December 31, 1999.

     Clearing costs,  which are associated with the level of transaction  volume
and type,  decreased  $756,000 to  $3,247,000  in 2001 from  $4,003,000 in 2000,
which was relatively unchanged from the 1999 expense of $4,110,000. As a percent
of revenues,  clearing costs have remained  fairly constant at 6% in 2001, 7% in
2000 and 7% in 1999. 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.

     Communications  and occupancy costs increased 19% or $517,000 to $3,249,000
in 2001 from  $2,732,000  in 2000. As a percent of revenue,  communications  and
occupancy increased from 5% to 6%. During the third quarter of 2001, the Company
entered  into two new leases for branch  offices in Boca Raton,  Florida and New
York City.  In fourth  quarter  2001,  the  Company  sublet its office  space in
Paramus,  New Jersey,  which formerly housed the operations of Century  Discount
Investments ("CDI"). CDI was relocated to the Red Bank headquarters. As a result
of opening these new offices and general rent increases on current office space,
rent increased by approximately  $258,000.  Data processing costs also increased
by $102,000  over 2000 due to the  addition  of  services  to support  these new
corporate offices.  Communications and occupancy costs were relatively unchanged
from 1999 to 2000, increasing only $35,000.

     Other  operating  costs  increased  $215,000  to  $5,077,000  in 2001  from
$4,862,000  in 2000.  The increase is due  primarily  to increased  customer and
broker bad debts, as well as a reserve for payments  previously made to a vendor
for the development of applications software. The Company is seeking restitution
from this  vendor for  breach of  contract.  From 1999 to 2000  other  operating
expenses increased from $3,546,000 to $4,861,000,  respectively,  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.

     Legal fees and litigation settlements increased $1,235,000 to $2,415,000 in
2001 from  $1,181,000  in 2000,  an increase of 104%.  The  increase is due to a
larger volume of cases, significant settlement costs, and the establishment of a
$945,000 reserve for future  litigation  costs. The Company is a respondent in a
customer arbitration seeking rescissionary damages of approximately $9.5 million
including statutory interest,  plus punitive damages. The Company is currently a
respondent in various other customer  arbitrations  and lawsuits  arising in the
normal course of its securities business.  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  year  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.  Legal matters and related costs decreased $214,000
from $1,395,000 in 1999 to $1,181,000 in 2000.

     In  December  1999,  the  Company  accepted  a  $500,000  cash  payment  in
settlement of an arbitration claim 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.

<PAGE>
18


     The Company's  effective tax rate in 2001 was higher than expected  because
of an increase of $1,877,000 in the deferred tax valuation allowance. Management
remains  uncertain  as to the  ability of the  Company  to  realize  most of its
deferred tax  benefits.  The Company has filed for federal and state tax refunds
of approximately  $1,076,000.  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.

     For the year 2001,  the  Company  reported a net loss  available  to common
stockholders of $5,307,000,  or $.61 per basic and diluted share, as compared to
the net loss available to common stockholders  reported in 2000 of $792,000,  or
$.08 per basic and diluted  share.  For 1999,  the Company  reported  net income
available to common stockholders of $2,216,000, or $.22 per basic share and $.21
per diluted share.

Liquidity and Capital Resources

     The Company maintains a highly liquid balance sheet with  approximately 50%
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.  As of December  31,  2001,  this  balance was  $7,138,000.  The
balances in the Company's cash,  inventory and clearing firm accounts can and do
fluctuate  significantly  from day to day,  depending  on general  economic  and
market conditions, volume of 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 used in operating  activities during 2001 was $1,408,000 primarily
as a result  of the  Company's  net loss for  2001 of  $5,208,000,  adjusted  by
non-cash  charges  including  the  reserve  for  software  development  cost  of
$500,000,  depreciation  and  amortization of $564,000,  decreases in securities
held for trading and investment,  and  commissions  payable and taxes payable of
$2,776,000,  $2,009,000 and $869,000,  respectively.  Cash was also generated in
both 2001 and 2000 by  advances  received  under the  financial  agreement  with
Fiserv.

     The Company  received cash under the Fiserv agreement of $1,250,000 in 2001
and $4,000,000 in 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.  Advances are subject to
income  taxes in the year of  receipt.  Fiserv has agreed to provide  additional
advances of $1,250,000 in each of the next two years, provided the Company meets
certain  performance and other criteria.  Also impacting operating cash flows is
the increase in employee  and broker  receivables  of $496,000.  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 productions goals. 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.  The balance of these loans at December
31, 2001 was $2,106,000.

     Investing  activities  required  cash of  $318,000  in 2001.  Additions  to
capital  expenditures  and increased  security  deposits  consumed  $308,000 and
$237,000,  respectively, while collections of notes and Global lease receivables
contributed  $186,000.  As of the first quarter 2002,  all expected  collections
from Global lease receivables have been received.

     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.

<PAGE>
19


     Financing  activities used cash of $195,000 in 2001. A total of $606,000 of
proceeds was received from capital lease financing. This was offset by notes and
capital  lease  repayments  of  $559,000  and  dividend  payments  to  preferred
shareholders of $99,000. In addition, a total of $144,000 was used to repurchase
236,737 of the  Company's  outstanding  shares  pursuant  to a stock  repurchase
program.

     At December  31,  2001,  the  Company's  broker-dealer  subsidiary  had net
capital of  $1,039,165  which was $726,396 in excess of its required net capital
of $ 312,769, and the ratio of aggregate indebtedness to net capital was 4.51 to
1.

     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.

     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 payment 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 245,263 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,  2001,  the  Company  had an  aggregate  of $50,000 of
subordinated  notes outstanding with interest at 8% per annum. The final $50,000
payment was due and paid in January 2002.

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.  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.

<PAGE>
20


Effects of Recently Issued Accounting Pronouncement(s)

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  ("FAS  133"),  "Accounting  for
Derivative  Instruments and Hedging Activities",  which became effective for the
Company  during the first quarter of 2001.  FAS 133 requires the  recognition of
all  derivatives as either assets or liabilities in the Company's  balance sheet
and measurement of those instruments at fair value. To date, the Company ahs not
entered into any derivative or hedging activities, and, as such, the adoption of
FAS 133, as amended, has not had a material effect on its consolidated financial
statements.

     In June 2001, the Financial  Accounting  Standards Board finalized the FASB
Statements No. 141, Business Combinations ("FAS 141"), and No. 142, Goodwill and
Other  Intangible  Assets ("FAS 142").  FAS 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interest  method of
accounting for business combinations initiated after June 30, 2001. FAS 141 also
requires  that the  Company  recognize  acquired  intangible  assets  apart from
goodwill if the  acquired  intangible  assets  meet  certain  criteria.  FAS 141
applies to all  business  combinations  initiated  after  June 30,  2001 and for
purchase  business  combinations  completed  on or after July 1,  2001.  It also
requires, upon adoption of FAS 142, that the Company reclassifies, if necessary,
the carrying amounts of intangible  assets and goodwill based on the criteria in
FAS 141.

     FAS 142 requires,  among other things,  that  companies no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  FAS 142 requires that the Company  identify  reporting  units for the
purposes of assessing  potential  future  impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the  guidance in FAS 142.  FAS 142 is required to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other
intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  FAS 142 requires the Company to complete a  transitional
goodwill  impairment test six months from the date of adoption.  The adoption of
FAS  141  and 142 has not  had a  material  impact  on the  Company's  financial
statements.

     In August 2001, the FASB issued FASB Statement No. 144,  Accounting for the
Impairment  or Disposal of  Long-Lived  Assets  ("FAS  144").  The new  guidance
resolves  significant  implementation  issues related to FASB Statement No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed  Of ("FAS  121").  FAS 144  supersedes  FAS 121,  but it retains its
fundamental  provision.  It  also  amends  Account  Research  Bulletin  No.  51,
Consolidated  Financial Statements,  to eliminate the exception to consolidate a
subsidiary  for which  control is likely to be  temporary.  FAS 144  retains the
requirement  of FAS 121 to  recognize  an  impairment  loss only if the carrying
amount of a long-lived asset within the scope of FAS 144 is not recoverable from
its undiscounted cash flows and exceeds its fair value.

     FAS 144 is effective for fiscal years  beginning  after  December 15, 2001,
and  interim  periods  within  those  fiscal  years,   with  early   application
encouraged.  The Company adopted the provisions of FAS 144 with no impact on its
financial statements.

<PAGE>
21


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 rating 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, 2001 and December 31, 2000, the balances of the
Company's equity securities  positions owned and sold but not yet purchased were
approximately $1,199,102 and $245,000 and $3,975,000 and $386,000, 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
financial 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>
 22

                                    PART III

Item 10. Directors and Executive Officers

     The Directors and  Executive  Officers of the Company and its  subsidiaries
are as follows:

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

         Name                       Age                       Position

Herbert Kurinsky                    70                  Director, President and Chief Executive
                                                        Officer of FMFC and of FMSC and Registered
                                                        Options Principal of FMSC

William J. Kurinsky                 41                  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.          44                  General Counsel, FMFC, Chief
                                                        Administrative Officer, Vice President
                                                        And General Securities Principal of FMSC

Dave M. McCoy                       40                  Director of Retail Sales, FMSC

Norma Dopey                         62                  Director, Vice President of Operations, FMSC

Ward R. Jones, Jr.                  71                  Director

David I. Postman                    61                  Director

Barry D. Shapiro, C.P.A.            59                  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.

     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.

<PAGE>
23


     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.

     Dave M. McCoy was  director  of retail  sales  since  June 2000,  until his
resignation  in  March  2002.  Prior  to  that he was an  affiliated  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.

     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   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.

Significant Employees

     Paul  L.  Lieberman,  Esq.,  53,  is  general  counsel  for  First  Montauk
Securities  Corp.  since January 1998, and special  counsel from June 1997. From
1990 to 1997,  he was Senior Vice  President and  Associate  General  Counsel at
Tucker, Anthony, Inc. a securities  broker/dealer.  Prior to that, Mr. Lieberman
served as Vice President and Senior  Attorney for  Citicorp/Citibank  as well as
the New York Stock  Exchange and the  Securities  and Exchange  Commission.  Mr.
Lieberman is an attorney at law.

     Mark D. Lowe, 43, 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.

     Mindy A. Horowitz, C.P.A., 44, has been Vice President of Finance for First
Montauk Securities Corp. since September,  1995. Prior to that, Ms. Horowitz was
a tax partner  with and held other  positions at the  accounting  firm of Broza,
Block & Rubino from 1981 through 1995 when she joined First  Montauk  Securities
Corp. Ms. Horowitz is a Certified Public Accountant.

<PAGE>
24


Certain Reports

     No person  who,  during the fiscal  year ended  December  31,  2001,  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.

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, 2001, 2000 and 1999 to each of the named executive officers of the Company.

<TABLE>
<CAPTION>

                                               SUMMARY COMPENSATION TABLE
<S>                           <C>       <C>            <C>             <C>                   <C>
                                                                                  Long Term
                                        Annual Compensation                      Compensation
                                        -------------------                      ------------

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

Herbert Kurinsky              2001      $233,140       $  -            $   2,000 (4)          200,000(1)
Chairman, Chief               2000      $256,217       $ 29,306        $   2,000 (4)          125,000 (1)
 Executive Officer(7)         1999      $232,925       $100,000        $     925 (4)              0


William J. Kurinsky           2001      $233,140       $   -           $   1,000 (5)          200,000 (2)
Vice President,               2000      $256,217       $   -           $   2,000 (5)          125,000 (2)
 Chief Operating and          1999      $232,925       $100,000        $   1,925 (5)              0
 Financial Officer
 and Secretary (8)

Robert I. Rabinowitz          2001      $146,154       $   -           $   2,000 (6)           43,750 (3)
General Counsel, FMFC,        2000      $150,000       $24,234         $   2,000 (6)           60,000 (3)
 Chief Administrative         1999      $125,000       $25,000         $   1,200 (6)              0
 Officer, FMSC (9)

Dave McCoy,
  Director of Retail Sales    2001      $179,436       $27,787         $      -                   0
  FMSC (10)                   2000(11)  $ 59,231       $50,000         $  14,676              200,000 (12)
                              1999      $ N/A          $N/A            $    N/A                   0

----------------------------
</TABLE>

     1) In 2001  The  Compensation  Committee  of the  Board of  Directors  (the
"Committee)  authorized  an option  grant to Mr.  Herbert  Kurinsky  to purchase
200,000  shares of  Common  Stock at an  exercise  price of $.75 per share for 5
years. In 2000, 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.  See  "Aggregated  Options/Sar  Exercises  in Last Fiscal Year and Fy-End
Option/Sar Values."

<PAGE>
25


     2) In 2001  The  Compensation  Committee  of the  Board of  Directors  (the
"Committee)  authorized  an option grant to Mr.  William J. Kurinsky to purchase
200,000  shares of  Common  Stock at an  exercise  price of $.83 per share for 5
years.  In 2000 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. See "Aggregated  Options/Sar  Exercises in Last Fiscal Year and
Fy-End Option/Sar Values."

     3) In 2001  The  Compensation  Committee  of the  Board of  Directors  (the
"Committee)  authorized  an option grant to Mr.  Robert  Rabinowitz  to purchase
43,750  shares of  Common  Stock at an  exercise  price of $1.50 per share for 5
years. In 2000 the Committee 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.  See  "Aggregated  Options/Sar  Exercises  in Last Fiscal Year and Fy-End
Option/Sar Values."

     4) Includes:  (i) for 2001,  automobile  allowance of $2000;  ii) for 2000,
automobile allowance of $2000 (iii) for 1999, auto allowance of $925.

     5) Includes:  (i) for 2001,  automobile allowance of $1,000; (ii) for 2000,
automobile allowance of $2,000; (iii) for 1999, auto allowance of $1,928.

     6) Includes (i) for 2001,  automobile  allowance of $2,000;  (ii) for 2000,
automobile allowance of $2,000; (iii) for 1999, automobile allowance of $1,200.

     7) Mr.  Herbert  Kurinsky is the  beneficial  owner of 56,518 shares of the
Company's  Common Stock as of December 31, 2001, which shares had a market value
of $24,868 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  1,110,823  shares of the
Company's  Common Stock as of December 31, 2000, which shares had a market value
of $488,762 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, 2001, which shares had a market value
of $12,980 as of that date,  without  giving  effect to the  diminution in value
attributable to the restriction on said shares.

     10) Mr.  Dave  McCoy is the  beneficial  owner  of  141,250  shares  of the
Company's  Common Stock as of December 31, 2001, which shares had a market value
of $62,150 as of that date.

     11) Mr.  McCoy  became  employed by the Company in June 2000 as Director of
Retail Sales.  The salary,  bonus and option grant was provided  pursuant to his
compensation  package.  The  commissions  paid were  earned by Mr.  McCoy in his
capacity  as a  registered  representative  prior  to  the  commencement  of his
salaried position.

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 2001, the Board of
Directors met on three (3) 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 2001. 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.

Compensation Committee Report on Executive Compensation

     In fiscal 1995,  the  Corporation  established  a  compensation  committee,
composed of two  non-executive  directors,  for the purpose of  negotiating  and
reviewing all employment  agreements for executive  officers of the  Corporation
and for  administering the Senior Management Plan and the Incentive Stock Option
Plan, as amended.  At present,  Ward R. Jones,  Jr. and David I. Portman are the
members of the  compensation  committee.  This committee met on one (1) occasion
during fiscal 2001.

<PAGE>
26


     The compensation  committee and the Board of Directors have established the
following  ongoing  principles and objectives for determining the  Corporation's
executive  compensation:  o provide  compensation  opportunities  that will help
attract, motivate and retain highly motivated qualified managers and executives.

     - link executive total  compensation to the  Corporation's  performance and
individual job performance.

     -  provide  a  balance  between   incentives  based  upon  annual  business
achievements  and longer term  incentives  linked to  increases  in  shareholder
value.

     During  the  last  fiscal  year,   except  as  discussed  below,  the  cash
compensation  portions of the Chief  Executive  Officer and the Chief  Operating
Officer  were not  reviewed by the  compensation  committee  as the terms of the
compensation  were governed by the terms of their  employment  agreements  which
were entered into in January 2000.  Shareholders  are directed to the discussion
of  these  agreements  under  the  heading  "Employment   Agreements"  appearing
elsewhere in this Annual Report on Form 10-K.

     During the last fiscal year,  neither the Chief  Executive  Officer nor the
Chief Operating  Officer received any cash bonuses or compensation  outside of a
$2,000 and $1,000  automobile  expense allowance for the Chief Executive Officer
and the Chief Operating Officer, respectively.  Total cash compensation for both
of the executive  officers was voluntarily  reduced by $23,000 in fiscal 2001 as
compared  to 2000,  rather than  increased  by 10%, as provided in each of their
employment agreements.

     During the last fiscal year,  the  compensation  committee  authorized  the
grant of options to purchase  200,000  shares of the  Company's  Common Stock to
each of Messrs.  Herbert  Kurinsky and William  Kurinsky.  See "Option Grants in
Last Fiscal Year."

The Compensation Committee:

Ward R. Jones Jr.
David I. Portman

Compensation Committee Interlocks and Insider Participation

     There are no compensation  committee  interlocks between the members of the
Corporation's  compensation  committee and any other entity. None of the members
of the Board's compensation committee are executive officers of the Corporation.
Mr.  Jones is a registered  representative  of the  Corporation's  broker-dealer
subsidiary,  First  Montauk  Securities  Corp.,  but  does  not  engage  in  any
securities business.

                      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,
2001.
<TABLE>
<S>                           <C>             <C>               <C>          <C>              <C>           <C>

                                                                                            Potential Realizable Value At
                              Number of       % of Total                                    Assumed Rates of Stock Price
                              Underlying      Granted to        Exercise                    Appreciation For Options Term

                              Options/SAR     Employees in      or Base      Expiration
Name                          Granted(#)      Fiscal Year (1)   Price($Sh)      Date           5%($)         10%($)

Herbert Kurinsky               200,000            18.3%           0.66         1/4/06         18,469        62,587
William J. Kurinsky            200,000            18.3%           0.66         1/4/06          2,469        46,587
Robert I. Rabinowitz            43,750             4.0%           0.66         1/4/06           --            --
<FN>
--------------------------
(1) Includes options granted to non-employee registered representatives under
    the 1992 Incentive Stock Option Plan, as amended.
</FN>

</TABLE>

<PAGE>
27

<TABLE>


                                    AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                                               AND FY-END OPTION/SAR VALUES
     <S>                 <C>       <C>                   <C>                           <C>

                                                                                        Value of
                         Shares                           Number of                     Unexercised
                         Acquired                         Unexercised                   In-the-money
                         on        Value                  Options as of                 Options at
          Name           Exercise  Realized               December 31, 2001             December 31, 2001 (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
     Dave McCoy             --       $0                  369,500/180,500                       $0/$0
</TABLE>


     (1) Based  upon the  closing  bid price of the  Company's  Common  Stock on
December 31, 2001 ($.44 per share),  less the exercise  price for the  aggregate
number of shares subject to the options.

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  that 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  employeesto  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.

<PAGE>
28


     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  4,612,698  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.

     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 360,000 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.

<PAGE>
29


     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 2,127,500  shares of the  Company's  Common Stock
have been issued under the Senior Management Plan.

Item 12.        Security Ownership of Certain
                Beneficial Owners and Management

     The  following  table  sets  forth,  as of April 12,  2002,  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)

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

                                                     Number of Shares           Percent
                                                     ----------------           -------

Herbert Kurinsky                                          561,518(2)               6.2%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

William J. Kurinsky                                     1,680,823(3)              18.4%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

Robert I. Rabinowitz, Esq.                                375,749(4)               4.2%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

Dave M. McCoy                                             691,250(5)               7.7%
20197 Ocean Key Drive
Boca Raton, Fl. 33498

Ward R. Jones                                             110,000(6)               1.3%
7 Leda Lane
Guilderland, NY 12084

Norma Doxey                                                74,900(7)                *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

David I. Portman                                          219,800(8)               2.5%
300 Ocean Avenue, Apt. 6A
Long Branch, NJ 07740

Barry Shapiro, C.P.A.                                        0                     N/A
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701

All Directors and                                       3,714,040                 35%
Officers as a group
(8 persons in number)

* Indicates less than 1%
</TABLE>

<PAGE>
30


     (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.

     (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  option of Mr.  McCoy to
purchase 369,500 shares of Common Stock, and 180,500 non-vested options.

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

     (7) Includes vested and presently exercisable options of Ms. Norma Doxey to
purchase 50,500 shares of Common Stock, and 12,000 non-vested stock options.

     (8) 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.


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>
31


                                    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>
32


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

Dated April 15, 2002                       Herbert Kurinsky, President

     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 15, 2002
Herbert Kurinsky
President, Chief Executive
Officer and Director


/s/ William J. Kurinsky
-----------------------                                 April 15, 2002
William J. Kurinsky
Vice-President, Chief Operating
and Chief Financial Officer, and
Principal Accounting Officer,
Secretary and Director


/s/ Norma Doxey
---------------                                         April 15, 2002
Norma Doxey, Director


/s/ Ward R. Jones, Jr.
----------------------                                  April 15, 2002
Ward R. Jones, Jr., Director


/s/ David I. Portman
--------------------                                    April 15, 2002
David I. Portman, Director


/s/ Barry Shapiro
-----------------                                       April 15, 2002
Barry Shapiro, Director


<PAGE>
33


                                 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.  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 which have been filed with the Company's Form
10-K for the fiscal year ended  December  31,  2000,  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 herewith.



<TABLE>
<S>                                 <C>

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.
</TABLE>

<PAGE>
34
<TABLE>
<S>                                 <C>


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

  10.26+++++                        Sublease Agreement between Eloquent, Inc. and First Montauk Financial Corp.
                                    dated May 31, 2001.

  10.27+++++                        Sublease Agreement between Aimnet Solutions, Inc. and First Montauk Financial Corp.
                                    dated January 15, 2002.

  11+++++                           Computation of Earnings Per Share.

  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.


</TABLE>

<PAGE>
F-1


                         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,
2001 and 2000, 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, 2001. 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 financial statements referred to above present fairly,
in all material  respects,  the financial  position of First  Montauk  Financial
Corp.  and  subsidiaries  as of December  31, 2001 and 2000,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2001 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

                                         Schneider & Associates LLP

Jericho, New York
March 25, 2002

<PAGE>
F-2


<TABLE>
<CAPTION>


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

                                                                                              December 31,
                                                                                        2001                2000
                                                                                        ----                ----
ASSETS
Cash and cash equivalents                                                           $ 1,779,554        $ 3,701,010
Due from clearing firms                                                               4,146,410          2,405,666
Trading and investment account securities                                             1,199,102          3,975,309
Employee and broker receivables                                                       2,105,620          1,609,666
Global leases receivable                                                                  6,491            174,661
Notes receivable                                                                             --             18,000
Due from officers                                                                       202,964            175,068
Property and equipment - net                                                          1,631,801          2,304,533
Income tax refunds receivable                                                         1,069,442                 --
Deferred income taxes - net                                                             930,000          1,721,262
Other assets                                                                          1,156,178            827,888
                                                                                     ----------         ----------
     Total assets                                                                   $14,227,562        $16,913,063
                                                                                    ===========        ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deferred income                                                                     $ 4,783,333        $ 3,933,333
Securities sold, but not yet purchased, at market                                       245,078            386,459
Notes payable                                                                           277,376            559,179
Commissions payable                                                                   3,647,170          1,637,733
Accounts payable                                                                        490,845            450,974
Accrued expenses                                                                      1,434,885            840,578
Income taxes payable                                                                      7,111            875,786
Capital leases payable                                                                  542,210            138,995
Other liabilities                                                                       506,876            380,635
                                                                                     ----------          ---------
     Total liabilities                                                               11,934,884          9,203,672
                                                                                     ----------          ---------

Temporary equity - stock subject to redemption                                            6,500              6,500

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,
     331,190 and 349,511 shares issued and outstanding, respectively;
     liquidation preference:  $1,655,950 and $1,747,555, respectively                    33,119             34,951
Common Stock, no par value, 30,000,000 shares
     authorized, 8,622,284 and 9,309,309 shares issued,
     8,622,284 and 8,822,409 shares outstanding, respectively                         3,434,642          4,063,397
Additional paid-in capital                                                            3,950,542          4,253,765
Retained earnings (accumulated deficit)                                              (5,076,055)           230,921
Less:  Deferred compensation                                                            (56,067)          (393,120)
Less:  Treasury stock, at cost (-0- and 486,900
     shares, respectively)                                                                   --           (487,023)
                                                                                     ----------         ----------
     Total stockholders' equity                                                       2,286,181          7,702,891
                                                                                     ----------         ----------
     Total liabilities and stockholders' equity                                     $14,227,565        $16,913,063
                                                                                    ===========        ===========


                               See notes to consolidated financial statements.
</TABLE>

<PAGE>
F-3


<TABLE>
<CAPTION>

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

                                                                               Years ended December 31,
                                                                        2001             2000               1999
                                                                        ----             ----               ----
Revenues:
Commissions                                                         $37,807,870      $46,529,771       $40,516,625
Principal transactions                                                8,021,887        7,131,079        14,000,680
Investment banking                                                    1,483,210        2,416,711           439,065
Interest and other income                                             3,907,448        3,252,325         2,628,246
                                                                     ----------        ---------         ---------
     Total revenues                                                  51,220,415       59,329,886        57,584,616
                                                                     ==========       ==========        ==========
Expenses:
Commissions, employee compensation
     and benefits                                                    42,356,207       46,800,661        42,137,968
Clearing and floor brokerage                                          3,247,219        4,003,345         4,109,961
Communications and occupancy                                          3,249,389        2,731,681         2,697,433
Legal matters and related costs                                       2,415,374        1,181,115         1,395,008
Write down of Notes Receivable - Global
 Financial Corp.                                                             --          239,183           100,000
Loss on Global lease settlements                                             --               --           600,416
Other operating expenses                                              5,076,806        4,862,158         3,545,308
Interest                                                                174,632          160,230           166,104
                                                                     ----------       ----------        ----------
     Total expenses                                                  56,519,627       59,978,373        54,752,198
                                                                     ----------       ----------        ----------

Income (loss) before income taxes                                    (5,299,212)        (648,487)        2,832,418
Provision for income taxes (income tax benefit)                         (90,989)           6,721           549,140
                                                                      ---------       ----------        ----------

Income (loss) before extraordinary loss                              (5,208,223)        (655,208)        2,283,278
Extraordinary loss - extinguishment of debt,
     net of tax                                                              --          (34,200)               --
                                                                     ----------       ----------        ----------
Net income (loss)                                                   $(5,208,223)     $  (689,408)      $ 2,283,278
                                                                    ===========      ===========       ===========
Net income (loss) available to common
     stockholders                                                   $(5,306,976)     $  (792,136)      $ 2,215,528
                                                                    ===========      ===========       ===========
Per share of Common Stock:
     Basic:
     Before extraordinary loss                                    $        (.61)     $     (0.08)      $      0.22
     Extraordinary loss                                                      --               --               --
                                                                    ------------     -------------     -----------
     Net income (loss)                                            $        (.61)     $     (0.08)      $      0.22
                                                                    ============     =============     ===========

     Diluted:
     Before extraordinary loss                                    $        (.61)     $     (0.08)      $      0.21
                                                                    ------------     -------------     -----------
     Extraordinary loss                                                       --               --               --
     Net income (loss)                                            $        (.61)     $     (0.08)      $      0.21
                                                                    ============     =============     ===========

Weighted average common shares
     outstanding - basic                                              8,704,355        9,450,055         9,878,129
                                                                    ============     =============     ===========

Weighted average common and common
     equivalent shares outstanding - diluted                          8,704,355        9,450,055        11,262,708
                                                                    ============     =============     ===========


                                  See notes to consolidated financial statements.
</TABLE>
<PAGE>
F-4

<TABLE>

                                            FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                       FOR THE PERIOD FROM JANUARY 1, 1999 TO DECEMBER 31, 2001
<S>                                              <C>           <C>              <C>             <C>        <C>


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


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

Reversal of deferred compensation                       --             --              --           --        (303,223)
Amortization of deferred compensation                   --             --              --           --              --
Repurchase of common stock                              --             --              --           --              --
Cancellation of treasury shares                   (723,667)      (630,587)             --           --              --
Conversion of preferred stock
   into common stock                                36,642          1,832         (18,321)      (1,832)             --
Payment of dividends                                    --             --              --           --              --
Net loss for the year                                   --             --              --           --              --
                                                 ---------      ---------         --------      -------      ---------

Balances at December 31, 2001                    8,622,284     $3,434,642         331,190      $33,119      $3,950,542
                                                 =========     ==========         =======      =======      ==========


</TABLE>
<PAGE>
F-5

<TABLE>


                                            FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                       FOR THE PERIOD FROM JANUARY 1, 1999 TO DECEMBER 31, 2001
<S>                                        <C>               <C>               <C>            <C>         <C>


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

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

Reversal of deferred compensation                  --            303,223             --             --               --
Amortization of deferred compensation              --             33,830             --             --           33,830
Repurchase of common stock                         --                 --       (236,767)      (143,564)        (143,564)
Cancellation of treasury shares                    --                 --        723,667        630,587               --
Conversion of preferred stock
   into common stock                               --                 --             --             --               --
Payment of dividends                          (98,753)                --             --             --          (98,753)
Net loss for the year                      (5,208,223)                --             --             --       (5,208,223)
                                           ----------           --------        -------        -------       ----------
Balances at December 31, 2001             $(5,076,055)         $(56,067)             --   $         --      $ 2,286,181
                                           ==========           ========        =======        =======       ==========
</TABLE>
<PAGE>
F-6
<TABLE>
<CAPTION>

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

                                                                               Years ended December 31,
                                                                        2001              2000             1999
                                                                        ----              ----             ----
Cash flows from operating activities:
     Net income (loss)                                              $(5,208,223)     $  (689,408)      $ 2,283,278
Adjustments to reconcile net income (loss)
     to net cash provided by (used in)
     operating activities:
     Depreciation and amortization                                      563,685          600,626           539,306
     Amortization of deferred compensation                               33,830          288,209           195,841
     Amortization of bond discount                                       18,033           31,736            10,988
     Amortization of deferred gain                                       11,350               --                --
     Loan reserves and write-offs                                       500,000          389,823           100,000
     Loss on Global lease settlements                                        --               --           377,667
     Other                                                                   --          (1,448)                --
     Increase (decrease) in cash attributable to
      changes in assets and liabilities:
     Due from clearing firms                                         (1,740,744)       4,056,680        (3,586,144)
     Trading and investment account securities                        2,776,207         (499,418)         (742,631)
     Employee and broker receivables                                   (495,954)      (1,157,381)          145,927
     Due from officers                                                  (27,896)         (42,314)           (1,253)
     Income tax refund receivable                                    (1,069,442)              --                --
     Deferred income taxes - net                                        791,262       (1,057,006)           36,499
     Other assets                                                      (132,241)         651,005          (247,885)
     Deferred income                                                    850,000        3,933,333                --
     Securities sold, but not yet purchased                            (141,381)         206,179          (146,767)
     Commissions payable                                              2,009,437       (1,073,003)        1,179,092
     Accounts payable                                                    39,868          (74,835)         (276,689)
     Accrued expenses                                                   594,307         (231,974)          167,398
     Income taxes payable                                              (868,675)         365,560           510,226
     Other liabilities                                                   88,094         (363,337)          378,631
                                                                      ---------        ---------         ---------
         Total adjustments                                            3,799,740        6,022,435        (1,359,794)
                                                                      ---------        ---------        ----------
         Net cash provided by (used in)
          operating activities                                       (1,408,483)       5,333,027           923,484
                                                                      ----------       ---------        -------

Cash flows from investing activities:
     Issuance of notes receivable                                            --               --          (207,000)
     Collection of notes receivable                                      18,000           74,708           102,197
     Payment for Global leases receivable                                    --               --           (12,532)
     Collection of Global leases receivable                             168,170          649,652           619,497
     Additions to property and equipment                               (308,061)        (722,205)         (658,342)
     Other assets                                                      (196,049)         (39,150)          (23,867)
                                                                       --------          -------           -------
         Net cash used in investing activities                         (317,940)         (36,995)         (180,047)
                                                                       --------          -------           -------
                                                                                                           (continued)

                                         See notes to consolidated financial statements.
</TABLE>
<PAGE>
F-7
<TABLE>
<CAPTION>

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

                                                     (continued)
<S>                                                                    <C>            <C>                 <C>
                                                                               Years ended December 31,
                                                                        2001              2000             1999
                                                                        ----              ----             ----
Cash flows from financing activities:
     Payments of notes payable                                         (299,836)        (896,364)         (227,943)
     Proceeds from capital lease financing                              606,195               --                --
     Repurchase of common stock                                        (143,564)      (1,460,740)         (222,624)
     Payments of capital leases payable                                (259,075)        (122,669)         (111,915)
     Payment of preferred stock dividends                               (98,753)        (102,728)          (67,750)
     Proceeds from exercise of stock
      options and warrants                                                   --           55,920           204,841
     Other assets                                                            --          244,579          (244,579)
                                                                      ----------      ----------          ---------
         Net cash used in financing activities                         (195,033)      (2,282,002)         (669,970)
                                                                      ----------       ----------          --------
Net increase (decrease) in cash and
     cash equivalents                                                (1,921,456)       3,014,030            73,467
Cash and cash equivalents at beginning of
     year                                                             3,701,010          686,980           613,513
                                                                      ----------       ---------           --------
Cash and cash equivalents at end of year                            $ 1,779,554      $ 3,701,010        $  686,980
                                                                      ==========       =========           ========


Supplemental disclosures of cash flow information: Cash paid during the period
     for:
         Interest                                                 $     174,632    $     160,230    $      166,104
         Income taxes                                             $     894,852    $     725,800    $        5,232

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

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

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

Property and equipment financed under
     capital leases                                               $     662,290    $          --    $           --

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



                               See notes to consolidated financial statements.

</TABLE>




<PAGE>
F-8



                         FIRST MONTAUK FINANCIAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1 -        NATURE OF BUSINESS

     First Montauk  Financial  Corp.  (the  Company) is a holding  company whose
principal  subsidiary,  First Montauk  Securities  Corp.  (FMSC),  is 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.

     Certain  items  in  the  2000  and  1999  financial  statements  have  been
reclassified to conform with the current year's presentation.

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.

     Advances received under the Company's financial agreement with its clearing
firm (see Note 3) are  deferred and  amortized  over the  remaining  term of the
agreement on a straight-line basis.

Advertising

     Advertising  costs are expensed as incurred and totaled $67,000,  $348,000,
and $398,000 in 2001, 2000, and 1999, 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  consisted  of money
market funds at December 31, 2001 and 2000.

<PAGE>
F-9


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:



                                           Year ended December 31,
                                    2001            2000            1999
                                    ----            ----            ----

       Stock options             5,243,998       4,509,698           --
       Warrants                  9,242,338       9,242,338       9,242,338
       Convertible debt (as
        if converted)              345,263         345,263           --
       Convertible preferred
        stock (as if converted)    662,380         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

     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  accounts for  stock-based  compensation in accordance with APB
Opinion  No.  25,   "Accounting   for  Stock  Issued  to  Employees"   and  FASB
Interpretation  44,  "Accounting  for  Certain   Transactions   Involving  Stock
Compensation".  Pursuant to these  accounting  standards,  the  Company  records
deferred  compensation  for share  options  granted to  employees at the date of
grant based on the difference  between the exercise price of the options and the
market value of the underlying  shares at that date.  Deferred  compensation  is
amortized  to  compensation  expense over the vesting  period of the  underlying
options.  No  compensation  expense is recorded for fixed stock options that are
granted to employees and directors at an exercise price equal to the fair market
value of the common stock at the time of the grant.

     For variable stock options,  compensation  expenses are recognized over the
vesting period based on the difference,  if any, between the quoted market price
of the Company's stock on the last trading day of each reporting  period and the
exercise price of the option.

     See Note 16 for pro forma disclosures  required in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation".

     Stock options granted to non-employees are recorded at their fair value, as
determined  in  accordance  with SFAS No.  123 and  Emerging  Issues  Task Force
Consensus No. 96-18,  and recognized over the related  service period.  Deferred
compensation  charges  for options  granted to  non-employees  are  periodically
re-measured during the option vesting periods.
<PAGE>
F-10



Recent pronouncements of the Financial Accounting Standards Board

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  ("FAS  133"),  "Accounting  for
Derivative  Instruments and Hedging Activities",  which became effective for the
Company  during the first quarter of 2001.  FAS 133 requires the  recognition of
all  derivatives as either assets or liabilities in the Company's  balance sheet
and measurement of those instruments at fair value. To date, the Company has not
entered into any derivative or hedging activities, and, as such, the adoption of
FAS 133, as amended, has not affected its consolidated financial statements.

     In June 2001,  the Financial  Accounting  Standards  Board  finalized  FASB
Statements No. 141, Business Combinations ("FAS 141"), and No. 142, Goodwill and
Other  Intangible  Assets ("FAS 142").  FAS 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interest  method of
accounting for business combinations initiated after June 30, 2001. FAS 141 also
requires  that the  Company  recognize  acquired  intangible  assets  apart from
goodwill if the  acquired  intangible  assets  meet  certain  criteria.  FAS 141
applies to all  business  combinations  initiated  after  June 30,  2001 and for
purchase  business  combinations  completed  on or after July 1,  2001.  It also
requires, upon adoption of FAS 142, that the Company reclassifies, if necessary,
the carrying amounts of intangible  assets and goodwill based on the criteria in
FAS 141.

     FAS 142 requires,  among other things,  that  companies no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  FAS 142 requires that the Company  identify  reporting  units for the
purposes of assessing  potential  future  impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the  guidance in FAS 142.  FAS 142 is required to be applied in
fiscal  years  beginning  after  December  15,  2001 to all  goodwill  and other
intangible assets recognized at that date,  regardless of when those assets were
initially  recognized.  FAS 142 requires the Company to complete a  transitional
goodwill  impairment test six months from the date of adoption.  The adoption of
FAS  141  and 142 has not  had a  material  impact  on the  Company's  financial
statements.

     In August 2001, the FASB issued FASB Statement No. 144,  Accounting for the
Impairment  or Disposal of  Long-Lived  Assets  ("FAS  144").  The new  guidance
resolves  significant  implementation  issues related to FASB Statement No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed  Of ("FAS  121").  FAS 144  supersedes  FAS 121,  but it retains its
fundamental  provisions.  It also  amends  Account  Research  Bulletin  No.  51,
Consolidated  Financial Statements,  to eliminate the exception to consolidate a
subsidiary  for which  control is likely to be  temporary.  FAS 144  retains the
requirement  of FAS 121 to  recognize  an  impairment  loss only if the carrying
amount of a long-lived asset within the scope of FAS 144 is not recoverable from
its undiscounted cash flows and exceeds its fair value.

     FAS 144 is effective for fiscal years  beginning  after  December 15, 2001,
and  interim  periods  within  those  fiscal  years,   with  early   application
encouraged. The Company adopted the provisions of FAS 144 in 2001 with no impact
on its financial statements.

NOTE 3 -        AMENDED AND RESTATED FISERV FINANCIAL AGREEMENT

     In May 2000,  FMSC entered into a ten-year  clearing  agreement with Fiserv
Securities, Inc. ("Fiserv"). In connection with the clearing agreement, FMSC and
Fiserv also entered into a financial agreement under which Fiserv was to provide
cash advances to FMSC under certain terms and conditions. Upon the conversion of
FMSC's  accounts to Fiserv in November 2000, it received an initial cash advance
of $4,000,000. As of February 1, 2001, the Company and FMSC 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 without
recourse to FMSC. 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.  The Company  received  another  scheduled  cash advance of  $1,250,000 in
November 2001.

<PAGE>
F-11



NOTE 4 -        TRADING AND INVESTMENT SECURITIES
<TABLE>
                <S>                                <C>              <C>             <C>               <C>
                                                                             December 31,
                                                                2001                            2000
                                                                ----                            ----

                                                                       Sold but                         Sold but
                                                                       not yet                          not yet
                                                       Owned           Purchased        Owned           Purchased
                                                       -----           ---------        -----           ---------
                Marketable:
                Municipal obligations              $    51,813      $        --     $     5,995       $       --
                Stocks                               1,001,705          230,923       3,490,353           110,113
                Corporate bonds                         37,031               --         191,362               --
                Options                                  5,120           14,155         163,867           276,346
                Other                                   34,223               --          35,249               --
                Nonmarketable securities                69,210               --          88,483               --
                                                     ---------          -------       ---------           -------
                                                    $1,199,102         $245,078      $3,975,309          $386,459
                                                    ==========         ========      ==========          ========

     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.

</TABLE>

NOTE 5 -        EMPLOYEE AND BROKER RECEIVABLES

                                                         December 31,
                                                    2001              2000
                                                    ----              ----

                Commission advances             $  611,896        $  251,512
                Forgivable loans                 1,148,624           606,473
                Other loans                        345,100           751,681
                                                 ---------         ---------
                                                $2,105,620        $1,609,666
                                                ==========        ==========


     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.  The loans are being  amortized to
expense  for  financial  reporting  purposes  over  the term of the  loan.  Loan
amortization expense was $483,651,  $129,986 and $88,253 in 2001, 2000 and 1999,
respectively.

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

NOTE 6 -        PROPERTY AND EQUIPMENT

                                                              December 31,
                                                           2001         2000
                                                           ----         ----

                Computer and office equipment          $ 2,611,856  $ 2,793,518
                Furniture and fixtures                   1,195,186    1,140,170
                Leasehold improvements                     802,790      785,190
                                                         ---------    ---------
                                                         4,609,832    4,718,878
                Less:  Accumulated depreciation
                       and amortization                 (2,978,031)  (2,414,345)
                                                        ----------   ----------
                                                       $ 1,631,801  $ 2,304,533
                                                        ==========   ==========

     Depreciation expense was $563,685,  $600,626 and $539,306 in 2001, 2000 and
1999, respectively.

<PAGE>
F-12


    During 2001, the Company  established a $500,000  reserve against  payments
previously made to a vendor for the development of  applications  software.  The
Company is currently seeking to recover its payments due to the vendor's failure
to complete the project.


NOTE 7 -        NOTES RECEIVABLE
                                                      2001              2000
                                                      ----              ----

                Global Financial Corp.             $   --             $18,000
                                                     ======            ======

     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. During 2000 and 1999, the Company recorded
loan  impairment  charges of $239,000 and  $100,000,  respectively,  based on an
evaluation of collectibility.


NOTE 8 -        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 9 -        NOTES PAYABLE
<TABLE>
                <S>                                                  <C>            <C>
                                                                        2001            2000
                                                                        ----            ----

                a)    Notes payable - bank                           $   --         $  52,994
                b)    Convertible promissory notes, net of discount   227,376         406,185
                c)    Subordinated notes payable                       50,000         100,000
                                                                      -------         -------
                                                                     $277,376        $559,179
                                                                      =======         =======
</TABLE>

     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  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
through  September  2002,  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.  The Company has not  registered the underlying
shares.

     c) Final note  installment of $50,000 payable in January 2002 with interest
at 8% per  annum.  The note is  subordinated  to the  claims of  FMSC's  general
creditors under a subordination agreement approved by the NASD.

<PAGE>
F-13


NOTE 10 -       GLOBAL LEASE SETTLEMENTS

     During 1999, the Company  entered into  settlement  agreements with various
Global lease investors.  Under terms of those agreements,  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 9) 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.

     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 were valued at $985,543,  the present value of the lease
receivables assigned in the offering.

NOTE 11 -       INCOME TAXES

     The  provision  for income  taxes  (income  tax  benefit)  consists  of the
following:
<TABLE>
<S>                                               <C>           <C>               <C>
                                                            Year ended December 31,
                                                      2001            2000            1999
                                                      ----            ----            ----

                Currently payable (refundable):
                      Federal                     $(893,978)    $   838,225       $ 301,058
                      State                          11,727         225,502         211,583
                                                    -------       ---------         -------
                                                   (882,251)      1,063,727         512,641
                                                    -------       ---------         -------
                Deferred:
                      Federal                       483,978        (817,223)        138,673
                      State                         307,284        (239,783)       (102,174)
                                                    -------       ---------        --------
                                                    791,262      (1,057,006)         36,499
                                                    -------       ---------        --------
                Provision for income taxes
                      (income tax benefit)       $  (90,989)    $     6,721       $ 549,140
                                                    =======       =========        ========
</TABLE>

     Following is a  reconciliation  of the income tax provision  (benefit) with
income taxes based on the federal statutory rate:

<TABLE>
        <S>                                          <C>               <C>             <C>
                                                                      December 31,
                                                         2001             2000            1999
                                                         ----             ----            ----

        Expected federal tax at statutory rate       $(1,802,142)      $(220,319)      $ 963,421
        Non-deductible expenses                           65,400          32,219          20,998
        State taxes, net of federal tax effect          (230,898)        (44,355)        172,956
        Other                                              --              --            (66,395)
        Change in valuation allowance                  1,876,651         239,176        (541,840)
                                                       ---------         -------        --------
                                                     $   (90,989)      $   6,721       $ 549,140
                                                       =========         =======        ========
</TABLE>
<PAGE>
F-14


     The tax effects of the temporary  differences that give rise to significant
portions of the deferred tax assets and  liabilities as of December 31, 2001 and
2000 are:


                                                           December 31,
                                                    2001                2000
                                                    ----                ----

       Deferred tax assets:
          Deferred income                       $ 1,913,333         $1,573,333
          Reserves and allowances                   849,213             75,188
          Tax loss carryforwards                    165,163            180,986
          Stock-based compensation                  270,092            247,819
          Other                                      37,655             72,741
                                                -----------         ----------
        Sub total                                 3,235,456          2,150,067
        Valuation allowance                      (2,305,456)          (428,805)
                                                -----------         ----------
        Net deferred tax assets                 $   930,000         $1,721,262
                                                ===========         ==========


     The  Company  has  recorded  valuation  allowances  to offset tax  benefits
arising  from  deferred  revenue,  reserves,  state tax loss  carryforwards  and
stock-based compensation because their realization is uncertain.

     The Company has  approximately  $2.7  million of state net  operating  loss
carryforwards available to offset future taxable income.

NOTE 12 -       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.

     During the year,  the  Company  entered  into two  capital  leases  under a
sale/leaseback  arrangement with a leasing company. The transactions resulted in
a gain of approximately  $45,000,  which has been deferred and will be amortized
on a straight-line  basis over the related lease terms.  The leases are together
payable in 36 monthly  installments of $21,000 and an additional 12 installments
of $3,900.

     Future minimum lease payments as of December 31, 2001 are as follows:

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

               2002                             $248,916          $1,348,200
               2003                              248,916           1,106,446
               2004                              114,396           1,060,517
               2005                               15,711             295,341
               2006                                --                169,500
                                                 -------           ---------
        Total minimum lease payments            627,939           $3,980,004
                                                                  ==========
        Less:  Amount representing
         interest on capital leases             (85,729)
                                                -------
                                               $542,210
                                                =======

Operating lease expense for 2001, 2000 and 1999 totaled $1,253,711, $955,866 and
$947,732, respectively.
<PAGE>
F-15



Employment agreements

     In January 2001, the Company  entered into new employment  agreements  with
its President and Vice-President. The agreements run for three years and provide
for annual  increases in base  salaries,  and  customary  fringe  benefits.  The
officers  are also  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 $9.5 million including  statutory interest and punitive
damages.  The claimant alleges  violations of various  provisions of federal and
state securities laws. FMSC is vigorously defending against this claim.

     FMSC is also a respondent in several claims arising from customer purchases
of certain high yield  corporate  bonds which declined in market value after the
purchases  were  made.  The  claims  allege,  among  other  charges,  unsuitable
recommendations  and/or  improper use of margin,  and seek aggregate  damages of
approximately $2,500,000. FMSC is vigorously defending these actions.

     FMSC  is  also  a  respondent  or  co-respondent  in  various  other  legal
proceedings which are incidental to its securities business.  FMSC is contesting
these claims and believes that there are meritorious defenses in each case.

     After considering all relevant facts,  available insurance coverage and the
advice of  counsel,  management  believes  that  significant  adverse  judgments
against  FMSC  from  pending  litigation  could  have a  material  impact on the
Company's  financial  condition,  results of  operations,  and cash flows in any
particular  quarterly or annual period, or in the aggregate.  As of December 31,
2001, the Company has established a $995,000  reserve for litigation  costs that
are probable and can be reasonably estimated. The reserve is included in accrued
liabilities. Management cannot give assurance that this reserve will be adequate
to abosrb actual costs that are subsequently incurred.

NOTE  13  -  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>
F-16


     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  ($245,078  and  $386,459 at December 31, 2001 and 2000,
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 14 -       401(k) PLAN

     The Company  sponsors a defined  contribution  pension  plan  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 2001,
2000 and 1999 were $-0-, $-0- and $74,132, respectively.

NOTE 15 -       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
2001):


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

                                                              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 and December 31, 2001      3,000           $  6,500
                                                             =======            ========

</TABLE>

<PAGE>
F-17



NOTE 16 -       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.

     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.
<PAGE>
F-18


     A summary of the  activity  in the  Company's  stock  option  plans for the
three-year period ended December 31, 2001 is presented below:

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

        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
            Granted                                     1,130,000          1.29
            Canceled                                     (395,700)         1.69
                                                        ---------

        Options outstanding, December 31, 2001          5,243,998          1.73
                                                        =========


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

        Shares of common stock available
         for future grant                                              5,899,802
        Weighted-average grant date fair value of options
         granted during each year using the Black-Scholes
         option pricing model
                1999                                                     $.70
                2000                                                     $.49
                2001                                                     $.21

     The Company  applies APB No. 25 in accounting  for employee  stock options.
Accordingly, 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 2001, 2000 and 1999 totaled $33,830, $288,209
and $195,841, respectively.
<PAGE>
F-19


     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 2001, 2000 and 1999:

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

                                                           2001            2000           1999
                                                           ----            ----           ----

        Risk free interest rates                            4.46%           6.07%           5.76%
        Expected option lives                           2.4 years       2.4 years       2.5 years
        Expected volatilities                                 83%             72%           48.5%
        Expected dividend yields                               0%              0%              0%

        The Company's pro forma information follows:

        Net income (loss)                                  2001            2000           1999
                                                           ----            ----           ----

        As reported                                     $(5,208,223)    $  (689,408)    $2,283,278
        Pro forma                                        (5,676,242)     (1,152,958)     2,109,706

        Basic income (loss) per share
           As reported                                  $      (.61)    $      (.08)    $      .22
           Pro forma                                    $      (.65)    $      (.13)    $      .21


        Diluted income (loss) per share
           As reported                                  $      (.61)    $      (.08)    $      .21
           Pro forma                                    $      (.65)    $      (.13)    $      .19
</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.

     Deferred  compensation  resulting  from the issuance of  nonemployee  stock
options of approximately $56,067 at December 31, 2001 will be charged to expense
over the  remaining  vesting  period of the  related  options.  Amortization  of
deferred compensation totaled $33,830,  $288,209, and $195,841 in 2001, 2000 and
1999, respectively.

     Additional  information  as of  December  31,  2001  with  respect  to  all
outstanding options is as follows:

<TABLE>
        <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
        ---------------        -----------        ----              -----        -----------         -----

        $0.44 - $0.67             134,000         5.51             $0.54             58,800         $0.55
        $0.70 - $1.09             865,000         2.33              0.90            853,000          0.90
        $1.20 - $1.80           1,353,998         2.44              1.53            942,899          1.52
        $1.94 - $2.75           2,891,000         3.04              2.13          1,786,000          2.17
                                ---------         ----              ----          ---------          ----

        $0.44 - $2.75           5,243,998         2.83             $1.73          3,640,699         $1.68
                                =========         ====              ====          =========          ====
</TABLE>

<PAGE>
F-20


NOTE 17 -       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.  There are
currently  3,072,446  Class  A,  Class  B  and  Class  C  warrants  outstanding,
respectively.

     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). During 2001,  18,321
preferred shares were converted into 36,642 shares of common stock.

     The Company is presently authorized to issue 4,375,000 additional shares of
Preferred Stock,  none of which has been issued at December 31, 2001. The rights
and  preferences,  if  any,  to be  given  to  these  preferred  shares  will be
designated at the time of issuance.
<PAGE>
F-21


Stock Repurchase Program

     During 2001 and 2000, the Company  repurchased 236,767 and 1,105,034 shares
for $143,564 and  $1,460,740,  respectively,  under a stock  repurchase  program
authorized by the board of directors.

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 18 -       FAIR VALUE OF FINANCIAL INSTRUMENTS

     Substantially  all of the Company's  financial  instruments at December 31,
2001 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,  or the  use of  mark-to-market
accounting for marketable securities.

NOTE 19 -       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, 2001, FMSC had net capital of $1,039,165,  which was
$726,396 in excess of its  required  net capital of  $312,769.  FMSC's  ratio of
aggregate indebtedness to net capital was 4.51 to 1.

NOTE 20 -       UNAUDITED QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<S>                                          <C>              <C>              <C>                <C>

                                               March 31,        June 30,       September 30,       December 31,
                                                 2001             2001             2001                2001
                                                 ----             ----             ----                ----

Revenues                                     $11,712,547      $14,608,537      $12,192,917        $12,706,414
Expenses                                      12,331,999       15,391,658       14,267,380         14,437,601
Net loss                                        (619,452)        (783,121)      (2,074,463)        (1,731,187)
Net loss available to common
   stockholders                                 (642,918)        (807,961)      (2,099,303)        (1,756,794)

Loss per common share:

   Net loss available to common
      stockholders - basic                          (.07)            (.09)            (.24)              (.20)
   Net loss available to common
      stockholders - diluted                        (.07)            (.09)            (.24)              (.20)


                                               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
Expenses                                      22,598,586         13,202,413      13,061,206         11,122,889
Net income (loss)                              1,888,320            109,647        (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)

</TABLE>
<PAGE>
F-22


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, 2001         $  428,805      $1,876,651          $--  $           --       $2,305,456
   Year ended December 31, 2000            189,629         239,176           --              --          428,805
   Year ended December 31, 1999            731,469              --           --        (541,840)         189,629

Reserve for notes receivable:
   Year ended December 31, 2001       $         --   $          --          $--  $           --    $          --
   Year ended December 31, 2000                 --         239,000           --        (239,000)              --
   Year ended December 31, 1999          1,775,000         100,000           --      (1,875,000)              --

</TABLE>

 <PAGE>



EXHIBIT 10.26


                                    SUBLEASE


     Sublease dated as of May 31, 2001 between ELOQUENT,  INC., having an office
at  2000  Alameda  de  las  Pulges,  Suite  100,  San  Mateo,  California  94403
("Sublessor") and FIRST MONTAUK FINANCIAL CORP., a New York corporation,  having
an office at 328 Newman Springs Road, Red Bank, New Jersey 07741("Subtenant").

     In consideration of Ten ($10.00) Dollars,  in hand paid, each to the other,
the receipt  and  sufficiency  of which is hereby  acknowledged,  Sublessor  and
Subtenant agree as follows:

1.       Demise and Term.

     (a) Sublessor hereby Subleases to Subtenant, and the Subtenant hereby hires
from Sublessor,  the premises consisting of a portion of the twenty-fifth (25th)
floor (the  "Subleased  Premises") in the building known as 40 Wall Street,  New
York, New York (the  "Building")  being the entire premises that has been leased
to  Sublessor  under a lease dated as of January 5, 2000 between 40 Wall Street,
LLC, as landlord  (herein,  "Landlord"),  and  Sublessor,  as tenant (herein the
"Prime Lease").

     (b) The term of this Sublease  (herein,  the "Term") shall  commence on the
date hereof (herein,  the  "Commencement  Date") and shall expire on January 30,
2005 (the "Expiration Date"),  unless sooner canceled or otherwise terminated as
provided in this Sublease.

2.       Rent.

(a)

     (i) Subtenant  shall pay to Sublessor  fixed rent (the "Fixed Rent") at the
rate of One Hundred  Ninety-Two  Thousand  One Hundred  Five  Dollars and 00/100
($192,105.00) per annum ($16,008.75 per month);

     (ii) The Fixed Rent shall be paid in equal monthly  installments of Sixteen
Thousand Eight and 75/100 Dollars ($16,008.75),  payable in advance on the first
day of each  calendar  month during the Term,  commencing  on June 1, 2001,  and
shall  be,  at  Subtenant's  option,   either  (1)  delivered  to  Sublessor  at
Sublessor's  address  as set forth  above (or such  address as  Sublessor  shall
designate  by written  notice) or (2) sent to  Sublessor  via wire  transfer  in
immediately  available  federal  funds to such account in such bank as Sublessor
shall designate,  from time to time,  except that the sum of $16,008.75 shall be
paid by Subtenant to Sublessor on the  execution  and delivery of this  Sublease
and shall be applied by Sublessor to the first monthly installment of Fixed Rent
becoming due hereunder on June 1, 2001.  Subtenant shall provide  Sublessor with
at least thirty (30) days' prior  written  notice if elects to change its method
of paying Fixed Rent, as provided in clauses (1) and (2) above.  Notwithstanding
the  foregoing,  provided  that  Subtenant  is not then in  default  beyond  any
applicable  grace  period of any of its  obligations  or  covenants  under  this
Sublease,  Subtenant  shall not be required to pay its  monthly  installment  of
Fixed Rent due on June 1, 2002.

(b)

     (i)  Subtenant   shall  further  pay  to  Sublessor  any  and  all  amounts
("Additional  Rent") payable by Sublessor to Landlord pursuant to the provisions
of the Prime Lease,  as hereby  modified,  for all periods  occurring  within or
attributable  to the Term or otherwise to be paid by Subtenant  pursuant to this
Sublease.  Such  Additional  Rent shall be (1) payable,  at Subtenant's  option,
pursuant to the methods set forth in clauses 2(a)(1) and 2(a)(2) above,  and (2)
due (10) days after notice from Sublessor or five (5) days prior to the due date
of such  Additional  Rent under the Prime Lease,  whichever is later.  Subtenant
shall provide  Sublessor with at least thirty (30) days' prior written notice if
elects to change its method of paying Additional Rent. Upon Sublessor's  receipt
of any backup documentation relating to Additional Rent, Sublessor shall furnish
Subtenant with copies  thereof.  For purposes of determining the amounts payable
as Additional Rent by Subtenant pursuant to this paragraph  2(b)(i),  any of the
aforesaid  amounts  payable by  Sublessor  under the Prime  Lease  which cover a
fiscal or other period any part of which occurs before the Commencement  Date or
after the Expiration Date, shall be apportioned  according to the number of days
in such period which occur within the portion of the Term of this Sublease.
<PAGE>



     (ii)  Subtenant  shall pay all  charges  specifically  attributable  to the
Subleased  Premises  under the Prime  Lease and  Subtenant's  use and  occupancy
thereof,  including without limitation,  all charges for cleaning,  electricity,
supplemental  or  after  hours   air-conditioning   (whether  or  not  any  such
supplemental  air-conditioning  equipment is existing in the Demised Premises as
of the Commencement Date),  condenser water charges, and all other fees, charges
and expenses payable  separately to Landlord under the Prime Lease to the extent
requested,  caused  or  necessitated  by  Subtenant  or its  agents,  employees,
designees,  contractors  or  invitees  and which are not  furnished  by Landlord
without  additional  charge.  Such charges may be billed to Subtenant  either by
Sublessor or directly by the Landlord.  If billed by Subtenant,  such bill shall
include a copy of the invoice, if any, provided by Landlord.

(c)

     (i) All amounts  required to be paid under this Sublease by Subtenant shall
be deemed "rent".

     (ii) All rent shall be paid by  Subtenant  to  Sublessor in lawful money of
the United States,  without notice  (except as may be  specifically  provided in
this Sublease) or demand therefor, and without setoff, abatement,  counterclaim,
or other  deduction  of any amount for any reason  whatsoever  (except as may be
expressly permitted under this Sublease),  at the address of Sublessor set forth
at the  beginning of this  Sublease or to such other person and/or at such other
address as Sublessor shall have then designated by notice to Subtenant.

     (iii) No payment by  Subtenant  or receipt by  Sublessor  of an amount less
than the amount  required  to be paid  hereunder  shall be deemed  other than on
account of the earliest  unpaid rent; nor shall any  endorsement or statement on
any check,  letter, or other document be deemed an accord and satisfaction,  and
Sublessor  may accept  any check or payment  without  prejudice  to  Sublessor's
rights under this Sublease,  including  Sublessor's right to recover the balance
due or to pursue any other right or remedy available to Sublessor.

     (d)  Any  provision  in the  Prime  Lease  referring  to  "fixed  rent"  or
"additional rent" incorporated  herein by reference shall be deemed to refer to,
respectively, the Fixed Rent and Additional Rent due under this Sublease.

     (e) If  Subtenant  fails to pay in a timely  manner  any  rent  under  this
Sublease  and said rent shall not be paid by the tenth (10th) day after the same
become due and payable,  (i) interest shall accrue on the amount  overdue,  from
the date on which that amount became due and payable until paid, at the rate set
forth in Article  48 of the Prime  Lease,  and (ii) a late  charge of three (3%)
percent  shall accrue and be payable by Subtenant to the Sublessor on the amount
overdue to  compensate  Sublessor  for the  administrative  burden  and  expense
incurred in  connection  with any such late payment.  Nothing  contained in this
subsection, and no acceptance of interest or late charges by Sublessor, shall be
construed to extend or change the time for payment of rent or to impair,  limit,
or  otherwise  affect any other  rights or  remedies  Sublessor  may have as the
result of Subtenant's failure to timely pay rent.

     (f) Subtenant agrees to pay directly to the applicable  authority,  all use
and occupancy  taxes assessed or imposed on the rents payable by Subtenant under
this  Sublease,  to file  all  applicable  returns  and  filings  in  connection
therewith  and to provide  Sublessor  with  copies  and  evidence  thereof  upon
request.

3.       Subject To Prime Lease:

     (a) This  Sublease  is and shall be subject  and  subordinate  to the Prime
Lease and to all  matters to which the Prime  Lease is and shall be subject  and
subordinate.

     (b) If for any  reason the term of the Prime  Lease  shall end prior to the
Expiration  Date, then the Term of this Sublease shall  thereupon  automatically
terminate, and, unless such termination shall be due to the Sublessor not paying
the rent payable under the Prime Lease at a time when the Subtenant has paid all
rents due and  payable  under this  Sublease,  Sublessor  shall not be liable to
Subtenant by reason thereof.

     (c)  Notwithstanding  anything to the contrary  contained in this Sublease,
Subtenant does not have any right in respect of the Subleased  Premises  greater
than Sublessor's rights under Prime Lease.

<PAGE>



4.       Incorporation by Reference.

(a)

     (i) The provisions,  terms, conditions and covenants of the Prime Lease are
incorporated  by reference  into this Sublease  such that,  except to the extent
that they are  inapplicable or  specifically  modified by the provisions of this
Sublease  for the  purposes  of  incorporation  by  reference,  each  and  every
provision,  term,  condition  and  covenant of the Prime Lease  binding  upon or
inuring to the  benefit of the  Landlord  thereunder  shall,  in respect of this
Sublease,  bind or inure to the benefit of Sublessor,  and each provision of the
Prime Lease  binding  upon or inuring to the benefit of the "Tenant" or "Lessee"
thereunder  shall, in respect of this Sublease,  bind or inure to the benefit of
Subtenant,  with the same  force  and  effect as though  those  provisions  were
completely set forth in this document except Sublessor shall not be obligated to
perform any of the obligations of the Landlord thereunder.

     (ii) For the purpose of  incorporation  by reference of  provisions  of the
Prime Lease into this Sublease:  (A) the words "Landlord" and "Tenant", or words
of similar import, wherever used in the Prime Lease, shall be construed to mean,
respectively,  the  Sublessor and Subtenant  under this  Sublease,  (B) the word
"lease" or words of similar  import,  wherever  they appear in the Prime  Lease,
shall be  construed  to mean this  Sublease,  (C) the word  "rent"  and words of
similar import, wherever used in the Prime Lease, shall be construed to mean the
rent payable under this Sublease, and (D) the words "Term", "Commencement Date",
and "Expiration  Date",  or words of similar import,  wherever used in the Prime
Lease, shall be construed to mean,  respectively,  the term of this Sublease and
the dates set for the beginning and the end of the term of this Sublease.

     (iii)  To  the  extent   possible,   the  provisions  of  the  Prime  Lease
incorporated  by reference  into this Sublease  shall be construed as consistent
with and  complementary to the other provisions of this Sublease.  If any of the
express  provisions of this Sublease  shall  conflict with any of the provisions
incorporated by reference,  such conflict shall be resolved in every instance in
favor of the express provisions of this Sublease.

     (b) In order to  facilitate  the  coordination  of the  provisions  of this
Sublease with those of the Prime Lease, the time periods contained in provisions
of the Prime Lease that are incorporated by reference into this Sublease and for
which the same action must be taken under both the Prime Lease and this Sublease
(such as, for example and without limitation,  the time period for the curing of
a default  under this  Sublease  that is also a default under the Prime Lease or
for the  response to a request by  Subtenant  for consent to an action for which
the  consent of  Landlord  is also  required),  are  changed  for the purpose of
incorporation  by reference by  shortening  or  lengthening  that period in each
instance  by five (5) days so that in each  instance  Subtenant  shall have that
much less time to observe or perform  hereunder than Sublessor has as the tenant
under the Prime Lease and  Sublessor  shall have that much more time to observe,
perform,  consent,  approve,  or otherwise act  hereunder  than the Landlord has
under the Prime  Lease.  In  instances  in which the same action is not required
under both the Prime Lease and this  Sublease,  the time  periods  contained  in
provisions  of the  Prime  Lease  that are  incorporated  by  reference  are not
changed.

     (c) To the extent that the Prime Lease requires that Sublessor,  as tenant,
obtain the written  consent of Landlord,  Subtenant  shall be required to obtain
both the prior written  consent of Landlord and  Sublessor.  Sublessor  shall be
under no  obligation  to  consent to or approve  any  matter  unless  consent or
approval  with regard to that  matter  shall have  already  been  obtained  from
Landlord, or unless such consent is simultaneously obtained,  whether or not the
Prime Lease,  as incorporated  by reference  herein,  requires that such consent
shall not be unreasonably withheld or delayed.  Nothing herein contained however
shall be deemed to require  Sublessor  to grant its  consent or  approval to any
matter  even where  Landlord's  consent or approval  has been  obtained or where
Landlord's consent is not to be unreasonably withheld or delayed.

<PAGE>



5.       Services.

     (a) All  systems  and  facilities  serving and  services  furnished  to the
Subleased  Premises and all maintenance,  repairs,  replacements,  restorations,
alterations,  and other work pertaining to the Subleased  Premises,  if any, are
not to be furnished or made by or otherwise be the obligation of Sublessor,  and
Subtenant shall look solely to Landlord for the furnishing of those items to the
extent of Landlord's  obligations  under the Prime Lease.  Without  limiting the
generality of the  foregoing,  (1) Sublessor  shall not be  responsible  for any
failure or  interruption,  for any  reason  whatsoever,  of any of the  services
supplied  at the  Subleased  Premises  or the  property  of which the  Subleased
Premises is a part by Landlord,  and (2) no failure to furnish,  or  impairment,
diminution or interruption  of, any of such services by Landlord under the Prime
Lease  shall  give  rise to any  (a)  abatement,  diminution,  or  reduction  of
Subtenant's  obligations under this Sublease,  or (b) constructive  eviction, in
whole or in part,  or (c)  liability  on the part of  Sublessor.  The  foregoing
notwithstanding,  if Sublessor  shall  actually  receive any abatement of all or
part of the rents  payable  under the Prime  Lease due to any of the  foregoing,
Subtenant shall similarly receive a corresponding and proportionate abatement of
the rents payable hereunder.

     (b)  Any  obligation  of  Sublessor  contained  in  this  Sublease  by  the
incorporation  by  reference of  provisions  of the Prime Lease may and shall be
deemed to be fully  observed  or  performed  by  Sublessor's  using  good  faith
efforts,  upon request of  Subtenant,  to cause the  Landlord to observe  and/or
perform such corresponding obligation of the Landlord under the Prime Lease, and
Sublessor  shall not be required to make any payment (other than to pay the rent
due under the Prime Lease if Subtenant  shall have timely paid all the rent then
due under this Sublease) or to take any action, and shall not otherwise have any
liability to Subtenant with respect to such  obligations.  Without  limiting the
generality  of the  foregoing,  the  obligation  of  Sublessor to use good faith
efforts  to cause the  observance  or  performance  by  Landlord  of  Landlord's
obligations under the Prime Lease shall not be construed as requiring  Sublessor
to pay any  money or incur  any cost or  liability  beyond  that for which it is
obligated under the Prime Lease or to institute or prosecute any legal action or
proceeding or to withhold any rent or risk any threat of  litigation.  All costs
reasonably  incurred by  Sublessor  at the  direction  or with the  knowledge of
Subtenant in seeking to cause the Landlord to perform its obligations  under the
Prime  Lease with  respect to the  Subleased  Premises  shall be  promptly  paid
directly by Subtenant or reimbursed by Subtenant to Sublessor,  as Sublessor may
direct.

     (c) In the event the Landlord shall fail to perform any of its  obligations
with respect to the Subleased  Premises,  then  Subtenant  shall give  Sublessor
prompt  written  notice thereof and Sublessor  shall,  at  Subtenant's  expense,
exercise  and enforce its rights  under the Prime Lease to cause the Landlord to
observe  and/or perform such  obligations.  Subtenant  shall  indemnify and hold
harmless  Sublessor  from and  against  claims made  against and losses,  costs,
damages and  liabilities  (including  reasonable  attorneys'  fees)  incurred by
Sublessor in connection with any such claim, action or proceeding  instituted or
prosecuted by Sublessor on behalf of the Subtenant.

<PAGE>


6.       Use.

     (a)  Subtenant  shall  use and  occupy  the  Subleased  Premises  only  for
executive and general  offices and for no other  purpose.  Without  limiting the
generality of the foregoing,  Subtenant shall not allow the use of the Subleased
Premises or any part thereof for (i) the preparation  and/or sale of food for on
or off premises  consumption  or (ii) use by a foreign or domestic  governmental
agency.

     (b) Subtenant  shall not make or cause,  suffer or permit the making of any
addition, change,  replacement,  installation,  or other alteration in or to the
Subleased  Premises without  obtaining the prior written consent of Sublessor in
each instance. Sublessor shall not unreasonably withhold or delay its consent to
non-structural  alterations in or to the Subleased Premises,  provided that such
alterations  shall have been  consented  to by the  Landlord  if the  Landlord's
consent  is  required  under the terms of the Prime  Lease,  and  provided  that
Subtenant shall remove such alterations and restore the Subleased  Premises,  to
the  condition  required  pursuant  to the  terms of the  Prime  Lease  upon the
expiration  of the term of the Prime Lease and provide  Sublessor  with adequate
security therefor.

     (c) Subtenant shall not,  without first obtaining the prior written consent
of both  Landlord  as  provided,  and if  required,  in the  Prime  Lease and of
Sublessor,  either  (i)  assign,  mortgage  or  encumber  its  interest  in this
Sublease;  (ii) permit this  Sublease  to be  assigned  by  operation  of law or
otherwise;  or (iii)  sublet  all or permit  the  subletting  of any part of the
Subleased  Premises  or permit the  occupancy  thereof by any  person,  party or
entity other than Subtenant.

     (d)  Subtenant  shall  maintain  and repair the  Subleased  Premises in the
condition   required  by  the  Prime  Lease  and  otherwise  perform  all  other
obligations of the tenant or lessee under the Prime Lease insofar as they relate
to the Subleased Premises during the Term of this Sublease.

     (e)  Subtenant  shall not do, or  permit  to be done  with  respect  to the
Subleased Premises,  anything that would constitute a breach or violation of any
term,  covenant,  or condition of the Prime Lease or other  default  under Prime
Lease on the part of the tenant or lessee thereunder.

     (f) In the event Subtenant shall be in default of any covenant of, or shall
fail to honor any obligation under this Sublease, Sublessor shall have available
to it all of the remedies  available to the Landlord  under the Prime Lease,  in
the event of a like default thereunder.

7.       Condition of Subleased Premises.

     (a)   Subtenant  is  leasing  and  accepts  the   Subleased   Premises  "AS
IS"condition as of the date hereof, the removal of Sublessor's personal property
and reasonable wear and tear between the date hereof and the  Commencement  Date
excepted. Without limiting the generality of the foregoing, Sublessor shall have
no obligation to make, supply, or perform any alterations,  services,  material,
fixtures,  equipment or decorations to the Subleased Premises.  In entering into
this Sublease, Subtenant has relied solely on such investigations,  examinations
and  inspections as Subtenant has chosen to make.  Subtenant  acknowledges  that
Sublessor  has  afforded   Subtenant  the  opportunity  for  full  and  complete
investigations,  examinations  and  inspections.  The  taking of  possession  by
Subtenant shall be deemed conclusive evidence that the same were in satisfactory
condition as of the Commencement Date.

<PAGE>


     (b) So long as Subtenant  shall not be in default  under this  Sublease and
this Sublease shall be in full force and effect,  Subtenant shall have the right
to use the items of personal property  described on Schedule "I" attached hereto
as and to the  extent  the  same  exist  in  the  Subleased  Premises  as of the
Commencement  Date  (herein,  the "Items").  Subtenant  acknowledges  that:  (1)
Sublessor has made no  representations  or warrantees with respect to the Items;
(ii)  Subtenant  agrees to accept the Items in their "as is" condition as of the
Commencement Date and assumes all risk of the condition,  operation,  fitness or
suitability of the same; (iii) Subtenant shall operate,  maintain, repair and/or
replace the Items to the extent required,  at Subtenant's sole cost and expense,
including  without  limitation,  making all payments and arrangements  under any
required service  contracts and operating  agreements,  it being understood that
Sublessor  shall not be required to incur any cost or expense to allow Subtenant
to utilize  any of the Items or to repair,  restore  or replace  the same;  (iv)
Subtenant shall  indemnify and hold the Sublessor  harmless from and against any
and all claims, loss, cost, damage,  liability or expense (including  reasonable
attorney's  fees and expenses) which Sublessor may sustain or incur by reason of
Subtenant's  and its  employees,  agents,  guests or invitees  use of the Items,
whether or not based,  in whole or in part,  upon any claim of negligence on the
part of the Sublessor;  (v) during the term of this Sublease, the Items shall be
the property of Sublessor and shall not be removed from the Subleased  Premises,
and (vi) upon the expiration of this  Sublease,  and provided that Subtenant has
paid to Sublessor all fees due and payable by Subtenant under this Sublease, the
Items shall become the property of Subtenant and all rights of Sublessor therein
or thereto shall be  extinguished.  Subtenant's  right to use the Items shall be
deemed  automatically  revoked  upon  the  expiration  or  termination  of  this
Sublease.  To the extent with respect to any of the Items,  any existing service
contracts or operating  agreements shall be in effect,  the same shall either be
(x) terminated by Sublessor prior to the Commencement Date, or (y) if assignable
to Subtenant  and  Subtenant  desires the same to be assigned to  Subtenant  and
Sublessor  desires to do so, assigned by Sublessor to Subtenant,  in which event
Sublessor  shall pay all charges  unpaid and accrued  thereunder  up to, but not
including, the Commencement Date.

     8.  Insurance.  Subtenant  shall  obtain  and keep in full force and effect
during the entire  term of this  Sublease,  at its sole cost and  expense,  such
insurance as is required to be carried  under the Prime Lease and in  compliance
with the provisions  thereof.  Subtenant shall, in addition to the parties to be
named as additional  insureds under the Prime Lease, cause Sublessor to be named
as additional  named  insured  thereunder.  Upon  execution and delivery of this
Sublease by Subtenant,  Subtenant  shall  deliver to Sublessor a certificate  of
insurance complying with the foregoing requirements.

     9. Fire and Other  Casualty.  In the event of any fire or other casualty in
or to the Subleased Premises,  the respective rights of Subtenants and Sublessor
shall be governed by Article 9 of the Prime Lease.

     10. Changes. This Sublease cannot be changed or terminated orally or in any
manner  other  than by a  written  agreement  executed  by both  parties,  which
agreement is consented to by the Landlord, if required by the terms of the Prime
Lease.

     11.  Successors  And  Assigns.  Except  as  may be  otherwise  specifically
provided in this  Sublease,  the  provisions of this  Sublease  shall extend to,
bind,  and inure to the  benefit  of the  parties  hereto  and their  respective
personal representatives, heirs, successors, and assigns.

     12. Brokerage.  Sublessor and Subtenant hereby represent to each other that
each such party,  for itself only,  has not dealt with any broker in  connection
with this Sublease other than Cushman & Wakefield,  Inc. (the "Broker") nor does
it have any  knowledge  of any other  broker who has been or has claimed to have
been involved or instrumental  in any way in bringing about this Sublease.  Each
party shall indemnify,  defend, and hold harmless the other from and against all
losses,  damages,   costs,  and  liabilities  (including,   without  limitation,
reasonable  attorneys' fees and expenses)  arising in connection with any claims
for a brokerage  commission  made by any broker or other person  (other than the
Broker)  against the other party based upon any dealings such party may have had
with  the  claimant.  In  reliance  on the  foregoing,  Sublessor  will  pay the
commission  payable to the Broker on account of this  transaction  pursuant to a
separate  agreement.  The  provisions  of this  Article  12  shall  survive  the
termination of this Sublease.
<PAGE>


     13.  Notices.  All  notices,   requests,   approvals,   waivers,  consents,
deliveries, or other communications ("Notices") that either party is required or
desires  to send to the  other in  connection  with  this  Sublease  shall be in
writing,  duly executed by the party sending the Notice, and sent by registered,
or certified mail,  return receipt requested (with postage prepaid) or reputable
guaranteed  overnight  carrier (such as Federal  Express),  securely wrapped and
addressed  as  follows:  (a) if to  Subtenant,  to  Subtenant  at the  Subleased
Premises or such other address as Subtenant  shall then have designated for that
purpose  by Notice to  Sublessor,  with a copy to Paul  Lieberman,  Esq.,  First
Montauk  Securities  Corp.,  328 Newman Springs Road, Red Bank, New Jersey 07741
and (b) if to Sublessor,  to  Sublessor's  address set forth at the beginning of
this Sublease or to such other address as Sublessor  shall then have  designated
for that purpose by notice to Subtenant, with a copy to Abby Wenzel, Esq., Wolf,
Block,  Schorr and Solis-Cohen  LLP, 250 Park Avenue,  New York, New York 10177.
Except in any instance where it maybe  otherwise  specifically  provided in this
Sublease,  Notices shall be deemed given or served three (3) days  following the
date  delivery  of the  Notice is  tendered  by the  postal  service  or one (1)
business day following delivery to reputable guaranteed overnight courier.

14.      Interpretation.

     (a) This Sublease shall be governed by and construed in accordance with the
of the State of New York or the State of California.

     (b) If any  provision of this  Sublease or the  application  thereof to any
person or circumstance  shall,  for any reason and to any extent,  be invalid or
unenforceable,  the  remainder  of this  Sublease  and the  application  of that
provision  to other  persons or  circumstances  shall not be affected but rather
shall be enforced to the extent permitted by law.

     (c) The captions,  headings and titles contained in this Sublease,  if any,
are solely for convenience of reference and shall not affect its interpretation.

     (d) This Sublease shall be construed  without regard to any  presumption or
other rule requiring  construction against the party causing this Sublease to be
drafted.

     (e) Each  covenant in this  Sublease  shall be  construed as a separate and
independent covenant, not dependent on any other provision of this Sublease.

     (f) All words and terms used in this Sublease,  regardless of the number or
gender in which they are used,  shall be  construed  to include any other number
and any other gender as the context may require.

     (g) When used in this  Sublease,  the  following  words or terms shall have
respective meanings indicated:

     (i) "person" shall mean any individual,  corporation,  partnership, limited
liability company, joint venture, trust, or other business or legal entity;

     (ii)  "including",  shall be  construed  as though it were  followed by the
words "without limitation" or "but not limited to";

     (iii) "provision" shall be construed as including any agreement  condition,
or other term; and
<PAGE>



     (iv) "rent"  shall be construed  as  including  all Fixed Rent,  Additional
Rent, and other charges payable under this Sublease, however designated.

     (h) Nothing contained in this Sublease shall be construed to create privity
of estate or of contract between Subtenant and the Landlord.

     (i) All  obligations  under this  Sublease  that shall  arise,  accrue,  or
otherwise  relate to the  period  prior to the end of the term of this  Sublease
shall survive the end of the term of this Sublease.

15.      Consent of Landlord.

     (a)  Notwithstanding  anything  contained in this Sublease to the contrary,
this Sublease is subject to and  conditioned  upon obtaining the written consent
of Landlord (the  "Consent") to this Sublease in accordance  with the provisions
of the Prime Lease.  Sublessor shall promptly request such consent and Sublessor
and Subtenant use all reasonable efforts to obtain such consent on or before the
Commencement  Date.  In the  event  that  the  Consent  is not  obtained  by the
Commencement Date, or is otherwise denied, either party may cancel this Sublease
upon five (5) days' written notice to the other.

     (b) Neither  Sublessor nor Subtenant  shall be obligated to take any action
or to incur any cost (other than its own attorneys'  fees) or liability in order
to obtain the Consent, other than Sublessor requesting the same of the Landlord.

     (c) Subtenant  agrees that it will reasonably  cooperate with Sublessor and
Landlord,  diligently and in good faith in order to obtain the Consent.  In such
regard,  Subtenant shall promptly  provide such  information as the Landlord may
reasonably  request and, if required,  shall  execute and deliver the Consent in
the form  reasonably  required  by  Landlord  or any  other  agreement  that the
Landlord  shall  reasonably  require  promptly  following  Sublessor's  request,
provided  such  Consent  or  other   agreement  does  not  materially   increase
Subtenant's obligations or reduce Subtenant's rights under this Sublease.

     (d) If the Sublease shall be so canceled,  then this  Sublease,  except for
the provisions of Article 12, shall have no further force or effect.

     16.  Waiver of Jury Trial and Right To  Counterclaim.  Both parties  hereby
waive all right to trial by jury in any summary or other  action,  proceeding or
counterclaim  arising out of or in any way  connected  with this  Sublease,  the
relationship of Sublessor and Subtenant,  the Subleased Premises and the use and
occupancy  thereof,  and any claim of injury or damages.  Except for  compulsory
counterclaims,  Subtenant  also hereby waives all fight to assert or interpose a
counterclaim in any summary  proceeding or other action or proceeding to recover
or obtain possession of the Subleased Premises.

     17.  Complete  Agreement.   There  are  no   representations,   agreements,
arrangements or understandings,  oral or written between the parties relating to
the  subject  matter of this  Sublease  which are not  fully  expressed  in this
Sublease.

     18.  Execution and Delivery.  This submission to Subtenant of this Sublease
shall  not  constitute  an  option or offer  for the  leasing  of the  Subleased
Premises,  and the execution and/or delivery of this Sublease by Subtenant shall
have no  binding  force or effect on  Sublessor  or  Subtenant  unless and until
Sublessor and Subtenant  shall have executed this Sublease and a fully  executed
counterpart thereof shall have been unconditionally delivered to Subtenant.

19.      Security Deposit.

     (a) Simultaneously with Subtenant's  execution of this Sublease,  Subtenant
shall deposit with  Sublessor the sum of $64,035.00 as security for the faithful
performance and observance by Subtenant of the terms,  provisions and conditions
of this Sublease. Subtenant agrees to sign a written acknowledgment, prepared by
Subtenant,  of receipt of such funds. In the event Subtenant defaults in respect
of any of the terms, provisions and conditions of this Sublease,  including, but
not  limited  to, the payment of rent,  Sublessor  may use,  apply or retain the
whole or any part of the security so deposited to the extent  required to expend
or may be required to expend by reason of Subtenant's  default in respect of any
of the terms,  covenants  and  conditions  of this  Sublease,  including but not
limited  to,  any  damages  or  deficiency   accrued  before  or  after  summary
proceedings or other re-entry by Sublessor.  In the event  Sublessor  applies or
retains any portion or all of the security deposited,  Subtenant shall forthwith
restore  the  amount so  applied  or  retained  so that at all times the  amount
deposited shall be $64,035.00.
<PAGE>


     (b) Subtenant covenants that it will not assign or encumber,  or attempt to
assign or encumber, the monies deposited hereunder as security, and that neither
Sublessor nor its  successors or assigns shall be bound by any such  assignment,
encumbrance, attempted assignment, or attempted encumbrance.

     IN WITNESS WHEREOF,  the parties have executed this Sublease as of the date
first written above.

                                        Sublessor:

Witness:                                ELOQUENT, INC.

_____________________________           By: /s/ Eloquent, Inc.
                                            ---------------------------------

By: __________________________

Witness:                                Subtenant:

                                        FIRST MONTAUK FINANCIAL CORP.

______________________________          By: /s/ William J. Kurinsky
                                            --------------------------------
                                            WILLIAM J. KURINSKY
By: ___________________________             EXECUTIVE VICE PRESIDENT

<PAGE>



                                   SCHEDULE I

                                    The Items

                                  [To be added]

<PAGE>

EXHIBIT 10.27


                                    SUBLEASE

     SUBLEASE  made  as of the 15th day  of  January  ,  2002,  between  AIMNET
SOLUTIONS,  INC., a Delaware  corporation having an office at 401 Merritt Seven,
Norwalk,  Connecticut 06851 (the "Landlord"), and FIRST MONTAUK FINANCIAL CORP.,
a New York  corporation  having its headquarters at 328 Newman Springs Road, Red
Bank, New Jersey 07701 (the "Tenant").

                               W I T N E S S E T H

     Landlord and Tenant agree as follows:

     1.  Subleasing.  Subject  to  all  the  terms,  covenants,  conditions  and
provisions of that certain Lease  (hereinafter  referred to as the "Main Lease")
dated  as  of  January  2,  2001,   between  Royal  Realty  Corp.,  as  landlord
(hereinafter referred to as the "Main Landlord"), and AimNet Solutions, Inc., as
tenant, a copy of which Main Lease has been delivered to and examined by Tenant,
Tenant  hereby hires and takes from  Landlord  that certain  space  (hereinafter
referred to as the "Subleased  Premises") consisting of Room 1416-20 in the 14th
floor of the  building  known as 655  Third  Avenue,  New  York,  New York  (the
"Building"),  comprising  approximately  4,520 rentable square feet and shown on
the floor plan contained in Exhibit A attached hereto and made a part hereof.

     2.  Commencement and Expiration  Dates. The Subleased  Premises are demised
for a term which  shall  begin on the later of (a)  January 31, 2002 and (b) the
date on which the Main  Landlord  grants the  approvals  described in Article 26
hereof (Approval of Main Landlord) (the "Sublease Commencement Date"), and shall
expire  on  September  29,  2006  (hereinafter  referred  to  as  the  "Sublease
Expiration Date").

     3. Base Rent.  Tenant  shall pay rent  ("Base  Rent") to  Landlord  for the
Subleased   Premises,   beginning   thirty  (30)  days  following  the  Sublease
Commencement  Date,  at the annual rate of  $212,440.00  (that is, the number of
square  feet of  rentable  area  contained  in the  Subleased  Premises,  4,520,
multiplied  by $47.00,  plus,  $13,560  for  electricity  pursuant to Article 10
hereof) , subject to adjustment as hereinafter provided.

     Beginning as of January 31, 2004, and continuing thereafter for the balance
of the term of this Sublease, the annual rate of Base Rent shall be increased to
$226,000.00  (that is, the number of square feet of rentable  area  contained in
the  Subleased  Premises,   4,520,  multiplied  by  $50.00,  plus,  $13,560  for
electricity pursuant to Article 10 hereof).

     Base Rent shall be  inclusive  of costs  payable  by Tenant for  electrical
services to the Subleased  Premises payable pursuant to Article 10 (Electricity)
hereof and shall be payable in  advance  in equal  monthly  installments  on the
first day of each  calendar  month during the term of this  Sublease.  Base Rent
shall be in addition to all other sums payable hereunder, which other sums shall
constitute  additional rent. All rent shall be paid at the office of Landlord or
such other  place as Landlord  may  designate,  without any setoff or  deduction
whatsoever  (except as to the extent expressly provided for in Article 19 hereof
(Damage or Condemnation)).

     4. Rights and  Obligations of Tenant.  Tenant shall conform to, and use the
Subleased  Premises in accordance with, all the terms,  covenants and conditions
of the Main Lease (except those terms, covenants and conditions described in the
third  paragraph  of this  Article  4,  which  do not  apply  to the  rights  or
obligations of Tenant under this  Sublease),  and will do no act, nor permit any
act, which will result in a violation of such terms,  covenants and  conditions.
Tenant shall  perform all of the terms,  covenants  and  conditions  of the Main
Lease on the  part of the  tenant  therein  named to be  performed  (except  for
payment of the rent and certain  additional rent provided for in the Main Lease,
which shall  remain the  obligation  of  Landlord  as the tenant  under the Main
Lease,  and except for those terms,  covenants and  conditions  described in the
third  paragraph  of this  Article 4 which do not apply to, or are  modified by,
this Sublease).
<PAGE>


     Except as  otherwise  provided in the third  paragraph  of this  Article 4,
Tenant shall be entitled to the rights of AimNet Solutions,  Inc. ("AimNet"), as
tenant  under the Main Lease.  AimNet  shall have no  liability by reason of any
default of the Main Landlord,  it being  understood that if AimNet shall fail to
fulfill any  obligation of the Landlord  hereunder and if such failure is caused
by the failure of the Main  Landlord to comply  with its  obligations  under the
Main Lease,  then AimNet shall have no obligation or liability by reason of such
failure, but in such event Tenant shall be subrogated to the rights of AimNet to
enforce the obligations of the Main Landlord. Without limiting the generality of
the foregoing,  Tenant understands that the supplying of heat, light, water, air
conditioning,  electricity and other  utilities,  janitorial,  cleaning,  window
washing and  elevator  services,  and  building  maintenance  and repair are the
obligations of the Main Landlord,  and that Landlord has no control thereof, and
assumes no  responsibility in connection  therewith,  and shall not be liable in
any  way  with  respect  to the  failure  of or  interference  with  any of such
services.

     Notwithstanding  anything to the contrary  contained herein,  the following
provisions  of the Main  Lease do not apply to Tenant,  and Tenant  shall not be
entitled  to the rights of AimNet  thereunder  nor bound by any  obligations  of
AimNet thereunder:  Articles 1 and 37 (Commencement Date, Expiration Date, Fixed
Rent),  Article  17  (Default),  Article  18  (Remedies  of Owner and  Waiver of
Redemption),  Article 24  (Failure  to Give  Possession);  Article 28 (Bills and
Notices), Articles 34 and 60 (Security Deposit), Article 41 (Brokerage), Article
43 (Initial Work) and Article 55 (Remedies). Also, Tenant shall not be obligated
to furnish an estoppel certificate with respect to the Main Lease as required of
AimNet under Article 35 (Estoppel  Certificate) of the Main Lease; however, upon
request  by either  Landlord  or the Main  Landlord,  Tenant  shall  furnish  an
estoppel  certificate  with  respect to this  Sublease,  within the time  period
provided in said  Article 35 of the Main Lease,  and in  substantially  the same
form and containing the same  information as the  certificate  described in said
Article 35 of the Main Lease.

     If  the  Main  Landlord  shall  default  in the  performance  of any of its
obligations  with respect to the Subleased  Premises,  Landlord  shall take such
steps as Tenant may reasonably request to cooperate in causing the Main Landlord
to perform its obligations and provide the services specified in the Main Lease,
including  bringing an action or  proceeding  or taking other steps which may be
reasonably  necessary to enforce the rights of Landlord as tenant under the Main
Lease.  However,  Tenant shall indemnify and hold harmless AimNet and all of its
officers, directors, shareholders, employees, agents, predecessors,  successors,
assigns and legal representatives, and all parties claiming by, through or under
any of the above,  from and against  any loss,  damage,  claim,  cost or expense
(including  attorneys'  fees) incurred by any such indemnitee in connection with
or by reason  of any  proceedings  commenced  or any  action  taken by or at the
request of Tenant to enforce the  obligations of the Main Landlord.  Tenant will
indemnify,  defend and hold  harmless  Landlord  from and against all  loss(es),
costs, damages, expenses and liability,  including but not limited to reasonable
attorneys'  fees, that Landlord may incur by reason of any injuries to person or
property  occurring  in, on or about the Subleased  Premises  during the term of
this Sublease, or by reason of any breach or default hereunder on Tenant's part,
or by reason of any work done in or to the Subleased Premises by or on behalf of
Tenant or any act or negligence  on the part of Tenant.  Tenant shall in no case
have any rights in respect of the  Subleased  Premises  greater than  Landlord's
rights under the Main Lease,  and Landlord shall have no liability to Tenant for
any matter  whatsoever  for which  Landlord  does not have at least  coextensive
rights, as tenant, against Main Landlord under the Main Lease.

     Landlord  represents  that (i) the Main Lease is in full force and  effect,
(ii) the  expiration  date of the term of the Main Lease is September  30, 2006,
and  (iii) to the  best of its  knowledge,  Landlord  is not in  default  in the
performance  of its  obligations  as tenant  under  the Main  Lease  beyond  any
applicable notice and cure period.

     Landlord  agrees  that  it  will  not  agree  with  Main  Landlord  to  the
cancellation  or termination  of the Main Lease or to the further  modification,
annulment or supplementation of the Main Lease in a manner that would prevent or
limit  Tenant's use of the  Subleased  Premises or adversely  affect such use or
shorten  the term of this  Sublease or  increase  any charges  payable by Tenant
hereunder  or in any other way  increase  Tenant's  obligations  or decrease its
rights under this Sublease.
<PAGE>


     5. Use.  Tenant shall use the  Subleased  Premises  only for  executive and
general offices in connection with the operation of Tenant's business,  and such
ancillary  uses as may be  permitted  under  Article 2  (Occupancy)  of the Main
Lease, and for no other purpose.

     As provided in Article 4 hereof (Rights and Obligations of Tenant),  Tenant
shall not use the Subleased  Premises for any purpose which is prohibited  under
Article 2 (Occupancy) of the Main Lease.

     6.  Alterations.  Tenant  shall  not make any  alterations,  installations,
additions or  improvements  in or to the  Subleased  Premises  without the prior
written   consent  of  Landlord  in  each  instance.   Landlord  agrees  not  to
unreasonably  withhold or delay such consent  provided the Main  Landlord  shall
have consented as required under the Main Lease.

     Also, as provided in Article 4 hereof  (Rights and  Obligations of Tenant),
Tenant shall not make any alterations, installations,, additions or improvements
in or to the  Subleased  Premises  without  complying  with  the  provisions  of
Articles 3 and 54 (Tenant Alterations) of the Main Lease.

     7. No Assignment or Subletting.  Tenant may not assign this  Sublease,  nor
further  sublet the  Subleased  Premises,  nor permit the same to be occupied by
others, without the prior written consent of Landlord in each instance. Landlord
agrees not to  unreasonably  withhold or delay such  consent  provided  the Main
Landlord shall have consented as required under the Main Lease.

     Also, as provided in Article 4 hereof  (Rights and  Obligations of Tenant),
any proposed assignment or further subletting shall be subject to the provisions
of  Article  11  (Assignment,  Mortgaging,  Etc.) and  Article  46  (Assignment,
Mortgaging and Subletting) of the Main Lease,  and all of the rights of the Main
Landlord thereunder.

     If Tenant assigns this Sublease, or further sublets the Subleased Premises,
in whole or in part,  Tenant  shall  deliver  to  Landlord  a true  copy of each
executed  assignment  or  sublease  within  seven  (7)  days  after  the date of
execution and delivery thereof, and Tenant shall pay to Landlord an amount equal
to any rent or other  consideration  paid to Tenant by any assignee or subtenant
in excess of the rent payable by Tenant to Landlord  pursuant to this  Sublease;
in computing the amount of excess rent or other  consideration which Tenant must
pay to Landlord,  Tenant may first subtract the amount of any actual  documented
bona fide brokerage  commissions and attorneys' fees incurred in connection with
the  assignment or  subletting,  provided  however that in all events the amount
payable by Tenant to Landlord  pursuant to this paragraph shall be not less than
the amount  which  Landlord  (as the tenant under the Main Lease) is required to
pay to the Main Landlord in connection with such  assignment or subletting.  All
sums payable by Tenant pursuant to this paragraph shall be paid to Landlord,  as
additional  rent, on the first day of the month following the receipt thereof by
Tenant.

     Tenant  shall  pay  to  Landlord,   promptly  upon  demand  therefor,   all
out-of-pocket  costs and expenses  (including,  without  limitation,  reasonable
attorneys' fees and  disbursements  payable by Landlord to its own attorneys and
all costs and  expenses  for which  Landlord is required to  reimburse  the Main
Landlord)  incurred  by  Landlord  in  connection  with any  assignment  of this
Sublease or sub-sublease of all or any part of the Subleased Premises.

     For the  purposes  hereof,  any  transfer of a majority of the  outstanding
voting stock of Tenant shall be deemed an assignment.

     Notwithstanding  anything to the  contrary  contained  herein,  Tenant may,
without  Landlord's  prior  written  consent  (but only with the consent of Main
Landlord if required by the Main Lease),(i)  sublet all or part of the Subleased
Premises to any  corporations  or other business  entities  which  control,  are
controlled by, or are under common control with Subtenant (herein referred to as
an  "affiliated  entity")  for any of the purposes  permitted  to an  affiliated
entity,  subject,  however,  to compliance with Tenant's  obligations under this
Sublease or (ii) assign all of its right title and interest in this  Sublease to
an affiliated entity. No such sub-subletting shall be deemed to vest in any such
related  corporation  any right or  interest in this  Sublease or the  Subleased
Premises  nor shall it relieve,  release,  impair or  discharge  any of Tenant's
obligations hereunder.
<PAGE>


     8. Default. (a) Any one or more of the following events shall constitute an
Events of Default hereunder:

     (i) if Tenant shall default in the payment when due of any  installment  of
Base Rent or in the payment when due of any  additional  rent,  and such default
shall  continue for a period of five (5) days after notice by Landlord to Tenant
of such default;  or if Tenant shall default in the observance or performance of
any term, covenant or condition of this Sublease on Tenant's part to be observed
or performed  (other than the covenants  for the payment of rent and  additional
rent) and Tenant  shall fail to remedy such  default  within  fifteen  (15) days
after  notice by Landlord to Tenant of such  default,  or if such  default is of
such a nature  that it cannot  be  completely  remedied  within  such  period of
fifteen (15) days and Tenant  shall not  commence  within such period of fifteen
(15) days, or shall not  thereafter  continuously  and  diligently  prosecute to
completion, all steps necessary to remedy such default; or

     (ii) if Tenant shall file a voluntary petition in bankruptcy or insolvency,
or shall be  adjudicated a bankrupt or insolvent,  or shall file any petition or
answer  seeking  any  reorganization,  arrangement,  composition,  readjustment,
liquidation,  dissolution  or  similar  relief  under the  present or any future
federal bankruptcy act or any other present or future applicable federal,  state
or other  statute  or law,  or  shall  make an  assignment  for the  benefit  of
creditors  or shall seek or consent to or acquiesce  in the  appointment  of any
trustee,  receiver  or  liquidator  of Tenant or of all or any part of  Tenant's
property; or

     (iii) if, within thirty (30) days after the  commencement of any proceeding
against  Tenant,  whether by the filing of a petition or otherwise,  seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the present or any future federal  bankruptcy act or any
other present or future applicable federal,  state or other statute or law, such
proceeding  shall not have been dismissed,  or if, within thirty (30) days after
the appointment of any trustee,  receiver or liquidator of Tenant,  or of all or
any part of Tenant's  property,  without the consent or  acquiescence of Tenant,
such appointment shall not have been vacated or otherwise discharged,  or if any
execution  or  attachment  shall be issued  against  Tenant  or any of  Tenant's
property pursuant to which the Subleased  Premises shall be taken or occupied or
attempted to be taken or occupied; or

     (iv) if the Subleased  Premises shall become abandoned;  then Landlord,  at
any time  thereafter,  at Landlord's  option,  may give to Tenant five (5) days'
notice of  termination of this Sublease and the term hereof shall come to an end
and expire upon the  expiration of said five (5) days with the same effect as if
the date of  expiration of said five (5) days were the  expiration  date of this
Sublease,  but Tenant  shall  remain  liable for  damages  as  provided  in this
Article.

     (b) If an Event of Default occurs,  or if this Sublease and the term hereof
shall expire and come to an end as hereinabove provided:

     (i) Landlord or Landlord's  agents or servants may  immediately,  or at any
time after such Event of Default or after the date upon which this  Sublease and
the term hereof shall expire and come to an end, re-enter the Subleased Premises
or any part thereof,  without  notice,  either by summary  proceedings or by any
other applicable action or proceeding,  or by force or otherwise  (without being
liable to indictment,  prosecution or damages  therefor),  and may repossess the
Subleased  Premises  and  dispossess  Tenant  and any  other  persons  from  the
Subleased  Premises  and  remove  any  and all of  their  property  and  effects
therefrom without incurring any liability to Tenant or any other person for such
repossession or removal; and

     (ii)  Landlord,  at Landlord's  option,  may relet the whole or any part or
parts  of the  Subleased  Premises  from  time to  time,  either  in the name of
Landlord or otherwise,  to such tenant or tenants, for such term or terms ending
before,  on or after the  expiration  date of this  Sublease,  at such rental or
rentals and upon such other conditions,  which may include  concessions and free
rent  periods,  as Landlord,  in  Landlord's  sole  discretion,  may  determine.
Landlord  shall have no obligation  to relet the Subleased  Premises or any part
thereof  and in no event  shall be liable  for  refusal  or failure to relet the
Subleased Premises or any part thereof,  or, in the event of any such reletting,
for refusal or failure to collect any rent due upon any such  reletting,  and no
such refusal or failure shall operate to relieve  Tenant of any liability  under
this Sublease or otherwise to affect any such liability. Landlord, at Landlord's
option,   may  make  such   repairs,   replacements,   alterations,   additions,
improvements,  decorations  and other  physical  changes in and to the Subleased
Premises as Landlord,  in Landlord's  sole  discretion,  considers  advisable or
necessary in connection with any such reletting or proposed  reletting,  without
relieving Tenant of any liability under this Sublease or otherwise affecting any
such liability.
<PAGE>


     (c) Tenant hereby waives the service of any notice of intention to re-enter
or to institute legal proceedings to that end which may otherwise be required to
be given under any present or future law. Tenant,  on Tenant's own behalf and on
behalf of all persons claiming through or under Tenant, including all creditors,
does  further  hereby waive any and all rights which Tenant and all such persons
might  otherwise  have under any  present or future law to redeem the  Subleased
Premises,  or to re-enter or repossess the Subleased Premises, or to restore the
operation of this Sublease,  after (i) Tenant shall have been  dispossessed by a
judgment or by warrant of any court or judge,  or (ii) any re-entry by Landlord,
or (iii) any  expiration  or  termination  of this Sublease and the term hereof,
whether such  dispossession,  re-entry,  expiration or  termination  shall be by
operation  of law or  pursuant to the  provisions  of this  Sublease.  The words
"reenter",  "re-entry"  and  "re-entered"  as  used in this  Sublease  shall  be
construed in their  broadest  sense and shall not be deemed to be  restricted to
their technical legal meanings. In the event of a breach or threatened breach by
Tenant, or any person claiming through or under Tenant, of any term, covenant or
condition  of this  Sublease  on  Tenant's  part to be  observed  or  performed,
Landlord  shall have the right to enjoin such breach and the right to invoke any
other remedy allowed by law or in equity as if re-entry, summary proceedings and
other  special  remedies  were not  provided in this  Sublease  for such breach.
Acceptance of rent by Landlord with knowledge of any default,  or the failure of
Landlord  to  seek  redress  for any  default,  or to  insist  upon  the  strict
performance  of any term,  covenant,  condition or  obligation  of this Sublease
shall not  constitute a waiver  thereof,  and  Landlord  shall have all remedies
provided  herein and by  applicable  law with respect to any  subsequent  act or
omission which would have originally constituted a default.  Landlord's remedies
for any default which are available to it under this  Sublease,  or at law or in
equity,  shall be cumulative,  and Landlord's  decision to pursue any particular
remedy  following  any default  shall not affect the  availability  of any other
remedy for such default or for any subsequent default.

     (d) If this Sublease and the term hereof shall expire and come to an end as
provided in this  Article,  or by or under any summary  proceeding  or any other
action or proceeding,  or if Landlord  shall re-enter the Subleased  Premises as
provided in this Article, then, in any of these events:

     (i)  Tenant  shall  pay to  Landlord  all rent,  additional  rent and other
charges payable under this Sublease by Tenant to Landlord to the date upon which
this  Sublease  and the term hereof  shall have expired and come to an end or to
the date of re-entry  upon the Subleased  Premises by Landlord,  as the case may
be; and

     (ii) Tenant shall also be liable for and shall pay to Landlord, as damages,
any deficiency  (referred to as the  "Deficiency")  between the rent reserved in
this  Sublease  for the  period  which  otherwise  would  have  constituted  the
unexpired  portion of the term hereof and the net  amount,  if any, of the rents
collected  under any  reletting  effected  pursuant  to the  provisions  of this
Article for any part of such period (first  deducting  from the rents  collected
under any such  reletting  all of  Landlord's  expenses in  connection  with the
termination of this Sublease or Landlord's  re-entry upon the Subleased Premises
and with such reletting including,  without limitation,  all repossession costs,
brokerage  commissions,  legal expenses,  attorneys' fees,  alteration costs and
other expenses of preparing the Subleased Premises for such reletting). Any such
Deficiency shall be paid in monthly installments by Tenant on the days specified
in this Sublease for payment of monthly  installments of rent. Landlord shall be
entitled to recover from Tenant each monthly Deficiency as the same shall arise,
and no suit to  collect  the  amount  of the  Deficiency  for  any  month  shall
prejudice Landlord's right to collect the Deficiency for any subsequent month by
a similar proceeding; and
<PAGE>


     (iii) At any time after the term hereof  shall have  expired and come to an
end or Landlord shall have reentered  upon the Subleased  Premises,  as the case
may be, whether or not Landlord shall have collected any monthly Deficiencies as
aforesaid,  Landlord shall be entitled to recover from Tenant,  and Tenant shall
pay to  Landlord,  on  demand,  in  lieu  of  further  Deficiencies,  as and for
liquidated and agreed final damages, a sum equal to the amount by which the rent
reserved in this Sublease for the period which otherwise would have  constituted
the  unexpired  portion of the term hereof  (less any portion of such period for
which Tenant shall have paid Deficiencies to Landlord pursuant to subsection (b)
of this  paragraph)  exceeds the then fair and  reasonable  rental  value of the
Subleased Premises for the same period,  both discounted to present worth at the
rate of eight percent (8%) per annum.  If, before  presentation of proof of such
liquidated damages to any court, commission or tribunal, the Subleased Premises,
or any part  thereof,  shall have been relet by  Landlord  for the period  which
otherwise would have  constituted the unexpired  portion of the term hereof,  or
any part  thereof,  the amount of rent  reserved  upon such  reletting  shall be
deemed,  prima facie, to be the fair and reasonable rental value for the part or
the whole of the Subleased Premises so relet during the term of the reletting.

     (e) Tenant shall in no event be entitled to any rents  collected or payable
under any reletting, whether or not such rents shall exceed the rent reserved in
this  Sublease.  Nothing  contained in this Article  shall be deemed to limit or
preclude the recovery by Landlord from Tenant of the maximum  amount  allowed to
be  obtained as damages by any statute or rule of law, or of any sums or damages
to which  Landlord  may be entitled in addition to the damages set forth in this
Article.

     9.  Escalation  Charges.  If the rent  payable by the Tenant under the Main
Lease shall be increased  pursuant to Article 39 (Escalations) of the Main Lease
by reason of any increase or increases  in "Taxes"  above the Taxes  payable for
the "Tax Year"  commencing  on July 1, 2001 and  expiring  on June 30,  2002 (as
those terms are defined in subsection 39.A of the Main Lease), then Tenant shall
pay to Landlord,  as additional  rent, an amount equal to any such increase.  In
addition,  if the rent  payable  by the  tenant  under the Main  Lease  shall be
increased  pursuant to said Article 39 by reason of any increase or increases in
"Operating  Expense Rate" (as that term is defined in  subsection  39.A.6 of the
Main Lease)  above the Base Rate paid or incurred  for the  calendar  year 2002,
then Tenant shall pay to Landlord,  as  additional  rent, an amount equal to any
such  increase.  Accordingly,  Tenant  shall pay to Landlord on the first day of
each month (or, in the case of payments  requiring notice,  within ten (10) days
after such notice),  in addition to all other sums payable hereunder,  an amount
equal to that portion of the total sum payable with respect to such month by the
tenant  under the Main  Lease  which is  attributable  to any such  increase  or
increases in Taxes and Expenses.  Landlord  shall furnish  Tenant with copies of
any relevant  notices,  statements,  supporting  data and other  information and
materials  which  Landlord may from time to time receive from the Main  Landlord
with respect to such increases in Taxes and Operating Expense Rate.

     10. Electricity. As provided in Article 4 hereof (Rights and Obligations of
Tenant),  Tenant  agrees  that the  Subleased  Premises  will be  provided  with
electricity  on  a  "rent   inclusion"  basis  in  accordance  with  Article  38
(Electricity)  of the Main  Lease.  Base Rent  hereunder  includes  an  electric
inclusion  factor of  $13,560  per  annum,  and  consequently,  Tenant  shall be
responsible for payment of charges for electricity  under the Main Lease only to
the extent set forth in Article 38 (Electricity) thereof.

     Landlord  will  cooperate  with  Subtenant,  at no expense to Landlord,  in
Tenant's  efforts,  consistent  with the Main Lease,  to ensure that it is being
billed for  electricity in a manner that complies with the Main Lease. If and to
the extent that Main Landlord ceases furnishing electricity to Landlord pursuant
to Paragraph  38.D of the Main Lease,  then  Landlord will have no obligation to
furnish  electricity  to Tenant,  Tenant  shall have the rights set forth in the
Main Lease to arrange for  electricity  directly  from the public  utility at no
cost to  Landlord  and the Base Rent then in effect  shall be reduced by $13,560
per annum.
<PAGE>


     11.  Additional  Charges.  Tenant shall direct all requests for  additional
services  to the  Main  Landlord.  If  Tenant  shall  request  freight  elevator
facilities, heat, cooled air, mechanical ventilation or other services for which
a charge is  imposed,  pursuant to Article 29  (Services  Provided by Owner) and
Article 44 (After Hours HVAC;  Condenser  Water) of the Main Lease or otherwise,
Tenant shall promptly furnish Landlord with copies of all purchase orders and/or
similar  documentation  with respect to each such request,  and Tenant shall pay
the full amount of such charge to Landlord  (or as Landlord  may direct)  within
fifteen (15) days after demand.

     In  addition,  Tenant  shall pay to Landlord  (or as Landlord  may direct),
within  fifteen  (15) days after  demand,  the full  amount of any and all other
charges imposed under the Main Lease;  provided however that Tenant shall not be
required  to pay the rent  provided  for in Articles 1 and 37 (Rent) of the Main
Lease, or escalation  charges  provided for in Article 39  (Escalations)  of the
Main Lease (except to the extent set forth in Article 9 (Escalation  Charges) of
this  Sublease),  or interest or late  charges  imposed  under the Main Lease by
reason of any failure by Landlord to make a timely payment thereunder (except to
the extent that such failure  shall have been caused by a failure on the part of
Tenant to make a corresponding payment hereunder when due), or any fee or charge
imposed  under the Main  Lease for the  review  and  approval  of this  Sublease
pursuant to Articles  11 and 46 thereof  (as  contrasted  with any fee or charge
imposed  by the  Main  Landlord  for  the  review  and  approval  of  Plans  and
Specifications  for Tenant's  alterations,  which shall be the responsibility of
Tenant).

     12. Payment of Charges. As provided in Article 3 hereof (Base Rent), Tenant
shall pay  Landlord  the full  amount of the  charges  referred to in Articles 9
(Escalation   Charges)  and  11  (Additional  Charges)  hereof,  and  all  other
additional  rent,  without any set-off or  deduction  whatsoever  (except to the
extent  expressly  provided for in Article 19 hereof  (Damage or  Condemnation).
Without  limiting the generality of the foregoing,  Tenant shall not be entitled
to set  off  against  the  rent  payable  hereunder  by  reason  of any  alleged
inaccuracy  of  impropriety  of any  charge  imposed  under the Main  Lease with
respect to the Subleased Premises.  Landlord shall, upon request, use reasonable
efforts  to  obtain  from  the Main  Landlord  supporting  information  and data
relating to any such  charge  imposed  under the Main Lease with  respect to the
Subleased  Premises  (provided  that  Tenant  shall,  as set forth in the fourth
paragraph of Article 4 hereof (Rights and Obligations of Tenant),  indemnify and
hold harmless  Landlord and the other parties described therein from and against
any loss, damage, claim, cost or expense (including attorneys' fees) incurred in
connection  therewith).  If Landlord  shall receive a refund for any such charge
which shall have been paid by Tenant,  Landlord shall promptly remit such refund
(less the amount of any costs  reasonably  incurred by  Landlord  in  connection
therewith) to Tenant.

     13. Access. Main Landlord or Main Landlord's agents shall have the right to
enter the  Subleased  Premises  at all  reasonable  times,  upon  giving  Tenant
reasonable advance notice (except in the case of any emergency, in which case no
notice shall be required),  to examine the Subleased  Premises,  to maintain and
repair any improvements  installed therein by or on behalf of Main Landlord, and
to show the  Subleased  Premises to  prospective  assignees  of Main  Landlord's
interest  under the Main  Lease or,  during  the last six (6) months of the term
hereof, to prospective subtenants of the Subleased Premises.

     14.  Self-Help.  If Tenant shall default in the  performance  of any of its
obligations  hereunder beyond any applicable grace period (except in the case of
an emergency, or in order to prevent the occurrence of an event of default under
the Main Lease, in which events Landlord need not wait for the expiration of any
such grace period), Landlord at its option (but without any obligation to do so)
may perform such obligations and, if necessary, enter the Subleased Premises for
such purpose.  Tenant shall pay to Landlord,  within ten (10) days after demand,
the amount of all costs and expenses  incurred by Landlord in the performance of
any such  obligations.  Any action taken by Landlord pursuant to this Article 14
shall not  constitute  a waiver of any of  Landlord's  other rights and remedies
hereunder.

     15.  Interest.  If  Tenant  shall  fail to pay any  installment  of rent or
additional  rent (other  than  interest  pursuant to this  Article 15) when due,
Tenant shall pay interest  thereon at an annual rate equal to three percent (3%)
above the Prime Rate (hereinafter defined) or the maximum rate permitted by law,
whichever  is less,  from the date on which  such  payment is due to the date of
payment  thereof.  The "Prime  Rate" at any time shall mean the rate of interest
established  and approved by Citibank,  N.A., New York,  New York,  from time to
time as its interest rate charged for unsecured loans to its corporate customers
but in no event  greater  than the  highest  lawful  rate  from  time to time in
effect.
<PAGE>


     16. Surrender of Subleased Premises.  Upon the expiration or termination of
this  Sublease  or the  termination  of  Tenant's  right  of  possession  to the
Subleased  Premises,  Tenant shall surrender and vacate the Subleased  Premises,
remove all of the  Personal  Property  (hereinafter  defined)  and  deliver  the
Subleased  Premises to Landlord in accordance  with Articles 22 (End of Term) of
the Main Lease.

     17. Initial  Tenant Work.  The Subleased  Premises are demised to Tenant in
the  condition  which  shall  exist on the  Sublease  Commencement  Date "as is"
including (i) the existing  improvements  and all built-in  furnishings and (ii)
the furniture  (including  all desks,  chairs,  filing  cabinets and  conference
tables) presently located therein (collectively,  the "Furniture") (collectively
with the  items  set forth  above in  subsection  (i) of this  Article  17,  the
"Personal  Property") being more  particularly  described on Exhibit "B" annexed
hereto,  it being  understood  and agreed that Landlord shall not be required to
make any improvements, and it being further understood that neither Landlord nor
the  Main  Landlord  shall  be  obligated  to  perform  any  work  or  make  any
installation  to prepare the  Subleased  Premises or the  Personal  Property for
occupancy  and/or  use by  Tenant,  as the  case  may be.  Landlord  and  Tenant
expressly  acknowledge  that  the  telephone  system  currently  located  at the
Subleased Premises shall not be included from the Personal Property and shall be
removed by Landlord prior to the Sublease  Commencement  Date. At the expiration
of the Term, all of the Personal Property shall become the property of Tenant

     Tenant is subleasing the Subleased  Premises from the Landlord after having
an  opportunity  to fully  inspect the  Subleased  Premises and the right not to
execute  this  Sublease  if the  results of said  inspection  are  unacceptable.
Therefore,  Tenant hereby agrees that the term "as is" means that upon approving
or having been deemed to have  approved  said  inspection,  it will sublease the
Subleased Premises, without warranty or representation,  either oral or written,
or expressed or implied,  as to the physical condition of the Subleased Premises
and the Personal  Property  and/or the compliance of same with  building,  fire,
health and zoning codes and other applicable  laws,  ordinances and regulations.
Landlord hereby  expressly  disclaims any and all warranties or  representations
made to Tenant,  whether same were made by any officer,  director or employee of
Landlord or any other agent of same,  such as a broker,  unless such warranty or
representation is contained in writing as a part of this Sublease.

     All work  necessary  to prepare the  Subleased  Premises  for  occupancy by
Tenant (the "Initial Tenant Work") shall be performed by Tenant at its sole cost
and expense, subject to and in accordance with the provisions of Articles and 54
(Tenant Alterations) of the Main Lease.

     18.  Insurance.  As provided in Article 4 hereof (Rights and Obligations of
Tenant),   Tenant  shall  maintain  the  insurance   required  under  Article  6
(Requirements of Law, Fire Insurance, Flood Loads) and Article 51 (Insurance) of
the Main Lease,  in coverage  amounts and with minimum  limits on liability  not
less  than  those  provided  for in said  Articles  6 and 51,  and  issued by an
insurance  company  which  satisfies the standards and ratings set forth in said
Articles 6 and 51 and which  (unless  otherwise  approved by  Landlord)  has its
principal office in the continental United States. All insurance required by the
Main Lease to be  maintained  by the tenant  thereunder  shall be  maintained by
Tenant for the  benefit of, and shall name as insureds  both  Landlord  and Main
Landlord as well as any other parties required to be named under the Main Lease
<PAGE>


     19. Damage or  Condemnation.  If Landlord shall elect to terminate the Main
Lease pursuant to Article 9 (Destruction, Fire and Other Casualty) or Article 10
(Eminent Domain) thereof, this Sublease shall also terminate. In any such event,
Tenant shall have no claim  (against  Landlord or  otherwise)  by reason of such
termination,  and Tenant shall have no interest in any insurance proceeds (other
than proceeds from its own policies) or any condemnation award.

     In the event  Landlord  shall have the right to terminate the Main Lease by
reason any casualty or condemnation  pursuant to the provisions of Articles 9 or
10 thereof,  then Tenant  shall have a  corresponding  right to  terminate  this
Sublease by giving written notice to Landlord not later than ten (10) days prior
to the date by which  Landlord  must  exercise its right to  terminate  the Main
Lease pursuant to the provisions thereof.

     If a casualty or  condemnation  shall occur and Landlord shall not elect to
terminate  the Main Lease  pursuant  to said  Articles 9 or 10  thereof,  and if
Tenant  shall not elect to terminate  this  Sublease  pursuant to the  preceding
paragraph,  this  Sublease  shall  remain in full force and  effect and  neither
Landlord nor Tenant shall have the right to terminate this Sublease by reason of
such casualty or  condemnation  (but Tenant shall be entitled to an abatement of
rent to the  extent,  if any,  provided  under the Main  Lease).  Tenant  hereby
expressly  waives the  provisions of Section 227 of the Real Property Law or any
successor statute of similar import and agrees that the foregoing  provisions of
this Article 19 shall govern and control in lieu thereof.

     20. Brokers. Landlord and Tenant each represent to the other that they have
dealt with no brokers in connection with this transaction,  other than Cushman &
Wakefield,  Wall Street Plaza, New York, NY 10005, and NewMark Real Estate,  125
Park Avenue,  New York, NY 1001 and Landlord and Tenant shall each indemnify and
hold the other harmless from and against any and all claims, liabilities,  costs
and expenses of any kind and nature (including  attorneys' fees) arising from or
related to a breach of the foregoing  representation.  Any  commissions or other
compensation  due  Cushman & Wakefield  and MB Real Estate and NewMark  shall be
paid by Landlord pursuant to a separate agreement.

     21. Successors and Assigns.  This Sublease shall be binding upon, and inure
to the  benefit  of, the  parties  hereto and their  respective  successors  and
assigns.

     22. Notices. All notices,  demands,  statements and communications required
hereunder shall be in writing and shall be sent by registered or certified mail,
if to Landlord, addressed to Landlord at the address set forth on the first page
of the  Sublease,  with a copy  thereof to Kelley  Drye & Warren  LLP,  101 Park
Avenue, New York, NY 10178,  Attention:  Salvatore J. Vitiello,  Esq.; and if to
Tenant,  addressed to Tenant at: the address set forth on the first page of this
Sublease to the attention of General Counsel;  or to such other address as shall
from time to time be designated  by written  notice by either party to the other
party as herein provided,  and shall be deemed given on the third (3rd) business
day after being so mailed.

     23.  Security  Deposit.  Upon the execution and delivery of this  Sublease,
Tenant has  deposited  with  Landlord the sum of  $70,814.00 as security for the
faithful  performance  by Tenant of the terms,  covenants and conditions of this
Sublease.
<PAGE>


     Landlord  shall hold such  security  deposit  (subject to the terms of this
Sublease) in Landlord's own name, in an interest-bearing money market account at
a reputable bank, trust company or other financial institution;  provided Tenant
is not in default  hereunder,  interest earned on the security  deposit shall be
paid to Tenant on an annual basis.

     In the event  Tenant is in default  under  Article 8 hereof,  Landlord  may
retain such sum or any part thereof and apply such amount to the satisfaction of
any obligation of Tenant to pay any sum of money due  hereunder,  or expend such
amount to the extent  required to fulfill any  obligation  of Landlord as tenant
under the Main Lease  resulting from such default,  or expend such amount to pay
any brokerage commissions or fees which are payable in respect of this Sublease,
or expend such amount for any purpose  specified in Article 8 hereof,  including
without limitation the preparation of the Subleased  Premises for reletting.  If
Landlord  shall  apply  any  portion  of the  security  deposit  as  hereinabove
described,  Tenant shall,  within ten (10) days after receiving  notice thereof,
deposit  with  Landlord  the amount so applied so that the total  amount held by
Landlord as security  pursuant to this Article 23 shall at all times be not less
than the sum hereinabove set forth.

     If Tenant  shall fully and  faithfully  comply with all of its  obligations
hereunder,  any security then held by Landlord shall be returned to Tenant after
this Sublease  terminates,  upon Tenant's fully vacating the Subleased  Premises
and delivering  possession thereof to Landlord. In the event Landlord assigns or
otherwise  transfers its interest in the Main Lease or the Subleased  Premises,,
Landlord may transfer  the security to the assignee or  transferee  and Landlord
shall thereupon be released from liability for the return of such security,  and
Tenant shall look solely to such  assignee or  transferee,  as the new Landlord,
for the  return of such  security.  Tenant  further  covenants  that it will not
assign or  encumber,  or attempt to assign or encumber,  the funds  deposited as
security and that neither  Landlord nor its successors or assigns shall be bound
by any such actual or attempted assignment or encumbrance.

     At any time during the term hereof, Tenant may furnish to Landlord, in lieu
of the cash deposit  referred to above,  a letter of credit which  satisfies the
following terms and conditions. Any letter(s) of credit which Tenant delivers to
Landlord pursuant to this paragraph (i) must be irrevocable,  (ii) must be in an
amount equal to the cash deposit  required  under this Article 23, (iii) must be
payable to Landlord upon  presentation  of  Landlord's  sight draft signed by an
officer of Landlord,  and no other  documentation,  (iv) must provide that it is
payable in multiple  drafts  without  restriction  as to the amount or number of
such drafts,  (v) must be issued by a New York Clearing House bank and (vi) must
otherwise be in form reasonably satisfactory to Landlord.  Tenant shall maintain
such letter(s) of credit (or a renewal or replacement  thereof) in effect at all
times  until the term of this  Sublease  has  terminated  and  Tenant  has fully
vacated the Subleased Premises and delivered possession thereof to Landlord.  If
such  letter(s) of credit (or renewal or  replacement  thereof)  shall be due to
expire at any time before the events set forth in the preceding  sentence  shall
have  occurred,  Tenant shall  obtain and deliver to Landlord,  thirty (30) days
prior to such  date of  expiration,  an  amendment  or  advice  in  proper  form
extending such date of expiration,  or a renewal or replacement letter of credit
containing the same terms and conditions as the expiring letter(s) of credit. If
Tenant  shall fail to deliver an  amendment  or advice in proper form  extending
such date of expiration,  or a renewal or replacement letter of credit, at least
thirty  (30)  days  prior to the  expiration  of such  letter(s)  of  credit  as
aforesaid,  Landlord  shall be entitled to draw the full amount of the credit(s)
and hold the proceeds  thereof as security in accordance  with the provisions of
this Article 23.  Landlord  may draw under the  letter(s) of credit from time to
time  (without  limitation  as to the  number of  drafts  or the  amount of such
drafts)  and apply the  proceeds in the same  manner as is  permitted  under the
first  paragraph  of this  Article  23 and,  within  five (5) days  notice  from
Landlord  that  Landlord has drawn under any  letter(s) of credit,  Tenant shall
furnish  Landlord  with a new  letter of credit so as to  restore  the letter of
credit security deposit to the full amount required under this Article 23.
<PAGE>


     24. Entire Agreement.  This Sublease  embodies the entire  understanding of
the parties and there are no further  agreements or  understandings,  written or
oral, in effect between the parties relating to the subject matter hereof.

     25.  Quiet  Enjoyment.   Provided  Tenant  shall  perform  its  obligations
hereunder and shall comply with all of the terms,  covenants  and  conditions of
this Sublease,  Tenant's quiet enjoyment and use of the Subleased Premises shall
not be  disturbed  by reason of any  default on the part of  Landlord  as tenant
under the Main  Lease,  or by reason of any other act or omission on the part of
Landlord.

     26.  Approval  of Main  Landlord.  This  Sublease is subject to the written
approval  of the Main  Landlord  pursuant to Article 11  (Assignment,  Mortgage,
Etc.) or Article 46  (Assignment  and  Subletting)  of the Main Lease.  Landlord
shall  promptly  apply to the Main Landlord for such  approval.  Landlord  shall
promptly notify Tenant of the granting or denial of such approvals. In the event
the  Main  Landlord  disapproves  this  Sublease,  or  disapproves  the  matters
described  in clauses (i) and (ii) above,  or fails to grant such  approvals  by
January  15,  2002  (which  date may be  extended  by mutual  agreement  between
Landlord and  Tenant),  or  exercises  its right to terminate  the Main Lease in
accordance with subsection 46.C thereof,  all sums  theretofore paid to Landlord
by Tenant shall be returned to Tenant without interest,  and neither party shall
have any further  rights or  liabilities  hereunder  (except  that  Landlord and
Tenant shall remain  liable for their  respective  representations  contained in
Article 20 hereof (Brokers).

     27. Modifications. This Sublease may not be modified orally.

     28.  Separability.  Each  provision  contained  in this  Sublease  shall be
separate and  independent and the breach of any such provision by Landlord shall
not discharge or relieve Tenant from its  obligation to perform each  obligation
of this Sublease to be performed by Tenant. If any provision of this Sublease or
the  application  thereof to any person or  circumstance  shall to any extent be
invalid and unenforceable, the remainder of this Sublease, or the application of
such  provision to persons or  circumstances  other than those as to which it is
invalid or unenforceable,  shall not be affected thereby,  and each provision-of
this Sublease shall be valid and shall be enforceable to the extent permitted by
law.

     29.  Waiver of Trial by Jury.  To the extent  permitted by law Landlord and
Tenant  hereby  waive trial by jury in any  litigation  brought by either of the
parties  hereto  against  the other on any matter  arising  out of or in any way
connected with this Sublease.

     30. No Warranties or Representations. Tenant acknowledges that Landlord has
not made,  and Tenant has not relied  on,  any  representations  or  warranties,
express  or  implied,  with  respect to the  Subleased  Premises,  the  Personal
Property,  this  Sublease or any related  matter,  except as expressly set forth
herein.

     31. Termination of Main Lease. If for any reason the term of the Main Lease
is terminated prior to the Expiration Date of this Sublease, this Sublease shall
thereupon be  terminated,  and Landlord  shall not be liable to Tenant by reason
thereof unless said termination was effected because of the breach or default of
Landlord (not caused by the parallel default of Tenant hereunder) under the Main
Lease.

     32.  Miscellaneous.  (a) The  headings  to the various  paragraphs  of this
Sublease  shall not  define,  limit or expand  the  express  provisions  of this
Sublease.  (b) This Sublease shall apply to and bind the  respective  successors
and assigns of the parties  hereto but this Section  shall not be construed as a
consent to any assignment or subletting by Subtenant.

     (c) In the event Tenant shall hold over after the  expiration  of the term,
the parties hereby agree that Tenant's occupancy of the Subleased Premises after
the  expiration  of the term  shall be upon all of the  terms  set forth in this
Sublease  except that  Tenant  shall pay as a use and  occupancy  charge for the
holdover  period an amount equal to the higher of (A) an amount equal to 150% of
the pro rata Base Rent and additional rent payable by Tenant during the term; or
(B) an amount equal to the then market rental value for the Subleased Premises.
<PAGE>


     (d) This Sublease may be executed in multiple  counterparts,  each of which
shall  be  considered  to be an  original  document,  but  all of  which,  taken
together, shall be deemed to constitute a single instrument.

     33.  Governing  Law.  This Sublease is governed by the laws of the State of
New York.

     34. No Waiver.  The failure of either party to this Sublease to insist upon
strict performance of any of the terms and conditions of this Sublease shall not
be deemed a waiver of any such  terms or  conditions,  and shall not be deemed a
waiver of any subsequent  breach or default of the terms and  conditions  herein
contained.

                                                    [signature page to follow]


     IN WITNESS  WHEREOF,  the undersigned have duly executed this Agreement the
day and year first above set forth.

                                        AIMNET SOLUTIONS, INC.


                                           /s/ Jack A. Orlando
                                        By:-----------------------
                                           Name:  Jack A. Orlando
                                           Title:  Director of Finance

                                        FIRST MONTAUK FINANCIAL CORP.

                                           /s/ William J. Kurinsky
                                        By:-----------------------
                                           Name:  William J. Kurinsky
                                           Title: Executive Vice President
<PAGE>
                                      ~36~



                                   EXHIBIT "B"

                            [The Subleased Premises]


                                   EXHIBIT "B"

                             [The Personal Property]
<PAGE>
<PAGE>
35


EXHIBIT 11
<TABLE>
<CAPTION>

                                           FIRST MONTAUK FINANCIAL CORP.
                                        COMPUTATION OF EARNINGS PER SHARE
<S>                                                            <C>                  <C>              <C>
                                                                            Year ended December 31,
                                                                   2001               2000              1999
                                                                   ----               ----              ----

Basic:
Income (loss) before extraordinary loss                        $(5,208,223)         $(655,208)       $2,283,278
Extraordinary loss                                                      --            (34,200)               --
                                                                -----------          --------         ---------
Net income (loss)                                               (5,208,223)          (689,408)        2,283,278
Less: Preferred stock dividends                                    (98,753)          (102,728)          (67,750)

Net income (loss) for basic computation                        $(5,306,976)        $ (792,136)      $ 2,215,528
                                                               ===========         ==========       ===========

Weighted average common shares outstanding                       8,704,355          9,450,055         9,878,129
                                                                 =========          =========         =========

Per share - basic:
Before extraordinary loss                                            $(.61)             $(.08)             $.22
Extraordinary loss                                                      --                 --                --
                                                                      -----              -----              ----
Net income (loss)                                                    $(.61)             $ .08              $.22
                                                                     =====              =====              ====

Diluted:

Net income (loss) for basic computation                        $(5,306,976)         $(792,136)      $ 2,215,528
Additions:
   Preferred stock dividends                                            --                 --            67,750
   Interest on convertible debt, net of taxes                           --                 --            28,384
                                                                -----------          ---------        ---------

Net income (loss) for diluted computation                      $(5,306,976)         $(792,136)      $ 2,311,662
                                                               ===========          =========       ===========

Weighted average common shares outstanding                       8,704,355          9,450,055         9,878,129
Additions:
   Incremental shares from assumed
   conversion of stock options and warrants
   using the treasury stock method                                      --                 --           691,759

   Incremental shares from assumed conversion
   of convertible debt and preferred stock
   using the if-converted method                                        --                 --           692,820
                                                                 ---------          ---------        ----------

Weighted average common and common
   equivalent shares outstanding - diluted                       8,704,355          9,450,055        11,262,708
                                                                 =========          =========        ==========

Per share - diluted:
Before extraordinary loss                                            $(.61)             $(.08)             $.21
Extraordinary loss                                                      --                 --                --
                                                                  ---------          ---------        ----------
Net income (loss)                                                    $(.61)             $(.08)             $.21
                                                                     =====              =====              ====


                                       See notes to consolidated financial statements.
</TABLE>