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

For the fiscal year ended December 31, 2003
                          -----------------
                                       OR
         |_|     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                              to
                               --------------------------------------------

Commission File 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
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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>


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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 ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined by rule 12b-2 of the Act)    Yes __  No X


State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter (June 30, 2003): $2,168,591.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 10,065,486 as of
March 30, 2004.


                       DOCUMENTS INCORPORATED BY REFERENCE

         List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.

                                 Not Applicable



                            [Cover Page 2 of 2 Pages]

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

Table of Contents
                                     PART I
                                                                                                              PAGE

Item 1.             Business                                                                                    1

Item 2.             Properties                                                                                 11

Item 3.             Legal Proceedings                                                                          12

Item 4.             Submission of Matters to a Vote of Security Holders                                        12

                                     PART II


Item 5.             Market For the Company's Common Equity and Related Stockholder Matters                     13

Item 6.             Selected Financial Data                                                                    15

Item 7.             Management's Discussion and Analysis of Financial Condition and Results of Operations      17

Item 7A.            Quantitative and Qualitative Disclosures About Market Risk                                 26

Item 8.             Financial Statements and Supplemental Data                                                 27

Item 9.             Changes in and Disagreements With Accountants on Accounting and Financial Disclosure       27

Item 9A.            Controls and Procedures                                                                    27

                                    PART III


Item 10.            Directors and Executive Officers of the Registrant                                         28

Item 11.            Executive Compensation                                                                     31

Item 12.            Security Ownership of Certain Beneficial Owners and Management                             39

Item 13.            Certain Relationships and Related Transactions                                             41

Item 14.            Principal Accounting Fees and Services                                                     41

                                     PART IV


Item 15.             Exhibits, Financial Statement Schedules and Reports on Form 8-K                           42

</TABLE>
<PAGE>
01

PART I
Item 1.   Business
Introduction

     First Montauk  Financial  Corp. is a New  Jersey-based  financial  services
holding company whose principal  subsidiary,  First Montauk Securities Corp. has
operated as a full service retail and  institutional  securities  brokerage firm
since 1987. Since July 2000,  First Montauk  Securities Corp. has operated under
the registered  tradename "Montauk  Financial Group".  References in this Annual
Report  on Form  10-K to  Montauk  Financial  Group  shall  refer  solely to our
subsidiary  First Montauk  Securities Corp.  Montauk  Financial Group 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,  Montauk  Financial  Group
established Century Discount Investments,  a discount brokerage division.  First
Montauk  Financial Corp. also sells  insurance  products  through its subsidiary
Montauk Insurance Services, Inc.

     Montauk Financial Group has  approximately  439 registered  representatives
and services  over 60,000  retail and  institutional  customer  accounts,  which
comprises over $2 billion of customer  assets.  With the exception of two branch
offices  leased by First  Montauk  Financial  Corp.,  all of  Montauk  Financial
Group's 113 other branch office and  satellite  locations in 28 states are owned
and operated by  affiliates,  independent  owners who  maintain all  appropriate
licenses  and are  responsible  for all office  overhead and  expenses.  Montauk
Financial  Group  also  employs  registered   representatives  directly  at  its
corporate office and the branch offices leased by First Montauk Financial Corp.

     Montauk  Financial  Group  is  registered  as  a  broker-dealer   with  the
Securities  and Exchange  Commission,  the National  Association  of  Securities
Dealers, the Municipal Securities Rule Making Board, and the Securities Investor
Protection  Corporation  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,  Pennsylvania  and various floor  brokerage and  specialist  firms
provide execution services.  These arrangements  provide Montauk Financial Group
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 Montauk  Financial  Group to offer
products and services comparable to large brokerage firms.

     Montauk Financial Group'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 & Over-The-Counter Stocks                            56%
Debt Instruments:
   Municipal, Government, Corporate Bonds and
   Unit Investment Trusts                                      8%
Mutual Funds                                                  10%
Options: Equity & Index                                        4%
Insurance and Annuities                                        7%
Corporate Finance and Investment Banking                       4%
Investment Advisory Fees                                       3%
Miscellaneous (1)                                              8%
                                                              ---
Total                                                        100%
----------------------------
(1)  Miscellaneous  includes interest income, amortization of deferred revenue
     and recovery of bad debts.

<PAGE>
02
     The following table reflects Montauk  Financial  Group's various sources of
revenues and the  percentage  of total  revenues for fiscal 2003.  Revenues from
agency transactions in securities for individual  customers of Montauk Financial
Group are shown as commissions.  Montauk  Financial Group also executes customer
orders on a riskless  principal  basis, as well as conducts  trading activity on
behalf  of its own  accounts.  Revenues  from  such  transactions  are  shown as
Principal   Transactions  on  the  table  below.  Also  reflected  in  Principal
Transactions are revenues derived from market making activities.
<TABLE>
       <S>                                                                          <C>                           <C>
                                                                                      Year Ended December 31, 2003

                                                                                      Amount               Percent

       Agency commissions from equity securities,
       options and mutual funds, variable insurance
       and management fees......................                                    $41,950,392               72%

       Riskless Principal trades in equity and fixed
       income securities on behalf of customers..................                    $7,779,213               13%

       Proprietary trading...................                                        $1,687,146                3%

       Interest and other Income...........                                          $4,370,787                8%

       Investment Banking(1)...............                                          $2,439,144                4%
                                                                                      ----------              --

       Total Revenues........................                                       $58,226,682              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.

Affiliated Registered Representative Program

     Montauk  Financial  Group's  primary  method of  operations  is through its
affiliated registered representatives, who operate as independent contractors. A
registered  representative  who becomes  affiliated with Montauk Financial Group
establishes  his/her 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.   Under  this  program,  the  affiliated   representatives   retain  a
significantly higher percentage of the commissions and fees generated by his/her
sales than a registered  representative in a traditional brokerage  arrangement.
The affiliate program is designed to attract  experienced  brokers with existing
clientele  who  desire  to  operate   their  own  offices,   as  well  as  other
professionals in all facets of the financial services industry.

     Affiliated  representatives  must possess a  sufficient  level of sales 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  become  registered  with  Montauk  Financial  Group  to  provide
securities products and services to their clients.

     Montauk  Financial  Group  provides  full  support  services to each of the
affiliated representatives,  including access to stock and options execution and
over-the-counter stock trading;  products such as insurance,  mutual funds, unit
trusts and investment advisory programs; and research, compliance,  supervision,
accounting and related services.

     Each affiliated  representative  is required to obtain and maintain in good
standing  each  license  required  by the SEC and  NASD 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.  Montauk Financial
Group is ultimately  responsible  for  supervising  each  affiliated  registered
representative.  Montauk  Financial Group can incur  substantial  liability from
improper  actions of any of the affiliated  representatives.  Montauk  Financial
Group maintains a professional  liability errors and omissions  insurance policy
which provides  coverage for certain actions taken and/or  omissions made by its
registered  representatives,  employees and other agents in connection  with the
purchase and sale of securities and other financial products and services.
<PAGE>
03

Revenue Sources

     Through  our  affiliate  program  we derive a  substantial  portion  of our
revenues from customer commissions on brokerage  transactions in equity and debt
securities for domestic and international investors such as investment advisors,
banks, mutual funds,  insurance  companies,  hedge funds, and pension and profit
sharing  plans.  In addition,  in the regular  course of our  business,  we take
securities  positions as a market maker to facilitate customer  transactions and
for investment purposes. In making markets and when trading for its own account,
we expose our own capital to the risk of fluctuations  in market value.  Trading
profits (or losses) depend primarily upon the skills of the employees engaged in
market making and position taking,  the amount of capital allocated to positions
in securities  and the general  trend of prices in the  securities  markets.  We
monitor our risk by  maintaining  our  securities  positions at or below certain
pre-established  levels.  These levels reduce certain  opportunities  to realize
profits in the event that the value of such securities increases.  However, they
also reduce the risk of loss in the event of a decrease in such value and result
in  controlled  interest  costs  incurred on funds  provided  to  maintain  such
positions.

Montauk Insurance Services

     In 1991,  we formed  Montauk  Insurance  Services,  Inc. for the purpose of
offering and selling variable annuity, variable life as well as traditional life
and health insurance products.  Currently, Montauk Insurance is licensed to sell
life insurance and annuities in 49 states.  Montauk  Insurance  derives  revenue
from the sale of  insurance-related  products and  services to the  customers of
Montauk Financial Group's registered  representatives,  who are also licensed to
sell  certain  insurance  products.   In  fiscal  year  2003,  we  earned  gross
commissions of $4.2 Million from the sale of insurance and annuity products.

Asset Management Advisory Services

     Montauk Financial Group is registered as an Investment Adviser with the SEC
and  provides  investment  advisory  services  to clients  through  independent,
third-party  sponsored advisory programs.  Montauk Financial Group is registered
or eligible to conduct  business as an  investment  adviser in 37 states and the
District of Columbia.

     Managed  account  programs  generally  require  the client to pay a fee for
portfolio  advisory  services,  brokerage  execution  and custody  and  periodic
account performance reports. These fees are calculated as a percentage of client
assets under management.  Historically,  we have only derived a relatively small
percentage  of our overall  revenues  from this  business  line.  Management  is
currently   evaluating  various  business  strategies  relative  to  the  future
operation of this segment.

Investment Banking

     Montauk  Financial Group  participates  in private and public  offerings of
equity and debt securities and provides general  investment  banking  consulting
services  to various  public and  private  corporations.  Historically,  Montauk
Financial  Group has not  derived a  significant  amount  of its  revenues  from
investment banking.  We continue to review investment banking  opportunities and
anticipate that we will engage in additional public and private offerings in the
future as  business  and  market  conditions  warrant.  Our  investment  banking
services include bridge and senior loan financing, private placements and public
offerings of debt and equity  securities,  and  exclusive  sales  advice.  Under
circumstances  where we act as an  underwriter,  we may assume greater risk than
would  normally  be assumed in our normal  trading  activity.  Under the federal
securities  laws, an underwriter is subject to substantial  potential  liability
for material misstatements or omissions in prospectuses and other communications
with  respect  to  underwritten  offerings.  Further,  underwriting  commitments
constitute a charge against net capital and our underwriting  commitments may be
limited by the requirement that we must, at all times, be in compliance with the
Uniform Net Capital Rule 15c3-1 of the Securities and Exchange Commission.

Montauk Capital Markets Group

     As discussed below under the caption "Recent  Events," we ceased  operation
of this division in January  2004.  From its inception in March 2002 through the
end of the 2003 fiscal year,  this division  offered market  commentary,  equity
research and specialized brokerage services to its institutional clientele.

Clearing Arrangement

     In May 2000,  Montauk  Financial  Group  entered  into a  10-year  clearing
agreement  with Fiserv  Securities,  Inc. under which Fiserv will act as Montauk
Financial  Group's  primary  clearing  broker.  In February  we entered  into an
amended and restated  financial  agreement with Fiserv whereby Montauk Financial
Group's  rights and  obligations  under the  agreement  were  assigned to us. In
connection with this  amendment,  we granted Fiserv a first priority lien in all

<PAGE>
04


of the outstanding  shares of Montauk  Financial Group stock. In connection with
the clearing  agreement,  Montauk Financial Group and Fiserv also entered into a
financial agreement under which Fiserv provided an aggregate of $7.75 Million in
cash advances to Montauk Financial Group over the initial three-year term of the
agreement. In November 2003, we received the final cash advance of $1.25 Million
from Fiserv.  We are required to repay any unearned portion of the cash advances
in the  event  we fail to  achieve  certain  minimum  performance  criteria,  or
terminate the  agreement  under certain  circumstances  prior to the  expiration
date, as well as penalties for early termination.

Competition

     We  encounter  intense  competition  in all aspects of our  business and we
compete  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,  we also compete with numerous regional and local firms.
Our Montauk  Financial Group  subsidiary  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,  we  entered  the
discount  brokerage  arena through our 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 our 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, we may be adversely affected to
the extent those services are offered on a large-scale basis.

     Our subsidiary Montauk Financial Group competes through its advertising and
recruiting  programs for  registered  representatives  interested in joining its
affiliate program.  Montauk Financial Group often offers incentives to qualified
registered  representatives to join it. 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,   Montauk  Financial  Group  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,  principally the NASD, and in
the case of New York  Stock  Exchange,  Inc.  member  firms,  the New York Stock
Exchange.  The  self-regulatory  organizations,  among other things,  promulgate
regulations and provide oversight in areas of:

o        sales practices,
o        trade practices among broker-dealers,
o        capital requirements,
o        record keeping, and
o        conduct of employees and affiliates of member organizations.

     In addition to promulgating  regulations and providing  oversight,  the SEC
and  the   self-regulatory   organizations   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 SEC and the
self-regulatory  organizations,  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>
05


     Net  Capital  Requirements.   Every  U.S.  registered  broker-dealer  doing
business with the public is subject to the Commission's Uniform Net Capital Rule
(the "Rule"), which specifies minimum net capital requirements.  Although we are
not directly subject to the Rule, our subsidiary,  Montauk Financial Group, is a
registered  broker-dealer  and is subject to the Rule.  The Rule provides that a
broker-dealer  doing  business  with the public  shall not permit its  aggregate
indebtedness  to exceed 15 times its adjusted  net capital (the "basic  method")
or,  alternatively,  that it not permit its adjusted net capital to be less than
2% of its aggregate  debit balances  (primarily  receivables  from customers and
broker-dealers)   computed  in  accordance  with  such  Rule  (the  "alternative
method"). Montauk Financial Group applies the basic method of calculation.

     Compliance  with  applicable net capital rules could limit our  operations,
such as underwriting and trading activities, that require the use of significant
amounts of capital, and may also restrict loans,  advances,  dividends and other
payments by our subsidiaries to us. As of December 31, 2003,  Montauk  Financial
Group has $757,047 of net capital and $344,479 of excess net capital.

Employees

     Currently,  we have  approximately 439 registered  representatives of which
333 are associated with affiliate offices. In addition,  we employ approximately
90 support  personnel in the areas of operations,  compliance,  accounting,  and
administration. We believe our relationship with our employees is satisfactory.

Fidelity Bond

     As required by the NASD and certain other  authorities,  Montauk  Financial
Group 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 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  aggregate  protection
provided by a private  insurance  company for the benefit of all of our clearing
firm's  customer.  The  Securities  Investor  Protection  Corporation  is funded
through  assessments on registered  broker-dealers and charges a flat annual fee
of $150.

Securities Broker/Dealer Professional Liability Insurance

     Montauk  Financial  Group carries a securities  Broker/Dealer  professional
liability  insurance  policy  underwritten  by National  Union  First  Insurance
Company of  Pittsburgh,  PA, a subsidiary of American  International  Companies.
This liability 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 transactions, investment management services, the giving of
financial  investment  advice and the purchase  and/or sale of securities.  This
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, 2004 to
January 31, 2005,  with a $1 Million  limit of liability  for each covered event
and a $3 Million  aggregate  liability  limit. We are responsible for a $100,000
deductible  payment  per  claim,  of which a minimum of $10,000 is offset to the
registered  representative  involved in the claim. In the event that the cost of
this coverage becomes cost  prohibitive or otherwise  becomes  unavailable,  the
lack of coverage may have an adverse  impact on our  financial  condition in the
event of material  claims in the future which may not be covered by our existing
policy.

Executive and Organization Liability Insurance Policy

     We carry an executive and  organization  liability  insurance  policy (also
known as Directors and Officers liability insurance), which covers our 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 our behalf.
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.  Our carrier has
issued a renewal  quote for the policy  period  commencing  March 30,  2004 with
coverage substantially similar to that in effect during the prior policy period.
During  the  prior  policy,  this  coverage  was  underwritten  by XL  Specialty
Insurance  Company of  Stamford,  Connecticut,  and provided for coverage in the
amount of $5 Million with a deductible of $250,000 for all claims.
<PAGE>
06


General Business Developments During the
2003 Fiscal Year and Subsequent Events

New Management

     Effective  January 1, 2004, we restructured  our senior  management.  As of
such date,  Mr.  Victor K. Kurylak  commenced  his service as our  President and
Chief Operating Officer.  Mr. Herbert Kurinsky,  who had served as our Chairman,
President and Chief  Executive  Officer will continue to serve us as Chairman of
the Board of Directors,  but  relinquished  his other  offices.  Mr.  William J.
Kurinsky,  who had  served  as our Vice  President,  Chief  Operating  and Chief
Financial  Officers and Secretary  will now serve as our Vice Chairman and Chief
Executive  Officer.  Mr.  William J.  Kurinsky has also  retained his offices of
Chief Financial Officer and Secretary.

Closure of Montauk Capital Markets Group

     In January 2004, we ceased  operations of Montauk  Capital  Markets  Group,
which provided market  analysis,  equity research and brokerage  services to its
institutional  clientele.  Management determined to cease the operations of this
division in view of new  regulations  pertaining to the  publication of research
reports and pending regulatory action regarding our research.

Debenture Offering

     During the quarter ended December 31, 2003 we completed a private  offering
of  securities  pursuant  to  Section  4(2) of the  Securities  Act of 1933,  as
amended, and Regulation D, promulgated  thereunder.  In the offering, we sold an
aggregate  of  $1,895,000  of  convertible  debentures  to  certain  "accredited
investors" only. The offering consisted of up to $3,000,000  principal amount of
6%  convertible  debentures.  Each  debenture is due and payable five years from
issuance,  unless  previously  converted  into shares of our common  stock.  The
proceeds of the financing  will be used to satisfy our general  working  capital
needs.

     Each  debenture  earns  interest  at  the  rate  of 6% per  annum,  payable
semi-annually,  and is convertible at an initial  conversion  price of $0.50 per
share,  subject  to  adjustment  for  stock  dividends,   combinations,  splits,
recapitalizations,  and like events. Each holder shall have the right to convert
its  debentures,  at the option of such holder,  at any time, into shares of our
common stock at the then applicable  conversion  price. In addition,  we, at our
option, may demand the holders convert some or all of the debentures into shares
of common  stock in the event that the closing bid price of our common  stock is
200% of the conversion  price for the twenty  consecutive  trading days prior to
the date of the notice of conversion.

     Further, we, at our option, may prepay some or all of the debentures in the
event that the closing bid price of our common  stock is 200% of the  conversion
price for the twenty consecutive trading days prior to the date of the notice of
prepayment.  The prepayment  amount shall be 130% of the principal amount of the
debentures from the date of issuance until the first  anniversary of the date of
issuance, together with accrued and unpaid interest.  Thereafter, the prepayment
amount  shall  be  equal  to 120% of the  principal  amount  of the  debentures,
together with accrued and unpaid interest through the date of prepayment.

     Holders of  debentures  shall have  notice of and the right to include  the
shares  of  common  stock  issuable  upon  conversion  of  the  debentures  in a
registration  statement that we file other than a registration statement on Form
S-4 or S-8, or a successor form. Montauk Financial Group served as the exclusive
agent for the sale of the  debentures  and  received  commissions  of 10% of the
principal  amount of  debentures  sold in the  offering and warrants to purchase
such number of shares of common stock as equals 10% of the  aggregate  principal
amount of the debentures  sold.  These warrants are  exercisable for a period of
five  years  at an  exercise  price  of  equal  to the  conversion  price of the
debentures.

     The  debentures  have not been  registered  for  offer  or sale  under  the
Securities  Act; such  securities are being issued on the basis of the statutory
exemption  provided by Section 4(2) of the  Securities  Act, as amended,  and/or
Rule 506 of Regulation D, promulgated  thereunder relating to transactions by an
issuer not  involving  any public  offering;  and the  transaction  has not been
reviewed  by,  passed  on or  submitted  to  any  Federal  or  state  agency  or
self-regulatory  organization  where an  exemption  is being  relied  upon.  The
securities  may not be  sold,  assigned  or  transferred  unless  (i) the  sale,
assignment or transfer of such  securities is  registered  under the  Securities
Act, or (ii) the securities are sold, assigned or transferred in accordance with
all the requirements and limitations of Rule 144 under the Securities Act.
<PAGE>
07

                                  Risk Factors

Our business is inherently risky and we have suffered losses

     For the years ended December 31, 2003, 2002 and 2001, we reported  revenues
of  $58,227,000,  $47,967,000  and  $51,220,000,  respectively.  We suffered net
losses of  $3,518,000,  $2,960,000  and  $5,208,000  for the fiscal  years ended
December 31, 2003, 2002 and 2001, respectively. The losses in these periods were
primarily due to costs associated with litigation  expenses and settlements.  We
may incur further losses in the future, and such losses would necessarily affect
the nature, scope and level of our future operations.  Our 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 our  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 our business is directly affected by our available
net capital.

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

     We, 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.  We 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 we expand our investment banking activities
and more  frequently  serve as  manager or  co-manager  of public  offerings  of
securities,   we  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  results 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 us to losses

     Our  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 our ability to
resell  securities  purchased  or to  repurchase  securities  sold in  principal
transactions.  Montauk  Financial  Group'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 we may not recover the funds loaned to
the customer.

Competition in the brokerage industry may adversely impact our retail business.

     We encounter intense competition in all aspects of our business and compete
directly with many other securities  firms, a significant  number of which offer
their  customers  a broader  range of  financial  services,  have  substantially
greater resources and may have greater operating  efficiencies.  In addition,  a
number of firms offer discount brokerage services to individual retail customers
and generally  effect  transactions at lower  commission  rates on an "execution
only" basis without  offering other services such as investment  recommendations
and research.  The further expansion of discount brokerage firms could adversely
affect  our  retail  business.   Moreover,   there  is  substantial   commission
discounting  by  full-service  broker-dealers  competing for  institutional  and
individual  brokerage business.  The possible increase of this discounting could
adversely affect us. Other financial institutions,  notably commercial banks and
savings and loan associations, offer customers some of the services and products
presently provided by securities firms. In addition,  certain large corporations
have entered the securities industry by acquiring  securities firms. While it is
not possible to predict the type and extent of competitive  services which banks
and other  institutions  ultimately may offer to customers,  we may be adversely
affected to the extent those services are offered on a large scale.
<PAGE>
08


We are subject to various risks in the securities industry.

     As a securities  broker-dealer,  our subsidiary is subject to uncertainties
that are common in the securities industry. These uncertainties include:

         o     the volatility of capital markets;
         o     governmental regulation;
         o     litigation;
         o     intense competition;
         o     substantial fluctuations in the volume and price level of
               securities; and
         o     dependence on third parties.

     As a result,  revenues and earnings may vary  significantly  from period to
period.  In periods of low volume,  profitability  is impaired  because  certain
expenses remain relatively fixed. We are smaller and have less capital than many
competitors in the securities industry.  In the event of a market downturn,  our
business could be adversely  affected in many ways,  including  those  described
herein.  Our revenues are likely to decline in such  circumstances and, if it is
unable to reduce expenses  accordingly,  our financial  condition and results of
operations would be adversely affected.

We have incurred liability due to securities-related litigation.

     Many  aspects  of our  business  involve  substantial  risks of  liability,
including  exposure to liability under  applicable  federal and state securities
laws in  connection  with the activity of our  associated  persons,  as well the
underwriting and distribution of securities.  In recent years, there has been an
increasing incidence of litigation involving the securities industry in general,
which  seeks both  rescissionary  and  punitive  damages.  During the year ended
December 31, 2003,  we incurred  $5,837,000 in  litigation  costs,  reserves and
expenses related to various legal claims and settlements. Management cannot give
assurance  that the accrual will be adequate to cover  actuaul costs that may be
subsequently  incurred.  It is not  possible  to  predict  the  outcome of other
matters pending against us at this time. All such cases are and will continue to
be, vigorously  defended.  However,  litigation is subject to many uncertanties,
and some of these  actions  and  proceedings  may  result in  adverse  awards or
judgments.  After considering all relevant facts,  available  insurance coverage
and consultation with litigation  counsel,  it is possible that our consolidated
financial  condition,  results of operations,  or cash flows could be materially
affected by unfavorable outcomes or settlements of certain pending litigation.

We remain subject to extensive regulation and the failure to comply with these
regulations could subject us to penalties or sanctions.

     The  securities  industry in general  and our  business  in  particular  is
subject to extensive  regulation by the SEC,  state  securities  regulators  and
other governmental regulatory  authorities.  The broker-dealer is also regulated
by industry self-regulatory organizations,  including the NASD and the Municipal
Securities   Rulemaking   Board.   Montauk   Financial  Group  is  a  registered
broker-dealer  with the SEC and a member  firm of the NASD.  Broker-dealers  are
subject to  regulations  which  cover all  aspects of the  securities  business,
including:

            o   sales methods and supervision;
            o   trading practices among broker-dealers;
            o   use and safekeeping of customers' funds and securities;
            o   capital structure of securities firms;
            o   record keeping; and
            o   the conduct of directors, officers, agents and employees.

     Much  of  the   regulation  of   broker-dealers   has  been   delegated  to
self-regulatory organizations,  principally the NASD, which is Montauk Financial
Group's primary  regulator.  NASD adopts rules,  subject to approval by the SEC,
that govern its members and  conducts  periodic  examinations  of member  firms'
operations.

     Compliance with these regulations involves a number of risks,  particularly
where the regulations may be subject to varying interpretation.  If we are found
to have violated an applicable regulation,  an administrative or judicial action
may be  initiated  against us that may result in  penalties  which  could have a
material  adverse  effect on our  operating  results  and  financial  condition,
including but not limited to:

            o   censure;
            o   fine;
            o   civil damage awards, including treble damages for insider
                trading violations;
            o   the issuance of cease-and-desist orders; or
            o   the deregistration or suspension of our broker-dealer activities
                and/or our employees.
<PAGE>
09


We depend upon our registered representatives.

     Most  aspects  of  our  business  are  dependent  on  highly   skilled  and
experienced individuals.  We have devoted considerable efforts to recruiting and
compensating  those  individuals  and provide  incentives  to encourage  them to
remain employed by or associated with us. Individuals  associated with us may in
the future leave our company at any time to pursue other opportunities.

We depend upon our senior management.

     For the foreseeable  future,  we will be  substantially  dependent upon the
personal efforts and abilities of our senior management,  including our Chairman
and  founder,  Mr.  Herbert  Kurinsky,  our Chief  Executive  Officer  and Chief
Financial  Oficer,  Mr. William  Kurinsky and our President and Chief  Operating
Officer, Mr. Victor K. Kurylak to coordinate,  implement and manage our business
plans and programs.  The loss or  unavailability  of the services of any of them
would likely have a material  adverse  affect on our  business,  operations  and
prospects.  We have obtained,  for our benefit,  a life insurance  policy on the
life of Mr. Herbert Kurinsky in the amount of $500,000.

Montauk Financial Group must comply with Net Capital Requirements.

     The business of our broker-dealer,  like that of other securities firms, is
capital intensive.  The SEC and the NASD 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 our ability to  significantly  expand or, depending upon the magnitude of
the loss or charge, to maintain our present level of business.

We are exposed to risks due to our investment banking activities.

     Participation in an underwriting syndicate or a selling group involves both
economic and regulatory  risks.  An underwriter may incur losses if it is unable
to resell the  securities  it is committed  to  purchase,  or if it is forced to
liquidate its  commitment at less than the purchase  price.  In addition,  under
federal  securities  laws,  other  laws and  court  decisions  with  respect  to
underwriters' liabilities and limitations on the indemnification of underwriters
by issuers,  an underwriter is subject to  substantial  potential  liability for
misstatements   or  omissions  of  material  facts  in  prospectuses  and  other
communications with respect to such offerings.  Acting as a managing underwriter
increases these risks.  Underwriting commitments constitute a charge against net
capital and our ability to make  underwriting  commitments may be limited by the
requirement  that it must at all  times be in  compliance  with the Net  Capital
Rule.

We rely on one clearing firm and the termination of the clearing agreement with
this firm could disrupt Montauk Financial Group's business.

     Montauk Financial Group uses one clearing broker, Fiserv Securities,  Inc.,
to process its securities  transactions,  maintain customer  accounts,  control,
receive,  custody  and  deliver  securities,  on a fee  basis.  We depend on the
operational  capacity  and  ability  of the  clearing  broker  for  the  orderly
processing of  transactions.  If the clearing  agreement is  terminated  for any
reason,  or if the clearing  firm fails to provide its  functions  for us in the
normal course of business,  we would be forced to find an  alternative  clearing
firm.  There  is no  assurance  that we  would  be  able to find an  alternative
clearing firm on acceptable terms to us or at all.

We do not pay dividends on our common stock.

     We do not pay dividends on the issued and outstanding  shares of our common
stock.  However,  we pay 6% quarterly dividends on the outstanding shares of our
Series A Preferred  Stock and pay interest at the rate of 6% on our  outstanding
debentures. Applicable laws, rules and regulations under the New Jersey Business
Corporation Act, the Securities Act of 1933, as amended,  as well as regulations
of the NASD may affect our ability to declare and pay dividends.

The conversion or exercise of outstanding convertible securities may result in
dilution to our common shareholders.

     Dilution of the per share value of our common  shares could result from the
conversion of most or all of the currently outstanding  debentures and shares of
Series A Preferred Stock. We issued an aggregate of $1,240,000  principal amount
of debentures in a private  offering  completed  March 1, 2003 and  subsequently
issued an aggregate of  $1,895,000  principal  amount of debentures in a private
placement  completed in December 2003. The  debentures  are  convertible  into a
total of 6,270,000  shares of our common stock at an initial  conversion rate of
$0.50.  In 1999, we issued an aggregate of 349,511  shares of Series A Preferred
Stock  in  connection  with an  exchange  offer.  Currently,  311,089  Series  A
Preferred  Shares remain  outstanding  and  convertible  into 622,178  shares of
common stock at the rate of $2.50 per share.  However, if the last sale price of
the common stock is $3.50 or more a share for 20  consecutive  trading  days, as
listed  on the  Over-the-Counter  Bulletin  Board,  the  Series  A  Shares  will
automatically be converted into shares of common stock.
<PAGE>
10


     In addition, as of December 31, 2003, there were outstanding:

            o   warrants to purchase 313,500 shares of common stock at an
                exercise price of $0.50 per share;
            o   warrants to purchase 775,000 shares of common stock at exercise
                prices ranging from $.25 to $1.75, issued in a settlement of
                certain claims;
            o   warrants to purchase 3,072,446 shares of common stock at an
                exercise price of $7.00 per share; and
            o   options to purchase 3,556,498 shares of common stock, at
                exercise prices ranging from $0.20 to $2.75 per share.

     The conversion or exercise of these convertible  securities and the sale of
the  underlying  common  stock,  or even the  potential  of such  conversion  or
exercise  and sale,  may have a  depressive  effect on the  market  price of our
securities and will cause dilution to our shareholders. Moreover, the terms upon
which we will be able to  obtain  additional  equity  capital  may be  adversely
affected,  since the holders of the  outstanding  convertible  securities can be
expected to convert or exercise them at a time when we would, in all likelihood,
be able to obtain any needed  capital  on terms  more  favorable  to us than the
exercise terms provided by the outstanding options and warrants.  Dilution could
create significant downward pressure on the trading price of our common stock if
the conversion or exercise of these securities  encouraged short sales. Even the
mere  perception of eventual  sales of common shares issued on the conversion of
these  securities  could  lead to a decline in the  trading  price of our common
stock.


We have sold restricted shares which may depress the common stock price.

     As of March 30, 2004, of the 10,065,486  issued and  outstanding  shares of
our common stock, approximately 2,544,241 shares may be deemed restricted shares
and, in the future, may be sold in compliance with Rule 144 under the securities
Act of 1933,  as amended.  Rule 144 provides  that a person  holding  restricted
securities for a period of one year may sell in brokerage transactions an amount
equal to 1% of our outstanding common stock every three months. A person who not
affiliated with us and who has held restricted  securities for over two years is
not subject to the aforesaid volume  limitations as long as the other conditions
of the Rule are met.  Possible or actual sales of our common stock by certain of
our present  shareholders  under Rule 144 may, in the future,  have a depressive
effect on the price of the common stock in any market which may develop for such
shares. Such sales at that time may have a depressive effect on the price of the
common stock in the open market.

There is a limited public market for our securities

     Our 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 NASD.
Although we may apply for  inclusion of our common stock in the Nasdaq  Smallcap
Market and/or on the American Stock  Exchange,  we do not currently  satisfy the
minimum  listing  requirements.  Accordingly,  there can be no assurance that we
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.

Our broker-dealer subsidiary faces limitations on trading and market-making
activities in our securities

     Due to regulatory  positions and  requirements of both the SEC and the NASD
relating to the circumstances and extent to which a registered broker-dealer and
NASD member may engage in  market-making  transactions  in the securities of its
parent  company,   Montauk  Financial  Group  does  not  engage  in  trading  or
market-making  activities relating to our common stock or warrants where Montauk
Financial  Group would speculate in, purchase or sell our securities for its own
account.  The purpose and effect of such limitation  restricts Montauk Financial
Group  from  being a factor in the  determination  of the market or price of our
securities.  Montauk Financial Group does, however, execute transactions for its
customers on an "agency  basis" where it does not acquire our securities for its
own proprietary  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 NASD, Montauk Financial
Group is permitted to participate as a  market-maker,  it may do so on the basis
of showing a bid and offer for our securities at specified  prices  representing
customer interest.

We have limited the liability of our directors.

     We have amended our  certificate  of  incorporation  to include  provisions
eliminating  the  personal  liability of our  directors,  except for breach of a
director's  duty of  loyalty  to the  company  or to our  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

<PAGE>
11


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.

     We  believe  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.

Our Certificate of Incorporation and By-Laws contain provisions which may have
an anti-takeover effect.

     Our 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, our 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

     We maintain our corporate headquarters and executive offices at Parkway 109
Office Center,  328 Newman Springs Road, Red Bank, New Jersey. In March 1997, we
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, we 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. We pay, 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.   Management  is  currently  reviewing  its
alternatives  in light of the  impending  expiration  of the current term of the
Master Lease.

Leased Branch Offices

     In June 2001 we 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 we 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.  In January  2004 we  discontinued  the
operations  of this  division  and  currently  utilize  this  space as a Montauk
Financial Group-operated branch office.

<PAGE>
12

Item 3.   Legal Proceedings

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

     On July 17,  2003,  we  entered  into a  settlement  agreement,  along with
Montauk  Financial  Group,  with certain  claimants  in order to settle  pending
arbitration  proceedings  which were brought against us within the last eighteen
months.  The  covered  proceedings  arose out of customer  purchases  of certain
high-yield  corporate  bonds  which  declined in market  value and  subsequently
defaulted. The settlement agreement covers eleven separate claims that sought an
aggregate  of  approximately  $12.3  million in  damages.  In  exchange  for the
consideration we provided,  each claimant granted a general release of claims in
favor of our company and all individual  respondents,  with the exception of the
registered   representative  who  had  handled  the  claimants'   accounts.   In
consideration for the release granted by the claimants,  we agreed to pay to the
claimants an aggregate of $1,000,000 cash and to issue to the claimants warrants
to  purchase  an  aggregate  of 750,000  shares of our common  stock and 500,000
shares of our common stock. We agreed to file a registration  statement with the
Securities and Exchange  Commission  covering the resale of the shares of common
stock  underlying  the warrants and fifty  percent of the shares of common stock
issued in connection with the settlement agreement.

     In addition,  the settlement agreement provides that we may be obligated to
make additional payments of up to $600,000, in the event that claimants elect to
exercise the warrants on certain dates.  Specifically,  upon the election of the
majority of then existing warrant holders to exercise up to a maximum of 250,000
warrants,  respectively during the months of June 2004, June 2005 and June 2006,
the claimants,  upon  exercising  their  warrants,  will be required to sell the
shares in the open market.  Thereafter,  we would pay to the  claimants up to an
aggregate  amount of $200,000 less the amount received by the claimants from the
sale of their shares net of  commissions.  In the event that warrant  holders do
not elect to exercise the warrants  during a particular  period,  we will not be
required to make a payment for that period.

     We are currently  defending nine additional  claims relating to the sale of
the high-yield  bonds referenced in the preceding  paragraphs.  The claimants in
these matters seek compensatory damages in excess of $4.3 million, plus punitive
damages and the recovery of various costs.  We are vigorously  defending  theses
actions and believe that there are meritorious  defenses in each case.  There is
no insurance  coverage available for the payment of settlements and/or judgments
that may result from these particular claims.

     In 2002,  we filed a claim  against  one of our  competitors  for  raiding,
unfair  competition and unfair use of proprietary and confidential  information.
In 2003,  the matter was  resolved  between  the  parties and we received a cash
payment  from  the  respondent   firm,   with  specific   restrictions   on  the
solicitation, and limitation on the hiring of our registered representatives and
employees by the  respondent  for a specific  time period.  The  agreement  also
requires  the  payment  of  liquidated  damages  by each party in the event of a
breach of its terms.

     Montauk  Financial Group is also a respondent or  co-respondent  in various
other legal  proceedings which are related to its securities  business.  Montauk
Financial  Group is contesting  these claims and believes there are  meritorious
defenses in each case. However, litigation is subject to many uncertainties, and
some of these actions and proceedings may result in adverse judgments.  Further,
the availability of insurance coverage in any particular case is determined on a
case by case basis by the  insurance  carrier,  and is  limited to the  coverage
limits within the policy for any individual  claim and in the  aggregate.  After
considering all relevant facts,  available  insurance  coverage and consultation
with litigation counsel, management believes that significant judgments or other
unfavorable  outcomes  from  pending  litigation  could have a material  adverse
impact on our consolidated  financial condition,  results of operations and cash
flows in any particular  quarterly or annual period,  or in the aggregate  could
impair  our  ability  to  meet  the net  capital  requirements  relating  to our
securities business.

     As of December 31,  2003,  we have  accrued for  litigation  costs that are
probable and can be reasonably  estimated based on a review of existing  claims,
arbitrations and unpaid settlements.  Management cannot give assurance that this
accrual  will be  adequate  to  cover  actual  costs  that  may be  subsequently
incurred.  It is not  possible to predict the outcome of other  matters  pending
against Montauk  Financial  Group.  All such cases are, and will continue to be,
vigorously defended.

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

     Not Applicable.
<PAGE>
13

                                    PART II

Item 5. Market of and Dividends on our Common Equity and
        Related Stockholder Matters

A.      Principal Market

     Our common stock is traded in the over-the-counter  market.  Trading in the
our common stock is reported on the NASD  Bulletin  Board system and in the pink
sheets  published  by Pink Sheets LLC. We believe  that there is an  established
public trading market for our common stock based on the volume of trading in our
common stock and the existence of market makers who regularly publish quotations
for our  common  stock.  Our  Class A,  Class B and Class C  Warrants  commenced
trading in the  over-the-counter  market upon their  issuance in March 1998. The
Class A Warrants and Class B Warrants  expired on February 17, 2003. The Class C
Warrants are exercisable until February 17, 2005.

B.      Market Information

     Our common stock commenced trading in the over-the-counter  market in 1987.
On March 30,  2004,  our  common  stock had a high and low bid price of $.38 and
$.32, respectively.

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

Common Stock

Fiscal Year 2004                         High Bid            Low Bid

     1st   Quarter                          $.43              $.30
    (through 3/29/04)

Fiscal Year 2003                         High Bid            Low Bid

     1st Quarter                            $.22              $.20
     2nd Quarter                            $.32              $.17
     3rd Quarter                            $.32              $.20
     4th Quarter                            $.40              $.24

Fiscal Year 2002                         High Bid            Low Bid

     1st   Quarter                          $.55              $.25
     2nd Quarter                            $.53              $.21
     3rd  Quarter                           $.51              $.21
     4th  Quarter                           $.23              $.18

C.       Number of Record Holders

     The  approximate  number of record  holders of our common stock as of March
30,  2004 was 470.  Such  number  of  record  holders  was  determined  from our
stockholder  records, and does not include beneficial owners of our common stock
whose  shares are held in the names of various  security  holders,  dealers  and
clearing agencies. We believe there are in excess of 3,000 beneficial holders of
our common stock.

D.       Dividend Policy

     We have not paid any dividends  upon our common stock since our  inception,
and 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.  We pay quarterly  dividends on outstanding shares of
our  Series  A  Preferred  Stock  at the rate of 6% per  annum,  subject  to the
limitations  under the New Jersey Business  Corporation Act. There are currently
outstanding  311,089  shares  of  Series  A  Preferred  Stock.  We have not paid
dividends on our outstanding  shares of Series A Preferred Stock since the first
quarter of our 2003 fiscal year. There can be no assurance that we will continue
to pay dividends in the future.
<PAGE>
14


E.       Sales of Unregistered Securities

Private Placement

     In  December  2003,  we  completed  a private  offering  of 6%  convertible
debentures.  We  offered  an  aggregate  of  $3,000,000  of  the  debentures  to
accredited  investors  on a best  efforts  basis.  In the  offering,  we sold an
aggregate  amount of  $1,895,000 of  debentures.  The  debentures  are initially
convertible into shares of our common stock at the conversion price of $0.50 per
share.  Interest  on the  debentures  accrues at the rate of 6% per annum and is
payable in cash on a semi-annual basis on April 1st and October 1st of each year
until maturity or  conversion.  Each debenture is due and payable five (5) years
from issuance,  unless previously converted into shares of common stock. Montauk
Financial Group served as our placement agent for the sale of the debentures. We
paid  commissions of ten percent (10%) of the principal  amount sold, and issued
warrants to purchase  189,500  shares of common stock,  exercisable at $0.50 per
share,  which  expire five (5) years from the date of  issuance,  to  registered
representatives  of Montauk  Financial Group who participated in the sale of the
debentures.  Additional  information  regarding this offering is described under
the  caption  "General  Business  Developments  During  the 2003  Fiscal  Year -
Debenture Offering" in Item 1 "Business" of this Annual Report on Form 10-K.

Settlement of Certain Claims

     On July 17,  2003,  we  entered  into a  settlement  agreement,  along with
Montauk  Financial  Group,  with certain  claimants  in order to settle  pending
arbitration  proceedings  which were brought against us within the last eighteen
months.  The  covered  proceedings  arose out of customer  purchases  of certain
high-yield  corporate  bonds  which  declined in market  value and  subsequently
defaulted.  The settlement agreement covers eleven separate claims and sought an
aggregate  of  approximately  $12.3  million in  damages.  In  exchange  for the
consideration we provided,  each claimant granted a general release of claims in
favor of our company and all individual  respondents,  with the exception of the
registered   representative  who  had  handled  the  claimants'   accounts.   In
consideration for the release granted by the claimants,  we agreed to pay to the
claimants an aggregate of $1,000,000 cash and to issue to the claimants warrants
to  purchase  an  aggregate  of 750,000  shares of our common  stock and 500,000
shares of our common stock. We agreed to file a registration  statement with the
Securities and Exchange  Commission  covering the resale of the shares of common
stock  underlying  the warrants and fifty  percent of the shares of common stock
issued in connection with the settlement agreement.

<PAGE>
15

Item 6.  Selected Financial Data

     The following  selected  financial data should be read in conjunction  with
the  Consolidated  Financial  Statements,   including  the  related  notes,  and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."
<TABLE>
<S>                                    <C>                 <C>                <C>                 <C>                  <C>

                                                                    Year Ended December 31,

                                       2003                2002               2001                2000                1999

Operations Results:

Revenues:

  Commissions                          $41,950,392         $36,513,802        $37,807,870         $46,529,771          $40,516,625

  Principal transactions                 9,466,359           6,727,642          8,021,887           7,131,079           14,000,680

  Investment banking                     2,439,144           1,007,700          1,483,210           2,416,711              439,065


  Interest and other income              4,370,787           3,717,600          3,907,448           3,252,325            2,628,246
                                         ---------           ---------          ---------           ---------            ---------

Total                                  $58,226,682         $47,966,744       $ 51,220,415        $ 59,329,886          $57,584,616
                                        ----------          ----------         ----------          ----------           ----------
revenues


Expenses:

  Commissions, employee                $46,218,107          39,572,851         42,356,207          46,800,661           42,137,968
compensation and benefits

  Clearing and floor                    $2,934,164           2,666,376          3,247,219           4,003,345            4,109,961
brokerage

  Communications and                    $2,659,105           3,006,017          3,249,389           2,731,681            2,697,433
occupancy

  Legal matters and related             $5,836,960           1,259,502          2,415,374           1,181,115            1,395,008
costs

  Write-down of Note                            --                  --                 --             239,183              100,000
Receivable - Global Financial
Corp.

  Loss on Global lease                          --                  --                 --                  --              600,416
Settlements

  Other operating expenses               3,393,335           4,029,515          5,076,806           4,862,158            3,545,308

  Interest                                 204,054              98,918            174,632             160,230              166,104
                                           -------              ------            -------             -------              -------

  Total expenses                       $61,245,725          50,633,179         56,519,627          59,978,373           54,752,198
                                        ----------          ----------         ----------          ----------           ----------

  Income (loss) before income          (3,019,043)          (2,666,435)        (5,299,212)           (648,487)           2,832,418
taxes

  Provision for income taxes (benefit)    499,000              294,000           (90,989)               6,721              549,140
                                          -------              -------           --------               -----              -------

  Income (loss) before                 $(3,518,043)        $(2,960,435)      $(5,208,223)          $ (655,208)          $2,283,278
extraordinary loss


Extraordinary loss -                            --                  --                 --              34,200                   --
                                                --                  --                 --              ------                   --
extinguishment of debt, net
of tax

Net income (loss)                     $(3,518,043)        $(2,960,435)       $(5,208,223)          $(689,408)           $2,283,278
                                      ============        ============       ============          ==========           ==========

Net income (loss) available           $(3,542,882)        $(3,059,722)       $(5,306,976)          $(792,136)           $2,215,528
                                      ============        ============       ============          ==========           ==========
to common stockholders
Per share of
Common Stock:

(continued)
<PAGE>
16



                                                                    Year Ended December 31,

                                       2003                2002               2001                2000                1999


Basic:                                      $(.40)              $(.36)             $(.61)              $(.08)                 $.22
                                            $(.40)              $(.36)             $(.61)              $(.08)                 $.21
Diluted:


Weighted average common                  8,784,103           8,551,932          8,704,355           9,450,055            9,878,129
                                         =========           =========          =========           =========            =========
shares outstanding--  Basic

Weighted average common and              8,784,103           8,551,932          8,704,355           9,450,055           11,262,708
                                         =========           =========          =========           =========           ==========
common share equivalents
outstanding - Diluted

Financial condition:

Total assets                           $12,596,776         $11,425,506        $14,227,562         $16,913,063          $17,059,184


Total liabilities                      $16,684,215         $12,203,196        $11,934,884         $ 9,203,672           $7,429,046


Temporary Equity-Shares                $ --                $--                $     6,500         $     6,500           $   36,500
subject to redemption


Stockholders' equity (deficit)        $(4,087,439)          $(777,690)         $2,286,181          $7,702,891           $9,593,638

</TABLE>
<PAGE>
17
Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations

Factors Affecting "Forward Looking Statements"

     From time to time, we 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 our 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 and political 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 us. We do
not undertake any  obligation to publicly  update or revise any  forward-looking
statements.

Overview

     We  are  a  New  Jersey-based  financial  services  holding  company  whose
principal  subsidiary,  First Montauk  Securities  Corp., has operated as a full
service retail and  institutional  securities  brokerage firm since 1987.  Since
July 2000,  First  Montauk  Financial  Group has  operated  under the trade name
"Montauk Financial Group" and 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,  Montauk  Financial  Group  established  Century  Discount
Investments,  a discount  brokerage  division.  We also sell insurance  products
through our subsidiary, Montauk Insurance Services, Inc.

     Montauk Financial Group has  approximately  439 registered  representatives
and services over 60,000 retail and institutional customers.  With the exception
of two  corporate-leased  branch offices, all of our other 113 branch office and
satellite  locations  in  28  states  are  owned  and  operated  by  affiliates;
independent  representatives  who  maintain  all  appropriate  licenses  and are
responsible for all office overhead and expenses.  Montauk  Financial Group also
employs registered  representatives directly at its corporate office and its two
company-leased branch offices.

     Montauk  Financial  Group  is  registered  as  a  broker-dealer   with  the
Securities  and Exchange  Commission,  the National  Association  of  Securities
Dealers, the Municipal Securities Rule Making Board, and the Securities Investor
Protection  Corporation  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,  Pennsylvania  with various floor  brokerage and specialist  firms
also providing execution services.  These arrangements provide Montauk Financial
Group  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 Montauk  Financial Group to
offer products and services comparable to larger brokerage firms.

     Montauk Financial Group's revenues consist primarily of commissions and fee
income from individual and institutional  securities  transactions,  mutual fund
and annuity sales 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 & Over-The-Counter Stocks                                     56%
Debt Instruments:
   Municipal, Government and Corporate Bonds and
    Unit Investment Trusts                                              8%
Mutual Funds                                                           10%
Options: Equity and Index                                               4%
Insurance and Annuities                                                 7%
Investment Banking and Corporate Finance                                4%
Investment Advisory Fees                                                3%
Miscellaneous (1)                                                       8%
                                                                      ----
Total                                                                 100%
---------------------------------------
 (1)     Miscellaneous includes interest income, amortization of deferred
         revenue and recovery of bad debts.

     We engage in a highly competitive business.  Therefore,  our earnings, like
those of others in the industry, reflect the activity in the markets and can and
do fluctuate accordingly.
<PAGE>
18

Results of Operations
Three Years Ended December 31, 2003

     The  results of  operations  for fiscal 2003 showed an increase in revenues
over fiscal 2002, as investors  returned to the equity  markets.  Total revenues
for 2003 increased $10,260,000,  or 21.4%, to $58,227,000,  as compared to 2002.
However, the net loss applicable to common stockholders for 2003 was $3,543,000,
approximately 19% greater than the net loss applicable to common stockholders of
$3,060,000 for 2002.
<TABLE>
<S>                                <C>                     <C>           <C>                 <C>           <C>

                                                                Year Ended December 31,
                                   ---------------------------------------------------------------------------------
                                         2003
                                                                      2002                                  2001
                                   ---------------------------------------------------------------------------------
                                   ----------        ----------------------------       ----------------------------
 Revenues:                           (000's)                 % Change    (000's)                 % Change   (000's)
                                   ----------        ----------------------------       ----------------------------

 Commissions                          41,950                15            36,514               (3)           37,808

 Principal Transactions                9,466                41             6,728              (16)            8,022

Investment Banking                     2,439               142             1,008              (32)            1,483

Interest/Other                         4,371                18             3,717               (5)            3,907
                                       -----                               -----                              -----


Total Revenues                        58,226                21            47,967               (6)           51,220
                                      ======                              ======                             ======

</TABLE>

     The primary source of our revenue is commissions  generated from securities
transactions,  mutual funds,  syndicate offerings and insurance products.  Total
revenues  from  commissions  increased  $5,437,000,  or 15%, from fiscal 2002 to
fiscal 2003. The increase resulted from stronger volume of transaction  business
executed by our registered representatives on behalf of customers, who were more
active in the purchase and sale of stocks,  bonds, options and mutual funds than
in the previous two years.

     Revenues  from  agency  transactions  increased  $5,467,000,  or 24%,  from
$22,732,000 in 2002, to $28,199,000 in 2003. As a percentage of total  revenues,
agency  revenues,  which consist  primarily of equity and options  transactions,
increased  from 47% in 2002,  to 48% in 2003.  The 2002 revenues were 4% greater
than the 2001 revenues of $21,918,000 in this category.

     Mutual  fund  revenues  decreased  slightly  from  $5,756,000  in 2002,  to
$5,717,000 in 2003, a decrease of less than 1%. We anticipate  that the level of
mutual fund sales will continue to decline in light of the recent  disclosure of
regulatory  investigations  into the mutual fund industry.  In 2002, mutual fund
commissions  increased  from  the  2001  fiscal  year by 13% due to the  sale of
certain  products  including  principal  protection  plans,  bond  funds and 529
College Savings Plans.

     Revenues from insurance commissions also decreased in 2003, from $5,101,000
in 2002 to  $4,212,000  in 2003,  a  decrease  of  $889,000.  This  decrease  is
reflective of a shift in investor focus from insurance-related  investments back
toward the equity markets.  For 2001 insurance  commissions  were $8,160,000 due
primarily  from the  sales of  certain  variable  annuity  contracts.  The large
commissions  associated  with these products in 2001 were a one-time  occurrence
that was not  repeated  during 2002 or 2003  primarily  due to the fact that the
registered  representative  responsible for the majority of these commissions is
no longer with us.

     Fees  generated  from managed  accounts have continued to increase over the
years through efforts that began in 2001. In 2003, revenues were $1,880,000,  up
from  $1,343,000  in  2002,  an  increase  of  40%.  This  increase  of  40%  is
attributable  to the  increased  interest by  investors  who prefer to pay a fee
based  on  a  percentage  of  asset  value,  rather  than  commissions  paid  on
transactions.  As this structure has increased in popularity  industry-wide,  we
have increased our focus on servicing and increasing this business  segment.  In
2001 fee based revenues were $962,000, 39% below the 2002 revenues.
<PAGE>
19

     Total    revenues    from    principal    transactions,    which    include
mark-ups/mark-downs  on transactions  in which we act as principal,  proprietary
trading and the sale of fixed income and equity securities, showed increases for
2003.  Gross revenue from  principal  transactions  increased  $2,739,000,  from
$6,728,000 to $9,466,000,  an increase of 41% over the 2002 year.  Revenues from
proprietary  equity  trading  decreased in 2003 when  compared with the previous
year. For 2003,  profits from trading were $774,000,  compared to $1,075,000 for
the 2002 year. Revenues from all fixed income sources,  which include municipal,
government,  corporate bonds and unit investment trusts increased to $4,446,000,
from $3,322,000 for the 2003 year.

     In 2002, we implemented new policies and procedures  governing firm trading
operations,  which resulted in fewer inventory accounts, shorter holding periods
of securities positions, and improvements in risk management.

     Investment   banking   revenues   for  the  2003  fiscal   year   increased
significantly, to $2,439,000, an increase of $1,431,000 over 2002, as investment
banking and syndicate  business  increased  substantially over prior years. This
category includes new issues of equity and preferred stock offerings in which we
participated as a selling group or syndicate member. After two years of sluggish
activity in this  segment,  we were able to generate  greater  volume during the
2003 year as more companies returned to the capital markets.

     Interest  and other  income for 2003  totaled  $4,371,000,  as  compared to
$3,718,000 for 2002, an increase of $653,000.  Interest income as a component of
this segment, increased about 5% or $125,000, in 2003, when compared to the 2002
year. The primary reason for the increase in other income is attributable to the
recognition  of  deferred  income,  and  recovery  of bad debt  write-offs.  For
financial  reporting  purposes,  the cash  advances  that were received from our
clearing  firm,  Fiserv  Securities,  Inc.,  are  deferred  and  amortized  on a
straight-line  basis over the remaining  contract  term.  Other income  included
amortization of approximately  $726,000,  $589,000, and $400,000 in fiscal 2003,
fiscal 2002 and fiscal 2001, respectively.

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


                                                    Year Ended December 31,
                                     -------------------------------------------------
                                       2003            2002                 2001
                                     -------------------------------------------------
                                     (000's)    % Change  (000's)    % Change  (000's)
                                     -------- -------------------- -------------------


Expenses:

Commissions, employee
Compensation & benefits               46,218        17     39,572       (7)    42,356

Clearing and floor brokerage           2,934        10      2,666      (18)     3,247

Communications and occupancy           2,659       (12)     3,006       (7)     3,249

Legal matters and related costs        5,837       363      1,260      (48)     2,415

Other operating expenses               3,393       (16)     4,030      (21)     5,077

 Interest                                204       106         99      (43)       175
                                    ---------              -------             -------
 Total expenses                       61,245        21     50,633       (6)    56,519
                                    =========              =======             =======

</TABLE>

     Total expenses  increased by  $10,612,000,  or 21%, to $61,245,000 in 2003,
from  $50,633,000 in 2002.  Compensation  and benefits  expense for  management,
operations and clerical  personnel,  increased slightly in 2003, from $7,026,000
(15% of revenues) to $7,061,000  (12% of revenues),  an increase of $35,000 over
the 2002 year.  When  compared  with the 2001 year,  compensation  and  benefits

<PAGE>
20

decreased $1,206,000. Commission expense, the largest expense category, which is
directly  related to commission  revenues,  increased 20%, or  $6,611,000,  from
$32,546,000 for the 2002 year to $39,157,000 for the 2003 year. Commissions as a
percentage of total revenues remained  relatively  constant at 67% for all three
years. We employed  approximately 90 salaried employees as of December 31, 2003,
97 salaried  employees as of December 31, 2002, and 106 salaried employees as of
December  31,  2001.  In  fiscal  2001,   certain  cost  cutting  measures  were
implemented in response to the decrease in revenues and trading activity.  These
measures  included a reduction in  executive  officers'  salaries and  personnel
layoffs. Additional layoffs were made in 2002 to further reduce expenses.

     Clearing and floor brokerage costs,  which are determined by the volume and
type of transactions, increased $268,000, to $2,934,000 in 2003, from $2,666,000
in 2002,  which was a decrease of $581,000 from the 2001 expense of  $3,247,000.
As a percent  of  revenues,  clearing  costs were  approximately  5% for 2003 as
compared with 5.6% and 6.3% in years 2002 and 2001, respectively. The percentage
of clearing costs to gross revenues can fluctuate on an interim basis  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  decreased  12%,  or  $347,000,   to
$2,659,000  in 2003 from  $3,006,000  in 2002,  which was a decrease of $243,000
from the 2001 expense of $3,249,000. As a percentage of revenue,  communications
and occupancy decreased to 4.6%, from 6.3% for both the 2002 and 2001 years. The
decrease in communications and occupancy costs was the result of the elimination
of three  company-leased  branch  offices and their  related costs and equipment
rental expenses.

     Legal matters and related  settlement  costs  increased by  $4,615,000,  to
$5,875,000  in 2003,  from  $1,260,000  in 2002. In July 2003, we entered into a
settlement   agreement  with  certain  claimants  in  order  to  settle  pending
arbitration  proceedings  that were brought  against us within the last eighteen
months.  The  covered  proceedings  arose out of customer  purchases  of certain
high-yield  corporate  bonds  that  declined  in market  value and  subsequently
defaulted. The settlement agreement covers eleven separate claims that sought an
aggregate  of  approximately  $12.3  million in  damages.  In  exchange  for the
consideration we provided,  each claimant granted a general release of claims in
our favor and all individual  respondents,  with the exception of the registered
representative who had handled the claimants' accounts. In consideration for the
release,  we paid an aggregate of $1,000,000  cash and issued  500,000 shares of
our common stock and warrants to purchase an  additional  750,000  shares of our
common stock to those claimants. We agreed to file a registration statement with
the  Securities  and  Exchange  Commission  covering the resale of the shares of
common stock  underlying  the warrants and fifty percent of the shares of common
stock issued in connection with the settlement agreement.

     In addition,  the settlement agreement provides that we may be obligated to
make additional payments of up to $600,000, in the event that claimants elect to
exercise the warrants on certain dates.  Specifically,  upon the election of the
majority of then existing warrant holders to exercise up to a maximum of 250,000
warrants,  respectively during the months of June 2004, June 2005 and June 2006,
the claimants,  upon  exercising  their  warrants,  will be required to sell the
shares in the open market.  Thereafter,  we would pay to the  claimants up to an
aggregate  amount of $200,000 less the amount received by the claimants from the
sale of their shares,  net of commissions.  In the event that warrant holders do
not elect to exercise the warrants  during a particular  period,  we will not be
required to make a payment for that period.

     We are currently  defending nine additional  claims relating to the sale of
the high-yield  bonds referenced in the preceding  paragraphs.  The claimants in
these matters seek compensatory damages in excess of $4.3 million, plus punitive
damages and the recovery of various costs.  We are vigorously  defending  theses
actions and believe that there are meritorious  defenses in each case.  There is
no insurance  coverage available for the payment of settlements and/or judgments
that may result from these particular claims.

     In 2002,  we filed a claim  against  one of our  competitors  for  raiding,
unfair  competition and unfair use of proprietary and confidential  information.
In 2003,  the matter was  resolved  between  the  parties and we received a cash
payment  from  the  respondent   firm,   with  specific   restrictions   on  the
solicitation, and limitation on the hiring of our registered representatives and
employees by the  respondent  for a specific  time period.  The  agreement  also
requires  the  payment  of  liquidated  damages  by each party in the event of a
breach of its terms.

     Montauk  Financial Group is also a respondent or  co-respondent  in various
other legal  proceedings which are related to its securities  business.  Montauk
Financial  Group is contesting  these claims and believes there are  meritorious
defenses in each case. However, litigation is subject to many uncertainties, and
some of these actions and proceedings may result in adverse judgments.  Further,
the availability of insurance coverage in any particular case is determined on a
case by case basis by the  insurance  carrier,  and is  limited to the  coverage
limits within the policy for any individual  claim and in the  aggregate.  After

<PAGE>
21

considering all relevant facts,  available  insurance  coverage and consultation
with litigation counsel, management believes that significant judgments or other
unfavorable  outcomes  from  pending  litigation  could have a material  adverse
impact on our consolidated  financial condition,  results of operations and cash
flows in any  particular  quarterly or annual period,  or in the aggregate,  and
could impair our ability to meet the statutory net capital requirements relating
to our securities business.

     As of December 31,  2003,  we have  accrued for  litigation  costs that are
probable and can be reasonably  estimated based on a review of existing  claims,
arbitrations and unpaid settlements.  Management cannot give assurance that this
accrual  will be  adequate  to  cover  actual  costs  that  may be  subsequently
incurred.  It is not  possible to predict the outcome of other  matters  pending
against Montauk  Financial  Group.  All such cases are, and will continue to be,
vigorously defended.

     Other  operating  costs  decreased  $637,000,  to $3,393,000 in 2003,  from
$4,030,000 in 2002. In 2003, we took less of a write off for customer and broker
bad debts as compared to 2002 and 2001.  This  expense  item was $73,000 in 2003
compared to $1,021,000 and $1,281,000 in 2002 and 2001, respectively.  From 2001
to 2002,  other  operating  expenses  decreased  $1,047,000,  from $5,077,000 to
$4,030,000.

     Professional  liability insurance premiums have substantially  increased in
fiscal  2003 due to a  hardening  in the market for  broker-dealer  professional
liability  and  directors  and  officers  insurance  coverages.  Many  insurance
carriers  have   eliminated   these  types  of  coverages,   while  others  have
substantially   increased   premiums  and  deductible   limits.  Our  registered
representatives   have  historically  paid  the  cost  of  errors  and  omission
insurance.  However,  to stay  competitive  in the  marketplace  for  registered
representatives,  we absorbed a large portion of these premiums in 2003. The net
cost to us for this errors and omissions insurance  increased by $332,000,  from
$7,000 in 2002 to $339,000 in 2003.  The amount of this cost will continue to be
dependent  on the  number  of  registered  representatives  associated  with  us
throughout the year.

     Income tax expense  (benefit) for the years ended  December 31, 2003,  2002
and 2001 was $499,000, $294,000 and $(90,989),  respectively.  The effective tax
rate on pre-tax loss was 16.5%,  11.0% and (2.8)%  during  2003,  2002 and 2001,
respectively. The difference in the rate from fiscal 2002 to fiscal 2003 was due
primarily  to a  reduction  in the 2002  provision  to  reflect a  federal  loss
carryback refund claim of  approximately  $212,000.  In addition,  during fiscal
2002.  During the fourth  quarter of 2002 and 2003,  we  received  the final two
payments of $1,250,000 under the financing agreement with our clearing firm. The
payments were taxable in the year of receipt.  Previously  recorded deferred tax
assets were charged  against that income in both years. As of December 31, 2003,
other future tax benefits  have been  entirely  offset by a valuation  allowance
because,  based on the weight of available evidence,  it is more likely than not
that the recorded  deferred  tax assets will not be realized in future  periods.
The difference in the rate from 2002 to 2001 was due primarily to higher federal
loss  carryback  refund  claims  in  2001,  as well as an  increase  in the 2001
valuation allowance to offset deductible temporary differences that did not meet
the "more likely than not" realization test.

     For 2003,  we  reported a net loss  applicable  to common  stockholders  of
$3,543,000,  or $.40 per basic and  diluted  share,  as  compared  to a net loss
applicable to common stockholders reported in fiscal 2002 of $3,060,000, or $.36
per basic and diluted  share.  For 2001,  we reported a net loss  applicable  to
common stockholders of $5,307,000,  or $.61 per basic and diluted share. The net
loss for 2003 was  primarily  related  to the legal  fees and  settlement  costs
attributable to several arbitrations reserved and paid for in 2003, as described
in more detail above and in Footnote 14 to the financial statements.

Liquidity and Capital Resources

     We maintain a highly liquid balance sheet with  approximately 70% of assets
consisting of cash and cash equivalents,  securities owned, and receivables from
our clearing firm and other  broker-dealers.  The balances in these accounts can
and do fluctuate  significantly  from day to day,  depending on general economic
and market conditions,  volume of activity, and investment opportunities.  These
accounts  are  monitored  on a daily  basis in order to ensure  compliance  with
regulatory net capital requirements and to preserve liquidity.

     Overall, cash and cash equivalents increased for 2003 by $803,000. Net cash
used in operating  activities  during 2003 was $625,000,  as a result of the net
loss for 2003 of $3,518,000, adjusted by non-cash charges including depreciation
and amortization of $510,000,  increases in the amount due from clearing firm of
$628,000 and other assets of $736,000,  offset by net increases in  commissions,
accounts payable and accrued expenses of $1,616,000.

     We received cash  advances  under the  financing  agreement  with Fiserv of
$1,250,000 in both 2002 and 2001.  Under this agreement,  we received our fourth
and final advance of $1,250,000 in November 2003.

     Investing  activities  required  cash of  $139,000  in 2003.  Additions  to
capital expenditures consumed $166,000, while decreases in other assets provided
$27,000.
<PAGE>
22

     Financing  activities  provided cash of $1,567,000 during the 2003 year. We
received  gross  proceeds of  $2,105,000  in 2003 from a private  offering of 6%
convertible  debentures.  This was  partially  offset by notes and capital lease
repayments of $269,000,  dividend payments to preferred  shareholders of $25,000
and a decrease in the cash portion of deferred financing costs of $244,000.

     In connection  with the settlement  agreement we entered into in July 2003,
regarding the settlement of eleven  pending  arbitration  proceedings  discussed
above, we issued 750,000 five-year warrants in three classes of 250,000 warrants
each.  Class A warrants  have an exercise  price of $.40 per share;  Class B and
Class C  warrants  have  exercise  prices  of $.25  per  share.  The  settlement
agreement  provides that we may be obligated to make additional cash payments of
up to $600,000 in the event that  claimants  elect to exercise  the  warrants on
certain  dates.  Specifically,  if a majority of then  existing  Class A warrant
holders  elect to exercise  the  remaining  warrants in their  particular  class
during the month of June 2004 (the "Required  Exercise  Event"),  the claimants,
upon exercising their warrants,  will be required to sell the shares in the open
market.  If the warrants are  exercised  and the shares sold, we will pay to the
claimants up to an aggregate  amount of $200,000 less the amount received by the
claimants from the sale of their shares,  net of commissions.  This process will
be repeated for remaining  Class B and Class C warrant holders during the months
of June 2005 and June 2006, respectively.

     In the  alternative,  we may elect or be required to redeem the unexercised
warrants  for up to $.80 per  warrant,  or a  maximum  of  $200,000  per  class,
depending upon the then prevailing  market price of our common stock on or about
the date of the Required  Exercise  Event of a particular  class.  We may call a
warrant  class for  redemption  if the average  market  price of the  underlying
common  shares during the ten trading days  immediately  preceding the date upon
which we receive  notice that the  warrant  holders of a  particular  class have
elected to  declare a Required  Exercise  Event is less than  $1.20.  We will be
required  to redeem the  warrants  for $.80 per  warrant in cash if the  average
market  price of the  underlying  common  shares  during  the ten  trading  days
immediately  preceding  the date upon which we receive  notice  that the warrant
holders of a particular class have elected to declare a Required  Exercise Event
is less than or equal to the warrant  exercise  price. In the event that warrant
holders of a particular  class elect not to declare a Required  Exercise  Event,
our guarantee will be canceled with respect to that class.

Consolidated Contractual Obligations and Lease Commitments

     The table below provides  information about our commitments related to debt
obligations,  leases,  guarantees and  investments as of December 31, 2003. This
table does not include any projected  payment  amounts  related to our potential
exposure to arbitrations and other legal matters.
<TABLE>
<S>                          <C>             <C>               <C>              <C>             <C>          <C>       <C>
                                                             Expected Maturity Date
As of December 31, 2003
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Category                              2004              2005             2006            2007           2008  After            Total
                                                                                                               2008
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------

--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Debt Obligations            0               0                 0                $1,030,000      $2,105,000     0      $3,135,000
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Capital Lease Obligations   $114,000        $15,711           0                0               0              0        $130,107
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Operating            Lease  $1,103,126      $296,302          $169,500         0               0              0      $1,568,928
Obligations
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Purchase Obligations
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Other            Long-Term  $200,000(1)     $200,000(1)       $200,000(1)      0               0              0        $600,000(1)
Obligations  Reflected  on
Balance Sheet under GAAP
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
Total                       $1,417,126      $512,013          $881,513         $1,030,000      $2,105,000            $5,434,035
--------------------------- --------------- ----------------- ---------------- --------------- -------------- ----- ----------------
</TABLE>
(1)  Expected  payment  obligations  embodied  in the  warrants  subject  to put
options.  For more detailed  information  please refer to Footnote No. 12 of the
consolidated financial statements.

<PAGE>
23

Net Capital

     At December 31, 2003,  Montauk  Financial Group had net capital of $757,047
which was $344,479 in excess of its  required  net capital of $412,568,  and the
ratio of aggregate indebtedness to net capital was 8.17 to 1.

Financing Activities

     In 1999, we 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 Common Stock and pays a
quarterly  dividend of 6%.  Pursuant to the offering,  we 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.  We have suspended the
quarterly  payments of our Series A Preferred  Stock dividend in accordance with
applicable   state  law.  (See  Footnote  17  to  the   consolidated   financial
statements).

     In October 2002, we commenced a private  offering of up to $3,000,000 of 6%
convertible debentures to accredited investors. Each debenture is convertible at
an initial conversion price of $0.50 per share,  subject to adjustment for stock
dividends, combinations, splits, recapitalizations, and like events. Interest on
the  debentures  accrues at the rate of 6% per annum and is payable in cash on a
semi-annual  basis on April 1st and October  1st of each year until  maturity or
conversion.  Each  debenture  is due and payable  five (5) years from  issuance,
unless previously converted into shares of Common Stock. The offering expired on
March 1, 2003.  In the  offering,  we sold an aggregate  amount of $1,240,000 of
debentures,  $1,030,000  in 2002 and  $210,000  in  2003.  The  proceeds  of the
financing will be used to satisfy  general  working  capital needs.  Neither the
debentures nor the shares  underlying the  debentures  have been  registered for
offer or sale under the Securities  Act; such securities are being issued on the
basis of the statutory exemption provided by Section 4(2) of the Securities Act,
as amended,  and/or Rule 506 of Regulation D, promulgated thereunder relating to
transactions by an issuer not involving any public offering.

     In September  2003,  we commenced an additional  private  offering of up to
$3,000,000 of 6% convertible debentures to accredited investors.  Each debenture
is convertible  at an initial  conversion  price of $0.50 per share,  subject to
adjustment for stock dividends,  combinations,  splits,  recapitalizations,  and
like events.  Interest on the debentures accrues at the rate of 6% per annum and
is payable in cash on a  semi-annual  basis on April 1st and October 1st of each
year until  maturity or  conversion.  Each debenture is due and payable five (5)
years from issuance,  unless  previously  converted into shares of Common Stock.
The offering was  completed on December 31, 2003.  In the  offering,  we sold an
aggregate  principal  amount of  $1,895,000 of  debentures.  The proceeds of the
financing will be used to satisfy general working capital needs.  The debentures
have not been  registered  for offer or sale  under  the  Securities  Act;  such
securities are being issued on the basis of the statutory  exemption provided by
Section 4(2) of the Securities Act, as amended, and/or Rule 506 of Regulation D,
promulgated  thereunder  relating to transactions by an issuer not involving any
public offering. For more information,  see a discussion of the debentures under
the  captions  "Item 1.  Business --  Debenture  Offering"  and "Item 5. Sale of
Unregistered Securities."

Off-Balance Sheet Arrangements

     We execute  securities  transactions on behalf of our customers.  If either
the  customer or a  counter-party  fail to perform,  we, by  agreement  with our
clearing   broker  may  be  required  to  discharge  the   obligations   of  the
non-performing party. In such circumstances, we may sustain a loss if the market
value of the security is different from the contract  value of the  transaction.
We seek 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,  our clearing firm requires
additional  collateral  or  reduction  of  positions,  when  necessary.  We also
complete credit evaluations where there is thought to be credit risk.

Critical accounting policies

     We  prepare  our  financial   statements  in  accordance   with  accounting
principles  generally  accepted  in the  United  States  of  America.  Preparing
financial statements in accordance with generally accepted accounting principles
requires us to make estimates and assumptions  that affect the reported  amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues and
expenses  during  the  reporting  period.  The  following  paragraphs  include a
discussion of some of the significant accounting policies and methods applied to
the preparation of our consolidated  financial statements.  Review Note 2 to the
financial statements for further discussion of significant accounting policies.
<PAGE>
24

Warrants subject to put options

     We have issued  common  stock  purchase  warrants  that embody  obligations
requiring us to make cash redemption payments under certain  circumstances.  FAS
150 requires us to classify these  financial  instruments as liabilities  and to
record  them at fair  value  initially  and at the end of  subsequent  reporting
periods. The valuation of the warrants involves the use of significant judgments
and  assumptions.  At  December  31,  2003,  we valued  the  warrants  using the
discounted cash flow method, assuming, based on available evidence, that we will
be required to pay the full  redemption  liability.  Actual results could differ
from these estimates as circumstances change.

Use of Estimates

     In presenting  the  consolidated  financial  statements,  management  makes
estimates  regarding the  valuation of certain  securities  owned,  the carrying
value of  investments,  the  realization of deferred tax assets,  the outcome of
litigation, and other matters that affect the reported amounts and disclosure of
contingencies in the financial statements. Estimates, by their nature, are based
on judgment and available  information.  Therefore,  actual results could differ
from  those  estimates  and could  have a  material  impact on the  consolidated
financial  statements  and it is possible  that such changes  could occur in the
near term.

Revenue recognition

     Securities  transactions,   commission  income  and  related  expenses  are
recorded  on a  trade  date  basis.  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 our financial  agreement with our clearing firm are deferred and
amortized over the remaining term of the agreement on a straight-line basis.

Long-lived Assets

     We evaluate  impairment  losses on  long-lived  assets used in  operations,
primarily fixed assets, when events and circumstances indicate that the carrying
value of the assets,  might not be recoverable in accordance with FASB Statement
No. 144  "Accounting for the Impairment or Disposal of Long-lived  Assets".  For
purposes of evaluating the recoverability of long-lived assets, the undiscounted
cash flows  estimated  to be  generated by those assets would be compared to the
carrying amounts of those assets.  If and when the carrying values of the assets
exceed their fair values, the related assets will be written down to fair value.

Clearing Agreement

     Montauk Financial Group introduces all of its customer transactions,  which
are not reflected in the financial  statements,  to its clearing  broker,  which
maintains the customers'  accounts and clears such  transactions.  Additionally,
the clearing broker provides the clearing and depository  operations for Montauk
Financial  Group's  proprietary  securities  transactions.  These activities may
expose us to  off-balance  sheet risk in the event that customers do not fulfill
their  obligations  with the clearing  broker,  as Montauk  Financial  Group has
agreed to indemnify the clearing broker for any resulting losses. We will record
a  loss  from  a  client  transaction  when  information  becomes  available  to
management that allows it to estimate its impact on our financial statements.

Income taxes

     Due to significant  operating losses from 2001-2003 and continuing business
uncertainty,  we have  established  a  valuation  allowance  against  all of our
deferred  tax  benefits  as of December  31,  2003.  We intend to maintain  this
valuation  allowance  until we  determine  that it is more  likely than not that
deferred  tax assets will be  realized.  Our income tax expense  recorded in the
future will be reduced to the extent of  offsetting  decreases in our  valuation
allowance.  The  realization  of our remaining  deferred tax assets is primarily
dependent on forecasted future taxable income.

Recent pronouncements of the Financial Accounting Standards Board

     In April  2003,  the FASB  issued  FAS No. 149 which  amends and  clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments embedded in other contracts,  and for hedging activities
under FAS No. 133. In particular, FAS No. 149 clarifies under what circumstances
a  contract  with an  initial  net  investment  meets  the  characteristic  of a
derivative  discussed in FAS No. 133,  clarifies  when a  derivative  contains a
financing  component,  amends the  definition  of an  underlying  (as  initially
defined  in FAS No.  133)  to  conform  it to a  language  used  in FIN No.  45,
Guarantor's  Accounting and Disclosure  Requirements  for Guarantees,  Including
Indirect Guarantees of Indebtedness of Others, and amends certain other existing
pronouncements.  FAS No. 149 is  effective  for all  contracts  entered  into or
modified  after June 30, 2003,  subject to certain  exceptions.  The adoption of
this  statement  did not have an impact on our  financial  position,  results of
operations, or cash flows.
<PAGE>
25

     In May 2003, the FASB issued FAS No. 150, "Accounting for Certain Financial
Instruments with  Characteristics  of both Liabilities and Equity".  FAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics of both liabilities and equity. FAS
No. 150 requires that an issuer  classify a financial  instrument that is within
the scope of FAS No. 150 as a liability.  FAS No. 150 is effective for financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective beginning September 1, 2003. We have applied the provisions of FAS No.
150 to certain warrants issued in a legal settlement during 2003.

     In November 2002, the FASB issued FASB  Interpretation No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  including  Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize,  at the inception of a
guarantee,  a  liability  for the fair  value of the  obligation  undertaken  in
issuing the guarantee.  The disclosure  requirements of this  interpretation are
effective for interim and annual  periods after  December 15, 2002.  The initial
recognition  and initial  measurement  requirements of this  interpretation  are
effective  prospectively  for  guarantees  issued or modified after December 31,
2002. We adopted FIN 45 effective  January 1, 2003.  The effect of such adoption
was not  material to our  financial  position,  results of  operations,  or cash
flows.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable  Interest  Entities" ("FIN 46"). This  interpretation  of Accounting
Research  Bulletin  No.  51,  "Consolidated  Financial  Statements",   addresses
consolidation  by business  enterprises  of variable  interest  entities.  Under
current practice,  two enterprises  generally have been included in consolidated
financial  statements  because one enterprise  controls the other through voting
interests.  This interpretation  defines the concept of "variable interests" and
requires existing  unconsolidated  variable interest entities to be consolidated
by their primary  beneficiaries if the entities do not effectively  disperse the
risks among the parties  involved.  The provisions of FIN 46, which were adopted
in 2003, did not have a material impact on our consolidated  financial position,
results of operations, or cash flows.

     In  accordance  with the  provisions  of FAS 150,  "Accounting  for Certain
Financial  Instruments with  Characteristics of both Liabilities and Equity," we
have  classified  our  obligations  under the  warrants  as  liabilities  in the
Statement of Financial Condition.  The fair value of the obligations embodied in
the warrants were initially  valued at $441,000  using the discounted  cash flow
method,  assuming that we will be required to pay the full redemption liability.
We will  re-measure  the value of the warrant  obligations as of the end of each
reporting period using the discounted cash flow method until the obligations are
settled. The recorded value at December 31, 2003 was $479,066.  Changes in value
are recognized in earnings as interest  expense.  We have agreed to register all
shares of common stock underlying the warrants.

Impact of Inflation

     We believe  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  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, or
has other adverse effects on the securities  markets and the value of securities
held in inventory, it may adversely affect our financial position and results of
operations.

Risk Management

     Risk is an inherent  part of our  business  and  activities.  The extent to
which we  properly  and  effectively  identify,  assess,  monitor and manage the
various  types of risk  involved in our  activities is critical to our soundness
and profitability. We seek to identify, assess, monitor and manage the following
principal risks involved in its business activities: market, credit, operational
and legal. Senior management takes an active role in the risk management process
and requires  specific  administrative  and business  functions to assist in the
identification,  assessment  and control of various risks.  Our risk  management
policies and procedures are subject to ongoing review and modification.

Market Risk.  Certain of our business  activities expose us 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  we hold as  investment  and for trading.
Securities  inventories  are exposed to risk of loss in the event of unfavorable
price  movements.  Securities  positions  are marked to market on a daily basis.
Market-making  activities  are  client-driven,  with the  objective  of  meeting

<PAGE>
26

clients'  needs  while  earning a positive  spread.  At  December  31,  2003 and
December 31, 2002, equity securities positions owned and sold, not yet purchased
were approximately $169,500 and $184,000, and $69,000 and $-0-, respectively. In
our view,  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 its financial position.

Credit Risk.  Credit risk  represents  the loss that we would incur if a client,
counterparty or issuer of securities or other  instruments that we hold fails to
perform its contractual  obligations.  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.  Client
activities  may  expose us to  off-balance  sheet  credit  risk.  We 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.  We seek to  control  the risks
associated with client activities by requiring clients to maintain collateral in
compliance with various regulations and company policies.

Operational  Risk.  Operational  risk  generally  refers  to the  risk  of  loss
resulting  from our  operations,  including,  but not  limited  to,  improper or
unauthorized  execution and  processing  of  transactions,  deficiencies  in our
operating  systems,  business  disruptions  and  inadequacies or breaches in our
internal  control  processes.  We  operate in  diverse  markets  and rely on the
ability of our  employees  and systems to process high  numbers of  transactions
often  within  short  time  frames.  In the  event of a  breakdown  or  improper
operation  of systems,  human error or improper  action by  employees,  we could
suffer  financial loss,  regulatory  sanctions or damage to our  reputation.  In
order to mitigate and control  operational  risk, we have developed and continue
to enhance  policies  and  procedures  that are  designed to identify and manage
operational  risk  at  appropriate  levels.  Included  in our  operational  risk
management  practice is disaster recovery for our critical  systems.  We believe
that our disaster recovery program,  including  off-site back-up  technology and
operational facilities,  is adequate to handle a reasonable business disruption.
However,  there can be no  assurances  that a disaster  directly  affecting  our
headquarters  or  operations  center would not have a material  adverse  impact.
Insurance and other safeguards might only partially reimburse us for our losses.

     Legal Risk. Legal risk includes the risk of non-compliance  with applicable
legal and regulatory requirements. We are subject to extensive regulation in the
different  jurisdictions  in which we  conduct  our  business.  We have  various
procedures addressing issues such as regulatory capital requirements,  sales and
trading  practices,  use of and safekeeping of customer funds,  credit granting,
collection activities, anti money-laundering and record keeping.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our activities often involve the purchase, sale or short sale of securities
as principal.  Such  activities  subject our capital to  significant  risks from
markets that may be characterized by relative illiquidity or may be particularly
susceptible to rapid  fluctuation in price or liquidity.  Such market conditions
could limit our ability to resell securities purchased or to purchase securities
sold short. These activities subject our capital to significant risks, including
market,  credit  and  liquidity  risks.  Market  risk  relates  to the  risk  of
fluctuating  values  based on market  prices  without  action  on our part.  Our
primary credit risk is settlement  risk,  which relates to whether  counterparty
will fulfill its  contractual  obligations,  such as delivery of  securities  or
payment of funds. Liquidity risk relates to our inability to liquidate assets or
redirect the deployment of assets contained in illiquid investments.  Additional
information  pertaining  to the  foregoing  risks is included  under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Risk Management."
<PAGE>
27

Item 8.    Financial Statements

     See Financial Statements attached hereto at pages F-1 to F-24.

Item 9.    Changes in and Disagreements With Accountants on Accounting and
           Financial Disclosure

     Not Applicable.

Item 9A.    Controls and Procedures

     Our management, including the President and the Chief Executive Officer and
Chief Financial  Officer,  carried out an evaluation of our disclosure  controls
and procedures (as defined in Rule 15d-15(e)  under the Securities  Exchange Act
of 1934, as amended) as of the end of the period  covered by this report.  Based
on that  evaluation,  our  President and our Chief  Executive  Officer and Chief
Financial  Officer  concluded that we had effective  controls and procedures for
(i)  recording,  processing,  summarizing  and  reporting  information  that  is
required to be disclosed  in its reports  under the  Securities  Exchange Act of
1934,  as amended,  within the time  periods  specified  in the  Securities  and
Exchange  Commission's  rules  and  forms  and (ii)  ensuring  that  information
required to be disclosed in such reports is accumulated and  communicated to our
management,  including our President and our Chief  Executive  Officer and Chief
Financial   Officer,   as  appropriate  to  allow  timely  decisions   regarding
disclosure.

     No change in our internal  control over financial  reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended January 31, 2004 that has  materially  affected,  or is reasonably
likely to materially affect, our internal control over financial reporting.

<PAGE>
28

                                    PART III

Item 10. Directors and Executive Officers Our directors and executive officers
         are as follows:
<TABLE>
<S>                                     <C>                  <C>


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

Herbert Kurinksy                         72                  Class I Director and Chairman of the Board of First
                                                             Montauk Financial Corp. and Registered Options
                                                             Principal of Montauk Financial Group

William J. Kurinsky                      43                  Class I Director, Vice-Chairman, Chief Executive and
                                                             Chief Financial Officer and Secretary of First Montauk
                                                             Financial Corp. and of Montauk Financial Group and
                                                             Financial/Operations Principal of Montauk Financial
                                                             Group

Victor K. Kurylak                        46                  President and Chief Operating Officer, First Montauk
                                                             Financial Corp. and Montauk Financial Group

Robert I. Rabinowitz                     46                  General Counsel, First Montauk Financial Corp., Chief
                                                             Administrative Officer, Vice President and General
                                                             Securities Principal of Montauk Financial Group

Norma Doxey                              65                  Class II Director, First Montauk Financial Corp., and
                                                             Vice President of Operations, Montauk Financial Group

Ward R. Jones                            72                  Class III Director, First Montauk Financial Corp.

Barry D. Shapiro                         62                  Class II Director, First Montauk Financial Corp.

</TABLE>


     Our 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 our 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 our company (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 company which
is materially  and  demonstrably  injurious to the company,  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.

     David Portman, a former Class III Director, resigned his position effective
December 31, 2002. The Board of Directors has not yet filled the vacancy created
by Mr. Portman's resignation.

     All officers  serve at the  discretion  of the Board of  Directors.  Family
relationships  exist among the following  officers and  directors:  Mr.  Herbert
Kurinsky is the uncle of Mr.  William J. Kurinsky.  Mr. Robert I.  Rabinowitz is
the brother-in-law of Mr. William J. Kurinsky.
<PAGE>
29

     Herbert  Kurinsky,  our  Chairman,  became a Director and the  President of
First Montuak Financial Corp. on November 16, 1987. Mr. Kurinsky is a co-founder
of Montauk Financial Gorup. and has been its President, one of its Directors and
its Registered Options Principal since September of 1986. Effective December 15,
2003, Mr. Kurinsky  relinquished his duties as our Chief Executive Officer. 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,  serves as our Chief Executive Officer, Vice Chairman,
Chief Financial  Officer and Secretary.  Mr. Kurinsky  previously  served as our
Vice President,  a Director and Chief Operating Officer,  in addition to serving
as Chief Financial Officer and Secretary,  since November 16, 1987. Mr. Kurinsky
relinquished  the  office  of Chief  Operating  Officer  and  became  our  Chief
Executive  Officer and Vice  Chairman,  effective  December  15,  2003.  He is a
co-founder of Montauk Financial Group 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.

     Victor  K.  Kurylak  became  our  President  and  Chief  Operating  Officer
effective as of January 1, 2004.  From November 2001 through  December 2003, Mr.
Kurylak was a self-employed business consultant, and was retained by us prior to
his becoming our  President  and Chief  Operating  Officer.  From  November 1995
through  December 2000 he was the owner and Executive Vice President for Madison
Consulting Group/Summit Insurance, an independent insurance brokerage firm. From
January 2001 through November 2001 he was also a registered  representative with
Terra-Nova Trading Company. From February 1990 through October 1995, Mr. Kurylak
was the Chief Information Officer for Rockefeller Financial Services in New York
City.  Mr.  Kurylak  received  his Bachelor of Arts degree in  Engineering  from
Princeton  University in 1979. Mr. Kurylak is registered as a general securities
representative  and registered  principal and is licensed as a life,  health and
property and casualty insurance producer.

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

     Norma L. Doxey has been a member of our Board of Directors  since  December
6, 1988.  Ms.  Doxey has been a Vice  President of  Operations  and a Registered
Representative with Montauk Financial Group since September 1986. From September
1986, she was operations 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 member of our Board of Directors  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.

     Barry D.  Shapiro,  CPA has been a member of our Board of  Directors  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 CPAs P.A. from 1976 thru 1996 when he
became a partner of Rudolf, Cinnamon & Calafato, P.A. until joining Withum Smith
+ Brown.  Mr. Shapiro was previously  employed with the Internal Revenue Service
from 1965 thru 1971,  where he was responsible for audit,  review and conference
functions. Mr. Shapiro is a member of the New Jersey Society of Certified Public
Accountants,  where he  currently  participates  on the IRS  Co-Op and State Tax
Committees.  Mr. Shapiro is a past Trustee,  Treasurer and Vice President of the
NJSCPA. He has been involved and is in many civic and community  activities,  as
well as  charitable  organizations,  including  the  Monmouth  County New Jersey
Chapter of the American  Cancer  Society and the Ronald  McDonald  House of Long
Branch,  New  Jersey.  Mr.  Shapiro  received a B.S.  in  accounting  from Rider
University in 1965.
<PAGE>
30

Significant Employees

     Mark D. Lowe, 45, 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,  a  Chartered  Financial  Planner  (Chfc)  in 2001  and a  Chartered  Life
Underwriter  (CLU) in 2003.  Mr. Lowe  graduated  Ocean  County  College in Toms
River,  NJ. Mr. Lowe is the past President of the Estate and Financial  Planning
Council of Central New Jersey.

     Mindy A. Horowitz,  CPA, 46, has been Vice President of Finance for Montauk
Financial  Group 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.

Certain Reports

     No person  who,  during the fiscal  year ended  December  31,  2003,  was a
Director,  officer or  beneficial  owner of more than ten  percent of our common
stock (which is the only class of our securities  registered under Section 12 of
the  Securities  Exchange Act of 1934 failed to file on a timely basis,  reports
required  by Section 16 of the  Securities  Exchange  Act during the most recent
fiscal year or prior  years.  The  foregoing  is based solely upon our review of
Forms 3 and 4 during the most  recent  fiscal  year as  furnished  us under Rule
16a-3(d) under the Securities  Exchange Act, and Forms 5 and amendments  thereto
furnished  to  us  with  respect  to  its  most  recent  fiscal  year,  and  any
representation  received  by us  from  any  reporting  person  that no Form 5 is
required.

Compensation of Directors; Meetings of Directors

     We pay our  directors who are not also our employees 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  that  are  also  our  employees  are  not  entitled  to any
additional compensation as such. During fiscal year 2003, the Board of Directors
met on five occasions and voted by unanimous written consent on one occasion. No
member of the Board of Directors  attended less than 75% of the aggregate number
of (i) the total  number of meetings of the Board of Directors or (ii) the total
number of meetings held by all Committees of the Board of Directors.

Committees of the Board of Directors

     The Board of Directors has two committees: Audit and Compensation.

     For the fiscal year ended December 31, 2003, the members of the committees,
and a description of the duties of the Committees were as follows:

Audit Committee.  Our audit committee acts to:

o        review with management our finances, financial condition and interim
         financial statements;
o        review with our independent auditors the year-end financial statements;
         and
o        review implementation with the independent auditors and management any
         action recommended by the independent auditors and the retention and
         termination of our independent auditors.

     During the fiscal year ended December 31, 2003, the audit  committee met on
one  occasion.  The audit  committee  adopted a written  charter  governing  its
actions  effective  June 23, 2000.  During the fiscal  year,  the members of the
audit committee were Ward R. Jones and Barry Shapiro. Both of the members of our
audit  committee  were  "independent"  within  the  definition  of that  term as
provided  by  Rule  4200(a)(14)  of  the  listing   standards  of  the  National
Association of Securities Dealers. Members of the Audit Committee do not receive
additional  compensation  for such service.  The Board has  determined  that Mr.
Barry D. Shapiro  qualified as the audit committee  financial  expert as defined
under applicable Securities and Exchange Commission rules.

     Compensation  Committee.   The  compensation  committee  functions  include
administration  of our 2002  Incentive  Stock  Option Plan,  2002  Non-Executive
Director  Stock  Option  Plan and 1996  Senior  Management  Option  Plan and the
negotiation and review of all employment agreements with our executive officers.
The compensation committees' members are Ward R. Jones and Barry Shapiro. During
the fiscal year ended December 31, 2003, the committee met on one occasion.
<PAGE>
31

Compensation Committee Interlocks and Insider Participation

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

Code of Ethics

     On March 29, 2004,  our Board of Directors  approved the Code of Ethics and
Business Conduct for our company.  Our Code of Ethics and Conduct covers all our
employees  and  Directors,  including  our  Chief  Executive  Officer  and Chief
Financial Officer and our President. A copy of our Code of Ethics and Conduct is
included as an exhibit to this Annual Report.

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 us during the years ended  December 31, 2003,
2002 and 2001 to each of our named executive officers.
<TABLE>
<S>                           <C>       <C>            <C>        <C>                    <C>              <C>
                                                   SUMMARY COMPENSATION TABLE

                                            Annual Compensation                Long Term
                                                                              Compensation

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

Herbert Kurinsky              2003      $231,218       $200,000   $ 2,500 (4)                  0  (1)
Chief Executive Officer       2002      $181,218       $   -      $ 2,500 (4)                  0
and Chairman (7)              2001      $233,140       $   -      $ 2,000 (4)              200,000 (1)

William J. Kurinsky           2003      $231,218       $50,000    $     0 (5)                  0   (2)
Chief Operating and           2002      $181,218       $   -      $ 2,000 (5)                  0
Chief Financial               2001      $233,140       $   -      $ 1,000 (5)              200,000 (2)
Officer and Secretary (8)

Robert I. Rabinowitz          2003      $150,000       $10,000    $ 2,500 (6)                  0  (3)
General Counsel, FMFC,        2002      $150,000       $      -   $ 2,500 (6)                  0
Chief Administrative          2001      $146,154       $     -    $ 2,000 (6)               43,750(3)
Officer, Montauk
Financial Group (9)

</TABLE>

1)       In 2003 the Compensation Committee of the Board of Directors did not
         authorize any option grants the named officer. In 2001, 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.

2)       In 2002 the Compensation Committee did not authorize any option grants
         the named officer. In 2001, 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.

3)       In 2002 the Compensation Committee did not authorize any option grants
         the named officer. In 2001, 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.

4)       Includes: (i) for 2003, an automobile allowance of $2,500; (ii) for
         2002, an automobile allowance of $2,500; and (i) for 2001, an
         automobile allowance of $2,000. Subsequent to the fiscal year ended
         December 31, 2003, we granted the named executive officer the right to
         receive an aggregate of 375,000 restricted shares of common stock,
         which vest in equal amounts of 33.3%, on April 1, 2004, July 1, 2004
         and October 1, 2004.
<PAGE>
32

5)       Includes: (i) for 2003 and 2002 no automobile allowance was paid, (iii)
         for 2001, an automobile allowance of $1,000. Subsequent to the fiscal
         year ended December 31, 2003, we granted the named executive officer
         the right to receive an aggregate of 375,000 restricted shares of
         common stock, which vest in equal amounts of 33.3%, on April 1, 2004,
         July 1, 2004 and October 1, 2004.

6)       Includes (i) for 2003, an automobile  allowance of $2,500;  (ii) for
         2002,  an automobile  allowance of $2,500;  and (iii) for 2001, an
         automobile allowance of $2,000.

7)       Effective January 1, 2004, Mr. Herbert Kurinsky relinquished the office
         of Chief Executive Officer. He is the beneficial owner of 86,518 shares
         of the Company's Common Stock as of December 31, 2003, which shares had
         a market value of $30,281 as of that date, without giving effect to the
         diminution in value attributable to the restriction on said shares. In
         January 2004, we issued 375,000 shares of restricted common stock
         pursuant to the terms of his employment agreement, as discussed below
         in greater detail.

8)       Effective January 1, 2004, Mr. William Kurinsky became our Chief
         Executive Officer and relinquished the office of Chief Operating
         Officer. He is the beneficial owner of 1,405,823 shares of the
         Company's Common Stock as of December 31, 2003, which shares had a
         market value of $492,038 as of that date, without giving effect to the
         diminution in value attributable to the restriction on said shares. In
         January 2004, we issued 375,000 shares of restricted common stock
         pursuant to the terms of his employment agreement, as discussed below
         in greater detail.

9)       Mr. Robert I. Rabinowitz is the beneficial owner of 29,500 shares of
         the Company's Common Stock as of December 31, 2003, which shares had a
         market value of $10,325 as of that date, without giving effect to the
         diminution in value attributable to the restriction on said shares.

Compensation Committee Report on Executive Compensation

     This report is  submitted  by the  compensation  committee  of the Board of
Directors.  During the fiscal year ended  December  31, 2003,  the  compensation
committee  was  responsible  for  reviewing  our stock plans and  reviewing  and
approving  compensation  matters  concerning  our  executive  officers  and  key
employees.

     Overview and Philosophy.  We uses our  compensation  program to achieve the
following objectives:

         o        To provide compensation that attracts, motivates and retains
                  the talented, high caliber officers and employees necessary to
                  achieve our strategic objectives, as determined by the
                  compensation committee;

         o        To align the interest of officers with our success;

         o        To align the interest of officers with stockholders by
                  including long-term equity incentives; and

         o        To increase our long-term profitability and, accordingly,
                  increase stockholder value.

     Compensation under the executive  compensation program is comprised of cash
compensation  in the  form of base  salary,  bonus  compensation  and  long-term
incentive awards,  generally in the form of options to purchase common stock. In
addition,  the compensation  program includes various other benefits,  including
medical and insurance  plans and the employee stock option  incentive  plans and
company sponsored 401(k) plans,  both of which plans are generally  available to
all of our employees.
<PAGE>
33

     The principal  factors which the  compensation  committee  considered  with
respect to each  officer's  compensation  package for fiscal year ended December
31, 2003 are summarized below. The compensation  committee may, however,  in its
discretion,  apply  different or  additional  factors in making  decisions  with
respect to executive compensation in future years.

     Base Salary.  Compensation  levels for each of our officers,  including the
Chief Executive Officer, are generally set within the range of salaries that the
compensation   committee   believes  are  paid  to  officers   with   comparable
qualifications, experience and responsibilities at similar companies. In setting
compensation levels, the compensation  committee takes into account such factors
as (i) the Company's past performance and future  expectations,  (ii) individual
performance  and  experience  and (iii) past  salary  levels.  The  compensation
committee  does not assign  relative  weights or ranking to these  factors,  but
instead  makes a  determination  based  upon the  consideration  of all of these
factors as well as the progress made with respect to the our long-term goals and
strategies.  Base salary,  while reviewed  annually,  is only adjusted as deemed
necessary by the compensation  committee in determining  total  compensation for
each officer. Additionally,  certain executives, including Herbert Kurinsky, our
Chief Executive Officer during the 2003 fiscal year, and William  Kurinsky,  the
Chief  Operating  Officer  during the 2003 fiscal year have existing  employment
agreements  with us which set forth  certain  levels  of base  salary  and bonus
compensations.  Each of Messrs.  Kurinsky entered into new employment agreements
with us effective  January 1, 2004 and we entered into an  employment  agreement
with our new President and Chief Operating Officer, Mr. Victor K. Kurylak,  also
effective January 1, 2004. Mr. Kurylak's annual  compensation during the term of
his  employment  will  be as set  forth  in his  employment  agreement.  You are
directed  to the  detailed  discussion  of these  agreements  under the  heading
"Employment Agreements" appearing elsewhere in this Annual Report on Form 10-K.

     Equity   Incentives.   The  compensation   committee  believes  that  stock
participation  aligns  officers'  interests with those of the  stockholders.  In
addition,  the compensation committee believes that equity ownership by officers
helps to balance the short term focus of annual  incentive  compensation  with a
longer  term  view and may help to  retain  key  executive  officers.  Long term
incentive  compensation,  generally granted in the form of stock options, allows
the officers to share in any appreciation in the value of our common stock.

     In making stock option grants, the compensation committee considers general
corporate performance,  individual  contributions to our financial,  operational
and strategic objectives, level of seniority and experience,  existing levels of
stock  ownership,  previous  grants  of  restricted  stock or  options,  vesting
schedules  of  outstanding  restricted  stock or options and the  current  stock
price. With respect to the compensation  determination for the fiscal year ended
December 31, 2003, the  compensation  committee  believes that the current stock
ownership  positions of the  executive  officers was  sufficient  to achieve the
benefits intended by equity ownership.  Accordingly,  no additional options were
granted options to our executive  officers during the past fiscal year.  However
subsequent to the end of the 2003 fiscal year, each of Mr. Herbert Kurinsky, Mr.
William  Kurinsky and Mr.  Victor K. Kurylak  received  equity  compensation  in
connection  with the  employment  agreements  each of them entered into with us,
effective as of January 1, 2004. Each of Messrs.  Kurinsky  received an award of
granted them the right to receive an aggregate of 375,000  restricted  shares of
common stock,  which vest in equal amounts of 33.3%,  on April 1, 2004,  July 1,
2004 and October 1, 2004.  Mr. Kurylak was granted  options to purchase  500,000
shares of common stock and 250,000  restricted  shares of common  stock,  all of
which vest in equal  amounts over a three-year  period,  commencing on the first
anniversary of his employment agreement.

     Other Benefits.  We also have various  broad-based  employee benefit plans.
Executive  officers  participate  in these plans on the same terms as  eligible,
non-executive employees,  subject to any legal limits on the amounts that may be
contributed or paid to executive  officers under these plans.  We offer a 401(k)
savings  plan,  which  allows  employees to invest in a wide array of funds on a
pre-tax  basis,  as well as insurance and other benefit plans for its employees,
including executive officers.
<PAGE>
34

     Chief Executive Officer and Chief Operating Officer Compensation. The terms
of the  compensation  paid to each of our  Chief  Executive  Officer  and  Chief
Operating  Officer  for the  2003  fiscal  year  were  determined  primarily  in
accordance  with the  employment  agreements  entered  into by such  officer  in
August,  2003. During the last fiscal year,  neither the Chief Executive Officer
nor the Chief  Operating  Officer  received  any cash  bonuses  or  compensation
outside  of a  $2,500  automobile  expense  allowance  for the  Chief  Executive
Officer.  Each of our  Chief  Executive  Officer  and  Chief  Operating  Officer
received a base salary of $231,218  during the fiscal  year ended  December  31,
2003.  Each  officer  received  an increase in his base salary in fiscal 2003 as
compared to the fiscal  year ended  December  31, 2002  pursuant to the terms of
their then-effective employment agreements.  Each of our Chief Executive Officer
and Chief  Operating  Officer was  entitled to a base salary of $256,218 for the
2003 fiscal year pursuant to their employment agreements. Each of these officers
agreed to accept a base salary below the amount that they were entitled in order
to assist us in improving our cash flow and financial condition. We paid a bonus
of $200,000 to our former  Chief  Executive  Officer for the 2003 fiscal year in
consideration  of his  agreement to accept a new  employment  contract for a new
salary  and  shorter  employment  duration  as he was  entitled  under his prior
contract.  With respect to our former Chief Operating Officer (and current Chief
Executive  Officer),  a bonus of $50,000  was paid for the 2003  fiscal  year in
recognition of his promotion to Vice Chairman and Chief  Executive  Officer.  As
discussed below, each of these employees entered into new employment  agreements
effective January 1, 2004.

     New Employment  Agreements.  In December  2003, the Committee  approved new
employment agreements for each of Mr. Herbert Kurinsky, Mr. William Kurinsky and
Mr. Victor K. Kurylak.  Each agreement  became  effective as of January 1, 2004.
Pursuant to his  agreement,  Mr. Herbert  Kurinsky  resigned his position as our
Chief  Executive  Officer  and now serves as our  Chairman.  As set forth in his
employment  agreement,  Mr. William Kurinsky became our Chief Executive Officer,
remained as our Chief  Financial  Officer  and  resigned  his  position as Chief
Operating Officer and Executive Vice President.  Finally, Mr. Kurylak became our
President  and Chief  Operating  Officer.  We entered into these new  employment
agreements in order to strengthen  our management  team and to include  adequate
provisions  for  these  employees  in the  event of a  change  of  control.  The
Committee determined that these officers were essential to our success, and that
their  continued  retention,  especially in the event of a threat of a change of
control of our company, necessitated that these executives be eligible for added
compensation  under  certain  conditions.  The  Committee  believed that several
factors out of our control made a potential  change of control  possible.  These
factors  included the falling stock market  generally,  and the falling price of
our stock. The new employment  agreements also provide for additional  financial
and employment  security  under other  conditions,  such as termination  without
cause.  Additional  information  relating to these new employment  agreements is
described under the heading "Employment  Agreements" appearing elsewhere in this
Annual Report on Form 10-K.

     Tax  Deductibility  of Executive  Compensation.  Section 162(m) of the Code
limits the tax deduction to us to $1 million for compensation paid to any of the
executive  officers  unless  certain  requirements  are  met.  The  compensation
committee has  considered  these  requirements  and the  regulations.  It is the
compensation  committee's  present  intention  that, so long as it is consistent
with  its  overall   compensation   objectives,   substantially   all  executive
compensation  be deductible for United States  federal income tax purposes.  The
compensation committee believes that any compensation deductions attributable to
options  granted under the employee stock option plan  currently  qualify for an
exception to the  disallowance  under  Section  162(m).  Future option grants to
executive officers under each of our employee stock option plans will be granted
by the compensation committee.

                                    By the Compensation Committee of
                                    the Board of Directors of First Montauk
                                    Financial Corp.

                                    Ward R. Jones, Jr.
                                    Barry Shapiro


<PAGE>
35


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

     There were no stock option grants to any executive  officers granted during
the year ended December 31, 2003. In connection  with his employment  agreement,
effective January 1, 2004, Mr. Victor K. Kurylak was granted options to purchase
500,000  shares of common stock and 250,000  restricted  shares of common stock,
all of which vest in equal amounts over a three-year  period.  In addition,  Mr.
Robert  Rabinowitz,  our General  Counsel,  was granted an  aggregate of 100,000
options during the current fiscal year.
<TABLE>
     <S>                     <C>        <C>         <C>                               <C>

                                     AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                                                AND FY-END OPTION/SAR VALUES

                                                                                       Value of
                             Shares                   Number of                        Unexercised
                             Acquired                 Unexercised                      In-the-money
                             on        Value          Options as of                    Options at
              Name           Exercise  Realized       December 31, 2003                December 31, 2003 (1)
              ----           --------  --------       -----------------                ---------------------

                                                   Exercisable/Unexercisable          Exercisable/Unexercisable
     Herbert Kurinsky            --      $0           325,000/0                               $0/$0
     William J. Kurinsky         --      $0           325,000/0                               $0/$0
     Robert I. Rabinowitz        --      $0           103,750/0                               $0/$0
----------------------

 (1) Based upon the closing bid price of our common stock on December 31, 2003
     ($.35 per share), less the exercise price for the aggregate number of shares
     subject to the options.

</TABLE>

Employment Agreements

     In December 2003, we entered into new three-year  employment contracts with
Herbert Kurinsky, William J. Kurinsky and Victor K. Kurylak, as described below.
Our agreements with each of the aforementioned officers became effective January
1, 2004.

     Pursuant to his  employment  agreement,  Mr. Herbert  Kurinsky  resigned as
Chief Executive Officer and remained as our Chairman. This agreement, which will
expire on December  31,  2006,  provides  for a base salary of $200,000 for each
year of the  agreement.  The  agreement  automatically  renews for an additional
one-year  term,  unless  we elect  not to renew it.  Mr.  Kurinsky  will also be
entitled to receive a portion of a bonus pool  consisting  of 15% of our pre-tax
profits,  to be determined by our compensation  committee.  The bonus pool would
require  a  minimum  of  $500,000  pretax  profit  per year in  order to  become
effective.  He is also entitled to receive  commissions at the same rate as paid
to our other  non-affiliate  registered  representatives.  Mr.  Kurinsky is also
entitled to purchase from Montauk Financial Group, up to 20% of all underwriters
and/or placement agent warrants or options that are granted to Montauk Financial
Group upon the same price,  terms and conditions  afforded to Montauk  Financial
Group as the underwriter or placement  agent.  Mr. Kurinsky also receives health
insurance benefits and life insurance as generally made available to our regular
full-time  employees,  and reimbursement for expenses incurred on our behalf and
the use of an automobile,  or in the alternative,  an automobile allowance.  The
contracts  also  provide  for a severance  of one years  salary in the event Mr.
Kurinsky's employment is terminated without cause or the contract is not renewed
and a severance benefit equal to three times the five year average  compensation
paid to him in the event Mr. Kurinsky is terminated or his duties  significantly
change  after a  change  in our  management  as  defined  in the  agreement.  As
additional  compensation under the agreement,  we granted Mr. Kurinsky the right
to receive an aggregate of 375,000 restricted shares of common stock, which vest
in equal amounts of 33.3%, on April 1, 2004, July 1, 2004 and October 1, 2004.

     Pursuant to his employment agreement, Mr. William J. Kurinsky was appointed
as our Chief Executive  Officer,  remained as our Chief Financial  Officer and a
director and  relinquished  his positions as Executive  Vice President and Chief
Operating  Officer.  This  agreement,  which will expire on December  31,  2008,
provides  for a base  salary of  $300,000  for each year of the  agreement.  The
agreement  automatically renews for an additional one-year term, unless we elect
not to renew it. Mr.  Kurinsky  will also be  entitled to receive a portion of a
bonus pool  consisting  of 15% of our pre-tax  profits,  to be determined by our

<PAGE>
36


compensation  committee.  The bonus  pool would  require a minimum  of  $500,000
pretax  profit per year in order to become  effective.  He is also  entitled  to
receive  commissions  at the  same  rate  as  paid  to our  other  non-affiliate
registered  representatives.  Mr.  Kurinsky is also  entitled  to purchase  from
Montauk  Financial Group, up to 20% of all  underwriters  and/or placement agent
warrants or options  that are granted to Montauk  Financial  Group upon the same
price,  terms  and  conditions  afforded  to  Montauk  Financial  Group  as  the
underwriter or placement  agent.  Mr.  Kurinsky also receives  health  insurance
benefits and life insurance as generally made available to our regular full-time
employees,  and reimbursement for expenses incurred on our behalf and the use of
an automobile,  or in the alternative,  an automobile  allowance.  The contracts
also  provide for a severance  of one years  salary in the event Mr.  Kurinsky's
employment  is  terminated  without  cause or the  contract is not renewed and a
severance  benefit equal to three times the five year average  compensation paid
to him in the event Mr.  Kurinsky  is  terminated  or his  duties  significantly
change  after a  change  in our  management  as  defined  in the  agreement.  As
additional  compensation under the agreement,  we granted Mr. Kurinsky the right
to receive an aggregate of 375,000 restricted shares of common stock, which vest
in equal amounts of 33.3%, on April 1, 2004, July 1, 2004 and October 1, 2004.

     Pursuant to his  employment  agreement,  Mr. Victor K. Kurylak was hired as
our President and Chief Operating Officer. This agreement,  which will expire on
December 31,  2006,  provides for a base salary of $250,000 for each year of the
agreement.  The agreement  automatically renews for an additional one-year term,
unless we elect  otherwise.  Mr.  Kurylak  will also be  entitled  to  receive a
portion  of a  bonus  pool  consisting  of  15% of our  pre-tax  profits,  to be
determined by our compensation committee. The bonus pool would require a minimum
of  $500,000  pretax  profit per year in order to become  effective.  He is also
entitled  to  receive  commissions  at the  same  rate  as  paid  to  our  other
non-affiliate  registered  representatives.  Mr.  Kurylak  is also  entitled  to
purchase from Montauk  Financial  Group,  up to 20% of all  underwriters  and/or
placement agent warrants or options that are granted to Montauk  Financial Group
upon the same price, terms and conditions afforded to Montauk Financial Group as
the underwriter or placement  agent.  Mr. Kurylak also receives health insurance
benefits and life insurance as generally made available to our regular full-time
employees,  and reimbursement for expenses incurred on our behalf and the use of
an automobile,  or in the alternative,  an automobile  allowance.  The contracts
also  provide  that Mr.  Kurylak  will be  nominated  to  serve on our  Board of
Directors  after his first full year of service  pursuant to the  agreement.  As
additional  compensation under the agreement,  we granted Mr. Kurylak options to
purchase 500,000 shares of common stock and 250,000  restricted shares of common
stock, all of which vest in equal amounts over a three-year period commencing on
the first anniversary of his employment agreement.

Incentive Stock Option Plan

     In June 2002,  we adopted  the 2002  Incentive  Stock  Option  Plan,  which
provides  for the grant of options to  purchase  up to  5,000,000  shares of our
common stock by our employees, registered representatives and consultants. Under
the terms of the Incentive Plan, options granted thereunder may be designated as
options which qualify for incentive stock option treatment under Section 422A of
the Code, or options which do not so qualify.

     The Plan is administered by our Board of Directors which has the discretion
to  determine  the eligible  employees  to whom,  and the times and the price at
which,  options will be granted;  whether such options shall be Incentive  Stock
Options or  Non-Incentive  Stock  Options;  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  Incentive  Plan and to establish and amend
rules and regulations relating thereto.

     Under the Incentive Plan, the exercise price of an option  designated as an
Incentive  Stock  Option  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 Incentive Stock Option is granted to a ten percent  stockholder
such exercise  price shall be at least 110% of such fair market value.  Exercise
prices of  Non-Incentive  Stock 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  Incentive  Stock  Options  which  become
exercisable in any calendar year may not exceed $100,000.
<PAGE>
37

     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 Incentive Plan will expire in 2012.

     Since the adoption of the 2002  Incentive  Plan,  we have issued  1,003,000
options to registered  representatives  and  employees.  There remain  1,195,998
options  outstanding  from our 1992 Incentive Stock Option Plan,  resulting in a
total of 2,198,998 options outstanding.

Director Plan

     In June 2002, we adopted the Non-Executive  Director Stock Option Plan (the
"Director Plan").  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. A  Non-Executive  Director who has not served as a
director for an entire year prior to September  1st of each year shall receive a
pro rata number of options determined as follows:

Date of Membership                              Options Granted
------------------                              ---------------

September 1 through November 30                      20,000
December 1 through February 28                       15,000
March 1 through May 30                               10,000
June 1 through August 31                              5,000

     Options are granted  under the  Director  Plan until 2012 to  non-executive
directors who are not our full time employees.

     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 Director 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 our common  stock 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 two  persons  who are our  officers  (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 80,000 options have been granted to our  Non-Executive  members
of the Board of Directors  under the 2002. An additional  60,000  options remain
outstanding from grants made pursuant to the 1992  Non-Executive  Director Stock
Option Plan,  which  terminated in June 2002, and which was replaced by the 2002
Non-Executive Director Stock Option Plan.

Senior Management Plan

     In 1996,  we  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 Management Plan or grants of restricted stock or incentive stock rights. The
Board of  Directors  or a  committee  of the board may  grant  awards  under the
Management Plan to executive management employees,  if one is appointed for this
purpose.  The Management Plan provides for four types of awards:  stock options,
incentive stock rights, stock appreciation rights, and restricted stock purchase
agreements.  The stock options  granted under the Management  Plan can be either
incentive stock options or non-incentive  stock options,  similar to the options
granted  under  the  Incentive   Plan,   except  that  the  exercise   price  of
non-Incentive  Stock  Option 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 us. 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 stock  appreciation  rights,  which become
exercisable  upon a "change  of  control"  of our  company.  A change of control
includes  the  purchase by any person of 25% or more of the voting  power of our
outstanding securities, or a change in the majority of the Board of Directors.
<PAGE>
38

     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 our  company.  Awards  under
the Management Plan may be made until 2006.

     In June 2000,  at our 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. Options to purchase
1,317,500  shares of the our common stock are  currently  outstanding  under the
Senior  Management  Plan.  In January 2004, we granted an aggregate of 1,000,000
restricted  shares of common  stock to Mr.  Herbert  Kurinsky,  Mr.  William  J.
Kurinsky and Mr. Victor K. Kurylak, pursuant to their employment agreements.

Shareholder Return Performance Presentation

     Set forth  herein is a line graph  comparing  the total  returns  (assuming
reinvestment of dividends) of our common stock, the Standard and Poor Industrial
Average,  and an industry composite  consisting of a group of three peer issuers
we have  selected in good faith.  Our common  stock is listed for trading in the
over the counter market and is traded under the symbol "FMFK".
<TABLE>
<S>                                  <C>                            <C>               <C>              <C>             <C>
                                                     Comparison of 5 Year Cumulative Total Return
                                                          Assumes Initial Investment of $100

                                                   1998          1999        2000            2001             2002      2003

First Montauk Financial Corp.        Return %    $-49.50       -10.61       -44.75         -38.03           -54.54      75.00
                                     Cum $       $ 50.50       $45.14       $24.94         $15.46            $7.03     $24.35

S & P 500                            Return %      28.58        21.05        -9.10         -11.88           -22.10      28.69
                                     Cum $       $128.58      $155.64      $141.47        $124.66           $97.11     $97.19

Peer Group Only                      Return %    $-39.06       186.80       -59.19          15.01           -49.14     158.29
                                     Cum $       $ 60.94      $174.78       $71.32         $82.03           $41.72    $176.81


Peer Group + FMFK                    Return %    $-43.10       119.35       -57.28           6.67          -49.60      151.97
                                     Cum $       $56.90      $124.81       $53.32         $56.87           $28.66     $126.92

</TABLE>
Listed below is the value of a $100 investment at each of our last five fiscal
year ends:

<TABLE>
          <S>                      <C>                    <C>                     <C>
                                            Cumulative Total Shareholder Return
          ------------------------ ---------------------- ----------------------- ----------------------
                                       First Montauk
                   Date               Financial Corp.         S&P 500 Index         Peer Group Index
          ------------------------ ---------------------- ----------------------- ----------------------
          ------------------------ ---------------------- ----------------------- ----------------------

          ------------------------ ---------------------- ----------------------- ----------------------
          ------------------------ ---------------------- ----------------------- ----------------------
                 12/31/99                  $100                    $100                   $100
          ------------------------ ---------------------- ----------------------- ----------------------
          ------------------------ ---------------------- ----------------------- ----------------------
                 12/31/00                 $49.39                 $110.02                 $117.03
          ------------------------ ---------------------- ----------------------- ----------------------
          ------------------------ ---------------------- ----------------------- ----------------------
                 12/31/01                 $30.61                  $96.95                 $134.60
          ------------------------ ---------------------- ----------------------- ----------------------
          ------------------------ ---------------------- ----------------------- ----------------------
                 12/31/02                 $13.91                  $75.52                 $68.45
          ------------------------ ---------------------- ----------------------- ----------------------
          ------------------------ ---------------------- ----------------------- ----------------------
                 12/31/03                 $24.35                  $97.19                 $176.81
          ------------------------ ---------------------- ----------------------- ----------------------
</TABLE>
-------------------------
NOTES  Industry  composite  includes  Paulson  Capital  Corp.,  Olympic  Cascade
Financial  Corp.  and Kirlin  Holding  Corp.  The  industry  composite  has been
determined in good faith by  management to represent  entities that compete with
us in certain of its significant business segments.
<PAGE>
39

Item 12.        Security Ownership of Certain
                Beneficial Owners and Management

     The  following  table  sets  forth,  as of March 30,  2004,  the number and
percentage of outstanding  shares of our common stock beneficially owned by each
person known by us to own beneficially more than 5% of our outstanding shares of
common stock and common stock  warrants,  by each of our  directors and officers
and by all of our directors and officers as a group.
<TABLE>
           <S>                                        <C>                         <C>

           Directors, Officers                               Amount and Percentage
           and 5% Shareholders (1)                        Of Beneficial Ownership (1)
           -----------------------                        ---------------------------

                                                       Number of Shares            Percent
           Herbert Kurinsky
           Parkway 109 Office Center
           328 Newman Springs Road
           Red Bank, NJ 07701                                786,518(2)             7.57%

           William J. Kurinsky
           Parkway 109 Office Center
           328 Newman Springs Road                         2,105,823(3)            20.27%
           Red Bank, NJ 07701

           Victor K. Kurylak
           Parkway 109 Office Center
           328 Newman Springs Road                           750,000(4)             7.10%
           Red Bank, NJ 07701

           Robert I. Rabinowitz, Esq.
           Parkway 109 Office Center
           328 Newman Springs Road                           233,250(5)             2.27%
           Red Bank, NJ 07701

           Ward R. Jones
           300 West Jersey Road
           Lehigh Acres, FL  33936                           110,000                1.08%

           Norma Doxey
           Parkway 109 Office Center
           328 Newman Springs Road                            54,900(7)               *
           Red Bank, NJ 07701

           Barry Shapiro, CPA
           Parkway 109 Office Center
           328 Newman Springs Road                            40,000(8)               *
           Red Bank, NJ 07701

           Kirlin Holdings Corp.
           6901 Jericho Turnpike
           Syosset, NY  11792                                852,500(9)             8.47%

           All   Directors,   Officers  and  5%
           Shareholders  as a group (8  persons            4,932,991               46.68%
           in number) (2, 3, 4, 5, 6, 7, 8, 9)
------------------------------------------
* Indicates less than 1%
</TABLE>

(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  325,000  shares  of common  stock.  Amounts  and  percentages
     indicated  for Mr.  Kurinsky  include an  aggregate  of  375,000  shares of
     restricted  common stock,  which shares vest in equal amounts of 33.3%,  on
     April 1, 2004, July 1, 2004 and October 1, 2004.

(3)  Includes  vested  and  presently  exercisable  options  of Mr.  William  J.
     Kurinsky  to  purchase   325,000  shares  of  common  stock.   Amounts  and
     percentages  indicated  for Mr.  Kurinsky  include an  aggregate of 375,000
     shares of restricted  common  stock,  which shares vest in equal amounts of
     33.3%, on April 1, 2004, July 1, 2004 and October 1, 2004.

(4)  Amounts and  percentages  indicated for Mr. Kurylak include an aggregate of
     250,000 shares of restricted  common stock and options to purchase  500,000
     shares of common stock,  all of which securities vest in equal amounts over
     a three-year  period  commencing on the first anniversary of his employment
     agreement.
<PAGE>
40

(5)  Includes vested and presently  exercisable options of Mr. Robert Rabinowitz
     to purchase 203,750 shares of common stock. Mr.  Rabinowitz's  children own
     2,000  shares of common  stock.  Mr.  Rabinowitz  also owns  5,833  Class C
     Warrants.

(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 42,500 shares of common stock.

(8)  Includes vested and presently  exercisable  options of Mr. Barry Shapiro to
     purchase 40,000 shares of common stock.

(9)  As reported under  Schedule 13G filing made by Kirlin  Holding Corp.  dated
     July 15, 2002.

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

Equity Compensation Plan Information

     The following table provides information about our common stock that may be
issued upon the exercise of options and rights under all of our existing  equity
compensation  plans as of December 31, 2003,  including the 2002 Incentive Stock
Option  Plan,  the 2002  Non-Executive  Director  Stock  Option  Plan,  the 1992
Incentive Stock Option Plan, as amended,  the 1992  Non-Employee  Director Stock
Option Plan,  as amended and the 1996 Senior  Management  Stock Option Plan,  as
amended.  Information  concerning each of the aforementioned  plans is set forth
below  following the caption  "Shareholder  Approved  Option Plans." Each of the
1992 Incentive  Stock Option Plan and 1992  Non-Executive  Director Stock Option
Plan have  expired and no  additional  options may be granted  under such plans.
Unexpired  options  granted  pursuant to such plans  prior to their  expiration,
however, remain exercisable (when vested) until the expiration of the individual
option grant.
<TABLE>
<S>                             <C>                        <C>                         <C>
============================== =========================== =========================== ==============================
                                                                                           Number of Securities
                                                                                          Remaining Available for
                                Number of Securities to                                Future Issuance Under Equity
                                be Issued upon Exercise                                Compensation Plans Excluding
                                 of Outstanding Options    Weighted Average Exercise      Securities Reflected in
                                       and Rights             Price of Outstanding              Column (a)
                                          (a)                     Options (b)                       (c)
        Plan Category
============================== =========================== =========================== ==============================
------------------------------ --------------------------- --------------------------- ------------------------------

Equity Compensation Plans              3,556,4981                    $1.19                     7,164,5002,3
Approved by Stockholders
------------------------------ --------------------------- --------------------------- ------------------------------

Equity Compensation Plans                 N/A                         N/A                           N/A
Not Approved by Stockholders
------------------------------ --------------------------- --------------------------- ------------------------------

Total                                  3,556,4981                    $1.19                     7,164,5002,3
------------------------------ --------------------------- --------------------------- ------------------------------
</TABLE>

1.       Includes 1,003,000 options issued pursuant to the our 2002 Incentive
         Stock Option Plan, 1,195,998 options issued pursuant to our 1992
         Incentive Stock Option Plan, as amended, 80,000 options issued pursuant
         to our 2002 Director Stock Option Plan, 60,000 options issued pursuant
         to our 1992 Director Stock Option Plan, as amended, and 1,217,500
         options and shares issued pursuant to our 1996 Senior Management Stock
         Option Plan, as amended.

2.       Includes 3,997,000 options available for issuance under our 2002
         Incentive Stock Option Plan and an aggregate of 2,687,500 shares
         reserved for issuance as options, incentive stock rights or pursuant to
         restricted stock purchase agreements under our 1996 Senior Management
         Stock Option Plan, as amended.
3.       Includes 480,000 options assumed available for issuance under our 2002
         Directors Stock Option Plan. We expect to have three outside directors,
         each of whom will receive 20,000 options over the ten years of the
         plan.
<PAGE>
41


Item 13.   Certain Relationships and Related Transactions

     For information  concerning the terms of the employment  agreements entered
into between us and Messrs.  Herbert  Kurinsky  and William J.  Kurinsky and Mr.
Victor K. Kurylak, see "Executive Compensation".

Item 14.  Principal Accountant Fees and Service.

     Our Audit  Committee has selected  Schneider & Associates,  LLP,  Certified
Public Accountants,  as its independent accountants for the current fiscal year.
The  audit  services  provided  by  Schneider  &  Associates,   LLP  consist  of
examination  of  financial  statements,  services  relative to filings  with the
Securities  and  Exchange  Commission,  and  consultation  in regard to  various
accounting  matters.  The  following  table  presents  the  total  fees paid for
professional audit and non-audit  services rendered by our independent  auditors
for the audit of our annual  financial  statements  for the years ended December
31, 2003 and  December 31, 2002 and fees billed for other  services  rendered by
our independent auditors during those periods.
<TABLE>
<S>                                       <C>                                                    <C>

---------------------------------------- ------------------------------------- -------------------------------------
                                          Fiscal Year Ended December 31, 2003                     Fiscal Year Ended
                                                                                                  December 31, 2002
---------------------------------------- ------------------------------------- -------------------------------------

Audit Fees (1)                                                       $149,000                              $129,674
---------------------------------------- ------------------------------------- -------------------------------------

Audit-Related Fees (2)                                                 $5,025                                    $0
---------------------------------------- ------------------------------------- -------------------------------------

Tax Fees (3)                                                          $29,300                               $22,001
---------------------------------------- ------------------------------------- -------------------------------------

All Other Fees (4)                                                    $12,000                                $4,500
---------------------------------------- ------------------------------------- -------------------------------------

Total                                                                $195,325                              $156,175
---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>

-------------------------
(1)  Audit  services  consist  of audit work  performed  in the  preparation  of
     financial  statements  for the fiscal year and for the review of  financial
     statements  included  in  Quarterly  Reports on Form 10-Q during the fiscal
     year,  as well as work that  generally  only the  independent  auditor  can
     reasonably  be expected to provide,  including  consents  for  registration
     statement  flings  and  responding  to SEC  comment  letters  on annual and
     quarterly filings.

(2)  Audit-related  services  consist of assurance and related services that are
     traditionally performed by the independent auditor, including due diligence
     related to mergers  and  acquisitions,  agreed upon  procedures  report and
     accounting and regulatory consultations.

(3)  Tax services consist of all services performed by the independent auditor's
     tax personnel,  except those services  specifically related to the audit of
     the financial statements, and includes fees in the areas of tax compliance,
     tax planning, and tax advice.

(4)  Other  services  consist  of  those  service  not  captured  in  the  other
     categories.
<PAGE>
42


     Our Audit  Committee  has  determined  that the  services  provided  by our
independent  auditors  and the  fees  paid to them  for  such  services  has not
compromised the independence of our independent auditors.

     Consistent  with SEC policies  regarding  auditor  independence,  the Audit
Committee has responsibility for appointing, setting compensation and overseeing
the work of the independent auditor. In recognition of this responsibility,  the
Audit   Committee  has  established  a  policy  to  pre-approve  all  audit  and
permissible  non-audit  services provided by the independent  auditor.  Prior to
engagement of the independent auditor for the next year's audit, management will
submit a detailed  description of the audit and permissible  non-audit  services
expected to be rendered during that year for each of four categories of services
described  below to the Audit  Committee for approval.  In addition,  management
will also provide to the Audit Committee for its approval a fee proposal for the
services  proposed  to be  rendered  by the  independent  auditor.  Prior to the
engagement of the independent auditor, the Audit Committee will approve both the
description of audit and permissible  non-audit services proposed to be rendered
by the  independent  auditor and the budget for all such services.  The fees are
budgeted and the Audit Committee requires the independent auditor and management
to report  actual fees  versus the budget  periodically  throughout  the year by
category of service.

     During the year,  circumstances  may arise when it may become  necessary to
engage the independent  auditor for additional  services not contemplated in the
original pre-approval. In those instances, the Audit Committee requires separate
pre-approval before engaging the independent  auditor. To ensure prompt handling
of unexpected matters, the Audit Committee may delegate  pre-approval  authority
to one or more of its  members.  The member to whom such  authority is delegated
must report, for informational  purposes only, any pre-approval decisions to the
Audit Committee at its next scheduled  meeting.  The four categories of services
provided by the  independent  auditor are as defined in the footnotes to the fee
table set forth above.


                                     PART IV

Item 15.          Exhibits, Financial Statement Schedules
                  and Reports on Form 8-K

(a)      1.     Financial Statements

     See the Consolidated Financial Statements and Notes thereto,  together with
the  reports  thereon  of  Schneider  &  Associates,  LLP dated  March 18,  2004
beginning on page F-1 of this report.

         2.     All schedules are omitted because they are not required or
applicable,  or the required information is shown in the consolidated financial
statements or notes.

         3.     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, the following
reports were filed on Form 8-K:
<TABLE>
     <S>                        <C>         <C>

     -------------------------- ----------- ------------------------------------------------------------------------
     Date of Report             Item(s)     Description
     -------------------------- ----------- ------------------------------------------------------------------------
      November 17, 2003          7, 12      Announcement of quarterly financial information and including related
                                            press release.
     -------------------------- ----------- ------------------------------------------------------------------------
      December                              15, 2003 5, 7 Announcement of hiring
                                            of new President and Chief Operating
                                            Officer and restructuring of
                                            management and including related
                                            press release.
     -------------------------- ----------- ------------------------------------------------------------------------
</TABLE>
<PAGE>
43

                                   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/ William J. Kurinsky
                                                --------------------------------
Dated:  March 30, 2004                         William J. Kurinsky,
                                               Chief Executive Officer

     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                                             March 30, 2004
--------------------------------------------
Herbert Kurinsky,
Chairman

/s/ William J. Kurinsky                                          March 30, 2004
--------------------------------------------
William J. Kurinsky,
Chief Executive Officer, Chief Financial
Officer, Secretary and Director

/s/ Victor K. Kurylak                                            March 30, 2004
--------------------------------------------
Victor K. Kurylak,
President and Chief Operating Officer

/s/ Norma Doxey                                                  March 30, 2004
--------------------------------------------
Norma Doxey, Director

/s/ Ward R. Jones, Jr.                                           March 30, 2004
--------------------------------------------
Ward R. Jones, Jr., Director

/s/ Barry Shapiro                                                March 30, 2004
--------------------------------------------
Barry Shapiro, Director


<PAGE>
44

                                  EXHIBIT INDEX

The  exhibits  designated  with an asterisk  (*) are filed  herewith.  All other
exhibits have been  previously  filed with the  Commission  and,  pursuant to 17
C.F.R.  ss.230.411,  are incorporated by reference to the document referenced in
brackets following the descriptions of such exhibits.
<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  (Previously  filed with the  Commission as an
                     exhibit to our Registration Statement on Form S-l, File No. 33-24696).

3.2                  Amended and Restated  By-Laws  (Previously  filed with the  Commission as an exhibit to
                     our Registration Statement on Form S-l, File No. 33-24696).

3.3                  Certificate of Designations  of Series A Preferred  Stock.  (Previously  filed with the
                     Commission  as an exhibit to our Annual  Report on Form 10-K for the fiscal  year ended
                     December 31, 2002).

4.1                  Form of Common  Stock.  (Previously  filed  with the  Commission  as an  exhibit to our
                     Registration Statement on Form S-l, File No. 33-24696).

4.2                  Form of Debenture Sold in Private  Placement.  (Previously filed with the Commission as
                     Exhibit 4.1 to Report on Form 8-K dated March 27, 2003).

4.3                  Form of Placement  Agent Warrant  (Previously  filed with the Commission as Exhibit 4.2
                     to Report on Form 8-K dated March 27, 2003).

4.4                  Form of Debenture Sold in Private  Placement.  (Previously filed with the Commission as
                     Exhibit 4.1 to Report on Form 8-K dated January 5, 2004).

4.5                  Form of Placement  Agent Warrant  (Previously  filed with the Commission as Exhibit 4.2
                     to Report on Form 8-K dated January 5, 2004).

10.1                 Office Lease Agreement between First Montauk Securities
                     Corp. and River Office Equities dated March 5, 1997
                     (Previously filed with the Commission as an exhibit to our
                     Annual Report on Form 10-KSB for the fiscal year ended
                     December 31, 1997).

10.2                 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 with
                     the  Commission  as Exhibit  28.8 to Form 10-K for the fiscal year ended  December  31,
                     1998).

10.3                 Employment  Agreement  between  First  Montauk  Securities  Corp.  and Mark Lowe  dated
                     October  15, 1998  (Previously  filed with the  Commission  as an exhibit to our Annual
                     Report on Form 10-K for the fiscal year ended December 31, 1998).

10.4                 Employment  Agreement  between  First  Montauk  Securities  Corp.  and Seth Rosen dated
                     January  25, 1999  (Previously  filed with the  Commission  as an exhibit to our Annual
                     Report Form 10-K for the fiscal year ended December 31, 1998).

10.5                 Clearing Agreement dated May 8, 2000 between Fiserv Securities,  Inc. and First Montauk
                     Securities  Corp.  (Previously  filed with the  Commission  as an exhibit to our Annual
                     Report on Form 10-K for the fiscal year ended December 31, 2000).

10.6                 Financial  Agreement  dated May 8,  2000  between  Fiserv  Securities,  Inc.  and First
                     Montauk  Securities  Corp.  (Previously  filed with the Commission as an exhibit to our
                     Annual Report on Form 10-K for the fiscal year ended December 31, 2000).

10.7                 Amended  and  Restated  Financial  Agreement  dated  February  1, 2001  between  Fiserv
                     Securities,  Inc.,  First Montauk  Financial Corp. and First Montauk  Securities  Corp.
                     (Previously  filed with the  Commission as an exhibit to our Annual Report on Form 10-K
                     for the fiscal year ended December 31, 2000).

10.8                 Security  Agreement  dated February 1, 2001 between Fiserv  Securities,  Inc. and First
                     Montauk  Financial  Corp.  (Previously  filed with the  Commission as an exhibit to our
                     Annual Report on Form 10-K for the fiscal year ended December 31, 2000).

10.9                 Sublease  Agreement between Eloquent,  Inc. and First Montauk Financial Corp. dated May
                     31, 2001  (Previously  filed with the  Commission as an exhibit to our Annual Report on
                     Form 10-K for the fiscal year ended December 31, 2001).

10.10                Sublease  Agreement  between Aim net Solutions,  Inc. and First Montauk Financial Corp.
                     dated  January  15, 2002  (Previously  filed with the  Commission  as an exhibit to our
                     Annual Report on Form 10-K for the fiscal year ended December 31, 2001).
<PAGE>
45

10.11                Employment  Agreement dated August 21, 2002 between Herbert  Kurinsky and First Montauk
                     Financial  Corp.  (Previously  filed with the Commission as an exhibit to our Quarterly
                     Report on Form 10-Q for the Quarter ended September 20, 2002).

10.12                 Employment  Agreement  dated  August 21, 2002  between  William J.  Kurinsky  and First
                      Montauk  Financial  Corp.  (Previously  filed with the  Commission as an exhibit to our
                      Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).

10.13*                Employment  Agreement  dated as of January 1, 2004 between  Herbert  Kurinsky and First
                      Montauk Financial Corp.

10.14*                Employment  Agreement dated as of January 1, 2004 between William J. Kurinsky and First
                      Montauk Financial Corp.

10.15*                Employment  Agreement  dated as of January 1, 2004 between  Victor K. Kurylak and First
                      Montauk Financial Corp.

10.16                 1992 Incentive  Stock Option Plan  (Previously  filed with the Commission as an exhibit
                      to our Registration Statement on Form S-l, File No. 33-24696).

10.17                 1992 Non-Executive  Director Stock Option Plan (Previously filed with the Commission as
                      an exhibit to our Registration Statement on Form S-l, File No. 33-24696).

10.18                 Amended and Restated  1992  Incentive  Stock Option  Plan.  (Previously  filed with the
                      Commission as an exhibit to our Proxy Statement dated May 30, 1996).

10.19                 Non-Executive  Director  Stock  Option  Plan -  Amended  and  Restated  June  28,  1996
                      (Previously  filed with the Commission as an exhibit to our Proxy  Statement  dated May
                      30, 1996).

10.20                 1996  Senior  Management  Incentive  Stock  Option  Plan  (Previously  filed  with  the
                      Commission as an exhibit to our Proxy Statement dated May 30, 1996).

10.21                 Second Amended and Restated 1992 Incentive Stock Option
                      Plan (Previously filed with the Commission as an exhibit
                      to our Proxy Statement dated May 23, 2000).

10.22                 1996 Senior Management Incentive Plan Amended as of June
                      23, 2000 (Previously filed with the Commission as an
                      exhibit to our Proxy Statement dated May 23, 2000).

10.23                 2002 Incentive Stock Option Plan.  (Previously  filed with the Commission as an Exhibit
                      A to our Proxy Statement dated May 20, 2002).

10.24                 2002  Non-Executive  Director Stock Option Plan.  (Previously filed with the Commission
                      as Exhibit B to our Proxy Statement dated May 20, 2002).

14*                   Code of Ethics

21*                   Subsidiary companies

31.1*                 Certification of Chief Executive Officer and Chief Financial Officer

31.2*                 Certification of President

32.1 *                Certification  of William J.  Kurinsky  pursuant to 18 U.S.C.  Section 1350, as adopted
                      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 *                Certification  of Victor K.  Kurylak  pursuant to 18 U.S.C.  Section  1350,  as adopted
                      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
--------------------- ----------------------------------------------------------------------------------------
</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,
2003 and 2002, and the related consolidated statements of operations, changes in
stockholders'  equity  (deficit),  and cash flows for each of the three years in
the period ended December 31, 2003. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position of First
Montauk  Financial Corp. and  Subsidiaries as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2003 in conformity with  accounting  principles
generally accepted in the United States of America.



                                                 /s/ Schneider & Associates LLP
Jericho, New York
March 18, 2004

<PAGE>
F-2
<TABLE>
<S>                                                                               <C>              <C>
                                    FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                                           December 31,
                                                                                     2003              2002
                                                                                     ----              ----

ASSETS
Cash and cash equivalents                                                         $ 3,441,743      $ 2,638,819
Due from clearing firm                                                              5,219,267        4,591,701
Securities owned, at market value                                                     169,534          183,944
Employee and broker receivables                                                     1,052,317        1,070,087
Loans receivable - officers                                                                --          178,936
Property and equipment - net                                                        1,052,564        1,396,892
Income tax refund receivable                                                               --          212,300
Deferred income taxes - net                                                                --          460,000
Other assets                                                                        1,661,351          692,827
                                                                                   ----------     ------------
   Total assets                                                                   $12,596,776      $11,425,506
                                                                                   ==========       ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES
Deferred income                                                                   $ 5,980,124      $ 5,456,323
6% convertible debentures                                                           3,135,000        1,030,000
Warrants subject to put options                                                       479,066               --
Securities sold, not yet purchased, at market value                                    69,330               --
Commissions payable                                                                 4,077,803        2,681,128
Accounts payable                                                                      980,483          577,225
Accrued expenses                                                                    1,803,973        1,987,871
Capital leases payable                                                                122,733          343,682
Notes payable                                                                              --           48,057
Other liabilities                                                                      35,703           78,910
                                                                                      -------    -------------
   Total liabilities                                                               16,684,215       12,203,196
                                                                                   ----------       ----------

Commitments and contingencies (See Notes)

STOCKHOLDERS' DEFICIT
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, 311,089 and 330,250 shares issued and
   outstanding, respectively; liquidation preference:  $1,555,445                      31,109           33,025
Common Stock, no par value, 30,000,000 shares authorized,
   9,065,486 and 8,527,164 shares issued and outstanding,
   respectively                                                                     3,578,136        3,416,220
Additional paid-in capital                                                          4,097,309        3,918,930
Accumulated deficit                                                               (11,678,659)      (8,135,777)
Less:  Deferred compensation                                                         (115,334)         (10,088)
                                                                                    ---------      -----------
   Total stockholders' deficit                                                     (4,087,439)        (777,690)
                                                                                  -----------      -----------
   Total liabilities and stockholders' deficit                                    $12,596,776      $11,425,506
                                                                                   ==========       ==========



                                          See notes to consolidated financial statements.
</TABLE>
<PAGE>
F-3
<TABLE>
<S>                                                             <C>               <C>              <C>


                              FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                          Years ended December 31,
                                                                 2003              2002             2001
                                                                 ----              ----             ----

Revenues:
Commissions                                                     $41,950,392       $36,513,802      $37,807,870
Principal transactions                                            9,466,359         6,727,642        8,021,887
Investment banking                                                2,439,144         1,007,700        1,483,210
Interest and other income                                         4,370,787         3,717,600        3,907,448
                                                                -----------       -----------      -----------
   Total revenues                                                58,226,682        47,966,744       51,220,415
                                                                 ----------        ----------       ----------

Expenses:
Commissions, employee compensation and benefits                  46,218,107        39,572,851       42,356,207
Clearing and floor brokerage                                      2,934,164         2,666,376        3,247,219
Communications and occupancy                                      2,659,105         3,006,017        3,249,389
Legal matters and related costs                                   5,836,960         1,259,502        2,415,374
Other operating expenses                                          3,393,335         4,029,515        5,076,806
Interest                                                            204,054            98,918          174,632
                                                                   --------      ------------     ------------
   Total expenses                                                61,245,725        50,633,179       56,519,627
                                                                 ----------        ----------       ----------

Loss before income taxes                                         (3,019,043)       (2,666,435)      (5,299,212)
Provision for income taxes (benefit)                                499,000           294,000          (90,989)
                                                                   --------       -----------     ------------
   Net loss                                                     $(3,518,043)      $(2,960,435)     $(5,208,223)
                                                                 ==========        ==========       ==========
   Net loss applicable to common stockholders                   $(3,542,882)      $(3,059,722)     $(5,306,976)
                                                                 ==========        ==========       ==========
Per share of common stock:
   Basic and diluted                                                 $(.40)            $(.36)           $(.61)
                                                                      ====              ====             ====
Weighted average common shares
   outstanding - basic and diluted                                8,784,103         8,551,932        8,704,355
                                                                  =========         =========        =========



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


                                            FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                       FOR THE PERIOD FROM JANUARY 1, 2001 TO DECEMBER 31, 2003

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

Balances at January 1, 2001                 349,511      $34,951       9,309,309     $4,063,397     $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                        (18,321)      (1,832)         36,642          1,832             --
Payment of dividends                             --           --              --             --             --
Net loss for the year                            --           --              --             --             --
                                       ------------  ------------      -----------    -----------    -----------
Balances at December 31, 2001               331,190       33,119       8,622,284      3,434,642      3,950,542

Transfer of common shares from
   temporary equity to permanent
   capital                                       --           --           3,000          6,500             --
Reversal of deferred
   compensation                                  --           --              --             --        (42,994)
Amortization of deferred
   compensation                                  --           --              --             --             --
Repurchase of common stock                       --           --              --             --             --
Cancellation of treasury shares                  --           --        (100,000)       (25,016)            --
Issuance of common stock
   purchase warrants for services                --           --              --             --         11,382
Conversion of preferred stock
   into common stock                           (940)         (94)          1,880             94             --
Payment of dividends                             --           --              --             --             --
Net loss for the year                            --           --              --             --             --
                                       ------------   ----------       -----------    -----------    -----------
Balances at December 31, 2002               330,250       33,025       8,527,164      3,416,220      3,918,930

Increase in deferred compensation               --           --               --             --        142,402
Amortization of deferred
   compensation                                 --           --               --             --             --
Common stock issued in
   connection with legal
   settlements                                  --           --          500,000        160,000             --
Conversion of preferred stock
   into common stock                        (19,161)      (1,916)         38,322          1,916             --
Payment of dividends                            --           --               --             --             --
Issuance of common stock
   purchase warrants for services               --           --               --             --         35,977
Net loss for the year                           --           --               --             --              --
                                       ------------  -----------       -----------    ----------    ------------

Balances at December 31, 2003               311,089      $31,109       9,065,486     $3,578,136     $4,097,309
                                            =======       ======       =========      ==========     =========



                                          See notes to consolidated financial statements.
</TABLE>
<PAGE>
F-5
<TABLE>
<S>                                       <C>            <C>             <C>           <C>          <C>


                                            FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                       FOR THE PERIOD FROM JANUARY 1, 2001 TO DECEMBER 31, 2003

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

Balances at January 1, 2001               $ 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

Transfer of common shares from
   temporary equity to permanent
   capital                                       --             --             --             --         6,500
Reversal of deferred
   compensation                                  --         42,994             --             --            --
Amortization of deferred
   compensation                                  --          2,985             --             --         2,985
Repurchase of common stock                       --             --       (100,000)       (25,016)      (25,016)
Cancellation of treasury shares                  --             --        100,000         25,016            --
Issuance of common stock
   purchase warrants for services                --             --             --             --        11,382
Conversion of preferred stock
   into common stock                             --             --             --             --            --
Payment of dividends                        (99,287)            --             --             --       (99,287)
Net loss for the year                    (2,960,435)            --             --             --    (2,960,435)
                                         ----------  -------------    -----------    -----------    ----------
Balances at December 31, 2002            (8,135,777)       (10,088)            --             --      (777,690)

Increase in deferred compensation               --        (142,402)            --             --            --
Amortization of deferred
   compensation                                 --          37,156             --             --        37,156
Common stock issued in
   connection with legal
   settlements                                  --             --              --             --       160,000
Conversion of preferred stock
   into common stock                            --             --              --             --            --
Payment of dividends                        (24,839)           --              --             --       (24,839)
Issuance of common stock
   purchase warrants for services                                                                       35,977
Net loss for the year                    (3,518,043)           --              --             --    (3,518,043)
                                        ----------- --------------   ------------      ---------    ----------

Balances at December 31, 2003          $(11,678,659)     $(115,334)            --           $ --   $(4,087,439)
                                        ===========       ========            ===            ===    ==========



                                        See notes to consolidated financial statements.
</TABLE>
<PAGE>
F-6
<TABLE>
<S>                                                             <C>               <C>              <C>

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

                                                                          Years ended December 31,
                                                                 2003              2002             2001
                                                                 ----              ----             ----

Cash flows from operating activities:
   Net loss                                                     $(3,518,043)      $(2,960,435)     $(5,208,223)
                                                                 ----------        ----------       ----------
 Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
   Depreciation and amortization                                    509,968           526,816          563,685
   Amortization of deferred compensation                             37,156             2,985           33,830
   Amortization of deferred financing costs                          20,776                --               --
   Amortization of bond discount                                         --             3,852           18,033
   Reserves                                                              --                --          500,000
   Shares issued in legal settlement                                160,000                --               --
   Loss on disposal of property and equipment                            --             5,964               --
   Loss on investment                                                    --            23,147               --
   Increase (decrease) in cash attributable to
     changes in assets and liabilities:
   Due from clearing firm                                          (627,566)         (445,291)      (1,740,744)
   Securities owned                                                  14,410           992,011        2,776,207
   Employee and broker receivables                                   17,770         1,035,533         (495,954)
   Loans receivable - officers                                      178,936            24,028          (27,896)
   Income tax refund receivable                                     212,300           857,142       (1,069,442)
   Deferred income taxes - net                                      460,000           470,000          791,262
   Other assets                                                    (736,366)          482,103         (132,241)
   Deferred income                                                  523,801           672,990          850,000
   Warrants subject to put options                                  479,066                --               --
   Securities sold, not yet purchased                                69,330          (245,078)        (141,381)
   Commissions payable                                            1,396,675          (966,042)       2,009,437
   Accounts payable                                                 403,258            86,383           39,868
   Accrued expenses                                                (183,898)          552,986          594,307
   Income taxes payable                                                  --                --         (868,675)
   Other liabilities                                                (43,207)         (466,094)          99,444
                                                                 ----------       -----------      -----------
     Total adjustments                                            2,892,409         3,613,435        3,799,740
                                                                 ----------        ----------       ----------
     Net cash provided by (used in) operating activities           (625,634)          653,000       (1,408,483)
                                                                  ---------         ---------       ----------
Cash flows from investing activities:
   Collection of notes receivable                                        --                --           18,000
   Collection of leases receivable                                       --                --          168,170
   Additions to property and equipment                             (165,640)         (266,854)        (308,061)
   Other assets                                                      26,873            31,821         (196,049)
                                                                  ---------          --------     ------------
     Net cash used in investing activities                         (138,767)         (235,033)        (317,940)
                                                                -----------         ---------     ------------


   (continued)

                                               See notes to consolidated financial statements.

</TABLE>
<PAGE>
F-7

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


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

                                                                            Years ended December 31,
                                                                   2003              2002              2001
                                                                   ----              ----              ----

Cash flows from financing activities:
   Payments of notes payable                                        (48,057)         (233,171)        (299,836)
   Proceeds from capital lease financing                                 --                --          606,195
   Repurchase of common stock                                            --           (25,016)        (143,564)
   Payments of capital leases payable                              (220,949)         (198,528)        (259,075)
   Payment of preferred stock dividends                             (24,839)          (99,287)         (98,753)
   Proceeds from issuance of 6% convertible debentures            2,105,000         1,030,000               --
   Other assets                                                    (243,830)          (32,700)              --
                                                                  ---------        ----------      ------------
      Net cash provided by (used in) financing activities         1,567,325           441,298         (195,033)
                                                                 ----------         ---------      -----------
Net increase (decrease) in cash and cash equivalents                802,924           859,265       (1,921,456)
Cash and cash equivalents at beginning of year                    2,638,819         1,779,554        3,701,010
                                                                 ----------        ----------       ----------
Cash and cash equivalents at end of year                        $ 3,441,743       $ 2,638,819      $ 1,779,554
                                                                 ==========        ==========       ==========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
   Interest                                                   $     134,055      $      95,522    $    174,632
   Income taxes                                               $    (187,707)     $ (1,113,636)    $    894,852

Noncash financing and investing transactions:
Property and equipment financed under capital leases          $          --      $         --     $    662,290

Equipment acquired through vendor financing                   $          --      $     31,017     $         --

Warrants charged to deferred financing costs in
   connection with debenture offerings                        $      35,987      $     11,382     $         --









                                          See notes to consolidated financial statements.
</TABLE>
<PAGE>
F-8

                 FIRST MONTAUK FINANCIAL CORP. AND SUBSIDIARIES
                   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), operates a securities broker-dealer registered
                  with the Securities and Exchange Commission (SEC). Through
                  FMSC, the Company executes principal and agency transactions
                  primarily for retail customers, performs investment banking
                  services, and trades securities on a proprietary basis.
                  Montauk Insurance Services, Inc. (MISI) sells a range of
                  insurance products. The Company operates in one business
                  segment. Customers are located primarily throughout the United
                  States.

                  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. FMSC
                  is a member of the National Association of Securities Dealers,
                  Inc. (NASD).

NOTE 2 -          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  Basis of Presentation

                  The consolidated financial statements include the accounts of
                  the Company and its subsidiaries, all of which are
                  wholly-owned. All intercompany accounts and transactions have
                  been eliminated in consolidation.

                  Revenue Recognition

                  Securities transactions, commission income and related
                  expenses are recorded on a trade date basis. Sales concessions
                  from participation in syndicated offerings are recorded on
                  settlement date.

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

                  Advances received under the Company's financial agreement with
                  its clearing firm are deferred and amortized to income over
                  the remaining term of the agreement on a straight-line basis
                  (see Note 8).


                  Advertising

                  Advertising costs are expensed as incurred and totaled
                  approximately $71,000, $115,000 and $67,000 in 2003, 2002 and
                  2001, respectively.

                  Property and Equipment

                  Furniture, equipment and leasehold improvements are stated at
                  cost. Depreciation of furniture and equipment are computed
                  over the estimated useful lives of the assets, ranging from
                  three to ten years. Capitalized lease equipment is amortized
                  over the lease term. Leasehold improvements are amortized over
                  the shorter of either the asset's useful life or the related
                  lease term. Depreciation is computed on the straight-line
                  method for financial reporting purposes and on an accelerated
                  basis for income tax purposes.

                  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, 2003 and 2002.
<PAGE>
F-9


                  Loss per Share

                  Basic loss per share is computed by dividing net loss
                  attributable to common stockholders by the weighted-average
                  number of common shares outstanding for the period. In
                  determining basic loss per share for the periods presented,
                  dividends paid on Series A Convertible Preferred Stock are
                  added to the net loss. Diluted loss per share reflects the
                  potential dilution from the exercise or conversion of other
                  securities into common stock, but only if dilutive. Diluted
                  loss per share for 2003, 2002 and 2001 is the same as basic
                  loss per share, since the effects of the calculation for these
                  years were anti-dilutive. The following securities, presented
                  on a common share equivalent basis, have been excluded from
                  the per share computations:
<TABLE>
<S>                                                                 <C>               <C>            <C>

                                                                               Year ended December 31,
                                                                       2003             2002            2001
                                                                       ----             ----            ----

                  Stock options                                     3,556,498         4,072,498      5,243,998
                  Warrants                                          4,160,946         9,345,338      9,242,338
                  Convertible debt                                  6,270,000         2,084,028        345,263
                  Convertible preferred stock                         622,178           660,500        662,380
</TABLE>

                  In January 2004, the Company issued a total of 1,000,000
                  restricted common shares and 500,000 stock options to various
                  executive officers pursuant to new employment agreements (see
                  Note 23).

                  Use of Estimates

                  The consolidated financial statements are prepared in
                  conformity with accounting principles generally accepted in
                  the United States of America which require management to make
                  estimates and assumptions that affect the amounts reported in
                  the financial statements and accompanying notes. Management
                  periodically evaluates estimates used in the preparation of
                  financial statements for continued reasonableness. Appropriate
                  adjustments, if necessary, to the estimates used are made
                  prospectively based upon such periodic evaluation. Actual
                  results could differ from those estimates.

                  Long-lived Assets

                  The Company evaluates impairment losses on long-lived assets
                  used in operations, primarily property and equipment, when
                  events and circumstances indicate that the carrying value of
                  the assets might not be recoverable in accordance with FAS No.
                  144 "Accounting for the Impairment or Disposal of Long-lived
                  Assets". For purposes of evaluating the recoverability of
                  long-lived assets, the undiscounted cash flows estimated to be
                  generated by those assets would be compared to the carrying
                  amounts of those assets. If and when the carrying values of
                  the assets exceed their fair values, the related assets will
                  be written down to fair value.

                  Income Taxes

                  The Company uses the liability method to determine its income
                  tax expense as required under Statement of Financial
                  Accounting Standards No. 109 (FAS 109). Under FAS 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.

                  Reclassification

                  Syndicate revenues totaling $641,858 in 2002 have been
                  reclassified from Principal transactions to Investment banking
                  in the Statement of Operations to conform with the
                  presentations in 2001 and 2003.
<PAGE>
F-10


                  Stock-based Compensation

                  The Company periodically grants stock options to employees in
                  accordance with the provisions of its stock option plans, with
                  the exercise price of the stock options being set at the
                  closing market price of the common stock on the date of grant.
                  The Company accounts for stock-based compensation plans under
                  Accounting Principles Board Opinion No. 25, "Accounting for
                  Stock Issued to Employees", and accordingly accounts for
                  employee stock-based compensation utilizing the intrinsic
                  value method. FAS No. 123, "Accounting for Stock-Based
                  Compensation", establishes a fair value based method of
                  accounting for stock-based compensation plans. The Company has
                  adopted the disclosure only alternative under FAS No. 123,
                  which requires disclosure of the pro forma effects on earnings
                  and earnings per share as if FAS No. 123 had been adopted as
                  well as certain other information.

                  Stock options granted to non-employees are recorded at their
                  fair value, as determined in accordance with FAS No. 123 and
                  Emerging Issues Task Force Consensus No. 96-18, and recognized
                  over the related service period. Deferred charges for options
                  granted to non-employees are periodically re-measured until
                  the options vest.

                  In December 2002, the FASB issued Statement of Financial
                  Accounting Standards No. 148, "Accounting for Stock-Based
                  Compensation -- Transition and Disclosure" ("FAS 148"), which
                  (i) amends FAS Statement No. 123, "Accounting for Stock-Based
                  Compensation," to provide alterative methods of transition for
                  an entity that voluntarily changes to the fair value based
                  method of accounting for stock-based employee compensation
                  (ii) amends the disclosure provisions of FAS 123 to require
                  prominent disclosure about the effects on reported net income
                  of an entity's accounting policy decisions with respect to
                  stock-based employee compensation and (iii) amends APB opinion
                  No. 28, "Interim Financial Reporting," to require disclosure
                  about those effects


                  in interim financial information.  The additional disclosures
                  required by FAS 148 are as follows:
<TABLE>
<S>                                                             <C>                 <C>              <C>

                                                                            Years ended December 31,
                                                                     2003             2002              2001
                                                                     ----             ----              ----

                  Net loss applicable to common
                  stockholders, as reported                     $(3,542,882)        $(3,059,722)     $(5,306,976)
                  Add:  Stock based employee
                  compensation expense included
                  in reported net loss, net of tax                       --                  --               --
                  Deduct:   Total stock based
                  employee compensation expense
                  determined under the fair value
                  based method for all awards, net
                  of tax                                           (105,862)           (178,642)        (468,019)
                                                                  ---------           ---------        ---------
                  Pro forma net loss                            $(3,648,744)        $(3,238,364)     $(5,774,995)
                                                                 ==========          ==========       ==========
                  Loss per share:

                  Basic and diluted - as reported                 $(.40)               $(0.36)           $(0.61)
                  Basic and diluted - pro forma                   $(.42)               $(0.38)           $(0.66)

                  Pro forma net loss and loss per share information, as required
                  by FAS 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 2003, 2002 and
                  2001:

                                                                         2003              2002         2001
                                                                         ----              ----         ----

                  Risk free interest rates                                 3.14%            1.97%        4.46%
                  Expected option lives                                  4 years        2.4 years    2.4 years
                  Expected volatilities                                  105.11%          87.64%           83%
                  Expected dividend yields                                    0%               0%           0%
</TABLE>

<PAGE>
F-11


                  Recent Pronouncements of the Financial Accounting Standards
                  Board

                  In April 2003, the FASB issued FAS No. 149 which amends and
                  clarifies financial accounting and reporting for derivative
                  instruments, including certain derivative instruments embedded
                  in other contracts, and for hedging activities under FAS No.
                  133. In particular, FAS No. 149 clarifies under what
                  circumstances a contract with an initial net investment meets
                  the characteristic of a derivative discussed in FAS No. 133,
                  clarifies when a derivative contains a financing component,
                  amends the definition of an underlying (as initially defined
                  in FAS No. 133) to conform it to a language used in FIN No.
                  45, Guarantor's Accounting and Disclosure Requirements for
                  Guarantees, Including Indirect Guarantees of Indebtedness of
                  Others, and amends certain other existing pronouncements. FAS
                  No. 149 is effective for all contracts entered into or
                  modified after June 30, 2003, subject to certain exceptions.
                  The adoption of this statement did not have an impact on the
                  Company's financial position, results of operations, or cash
                  flows.

                  In May 2003, the FASB issued FAS No. 150, "Accounting for
                  Certain Financial  Instruments with Characteristics of both
                  Liabilities  and Equity".  FAS No. 150  establishes  standards
                  for how an issuer  classifies  and  measures  certain
                  financial  instruments  with  characteristics  of both
                  liabilities  and equity.  FAS No. 150 requires that an issuer
                  classify a financial  instrument  that is within the scope of
                  FAS No. 150 as a  liability.  FAS No. 150 is  effective
                  for  financial  instruments  entered into or modified  after
                  May 31,  2003,  and  otherwise  is  effective  beginning
                  September  1, 2003.  The  Company has applied the  provisions
                  of FAS No. 150 to certain  warrants  issued in a legal
                  settlement during 2003.

                  In November 2002, the FASB issued FASB Interpretation No. 45,
                  "Guarantor's Accounting and Disclosure Requirements for
                  Guarantees, including Indirect Guarantees of Indebtedness of
                  Others" ("FIN 45"). This interpretation elaborates on the
                  disclosures to be made by a guarantor in its interim and
                  annual financial statements about its obligations under
                  certain guarantees that it has issued. It also clarifies that
                  a guarantor is required to recognize, at the inception of a
                  guarantee, a liability for the fair value of the obligation
                  undertaken in issuing the guarantee. The disclosure
                  requirements of this interpretation are effective for interim
                  and annual periods after December 15, 2002. The initial
                  recognition and initial measurement requirements of this
                  interpretation are effective prospectively for guarantees
                  issued or modified after December 31, 2002. The Company
                  adopted FIN 45 effective January 1, 2003. The effect of such
                  adoption was not material to the Company's financial position,
                  results of operations, or cash flows.

                  In January 2003, the FASB issued FASB Interpretation No. 46,
                  "Consolidation of Variable Interest Entities" ("FIN 46"). This
                  interpretation of Accounting Research Bulletin No. 51,
                  "Consolidated Financial Statements", addresses consolidation
                  by business enterprises of variable interest entities. Under
                  current practice, two enterprises generally have been included
                  in consolidated financial statements because one enterprise
                  controls the other through voting interests. This
                  interpretation defines the concept of "variable interests" and
                  requires existing unconsolidated variable interest entities to
                  be consolidated by their primary beneficiaries if the entities
                  do not effectively disperse the risks among the parties
                  involved. The provisions of FIN 46, which were adopted in
                  2003, did not have a material impact on the Company's
                  consolidated financial position, results of operations, or
                  cash flows.
<PAGE>
F-12

NOTE 3 -          SECURITIES OWNED and SOLD, NOT YET PURCHASED
<TABLE>
<S>                                                          <C>             <C>           <C>           <C>

                                                                                December 31,
                                                                     2003                          2002
                                                                     ----                          ----

                                                                              Sold                        Sold
                                                                             not yet                     not yet
                                                              Owned         Purchased        Owned      Purchased

                  Corporate stocks                           $ 80,710        $69,330       $111,216      $    --
                  U. S. government agency and
                   municipal obligations                       73,875             --         10,537           --
                  Corporate bonds                              10,016             --             --           --
                  Certificates of deposit                          --             --         42,000           --
                  Mutual funds                                     --             --         14,820           --
                  Other                                         4,933            --           5,371           --
                                                               ------           ----         ------           --
                                                             $169,534        $69,330       $183,944         $ --
                                                              =======         ======        =======          ===
</TABLE>

                  Securities owned and securities sold, not yet purchased
                  consist of trading securities at quoted market values. The
                  Company owns investment securities, consisting of shares of
                  common stock and common stock purchase warrants, that cannot
                  be publicly offered or sold unless registration has been
                  affected under the Securities Act of 1933. At December 31,
                  2003 and 2002, these nonmarketable securities were deemed by
                  management to have nominal value, and are included in Other
                  securities above.


NOTE 4 -          EMPLOYEE AND BROKER RECEIVABLES
<TABLE>
                  <S>                                                         <C>                  <C>
                                                                                        December 31,
                                                                                 2003                  2002
                                                                                 ----                  ----

                  Commission advances                                         $  285,866           $ 265,678
                  Forgivable loans                                                43,395             167,221
                  Other loans                                                    723,056             637,188
                                                                                --------            --------
                                                                              $1,052,317          $1,070,087
                                                                               =========           =========
</TABLE>

                  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 five years. The loans are being amortized to expense
                  for financial reporting purposes over the term of the loan.
                  Loan amortization charged to compensation was $230,578,
                  $235,528 and $483,651 in 2003, 2002, and 2001, respectively.
                  Other loans to employees and registered representatives are
                  payable in installments generally over periods of one to five
                  years with interest rates ranging from 0% to 8% per annum.

NOTE 5 -          PROPERTY AND EQUIPMENT
<TABLE>
<S>                                                             <C>               <C>            <C>

                                                                         December 31,                Estimated
                                                                   2003             2002             Useful Life
                                                                   ----             ----             -----------

                  Computer and office equipment                 $ 2,960,830       $ 2,852,536    3 to 7 years
                  Furniture and fixtures                          1,299,343         1,243,861    7 to 10 years
                  Leasehold improvements                            804,654           802,790    Term of lease
                                                                   --------          --------
                                                                  5,064,827         4,899,187
                  Less:  Accumulated depreciation
                    and amortization                             (4,012,263)       (3,502,295)
                                                                 ----------        ----------
                                                                $ 1,052,564       $ 1,396,892
                                                                 ==========        ==========

                  Depreciation expense was $509,968, $526,816 and $563,685 in
                  2003, 2002 and 2001, respectively.
</TABLE>

<PAGE>
F-13

NOTE 6 -          LOANS RECEIVABLE - OFFICERS
<TABLE>
                  <S>                                                                   <C>           <C>
                                                                                             December 31,
                                                                                        2003            2002
                                                                                        ----            ----

                  Chief Executive Officer (CEO)                                         $    --       $133,368
                  Chief Operating Officer (COO)                                              --         45,568
                                                                                          -----        -------
                                                                                         $   --       $178,936
                                                                                          =====        =======
</TABLE>
                  In April 2003, the CEO and COO began repaying their loan
                  balances in bi-weekly installments of $2,576 and $1,630,
                  respectively, with interest at 3% per annum. In December 2003,
                  in connection with the execution of new employment agreements
                  (See Note 23), the board of directors approved bonuses of
                  $200,000 and $50,000 for the CEO and COO, respectively. Both
                  officers applied the after-tax proceeds towards repayment of
                  their loans.

NOTE 7 -          OTHER ASSETS
<TABLE>
                  <S>                                                                 <C>             <C>
                                                                                            December 31,
                                                                                        2003            2002
                                                                                        ----            ----

                  Commissions and concessions receivable                              $ 306,442       $ 51,915
                  Deferred financing costs-net                                          303,113         44,082
                  Insurance claim receivable                                            245,000            ---
                  Security deposits                                                     285,129        338,126
                  Prepaid expenses and other                                            521,667        258,704
                                                                                       --------        -------
                                                                                     $1,661,351       $692,827
                                                                                      =========        =======
</TABLE>

NOTE 8 -          DEFERRED INCOME

                  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, FMSC
                  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 on all
                  shares.

                  The Company received additional cash advances of $1,250,000
                  each in November 2001, 2002 and 2003, respectively. All
                  advances have been recorded as deferred income and are being
                  amortized to earnings over the term of the agreement.
                  Amortization of approximately $726,000, $577,000 and $400,000
                  in 2003, 2002 and 2001, respectively, is included in Other
                  Income. Advances are subject to income taxes in the year of
                  receipt.
<PAGE>
F-14


NOTE 9 -          ACCRUED EXPENSES
<TABLE>
                  <S>                                                                <C>            <C>
                                                                                           December 31,
                                                                                        2003            2002
                                                                                        ----            ----

                  Accrued litigation costs                                           $1,364,169     $1,154,000
                  Accrued commission refund                                                  --        175,000
                  Accrued payroll                                                       123,886        144,000
                  Accrued professional fees                                              97,254        140,673
                  Other accrued expenses                                                218,664        374,198
                                                                                     ----------     ----------
                                                                                     $1,803,973     $1,987,871
                                                                                      =========      =========
</TABLE>

NOTE 10 -         NOTES PAYABLE
<TABLE>
                  <S>                                                                   <C>            <C>
                                                                                           December 31,
                                                                                        2003            2002
                                                                                        ----            ----

                  Convertible promissory notes, net of discount                         $  --          $48,057
                                                                                         ====           ======
</TABLE>
                  Notes payable consisted of thirty-six monthly non-interest
                  bearing installments of $16,404 through September 2002, plus
                  balloon payments of $112,000,. The balloon payments included
                  interest of $12,000 calculated on the basis of 8% of the
                  balloon amount beginning in month nineteen of the note term.
                  The Company recorded a loan discount on the notes of $64,609,
                  which was amortized over the note terms using the interest
                  method. The notes were convertible into 345,263 common shares
                  of the Company's common stock based on a conversion price of
                  $2.00 per share. In September 2002, the parties agreed to
                  refinance the balloon payments. The amended terms provided for
                  six monthly installments of $16,404 and a final payment in
                  March 2003 of $15,889, including interest at the rate of 8%
                  per annum. The Company's CEO personally guaranteed repayment
                  of the refinanced amounts.

NOTE 11 -         6% CONVERTIBLE DEBENTURES

                  In 2002 and 2003, the Company raised gross proceeds of
                  $1,030,000 and $2,105,000, respectively, in private placements
                  of 6% convertible debentures to accredited investors. The
                  offerings were made in reliance upon the exemption under
                  Sections 4(2) of the Securities Act of 1933 and the provisions
                  of Regulation D. The debentures are convertible into shares of
                  common stock at $.50 per share, subject to adjustment for
                  stock dividends and stock splits, and mature five years from
                  the date of issuance unless previously converted. Interest is
                  payable in cash on a semi-annual basis until maturity or
                  conversion.

                  In the event that the closing bid price of the Company's
                  common stock is 200% of the conversion price for the twenty
                  (20) consecutive trading days prior to the date of notice of
                  conversion or prepayment, the Company may, at its option and
                  only if the underlying shares have been registered, upon
                  thirty (30) days written notice to the holders, demand the
                  conversion of some or all of the debentures, or prepay some or
                  all of the debentures at the following repayment prices: 130%
                  of the principal amount if prepaid from the date of issuance
                  until the first anniversary of the date of issuance; 120% of
                  the principal amount if prepaid anytime thereafter. The
                  debentures contain certain covenants which, among other
                  things, prevent the sale of all or substantially all of the
                  Company's assets without provision for the payment of the
                  debentures from such sales proceeds, and making loans to any
                  executive officers or 5% stockholders. The debentures provide
                  for piggy-back registration rights relating to the underlying
                  shares.

                  FMSC was the Placement Agent for the offerings. Offering costs
                  of approximately $324,000, consisting of the value of warrants
                  issued to selling brokers, commissions and other cash
                  expenses, have been capitalized and are being amortized on a
                  straight-line basis over the respective terms of the
                  debentures.

                  Assuming no prior conversion, the debentures will mature in
                  2007 and 2008, as follows: 2007 - $1,030,000; 2008 -
                  $2,105,000.

<PAGE>
F-15

NOTE 12 -         WARRANTS SUBJECT TO PUT OPTIONS

                  In July 2003, the Company issued 750,000 five-year warrants to
                  various plaintiffs as part of a legal settlement (See Note
                  14). The warrants have been issued in three classes of 250,000
                  warrants each. Class A warrants have an exercise price of $.40
                  per share; Class B and Class C warrants have exercise prices
                  of $.25 per share. The settlement agreement provides that the
                  Company may be obligated to make additional cash payments of
                  up to $600,000 in the event that claimants elect to exercise
                  the warrants on certain dates. Specifically, if a majority of
                  then existing Class A warrant holders elect to exercise the
                  remaining warrants in their particular class during the month
                  of June 2004 (the "Required Exercise Event"), the claimants,
                  upon exercising their warrants, will be required to sell the
                  shares in the open market. If the warrants are exercised and
                  the shares sold, the Company will pay to the claimants up to
                  an aggregate amount of $200,000 less the amount received by
                  the claimants from the sale of their shares, net of
                  commissions. This process will be repeated for remaining Class
                  B and Class C warrant holders during the months of June 2005
                  and June 2006, respectively.

                  In the alternative, the Company may elect or be required to
                  redeem the unexercised warrants for up to $.80 per warrant,
                  or a maximum of $200,000 per class, depending upon the then
                  prevailing market price of the Company's common stock on or
                  about the date of the Required Exercise Event of a particular
                  class.  The Company may call a warrant class for redemption if
                  the average market price of the underlying common shares
                  during the ten trading days immediately preceding the date
                  upon which the Company receives notice that the warrant
                  holders of a particular class have elected to declare a
                  Required Exercise Event is less than $1.20. The Company will
                  be required to redeem the warrants for $.80 per warrant in
                  cash if the average market price of the underlying common
                  shares during the ten trading days immediately preceding the
                  date upon which the Company receives notice that the warrant
                  holders of a particular class have elected to declare a
                  Required Exercise Event is less than or equal to the warrant
                  exercise price. In the event that warrant holders of a
                  particular class elect not to declare a Required Exercise
                  Event, the Company's guarantee will be canceled with respect
                  to that class.

                  In accordance with the provisions of FAS 150, "Accounting for
                  Certain Financial Instruments with Characteristics of both
                  Liabilities and Equity," the Company has classified its
                  obligations under the warrants as liabilities in the Statement
                  of Financial Condition. The fair value of the obligations
                  embodied in the warrants were initially valued at $441,000
                  using the discounted cash flow method, assuming, based on
                  available evidence, that the Company will be required to pay
                  the full redemption liability.  The Company will re-measure
                  the value of the warrant obligations as of the end of each
                  reporting period using the discounted cash flow method until
                  the obligations are settled.  The recorded value at
                  December 31, 2003 was $479,066. Changes in value are
                  recognized in earnings as interest expense. The Company has
                  agreed to register all shares of common stock underlying the
                  warrants.

NOTE 13 -         INCOME TAXES

                  The provision for income taxes (benefit) consists of the
                  following:
<TABLE>
                  <S>                                                <C>              <C>            <C>
                                                                               Year ended December 31,
                                                                       2003             2002            2001
                                                                       ----             ----            ----

                  Currently payable (refundable):
                    Federal                                          $     --         $(212,300)     $(893,978)
                    State                                              39,000            36,300         11,727
                                                                      -------           -------        -------
                                                                       39,000          (176,000)      (882,251)
                                                                      -------          --------       --------
                  Deferred:
                    Federal                                           425,000           425,000        483,978
                    State                                              35,000            45,000        307,284
                                                                      -------         ---------       --------
                                                                      460,000           470,000        791,262
                                                                      -------          --------       --------
                  Provision for income taxes (benefit)               $499,000         $ 294,000     $  (90,989)
                                                                      =======          ========      =========
</TABLE>
<PAGE>
F-16


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

                                                                               Year ended December 31,
                                                                       2003             2002            2001
                                                                       ----             ----            ----

                  Expected federal tax benefit at
                    statutory rate                                $(1,043,000)      $  (926,397)     $(1,802,142)
                  State taxes, net of federal tax effect             (145,000)         (144,958)        (230,898)
                  Non-deductible expenses                              29,000            35,680           65,400
                  Increase in valuation allowance                   1,658,000         1,329,675        1,876,651
                                                                   ----------         ---------        ---------
                  Provision for income taxes (benefit)              $ 499,000       $   294,000     $    (90,989)
                                                                     ========        ==========      ===========
</TABLE>

                  The tax effects of the temporary differences that give rise to
                  significant portions of the deferred tax assets and
                  liabilities as of December 31, 2003 and 2002 are:
<TABLE>
                  <S>                                                      <C>                   <C>

                                                                                  Year ended December 31,
                                                                                2003                  2002
                                                                                ----                  ----
                  Deferred tax assets:
                    Deferred income                                        $ 2,392,000           $ 2,177,729
                    Reserves and allowances                                  1,356,000             1,366,266
                    Tax loss carryforwards                                   1,028,000               258,125
                    Stock-based compensation                                   447,000               261,286
                    Other                                                       70,000                31,725
                                                                           -----------            ----------
                  Subtotal                                                   5,293,000             4,095,131
                  Valuation allowance                                       (5,293,000)           (3,635,131)
                                                                            ----------            ----------
                   Net deferred tax assets                                 $        --           $   460,000
                                                                            ==========           ===========
</TABLE>
                  The Company has determined that, based upon available
                  information, the probability of utilizing its deferred tax
                  assets does not meet the "more likely than not" test under
                  SFAS 109. As such, a valuation allowance has been provided
                  against all deferred tax assets as of December 31, 2003.

                  The Company and its subsidiaries file a consolidated federal
                  tax return and separate state returns. At December 31, 2003,
                  the Company has approximately $2.4 million and $5.0 million of
                  federal and state operating loss carryforwards, respectively,
                  available to offset future taxable income. These losses expire
                  at various dates through 2023.

                  During 2002 and 2003, the Company recovered approximately
                  $904,000 and $212,000, respectively, of federal income taxes
                  through loss carryback refund claims.

                  The Internal Revenue Service is conducting an examination of
                  the Company's income tax return for the year ended December
                  31, 2000. Management does not expect the outcome to have a
                  material impact on the Company's financial condition, results
                  of operations or cash flows.

NOTE 14 -         COMMITMENTS AND CONTINGENT LIABILITIES

                  Operating Leases

                  The Company leases office facilities and equipment under
                  operating leases expiring at various dates through 2006. The
                  lease for the Company's headquarters has a six-year renewal
                  option through 2011. Certain leases require the Company to pay
                  increases in real estate taxes, operating costs and repairs
                  over certain base year amounts. Operating lease expense for
                  the years ended December 31, 2003, 2002 and 2001 were
                  approximately $1,192,000, $1,393,000 and $1,254,000,
                  respectively.
<PAGE>
F-17


                  Future minimum rental commitments under all non-cancelable
                  leases are as follows:
<TABLE>
                                <S>                                                                 <C>

                                Year ending December 31,

                                          2004                                                      $1,103,126
                                          2005                                                         296,302
                                          2006                                                         169,500
                                                                                                    ----------
                                                                                                    $1,568,928
                                                                                                     =========
</TABLE>


                  Capital Lease Obligations

                  The Company leases certain equipment under non-cancelable
                  lease agreements, which meet the criteria for capitalization.
                  The cost, accumulated depreciation and net book value of
                  equipment under the capital leases as of December 31, 2003
                  were $689,086, $431,906, and $257,180.

                  Future minimum lease payments under capital lease obligations
                  at December 31, 2003 are as follows:

<TABLE>
                                <S>                                                                   <C>
                               Year ending December 31,

                                          2004                                                        $114,396
                                          2005                                                          15,711
                                                                                                       -------
                  Total minimum payments                                                               130,107
                  Less amount representing interest                                                     (7,375)
                                                                                                      --------
                  Total principal                                                                     $122,732
                                                                                                       =======
</TABLE>

                  Employment agreements

                  In August 2002, the Company's board of directors approved new
                  employment agreements with similar terms for its CEO and its
                  COO. The agreements expire in December 2005 and provide for a
                  base annual salary of $256,218, increasing by 10% per annum on
                  January 1st of each contract year. Each employee will also be
                  entitled participate in a bonus pool, as defined. The
                  agreements also include severance provisions and termination
                  payments arising from a change in control, as defined. These
                  agreements were superceded by new employment contracts in
                  January 2004 (see Note 23).

                  During 2002 and 2003, respectively, each officer waived his
                  rights to approximately $126,000 and $75,000 of base salary.

                  Mutual fund breakpoints

                  The NASD has directed member firms to assess mutual fund
                  transactions executed during the five-year period from 1999 to
                  2003 for the purpose of determining potential breakpoint
                  commission refunds to customers. Based on its internal review
                  as well as information provided by the NASD, the Company has
                  established a reserve account of $10,000 for customer claims.
                  Management believes, but cannot give assurance, that this
                  amount will be sufficient to cover eventual payouts.

                  Legal matters

                  On July 17, 2003, the Company and FMSC entered into an
                  agreement with certain claimants in order to settle pending
                  arbitration proceedings. The litigation arose out of customer
                  purchases of certain high-yield corporate bonds that declined
                  in market value or defaulted. The settlement agreement covers
                  eleven separate claims which sought an aggregate of
                  approximately $12.3 million in damages. In exchange for the
                  consideration provided by the Company, each claimant granted a
                  general release of claims in favor of the Company and all
                  individual respondents, with the exception of the former
                  registered representative who had handled the claimants'
                  accounts. The Company paid an aggregate of $1,000,000 cash,
                  and issued to the claimants 500,000 shares of the Company's
                  common stock valued at $160,000 based on the stock's quoted
                  market price. The Company also issued to the claimants
                  five-year warrants to purchase an aggregate of 750,000 common
                  shares (see Note 12).
<PAGE>
F-18

                  The Company is currently defending nine additional claims
                  relating to the sale of the high-yield bonds. The claimants
                  seek compensatory damages in excess of $4.3 million plus
                  punitive damages and the recovery of various costs. The
                  Company is vigorously defending these actions and believes
                  that there are meritorious defenses in each case. There is no
                  insurance coverage available for the payment of settlements
                  and/or judgments that may result from these particular claims.

                  In 2002, the Company filed a claim against one of its
                  competitors for raiding, unfair competition and unfair use of
                  proprietary and confidential information. In 2003, the matter
                  was resolved between the parties with the Company receiving a
                  cash payment from the respondent firm, with specific
                  restrictions on the solicitation, and limitation on the hiring
                  of Company registered representatives and employees for a
                  specific time period. The agreement also requires the payment
                  of liquidated damages by each party in the event of a breach
                  of its terms.

                  During 2001, the Company established a $500,000 reserve
                  against payments previously made to a vendor for the
                  development of applications software, and in 2002 instituted a
                  lawsuit against the vendor. In July 2002, the Company settled
                  the lawsuit upon receipt of a $230,000 cash payment and
                  terminated the software project.

                  The Company is a respondent or co-respondent in various other
                  legal proceedings which are related to its securities
                  business. Management is contesting these claims and believes
                  that there are meritorious defenses in each case. However,
                  litigation is subject to many uncertainties, and some of these
                  actions and proceedings may result in adverse judgments.
                  Further, the availability of insurance coverage is determined
                  on a case-by-case basis by the insurance carrier, and is
                  limited to the coverage limits within the policy for any
                  individual claim and in the aggregate. After considering all
                  relevant facts, available insurance coverage and consultation
                  with litigation counsel, management believes that significant
                  judgments or other unfavorable outcomes from pending
                  litigation could have a material adverse impact on the
                  Company's consolidated financial condition, results of
                  operations, and cash flows in any particular quarterly or
                  annual period, or in the aggregate, and could impair the
                  Company's ability to meet the statutory net capital
                  requirements of its securities business.

                  As of December 31, 2003, the Company has accrued litigation
                  costs that are probable and can be reasonably estimated based
                  on a review of existing claims, arbitrations and unpaid
                  settlements. Management cannot give assurance that this amount
                  will be adequate to cover actual costs that may be
                  subsequently incurred. Further, it is not possible to predict
                  the outcome of other matters pending against the Company. All
                  such cases will continue to be vigorously defended.

NOTE 15 -         FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK and
                  CONCENTRATION 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.

                  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 ($69,330 and $-0- at December 31, 2003 and 2002,
                  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. Cash balances held at
                  commercial banks may periodically exceed federal insurance
                  limits.

<PAGE>
F-19

NOTE 16 -         PENSION PLAN

                  The Company sponsors a defined contribution (401(k)) pension
                  plan covering substantially all employees who meet minimum age
                  and service requirements. The Company may elect to contribute
                  up to 100% of each participant's annual contribution to the
                  plan. There were no employer contributions in 2003, 2002 or
                  2001.

NOTE 17 -         STOCKHOLDERS' EQUITY (DEFICIT)

                  Preferred Stock

                  In 1999, the Company's board of directors designated a Series
                  A Convertible Preferred Stock with the following features:

                  Shares authorized:        625,000
                  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:  Convertible  at the option of the  holder
                  anytime  into two shares of Common  Stock at $2.50 per share;
                  automatic  conversion  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.

                  The Company issued 349,511 Series A shares in a private
                  exchange offering in 1999. As of December 31, 2003, a total of
                  38,422 preferred shares have been converted into 76,844 shares
                  of common stock.

                  During the quarter ended June 30, 2003, the Company suspended
                  the payment of cash dividends on its Series A Preferred stock.
                  New Jersey Business Corporation Act prohibits the payment of
                  any distribution by a corporation to, or for the benefit of
                  its shareholders, if the corporation's total assets would be
                  less than its total liabilities. Unpaid preferred dividends
                  will continue to accumulate at 6% per annum. Arrearages must
                  be fully paid before any distribution can be declared or paid
                  on the Company's common stock. Cumulative dividends in arrears
                  at December 31, 2003 were approximately $75,000.

                  The Company is presently authorized to issue 4,375,000
                  additional shares of Preferred Stock, none of which has been
                  issued at December 31, 2003. The rights and preferences, if
                  any, to be given to these preferred shares will be designated
                  by the board of directors at the time of issuance.

                  Common Stock

                  In connection with a legal settlement in 2003, the Company
                  issued 500,000 shares of common stock to various litigants.
                  The shares were valued at $160,000 based on the quoted market
                  price of the shares on the issuance date. The Company has
                  provided demand registration rights with respect to 250,000
                  shares and piggy-back registration rights with respect to the
                  remaining 250,000 shares.

                  During 2001 and 2002, respectively, the Company repurchased
                  236,737 shares for $143,564, and 100,000 shares for $25,016
                  under a stock repurchase program authorized by the board of
                  directors.

                  During 2002, the holder of 3,000 shares of common stock
                  subject to redemption agreed to sell the shares and provided a
                  general release to the Company. The shares were reclassified
                  from temporary equity to permanent capital at that time.

                  Warrants

                  During 2002 and 2003, the Company issued 103,000 and 210,500
                  common stock purchase warrants, respectively, to FMSC
                  registered representatives as compensation in connection with
                  the sale of convertible debentures. The Company valued the
                  warrants at $11,382 and $35,977, respectively using the
                  Black-Scholes option pricing method. The warrants are
                  exercisable at $.50 per share for five years from the date of
                  issuance.
<PAGE>
F-20

                  The Company presently has outstanding 3,072,446 Class C
                  Redeemable Common Stock Purchase Warrants issued in February
                  1998 in connection with a Rights Offering. The Warrants are
                  exercisable at a price of $7.00 per share and expire in
                  February 2005. Class A and Class B Warrants issued in the
                  Rights Offering expired in February 2003.

                  During 1999, the Company issued 25,000 common stock purchase
                  warrants in connection with a legal 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 -         STOCK OPTION PLANS

                  2002 Stock Incentive Plan

                  In June 2002, the Company adopted and its stockholders
                  approved the 2002 Incentive Stock Option Plan (the "2002
                  Plan"), replacing the 1992 Incentive Stock Option Plan (the
                  "1992 Plan"), which expired in September 2002. The 1992 Plan
                  provided for the granting of options to employees, consultants
                  and registered representatives of the Company, but only
                  options issued to employees qualify for incentive stock option
                  treatment ("ISOs"). Option exercise periods were fixed by the
                  Board of Directors on the grant date but no exercise period
                  could be less than one year nor more than ten years from the
                  date of grant. As of December 31, 2003, a total of 1,195,998
                  options issued under this plan remain outstanding.

                  The Company has reserved up to 5,000,000 shares of common
                  stock for issuance under the 2002 Plan. The 2002 Plan provides
                  for the grant of options, including ISOs to employees; NQSOs
                  to employees, consultants and independent registered
                  representatives; and stock appreciation rights or any
                  combination thereof (collectively, "Awards"). The Board of
                  Directors determines the terms and provisions of each award
                  granted under the 2002 Plan, including the exercise price,
                  term and vesting schedule. In the case of ISOs, the per share
                  exercise price must be equal to at least 100% of the fair
                  market value of a share of common stock on the date of grant,
                  and no individual will be granted ISOs corresponding to shares
                  with an aggregate fair value in excess of $100,000 in any
                  calendar year. The 2002 Plan will terminate in 2012. As of
                  December 31, 2003, options to purchase a total of 1,003,000
                  shares were outstanding and 3,997,000 shares remained
                  available for future issuance under the 2002 Plan.

                  2002 Non-Executive Director Stock Option Plan

                  In June 2002, the Company adopted and its stockholders
                  approved the 2002 Non-Executive Director Stock Option Plan
                  (the "2002 Director Plan"), replacing the Non-Executive
                  Director Stock Option Plan, which expired in September 2002.
                  Under the 2002 Director Plan, each non-executive director will
                  automatically be granted an option to purchase 20,000 shares,
                  pro rata, on September 1st of each year or partial year of
                  service. The Plan will be administered by the Board of
                  Directors or a committee of the Board, which shall at all
                  times consist of not less than two officer/directors of the
                  Company who are ineligible to participate in the 2002 Director
                  Plan. The 2002 Director Plan does not contain a reserve for a
                  specific number of shares available for grant. Each option
                  issued under the 2002 Director Plan will be immediately vested
                  NQSOs, and will have a five-year term and an exercise price
                  equal to the 100% of the fair market value of the shares
                  subject to such option on the date of grant. The 2002 Director
                  Plan will terminate in 2012. As of December 31, 2003, 60,000
                  options were outstanding under the Non-Executive Director
                  Stock Plan and 80,000 options were outstanding under the 2002
                  Director Plan.

                  1996 Management Incentive Plan

                  In June 2000, the Company's stockholders approved an amendment
                  to the 1996 Management Incentive Plan (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

<PAGE>
F-21
                  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. As of December 31, 2003, options to purchase
                  1,217,500 shares were outstanding and 2,687,500 shares
                  remained available for future issuance under the plan.

                  A summary of the activity in the Company's stock option plans
                  for the three-year period ended December 31, 2003 is presented
                  below:
<TABLE>
                  <S>                                                              <C>                  <C>
                                                                                                      Weighted
                                                                                                       Average
                                                                                                      Exercise
                                                                                      Shares            Prices
                                                                                      ======            ======

                  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
                       Granted                                                        573,000             .55
                       Canceled                                                    (1,744,500)           1.84
                                                                                   ----------

                  Options outstanding, December 31, 2002                            4,072,498            1.52
                        Granted                                                       873,000             .54
                         Canceled                                                  (1,389,000)           1.75
                                                                                   ----------

                  Options outstanding, December 31, 2003                            3,556,498           $1.19
                                                                                   ==========
</TABLE>
                  Shares of common stock available for future grant under
                  Company plans totaled 6,684,500 as of December 31, 2003. This
                  number does not include options that are expected to be issued
                  during the remaining term of the 2002 Director's Plan, but for
                  which no specific reserve has been established.

                  The Company has elected to use the intrinsic value-based
                  method of APB Opinion No. 25 to account for all of its
                  employee stock-based compensation plans. Accordingly, no
                  compensation cost has been recognized in the accompanying
                  financial statements for stock options issued to employees
                  because the exercise price of each option equals or exceeds
                  the fair value of the underlying common stock as of the grant
                  date for each stock option. Accordingly, compensation is
                  recognized in the consolidated financial statements only for
                  the fair value of options issued to consultants and
                  independent registered representatives. Such compensation is
                  amortized to expense over the related options' vesting
                  periods. Compensation expense recognized in 2003, 2002 and
                  2001 totaled $37,156, $2,985 and $33,830, respectively. The
                  weighted-average grant date fair value of options granted
                  during 2003, 2002 and 2001 was $.22, $.08, and $.21,
                  respectively.

                  Additional information as of December 31, 2003 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             Prices         Exercisable         Prices
         ---------------         -----------         ----             ------         -----------         ------

         $0.20 - $0.30             125,000            4.22              $.25               70,000          $.26
         $0.30 - $0.49              95,000            3.50               .41               65,400           .41
         $0.50 - $0.75           1,413,000            3.93               .58              859,623           .63
         $ .83 - $1.09             333,000            2.79               .90              255,100           .87
         $1.44 - $2.16           1,485,498            1.42              1.87            1,183,498          1.87
         $2.38 - $2.75             105,000            2.20              2.53               52,200          2.56

----------------------------------------------------------------------------------------------------------------------------------
         $0.20 - $2.75           3,556,498            2.72             $1.19            2,485,821         $1.27
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
F-22

NOTE 19 -         FAIR VALUE OF FINANCIAL INSTRUMENTS

                  Financial instruments reported in the Company's consolidated
                  statement of financial condition consist of cash, securities
                  owned and sold, not yet purchased, loans receivable, warrants
                  subject to put options, 6% convertible debentures, accounts
                  payable and accrued expenses, and capital leases payable, the
                  carrying value of which approximated fair value at December
                  31, 2003 and 2002. The fair value of the financial instruments
                  disclosed are not necessarily representative of the amount
                  that could be realized or settled nor does the fair value
                  amount consider the tax consequences of realization or
                  settlement.

NOTE 20 -         NET CAPITAL REQUIREMENTS

                  FMSC is subject to the Securities and Exchange Commission
                  Uniform Net Capital Rule (Rule 15c3-1), which requires FMSC to
                  maintain minimum net capital, as defined. At December 31,
                  2003, FMSC had net capital of $757,047, which was $344,479 in
                  excess of its required net capital of $412,568. FMSC's ratio
                  of aggregate indebtedness to net capital was 8.17 to 1.

NOTE 21 -         VALUATION ACCOUNT
<TABLE>
<S>                                          <C>             <C>               <C>            <C>        <C>

                                                                            Additions
                                            Balance at     Charged to        charged                       Balance
                                             beginning     costs and        to other                       at end
                                             of period      expenses        accounts      Deductions      of period
                                             ---------      --------        --------      ----------      ---------

Valuation allowance for
Deferred tax assets:
Year ended December 31, 2003                 $3,635,131      $1,657,869        $--            $--        $5,293,000
Year ended December 31, 2002                  2,305,456       1,329,675         --             --         3,635,131
Year ended December 31, 2001                    428,805       1,876,651         --             --         2,305,456

</TABLE>
NOTE 22 -         UNAUDITED QUARTERLY RESULTS OF OPERATIONS
<TABLE>
                  <S>                       <C>                 <C>               <C>                <C>

                                            March 31,            June 30,       September 30,       December 31,
                                               2003                2003             2003                2003
                                               ----                ----             ----                ----

                  Revenues                  $10,956,167         $15,902,470       $15,171,548        $16,196,497
                  Expenses                   11,427,511          17,241,938        15,460,089         17,615,187
                  Net loss                     (471,344)         (1,339,468)         (288,541)        (1,418,690)
                  Net loss applicable
                   to common
                   stockholders                (496,183)         (1,339,468)         (288,541)        (1,418,690)

                  Loss per common share:
                  Net loss applicable
                   to common
                   stockholders - basic
                   and diluted                    (.06)               (.16)            (.03)               (.16)

                  Revenues                  $12,748,468           $12,876,729       $10,738,742      $11,602,805
                  Expenses                   13,044,130            13,849,861        11,243,268       12,789,920
                  Net loss                     (295,662)             (973,132)         (504,526)      (1,187,115)

                  Net loss applicable
                  to common
                  stockholders                 (320,502)             (997,971)         (529,365)      (1,211,884)

                  Loss per common share:

                  Net loss applicable to
                  common stockholders -
                  basic and diluted               (.04)               (.12)            (.06)               (.14)
</TABLE>
                  Net loss per share is computed independently for each of the
                  quarters presented. Therefore, the sum of the quarterly net
                  loss per share figures in 2003 does not necessarily equal the
                  total computed for the entire year.
<PAGE>
F-23


NOTE 23 -         SUBSEQUENT EVENTS

                  Employment Agreements

                  Effective in January 2004, the board named William Kurinsky
                  Chief Executive Officer, replacing Herb Kurinsky, who has
                  retained the office of Chairman. The board also named Victor
                  Kurylak President. In connection with these management
                  changes, FMFC entered into new employment agreements with the
                  three executive officers. The agreements provide for annual
                  base salaries of $200,000, $300,000 and $250,000, for the
                  Chairman, CEO and President, respectively, customary fringe
                  benefits, severance, and participation in an executive bonus
                  pool and a corporate finance bonus pool. The executive bonus
                  pool will be equal to 15% of net pre-tax profit, as defined,
                  provided that net pre-tax profit for any bonus year exceeds
                  $500,000. The corporate finance bonus pool will provide for
                  grants of up to 20% of warrants and other securities issued to
                  the Company for investment banking services. In the event of a
                  change of control, as defined, the Chairman and CEO will each
                  be entitled to receive a single cash payment equal to three
                  times the amount of the five-year average of their gross
                  incomes, as well as the automatic vesting of any unvested
                  Company securities granted to them. The agreements have terms
                  of two, five, and three years, respectively, for the Chairman,
                  CEO and President, with a one-year extension provision. The
                  agreements also provide for the following restricted stock and
                  option grants:

                  Chairman:  375,000  restricted shares of common stock vesting
                  one-third in three, six and nine months,  respectively,
                  from the grant date.

                  CEO: 375,000  restricted shares of common stock vesting
                  one-third in three, six and nine months,  respectively,  from
                  the grant date.

                  President: 250,000 restricted shares of common stock vesting
                  one-third on each of the next three grant date anniversaries;
                  250,000 stock options exercisable at $.50 per share and
                  250,000 stock options exercisable at $.75 per share, vesting
                  one-third on each of the next three grant date anniversaries.
<PAGE>
                                                              Exhibit 10.13

                              EMPLOYMENT AGREEMENT

     AGREEMENT  made as of the 1st day of January,  2004 by and between  Herbert
Kurinsky,  residing at 16 Barberry Drive,  Ocean, New Jersey 07712  (hereinafter
referred to as the "Employee") and First Montauk  Financial  Corp., a New Jersey
corporation  with  principal  offices  Parkway 109,  Red Bank,  New Jersey 07701
(hereinafter referred to as the "Company").

                              W I T N E S S E T H :

     WHEREAS,  the Company,  through its wholly owned  subsidiary  First Montauk
Securities  Corp, is engaged in the  investment  banking and general  securities
business as a registered broker-dealer; and

     WHEREAS, the Company desires to continue the employment of the Employee for
the purpose of securing for the Company the experience,  ability and services of
the Employee; and

     WHEREAS,  the  Employee  desires to continue to be employed by the Company,
pursuant to the terms and  conditions  herein set forth,  superseding  all prior
oral and written employment agreements,  and term sheets and letters between the
Company, its subsidiaries and/or predecessors and Employee;

     NOW, THEREFORE,  it is mutually agreed by and between the parties hereto as
follows:


                                    ARTICLE I
                                   DEFINITIONS

     1.1 Accrued Compensation. "Accrued Compensation" shall mean an amount which
shall include all amounts earned or accrued through the  "Termination  Date" (as
defined  below)  but not paid as of the  Termination  Date,  including  (i) Base
Salary,  (ii)  reimbursement  for business  expenses incurred by the Employee on
behalf of the Company, pursuant to the Company's expense reimbursement policy in
effect at such  time,  (iii) car  allowance,  (iv)  vacation  pay,  (v) Gross Up
Payments,  and (vi) bonuses and incentive compensation (other than the "Pro Rata
Bonus" (as defined below)).

     1.2 BASE AMOUNT.  "Base  Amount"  shall mean the greater of the  Employee's
annual base  compensation  (a) at the rate in effect on the Termination  Date or
(b) at the highest  rate in effect at any time during the ninety (90) day period
prior to the  Termination  Date or a Change in  Control,  and shall  include all
amounts of his base compensation that are reported as income;  provided however,
Base Amount shall not include the Bonus Amount or any other  payment  contingent
on performance.

     1.3 BONUS AMOUNT.  "Bonus Amount" shall mean the greater of the most recent
annual bonus paid or payable to the Employee,  or, if greater,  the annual bonus
paid or payable  for the full  fiscal year ended prior to the fiscal year during
which a Termination Date or a Change in Control occurred.

     1.4 CAUSE. "Cause"shall mean if the Employee has been convicted of a felony
or the  termination  is  evidenced  by a  resolution  adopted  in good  faith by
two-thirds  of the Board that the Employee  (a)  intentionally  and  continually
failed  substantially to perform his reasonably assigned duties with the Company
(other than a failure  resulting from the Employee's  incapacity due to physical
or mental illness or from the assignment of duties that would  constitute  "Good
Reason"),  which  failure  continued  for a period of at least  thirty (30) days
after a written notice of demand for substantial  performance has been delivered
to the  Employee,  specifying  the  manner  in which  the  Employee  has  failed
substantially  to  perform,   or  (b)  intentionally   and  continually   failed
substantially  to  follow  or  perform  the  lawful  directives  of the Board of
Directors (other than a failure resulting from the Employee's  incapacity due to
physical or mental illness or from the  establishment  of directives  that would
constitute  "Good  Reason"),  which  failure  continued for a period of at least
thirty (30) days after written  notice of demand for  compliance or  substantial
performance  has been delivered to the Employee,  specifying the manner in which
the Employee has failed  substantially to perform or comply. No act, nor failure
to act, on the Employee's  part, shall be considered  "intentional,"  unless the
Employee has acted,  or failed to act,  with a lack of good faith or with a lack
of  reasonable  belief that the  Employee's  action or failure to act was in the
best interest of the Company.
<PAGE>


     1.5  CHANGE IN  CONTROL.  For  purposes  of this  Agreement,  a "Change  in
Control" shall mean any of the following events:

     (a) (i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934,  as amended (the "1934 Act"))  immediately  after which such Person
has "Beneficial  Ownership"  (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty  percent  (20%) or more of the combined  voting power of
the Company's then outstanding Voting  Securities;  provided,  however,  that in
determining  whether a Change in Control has occurred,  Voting  Securities which
are  acquired  in a  "Non-Control  Acquisition"  (as  defined  below)  shall not
constitute an acquisition which would cause a Change in Control.  A "Non-Control
Acquisition"  shall mean an  acquisition  by (1) an employee  benefit plan (or a
trust  forming  a  part  thereof)  maintained  by (x)  the  Company  or (y)  any
corporation  or other  Person of which a  majority  of its  voting  power or its
equity  securities  or equity  interest is owned  directly or  indirectly by the
Company (a "Subsidiary"), or (2) the Company or any Subsidiary.

     (ii)Notwithstanding  the foregoing, a Change in Control shall not be deemed
to occur  solely  because a Person  (the  "Subject  Person")  gained  Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the  acquisition of Voting  Securities by the Company  which,  by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares  Beneficially  Owned by the Subject Person,  provided that if a
Change in Control  would occur (but for the  operation  of this  sentence)  as a
result of the  acquisition of Voting  Securities by the Company,  and after such
share  acquisition  by the Company,  the Subject  Person  becomes the Beneficial
Owner of any additional  Voting Securities which increases the percentage of the
then outstanding  Voting  Securities  Beneficially  Owned by the Subject Person,
then a Change in Control shall occur.

     (b) The  individuals  who, as of the date this Agreement is approved by the
Board, are members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least  two-thirds  of the Board;  provided,  however,  that if the
election, or nomination for election by the Company's  stockholders,  of any new
director was approved by a vote of at least  two-thirds of the Incumbent  Board,
such new director  shall,  for purposes of this  Agreement,  be  considered  and
defined as a member of the  Incumbent  Board;  and  provided,  further,  that no
individual  shall  be  considered  a  member  of the  Incumbent  Board  if  such
individual  initially  assumed  office  as a  result  of  either  an  actual  or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened  solicitation  of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest"),  including by
reason of any  agreement  intended  to avoid or settle any  Election  Contest or
Proxy Contest; or

     (c) Approval by stockholders of the Company of:

     (1) A merger, consolidation or reorganization involving the Company, unless

     (i) the  stockholders  of the  Company,  immediately  before  such  merger,
consolidation  or  reorganization,   own,  directly  or  indirectly  immediately
following such merger,  consolidation or  reorganization,  at least  eighty-five
percent (85%) of the combined voting power of the outstanding  voting securities
of the corporation resulting from such merger or consolidation or reorganization
(the  "Surviving  Corporation")  in  substantially  the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization,

     (ii) the individuals  who were members of the Incumbent  Board  immediately
prior to the execution of the agreement providing for such merger, consolidation
or reorganization  constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation, and

     (iii) no Person  (other than the  Company,  any  Subsidiary,  any  employee
benefit plan (or any trust  forming a part  thereof)  maintained by the Company,
the Surviving  Corporation or any Subsidiary) has Beneficial Ownership of twenty
percent   (20%)  or  more  of  the  combined   voting  power  of  the  Surviving
Corporation's  then outstanding voting  securities,  a transaction  described in
clauses  (i)  through  (iii)  shall  herein  be  referred  to as a  "Non-Control
Transaction"; or

     (2) An agreement for the sale or other  disposition of all or substantially
all of the assets of the Company, or of a significant subsidiary, to any Person,
other than a transfer to a Subsidiary, in one transaction or a series of related
transactions.  For  purposes  of this  subparagraph  1.5 (c)  (2),  "significant
subsidiary " shall mean any subsidiary or business division of the Company which
accounts for more than 40% of the Company's income, revenue or gross profits.

     (3) The  stockholders  of the Company  approve any plan or proposal for the
liquidation or dissolution of the Company.

<PAGE>



     (d)  Notwithstanding  anything contained in this Agreement to the contrary,
if the Employee's  employment is terminated prior to a Change in Control and the
Employee reasonably demonstrates that such termination (i) was at the request of
a third  party  who  has  indicated  an  intention  or  taken  steps  reasonably
calculated  to effect a Change in  Control (a "Third  Party") or (ii)  otherwise
occurred in connection  with, or in anticipation  of, a Change in Control,  then
for all purposes of this Agreement, the date of a Change in Control with respect
to the  Employee  shall  mean  the  date  immediately  prior to the date of such
termination of the Employee's employment.

     1.6 COMPANY.  For purposes of this  Agreement,  "Company"  shall mean First
Montauk Financial Corp, its subsidiaries,  and shall include its "Successors and
Assigns" (as defined below).

     1.7   CONTINUATION   BENEFITS.   "Continuation   Benefits"   shall  be  the
continuation for a period of eighteen (18) months from the Termination Date (the
"Continuation  Period") at the  Company's  expense on behalf of the Employee and
his dependents and beneficiaries,  of the life insurance,  disability,  medical,
dental and  hospitalization  benefits  provided  (x) to the Employee at any time
during the ninety (90) day period  prior to the Change in Control or at any time
thereafter or (y) to other  similarly  situated  executives  who continue in the
employ of the Company during the Continuation  Period. The coverage and benefits
(including  deductibles and costs) provided during the Continuation Period shall
be no less favorable to the Employee, and his dependents and beneficiaries, than
the most  favorable of such  coverages  and  benefits  during any of the periods
referred to in clauses (x) and (y) above.  The  Company's  obligation  hereunder
with respect to the  foregoing  benefits  shall be limited to the extent that if
the  Employee  obtains any such  benefits  pursuant to a  subsequent  employer's
benefit  plans,  the  Company  may reduce the  coverage  of any  benefits  it is
required to provide the Employee  hereunder as long as the  aggregate  coverages
and benefits of the combined  benefit plans is no less favorable to the Employee
than the coverages and benefits required to be provided hereunder.  In the event
any amounts  attributable to these  Continuation  Benefits are includible in the
gross income of the Employee for federal income tax purposes, the Company shall,
in addition to the benefits set forth above, pay the Employee a Gross Up Payment
on the amount so  includible in Employee's  gross  income.  Notwithstanding  the
foregoing,  in lieu of providing the foregoing benefits, the Company may pay the
Employee an amount  equal to the cost to the  Employee of  obtaining  comparable
Continuation  Benefits plus a Gross Up Payment with respect to such amount. This
definition of Continuation  Benefits shall not be interpreted so as to limit any
benefits to which the Employee,  his dependents or beneficiaries may be entitled
under  any of the  Company's  employee  benefit  plans,  programs  or  practices
following  the  Employee's   termination  of  employment,   including,   without
limitation, retiree medical and life insurance benefits.

     1.8 DISABILITY. A physical or mental infirmity which impairs the Employee's
ability to substantially perform his duties with the Company for a period of one
hundred eighty (180)  consecutive days, and the Employee has not returned to his
full time employment  prior to the Termination  Date as stated in the "Notice of
Termination" (as defined below).

     1.9 GOOD REASON. (a) "Good Reason" shall mean:

                  (i) the occurrence of a Change in Control;

     (ii) a change in the Employee's status, title, position or responsibilities
(including  reporting  responsibilities)  which,  in the  Employee's  reasonable
judgment,  represents  an adverse  change  from his status,  title,  position or
responsibilities;   the   assignment   to  the   Employee   of  any   duties  or
responsibilities  which, in the Employee's reasonable judgment, are inconsistent
with his  status,  title,  position or  responsibilities;  or any removal of the
Employee  from or failure to  reappoint or reelect him to any of such offices or
positions,  except in connection  with the  termination  of his  employment  for
Disability,  Cause,  as a result of his death or by the Employee  other than for
Good Reason;  (iii) a reduction in the  Employees  base salary or any failure to
pay the  Employee  any  compensation  or benefits to which he or she is entitled
within five (5) days of the date due; (iv) the Company's  requiring the Employee
to be based at any place  outside a 30-mile  radius  from Red Bank,  New Jersey,
except for  reasonably  required  travel on the Company's  business which is not
materially  greater than such travel generally  required for such Employee;  (v)
the failure by the Company to continue in effect  (without  reduction in benefit
level,  and/or  reward  opportunities)  any  material  compensation  or employee
benefit  plan in which  the  Employee  was  participating,  unless  such plan is
replaced   with  a  plan  that  provides  at  least   substantially   equivalent
compensation or benefits to the Employee;
<PAGE>


     (vi) the insolvency or the filing (by any party,  including the Company) of
a petition for bankruptcy of the Company, which petition is not dismissed within
sixty (60) days;  (vii) any material  breach by the Company of any  provision of
this  Agreement  which is not cured within  thirty (30) days after notice to the
Company by the Employee specifying the breach;  (viii) any purported termination
of the Employee's employment for Cause by the Company which is inconsistent with
the terms of Section 1.4 and the other applicable  provisions of this Agreement;
or (ix) the failure of the Company to obtain an agreement,  satisfactory  to the
Employee,  from any  Successors  and Assigns to assume and agree to perform this
Agreement, as contemplated in Section 15.3 hereof; or

     (b) The  Employee's  right to  terminate  his  employment  pursuant to this
Section 1.9 shall not be affected  by his  incapacity  due to physical or mental
illness.

     1.10  GROSS UP  PAYMENT.  With  respect  to any  amount  includible  in the
Employee's gross income for federal income tax purposes (the "Taxable Benefit"),
an amount in cash equal to (i) the  product of the Highest  Marginal  Income Tax
Rate and the Taxable  Benefit,  (ii)  divided by one minus the Highest  Marginal
Income Tax Rate. The Highest  Marginal Income Tax Rate shall mean the sum of the
highest  marginal  combined local,  state and federal  personal income tax rates
(including tax rates associated with any state  unemployment  compensation  tax,
any tax imposed under the Federal Insurance Contributions Act, any excise tax or
surtax,  and any other tax on income based on the  Company's  employment  of the
Employee),  as in effect for the calendar  year in which the Taxable  Benefit is
includible in the gross income of the Employee for federal  income tax purposes.
The  Gross Up  Payment  shall be paid  within  ten (10) days of the  payment  or
realization for federal income tax purposes of the Taxable Benefit.

     1.11 NOTICE OF TERMINATION.  "Notice of  Termination"  shall mean a written
notice  from the  Company of  termination  of the  Employee's  employment  which
indicates the specific  termination  provision in this Agreement relied upon, if
any,  and which sets  forth in  reasonable  detail  the facts and  circumstances
claimed to provide a basis for  termination of the Employee's  employment  under
the provision so indicated.

     1.12  OUTPLACEMENT  SERVICES.   "Outplacement   Services"  shall  mean  all
reasonable  costs and expenses  associated  with the  engagement of an executive
outplacement firm to provide executive outplacement services to the Employee.

     1.13 PRO RATA  BONUS.  "Pro Rata Bonus"  shall mean an amount  equal to the
greater of (i) the Bonus Amount or (ii) an amount  equal to the bonus  objective
or target established by the Board for the Employee for the fiscal year in which
the  termination  occurs  multiplied by a fraction the numerator of which is the
number  of  days  in the  fiscal  year  through  the  Termination  Date  and the
denominator of which is 365.

     1.14  SEVERANCE  PAYMENT.  Severance  Payment  shall  mean a lump  sum cash
payment equal to twelve (12) months Base Amount.

     1.15  SUCCESSORS  AND  ASSIGNS.  "Successors  and  Assigns"  shall  mean  a
corporation or other entity  acquiring all or  substantially  all the assets and
business of the Company  (including this Agreement)  whether by operation of law
or otherwise.

     1.16  TERMINATION  DATE.  "Termination  Date" shall mean in the case of the
Employee's death, his date of death; in the case of Good Reason, the last day of
his  employment;  and in all other  cases,  the date  specified in the Notice of
Termination;  provided, however, that if the Employee's employment is terminated
by the Company for Cause or due to Disability,  the date specified in the Notice
of Termination shall be at least 30 days from the date the Notice of Termination
is given to the Employee,  and provided  further that in the case of Disability,
the Employee shall not have returned to the full-time  performance of his duties
during such period of at least 30 days.
<PAGE>

                                   ARTICLE II
                                   EMPLOYMENT

     2.1 Subject to and upon the terms and  conditions  of this  Agreement,  the
Company  hereby  employs and agrees to continue the  employment of the Employee,
and the Employee  hereby  accepts such  continued  employment in his capacity as
Chairman of the Board.  In this  capacity,  Employee will report to the Board of
Directors.

                                   ARTICLE III
                                     DUTIES

     3.1 The Employee shall, during the term of his employment with the Company,
and subject to the direction  and control of the  Company's  Board of Directors,
perform  such  duties and  functions  as he may be called upon to perform by the
Company's Board of Directors during the term of this Agreement,  consistent with
his position as Chairman of the Board.

     3.2 The  Employee  agrees  to use his best  efforts  in the  promotion  and
advancement  of the Company and its welfare  and  business.  Employee  agrees to
devote his primary  professional time to the business of the Company as Employee
deems reasonably  necessary;  provided,  however,  that the Company acknowledges
that Employee shall be entitled to pursue unrelated  personal  business ventures
that do not materially conflict with the performance of Employee's duties to the
Company. 3. 3 Employee shall be based in the Red Bank New Jersey area, and shall
undertake such occasional  travel,  within or without the United States as is or
may be reasonably necessary in the interests of the Company.

                                   ARTICLE IV
                                  COMPENSATION

     4.1  During  the term of this  Agreement,  Employee  shall  be  compensated
initially at the rate of $200,000 per annum, subject to such increases,  if any,
as  determined  by the Board of Directors,  or if the Board so  designates,  the
Compensation  Committee,  in its discretion,  at the commencement of each of the
Company's  fiscal years during the term of this Agreement  (the "Base  Salary").
The Base Salary shall be paid to the Employee in  accordance  with the Company's
regular executive payroll periods.

     4.2 Employee shall be entitled to receive a bonus (the "Bonus") during each
year of this Agreement,  determined as follows: The amount to be paid as a Bonus
shall be determined as of each December 31 by the Compensation  Committee of the
Board of Directors  based upon the prior fiscal year end and shall  consist of a
portion of an "Executive Bonus Pool." The Executive Bonus Pool shall be equal to
fifteen (15%) percent of the net pre-tax  profit of the Company as determined by
the Company's  independent  auditors, no later than 90 days following the end of
the Company's fiscal year,  excluding any expense  deduction  attributed to such
Executive Bonus Pool (the "Net Pre-Tax Profit"); provided that, in the event the
Net Pre-Tax Profit of the Company for any fiscal year is less than $500,000,  no
Executive  Bonus Pool shall be  established  or Bonus paid by the Company to the
Employee pursuant to this subparagraph 4.2. Such determination,  for purposes of
this  Section 4.2 only,  shall be made in  accordance  with  generally  accepted
accounting principles, as modified by these resolutions.

     4.3 Employee shall also be entitled to receive brokerage  commissions on in
accordance  with the  commission  schedule  in effect  for  other  non-affiliate
brokers employed by the Company.
<PAGE>


     4.4 Employee  shall be eligible to purchase from the Company,  at Employees
sole  discretion,  a portion of the  securities  contributed  to the  "Corporate
Finance Bonus Pool" upon the same price, terms and conditions  afforded to First
Montauk Securities Corp. The Corporate Finance Bonus Pool shall consist of up to
20% of  all  underwriter's  warrants,  placement  agent  warrants  and/or  other
securities  granted to First Montauk  Securities  Corp.,  in connection with its
service as an  underwriter,  placement  agent or investment  banker.  The amount
Employee shall be entitled to purchase  shall be determined by the  Compensation
Committee of the Board of Directors on a transaction by transaction basis.

     4.5 The Company  shall  deduct from  Employee's  compensation  all federal,
state and local taxes which it may now or may hereafter be required to deduct.

     4.6  Employee  may receive  such other  additional  compensation  as may be
determined  from time to time by the Board of  Directors  including  bonuses and
other long term compensation plans.  Nothing herein shall be deemed or construed
to require the Board to award any bonus or additional compensation.

                                    ARTICLE V
                                    BENEFITS

     5.1 During the term hereof,  the Company  shall  provide  Employee with the
following  benefits  (the  "Benefits"):  (i)  group  health  care and  insurance
benefits as generally made available to the Company's  senior  management;  (ii)
such  other  insurance  benefits  obtained  by the  Company  and made  generally
available to the Company's  senior  management;  (iii) the Company shall provide
the Employee  with an  automobile  suitable for his  position,  equipped  with a
mobile telephone,  or at Employee's option, an appropriate automobile allowance,
and reimburse  reasonable  automobile  expenses including repairs,  maintenance,
gasoline charges,  mobile phone,  etc. via receipted  expense reports;  and (iv)
reimbursement,  upon  presentation of appropriate  vouchers,  for all reasonable
business   expenses   incurred  by  Employee  on  behalf  of  the  Company  upon
presentation of suitable documentation.
<PAGE>



     5.2 In the event the Company wishes to obtain Key Man life insurance on the
life of Employee,  Employee  agrees to cooperate  with the Company in completing
any applications  necessary to obtain such insurance and promptly submit to such
physical  examinations  and furnish such  information as any proposed  insurance
carrier may request.

     5.3 For the term of this  Agreement,  Employee  shall be  entitled  to paid
vacation at the rate of four (4) weeks per annum.

                                   ARTICLE VI
                                 NON-DISCLOSURE

     6.1 The Employee shall not, at any time during or after the  termination of
his  employment  hereunder,  except  when  acting  on  behalf  of and  with  the
authorization  of  the  Company,   make  use  of  or  disclose  to  any  person,
corporation,  or other entity, for any purpose  whatsoever,  any trade secret or
other  confidential  information  concerning the Company's  business,  finances,
marketing,  brokerage  accounts,  corporate  finance  transactions  and clients,
products and  services,  accounting,  insurance  business  and  personnel of the
Company and its subsidiaries,  including information relating to any customer of
the Company,  or any other nonpublic business  information of the Company and/or
its  subsidiaries  learned as a consequence  of Employee's  employment  with the
Company  (collectively  referred to as the "Proprietary  Information").  For the
purposes of this Agreement,  trade secrets and  confidential  information  shall
mean  information  disclosed to the Employee or known by him as a consequence of
his employment by the Company,  whether or not pursuant to this  Agreement,  and
not  generally  known in the  industry.  The  Employee  acknowledges  that trade
secrets and other items of confidential information, as they may exist from time

<PAGE>


to time, are valuable and unique assets of the Company,  and that  disclosure of
any such  information  would  cause  substantial  injury to the  Company.  Trade
secrets  and  confidential  information  shall  cease  to be  trade  secrets  or
confidential  information,  as  applicable,  at such  time  as such  information
becomes  public  other than  through  disclosure,  directly  or  indirectly,  by
Employee in violation of this Agreement.

     6.2  If   Employee  is   requested   or   required   (by  oral   questions,
interrogatories,   requests  for  information  or  document   subpoenas,   civil
investigative   demands,   or  similar  process)  to  disclose  any  Proprietary
Information,  Employee  shall,  unless  prohibited by law,  promptly  notify the
Company  of such  request(s)  so  that  the  Company  may  seek  an  appropriate
protective order.

                                   ARTICLE VII
                              RESTRICTIVE COVENANT

     7.1 In the  event  of the  voluntary  termination  of  employment  with the
Company prior to the expiration of the term hereof,  or Employee's  discharge in
accordance  with  Article  IX,  or the  expiration  of the term  hereof  without
renewal,  Employee  agrees  that he will not,  during the term  hereof and for a
period of one (1) year  following  termination  of  employment  for any  reason,
directly or indirectly,  solicit  brokers,  or employees of the Company,  or any
sister or subsidiary  of the Company for  employment  with any other entity,  or
(ii)  solicit  or  accept  (a)  any  corporate  finance  client  relating  to  a
transaction,   pending  or  proposed,   involving  a  public  offering,  private
placement,  or merger and acquisition  advisory  services,  (b) research project
which was under consideration or pending at the time of Employee's  termination,
or (c) any brokerage client of the Company.

     7.2 If any court  shall hold that the  duration of  non-competition  or any
other  restriction  contained  in this Article VII is  unenforceable,  it is our
intention  that same shall not thereby be terminated but shall be deemed amended
to delete  therefrom  such  provision  or portion  adjudicated  to be invalid or
unenforceable  or, in the alternative,  such judicially  substituted term may be
substituted therefor.

                                  ARTICLE VIII
                                      TERM

     8.1 This Agreement shall be for a term (the "Initial  Term")  commencing on
January 1, 2004 (the  "Commencement  Date") and terminating on December 31, 2006
(the  "Expiration  Date"),  and  renewable  as  provided  for  herein,  for  one
additional period of one year.

     8.2 The  Company  agrees to notify  Employee  in  writing  of its intent to
negotiate an extension of this  Agreement six months prior to the  expiration of
the original term hereof.  If the Company fails to so notify Employee,  or after
having  timely  notified  Employee of its  intention  to extend,  fails to reach

<PAGE>


agreement with Employee on the terms of such extension,  this agreement shall be
renewable,  at the option of the Employee,  for an additional period of one year
from the expiration of the original term, except that the Employee's base salary
shall be increased 10% above the prior year,  and Employee  shall be entitled to
stock options  equivalent to one-third of the options granted during the initial
term of this agreement on comparable terms and conditions. If the Company elects
not to seek to negotiate an extension and has so timely notified Employee,  then
the Company shall pay Employee, upon the expiration of the original term of this
Agreement, the Severance Payment.

                                   ARTICLE IX
                                   TERMINATION

     9.1 The  Company  may  terminate  this  Agreement  by  giving a  Notice  of
Termination to the Employee in accordance with this Agreement:

                a. For Disability;

                b. For Cause.

                c. Without Cause.

     9.2 Employee may terminate this Agreement by giving a Notice of Termination
to the Company in accordance with this  Agreement,  at any time, with or without
good reason.

     9.3 If the Employee's employment with the Company shall be terminated,  the
Company shall pay and/or provide to the Employee the following  compensation and
benefits  in lieu of any other  compensation  or  benefits  arising  under  this
Agreement or otherwise:

a.                         if the Employee was terminated by the Company for
                           Cause, or the Employee terminates without Good
                           Reason, the Accrued Compensation;

b.                         if the Employee was terminated by the Company for
                           Disability, the Accrued Compensation, a Pro Rata
                           Bonus, the Severance Payment and the Continuation
                           Benefits, less all disability insurance payments
                           which Employee may receive from insurance policies
                           provided by the Company; or

c.                         if termination was due to the Employee's death, the
                           Accrued Compensation; and Employee's pro rata bonus
                           for the fiscal year in which the date of death
                           occurred; or

d.                         if termination was by the Employee other than for
                           Good Reason, the Company shall pay to the Employee
                           the Accrued Compensation.

e.                         If the Employee's employment with the Company shall
                           be terminated for any reason other than as specified
                           in Section 9.3 (a-d), in lieu of any further
                           compensation for periods subsequent to the
                           Termination Date, the Company shall pay and/or
                           provide to the Employee each and all of the following
                           compensation and benefits:

     (i) all Accrued Compensation;

     (ii) a Pro-Rata Bonus;

     (iii) the Employee's Base Amount,  for the period from the Termination Date
to the expiration of the term of the Employment Agreement, including any renewal
period which is automatic on the Termination Date;

     (iv) a bonus payment equal to one-twelfth  (1/12) of the Bonus Amount times
the number of months  remaining from the  Termination  Date to the expiration of
the term of the  Employment  Agreement,  including  any renewal  period which is
automatic on the Termination Date;
<PAGE>


     (v) The Severance Payment;

     (vi) The Continuation Benefits;

     (vii) Any Gross Up Payments to which the Employee  would have been entitled
from  the  Termination  Date to the  expiration  of the  term of the  Employment
Agreement,  including any renewal  period which is automatic on the  Termination
Date; and

     (viii) The Outplacement Services.

     9.4 In the event the  Employee's  employment is  terminated  for any reason
other than as specified in Section 9.3 (a-d),  the  conditions to the vesting of
any outstanding  incentive awards (including restricted stock, stock options and
granted  performance  shares or units)  granted to the Employee under any of the
Company's  plans,  or under any other  incentive plan or  arrangement,  shall be
deemed void and all such incentive  awards shall be immediately and fully vested
and exercisable.

     9.5 The amounts payable under this Section 9, shall be paid as follows:

     (a) Accrued  Compensation shall be paid within five (5) business days after
the Employee's Termination Date (or earlier, if required by applicable law).

     (b) The  Pro-Rata  Bonus  shall be paid  within  thirty (30) days after the
Employee's Termination Date (or earlier, if required by applicable law).

     (c) If the  Continuation  Benefits are paid in cash,  the payments shall be
made within thirty (30) days after the Employee's  Termination Date (or earlier,
if required by applicable law).

     (d) The  Severance  Payment shall be paid within thirty (30) days after the
Employee's Termination Date (or earlier, if required by applicable law).

     (e) The amounts  provided for in Sections  9.3(e)(iii)  and (iv),  shall be
paid within thirty (30) days after the Employee's  Termination Date (or earlier,
if required by applicable law).

     9.6 The  Employee  shall not be  required  to  mitigate  the  amount of any
payment  provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits  provided to the  Employee in any  subsequent  employment  except as
provided in Section 1.7.

     9.7 Employee's employment and the Employment Agreement may be terminated by
the Company or by the Employee, in accordance with this Agreement, by service of
a Notice of  Termination.  For  purposes of this  Agreement,  no such  purported
termination shall be effective without service of a Notice of Termination.

                                    ARTICLE X
                         TERMINATION OF PRIOR AGREEMENTS

     10.1 This Agreement sets forth the entire agreement between the parties and
supersedes all prior agreements, letters and understandings between the parties,
whether oral or written prior to the effective date of this Agreement.

                                   ARTICLE XI
                             RESTRICTED STOCK GRANTS

     11.1 As an inducement to Employee to enter into this Agreement, the Company
hereby grants to Employee  375,000  restricted  shares of the  Company's  Common
Stock, $.001 par value.

     11.2  Subject to the terms and  conditions  of the  Company's  1996  Senior
Management  Incentive Plan (the "Plan"),  the Employee is hereby granted 375,000
restricted shares of the Company's Common Stock,  $.001 par value (the "Shares")
.. One-third of such Shares shall vest one year after the date of this Agreement,
one-third of such Shares shall vest two years after the date of this  Agreement,
and one- third of such  Shares  shall vest  three  years  after the date of this
Agreement.  If Employee renders  continuous service to the Company from the date

<PAGE>

hereof to a vesting date, on each such vesting date the Company shall deliver to
Employee  such  number of shares of  Common  Stock as shall  vest on such  date.
Notwithstanding the foregoing,  in the event Employee's employment is terminated
due to Death or Disability,  all Restricted Share Awards shall  immediately vest
and all such Shares shall delivered to the Employee, or Employee's estate.

                                   ARTICLE XII
                           EXTRAORDINARY TRANSACTIONS

     12.1 In the event of a Change of Control as  described  in Sections  1.5(a)
and (b), the Company shall provide  notice to the Employee  within ten (10) days
of the date the Company has notice of such Change of Control transaction. If the
Employee  provides  notice in writing to the  Company,  within  ninety (90) days
after  the  Company's  notice,  that  the  Employee  intends  to  terminate  his
Employment  Agreement for Good Reason  effective thirty (30) days after the date
of  such  notice,  in  addition  to the  benefits  provided  elsewhere  in  this
Agreement,  the Company shall pay and/or provide to the Employee,  the following
compensation and benefits:

     (a) The Company shall pay the Employee as additional severance, in a single
payment,  an amount  in cash  equal to three  times the  amount of the five year
average of the gross  income of the  Employee,  as  reported  by the Company for
federal  income tax  purposes  or, at the option of the  Employee,  credit  such
amount against the exercise price of Employee's employee stock options; and

     (b) The  conditions  to the  vesting of any  outstanding  incentive  awards
(including  restricted stock,  stock options and granted  performance  shares or
units)  granted to the Employee under any of the Company's  plans,  or under any
other incentive plan or arrangement, shall be deemed void and all such incentive
awards shall be immediately and fully vested and exercisable.

     12.2  Notwithstanding the provisions of Article IX to the contrary,  in the
event the Employee's  employment is terminated for any reason within twenty-four
(24) months of a Change of  Control,  the  amounts  provided  for in Article IX,
including the Continuation  Benefits,  if the Continuation  Benefits are paid in
cash, and the amounts  payable under Section 12.1 shall be paid in a single lump
sum cash payment within five (5) business days after the Employee's  Termination
Date (or earlier, if required by applicable law).

     12.3 In the event of a Change of Control as  described  in Section  1.5(c),
the Company shall provide  thirty (30) days prior written notice to the Employee
of the anticipated  closing date of such Change of Control  transaction.  If the
Employee provides notice in writing to the Company, at least five (5) days prior
to the closing date specified in the Company's notice, that the Employee intends
to terminate his Employment  Agreement for Good Reason  effective on the closing
date,  there shall be paid to the  Employee in a single lump sum,  cash  payment
simultaneously  with the  closing  of such  Change of Control  transaction,  the
amounts provided for in this Article XII,  including the Continuation  Benefits,
if the  Continuation  Benefits are paid in cash. Upon the closing of such Change
of Control  Transaction  and the payment of the amounts due Employee  under this
Agreement,  Employee's employment,  and the Employment Agreement shall be deemed
terminated for Good Reason.


                                  ARTICLE XIII
                           EXCISE TAX GROSS UP PAYMENT

     13.1  The  Company  and the  Employee  acknowledge  that the  payments  and
benefits  provided under this  Agreement,  and benefits  provided to, or for the
benefit of, the Employee under other Company plans and agreements (such payments
or benefits are  collectively  referred to as the "Payments") are subject to the
excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"). In addition to the Payments,  the Company
shall pay to the Employee  within five (5) business  days of Payment  subject to
the Excise Tax, a gross up payment (the "Gross Up Payment")  equal to the amount
which,  after the deduction of any  applicable  Federal,  State and Local income
taxes attributable to the Gross Up Payment, is equal to the Excise Tax including
the Excise Tax attributable to the Gross Up Payment.
<PAGE>


     13.2 The Company shall pay to the applicable government taxing authorities,
as Excise Tax  withholding,  the amount of the Excise Tax that the  Company  has
actually withheld from the Payment or Payments.

     13.3 If it is established  pursuant to a  determination  of a court,  or an
Internal Revenue Service (the "IRS") decision, action or proceeding,  that there
has been an  underpayment  of the Excise Tax (an  "Underpayment"),  the  Company
shall pay to the  Employee  within  thirty  (30) days of such  determination  or
resolution,  the amount which,  after the deduction of any  applicable  federal,
state  and  local  income  taxes,  including  the  Excise  Tax,  is equal to the
Underpayment, plus applicable interest and penalties until the date of payment.

     13.4 The Company hereby agrees to indemnify,  defend, and hold harmless the
Employee for any and all claims arising from or related to non-payment of Excise
Tax, including the amount of such tax and any and all costs, interest, expenses,
penalties  associated  with the  non-payment  of such tax to the fullest  extent
permitted by law.

                                   ARTICLE XIX
               ARBITRATION AND INDEMNIFICATION; FEES AND EXPENSES

     14.1 Any dispute  arising out of the  interpretation,  application,  and/or
performance of this Agreement with the sole exception of any claim,  breach,  or
violation arising under Articles VI or VII hereof shall be settled through final
and binding  arbitration  before a panel of arbitrators  in accordance  with the
rules of the  National  Association  of  Securities  Dealers (the  "NASD").  Any
judgment  upon any  arbitration  award may be entered  in any court,  federal or
state,  having competent  jurisdiction of the parties before a single arbitrator
in the  State  of New  Jersey  in  accordance  with the  Rules  of the  American
Arbitration  Association.  The  arbitrators  shall be selected by the NASD.  Any
judgment  upon any  arbitration  award may be entered  in any court,  federal or
state, having competent jurisdiction of the parties.

     14.2 The Company hereby agrees to indemnify,  defend, and hold harmless the
Employee for any and all claims arising from or related to his employment by the
Company at any time  asserted,  at any place  asserted,  to the  fullest  extent
permitted  by law,  except  for  claims  based on  Employee's  fraud,  deceit or
wilfulness.  The Company  shall  maintain  such  insurance as is  necessary  and
reasonable  to protect the Employee  from any and all claims  arising from or in
connection  with his  employment  by the Company  during the term of  Employee's
employment  with the Company and for a period of six (6) years after the date of
termination  of employment  for any reason.  The provisions of this Section 12.2
are in  addition  to and not in lieu of any  indemnification,  defense  or other
benefit to which Employee may be entitled by statute, regulation,  common law or
otherwise.

     14.3 The Company shall pay all reasonable  legal fees and related  expenses
(including the costs of arbitrators, experts, evidence and counsel) incurred by,
the Employee as they become due as a result of (a) the Employee's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment) in violation of this Agreement,
or (b) the Employee  seeking to obtain or enforce any right or benefit  provided
by this Agreement.

                                   ARTICLE XV
                          SUCCESSORS: BINDING AGREEMENT

     15.1 This Agreement shall be binding upon and shall inure to the benefit of
the Company,  and its Successors and Assigns,  and the Company shall require any
Successors  and Assigns to expressly  assume and agree to perform this Agreement
in the same manner and to the same extent that the Company  would be required to
perform it if no such succession or assignment had taken place.
<PAGE>


     15.2 Neither this  Agreement nor any right or interest  hereunder  shall be
assignable  or  transferable  by  the  Employee,   his  beneficiaries  or  legal
representatives, except by will or by the laws of descent and distribution. This
Agreement  shall inure to the benefit of and be  enforceable  by the  Employee's
personal representative.

     15.3 In the event that a Division (or part thereof) is sold,  divested,  or
otherwise  disposed  of by the Company  subsequent  to or in  connection  with a
Change in Control  and the  Employee  accepts  employment  by the  purchaser  or
acquiror  thereof,  the Company  shall  require  such  purchaser  or acquiror to
assume, and agree to perform, the Company's obligations under this Agreement, in
the same manner,  and to the same extent,  that the Company would be required to
perform if no such acquisition or purchase had taken place.

                                   ARTICLE XVI
         OTHER CONTRACTUAL RIGHTS; NON-EXCLUSIVITY; SETTLEMENT OF CLAIMS


     16.1  The  provisions  of this  Agreement,  and any  payment  provided  for
hereunder,  shall  not  reduce  any  amounts  otherwise  payable,  or in any way
diminish the Employee's  existing rights, or rights which would accrue solely as
a result of the  passage of time,  under any  Benefit  Plan,  Incentive  Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.

     16.2  Nothing  in this  Agreement  shall  prevent  or limit the  Employee's
continuing or future  participation  in any benefit,  bonus,  incentive or other
plan or program provided by the Company (except for any severance or termination
policies,  plans, programs or practices) and for which the Employee may qualify,
nor shall  anything  herein limit or reduce such rights as the Employee may have
under any  other  agreements  with the  Company  (except  for any  severance  or
termination agreement).  Amounts which are vested benefits or which the Employee
is otherwise  entitled to receive under any plan or program of the Company shall
be  payable  in  accordance  with such  plan or  program,  except as  explicitly
modified by this Agreement.

     16.3 The  Company's  obligation  to make the payments  provided for in this
Agreement  and  otherwise  to perform  its  obligations  hereunder  shall not be
affected by any  circumstances,  including,  without  limitation,  any  set-off,
counterclaim,  recoupment,  defense or other  right  which the  Company may have
against the Employee or others.

                                  ARTICLE XVII
                                  SEVERABILITY

     17.1  If any  provision  of  this  Agreement  shall  be  held  invalid  and
unenforceable,  the remainder of this  Agreement  shall remain in full force and
effect.  If any  provision  is held  invalid or  unenforceable  with  respect to
particular circumstances,  it shall remain in full force and effect in all other
circumstances.
<PAGE>

                                  ARTICLE XVIII
                                     NOTICE

     18.1  For  the   purposes  of  this   Agreement,   notices  and  all  other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  personally  delivered  or sent by certified
mail,  return receipt  requested,  postage prepaid,  addressed to the respective
addresses  as set  forth  below or to any such  other  address  as the  party to
receive the notice  shall  advise by due notice  given in  accordance  with this
paragraph . All notices and communications shall be deemed to have been received
on the date of delivery  thereof or on the third  business day after the mailing
thereof,  except that notice of change of address  shall be effective  only upon
receipt.


     18.2 The current addresses of the parties are as follows:

                IF TO THE COMPANY:      First Montauk Financial Corp.
                                        Parkway 109 Office Center
                                        328 Newman Springs Road
                                        Red Bank, New Jersey 07701
                                        Att. Chief Counsel

                With a copy to:         Victor J. DiGioia, Esq.
                                        Goldstein & DiGioia, LLP
                                        45 Broadway
                                        New York, NY 10006

                IF TO THE EMPLOYEE:     Herbert Kurinsky
                                        16 Barberry Drive,
                                        Ocean,  New Jersey 07712

                                   ARTICLE XIX
                                     WAIVER

     19.1 The waiver by either party of any breach or violation of any provision
of  this  Agreement  shall  not  operate  or be  construed  as a  waiver  of any
subsequent breach of construction and validity.

                                   ARTICLE XX
                                  GOVERNING LAW

     20.1 This  Agreement has been  negotiated  and executed in the State of New
Jersey which shall govern its construction and validity.

                                   ARTICLE XXI
                                  JURISDICTION

     21.1 Any or all actions or proceedings  which may be brought by the Company
or  Employee  under this  Agreement  shall be  brought in courts  having a situs
within the State of New Jersey, and Employee and the Company each hereby consent
to the  jurisdiction  of any local,  state,  or federal court located within the
State of New Jersey.

                                  ARTICLE XXII
                                ENTIRE AGREEMENT

     22.1 This  Agreement  contains  the entire  agreement  between  the parties
hereto.  No change,  addition,  or  amendment  shall be made  hereto,  except by
written agreement signed by the parties hereto.

     IN WITNESS  WHEREOF,  the parties  hereto have executed this  Agreement and
affixed their hands and seals the day and year first above written.

                                            FIRST MONTAUK FINANCIAL CORP..



                                            By:_________________________________




                                            ------------------------------------
                                                     Herbert Kurinsky
                                                     Employee
<PAGE>
                                                              Exhibit 10.14



                             EMPLOYMENT AGREEMENT


     AGREEMENT made as of the 1st day of January, 2004 by and between William J.
Kurinsky,  residing at 4 Cotswold Circle,  Ocean, New Jersey 07712  (hereinafter
referred to as the "Employee") and First Montauk  Financial  Corp., a New Jersey
corporation  with  principal  offices  Parkway 109,  Red Bank,  New Jersey 07701
(hereinafter referred to as the "Company").

                              W I T N E S S E T H :

     WHEREAS,  the Company,  through its wholly owned  subsidiary  First Montauk
Securities  Corp, is engaged in the  investment  banking and general  securities
business as a registered broker-dealer; and

     WHEREAS, the Company desires to continue the employment of the Employee for
the purpose of securing for the Company the experience,  ability and services of
the Employee; and

     WHEREAS,  the  Employee  desires to continue to be employed by the Company,
pursuant to the terms and  conditions  herein set forth,  superseding  all prior
oral and written employment agreements,  and term sheets and letters between the
Company, its subsidiaries and/or predecessors and Employee;

     NOW, THEREFORE,  it is mutually agreed by and between the parties hereto as
follows:


                                    ARTICLE I
                                   DEFINITIONS

     1.1 Accrued Compensation. "Accrued Compensation" shall mean an amount which
shall include all amounts earned or accrued through the  "Termination  Date" (as
defined  below)  but not paid as of the  Termination  Date,  including  (i) Base
Salary,  (ii)  reimbursement  for business  expenses incurred by the Employee on
behalf of the Company, pursuant to the Company's expense reimbursement policy in
effect at such  time,  (iii) car  allowance,  (iv)  vacation  pay,  (v) Gross Up
Payments,  and (vi) bonuses and incentive compensation (other than the "Pro Rata
Bonus" (as defined below)).

     1.2 BASE AMOUNT.  "Base  Amount"  shall mean the greater of the  Employee's
annual base  compensation  (a) at the rate in effect on the Termination  Date or
(b) at the highest  rate in effect at any time during the ninety (90) day period
prior to the  Termination  Date or a Change in  Control,  and shall  include all
amounts of his base compensation that are reported as income;  provided however,
Base Amount shall not include the Bonus Amount or any other  payment  contingent
on performance.

     1.3 BONUS AMOUNT.  "Bonus Amount" shall mean the greater of the most recent
annual bonus paid or payable to the Employee,  or, if greater,  the annual bonus
paid or payable  for the full  fiscal year ended prior to the fiscal year during
which a Termination Date or a Change in Control occurred.

     1.4 CAUSE. "Cause"shall mean if the Employee has been convicted of a felony
or the  termination  is  evidenced  by a  resolution  adopted  in good  faith by
two-thirds  of the Board that the Employee  (a)  intentionally  and  continually
failed  substantially to perform his reasonably assigned duties with the Company
(other than a failure  resulting from the Employee's  incapacity due to physical
or mental illness or from the assignment of duties that would  constitute  "Good
Reason"),  which  failure  continued  for a period of at least  thirty (30) days
after a written notice of demand for substantial  performance has been delivered
to the  Employee,  specifying  the  manner  in which  the  Employee  has  failed
substantially  to  perform,   or  (b)  intentionally   and  continually   failed
substantially  to  follow  or  perform  the  lawful  directives  of the Board of
Directors (other than a failure resulting from the Employee's  incapacity due to
physical or mental illness or from the  establishment  of directives  that would
constitute  "Good  Reason"),  which  failure  continued for a period of at least
thirty (30) days after written  notice of demand for  compliance or  substantial
performance  has been delivered to the Employee,  specifying the manner in which
the Employee has failed  substantially to perform or comply. No act, nor failure
to act, on the Employee's  part, shall be considered  "intentional,"  unless the
Employee has acted,  or failed to act,  with a lack of good faith or with a lack
of  reasonable  belief that the  Employee's  action or failure to act was in the
best interest of the Company.
<PAGE>


     1.5  CHANGE IN  CONTROL.  For  purposes  of this  Agreement,  a "Change  in
Control" shall mean any of the following events:

     (a) (i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934,  as amended (the "1934 Act"))  immediately  after which such Person
has "Beneficial  Ownership"  (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty  percent  (20%) or more of the combined  voting power of
the Company's then outstanding Voting  Securities;  provided,  however,  that in
determining  whether a Change in Control has occurred,  Voting  Securities which
are  acquired  in a  "Non-Control  Acquisition"  (as  defined  below)  shall not
constitute an acquisition which would cause a Change in Control.  A "Non-Control
Acquisition"  shall mean an  acquisition  by (1) an employee  benefit plan (or a
trust  forming  a  part  thereof)  maintained  by (x)  the  Company  or (y)  any
corporation  or other  Person of which a  majority  of its  voting  power or its
equity  securities  or equity  interest is owned  directly or  indirectly by the
Company (a "Subsidiary"), or (2) the Company or any Subsidiary.

     (ii)Notwithstanding  the foregoing, a Change in Control shall not be deemed
to occur  solely  because a Person  (the  "Subject  Person")  gained  Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the  acquisition of Voting  Securities by the Company  which,  by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares  Beneficially  Owned by the Subject Person,  provided that if a
Change in Control  would occur (but for the  operation  of this  sentence)  as a
result of the  acquisition of Voting  Securities by the Company,  and after such
share  acquisition  by the Company,  the Subject  Person  becomes the Beneficial
Owner of any additional  Voting Securities which increases the percentage of the
then outstanding  Voting  Securities  Beneficially  Owned by the Subject Person,
then a Change in Control shall occur.

     (b) The  individuals  who, as of the date this Agreement is approved by the
Board, are members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least  two-thirds  of the Board;  provided,  however,  that if the
election, or nomination for election by the Company's  stockholders,  of any new
director was approved by a vote of at least  two-thirds of the Incumbent  Board,
such new director  shall,  for purposes of this  Agreement,  be  considered  and
defined as a member of the  Incumbent  Board;  and  provided,  further,  that no
individual  shall  be  considered  a  member  of the  Incumbent  Board  if  such
individual  initially  assumed  office  as a  result  of  either  an  actual  or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened  solicitation  of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest"),  including by
reason of any  agreement  intended  to avoid or settle any  Election  Contest or
Proxy Contest; or

         (c) Approval by stockholders of the Company of:

     (1) A merger, consolidation or reorganization involving the Company, unless

     (i) the  stockholders  of the  Company,  immediately  before  such  merger,
consolidation  or  reorganization,   own,  directly  or  indirectly  immediately
following such merger,  consolidation or  reorganization,  at least  eighty-five
percent (85%) of the combined voting power of the outstanding  voting securities
of the corporation resulting from such merger or consolidation or reorganization
(the  "Surviving  Corporation")  in  substantially  the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization,

     (ii) the individuals  who were members of the Incumbent  Board  immediately
prior to the execution of the agreement providing for such merger, consolidation
or reorganization  constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation, and

     (iii) no Person  (other than the  Company,  any  Subsidiary,  any  employee
benefit plan (or any trust  forming a part  thereof)  maintained by the Company,
the Surviving  Corporation or any Subsidiary) has Beneficial Ownership of twenty
percent   (20%)  or  more  of  the  combined   voting  power  of  the  Surviving
Corporation's  then outstanding voting  securities,  a transaction  described in
clauses  (i)  through  (iii)  shall  herein  be  referred  to as a  "Non-Control
Transaction"; or

     (2) An agreement for the sale or other  disposition of all or substantially
all of the assets of the Company, or of a significant subsidiary, to any Person,
other than a transfer to a Subsidiary, in one transaction or a series of related
transactions.  For  purposes  of this  subparagraph  1.5 (c)  (2),  "significant
subsidiary " shall mean any subsidiary or business division of the Company which
accounts for more than 40% of the Company's income, revenue or gross profits.

     (3) The  stockholders  of the Company  approve any plan or proposal for the
liquidation or dissolution of the Company.
<PAGE>


     (d)  Notwithstanding  anything contained in this Agreement to the contrary,
if the Employee's  employment is terminated prior to a Change in Control and the
Employee reasonably demonstrates that such termination (i) was at the request of
a third  party  who  has  indicated  an  intention  or  taken  steps  reasonably
calculated  to effect a Change in  Control (a "Third  Party") or (ii)  otherwise
occurred in connection  with, or in anticipation  of, a Change in Control,  then
for all purposes of this Agreement, the date of a Change in Control with respect
to the  Employee  shall  mean  the  date  immediately  prior to the date of such
termination of the Employee's employment.

     1.6 COMPANY.  For purposes of this  Agreement,  "Company"  shall mean First
Montauk Financial Corp, its subsidiaries,  and shall include its "Successors and
Assigns" (as defined below).

     1.7   CONTINUATION   BENEFITS.   "Continuation   Benefits"   shall  be  the
continuation for a period of eighteen (18) months from the Termination Date (the
"Continuation  Period") at the  Company's  expense on behalf of the Employee and
his dependents and beneficiaries,  of the life insurance,  disability,  medical,
dental and  hospitalization  benefits  provided  (x) to the Employee at any time
during the ninety (90) day period  prior to the Change in Control or at any time
thereafter or (y) to other  similarly  situated  executives  who continue in the
employ of the Company during the Continuation  Period. The coverage and benefits
(including  deductibles and costs) provided during the Continuation Period shall
be no less favorable to the Employee, and his dependents and beneficiaries, than
the most  favorable of such  coverages  and  benefits  during any of the periods
referred to in clauses (x) and (y) above.  The  Company's  obligation  hereunder
with respect to the  foregoing  benefits  shall be limited to the extent that if
the  Employee  obtains any such  benefits  pursuant to a  subsequent  employer's
benefit  plans,  the  Company  may reduce the  coverage  of any  benefits  it is
required to provide the Employee  hereunder as long as the  aggregate  coverages
and benefits of the combined  benefit plans is no less favorable to the Employee
than the coverages and benefits required to be provided hereunder.  In the event
any amounts  attributable to these  Continuation  Benefits are includible in the
gross income of the Employee for federal income tax purposes, the Company shall,
in addition to the benefits set forth above, pay the Employee a Gross Up Payment
on the amount so  includible in Employee's  gross  income.  Notwithstanding  the
foregoing,  in lieu of providing the foregoing benefits, the Company may pay the
Employee an amount  equal to the cost to the  Employee of  obtaining  comparable
Continuation  Benefits plus a Gross Up Payment with respect to such amount. This
definition of Continuation  Benefits shall not be interpreted so as to limit any
benefits to which the Employee,  his dependents or beneficiaries may be entitled
under  any of the  Company's  employee  benefit  plans,  programs  or  practices
following  the  Employee's   termination  of  employment,   including,   without
limitation, retiree medical and life insurance benefits.

     1.8 DISABILITY. A physical or mental infirmity which impairs the Employee's
ability to substantially perform his duties with the Company for a period of one
hundred eighty (180)  consecutive days, and the Employee has not returned to his
full time employment  prior to the Termination  Date as stated in the "Notice of
Termination" (as defined below).

     1.9 GOOD REASON. (a) "Good Reason" shall mean:

     (i) the occurrence of a Change in Control;

     (ii) a change in the Employee's status, title, position or responsibilities
(including  reporting  responsibilities)  which,  in the  Employee's  reasonable
judgment,  represents  an adverse  change  from his status,  title,  position or
responsibilities;   the   assignment   to  the   Employee   of  any   duties  or
responsibilities  which, in the Employee's reasonable judgment, are inconsistent
with his  status,  title,  position or  responsibilities;  or any removal of the
Employee  from or failure to  reappoint or reelect him to any of such offices or
positions,  except in connection  with the  termination  of his  employment  for
Disability,  Cause,  as a result of his death or by the Employee  other than for
Good Reason;

     (iii) a reduction  in the  Employees  base salary or any failure to pay the
Employee any compensation or benefits to which he or she is entitled within five
(5) days of the date due;

     (iv) the Company's  requiring the Employee to be based at any place outside
a 30-mile  radius from Red Bank,  New  Jersey,  except for  reasonably  required
travel on the  Company's  business  which is not  materially  greater  than such
travel generally required for such Employee;

     (v) the failure by the Company to continue in effect (without  reduction in
benefit  level,  and/or  reward  opportunities)  any  material  compensation  or
employee benefit plan in which the Employee was participating,  unless such plan
is  replaced  with  a plan  that  provides  at  least  substantially  equivalent
compensation or benefits to the Employee;
<PAGE>


     (vi) the insolvency or the filing (by any party,  including the Company) of
a petition for bankruptcy of the Company, which petition is not dismissed within
sixty (60) days;

     (vii) any material breach by the Company of any provision of this Agreement
which is not cured  within  thirty (30) days after  notice to the Company by the
Employee specifying the breach;

     (viii) any purported  termination of the Employee's employment for Cause by
the Company  which is  inconsistent  with the terms of Section 1.4 and the other
applicable provisions of this Agreement; or

     (ix) the failure of the Company to obtain an agreement, satisfactory to the
Employee,  from any  Successors  and Assigns to assume and agree to perform this
Agreement, as contemplated in Section 15.3 hereof; or

     (b) The  Employee's  right to  terminate  his  employment  pursuant to this
Section 1.9 shall not be affected  by his  incapacity  due to physical or mental
illness.

     1.10  GROSS UP  PAYMENT.  With  respect  to any  amount  includible  in the
Employee's gross income for federal income tax purposes (the "Taxable Benefit"),
an amount in cash equal to (i) the  product of the Highest  Marginal  Income Tax
Rate and the Taxable  Benefit,  (ii)  divided by one minus the Highest  Marginal
Income Tax Rate. The Highest  Marginal Income Tax Rate shall mean the sum of the
highest  marginal  combined local,  state and federal  personal income tax rates
(including tax rates associated with any state  unemployment  compensation  tax,
any tax imposed under the Federal Insurance Contributions Act, any excise tax or
surtax,  and any other tax on income based on the  Company's  employment  of the
Employee),  as in effect for the calendar  year in which the Taxable  Benefit is
includible in the gross income of the Employee for federal  income tax purposes.
The  Gross Up  Payment  shall be paid  within  ten (10) days of the  payment  or
realization for federal income tax purposes of the Taxable Benefit.

     1.11 NOTICE OF TERMINATION.  "Notice of  Termination"  shall mean a written
notice  from the  Company of  termination  of the  Employee's  employment  which
indicates the specific  termination  provision in this Agreement relied upon, if
any,  and which sets  forth in  reasonable  detail  the facts and  circumstances
claimed to provide a basis for  termination of the Employee's  employment  under
the provision so indicated.

     1.12  OUTPLACEMENT  SERVICES.   "Outplacement   Services"  shall  mean  all
reasonable  costs and expenses  associated  with the  engagement of an executive
outplacement firm to provide executive outplacement services to the Employee.

     1.13 PRO RATA  BONUS.  "Pro Rata Bonus"  shall mean an amount  equal to the
greater of (i) the Bonus Amount or (ii) an amount  equal to the bonus  objective
or target established by the Board for the Employee for the fiscal year in which
the  termination  occurs  multiplied by a fraction the numerator of which is the
number  of  days  in the  fiscal  year  through  the  Termination  Date  and the
denominator of which is 365.

     1.14  SEVERANCE  PAYMENT.  Severance  Payment  shall  mean a lump  sum cash
payment equal to twelve (12) months Base Amount.

     1.15  SUCCESSORS  AND  ASSIGNS.  "Successors  and  Assigns"  shall  mean  a
corporation or other entity  acquiring all or  substantially  all the assets and
business of the Company  (including this Agreement)  whether by operation of law
or otherwise.

     1.16  TERMINATION  DATE.  "Termination  Date" shall mean in the case of the
Employee's death, his date of death; in the case of Good Reason, the last day of
his  employment;  and in all other  cases,  the date  specified in the Notice of
Termination;  provided, however, that if the Employee's employment is terminated
by the Company for Cause or due to Disability,  the date specified in the Notice
of Termination shall be at least 30 days from the date the Notice of Termination
is given to the Employee,  and provided  further that in the case of Disability,
the Employee shall not have returned to the full-time  performance of his duties
during such period of at least 30 days.
<PAGE>

                                   ARTICLE II
                                   EMPLOYMENT

     2.1 Subject to and upon the terms and  conditions  of this  Agreement,  the
Company  hereby  employs and agrees to continue the  employment of the Employee,
and the Employee  hereby  accepts such  continued  employment in his capacity as
Vice-Chairman  of the Board  and  Chief  Executive  Officer.  In this  capacity,
Employee will report to the Chairman of the Board and the Board of Directors.

                                   ARTICLE III
                                     DUTIES

     3.1 The Employee shall, during the term of his employment with the Company,
and subject to the direction  and control of the  Company's  Board of Directors,
perform  such  duties and  functions  as he may be called upon to perform by the
Chairman and the Company's Board of Directors during the term of this Agreement,
consistent with his position as  Vice-Chairman  of the Board and Chief Executive
Officer.

     3.2 The  Employee  agrees  to use his best  efforts  in the  promotion  and
advancement  of the Company and its welfare  and  business.  Employee  agrees to
devote his primary  professional time to the business of the Company as Employee
deems reasonably  necessary;  provided,  however,  that the Company acknowledges
that Employee shall be entitled to pursue unrelated  personal  business ventures
that do not materially conflict with the performance of Employee's duties to the
Company.

     3. 3  Employee  shall be based in the Red Bank New Jersey  area,  and shall
undertake such occasional  travel,  within or without the United States as is or
may be reasonably necessary in the interests of the Company.

                                   ARTICLE IV
                                  COMPENSATION

     4.1  During  the term of this  Agreement,  Employee  shall  be  compensated
initially at the rate of $300,000 per annum, subject to such increases,  if any,
as  determined  by the Board of Directors,  or if the Board so  designates,  the
Compensation  Committee,  in its discretion,  at the commencement of each of the
Company's  fiscal years during the term of this Agreement  (the "Base  Salary").
The Base Salary shall be paid to the Employee in  accordance  with the Company's
regular executive payroll periods.

     4.2 Employee shall be entitled to receive a bonus (the "Bonus") during each
year of this Agreement,  determined as follows: The amount to be paid as a Bonus
shall be determined as of each December 31 by the Compensation  Committee of the
Board of Directors  based upon the prior fiscal year end and shall  consist of a
portion of an "Executive Bonus Pool." The Executive Bonus Pool shall be equal to
fifteen (15%) percent of the net pre-tax  profit of the Company as determined by
the Company's  independent  auditors, no later than 90 days following the end of
the Company's fiscal year,  excluding any expense  deduction  attributed to such
Executive Bonus Pool (the "Net Pre-Tax Profit"); provided that, in the event the
Net Pre-Tax Profit of the Company for any fiscal year is less than $500,000,  no
Executive  Bonus Pool shall be  established  or Bonus paid by the Company to the
Employee pursuant to this subparagraph 4.2. Such determination,  for purposes of
this  Section 4.2 only,  shall be made in  accordance  with  generally  accepted
accounting principles, as modified by these resolutions.

     4.3 Employee shall also be entitled to receive brokerage  commissions on in
accordance  with the  commission  schedule  in effect  for  other  non-affiliate
brokers employed by the Company.

     4.4 Employee  shall be eligible to purchase from the Company,  at Employees
sole  discretion,  a portion of the  securities  contributed  to the  "Corporate
Finance Bonus Pool" upon the same price, terms and conditions  afforded to First
Montauk Securities Corp. The Corporate Finance Bonus Pool shall consist of up to
20% of  all  underwriter's  warrants,  placement  agent  warrants  and/or  other

<PAGE>



securities  granted to First Montauk  Securities  Corp.,  in connection with its
service as an  underwriter,  placement  agent or investment  banker.  The amount
Employee shall be entitled to purchase  shall be determined by the  Compensation
Committee of the Board of Directors on a transaction by transaction basis.

     4.5 The Company  shall  deduct from  Employee's  compensation  all federal,
state and local taxes which it may now or may hereafter be required to deduct.

     4.6  Employee  may receive  such other  additional  compensation  as may be
determined  from time to time by the Board of  Directors  including  bonuses and
other long term compensation plans.  Nothing herein shall be deemed or construed
to require the Board to award any bonus or additional compensation.

                                    ARTICLE V
                                    BENEFITS


     5.1 During the term hereof,  the Company  shall  provide  Employee with the
following  benefits  (the  "Benefits"):  (i)  group  health  care and  insurance
benefits as generally made available to the Company's  senior  management;  (ii)
such  other  insurance  benefits  obtained  by the  Company  and made  generally
available to the Company's  senior  management;  (iii) the Company shall provide
the Employee  with an  automobile  suitable for his  position,  equipped  with a
mobile telephone,  or at Employee's option, an appropriate automobile allowance,
and reimburse  reasonable  automobile  expenses including repairs,  maintenance,
gasoline charges,  mobile phone,  etc. via receipted  expense reports;  and (iv)
reimbursement,  upon  presentation of appropriate  vouchers,  for all reasonable
business   expenses   incurred  by  Employee  on  behalf  of  the  Company  upon
presentation of suitable documentation.

     5.2 In the event the Company wishes to obtain Key Man life insurance on the
life of Employee,  Employee  agrees to cooperate  with the Company in completing
any applications  necessary to obtain such insurance and promptly submit to such
physical  examinations  and furnish such  information as any proposed  insurance
carrier may request.

     5.3 For the term of this  Agreement,  Employee  shall be  entitled  to paid
vacation at the rate of four (4) weeks per annum.

                                   ARTICLE VI
                                 NON-DISCLOSURE

     6.1 The Employee shall not, at any time during or after the  termination of
his  employment  hereunder,  except  when  acting  on  behalf  of and  with  the
authorization  of  the  Company,   make  use  of  or  disclose  to  any  person,
corporation,  or other entity, for any purpose  whatsoever,  any trade secret or
other  confidential  information  concerning the Company's  business,  finances,
marketing,  brokerage  accounts,  corporate  finance  transactions  and clients,
products and  services,  accounting,  insurance  business  and  personnel of the
Company and its subsidiaries,  including information relating to any customer of
the Company,  or any other nonpublic business  information of the Company and/or
its  subsidiaries  learned as a consequence  of Employee's  employment  with the
Company  (collectively  referred to as the "Proprietary  Information").  For the
purposes of this Agreement,  trade secrets and  confidential  information  shall
mean  information  disclosed to the Employee or known by him as a consequence of
his employment by the Company,  whether or not pursuant to this  Agreement,  and
not  generally  known in the  industry.  The  Employee  acknowledges  that trade
secrets and other items of confidential information, as they may exist from time
to time, are valuable and unique assets of the Company,  and that  disclosure of
any such  information  would  cause  substantial  injury to the  Company.  Trade
secrets  and  confidential  information  shall  cease  to be  trade  secrets  or
confidential  information,  as  applicable,  at such  time  as such  information
becomes  public  other than  through  disclosure,  directly  or  indirectly,  by
Employee in violation of this Agreement.

<PAGE>

     6.2  If   Employee  is   requested   or   required   (by  oral   questions,
interrogatories,   requests  for  information  or  document   subpoenas,   civil
investigative   demands,   or  similar  process)  to  disclose  any  Proprietary
Information,  Employee  shall,  unless  prohibited by law,  promptly  notify the
Company  of such  request(s)  so  that  the  Company  may  seek  an  appropriate
protective order.

                                   ARTICLE VII
                              RESTRICTIVE COVENANT

     7.1 In the  event  of the  voluntary  termination  of  employment  with the
Company prior to the expiration of the term hereof,  or Employee's  discharge in
accordance  with  Article  IX,  or the  expiration  of the term  hereof  without
renewal,  Employee  agrees  that he will not,  during the term  hereof and for a
period of one (1) year  following  termination  of  employment  for any  reason,
directly or indirectly,  solicit  brokers,  or employees of the Company,  or any
sister or subsidiary  of the Company for  employment  with any other entity,  or
(ii)  solicit  or  accept  (a)  any  corporate  finance  client  relating  to  a
transaction,   pending  or  proposed,   involving  a  public  offering,  private
placement,  or merger and acquisition  advisory  services,  (b) research project
which was under consideration or pending at the time of Employee's  termination,
or (c) any brokerage client of the Company.

     7.2 If any court  shall hold that the  duration of  non-competition  or any
other  restriction  contained  in this Article VII is  unenforceable,  it is our
intention  that same shall not thereby be terminated but shall be deemed amended
to delete  therefrom  such  provision  or portion  adjudicated  to be invalid or
unenforceable  or, in the alternative,  such judicially  substituted term may be
substituted therefor.

                                  ARTICLE VIII
                                      TERM

     8.1 This Agreement shall be for a term (the "Initial  Term")  commencing on
January 1, 2004 (the  "Commencement  Date") and terminating on December 31, 2008
(the  "Expiration  Date"),  and  renewable  as  provided  for  herein,  for  one
additional period of one year.

     8.2 The  Company  agrees to notify  Employee  in  writing  of its intent to
negotiate an extension of this  Agreement six months prior to the  expiration of
the original term hereof.  If the Company fails to so notify Employee,  or after
having  timely  notified  Employee of its  intention  to extend,  fails to reach
agreement with Employee on the terms of such extension,  this agreement shall be
renewable,  at the option of the Employee,  for an additional period of one year
from the expiration of the original term, except that the Employee's base salary
shall be increased 10% above the prior year,  and Employee  shall be entitled to
stock options  equivalent to one-third of the options granted during the initial
term of this agreement on comparable terms and conditions. If the Company elects
not to seek to negotiate an extension and has so timely notified Employee,  then
the Company shall pay Employee, upon the expiration of the original term of this
Agreement, the Severance Payment.

                                   ARTICLE IX
                                   TERMINATION

     9.1 The  Company  may  terminate  this  Agreement  by  giving a  Notice  of
Termination to the Employee in accordance with this Agreement:

                a. For Disability;

                b. For Cause.

                c. Without Cause.

     9.2 Employee may terminate this Agreement by giving a Notice of Termination
to the Company in accordance with this  Agreement,  at any time, with or without
good reason.

         9.3 If the Employee's employment with the Company shall be terminated,
the Company shall pay and/or provide to the Employee the following compensation
and benefits in lieu of any other compensation or benefits arising under this
Agreement or otherwise:

     a. if the Employee was terminated by the Company for Cause, or the Employee
terminates without Good Reason, the Accrued Compensation;

     b. if the  Employee  was  terminated  by the  Company for  Disability,  the
Accrued  Compensation,   a  Pro  Rata  Bonus,  the  Severance  Payment  and  the
Continuation Benefits, less all disability insurance payments which Employee may
receive from insurance policies provided by the Company; or
<PAGE>


     c.  if  termination   was  due  to  the  Employee's   death,   the  Accrued
Compensation;  and  Employee's  pro rata bonus for the fiscal  year in which the
date of death occurred; or

     d. if  termination  was by the  Employee  other than for Good  Reason,  the
Company shall pay to the Employee the Accrued Compensation.

     e. If the  Employee's  employment  with the Company shall be terminated for
any reason other than as specified in Section 9.3 (a-d),  in lieu of any further
compensation for periods  subsequent to the Termination  Date, the Company shall
pay and/or  provide to the Employee each and all of the  following  compensation
and benefits:

     (i) all Accrued Compensation;

     (ii) a Pro-Rata Bonus;

     (iii) the Employee's Base Amount,  for the period from the Termination Date
to the expiration of the term of the Employment Agreement, including any renewal
period which is automatic on the Termination Date;

     (iv) a bonus payment equal to one-twelfth  (1/12) of the Bonus Amount times
the number of months  remaining from the  Termination  Date to the expiration of
the term of the  Employment  Agreement,  including  any renewal  period which is
automatic on the Termination Date;

     (v) The Severance Payment;

     (vi) The Continuation Benefits;

     (vii) Any Gross Up Payments to which the Employee  would have been entitled
from  the  Termination  Date to the  expiration  of the  term of the  Employment
Agreement,  including any renewal  period which is automatic on the  Termination
Date; and

     (viii) The Outplacement Services.

     9.4 In the event the  Employee's  employment is  terminated  for any reason
other than as specified in Section 9.3 (a-d),  the  conditions to the vesting of
any outstanding  incentive awards (including restricted stock, stock options and
granted  performance  shares or units)  granted to the Employee under any of the
Company's  plans,  or under any other  incentive plan or  arrangement,  shall be
deemed void and all such incentive  awards shall be immediately and fully vested
and exercisable.

     9.5 The amounts payable under this Section 9, shall be paid as follows:

     (a) Accrued  Compensation shall be paid within five (5) business days after
the Employee's Termination Date (or earlier, if required by applicable law).

     (b) The  Pro-Rata  Bonus  shall be paid  within  thirty (30) days after the
Employee's Termination Date (or earlier, if required by applicable law).

     (c) If the  Continuation  Benefits are paid in cash,  the payments shall be
made within thirty (30) days after the Employee's  Termination Date (or earlier,
if required by applicable law).

     (d) The  Severance  Payment shall be paid within thirty (30) days after the
Employee's Termination Date (or earlier, if required by applicable law).

     (e) The amounts  provided for in Sections  9.3(e)(iii)  and (iv),  shall be
paid within thirty (30) days after the Employee's  Termination Date (or earlier,
if required by applicable law).

     9.6 The  Employee  shall not be  required  to  mitigate  the  amount of any
payment  provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits  provided to the  Employee in any  subsequent  employment  except as
provided in Section 1.7.

     9.7 Employee's employment and the Employment Agreement may be terminated by
the Company or by the Employee, in accordance with this Agreement, by service of
a Notice of  Termination.  For  purposes of this  Agreement,  no such  purported
termination shall be effective without service of a Notice of Termination.
<PAGE>

                                    ARTICLE X
                         TERMINATION OF PRIOR AGREEMENTS

     10.1 This Agreement sets forth the entire agreement between the parties and
supersedes all prior agreements, letters and understandings between the parties,
whether oral or written prior to the effective date of this Agreement.

                                  ARTICLE XVIII
                              INCENTIVE STOCK UNITS

     11.1 As an inducement to Employee to enter into this Agreement, the Company
hereby grants to Employee  375,000  restricted  shares of the  Company's  Common
Stock, $.001 par value subject to the provisions of Section 11.2.

     11.2  Subject to the terms and  conditions  of the  Company's  1996  Senior
Management  Incentive Plan (the "Plan"),  and the terms and conditions set forth
in the  Incentive  Stock  Rights  Agreement,  which are  incorporated  herein by
reference,  the  Employee is hereby  granted  375,000  restricted  shares of the
Company's Common Stock, $.001 par value (the "Shares"). One-third of such Shares
shall vest one year after the date of this  Agreement,  one-third of such Shares
shall vest two years  after the date of this  Agreement,  and one- third of such
Shares  shall vest three  years  after the date of this  Agreement.  If Employee
renders  continuous  service to the  Company  from the date  hereof to a vesting
date,  on each such  vesting  date the Company  shall  deliver to Employee  such
number of shares of Common Stock as shall vest on such date. Notwithstanding the
foregoing,  in the event  Employee's  employment is  terminated  due to Death or
Disability,  all  Restricted  Share Awards shall  immediately  vest and all such
Shares shall delivered to the Employee, or Employee's estate.

                                   ARTICLE XII
                           EXTRAORDINARY TRANSACTIONS

     12.1 In the event of a Change of Control as  described  in Sections  1.5(a)
and (b), the Company shall provide  notice to the Employee  within ten (10) days
of the date the Company has notice of such Change of Control transaction. If the
Employee  provides  notice in writing to the  Company,  within  ninety (90) days
after  the  Company's  notice,  that  the  Employee  intends  to  terminate  his
Employment  Agreement for Good Reason  effective thirty (30) days after the date
of  such  notice,  in  addition  to the  benefits  provided  elsewhere  in  this
Agreement,  the Company shall pay and/or provide to the Employee,  the following
compensation and benefits:

     (a) The Company shall pay the Employee as additional severance, in a single
payment,  an amount  in cash  equal to three  times the  amount of the five year
average of the gross  income of the  Employee,  as  reported  by the Company for
federal  income tax  purposes  or, at the option of the  Employee,  credit  such
amount against the exercise price of Employee's employee stock options; and

     (b) The  conditions  to the  vesting of any  outstanding  incentive  awards
(including  restricted stock,  stock options and granted  performance  shares or
units)  granted to the Employee under any of the Company's  plans,  or under any
other incentive plan or arrangement, shall be deemed void and all such incentive
awards shall be immediately and fully vested and exercisable.

     12.2  Notwithstanding the provisions of Article IX to the contrary,  in the
event the Employee's  employment is terminated for any reason within twenty-four
(24) months of a Change of  Control,  the  amounts  provided  for in Article IX,
including the Continuation  Benefits,  if the Continuation  Benefits are paid in
cash, and the amounts  payable under Section 12.1 shall be paid in a single lump
sum cash payment within five (5) business days after the Employee's  Termination
Date (or earlier, if required by applicable law).

     12.3 In the event of a Change of Control as described  in Section  1.5(c)),
the Company shall provide  thirty (30) days prior written notice to the Employee
of the anticipated  closing date of such Change of Control  transaction.  If the
Employee provides notice in writing to the Company, at least five (5) days prior
to the closing date specified in the Company's notice, that the Employee intends
to terminate his Employment  Agreement for Good Reason  effective on the closing
date,  there shall be paid to the  Employee in a single lump sum,  cash  payment
simultaneously  with the  closing  of such  Change of Control  transaction,  the
amounts provided for in this Article XII,  including the Continuation  Benefits,
if the  Continuation  Benefits are paid in cash. Upon the closing of such Change
of Control  Transaction  and the payment of the amounts due Employee  under this
Agreement,  Employee's employment,  and the Employment Agreement shall be deemed
terminated for Good Reason.
<PAGE>

                                  ARTICLE XIII
                           EXCISE TAX GROSS UP PAYMENT

     13.1  The  Company  and the  Employee  acknowledge  that the  payments  and
benefits  provided under this  Agreement,  and benefits  provided to, or for the
benefit of, the Employee under other Company plans and agreements (such payments
or benefits are  collectively  referred to as the "Payments") are subject to the
excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"). In addition to the Payments,  the Company
shall pay to the Employee  within five (5) business  days of Payment  subject to
the Excise Tax, a gross up payment (the "Gross Up Payment")  equal to the amount
which,  after the deduction of any  applicable  Federal,  State and Local income
taxes attributable to the Gross Up Payment, is equal to the Excise Tax including
the Excise Tax attributable to the Gross Up Payment.

     13.2 The Company shall pay to the applicable government taxing authorities,
as Excise Tax  withholding,  the amount of the Excise Tax that the  Company  has
actually withheld from the Payment or Payments.

     13.3 If it is established  pursuant to a  determination  of a court,  or an
Internal Revenue Service (the "IRS") decision, action or proceeding,  that there
has been an  underpayment  of the Excise Tax (an  "Underpayment"),  the  Company
shall pay to the  Employee  within  thirty  (30) days of such  determination  or
resolution,  the amount which,  after the deduction of any  applicable  federal,
state  and  local  income  taxes,  including  the  Excise  Tax,  is equal to the
Underpayment, plus applicable interest and penalties until the date of payment.

     13.4 The Company hereby agrees to indemnify,  defend, and hold harmless the
Employee for any and all claims arising from or related to non-payment of Excise
Tax, including the amount of such tax and any and all costs, interest, expenses,
penalties  associated  with the  non-payment  of such tax to the fullest  extent
permitted by law.

                                   ARTICLE XIX
               ARBITRATION AND INDEMNIFICATION; FEES AND EXPENSES

     14.1 Any dispute  arising out of the  interpretation,  application,  and/or
performance of this Agreement with the sole exception of any claim,  breach,  or
violation arising under Articles VI or VII hereof shall be settled through final
and binding  arbitration  before a panel of arbitrators  in accordance  with the
rules of the  National  Association  of  Securities  Dealers (the  "NASD").  Any
judgment  upon any  arbitration  award may be entered  in any court,  federal or
state,  having competent  jurisdiction of the parties before a single arbitrator
in the  State  of New  Jersey  in  accordance  with the  Rules  of the  American
Arbitration  Association.  The  arbitrators  shall be selected by the NASD.  Any
judgment  upon any  arbitration  award may be entered  in any court,  federal or
state, having competent jurisdiction of the parties.

     14.2 The Company hereby agrees to indemnify,  defend, and hold harmless the
Employee for any and all claims arising from or related to his employment by the
Company at any time  asserted,  at any place  asserted,  to the  fullest  extent
permitted  by law,  except  for  claims  based on  Employee's  fraud,  deceit or
wilfulness.  The Company  shall  maintain  such  insurance as is  necessary  and
reasonable  to protect the Employee  from any and all claims  arising from or in
connection  with his  employment  by the Company  during the term of  Employee's
employment  with the Company and for a period of six (6) years after the date of
termination  of employment  for any reason.  The provisions of this Section 12.2
are in  addition  to and not in lieu of any  indemnification,  defense  or other
benefit to which Employee may be entitled by statute, regulation,  common law or
otherwise.

     14.3 The Company shall pay all reasonable  legal fees and related  expenses
(including the costs of arbitrators, experts, evidence and counsel) incurred by,
the Employee as they become due as a result of (a) the Employee's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment) in violation of this Agreement,
or (b) the Employee  seeking to obtain or enforce any right or benefit  provided
by this Agreement.

                                   ARTICLE XV
                          SUCCESSORS: BINDING AGREEMENT

     15.1 This Agreement shall be binding upon and shall inure to the benefit of
the Company,  and its Successors and Assigns,  and the Company shall require any
Successors  and Assigns to expressly  assume and agree to perform this Agreement
in the same manner and to the same extent that the Company  would be required to
perform it if no such succession or assignment had taken place.
<PAGE>



     15.2 Neither this  Agreement nor any right or interest  hereunder  shall be
assignable  or  transferable  by  the  Employee,   his  beneficiaries  or  legal
representatives, except by will or by the laws of descent and distribution. This
Agreement  shall inure to the benefit of and be  enforceable  by the  Employee's
personal representative.

     15.3 In the event that a Division (or part thereof) is sold,  divested,  or
otherwise  disposed  of by the Company  subsequent  to or in  connection  with a
Change in Control  and the  Employee  accepts  employment  by the  purchaser  or
acquiror  thereof,  the Company  shall  require  such  purchaser  or acquiror to
assume, and agree to perform, the Company's obligations under this Agreement, in
the same manner,  and to the same extent,  that the Company would be required to
perform if no such acquisition or purchase had taken place.

                                   ARTICLE XVI
         OTHER CONTRACTUAL RIGHTS; NON-EXCLUSIVITY; SETTLEMENT OF CLAIMS

     16.1  The  provisions  of this  Agreement,  and any  payment  provided  for
hereunder,  shall  not  reduce  any  amounts  otherwise  payable,  or in any way
diminish the Employee's  existing rights, or rights which would accrue solely as
a result of the  passage of time,  under any  Benefit  Plan,  Incentive  Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.

     16.2  Nothing  in this  Agreement  shall  prevent  or limit the  Employee's
continuing or future  participation  in any benefit,  bonus,  incentive or other
plan or program provided by the Company (except for any severance or termination
policies,  plans, programs or practices) and for which the Employee may qualify,
nor shall  anything  herein limit or reduce such rights as the Employee may have
under any  other  agreements  with the  Company  (except  for any  severance  or
termination agreement).  Amounts which are vested benefits or which the Employee
is otherwise  entitled to receive under any plan or program of the Company shall
be  payable  in  accordance  with such  plan or  program,  except as  explicitly
modified by this Agreement.

     16.3 The  Company's  obligation  to make the payments  provided for in this
Agreement  and  otherwise  to perform  its  obligations  hereunder  shall not be
affected by any  circumstances,  including,  without  limitation,  any  set-off,
counterclaim,  recoupment,  defense or other  right  which the  Company may have
against the Employee or others.

                                  ARTICLE XVII
                                  SEVERABILITY

     17.1  If any  provision  of  this  Agreement  shall  be  held  invalid  and
unenforceable,  the remainder of this  Agreement  shall remain in full force and
effect.  If any  provision  is held  invalid or  unenforceable  with  respect to
particular circumstances,  it shall remain in full force and effect in all other
circumstances.

                                  ARTICLE XVIII
                                     NOTICE

     18.1  For  the   purposes  of  this   Agreement,   notices  and  all  other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  personally  delivered  or sent by certified
mail,  return receipt  requested,  postage prepaid,  addressed to the respective
addresses  as set  forth  below or to any such  other  address  as the  party to
receive the notice  shall  advise by due notice  given in  accordance  with this
paragraph . All notices and communications shall be deemed to have been received
on the date of delivery  thereof or on the third  business day after the mailing
thereof,  except that notice of change of address  shall be effective  only upon
receipt.

     18.2 The current addresses of the parties are as follows:

              IF TO THE COMPANY:       First Montauk Financial Corp.
                                       Parkway 109 Office Center
                                       328 Newman Springs Road
                                       Red Bank, New Jersey 07701
                                       Att. Chief Counsel

              With a copy to:          Victor J. DiGioia, Esq.
                                       Goldstein & DiGioia, LLP
                                       45 Broadway
                                       New York, NY 10006

              IF TO THE EMPLOYEE:      William J.  Kurinsky
                                       4 Cotswold Circle
                                       Ocean, New Jersey 07712
<PAGE>


                                   ARTICLE XIX
                                     WAIVER

     19.1 The waiver by either party of any breach or violation of any provision
of  this  Agreement  shall  not  operate  or be  construed  as a  waiver  of any
subsequent breach of construction and validity.

                                   ARTICLE XX
                                  GOVERNING LAW

     20.1 This  Agreement has been  negotiated  and executed in the State of New
Jersey which shall govern its construction and validity.

                                   ARTICLE XXI
                                  JURISDICTION

     21.1 Any or all actions or proceedings  which may be brought by the Company
or  Employee  under this  Agreement  shall be  brought in courts  having a situs
within the State of New Jersey, and Employee and the Company each hereby consent
to the  jurisdiction  of any local,  state,  or federal court located within the
State of New Jersey.

                                  ARTICLE XXII
                                ENTIRE AGREEMENT

     22.1 This  Agreement  contains  the entire  agreement  between  the parties
hereto.  No change,  addition,  or  amendment  shall be made  hereto,  except by
written agreement signed by the parties hereto.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.

                                      FIRST MONTAUK FINANCIAL CORP.



                                      By:___________________________________


                                      --------------------------------------
                                               William J. Kurinsky
                                                    Employee

<PAGE>
                                                              Exhibit 10.15


                             EMPLOYMENT AGREEMENT


     AGREEMENT  made as of the 1st day of January,  2004 by and  between  Victor
Kurylak,  residing at 26 Meadow Lane,  Lebanon,  New Jersey  08833  (hereinafter
referred to as the "Employee") and First Montauk  Financial  Corp., a New Jersey
corporation  with  principal  offices  Parkway 109,  Red Bank,  New Jersey 07701
(hereinafter referred to as the "Company").

                              W I T N E S S E T H :

     WHEREAS,  the Company,  through its wholly owned  subsidiary  First Montauk
Securities  Corp, is engaged in the  investment  banking and general  securities
business as a registered broker-dealer; and

     WHEREAS,  the  Company  desires to employ the  Employee  for the purpose of
securing for the Company the  experience,  ability and services of the Employee;
and

     WHEREAS,  the Employee  desires to be employed by the Company,  pursuant to
the terms and  conditions  herein  set  forth,  superseding  all prior  oral and
written employment agreements,  and term sheets and letters between the Company,
its subsidiaries and/or predecessors and Employee;

         NOW, THEREFORE, it is mutually agreed by and between the parties hereto
as follows:

                                    ARTICLE I
                                   DEFINITIONS


     1.1 Accrued  Compensation.  Accrued Compensation shall mean an amount which
shall include all amounts earned or accrued through the  "Termination  Date" (as
defined  below)  but not paid as of the  Termination  Date,  including  (i) Base
Salary,  (ii)  reimbursement  for business  expenses incurred by the Employee on
behalf of the Company, pursuant to the Company's expense reimbursement policy in
effect  at such  time,  (iii)  vacation  pay,  and (iv)  bonuses  and  incentive
compensation earned and awarded prior to the Termination Date.

     1.2 Cause. Cause shall mean: (i) willful  disobedience by the Employee of a
material and lawful  instruction of the Board of Directors of the Company;  (ii)
formal  charge,  indictment  or  conviction  of the Employee of any  misdemeanor
involving fraud or embezzlement or similar crime, or any felony; (iii) breach by
the Employee of any material provision of this Agreement; (iv) conduct amounting
to  fraud,  dishonesty,  gross  negligence,   willful  misconduct  or  recurring
insubordination;  (v) excessive  absences  from work,  other than for illness or
Disability;  or (vi)  unsatisfactory  performance  of duties;  provided that the
Company  shall  not have the  right to  terminate  the  employment  of  Employee
pursuant to the foregoing  clauses (i),  (iii),  (iv), (v) and (vi) above unless
written notice specifying such breach shall have been given to the Employee and,
in the case of breach which is capable of being cured,  the Employee  shall have
failed to cure such  breach  within  thirty  (30) days after his receipt of such
notice.

     1.3  Change in  Control.  For  purposes  of this  Agreement,  a "Change  in
Control" shall mean any of the following events:

     (a) (i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934,  as amended (the "1934 Act"))  immediately  after which such Person
has "Beneficial  Ownership"  (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty  percent  (20%) or more of the combined  voting power of
the Company's then outstanding Voting  Securities;  provided,  however,  that in
determining  whether a Change in Control has occurred,  Voting  Securities which
are  acquired  in a  "Non-Control  Acquisition"  (as  defined  below)  shall not
constitute an acquisition which would cause a Change in Control.  A "Non-Control
Acquisition"  shall mean an  acquisition  by (1) an employee  benefit plan (or a
trust  forming  a  part  thereof)  maintained  by (x)  the  Company  or (y)  any
corporation  or other  Person of which a  majority  of its  voting  power or its
equity  securities  or equity  interest is owned  directly or  indirectly by the
Company (a "Subsidiary"), or (2) the Company or any Subsidiary.

     (ii)Notwithstanding  the foregoing, a Change in Control shall not be deemed
to occur  solely  because a Person  (the  "Subject  Person")  gained  Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the  acquisition of Voting  Securities by the Company  which,  by
reducing the number of Voting Securities outstanding, increases the proportional

<PAGE>


number of shares  Beneficially  Owned by the Subject Person,  provided that if a
Change in Control  would occur (but for the  operation  of this  sentence)  as a
result of the  acquisition of Voting  Securities by the Company,  and after such
share  acquisition  by the Company,  the Subject  Person  becomes the Beneficial
Owner of any additional  Voting Securities which increases the percentage of the
then outstanding  Voting  Securities  Beneficially  Owned by the Subject Person,
then a Change in Control shall occur.

     (b) The  individuals  who, as of the date this Agreement is approved by the
Board, are members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least  two-thirds  of the Board;  provided,  however,  that if the
election, or nomination for election by the Company's  stockholders,  of any new
director was approved by a vote of at least  two-thirds of the Incumbent  Board,
such new director  shall,  for purposes of this  Agreement,  be  considered  and
defined as a member of the  Incumbent  Board;  and  provided,  further,  that no
individual  shall  be  considered  a  member  of the  Incumbent  Board  if  such
individual  initially  assumed  office  as a  result  of  either  an  actual  or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened  solicitation  of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest"),  including by
reason of any  agreement  intended  to avoid or settle any  Election  Contest or
Proxy Contest; or

     (c) Approval by stockholders of the Company of:

     (1) A merger, consolidation or reorganization involving the Company, unless

     (i) the  stockholders  of the  Company,  immediately  before  such  merger,
consolidation  or  reorganization,   own,  directly  or  indirectly  immediately
following such merger,  consolidation or  reorganization,  at least  eighty-five
percent (85%) of the combined voting power of the outstanding  voting securities
of the corporation resulting from such merger or consolidation or reorganization
(the  "Surviving  Corporation")  in  substantially  the same proportion as their
ownership of the Voting Securities immediately before such merger, consolidation
or reorganization,

     (ii) the individuals  who were members of the Incumbent  Board  immediately
prior to the execution of the agreement providing for such merger, consolidation
or reorganization  constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation, and

     (iii) no Person  (other than the  Company,  any  Subsidiary,  any  employee
benefit plan (or any trust  forming a part  thereof)  maintained by the Company,
the Surviving  Corporation or any Subsidiary) has Beneficial Ownership of twenty
percent   (20%)  or  more  of  the  combined   voting  power  of  the  Surviving
Corporation's then outstanding voting securities,

     a  transaction  described  in clauses  (i) through  (iii)  shall  herein be
referred to as a "Non-Control Transaction"; or

     (2) An agreement for the sale or other  disposition of all or substantially
all of the assets of the Company, or of a significant subsidiary, to any Person,
other than a transfer to a Subsidiary, in one transaction or a series of related
transactions.  For  purposes  of this  subparagraph  1.3 (c)  (2),  "significant
subsidiary " shall mean any subsidiary or business division of the Company which
accounts for more than 40% of the Company's income, revenue or gross profits.

     (3) The  stockholders  of the Company  approve any plan or proposal for the
liquidation or dissolution of the Company.

     (d)  Notwithstanding  anything contained in this Agreement to the contrary,
if the Employee's  employment is terminated prior to a Change in Control and the
Employee reasonably demonstrates that such termination (i) was at the request of
a third  party  who  has  indicated  an  intention  or  taken  steps  reasonably
calculated  to effect a Change in  Control (a "Third  Party") or (ii)  otherwise
occurred in connection  with, or in anticipation  of, a Change in Control,  then
for all purposes of this Agreement, the date of a Change in Control with respect
to the  Employee  shall  mean  the  date  immediately  prior to the date of such
termination of the Employee's employment.

     1.4 Continuation Benefits.  Continuation Benefits shall be the continuation
of the Benefits,  as defined in Section 5.1, for the period from the Termination
Date to the earlier of three months from the Termination  Date or the Expiration
Date (the  "Continuation  Period")  at the  Company's  expense  on behalf of the
Employee and his dependents.  The Company's obligation hereunder with respect to
the  foregoing  benefits  shall be limited to the  extent  that if the  Employee
obtains any such benefits pursuant to a subsequent employer's benefit plans, the
Company may reduce the  coverage  of any  benefits it is required to provide the
Employee  hereunder  as long as the  aggregate  coverages  and  benefits  of the
combined  benefit plans is no less  favorable to the Employee than the coverages
and benefits required to be provided hereunder.  This definition of Continuation
Benefits  shall  not be  interpreted  so as to limit any  benefits  to which the
Employee,  his  dependents  or  beneficiaries  may be entitled  under any of the
Company's employee benefit plans, programs or practices following the Employee's
termination of employment,  including,  without limitation,  retiree medical and
life insurance benefits.
<PAGE>


     1.5 Disability.  Disability shall mean a physical or mental infirmity which
impairs  the  Employee's  ability to  substantially  perform his duties with the
Company for a period of ninety (90) consecutive days.

     1.6  Notice of  Termination.  Notice of  Termination  shall  mean a written
notice from the Company,  or the  Employee,  of  termination  of the  Employee's
employment  which indicates the provision in this Agreement relied upon, if any.
A Notice of  Termination  served by the Company shall specify the effective date
of termination.

     1.7 Termination  Date.  Termination  Date shall mean (i) in the case of the
Employee's  death,  his date of  death;  and (ii) in all other  cases,  the date
specified in the Notice of Termination.


                                   ARTICLE II
                                   EMPLOYMENT

     2.1 Subject to and upon the terms and  conditions  of this  Agreement,  the
Company  hereby  employs and agrees to continue the  employment of the Employee,
and the Employee  hereby  accepts such  continued  employment in his capacity as
President and Chief Operating Officer. In this capacity, Employee will report to
the  Chief  Executive  Officer  and  Chairman  of the  Board  and the  Board  of
Directors.

                                   ARTICLE III
                                     DUTIES

     3.1 The Employee shall, during the term of his employment with the Company,
and  subject  to the  direction  and  control  of the  Chairman  of the Board of
Directors and Chief Executive  Officer,  perform such duties and functions as he
may be called  upon to perform by the  Chairman  of the Board of  Directors  and
Chief Executive  Officer during the term of this Agreement,  consistent with his
position as President and Chief Operating Officer.

     3.2 The  Employee  agrees  to use his best  efforts  in the  promotion  and
advancement  of the Company and its welfare  and  business.  Employee  agrees to
devote his primary  professional time to the business of the Company as Employee
deems reasonably  necessary;  provided,  however,  that the Company acknowledges
that Employee shall be entitled to pursue unrelated  personal  business ventures
that do not materially conflict with the performance of Employee's duties to the
Company. 3. 3 Employee shall be based in the Red Bank New Jersey area, and shall
undertake such occasional  travel,  within or without the United States as is or
may be reasonably necessary in the interests of the Company.


                                   ARTICLE IV
                                  COMPENSATION

     4.1  During  the term of this  Agreement,  Employee  shall  be  compensated
initially at the rate of $250,000 per annum, and increasing 10% per annum on the
1st day of each  January  during the period  this  Agreement  provided  that the
Company shall have achieved net profits of at least $500,000 during the previous
fiscal year (the "Base  Salary").  The Base Salary shall be paid to the Employee
in accordance with the Company's regular executive payroll periods.

     4.2 Employee shall be entitled to receive a bonus (the "Bonus") during each
year of this Agreement,  determined as follows: The amount to be paid as a Bonus
shall be determined as of each December 31 by the Compensation  Committee of the
Board of Directors  based upon the prior fiscal year end and shall  consist of a
portion of an "Executive Bonus Pool." The Executive Bonus Pool shall be equal to
fifteen (15%) percent of the net pre-tax  profit of the Company as determined by
the Company's  independent  auditors, no later than 90 days following the end of
the Company's fiscal year,  excluding any expense  deduction  attributed to such
Executive Bonus Pool (the "Net Pre-Tax Profit"); provided that, in the event the
Net Pre-Tax Profit of the Company for any fiscal year is less than $500,000,  no
Executive  Bonus Pool shall be  established  or Bonus paid by the Company to the
Employee pursuant to this subparagraph 4.2. Such determination,  for purposes of
this  Section 4.2 only,  shall be made in  accordance  with  generally  accepted
accounting principles, as modified by these resolutions.

     4.3 Employee shall also be entitled to receive brokerage  commissions on in
accordance  with the  commission  schedule  in effect  for  other  non-affiliate
brokers employed by the Company.

<PAGE>


     4.4 Employee  shall be eligible to purchase from the Company,  at Employees
sole  discretion,  a portion of the  securities  contributed  to the  "Corporate
Finance Bonus Pool" upon the same price, terms and conditions  afforded to First
Montauk Securities Corp. The Corporate Finance Bonus Pool shall consist of up to
20% of  all  underwriter's  warrants,  placement  agent  warrants  and/or  other
securities  granted to First Montauk  Securities  Corp.,  in connection with its
service as an  underwriter,  placement  agent or investment  banker.  The amount
Employee shall be entitled to purchase  shall be determined by the  Compensation
Committee of the Board of Directors on a transaction by transaction basis.

     4.5 The Company  shall  deduct from  Employee's  compensation  all federal,
state and local taxes which it may now or may hereafter be required to deduct.

     4.6  Employee  may receive  such other  additional  compensation  as may be
determined  from time to time by the Board of  Directors  including  bonuses and
other long term compensation plans.  Nothing herein shall be deemed or construed
to require the Board to award any bonus or additional compensation.

                                    ARTICLE V
                                    BENEFITS

     5.1 During the term hereof,  the Company  shall  provide  Employee with the
following  benefits  (the  "Benefits"):  (i)  group  health  care and  insurance
benefits as generally made available to the Company's  senior  management;  (ii)
such  other  insurance  benefits  obtained  by the  Company  and made  generally
available to the Company's  senior  management;  (iii) the Company shall provide
the Employee  with an  automobile  suitable for his  position,  equipped  with a
mobile telephone,  or at Employee's option, an appropriate automobile allowance,
and reimburse  reasonable  automobile  expenses including repairs,  maintenance,
gasoline charges,  mobile phone,  etc. via receipted  expense reports;  and (iv)
reimbursement,  upon  presentation of appropriate  vouchers,  for all reasonable
business   expenses   incurred  by  Employee  on  behalf  of  the  Company  upon
presentation of suitable documentation.

     5.2 In the event the Company wishes to obtain Key Man life insurance on the
life of Employee,  Employee  agrees to cooperate  with the Company in completing
any applications  necessary to obtain such insurance and promptly submit to such
physical  examinations  and furnish such  information as any proposed  insurance
carrier may request.

     5.3 For the term of this  Agreement,  Employee  shall be  entitled  to paid
vacation at the rate of four (4) weeks per annum.

                                   ARTICLE VI
                                 NON-DISCLOSURE

     6.1 The Employee shall not, at any time during or after the  termination of
his  employment  hereunder,  except  when  acting  on  behalf  of and  with  the
authorization  of  the  Company,   make  use  of  or  disclose  to  any  person,
corporation,  or other entity, for any purpose  whatsoever,  any trade secret or
other  confidential  information  concerning the Company's  business,  finances,
marketing,  brokerage  accounts,  corporate  finance  transactions  and clients,
products and  services,  accounting,  insurance  business  and  personnel of the
Company and its subsidiaries,  including information relating to any customer of
the Company,  or any other nonpublic business  information of the Company and/or
its  subsidiaries  learned as a consequence  of Employee's  employment  with the
Company  (collectively  referred to as the "Proprietary  Information").  For the
purposes of this Agreement,  trade secrets and  confidential  information  shall
mean  information  disclosed to the Employee or known by him as a consequence of
his employment by the Company,  whether or not pursuant to this  Agreement,  and
not  generally  known in the  industry.  The  Employee  acknowledges  that trade
secrets and other items of confidential information, as they may exist from time
to time, are valuable and unique assets of the Company,  and that  disclosure of
any such  information  would  cause  substantial  injury to the  Company.  Trade
secrets  and  confidential  information  shall  cease  to be  trade  secrets  or
confidential  information,  as  applicable,  at such  time  as such  information
becomes  public  other than  through  disclosure,  directly  or  indirectly,  by
Employee  in  violation  of  this  Agreement.   Notwithstanding  the  foregoing,
information  concerning a customer  introduced  to the Company by Employee,  and
known to Employee  other than as a consequence of his employment by the Company,
shall not be deemed  Propriety  Information  within  the  contemplation  of this
Section 6.1.

     6.2  If   Employee  is   requested   or   required   (by  oral   questions,
interrogatories,   requests  for  information  or  document   subpoenas,   civil
investigative   demands,   or  similar  process)  to  disclose  any  Proprietary
Information,  Employee  shall,  unless  prohibited by law,  promptly  notify the
Company  of such  request(s)  so  that  the  Company  may  seek  an  appropriate
protective order.
<PAGE>

                                   ARTICLE VII
                              RESTRICTIVE COVENANT


     7.1 In the  event  of the  voluntary  termination  of  employment  with the
Company prior to the expiration of the term hereof,  or Employee's  discharge in
accordance  with  Article  IX,  or the  expiration  of the term  hereof  without
renewal,  Employee  agrees  that he will not,  during the term  hereof and for a
period of one (1) year  following  termination  of  employment  for any  reason,
directly or indirectly,  solicit  brokers,  or employees of the Company,  or any
sister or subsidiary  of the Company for  employment  with any other entity,  or
(ii)  solicit  or  accept  (a)  any  corporate  finance  client  relating  to  a
transaction,   pending  or  proposed,   involving  a  public  offering,  private
placement,  or merger and acquisition  advisory  services,  (b) research project
which was under consideration or pending at the time of Employee's  termination,
or (c) any  brokerage  client  of the  Company,  other  than  brokerage  clients
introduced  to the Company by  Employee,  and known to Employee  other than as a
consequence of his employment by the Company.

     7.2 If any court  shall hold that the  duration of  non-competition  or any
other  restriction  contained  in this Article VII is  unenforceable,  it is our
intention  that same shall not thereby be terminated but shall be deemed amended
to delete  therefrom  such  provision  or portion  adjudicated  to be invalid or
unenforceable  or, in the alternative,  such judicially  substituted term may be
substituted therefor.

                                  ARTICLE VIII
                                      TERM

     8.1 This Agreement shall be for a term (the "Initial  Term")  commencing on
January 1, 2004 (the  "Commencement  Date") and terminating on December 31, 2005
(the  "Expiration  Date"),  and  renewable  as  provided  for  herein,  for  one
additional period of one year.

                                   ARTICLE IX
                                   TERMINATION

     9.1 The  Company  may  terminate  this  Agreement  by  giving a  Notice  of
Termination to the Employee in accordance with this Agreement:

     a. For Disability;

     b. For Cause.

     c. Without Cause.

     9.2 Employee may terminate this Agreement by giving a Notice of Termination
to the Company in accordance with this  Agreement,  at any time, with or without
good reason.

     9.3 If the Employee's employment with the Company shall be terminated,  the
Company shall pay and/or provide to the Employee the following  compensation and
benefits  in lieu of any other  compensation  or  benefits  arising  under  this
Agreement or otherwise:

     a. if the Employee was terminated by the Company for Cause, or the Employee
terminates, the Accrued Compensation.

     b. if the  Employee  was  terminated  by the  Company for  Disability,  the
Accrued  Compensation,  the  Continuation  Benefits  from the  Termination  Date
through the period ending three (3) months thereafter, and Base Salary, from the
Termination Date through the period ending three (3) months thereafter; or

     c.  if  termination   was  due  to  the  Employee's   death,   the  Accrued
Compensation;  and  Employee's  pro rata bonus for the fiscal  year in which the
date of death occurred; or

<PAGE>


     d. if the Employee was  terminated by the Company  without  cause,  (i) the
Accrued  Compensation;  (ii) the Employee's Base Salary to the end of the fiscal
year in which such termination occurs,  provided,  however;  that such period of
payment  shall not be less than three (3) months if such  termination  occurs in
fiscal 2004; (iii) the Continuation  Benefits;  and (iv) the Pro Rata Bonus; and
further, all conditions to the vesting of outstanding Incentive Stock Awards and
Employee  Stock Options  granted to the Employee under Articles XI and XII shall
be deemed void and all such awards  shall be  immediately  and fully  vested and
exercisable.

     9.4 The amounts payable under this Section 9, shall be paid as follows:

     a. Accrued  Compensation  shall be paid within five (5) business days after
the Employee's Termination Date (or earlier, if required by applicable law).

     b. If the  Continuation  Benefits are paid in cash,  the payments  shall be
made on the first day of each month during the Continuation  Period (or earlier,
if required by applicable law).

     c. The Base Salary through the Expiration Date, shall be paid in accordance
with the  Company's  regular pay periods (or earlier,  if required by applicable
law).

     9.5 Notwithstanding the foregoing, in the event Employee is a member of the
Board  of  Directors  on the  Termination  Date,  the  payment  of any  and  all
compensation due hereunder, except Accrued Compensation, and Employee's right to
exercise any Employee  Stock Option  after the  Termination  Date,  is expressly
conditioned on Employee's  resignation  from the Board of Directors  within five
(5) business days of the Termination Date.

         9.6 The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Employee in any subsequent employment except as
provided in Sections 1.4.


                                    ARTICLE X
                         TERMINATION OF PRIOR AGREEMENTS

     10.1 This Agreement sets forth the entire agreement between the parties and
supersedes all prior agreements, letters and understandings between the parties,
whether oral or written prior to the effective date of this Agreement.

                                  ARTICLE XVIII
                             RESTRICTED STOCK GRANTS

     11.1 As an inducement to Employee to enter into this Agreement, the Company
hereby grants to Employee  250,000  restricted  shares of the  Company's  Common
Stock, $.001 par value subject to the provisions of Section 11.2.

     11.2  Subject to the terms and  conditions  of the  Company's  1996  Senior
Management  Incentive Plan (the "Plan"),  the Employee is hereby granted 250,000
restricted shares of the Company's Common Stock, $.001 par value (the "Shares").
One-third of such Shares  shall vest one year after the date of this  Agreement,
one-third of such Shares shall vest two years after the date of this  Agreement,
and one- third of such  Shares  shall vest  three  years  after the date of this
Agreement.  If Employee renders  continuous service to the Company from the date
hereof to a vesting date, on each such vesting date the Company shall deliver to
Employee such number of shares of Common Stock as shall vest on such date.

     11.3 In the event of a Change of Control,  as defined in Section  1.3,  the
conditions to the vesting of any outstanding  Restricted Stock Awards granted to
the  Employee  under this  Article XI shall be deemed  void and all such  Shares
shall be immediately and fully vested and delivered to the Employee.

<PAGE>



                                   ARTICLE XII
                                  STOCK OPTIONS

     12.1 As an inducement to Employee to enter into this  Agreement the Company
hereby grants to Employee  options to purchase  shares of the  Company's  Common
Stock, $.001 par value, as follows:

     Subject to the terms and conditions of the Company's 2000 Employees'  Stock
Option Plan (the "Plan"),  and the terms and  conditions  set forth in the Stock
Option Certificate which are incorporated  herein by reference,  the Employee is
hereby granted options to purchase 500,000 shares of the Company's Common Stock,
of which  250,000  options  shall be  exercisable  at $.50 per share and 250,000
options shall be exercisable at $.75 per share.  One-third of such options shall
vest on the first anniversary of this Agreement, one-third of such options shall
vest on the second anniversary of this Agreement,  and one-third of such options
shall vest on the third anniversary of this Agreement. The options shall contain
such other terms and conditions as set forth in the stock option agreement.  The
foregoing  options shall be qualified as incentive  stock options to the maximum
as allowed by law.  The  Options  provided  for herein are not  transferable  by
Employee and shall be exercised only by Employee, or by his legal representative
or executor, as provided in the Plan.

     12.2 In the event of a Change of Control,  as defined in Section  1.3,  the
conditions to the vesting of any outstanding Employee's Stock Options granted to
the  Employee  under this  Article XII shall be deemed void and all such options
shall be immediately and fully vested and exercisable.

                                  ARTICLE XIII
               ARBITRATION AND INDEMNIFICATION; FEES AND EXPENSES

     13.1 Any dispute  arising out of the  interpretation,  application,  and/or
performance of this Agreement with the sole exception of any claim,  breach,  or
violation arising under Articles VI or VII hereof shall be settled through final
and binding  arbitration  before a panel of arbitrators  in accordance  with the
rules of the  National  Association  of  Securities  Dealers (the  "NASD").  Any
judgment  upon any  arbitration  award may be entered  in any court,  federal or
state,  having competent  jurisdiction of the parties before a single arbitrator
in the  State  of New  Jersey  in  accordance  with the  Rules  of the  American
Arbitration  Association.  The  arbitrators  shall be selected by the NASD.  Any
judgment  upon any  arbitration  award may be entered  in any court,  federal or
state, having competent jurisdiction of the parties.

     13.2 The Company hereby agrees to indemnify,  defend, and hold harmless the
Employee for any and all claims arising from or related to his employment by the
Company at any time  asserted,  at any place  asserted,  to the  fullest  extent
permitted  by law,  except  for  claims  based on  Employee's  fraud,  deceit or
wilfulness.  The Company  shall  maintain  such  insurance as is  necessary  and
reasonable  to protect the Employee  from any and all claims  arising from or in
connection  with his  employment  by the Company  during the term of  Employee's
employment  with the Company and for a period of six (6) years after the date of
termination  of employment  for any reason.  The provisions of this Section 12.2
are in  addition  to and not in lieu of any  indemnification,  defense  or other
benefit to which Employee may be entitled by statute, regulation,  common law or
otherwise.

     13.3 The Company shall pay all reasonable  legal fees and related  expenses
(including the costs of arbitrators, experts, evidence and counsel) incurred by,
the Employee as they become due as a result of (a) the Employee's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment) in violation of this Agreement,
or (b) the Employee  seeking to obtain or enforce any right or benefit  provided
by this Agreement.

                                   ARTICLE XIV
                                  SEVERABILITY

     14.1  If any  provision  of  this  Agreement  shall  be  held  invalid  and
unenforceable,  the remainder of this  Agreement  shall remain in full force and
effect.  If any  provision  is held  invalid or  unenforceable  with  respect to
particular circumstances,  it shall remain in full force and effect in all other
circumstances.
<PAGE>

                                   ARTICLE XV
                                     NOTICE

     15.1  For  the   purposes  of  this   Agreement,   notices  and  all  other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  personally  delivered  or sent by certified
mail,  return receipt  requested,  postage prepaid,  addressed to the respective
addresses  as set  forth  below or to any such  other  address  as the  party to
receive the notice  shall  advise by due notice  given in  accordance  with this
paragraph . All notices and communications shall be deemed to have been received
on the date of delivery  thereof or on the third  business day after the mailing
thereof,  except that notice of change of address  shall be effective  only upon
receipt.

     15.2 The current addresses of the parties are as follows:

        IF TO THE COMPANY:                First Montauk Financial Corp.
                                          Parkway 109 Office Center
                                          328 Newman Springs Road
                                          Red Bank, New Jersey 07701
                                          Att. Chief Counsel

        With a copy to:                   Victor J. DiGioia, Esq.
                                          Goldstein & DiGioia, LLP
                                          45 Broadway
                                          New York, NY 10006

        IF TO THE EMPLOYEE:               Victor Kurylak
                                          26 Meadow Lane
                                          Lebanon, New Jersey 08833

                                   ARTICLE XVI
                                     WAIVER

     16.1 The waiver by either party of any breach or violation of any provision
of  this  Agreement  shall  not  operate  or be  construed  as a  waiver  of any
subsequent breach of construction and validity.

                                  ARTICLE XVII
                                  GOVERNING LAW

     17.1 This  Agreement has been  negotiated  and executed in the State of New
Jersey which shall govern its construction and validity.

                                  ARTICLE XVIII
                                  JURISDICTION

     18.1 Any or all actions or proceedings  which may be brought by the Company
or  Employee  under this  Agreement  shall be  brought in courts  having a situs
within the State of New Jersey, and Employee and the Company each hereby consent
to the  jurisdiction  of any local,  state,  or federal court located within the
State of New Jersey.

                                   ARTICLE XIX
                                ENTIRE AGREEMENT

     19.1 This  Agreement  contains  the entire  agreement  between  the parties
hereto.  No change,  addition,  or  amendment  shall be made  hereto,  except by
written agreement signed by the parties hereto.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.

                                            FIRST MONTAUK FINANCIAL CORP.



                                            By:________________________________




                                            -----------------------------------
                                                        Victor Kurylak
                                                           Employee



<PAGE>
                                                              Exhibit 14



                           CODE OF ETHICS AND CONDUCT
                                       FOR
                          FIRST MONTAUK FINANCIAL CORP.


     Adopted by the Board of Directors of First Montauk  Financial  Corp., a New
Jersey corporation ("First Montauk"), on March 29, 2004.

     First  Montauk  Financial  Corp.  and its  subsidiaries  are  committed  to
fostering  an  environment   throughout  our  organization   that  supports  and
reinforces our  commitment to the highest  ethical  standards.  Each of us has a
singular duty to First Montauk to engage in business conduct consistent with the
highest legal,  moral and ethical  standards.  To that end, we have adopted this
Code of Ethics. This Code of Ethics applies to our Board of Directors, executive
officers and employees  alike. Any waiver of the Code for directors or executive
officers  must be approved by the Audit  Committee of First  Montauk's  Board of
Directors and will be promptly disclosed to our shareholders.

     We make business decisions every day at all levels of our organization.  We
are  accountable  for making good decisions and for the outcomes those decisions
produce.  This Code of Ethics  establishes  guidelines  and standards for how we
conduct  business and make business  decisions.  We apply these  guidelines  and
standards  in both  letter  and  spirit.  Where  the  letter  of the Code is not
specific,  the spirit of the Code will  prevail.  Experience  and good  business
judgment must be applied when following the Code. By the same token, the Code is
not a substitute for legal advice and cannot cover all possible  situations.  If
you have any questions  concerning  the Code of Ethics or its  application  in a
particular  instance,  you should consult with a member of senior  management or
our outside legal counsel.

     The Code's  guidelines  and  standards are intended to provide a foundation
that will help us:

        o       maintain a strong ethical climate;
        o       provide clear channels of communication for employees and
                clients; and
        o       promote ethical decision making at all levels within the
                organization.

     Each First Montauk employee must abide by our Code of Ethics.  Adherence to
the Code of Ethics is a  condition  of  employment.  Violators  are  subject  to
disciplinary  action,  up to and including  dismissal from the Company for cause
and criminal prosecution.

1.  Introduction to and  Administration  of the First Montauk Code of Ethics and
Conduct

     1.1 Introduction. First Montauk has adopted this Code of Ethics and Conduct
(the  "Code") to advise all First  Montauk  Employees  of the  ethical and legal
standards  that we expect you to observe when dealing with First  Montauk,  your
First Montauk  colleagues,  our  customers  and our vendors.  When you encounter
ethical or legal  issues where you are not certain  about the correct  course of
action, you should apply the principles  described in this Code as guideposts in
deciding  how to proceed.  We have  adopted  this Code to give you  guidance for
resolving  these  questions.  When you are in doubt  about the  correct  or best
course of action,  you should  always  consider  consulting  your manager or our
General Counsel  director for guidance.  First Montauk expects all First Montauk
Employees  to adhere to this  Code and to  comply  with all legal  requirements.
Accordingly,  we have established a procedure for reporting suspected violations
of the Code.  Any  violations  of the Code may  result in  disciplinary  action,
including termination of employment.  These matters are described in more detail
below.  Throughout this Code, we use the terms "First Montauk Employees",  "you"
and "your" to refer to all First Montauk  employees,  directors and  independent
contractors,  and the terms "First  Montauk",  the "company",  "we" and "our" to
refer to First Montauk and its subsidiaries.

<PAGE>


1.2 Administration

     1.2.1 Ongoing Review of Compliance.  We require all First Montauk Employees
to comply with this Code.  Upon your receipt of this Code, and also from time to
time as we deem to be  necessary,  we may require you to sign an  acknowledgment
that you have  read and  understood  this  Code  and  agree to  comply  with its
provisions. We reserve the right to monitor the ongoing compliance by any or all
First  Montauk  Employees  with  this  Code  and to  investigate  any  suspected
violations.  If  substantiated,  these  violations  could result in disciplinary
action, including immediate termination of employment.

     1.2.2 Reporting of Suspected Violations. All First Montauk Employees are to
report  information  about suspected  violations of this Code by any other First
Montauk  Employee,  regardless  of the identity or position of the person who is
the subject of such report, to the attention of our General Counsel or the Audit
Committee  of the Board of  Directors.  If you suspect  improper  accounting  or
auditing  matters,  you should bring such  information  to the  attention of our
General  Counsel  or a member  of our  Audit  Committee.  To  contact  our Audit
Committee  or to  submit  a report  to  them,  please  contact  Audit  Committee
Chairman.  With respect to any  suspected  violation,  you may make an anonymous
report through the Assistant to the President.

     First Montauk will treat all information in a confidential  manner and will
not take any acts of  retribution  or  retaliation  against  any  First  Montauk
Employee for making a report.  As the failure to report wrongful  conduct may be
interpreted  as  condoning  such  actions,  the failure to report  knowledge  of
wrongdoing may result in disciplinary  action against any First Montauk Employee
who fails to report.

     1.2.3  Non-Retaliation.  Retaliation  in any form against an First  Montauk
Employee  who reports a  violation  of this Code (even if the report is mistaken
but was  submitted  in good  faith) or who  assists  in the  investigation  of a
reported  violation  is a serious  violation of this Code.  Acts of  retaliation
should be reported immediately and may result in severe disciplinary action.

     1.2.4 Investigation of Suspected  Violations.  Suspected violations will be
investigated  under the supervision of our General Counsel or Audit Committee as
deemed  appropriate.  All First Montauk  Employee's are expected to cooperate in
the  investigation  of reported  violations.  In order to protect the privacy of
persons involved in investigations,  persons investigating a suspected violation
will use  their  best  efforts  to keep  confidential,  the  identity  of anyone
reporting a suspected  violation or  participating in an  investigation,  unless
disclosure is required by law or is otherwise in the company's  best  interests.
Persons involved in an investigation are obliged to act in the best interests of
First  Montauk  as a company  and not on behalf of any First  Montauk  Employee,
including executive officers. Our Board of Directors has ultimate responsibility
for final interpretation of this Code and for determining whether any violations
of this Code have occurred.

     1.2.5 Disciplinary  Action. If we determine,  in our good faith discretion,
that any First Montauk  Employee has violated any  provision of this Code,  such
First  Montauk  Employee  may  be  subject  to  disciplinary  action,  including
termination of employment, without prior warning.

     1.2.6  Amendments  to this  Code;  Disclaimers.  This Code may be  revised,
changed or amended at any time by our Board of Directors. Following any material
revisions or updates,  an amended  version of this Code will be  distributed  to
you, and will  immediately  supercede the prior version of this Code. We may ask
you to sign an  acknowledgment  confirming that you have read and understood the
revised  version of the Code, and that you agree to comply with its  provisions.
This Code  reflects  general  principles  to assist First  Montauk  Employees in
making  ethical  decisions  and cannot,  and is not intended to,  address  every
specific  situation  in which we may find it  appropriate  to take  disciplinary
action.  This Code is not intended to create any  contract  (express or implied)
with you,  including without  limitation any employment  contract,  and is not a
promise that your employment will be not terminated except for cause.

     1.2.7  Special  Provisions  Applicable  to  First  Montauk  Employees  with
Financial  Reporting  Obligations.  Given the  important  position  of trust and
authority  that  they  occupy,  our Chief  Executive  Officer,  Chief  Financial
Officer,  Chief Operating  Officer,  the heads of our subsidiaries and operating
divisions  and First  Montauk  Employees  involved  in the  Company's  financial
reporting function  (collectively,  the "Financial Reporting  Personnel") should
use the utmost of discretion and caution in interpreting and applying this Code.
In the  event  that any  Financial  Reporting  Personnel  wishes  to engage in a
proposed  action that is not consistent with the Code, such person must obtain a
waiver of the relevant Code provisions in advance from our Audit Committee. U.S.
federal law requires  First  Montauk to make public  disclosure of our Financial
Reporting  Personnel's  compliance  with the Code.  Therefore,  we will publicly

<PAGE>


report on a Current  Report on Form 8-K any waivers of any provision of the Code
granted  by our  Board  of  Directors  to  any  Financial  Reporting  Personnel.
Similarly,  violations of the Code by our Financial Reporting Personnel may also
be  immediately  reported  on Form  8-K.  Additional  provisions  of  this  Code
pertaining solely to Financial Reporting Personnel are set forth in Section 5.

2.       Conflicts of Interest

     2.1 Generally . All First Montauk  Employees  have a duty of loyalty to act
in the best  interests of the company.  The  business  decisions  and actions of
First Montauk  Employees must never be influenced by personal  considerations or
personal relationships. First Montauk Employees should avoid any relationship or
activity that might impair, or appear to impair, their ability to make objective
and fair business decisions.  Generally,  a conflict of interest arises whenever
your personal interests diverge from your  responsibilities  to First Montauk or
from First  Montauk's best  interests.  First Montauk  persons must not take for
themselves  personally  opportunities  they  discover  through  the use of First
Montauk  property,  information  or  position  in  violation  of  First  Montauk
policies. In addition, First Montauk property,  information or position must not
be used for  personal  gain.  No First  Montauk  person may  compete  with First
Montauk.  Examples of when a conflict of interest may occur  include  situations
where a  family  member  or  close  personal  friend  is  involved  in  business
relationships with you, either inside or outside the company.  Other examples of
potential conflicts of interest include, but are not limited to:

o       employment by an actual or potential competitor, customer, vendor or
        regulator while you are employed by First Montauk;

o       acceptance of gifts, payments, products or anything of value from anyone
        seeking to do business with First Montauk;

o       placement of First Montauk business with an entity in which you or a
        family member has a financial interest;

o       Appropriating or diverting to yourself or others any business
        opportunity or idea in which First Montauk might have an interest; and

o       a significant ownership interest in a First Montauk competitor.

     In such situations,  or where even the appearance of a conflict of interest
may exist, seek guidance from your manager or our General Counsel.

     2.2 Use of Company Assets.  You are responsible for the proper use of First
Montauk's  assets and  property,  as well as its  proprietary  information.  Our
offices, equipment,  supplies and other resources may not be used for activities
which are not  related to your  employment  with First  Montauk,  except for any
activities  that have been approved in writing in advance by us, or for personal
usage that is minor in amount and  reasonable.  If you are found to be  engaging
in,  or  attempting,  theft of any First  Montauk  property,  including  without
limitation,  documents,  equipment,  intellectual property, personal property of
other employees,  you may be subject to immediate termination of your employment
and we reserve the right to refer the matter for criminal proceedings. We expect
you to report  any  theft or  attempted  theft to your  manager  or our  General
Counsel.

     Proprietary marks,  slogans,  logos or other devices used to identify First
Montauk and its proprietary products and technologies are important and valuable
assets which  require  discretion  in their use. You may not  negotiate or enter
into any agreement concerning First Montauk's trademarks, service marks or logos
without first consulting an authorized  officer of the Company.  We also respect
the  intellectual  property  rights of others,  and any  proposed  name of a new

<PAGE>


product or  offering  intended to be sold or  provided  to  customers  should be
submitted  to the  appropriate  authorized  officer for  clearance  prior to its
adoption  and use.  Similarly,  using the  trademark  or service mark of another
company for marketing  purposes (even one with whom First Montauk has a business
relationship),  requires clearance or approval.  You must avoid the unauthorized
use of copyrighted or patented  materials of others and should ask an authorized
officer if you have any questions  regarding the permissibility of photocopying,
excerpting,  electronically  copying or otherwise using  copyrighted or patented
materials.  In  addition,  First  Montauk does not permit the use of software or
other  devices  whose  primary  purpose is the  circumvention  or  violation  of
another's  intellectual property rights. Please contact the General Counsel with
questions  about the proposed use of another party's  intellectual  property and
for  appropriate  contracts.  All copies of work that is  authorized  to be made
available for ultimate  distribution  to the public  should bear the  prescribed
form of copyright notice.

     Proprietary  information  includes  business,  marketing and service plans,
unpublished  financial data and reports,  databases,  customer  information  and
salary and bonus  information  as well as  intellectual  property  such as trade
secrets, patents, trademarks and copyrights. Unauthorized use or distribution of
this material is a violation of First Montauk policy. It may also be illegal and
result  in civil  and  criminal  penalties.  Intellectual  property  refers to a
company's intangible assets, such as the company's business methods, inventions,
trademarks and publications. All inventions and copyrightable material conceived
by an  employee  within  the scope of his or her  employment  are the  exclusive
property  of First  Montauk  and as a  condition  of  continued  employment  the
employee  must do  whatever  is  necessary  to  transfer  to First  Montauk  the
technical ownership of such inventions or materials.  All employees are required
as a condition of their  employment to disclose to First Montauk all  inventions
and copyrightable  materials that are conceived,  developed or otherwise pursued
by them during their employment.  It is the  responsibility of every employee to
protect  First  Montauk's  intellectual  property  by  following  the  company's
policies and procedures relating to its intellectual property.

     2.3 Gifts, Gratuities and Entertainment.  You may not offer money, gifts or
other items or products of value to  customers or  potential  customers  for the
purpose   of   securing   a   contract   or   obtaining   favorable   treatment.
Business-connected  favors or gifts may not be extended to  customers or vendors
(current or prospective), unless they (a) are consistent with customary business
practices; (b) do not have substantial monetary value and would not be viewed as
improper  by others;  and (c) do not  violate  applicable  laws or  regulations.
Business entertainment in the form of meals and beverages or other entertainment
may be offered  only if these  activities  and related  expenses  are modest and
infrequent.

     You should decline any gift, favor, entertainment or anything else of value
from  current  or  prospective  customers,   vendors  or  contractors  or  their
representatives except for (a) gifts that do not have substantial monetary value
given at holidays or other special occasions and (b) reasonable entertainment at
lunch,  dinner or business  meetings  where the return of the  expenditure  on a
reciprocal  basis is  likely  to occur and  would be  properly  chargeable  as a
business expense.  Other routine  entertainment that is business-related such as
sports  outings or  cultural  events is  acceptable  under this  policy  only if
reasonable,  customary and not  excessive.  If you question the propriety of any
gift, consult with your manager or our General Counsel.

     2.4 Outside Business Activities; Ownership of Securities. All First Montauk
employees must report all outside business  activities,  including  ownership of
privately held stock and limited partnership interests, to their managers and to
the Office of General  Counsel so a review for  potential  conflicts of interest
can be conducted. Outside business activities and interests include serving as a
partner or a stockholder  in another  business,  as an officer in a family-owned
corporation or as an outside director of another company. The appropriateness of
a First Montauk  employee  engaging in these and other types of outside business
activities,  interests  or  investment  opportunities  depends on many  factors,
including  the nature and extent of the  outside  interest,  the  potential  for
conflicts  of  interest,  and the  relationship  between  First  Montauk and the
outside entities and the duties involved.  A First Montauk employee must receive
prior written approval for any outside business activity and private investment.
You have an obligation to keep First Montauk  apprised of these  activities  and
provide updated  information about the outside interests.  This information will
be  reviewed  and  monitored  by the  employee's  business  manager and by First
Montauk  compliance  personnel.  Service  by any  First  Montauk  employee  as a
director,  officer or employee  of any other  corporation  or  business  must be
authorized  in  writing by the Office of General  Counsel.  Unless  approved  in
writing,  no First Montauk employee may serve as a director of a publicly traded
company.

     Directors of First Montauk should inform the Corporate  Secretary  prior to
accepting  appointments  to the boards of  directors  or advisory  boards of any
public or privately held company. The disclosure requirements and other possible
conflict-of-interest issues involved must be analyzed and discussed.

3.       Laws and Regulations

     3.1  Generally.  All  First  Montauk  Employees  are  to  comply  with  all
applicable  local,  state and federal laws and  regulations,  both  domestic and
international,  and  refrain  from  illegal,  dishonest  or  unethical  conduct.
Although laws and regulations may sometimes be difficult to interpret, we expect
you to make a good-faith  effort to follow both the letter and the spirit of the
law. You must consult  your manager or our Human  Resources  director if you are
uncertain  as to whether a specific act or omission is legal.  In addition,  all
First Montauk Employees are to comply with all applicable First Montauk policies
and  procedures.  This  includes,  but is not limited to, our  policies on equal
opportunity,  harassment,  drug-free  workplace,  computer usage and information
technology,  data protection,  expense  reimbursement and travel, as well as our
internal  financial  controls  and  procedures.  We may  modify or update  these
policies  and  procedures  in the  future,  and adopt new company  policies  and
procedures  from time to time. You must ensure that you remain aware of all such
changes to these  policies.  You are also  expected  to observe the terms of any
Non-Disclosure,  Non-Solicitation or Non-Compete Agreement, Employment Agreement
or other similar  agreement that applies to you. If you previously signed one of
these agreements with First Montauk, it remains in full force and effect.
<PAGE>


     3.2 Bribes.  Bribery is illegal and subject to criminal penalties.  You may
not give any bribes,  kickbacks or other similar considerations to any person or
organization  to attract  business.  All decisions  regarding the  purchasing of
materials,  supplies,  products  and  services  must  be made  on the  basis  of
competitive  price,  quality and performance,  and in a way that preserves First
Montauk's  integrity.  Fees,  commissions  or  other  amounts  paid  to  outside
consultants,  agents  or other  third  parties  must be fully  disclosed  to our
General Counsel and must be legal, proper and reasonable.

     3.3  International  Operations.  You are  expected to comply with the legal
requirements  and ethical  standards of each country in which you conduct  First
Montauk  business,  as well as with all U.S. laws applicable in other countries.
The U.S. Foreign Corrupt  Practices Act (FCPA) applies to business  transactions
both inside the United States and in other countries. Its requirements relate to
accurate and complete financial recording,  transactions with foreign government
officials  and  restrictions  on the  use of  funds  for  unlawful  or  improper
purposes. The FCPA makes illegal any corrupt offer, payment,  promise to pay, or
authorization  to pay any  money,  gift,  or  anything  of value to any  foreign
official, or any foreign political party, candidate or official, for the purpose
of:

o       Influencing any act, or failure to act, in the official capacity of that
        foreign official or party; or

o       Inducing the foreign official or party to use influence to
        affect a decision of a foreign government or agency, in order
        to obtain or retain business for anyone, or direct business to
        anyone.

     Because  violation  of the  FCPA  can  bring  severe  penalties,  including
criminal fines for the company and  individuals  and jail terms, it is essential
that you  become  familiar  with the  FCPA's  requirements  if you are living or
working in a foreign country.  Other statutes that may affect our  international
operations  include,   but  are  not  limited  to,  the  Anti-Bribery  and  Fair
Competition Act and the Export Administration Act. All supervisory personnel are
expected  to  monitor  continued  compliance  with  these  laws  to  ensure  our
compliance. If you have any questions regarding these legal requirements, please
contact your manager or our General Counsel.

     3.4 Political  Activity.  You should not make political  contributions in a
way that might appear to be an endorsement or contribution by First Montauk.  We
will not reimburse you for political contributions under any circumstances.

     3.5 Antitrust Considerations. Antitrust laws prohibit agreements or actions
that  restrain  trade or reduce  competition.  Violation of  antitrust  laws can
result in severe  civil  and  criminal  penalties,  including  imprisonment  for
individuals,  and  First  Montauk  can be  subjected  to  substantial  fines and
monetary awards.  First Montauk as a company avoids conduct that may even appear
to be questionable  under antitrust laws and expects all First Montauk Employees
to carry out company business  consistent with this policy. In all contacts with
our  competitors,   you  are  expected  to  avoid  discussing   prices,   costs,
competition, market share, marketing plans or studies, and any other proprietary
or  confidential  information.  Examples  of  agreements  or  arrangements  with
competitors  which should  therefore be avoided  include:  (a)  Agreements  that
affect the price or other terms or conditions of sale; (b) Agreements  regarding
the customer to whom First Montauk  will,  or will not,  sell its products;  (c)
Agreements to refuse to buy from  particular  vendors;  and (d) Agreements  that
limit the types of products which First Montauk will provide. Furthermore, First
Montauk cannot coerce  customers into complying with  restrictive  arrangements.
Therefore,  you should not  negotiate  agreements  with  customers  without  the
approval  of an  authorized  company  officer  which  (a)  require  or  prohibit
customers from purchasing all of their  requirements from First Montauk or other
companies  or (b)  require  customers  to buy one  First  Montauk  product  as a
condition  of obtaining  another.  In all cases where there is question or doubt
about a particular activity or practice, First Montauk Employees should promptly
contact our General Counsel.

     3.6 Fair Business  Practices;  Relationships With Competitors.  Every First
Montauk  person  must  deal  fairly  with  First  Montauk's  clients,   vendors,
competitors  and fellow  employees.  No First  Montauk  person  may take  unfair
advantage of anyone through unethical or illegal measures, such as manipulation,
concealment,  abuse of  privileged  information,  misrepresentation  of material
facts or any other unfair dealing practices. It is improper, and may be illegal,
to hire  competitors'  employees  for the purpose of obtaining  trade secrets or
other proprietary  information.  It is also against First Montauk policy to seek
increased sales by disparaging the products and services of other companies. Our
goal is to  increase  business  by  offering  superior  products  and  services.
Accordingly,  all First Montauk advertising must be truthful,  not deceptive and
in full compliance with applicable laws,  regulations and company policies.  All
advertising and marketing  materials must be approved pursuant to the procedures
established in each of the business units across the company.

     All First Montauk persons must guard against unfair  competitive  practices
and exercise extreme caution to avoid conduct that might violate  antitrust laws
or other rules  prohibiting  anti-competitive  activities.  Violations may carry
criminal  penalties.  If a competitor or third party  proposes to discuss unfair
collusion,    price-fixing   or   other   anti-competitive    activities,   your
responsibility is to object, terminate the conversation or leave the meeting and
report the incident  promptly to the Office of General  Counsel.  Employees must
avoid  any  discussion   with   competitors   of  proprietary  or   confidential
information,  business  plans or topics such as pricing or sales policies -- the
discussion  of which  could be viewed as an attempt to make  joint  rather  than
independent business decisions.
<PAGE>


     3.7 Securities Laws and Insider Trading. First Montauk is a publicly-traded
company - meaning that our  securities  are sold in the public  marketplace.  We
files reports with the  Securities  and Exchange  Commission.  As an employee of
First Montauk you are subject to First Montauk's policy against insider trading.
Simply stated,  material,  non-public information is not to be used for personal
gain,  and you should not trade in First  Montauk  stock when you  possess  such
information.  If you have any question  regarding  whether it is  appropriate to
engage in any transaction, contact the General Counsel.

     The U.S.  securities  laws forbid an investor  from  purchasing  or selling
securities based upon "inside" information not available to the other party. The
consequences  of  insider  trading  violations  can  be  severe.  First  Montauk
Employees who trade on inside  information,  or who  communicate (or "tip") this
information  to  others  so that  they may  trade,  may face  substantial  civil
penalties, criminal fines and imprisonment. Additionally, First Montauk may also
face severe  legal  consequences,  including,  among other  things,  substantial
criminal penalties.

     First  Montauk  Employees who have  material,  nonpublic  (i.e.,  "inside")
information  about the company  should not buy or sell First Montauk  securities
until  a  reasonable  time  after  the  inside  information  has  been  publicly
disclosed.  You also should not disclose  inside  information  to others outside
First Montauk until a reasonable  time after the  information  has been publicly
disclosed.  In addition, it is never appropriate for you to advise others to buy
or  sell  First  Montauk  securities.  We  further  believe  that  it is  highly
inappropriate  for any First Montauk  person to "sell short" First Montauk stock
or engage in other  transactions  where the person will earn a profit based on a
decline in First  Montauk's  stock  price.  These rules also apply to the use of
material,  nonpublic information about other companies (including,  for example,
our customers, competitors and potential business partners). In addition to you,
these rules apply to your spouse, children, parents and siblings, as well as any
other family members living with you in your household.

     3.8 Government  Contracting.  First Montauk  frequently  does business with
federal,  state or local  government  agencies in the United States and in other
countries. All First Montauk Employees engaged in business with these government
entities must comply with specific rules and  regulations  concerning  relations
with these entities. Important considerations for doing business with government
entities include:

o                 Not offering or accepting kickbacks, bribes, gifts, or
                  anything else of value with the intent of obtaining favorable
                  treatment from the recipient (note that a gift that is
                  customary in the private sector may be impermissible to a
                  government entity); and

o                 Not improperly soliciting or obtaining confidential
                  information, such as sealed competitors' bids, from government
                  officials prior to the award of a contract.

     3.9 Retention of Documents.  Certain documents and records must be retained
for specific periods of time to comply with legal and regulatory requirements or
contractual  obligations.   You  are  to  comply  with  all  document  retention
requirements applicable to your work. If you are uncertain whether the documents
or records you are handling are subject to these  requirements,  please  consult
with your manager or our General  Counsel.  If at any time you become aware that
any  document or record may be required to be  disclosed  in  connection  with a
lawsuit or government  investigation,  you must  preserve all possibly  relevant
documents.  This means that you must immediately  cease disposing of or altering
all  potentially  relevant  documents,  even if that  activity  is  ordinary  or
routine.  If you are uncertain  whether  documents or records under your control
should be preserved because they might relate to a lawsuit or investigation, you
should contact your manager or our General Counsel.

     3.10 Money  Laundering;  Antiterrorism  Laws.  First Montauk complies fully
with federal, state and international laws prohibiting money laundering and with
the  safeguards  against  terrorist  activity  contained in the USA Patriot Act.
Under no  circumstances  should any First Montauk  employee  participate  in any
money  laundering  activity.  In addition to severe  criminal  penalties,  money
laundering by First Montauk employees and violations of the USA Patriot Act will
result in disciplinary action, including termination. Any suspicious deposits or
any other client activity that raises questions about the source of the client's
funds should be reported  immediately  to your manager and the Office of General
Counsel.

     3.11  Cooperation  With  Investigations  and Law  Enforcement.  It is First
Montauk policy to cooperate with  government  investigators  and law enforcement
officials. Every First Montauk person must also cooperate with investigations by
non-governmental  regulators with oversight of our business,  such as securities
exchanges, as well as with internal First Montauk investigations.  All inquiries
or requests or demands  for  information  from  external  investigators  must be
immediately  referred  to the Office of General  Counsel.  The Office of General
Counsel must  coordinate  all  responses to external  investigators'  questions.
Failure to cooperate with legitimate  investigations will result in disciplinary
action, including termination.

     3.12 Privacy. First Montauk persons must comply with all applicable privacy
laws in their  handling of client  matters and client and company  records.  You
should refer any questions about the applicability of privacy laws to the Office
of General Counsel.
<PAGE>


4.                Confidentiality

     4.1 First Montauk Confidential  Information.  You will often have access to
information that is confidential and proprietary to First Montauk,  has not been
made public and constitutes trade secrets or proprietary information. Protection
of this information is critical to our success. Your obligations with respect to
our confidential trade secrets and proprietary information are:

o       Not to disclose the information outside of First Montauk;

o       Not to use the information for any purpose except to benefit First
        Montauk's business; and

o       Not to disclose the information within First Montauk, except to other
        First Montauk Employees who need to know, or use, the information and
        are aware that it constitutes a trade secret or proprietary information.

     These obligations  continue even after you leave First Montauk. If you have
previously  signed a  Non-Disclosure  Agreement,  Employment  Agreement or other
similar agreement that governs your obligations with respect to our information,
you must also follow such  agreements.  Any  documents,  papers or records  that
contain  trade secrets or  proprietary  information  are our property,  and must
remain  at  the  company.   Our  confidential   trade  secrets  and  proprietary
information may include,  information regarding our operations,  business plans,
customers,  strategies,  trade secrets, finances,  assets,  technology,  data or
other information that reveals the processes, methodologies, technology or "know
how" by which our existing or future products,  services or methods of operation
are developed or conducted.

     4.2  Confidential  Information  of Third  Parties.  In the normal course of
business,  you will  acquire  information  about  others,  including  customers,
vendors and  competitors.  We properly  gather this kind of information for such
purposes as evaluating customers' business needs,  determining  requirements and
evaluating vendors. We also collect information on competitors from a variety of
legitimate sources to evaluate the relative merits of our products and marketing
methods.  You may not use information  obtained from our customers or vendors in
any way that  harms  them or  violates  contractual  obligations  to them.  When
working with sensitive  information  about customers or vendors,  you should use
that  information  only for the purposes  for which it was  disclosed to you and
make it available only to other First Montauk  Employees with a legitimate "need
to know".

     4.3 Inadvertent Disclosure. In order to avoid the inadvertent disclosure of
any  confidential  information,  you should never discuss with any  unauthorized
person  (whether or not an First Montauk  Employee) any  information  that First
Montauk considers confidential or which we have not made public. You should also
not discuss this  information  with family members or with friends,  as they may
unintentionally pass the information on to someone else.

     4.4 Contacts  with  Reporters,  Analysts  and Other  Media.  Because of the
importance of the legal requirements regarding disclosure of certain information
to our investors,  we must ensure the accuracy of any information  regarding our
business,  financial  condition  or  operating  results  that is released to the
public. As a result,  you should not discuss internal First Montauk matters with
anyone outside of First Montauk,  except as clearly  required in the performance
of your job duties.  This  prohibition  applies  particularly to inquiries about
First Montauk made by the news media,  securities  analysts and  investors.  All
responses  to these  inquiries  must be made  only by the  following  authorized
persons: our Chief Executive Officer, Chief Financial Officer or any individuals
specifically  designated  by them.  Only these  individuals  are  authorized  to
discuss information about First Montauk with the news media, securities analysts
and  investors.  If  you  receive  inquiries  from  these  sources,  you  should
immediately refer them to one of these authorized spokespersons.

     4.5 Client Information Privacy.  First Montauk protects the confidentiality
and security of client  information.  First Montauk's  Privacy Policy for client
information provides that:

o       First Montauk does not sell or rent clients' personal information.
o       Employees may not discuss the business affairs of any client with any
        other person, except on a strict need-to-know basis.
o       First Montauk does not release client information to third parties,
        except upon a client's authorization or when permitted or required by
        law.
o       Third-party service providers and vendors with access to client
        information are required to keep client information confidential and
        use it only to provide services to or for First Montauk.

     5.  Duties of  Financial  Reporting  Personnel;  Accounting  and  Financial
Records and Disclosure

     5.1  General.  First  Montauk has a  responsibility  to maintain  complete,
accurate  and  reliable  records of our  business  and must comply with  various
disclosure  requirements  imposed by the United States  Securities  and Exchange
Commission  and by any exchange on which its  securities are listed for trading.
First Montauk's  executive officers,  the heads of First Montauk's  subsidiaries
and operating divisions and members of First Montauk's finance department have a
special role in the preparation of these reports. To satisfy these requirements,
First Montauk has implemented procedures to ensure that only proper transactions
are entered into by the Company,  that such  transactions have proper management
approval,  that such  transactions  are properly  accounted for in the books and
records of the  Company and that the reports  and  financial  statements  of the
Company  fairly and  accurately  reflect such  transactions.  All First  Montauk
Financial Reporting Personnel are to familiarize themselves with these policies,
accounting controls,  procedures and records and comply with these requirements.
Ultimately,  First  Montauk's  Financial  Reporting  Personnel bear  significant
responsibility  for the accuracy and  timeliness of  disclosures  in reports and
documents  First  Montauk files with or submits to the  Securities  and Exchange
Commission and in other public communications.
<PAGE>


     Due to these considerations,  First Montauk's Financial Reporting Personnel
bear  a  special   responsibility   for  promoting   integrity   throughout  the
organization,  with  responsibilities to stakeholders both inside and outside of
First Montauk.  These  particular  persons have a special role both to adhere to
these principles  themselves and also to ensure that a culture exists throughout
the  company as a whole that  ensures  the fair and  timely  reporting  of First
Montauk's  financial  results  and  condition.   Each  First  Montauk  Financial
Reporting Personnel agrees to:

o        Provide information that is accurate, complete, objective, relevant,
         timely and understandable to ensure full, fair, accurate, timely, and
         understandable disclosure in reports and documents that First Montauk
         files with, or submits to, government agencies and in other public
         communications.

o        Comply with rules and regulations of federal, state and local
         governments, and other appropriate private and public regulatory
         agencies.

o        Act in good faith, responsibly, with due care, competence and
         diligence, without misrepresenting material facts or allowing one's
         independent judgment to be subordinated.

o        Respect the confidentiality of information acquired in the course of
         work except when authorized or otherwise legally obligated to disclose.

o        Promptly report to the Audit Committee any conduct that the individual
         believes to be a violation of law or business ethics or of any
         provision of this Code, including any transaction or relationship that
         reasonably could be expected to give rise to such a conflict.

     5.2 Disclosures to Investors;  Financial  Reporting  Considerations.  First
Montauk is required  under U.S.  federal  securities  laws to provide the public
with periodic disclosure regarding our business and financial condition (such as
quarterly  and  annual  reports  and  materials  for  our  annual  stockholders'
meeting).  We provide  additional  disclosures to the public  through  quarterly
earnings  releases and other press  releases.  All First  Montauk  Employees who
participate in the  preparation or  dissemination  of this  information,  or who
provide  information  that  they  know may be used in the  preparation  of these
disclosures,  have a legal and  ethical  duty to ensure  that the content of the
disclosures  is  accurate,  complete  and  timely.  We have  created  disclosure
controls and procedures which are designed to ensure that all public disclosures
are accurate, complete and timely.

     To administer these controls and procedures,  First Montauk has established
a Disclosure  Committee  that reports to the Chief  Executive  Officer and Chief
Financial Officer.  The Disclosure Committee is (or certain of its members are),
among other things,  charged with reviewing First Montauk's periodic reports and
press releases.  It is the responsibility of the Committee to ensure that it has
reviewed and  disseminated all material  information  about the Company that, by
law, should be  disseminated.  You may be asked to serve on this Committee or to
assist the  Disclosure  Committee in reviewing  certain  materials in connection
with it's  responsibilities.  If you do so, you must  accomplish this faithfully
and in accordance  with all the Committee's  policies.  You should report to the
Disclosure  Committee all information  that it needs to fulfill its duties.  All
employees responsible for the preparation of First Montauk's public disclosures,
or who provide  information as part of that process,  have a  responsibility  to
ensure that such  disclosures  and  information  are  complete,  accurate and in
compliance with First Montauk's disclosure controls and procedures.

     5.3 Accounting and Financial Records.  First Montauk is required under U.S.
federal  securities laws and generally  accepted  accounting  principles to keep
books,  records and accounts that  accurately  reflect all  transactions  and to
provide an adequate system of internal accounting and controls. We expect you to
ensure that those portions of our books, records and accounts for which you have
responsibility  are valid,  complete,  accurate  and  supported  by  appropriate
documentation in verifiable form.

         You should not:

o       Improperly accelerate or defer expenses or revenues to achieve financial
        results or goals;
o       Maintain any undisclosed or unrecorded funds or "off the book" assets;
o       Establish or maintain improper, misleading, incomplete or fraudulent
        accounting documentation or financial reporting;
o       Record revenue for any project that has not fully complied with First
        Montauk's revenue recognition guidelines;
o       Make any payment for purposes other than those described in the
        documents supporting the payment;
o       Submit or approve any expense report where you know or suspect that any
        portion of the underlying expenses were not incurred or are not
        accurate; or
o       Sign any documents believed to be inaccurate or untruthful.


<PAGE>


     All First  Montauk  Employees  who exercise  supervisory  duties over First
Montauk's assets or records are expected to establish and implement  appropriate
internal controls over all areas of their responsibility.  This will help ensure
(a) the safeguarding of First Montauk's assets; (b), that business  transactions
are properly  authorized  and carried out, and (c) the accuracy of our financial
records and reports.  We have  adopted  various  types of internal  controls and
procedures  as  required  to  meet  internal  needs  and  applicable   laws  and
regulations.  You are to adhere to these  controls and  procedures to assure the
complete and accurate  recording of all transactions.  Any accounting entries or
adjustments that materially depart from generally accepted accounting principles
must  be  approved  by our  Audit  Committee  and  reported  to our  independent
auditors.  You must not interfere with or seek to improperly influence (directly
or  indirectly)  the review or  auditing of our  financial  records by our Audit
Committee or independent auditors.

     All  business   transactions   require   authorization  at  an  appropriate
management  level.  Any  employee  who is  responsible  for the  acquisition  or
disposition of assets for the company, or who is authorized to incur liabilities
on the company's  behalf,  must act prudently in exercising  this  authority and
must be careful not to exceed his or her  authority.  Equally  important,  every
employee  must help  ensure  that all  business  transactions  are  executed  as
authorized.  Transactions must be properly  reflected on the company's books and
records.

     If you become aware of any questionable  transaction or accounting practice
concerning  First  Montauk  or our  assets,  we expect  you to report the matter
immediately  to  our  Chief  Financial  Officer  or to a  member  of  our  Audit
Committee.  In addition, we expect you to report all material  off-balance-sheet
transactions,  arrangements and obligations,  contingent or otherwise, and other
First Montauk  relationships with unconsolidated  entities or other persons that
may have  material  current or future  effects  on our  financial  condition  or
results of operations to our Chief Financial Officer or to a member of our Audit
Committee.

     5.5  Confidentiality   Considerations;   Securities  Law  Compliance.   All
Financial  Reporting  Personnel  will have  special  access  to First  Montauk's
confidential  financial  information.  This may include  non-public  reports and
analyses,   pro-forma  financial  statements  and  other  draft  or  preliminary
financial information.  First Montauk's Financial Reporting Personnel should (i)
never  disclose this  information  to  individuals  outside the Company and (ii)
caution  individuals  within the Company to whom you provide such information to
carefully  maintain  its  confidentiality  and  prevent  its  disclosure.  First
Montauk's Financial Reporting Personnel must also apply the utmost consideration
to transactions  involving First Montauk securities in light of their possession
to  confidential  financial  information.   Financial  Reporting  Personnel  are
therefore  expected to notify our Chief  Financial  Officer prior to engaging in
any  transactions   involving  First  Montauk  securities  in  order  to  ensure
compliance with all securities laws and  regulations.  Similarly,  First Montauk
imposes periodic blackout periods during which Financial Reporting Personnel may
not engage in  transactions  involving First Montauk  securities.  All Financial
Reporting  Personnel should notify our Chief Financial Officer before purchasing
or selling any First Montauk  securities in order to obtain  clearance  from the
Chief  Financial  Officer  that  the  proposed  transaction  complies  with  all
securities laws and regulations and First Montauk policies.

6.       Our Responsibilities to Each Other

     6.1 Dignity and  Respect.  One of First  Montauk's  goals is to attract and
retain  outstanding  employees who will  consistently  contribute to the ongoing
success  of our  organization.  Each  First  Montauk  employee  brings  a unique
background and set of skills to his or her position.  It is this  background and
skill set that helped you attain your position at First  Montauk.  First Montauk
values the perspective, initiative and creativity of each of its employees. As a
First Montauk  employee,  First Montauk will treat you with dignity and respect.
Similarly,  First  Montauk  expects  that  employees  will treat each other with
dignity and respect.

     6.2 Discrimination. Discriminating against any employee or person with whom
First  Montauk does business on the basis of factors such as age,  race,  color,
religion, gender, national origin, disability, or other legally protected status
is a violation of our Code and is not permitted.

     6.3 Workplace  Harassment and Violence.  Workplace  harassment and violence
are unacceptable and will not be tolerated. Conduct that creates an unwelcome or
uncomfortable  situation or hostile work environment,  including but not limited
to unwelcome  advances or requests for sexual  favors,  inappropriate  comments,
jokes,  intimidation,  bullying,  or physical  contact may be forms of workplace
harassment.  All First Montauk  employees should avoid any conduct that might be
interpreted by their fellow employees as harassment or a threat of violence.

     6.4  Safety and  Health.  First  Montauk  is  committed  to  providing  its
employees with a safe  workplace.  Each of us is  responsible  for observing all
safety and  health  rules that  apply to our jobs.  We are all  responsible  for
taking  precautions to protect  ourselves  from  accident,  injury or any unsafe
condition.  Additionally,  employees  must  promptly  report unsafe or unhealthy
conditions to their  supervisors so that First Montauk can take immediate  steps
to correct those conditions.

     6.5 Alcohol/Substance Abuse. First Montauk is a drug free workplace. We are
committed to maintaining a work  environment  free from all forms of alcohol and
drug abuse.  The safety of all  employees  is  compromised  if even one employee
reports  to work  while  impaired  from the use of  alcohol  or drugs.  The use,
possession,  or  distribution  of  unauthorized  drugs or alcohol while on First
Montauk's  premises  or on  company  time  is not  permitted.  Additionally,  an
employee who engages in this conduct may be subject to criminal prosecution. All
employees are encouraged to seek treatment for alcohol or drug abuse problems.


<PAGE>


                                                              Exhibit 21

                          LIST OF SUBSIDIARY COMPANIES


First Montauk Securities Corp.
Red Bank, NJ

Montauk Insurance Services, Inc.
Red Bank, NJ

Montauk Advisors, Inc.
Red Bank, NJ


<PAGE>

                                                              Exhibit 31.1

                                 CERTIFICATIONS

     I, William J. Kurinsky, Chief Executive Officer and Chief Financial Officer
of First Montauk Financial Corp. certify that:

1. I have reviewed  this annual  report on Form 10-K of First Montauk  Financial
Corp.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         a)       designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)        [reserved]

         c)       Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         d)       Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5. The registrant's other certifying  officer(s) and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

         a)       all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:    March 30, 2004


/s/ William J. Kurinsky
-----------------------
William J. Kurinsky,
Chief Executive Officer and
Chief Financial Officer
First Montauk Financial Corp.

<PAGE>



                                                              Exhibit 31.2

                                 CERTIFICATIONS

     I, Victor K. Kurylak,  President of First Montauk  Financial Corp.  certify
that:

1. I have reviewed  this annual  report on Form 10-K of First Montauk  Financial
Corp.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         a)       designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)        [reserved]

         c)       Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         d)       Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5. The registrant's other certifying  officer(s) and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

         a)       all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date:    March 30, 2004


/s/ Victor K. Kurylak
----------------------
Victor K. Kurylak
President, First Montauk Financial Corp.

<PAGE>


Exhibit 32.1



          CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
           PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of FIRST MONTAUK  FINANCIAL CORP. (the
"Company")  on Form 10-K for the period  ending  December 31, 2003 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
William J. Kurinsky,  Chief Executive Officer and Chief Financial Officer of the
Company,  certify,  pursuant to 18 U.S.C.  section 1350, as adopted  pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

         (1)      The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and result of
                  operations of the Company.



/s/ William J. Kurinsky
--------------------------------------------
William J. Kurinsky
Chief Executive Officer and Chief Financial Officer
March 30, 2004


<PAGE>


Exhibit 32.2



          CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
           PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of FIRST MONTAUK  FINANCIAL CORP. (the
"Company")  on Form 10-K for the period  ending  December 31, 2003 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Victor Kurylak, President of the Company, certify, pursuant to 18 U.S.C. section
1350,  as adopted  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002,
that:

         (1)      The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934;
                  and

         (2)      The information contained in the Report fairly presents, in
                  all material respects, the financial condition and result of
                  operations of the Company.



/s/ Victor K. Kurylak
--------------------------------------------
Victor K. Kurylak,
President
March 30, 2004