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                                    FORM 10-Q/A

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

       (Mark One)

           (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended: June 30, 2001
                                                  -------------

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from _____ to ______

                         Commission file number: 1-14897

                             A. B. Watley Group Inc.
                             -----------------------
             (Exact name of registrant as specified in its charter)

                         Delaware                   13-3911867
                         --------                   ----------
             (State or other jurisdiction of     (I.R.S. Employer
              incorporation or organization)    Identification No.)

                      40 Wall Street, New York, N.Y. 10005
                      ------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (212) 422-1100
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/  No / /.

The number of shares outstanding of the issuer's common stock, par value $.001
per share, as of August 14, 2001 was 10,995,796.

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     This Amendment is being filed to correct certain numerical and percentage
errors contained in the following sections of "Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations" of the Company's
10-Q filed with the Securities and Exchange Commission on August 14, 2001:
"Results of Operations - Three Months ending June 30, 2001 compared to the three
months ending June 30, 2000 - REVENUES"; "- EXPENSES EXCLUDING INTEREST";
"- Nine months ended June 30, 2001 compared to nine months ended June 30, 2000";
"- EXPENSES EXCLUDING INTEREST"; and "Liquidity and Capital Resources."
Accordingly, Item 2. is being refiled in its entirety.


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

The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB. The results of operations for the three and nine months ended June 30,
2001 are not necessarily indicative of the results for the entire fiscal year
ending September 30, 2001.

Results of Operations

Three months ending June 30, 2001 compared to the three months ending June 30,
2000.

REVENUES: Total revenues for the quarter ending June 30, 2001 were $5,506,288, a
decrease of 54.4%, as compared to revenues of $12,065,364 for the quarter ending
June 30, 2000. Revenues from commissions decreased by $5,041,601, or 55.0%, from
$9,167,465 for the June 30, 2000 quarter to $4,125,864 for the June 30, 2001
quarter primarily due to a decrease in UltimateTrader accounts as well as a
significant decrease in overall trading activity by online traders. The Company
had 5,697 UltimateTrader accounts at June 30 2000, as compared to 3,661 at June
30, 2001, for a decrease of 2,036 accounts or 35.7%. During the quarter ending
June 30, 2001, the Company's online brokerage division had total billed
transactions of 216,951 and average billed transactions of 3,444 per day. This
is a decrease of 48.7% compared to an average daily billed transaction rate of
6,715 per day during the June 30, 2000 quarter totaling 423,029 billed
transactions. Data service revenues decreased by $224,152, or 45.0%, from
$497,949 for the June 30, 2000 quarter to $273,797 for the quarter ending June
30, 2001 due to a change in our pricing structure, and a decrease in the number
of UltimateTrader online accounts. Revenues from principal transactions
decreased by $1,301,093, or 72.2%, from $1,801,964 for the June 30, 2000 quarter
to $500,871 for the quarter ending June 30, 2001, mainly as a function of the
significantly lower volumes of business conducted by the online brokerage
division and a reduction in volume by our third-market institutional sales
division. Interest and other income increased from $596,441 for the June 30,
2000 quarter to $604,211 for the quarter ending June 30, 2001 due to slightly
higher interest income rebates from our clearing broker.

Interest expense increased from $58,511 for the June 30, 2000 quarter to
$182,319 for the June 30, 2001 quarter as result of interest charged on
capitalized lease obligations. Interest expense - related party increased from
$6,667 for the quarter ending June 30, 2000 to $111,873 for the quarter ending
June 30, 2001 due to additional borrowings from officers, as well as an increase
in the average interest charged on borrowings.

As a result of the foregoing, net revenues decreased by $6,788,090, or 56.6%,
from $12,000,186 for the June 30, 2000 quarter to $5,212,096 for the quarter
ending June 30, 2001. Most of our revenues were generated by clients in the
United States and no single group of related clients accounted for 10% or more
of our revenues.

EXPENSES EXCLUDING INTEREST: Total expenses decreased by $3,566,964, or 24.0%,
from $14,809,839 for the June 30, 2000 quarter to $11,242,875 for the quarter
ending June 30, 2001. Commissions, floor brokerage and clearing charges
represent payments to our clearing and floor brokers. As a result of the
significant decrease in business conducted by our online clients and the
conversion of our customers to our proprietary direct access trading platform,
such expenses decreased by $3,281,976, or 55.5%, from $5,915,402 for the June
30, 2000 quarter to $2,633,426 for the quarter ending June 30, 2001. Employment
compensation and related costs decreased by $293,660, or 9.2%, from $3,186,768
for the June 30, 2000 quarter to $2,893,108 for the quarter ending June 30,
2001, as a result of staff reductions enacted by us due to client attrition, but
was offset by expenses for software developers that are no longer working on
capitalized software development projects and, accordingly, have their salaries
expensed in the current period. Included in this period's compensation and
related costs are $664,441 incurred to modify our software to be used by our
business to business software licensee in accordance with our licensing
agreement, as well as costs related to maintenance and support of our software.
We are continuing to work with our licensee on various software integration
issues. We do not anticipate the additional costs we will incur to complete the
integration to be material. We anticipate the software integration to be
completed by the first fiscal quarter of 2002.

Communications expense increased marginally by $9,006, or 1.9%, from $480,797
for the June 30, 2000 quarter to $489,803 for the quarter ending June 30, 2001.
Business development costs consist of television, radio, online and print
advertising to obtain new clients. These expenses decreased by $2,562,545, or
82.8%, from $3,094,243 for the June 30, 2000 quarter to $531,698 for the quarter
ending June 30, 2001 as the Company decreased its planned advertising and
promotional efforts.

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Professional services increased from $365,013 for the June 30, 2000 quarter to
$1,437,920 for the quarter ending June 30, 2001 due primarily to the use of
software consultants and an investor relations firm. The software consulting
expense totaled $856,666. The consultants were utilized to modify our software
to be used by our licensee in accordance with our licensing agreement, as well
as to continue support of our software platform. Additionally professional
services increased by $230,000 due to the use of an investor relations firm.
Occupancy and equipment costs increased by $398,486, or 34.3%, from $1,160,136
for the June 30, 2000 quarter to $1,558,622 for the quarter ending June 30, 2001
due to the addition of 7,000 square feet at 40 Wall Street and the leasing of
additional equipment to increase our capacity and to facilitate the transactions
of our proprietary direct access trading platform. Depreciation and amortization
increased by $1,139,251, or 384.6%, from $296,217 for the June 30, 2000 quarter
to $1,435,468 for the quarter ending June 30, 2001 due to the implementation of
our direct access trading platform and the related amortization of capitalized
software, as well as the amortization of capitalized lease obligations. Other
expenses decreased by $48,433, or 15.6%, from $311,263 for the June 30, 2000
quarter to $262,830 for the quarter ending June 30, 2001.

As a consequence of the foregoing, our net loss increased from $2,812,106 for
the June 30, 2000 quarter to a net loss of $6,606,891 for the quarter ending
June 30, 2001.

Nine months ended June 30, 2001 compared to nine months ended June 30, 2000.

NET REVENUES: Total revenues for the nine months ended June 30, 2001 were
$20,891,174, a decrease of $12,415,826, or 37.3%, as compared to revenues of
$33,307,000 for the nine months ended June 30, 2000. Revenues from commissions
decreased by $10,374,483, or 40.1%, from $25,902,411 for the nine months ended
June 30, 2000 to $15,527,928 due primarily to the decrease in overall trading
activity by online traders as well as a reduction of UltimateTrader accounts of
2,036, or 35.7%. During the nine months ending June 30, 2001, the Company's
online brokerage division had total billed transactions of 750,756 and average
billed transactions of 3,994 per day. This is a decrease of 35.5% compared to an
average daily billed transaction rate of 6,193 per day during the nine months
ending June 30, 2000 totaling 1,176,715 billed transactions. Data service
revenues decreased by $391,428, or 26.6%, from $1,472,910 for the nine months
ending June 30, 2000 to $1,081,482 for the nine months ending June 30, 2001, due
to a decrease in the number of Ultimate Trader online accounts as well as a
change in our pricing structure. Revenues from principal transactions decreased
by $1,800,892, or 40.6%, from $4,437,449 for the nine month period ending June
30, 2000 to $2,636,557 for the nine month period ending June 30, 2001 mainly as
a result of the significantly lower volume of business conducted by both the
online brokerage division's trading desk and the third-market institutional
sales division. Interest and other income increased from $1,489,595 for the nine
month period ending June 30, 2000 to $1,640,572 for the nine months ending June
30, 2001.

Interest expense increased from $191,898 for the nine months ended June 30, 2000
to $443,709 for the nine months ending June 30, 2001 as a result of interest
charged on capitalized lease obligations. Interest expense related-party
increased $272,727 due to increased borrowings from officers, as well as an
increase in the average interest rate charged on borrowings.

As a result of the foregoing, net revenues decreased by $12,940,364, or 39.1%,
from $33,100,935 for the nine months ending June 30, 2000 to $20,160,571 for the
nine months ending June 30, 2001. Clients in the United States generated most of
our revenues and no single client or group of related clients accounted for 10%
or more of our revenues.

EXPENSES EXCLUDING INTEREST: Total expenses decreased by $4,235,817 or 11.4%,
from $37,137,729 for the nine months ending June 30, 2000 to $32,901,912 for the
nine months ending June 30, 2001. Commissions, floor brokerage and clearing
charges represent payments to our clearing and floor brokers. As a result of the
decrease in the volume of business conducted by our online customers and the
conversion of our customers to our proprietary direct access trading platform,
such expenses decreased by $5,562,280, or 40.1%, from $13,887,975 for the nine
months ending June 30, 2000 to $8,325,695 for the nine months ending June 30,
2001. Employment compensation and related costs increased by $618,700, or 7.1%,
from $8,695,960 for the nine months ending June 30, 2000 to $9,314,660 for the
nine months ending June 30, 2001, largely due to software developers that are no
longer working on capitalizable software projects, and, accordingly, have their
salaries expensed in the current period. Included in these current period
compensation expenses are $1,279,608 incurred to modify our software to be used
by our business to business software licensee in accordance with our licensing
agreement. These expenses were offset by a reduction in staff due to client
attrition. Communications expense increased by $205,151, or 15.4%, from
$1,332,246 for the nine months ending June 30, 2000 to $1,537,397 for the nine
months ending June 30, 2001 as a function of adding additional lines from our
data providers and ECNs to our Dallas location, in order to create a back-up to
our system. These expenses were offset by more favorable communication costs as
we were able to renegotiate certain telecommunications contracts.

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Business development expenses consist of television, radio, online and print
advertising to obtain new clients. These expenses decreased by $4,881,946, or
71.1%, from $6,870,166 for the nine months ending June 30, 2000 to $1,988,220
for the nine months ending June 30, 2001 as the Company decreased its planned
advertising and promotional efforts.

Professional services increased by $1,247,111 or 94.2% from $1,324,053 for the
nine months ended June 30, 2000 to $2,571,164 for the nine months ending June
30, 2001 due to the use of software consultants and the use of an investor
relations firm. The software consulting expense totaled $1,510,469. These
software consultants were utilized to modify our software to be used by our
business to business licensee in accordance with our licensing agreement.
Additionally professional services increased by $290,000 due to the use of an
investor relations firm. These costs were offset by reduced employee acquisition
costs. Occupancy and equipment costs increased by $852,094, or 23.8%, from
$3,578,724 for the nine months ending June 30, 2000 to $4,430,818 for the nine
months ending June 30, 2001 primarily due to the addition of 7,000 square feet
at 40 Wall Street and the leasing of additional equipment to increase our
capacity and to facilitate the transition of our clients to our proprietary
direct access trading platform. Depreciation and amortization increased by
$3,262,203, or 443.9%, from $734,806 for the nine months ending June 30, 2000 to
$3,997,009 for the nine months ending June 30, 2001 due to the implementation of
our direct access trading platform and the related amortization of capitalized
software, as well as the amortization of capitalized lease obligations. Other
expenses increased by $23,150, or 3.2%, from $713,799 for the nine months ending
June 30, 2000 to $736,949 for the nine months ending June 30, 2001.

The income tax provision decreased from $21,413 for the nine months ended June
30, 2000 to $19,961 for the nine months ending June 30, 2001.

As a consequence of the foregoing, our net loss increased from $4,058,207 for
the nine months ending June 30, 2000 to a net loss of $13,464,916 for the nine
months ending June 30, 2001.

Liquidity and Capital Resources

Prior to our initial public offering ("IPO"), our capital requirements had
exceeded our cash flow from operations as we built our business. Since the IPO,
the proceeds from the IPO, the exercise of stock options and warrants of
$3,348,818, the sale of $3,000,000 of stock through our equity line facility,
loans from officers of $4,475,000, a private placement of $10,012,127, and cash
flow from operations have been able to satisfy our cash needs as we continue to
grow our business.

On April 2, 2001 the Company sold 2,027,241 shares of common stock in a private
placement offering. The common stock was issued at $5.50 per share. The private
placement offering generated total net proceeds of $10,012,127. In addition, the
Company issued warrants expiring April 1, 2004 to acquire 608,174 shares of the
Company's common stock at an exercise price of $6.75 per share. The Company has
registered the shares for resale under the Securities Act of 1933, as amended.

Effective August 8, 2000, we entered into an agreement with an investment group
providing us with an eighteen-month equity line of up to $48,000,000. The
agreement allows us to draw down funds in exchange for equity. We are not
obligated to take down any of the funds and pricing is based upon ninety four
percent of the volume weighted average price of our common stock for the 22 days
prior to each takedown. We have registered the securities to be sold to the
investment group pursuant to the equity line facility for resale under the
Securities Act of 1933. On September 6, 2000, we drew down $3,000,000 of the
equity line, and issued 333,333 shares to the investment group and received net
proceeds of $2,850,000.

We continue to grow our brokerage and software licensing businesses and are
considering certain strategic acquisitions. In order to fund these activities we
will need to raise additional financing, either through our existing equity line
of credit or alternative sources. However, there can be no guarantee that
alternative sources of funding will be available.

Cash used in operating activities during the nine months ended June 30, 2001 was
$10,921,400 as compared to $1,322,630 for the nine months ended June 30, 2000.
The Company had a net loss of $13,464,916, an increase in receivables from
brokers of $123,358, a decrease in accrued liabilities of $2,161,046, a decrease
in securities sold not yet purchased of $163,140, a decrease in securities owned
of $191,839, a decrease in restricted cash of $38,462, and non-cash items such
as depreciation and amortization of $3,997,009 and a loss from investments of
$703,614.

Cash used in investing activities was $1,483,865 during the nine months ended
June 30, 2001 compared to $5,008,516 during the nine months ending June 30,
2000. Uses of cash in the nine months ending June 30, 2001 related to purchases
of equipment, software and leasehold improvements made in the Company's new
facility at 40 Wall Street. In addition to the cash used in investing activities
during the nine months ended June 30, 2001, the Company accrued accounts payable
relating to purchases of property and equipment and leasehold improvements of
$317,802 during this period.

Cash provided by financing activities was $10,580,484 during the nine months
ending June 30, 2001 compared to $2,863,328 during the nine months ended June
30, 2000. Cash provided by financing activities during the nine months ending
June 30, 2001 consisted primarily of net proceeds from our private placement
offering of $10,012,127, loans made by officers of the Company of $975,000, and
proceeds from the exercise of options of $987,290. These were offset by payments
made for capital lease obligations of $451,672, and repayments of notes payable
of $938,928.

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Net Operating Loss Carryforward

The Company's net operating loss carryforward expires beginning in the year
2013. The issuance of additional equity securities, together with the Company's
public offering, and certain potential financing arrangements, could result in
an ownership change and thus could limit our use of the Company's prior net
operating losses. If the Company achieves profitable operations, any significant
limitation on the utilization of our net operating losses would have the effect
of increasing our tax liability and reducing net income and available cash
reserves. We are unable to determine the availability of these net operating
losses since this availability is dependent upon profitable operations, which we
have not achieved in periods prior to the most recent four quarters.

Relevant Accounting Standards

We generally grant stock options to employees and consultants with an exercise
price not less than the fair market value at the date of grant. We account for
stock option grants to employees in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly,
recognize no compensation expense related to option grants. In cases where we
grant options below the fair market value of the stock at the date of grant, the
difference between the strike price and the fair market value is treated as
compensation expense and amortized over the vesting period of the option, if
any. Stock options granted to consultants and others instead of cash
compensation are recorded based upon management's estimate of fair value of the
options or the related services provided and expensed over the vesting period,
if any.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." It revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
No. 125's provisions without reconsideration. SFAS No. 140 is effective for
transactions after March 31, 2001. This standard does not materially impact the
Company's financial position or statement of operations.

Forward Looking Statements

Certain statements contained in this report, including statements regarding the
development of services and markets and future demand for services and other
statements regarding matters that are not historical facts, discuss future
expectations or other forward-looking information. Those statements are subject
to known and unknown risks, uncertainties and other factors that could cause our
actual results to differ materially from those contemplated by the statements.
Factors that might cause a difference include, but are not limited to, customer
trading activity, loss of one or more significant customers, changes in
technology, issues involved in the launch of new or modified software programs,
issues involved in acting as licensor for proprietary software, shifts in
competitive patterns, ability to manage growth effectively, risks associated
with acquisitions including integration risks, risks associated with strategic
partnerships, various project-associated risks, substantial competition, general
economic and securities markets conditions, risks associated with intellectual
property rights, risks associated with international operations and other risk
factors listed from time to time in the Company's filings and reports with the
Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our primary financial instruments are cash in banks and money market
instruments. We do not believe that these instruments are subject to material
potential near-term losses in future earnings from reasonably possible near-term
changes in market rates or prices. We do not have derivative financial
instruments for speculative or trading purposes. In the normal course of
business, our customers enter into transactions where the risk of potential loss
due to market fluctuations or failure to perform exceeds the amount reported for
the transaction. We have established policies, procedures and internal processes
governing our management of market risk in the normal course of our business
operations. We, along with Penson Financial Services, Inc., our clearing broker,
continuously monitor our exposure to market and counter-party risk through the
use of a variety of financial, position and credit exposure reporting and
control procedures. In addition, we review the creditworthiness of each customer
and/or other counter-party with which we conduct business. We are not currently
exposed to any material currency exchange risk because the risk is borne by
international customers and our international licensees, and we do not hold any
assets or incur any liabilities denominated in foreign currency.

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PART II - OTHER INFORMATION

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

         (a) None.

         (b) None.

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                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date: August 20, 2001

                                       A. B. WATLEY GROUP INC

                                       By: /s/ Steven Malin
                                           ----------------
                                           Steven Malin
                                           Chairman and Chief Executive Officer

                                       By: /s/ Joseph M. Ramos, Jr.
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                                           Joseph M. Ramos, Jr.
                                           Executive Vice President and
                                           Chief Financial Officer

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