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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13

OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended March 31, 2001

Commission file number: 0-22247


STOCKWALK GROUP, INC.

(Exact name of Registrant as specified in its
charter)


|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|                                                               
|                                                               
|                                                               
|                                                               
|Minnesota                                                       |  | 41-1756256                           
|(State or other jurisdiction of
	incorporation or organization) |  | (IRS Employer
	Identification Number)

5500 Wayzata Boulevard

Suite 800


Minneapolis, Minnesota 55416


(Address of principal executive offices)


(763) 542-6000



Securities registered pursuant to Section 12 (b) of
the Act: None

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



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 
     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.

The aggregate market value of the
voting stock held by non-affiliates of the Registrant, based
upon the closing sale price of the Registrants Common
Stock on May 31, 2001, as reported on the NASDAQ National
Market System, was $19.0 million.

Shares of $.04 par value Common
Stock outstanding as of May 31, 2001: 32,672,711 shares.

Documents Incorporated by Reference





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TABLE OF CONTENTS



|                                                                                              |                                                                                |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I                                                                                       
|                                                                                              | Company Overview                                                              
|                                                                                              | Our Industry                                                                  
|                                                                                              | Products & Services                                                           
|                                                                                              | Full Service Brokerage Division - Miller Johnson Steichen Kinnard, Inc. MJSK
|                                                                                              | Clearing Division - MJK Clearing, Inc. MJK Clearing                         
|                                                                                              | Online Division - Stockwalk.com, Inc. Stockwalk.com                         
|                                                                                              | Our Strategy                                                                  
|                                                                                              | Recent Developments                                                           
|                                                                                              | Competition                                                                   
|                                                                                              | Regulation                                                                    
|                                                                                              | Uniform Net Capital Rule                                                      
|                                                                                              | Employees                                                                     
|Item 2: Properties                                                                           
|Item 3: Legal Proceedings                                                                    
|Item 4: Submission of Matters to a Vote of Security Holders.                                 
|PART II                                                                                      
|Item 5: Market for the Registrants Common Equity and Related Shareholder Matters.           
|Item 6: Selected Financial Data.                                                             
|Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 7A: Quantitative and Qualitative Disclosures About Market Risk.                         
|Item 8: Financial Statements And Supplementary Data                                          
|Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|PART III                                                                                     
|Item 11: Executive Compensation                                                              
|Item 12: Security Ownership of Certain Beneficial Owners, Directors and Executive Officers   
|Item 13: Certain Relationships and Related Transactions                                      
|Item 14: Exhibits and Reports on Form 8-K.                                                   
|INDEX TO EXHIBITS                                                                            
|SIGNATURES*                                                                                  
|EX-10.2 - Employment Agreement                                                               
|EX-21.1 - Subsidiaries of the Registrant                                                     
|EX-23.1 - Consent of Ernst & Young LLP                                                       
|EX-99.1 - Cautionary Statements                                                              



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STOCKWALK GROUP, INC.

INDEX TO ANNUAL REPORT FORM 10-K


|          |  |                                                                                        |  |  |    | 
|--------- |  | -------------------------------------------------------------------------------------- |  |  | -- | 
|          |  |                                                                                       
|PART I    |  | Page                                                                                  
|          |  |                                                                                       
|Item  1.  |  | Company Overview                                                                       |  |  | 3  | 
|         
|         
|         
|         
|          |  | Our Industry                                                                           |  |  | 3  | 
|         
|         
|         
|         
|          |  | Products and Services                                                                  |  |  | 4  | 
|         
|         
|         
|         
|          |  |  Full Service Division                                                                |  |  | 4  | 
|         
|         
|         
|         
|          |  |  Clearing Division                                                                    |  |  | 5  | 
|         
|         
|         
|         
|          |  |  Online Division                                                                      |  |  | 6  | 
|         
|         
|         
|         
|          |  | Our Strategy                                                                           |  |  | 6  | 
|         
|         
|         
|         
|          |  | Recent Developments                                                                    |  |  | 6  | 
|         
|         
|         
|         
|          |  | Competition                                                                            |  |  | 8  | 
|         
|         
|         
|         
|          |  | Regulation                                                                             |  |  | 9  | 
|         
|         
|         
|         
|          |  | Uniform Net Capital Rule                                                               |  |  | 9  | 
|         
|         
|         
|         
|          |  | Employees                                                                              |  |  | 9  | 
|         
|         
|         
|         
|Item  2.  |  | Properties                                                                             |  |  | 9  | 
|         
|         
|         
|         
|Item  3.  |  | Legal Proceedings                                                                      |  |  | 10 | 
|         
|         
|         
|         
|Item  4.  |  | Submission of Matters to a Vote of Security
	Holders                                   |  |  | 10 | 
|         
|PART II   |  |                                                                                        |  |  |    | 
|          |  |                                                                                        |  |  |    | 
|Item  5.  |  | Market for the Registrants Common Equity
	and Related Shareholder Matters             |  |  | 10 | 
|         
|         
|         
|         
|Item  6.  |  | Selected Consolidated Financial Data                                                   |  |  | 11 | 
|         
|         
|         
|         
|Item  7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |  | 12 | 
|         
|         
|         
|         
|Item  7a. |  | Quantitative and Qualitative Disclosures About
	Market Risk                            |  |  | 16 | 
|         
|         
|         
|         
|Item  8.  |  | Financial Statements and Supplementary Data                                            |  |  | 16 | 
|         
|         
|         
|         
|Item  9.  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |  | 36 | 
|         
|PART III  |  |                                                                                        |  |  |    | 
|          |  |                                                                                        |  |  |    | 
|Item  10. |  | Directors and Executive Officers of the Registrant                                     |  |  | 36 | 
|         
|         
|         
|         
|Item  11. |  | Executive Compensation                                                                 |  |  | 39 | 
|         
|         
|         
|         
|Item  12. |  | Security Ownership of Certain Beneficial Owners
	and Management                        |  |  | 39 | 
|         
|         
|         
|         
|Item  13. |  | Certain Relationships and Related Transactions                                         |  |  | 39 | 
|         
|PART IV   |  |                                                                                        |  |  |    | 
|          |  |                                                                                        |  |  |    | 
|Item  14. |  | Exhibits, Financial Statement Schedules and
	Reports on Form 8-K                       |  |  | 39 | 
|         
|         
|         
|         
|          |  | Signatures                                                                             |  |  | 46 | 

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PART I







Company Overview


We are a technologically driven regional securities firm
headquartered in Minneapolis, Minnesota. Through our operating
subsidiaries, we provide a broad range of investment services to
individual, corporate and public clients. These services include
both traditional and online securities brokerage, investment
banking and research services and the processing of securities
transactions for correspondent brokerage firms and financial
institutions.

We have three primary operating subsidiaries. Our Miller Johnson
Steichen Kinnard, Inc. (MJSK) subsidiary is the
combination of the full service operations of three midwestern
broker dealers: R.J. Steichen and Company, John G. Kinnard and
Miller Johnson & Kuehn, Inc. MJSK offers traditional
securities brokerage, securities trading, investment banking and
research services. Our MJK Clearing, Inc. (MJK
Clearing) subsidiary provides securities clearing
functions for our other subsidiaries as well as 61 other
correspondent brokerage firms. Our Stockwalk.com, Inc.
(Stockwalk.com) subsidiary offers a secure online
brokerage service that provides order placement, portfolio
tracking and related market information, news and other
information to investors 24 hours a day, seven days a week, by
means of the Internet and telephone.

Our history began in 1980 with the incorporation of Miller
Securities, Inc. a specialized municipal bond firm. Miller
Securities eventually broadened its business to include a
variety of financial services, including securities clearing,
and changed its name to Miller, Johnson & Kuehn,
Incorporated. MJK Holdings, Inc. (MJKH) was formed
in June 1997 as a holding company for MJK and MJKs
clearing division. On July 7, 1999, then privately owned
MJKH and publicly held NM Holdings, Inc. completed a merger
whereby MJKH became a wholly owned subsidiary of NM Holdings,
Inc. The surviving entity changed its name to Stockwalk Group,
Inc., and merged with John G. Kinnard and R.J. Steichen in the
Fall of 2000. On January 1, 2001, R. J. Steichen, John G.
Kinnard and the full service operations of Miller Johnson &
Kuehn, Inc. combined to form MJSK. The clearing division of
Miller, Johnson & Kuehn, Inc. was renamed MJK Clearing.
Stockwalk Group, Inc. is the holding company of MJSK, MJK
Clearing, Stockwalk.com, MJK Capital Corporation and Stockwalk
Investment Management, Inc., a registered investment advisor.
MJSK, MJK Clearing and Stockwalk.com, are registered as
broker-dealers with the SEC and are members of the NASD. Our
common stock is listed on the NASDAQ NMS under the symbol
STOK.






Our Industry


The securities brokerage industry is undergoing dramatic change.
Loosened restrictions on relationships between financial
institutions and broker-dealers are leading to increased
competition and consolidation in the industry. Consequently, the
industry is seeing increased consolidation among firms as they
strive to maintain a competitive advantage.

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Products & Services







Full Service Brokerage Division  Miller Johnson
Steichen Kinnard, Inc. MJSK


Our full service brokerage business is comprised of R.J.
Steichen, John G. Kinnard, and Miller, Johnson and Kuehn and
includes retail brokerage, trading, investment banking and
research services. The division offers services to clients in
the following four areas:



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | investment advice for individuals and institutions;                                                  
|
| |  | financial advisory and underwriting services to governments and
	municipalities in the upper Midwest;
|
| |  | investment banking assistance to start-up and early stage
	regional companies; and                   
|
| |  | resale of bank and thrift certificates of deposit.                                                   

At May 31, 2001, MJSK employed approximately 400 licensed
sales representatives in 29 offices located in eight states.

MJSK is a dealer in corporate equity and corporate and
governmental fixed income securities and recognizes profits or
losses on transactions in, or fluctuations in, the value of
securities held in inventory. We have established internal
guidelines, which are periodically reviewed, limiting the size
and risk of inventories maintained. Additionally, MJSK presently
serves as a market maker for approximately 297 NASDAQ companies.
Many of these companies have been clients of our investment
banking group or are covered by our research analysts. As a
market maker we publish bid and ask prices for the securities in
which we make markets. We publish prices on our inventory of
taxable and non-taxable municipal bond issues and bid on
municipal bond issues in the inter-dealer market.

As a securities broker, MJSK acts as an agent in the purchase
and sale of securities, options, commodities and futures
contracts traded on various securities and commodities exchanges
or in the over-the-counter market. MJSK charges a brokerage
commission when acting as agent for the purchaser or seller of a
security. If the security is listed on an exchange, the
transaction is generally effected through a floor broker who is
unaffiliated with MJSK. If the security is traded in the
over-the-counter market, transactions are generally effected
with a market maker in the security. In addition to the
foregoing, MJSK earns commissions from transactions involving
various other financial products.

MJSKs investment banking group consists of a total of 24
public finance and corporate finance professionals. The
investment banking department generates income primarily from
fees which are frequently based on the amount of capital raised,
but may include equity participation through the receipt of
warrants. The public finance division also includes an
originations group and a fiscal advisory group. The originations
group participates in underwriting activities while the fiscal
advisory group provides independent advice to MJSKs public
sector clients. MJSKs originations group concentrates
primarily on revenue bond issues, many of which are conduit
issues where a municipality lends its name to provide tax-exempt
status to qualifying projects. Our underwriting areas include
501(c)(3) nonprofit healthcare projects, housing projects,
industrial revenue bond projects and school facilities.
MJSKs fiscal advisory group advises municipalities on the
structure and terms of bond financings, particularly general
obligation bond issues, throughout the upper Mid-western United
States.

MJSKs corporate finance group assists small and emerging
companies, including start-ups, in raising capital from both
public and private sources. The group focuses on

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MJSK also maintains a research department that provides
analysis, investment recommendations and market information on
small capitalization emerging growth companies. As of
May 31, 2001, MJSK employed 9 research analysts covering
approximately 100 companies. MJSK also supplements internal
research with research products from independent organizations.






Clearing Division  MJK Clearing, Inc. MJK
Clearing


MJK Clearing is a self-clearing firm, providing
transaction-clearing services for MJSK and Stockwalk.com
clients, as well as for the clients of approximately 61
correspondent brokerage firms. As a clearing agent, we provide
transaction execution, account maintenance and record keeping
services for 164,200 customer accounts which generated 1,861,900
tickets in the year ended March 31, 2001. Securities
Industries Software Corporation, a division of ADP, maintains
our back office information system. MJK Clearing also contracts
with other vendors to produce, batch and mail its confirmations
and customer reports. MJK Clearing also extends credit to its
customers as well as its correspondents customers. MJK
Clearings correspondent brokerage firms are responsible to
us for all transactions in their customer accounts. MJK Clearing
also lends securities to and borrows securities from other firms
and customers.

MJK Clearing derives a significant portion of its revenue from
interest income, the major portion of which relates to customer
balances. We effect customers transactions on either a
cash or margin basis. Purchases on a cash basis require full
payment by the designated settlement date, generally the third
business day following the transaction date, except in the case
of options, which settle the day following the transaction. When
a purchase is made on a margin basis, MJK Clearing extends
credit to the customer for a portion of the purchase price. The
amount of the loan is subject to margin regulations of the
Federal Reserve Board and the internal policies of MJK Clearing,
which are generally more stringent than applicable regulations.
Interest is charged at a floating rate on amounts borrowed by
customers to finance purchases on margin. The rate charged is
dependent on federal interest rates generally, the average net
debit balance in the customers accounts and the activity
level in the accounts. As of March 31, 2001, our
customers aggregate margin debt was approximately
$403.3 million, secured by customer securities positions.

Customers will at times accumulate credit balances in their
accounts. Such balances result from payment of dividends,
interest or principal on securities held for such customers,
from funds received in connection with sales of a
customers securities and from cash deposits made by
customers pending investment. Pending investment of such funds
or reimbursement upon the customers request, MJK Clearing
pays interest on these credit balances. MJK Clearing uses
available credit balances to lend funds to customers purchasing
securities on margin. Excess customer credit balances are
invested in short-term securities in accordance with applicable
regulations and are segregated for the exclusive benefit of
customers. MJK Clearing generates net interest income from the
positive interest rate spread between the rate earned from
margin lending and alternative short-term investments and the
rate paid on customer credit balances.

We borrow securities from, and lend securities to, other broker
dealers to facilitate short sales and clearance and delivery of
securities sold by customers if customers fail to deliver
securities prior to settlement date. We also arrange securities
lending transactions

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Online Division  Stockwalk.com, Inc.
Stockwalk.com


We launched Stockwalk.com, our online division, in
September 1999. Stockwalk.com offers a secure online
brokerage service that provides order placement, portfolio
tracking and related market information, news and other
information to investors 24 hours a day, seven days a week, by
means of the Internet and telephone.

Most of Stockwalk.coms customers are individuals with
traditional retail accounts. A customer may open an account with
a minimum of $1,000 but, from time-to-time, the minimum deposit
and transaction fees have been reduced or waived for promotional
purposes. Currently, Stockwalk.com charges a flat fee of $18.95
per non-broker assisted equity trade, up to 5,000 shares.

The software applications for our website are proprietary to
Stockwalk.com and are designed to efficiently interface with MJK
Clearings system. Stockwalk.com has offices in Golden
Valley, Minnesota and San Francisco, California.






Our Strategy


We intend to return to profitability through further integration
of the recent year acquisitions, attracting and retaining highly
skilled brokers and new correspondent broker relationships, as
well as expanding the products and services offered through our
full service division.






Recent Developments


Acquisitions

R.J. Steichen & Company  August 1,
2000

Steichen was a privately owned full-service investment brokerage
firm that had been in continuous operations since 1929. Steichen
had 282 full-time and 185 independent licensed sales
representatives, and recorded total annual revenues of
approximately $52.5 million. Steichens principal
office was in Minneapolis, and it operated 11 additional offices
in the Minneapolis-St. Paul metropolitan area, in addition to
seven other branch offices. Pursuant to the terms of the
agreement we issued an aggregate of 6,315,062 shares of
unregistered common stock to the former Steichen shareholders in
exchange for all of the issued and outstanding shares of
Steichens capital stock. Additional material terms of the
Steichen agreement are as follows:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Steichens former principal shareholder, Mr. John
	E. Feltl, withdrew approximately $22.0 million in cash
	from Steichen prior to closing, in the form of a dividend.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Mr. Feltl agreed to leave $3.0 million of capital in
	Steichen for a period of two years. At the end of the two-year
	period, he will have the option to be repaid the
	$3.6 million or to convert such amount into shares of the
	registrants common stock at a per share price equal to the
	lesser of 85% of the then-current fair market value of such
	stock or $10.00, but not less than $5.00 per share.



| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Mr. John E. Feltl also received a five-year warrant to
	purchase 300,000 additional shares of our common stock at $6.375
	per share. This warrant does not contain cashless exercise
	provisions, but it does contain piggyback registration rights.
|
| |  | John E. and John C. Feltl were appointed to our Board of
	Directors.                                                                                                                                                                                

Kinnard Investments, Inc.  September 8,
2000

Kinnard was a publicly held holding company that provided
financial products and services, primarily through its
broker-dealer subsidiary, John G. Kinnard and Company,
Incorporated (JGK). JGK was a member of the Chicago
Stock Exchange and the NASD, and was a registered investment
advisor under the Investment Advisors Act of 1940. Kinnard
employed 111 registered representatives, had total revenues of
approximately $62.1 million for the twelve months ended
March 31, 2001 and was a market maker for approximately 175
equity securities.

Pursuant to the terms of the Kinnard agreement, we issued an
aggregate of 3,557,819 shares (the equivalent of .7676 shares of
our common stock for each issued and outstanding share of
Kinnard common stock) to the former shareholders of Kinnard, and
paid to such shareholders an aggregate of $21,346,900 in cash
($6.00/share for each outstanding Kinnard share).

We also paid to the former holders of Kinnards outstanding
options and warrants to purchase common stock an aggregate of
$4.1 million, which is the equivalent of $6.00 in cash plus
the cash value of the stock that would have been issued had the
option or warrant been exercised prior to the merger, less the
per share exercise price of the option or warrant. In
conjunction with the Kinnard acquisition, we also established a
retention program to be used to retain various registrant and
Kinnard employees. We recorded a liability of $3.5 million
for anticipated retention bonuses and $2.0 million for a
severance to the former Chief Executive Officer.

On January 1, 2001 the full-service operations of the
various firms were consolidated into Miller Johnson Steichen
Kinnard, Inc. The remaining clearing operations of Miller
Johnson & Kuehn, Inc. were renamed MJK Clearing, Inc.

Dispositions

On February 26, 2001, BlueSuit, Inc.
(BlueSuit), purchased all of the outstanding common
stock of Online Brokerage Solutions, Inc. (OBS),
formerly a wholly-owned subsidiary of ours, and certain assets
used in OBSs business. In connection with this
transaction, we also entered into a Transition Services
Agreement with BlueSuit, pursuant to which we obligated
ourselves to perform certain IT-related and other transition
services for BlueSuit for up to six months from the date of
closing.

We received $1,875,000 at closing, with an additional $200,000
being payable following the transition period. In addition,
BlueSuit issued an aggregate of 300,000 shares, valued at $6.00
per share, of its restricted Series A Preferred Stock to
us. Subject to our

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Competition


We compete for investor funds with traditional brokerage firms
and banks, insurance companies and mutual funds. Traditional
brokerage firms rely on a network of internal or affiliated
brokers to solicit customer accounts, provide investment advice
to clients, and execute transactions on their clients
behalf. Although there are many large national brokerage firms,
such as Merrill Lynch, Morgan Stanley and Discover & Company
with which we compete, we more frequently encounter the
following firms in the normal course of competing for
traditional brokerage account funds:



| |   |                                           
| | - | ------------------------------------------
| |  | American Express Financial Advisors, Inc.;
|
| |  | AG Edwards & Sons, Inc.;                  
|
| |  | Dain Rauscher Incorporated; and           
|
| |  | U S Bancorp Piper Jaffray, Inc.           

We also face several large competitors in the clearing business.
Most of the competition for our clearing division business comes
from the following companies:



| |   |                                                  
| | - | -------------------------------------------------
| |  | Bear Stearns Securities Corp.;                   
|
| |  | Correspondent Service Corporation (Paine Webber);
|
| |  | Fiserv;                                          
|
| |  | National Financial Services Corp.;               
|
| |  | Pershing;                                        
|
| |  | Southwest Securities, Inc.; and                  
|
| |  | U.S. Clearing Corp.                              

All of these firms provide clearing services including the
confirmation, receipt, settlement and delivery functions
involved in securities transactions. Many of our clearing
competitors are substantially larger than us and may be able to
offer more favorable terms to their clearing customers.

Representative competitors for online brokerage services include
the following:



| |   |                            
| | - | ---------------------------
| |  | Ameritrade;                
|
| |  | Charles Schwab & Co., Inc.;
|
| |  | DLJdirect Inc.; and        
|
| |  | E*Trade Securities, Inc.   

We do not have the resources or market presence to compete
directly with the major online brokerage firms.

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Regulation


The securities industry is subject to comprehensive regulation
by federal and state governments, the various securities
exchanges and self-regulatory bodies. The regulations cover all
aspects of the securities business including sales methods,
trade practices among broker-dealers, uses and safekeeping of
customers funds and securities, capital levels of
securities firms, record keeping and the conduct of employees.
Violations of these rules and regulations can result in censure,
fines, suspensions and loss of the right to do business. We have
been in compliance with such rules and regulations in all
material respects.






Uniform Net Capital Rule


As broker-dealers and member firms of the NASD, MJSK, MJK
Clearing and Stockwalk.com are subject to the Uniform Net
Capital Rule (the Rule) promulgated by the SEC. The
Rule is designed to measure the general financial integrity and
liquidity of a broker-dealer and the minimum net capital deemed
necessary to meet the broker-dealers continuing
commitments to its customers. The Rule provides for two methods
of computing net capital, MJSK and MJK Clearing have adopted
what is generally referred to as the alternative method. Minimum
net capital is defined under this method to be equal to 2% of
customer debit balances. The NASD may also require a member
organization to reduce its business if net capital is less than
5% of such aggregate debit items and may prohibit a member firm
from expanding its business and declaring cash dividends if its
net capital is less than 5% of such aggregate debit items. In
computing net capital, various adjustments are made to exclude
assets that are not readily convertible into cash and to provide
a conservative valuation of other assets such as a
companys trading securities. Failure to maintain the
required net capital may subject a firm to suspension or
expulsion by the NASD, the SEC and other regulatory bodies and
may ultimately require its liquidation. All three of our
broker-dealer subsidiaries are in compliance with all net
capital requirements.






Employees


As of March 31, 2001, we had approximately 674 full-time
employees and 166 independent contractors. All 166 independent
contractors were MJSK stockbrokers. Of the employees, MJSK
employed 420, MJK employed 111, Stockwalk.com employed 37 and
Stockwalk Group employed 106. None of our employees are
represented by a collective bargaining unit.






Item 2:  Properties


Our principal executive offices and back office facilities are
located at 5500 Wayzata Boulevard, Minneapolis, Minnesota
55416 where at March 31, 2001 we leased approximately
68,300 square feet of office space, expiring March 2004.
Additionally we lease approximately 100,200 square feet in
downtown Minneapolis at the former headquarters of
R.J. Steichen and John G. Kinnard that have leases
that expire in December 2002 and April 2004,
respectively. We also have several leases for our regional
branch offices, with month-to-month leases or term leases
terminating as late as May 2007. We currently have more
space available than needed, and efforts are being made to
reduce our commitments in this regard.

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Item 3:  Legal Proceedings


Many aspects of our business involve substantial risks of
liability, including exposure under federal and state securities
laws in connection with the underwriting and distribution of
securities. We do not presently maintain an errors and omissions
insurance policy insuring us against these risks. In recent
years, there has been an increasing incidence of litigation
involving the securities industry, including class actions that
generally seek rescission and substantial damages. Additionally,
securities brokerage firms, including us, become parties to
arbitrations brought by dissatisfied customers in the general
course of business. At the present time, we are not a party to,
nor is any property subject to, any pending legal proceedings,
other than routine litigation or arbitration incidental to our
business. We believe that we have good factual and legal
defenses to pending proceedings, and we do not expect that
losses related to any of these proceedings, in the aggregate,
will be material.






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


No matters were submitted to a vote of security holders during
the fourth quarter of fiscal year 2001.






PART II







|        |                                                                            
|------- | ---------------------------------------------------------------------------
|Item 5: | Market for the Registrants Common Equity and Related
	Shareholder Matters.

On October 5, 1999, the Company received approval for
listing on the NASDAQ National Market. The table below sets
forth the high and low prices of the Companys common stock
as reported by NASDAQ for the quarters indicated:

|       |      |       |  |        |        |       |  |        |       |        |  |       |        |        |  |       |       |        |  |  |      |  |  |  |       |  |  |  |          |  |  |  |        |  |  |  |        | 
|------ | ---- | ----- |  | ------ | ------ | ----- |  | ------ | ----- | ------ |  | ----- | ------ | ------ |  | ----- | ----- | ------ |  |  | ---- |  |  |  | ----- |  |  |  | -------- |  |  |  | ------ |  |  |  | ------ | 
|Fiscal |      |       |  |        |        |       |  |        |       | Fiscal |  |       |        |        |  |       |       |       
|2001   |      | First |  | Second |        | Third |  | Fourth |       | 2000   |  | First |        | Second |  | Third |       | Fourth
|       |      |       |  |        |        |       |  |        |       |        |  |       |        |        |  |       |       |       
|       | High |       |  |        | 14 1/4 |       |  |        | 9 5/8 |        |  |       | 5 1/16 |        |  |       | 3 1/2 |        |  |  | High |  |  |  | 20    |  |  |  | 16 13/16 |  |  |  | 11 3/4 |  |  |  | 17 1/8 | 
|      
|      
|      
|      
|       | Low  |       |  |        | 7      |       |  |        | 3 3/4 |        |  |       | 1 5/8  |        |  |       | 1 3/8 |        |  |  | Low  |  |  |  | 6 1/2 |  |  |  | 8 5/8    |  |  |  | 7 1/4  |  |  |  | 6 1/2  | 

At May 31, 2001, there were 30,672,711 shares of common
stock outstanding held by 462 shareholders of record. The
Company has not paid any cash dividends on its common stock and
does not anticipate paying cash dividends in the foreseeable
future. In 2001, $3.2 million of unregistered subordinated
notes converted into 1,284,000 shares of common stock at $2.50
per share.

10



---



##### Table of Contents








Item 6:  Selected Financial Data.


The following selected consolidated financial data for each of
the five years ended March 31, 1997, through March 31,
2001, have been derived from the audited consolidated statements
of MJK Holdings, Inc. for the years ended March 31, 1997, 1998
and 1999 and Stockwalk Group, Inc. for the fiscal years ended
March 31, 2000 and 2001. The information should be read in
conjunction with the financial statements and related notes, and
Managements Discussion and Analysis of Financial Condition
and Results of Operations. All numbers are in thousands except
earnings per share.

|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |        |         | 
|------------------------------------------------------------------- | ----------------------------------- | --------------------------- | ------- | ------ | ------- | ---- | ------ | ------ | ------- | ---- | ----- | ------ | ------- | - | ------ | ------ | ------- | - | ---- | ------ | ------- | 
|                                                                    |                                     |                            
|                                                                    |                                     | Fiscal Year Ended March 31,
|                                                                    |                                     |                            
|                                                                    |                                     | 2001                        |         | 2000   |         | 1999 |        | 1998   |         | 1997
|                                                                    |                                     |                             |         |        |         |      |        |        |         |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Consolidated Statements of Operations Data                          |                                     |                             |         |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Revenues:                                                           |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Trading profits                     |                             | $       | 26,599 |         |      | $      | 16,073 |         |      | $     | 15,063 |         |   | $      | 10,634 |         |   | $    | 9,856  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Interest                            |                             |         | 47,704 |         |      |        | 20,988 |         |      |       | 15,410 |         |   |        | 13,507 |         |   |      | 9,150  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Commissions                         |                             |         | 35,559 |         |      |        | 14,286 |         |      |       | 9,888  |         |   |        | 9,040  |         |   |      | 3,930  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Investment banking                  |                             |         | 12,526 |         |      |        | 10,363 |         |      |       | 8,389  |         |   |        | 9,656  |         |   |      | 7,716  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Clearing fees                       |                             |         | 6,338  |         |      |        | 5,248  |         |      |       | 3,105  |         |   |        | 1,902  |         |   |      | 785    |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Other Income                        |                             |         | 8,656  |         |      |        | 3,828  |         |      |       | 3,735  |         |   |        | 2,354  |         |   |      | 1,170  |        
|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                    |                                     | Total revenues              |         | $      | 137,382 |      |        | $      | 70,786  |      |       | $      | 55,590  |   |        | $      | 47,093  |   |      | $      | 32,607  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Expenses                                                            |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Employee compensation and
	benefits |                             | $       | 68,752 |         |      | $      | 33,868 |         |      | $     | 26,987 |         |   | $      | 25,950 |         |   | $    | 17,736 |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Clearing fees                       |                             |         | 4,334  |         |      |        | 2,999  |         |      |       | 2,890  |         |   |        | 1,475  |         |   |      | 750    |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Occupancy and equipment rental      |                             |         | 9,895  |         |      |        | 4,830  |         |      |       | 3,285  |         |   |        | 3,381  |         |   |      | 1,965  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Communication                       |                             |         | 15,778 |         |      |        | 7,999  |         |      |       | 5,251  |         |   |        | 3,938  |         |   |      | 2,298  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Interest                            |                             |         | 38,213 |         |      |        | 16,331 |         |      |       | 11,806 |         |   |        | 11,027 |         |   |      | 7,427  |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Amortization of goodwill            |                             |         | 3,740  |         |      |        | 246    |         |      |       | 108    |         |   |        | 108    |         |   |      | 27     |        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Other expense                       |                             |         | 7,882  |         |      |        | 6,806  |         |      |       | 3,005  |         |   |        | 3,037  |         |   |      | 2,180  |        
|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                    |                                     | Total expenses              |         | $      | 148,594 |      |        | $      | 73,079  |      |       | $      | 53,332  |   |        | $      | 48,916  |   |      | $      | 32,383  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Net income (loss) from continuing
	operations-pretax                |                                     |                             | (11,212 | )      |         |      | (2,293 | )      |         |      | 2,258 |        |         |   | (1,823 | )      |         |   | 224  |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Income tax expense (benefit)                                        |                                     |                             | (2,777  | )      |         |      | (839   | )      |         |      | 985   |        |         |   | (599   | )      |         |   | 34   |       
|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|Net income (loss) from continuing
	operations                       |                                     |                             | (8,435  | )      |         |      | (1,454 | )      |         |      | 1,273 |        |         |   | (1,224 | )      |         |   | 190  |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Discontinued operations, Online Brokerage
	Solutions:               |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Operating loss, net of income taxes                                 |                                     |                             | (1,874  | )      |         |      | (246   | )      |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Gain on sale, net of income taxes of
	$1.5  million                 |                                     |                             | 2,231   |        |         |      |       |        |         |      |      |        |         |   |       |        |         |   |     |       
|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|Net income (loss)                                                   |                                     | $                           | (8,078  | )      |         | $    | (1,700 | )      |         | $    | 1,273 |        |         | $ | (1,224 | )      |         | $ | 190  |       
|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|Basic and diluted earnings per share                                |                                     | $                           | (0.29   | )      |         | $    | (0.09  | )      |         | $    | 0.08  |        |         | $ | (0.08  | )      |         | $ | 0.01 |       
|                                                                    |                                     |                             |         |        |         |      |        |        |         |      |       |        |         |   |        |        |         |   |      |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Consolidated Statements of Financial Condition
	Data  In Thousands |                                     |                             |         |       
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                     | Total Assets                |         | $      | 984,400 |      |        | $      | 538,875 |      |       | $      | 322,353 |   |        | $      | 272,616 |   |      | $      | 181,042 | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                     | Total Debt                  |         |        | 69,511  |      |        |        | 55,619  |      |       |        | 48,113  |   |        |        | 27,728  |   |      |        | 27,102  | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                     | Total Shareholders Equity  |         |        | 80,921  |      |        |        | 24,652  |      |       |        | 7,011   |   |        |        | 1,358   |   |      |        | 2,583   | 

11



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7: | Managements Discussion and Analysis of Financial
	Condition and 
	 Results of Operations

Factors that may affect future results

Certain matters set forth in the following discussion, including
managements expectations regarding future growth, cash
requirements and profitability, include forward-looking
statements within the context of the Private Securities
Litigation Reform Act of 1995. These statements involve certain
risks and uncertainties that could cause actual results to
differ materially from such statements. These potential risks
and uncertainties include, among other factors, the volatile
nature of financial markets and the securities industry, rapidly
growing competition in the financial services industry,
including the online security trading business, dependence on
and competition for experienced personnel, successful
implementation of our long-term strategy and federal and state
regulatory and legislative changes. See also Exhibit 99.1
for additional risks related to our business.

Segments

Our reportable segments are as follows: full-service brokerage,
clearing brokerage, online brokerage and other. Underwriting
results are combined with other full-service brokerage
operations for managements review of internal financial
statements. Results of underwriting operations are included in
the full-service brokerage segment for each of the years
presented.

Full-Service Brokerage

Through our traditional full-service broker dealer, MJSK, we act
as agents, principals and underwriters for customers seeking to
complete securities transactions. We charge a brokerage
commission when acting as an agent for our customers. We
recognize income or loss on inventory sold to customers from
inventory maintained for those securities in which we make a
market. We also provide investment banking services to our
clients by managing or co-managing public offerings of
securities or by arranging private placements of securities with
institutional or individual investors. Our corporate and public
capital finance departments accept invitations to participate in
competitive or negotiated underwritings managed by other
investment banking firms and allocate our underwriting positions
to our brokers, institutional clients and other broker dealers.

Clearing Brokerage

MJK Clearing, Inc. serves as a clearing agent by providing
transaction execution and settlement, account maintenance,
including extension of credit, and record keeping services for
our customers as well as customers of our correspondents and
affiliates. We collect a clearing fee and charge interest on
customers margin accounts and pay interest on cash in
customers accounts. Additionally we borrow securities
from, and lend securities to, other broker dealers and pay and
earn interest on related cash collateral deposits.

Online Brokerage

Through our Stockwalk.com, Inc. broker-dealer and our web-site
www.stockwalk.com, we provide automated order placement,
portfolio tracking and related market information, news and
other information services 24 hours a day, seven days a week.
This is done by means of the Internet and telephone, which
allows our customers the ability to place

12



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##### Table of Contents





Other/ Eliminations

Other revenues and expenses consist of clearing and interest
charges assessed to affiliates that are eliminated in
consolidation.

Intersegment transactions are measured on the same basis as if
the transactions occurred with external customers. In reviewing
the segment operating results, our operating decision-makers do
not distinguish between intersegment transactions and external
customer transactions. Intersegment revenue is eliminated to
reconcile total segment revenue to consolidated revenue. Income
tax expense or benefit is not allocated to our operating
segments.

Information concerning operations in our segments of business is
as follows:

|                                                     |                        |                    |             |            |   |          |            |            |   |   |            |            |  
|---------------------------------------------------- | ---------------------- | ------------------ | ----------- | ---------- | - | -------- | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                     |                        |                   
|                                                     |                        | Fiscal Years Ended
|                                                     |                        |                   
|                                                     |                        | March 31           |             | March 31   |   | March 31
|                                                     |                        | 2001               |             | 2000       |   | 1999    
|                                                     |                        |                    |             |            |   |         
|Revenue:                                             |                        |                    |             |            |   |          |            |            |   |   |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Full service brokerage |                    | $           | 84,263,900 |   |          | $          | 40,975,600 |   |   | $          | 36,310,400 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Clearing brokerage     |                    |             | 51,322,500 |   |          |            | 28,102,800 |   |   |            | 21,691,800 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Online brokerage       |                    |             | 4,643,200  |   |          |            | 2,533,100  |   |   |            |           |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other/eliminations     |                    |             | (2,848,000 | ) |          |            | (825,600   | ) |   |            | (2,411,900 | )
|                                                     |                        |                    |             |            |   |          |            |            |   |   |            |           
|Consolidated revenue                                 |                        | $                  | 137,381,600 |            |   | $        | 70,785,900 |            |   | $ | 55,590,300 |           
|                                                     |                        |                    |             |            |   |          |            |            |   |   |            |           
|Pretax income (loss):                                |                        |                    |             |            |   |          |            |            |   |   |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Full service brokerage |                    |             | (7,609,100 | ) |          |            | (858,100   | ) |   |            | 212,700    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Clearing brokerage     |                    |             | 1,709,200  |   |          |            | 4,210,900  |   |   |            | 2,050,700  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Online brokerage       |                    |             | (5,298,200 | ) |          |            | (3,339,400 | ) |   |            |           |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other/eliminations     |                    |             | (13,900    | ) |          |            | (2,306,000 | ) |   |            | (5,800     | )
|                                                     |                        |                    |             |            |   |          |            |            |   |   |            |           
|Income (loss) from continuing
	operations 
	pretax: |                        | $                  | (11,212,000 | )          |   | $        | (2,292,600 | )          |   | $ | 2,257,600  |           
|                                                     |                        |                    |             |            |   |          |            |            |   |   |            |           

Revenues from full-service brokerage increased
$43.3 million or 105.6% from 2000 to 2001 and
$4.7 million or 12.8% from 1999 to 2000. Revenues from
R.J. Steichen, acquired August 1, 2000 and
John G. Kinnard, acquired September 8, 2000 were
approximately $41.3 million. Full-service brokerage
expenditures increased $50 million or 119.6% from 2000 to
2001 and $5.7 million or 15.9% from 1999 to 2000.
Expenditures directly related to the operations of Steichen and
Kinnard were $43.1 million. In addition, retail
expenditures increased due to administrative charges for legal,
accounting, information technology and employee benefit plans,
interest charges from larger equity trading inventories, and an
increase in clearing costs due to higher transaction levels. We
anticipate an increase in full-service brokerage revenues as
investor confidence improves, underwriting opportunities arise,
and we attract new brokers. We believe that one-time fees and
non-recurring expenditures made in 2001 for professional fees
and technological enhancements will decline in future periods.
We have made and will continue to make cost

13



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##### Table of Contents





The increase in clearing brokerage revenues and related
expenditures is a result of our growth in introducing broker
dealers for whom we clear trades and an increase in our stock
borrow/lending operations.

The number of introducing brokers increased from 31 at
March 31, 1999 to 50 at March 31, 2000 and 61 at
March 31, 2001. These new relationships produced new
customer accounts, resulting in an increase in trades processed
and interest earning margin balances.

Interest income earned on customer margin accounts increased
from $10.1 million to $11.1 million to
$27 million as the average customer margin balances
increased from $133.6 million to $147.8 million to
$314.8 million in the respective years ended March 31,
1999, 2000 and 2001. The current year increase in customer
margin accounts includes aggregate margin balances of $40
million held by J.G. Kinnard customers now held at MJK Clearing.
Interest expense incurred on customer cash accounts increased
from $7.7 million to $9.3 million to $16.7 million as
the average customer cash balances increased from $189.5 to
$219.3 million to $314.4 million in the respective
years ended March 31, 1999, 2000 and 2001.

Clearing fee transaction revenues increased from
$3.1 million in 1999 to $5.2 million in 2000 to
$6.3 million in 2001 as the volume of trades processed
increased from 504,700 to 916,900 to 1,861,900 during the same
timeframe. Data processing costs incurred to process the
customer trades increased from $2.7 million in 1999 to
$4.1 million in 2000 to $7.8 million in 2001.
Compensation expenditures increased $2 million in 2001 due
to an increase in personnel required to handle the additional
correspondent relationships and increase in trading volume. The
clearing brokerage operations also incurred a $2.5 million
increase in technology expenditures to improve correspondent
services and improve interfaces with its online operations in
2001.

We anticipate forming new correspondent relationships and
recognizing modest increases in our clearing business mitigated
by lower interest rates charged to and earned from customer
balances. We anticipate that data processing costs will remain
relatively constant due to favorable vender volume pricing.

Interest income earned on stock borrowed from broker dealers
increased from $631,800 to $4.2 million to
$15.5 million in the respective years ended March 31,
1999, 2000 and 2001, due to growth in stock borrowed balances
and related cash collateral. Interest expense incurred on stock
loaned to broker dealers increased from $256,300 to
$3.6 million to $15.5 million in the respective years
ended March 31, 1999, 2000 and 2001, due to growth in the
stock loaned balances and related cash deposits received. We
anticipate more moderate levels of growth in the next few years
in our stock lending operations.

Our online brokerage business trading fee revenues were
$4.6 million, an increase of 2.1 million or 83.3% from
the prior year. Our online brokerage expenditures increased
$4.1 million or 69.3% from the prior year. The significant
increases were the result of having an entire year of operations
recorded in 2001, as we launched our website in
September 1999 and grew our customer base through the
acquisition of Arnold Securities,

14



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##### Table of Contents





The $2.3 million loss from other operations in the year
ended March 31, 2000 is related to compensation for
administrative personnel, legal and accounting services and
other incremental expenditures associated with being a public
company and developmental costs of our technological
infrastructure that were not allocated to the other segments of
our business. For the year ended March 31, 2001, similar charges
were equitably allocated to the respective segments.

Liquidity and Capital Resources

Our assets consist primarily of cash and assets readily
convertible into cash. Security inventories are stated at market
value and are generally readily marketable. Customer margin
loans are collateralized by securities and have floating
interest rates. Other receivables and payables arising from
transactions with customers and other brokers and dealers
usually settle transactions within three days following the date
of transaction. Fluctuations in the customer margin and cash
balances result in changes in the amount of segregated cash
required by SEC brokerage rules and regulations. Operations are
financed by equity capital, bank lines of credit, stock lending,
proceeds from sales of securities and non-interest bearing
liabilities. Due to the liquid nature of our balance sheet, the
fluctuations in cash flows from financing activities are
directly related to operating activities.

The $53.9 million of cash provided by operating activities
was a result of a $114.4 million increase in payables to
other broker-dealers excluding balances obtained from Steichen
and Kinnard, a $17.1 million decline in reserve account
requirements and a $9.1 million reduction in the combined
entity fixed income securities, offset by the financing of a
$90.3 million increase in customer margin accounts.

Our investing activities used $35.8 million of cash in the
year ended March 31, 2001 as a result of the acquisitions
of certain assets of R.J. Steichen and Company and
John G. Kinnard, Inc. in addition to the purchase of
furniture and equipment. We funded these acquisitions primarily
through the issuance of notes payable and common stock.

Our financing activities provided cash of $8.7 million in
the year ended March 31, 2001, primarily resulting from the
net proceeds from the sale of convertible notes of
$19.6 million offset by $3.1 million payments on other
notes and a net reduction in short term borrowings of
approximately $8.0 million. The increase in short-term
borrowings at March 31, 1999 and subsequent decline in
March of 2000 and 2001 is the result of fluctuating operating
balances at each respective year-end.

At March 31, 2001, we had approximately $95 million in
committed credit agreements, of which $12.9 million was
utilized. The extended credit was collateralized with
approximately $8.5 million of firm-owned securities and
cash and approximately $8.3 million was collateralized by
customer securities collateralizing liabilities subordinated to
claims of general creditors.

We believe that our current cash position, cash generated from
future operations, availability of line of credit borrowings,
security lending availability, additional capacity for
subordinated debt, and sale of securities will be adequate to
meet our current obligations and operating needs.

15



---



##### Table of Contents








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


Our primary market risk exposure is the impact that equity
market pricing and interest rate fluctuations may have on the
value of financial securities we own and hold for proprietary
trading. We manage this risk exposure through a process of
internal controls and management review. Position limits for
trading and investments are established and monitored on an
on-going basis. The trading inventory is turned over frequently
throughout the year.

Our equity price risk results from the risk of loss from price
movements, volatility or liquidity over which we have no
control. Our corporate equity holdings, trading securities and
investments, increased from long positions of $3.5 million
at March 31, 2000 to $6.7 million at March 31,
2001. The potential loss in fair value, using a hypothetical 25%
decline in equity prices on the March 31, 2001 holdings, is
estimated to be $1.7 million. A 25% hypothetical decline
was used to represent a significant yet plausible market change.

Our primary exposure to interest rate risk arises from our
interest earning fixed income securities held primarily for
deposits at clearing organizations and for SEC reserve
requirements. We mitigate this risk by holding high-grade
government obligations with short-term maturities.






Item 8:  Financial Statements And Supplementary Data


Stockwalk Group, Inc.

Index to Financial Statements


|                                                 |  |  |         | 
|------------------------------------------------ |  |  | ------- | 
|                                                
|                                                
|                                                
|                                                
|Consolidated Statements of Financial Condition   |  |  | Page 17 | 
|                                                
|                                                
|                                                
|                                                
|Consolidated Statements of Operations            |  |  | Page 18 | 
|                                                
|                                                
|                                                
|                                                
|Consolidated Statements of Shareholders
	Equity |  |  | Page 19 | 
|                                                
|                                                
|                                                
|                                                
|Consolidated Statements of Cash Flows            |  |  | Page 20 | 
|                                                
|                                                
|                                                
|                                                
|Consolidated Notes to Financial Statements       |  |  | Page 21 | 
|                                                
|                                                
|                                                
|                                                
|Report of Independent Auditors                   |  |  | Page 35 | 
|                                                
|                                                
|                                                
|                                                
|                                                
|Parent Company Statements of Financial Condition |  |  | Page 40 | 
|                                                
|                                                
|                                                
|                                                
|Parent Company Statements of Operations          |  |  | Page 41 | 
|                                                
|                                                
|                                                
|                                                
|Parent Company Statements of Cash Flows          |  |  | Page 42 | 
|                                                
|                                                
|                                                
|                                                
|Parent Company Notes to Financial Statements     |  |  | Page 43 | 

16



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##### Table of Contents



Stockwalk Group, Inc.

Consolidated Statements of Financial Condition

|                                                                     |                                                              |           |             |           |  |   |             |         | 
|-------------------------------------------------------------------- | ------------------------------------------------------------ | --------- | ----------- | --------- |  | - | ----------- | ------- | 
|                                                                     |                                                              |          
|                                                                     |                                                              | March 31,
|                                                                     |                                                              |          
|                                                                     |                                                              | 2001      |             | 2000     
|                                                                     |                                                              |           |             |          
|Assets                                                               |                                                              |           |             |           |  |   |             |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash                                                                 |                                                              | $         | 32,398,800  |           |  | $ | 5,533,500   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and investments  segregated                                    |                                                              |           | 65,928,300  |           |  |   | 83,009,400  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Receivables from customers                                           |                                                              |           | 403,288,100 |           |  |   | 216,216,100 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Receivables from brokers and dealers                                 |                                                              |           | 339,953,600 |           |  |   | 160,230,300 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Deposits at clearing organizations                                   |                                                              |           | 23,651,100  |           |  |   | 26,234,900  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Trading securities owned, at market                                  |                                                              |           | 9,176,500   |           |  |   | 8,320,100   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Secured demand notes receivable                                      |                                                              |           | 18,025,000  |           |  |   | 18,575,000  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Goodwill, less accumulated amortization of
	$4,229,100
	and $489,400 |                                                              |           | 67,657,600  |           |  |   | 10,284,900  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other assets                                                         |                                                              |           | 24,320,900  |           |  |   | 10,471,100  |        
|                                                                     |                                                              |           |             |           |  |   |             |        
|Total Assets                                                         |                                                              | $         | 984,399,900 |           |  | $ | 538,875,300 |        
|                                                                     |                                                              |           |             |           |  |   |             |        
|Liabilities                                                          |                                                              |           |             |           |  |   |             |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Short-term borrowings                                                |                                                              | $         | 25,541,000  |           |  | $ | 29,500,000  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payables to customers                                                |                                                              |           | 360,852,800 |           |  |   | 280,364,200 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Payables to brokers and dealers                                      |                                                              |           | 443,935,800 |           |  |   | 160,153,400 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Trading securities sold but not yet purchased, at
	market            |                                                              |           | 1,963,400   |           |  |   | 1,339,000   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Notes payable                                                        |                                                              |           | 25,944,800  |           |  |   | 7,544,400   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Liabilities subordinated to claims of general
	creditors             |                                                              |           | 18,025,000  |           |  |   | 18,575,000  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other liabilities                                                    |                                                              |           | 27,216,400  |           |  |   | 16,747,000  |        
|                                                                     |                                                              |           |             |           |  |   |             |        
|Total Liabilities                                                    |                                                              | $         | 903,479,200 |           |  | $ | 514,223,000 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Shareholders Equity                                                 |                                                              |           |             |           |  |   |             |        
|Common stock, 2001  $.04 par value;
	2000 
	$.04 par value         |                                                              |           |             |           |  |   |             |        
|                                                                     | Authorized shares: 50,000,000                                |           |             |           |  |   |             |         | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Issued and outstanding 2001 
	32,775,071; 2000  21,575,313 |           | $           | 1,311,000 |  |   | $           | 863,000 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Additional paid-in capital                                           |                                                              |           | 89,338,800  |           |  |   | 25,440,900  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Retained deficit                                                     |                                                              |           | (9,729,100  | )         |  |   | (1,651,600  | )      
|                                                                     |                                                              |           |             |           |  |   |             |        
|Total Shareholders Equity                                           |                                                              | $         | 80,920,700  |           |  | $ | 24,652,300  |        
|                                                                     |                                                              |           |             |           |  |   |             |        
|Total Liabilities & Shareholders
	Equity                            |                                                              | $         | 984,399,900 |           |  | $ | 538,875,300 |        
|                                                                     |                                                              |           |             |           |  |   |             |        

See accompanying notes to the consolidated financial
statements.

17



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##### Table of Contents



Stockwalk Group, Inc.

Consolidated Statements of Operations

|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |            | 
|----------------------------------------------------- | ------------------------ | ---------------------------- | ----------- | ---------- |  | ---- | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                      |                          |                             
|                                                      |                          | Fiscal Years Ended March 31,
|                                                      |                          |                             
|                                                      |                          | 2001                         |             | 2000       |  | 1999
|                                                      |                          |                              |             |            |  |     
|Revenues                                              |                          |                              |             |            |  |      |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Trading profits          |                              | $           | 26,598,500 |  |      | $          | 16,073,000 |  |   | $          | 15,063,100 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest                 |                              |             | 47,704,000 |  |      |            | 20,988,500 |  |   |            | 15,410,200 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Commissions              |                              |             | 35,558,600 |  |      |            | 14,286,000 |  |   |            | 9,888,200  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Investment banking       |                              |             | 12,526,000 |  |      |            | 10,362,900 |  |   |            | 8,388,900  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Clearing fees            |                              |             | 6,338,500  |  |      |            | 5,247,600  |  |   |            | 3,105,400  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other income             |                              |             | 8,656,000  |  |      |            | 3,827,900  |  |   |            | 3,734,500  | 
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Total revenues                                        |                          | $                            | 137,381,600 |            |  | $    | 70,785,900 |            |  | $ | 55,590,300 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Expenses                                              |                          |                              |             |            |  |      |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Compensation             |                              | $           | 68,751,600 |  |      | $          | 33,868,200 |  |   | $          | 26,986,900 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Clearing fees            |                              |             | 4,334,000  |  |      |            | 2,998,500  |  |   |            | 2,890,100  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Occupancy                |                              |             | 9,895,200  |  |      |            | 4,829,900  |  |   |            | 3,285,100  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Communication            |                              |             | 15,778,200 |  |      |            | 7,998,800  |  |   |            | 5,251,400  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest                 |                              |             | 38,213,300 |  |      |            | 16,331,400 |  |   |            | 11,805,900 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Amortization of goodwill |                              |             | 3,739,700  |  |      |            | 245,800    |  |   |            | 108,200    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other expense            |                              |             | 7,881,600  |  |      |            | 6,805,900  |  |   |            | 3,005,100  | 
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Total expenses                                        |                          | $                            | 148,593,600 |            |  | $    | 73,078,500 |            |  | $ | 53,332,700 |           
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Income (loss) from continuing operations
	pretax      |                          |                              | (11,212,000 | )          |  |      | (2,292,600 | )          |  |   | 2,257,600  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax expense (benefit)                          |                          |                              | (2,777,000  | )          |  |      | (838,800   | )          |  |   | 985,000    |           
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Net income (loss) from continuing
	operations         |                          | $                            | (8,435,000  | )          |  | $    | (1,453,800 | )          |  | $ | 1,272,600  |           
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Discontinued operations, Online Brokerage
	Solutions: |                          |                              |             |            |  |      |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|Operating loss, net of income taxes                   |                          | $                            | (1,873,500  | )          |  | $    | (246,100   | )          |  | $ |           |           
|                                                     
|                                                     
|                                                     
|                                                     
|Gain on sale, net of income taxes of
	$1.5 million    |                          |                              | 2,231,000   |            |  |      |           |            |  |   |           |           
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Net income (loss)                                     |                          | $                            | (8,077,500  | )          |  | $    | (1,699,900 | )          |  | $ | 1,272,600  |           
|                                                      |                          |                              |             |            |  |      |            |            |  |   |            |           
|Net income (loss) per common share:                   |                          |                              |             |            |  |      |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|Basic and diluted                                     |                          | $                            | (0.29       | )          |  | $    | (0.09      | )          |  | $ | 0.08       |           
|                                                     
|                                                     
|                                                     
|                                                     
|Weighted average shares outstanding:                  |                          |                              |             |            |  |      |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|Basic                                                 |                          |                              | 27,969,900  |            |  |      | 18,849,200 |            |  |   | 15,848,500 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Diluted                                               |                          |                              | 28,005,900  |            |  |      | 18,998,400 |            |  |   | 15,848,500 |           

See accompanying notes to the consolidated financial
statements.

18



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##### Table of Contents



Stockwalk Group, Inc.

Consolidated Statements of Shareholders Equity

Fiscal Years Ended March 31, 2001, 2000 and 1999


|                                                            |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   |            |  
|----------------------------------------------------------- |  | --------- | ---------- | ------------ |  | ---------- | ---------- | -------- |  | --------- | --------- | ----- |  | - | ---------- |  |  | - | ---------- | - |  | - | ---------- | -
|                                                            |  |           |            |              |  |            |            |          |  |          
|                                                            |  |           |            | Common Stock |  | Additional |            | Retained |  |          
|                                                            |  | Preferred |            |              |  | Paid in    |            | Earnings |  |          
|                                                            |  | Stock     |            | Shares       |  | Amount     |            | Capital  |  | (Deficit) |           | Total
|                                                            |  |           |            |              |  |            |            |          |  |           |           |      
|Balance, March 31, 1998                                     |  |           |           |              |  |            | 4,255,971  |          |  | $         | 42,600    |       |  | $ | 2,540,000  |  |  | $ | (1,224,300 | ) |  | $ | 1,358,300  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issuance of preferred
	stock                                |  |           | 4,380,300  |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   | 4,380,300  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Net income                                                  |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   | 1,272,600  |   |  |   | 1,272,600  |  
|                                                            |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   |            |  
|Balance, March 31, 1999                                     |  | $         | 4,380,300  |              |  |            | 4,255,971  |          |  | $         | 42,600    |       |  | $ | 2,540,000  |  |  | $ | 48,300     |   |  | $ | 7,011,200  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issuance of preferred stock                                 |  |           | 101,800    |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   | 101,800    |  
|                                                           
|                                                           
|                                                           
|                                                           
|Recapitalization in connection with merger of
	NM Holdings  |  |           | (4,482,100 | )            |  |            | 14,959,670 |          |  |           | 726,000   |       |  |   | 6,380,100  |  |  |   |            |   |  |   | 2,624,000  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Exercise of options and warrants                            |  |           |            |              |  |            | 63,875     |          |  |           | 2,600     |       |  |   | 165,200    |  |  |   |            |   |  |   | 167,800    |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issued in connection with private placements                |  |           |            |              |  |            | 2,239,500  |          |  |           | 89,600    |       |  |   | 15,910,600 |  |  |   |           |   |  |   | 16,000,200 |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issued in connection with acquisition of Arnold
	Securities |  |           |            |              |  |            | 10,000     |          |  |           | 400       |       |  |   | 71,900     |  |  |   |           |   |  |   | 72,300     |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issued in connection with acquisition of M-One
	Securities  |  |           |            |              |  |            | 40,000     |          |  |           | 1,600     |       |  |   | 318,400    |  |  |   |           |   |  |   | 320,000    |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issued in connection with marketing agreement               |  |           |            |              |  |            | 6,297      |          |  |           | 200       |       |  |   | 54,700     |  |  |   |           |   |  |   | 54,900     |  
|                                                           
|                                                           
|                                                           
|                                                           
|Net loss                                                    |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   | (1,699,900 | ) |  |   | (1,699,900 | )
|                                                            |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   |            |  
|Balance, March 31, 2000                                     |  | $         |           |              |  |            | 21,575,313 |          |  | $         | 863,000   |       |  | $ | 25,440,900 |  |  | $ | (1,651,600 | ) |  | $ | 24,652,300 |  
|                                                           
|                                                           
|                                                           
|                                                           
|Exercise of options and warrants                            |  |           |            |              |  |            | 42,477     |          |  |           | 1,700     |       |  |   | 218,800    |  |  |   |            |   |  |   | 220,500    |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issued in connection with acquisition of
	R.J  Steichen     |  |           |            |              |  |            | 6,315,062  |          |  |           | 252,600   |       |  |   | 39,314,900 |  |  |   |            |   |  |   | 39,567,500 |  
|                                                           
|                                                           
|                                                           
|                                                           
|Issued in connection with acquisition of
	J.G.  Kinnard     |  |           |            |              |  |            | 3,557,819  |          |  |           | 142,300   |       |  |   | 21,204,600 |  |  |   |            |   |  |   | 21,346,900 |  
|                                                           
|                                                           
|                                                           
|                                                           
|Conversion of subordinated notes                            |  |           |            |              |  |            | 1,284,400  |          |  |           | 51,400    |       |  |   | 3,159,600  |  |  |   |            |   |  |   | 3,211,000  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Net loss                                                    |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   | (8,077,500 | ) |  |   | (8,077,500 | )
|                                                            |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   |            |  
|Balance, March 31, 2001                                     |  | $         |           |              |  | $          | 32,775,071 |          |  | $         | 1,311,000 |       |  | $ | 89,338,800 |  |  | $ | (9,729,100 | ) |  | $ | 80,920,700 |  
|                                                            |  |           |            |              |  |            |            |          |  |           |           |       |  |   |            |  |  |   |            |   |  |   |            |  

See accompanying notes to the consolidated financial
statements.

19



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##### Table of Contents



Stockwalk Group, Inc.

Consolidated Statements of Cash Flows

|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |           |             |  
|---------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------ | ----------- | --------- | ----------- | ---- | ---------- | ------- | ----------- | - | ----------- | --------- | ----------- | -
|                                                                                                     |                                    |                                           
|                                                                                                     |                                    | Fiscal Years Ended March 31,              
|                                                                                                     |                                    |                                           
|                                                                                                     |                                    | 2001                                       |             | 2000      |             | 1999
|                                                                                                     |                                    |                                            |             |           |             |     
|Operating Activities                                                                                 |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Net income (loss)                                                                                    |                                    | $                                          | (8,077,500  | )         |             | $    | (1,699,900 | )       |             | $ | 1,272,600   |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Adjustments to reconcile net income (loss) to net
	cash provided by (used for) operating activities: |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Depreciation and amortization      |                                            |             | 5,491,500 |             |      |            | 946,600 |             |   |             | 1,013,900 |            
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Changes in assets and liabilities: |                                            |             |           |             |      |            |         |             |   |             |           |            
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     |                                    | Cash and investments segregated            |             |           | 17,081,100  |      |            |         | (9,878,900  | ) |             |           | 22,515,600  |  
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     |                                    | Customer receivables and payables          |             |           | (90,307,600 | )    |            |         | 745,100     |   |             |           | 11,199,000  |  
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     |                                    | Broker and dealer receivables and payables |             |           | 114,429,000 |      |            |         | 16,909,800  |   |             |           | (47,410,100 | )
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     |                                    | Deposits at clearing organizations         |             |           | 2,809,900   |      |            |         | (17,742,700 | ) |             |           | (7,689,300  | )
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     |                                    | Trading securities                         |             |           | 9,070,200   |      |            |         | 1,481,000   |   |             |           | (9,168,700  | )
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     |                                    | Other assets and liabilities               |             |           | 3,489,000   |      |            |         | 3,113,500   |   |             |           | 3,264,000   |  
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|Net cash provided by (used for) operating
	activities                                                |                                    | $                                          | 53,985,600  |           |             | $    | (6,125,500 | )       |             | $ | (25,003,000 | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Investing activities                                                                                 |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Acquisition of certain assets of broker dealers
	and license agreements                              |                                    | $                                          | (30,793,200 | )         |             | $    | (9,150,500 | )       |             | $ |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Purchase of equipment and office furniture, net                                                      |                                    |                                            | (5,053,700  | )         |             |      | (338,500   | )       |             |   | (645,100    | )        
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|Net cash used for investing activities                                                               |                                    | $                                          | (35,846,900 | )         |             | $    | (9,489,000 | )       |             | $ | (645,100    | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Financing activities                                                                                 |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Increase (decrease) in short-term
	borrowings                                                        |                                    |                                            | (7,959,000  | )         |             |      | (4,400,000 | )       |             |   | 21,900,000  |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Issuance of notes payable                                                                            |                                    |                                            | 19,578,400  |           |             |      | 4,667,400  |         |             |   |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Payments on notes payable                                                                            |                                    |                                            | (3,113,300  | )         |             |      | (1,661,100 | )       |             |   | (714,400    | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Issuance of preferred stock                                                                          |                                    |                                            |            |           |             |      | 101,800    |         |             |   | 4,380,300   |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Issuance of common stock                                                                             |                                    |                                            | 220,500     |           |             |      | 19,239,200 |         |             |   |            |          
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|Net cash provided by financing activities                                                            |                                    | $                                          | 8,726,600   |           |             | $    | 17,947,300 |         |             | $ | 25,565,900  |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Net increase (decrease) in cash                                                                      |                                    |                                            | 26,865,300  |           |             |      | 2,332,800  |         |             |   | (82,200     | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Cash at beginning of period                                                                          |                                    |                                            | 5,533,500   |           |             |      | 3,200,700  |         |             |   | 3,282,900   |          
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|Cash at end of period                                                                                |                                    | $                                          | 32,398,800  |           |             | $    | 5,533,500  |         |             | $ | 3,200,700   |          
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Supplemental disclosure of cash flow
	information                                                    |                                    |                                            |             |           |             |      |            |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Cash paid during the year for:                                                                       |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Interest                                                                                             |                                    | $                                          | 37,009,000  |           |             | $    | 15,333,500 |         |             | $ | 11,297,200  |          
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          
|Income taxes                                                                                         |                                    | $                                          |            |           |             | $    | 798,600    |         |             | $ | (373,400    | )        
|                                                                                                     |                                    |                                            |             |           |             |      |            |         |             |   |             |          

See accompanying notes to the consolidated financial
statements.

20



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##### Table of Contents



Stockwalk Group, Inc.

Notes to Consolidated Financial Statements

1.  Summary of Significant Accounting Policies

Description of Business

Our history began in 1980 with the incorporation of Miller
Securities, Inc., a specialized municipal bond firm. Miller
Securities eventually broadened its business to include a
variety of financial services, including securities clearing,
and changed its name to Miller, Johnson & Kuehn,
Incorporated (MJK). MJK Holdings, Inc.
(MJKH) was formed in June 1997 as a holding
company for MJK and MJKs clearing division. On
July 7, 1999, then privately owned MJKH and publicly held
NM Holdings, Inc. completed a merger whereby MJKH became a
wholly owned subsidiary of NM Holdings, Inc. The surviving
entity is now known as Stockwalk Group, Inc. Stockwalk Group,
Inc. acquired R.J. Steichen & Company in August 2000
and John G. Kinnard in September 2000. These two firms were
merged along with the full service brokerage business of MJK
into Miller Johnson Steichen Kinnard, Inc. (MJSK) in
January 2001. Stockwalk Group, Inc. is the ultimate holding
company of MJSK, MJK Clearing, Stockwalk.com, MJK Capital
Corporation, and Stockwalk Investment Management. MJSK, MJK
Clearing and Stockwalk.com are registered as broker-dealers with
the SEC and are members of the NASD and SIPC. Our stock trades
on the NASDAQ under the ticker symbol STOK.

We are a technologically driven regional securities firm
headquartered in Minneapolis, Minnesota. Through our operating
subsidiaries, we provide a broad range of investment services to
individual, corporate and public clients. These services include
both traditional and online securities brokerage, investment
banking and research services and the processing of securities
transactions for correspondent brokerage firms and financial
institutions.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.

Revenue Recognition and Securities Transactions

Purchases and sales of securities are recorded on a settlement
date basis, which is generally the third business day following
the transaction date. The impact of unsettled transactions on
trading securities owned, trading securities sold but not yet
purchased, and commission income, net of related expenses, is
not material.

Valuation of Financial Instruments

Trading securities owned and trading securities sold but not yet
purchased are carried at fair value. The fair values of the
financial instruments are generally based on listed market
prices. If listed market prices are not available, fair value is
based on other relevant factors, including dealer price
quotations.

21



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



1.  Summary of Significant Accounting Policies
(continued)


Goodwill

Excess of cost over fair value of net assets acquired
(goodwill) is amortized using the straight-line
method over periods not exceeding 20 years and is evaluated
periodically for impairment, based on the present value of
anticipated future cash flows.

Customer Receivables, Payables and Securities

Receivables from and payables to customers arise from cash and
margin transactions executed on behalf of our customers.
Receivables are generally collateralized by securities with
market values in excess of the amounts due. It is our policy to
monitor the market value of the collateral and request
additional collateral when required. Such collateral is not
reflected in the accompanying consolidated financial statements.

We are required to maintain possession or control, as defined,
of all fully paid securities and excess margin securities of
customers. To the extent such control cannot be obtained from
various counter parties, we may have to purchase or sell
securities at prevailing market rates to obtain such possession
or control.

We charge interest on our customer margin accounts and pay
interest on customers free credit balances based on
prevailing market rates. We recorded interest revenue of
approximately $26.2 million, $11.1 million and $10.1
million on customer margin accounts in the fiscal years ended
March 31, 2001, 2000, and 1999, respectively, and interest
expense of approximately $16.4 million, $9.3 million and
$7.7 million in the same periods.

Reverse Repurchase Agreements

Securities purchased under agreements to resell (reverse
repurchase agreements) are recorded at the contract amount at
which the securities will be subsequently resold plus accrued
interest. These financial instruments are collateralized by
U.S. government securities. It is our policy to take
possession of securities purchased under agreements to resell.

Cash and Cash Equivalents

We consider all highly liquid investments, including short-term
government securities, with a maturity of three months or less
when purchased to be cash equivalents.

Cash and investments segregated consist of funds segregated in
special reserve bank accounts for the benefit of customers under
rule 15c3-3 of the Securities and Exchange Commission. The cash
and cash equivalents segregated in special reserve bank accounts
included $57.2 million and $17.1 million of short-term
government securities at March 31, 2001 and 2000
respectively.

22



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



1.  Summary of Significant Accounting Policies
(continued)


Income Taxes

Deferred income taxes are recorded to reflect the tax
consequences of differences between the tax and financial
reporting basis of assets and liabilities.

Principles of Consolidation

The consolidated financial statements include the accounts of
Stockwalk Group, Inc. and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated in
consolidation. We do not present a statement of comprehensive
income, as there are no items.

Segment Reporting

Intersegment transactions are measured on the same basis as if
the transactions occurred with external customers. In reviewing
the segment operating results, our operating decision-makers do
not distinguish between intersegment transactions and external
customer transactions. Intersegment revenue is eliminated to
reconcile total segment revenue to consolidated revenue. Income
tax expense or benefit is not allocated to our operating
segments. We do not provide balance sheet data for segment
reporting, as this data is not measured for our operating
segments.

Information concerning operations in our segments of business is
detailed in the Managements Discussion and Analysis of
Financial Condition and Results of Operations.

Advertising Expenditures

Our advertising costs of $762,000 and $1.5 million in
fiscal 2001 and 2000, respectively, have been expensed as
incurred. No significant advertising expenses were incurred in
fiscal 1999.

Investment Banking

Investment banking revenues include gains, losses and fees
arising from securities offerings in which we act as an
underwriter or agent. Investment banking management fees are
recorded on offering date, sales concessions on settlement date,
and underwriting fees at the time the underwriting is completed
and the income is reasonably determinable.

2.  Accounting changes

SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, is effective for financial statements
for periods beginning after June 15, 2000. This statement
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. It requires that
an entity recognize all derivative instruments as either assets
or liabilities in the

23



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)

2.  Accounting Changes (continued)

statement of financial position and measure those instruments
at fair value. The adoption of SFAS No. 133 did not have a
material impact on our financial results.

3.  Broker-Dealer Receivables and Payables

Broker-dealer receivables and payables at March 31
consisted of the following:

|                                   |                   |      |             |             |  |   |             |             | 
|---------------------------------- | ----------------- | ---- | ----------- | ----------- |  | - | ----------- | ----------- | 
|                                   |                   | 2001 |             | 2000       
|                                   |                   |      |             |            
|Securities borrowed                |                   | $    | 325,709,700 |             |  | $ | 148,564,800 |            
|                                  
|                                  
|                                  
|                                  
|Securities failed-to-deliver       |                   |      | 3,917,400   |             |  |   | 6,608,200   |            
|                                  
|                                  
|                                  
|                                  
|Receivable from introducing broker |                   |      | 5,591,500   |             |  |   | 2,632,200   |            
|                                  
|                                  
|                                  
|                                  
|Other                              |                   |      | 4,735,000   |             |  |   | 2,425,100   |            
|                                   |                   |      |             |             |  |   |             |            
|                                   | Total receivables |      | $           | 339,953,600 |  |   | $           | 160,230,300 | 
|                                   |                   |      |             |             |  |   |             |            
|                                  
|Securities loaned                  |                   | $    | 424,966,200 |             |  | $ | 147,089,600 |            
|                                  
|                                  
|                                  
|                                  
|Securities failed-to-receive       |                   |      | 7,774,200   |             |  |   | 5,605,300   |            
|                                  
|                                  
|                                  
|                                  
|Payable to introducing broker      |                   |      | 11,195,400  |             |  |   | 4,347,900   |            
|                                  
|                                  
|                                  
|                                  
|Payable to clearing broker         |                   |      |            |             |  |   | 3,110,600   |            
|                                   |                   |      |             |             |  |   |             |            
|                                   | Total payables    |      | $           | 443,935,800 |  |   | $           | 160,153,400 | 
|                                   |                   |      |             |             |  |   |             |            

Broker-dealer receivables and payables arise from securities
transactions executed for our customers. The receivables are
generally collected within 30 days and collateralized by
securities in physical possession, on deposit or receivable from
customers or other brokers-dealers.

Broker-dealer payables represent amounts due upon the receipt of
securities. Should the broker-dealer fail to deliver the
securities to us, we may be required to purchase identical
securities on the open market. The market value of such
securities at March 31, 2001 and 2000 approximates the
amount owed.

Securities borrowed and loaned are stated in the Consolidated
Statements of Financial Condition at the amounts of collateral
advanced and received in connection with the transactions. We
measure the fair value of the securities borrowed and loaned
against the cash collateral on a daily basis. Additional
collateral is obtained as necessary to ensure such transactions
are adequately collateralized.

4.  Trading Securities

Our trading securities represent investments in fixed income
securities, publicly traded equity securities and privately
placed equity securities. The value of certain trading

24



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



4.  Trading Securities (continued)


securities can fluctuate significantly, with the resulting
valuation changes being reported as net gains or losses. Trading
securities at March 31, consisted of the following:

|                                    |                                 |      |           |           |  |   |           |           | 
|----------------------------------- | ------------------------------- | ---- | --------- | --------- |  | - | --------- | --------- | 
|                                    |                                 | 2001 |           | 2000     
|                                    |                                 |      |           |          
|Trading securities owned, at market |                                 |      |           |           |  |   |           |          
|                                   
|                                   
|                                   
|                                   
|                                    | Corporate equities              |      | $         | 3,962,000 |  |   | $         | 2,346,200 | 
|                                   
|                                   
|                                   
|                                   
|                                    | State and municipal obligations |      |           | 2,656,000 |  |   |           | 4,372,900 | 
|                                   
|                                   
|                                   
|                                   
|                                    | U.S. Government obligations     |      |           | 1,583,700 |  |   |           | 938,900   | 
|                                   
|                                   
|                                   
|                                   
|                                    | Corporate obligations           |      |           | 974,800   |  |   |           | 662,100   | 
|                                    |                                 |      |           |           |  |   |           |          
|                                    |                                 | $    | 9,176,500 |           |  | $ | 8,320,100 |          
|                                    |                                 |      |           |           |  |   |           |          

Our trading securities sold but not yet purchased represent our
obligations to deliver a specified security at the contracted
price and thereby create a liability to purchase the security in
the market at prevailing prices. Accordingly, these transactions
result in off-balance-sheet market risk as the ultimate
obligations to satisfy the sale of securities sold but not yet
purchased may exceed the amount recorded in the Consolidated
Statements of Financial Condition at March 31, 2001 and
2000. Trading securities sold but not yet purchased at
March 31, consisted of the following:

|                                                          |                                 |      |           |           |  |   |           |         | 
|--------------------------------------------------------- | ------------------------------- | ---- | --------- | --------- |  | - | --------- | ------- | 
|                                                          |                                 | 2001 |           | 2000     
|                                                          |                                 |      |           |          
|Trading securities sold but not yet purchased, at
	market |                                 |      |           |           |  |   |           |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Corporate equities              |      | $         | 499,300   |  |   | $         | 688,600 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | State and municipal obligations |      |           | 1,144,100 |  |   |           | 370,100 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | U.S. government obligations     |      |           | 42,700    |  |   |           | 156,100 | 
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Corporate obligations           |      |           | 277,300   |  |   |           | 124,200 | 
|                                                          |                                 |      |           |           |  |   |           |        
|                                                          |                                 | $    | 1,963,400 |           |  | $ | 1,339,000 |        
|                                                          |                                 |      |           |           |  |   |           |        

5.  Organizational Changes

Acquisitions

On August 1, 2000, we completed our merger agreement with
R.J. Steichen & Company. The former shareholders of
Steichen received $17.5 million in cash and 6,315,062
shares of our common stock and five-year warrants to purchase
300,000 shares of our common stock exercisable at $6.375 per
share.

On September 8, 2000, we completed the merger with Kinnard
Investments, Inc. In this transaction, we issued an aggregate of
3,557,819 registered shares (the equivalent of .7676 shares of
the registrants common stock) of our common stock, to the
former shareholders of Kinnard. We also paid to such
shareholders an aggregate of $27.8 million in cash (6.00/
share for each outstanding Kinnard share). Pursuant to the terms
of the Kinnard merger, we also paid $4.1 million to the
former holders of Kinnards outstanding options and
warrants.

The acquisitions of Steichen and Kinnard were accounted for
under the purchase method of accounting, and accordingly, the
respective purchase prices were allocated to

25



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



5.  Organizational Changes (continued)


assets acquired and liabilities assumed based on their fair
market values at the dates of acquisition. The excess of the
purchase price over the fair market value of the net assets
acquired, $39.8 and $21.8 million respectively, was
recorded as goodwill and will be amortized over 20 years.
The results of operations of the two entities have been included
in the Consolidated Statements of Operations since the dates of
acquisition.

The following Pro Forma operating results assume that the
acquisitions had occurred at the beginning of each period
presented. In addition to combining the historical results of
operations, the Pro Forma results include adjustments for the
estimated effect of purchase accounting for the years ended
March 31:

|                                                  |  |                      |         |      |  |      |         |  |  |   |         |  
|------------------------------------------------- |  | -------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | -
|                                                  |  | 2001                 |         | 2000 |  | 1999
|                                                  |  |                      |         |      |  |     
|                                                  |  |                     
|                                                  |  | (in thousands except
|                                                  |  | per share data)     
|                                                 
|                                                 
|                                                 
|                                                 
|Total revenues                                    |  | $                    | 175,925 |      |  | $    | 185,381 |  |  | $ | 134,458 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net income (loss)                                 |  |                      | (6,898  | )    |  |      | 3,542   |  |  |   | (2,019  | )
|                                                 
|                                                 
|                                                 
|                                                 
|Basic and diluted income (loss) per common
	share |  |                      | (0.22   | )    |  |      | 0.12    |  |  |   | (0.08   | )

Dispositions

On February 26, 2001, BlueSuit, Inc.
(BlueSuit), purchased all of the outstanding common
stock of Online Brokerage Solutions, Inc. (OBS),
formerly a wholly-owned subsidiary of ours, and certain assets
used in OBSs business. In connection with this
transaction, we also entered into a Transition Services
Agreement with BlueSuit, pursuant to which we obligated
ourselves to perform certain IT-related and other transition
services for BlueSuit for up to six months from the date of
closing.

We received $1,875,000 at closing, with an additional $200,000
being payable following the transition period. In addition,
BlueSuit issued an aggregate of 300,000 shares, valued at
$6.00 per share, of its restricted Series A Preferred
Shares to us. Subject to our performance, BlueSuit is also
obligated to issue 33,334 shares of restricted Series A
Preferred Stock following the transition period. Finally,
BlueSuit obligated itself to issue us an additional 83,333
shares of its restricted Series A Preferred Stock if
OBS enters into a specified relationship within six months
following the closing.

Basic and diluted per share results of Online Brokerage
Solutions for the years ended March 31, were as follows:

|                                      |  |      |       |      |  |      |       |   |  |  |   | 
|------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | - | 
|                                      |  | 2001 |       | 2000 |  | 1999
|                                      |  |      |       |      |  |     
|Operating losses, net of income taxes |  |      | (0.07 | )    |  |      | (0.01 | ) |  |  |  | 
|                                     
|                                     
|                                     
|                                     
|Gain on sale, net of income taxes     |  |      | 0.08  |      |  |      |      |   |  |  |  | 

26



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)

6.  Financing Arrangements

Short term borrowings

We had discretionary lines of credit totaling $95 million
at March 31, 2001 and $70 million at March 31,
2000 which are secured by firm-owned securities, customer
securities collateralizing liabilities subordinated to claims of
general creditors and unpaid customer securities. These lines
are payable on demand. Borrowings on the lines bear interest at
various rates over the banks cost of funds; such rates
generally vary daily. The weighted average interest rates on the
lines were 6.42%, 7.55% and 6.48% on March 31, 2001, 2000,
and 1999 respectively. The March 31, 2001 balance
outstanding of $12.9 million was collateralized by
approximately $8.5 million of firm owned securities and
cash, and $8.3 million of customer securities
collateralizing liabilities subordinated to claims of general
creditors. The March 31, 2000 balance outstanding of
$29.5 million was collateralized by approximately
$20.9 million of firm owned securities and cash, and
$14.2 million of customer securities collateralizing
liabilities subordinated to claims of general creditors. The
lines of credit require us to comply with certain financial debt
covenants.

At March 31, 2001 we had $12.7 million of short-term
commercial paper outstanding with yields of approximately 8%
maturing between 30 and 270 days from the date of issuance.

Notes Payable

In August 2000, we completed an offering for $21.5 of 10%
convertible subordinated bonds due in 2005. During the fourth
quarter 2001, $3.2 million of the subordinated bonds had
converted into 1,284,400 shares of common stock at
$2.50 per share.

At March 31, 2001, we had a note payable of
$2.4 million. The note bears an interest rate of the
banks reference rate unless our investment account at the
bank is less than the principal balance of the note. If our
investment account balance at the bank is less than the
principal balance of the note, the note bears an interest rate
of the banks reference rate plus one-half of one percent.
The interest rate on the note at March 31, 2001 was 7.5%.
The note matures in installments through March 2005.

We also had various notes payable at March 31, 2001 and
2000 of $5.2 million and $4.5 million, respectively,
which were secured by certain assets. Borrowings bear interest
at either a fixed rate or various rates over the banks
cost of funds; such rates generally vary daily. The interest
rates ranged from 5.25% to 10.16% as of March 31, 2001 and
2000. Notes payable at March 31, 2001 mature as follows:

|                            |      |   |            |            | 
|--------------------------- | ---- | - | ---------- | ---------- | 
|                           
|                           
|                           
|                           
|Fiscal year ended March 31: |      |   |            |           
|                           
|                           
|                           
|                           
|                            | 2002 |   | $          | 1,667,800  | 
|                           
|                           
|                           
|                           
|                            | 2003 |   |            | 4,419,400  | 
|                           
|                           
|                           
|                           
|                            | 2004 |   |            | 962,600    | 
|                           
|                           
|                           
|                           
|                            | 2005 |   |            | 18,895,000 | 
|                            |      |   |            |           
|                            |      | $ | 25,944,800 |           
|                            |      |   |            |           

27



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



6.  Financing Arrangements (continued)


Liabilities subordinated to claims of general creditors

We had liabilities subordinated to claims of general creditors
at March 31, 2001 representing 70 secured demand notes
receivable, which are collateralized by securities with market
values in excess of their respective face amounts. The notes
bear interest at 5%-6% and mature as follows:

|                     |      |   |            |            | 
|-------------------- | ---- | - | ---------- | ---------- | 
|                    
|                    
|                    
|                    
|Year ended March 31: |      |   |            |           
|                    
|                    
|                    
|                    
|                     | 2002 |   | $          | 17,125,000 | 
|                    
|                    
|                    
|                    
|                     | 2003 |   |            | 900,000    | 
|                     |      |   |            |           
|                     |      | $ | 18,025,000 |           
|                     |      |   |            |           

7.  Shareholders Equity

Computation of weighted average number of shares
outstanding

We calculate earnings per share in accordance with FASB
Statement No. 128 by dividing net income by the weighted
average number of shares of common stock outstanding to arrive
at the basic earnings per common share. We calculate diluted
earnings per share by diving net income by the weighted average
number of shares of common stock and dilutive stock equivalents
from the exercise of stock options and warrants using the
treasury stock method. Dilutive stock equivalents are options
and warrants that have an exercise price less than the average
market price of our common stock, for the respective periods.

|                                                                                              |  |                              |            |      |  |      |            |  |  |  |            | 
|--------------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | ---- |  | ---- | ---------- |  |  |  | ---------- | 
|                                                                                              |  |                             
|                                                                                              |  | Fiscal Years Ended March 31,
|                                                                                              |  |                             
|                                                                                              |  | 2001                         |            | 2000 |  | 1999
|                                                                                              |  |                              |            |      |  |     
|Weighted average shares outstanding 
	Basic                                                  |  |                              | 27,969,900 |      |  |      | 18,849,200 |  |  |  | 15,848,500 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Dilutive effect of stock options and warrants
	after application of the treasury stock method |  |                              | 36,000     |      |  |      | 149,200    |  |  |  |           | 
|                                                                                              |  |                              |            |      |  |      |            |  |  |  |            | 
|Weighted average shares outstanding 
	Diluted                                                |  |                              | 28,005,900 |      |  |      | 18,998,400 |  |  |  | 15,848,500 | 
|                                                                                              |  |                              |            |      |  |      |            |  |  |  |            | 

Stock Option Plan

The 1995 Plan adopted by NM Holdings, Inc. provided for a
maximum of 200,000 shares of authorized common stock issuable
upon exercise of options or other awards granted or issued under
the 1995 Plan. Following the merger, the Plan was amended in
July 1999 and December 2000, changing the maximum
number of shares of authorized common stock issuable upon
exercise of options or other awards granted or issued under the
1995 Plan to 3.0 million. The 1996 Non-Employee Director
stock option plan provides for a maximum of up to 25,000 shares
of common stock be served for the granting of options. The Plan
was amended in December 2000, changing the maximum number of
shares of common stock issuable to 500,000 shares.

28



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)

7.  Shareholders Equity (continued)

Stock options granted, exercised and forfeited under the plans
are as follows:

|                              |                               |                  |           |           |   |                  |           |          |   |   |      |       | 
|----------------------------- | ----------------------------- | ---------------- | --------- | --------- | - | ---------------- | --------- | -------- | - | - | ---- | ----- | 
|                              |                               | Shares Available |           | Number    |   | Weighted Average
|                              |                               | for Grant        |           | of Shares |   | Exercise Price  
|                              |                               |                  |           |           |   |                 
|Outstanding at March 31, 1998 |                               |                  | 56,937    |           |   |                  | 166,063   |          |   | $ | 8.52 |      
|                             
|                             
|                             
|                             
|                              | Granted                       |                  |           | (125,000  | ) |                  |           | 125,000  |   |   |      | 1.17  | 
|                             
|                             
|                             
|                             
|                              | Exercised                     |                  |           |          |   |                  |           | (89,625  | ) |   |      | 1.81  | 
|                             
|                             
|                             
|                             
|                              | Forfeited                     |                  |           | 87,500    |   |                  |           | (87,500  | ) |   |      | 8.85  | 
|                              |                               |                  |           |           |   |                  |           |          |   |   |      |      
|Outstanding at March 31, 1999 |                               |                  | 19,437    |           |   |                  | 113,938   |          |   | $ | 5.16 |      
|                             
|                             
|                             
|                             
|                              | Granted                       |                  |           | (969,050  | ) |                  |           | 969,050  |   |   |      | 9.02  | 
|                             
|                             
|                             
|                             
|                              | Exercised                     |                  |           |          |   |                  |           | (60,125  | ) |   |      | 2.41  | 
|                             
|                             
|                             
|                             
|                              | Forfeited                     |                  |           | 400       |   |                  |           | (400     | ) |   |      | 10.84 | 
|                             
|                             
|                             
|                             
|                              | Increase in authorized shares |                  |           | 1,300,000 |   |                  |           |          |   |   |      |       | 
|                              |                               |                  |           |           |   |                  |           |          |   |   |      |      
|Outstanding at March 31, 2000 |                               |                  | 350,787   |           |   |                  | 1,022,463 |          |   | $ | 9.01 |      
|                             
|                             
|                             
|                             
|                              | Granted                       |                  |           | (565,800  | ) |                  |           | 565,800  |   |   |      | 6.55  | 
|                             
|                             
|                             
|                             
|                              | Exercised                     |                  |           |          |   |                  |           | (1,875   | ) |   |      | 0.625 | 
|                             
|                             
|                             
|                             
|                              | Forfeited                     |                  |           | 363,763   |   |                  |           | (363,763 | ) |   |      | 9.18  | 
|                             
|                             
|                             
|                             
|                              | Increase in authorized shares |                  |           | 1,975,000 |   |                  |           |          |   |   |      |       | 
|                              |                               |                  |           |           |   |                  |           |          |   |   |      |      
|Outstanding at March 31, 2001 |                               |                  | 2,123,750 |           |   |                  | 1,222,625 |          |   | $ | 7.86 |      
|                              |                               |                  |           |           |   |                  |           |          |   |   |      |      

Options available for future years as of March 31, 2001 are
exercisable as follows:

|               |  |                     |           |                     |  |          |      |          |  |          |       |  |  |  |         |  |  |   |       | 
|-------------- |  | ------------------- | --------- | ------------------- |  | -------- | ---- | -------- |  | -------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|               |  |                     |           |                    
|               |  | Options Outstanding |           | Options Exercisable
|               |  |                     |           |                    
|               |  |                     |           | Weighted Average    |  |          |      |         
|               |  |                     |           | Remaining           |  |          |      |         
|Range of       |  | Number              |           | Contractual Life    |  | Average  |      | Number   |  | Average 
|Exercise Price |  | Outstanding         |           | (Years)             |  | Exercise |      | Exercise |  | Exercise
|               |  |                     |           |                     |  |          |      |          |  |         
|$ 1.19   4.00 |  |                     | 149,000   |                     |  |          | 4.92 |          |  | $        | 2.57  |  |  |  | 87,500  |  |  | $ | 2.04  | 
|5.00   6.80   |  |                     | 225,925   |                     |  |          | 8.05 |          |  |          | 6.23  |  |  |  | 96,585  |  |  |   | 6.57  | 
|7.00   9.76   |  |                     | 486,950   |                     |  |          | 7.14 |          |  |          | 7.68  |  |  |  | 190,530 |  |  |   | 7.51  | 
|10.75  14.00  |  |                     | 360,750   |                     |  |          | 7.45 |          |  |          | 11.30 |  |  |  | 136,484 |  |  |   | 11.68 | 
|               |  |                     |           |                     |  |          |      |          |  |          |       |  |  |  |         |  |  |   |       | 
|               |  |                     | 1,222,625 |                     |  |          |      |          |  |          |       |  |  |  | 511,099 |  |  |   |       | 
|               |  |                     |           |                     |  |          |      |          |  |          |       |  |  |  |         |  |  |   |       | 

Warrants

In conjunction with various debt and equity financing
activities, we have granted warrants to acquire common stock at
exercise prices ranging between $3.50 and $16.80.

At March 31, 2001 warrants to purchase 734,320 shares were
outstanding at weighted average exercise price of $8.37 per
share. All warrants are vested and expire between
October 2001 and August 2004.

29



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



7.  Shareholders Equity (continued)


Convertible Notes

At March 31, 2001 we had $18,295,000 of convertible
subordinated notes outstanding. The notes mature in
September 2005 and are convertible into shares of our
common stock at an exchange rate of $9.00 per share.

Supplemental Disclosures for Stock-Based Compensation

We account for the above plans under APB Opinion No. 25,
and accordingly no compensation expense relating to the granting
of options has been recognized in the Consolidated Statements of
Operations. Had compensation cost for these plans been
determined consistent with Statement of Financial Accounting
Standards No. 123 Accounting for Stock-Based
Compensation (SFS 123), our pro-forma net income and
net income per common share diluted would have been adjusted to
the following proforma amounts:

|                                      |             |                              |   |            |   |      |   |            |   |  |   |           | 
|------------------------------------- | ----------- | ---------------------------- | - | ---------- | - | ---- | - | ---------- | - |  | - | --------- | 
|                                      |             |                             
|                                      |             | Fiscal Years Ended March 31,
|                                      |             |                             
|                                      |             | 2001                         |   | 2000       |   | 1999
|                                      |             |                              |   |            |   |     
|Net income (loss):                    |             |                              |   |            |   |      |   |            |   |  |   |          
|                                     
|                                     
|                                     
|                                     
|                                      | As Reported |                              | $ | (8,077,500 | ) |      | $ | (1,699,900 | ) |  | $ | 1,272,600 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Pro Forma   |                              |   | (9,383,700 | ) |      |   | (2,523,800 | ) |  |   | 1,268,600 | 
|                                     
|                                     
|                                     
|                                     
|Basic and diluted earnings per share: |             |                              |   |            |   |      |   |            |   |  |   |          
|                                     
|                                     
|                                     
|                                     
|                                      | As Reported |                              | $ | (0.29      | ) |      | $ | (0.09      | ) |  | $ | 0.08      | 
|                                     
|                                     
|                                     
|                                     
|                                      | Pro Forma   |                              | $ | (0.34      | ) |      | $ | (0.14      | ) |  | $ | 0.08      | 

The fair value of each option granted subsequent to
January 1, 1995 in accordance with SFAS No. 123 was
estimated on the date of the grant using the Black-Scholes
option pricing model with the following weighted average
assumptions: risk free interest rates of 4.50% to 6.31% in 2001,
5.67% to 6.77% in 2000 and 4.56% to 6.33% in 1999; expected life
of 3 to 10 years for 2001, 5 to 10 years for 2000 and
2.5 to 5 years for 1999; expected volatility of 73.7% to
110.5% in 2001, 113.32% to 159.75% in 2000 and 43.95% to 57.36%
in 1999.

Stock Purchase Plan

The 2000 Employee Stock Purchase Plan adopted in
December 2000 provides for a maximum of
1,000,000 shares issuable to employees whose employment is
at least 20 hours per week. The Plan operates in quarterly
phases, in which employees elect to withhold up to 15% of their
gross earnings to purchase stock at the end of the phase. Each
employee is limited to $6,250 per quarterly phase. The stock
purchase price is 85% of the fair market value of such common
stock on the commencement date or termination date of the phase,
whichever is lower. The Company did not issue any shares under
the plan in the year ended March 31, 2001. At
March 31, 2001, contributions have been received for the
issuance of 72,410 shares.

30



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)

8.  Net Capital Requirements and Dividend
Restrictions

Our three broker dealers are subject to the Securities and
Exchange Commissions Uniform Net Capital Rule
(Rule 15c3-1), which requires the maintenance of minimum
net capital. MJSK and MJK Clearings have elected to use
the alternative method permitted by Rule 15c3-1 which
requires that they maintain minimum net capital equal to the
greater of $250,000 or 2% of aggregate debit balances arising
from customer transactions, as defined. At March 31, 2001,
MJSK and MJK Clearings net capital were $9.0 million
and $21.4 million representing 9.0% and 7.1% of aggregate
debit balances and $7.0 million and $15.4 million in
excess of required net capital, respectively. The net capital
rule also provides that equity capital may not be withdrawn or
cash dividends paid if resulting net capital would be less than
5% of aggregate debits. Stockwalk.com Inc. required a minimum of
$50,000 net capital. At March 31, 2001, Stockwalk.com, Inc.
had net capital of $787,600.

9.  Employee Benefit Plans

We have a qualified profit-sharing plan and a 401(k) plan, which
cover all employees who are at least 21 years old.
Employees may contribute up to 15% of their compensation to the
401(k) plan. Employer contributions are made to the profit
sharing plan at the discretion of our Board of Directors. We did
not contribute to the profit-sharing plan in fiscal 2000. We
contributed $955,800 in fiscal 2001 and $100,000 in fiscal 1999.

10.  Commitments and Contingencies

We are obligated for the rental of office space, automobiles,
and equipment under noncancelable operating leases which expire
at various date from 2002 to 2005. The office leases include
escalation clauses for increases in taxes and operating expenses
of the leased premises. Minimum annual rental payments under
noncancelable leases in effect at March 31, 2001 are as
follows:

Fiscal Year Ended March 31:

|                                     |  |   |            | 
|------------------------------------ |  | - | ---------- | 
|                                    
|                                    
|                                    
|                                    
|2002                                 |  | $ | 4,665,100  | 
|                                    
|                                    
|                                    
|                                    
|2003                                 |  |   | 4,006,900  | 
|                                    
|                                    
|                                    
|                                    
|2004                                 |  |   | 2,725,000  | 
|                                    
|                                    
|                                    
|                                    
|2005                                 |  |   | 1,031,100  | 
|                                    
|                                    
|                                    
|                                    
|Thereafter                           |  |   | 809,400    | 
|                                     |  |   |            | 
|Total minimum future rental payments |  | $ | 13,237,500 | 
|                                     |  |   |            | 

11.  Related Party Transactions

Liabilities subordinated to claims of general creditors included
secured demand notes as of March 31, 2001 and 2000 entered
into by a member of our board of directors. The notes totaled
$250,000 in each period and mature in 2002. We also had
$6,394,900 and $1,758,400 of notes receivable from employees,
which are included in other assets as of March 31, 2001 and
2000, respectively. The amounts consist of 90 and 41 notes at

31



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



11.  Related Party Transactions (continued)


March 31, 2001 and 2000, respectively, which bear various
interest rates and mature at various dates through 2006. The
Company has a $3.2 million note payable, including accrued
interest, due to a director issued in connection with the
acquisition of R.J. Steichen & Company, due in
August 2002. At maturity, the note holder has the option to
be repaid $3.6 million or to convert such amount into
shares of common stock at a per share price equal to the lesser
of 85% of the then current market value or $10.00, but not less
than $5.00 per share.

12.  Income taxes

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of our
deferred tax assets as of March 31 are as follows:

|                                 |                                                                   |      |           |         |  |   |         |         | 
|-------------------------------- | ----------------------------------------------------------------- | ---- | --------- | ------- |  | - | ------- | ------- | 
|                                 |                                                                   | 2001 |           | 2000   
|                                 |                                                                   |      |           |        
|Deferred tax assets:             |                                                                   |      |           |         |  |   |         |        
|                                
|                                
|                                
|                                
|                                 | Depreciation of property, plant and equipment                     |      | $         | 364,900 |  |   | $       | 108,300 | 
|                                
|                                
|                                
|                                
|                                 | Amortization of notes receivable                                  |      |           | 194,900 |  |   |         | 44,400  | 
|                                
|                                
|                                
|                                
|                                 | Deferred rent                                                     |      |           | 45,600  |  |   |         | 65,000  | 
|                                
|                                
|                                
|                                
|                                 | Accrued bonuses                                                   |      |           | 183,700 |  |   |         | 74,800  | 
|                                
|                                
|                                
|                                
|                                 | Accrued severances                                                |      |           | 765,000 |  |   |         |         | 
|                                
|                                
|                                
|                                
|                                 | Amortization of goodwill                                          |      |           | 235,400 |  |   |         |         | 
|                                
|                                
|                                
|                                
|                                 | Accrued vacation pay                                              |      |           | 207,000 |  |   |         |         | 
|                                
|                                
|                                
|                                
|                                 | Other                                                             |      |           | 188,100 |  |   |         | 27,600  | 
|                                 |                                                                   |      |           |         |  |   |         |        
|                                 |                                                                   |      | 2,184,600 |         |  |   | 320,100 |        
|                                
|                                
|                                
|                                
|Net operating loss carryforwards |                                                                   |      | 47,700    |         |  |   | 421,000 |        
|                                 |                                                                   |      |           |         |  |   |         |        
|Total deferred tax assets        |                                                                   | $    | 2,232,300 |         |  | $ | 741,100 |        
|                                 |                                                                   |      |           |         |  |   |         |        
|Deferred tax liabilities:        |                                                                   |      |           |         |  |   |         |        
|                                
|                                
|                                
|                                
|                                 | Unrealized gain on investments                                    |      |           | 69,500  |  |   |         | 301,800 | 
|                                
|                                
|                                
|                                
|                                 | Amortization of goodwill                                          |      |           | 11,800  |  |   |         | 3,500   | 
|                                
|                                
|                                
|                                
|                                 | Acquired furniture and equipment adjustment to
	fair market value |      |           | 153,300 |  |   |         |         | 
|                                 |                                                                   |      |           |         |  |   |         |        
|                                 | Deferred tax liabilities                                          |      |           | 234,600 |  |   |         | 305,300 | 
|                                 |                                                                   |      |           |         |  |   |         |        
|Net deferred tax assets          |                                                                   | $    | 1,997,700 |         |  | $ | 435,800 |        
|                                 |                                                                   |      |           |         |  |   |         |        

32



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



12.  Income taxes (continued)


The income tax expense (benefit) for the fiscal years ended
March 31 included the following:

|                                               |  |      |            |      |  |      |          |   |  |   |         | 
|---------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | -------- | - |  | - | ------- | 
|                                               |  | 2001 |            | 2000 |  | 1999
|                                               |  |      |            |      |  |     
|Federal                                        |  | $    | 918,000    |      |  | $    | (698,100 | ) |  | $ | 706,000 | 
|                                              
|                                              
|                                              
|                                              
|State                                          |  |      | 132,600    |      |  |      | 12,200   |   |  |   | 100,000 | 
|                                              
|                                              
|                                              
|                                              
|Deferred                                       |  |      | (230,600   | )    |  |      | (152,900 | ) |  |   | 179,000 | 
|                                              
|                                              
|                                              
|                                              
|Tax adjustment recorded in purchase accounting |  |      | (3,597,000 | )    |  |      |         |   |  |   |        | 
|                                               |  |      |            |      |  |      |          |   |  |   |         | 
|                                               |  | $    | (2,777,000 | )    |  | $    | (838,800 | ) |  | $ | 985,000 | 
|                                               |  |      |            |      |  |      |          |   |  |   |         | 

Reconciliations of the provisions for income taxes and the
amounts that would be computed using statutory federal income
tax rates for the years ended March 31 are as follows:

|                                             |  |      |            |      |  |      |          |   |  |   |         |  
|-------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                             |  | 2001 |            | 2000 |  | 1999
|                                             |  |      |            |      |  |     
|Tax at statutory rate                        |  | $    | (3,812,100 | )    |  | $    | (863,100 | ) |  | $ | 769,700 |  
|                                            
|                                            
|                                            
|                                            
|Tax-exempt interest, net of related expenses |  |      | (146,400   | )    |  |      | 63,900   |   |  |   | 22,800  |  
|                                            
|                                            
|                                            
|                                            
|State taxes, net of federal tax benefit      |  |      | 251,300    |      |  |      | (240,100 | ) |  |   | 128,700 |  
|                                            
|                                            
|                                            
|                                            
|Non-deductible life insurance                |  |      | 81,000     |      |  |      | 54,000   |   |  |   | 52,900  |  
|                                            
|                                            
|                                            
|                                            
|Non-deductible goodwill amortization         |  |      | 725,200    |      |  |      |         |   |  |   |        |  
|                                            
|                                            
|                                            
|                                            
|Non-deductible meals and entertainment       |  |      | 115,100    |      |  |      | 36,000   |   |  |   | 29,700  |  
|                                            
|                                            
|                                            
|                                            
|Change in valuation allowance                |  |      |           |      |  |      |         |   |  |   | (95,300 | )
|                                            
|                                            
|                                            
|                                            
|Other                                        |  |      | 8,900      |      |  |      | 110,500  |   |  |   | 76,500  |  
|                                             |  |      |            |      |  |      |          |   |  |   |         |  
|                                             |  | $    | (2,777,000 | )    |  | $    | (838,800 | ) |  | $ | 985,000 |  
|                                             |  |      |            |      |  |      |          |   |  |   |         |  

At March 31, 2001, we had a net operating loss
(NOL) carryforward of approximately $194,000 for income tax
purposes that expires in 2004. The utilization of the NOL
carryforward is restricted under the provisions of
Section 382 of the Internal Revenue Code. The realization
of the deferred tax assets is dependent on our ability to
generate taxable income in future periods. We have evaluated the
available evidence supporting the realization of our deferred
tax assets and determined that it is more likely than not the
assets will be realized.

13.  Quarterly Financial Data (unaudited)

Selected unaudited data reflecting our results of operations for
each of the last eight quarters are shown in the following
table. The information for each of these quarters includes all
normal and recurring adjustments and accruals that we consider
necessary for a fair presentation. The fiscal year 2000
quarterly data do not include Pro Forma results for the merger
with NM Holdings, Inc. The operating results, however, are not
necessarily

33



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##### Table of Contents



Stockwalk Group, Inc.


Notes to Consolidated Financial Statements 
(Continued)



13.  Quarterly Financial Data (unaudited) (continued)


indicative of results for any future period. The fiscal year
2001 results include the discontinued operations of Online
Brokerage Solutions.

|                                 |                                             |         |   |              |   |             |   |            |   |  |   |            |   |  |   |            |  
|-------------------------------- | ------------------------------------------- | ------- | - | ------------ | - | ----------- | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                 |                                             | June 30 |   | September 30 |   | December 31 |   | March 31  
|                                 |                                             |         |   |              |   |             |   |           
|Fiscal Year Ended March 31, 2001 |                                             |         |   |              |   |             |   |            |   |  |   |            |   |  |   |           
|                                
|                                
|                                
|                                
|                                 | Revenues                                    |         | $ | 20,796,600   |   |             | $ | 33,405,500 |   |  | $ | 39,822,600 |   |  | $ | 43,431,600 |  
|                                
|                                
|                                
|                                
|                                 | Net income (loss)                           |         |   | (1,161,300   | ) |             |   | (1,861,000 | ) |  |   | (4,212,800 | ) |  |   | (842,400   | )
|                                
|                                
|                                
|                                
|                                 | Basic and diluted loss per share            |         |   | (.05         | ) |             |   | (.07       | ) |  |   | (.13       | ) |  |   | (.03       | )
|Fiscal Year Ended March 31, 2000 |                                             |         |   |              |   |             |   |            |   |  |   |            |   |  |   |           
|                                
|                                
|                                
|                                
|                                 | Revenues                                    |         | $ | 13,204,900   |   |             | $ | 13,891,200 |   |  | $ | 17,217,900 |   |  | $ | 26,656,300 |  
|                                
|                                
|                                
|                                
|                                 | Net income (loss)                           |         |   | (1,044,300   | ) |             |   | (1,259,400 | ) |  |   | (996,000   | ) |  |   | 1,599,800  |  
|                                
|                                
|                                
|                                
|                                 | Basic and diluted earnings (loss) per share |         |   | (.07         | ) |             |   | (.07       | ) |  |   | (.05       | ) |  |   | .08        |  

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##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders 
 Stockwalk Group, Inc.

We have audited the accompanying consolidated statements of
financial condition of Stockwalk Group, Inc. (formerly,
Stockwalk.com Group, Inc.) and subsidiaries as of March 31,
2001 and 2000 and the related consolidated statements of
operations, shareholders equity and cash flows for each of
the three years in the period ended March 31, 2001. Our
audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Stockwalk Group Inc. and subsidiaries at
March 31, 2001 and 2000 and the consolidated results of
their operations and their cash flows for the each of the three
years in the period ended March 31, 2001, in conformity
with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material
respects the information set forth therein.



| |                      
| | ---------------------
| | /s/ Ernst & Young LLP

Minneapolis, Minnesota 
 May 8, 2001

35



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##### Table of Contents








|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 9: | Changes in and Disagreements with Accountants on Accounting
	and Financial Disclosure.

None






PART III


Item 10:  Directors and Executive Officers of the
Registrant.

The directors and executive officers of the Company are as
follows:

|                   |  |     |    |                            |  |                                                                      
|------------------ |  | --- | -- | -------------------------- |  | ---------------------------------------------------------------------
|Name               |  | Age |    | Positions with the Company
|                   |  |     |    |                           
|Eldon C. Miller    |  |     | 60 |                            |  | Chief Executive Officer & Chairman of the
	Board                     
|David B. Johnson   |  |     | 50 |                            |  | President & Director                                                 
|John E. Feltl      |  |     | 62 |                            |  | Executive Vice President & Director                                  
|Paul R. Kuehn      |  |     | 58 |                            |  | Senior Vice President and Director                                   
|Stanley D. Rahm    |  |     | 69 |                            |  | Senior Vice President and Director                                   
|Ronald E. Erickson |  |     | 58 |                            |  | Executive Vice President, Director of MJSK Retail
	Equity Sales      
|Todd W. Miller     |  |     | 37 |                            |  | Chief Operating Officer and President of MJK
	Clearing               
|Philip T. Colton   |  |     | 42 |                            |  | Senior Vice President, General Counsel, Secretary                    
|Jeffrey L. Houdek  |  |     | 31 |                            |  | Chief Financial Officer                                              
|Randy G. Nitzsche  |  |     | 37 |                            |  | Chief Executive Officer of Stockwalk.com, Inc.                       
|Richard J. Nigon   |  |     | 53 |                            |  | Director of Corporate Finance Equity Division and
	Director          
|John C. Feltl      |  |     | 30 |                            |  | Assistant Director of Corporate Finance Equity
	Division and Director
|N. Lee Wesley      |  |     | 60 |                            |  | Director                                                             
|Louis C. Fornetti  |  |     | 51 |                            |  | Director                                                             
|Karl J. Breyer     |  |     | 54 |                            |  | Director                                                             
|Roger H. Scherer   |  |     | 65 |                            |  | Director                                                             

The Bylaws of the Company provide that the shareholder, subject
to increase by the Board of Directors, shall fix the number of
directors of the Company. Currently, the authorized size of the
Board of Directors is eleven.

The Companys directors and executive officers are as
follows:

Eldon C. Millerfounded Miller Securities, Inc., the
Companys predecessor, in December 1980. He has served as
Chairman of the Board and as Chief Executive Officer since the
Companys inception. Prior to forming Miller Securities,
Mr. Miller was a Vice President of Miller & Schroeder
Municipals for more than seven years. Mr. Miller is a 1968
graduate of Stonier Graduate School of Banking at Rutgers
University.

David B. Johnson,the Companys President, has
served as Executive Vice President and as a Director of MJK
since MJK purchased certain assets of McClees Investments, Inc.
in July 1989. Mr. Johnson served as Senior Vice President
of McClees Investments, Inc. from January 1987 to June 1989.
Prior to January 1987, Mr. Johnson acted as Senior Vice
President of Miller Securities for more than five years.

John E. Feltl,director, has been an Executive Vice
President of the Company since January 1, 2001 and was the
President and Chief Executive Officer of R.J. Steichen since

36



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##### Table of Contents





Paul R. Kuehn,served as President and Director of MJK
since MJK purchased certain assets of McClees Investments, Inc.
in July 1989. Mr. Kuehn served as President of McClees
Investments, Inc. from February 1988 to July 1989. Prior to
1989, Mr. Kuehn was Senior Vice President of Marketing for
Craig Hallum, Inc., a Minneapolis-based broker-dealer, for more
than 17 years.

Stanley D. Rahm,Director, served as Treasurer and as a
Director of MJK since inception in 1989 to January 1, 2001.
Prior to 1989, Mr. Rahm was a Vice President of Miller
& Schroeder Municipals, Inc., a Minneapolis-based
broker-dealer, for seven years.

Ronald E. Erickson,served as Executive Vice-president,
Director of Retail Sales since September 2000. Prior to
that Mr. Erickson was employed by John G. Kinnard, Piper
Jaffray, Kidder Peabody and Paine Webber. Mr. Erickson has
over 33 years experience in the brokerage business.

Todd W. Miller,has been employed by the companys
MJK Clearing subsidiary (or its predecessor) since 1982, most
recently as the companys Chief Operating Officer.
Mr. Miller is the President of MJK Clearing, Inc. and is
responsible for its founding. Mr. Miller was a member
of the NASDs District 4 Business Conduct Committee
from 1996 to 1998 and served as its Chairman during 1998.
Mr. Miller is licensed by NASD as a Registered
Representative (Series 7), General Securities Principal
(Series 24) and Financial and Operations Principal
(Series 27). Mr. Miller is the son of Mr. Eldon
C. Miller.

Philip T. Coltonbecame Senior Vice President and General
Counsel to the Company in September 1999. Mr. Colton has
served as Secretary of the Company and its various predecessors
since January 1998. Mr. Colton graduated with honors from
the University of Minnesota Law School in 1984, where he was a
member and editor of the Minnesota Law Review. Mr. Colton
also served as a law clerk to Justice Glenn E. Kelley of the
Minnesota Supreme Court. For the prior 15 years,
Mr. Colton practiced law at the Minneapolis law firm of
Maun & Simon, PLC, principally in the areas of corporate
finance, mergers and acquisitions, and securities and
broker/dealer regulation.

Jeffrey L. Houdek,31, has been employed by the Company
or one of its subsidiaries since 1995, most recently as Chief
financial Officer. Prior to joining the Company, Mr. Houdek
was employed by Ernst & Young LLP in its corporate audit
group, auditing principally in the areas of brokerage and
financial service markets. Mr. Houdek is licensed by the
NASD as a Registered Representative (Series 7), General
Securities Principal (Series 24) and Financial and
Operations Principal (Series 27). Mr. Houdek holds a
CPA certificate from the State of Minnesota.

Randy G. Nitzsche,Chief Executive Officer of the online
brokerage division (or Stockwalk.com, Inc.), has been employed
by the Company since 1994. Prior to 1999, he was a Vice
President in the clearing division. His efforts led to
significant growth in the number of correspondents serviced by
MJK, from two in 1994 to approximately 61 today. Prior to
his work at the Company, Mr. Nitzsche was employed by the
Chicago Stock Exchange in a variety of roles, including product
and sales management.

Richard J. Nigon,has served as Director of MJSKs
Corporate Finance Equity Division since January 2001, and a
director since March 2000. Mr. Nigon served as Chief

37



---



##### Table of Contents





John C. Feltl,Director, has been the Assistant Director
of Corporate Finance and a Senior Vice President of the Company
since Steichen merged with the Company on August 1, 2000.
Mr. Feltl has been employed by Steichen in various
capacities since 1994. His last position at R.J. Steichen
was a principal and the director of corporate finance.
John C. Feltl is the son of John E. Feltl.

N.  Lee Wesley, Director, has been a private
investor in real estate and securities for more than five years.
He is the general partner of Standard Mill Limited Partnership,
the owner of the Whitney Hotel, a 97-room luxury hotel located
in Minneapolis, Minnesota. He was formerly the Vice-Chairman of
Wesley-Jesson, Inc., a contact lens company, and is currently a
director of the National Eye Research Foundation.

Louis C. Fornetti, Director, has served as (1995-1998)
Executive Vice President and Chief Financial Officer of Dain
Rauscher Inc. (formerly Interra Financial) a securities
brokerage and investment banking firm. Mr. Fornetti also
served as President and CEO Interra Clearing Services. Prior to
Dain Rauscher, Mr. Fornetti spent 10 years with
American Express Financial Advisors with his last position there
as Sr. Vice President, Chief Financial Officer and a member
of the Board of Directors. Mr. Fornetti was Vice President
and Corporate Controller of the St. Paul Companies from 1979 to
1985. Prior to that, 1972-1979, he was a Certified Public
Accountant and Audit Manager with KPMG, a national public
accounting firm. He currently serves as Chairman of the Board of
I-Pool Corporation and a Board Member of Othnet.com. He holds
certifications from the Minnesota Society of Certified Public
Accountants and the American Institute of Certified Public
Accountants.

Karl J. Breyer, Director, joined the Board of Directors
in June 2001. From 1976 to March 2001, Mr. Breyer served in a
number of positions with the American Express Financial
Corporation family of companies. From 1986 to August 1998, Mr.
Breyer acted as General Counsel and Senior Vice
President  Government Affairs of American Express
Financial Advisors (then known as IDS) and as a member of that
companys board of directors and the Senior Management
Group. During this time, he assumed additional duties in the
real estate, corporate communications and corporate strategy
areas. From August 1998 until March 2001, he ran American
Express Financial Advisors Third Party Distribution and
International business units as a Corporate Senior Vice
President. Since March 2001, Mr. Breyer has operated a privately
held real estate firm called Cumberland Partners, Ltd.

Roger H. Scherer, Director, joined the Board of Directors
in June 2001. Chairman of the Board of Scherer Brothers Lumber
Co., former President and Chief Executive Officer of Scherer
Brothers Lumber Co.

There are no arrangements or understandings among any of the
executive officers of the Registrant and any other person (not
and officer or director of the Registrant acting as such)
pursuant to which any of the executive officers were selected as
an officer of the Registrant.

38



---



##### Table of Contents



Section 16(a) Beneficial Ownership Reporting
Compliance

Section 16(a) of the 1934 Act requires the Companys
directors, executive officers and persons who own more than ten
percent of the Common Stock of the Company to file with the
Securities and Exchange Commission (Commission)
initial reports of beneficial ownership and reports of changes
in beneficial ownership of common shares of the Company.
Directors, officers, and greater than ten percent shareholders
are required by the regulations of the Commission to furnish the
Company with copies of all Section 16(a) reports they file.
The Companys knowledge, based solely on review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended March 31, 2001, all Form 3,
Form 4, and Form 5 filing requirements were met. Each
Form 5 was filed late.






|         |                       
|-------- | ----------------------
|Item 11: | Executive Compensation

The section entitled Executive Compensation
appearing in the Registrants proxy statement for the
annual meeting of shareholders to be held on September 12,
2001, sets forth certain information with respect to the
compensation of management of the Registrant and the required
information is incorporated herein by reference.






|         |                                                                                   
|-------- | ----------------------------------------------------------------------------------
|Item 12: | Security Ownership of Certain Beneficial Owners, Directors
	and Executive Officers

The sections entitled Security Ownership of Certain
Beneficial Owners, Directors, and Executive Officers
appearing the Registrants proxy statement for the annual
meeting of stockholders to be held on September 12, 2001,
sets forth certain information with respect to ownership of the
Registrants Common Stock and the required information is
incorporated herein by reference.






|         |                                               
|-------- | ----------------------------------------------
|Item 13: | Certain Relationships and Related Transactions

The section entitled Certain Transactions appearing
in the Registrants proxy statement for the annual meeting
of stockholders to be held on September 12, 2001, sets
forth certain information with respect to certain business
relationships and transactions between the Registrant, its
directors and officers, and the required information is
incorporated herein by reference.

PART IV






|         |                                  
|-------- | ---------------------------------
|Item 14: | Exhibits and Reports on Form 8-K.



|     |                                                            
|---- | -----------------------------------------------------------
|(a.) | The following documents are filed as a part of this Report:



|   |                                                      
|-- | -----------------------------------------------------
|1. | Financial Statements and Financial Statement Schedule

The consolidated financial statements filed as part of this
report are listed on the Index to Financial Statements on
Page 16.

39



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##### Table of Contents



SCHEDULE I  CONDENSED FINANCIAL INFORMATION



Stockwalk Group, Inc.

(Parent Company)


Statements of Financial Condition

|                                                                              |                                               |                                                               |            |             |           |   |            |            |         | 
|----------------------------------------------------------------------------- | --------------------------------------------- | ------------------------------------------------------------- | ---------- | ----------- | --------- | - | ---------- | ---------- | ------- | 
|                                                                              |                                               | March 31,                                                     |            | March 31,  
|                                                                              |                                               | 2001                                                          |            | 2000       
|                                                                              |                                               |                                                               |            |            
|Assets                                                                        |                                               |                                                               |            |             |           |   |            |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Cash                                                                          |                                               | $                                                             | 198,200    |             |           | $ | 2,329,300  |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Investment in subsidiaries, at cost                                           |                                               |                                                               | 97,190,200 |             |           |   | 15,925,600 |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Advances to subsidiaries                                                      |                                               |                                                               | 7,489,100  |             |           |   | 230,700    |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Notes receivable                                                              |                                               |                                                               | 1,008,200  |             |           |   | 742,200    |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Goodwill, less accumulated amortization of:
	2001  $602,700; 2000  $109,500 |                                               |                                                               | 3,726,900  |             |           |   | 5,093,700  |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other assets                                                                  |                                               |                                                               | 10,168,000 |             |           |   | 1,929,900  |           
|                                                                              |                                               |                                                               |            |             |           |   |            |           
|                                                                              | Total Assets                                  |                                                               | $          | 119,780,600 |           |   | $          | 26,251,400 |        
|                                                                              |                                               |                                                               |            |             |           |   |            |           
|Liabilities                                                                   |                                               |                                                               |            |             |           |   |            |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Short-term borrowings                                                         |                                               | $                                                             | 12,671,000 |             |           | $ |           |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Due to affiliates                                                             |                                               |                                                               | 3,084,500  |             |           |   | 46,700     |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Accounts payable and accrued expenses                                         |                                               |                                                               | 620,000    |             |           |   | 258,000    |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Notes payable                                                                 |                                               |                                                               | 20,877,400 |             |           |   | 1,294,400  |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other liabilities                                                             |                                               |                                                               | 1,607,100  |             |           |   |            |           
|                                                                              |                                               |                                                               |            |             |           |   |            |           
|                                                                              | Total Liabilities                             |                                                               | $          | 38,860,000  |           |   | $          | 1,599,100  |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Shareholders Equity                                                          |                                               |                                                               |            |             |           |   |            |           
|                                                                              | Common stock, 2001 and 2000  $.04 par
	value |                                                               |            |             |           |   |            |            |        
|                                                                              |                                               | Authorized shares: 50,000,000                                 |            |             |           |   |            |            |         | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                               | Issued and outstanding 2001 
	32,775,071;
	2000  21,575,313 |            |             | 1,311,000 |   |            |            | 863,000 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Paid-in capital                                                               |                                               |                                                               | 89,338,800 |             |           |   | 25,440,900 |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Retained earnings (deficit) and other equity                                  |                                               |                                                               | (9,729,200 | )           |           |   | (1,651,600 | )         
|                                                                              |                                               |                                                               |            |             |           |   |            |           
|                                                                              | Total Shareholders Equity                    |                                                               | $          | 80,920,600  |           |   | $          | 24,652,300 |        
|                                                                              |                                               |                                                               |            |             |           |   |            |           
|                                                                              | Total Liabilities & Shareholders
	Equity     |                                                               | $          | 119,780,600 |           |   | $          | 26,251,400 |        
|                                                                              |                                               |                                                               |            |             |           |   |            |           

See accompanying notes to the parent company financial
statements.

40



---



##### Table of Contents



Stockwalk Group, Inc.

(Parent Company)


Statements of Operations

Fiscal Years Ended


|                                  |                                    |           |            |            |  |           |            |           |   |   |         |         | 
|--------------------------------- | ---------------------------------- | --------- | ---------- | ---------- |  | --------- | ---------- | --------- | - | - | ------- | ------- | 
|                                  |                                    | March 31, |            | March 31,  |  | March 31,
|                                  |                                    | 2001      |            | 2000       |  | 1999     
|                                  |                                    |           |            |            |  |          
|Revenues:                         |                                    |           |            |            |  |           |            |           |   |   |         |        
|                                 
|                                 
|                                 
|                                 
|                                  | Trading profits                    |           | $          | 5,700      |  |           | $          | (161,600  | ) |   | $       |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Interest                           |           |            | 30,800     |  |           |            | 46,100    |   |   |         | 900     | 
|                                 
|                                 
|                                 
|                                 
|                                  | Management fees                    |           |            | 14,168,200 |  |           |            | 1,104,200 |   |   |         | 325,000 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Investment banking                 |           |            |           |  |           |            |          |   |   |         |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Clearing fees                      |           |            |           |  |           |            |          |   |   |         |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Other income                       |           |            | 22,500     |  |           |            | 72,900    |   |   |         | 250,000 | 
|                                  |                                    |           |            |            |  |           |            |           |   |   |         |        
|Total revenues                    |                                    | $         | 14,227,200 |            |  | $         | 1,061,600  |           |   | $ | 575,900 |        
|                                 
|                                 
|                                 
|                                 
|Expenses:                         |                                    |           |            |            |  |           |            |           |   |   |         |        
|                                 
|                                 
|                                 
|                                 
|                                  | Employee compensation and benefits |           | $          | 8,081,200  |  |           | $          | 1,658,000 |   |   | $       |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Professional fees                  |           |            | 668,800    |  |           |            | 373,700   |   |   |         | 2,100   | 
|                                 
|                                 
|                                 
|                                 
|                                  | Occupancy and equipment            |           |            | 1,106,700  |  |           |            | 161,800   |   |   |         |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Communication                      |           |            | 470,900    |  |           |            | 117,400   |   |   |         |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Interest                           |           |            | 2,082,400  |  |           |            | 34,200    |   |   |         | 327,100 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Other expense                      |           |            | 1,817,200  |  |           |            | 448,200   |   |   |         | 2,200   | 
|                                  |                                    |           |            |            |  |           |            |           |   |   |         |        
|Total expenses                    |                                    | $         | 14,227,200 |            |  | $         | 2,793,300  |           |   | $ | 331,400 |        
|                                 
|                                 
|                                 
|                                 
|Income (loss) before income taxes |                                    |           |           |            |  |           | (1,731,700 | )         |   |   | 244,500 |        
|                                 
|                                 
|                                 
|                                 
|Income tax expense (benefit)      |                                    |           | 644,500    |            |  |           | (610,900   | )         |   |   |        |        
|                                  |                                    |           |            |            |  |           |            |           |   |   |         |        
|Net income (loss)                 |                                    | $         | (644,500   | )          |  | $         | (1,120,800 | )         |   | $ | 244,500 |        
|                                  |                                    |           |            |            |  |           |            |           |   |   |         |        

See accompanying notes to the parent company financial
statements

41



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##### Table of Contents



Stockwalk Group, Inc.

(Parent Company)


Statements of Cash Flows

Fiscal Years Ended


|                                                                                                     |                                        |           |             |            |   |           |             |            |   |   |            |           | 
|---------------------------------------------------------------------------------------------------- | -------------------------------------- | --------- | ----------- | ---------- | - | --------- | ----------- | ---------- | - | - | ---------- | --------- | 
|                                                                                                     |                                        | March 31, |             | March 31,  |   | March 31,
|                                                                                                     |                                        | 2001      |             | 2000       |   | 1999     
|                                                                                                     |                                        |           |             |            |   |          
|Operating Activities                                                                                 |                                        |           |             |            |   |           |             |            |   |   |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Net income (loss)                                                                                    |                                        | $         | (644,500    | )          |   | $         | (1,120,800  | )          |   | $ | 244,500    |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Adjustments to reconcile net income (loss) to net
	cash provided by (used for) operating activities: |                                        |           |             |            |   |           |             |            |   |   |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Depreciation and amortization          |           |             | 1,124,900  |   |           |             | 109,500    |   |   |            |          | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Changes in assets and liabilities:                                                                   |                                        |           |             |            |   |           |             |            |   |   |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Receivables                            |           |             | (266,000   | ) |           |             | (742,200   | ) |   |            |          | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Equity in net earnings of subsidiaries |           |             | (7,433,000 | ) |           |             | (579,100   | ) |   |            | 1,278,900 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Deposits at clearing organizations     |           |             |           |   |           |             |           |   |   |            |          | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Trading securities                     |           |             | (2,715,600 | ) |           |             |           |   |   |            |          | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Other assets and liabilities           |           |             | (4,144,100 | ) |           |             | (1,671,100 | ) |   |            |          | 
|                                                                                                     |                                        |           |             |            |   |           |             |            |   |   |            |          
|Net cash provided by (used for) operating
	activities                                                |                                        | $         | (14,078,300 | )          |   | $         | (4,003,700  | )          |   | $ | 1,523,400  |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Investing activities                                                                                 |                                        |           |             |            |   |           |             |            |   |   |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Acquisition of certain assets of broker dealers
	and license agreements                              |                                        |           |            |            |   |           | (5,203,200  | )          |   |   |           |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Investment in Subsidiary                                                                             |                                        |           | (81,264,600 | )          |   |           | (5,309,400  | )          |   |   | (1,123,900 | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Advances to subsidiaries                                                                             |                                        | $         | (3,388,000  | )          |   | $         | (184,000    | )          |   | $ |           |          
|                                                                                                     |                                        |           |             |            |   |           |             |            |   |   |            |          
|Net cash used for investing activities                                                               |                                        | $         | (84,652,600 | )          |   | $         | (10,696,600 | )          |   | $ | (1,123,900 | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Financing activities                                                                                 |                                        |           |             |            |   |           |             |            |   |   |            |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Increase in short-term borrowings                                                                    |                                        |           | 12,671,000  |            |   |           |            |            |   |   |           |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Issuance of notes payable                                                                            |                                        |           | 24,458,400  |            |   |           |            |            |   |   |           |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Payments on notes payable                                                                            |                                        |           | (4,875,500  | )          |   |           | (2,305,600  | )          |   |   | (400,000   | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Restructuring parent company                                                                         |                                        |           |            |            |   |           | (4,427,700  | )          |   |   |           |          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Issuance of common stock                                                                             |                                        |           | 64,345,900  |            |   |           | 23,762,100  |            |   |   |           |          
|                                                                                                     |                                        |           |             |            |   |           |             |            |   |   |            |          
|Net cash provided by (used for) financing
	activities                                                |                                        | $         | 96,599,800  |            |   | $         | 17,028,800  |            |   | $ | (400,000   | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Net increase (decrease) in cash                                                                      |                                        |           | (2,131,100  | )          |   |           | 2,328,500   |            |   |   | (500       | )        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Cash at beginning of period                                                                          |                                        |           | 2,329,300   |            |   |           | 800         |            |   |   | 1,300      |          
|                                                                                                     |                                        |           |             |            |   |           |             |            |   |   |            |          
|Cash at end of period                                                                                |                                        | $         | 198,200     |            |   | $         | 2,329,300   |            |   | $ | 800        |          
|                                                                                                     |                                        |           |             |            |   |           |             |            |   |   |            |          

See accompanying notes to the consolidated financial
statements

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##### Table of Contents



Stockwalk Group, Inc.

(Parent Company)


Notes to Condensed Financial Information



|   |                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A. | Certain prior-year amounts in the Parent Companys
	financial statements have been reclassified to conform to the
	2001 presentation. The reclassifications include restating
	prior-year amounts related to the Parent Companys
	capitalization of its former operating subsidiaries as defined
	above.



|   |                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|B. | Investments in subsidiaries are carried at cost plus equity in
	undistributed earnings. See Note 8 to Consolidated
	Financial Statements for information regarding net capital
	requirements of the broker-dealer subsidiaries which could
	result in restriction on the ability of the subsidiaries to
	transfer funds to the parent in the form of loans, advances or
	cash dividends.
|  
|C. | No dividends were paid to the Parent Company by its wholly owned
	subsidiaries in 2001. The Parent Company received $200,000 of
	dividends from Miller, Johnson & Kuehn, Inc. in 2000 in
	connection with principal payments on a bank note entered by the
	Parent Company.                                                                                                             
|  
|D. | Substantially all expenses of the Parent Company are allocated
	to each broker-dealer based on head count and sales volume. The
	Parent Company records management fee revenue and shows no net
	income or loss. The broker dealers record management fee
	expense. The management fee is eliminated in the Consolidated
	Statement of Operations.                                      

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##### Table of Contents








INDEX TO EXHIBITS


|        |      |             |  |                                                                                                                                                                     
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      | Description
|        |      |            
|        | 2.1  |             |  | Agreement and Plan of Reorganization, dated March
	25, 1999, among MJK Holdings, Inc., NM Holdings, Inc. and NM
	Merger Co. (1)                                     
|        | 2.2  |             |  | Amendment No. 1 to Agreement and Plan of
	Reorganization, dated May 7, 1999, among MJK Holdings,
	Inc., NM Holdings, Inc. and NM Merger Co. (1)                     
|        | 2.3  |             |  | Amendment No. 2 to Agreement and Plan of
	Reorganization, dated July 6, 1999, among MJK Holdings,
	Inc., NM Holdings, Inc. and NM Merger Co. (2)                    
|        | 2.4  |             |  | Asset Purchase Agreement, dated August 9,
	1999, among Stockwalk.com Group, Inc., William Yang and M-One
	Investment Securities, Inc. (3)                           
|        | 2.5  |             |  | Stock Acquisition Agreement, dated
	August 24, 1999, among Arnold Securities, Inc., John
	Arnold, Jerry W. Mulder, Cindy Pedersen and Stockwalk.com
	Group, Inc. (4)
|        | 2.6  |             |  | Agreement and Plan of Merger, dated June 5,
	2000, among R.J. Steichen, Stockwalk.com Group, Inc. and
	SCG Acquisition Corporation (5)                              
|        | 2.7  |             |  | Agreement and Plan of Merger, dated June 5,
	2000, among Kinnard Investments, Inc., Stockwalk.com Group, Inc.
	and SW Acquisition, Inc. (6)                         
|        | 2.8  |             |  | Asset Purchase Agreement between BlueSuit, Inc.
	and Stockwalk Group, Inc. (7)                                                                                      
|        | 3.1  |             |  | Third Amended and Restated Articles of
	Incorporation (1)                                                                                                           
|        | 3.2  |             |  | Restated Bylaws of Nutritional Medical, Inc.
	(n/k/a Stockwalk Group, Inc.) (8)                                                                                     
|        | 4.1  |             |  | Form of Indenture, including Form on Convertible
	Note (9)                                                                                                          
|        | 10.1 |             |  | Employment Agreement, dated September 27,
	1999, by and between Stockwalk.com Group, Inc. and
	Philip T. Colton  (10)                                               
|        | 10.2 |             |  | Employment Agreement, dated December 26,
	2000, by and between Miller Johnson Steichen Kinnard and
	Ronald E. Erickson                                              
|        | 10.3 |             |  | Transition Services Agreement, dated
	February 26, 2001, between BlueSuit, Inc. and Stockwalk
	Group, Inc. (11)                                                     
|        | 21.1 |             |  | Subsidiaries of the Registrant                                                                                                                                      
|        | 23.1 |             |  | Consent of Ernst & Young LLP                                                                                                                                        
|        | 99.1 |             |  | Cautionary Statements                                                                                                                                               




| |     |                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to our Definitive Schedule 14A
	(Proxy Statement) (Commission File No. 0-22247) filed with
	the SEC on June 14, 1999.        
|
| | (2) | Incorporated by reference to our Current Report on Form 8-K
	(Commission File No. 0-22247) filed with the SEC on
	July 22, 1999.                       
|
| | (3) | Incorporated by reference to Exhibit 2.1 to our Quarterly
	Report on Form 10-Q (Commission File No. 0-22247) for
	the quarter ended December 31, 1999. 
|
| | (4) | Incorporated by reference to Exhibit 2.1 to our Quarterly
	Report on Form 10-Q (Commission File No. 0-22247) for
	the quarter ended September 30, 1999.

44



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##### Table of Contents





| |     |                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Incorporated by reference to Exhibit 2.6 to Amendment
	No. 1 to our Registration Statement on Form S-2
	(Registration No.  333-35544) filed with the SEC on
	June 23, 2000.
|
| | (6) | Incorporated by reference to Exhibit 2.7 to Amendment
	No. 1 to our Registration Statement on Form S-2
	(Registration No.  333-35544) filed with the SEC on
	June 23, 2000.
|
| | (7) | Incorporated by reference to Exhibit 10.1 to our Current
	Report on Form 8-K (Commission File No. 0-22247) filed
	with the SEC on March 7, 2001.                           
|
| | (8) | Incorporated by reference to Exhibit 3.2 to our
	Registration Statement on Form  SB-2 (Registration
	No. 333-09999) filed with the SEC on August 12, 1996.                 
|
| | (9) | Incorporated by reference to Exhibit 4.1 to Amendment
	No. 1 to our Registration Statement on Form S-2
	(Registration No.  333-35544) filed with the SEC on
	June 23, 2000.



|     |                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to Exhibit 10.3 to our Quarterly
	Report on Form 10-Q (Commission File No. 0-22247) for the
	quarter ended September 30, 1999.
|    
|(11) | Incorporated by reference to Exhibit 10.2 to our Current
	Report on Form 8-K (Commission File No. 0-22247) filed with
	the SEC on March 7, 2001.        



| |     |                    
| | --- | -------------------
| | (b) | Reports on Form 8-k

None

45



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##### Table of Contents








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.

|                                                                                                              |  |                                       
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------------
|Dated:
	By: /s/ ELDON C. MILLEREldon C. Miller
	STOC
	Its: Chairman of the Board and
	Chief Executive Officer |  | KWALK GROUP, INC.
	Date: June 28, 2001

In accordance with the Securities Exchange Act of 1934, this
report has been sign below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|                                       |  |                                                    |  |              
|-------------------------------------- |  | -------------------------------------------------- |  | -------------
|SIGNATURE                              |  | TITLE                                              |  | DATE         
|                                       |  |                                                    |  |              
|/s/ ELDON C. MILLEREldon C. Miller     |  | Chairman of the Board and
	Chief Executive Officer |  | June 28, 2001
|/s/ DAVID B. JOHNSONDavid B. Johnson   |  | President and Director                             |  | June 28, 2001
|/s/ JOHN E. FELTLJohn E. Feltl         |  | Director                                           |  | June 28, 2001
|/s/ PAUL R. KUEHNPaul R. Kuehn         |  | Director                                           |  | June 28, 2001
|/s/ STANLEY P. RAHMStanley P. Rahm     |  | Director                                           |  | June 28, 2001
|/s/ TODD W. MILLERTodd W. Miller       |  | Chief Operating Officer                            |  | June 28, 2001
|/s/ JEFFREY L. HOUDEKJeffrey L. Houdek |  | Chief Financial Officer                            |  | June 28, 2001
|/s/ RICHARD J. NIGONRichard J. Nigon   |  | Director                                           |  | June 28, 2001
|/s/ JOHN C. FELTLJohn C. Feltl         |  | Director                                           |  | June 28, 2001
|/s/ N. LEE WESLEYN. Lee Wesley         |  | Director                                           |  | June 28, 2001
|/s/ LOUIS C. FORNETTILouis C. Fornetti |  | Director                                           |  | June 28, 2001
|Karl J. Breyer                         |  | Director                                           |  | June 28, 2001
|Roger H. Scherer                       |  | Director                                           |  | June 28, 2001

46