##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2001

Commission file number: 0-22247

STOCKWALK GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

|                                                                         |  |                                             
|------------------------------------------------------------------------ |  | --------------------------------------------
|MINNESOTA
(State or Other Jurisdiction
of Incorporation or Organization) |  | 41-1756256
(IRS Employer
Identification No.)

5500 WAYZATA BOULEVARD, SUITE 800, MINNEAPOLIS, MN 55416
(Address of Principal Executive Offices)

(763) 542-6000
(Registrants Telephone Number)

___________________

(Former Name, Former Address and

Former Fiscal Year, if Changed Since Last Report)

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

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the last practicable date:

|                                    |  |                                                    
|----------------------------------- |  | ---------------------------------------------------
|Class:
Common Stock, $.04 par value |  | Outstanding as of August 1, 2001:
32,715,724 shares





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TABLE OF CONTENTS



|                                                                                       |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Consolidated Condensed Statements of Financial Condition                              
|Management's Discussion and Analysis of Financial Condition and Results of Operations.
|Quantitative and Qualitative Disclosures about Market Risk.                           
|EX-99.1  Cautionary Statements                                                        



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##### Table of Contents



STOCKWALK GROUP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q

|                                                                                                       |      |                                                                                                                                                                                                                                                                                                                                                                                            |   |  |  |  | 
|------------------------------------------------------------------------------------------------------ | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                                         | PAGE
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 1. Consolidated Condensed Financial Statements (Unaudited).                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | Consolidated Condensed Statements of Financial Condition                                                                                                                                                                                                                                                                                                                                   | 3 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | June 30, 2001 and March 31, 2001                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | Consolidated Condensed Statements of Operations:                                                                                                                                                                                                                                                                                                                                           | 4 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | Three Months Ended June 30, 2001 and June 30, 2000                                                                                                                                                                                                                                                                                                                                        
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | Consolidated Condensed Statements of Cash Flows:                                                                                                                                                                                                                                                                                                                                           | 5 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | Three Months Ended June 30, 2001 and June 30, 2000                                                                                                                                                                                                                                                                                                                                        
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | Notes to Consolidated Condensed Financial Statements:                                                                                                                                                                                                                                                                                                                                      | 6 | 
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 2. Managements Discussion and Analysis of Financial
        Condition and Results of Operations. |      | 9                                                                                                                                                                                                                                                                                                                                                                                          |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 3. Quantitative and Qualitative Disclosures about Market Risk.                                    |      | 11                                                                                                                                                                                                                                                                                                                                                                                         |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|PART II  OTHER INFORMATION                                                                           
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 1. Legal Proceedings.                                                                            
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | At the present time, we are not a party to, nor is any property
subject to, any pending legal proceedings, other than routine
litigation and arbitration proceedings 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 2. Changes in Securities and Use of Proceeds- None.                                              
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 3. Defaults Upon Senior Securities- None.                                                        
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 4. Submission of Matters to a Vote of Security Holders- None.                                    
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 5. Other Information.                                                                            
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Item 6. Exhibits and Report on Form 8-K.                                                              
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | a.) Exhibits Number Description:                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | 99.1 Cautionary Statements                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | b.) Reports on Form 8-K.                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       |      | None                                                                                                                                                                                                                                                                                                                                                                                      

2



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##### Table of Contents






STOCKWALK GROUP, INC.Consolidated Condensed Statements of Financial Condition(Unaudited)

|                                                         |                                          |                                                              |               |               |           |                |             |           |           | 
|-------------------------------------------------------- | ---------------------------------------- | ------------------------------------------------------------ | ------------- | ------------- | --------- | -------------- | ----------- | --------- | --------- | 
|                                                         |                                          |                                                              |               | June 30, 2001 |           | March 31, 2001
|                                                         |                                          |                                                              |               |               |           |               
|Assets                                                  
|                                                        
|                                                        
|                                                        
|                                                        
|Cash                                                     |                                          | $                                                            | 25,208,000    |               |           | $              | 32,398,800  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and cash equivalents segregated                     |                                          |                                                              | 92,423,100    |               |           |                | 65,928,300  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Receivables from customers                               |                                          |                                                              | 407,163,000   |               |           |                | 403,288,100 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Receivables from brokers and dealers                     |                                          |                                                              | 443,224,300   |               |           |                | 339,953,600 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Deposits at clearing organizations                       |                                          |                                                              | 20,571,000    |               |           |                | 23,651,100  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Trading securities owned, at market                      |                                          |                                                              | 19,139,600    |               |           |                | 9,176,500   |          
|                                                        
|                                                        
|                                                        
|                                                        
|Secured demand notes receivable                          |                                          |                                                              | 16,900,000    |               |           |                | 18,025,000  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Goodwill, less accumulated amortization of $2,932,000    |                                          |                                                              | 63,528,600    |               |           |                | 63,528,600  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Intangible assets, less accumulated amortization of:    
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | June - $1,741,500 and March - $1,297,100 |                                                              |               | 3,684,600     |           |                |             | 4,129,000 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Other assets                                             |                                          |                                                              | 22,884,900    |               |           |                | 24,320,900  |          
|                                                         |                                          |                                                              |               |               |           |                |             |          
|Total assets                                             |                                          | $                                                            | 1,114,727,100 |               |           | $              | 984,399,900 |          
|                                                         |                                          |                                                              |               |               |           |                |             |          
|Liabilities                                             
|                                                        
|                                                        
|                                                        
|                                                        
|Short-term borrowings                                    |                                          | $                                                            | 52,882,000    |               |           | $              | 25,541,000  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Payables to customers                                    |                                          |                                                              | 364,050,600   |               |           |                | 360,852,800 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Payables to brokers and dealers                          |                                          |                                                              | 547,146,300   |               |           |                | 443,935,800 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Trading securities sold but not yet purchased, at market |                                          |                                                              | 3,573,400     |               |           |                | 1,963,400   |          
|                                                        
|                                                        
|                                                        
|                                                        
|Notes payable                                            |                                          |                                                              | 24,140,200    |               |           |                | 25,944,800  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Liabilities subordinated to claims of general creditors  |                                          |                                                              | 16,900,000    |               |           |                | 18,025,000  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Other liabilities                                        |                                          |                                                              | 26,780,600    |               |           |                | 27,216,400  |          
|                                                         |                                          |                                                              |               |               |           |                |             |          
|Total liabilities                                        |                                          | $                                                            | 1,035,473,100 |               |           | $              | 903,479,200 |          
|                                                        
|                                                        
|                                                        
|                                                        
|Shareholders equity                                    
|                                                        
|                                                        
|                                                        
|                                                        
|Common stock, $.04 par value;                           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                          | Authorized shares: 50,000,000                               
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                          | Issued and outstanding June  32,715,724; March - 32,775,071 |               |               | 1,308,600 |                |             |           | 1,311,000 | 
|                                                        
|                                                        
|                                                        
|                                                        
|Paid-in capital                                          |                                          |                                                              | 89,251,300    |               |           |                | 89,338,800  |          
|                                                        
|                                                        
|                                                        
|                                                        
|Retained deficit                                         |                                          |                                                              | (11,305,900   | )             |           |                | (9,729,100  | )        
|                                                         |                                          |                                                              |               |               |           |                |             |          
|Total shareholders equity                               |                                          | $                                                            | 79,254,000    |               |           | $              | 80,920,700  |          
|                                                         |                                          |                                                              |               |               |           |                |             |          
|Total liabilities & shareholders equity                 |                                          | $                                                            | 1,114,727,100 |               |           | $              | 984,399,900 |          
|                                                         |                                          |                                                              |               |               |           |                |             |          

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##### Table of Contents



STOCKWALK GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited)

|                                                     |                    |   |            |            |                             |   |            |            |  
|---------------------------------------------------- | ------------------ | - | ---------- | ---------- | --------------------------- | - | ---------- | ---------- | -
|                                                     |                    |   |            |            | Three Months Ended June 30,
|                                                     |                    |   |           
|                                                     |                    |   | 2001       |            | 2000                       
|                                                     |                    |   |            |            |                            
|Revenues                                            
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Trading profits    |   | $          | 5,680,600  |                             |   | $          | 3,503,200  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest           |   |            | 13,319,500 |                             |   |            | 8,057,600  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Commissions        |   |            | 13,410,200 |                             |   |            | 4,625,200  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment banking |   |            | 3,840,000  |                             |   |            | 1,837,900  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Clearing fees      |   |            | 1,693,000  |                             |   |            | 1,434,000  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other income       |   |            | 2,452,000  |                             |   |            | 1,355,300  |  
|                                                     |                    |   |            |            |                             |   |            |           
|Total revenues                                       |                    | $ | 40,395,300 |            |                             | $ | 20,813,200 |           
|                                                    
|                                                    
|                                                    
|                                                    
|Expenses                                            
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Compensation       |   | $          | 20,053,500 |                             |   | $          | 9,215,600  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Clearing fees      |   |            | 1,291,200  |                             |   |            | 728,500    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Occupancy          |   |            | 3,061,000  |                             |   |            | 1,417,400  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Communication      |   |            | 4,609,200  |                             |   |            | 2,801,700  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest           |   |            | 10,238,300 |                             |   |            | 6,520,600  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Amortization       |   |            | 444,400    |                             |   |            | 249,000    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other expense      |   |            | 2,274,500  |                             |   |            | 1,116,400  |  
|                                                     |                    |   |            |            |                             |   |            |           
|Total expenses                                       |                    | $ | 41,972,100 |            |                             | $ | 22,049,200 |           
|                                                    
|                                                    
|                                                    
|                                                    
|Loss before income taxes                             |                    |   | (1,576,800 | )          |                             |   | (1,236,000 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|Income tax benefit                                   |                    |   |           |            |                             |   | 533,900    |           
|                                                     |                    |   |            |            |                             |   |            |           
|Loss from continuing operations                      |                    | $ | (1,576,800 | )          |                             | $ | (702,100   | )         
|                                                    
|                                                    
|                                                    
|                                                    
|Discontinued operations, Online Brokerage Solutions: |                    |   |           
|                                                    
|                                                    
|                                                    
|                                                    
|Operating loss, net of income taxes                  |                    | $ |           |            |                             | $ | (459,200   | )         
|                                                     |                    |   |            |            |                             |   |            |           
|Net loss                                             |                    | $ | (1,576,800 | )          |                             | $ | (1,161,300 | )         
|                                                     |                    |   |            |            |                             |   |            |           
|Net loss per common share:                          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Basic and diluted  |   | $          | (0.05      | )                           |   | $          | (0.05      | )
|                                                     |                    |   |            |            |                             |   |            |           
|Weighted average shares outstanding:                
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Basic              |   |            | 32,761,100 |                             |   |            | 21,579,900 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Diluted            |   |            | 32,765,400 |                             |   |            | 21,861,800 |  

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STOCKWALK GROUP, INC.Consolidated Condensed Statements of Cash Flows(Unaudited)

|                                |                                           |   |            |             |                             |   |           |             |  
|------------------------------- | ----------------------------------------- | - | ---------- | ----------- | --------------------------- | - | --------- | ----------- | -
|                                |                                           |   |            |             | Three Months Ended June 30,
|                                |                                           |   | 2001       |             | 2000                       
|                                |                                           |   |            |             |                            
|Operating activities           
|                               
|                               
|                               
|                               
|                                | Net cash used for operating activities    |   | $          | (31,896,100 | )                           |   | $         | (17,218,400 | )
|                               
|                               
|                               
|                               
|Investing activities           
|                               
|                               
|                               
|                               
|                                | Purchase of furniture and equipment       |   |            | (741,200    | )                           |   |           | (1,129,100  | )
|                                |                                           |   |            |             |                             |   |           |            
|                                | Net cash used for investing activities    |   | $          | (741,200    | )                           |   | $         | (1,129,100  | )
|                               
|                               
|                               
|                               
|Financing activities           
|                               
|                               
|                               
|                               
|                                | Increase in short-term borrowings         |   |            | 27,341,000  |                             |   |           | 23,300,000  |  
|                               
|                               
|                               
|                               
|                                | Net payment on notes payable              |   |            | (1,804,600  | )                           |   |           | (1,274,100  | )
|                               
|                               
|                               
|                               
|                                | Issuance (purchase) of common stock       |   |            | (89,900     | )                           |   |           | 28,200      |  
|                                |                                           |   |            |             |                             |   |           |            
|                                | Net cash provided by financing activities |   | $          | 25,446,500  |                             |   | $         | 22,054,100  |  
|                               
|                               
|                               
|                               
|Net increase (decrease) in cash |                                           |   | (7,190,800 | )           |                             |   | 3,706,600 |            
|                               
|                               
|                               
|                               
|Cash at beginning of the period |                                           |   | 32,398,800 |             |                             |   | 5,533,500 |            
|                                |                                           |   |            |             |                             |   |           |            
|Cash at the end of the period   |                                           | $ | 25,208,000 |             |                             | $ | 9,240,100 |            
|                                |                                           |   |            |             |                             |   |           |            

5



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##### Table of Contents



STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements



|1. |  | 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, Inc.,
Stockwalk.com, Inc., MJK Capital Corporation, and Stockwalk Investment Management, Inc.
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/NMS 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.



|2. |  | Accounting Changes
|-- |  | ------------------

We have adopted the Statement of Financial Standards No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets as issued by
the Financial Accounting Standards Board in June 2001. Under these standards,
goodwill is no longer amortized but is subject to periodic impairment tests.
Other intangible assets with defined lives will continue to be amortized.
During the quarter ended June 30, 2001 we recognized amortization expense of
$444,400. Results for the quarter ended June 30, 2000 include $148,200 of
amortization expense related to goodwill. If the Company adopted the new
accounting guidelines for both periods the results would have been:

|                                        |  |                             |            |      |  |   |            |  
|--------------------------------------- |  | --------------------------- | ---------- | ---- |  | - | ---------- | -
|                                        |  | Three Months Ended June 30,
|                                        |  | 2001                        |            | 2000
|                                        |  |                             |            |     
|Net loss                                |  | $                           | (1,576,800 | )    |  | $ | (1,060,900 | )
|                                        |  |                             |            |      |  |   |            |  
|Basic and diluted loss per common share |  | $                           | (0.05      | )    |  | $ | (.05       | )
|                                        |  |                             |            |      |  |   |            |  

Annual amortization expenses are expected to be the following:

|                              |      |   |           |           | 
|----------------------------- | ---- | - | --------- | --------- | 
|Fiscal years ending March 31: |      |   |           |          
|                             
|                             
|                             
|                             
|                              | 2002 |   | $         | 1,204,500 | 
|                             
|                             
|                             
|                             
|                              | 2003 |   |           | 743,600   | 
|                             
|                             
|                             
|                             
|                              | 2004 |   |           | 723,800   | 
|                             
|                             
|                             
|                             
|                              | 2005 |   |           | 723,800   | 
|                             
|                             
|                             
|                             
|                              | 2006 |   |           | 387,500   | 
|                             
|                             
|                             
|                             
|Thereafter                    |      |   | 345,800   |          
|                              |      |   |           |          
|                              |      | $ | 4,129,000 |          
|                              |      |   |           |          

6



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##### Table of Contents



STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements

In accordance with the requirements of FASB No. 142, the Company performed an
initial impairment test by reporting unit, which indicated potential impairment
of goodwill attributed to a component of the on-line segment. The measurement
of the impairment loss has not yet been finalized. The Company expects to
finalize this measurement in the second fiscal quarter.



|3. |  | Managements Interim Financial Statement Representation
|-- |  | -------------------------------------------------------

The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all
adjustments (consisting solely of normal recurring accruals) considered
necessary for a fair presentation have been included. Although we believe that
the disclosures are adequate to make the information presented not misleading,
it is suggested that these condensed financial statements be read in
conjunction with the audited financial statements and the notes thereto
included in our latest annual financial statements included in our Annual
Report on Form 10-K.



|4. |  | Financing Arrangements
|-- |  | ----------------------

At June 30, 2001, we had discretionary lines of credit totaling $95 million,
which were and 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. We had outstanding balances of $34.2 million at
June 30, 2001, with an average annual interest rate of 5.20%, and outstanding
balances of $12.9 million at March 31, 2001, with and average annual interest
rate of 6.42%.

At June 30, 2001 we had $18.7 million of short-term commercial paper
outstanding with yields of approximately 8% maturing between 30 and 270 days
from the date of issuance.

In August 2000, we completed an offering for $21.5 million of 10% convertible
subordinated bonds due in 2005, of which $18.3 million were outstanding at
March 31, 2001. During the quarter ended June 30, 2001, $1.3 million of the
subordinated bonds were retired at less than par value.



|5. |  | Shareholders Equity
|-- |  | --------------------

Statement Regarding: 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 dividing 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.

|                                                                                             |  |                    |            |      |  |  |            | 
|-------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | ---- |  |  | ---------- | 
|                                                                                             |  | Three Months Ended
|                                                                                             |  | June 30,          
|                                                                                             |  | 2001               |            | 2000
|                                                                                             |  |                    |            |     
|Weighted average shares outstanding-basic                                                    |  |                    | 32,761,100 |      |  |  | 21,579,900 | 
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Dilutive effect of stock options and warrants
after application of the treasury stock method |  |                    | 4,300      |      |  |  | 281,900    | 
|                                                                                             |  |                    |            |      |  |  |            | 
|Weighted average shares outstanding-diluted                                                  |  |                    | 32,765,400 |      |  |  | 21,861,800 | 
|                                                                                             |  |                    |            |      |  |  |            | 

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##### Table of Contents



STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements



|6. |  | Business Combinations
|-- |  | ---------------------

The acquisitions of Steichen and Kinnard were accounted for under the purchase
method of accounting in August and September of 1999, respectively, and
accordingly, the respective purchase prices were allocated to assets acquired
and liabilities assumed based on their fair market values at the dates of
acquisition. The results of operations of the two entities have been included
in the Consolidated Condensed 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.

|                                       |  |                             |            |      |  |   |            | 
|-------------------------------------- |  | --------------------------- | ---------- | ---- |  | - | ---------- | 
|                                       |  | Three Months Ended June 30,
|                                       |  | 2001                        |            | 2000
|                                       |  |                             |            |     
|Total revenues                         |  | $                           | 40,395,300 |      |  | $ | 46,512,500 | 
|                                      
|                                      
|                                      
|                                      
|Net income (loss)                      |  |                             | (1,576,800 | )    |  |   | 206,400    | 
|                                      
|                                      
|                                      
|                                      
|Diluted income (loss) per
common share |  | $                           | (.05       | )    |  | $ | 0.01       | 



|7. |  | 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 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
June 30, 2001, MJSK and MJK Clearings net capital were $6.5 million and $21.9
million representing 8.0% and 7.0% of aggregate debit balances and $2.5 million
and $6.1 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. is required to maintain a minimum net capital of
$50,000. At June 30, 2001, Stockwalk.com, Inc. had net capital of $327,000.



|8. |  | Income Taxes
|-- |  | ------------

Given the uncertainty surrounding the economy, capital markets and our
operational profitability, the tax benefits attributed to the first quarter net
operating losses may not be recoverable. Accordingly, we established a
valuation reserve with respect to the tax benefit in the quarter ended June 30,
2001.

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##### Table of Contents






STOCKWALK GROUP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

We are a customer service 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. Our
niche market includes small capitalization, emerging and start-up businesses
and public finance clients located principally in the upper Midwest. Our
Stockwalk.com, Inc. 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.

Factors that may affect future results

The matters set forth in this public dissemination, including managements
expectations regarding future growth and profitability, are 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. See additional
cautionary statements in exhibit 99.1

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 agent,
principal and underwriter 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 interest on and earn interest from, 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 orders for stock trades and other
investment transactions, directly, and at a lower, more predictable transaction
cost than traditional full-commission brokerage firms. Operating results from
our discontinued private label online brokerage business have been excluded
from each period.

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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.

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

|                                                |                        |   |                             |            |      |   |            |            |  
|----------------------------------------------- | ---------------------- | - | --------------------------- | ---------- | ---- | - | ---------- | ---------- | -
|                                                |                        |   | Three Months Ended June 30,
|                                                |                        |   | 2001                        |            | 2000
|                                                |                        |   |                             |            |     
|Revenue                                        
|                                               
|                                               
|                                               
|                                               
|                                                | Full service brokerage |   | $                           | 24,052,300 |      |   | $          | 9,753,400  |  
|                                               
|                                               
|                                               
|                                               
|                                                | Clearing brokerage     |   |                             | 15,616,800 |      |   |            | 10,208,700 |  
|                                               
|                                               
|                                               
|                                               
|                                                | Online brokerage       |   |                             | 748,600    |      |   |            | 1,318,700  |  
|                                               
|                                               
|                                               
|                                               
|                                                | Other / Eliminations   |   |                             | (22,400    | )    |   |            | (467,600   | )
|                                                |                        |   |                             |            |      |   |            |           
|Consolidated revenue                            |                        | $ | 40,395,300                  |            |      | $ | 20,813,200 |           
|                                                |                        |   |                             |            |      |   |            |           
|Pretax income (loss)                           
|                                               
|                                               
|                                               
|                                               
|                                                | Full service brokerage |   | $                           | (2,411,300 | )    |   | $          | (1,116,900 | )
|                                               
|                                               
|                                               
|                                               
|                                                | Clearing               |   |                             | 1,530,100  |      |   |            | 790,400    |  
|                                               
|                                               
|                                               
|                                               
|                                                | Online                 |   |                             | (695,600   | )    |   |            | (1,017,200 | )
|                                               
|                                               
|                                               
|                                               
|                                                | Other / Eliminations   |   |                             |           |      |   |            | 107,700    |  
|                                                |                        |   |                             |            |      |   |            |           
|Income (loss) from continuing
operations-pretax |                        | $ | (1,576,800)                 |            |      | $ | (1,236,000 | )         
|                                                |                        |   |                             |            |      |   |            |           

Three Months Ended June 30, 2001 and June 30, 2000

During the quarter ended June 30, 2001, full service revenues were $24.1
million, an increase of $14.3 million or 146.6% from $9.8 million in the
quarter ended June 30, 2000. The increase was primarily due to commissions and
principal transactions revenues generated by brokers from R.J. Steichen and
John G. Kinnard. MJSK also recognized an increase in municipal bond
underwriting revenues, which increased from $1.2 million in the quarter ended
June 30, 2000 to $2.5 million in the quarter ended June 30, 2001. We also had
an increase in equity private placements closing 9 deals in the recent quarter,
compared to 4 for the same period of the prior year. The full service segment
incurred a pretax loss of $2.4 million in the quarter ended June 30, 2001
compared to a pretax loss of $1.1 million in the comparable period in 2000. The
$15.6 million increase in expenditures is primarily due to the acquisition of
R.J. Steichen and John G. Kinnard in the second quarter of 2000. Full service
expenses have decreased by $4.0 million from the third quarter 2000. MJSK
expects to further reduce future expenditures through streamlining the
operations of the combined firms.

During the quarter ended June 30, 2001, our clearing fee revenue was $15.6
million, an increase of $5.4 million or 53.0% from $10.2 million in the quarter
ended June 30, 2000. This increase in MJK Clearings revenues is the result of
interest earned on larger customer margin accounts and cash collateral related
to stock borrowing activities. The number of firms utilizing our clearing
services increased to 68 for the quarter ended June 30, 2001 from 55 for the
quarter ended June 30, 2000. Clearing fee expenses for the quarter ended June
30, 2001 totaled $14.1 million, an increase of $4.7 million or 49.6% from the
comparable period in 2000. The increase in clearing expenses is directly
related to its growth. During the quarter ended June 30, 2001, we processed
670,300 tickets compared to 314,900 tickets in the same period last year. We
anticipate future growth in our clearing operations to occur as we attract new
correspondents.

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Our online brokerage business generated trading fee revenues of $748,600 in the
quarter ended June 30, 2001, a decrease of $570,100 or 43.2% from $1.3 million
in the quarter ended June 30, 2001. The decline in online revenues is a result
of the decline in the equity markets. As overall investor confidence dropped
so have our online trading volumes. The online segment incurred a $695,600
pretax loss in the quarter ended June 30, 2001 compared to $1.0 million pretax
loss in the same period of the prior year. Online expenditures declined $1.4
million or 61.8% as a result of reductions in promotional, personnel and
amortization costs.

Given the uncertainty surrounding the economy, capital markets and our
operational profitability, the tax benefits attributed to the first quarter net
operating losses may not be recoverable. Accordingly, we established a valuation reserve with respect to the tax benefit in the quarter ended June 30, 2001.

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 with customers and
other brokers and dealers usually settle transactions within three days
following the date of transaction. Operations are financed by equity capital,
bank lines of credit, proceeds from sales of securities, and other non-interest
bearing liabilities.

The $31.9 million use of cash from operating activities is primarily related to
a $26.5 million increase in cash held in reserve for NASD requirements and an
$8.4 million increase in trading securities.

Our financing activities provided cash of $25.4 million in the three months
ended June 30, 2001 primarily resulting from the increase in short term
borrowings used to fund the increase in inventory and reserve accounts.

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. MJK Clearing, Inc. has elected
to use the alternative method permitted by Rule 15c3-1 which requires that MJK Clearing, Inc. maintain minimum net capital equal to the greater of $250,000 or 2% of
aggregate debit balances arising from customer transactions, as defined. At
June 30, 2001, MJSK and MJK Clearings net capital were $6.5 million and $21.9
million representing 8.0% and 7.0% of aggregate debit balances and $2.5 million
and $6.1 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 June
30, 2001, Stockwalk.com, Inc. had net capital of $327,000

At June 30, 2001, we had approximately $95.0 million in committed credit
agreements, of which $34.2 million was utilized. In addition, we had $18.7
million of short-term commercial paper outstanding with yield of approximately
8% maturing between 30 and 270 days of issuance.

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




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
hold and securities our customers hold in margin accounts. 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 customers credit standing is reviewed by management and we maintain
collateral to support customer margin loans.

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 on long positions were $5.4 million at June 30, 2001. The potential
loss in fair value, using a hypothetical 25% decline in equity prices on June
30, 2001 holdings, is estimated to be $1.4 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
assets held primarily for deposits at clearing organizations and NASD reserve
requirements. We mitigate this risk by holding high-grade government
obligations with short-term maturities.

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SIGNATURES

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

|                       |  |                       |  |                                                                   
|---------------------- |  | --------------------- |  | ------------------------------------------------------------------
|Dated: August 15, 2001 |  | STOCKWALK GROUP, INC.
|                      
|                      
|                       |  | By:
Its:              |  | /s/ Jeffrey L. Houdek
V. P. of Finance and Chief Financial Officer

12