##### 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 September 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:                       |  | Outstanding as of October 31, 2001:
|Common Stock, $.04 par value |  | 32,750,614 shares                  





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TABLE OF CONTENTS



|                                                   |                                                             |                                                          |  |  |  |  |  | 
|-------------------------------------------------- | ----------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|PART II  OTHER INFORMATION                       
|                                                   | Item 1. Legal Proceedings.                                 
|                                                   | Item 2. Changes in Securities and Use of Proceeds- None.   
|                                                   | Item 3. Defaults Upon Senior Securities                    
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders
|                                                   | Item 5. Other Information.                                 
|                                                   | Item 6. Exhibits and Report on Form 8-K.                   
|                                                   |                                                             | Consolidated Condensed Statements of Financial Condition
|                                                   |                                                             | Consolidated Condensed Statements of Operations         
|                                                   |                                                             | Consolidated Condensed Statements of Cash Flows         
|                                                   |                                                             | Notes to Consolidated Condensed Financial Statements    
|Cautionary Statement re: Forward Looking Statement



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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:                             |  |  | 4     | 
|                               |  | September 30, 2001 and March 31, 2001                                                 |  |  |       | 
|                               |  | Consolidated Condensed Statements of Operations:                                      |  |  | 5     | 
|                               |  | Six Months Ended September 30, 2001 and September 30, 2000                            |  |  |       | 
|                               |  | Consolidated Condensed Statements of Cash Flows:                                      |  |  | 6     | 
|                               |  | Six Months Ended September 30, 2001 and September 30, 2000                            |  |  |       | 
|                               |  | Notes to Consolidated Condensed Financial Statements:7-11                             |  |  |       | 
|Item 2                         |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  |  | 12-16 | 
|Item 3                         |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |  | 16    | 




PART II  OTHER INFORMATION




Item 1. Legal Proceedings.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On September 27, 2001, we consented to the initiation of a Securities
Investors Protection Corp (SIPC) liquidation proceeding of our MJK
Clearing, Inc. subsidiary. This proceeding is pending in the United
States Bankruptcy Court for the District of Minnesota captioned Securities
Investors Protection Corp. v. MJK Clearing, Inc., Case no. CV01-1779
RHK/JJM, Bky.Adv. Proc. No. 01-4257-RJK, and is more fully described in
Note 1 of the Notes to financial statements and the report on Form 8-K
filed on October 1, 2001, which are incorporated by reference.



| |                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On November 9, 2001, a holder of $700,000 of our matured commercial paper
filed a lawsuit in Hennepin County District Court for breach of contract,
seeking repayment of the loan, interest due and unspecified damages.




Item 2. Changes in Securities and Use of Proceeds- None.




Item 3. Defaults Upon Senior Securities



| |                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The SIPC liquidation of MJK Clearing, Inc. represents an Event of Default
under the indenture governing our 10% Convertible Subordinated Notes. The
event of default does not require note holder approval and the notes are
due on demand. At September 30, 2001 there was $16.4 million outstanding.



| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of November 14, 2001, payments for maturing commercial paper totaling
$15.6 million were not met. Each holder of maturing commercial paper is
being offered 5% of their principal balance in return for extending the
remaining balance for 180 days on which they will earn an annual interest
rate of 5%.



| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At September 30, 2001 we had a bank note payable for $2.1 million.
Subsequent monthly principal payments of $50,000 plus accrued interest
have not been paid.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At the commencement of the SIPC proceeding, MJK Clearing, Inc. had
outstanding loans under its lines of credit totaling $30.9 million which
were secured by customer and firm owned securities. These loans are in
default. Resolution of these claims of MJK Clearing, Inc. as well as the
$16.3 million of secured demand notes of MJK Clearing will be resolved in
the SIPC proceedings referred to in Item 1. We have not guaranteed any of
the obligations and, accordingly, they have been eliminated from our
consolidated financial statements. See notes 1 and 6 of the Notes of the
Financial Statements.

2



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##### Table of Contents






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



| |                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At the Annual Shareholders meeting held on September 12, 2001, there
were 32,715,724 shares of Common Stock entitled to vote and a total of
22,038,039 shares (67.36%) were represented at the meeting. The
following matters were submitted to a vote of security holders, in
which the respective proposals received the following votes:

|   |  |                        |  |     |            |          |  |         |  | 
|-- |  | ---------------------- |  | --- | ---------- | -------- |  | ------- |  | 
|1. |  | Election of Directors: |  | FOR |            | WITHHELD
|   |  |                        |  |     |            |         
|   |  | Eldon C. Miller        |  |     | 21,867,577 |          |  | 170,462
|   |  | David B. Johnson       |  |     | 21,877,527 |          |  | 160,512
|   |  | Paul R. Kuehn          |  |     | 21,874,745 |          |  | 163,294
|   |  | Stanley D. Rahm        |  |     | 21,878,545 |          |  | 159,494
|   |  | John (Jack) E. Feltl   |  |     | 21,869,231 |          |  | 168,809
|   |  | John C. Feltl          |  |     | 21,823,314 |          |  | 214,725
|   |  | N. Lee Wesley          |  |     | 21,923,134 |          |  | 114,905
|   |  | Louis C. Fornetti      |  |     | 21,925,757 |          |  | 112,282
|   |  | Richard J. Nigon       |  |     | 21,927,868 |          |  | 110,171
|   |  | Karl J. Breyer         |  |     | 21,925,427 |          |  | 112,612
|   |  | Roger H. Scherer       |  |     | 21,923,689 |          |  | 114,350



| |  |  | 2. Proposal to approve the appointment of Ernst & Young LLP as
the independent auditors of the Company for fiscal 2001.
| |  |  | -----------------------------------------------------------------------------------------------------------------------

|                |  |                 |  |                 |  |                   
|--------------- |  | --------------- |  | --------------- |  | ------------------
|For: 21,977,580 |  | Against: 23,197 |  | Abstain: 37,262 |  | Broker Non-vote: 0



| |  |  | 3. Proposal to approve an amendment to the Employee Stock Purchase Plan.
| |  |  | ------------------------------------------------------------------------

|                |  |                  |  |                 |  |                   
|--------------- |  | ---------------- |  | --------------- |  | ------------------
|For: 21,673,081 |  | Against: 334,712 |  | Abstain: 30,246 |  | Broker Non-vote: 0




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.
| | --- |  | --------------------

| | September 26, 2001
| | ------------------

| | Item 5.   MJK Clearing, Inc. in violation of SEC Net Capital Rules
| | ------------------------------------------------------------------



| | October 1, 2001
| | ---------------

| | Items 3.   Trustee appointment for the SIPC liquidation of MJK Clearing, Inc.
| | -----------------------------------------------------------------------------



| |                 
| | ----------------
| | October 12, 2001

| | Item 2.   Disposition of MJK Clearing, Inc. customer accounts to Southwest Securities, Inc.                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Item 3.   Bankruptcy court approval of the customer transfer to Southwest Securities, Inc. Bankruptcy court                      approval of the sale of MJSK stock to Stockwalk Group, Inc.
| | Item 5.   David B. Johnson named the new Chief Executive Officer                                                                                                                            

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

|                                                         |                    |                                  |                                                |   |           |                    |             |           |                |           |  | 
|-------------------------------------------------------- | ------------------ | -------------------------------- | ---------------------------------------------- | - | --------- | ------------------ | ----------- | --------- | -------------- | --------- |  | 
|                                                         |                    |                                  |                                                |   |           | September 30, 2001 |             |           | March 31, 2001 |          
|                                                         |                    |                                  |                                                |   |           |                    |             |           |                |          
|Assets                                                   |                    |                                  |                                                |   |           |                    |             |          
|Cash                                                     |                    | $                                | 7,011,200                                      |   |           | $                  | 32,398,800  |          
|Cash and cash equivalents segregated                     |                    |                                  |                                               |   |           |                    | 65,928,300  |          
|Cash restricted                                          |                    |                                  | 8,200,000                                      |   |           |                    |            |          
|Receivables from customers                               |                    |                                  |                                               |   |           |                    | 403,288,100 |          
|Receivables from brokers and dealers                     |                    |                                  | 1,349,300                                      |   |           |                    | 363,604,700 |          
|Trading securities owned, at market                      |                    |                                  | 27,794,500                                     |   |           |                    | 9,176,500   |          
|Secured demand notes receivable                          |                    |                                  |                                               |   |           |                    | 18,025,000  |          
|Goodwill, less accumulated amortization of:              |                    |                                  |                                                |   |           |                    |             |          
|                                                         |                    | September and March  $4,229,100 |                                                |   | 1,750,000 |                    |             |           | 63,528,600     |          
|Intangible assets, less accumulated amortization of:     |                    |                                  |                                                |   |           |                    |             |          
|                                                         | $1,297,100 - March |                                  |                                                |  |           |                    |             | 4,129,000 |               
|Other assets                                             |                    |                                  | 13,604,100                                     |   |           |                    | 24,320,900  |          
|                                                         |                    |                                  |                                                |   |           |                   
|Total assets                                             |                    | $                                | 59,709,100                                     |   |           | $                  | 984,399,900 |          
|                                                         |                    |                                  |                                                |   |           |                   
|Liabilities                                              |                    |                                  |                                                |   |           |                    |             |          
|Short-term borrowings                                    |                    | $                                | 32,348,300                                     |   |           | $                  | 25,541,000  |          
|Payables to customers                                    |                    |                                  |                                               |   |           |                    | 360,852,800 |          
|Payables to brokers and dealers                          |                    |                                  |                                               |   |           |                    | 443,935,800 |          
|Accounts payable                                         |                    |                                  | 18,522,400                                     |   |           |                    | 4,233,900   |          
|Trading securities sold but not yet purchased, at market |                    |                                  | 2,828,900                                      |   |           |                    | 1,963,400   |          
|Notes payable                                            |                    |                                  | 23,314,600                                     |   |           |                    | 25,944,800  |          
|Liabilities subordinated to claims of general creditors  |                    |                                  |                                               |   |           |                    | 18,025,000  |          
|Other liabilities                                        |                    |                                  | 9,958,800                                      |   |           |                    | 22,982,500  |          
|                                                         |                    |                                  |                                                |   |           |                   
|Total liabilities                                        |                    | $                                | 86,973,000                                     |   |           | $                  | 903,479,200 |          
|                                                        
|Shareholders equity (deficit)                           |                    |                                  |                                                |   |           |                    |             |          
|Common stock, $.04 par value;                            |                    |                                  |                                                |   |           |                    |             |          
|                                                         |                    |                                  | Authorized shares: 50,000,000                  |   |           |                    |             |           |                |           | 
|                                                         |                    |                                  | Issued and outstanding September  32,750,614; |   |           |                    |             |           |                |           | 
|                                                         |                    |                                  | March - 32,775,071                             |   |           | 1,310,000          |             |           |                | 1,311,000 | 
|Paid-in capital                                          |                    |                                  | 89,270,700                                     |   |           |                    | 89,338,800  |          
|Accumulated deficit                                      |                    |                                  | (117,844,600                                   | ) |           |                    | (9,729,100  | )        
|                                                         |                    |                                  |                                                |   |           |                   
|Total shareholders equity (deficit)                     |                    | $                                | (27,263,900                                    | ) |           | $                  | 80,920,700  |          
|                                                         |                    |                                  |                                                |   |           |                   
|Total liabilities & shareholders equity (deficit)       |                    | $                                | 59,709,100                                     |   |           | $                  | 984,399,900 |          
|                                                         |                    |                                  |                                                |   |           |                   

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

|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |            |             |   |            |            |            |  
|------------------------------------------------------------ | ------------------ | ------------------------------------------- | ------------ | ------------------ | ----------- | - | ---------------- | --------- | ---------- | ---- | ------------ | ---------- | ----------- | - | ---------- | ---------- | ---------- | -
|                                                             |                    |                                             |              | Three months ended |             |   | Six months ended |          
|                                                             |                    |                                             |              | September 30,      |             |   | September 30,    |          
|                                                             |                    |                                             |              |                    |             |   |                  |          
|                                                             |                    |                                             |              | 2001               |             |   | 2000             |           |            | 2001 |              |            | 2000        |  
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |            |             |  
|Revenues                                                     |                    |                                             |              |                    |             |   |                  |           |            |      |              |            |             |   |            |           
|                                                             | Trading profits    |                                             | $            | 4,543,000          |             |   | $                | 6,903,200 |            |      | $            | 10,123,200 |             |   | $          | 10,351,900 |           
|                                                             | Interest           |                                             |              | 1,041,800          |             |   |                  | 2,367,800 |            |      |              | 3,339,900  |             |   |            | 2,540,200  |           
|                                                             | Commissions        |                                             |              | 11,623,700         |             |   |                  | 6,124,600 |            |      |              | 24,346,300 |             |   |            | 9,528,000  |           
|                                                             | Investment banking |                                             |              | 4,654,200          |             |   |                  | 4,583,600 |            |      |              | 8,583,700  |             |   |            | 6,421,500  |           
|                                                             | Other income       |                                             |              | 1,709,300          |             |   |                  | 1,042,300 |            |      |              | 2,592,100  |             |   |            | 1,506,700  |           
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|Total revenues                                               |                    | $                                           | 23,572,000   |                    |             | $ | 21,021,500       |           |            | $    | 48,985,200   |            |             | $ | 30,348,300 |           
|                                                            
|Expenses                                                     |                    |                                             |              |                    |             |   |                  |           |            |      |              |            |             |   |            |           
|                                                             |                    | Compensation and benefits                   |              |                    | 17,232,400  |   |                  |           | 14,876,200 |      |              |            | 35,595,100  |   |            |            | 22,348,300 |  
|                                                             |                    | Clearing fees                               |              |                    | 1,150,600   |   |                  |           | 488,000    |      |              |            | 2,884,700   |   |            |            | 731,000    |  
|                                                             |                    | Occupancy                                   |              |                    | 2,429,900   |   |                  |           | 1,679,600  |      |              |            | 4,875,000   |   |            |            | 2,719,600  |  
|                                                             |                    | Communication                               |              |                    | 2,199,000   |   |                  |           | 989,900    |      |              |            | 4,107,200   |   |            |            | 1,622,600  |  
|                                                             |                    | Interest                                    |              |                    | 2,254,300   |   |                  |           | 2,452,500  |      |              |            | 4,528,900   |   |            |            | 3,245,000  |  
|                                                             |                    | Goodwill impairment                         |              |                    | 39,413,800  |   |                  |           |            |      |              |            | 39,413,800  |   |            |            |            |  
|                                                             |                    | Amortization                                |              |                    | 353,600     |   |                  |           | 695,400    |      |              |            | 778,600     |   |            |            | 835,300    |  
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|Total expenses                                               |                    | $                                           | 65,033,600   |                    |             | $ | 21,181,600       |           |            | $    | 92,183,300   |            |             | $ | 31,501,800 |           
|                                                            
|Loss from continuing operations
before income taxes          |                    |                                             | (41,461,600  | )                  |             |   | (160,100         | )         |            |      | (43,198,100  | )          |             |   | (1,153,500 | )         
|Income tax benefit (expense)                                 |                    |                                             | (2,232,300   | )                  |             |   | (177,600         | )         |            |      | (2,232,300   | )          |             |   | 224,200    |           
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|Loss from continuing operations                              |                    | $                                           | (43,693,900  | )                  |             | $ | (337,700         | )         |            | $    | (45,430,400  | )          |             | $ | (929,300   | )         
|                                                            
|Discontinued operations, net of
income taxes:                |                    |                                             |              |                    |             |   |                  |           |            |      |              |            |             |   |            |           
|                                                             |                    | Operating loss                              |              |                    | (90,795,400 | ) |                  |           | (1,523,400 | )    |              |            | (90,635,700 | ) |            |            | (2,093,100 | )
|                                                             |                    | Net gain on disposition                     |              |                    | 29,485,400  |   |                  |           |            |      |              |            | 29,485,400  |   |            |            |            |  
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|                                                             |                    | $                                           | (61,310,000  | )                  |             | $ | (1,523,400       | )         |            | $    | (61,150,300  | )          |             | $ | (2,093,100 | )         
|Cumulative effect of an accounting
Change, net of income tax |                    |                                             |              |                    |             |   |                  |           |            |      | (1,534,800   | )          |             |   |            |           
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|Net loss                                                     |                    | $                                           | (105,003,900 | )                  |             | $ | (1,861,100       | )         |            | $    | (108,115,500 | )          |             | $ | (3,022,400 | )         
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|Loss per common share basic &
diluted:                       |                    |                                             |              |                    |             |   |                  |           |            |      |              |            |             |   |            |           
|                                                             |                    | From continuing operations                  |              |                    | (1.33       | ) |                  |           | (0.01      | )    |              |            | (1.39       | ) |            |            | (0.04      | )
|                                                             |                    | From discontinued operations                |              |                    | (1.87       | ) |                  |           | (0.06      | )    |              |            | (1.87       | ) |            |            | (0.09      | )
|                                                             |                    | From cumulative effect of
accounting change |              |                    |             |   |                  |           |            |      |              |            | (0.04       | ) |            |            |            |  
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|                                                             |                    | Net loss per common share                   |              | $                  | (3.20       | ) |                  | $         | (0.07      | )    |              | $          | (3.30       | ) |            | $          | (0.13      | )
|                                                             |                    |                                             |              |                    |             |   |                  |           |            |      |              |           
|Diluted shares outstanding                                   |                    |                                             | 32,773,500   |                    |             |   | 26,609,900       |           |            |      | 32,766,600   |            |             |   | 24,095,000 |           

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

|                                |                                                      |   |                                |             |   |      |           |             |  
|------------------------------- | ---------------------------------------------------- | - | ------------------------------ | ----------- | - | ---- | --------- | ----------- | -
|                                |                                                      |   | Six Months Ended September 30, |            
|                                |                                                      |   |                                |            
|                                |                                                      |   | 2001                           |             |   | 2000 |          
|                                |                                                      |   |                                |             |   |      |          
|Operating activities            |                                                      |   |                                |             |   |      |           |            
|                               
|                                | Net cash provided by (used for) operating activities |   | $                              | 1,881,400   |   |      | $         | (29,226,300 | )
|                               
|Investing activities            |                                                      |   |                                |             |   |      |           |            
|                               
|                                | Disposal of MJK Clearing                             |   |                                | (52,767,300 | ) |      |           |            |  
|                                | Acquisition of R. J. Steichen and Company            |   |                                |            |   |      |           | (18,637,800 | )
|                                | Acquisition of Kinnard Investments, Inc.             |   |                                |            |   |      |           | (11,842,400 | )
|                                | Purchase of license agreements                       |   |                                |            |   |      |           | (168,000    | )
|                                | Purchase of furniture and equipment                  |   |                                | (1,303,900  | ) |      |           | (3,464,800  | )
|                                |                                                      |   |                                |             |   |     
|                                | Net cash used for investing activities               |   | $                              | (54,071,200 | ) |      | $         | (34,113,000 | )
|                               
|Financing activities            |                                                      |   |                                |             |   |      |           |            
|                               
|                                | Increase in short-term borrowings                    |   |                                | 37,701,500  |   |      |           | 48,064,000  |  
|                                | Issuance of notes payable                            |   |                                |             |   |      |           | 19,533,800  |  
|                                | Net payment on notes payable                         |   |                                | (2,630,200  | ) |      |           | (1,640,800  | )
|                                | Restricted by the SIPC                               |   |                                | (8,200,000  | ) |      |           |            |  
|                                | Issuance (purchase) of common stock                  |   |                                | (69,100     | ) |      |           | 220,400     |  
|                                |                                                      |   |                                |             |   |     
|                                | Net cash provided by financing activities            |   | $                              | 26,802,200  |   |      | $         | 66,177,400  |  
|                               
|Net increase (decrease) in cash |                                                      |   | (25,387,600                    | )           |   |      | 2,838,100 |            
|Cash at beginning of the period |                                                      |   | 32,398,800                     |             |   |      | 5,533,500 |            
|                                |                                                      |   |                                |             |   |     
|Cash at the end of the period   |                                                      | $ | 7,011,200                      |             |   | $    | 8,371,600 |            
|                                |                                                      |   |                                |             |   |     

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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. was the parent company of MJK Clearing, Inc., MJSK, Stockwalk.com,
Inc., MJK Capital Corporation, and Stockwalk Investment Management, Inc. MJSK
and Stockwalk.com are registered as broker-dealers with the SEC and are members
of the NASD and SIPC. Our stock currently trades on the NASDAQ / NMS under the
ticker symbol STOK.

Going Concern
Our quarterly financial statements reported on this Form 10-Q are prepared on a
going concern basis in accordance with Generally Accepted Accounting
Principals. Due to the events described below, we have recognized significant
losses and write-offs and our liabilities exceed our assets by $27.3 million.
We have been unable to pay our maturing commercial paper and certain other
liabilities. Without substantial accommodations from our creditors we may not
be able to continue in business. An informal committee of creditors is being
formed in an attempt to reach an agreement for repayment terms. We may find
it more difficult to retain our brokers. We have customers that invested in
our convertible notes, commercial paper and secured demand notes. We may have
these and other customers transfer their accounts elsewhere.

Reorganization
MJK Clearing, Inc. engaged in the conduit stock lending business. As an agent
it located and borrowed margined securities from one broker dealer and lent
them to another broker dealer principally to cover customer short transactions.
In these transactions, MJK Clearing, Inc. provided funds to the firm from
which they borrowed securities and received an equivalent amount of funds from
the lending firm. MJK Clearing, Inc. earned an interest spread on these
transaction. Each counter party firm was contractually obligated to transfer
cash collateral when there was an increase or decrease in the value of the
underlining securities.

On September 24, 2001, MJK Clearing, Inc. had outstanding securities lending
contracts in which it had a net receivable of $203.7 million from an unrelated
NASD member firm called Native Nations Securities, Inc., formerly Freeman
Securities, Inc. These contracts included securities that declined in value
significantly in the week following the September 11, 2001 terrorist attacks.
MJK Clearing, Inc. honored the collateral requests of the firms it had
initially received the funds from, and at September 24, 2001 it had a net
payable balance of $114.2 million related to the securities originally borrowed
from Native Nations. Native Nations failed to honor MJK Clearings collateral
requests during the rapid devaluation of the securities and announced that it
had shut down operations on September 24, 2001. At this point, the receivable
was deemed to be non-allowable for SEC regulatory purposes causing MJK
Clearing, Inc. to be in violation of its regulatory net capital requirements.
MJK Clearing, Inc. promptly notified the NASD and SEC and firm operations were
halted. The net loss of the receivable write-off from Native Nations and the
related remaining payable to the other firms was $89.5 million and is included
in the discontinued operations of MJK Clearing, Inc.

On Thursday September 27, 2001, the Securities Investor Protection Corp. (SIPC)
assumed control of MJK Clearing, Inc. and immediately began liquidation
proceedings. On Tuesday October 2, 2001, a bankruptcy court approved the
transfer of MJK Clearings customer accounts to Southwest Clearing Corporation
of Dallas, Texas. The SIPC trustee is responsible for the collection of the
assets for MJK Clearing, Inc. for distribution in the bankruptcy proceedings to
first reimburse SIPC for advances made in behalf of customers of MJK Clearing,
Inc. and then for the benefit of the creditors in accordance with the
Bankruptcy Act. In a separate transaction the court approved the sale of MJSK
stock to Stockwalk Group, Inc for $3.2 million.

Without the benefit of earning interest on the customer margin balances now
held at Southwest Clearing Corporation, management has determined that the
online brokerage business is not part of the long-term plans of Stockwalk
Group, Inc. and has received bids from potential buyers. The offers provide
for the purchase of the customer accounts without the assumption of tangible
assets or liabilities. See note 6 for further discussion on the disposition of
Stockwalk.com.

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STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements

2. Accounting Changes

We have adopted the Statement of Financial Accounting Standards No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets as
issued by the Financial Accounting Standards Board as of April 2001. Under
these standards, goodwill is no longer amortized but is subject to periodic
impairment tests. An April 1, 2001 calculation for goodwill impairment under
these new standards indicated that goodwill recorded in connection with our
online brokerage unit was impaired. The $1.5 million charge was recorded as a
cumulative effect of an accounting change. Other intangible assets with
defined lives will continue to be amortized. During the six months ended
September 30, 2001 we recognized amortization expense of $817,300 on those
intangibles, of which $38,700 was included in the discontinued operations of Stockwalk.com.

Due to the SIPC liquidation of our clearing brokerage and its effects on our
brokers and customers we performed an analysis of the goodwill in our full
service reporting unit at September 30, 2001, based on a discounted cash flow model. Our calculation indicated that
the entire $39.4 million of goodwill was impaired due to the impact of
decimalization, overall market declines and the uncertainty of our broker and
customer retention. We also recorded goodwill impairment of $20.0 million and
$2.3 million for the discontinued operations of MJK Clearing and Stockwalk.com
in the quarter ended September 30, 2001.

At September 30, 2001, we did not have any remaining capitalized intangibles
and therefore do not anticipate future amortization charges.

If the Company adopted the new accounting guidelines for both periods, the
results would have been as follows:

|                                                       |  |                    |              |   |                  |   |            |      |  |   |              |   |  |   |            |  
|------------------------------------------------------ |  | ------------------ | ------------ | - | ---------------- | - | ---------- | ---- |  | - | ------------ | - |  | - | ---------- | -
|                                                       |  | Three Months Ended |              |   | Six Months Ended |  
|                                                       |  | September 30,      |              |   | September 30,    |  
|                                                       |  |                    |              |   |                  |  
|                                                       |  | 2001               |              |   | 2000             |   |            | 2001 |  |   | 2000         |  
|                                                       |  |                    |              |   |                  |   |            |      |  |   |              |  
|Net loss before accounting change                      |  | $                  | (105,003,900 | ) |                  | $ | (1,861,100 | )    |  | $ | (108,115,500 | ) |  | $ | (3,022,400 | )
|Effects of accounting change, net of income tax        |  |                    |             |   |                  |   | 304,500    |      |  |   |             |   |  |   | 384,400    | )
|                                                       |  |                    |              |   |                  |   |            |      |  |   |              |  
|Net loss after accounting change                       |  | $                  | (105,003,900 | ) |                  | $ | (1,556,600 | )    |  | $ | (108,115,500 | ) |  | $ | (2,638,000 | )
|                                                       |  |                    |              |   |                  |   |            |      |  |   |              |  
|Diluted loss per common share before accounting change |  | $                  | (3.20        | ) |                  | $ | (0.07      | )    |  | $ | (3.30        | ) |  | $ | (0.13      | )
|Diluted loss per common share after accounting change  |  | $                  | (3.20        | ) |                  | $ | (0.06      | )    |  | $ | (3.30        | ) |  | $ | (0.11      | )

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 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.

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STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements

4. Financing Arrangements

As of September 30, 2001, we had outstanding commercial paper of $32.3 million
with maturities extending through June 18, 2002. Following the events of
September 24, we ceased paying matured commercial paper. However, we have
made offers to holders of matured commercial paper to pay 5% of the matured
value of their investment in return for an extension of the remaining balance
for 180 day, earning interest at an annual rate of 5%. As of September 30,
2001, there were nine holders of matured commercial paper totaling $721,000.
Of these, eight holders totaling $617,000 subsequently agreed to the terms
offered. Future maturities of commercial paper are as follows:

|                    |  |   |            | 
|------------------- |  | - | ---------- | 
|October 2001        |  | $ | 13,692,300 | 
|November 2001       |  |   | 6,519,000  | 
|December 2001       |  |   | 6,071,000  | 
|January  June 2002 |  |   | 5,345,000  | 

In August 2000, we completed an offering for $21.5 million of 10% convertible
subordinated notes due in 2005, of which $16.4 million were outstanding at
September 30, 2001. The next scheduled interest payment on the notes is
February 1, 2002. By the terms of the indenture related to these notes, the
liquidation of MJK Clearing, Inc. represents an event of default and the notes
outstanding are due on demand.

At September 30, 2001 we had a bank note payable for $2.1 million. Subsequent
monthly principal payments of $50,000 plus accrued interest have not been paid.

At the commencement of the SIPC proceeding, MJK Clearing, Inc. had outstanding
loans under its lines of credit totaling $30.9 million which were secured by
customer and firm owned securities. These loans are in default. Resolution of
these claims of MJK Clearing, Inc. as well as the $16.3 million of secured
demand notes of MJK Clearing will be resolved in the SIPC proceedings referred
to in Item 1. We have not guaranteed any of the obligations and, accordingly,
they have been eliminated from our consolidated financial statements.

5. Shareholders Equity

Statement Regarding Computation of Weighted Average Number of Shares
Outstanding
We calculate earnings per share 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 |            |  | Six Months Ended | 
|                                                                                             |  | September 30,      |            |  | September 30,    | 
|                                                                                             |  |                    |            |  |                  | 
|                                                                                             |  | 2001               |            |  | 2000             |  |            | 2001 |  |  | 2000       | 
|                                                                                             |  |                    |            |  |                  |  |            |      |  |  |            | 
|Weighted average shares outstanding- basic                                                   |  |                    | 32,773,500 |  |                  |  | 26,609,900 |      |  |  | 32,766,600 |  |  |  | 24,095,000 | 
|Dilutive effect of stock options and warrants
after application of the treasury stock method |  |                    | 4,400      |  |                  |  | 33,200     |      |  |  | 5,500      |  |  |  | 176,500    | 
|                                                                                             |  |                    |            |  |                  |  |            |      |  |  |            | 
|Weighted average shares outstanding-dilutive                                                 |  |                    | 32,777,900 |  |                  |  | 26,643,100 |      |  |  | 32,772,100 |  |  |  | 24,271,500 | 
|                                                                                             |  |                    |            |  |                  |  |            |      |  |  |            | 

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STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements

6. Organizational Changes

DispositionsMJK, Clearing, Inc.

On September 27, 2001, a SIPC liquidation proceeding of MJK Clearing, Inc. was
initiated following its violation of SEC net capital regulations. The second
quarter loss $89.2 million includes the $89.5 million net loss in stock lending
transactions initiated with Native Nations Securities, Inc. The $34.9 million
gain on the liquidation represents the relief of the net liabilities of MJK
Clearing, Inc. following the commencement of the SIPC liquidation proceedings.
The gain was reduced by a $3.2 million fee paid to the SIPC trustee for the
stock of MJSK, and a write-off of $5.1 million of our September commissions due
from the SIPC trustee. Future receipt of these commissions will depend on the
SIPCs ability to collect funds from other parties in the Native Nations stock
transaction in excess of the obligations of MJK Clearing, Inc. ranking ahead of
the claim. Basic and diluted per share results of MJK Clearing, Inc. were as
follows:

|                                             |  |                    |       |   |                  |   |      |      |  |   |       |   |  |   |     | 
|-------------------------------------------- |  | ------------------ | ----- | - | ---------------- | - | ---- | ---- |  | - | ----- | - |  | - | --- | 
|                                             |  | Three Months Ended |       |   | Six Months Ended |  
|                                             |  | September 30,      |       |   | September 30,    |  
|                                             |  |                    |       |   |                  |  
|                                             |  | 2001               |       |   | 2000             |   |      | 2001 |  |   | 2000  |  
|                                             |  |                    |       |   |                  |   |      |      |  |   |       |  
|Operating income (losses), net of income tax |  | $                  | (2.72 | ) |                  | $ | 0.00 |      |  | $ | (2.70 | ) |  | $ | .02 | 
|Gain on SIPC liquidation, net of income tax  |  | $                  | 1.06  |   |                  |   |      |      |  | $ | 1.06  |   |  |   |     | 

Stockwalk.com, Inc.

With the loss of customer account balances and their related interest
previously earned at MJK Clearing, Inc., management determined that
Stockwalk.coms business is no longer consistent with our long-term plans. We
plan on selling the customer accounts and reducing on-going financial
obligations of the online subsidiary. Stockwalk.com recognized a loss from
operations of $1.6 million for the quarter ended September 30, 2001 compared to
$1.5 million for comparable period in 2000. The $5.4 million loss on the
disposition of Stockwalk.com, Inc. includes $2.9 million write-offs of fixed
assets and capitalized software, a $506,500 provision for operating losses
during the three-month phase-out period ending December 31, 2001 and a $2.0
million write down on the investment in preferred shares acquired in connection
with the sale of a division of Stockwalk.com in February 2001. Basic and
diluted per share results of Stockwalk.com, Inc. were as follows:

|                                    |  |                    |       |   |                  |   |      |      |  |   |       |   |  |   |       |  
|----------------------------------- |  | ------------------ | ----- | - | ---------------- | - | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                                    |  | Three Months Ended |       |   | Six Months Ended |  
|                                    |  | September 30,      |       |   | September 30,    |  
|                                    |  |                    |       |   |                  |  
|                                    |  | 2001               |       |   | 2000             |   |      | 2001 |  |   | 2000  |  
|                                    |  |                    |       |   |                  |   |      |      |  |   |       |  
|Operating losses, net of income tax |  | $                  | (0.05 | ) |                  | $ | (.06 | )    |  | $ | (0.07 | ) |  | $ | (0.11 | )
|Loss on disposal, net of income tax |  | $                  | (0.16 | ) |                  |   |      |      |  | $ | (0.16 | ) |  |   |       |  

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STOCKWALK GROUP, INC.
Notes to Consolidated Condensed Financial Statements

7. Regulatory Net Capital Requirements and Dividend Restrictions

Our 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. At September 30, 2001, MJSKs net capital was $3.0
million and $625,100 in excess of its regulatory requirements. The SIPC
trustee released $1.5 million of our restricted funds in October 2001, which we
contributed to MJSK as a capital contribution. The September 30, 2001 net
capital calculation included a $2.7 million haircut that will not be imposed on
future calculations. Stockwalk.com, Inc. is required to maintain a minimum net
capital of $50,000. At September 30, 2001, Stockwalk.com, Inc. had net capital
of $139,062.

8.     Income Taxes

Given the uncertainty surrounding the economy, capital markets and our
operational profitability, the tax benefits attributed to the current year net
operating losses may not be recoverable. Accordingly, we established a
valuation reserve with respect to the tax benefit in the six months ended
September 30, 2001. We also recorded a valuation allowance for the existing
$2.2 million deferred tax asset in the quarter ended September 30, 2001. The
related change in the valuation allowance is reflected within the consolidated
condensed statements of operations as income tax expense.

9.     Commitments and Contingencies

On November 9, 2001, a holder of $700,000 of our matured commercial paper filed
a lawsuit in Hennepin County District Court for breach of contract, seeking
repayment of the loan, interest due and unspecified damages

We may be subject to legal proceedings commenced by investors who experienced
financial losses from the purchase of our common stock, commercial paper,
convertible notes, and secured demand notes.

At September 30, 2001, the SIPC restricted $8.2 million of our cash of which
$3.2 million was used to acquire the outstanding shares of MJSK stock in
October 2001. The SIPC has subsequently released $3.0 million, which was
contributed to MJSK as capital infusion. An additional $1.5 million may be
released in December 2001 and used as a contribution to MJSK. Similar to the
October release, the SIPC will only release the funds if they have not
determined that any facts or circumstances exist which would support a claim by
the liquidating estate of the Debtor against us or any of our officers or
directors.

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

Going Concern

Our quarterly financial statements reported on this Form 10-Q are prepared on a
going concern basis in accordance with Generally Accepted Accounting
Principals. Due to the events described below, we have recognized significant
losses and write-offs and our liabilities exceed our assets by $27.3 million.
We have been unable to pay our maturing commercial paper and certain other
liabilities. Without substantial accommodations from our creditors we may not
be able to continue operations. An informal committee of creditors is being
formed in an attempt to reach an agreement for repayment terms. We may find
it more difficult to retain our brokers. We have customers that invested in
our convertible notes, commercial paper and secured demand notes. We may have
these and other customers transfer their accounts elsewhere.

Reorganization

MJK Clearing, Inc. engaged in the stock lending business. As an agent it
located and borrowed margined securities from one broker dealer and lent them
to another broker dealer principally to cover customer short transactions. In
these transactions, MJK Clearing, Inc. wired funds to the firm from which they
borrowed securities and received an equivalent amount from the lending firm.
MJK Clearing, Inc. earned an interest spread on the transaction. As part of
the contract, each firm was required to transfer cash collateral when an
increase or decrease occurs in the value of the underlining securities.

On September 24, 2001, MJK Clearing, Inc. had outstanding contracts in which it
had a net receivable of $203.7 million from the NASD member firm called Native
Nations Securities, Inc, formerly Freeman Securities, Inc. These contracts
included securities that declined significantly the week following the
terrorist attacks. MJK Clearing, Inc. honored the collateral requests of the
firms had initially received the funds from, and at September 24, 2001 it had a
net payable balance of $114.2 million related to the Securities borrowed from
Native Nations. Native Nations failed to honor MJK Clearings collateral
requests during the rapid devaluation of the securities and announced that that
it had shut down operations on September 24, 2001. At this point the
receivable was deemed to be non-allowable for SEC regulatory purposes and put
MJK Clearing, Inc. in a regulatory net capital violation and firm operations
were halted. The net loss of the receivable write-off from Native Nations and
the related remaining payable to the other firms was $89.5 million and is
included in the discontinued operations of MJK Clearing, Inc.

On Thursday September 27, 2001, the Securities Investor Protection Corp (SIPC)
assumed control of MJK Clearing, Inc. and immediately began liquidation
proceedings. On Tuesday October 2, 2001, the bankruptcy court approved the
transfer of the customer accounts to Southwest Clearing Corporation of Dallas,
Texas. The SIPC trustee is responsible for the collection of the assets for
MJK Clearing, Inc. for distribution in the bankruptcy proceedings to reimburse
SIPC for advances made in behalf of customers of MJK Clearing, Inc. and then
for the benefit of the creditors in accordance with the Bankruptcy Act. In a
separate transaction the court approved the sale of MJSK operations to
Stockwalk Group, Inc for $3.2 million.

Without the benefit of earning interest on the customer margin balances now
held at Southwest Clearing Corporation, management has determined that the
online brokerage business is not part of the long term plans of Stockwalk
Group, Inc. and has received bids from potential buyers. The offers provide
for the purchase of the customer accounts without the assumption of tangible
assets or liabilities. The loss on disposal includes write-offs of capitalized
software and a provision for the estimated operating losses of $506,600 during
the phase out period.

Continuing Operations

Through our traditional full-service broker dealer, MJSK, we act as an 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 accredited 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.

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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. MJSK presently
serves as a market maker for approximately 140 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.

All of our customer and trading transactions are now cleared through Southwest
Clearing Corporation, a subsidiary of SWS Securities, Inc.

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 Midwest.

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 companies in the upper Midwest. It provides financial advisory
services, manages or co-manages public offerings of equity and debt, and
arranges private placement of securities.

MJSK also maintains a research department that provides analysis, investment
recommendations and market information on small capitalization emerging growth
companies. MJSK also supplements internal research with research products from
independent organizations.

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

We have recognized significant losses and write-offs and our liabilities exceed
our assets by $27.3 million. The equity markets have experienced significant
declines for the past 18 months that have reduced our commissions, trading
profits and equity underwriting results. We no longer operate our most
profitable business segment, MJK Clearing, Inc. and our ability to retain our
skilled brokers and their customers is uncertain. We have been unable to make
payments on amounts owed on the maturing commercial paper. Without substantial
accommodations from our creditors we will not be able to continue as a going
concern. An informal committee of creditors is being formed in an attempt to
reach an agreement for repayment terms.

Segments

Our reportable segments at April 1, 2001 consisted of full-service brokerage,
clearing brokerage and online brokerage. Each of these segments followed the
corporate structure, Miller Johnson Steichen Kinnard, Inc.  full-service
brokerage, MJK Clearing, Inc.  clearing brokerage and Stockwalk.com, Inc. 
online brokerage. With the SIPC liquidation of MJK Clearing, Inc. and
managements decision to dispose of Stockwalk.com, Inc. our continuing
reportable segment is the full-service brokerage operations.

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Information concerning changes in period results in dollars and percentages of
continuing full-service operations is as follows:

|               |                           |   |            |            |   |            |  |       |            |   |            |            |   |  |  |       |   
|-------------- | ------------------------- | - | ---------- | ---------- | - | ---------- |  | ----- | ---------- | - | ---------- | ---------- | - |  |  | ----- | --
|               |                           |   | Quarter    |            |   | Quarter    |  |       | Six Months |   |            | Six Months |  
|               |                           |   | Dollars    |            |   | Percentage |  |       | Dollars    |   |            | Percentage |  
|               |                           |   |            |            |   |            |  |       |            |   |            |           
|Revenues       |                           |   |            |            |   |            |  |       |            |   |            |            |   |  |  |      
|               | Trading profits           |   | $          | (2,360,200 | ) |            |  | (34.2 | %)         |   | $          | (228,700   | ) |  |  | (2.2  | %)
|               | Interest                  |   |            | (1,326,000 | ) |            |  | (56.0 | %)         |   |            | 799,700    |   |  |  | 31.5  | % 
|               | Commissions               |   |            | 5,499,100  |   |            |  | 89.8  | %          |   |            | 14,818,300 |   |  |  | 155.5 | % 
|               | Investment banking        |   |            | 70,600     |   |            |  | 1.5   | %          |   |            | 2,162,200  |   |  |  | 33.7  | % 
|               | Other income              |   |            | 667,000    |   |            |  | 64.0  | %          |   |            | 1,085,400  |   |  |  | 72.0  | % 
|               |                           |   |            |            |   |            |  |       |            |   |            |           
|Total revenues |                           | $ | 2,550,500  |            |   |            |  |       |            | $ | 16,729,300 |            |   |  |  |      
|              
|Expenses       |                           |   |            |            |   |            |  |       |            |   |            |            |   |  |  |      
|               | Compensation and benefits |   |            | 2,356,200  |   |            |  | 15.8  | %          |   |            | 13,246,800 |   |  |  | 59.3  | % 
|               | Clearing fees             |   |            | 662,600    |   |            |  | 135.8 | %          |   |            | 2,153,700  |   |  |  | 294.6 | % 
|               | Occupancy                 |   |            | 750,300    |   |            |  | 44.7  | %          |   |            | 2,155,400  |   |  |  | 79.3  | % 
|               | Communication             |   |            | 1,209,100  |   |            |  | 122.1 | %          |   |            | 2,484,600  |   |  |  | 153.1 | % 
|               | Interest                  |   |            | (198,200   | ) |            |  | (8.1  | %)         |   |            | 1,283,900  |   |  |  | 39.6  | % 
|               | Goodwill impairment       |   |            | 39,413,800 |   |            |  |       |            |   |            | 39,413,800 |   |  |  |       |   
|               | Amortization              |   |            | (341,800   | ) |            |  | (49.2 | %)         |   |            | (56,700    | ) |  |  | (6.8  | %)
|               |                           |   |            |            |   |            |  |       |            |   |            |           
|Total expenses |                           | $ | 43,852,000 |            |   |            |  |       |            | $ | 20,734,100 |            |   |  |  |      

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

The results for the three months ended September 2000 include the full-service
operations of the former Miller, Johnson & Kuehn, Inc. for the entire period
and the operations of R.J. Steichen & Company, Inc. and John G. Kinnard, Inc.
their respective acquisition dates of August 1, 2000 and September 8, 2000.
Trading profits declined $2.4 million or 34% as a result of the reduced trading
margins from the implementation of decimalization. Interest income declined
$1.3 million or 56% due to the transfer of certain customer balances (formerly
of R.J. Steichen) to MJK Clearing, Inc. on August 1, 2001. The current year
results from continuing operations include only one month of interest compared
to two months, from acquisition date, in the quarter ended September 30, 2000.
We do not hold customer balances and do not expect to earn interest income on
customer margin accounts in future periods. Commission revenue increased from
$6.1 million to $11.6 million as a result of recording a full quarters worth
of commissions from the former Steichen and Kinnard brokers in the current
year.

Employee compensation increased $2.4 million or 15.8% as a result of a $1.4
million accrual for John G. Kinnard annual retention bonus accruals during the
quarter ended September 30, 2001 and the increase in commissioned revenue
earned by the brokers. The increase in clearing fees, occupancy and
communication expenditures is due to the prior year operating results including
only two months of R.J. Steichen & Company activity and one month of John G.
Kinnard, Inc. activity.

The decrease in interest expense is due to the customer credit balances being
transferred to MJK Clearing on August 1, 2001. Interest expense was recorded
on these accounts for two months in the quarter ended September 30, 2000. The
offsetting increase in interest expense is the result of interest expense
recorded in connection with the outstanding commercial paper, $4.8 million
outstanding at September 30, 2000; $32.3 million at September 30, 2001.

Goodwill impairment of $39.4 million was recorded in the quarter ended
September 30, 2001. The charge reflects the effects of decimalization on our
equity trading operations, the declining equity markets, the lack of equity
financing deals and the potential loss of brokers and customers as a result of
the SIPC liquidation.

The ability to maintain and grow our revenues will be dependent on our ability
to retain and attract qualified brokers, and market conditions. We believe
that non-commission expenditures will decline from the current period results
that include residual
expenditures related to prior year acquisitions.

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

Six Months Ended September 30, 2001 and 2000

The results for the six months ended September 2000 include the full-service
operations of the former Miller, Johnson & Kuehn, Inc. for the entire period
and the operations of R.J. Steichen & Company, Inc. and John G. Kinnard, Inc.
their respective acquisition dates of August 1, 2000 and September 8, 2000.
Interest income increased $799,700 or 31.5% due to the customer margin balances
of R.J. Steichen earning interest income for the four months before these
balances were transferred to MJK Clearing, Inc. on August 1, 2001. The prior
year results include only the interest earned on the customer accounts for the
two months following the acquisition of R.J. Steichen. We no longer hold
customer balances and do not expect to earn interest income on customer margin
accounts in future periods. Commission revenue increased from $9.5 million to
$24.3 million as a result of the current year results including commissions
earned by the Steichen and Kinnard brokers for the entire period.

Employee compensation increased $14.9 million or 59.3% as a result of the
increase in commissioned revenue earned by the brokers, retention bonuses,
severances and Steichen and Kinnard support personnel being employed for the
full six months in the six months ended September 30, 2001. The increase in
clearing fees, occupancy and communication expenditures is due the prior year
operating results including only two months of R.J. Steichen & Company activity
and one month of John G. Kinnard, Inc. activity.

The increase in interest expense of 39.6% is due to the amounts paid for
customer credit balances of R.J. Steichen four months ending July 31, 2001
compared to two months of interest in the six months ended September 30, 2000.
The increase in interest expense is also the result of interest expense
recorded in connection with the outstanding commercial paper, $4.8 million
outstanding at September 30, 2000; $32.3 million at September 30, 2001.

The ability to maintain and grow our revenues will be dependent on our ability
to retain and attract qualified brokers, and market conditions. We believe
that non-commission expenditures will decline from the current period results
that include residual expenditures related to prior year acquisitions.

Discontinued Operations

On September 27, 2001, a SIPC liquidation proceeding of MJK Clearing, Inc. was
initiated following its violation of SEC net capital regulations. The second
quarter loss $89.2 million includes the $89.5 million net loss in stock lending
transactions initiated with Native Nations Securities, Inc. The $34.9 million
gain on the liquidation represents the relief of the net liabilities of MJK
Clearing, Inc. following the commencement of the SIPC liquidation proceedings.
The gain was reduced by $3.2 million fee paid to the SIPC trustee for the stock
of MJSK, and a write-off of $5.1 million of our September commissions due from
the SIPC trustee.

With the loss of customer account balances and their related interest
previously earned at MJK Clearing, Inc., management determined that
Stockwalk.coms business is no longer consistent with our long-term plans. We
plan on selling the customer accounts and reducing on-going financial
obligations of the online subsidiary. Stockwalk.com recognized a loss from
operations of $1.6 million for the quarter ended September 30, 2001 compared to
$1.5 million for comparable period in 2000. The $5.4 million loss on the
disposition of Stockwalk.com, Inc. includes write-offs of capitalized software,
a $506,500 provision for operating losses during the three-month phase-out
period ending December 31, 2001 and a write down on the investment in preferred
shares of $2.0 million acquired in connection with the sale of a division of
Stockwalk.com in February 2001.

Liquidity and Capital Resources

At September 30, 2001, our liabilities exceeded our total assets by $27.3
million. We had cash balances of $15.2 million, of which $8.2 million was
restricted due to the SIPC proceeding of MJK Clearing, Inc., and net marketable
securities of $25.0 million. Our current liabilities consist of $32.3 million
of outstanding commercial paper with maturities of 30 to 270 days from the time
of sale, $18.5 million of accounts payable which includes $12.1 million related
to the margined inventory previously held at MJK Clearing, Inc. and $3.2
million paid to SIPC for the shares for MJSK stock in October 2001. The $16.4
million of outstanding subordinated convertible notes, originally due in 2005,
went into default as a result of the SIPC liquidation and are therefore payable
on demand. We are meeting current payment obligations on trade accounts
payable as they come due. We have been unable to make payments

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on amounts owed on the maturing commercial paper and have defaulted on
principal and interest payments on a bank note. We do not currently have
existing viable means to obtain additional financing. Without substantial
accommodations from our creditors we will not be able to continue as a going
concern. An informal committee of creditors has been formed in an attempt to
reach an agreement for repayment terms.

The $1.9 million of cash provided by operations is primarily related to a $34.9
million in clearing brokerage assets prior to SIPC liquidation proceedings and
a decrease in other assets of $4.9 million offset by the net loss before
non-cash related items of $10.6 million and an increase in trading securities
of $27.3 million.

Our investing activities consisted of the disposal of MJK Clearing and the
acquisition of certain fixed assets. At the time of the SIPC assumption of our
clearing operations, MJK Clearing, Inc. had cash on hand of $52.8 million.

Our financing activities provided cash of $26.8 million in the six months ended
September 30, 2001 primarily resulting from the increase in commercial paper
from $12.7 million at March 31, 2001 to $32.3 million at September 30, 2001.
Additional financing was acquired by short-term secured borrowings on our bank
lines for use in our clearing operations. The SIPC restricted $8.2 million at
September 30, 2001, of which $3.2 million was subsequently released to acquire
the stock of MJSK and another $3.0 million has been released to capitalized
MJSK.

Our 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. At September 30, 2001, MJSKs net capital was $3.0
million and $625,100 in excess of its regulatory requirements. The SIPC
trustee released $1.5 million of our restricted funds in October 2001, which we
contributed to MJSK as a capital contribution. The September 30, 2001 net
capital calculation included a $2.7 million haircut that will not be imposed on
future calculations. Stockwalk.com, Inc. is required to maintain a minimum net
capital of $50,000. At September 30, 2001, Stockwalk.com, Inc. had net capital
of $139,062.

At September 30, 2001, we had approximately $35 million secured credit
agreements. We do not currently have collateral that would enable us to draw
funds on this credit facility.

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.
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 and are monitored daily by management. 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 $2.0 million at September 30, 2001. The
potential loss in fair value, using a hypothetical 25% decline in equity prices
on September 30, 2001 holdings, is estimated to be $500,000. 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.

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: November 19, 2001 |  | STOCKWALK GROUP, INC.
|                        
|                         |  | By:                   |  | /s/ Jeffrey L. Houdek                       
|                        
|                         |  | Its:                  |  | V. P. of Finance and Chief Financial Officer

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