CONFORMED
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                        For Quarter Ended August 31, 2000
                                       OR
              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

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

                          Commission file number 1-9480
      ---------------------------------------------------------------------


                      National Discount Brokers Group, Inc.
     ----------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


                               Delaware 22-2394480
     ----------------------------------------------------------------------
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)


             10 Exchange Place Centre, Jersey City, New Jersey 07302
  ----------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)


 -------------------------------------------------------------------------------
         (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 latest practicable date.

          21,005,037 shares of Common Stock, par value $.01 per share,
                    were outstanding on September 30, 2000.


<PAGE>


                      NATIONAL DISCOUNT BROKERS GROUP, INC.
                                AND SUBSIDIARIES


                                      INDEX
<TABLE>
<CAPTION>


                                                                                              PAGE



Part I - Financial Information

Item 1. - Financial Statements

  <S>                                                                                          <C>
  Condensed Consolidated Statements of Financial Condition -
     August 31, 2000 (Unaudited) and May 31, 2000..............................................3

  Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) -
     Three Months Ended August 31, 2000 and 1999...............................................4

  Condensed Consolidated Statements of Cash Flows (Unaudited) -
     Three Months Ended August 31, 2000 and  1999..............................................6

  Notes to Condensed Consolidated Financial Statements (Unaudited) -
     August 31, 2000...........................................................................7

Item 2. - Management's Discussion and Analysis of
            Financial Condition and Results of Operations......................................10

Item 3. - Quantitative and Qualitative Disclosures About Risk..................................15

Part II - Other Information

Item 1. - Legal Proceedings....................................................................16

Item 2. - Changes in Securities and Use of Proceeds............................................17

Item 6. - Exhibits and Reports on Form 8-K.................................................... 17

Signatures.....................................................................................18



Forward Looking Statements

     Statements regarding the Company's expectations as to its future operations
and financial  condition and certain  other  information  contained in this Form
10-Q or in documents incorporated herein by reference constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  Although  the  Company  believes  that  its  expectations  are  based  on
reasonable  assumptions  within the bounds of its  knowledge of its business and
operations,  there can be no  assurance  that  actual  results  will not  differ
materially  from its  expectations.  Factors which could cause actual results to
differ from expectations  include a general downturn in the economy,  changes in
the level of activity of securities  markets in which the Company  participates,
changes in  customer  growth,  unplanned  expense  increases,  inability  of the
Company  to attract or retain key  employees,  changes in  government  policy or
regulation and unforeseen  costs and other effects related to legal  proceedings
or investigations of governmental and self-regulatory organizations.

</TABLE>

<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS


             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                August 31,         May 31,
ASSETS                                                             2000              2000
                                                              -----------------  ----------------
<S>                                                         <C>                <C>
Cash and cash equivalents                                   $    134,145,280   $    17,250,832
U. S. Treasury obligations (including $940,513 and $928,797
 held aS collateral at August 31, 2000 and May 31, 2000,
 respectively)                                                    31,819,356        87,098,695
Receivables:
  Clearing brokers                                               225,129,367       175,660,353
  Other                                                            3,092,072         5,273,063
Securities owned, at market value                                 50,268,303        47,500,200
Securities not readily marketable, at fair value                  15,887,361        15,315,150
Loans and notes receivable                                         1,637,033         1,674,533
Furniture, fixtures, equipment and leasehold improvements - at
  cost, net of accumulated depreciation and amortization of
  $25,534,828 at August 31, 2000 and $25,519,329 at
  May 31, 2000                                                    47,336,935        48,176,697
Computer software - at cost, net of accumulated amortization of
  $7,602,426 at August 31, 2000 and $6,726,857 at May 31, 2000    10,569,656        10,464,153
Income taxes receivable                                            7,795,459         7,388,870
Deferred tax asset, net of valuation allowance of $861,877
  at August 31, 2000 and $533,708 at May 31, 2000                  3,117,636         2,199,072
Other assets                                                       9,727,148        11,180,367
                                                            -----------------  ----------------
          Total assets                                      $    540,525,606   $   429,181,984
                                                            -----------------  ----------------


LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased, at market value       $     23,576,445   $    12,335,906
  Accounts payable and accrued expenses                           66,128,512        99,434,509
                                                            -----------------  ----------------
          Total liabilities                                       89,704,957       111,770,415
                                                            -----------------  ----------------


Commitments and contingencies

Stockholders' equity:
  Preferred stock - $.01 par value;
    authorized 1,000,000 shares; none issued                               -                 -
  Common stock - $.01 par value; authorized
    50,000,000 shares; issued 21,333,201 shares at
   August 31, 2000 and 18,333,201 at May 31, 2000                    213,332           183,332
  Additional paid-in capital                                     322,179,799       187,583,451
  Retained earnings                                              132,346,144       133,639,888
                                                            -----------------  ----------------
                                                                 454,739,275       321,406,671
  Less: Treasury stock - at cost, 328,164 shares at
    August 31, 2000 and 334,569 shares at May 31, 2000            (3,918,626)       (3,995,102)
                                                            -----------------  ----------------
          Total stockholders' equity                             450,820,649       317,411,569
                                                            -----------------  ----------------
          Total liabilites and stockholders' equity         $    540,525,606   $   429,181,984
                                                            -----------------  ----------------


</TABLE>

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.










<PAGE>
             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                Three Months Ended August 31,
                                                            -----------------------------------
                                                                     2000           1999
                                                            -----------------  ----------------

Revenue:
  <S>                                                       <C>                <C>
  Firm securities transactions, net                         $     42,679,256   $    34,475,151
  Commission income                                               15,079,665        12,315,179
  Interest and dividends                                           8,632,065         4,752,091
  Fee income                                                       1,598,229         1,333,885
  Other                                                              134,945           145,842
                                                            -----------------  ----------------
       Total revenue                                              68,124,160        53,022,148
                                                            -----------------  ----------------

Expenses:
  Compensation and benefits                                       28,330,674        18,349,009
  Clearing and related brokerage charges                          15,316,805        11,997,648
  Communications                                                   5,433,626         3,880,883
  Selling and marketing:
    Advertising and marketing costs                                7,283,931         6,801,109
    Sales-related travel and entertainment                         1,316,652           773,581
  Technology development and other related costs:
    Depreciation and amortization                                  4,111,528         3,877,522
    Equipment rental                                               1,138,184           532,650
    Technology consulting                                            720,054         1,158,087
    Repairs and maintenance                                          851,280           585,811
  Other:
    Professional fees                                              1,467,437           500,408
    Occupancy costs                                                1,799,928         1,737,694
    Other                                                          2,506,366         2,026,708
                                                            -----------------  ----------------
       Total expenses                                             70,276,465        52,221,110
                                                            -----------------  ----------------

   (Loss) income from continuing operations
     before income taxes                                          (2,152,305)          801,038

   Income taxes (benefit):
        Federal, currently payable                                  (185,439)          265,560
        State and local, currently payable                           245,441           210,342
                                                            -----------------  ----------------
                  Total current income tax expense                    60,002           475,902
                                                            -----------------  ----------------

        Federal, deferred                                           (388,857)          (23,967)
        State and local, deferred                                   (529,706)          (85,840)
                                                            -----------------  ----------------
                  Total deferred income tax benefit                 (918,563)         (109,807)
                                                            -----------------  ----------------

   Total income taxes(benefit)from continuing operations            (858,561)          366,095
                                                            -----------------  ----------------

   Net(loss)income from continuing operations                     (1,293,744)          434,943
                                                            -----------------  ----------------

   Discontinued operations:
     Income from discontinued operations,
        net of taxes                                                       -            82,994
     Gain on sale of discontinued operations,
        net of taxes                                                       -        20,054,787
                                                            -----------------  ----------------
                                                                           -        20,137,781
                                                            -----------------  ----------------

   Net (loss) income                                        $     (1,293,744)  $    20,572,724
                                                            -----------------  ----------------


</TABLE>















                                   (Continued)
                                        4
<PAGE>

             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      AND COMPREHENSIVE INCOME (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>




                                                                Three Months Ended August 31,
                                                           -----------------------------------
                                                                     2000           1999
                                                           -----------------  ----------------

   <S>                                                      <C>                <C>
   Other comprehensive (loss) income, net of tax                           -                 -
                                                           -----------------  ----------------

   Comprehensive (loss) income                              $     (1,293,744)  $    20,572,724
                                                           -----------------  ----------------



   Net (loss) income per common and potential
      common share
     Basic:
        Net (loss) income from continuing operations        $          (0.06)  $          0.02
        Net income from discontinued operations,
          net of taxes                                                  0.00              0.01
        Gain on sale of discontinued operations,
          net of taxes                                                  0.00              1.24
                                                            -----------------  ----------------

            Net (loss) income                               $          (0.06)  $          1.27
                                                            -----------------  ----------------

Weighted average common shares outstanding                        20,543,594        16,205,035
                                                            -----------------  ----------------

     Diluted:
        Net (loss) income from continuing operations        $          (0.06)  $          0.02
        Net income from discontinued operations,
          net of taxes                                                  0.00              0.01
        Gain on sale of discontinued operations,
          net of taxes                                                  0.00              1.22
                                                            -----------------  ----------------

            Net (loss) income                               $          (0.06)  $          1.25
                                                            -----------------  ----------------

Weighted average common shares outstanding                        20,543,594        16,491,870
                                                           -----------------  ----------------

</TABLE>

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.






























                                        5
<PAGE>

             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                Three Months Ended August 31,
                                                            -----------------------------------
                                                                      2000            1999
                                                            -----------------  ----------------
 <S>                                                        <C>                <C>
 Cash flows from operating activities:

  Net (loss) income from continuing operations              $     (1,293,744)  $       434,943
  Net income from discontinued operations                                  -            82,994
  Gain on sale of discontinued operations, net of taxes                    -        20,054,787

 Non-cash items included in net (loss) income:
  Depreciation and amortization                                    4,111,528         3,877,522
  Provision for deferred taxes                                      (918,565)         (109,807)

 (Increase) decrease in operating assets:
  Receivables:
    Clearing brokers                                             (49,469,014)       (8,900,378)
    Other                                                          2,180,991         1,154,508
  Securities owned, at market value                               (2,768,103)       (1,019,367)
  Income taxes receivable                                           (362,130)                -
  Other assets (net of deposits made on furniture, fixtures,       1,592,706         1,603,812
    equipment, leasehold improvements and computer software)

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at market value             11,240,539         2,665,430
  Accounts payable and accrued expenses                          (33,305,997)       (3,808,565)
  Income taxes payable                                                     -        14,180,804
(Increase) decrease in operating assets due to sale of Equitrade:
    Investment in discontinued operations                                  -        28,341,746
    Exchange memberships                                                   -           351,496
                                                            ----------------  ----------------

     Net cash (used in) provided by operating activities         (68,991,788)       58,909,925
                                                            ----------------  ----------------

 Cash flows from investing activities:

  Net sales of U.S. Treasury obligations                          55,279,339         2,202,470
  Purchase of investment securities not readily marketable          (572,211)         (100,000)
  Principal collected on notes receivable                             37,500           900,000
  Net purchases of furniture, fixtures,
    equipment and leasehold improvements                          (1,970,268)       (5,260,782)
  Deposits made on furniture, fixtures, equipment,
    leasehold improvements and computer software                    (139,487)         (753,534)
  Purchases of computer software                                  (1,407,002)       (2,345,570)
  Principal collected on subordinated notes receivable                     -        27,000,000
  Repayment of loan                                                        -       (15,000,000)
                                                            -----------------  ----------------

     Net cash provided by investing activities                    51,227,871         6,642,584
                                                            -----------------  ----------------


 Cash flows from financing activities:

  Proceeds from issuance of common stock                         134,551,871        91,603,950
  Proceeds from exercise of options                                  106,494             3,969
                                                            -----------------  ----------------

     Net cash provided by financing activities                   134,658,365        91,607,919
                                                            -----------------  ----------------

 Net increase in cash and cash equivalents                       116,894,448       157,160,428

 Cash and cash equivalents at beginning of period                 17,250,832           411,629
                                                            -----------------  ----------------

 Cash and cash equivalents at end of period                 $    134,145,280   $   157,572,057
                                                            -----------------  ----------------
</TABLE>

Supplemental   disclosure  of  non-cash   operating,   investing  and  financing
activities:

 Between June 2000 and August 2000,  various  employees of the Company exercised
 an aggregate of 6,405 options for the purchase of 6,405 shares of the Company's
 common stock with exercise  prices  ranging from $13.50 per share to $22.50 per
 share. In connection with these exercises,  the Company has estimated an income
 tax benefit of $44,459,  which has been  utilized  to  increase  the  Company's
 current income tax receivable.

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.

                                        6




<PAGE>

             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                                 August 31, 2000

Note 1 - Business and organization

     National  Discount  Brokers Group,  Inc. ("NDB Group") is a holding company
whose  principal  wholly  owned   subsidiaries  are  National  Discount  Brokers
Corporation,  doing  business as NDB.com  ("NDB.com"),  and NDB Capital  Markets
Corporation ("NDBC").  NDB Group and its subsidiaries  (collectively referred to
as the  "Company")  are  primarily  engaged in the  securities  business  and in
providing related financial services.

      In July  1999,  NDB  Group  formed  Millennium  Clearing  Company,  L.L.C.
("Millennium")  as a  wholly  owned  subsidiary  for the  purpose  of  providing
clearing  services  initially  for NDBC and NDB.com and,  eventually,  for other
correspondents.  Management  of the  Company  anticipates  the  commencement  of
clearing for NDB.com and NDBC by Millennium during calendar year 2001.

    Effective  September 23, 2000, the operations and  substantially  all of the
net assets of NDBC were  transferred  to a newly  created  entity,  NDB  Capital
Markets,  L.P.  ("NDBCM  LP"),  of  which  NDBC is the  general  partner.  NDBCM
California  Corporation,  a wholly  owned  subsidiary  of NDBC,  is the  limited
partner of NDBCM LP.


Note 2 - Basis of presentation

     The accompanying  unaudited condensed  consolidated financial statements do
not include all of the  information  and notes  required by  generally  accepted
accounting  principles for complete consolidated  financial  statements.  In the
opinion  of  management,   all  adjustments  considered  necessary  for  a  fair
presentation  of  condensed  consolidated  financial  condition  and  results of
operations for the periods presented have been included.  All adjustments are of
a normal and recurring nature. It is suggested that these condensed consolidated
financial  statements  be read in  conjunction  with  the  audited  consolidated
financial statements and the related notes included in the Company's 2000 Annual
Report on Form  10-K.  Certain  prior year  amounts  have been  reclassified  to
conform to the three months ended August 31, 2000 presentation.

Note 3 - Net income per common share

     Net  income  per  common  share on a diluted  basis is  computed  using the
weighted  average  number of shares of common stock and  potential  common stock
outstanding.  Potential  common stock is comprised of stock issuable under stock
options.  The treasury  stock method is used in computing the  potential  common
stock for the computation of diluted  earnings per common share.  Basic earnings
per share differs from diluted earnings per share in that dilution for potential
common stock is excluded.

Note 4 - Sale of Common Stock

      On June 15, 2000, NDB Group sold 3,000,000 shares of its common stock in a
private offering to DB U.S. Financial Markets Holding  Corporation,  an indirect
subsidiary  of  Deutsche  Bank AG  ("DB")  for  $135,930,000  in gross  proceeds
pursuant  to  a  Securities  Purchase  Agreement  dated  as  of  May  15,  2000.
Commissions  and other fees of  approximately  $1,400,000  were  incurred on the
transaction.

Note 5 - Commitments and contingencies

     Certain significant legal proceedings and matters were previously disclosed
in Item 3, Legal  Proceedings,  of the Company's  Annual Report on Form 10-K for
the year ended May 31,  2000,  and the  disclosures  regarding  such matters are
incorporated  herein by  reference.  Many aspects of the business of the Company
involve  substantial risks of potential  liability.  In recent years,  there has
been an increasing  incidence of litigation  involving the securities  industry,
including class action suits that generally seek substantial damages.  Companies
engaged in the  underwriting  and  distribution  of  securities  are  exposed to
substantial  liability under federal and state  securities laws. The Company is,
from  time to  time,  involved  in  proceedings  with,  and  investigations  by,
governmental and self-regulatory agencies.

                                       7
<PAGE>

     The  Company  has been named as a  defendant  in a number of  lawsuits  and
arbitrations  and is the  subject of  investigations  that  allege,  among other
things,  violations  of  Federal  and state  securities  laws and other  laws or
regulations promulgated by governmental or self-regulatory bodies. A substantial
settlement  or  judgement  in any of these cases  could have a material  adverse
effect on the Company.  Except as described in Item 3 to the Company's Form 10-K
for the year ended May 31,  2000 and this Form 10-Q,  management  of the Company
believes that none of these pending lawsuits, arbitrations and investigations is
likely to have a material adverse effect on its financial condition,  results of
operations or liquidity, although the Company cannot be certain of this.

     In connection with the NASD arbitration  action against NDBC by Weiss, Peck
& Greer,  L.L.C.  ("WPG")  reported in Item 3 to the Company's Form 10-K for the
fiscal  year  ended May 31,  2000,  a  three-person  arbitration  panel has been
appointed and the parties have exchanged discovery requests and responses. NDBC,
after  consultation  with counsel,  believes it has valid defenses to the claims
made by WPG and intends to vigorously contest the claims.

Note 6 - Net capital requirements

     As  registered  broker-dealers,   NDB.com  and  NDBC  are  subject  to  the
Securities Exchange Act of 1934 Uniform Net Capital Rule 15c3-1 (the "Rule"). As
of August 31, 2000,  the net capital of NDB.com and NDBC exceeded their required
net capital under the Rule by $12,059,000 and $167,497,000, respectively.

     The Rule also  provides  that equity  capital may not be  withdrawn or cash
dividends  be paid if the  resulting  net capital  would be less than the amount
required  under the Rule.  Accordingly,  at August  31,  2000,  the  payment  of
dividends  and  advances  to the  Company  by  NDB.com  and NDBC is  limited  to
$12,009,000 and $167,297,000,  respectively, under the most restrictive of these
requirements.

Note 7 - Segments

     Under the  provisions  of Statement of Financial  Accounting  Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information",  the
Company has two  reportable  segments:  discount  brokerage  and market  making.
NDB.com  transacts all business that will be reported in the Company's  discount
brokerage segment. Its revenues are principally in the form of retail commission
income,  distribution  assistance  fees from mutual funds and interest earned on
its  customers'  balances  held at its  clearing  broker.  NDBC  represents  the
Company's market making segment,  which derives its firm securities  transaction
revenues either from the spread between the price paid when a security is bought
and the price received when a security is sold or from proprietary  investments,
as well as limited interest and dividend income.  "All Other" category  revenues
consist principally of interest income earned by NDB Group. Expenses incurred by
NDB Group on behalf of Millennium are included in "All Other" category profit or
loss before income taxes.

     Revenue  from the  transactions  with other  segments  within  the  Company
(referred to as  intersegment  revenues) is recorded at market value,  as if the
transactions were with third parties.

     The Company  evaluates the  performance  of its segments based on profit or
loss from operations before income taxes. No single customer  accounted for more
than  10% of the  Company's  condensed  consolidated  revenues.  Information  on
segment assets is not disclosed  because it is not used for  evaluating  segment
performance and deciding how to allocate resources to segments. However, capital
expenditures  are used in evaluating  segment  performance  and are,  therefore,
disclosed.  Capital  expenditures  are reported net of proceeds from the sale of
fixed assets, if any. Substantially all of the Company's revenues and assets are
attributable to or located in the U.S.

     Financial information for the Company's reportable segments is presented in
the  following  table,  which  excludes the Company's  discontinued  operations,
Equitrade Partners L.L.C.

                                       8
<PAGE>


<TABLE>
<CAPTION>


                                                          Three Months Ended August 31, 2000

                                          Discount        Market
                                         Brokerage        Making          All Other         Total
<S>                                    <C>             <C>              <C>             <C>
Revenue from external sources          $19,081,000     $46,382,000      $ 2,661,000     $ 68,124,000
Intersegment revenue                     1,066,000               -          124,000        1,190,000
                                       ------------   ------------     ------------    -------------
Total revenue                          $20,147,000     $46,382,000      $ 2,785,000     $ 69,314,000
                                       -----------     -----------      -----------     ------------
Profit (loss) before income taxes      $(8,725,000)    $ 7,223,000      $  (650,000)    $ (2,152,000)
Capital expenditures (1)               $ 2,084,000     $ 1,946,000      $  (513,000)    $  3,517,000


                                                          Three Months Ended August 31, 1999

                                          Discount        Market
                                         Brokerage        Making          All Other         Total
Revenue from external sources          $15,397,000     $35,889,000       $ 1,736,000    $ 53,022,000
Intersegment revenue                     1,753,000           5,000           216,000       1,974,000
                                       -------------   -----------      --------------  -------------

Total revenue                          $17,150,000     $35,894,000       $ 1,952,000     $54,996,000
                                       -----------     -----------      -------------    -----------
Profit (loss) before income taxes      $(7,278,000)   $  7,100,000      $    979,000         801,000
Capital expenditures (1)               $ 4,574,000    $  3,284,000      $    503,000     $ 8,361,000

<FN>
(1) - includes deposits made on assets not yet placed in service.
</FN>
</TABLE>


     The following table is a  reconciliation  of reportable  (loss) profit from
continuing operations before income taxes to the Company's consolidated totals.
<TABLE>
<CAPTION>

                                                Three Months Ended
                                            August 31,       August 31,
                                               2000             1999
                                               ----             ----
<S>                                      <C>               <C>
Total loss before income
   taxes for reportable segments         $  (1,502,000)    $  (178,000)
Other (loss) profit                           (650,000)        979,000
                                         ---------------  --------------
Total consolidated (loss) profit
   before income taxes                   $  (2,152,000)    $   801,000
                                         -------------     ------------
</TABLE>


Note 8 - Subsequent Event

     On October 6, 2000,  NDB Group  received a proposal from an affiliate of DB
offering to acquire all of the  outstanding  capital  stock of NDB Group for $49
per share in cash. DB, through its affiliates,  currently owns approximately 16%
of the outstanding  shares of NDB Group's common stock. On October 11, 2000, the
proposal was approved by the Board of Directors of NDB Group and the Supervisory
Board of DB. NDB Group, DB and Deutsche  Acquisition Corp. executed an Agreement
and Plan of Merger  providing  for the tender offer for the capital stock of NDB
Group  followed by a merger of NDB Group with  Deutsche  Acquisition  Corp.  The
tender offer is expected to close by the end of calendar year 2000 but there can
be no  assurance  that  the  transaction  will  close  or of the  timing  of the
transaction.







                                       9
<PAGE>



Item - 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS


Description of Business

      National  Discount Brokers Group,  Inc. ("NDB Group") and its subsidiaries
(collectively,  the "Company") are primarily engaged in the securities  business
and  in  providing  related  financial   services.   National  Discount  Brokers
Corporation,  doing  business  as NDB.com  ("NDB.com"),  is an on-line  discount
brokerage firm  specializing  in trade execution for individual  investors.  NDB
Capital  Markets  Corporation  ("NDBC") is primarily  engaged in the  securities
business as a wholesale  market maker in NASDAQ National Market System and other
over-the-counter securities.

     In  July  1999,  NDB  Group  formed  Millennium  Clearing  Company,  L.L.C.
("Millennium")  as a  wholly  owned  subsidiary  for the  purpose  of  providing
clearing  services  initially  for NDBC and NDB.com and,  eventually,  for other
correspondents.  Management  of the  Company  anticipates  the  commencement  of
clearing for NDB.com and NDBC by Millennium during calendar year 2001.

    Effective on September 23, 2000, the operations and substantially all of the
net assets of NDBC were  transferred  to a  newly-created  entity,  NDB  Capital
Markets,  L.P.  ("NDBCM  LP"),  of  which  NDBC is the  general  partner.  NDBCM
California  Corporation,  a wholly  owned  subsidiary  of NDBC,  is the  limited
partner of NDBCM LP.


Results of Operations

     The results of  continuing  operations  of the Company for the three months
ended August 31, 2000 reflect primarily the activities of NDB.com and NDBC.

     We have  experienced and expect to continue to experience,  fluctuations in
quarterly  operating  results  due to a variety of factors,  including,  but not
limited to, the value of our market-making  securities positions,  the volume of
our market-making and online brokerage activities,  volatility in the securities
markets,  our  ability  to  attract  and retain  personnel,  overhead  and other
expenses,  start-up costs related to Millennium,  the amount of revenue  derived
from limit orders as a percentage of net trading  revenues,  the mix of services
sold by our brokerage  operations,  changes in payments for order flow, clearing
costs,  the  addition  or loss of sales and  trading  professionals,  regulatory
changes,  the  amount and timing of capital  and  advertising  expenditures  and
general  economic  conditions.  If demand  for our  market-making  and  discount
brokerage  services  declines  either due to changing  market  conditions  or to
competitive  pressures,  and we are  unable to adjust  our cost  structure  on a
timely basis, our operating results could be materially and adversely  affected.
We have experienced,  and may experience in the future,  some seasonality in our
business.

       Due to all of the foregoing factors,  period-to-period comparisons of our
revenues  and  operating  results  are  not  necessarily   meaningful  and  such
comparisons  cannot be relied upon as  indicators of future  performance.  There
also can be no  assurance  that we will be able to sustain  the rates of revenue
growth that we have experienced in the past, that we will be able to improve our
operating results or that we will be able to be profitable on a quarterly basis.

     The Company's  consolidated  net loss from  continuing  operations  for the
quarter ended August 31, 2000 was $1,294,000  compared to net income of $435,000
for the quarter ended August 31, 1999, a decrease of  $1,729,000.  For the three
months ended August 31, 2000, NDBC had net income of $4,302,000  compared to net
income of $3,778,000  for the three months ended August 31, 1999.  NDB.com had a
net loss of $5,271,000 for the quarter ended August 31, 2000,  compared to a net
loss of $4,250,000 for the quarter ended August 31, 1999.

     Total  revenue  from  continuing  operations  of the Company  increased  by
$15,102,000,  or 28%, for the three  months  ended August 31, 2000,  as compared
with the quarter ended August 31, 1999.  Total revenue for NDBC was  $46,382,000
(or $11.22 per trade) for the three  months ended August 31, 2000 as compared to
$35,894,000  (or $16.10 per trade) for the three  months  ended August 31, 1999.
Total revenue for NDB.com  (before  elimination of the rebate received from NDBC
for order flow) was $20,147,000 (or $29.20 per trade) for the three months ended
August 31, 2000 as compared to  $17,150,000  (or $32.26 per trade) for the three
months ended August 31, 1999.  The reasons for the changes in total revenues are
set forth below.
                                       10
<PAGE>

     Revenue from firm  securities  transactions,  primarily  generated by NDBC,
increased by  $8,204,000,  or 24%, for the three months ended August 31, 2000 as
compared with the equivalent  period in fiscal 2000.  This increase is primarily
attributed to the increase in ticket volume of 85% together with the increase in
share volume of 33%.  Although  revenues  increased  when  compared to the first
quarter  of  fiscal  year  2000,  NDBC  did not  capitalize  on  certain  market
opportunities  afforded  to it during  the month of July 2000 and  technological
difficulties arose which interrupted  trading activities for a few days in July.
Notwithstanding  these  difficulties,  the increases in share volume and average
daily  tickets  were more than  enough to make up for  decreases  in the trading
profit per ticket and the average number of shares traded per ticket,  resulting
in higher revenue from firm securities transactions for the quarter ended August
31, 2000 versus the same quarter in the prior fiscal year.
<TABLE>
<CAPTION>


                                                    Three Months Ended
                                              August 31,           August 31,         Percentage
                                                 2000                 1999              Change
                                                 ----                 ----              ------
<S>                                             <C>                  <C>                 <C>
Trading profit per ticket                       $10.31               $15.48              (33%)
Average daily batched trades                    63,600               34,300               85%
Share volume (billions)                            3.2                  2.4               33%
Average number of shares per ticket                780                1,070              (27%)

</TABLE>

     The Company's commission income,  primarily generated by NDB.com,  includes
commissions received from customers,  as well as rebates received for order flow
from other broker-dealers.  Commissions increased by $2,764,000, or 22%, for the
three  months ended  August 31, 2000 when  compared  with the same period in the
prior year.  This  increase  occurred due to a rise in NDB.com's  average  daily
commissionable  ticket count and an increase in the number of NDB.com's customer
accounts,  from the comparative  prior quarter.  These increases were offset, in
part, by an increase in the  percentage of trades done on-line,  which  generate
smaller commissions per trade and a drop in average trades per customer.

     Unlike  some  of  its  competitors,  NDB.com,  through  its  Active  Trader
Advantage  program,  generates for the most part only one  commissionable  trade
from a customer  who trades the same  stock,  on the same side,  numerous  times
during a single session. NDB.com processed an average of 19,500 unbatched trades
per day during the quarter ended August 31, 2000.

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                August 31,         August 31,        Percentage
                                                   2000               1999             Change
                                                   ----               ----             ------
<S>                                               <C>                <C>               <C>
Average daily commissionable trades                10,600              8,200            29%
Average number of customers                       257,300            150,200            71%
Average trades per customer                           2.7                3.5           (23%)
Percentage of trades on-line                          85%                71%            20%

</TABLE>

     Interest and dividend income increased by $3,880,000, or 82%, for the three
months  ended  August 31, 2000 as compared to the same period in the prior year.
This increase is due  principally to three  factors.  Firstly,  NDBC's  interest
income  increased  sharply due to an increase in the  quarterly  average of firm
short positions,  on which NDBC receives a rebate.  Secondly,  there were larger
average  amounts of cash available to earn interest due to the Company taking in
approximately  $134,500,000 in net cash in connection with the sale of 3,000,000
shares of its common stock in a private  placement  to Deutsche  Bank AG ("DB"),
which occurred in June 2000, less cash outflows primarily for capital additions.
Lastly,  the  average  customer  debit and  credit  balances  that are held with
NDB.com's  clearing broker, on which NDB.com receives  interest,  were higher in
the current year's first quarter than in the first quarter of fiscal year 2000.

     Fee income  generated by NDB.com  increased  by  $264,000,  or 20%, for the
three  months  ended August 31, 2000 as compared to the same period in the prior
year. The increase is principally due to NDB.com  receiving higher  distribution
assistance fees from money market funds,  as customers'  balances in those funds
have increased since the prior year.

                                       11
<PAGE>

     Total  expenses  for the three  months  ended  August  31,  2000  increased
approximately $18,055,000,  or 35%, from $52,221,000 in the quarter ended August
31, 1999 to  $70,276,000  during the quarter ended August 31, 2000.  The reasons
for the increase in expenses are set forth below.

    Compensation  and benefits  increased by  $9,982,000,  or 54%, for the three
months ended August 31, 2000 as compared to the  equivalent  period in the prior
year. As a percentage of revenue, employee compensation and benefits was 42% for
the three months ended August 31, 2000 versus 35% for the  comparable  period in
the prior  fiscal  year.  The increase  was  principally  attributable  to fixed
expenses related  primarily to additional hires as the total number of employees
increased  to 950 for the Company as of August 31,  2000,  from 702 as of August
31,  1999.  The increase in  employees,  much of which was in the areas of trade
support,  customer  service and technology,  was necessitated by the significant
increase in trading activity that the Company has experienced  during the course
of the last year. Such growth in staff was planned in order to continue to build
the Company's  infrastructure  toward the goal of creating a business that fully
integrates  trade order,  execution  and  clearance.  Also  contributing  to the
increase  was  NDBC'  traders  being  compensated  on a tiered  commission  rate
schedule,  wherein  they earn higher  rates of  commissions  as the profits they
generate  increase.  Thus, the increase in trading profits in the current period
versus in the prior year period led, in part,  to the  increase in  compensation
and  benefits as a  percentage  of revenue as did the  increase in salaries  for
non-revenue producing employees.

    Clearing and related brokerage charges increased by $3,319,000,  or 28%, for
the three  months  ended August 31, 2000 as compared to same period in the prior
year.  This  increase was mainly due to increases in NDB.com's and NDBC's ticket
counts of 29% and 85%, respectively,  for the quarter ended August 31, 2000 over
the amounts in the  comparable  period during the prior year. As a percentage of
revenue,  however,  clearing and related  brokerage charges decreased to 22% for
the three  months ended  August 31, 2000 from 23% for the  comparable  period in
fiscal  2000.  Leading to the  decrease  in the current  period in clearing  and
related brokerage charges as a percentage of revenue,  was a decrease in the per
ticket rate negotiated with NDB.com's clearing broker as of September 1999.

     Communications  expenses  increased  by  $1,553,000,  or 40%, for the three
months  ended  August 31, 2000 as compared to the same period in the prior year.
The increase is partly due to a rise in  telecommunications  expenses  resulting
from the new 90 Hudson Street  location for NDB.com,  which created the need for
an  additional  phone  carrier.  In addition,  there was a rise in the aggregate
expense associated with obtaining market data and quotation  services.  Usage of
such services  during the fiscal  quarter ended August 31, 2000 has increased as
the number of users has risen as compared to the same period in the prior fiscal
year.

     Advertising and marketing costs increased by $483,000, or 7%, for the three
months ended August 31, 2000 as compared to the  comparable  period in the prior
year. The Company  advertises in order to attract retail  accounts to NDB.com as
well as  institutional  and  broker-dealer  order  flow  directly  to NDBC.  The
increase is due to this  quarter's  portion of the fee for the Company's  online
advertising via the Go2Net Network and Yahoo!  Finance.  These deals were signed
during early calendar year 2000 and, thus, there was no comparable charge during
the quarter ended August 31, 1999. Partially offsetting this increase are lesser
fees due to fewer  media buys during the three  months  ended  August 31,  2000.
During  the  quarter  ended  August  31,  1999,  NDB.com  had  rolled  out a new
multi-media campaign designed to strengthen NDB.com brand awareness and to put a
focus on its  products  and services  using a  combination  of network and cable
television,  local radio and print media to attract new  customers.  No such new
campaign debuted in the current quarter.

     NDB.com   also   attains   new   customers   through   its   affinity   and
business-to-business  relationship  programs.  Acquisition  costs  per  customer
account for NDB.com  averaged $313 for the three months ended August 31, 2000 as
compared  to $378 for the three  months  ended  August  31,  1999 based on total
advertising  expenses for the Company.  The number of average customer  accounts
rose 71% while  there was only a 7%  increase  in total  advertising  costs,  as
compared to the quarter  ended  August 31, 1999.  NDB.com  continues to focus on
attracting further affinity and business-to-business  partnerships to help abate
its acquisition costs.

     Sales-related  travel and entertainment  increased by $543,000,  or 70% for
the three  months  ended  August 31,  2000 as compared to the same period in the
prior  year.  The  increase  is due mainly to an increase in the number of NDBC'
institutional and broker-dealer  sales personnel and additional  efforts by this
sales force and  NDB.com's  sales force to attract new  customers  and  maintain
existing relationships.

                                       12
<PAGE>

       Depreciation and amortization increased by $234,000, or 6%, for the three
months ended August 31, 2000 as compared to the  equivalent  period in the prior
year. This increase is primarily attributable to the additional depreciation and
amortization  on the fixed assets and leasehold  improvements  which were placed
into service  during the fourth  quarter of fiscal year 2000 when the  Company's
new facility at 90 Hudson Street in Jersey City was completed. Partly offsetting
this increase was the absence of depreciation and amortization on certain assets
abandoned by NDB.com upon its move from New York City to Jersey City.

     Equipment rental costs increased by $606,000, or 114%, for the three months
ended August 31, 2000 as compared to the same period in the prior year.  NDB.com
commenced  lease payments this quarter for equipment at its new 90 Hudson Street
facility, which replaced equipment previously owned.

     Technology  consulting expense decreased by $438,000, or 38%, for the three
months  ended  August 31, 2000 versus the  comparable  period in the prior year.
This  decrease  is a result of the  capitalization  of certain  NDBC  technology
consultant costs, in the first quarter of fiscal 2001,  directly associated with
firm software development.

     Repairs and maintenance costs increased by $265,000,  or 45%, for the three
months  ended  August 31, 2000 as compared to the same period in the prior year.
This  increase,  primarily  for NDB.com,  is mainly due to  maintenance  service
contract  fees  paid  for new  equipment  and in  association  with  maintaining
existing  infrastructures  as the  original  warranties  on the various  systems
continue to expire.

     Professional  fees  increased  by $967,000,  or 193%,  for the three months
ended  August 31, 2000 as compared to the  equivalent  period in the prior year,
due to a number of factors.  In connection with the start up of Millennium,  the
Company  has  incurred  project   management  costs  and  fees  associated  with
converting  NDB.com and NDBC from their current  clearing brokers to Millennium.
In addition,  legal and  accounting  fees related to NDBC's  reorganization,  as
described in "Description  of Business",  were incurred during the quarter ended
August 31, 2000.

     Occupancy  costs  increased  by $62,000,  or 4%, for the three months ended
August 31, 2000 as compared to the same period in the prior year.

     Other  expenses  increased by $480,000,  or 24%, for the three months ended
August 31,  2000 as  compared to the  equivalent  period in the prior year.  The
increase in other  expenses is primarily due to the overall growth in the volume
of business and the increase in staff size.

     The Company's  effective tax rate was approximately 40% for the three-month
period  ended  August 31,  2000 as compared  to 46% for the three  months  ended
August 31, 1999. The decrease in rates is primarily due to a shift in the states
in which the Company does  business,  mainly to states with lower tax rates.  In
the prior year, a larger portion of the Company's revenues, property and payroll
were  allocated to high tax rate states,  such as New York. In the current year,
these operations have been shifted to a lower tax rate state,  New Jersey.  This
decrease  was partly  offset by the fact that some of the tax  benefit  that the
Company would otherwise receive due to its pretax loss was written off since the
portion of benefit pertaining to New Jersey will never come to fruition.

    For the three months  ended August 31, 2000,  included in income tax expense
are deferred tax benefits of approximately $919,000. These deferred tax benefits
relate  substantially to the future  taxability of certain temporary book to tax
basis  differences and to the  carryforward of NDB.com's  taxable loss to future
periods for certain tax  jurisdictions.  In  conjunction  with the  deferred tax
asset shown on the condensed statement of financial  condition,  the Company has
recorded  a  valuation   allowance  of  approximately   $862,000   because,   in
management's  judgment, it was concluded that it was more likely than not that a
portion of the benefit would not be realized.


Liquidity

     The  Company's  assets  are highly  liquid,  but  subject  to market  price
fluctuation, with more than 81% consisting of cash or assets readily convertible
into cash  (principally cash and cash  equivalents,  firm securities  positions,
U.S.  Treasury   obligations  and  receivables  from  brokers).   The  Company's
operations  have generally been financed by internally  generated  funds and the
proceeds from the sales of its common stock in both seasoned  public and private
offerings.
                                       13
<PAGE>

     From time to time,  the Company has  borrowed  funds on a secured  basis in
connection with its trading  activities.  The Company currently has no committed
lines  of  credit  and  such  borrowings  were  done  on an "as  needed"  basis.
Management is reviewing alternatives to meeting these funding requirements.

  NDB Group's broker-dealer  subsidiaries,  NDB.com and NDBC, are subject to the
SEC's minimum net capital requirement,  which is designed to measure the general
financial  soundness  and  liquidity of  broker-dealers.  As of August 31, 2000,
NDB.com and NDBC had approximately  $12,059,000 and $167,497,000,  respectively,
in excess of the SEC required minimum net capital.  The net capital rule imposes
financial  restrictions  upon  NDB.com's and NDBC's  businesses,  which are more
severe than those imposed on most other businesses.

     Cash  flows from  operations  will vary on a daily  basis as the  Company's
portfolio of marketable  securities  changes.  The Company's  ability to convert
marketable  securities  owned into cash is determined by the depth of the market
and the size of the Company's  securities positions in relation to the market as
a whole.  The portfolio  mix also affects the  regulatory  capital  requirements
imposed  on NDBC  and  NDB.com,  which  directly  affects  the  amount  of funds
available for operating, investing and financing activities.

  On June 15,  2000,  NDB Group sold  3,000,000  shares of its common stock in a
private offering to DB U.S. Financial Markets Holding  Corporation,  an indirect
subsidiary  of  Deutsche  Bank AG  ("DB")  for  $135,930,000  in gross  proceeds
pursuant  to  a  Securities  Purchase  Agreement  dated  as  of  May  15,  2000.
Commissions  and other fees of  approximately  $1,400,000  were  incurred on the
transaction.

     The  Company's  capital  expenditures  were $3.5  million and $8.4  million
during the three months ended August 31, 2000 and August 31, 1999, respectively,
including   deposits  made  on  assets  not  yet  placed  in  service.   Capital
expenditures during the first three months of fiscal 2001 were primarily related
to the  expansion of new offices  that will house  additional  NDB.com  customer
service personnel and NDBC' traders and salesmen.  During the three months ended
August 31, 2000,  lease  agreements  for two new office  spaces  located in Long
Island, New York and Tinton Falls, New Jersey were executed. In addition,  funds
were spent on the continual  upgrading of the Company's  information  technology
systems and telecommunications equipment.

      The  Company  expects  to  spend  between  $7million  and $10  million  on
advertising expense during the second quarter of fiscal year 2001,  inclusive of
the   period's   commitments   related  to  its  Go2Net  and  Yahoo!   marketing
arrangements, but absent any new business-to-business marketing associations.

     Cash flows from the Company's investment activities are directly related to
market conditions.


Effects of Inflation

     The Company's assets are not  significantly  affected by inflation  because
they are primarily  monetary in nature.  Management  believes  that  replacement
costs of furniture,  equipment and leasehold  improvements  will not  materially
affect  operations.  However,  the  rate  of  inflation  affects  the  Company's
principal expenses such as employee compensation, rent and communications, which
may not be readily recoverable from increased revenues. Because of market forces
and competitive  conditions in the securities  industry,  a broker-dealer may be
unable to  restructure  its profit margins in order to recover  increased  costs
related to inflation.  Consequently,  the Company must rely on increased  volume
for this purpose.  However, the Company has significant cash balances on deposit
with financial  institutions,  including money market accounts,  as well as with
its principal  clearing  brokers on which  interest is paid which,  in the event
there are higher  interest rates which  normally  result from  inflation,  would
offset some of the costs.

Looking Ahead

     The  Company  expects  that it will spend up to  approximately  $20 million
during the remainder of fiscal year 2001 in capital  expenditures related to its
forthcoming new offices and on ongoing  technological  improvements  and product
enhancements.

      The  Company  expects  to spend  between  $7  million  and $10  million on
advertising  during the second  quarter of fiscal  year 2001,  inclusive  of the
period's  commitments related to the Go2Net and Yahoo!  marketing  associations,
but absent any new business-to-business marketing associations. As of August 31,

                                       14
<PAGE>

2000,  NDB.com  had  generated   approximately  79,200  accounts  and  currently
continues  to  generate  accounts  through its  affiliation  with AST Stock Plan
("AST").  NDB.com's  current  contract  with AST expires on December  31,  2000.
Another  broker-dealer has acquired AST and, as a result,  the AST agreement may
not be extended.  Termination  of the  agreement may result in a loss of some of
the  accounts  generated  by NDB.com  through its  affiliation  with AST and may
further  result in higher  future  costs of  acquiring  customers.  The  Company
continues  to look  for  alternative  methods  of  account  acquisition  through
additional business-to-business alliances.

     The  Company   expects  that  as  a  result  of  the  NASDAQ's   change  to
decimalization, which is currently being phased in, the spread between "bid" and
"ask" prices on the stocks in which NDBC makes  markets will further  narrow and
may adversely affect  profitability per ticket.  Management,  however,  believes
that this  change may result in greater  market  volatility,  which will  create
potential opportunities for trading profits for NDBC.

     The Company  estimates  that it will begin  self-clearing  NDB.com and NDBC
transactions  through  Millennium during calendar year 2001. As a broker-dealer,
Millennium  will be subject to the SEC's minimum net capital  requirements.  The
Company  intends to fund this  required  capital  through  internally  generated
funds.  Over the long term, this  self-clearing  operation is expected to reduce
clearing  charges per ticket  incurred by both NDB.com and NDBC and increase the
interest spreads the Company earns on certain customer balances.

     On October 6, 2000,  NDB Group  received a proposal from an affiliate of DB
offering to acquire all of the  outstanding  capital  stock of NDB Group for $49
per share in cash. DB, through its affiliates,  currently owns approximately 16%
of the outstanding  shares of NDB Group's common stock. On October 11, 2000, the
proposal was approved by the Board of Directors of NDB Group and the Supervisory
Board of DB. NDB Group, DB and Deutsche  Acquisition Corp. executed an Agreement
and Plan of Merger  providing  for the tender offer for the capital stock of NDB
Group  followed by a merger of NDB Group with  Deutsche  Acquisition  Corp.  The
tender offer is expected to close by the end of calendar year 2000 but there can
be no  assurance  that  the  transaction  will  close  or of the  timing  of the
transaction.


Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK

      The Company's  principal business  activities are, by their nature,  risky
and  volatile  and are  directly  affected by many  national  and  international
factors.  Any one of  these  factors  may  cause a  substantial  decline  in the
securities  markets,  which  could  materially  adversely  affect the  Company's
business.  Managing  risk is  critical  to the  Company's  profitability  and to
reducing the likelihood of earnings  volatility.  The Company's risk  management
policies and procedures have been established to continually  identify,  monitor
and manage risk. The major types of risk that the Company faces include, but are
not limited to, credit risk, legal risk, operating risk and market risk.

      Credit risk is the  potential  for loss due to a customer or  counterparty
failing  to  perform  its  contractual  obligations.   The  Company  clears  its
securities transactions through unaffiliated clearing agents. Under the terms of
its clearing agent agreements,  the Company's  clearing agents have the right to
charge it for losses that result from its  customers'  failure to fulfill  their
contractual  obligations.  In order to mitigate risk, the Company's policy is to
monitor the credit standing of its customers and maintain  collateral to support
margin loans and short sales.  Further,  a significant  portion of the Company's
and its customer assets are held at one or more clearing agents.  Therefore,  it
would incur substantial  losses if one of the Company's  clearing agents were to
become insolvent or otherwise unable to meet its financial obligations.

     Operating  risk is the  potential for loss due to  deficiencies  in control
processes or computer and technological  systems.  The Company relies heavily on
various computer and communications  systems to operate its business,  including
NDB.com's web site.  The Company  relies  particularly  on third parties such as
Nasdaq,  telephone  companies,  online service providers,  clearing agents, data
processors and software and hardware  vendors.  The Company's  business could be
negatively impacted by unanticipated disruptions in service to customers, slower
response  times,  delays in  trading,  failed  settlement  of trades,  decreased
customer  service and  satisfaction,  incomplete  or  inaccurate  accounting  or
processing of trades,  and delays in the Company's  introduction of new products
and  services.  The Company  attempts to mitigate  operating  risk by  employing
experienced  personnel,  maintaining an internal control system, and maintaining
backup and recovery functions.

                                       15
<PAGE>

     Legal  risk is the risk  associated  with  non-compliance  with  legal  and
regulatory requirements,  and counterparty non-performance based upon non-credit
related  conditions,  such as legal  authority or capacity.  The SEC,  NASD, and
other agencies extensively regulate the U.S. securities industry. The Company is
required to comply  strictly with the rules and  regulations of these  agencies.
Further,  there are frequent  changes in the laws and regulations  affecting the
securities  industry and the securities  markets. If the Company fails to comply
with any of these laws, rules, or regulations,  it is subject to censure, fines,
cease-and-desist  orders or suspensions of its business.  Additionally,  the SEC
and NASD have strict rules that require it to maintain  sufficient  net capital.
If its broker-dealer subsidiaries fail to maintain the required net capital, the
SEC or the NASD may suspend or revoke the subsidiaries'  broker-dealer licenses.
In  addition,  the Company may be subject to lawsuits or  arbitration  claims by
customers,  employees or other third parties in the different  jurisdictions  in
which it  conducts  business  (see Part II,  Item 1,  below).  The  Company  has
established procedures in accordance with legal and regulatory requirements that
are designed to reasonably ensure compliance in these matters.

     Market  risk is the risk of loss that may result  from  changes in interest
and foreign  exchange rates,  equity and commodity  prices and the  correlations
among them.  The Company's  current  operations  and trading  activity limit its
exposure to the interest  rate and equity price  exposure  components  of market
risk.

     Interest rate risk is the  possibility  of a loss in the value of financial
instruments  from changes in interest rates.  The Company's  primary exposure to
interest rate risk arises from its interest  earning assets (mainly  deposits at
clearing brokers,  loans and notes receivable and U.S. Treasury obligations) and
funding sources (loans  payable).  The Company attempts to mitigate this risk by
only holding U.S. Treasury  obligations with maturities of one year or less. For
the other interest earning assets and funding sources, the interest rate risk is
not  material,  as the  underlying  value will not vary with changes in interest
rates.

     Equity price risk generally means the risk of loss that may result from the
potential change in the value of a financial  instrument as a result of absolute
and relative price  movements,  price  volatility or changes in liquidity,  over
which the Company has no control.  The Company's market making activities expose
its capital to  significant  equity price risk.  To mitigate  this risk,  senior
management  monitors  profits and losses on a  real-time  basis  throughout  the
trading  day.  Further,  from the  Company's  system-generated  reports,  senior
management reviews positions,  mark-to-market  valuations, and daily profits and
losses on individual security positions.  Additionally,  traders are required to
maintain  positions meeting a specified  potential  profit/loss  ratio, which is
monitored by management.

     The Company maintains  inventories for trading purposes in exchange-listed,
Nasdaq and other over-the-counter securities on both a long and short basis. The
fair  value of these  securities  at August 31,  2000 was $50.3  million in long
positions  and $23.6  million in short  positions.  The  potential  loss in fair
value,  using a  hypothetical  10% decline in prices,  is  estimated  to be $2.7
million as of August 31, 2000. A 10% hypothetical  decline was used to represent
a significant yet plausible market change.

     Other  financial  instruments  exposed  to  equity  rate  risk are held for
purposes other than trading. This includes investments by the Company in several
privately held corporations.  These investments were valued at their fair value,
$15.9  million at August  31,  2000,  in the  Company's  condensed  consolidated
financial statements under the heading "Securities not readily marketable".  The
potential  loss in fair value,  using a hypothetical  10% decline in prices,  is
estimated to be $1.6 million as of August 31, 2000.



PART II - OTHER INFORMATION

Item 1 - LEGAL PROCEEDINGS

     Certain significant legal proceedings and matters were previously disclosed
in Item 3, Legal  Proceedings,  of the Company's  Annual Report on Form 10-K for
the year ended May 31,  2000,  and the  disclosures  regarding  such matters are
incorporated  herein by  reference.  Many aspects of the business of the Company
involve  substantial risks of potential  liability.  In recent years,  there has
been an increasing  incidence of litigation  involving the securities  industry,
including class action suits that generally seek substantial damages.  Companies
engaged in the  underwriting  and  distribution  of  securities  are  exposed to
substantial  liability under federal and state  securities laws. The Company is,
from  time to  time,  involved  in  proceedings  with,  and  investigations  by,
governmental and self-regulatory agencies.

                                       16
<PAGE>

     The  Company  has been named as a  defendant  in a number of  lawsuits  and
arbitrations  and is the  subject of  investigations  that  allege,  among other
things,  violations  of  Federal  and state  securities  laws and other  laws or
regulations promulgated by governmental or self-regulatory bodies. A substantial
settlement  or  judgment  in any of these  cases  could have a material  adverse
effect on the Company.  Except as described disclosed in Item 3 to the Company's
Form 10-K for the year ended May 31, 2000 and this Form 10-Q,  management of the
Company  believes  that  none  of  these  pending  lawsuits,   arbitrations  and
investigations  is likely to have a  material  adverse  effect on its  financial
condition,  results of operations or liquidity,  although the Company  cannot be
certain of this.




Item 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

    On  March  28,  2000,  NDB  Group  announced  that  it  had  entered  into a
non-binding  letter of intent with Deutsche Bank  Americas  Holding  Corporation
("DBA"),  an affiliate of DB,  pursuant to which NDB Group would sell  3,000,000
shares of its common stock to DBA or one of its designated affiliates for $45.31
per share or $135,930,000 in gross proceeds (the "Investment"). On May 15, 2000,
NDB  Group  and DB U.S.  Financial  Markets  Holding  Corporation  ("DBUS"),  an
affiliate of DB, entered into a definitive  agreement (the "Securities  Purchase
Agreement")  respecting the  Investment.  On June 15, 2000, the  transaction was
consummated.  The transaction was exempt from  registration  pursuant to Section
2(2) of the  Securities  Act of 1933,  as amended,  and Rule 50b of Regulation D
thereunder.



Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

                       Exhibit 11 - Computation of Net Income Per Common Share

                       Exhibit 27 - Financial Data Schedule

(b)         The Company  filed one report on Form 8-K during the  quarter  ended
            August 31,  2000.  The  report,  dated June 15,  2000,  was filed in
            regard to the Securities Purchase Agreement the Company entered into
            with DBUS.

                                       17
<PAGE>


                                   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.



                                           National Discount Brokers Group, Inc.
                                           -------------------------------------

      Date: October 12, 2000               By: Arthur Kontos
       ----------------------------        -------------------------------------
                                           Arthur Kontos
                                           Chief Executive Officer


      Date: October 12, 2000               By: Daniel Fishbane
      -----------------------------        -------------------------------------
                                           Daniel Fishbane
                                           Chief Financial Officer and
                                           Principal Accounting Officer















                                       18
<PAGE>


                                                                      EXHIBIT 11
             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                              Three Months Ended August 31,        Three Months Ended August 31,
                                                              -----------------------------        -----------------------------
                                                                         Basic                              Diluted
                                                            -----------------------------------  -------------------------------
                                                                     2000            1999              2000             1999
                                                            -----------------  ----------------  --------------- ---------------
<S>                                                         <C>                <C>                <C>            <C>
Common stock and potential common stock:
  Weighted average common stock outstanding                       20,543,594        16,205,035       20,543,594      16,205,035
  Weighted average potential common stock
    issuable under stock options                                           -                 -                -         286,835
                                                            -----------------  ----------------  --------------- ---------------

Total weighted average common stock and potential common
  stock used for earnings per share computation (a)               20,543,594        16,205,035       20,543,594      16,491,870
                                                           -----------------  ----------------  --------------- ---------------

Income:
    Net (loss) income from continuing operations            $     (1,293,744)  $       434,943   $   (1,293,744) $      434,943
    Net income from discontinued operations,
      net of taxes                                                         -            82,994                -          82,994
    Gain on sale of discontinued operations,
      net of taxes                                                         -        20,054,787                -      20,054,787
                                                            -----------------  ----------------  --------------- ---------------

            Net (loss) income                               $     (1,293,744)  $    20,572,724   $   (1,293,744) $   20,572,724
                                                            -----------------  ----------------  --------------- ---------------

Net (loss) income per common and potential common share:
    Net (loss) income from continuing operations            $          (0.06)  $          0.02   $        (0.06) $         0.02
    Net income from discontinued operations,
      net of taxes                                                      0.00              0.01             0.00            0.01
    Gain on sale of discontinued operations,
      net of taxes                                                      0.00              1.24             0.00            1.22
                                                            -----------------  ----------------  --------------- ---------------

            Net (loss) income                               $          (0.06)  $          1.27   $        (0.06) $         1.25
                                                            -----------------  ----------------  --------------- ---------------


<FN>
(a)  Due to their antidilutive nature upon the net loss per common and potential
     share,  potential  common stock has been excluded from the  calculation  of
     total  weighted  average  common and  potential  common stock for the three
     months ended August 31, 2000.
</FN>
</TABLE>