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 February 29, 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.

          17,626,993 shares of Common Stock, par value $.01 per share,
                      were outstanding on March 31, 2000.


<PAGE>


                      NATIONAL DISCOUNT BROKERS GROUP, INC.
                                AND SUBSIDIARIES


                                      INDEX

<TABLE>
<CAPTION>

                                                                                                                                PAGE



<S>                                                                                                                              <C>
Part I - Financial Information

Item 1. - Financial Statements

  Condensed Consolidated Statements of Financial Condition -
     February 29, 2000 (Unaudited) and May 31, 1999............................................................................... 3

  Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) -
     Three and Nine Months Ended February 29, 2000 and February 28, 1999...........................................................4

  Condensed Consolidated Statements of Cash Flows (Unaudited) -
     Nine Months Ended February 29, 2000 and February 28, 1999.....................................................................6

  Notes to Condensed Consolidated Financial Statements (Unaudited) -
     February 29, 2000.............................................................................................................8

Item 2. - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations...................................................................12

Item 3. - Quantitative and Qualitative Disclosures About Risk.....................................................................20

Part II - Other Information

Item 1. - Legal Proceedings.......................................................................................................22

Item 2. - Changes in Securities and Use of Proceeds...............................................................................22

Item 6. - Exhibits and Reports on Form 8-K........................................................................................23

Signatures........................................................................................................................24

</TABLE>


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
operation,  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 expenses increases,  changes in government
policy or regulation  and  unforeseen  costs and other effects  related to legal
proceedings or investigations of governmental and self-regulatory organizations.


<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>


                                                        February 29,        May 31,
ASSETS                                                      2000             1999
                                                     ----------------- ----------------

<S>                                                  <C>               <C>
Cash and cash equivalents                            $     67,321,583  $       411,629
Receivables:
  Clearing brokers                                        148,869,483       86,509,122
  Other                                                     3,767,545        2,901,799
Securities owned, at market value                          76,095,811       38,048,489
U.S. Treasury obligations ($914,617 and $8,418,260
  held as collateral at February 29, 2000 and
  May 31, 1999, respectively)                              50,900,617        8,418,260
Securities not readily marketable, at fair value              600,000          500,000
Investment in discontinued operations                               -       28,341,746
Loans and notes receivable                                    193,728        1,094,989
Furniture, fixtures, equipment and leasehold
  improvements - at cost, net of accumulated
  depreciation and amortization of $20,774,611
  at February 29, 2000 and $15,304,535 at May 31, 1999     16,275,791       14,837,114
Computer software - at cost, net of accumulated
  amortization of $5,506,731 at February 29, 2000
  and $3,624,381 at May 31, 1999                            7,627,097        4,996,223
Exchange membership (market value $1,520,000 at
  May 31, 1999)                                                     -          351,496
Secured demand notes receivable                                     -       27,000,000
Deferred tax asset, net of valuation allowance of
  $243,992 at February 29, 2000)                            1,522,958          825,797
Deposits                                                   23,881,228        2,328,380
Other                                                       4,963,531          725,764
                                                     ----------------- ----------------

          Total assets                               $    402,019,372  $   217,290,808
                                                     ----------------- ----------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased,
    at market value                                  $     27,451,053  $    11,723,172
  Accrued compensation, accounts payable
    and accrued expenses                                   75,253,863       46,296,949
  Loan payable                                                      -       15,000,000
  Income taxes payable                                      7,523,042        2,275,481
                                                     ----------------- ----------------

          Total liabilities                               110,227,958       75,295,602
                                                     ----------------- ----------------


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 17,833,201 shares at
   February 29, 2000 and 14,343,201 at May 31, 1999           178,331          143,432
  Additional paid-in capital                              170,945,112       65,828,938
  Retained earnings                                       124,757,399       80,181,611
                                                     ----------------- ----------------

                                                          295,880,842      146,153,981
  Less: Treasury stock - at cost, 342,469 shares
    at February 29, 2000 and 348,277 shares
    at May 31, 1999                                        (4,089,428)      (4,158,775)

                                                     ----------------- ----------------
          Total stockholders' equity                      291,791,414      141,995,206
                                                     ----------------- ----------------

          Total liabilites and stockholders' equity  $    402,019,372  $   217,290,808
                                                     ----------------- ----------------

</TABLE>

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


                                        3
<PAGE>

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

                                                              Three Months Ended                 Nine Months Ended
                                                   -------------------------------------  ----------------------------------
                                                   February 29, 2000  February 28, 1999 February 29, 2000  February 28, 1999
                                                   -----------------  ----------------- -----------------  -----------------


<S>                                                  <C>               <C>               <C>             <C>
  Firm securities transactions, net                  $    111,562,702  $    46,403,425   $  196,832,463  $  97,192,841
  Commission income                                        21,894,280       12,593,098       47,963,074     30,992,390
  Interest and dividends                                    6,046,455        2,511,806       15,592,953      7,029,751
  Fee income                                                1,685,284        1,148,465        4,494,002      3,042,604
  Other                                                        24,374        1,215,523          207,328      2,741,227
                                                     ----------------- ----------------  --------------- --------------

       Total revenue                                      141,213,095       63,872,317      265,089,820    140,998,813
                                                     ----------------- ----------------  --------------- --------------

Expenses:
  Compensation and benefits                                60,241,366       24,213,932      105,245,469     52,739,223
  Clearing and related brokerage charges                   21,785,445       12,314,508       47,027,332     32,300,912
  Communications                                            5,481,488        4,022,593       13,847,322     11,355,981
  Selling and marketing:
    Advertising and marketing costs                         5,492,180        1,323,879       19,574,875      3,917,130
    Sales-related travel and entertainment                    867,199          384,177        2,224,985      1,102,051
  Technology development and other related costs:
    Depreciation and amortization                           5,104,912        2,687,453       11,791,726      6,174,867
    Equipment rental                                          739,286          158,547        1,949,766        420,144
    Technology consulting                                   1,019,889          840,027        3,844,118      1,410,650
    Repairs and maintenance                                 1,017,454          546,295        2,631,240      1,670,119
  Other:
    Professional fees                                         467,749          855,864        1,581,559      2,776,231
    Occupancy costs                                         1,677,338          626,135        5,098,768      1,895,611
    Other                                                   2,113,121        1,409,330        6,120,561      3,720,115
                                                     ----------------- ----------------  --------------- --------------

       Total expenses                                     106,007,427       49,382,740      220,937,721    119,483,034
                                                     ----------------- ----------------  --------------- --------------

   Income from continuing operations
     before income taxes                                   35,205,668       14,489,577       44,152,099     21,515,779

   Income taxes (benefit):
        Federal, currently payable                         11,223,301        4,636,960       13,523,165      6,783,295
        State and local, currently payable                  5,173,198        2,415,400        7,349,270      3,625,359
                                                     ----------------- ----------------  --------------- --------------

                  Total current income tax expense         16,396,499        7,052,360       20,872,435     10,408,654
                                                     ----------------- ----------------  --------------- --------------


        Federal, deferred                                    (392,079)        (225,625)        (198,455)      (302,034)
        State and local, deferred                             (29,715)         (86,457)        (498,706)      (122,582)
                                                     ----------------- ----------------  --------------- --------------

                  Total deferred income tax benefit          (421,794)        (312,082)        (697,161)      (424,616)
                                                     ----------------- ----------------  --------------- --------------


           Total income taxes from continuing operations   15,974,705        6,740,278       20,175,274      9,984,038
                                                     ----------------- ----------------  --------------- --------------


   Net  income from continuing operations                  19,230,963        7,749,299       23,976,825     11,531,741
                                                     ----------------- ----------------  --------------- --------------


   Discontinued operations:
     Income from discontinued operations,
        net of taxes                                                -          422,350           82,994      1,187,998
     Gain on sale of discontinued operations,
        net of taxes                                                -                -       20,515,969              -
                                                     ----------------- ----------------  --------------- --------------

                                                                    -          422,350       20,598,963      1,187,998
                                                     ----------------- ----------------  --------------- --------------

   Net income                                        $     19,230,963  $     8,171,649   $   44,575,788  $  12,719,739
                                                     ----------------- ----------------  --------------- --------------

</TABLE>

                                   (Continued)
                                        4
<PAGE>

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

<TABLE>
<CAPTION>


                                                              Three Months Ended                 Nine Months Ended
                                                   ------------------------------------  ----------------------------------

                                                   February 29, 2000  February 28, 1999 February 29, 2000 February 28, 1999

                                                   -----------------  ----------------  --------------- -------------------

<S>                                                   <C>             <C>                <C>             <C>
   Other comprehensive income (loss), before tax:
      Unrealized (gain) loss on investment securities
      available for sale:
         Unrealized holding gains (losses) arising
         during period                                $             - $        249,577   $            -  $     (159,446)
         Less: reclassification adjustment for gains
         included in net-income                                     -         (744,652)               -      (2,173,517)
                                                      ---------------- ----------------  --------------- --------------

  Other comprehensive loss before tax                               -         (495,075)               -      (2,332,963)
   Income tax benefit related to items of other
     comprehensive income (loss)                                    -         (353,676)               -      (1,073,163)
                                                     ----------------- ----------------  --------------- --------------


   Other comprehensive income (loss), net of tax                    -         (141,399)               -     (1,259,800)
                                                     ----------------- ----------------  --------------- --------------


   Comprehensive income                              $     19,230,963  $     8,030,250   $   44,575,788  $  11,459,939
                                                     ----------------- ----------------  --------------- --------------




   Net  income per common and potential
      common share  (a)
     Basic:
        Net  income from continuing operations       $           1.12  $          0.55   $         1.43  $        0.82
        Net income from discontinued operations,
          net of taxes                                           0.00             0.03             0.00           0.09
        Gain on sale of discontinued operations,
          net of taxes                                           0.00             0.00             1.23           0.00
                                                     ----------------- ----------------  --------------- --------------

            Net income                               $           1.12  $          0.58   $         2.66  $        0.91
                                                     ----------------- ----------------  --------------- --------------

Weighted average common shares outstanding                 17,115,134       14,001,718       16,766,429     14,028,253
                                                     ----------------- ----------------  --------------- --------------


     Diluted:
        Net  income from continuing operations       $           1.10  $          0.55   $         1.41  $        0.82
        Net income from discontinued operations,
          net of taxes                                           0.00             0.03             0.00           0.08
        Gain on sale of discontinued operations,
          net of taxes                                           0.00             0.00             1.21           0.00
                                                     ----------------- ----------------  --------------- --------------

            Net income                               $           1.10  $          0.58   $         2.62  $        0.90
                                                     ----------------- ----------------  --------------- --------------


Weighted average common shares outstanding                 17,410,172       14,204,529       17,037,933     14,101,184
                                                     ----------------- ----------------  --------------- --------------


<FN>
(a)  The sum of the  individual  quarters'  earnings  per common  share does not
     equal the total  amount for the nine  months  ended  February  29,  2000 or
     February  28, 1999 due to the effect of  averaging  the number of shares of
     potential common stock throughout the year.
</FN>

</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>

                                                                   Nine Months Ended
                                                     ------------------------------------------
                                                      February 29, 2000      February 28, 1999
                                                     -------------------    -------------------
 Cash flows from operating activities:

<S>                                                  <C>               <C>
  Net income from continuing operations              $     23,976,825  $    11,531,741
  Net income from discontinued operations                      82,994        1,187,998
  Gain on sale of discontinued operations, net of
  taxes                                                     20,515,969               -

 Non-cash items included in net income:
  Depreciation and amortization                            11,791,726        6,761,554
  Gain on sale of securities available for sale                     -       (2,173,517)
  Gain on sale of securities not readily marketable                 -          419,967
  Loss of Equitrade allocated to minority partners                  -          122,574
  Provision for deferred taxes                               (697,161)        (424,615)
  Provision for losses on notes receivable                          -          102,865

 (Increase) decrease in operating assets:
  Receivables:
    Clearing brokers                                      (62,360,361)     (36,120,318)
    Other                                                    (865,746)        (440,253)
  Securities owned, at market value                       (38,047,322)      (8,934,558)
  Other assets                                             (2,086,447)          72,335

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at market value      15,727,881        9,322,287
  Accrued compensation, accounts payable and accrued
  expenses                                                 28,956,914       12,284,124
  Income taxes payable                                      5,210,838        2,055,277
(Increase) decrease in operating assets due to sale of
  Equitrade:
    Investment in discontinued operations                  28,341,746                -
    Exchange membership                                       351,496                -
                                                     ----------------- ----------------


     Net cash provided by (used in) operating activities   30,899,352       (4,232,539)
                                                     ----------------- ----------------


 Cash flows from investing activities:

  Net purchases of U.S. Treasury obligations              (42,482,357)         (34,824)
  Proceeds from sale of securities available for sale               -        2,173,517
  Purchase of investment securities not readily marketable   (100,000)              -                     -
  Proceeds from sale of securities not readily marketable           -           80,033
  Notes issued                                               (160,000)        (906,000)
  Principal collected on notes receivable                   1,061,261          464,890
  Net purchases of furniture, fixtures,
    equipment and leasehold improvements                  (10,183,711)      (1,573,104)
  Deposits made on furniture, fixtures, equipment,
    leasehold improvements and computer software          (23,704,168)          (5,000)
  Purchases of computer software                           (5,677,566)      (2,453,332)
  Payment for purchase of intangible asset                          -         (450,000)
  Issuance of subordinated notes receivable                         -       (3,500,000)
  Principal collected on subordinated notes receivable     27,000,000          897,938
                                                     ----------------- ----------------


     Net cash used in investing activities           $    (54,246,541) $    (5,305,882)
                                                     ----------------- ----------------
</TABLE>



                                   (Continued)
                                        6
<PAGE>


             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)

<TABLE>
<CAPTION>

                                                              Nine Months Ended
                                                     ----------------------------------

                                                     February 29, 2000 February 28, 1999
                                                     ----------------- ----------------
<S>                                                  <C>               <C>
 Cash flows from financing activities:

  Proceeds from loan payable                         $              -  $     15,000,000
  Repayment of loan                                       (15,000,000)               -
  Proceeds from issuance of common stock                  105,103,949                -
  Proceeds from exercise of options                           153,194          606,978
  Purchase of treasury stock                                        -       (3,231,647)
  Capital contributions by minority interest                        -          362,527
  Capital withdrawals by minority interest                          -       (2,263,057)
                                                     ----------------- ----------------


     Net cash provided by financing activities             90,257,143       10,474,801
                                                     ----------------- ----------------


 Net increase in cash and cash equivalents                 66,909,954          936,380

 Cash and cash equivalents at beginning of period             411,629        1,039,121
                                                     ----------------- ----------------


 Cash and cash equivalents at end of period          $     67,321,583  $     1,975,501
                                                     ----------------- ----------------
</TABLE>





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

 Between July 1999 and February 2000, various employees of the Company exercised
 an aggregate of 5,808 options for the purchase of 5,808 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 $36,723, which has been utilized to reduce the Company's current
 liability for income taxes.





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



                                        7
<PAGE>




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

                                February 29, 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 Sherwood  Securities
Corp.  ("Sherwood  Securities").  NDB Group and its  subsidiaries,  collectively
referred to as the "Company",  are primarily engaged in the securities  business
and in providing related financial services.

     NDB Group and another wholly owned subsidiary,  SHD Corporation  ("SHD"),
also owned membership  interests in Equitrade Partners, L.L.C.,  a Delaware
limited  liability  company  ("Equitrade").  Equitrade was a registered
specialist on the New York Stock Exchange ("NYSE").  On June 18, 1999,  the
Company sold its 46.845%  membership  interest in Equitrade to a subsidiary of
Spear Leeds & Kellogg, L. P. for cash.  See Note 7, "Discontinued Operations".

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 1999 Annual
Report on Form  10-K.  Certain  prior year  amounts  have been  reclassified  to
conform to the three and nine months ended February 29, 2000 presentations.

Note 3 - Net income per common share

     SFAS No. 128, Earnings Per Share, requires a dual presentation of basic and
diluted earnings per share ("EPS").  Basic EPS excludes dilution and is computed
by  dividing  net  income  by  the  weighted-average  number  of  common  shares
outstanding for the period.  Diluted EPS reflects the potential reduction in EPS
that could occur if  securities  or other  contracts  to issue common stock were
exercised  or  converted  into  common  stock.  The  treasury  stock  method  of
accounting was used in computing  potential  common stock for the computation of
diluted earnings per common share.

Note 4 - Sale of Common Stock

      On February 7, 2000,  NDB Group sold an aggregate of 500,000 shares of its
common  stock in a private  offering  to  Go2Net,  Inc.  ("Go2Net")  and  Vulcan
Ventures Incorporated ("Vulcan") for $13,500,000.

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,  1999,  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.

                                       8
<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.  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, 1999 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 Sherwood  Securities
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, 1999, WPG and Sherwood  Securities agreed
to non-binding  mediation by the NASD. A mediation session was held on September
24, 1999. The attempted mediation was not successful. A three person arbitration
panel has been appointed and the parties have exchanged  discovery  requests and
responses. Sherwood Securities, 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,  Sherwood Securities and NDB.com are subject
to the  Securities  Exchange  Act of 1934  Uniform Net Capital  Rule 15c3-1 (the
"Rule").  As of February 29, 2000,  the net capital of Sherwood  Securities  and
NDB.com  exceeded their required net capital under the Rule by $104,117,000  and
$8,857,000, 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 February  29,  2000,  the payment of
dividends  and  advances to the Company by  Sherwood  Securities  and NDB.com is
limited to $103,917,000 and $8,807,000, 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, as well as gains recognized
from proprietary trading positions. Sherwood Securities 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 and realized  gains/losses  on securities  available for
sale.

     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.


                                       9

<PAGE>

<TABLE>
<CAPTION>

                                                    Three Months Ended February 29, 2000
                                          Discount        Market
                                         Brokerage        Making         All Other         Total
<S>                                    <C>             <C>              <C>             <C>
Revenue from external sources          $29,993,000     $109,807,000     $ 1,413,000     $141,213,000
Intersegment revenue                     1,415,000                -         110,000        1,525,000
                                       -----------     ------------     -----------     ------------
Total revenue                          $31,408,000     $109,807,000     $ 1,523,000     $142,738,000
                                       -----------     ------------     -----------     ------------
Profit (loss) before income taxes      $ 2,493,000    $  34,166,000    $(1,454,000)    $  35,205,000
Capital expenditures (1)               $11,025,000    $     499,000    $ 5,035,000     $  16,559,000
</TABLE>
<TABLE>
<CAPTION>


                                                    Three Months Ended February 28, 1999
                                         Discount        Market
                                         Brokerage       Making           All Other        Total
<S>                                    <C>             <C>               <C>            <C>
Revenue from external sources          $14,790,000     $48,073,000       $ 1,009,000    $63,872,000
Intersegment revenue                     1,974,000          25,000           775,000      2,774,000
                                       ------------   ------------     --------------  ------------
Total revenue                          $16,764,000     $48,098,000      $  1,784,000    $66,646,000
                                       -----------     -----------      -------------   -----------
Profit (loss) before income taxes      $ 1,333,000     $16,869,000      $ (3,713,000)   $14,489,000
Capital expenditures (1)               $ 1,430,000     $   728,000      $   (272,000)   $ 1,886,000

</TABLE>
<TABLE>
<CAPTION>


                                                    Nine Months Ended February 29, 2000
                                          Discount         Market
                                          Brokerage        Making           All Other       Total
<S>                                    <C>              <C>              <C>             <C>
Revenue from external sources          $ 62,126,000     $198,026,000     $  4,938,000    $265,090,000
Intersegment revenue                      5,229,000            5,000          432,000       5,666,000
                                       --------------   -------------    --------------  ------------
Total revenue                          $ 67,355,000     $198,031,000     $  5,370,000    $270,756,000
                                       ------------     ------------     ------------    ------------
Profit (loss) before income taxes      $ (8,003,000)    $ 52,415,000     $   (260,000)   $ 44,152,000
Capital expenditures (1)               $ 22,250,000     $  5,566,000     $ 11,750,000    $ 39,566,000
</TABLE>
<TABLE>
<CAPTION>


                                                    Nine Months Ended February 28, 1999
                                          Discount       Market
                                          Brokerage      Making             All Other        Total
<S>                                    <C>             <C>               <C>            <C>
Revenue from external sources          $37,386,000     $100,862,000      $ 2,751,000    $140,999,000
Intersegment revenue                     4,810,000           93,000        1,962,000       6,865,000
                                       -----------     ------------       -----------   ------------
Total revenue                          $42,196,000     $100,955,000      $ 4,713,000    $147,864,000
                                       -----------     ------------      ------------   ------------
Profit (loss) before income taxes      $(1,191,000)    $ 24,914,000      $(2,207,000)   $ 21,516,000
Capital expenditures (1)               $ 2,615,000     $  2,084,000      $  (218,000)   $  4,481,000
<FN>
(1) - includes deposits made on assets not yet placed in service.
</FN>
</TABLE>


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

                                                Three Months Ended                Nine Months Ended
                                           February 29,     February 28,     February 29,      February 28,
                                               2000             1999             2000              1999
                                               ----             ----             ----              ----
<S>                                      <C>               <C>              <C>              <C>
Total profit before income taxes
   for reportable segments               $ 36,659,000      $  18,202,000    $ 44,412,000     $   23,723,000
Other loss                                 (1,454,000)        (3,713,000)       (260,000)        (2,207,000)
                                         -------------     -------------    -------------    ---------------

Total consolidated profit before
   income taxes                          $ 35,205,000      $   14,489,000   $ 44,152,000     $   21,516,000
                                         ------------      --------------   ------------     --------------
</TABLE>

                                       10
<PAGE>

Note 8 - Discontinued Operation

     On June 18,  1999,  the  Company  sold its 46.845%  membership  interest in
Equitrade.  As  such,  the  operations  of  Equitrade  have  been  reflected  in
discontinued  operations for all periods reported.  Revenue and expenses for the
nine months ended February 29, 2000 applicable to this  discontinued  operation,
prior  to  the   allocation  of  minority   interest  and  income  taxes,   were
approximately $1,728,000 and $1,570,000,  respectively,  and for the nine months
ended  February  28,  1999  were   approximately   $6,898,000  and   $5,311,000,
respectively.  The gain on the sale was approximately $20,516,000,  net of taxes
and other expenses directly related to the sale.

Note 9 - Subsequent Events

      During March 2000,  warrants to purchase an aggregate of 500,000 shares of
NDB Group's common stock were  exercised by Go2Net and Vulcan.  NDB Group issued
130,000  shares  of its  common  stock to  Go2Net  at $33 per  share  upon  such
exercise. Vulcan's exercise of its warrants covering 370,000 shares of NDB Group
common  stock  is  subject  to  review  under  the  Hart-Scott-Rodino  Antitrust
Improvements Act. Vulcan's warrant is exercisable for $12,210,000.

      Effective March 27, 2000, Sherwood Securities Corp. changed its name to
NDB Capital Markets Corporation.

     On March  28,  2000,  the  Company  announced  that it had  entered  into a
non-binding  letter of intent (the "Letter") with Deutsche Bank Americas Holding
Corporation  ("DB") pursuant to which the Company would sell 3,000,000 shares of
its common stock to DB or one of its designated  affiliates for $45.31 per share
(the "Investment").

     The Letter,  in  addition,  provides  that DB and the  Company  propose the
following actions:  (i) the negotiation and execution of a definitive  agreement
relating to the Investment, (ii) coincident with the Investment, the negotiation
of the principal  terms (and binding  agreement with respect to exclusivity  and
non-competition)  with respect to a joint venture to be owned 25% by the Company
and 75% by DB or one or more of its  affiliates  with respect to the offering of
on-line discount equity  brokerage in Western Europe;  (iii) coincident with the
Investment,  the negotiation of the principal terms (and binding  agreement with
respect to mutual exclusively and  non-competition)  with respect to a worldwide
joint venture  (excluding  Western Europe and the United State) 50% owned by the
Company and 50% owned by DB or one or more of its affiliates (subject to certain
conditions) with respect to the offering of on-line  discount equity  brokerage;
(iv)  coincident  with  the  Investment,  the  negotiation  and  execution  of a
definitive  agreement with respect to the Company or one of its affiliates being
a distributor of initial public offerings of equity securities in the U.S. if DB
or one of its  affiliates is an  underwriter of the securities and wishes to use
the internet as a distribution  channel, and (v) coincident with the Investment,
the negotiation and execution of a definitive  agreement for the distribution of
certain research  prepared by DB to customers of the Company or its subsidiaries
in the United States.

     The  transactions  are  subject to several  conditions  including,  but not
limited to, the  approval of the Board of Directors of DB, the Board of Managing
Directors  of  Deutsche  Bank AG and the  Board  of  Directors  of the  Company,
regulatory approvals and filings and other matters.

     DB would be subject to certain standstill  provisions  regarding purchasing
additional voting stock of the Company, conducting proxy contests and the voting
of its shares of the Company and would have certain  registration,  antidilution
and veto rights described in the Letter.

     The  parties  to  the  Letter  have  agreed  to  certain   limitations   on
negotiations  and  other  matters  with  third  parties  regarding   alternative
transactions  until  the  execution  of a  definitive  agreement  regarding  the
Investment.

     The foregoing is a summary of the Letter and is not complete.  There can be
no  assurance  that  the  transactions   contemplated  by  the  Letter  will  be
consummated.

                                       11

<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 deep discount
brokerage  firm  specializing  in  trade  execution  for  individual  investors.
Sherwood  Securities Corp.  ("Sherwood  Securities") is primarily engaged in the
securities business as a wholesale market maker in NASDAQ National Market System
and other over-the-counter securities.

Results of Operations

     The results of continuing  operations of the Company for the three and nine
months ended  February 29, 2000 reflect  primarily the activities of NDB.com and
Sherwood Securities.

     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 activities,  volatility in the securities markets, our ability
to attract and retain  personnel,  overhead  and other  expenses,  the amount of
revenue derived from limit orders as a percentage of net trading  revenues,  the
mix of products 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  sustain  our  profitability  on a
quarterly basis.

     On June 18,  1999,  NDB Group and its wholly owned  subsidiary,  SHD Corp.,
sold their 46.845% aggregate membership  interests in Equitrade Partners,  L.L.C
("Equitrade").  As a result,  the results of operations  of Equitrade  have been
segregated   and   reflected  as   discontinued   operations  in  the  Condensed
Consolidated  Statements of Income and Comprehensive Income. For the nine months
ended  February  29,  2000,  the  Company has  recognized  a gain on the sale of
Equitrade of $20,516,000,  net of taxes and other expenses  directly  related to
the sale.

     The Company's  consolidated  net income from continuing  operations for the
quarter ended February 29, 2000 was  $19,231,000  compared to $7,749,000 for the
quarter ended  February 28, 1999, an increase of  $11,482,000  or 148%.  For the
three months ended  February 29,  2000,  Sherwood  Securities  had net income of
$18,808,000  compared to net income of  $9,277,000  for the three  months  ended
February 28, 1999.  NDB.com had net income of  $1,436,000  for the quarter ended
February  29,  2000,  compared to net income of $786,000  for the quarter  ended
February 28, 1999.

                                       12
<PAGE>

     The Company's  consolidated  net income from continuing  operations for the
nine months ended February 29, 2000 was $23,977,000  compared to $11,532,000 for
the nine months ended February 28, 1999, an increase of $12,445,000 or 108%. For
the nine months ended February 29, 2000,  Sherwood  Securities had net income of
$28,661,000  compared to net income of  $13,746,000  for the nine  months  ended
February  28,  1999.  NDB.com had a net loss of  $4,607,000  for the nine months
ended February 29, 2000,  compared to a net loss of $763,000 for the nine months
ended February 28, 1999.

     Total  revenue  from  continuing  operations  of the Company  increased  by
$77,341,000,  or 121%, for the three months ended February 29, 2000, as compared
with the quarter ended  February 28, 1999, and increased  $124,091,000,  or 88%,
for the nine months ended  February 29, 2000,  as compared  with the nine months
ended February 28, 1999. Total revenue for Sherwood  Securities was $109,807,000
(or $23.29 per trade) and  $198,031,000  (or $19.89 per trade) for the three and
nine months ended  February 29, 2000,  respectively,  as compared to $48,098,000
(or $28.03 per trade) and  $100,955,000  (or $24.41 per trade) for the three and
nine months ended  February 28, 1999,  respectively.  Total  revenue for NDB.com
(before  elimination of the rebate  received from Sherwood  Securities for order
flow) was  $31,408,000  (or $31.70 per  trade)  and  $67,355,000  (or $31.31 per
trade) for the three and nine months ended February 29, 2000,  respectively,  as
compared to  $16,764,000  (or $30.12 per trade) and  $42,196,000  (or $31.31 per
trade) for the three and nine months ended February 28, 1999, respectively.  The
reasons for the changes in total revenues are set forth below.

     Revenue from firm securities transactions,  primarily generated by Sherwood
Securities,  increased by $65,159,000, or 140%, and by $99,640,000, or 103%, for
the three and nine months ended  February 29,  2000,  respectively,  as compared
with the equivalent periods in fiscal 1999. The increased activity in the equity
markets,  particularly  trading volume in internet,  high technology and biotech
related stocks,  resulted in increases in Sherwood  Securities' ticket and share
volume, respectively, for the quarter and nine months ended February 29, 2000 as
compared to the same  periods a year ago.  Sherwood  Securities  market share in
terms of share volume  increased  over the prior year periods,  as well,  and in
fact,  Sherwood  Securities  was ranked as the sixth largest  NASDAQ/OTC  market
maker by AutEx in terms of share volume for the three months ended  February 29,
2000.  These  increases in ticket and share volume were more than enough to make
up for decreases in the trading profits per ticket.
<TABLE>
<CAPTION>


                                             Three Months Ended
                                   February 29,          February 28,            Percentage
                                        2000                 1999                  Change
                                        ----                 ----                  ------
<S>                                    <C>                  <C>                      <C>
Trading profit per ticket              $22.82               $27.33                   (17%)
Average daily batched trades           76,100               28,600                   166%
Share volume (billions)                   5.7                  2.2                   159%
Average number of shares per
ticket                                  1,200                1,200                     0%

</TABLE>
<TABLE>
<CAPTION>

                                              Nine Months Ended
                                   February 29,          February 28,             Percentage
                                       2000                  1999                   Change
                                       ----                  ----                   ------
<S>                                   <C>                   <C>                      <C>
Trading profit per ticket             $19.37                $23.63                   (18%)
Average daily batched trades          52,400                22,000                   138%
Share volume (billions)                 11.2                   5.3                   111%
Average  number of shares per
ticket                                 1,120                 1,280                   (13%)

</TABLE>

     In addition to the above,  NDB.com recognized  approximately  $4,000,000 in
revenue from firm securities  transactions during the quarter ended February 29,
2000 reflecting gains from proprietary trading positions.

     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 $9,301,000,  or 74%, and by
$16,971,000,  or 55%,  for the three and nine months  ended  February  29, 2000,
respectively,  when  compared  with the same  periods in the prior  year.  These
increases   occurred  primarily  due  to  a  rise  in  NDB.com's  average  daily
commissionable  ticket count.  Increases in the volume of  transactions  for the
U.S. equity markets and an increase in the number of NDB.com's customer accounts
led to the rise in NDB.com's ticket count.


                                       13
<PAGE>

<TABLE>
<CAPTION>

                                                       Three Months Ended
                                               February 29,        February 28,          Percentage
                                                   2000                1999                Change
                                                   ----                ----                ------
<S>                                              <C>                 <C>                     <C>
Average daily commissionable trades               16,000               9,300                 72%
Average number of customers                      193,200             121,700                 59%
Average trades per customer                          5.1                 4.6                 11%
Percentage of trades on-line                          77%                 60%                28%
</TABLE>

<TABLE>
<CAPTION>
                                                       Nine Months Ended
                                               February 29,        February 28,          Percentage
                                                   2000                1999                Change
                                                   ----                ----                ------
<S>                                              <C>                 <C>                     <C>
Average daily commissionable trades               11,300               7,200                 57%
Average number of customers                      174,500             113,400                 54%
Average trades per customer                         12.3                11.9                  3%
Percentage of trades on-line                          75%                 58%                29%
</TABLE>


     Interest  and  dividend  income  increased  by  $3,535,000,  or  141%,  and
$8,563,000,  or 122%,  for the three and nine months  ended  February  29, 2000,
respectively, as compared to the same periods in the prior year. These increases
are due principally to two factors.  First, there were larger average amounts of
cash available to earn interest. This was primarily due to the Company taking in
aggregate cash of approximately $190,000,000 in connection with the underwritten
public  offering of its common stock that closed on June 25,  1999,  the sale of
its membership interests in Equitrade on June 18, 1999 and the private placement
of  500,000  shares of its common  stock on  February  7,  2000,  net of capital
expenditure  cash outflows.  In addition,  the average customer debit and credit
balances that are held with NDB.com's clearing broker continued to rise.

     Fee  income  generated  by  NDB.com  increased  by  $537,000,  or 47%,  and
$1,452,000,  or 48%,  for the three and nine months  ended  February  29,  2000,
respectively,  as compared to the same periods in the prior year.  The increases
are 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.

     Total  expenses  for the three months  ended  February  29, 2000  increased
approximately  $56,624,000,  or 115%,  from  $49,383,000  in the  quarter  ended
February 28, 1999 to  $106,007,000  during the quarter ended  February 29, 2000.
Total   expenses  for  the  nine  months  ended   February  29,  2000  increased
approximately  $101,455,000,  or 85%, from  $119,483,000  during the nine months
ended February 28, 1999 to $220,938,000 during the current year. The reasons for
the changes in expenses are set forth below.

    Compensation   and  benefits   increased  by   $36,027,000,   or  149%,  and
$52,506,000,  or 100%,  for the three and nine months  ended  February 29, 2000,
respectively,  as compared  to the  equivalent  periods in the prior year.  As a
percentage of revenue,  employee  compensation  and benefits was 43% and 40% for
the three and nine months ended February 29, 2000, respectively,  versus 38% and
37% for the  comparable  periods in the prior fiscal year. The increases in this
expense were  primarily due to a rise in  compensation  to Sherwood  Securities'
traders and salesmen  resultant  from the increase in Sherwood  Securities'  net
trading revenue and profitability.  Further,  Sherwood  Securities'  traders are
compensated based on a tiered commission rate schedule, wherein they earn higher
rates of  commissions  as the profits they generate  increase.  Thus,  the large
increase  in trading  profits  in the  current  period  versus in the prior year
period led, in large part,  to the  increase in  compensation  and benefits as a
percentage of revenue.  Similarly,  based on the increasing profitability of the
Company, management and employee bonuses have increased.  Finally, the number of
employees  increased to 737 for the Company as of February 29, 2000, from 552 as
of  February  28,  1999.  The  increase in  employees  was  necessitated  by the
significant  increase in trade volume and  technological  needs that the Company
has  experienced  over the last  year.  The  Company  expects  compensation  and
benefits  expense to continue to  increase in support of expected  increases  in
customer accounts and trading activity.

                                       14
<PAGE>

    Clearing and related brokerage charges increased by $9,471,000,  or 77%, and
$14,726,000,  or 46%,  for the three and nine months  ended  February  29, 2000,
respectively,  as compared to same periods in the prior year. As a percentage of
revenue, clearing and related brokerage charges decreased to 15% and 18% for the
three and nine months ended  February 29, 2000,  respectively,  from 19% and 23%
for the comparable  periods in fiscal 1999. The increase in clearing and related
charges for the three and nine months ended  February 29, 2000 was mainly due to
increases in Sherwood  Securities' and NDB.com's  ticket counts of 175% and 78%,
respectively,  for the  quarter  ended  February  29,  2000  and  140%  and 60%,
respectively,  for the nine months  ended  February 29, 2000 over the amounts in
the  comparable  periods  during  the prior  year.  Partially  offsetting  these
increases, and leading to the decrease in clearing and related brokerage charges
as a percentage of revenue,  were decreases in per ticket rates  negotiated with
NDB.com's clearing broker as of February 1999.

     Communications increased by $1,459,000, or 36%, and $2,491,000, or 22%, for
the three and nine months ended February 29, 2000, respectively,  as compared to
the same periods in the prior year.  The  increases  are mainly due to a rise in
the  aggregate  expense  associated  with  obtaining  market data and  quotation
services.  Usage of such services has increased as the number of users has risen
since the prior fiscal year.

     Advertising  costs increased by $4,168,000,  or 315%, and  $15,658,000,  or
400%,  for the three and nine months ended February 29, 2000,  respectively,  as
compared to the comparable  periods in the prior year. The Company advertises in
order to attract retail  accounts  directly to NDB.com as well as  institutional
and broker-dealer order flow directly to Sherwood Securities.  The increases are
due  to   additional   media  buys  and  the  costs  to  produce  new  lines  of
advertisements designed to strengthen NDB.com brand awareness and to put a focus
on its products and  services.  The Company  uses a  combination  of network and
cable television,  local radio and print media to attract new customers. NDB.com
also  attains  new  customers  through  its  affinity  and  business-to-business
relationship  programs.  Acquisition costs per customer account for NDB.com were
$187 and $294 for the three and nine months ended  February 29, 2000 as compared
to $112 and $137 for the three and nine months ended  February 28, 1999 based on
total advertising expenses for the Company. Increased media spending by NDB.com,
and by its competitors in the online brokerage industry,  has led to the overall
increases in the average cost to acquire an account.  NDB.com continues to focus
on attracting  further  affinity and  business-to-business  partnerships to help
abate these escalating acquisition costs.

     Sales-related travel and entertainment  increased by $483,000, or 126%, and
$1,123,000,  or 102%,  for the three and nine months  ended  February  29, 2000,
respectively,  as compared to the same periods in the prior year.  The increases
are  due  mainly  to  an  increase   in  the  number  of  Sherwood   Securities'
institutional and broker-dealer  sales personnel and additional  efforts by this
sales force to attract new customers and maintain existing relationships.

       Depreciation  and  amortization  increased  by  $2,418,000,  or 90%,  and
$5,617,000,  or 91%,  for the three and nine months  ended  February  29,  2000,
respectively,  as compared to the  equivalent  periods in the prior year.  These
increases can be attributed to two main factors. NDB.com and Sherwood Securities
incurred additional charges for the write-off of obsolete computer equipment and
software in connection with upgrades of their brokerage operations. NDB.com also
wrote off $2,225,000 (of an expected total  write-off of $4,500,000) in net book
value of  equipment,  software  and  leasehold  improvement  costs of  assets it
expects to abandon when it moves its  headquarters  from New York City to Jersey
City during the quarter ended May 31, 2000. Also contributing to the increase is
depreciation  and amortization  incurred on additional  fixed assets,  leasehold
improvements and computer software purchased by Sherwood  Securities and NDB.com
aggregating  approximately $5,423,000 and $9,881,000,  respectively,  during the
period from June 1999 through February 2000.

     Equipment rental costs increased by $580,000,  or 366%, and $1,530,000,  or
364%,  for the three and nine months ended February 29, 2000,  respectively,  as
compared to the same periods in the prior year. The Company has begun to lease a
larger portion of the equipment used in connection  with NDB.com's  WebstationTM
and Sherwood Securities' trading operations as the useful lives for much of this
equipment has decreased due to the rapidly changing technologies involved.

     Technology   consulting   expense  increased  by  $180,000,   or  21%,  and
$2,433,000,  or 173%,  for the three and nine months  ended  February  29, 2000,
respectively,  as compared  to the  comparable  periods in the prior  year.  The
increases are primarily due to rising fees paid to  consultants in order to test
and maintain  NDB.com's  website and Sherwood  Securities'  proprietary  trading
system.

                                       15
<PAGE>


     Repairs and maintenance costs increased by $471,000,  or 86%, and $961,000,
or 58%, for the three and nine months ended February 29, 2000, respectively,  as
compared to the same periods in the prior year. These  increases,  primarily for
NDB.com,  are  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 decreased by $388,000,  or 45%, and $1,195,000,  or 43%,
for the three and nine months ended February 29, 2000, respectively, as compared
to the  equivalent  periods in the prior  year,  primarily  due to a decrease in
legal fees.

     Occupancy costs increased by $1,051,000,  or 168%, and $3,203,000, or 169%,
for the three and nine months ended February 29, 2000, respectively, as compared
to the same periods in the prior year. The increases are  principally due to the
signing of two additional  leases for office  locations to house NDB.com and the
Company's forthcoming clearing operations.

      Other expenses increased by $704,000, or 50%, and $2,400,000,  or 65%, for
the three and nine months ended February 29, 2000, respectively,  as compared to
the equivalent  periods in the prior year. The increases are due primarily to an
increase  in fees  paid to  employment  agencies  for the  placement  of new and
temporary  employees,  and fees for training and  conferences  for  employees of
Sherwood  Securities  and  NDB.com.  The  remainder  of the  increases  in other
expenses is due to the overall growth in the volume of business and the increase
in staff size.

     The Company's  effective tax rate was approximately 45% for the three month
period  ended  February  29, 2000 as compared to 47% for the three  months ended
February 28, 1999 and was approximately 46% for both the nine month period ended
February 29, 2000 and the nine months ended February 28, 1999.

    For the three and nine months ended  February  29, 2000,  included in income
tax expense are deferred tax benefits of  approximately  $422,000 and  $697,000,
respectively.  These  deferred tax benefits  relate 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,  the Company has recorded a valuation
allowance of $244,000 because, in management's  judgment,  it was concluded that
it was more likely than not that a portion of the benefit may not be realized.


Liquidity

     The  Company's  tangible  assets are highly  liquid,  but subject to market
price  fluctuation,  with more  than 85%  consisting  of cash or assets  readily
convertible into cash  (principally  firm securities  positions,  U.S.  Treasury
obligations,  receivables from brokers and cash). 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 and its
interest in Equitrade.

     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,  Sherwood Securities and NDB.com, 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
February  29,  2000,   Sherwood   Securities   and  NDB.com  had   approximately
$104,117,000 and $8,857,000, respectively, in excess of the SEC required minimum
net capital.  The net capital rule imposes financial  restrictions upon Sherwood
Securities' and NDB.com's  businesses,  which are more severe than those imposed
on most other businesses.

                                       16
<PAGE>



     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 Sherwood Securities and NDB.com, which directly affects the amount of
funds available for operating, investing and financing activities.

  As a result of the sale of Equitrade on June 18,  1999,  the Company  received
approximately  $85,000,000  in net  cash  proceeds  comprised  principally  of a
pre-tax gain of approximately $42,000,000 (before a bonus to the Company's chief
executive  officer),  the return of capital of  approximately  $28,000,000,  the
repayment of subordinated  notes  receivable of $27,000,000 and the repayment of
other notes and interest receivable of approximately  $3,000,000. As part of the
sale, the Company also repaid its $15,000,000 loan to Spear, Leeds & Kellogg, LP
from the above mentioned proceeds.

  On June 25, 1999, NDB Group closed an underwritten seasoned public offering of
2,990,000  shares  of  its  common  stock,  which  resulted  in its  receipt  of
approximately  $91,600,000  in  proceeds,  net of  underwriters'  discounts  and
commissions and expenses related to the offering.

     On February 7, 2000,  NDB Group sold an aggregate of 500,000  shares of its
common  stock in a private  offering  to  Go2Net,  Inc.  ("Go2Net")  and  Vulcan
Ventures Incorporated ("Vulcan") for $13,500,000.

     The  Company's  capital  expenditures  were $39.6  million and $4.5 million
during  the  nine  months  ended  February  29,  2000  and  February  28,  1999,
respectively,  including  deposits  made on assets  not yet  placed in  service.
Capital  expenditures during the first nine months of fiscal 2000 were primarily
related to the expansion of Sherwood  Securities'  trading floor and offices and
the  build out of the new  facilities  at 90  Hudson  Street in Jersey  City for
NDB.com and Millennium  Clearing  Company,  L.L.C., as well as for the continued
upgrading of the Company's information technology systems and telecommunications
equipment.  The Company  expects that it will spend an additional  $10.9 million
during the last quarter of fiscal year 2000 in capital  expenditures for its new
facilities  (including the data center) at 90 Hudson Street for a total of $34.4
million.   Approximately   half   of   these   assets   are   expected   to   be
leased/depreciated  over an average life of 24 to 36 months in  accordance  with
the Company's leasing or, if purchased,  depreciation  policies.  The remainder,
representing leasehold improvements,  will be amortized over the 15-year term of
the 90 Hudson Street facilities lease. Moreover, the Company expects to spend an
additional  $4-$6  million in  capital  expenditures  on  ongoing  technological
improvements and product  enhancements  during the remaining quarter and intends
to finance these  upgrades,  as it did during the nine months ended February 29,
2000,  with funds received from the  underwritten  public offering of its common
stock that closed on June 25, 1999 and the sale of Equitrade. As NDB.com expends
money on new  technology  during the fourth fiscal  quarter of fiscal year 2000,
maintenance  costs (estimated at about 16% to 18% annually of the hardware costs
incurred) will increase in proportion to these capital  expenditures.  NDB.com's
relocation  to its new  facilities  at 90 Hudson  Street  has  commenced  and is
expected to be completed by mid-calendar year 2000.

     In  connection  with the move to 90 Hudson  Street from New York City,  the
Company  expects to abandon and write-off  approximately  $3 million in net book
value of equipment and related  software that will be incompatible  with the new
network and  production  platform  established at 90 Hudson Street and write-off
approximately  $1.5 million in net book value of leasehold  improvement costs at
its  current  locations  in New York City.  Approximately  $2.25  million of the
aforementioned assets were already written off during the quarter ended February
29, 2000 with the  remainder to be written off during the quarter  ended May 31,
2000.

      The Company expects to incur advertising  expense (included in selling and
marketing expenses) for the fiscal year ending May 31, 2000 of approximately $32
million, inclusive of next quarter's portion of amortized commitments related to
the   Go2Net   and   Yahoo!   marketing   associations,   but   absent  any  new
business-to-business   marketing  associations.   In  March  2000,  the  Company
commenced  its second  multi-media  (television,  radio and  print)  advertising
campaign  this year,  featuring  the tagline  "We Take You Under Our Wing",  and
emphasizing NDB.com's role in assisting and educating all levels of investors to
become self-directed investors through the various products and services NDB.com
offers,  such as NDB University and StockFinder.  NDB.com also continues to look
for   alternative    methods   of   account   acquisition   through   additional
business-to-business alliances. The Company expects account acquisition costs to
be  approximately  $300 to $400 per  account  for the fiscal year ending May 31,
2000 in connection with its multi-media  marketing  campaigns which commenced in
June 1999.

                                       17

<PAGE>

     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.


Year 2000 Compliance

     This  material  is  subject  to the Year  2000  Information  and  Readiness
Disclosure Act of 1998.

     State of Readiness. The Company prepared for the issues associated with the
year 2000,  including changes in the programming of internal and vendor computer
systems.  The year 2000 problem was  pervasive  and complex as  virtually  every
computer  operation was affected by the rollover of the two-digit  year value to
00.  The issue was  whether  computer  systems  would  properly  recognize  date
sensitive  information  when the year  changed to 2000.  Systems  that would not
properly  recognize such  information  could generate  erroneous data or cause a
system  to fail.  The  Company's  plan to deal  with the year  2000  issue was a
five-step  plan,   which  included  both  information   technology   ("IT")  and
non-information  technology ("non-IT") systems. IT systems include the Company's
trading system, the Company's accounting software and the NDB.com  WebstationTM.
Non-IT systems include the Company's headquarters' water, sprinkler and elevator
systems. The five steps were awareness, assessment,  renovation,  validation and
implementation.   Awareness   required  the   notification   to  all  employees,
particularly senior management,  of the potential year 2000 problem.  Assessment
included  taking  inventory of every product or service  produced or used by the
Company  that relied on the use of such dates.  The date could be used to store,
search,  retrieve or calculate information.  The awareness and assessment phases
of the plan were 100%  complete as of December 31, 1999.  Renovation,  which had
also been  completed as of December 31, 1999,  included the  conversion  of year
2000 non-compliant  systems into year 2000 compliant systems.  Internal software
and hardware identified as non-compliant were made compliant or replaced, in all
material respects,  as of December 31, 1999 and the Company internally  verified
compliance of its new NDB.com WebstationTM.  Validation comprised the testing of
all systems by using test data with dates that included the year 2000.  This was
the certification phase of the Company's  production  platforms.  Implementation
was a final  review of all year  2000  production  systems,  IT and  non-IT,  in
service.  The Company completed,  in all material  respects,  the validation and
implementation  phases. The Company is dependent upon services rendered by third
parties, such as  telecommunications,  electric and clearance,  which may have a
material effect on operations.  These essential service  providers  indicated to
the Company that they were year 2000 compliant.  The Company has not experienced
any year 2000  problems  with its  production  systems  through the date of this
report.

     Costs. Through February 29, 2000, the Company spent approximately  $488,000
for software  modifications,  hardware and testing related to year 2000 of which
$55,000 was incurred  during the quarter  ended  February 29, 2000.  The Company
does not track  internal  costs  related to year 2000  issues,  which  consisted
primarily  of  payroll   expenses  and,  as  a  result,   the  foregoing  actual
expenditures do not include such internal costs.

     Contingency  Plan.  Although the Company has formulated  contingency  plans
should internal systems, vendors or customers have failed to become compliant or
have  failed to operate as a result of year 2000  problems,  the Company did not
experience such occurrences.

                                       18

<PAGE>

Looking Ahead

     The Company  expects that it will spend an additional  $10.9 million during
the remaining  quarter of fiscal year 2000 in capital  expenditures  for its new
facilities  (including the data center) at 90 Hudson Street for a total of $34.4
million.  Moreover,  the Company expects to spend an additional $4-$6 million in
capital   expenditures  on  ongoing   technological   improvements  and  product
enhancements during the remaining quarter. NDB.com's relocation to its new space
at  90  Hudson  Street  has  commenced  and  is  expected  to  be  completed  by
mid-calendar year 2000.

      The Company expects to incur advertising  expense (included in selling and
marketing  expenses) of  approximately  $12.5 million for the fourth  quarter of
fiscal  year  ending  May 31,  2000,  inclusive  of next  quarter's  portion  of
amortized commitments related to the Go2Net and Yahoo!  marketing  associations,
but absent any new  business-to-business  marketing  associations.  For the year
ended May 31, 1999, the Company incurred approximately $5,876,000 in advertising
expense.   In  March  2000,  the  Company   commenced  its  second   multi-media
(television,  radio and print)  advertising  campaign  this year,  featuring the
tagline  "We Take  You  Under  Our  Wing",  and  emphasizing  NDB.com's  role in
assisting  and  educating  all  levels  of  investors  to  become  self-directed
investors through the various products and services NDB.com offers,  such as NDB
University  and  StockFinder.  NDB.com also  continues  to look for  alternative
methods  of  account   acquisition   through   additional   business-to-business
alliances.  The Company expects account  acquisition  costs to be  approximately
$300 to $400 per account  for the fiscal year ending May 31, 2000 in  connection
with its multi-media marketing campaigns which commenced in June 1999.

     During the fiscal year ending May 31, 2000,  Sherwood  Securities has added
and is expected to add an  aggregate of  approximately  60 new trading and sales
positions  to  its   facilities   nationwide,   bringing  the  total  number  to
approximately  310  nationwide.  It is also expected that the upcoming change to
decimalization  in the NASDAQ  trading  market  will  further  narrow the spread
between "bid" and "ask" prices on the stocks in which Sherwood  Securities makes
markets and may adversely affect profitability per ticket.  Management believes,
however,  that Sherwood  will be able to capitalize on the increased  volatility
and liquidity in the markets that decimalization may bring about.

     In connection with the growth of both Sherwood Securities and NDB.com,  the
Company's  employee  count has grown from 624 at May 31, 1999 to 737 at February
29, 2000.  The Company  intends to continue to expand its  workforce  during the
remainder of the current fiscal year and believes  competition  for employees in
the brokerage and technology fields will put upward pressure on average employee
compensation.  The Company also anticipates expanding NDB.com's customer service
and  trade  execution  representatives,  by 80-120  employees  over the next six
months, an increase of approximately 50% to 75%.

     The Company estimates that it will begin self-clearing NDB.com and Sherwood
Securities  transactions  by the end of calendar year 2000 through the Company's
wholly owned subsidiary, Millennium Clearing Company, L.L.C. 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 Sherwood Securities and
increase the interest spreads the Company earns on certain customer balances.

     On March  28,  2000,  the  Company  announced  that it had  entered  into a
non-binding  letter of intent (the "Letter") with Deutsche Bank Americas Holding
Corporation  ("DB") pursuant to which the Company would sell 3,000,000 shares of
its common stock to DB or one of its designated  affiliates for $45.31 per share
(the  "Investment").  A copy of the press release  announcing the transaction is
incorporated by reference to this Form 10-Q, as is the Letter.

     The Letter,  in  addition,  provides  that DB and the  Company  propose the
following actions:  (i) the negotiation and execution of a definitive  agreement
relating to the Investment, (ii) coincident with the Investment, the negotiation
of the principal  terms (and binding  agreement with respect to exclusivity  and
non-competition)  with respect to a joint venture to be owned 25% by the Company
and 75% by DB or one or more of its  affiliates  with respect to the offering of
on-line discount equity  brokerage in Western Europe;  (iii) coincident with the

                                     19
<PAGE>

Investment,  the negotiation of the principal terms (and binding  agreement with
respect to mutual exclusively and  non-competition)  with respect to a worldwide
joint venture  (excluding  Western Europe and the United State) 50% owned by the
Company and 50% owned by DB or one or more of its affiliates (subject to certain
conditions) with respect to the offering of on-line  discount equity  brokerage;
(iv)  coincident  with  the  Investment,  the  negotiation  and  execution  of a
definitive  agreement with respect to the Company or one of its affiliates being
a distributor of initial public offerings of equity securities in the U.S. if DB
or one of its  affiliates is an  underwriter of the securities and wishes to use
the internet as a distribution  channel, and (v) coincident with the Investment,
the negotiation and execution of a definitive  agreement for the distribution of
certain research  prepared by DB to customers of the Company or its subsidiaries
in the United States.

     The  transactions  are  subject to several  conditions  including,  but not
limited to, the  approval of the Board of Directors of DB, the Board of Managing
Directors  of  Deutsche  Bank AG and the  Board  of  Directors  of the  Company,
regulatory approvals and filings and other matters.

     DB would be subject to certain standstill  provisions  regarding purchasing
additional voting stock of the Company, conducting proxy contests and the voting
of its shares of the Company and would have certain  registration,  antidilution
and veto rights described in the Letter.

     The  parties  to  the  Letter  have  agreed  to  certain   limitations   on
negotiations  and  other  matters  with  third  parties  regarding   alternative
transactions  until  the  execution  of a  definitive  agreement  regarding  the
Investment.

     The foregoing is a summary of the Letter and is not complete.  There can be
no  assurance  that  the  transactions   contemplated  by  the  Letter  will  be
consummated.



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.

                                       20
<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 it  fails to  maintain  the  required  net  capital,  the SEC or the NASD may
suspend or revoke its 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 February 29, 2000 was $76.1  million in long
positions  and $27.5  million in short  positions.  The  potential  loss in fair
value,  using a  hypothetical  10% decline in prices,  is  estimated  to be $4.9
million  as of  February  29,  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 three
privately held corporations.  These investments were valued at their fair value,
$600,000 at February 29, 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 $60,000 as of February 29, 2000.

                                       21







<PAGE>


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,  1999,  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.

     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.  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, 1999,  Form 10-Q for the quarters
ended August 31, 1999 and November 30, 1999,  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 the matter of Weiss, Peck & Greer,  L.L.C. v. Sherwood Securities Corp.,
NASD Arbitration No.  99-01368,  an unsuccessful  mediation  session was held on
September 24, 1999. Subsequently, a three-person arbitration panel was appointed
and the parties have exchanged  discovery  requests and responses.  A hearing on
the merits is currently scheduled for the last two weeks of September 2000.

Item 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

     On February 5, 2000,  NDB Group issued  500,000  shares of its common stock
and warrants  convertible into an additional  500,000 shares of its common stock
in a private  placement  pursuant to Section 4(2) of the Securities Act of 1933,
as amended, and Rule 506 of Regulation D, thereunder.  The offer and sale of the
common stock and the warrants were to two  "accredited  investors" (as such term
is  defined  in Rule 501 of  Regulation  D).  The  proceeds  from the sale  were
$13,500,000.  Go2Net  purchased  130,000  share of NDB Group  common stock and a
warrant  to  purchase  130,000  shares of NDB Group  common  stock at $33.00 per
share.  Vulcan purchased  370,000 shares of NDB Group common stock and a warrant
to purchase  370,000  shares of NDB Group common stock at $33.00 per share.  The
warrants  may be  exercised  at any time prior to  February  5, 2003  except the
warrants terminate sooner if NDB Group notifies the holders of the warrants that
the  "market  price" (as defined in the  warrants)  for NDB Group  common  stock
equals or  exceeds  $33.00  for 18 of 21  consecutive  trading  days.  NDB Group
provided this notice to warrant  holders on March 23, 2000. Upon notice from NDB
Group,  the  warrants  terminate  ten days after  receipt by the  holders of the
warrants of the notice  provided the termination of the warrant would be delayed
if the  exercise of the warrant  requires  filings  under the  Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Such a filing is
required by Vulcan but not by Go2Net.  On March 28, 2000,  Go2Net  exercised its
warrant.  By  letter  dated  March  23,  2000,  Vulcan  notified  NDB  Group  it
irrevocably  exercised its warrant  subject to the waiting  period under the HSR
Act being terminated or expiring.





                                       22



<PAGE>


Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

                      Exhibit 4(a) - Press Release dated March 28, 2000 -
                                     incorporated by reference  to Exhibit 99(a)
                                     to the Company's  Form 8-K dated March 27,
                                     2000.

                      Exhibit 4(b) - Letter of Intent dated March 27, 2000
                                     between National Discount Brokers
                                     Group,  Inc. and Deutsche Bank Americas
                                     Holding Corporation - incorporated by
                                     reference to Exhibit 99(b) to the Company's
                                     Form 8-K dated March 27, 2000.

                      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
            February 29, 2000. The report,  dated February 5, 2000, was filed in
            regard to the Securities Purchase Agreement the Company entered into
            with Go2Net and Vulcan.



                                       23


<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: April 10, 2000                 By: Arthur Kontos
      ----------------------------         -------------------------------------
                                           Arthur Kontos
                                           Chief Executive Officer


      Date: April 10, 2000                 By: Daniel Fishbane
      -----------------------------        -------------------------------------
                                           Daniel Fishbane
                                           Chief Financial Officer and
                                           Principal Accounting Officer






















                                       24
<PAGE>






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

                                                            Three Months Ended                Three Months Ended
                                                            ------------------                ------------------
                                                                  Basic                           Diluted
                                                     ----------------------------------  -----------------------------------
                                                    February 29, 2000  February 28, 1999 February 29, 2000 February 28, 1999
                                                    ----------------- ------------------ -----------------  ----------------
<S>                                                        <C>              <C>              <C>               <C>
Common stock and potential common stock:
  Average common stock outstanding                         17,115,134       14,001,718       17,115,134        14,001,718
  Average potential common stock
    issuable under stock options                                    -          295,038                -           202,811
                                                     ----------------- ----------------  ---------------   ----------------


Total average common stock and potential common
  stock used for earnings per share computation            17,115,134       14,001,718       17,410,172        14,204,529
                                                     ----------------- ----------------  --------------- -  ---------------


Income:
    Net income from continuing operations            $     19,230,963  $     7,749,299   $   19,230,963     $   7,749,299
    Net income from discontinued operations,
      net of taxes                                                  -          422,350                -           422,350
    Gain on sale of discontinued operations,
      net of taxes                                                  -                -                -                 -
                                                     ----------------- ----------------  ---------------   ---------------


            Net income                               $     19,230,963  $     8,171,649   $   19,230,963     $   8,171,649
                                                     ----------------- ----------------  ---------------   ---------------

Net income per common and potential common share:
    Net income from continuing operations            $           1.12  $          0.55   $         1.10     $        0.55
    Net income from discontinued operations,
      net of taxes                                               0.00             0.03             0.00              0.03
    Gain on sale of discontinued operations,
      net of taxes                                               0.00             0.00             0.00              0.00
                                                     ----------------- ----------------  ---------------    --------------


            Net income                               $           1.12  $          0.58   $         1.10     $        0.58
                                                     ----------------- ----------------  ---------------    --------------
</TABLE>

<TABLE>
<CAPTION>


                                                                Nine Months Ended                  Nine Months Ended
                                                                -----------------                  -----------------
                                                                     Basic                             Diluted
                                                     ----------------------------------     ---------------------------------
                                                    February 29, 2000  February 28, 1999  February 29, 2000 February 28, 1999
                                                    -------------------------------------------------------------------------

<S>                                                     <C>               <C>                  <C>              <C>
Common stock and potential common stock:
  Average common stock outstanding                      16,766,429        14,028,253           16,766,429       14,028,253
  Average potential common stock
    issuable under stock options                                 -                 -              271,504           72,931
                                                     ----------------- ----------------   ---------------   --------------

Total average common stock and potential common
  stock used for earnings per share computation         16,766,429        14,028,253           17,037,933       14,101,184
                                                     ----------------- ----------------   ---------------   --------------

Income:
    Net income from continuing operations            $  23,976,825   $    11,531,741       $   23,976,825    $  11,531,741
    Net income from discontinued operations,
      net of taxes                                          82,994         1,187,998               82,994        1,187,998
    Gain on sale of discontinued operations,
      net of taxes                                      20,515,969                 -           20,515,969                -
                                                     ----------------- ----------------   ---------------   --------------


            Net income                               $  44,575,788  $     12,719,739       $   44,575,788    $  12,719,739
                                                     ----------------- ----------------   ---------------   --------------


Net income per common and potential common share (a):
    Net income from continuing operations            $        1.43  $           0.82       $         1.41   $        0.82
    Net income from discontinued operations,
      net of taxes                                            0.00              0.09                 0.00            0.08
    Gain on sale of discontinued operations,
      net of taxes                                            1.23              0.00                 1.21            0.00
                                                     ----------------- ----------------   ---------------  --------------


            Net income                               $        2.66  $           0.91       $         2.62   $        0.90
                                                     ----------------- ----------------   ---------------  --------------



<FN>

(a)  The sum of the  individual  quarters'  earnings  per common  share does not
     equal the total  amount for the nine  months  ended  February  29,  2000 or
     February  28, 1999 due to the effect of  averaging  the number of shares of
     potential common stock throughout the year.
</FN>
</TABLE>