October 7, 1997

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: The Sherwood Group, Inc.
      Report on Form 10-Q for the Three Months Ended August 31, 1997

Gentlemen:

Enclosed please find the following  material submitted on behalf of The Sherwood
Group, Inc. ("Company"):

One  complete  copy of the  Company's  report on Form 10-Q for the three  months
ended August 31, 1997 including financial statements and exhibits.

Thank you for your attention to this matter.

Very truly yours,

/s/Denise Isaac
Denise Isaac
Chief Financial Officer and
Principal Accounting Officer






                                                                     CONFORMED

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


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

                        For Quarter Ended August 31, 1997
                                     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

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


                               The Sherwood 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 bee
              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.

12,694,665 shares of Common Stock, par value $.01 per share, were outstanding
                            on September 30, 1997.





                           THE SHERWOOD GROUP, INC.
                             AND SUBSIDIARIES


                                   INDEX


                                                                          PAGE

                                                                        --------

Part I - Financial Information

Item 1. - Financial Statements

  Consolidated Statements of Financial Condition -
         August 31, 1997 (Unaudited)and May 31, 1997                        3

  Consolidated Statements of Income (Unaudited) -
         Three Months Ended August 31, 1997 and 1996                        4

  Consolidated Statements of Cash Flows (Unaudited) -
         Three Months Ended August 31, 1997 and 1996                      5 - 6

  Notes to Consolidated Financial Statements (Unaudited) -
         August 31, 1997                                                  7 - 8



Item 2. - Management's Discussion and Analysis of
          Financial Condition and Results of Operations                   9 - 12


Part II - Other Information

Item 6. - Exhibits and Reports on Form 8-K                                 13

Signatures                                                                 14



PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
               
                  THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>

                                                                  August 31,
                                                                     1997              May 31,
              ASSETS                                              (Unaudited)           1997

                                                            ---------------------------------------
<S>                                                         <C>                  <C>      
Cash                                                        $        1,479,263           3,033,818
Funds segregated for customers                                        -                     29,203
Receivables:
  Brokers and dealers                                               54,680,586          58,047,183
  Other                                                                582,041             599,725
Securities owned, at market value                                   49,015,276          45,696,436
Investment securities not readily marketable, at fair value            501,320             501,320
Investment in partnerships                                              12,984              12,984
Notes receivable                                                       810,450             830,589
Furniture, fixtures, equipment, and leasehold improvements - at
  cost, net of accumulated depreciation and amortization of $8,304,128
  at August 31, 1997 and $7,674,370 at May 31, 1997                 20,081,543          20,263,511
Computer software - at cost, net of accumulated amortization of
  $575,685 at August 31, 1997 and $929,942 at May 31, 1997           2,024,300           1,853,693
Identified intangible assets, net of accumulated amortization of
   $736,384 at August 31, 1997 and $535,853 at May 31, 1997          6,527,427           6,727,958
Exchange memberships (market value $8,409,500 at August 31,
  1997 and $7,957,750 at May 31, 1997)                               7,416,496           7,416,496
U.S. Treasury Obligations, held as collateral                        7,630,759           7,815,254
Subordinated notes receivable                                        3,000,000           3,000,000
Deferred tax asset (net of valuation allowance)                      2,114,435           2,220,472
Other assets                                                         2,077,278           2,112,083
                                                            -------------------  ------------------
                                                            $      157,954,158   $     160,160,725
                                                            ===================  ==================
      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased, at market value       $       25,966,163   $      25,129,290
  Accounts payable and accrued expenses, including
    compensation payable to officers and employees of
    $7,229,409 at August 31, 1997 and $11,831,551
    at May 31, 1997                                                 24,412,562          31,734,213
  Secured demand notes payable                                       3,000,000           3,000,000
  Income taxes payable                                               1,665,409             302,501
  Minority interest in Equitrade                                     7,927,067           7,720,236
                                                            -------------------  ------------------
          Total liabilities                                         62,971,201          67,886,240
                                                            -------------------  ------------------

Commitments and contingencies (Note 4)

Stockholders' equity (Note 5):
  Preferred stock - $.01 par value;
    authorized 1,000,000 shares; none issued                              -                   -
  Class A common stock - $.01 par value;
    authorized 50,000,000 shares; none issued                             -                   -
  Common stock - $.01 par value; authorized
    50,000,000 shares; issued 14,343,201 shares                        143,432             143,432
  Additional paid-in capital                                        57,189,985          57,189,985
  Retained earnings                                                 49,924,305          47,215,833
                                                            -------------------  ------------------
                                                                   107,257,722         104,549,250
  Less: Treasury stock - at cost, 1,648,536 shares at
    August 31, 1997 and 1,648,536 shares at May 31, 1997           (12,274,765)        (12,274,765)
                                                            -------------------  ------------------
          Total stockholders' equity                                94,982,957          92,274,485
                                                            -------------------  ------------------
                                                            $      157,954,158   $     160,160,725
                                                            ===================  ==================

            The accompanying notes are an integral part of these statements.
</TABLE>
                                  (3)
<TABLE>


                               THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF INCOME
                                              (Unaudited)
<CAPTION>


                                                                  Three Months Ended August 31,
                                                            ---------------------------------------
                                                                       1997                 1996
                                                            --------------------------------------------
<S>                                                         <C>                  <C>
Revenues:              
  Firm securities transactions - net                        $       23,926,444   $      29,683,515
  Commission income                                                  9,702,707           7,696,151
  Floor brokerage income                                             4,278,998           2,938,304
  Equity loss in partnerships                                         -                    (11,840)
  Interest income                                                    1,900,016           1,995,559
  Fee income                                                           758,335             426,588
  Other revenues                                                       170,074             261,471
                                                            -------------------  ------------------
                                                                    40,736,574          42,989,748
                                                            -------------------  ------------------

Expenses:
  Compensation and benefits                                         12,742,397          15,024,338
  Clearing and related charges                                      13,587,282          14,110,873
  Communications                                                     2,546,182           2,885,189
  Depreciation and amortization                                      1,807,304             971,044
  Occupancy costs and equipment rental                                 625,968             692,448
  Other expenses                                                     3,089,133           3,199,652
  Interest expense                                                     215,078              71,741
                                                            -------------------  ------------------
                                                                    34,613,344          36,955,285
                                                            -------------------  ------------------

   Income before minority interest and income taxes                  6,123,230           6,034,463

   Income of Equitrade allocated to
    minority partners                                               (1,141,407)            (13,600)
                                                            -------------------  ------------------

   Income before income taxes                                        4,981,823           6,020,863
                                                            -------------------  ------------------

   Income taxes:
        Federal, currently payable                                   1,524,970           2,097,250
        State and local, currently payable                             642,344             920,572
                                                           --------------------  ------------------
                  Total current income tax expense                   2,167,314           3,017,822
                                                            -------------------  ------------------

        Federal, deferred                                               70,341            -
        State and local, deferred                                       35,696            -
                                                            -------------------  ------------------
                  Total deferred income tax expense                    106,037            -
                                                            --------------------  ------------------

           Total income taxes                                        2,273,351           3,017,822
                                                            -------------------  ------------------

   Net  income                                              $        2,708,472   $       3,003,041
                                                            ===================  ==================

   Net income per common and common equivalent share (a):
        Net  income                                         $             0.21   $            0.23
                                                            ===================  ==================

Weighted average common shares outstanding                          12,840,084          13,050,182
                                                            ===================  ==================

<FN>
(a) For presentation purposes, primary and fully diluted are identical.
</FN>

</TABLE>


        The accompanying notes are an integral part of these statements.


<TABLE>
                                                                                                                  (4)
                      THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                   (Unaudited)
<CAPTION>

                                                                  Three Months Ended August 31,
                                                            ---------------------------------------
                                                                      1997                 1996
                                                            -------------------  ------------------
 Cash flows from operating activities:

<S>                                                         <C>                  <C>              
  Net income                                                $        2,708,472   $       3,003,041

 Non-cash items included in net income:
  Equity (income) loss in partnerships                                -                     11,840
  Depreciation and amortization                                      1,807,304             971,044
  Income of Equitrade allocated to minority partners                 1,141,407              13,600
  Provision for deferred taxes                                         106,037

 (Increase) decrease in operating assets:
  Funds segregated for customers                                        29,203                     -
  Receivables:
    Brokers and dealers                                              3,366,597          37,834,260
    Other                                                               17,684             (24,435)
  Securities owned, at market value                                 (3,318,840)        (22,146,542)
  U.S. Treasury Obligations, held as collateral                        184,495            (109,474)
  Other assets (net of deposits made on furniture, fixtures
     and equipment, and leasehold improvements)                        222,434          (1,036,047)

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at market value                  836,873          (5,500,123)
  Accounts payable and accrued expenses                             (7,321,651)         (7,873,432)
  Income taxes payable                                               1,362,908          (1,772,788)
                                                            -------------------  ------------------
     Net cash provided by operating activities                       1,142,923           3,370,944
                                                            -------------------  ------------------

 Cash flows from investing activities:

  Purchase of investment securities not readily marketable            -                   (100,000)
  Principal collected on notes receivable                               20,139              54,406
  Purchases of furniture, fixtures and
    equipment, and leasehold improvements                           (1,228,012)         (1,002,529)
  Deposits made on furniture, fixtures and equipment,
    and leasehold improvements                                        (187,629)           -
  Purchases of computer software                                      (367,400)            (56,527)
  Purchase of exchange membership                                     -                 (1,450,000)
                                                            -------------------  ------------------
     Net cash used in investing activities                          (1,762,902)         (2,554,650)
                                                            -------------------  ------------------


</TABLE>









                                           (Continued)


                                              (5)
<TABLE>

                           THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                   (Unaudited)
<CAPTION>
                                                                                                                   (Continued)

                                                                  Three Months Ended August 31,
                                                            ---------------------------------------
                                                                       1997                 1996
                                                            -------------------  ------------------
 Cash flows from financing activities:
<S>                                                         <C> 

  Purchase of treasury stock                                          -                   (135,967)
  Capital contributions by minority interest                            50,000            -
  Capital withdrawals by minority interest                            (984,576)           (371,000)
                                                           --------------------  ------------------
     Net cash used in financing activities                            (934,576)           (506,967)
                                                           --------------------  ------------------

 Net increase in cash                                               (1,554,555)            309,327

 Cash at beginning of period                                         3,033,818             470,313
                                                            -------------------  ------------------
              
 Cash at end of period                                      $        1,479,263   $         779,640
                                                            ===================  ==================

</TABLE>

































           The accompanying notes are an integral part of these statements.



                                    (6)





















                        THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      (Unaudited)

                                   August 31, 1997

Note 1 - Business and organization

     The Sherwood Group, Inc. and its subsidiaries (the "Company") are primarily
engaged in the securities  business and in providing related financial services.
The Company has a principal  registered  broker-dealer  wholly owned subsidiary,
Sherwood Securities Corp. ("Sherwood Securities"). Sherwood Securities is also a
specialist  for  securities  listed on the  American  Stock  Exchange.  National
Discount Brokers ("NDB"), another registered broker-dealer, is a division of the
Company's  wholly owned  subsidiary,  Triak Services Corp.  During May 1996, the
Company  commenced  operations  of a new wholly owned  subsidiary,  MXNet,  Inc.
("MXNet").   MXNet  delivers   comprehensive   technical  solutions  to  trading
organizations. On January 24, 1997, the Company acquired, from its joint venture
partner,  the remaining 51% of Anvil Institutional  Services Company (the "Anvil
Joint Venture") that it did not previously own. The Company,  therefore,  became
the 100% owner of Anvil Institutional  Services Inc. ("Anvil"),  a broker-dealer
previously  owned by the Anvil Joint Venture.  See Note 7,  "Subsequent  Event",
regarding  the Company's  sale of Anvil on September 5, 1997.  In addition,  the
Company has a 60% special  limited  partnership  interest in Equitrade  Partners
("Equitrade"), which is a specialist for securities listed on The New York Stock
Exchange ("NYSE").  The Company acquired a further limited partnership  interest
in  Equitrade  on May 2,  1997 upon the  acquisition  of all of the stock of SHD
Corporation  (formerly  Dresdner-NY  Incorporated),  which  was  engaged  in the
specialist  business of the NYSE. The assets,  including four seats on the NYSE,
except cash, and liabilities of SHD Corporation ("SHD") were then contributed by
SHD to Equitrade in exchange for a limited  partner  interest.  Two employees of
SHD  retained a portion of the  specialist  book of SHD and also became  limited
partners  of  Equitrade.  SHD is entitled to 38.4% of the net profits and losses
from the activities of this specialist book.

Note 2 - Basis of presentation

     The accompanying unaudited 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
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 consolidated  financial statements be read in
conjunction  with the  consolidated  financial  statements and the related notes
included in the Company's  1997 Annual  Report on Form 10-K.  Certain prior year
amounts have been reclassified to conform with the three months ended August 31,
1997 presentation.

Note 3 - Net income per common share

     Net income per common share is computed  using the weighted  average number
of shares of common stock and common stock equivalents outstanding. Common stock
equivalents  include stock  issuable  under stock  options.  The treasury  stock
method of accounting was used in computing the common stock  equivalents for the
computation of earnings per common share.

Note 4 - Commitments and contingencies

     Certain significant legal proceedings and matters were previously disclosed
in Item 3, Legal Proceedings,  of the Company's 1997 Annual Report on Form 10-K,
and the disclosures regarding such matters are incorporated herein by reference.
The Company's  subsidiaries,  and in some cases the Company,  have been named as
defendants  in lawsuits that allege  violations of Federal and state  securities
and related  laws.  Sherwood  Securities  has received  additional  subpoenas in
connection with the SEC's ongoing  investigation In the Matter of Certain Market
Making  Activities  on NASDAQ,  HO-2974.  Sherwood  Securities  is continuing to
cooperate with the SEC's investigation.  Although there can be no assurance that
such lawsuits and investigations  involving the Company are not likely to have a
material,  adverse  effect on the  results of  operations  of the Company in any
future  period,  depending  in part on the  results  for such  period,  based on
information  currently  available,  management of the Company  believes that any
such  lawsuits  and  investigations  are not likely to have a  material  adverse
effect on the  consolidated  financial  condition  and results of  operations or
liquidity of the Company in future periods.


                                                        (7)


<PAGE>



Note 5 - Net capital requirements

     As registered broker-dealers, Sherwood Securities, NDB, Equitrade and Anvil
are subject to the  Securities  Exchange  Act of 1934  Uniform Net Capital  Rule
15c3-1  (the  "Rule").  As of August  31,  1997,  the net  capital  of  Sherwood
Securities,  NDB,  Equitrade and Anvil  exceeded  their  required net capital by
$20,696,000,  $3,361,000,  $25,532,000 and $469,000,  respectively.  On July 10,
1997, SHD filed its notice of withdrawal  from  registration  as a broker-dealer
with the SEC. As such, SHD is no longer required to compute net capital.

     The Rule also  provides  that equity  capital may not be  withdrawn or cash
dividends be paid if the resulting net capital of a broker-dealer  would be less
than the amount  required under the Rule.  Accordingly,  at August 31, 1997, the
payment of dividends  and advances to the Company by Sherwood  Securities,  NDB,
Equitrade  and Anvil is  limited to  $20,496,000,  $3,564,000,  $25,482,000  and
$459,000,  respectively,  under the most restrictive of these requirements.  The
SEC may, by order,  restrict the  withdrawal of equity capital on a net basis if
the SEC determines  that such  withdrawal  would be detrimental to the financial
integrity of the broker-dealer or the financial community.


Note 6 - New Accounting Pronouncement

              In February 1997, the Financial  Accounting Standards Board issued
Statement  of  Financial  Accounting  Standards  No. 128,  "Earnings  per Share"
("Statement  128"),  for periods ending after  December 15, 1997.  Statement 128
replaces  the current  standard  used to calculate  primary  earnings per share,
Accounting  Principles Board Opinion No. 15 ("APB 15"). Statement 128 requires a
calculation of basic earnings per share, as well as a dual presentation of basic
and diluted  earnings per share on the face of the  statement  of income.  Basic
earnings per share differs from primary  earnings per share under APB 15 in that
dilution for common stock  equivalents  is  excluded.  Basic  earnings per share
under  Statement  128 for the three  months ended August 31, 1997 and 1996 would
not have been materially different than primary earnings per share under APB 15.


Note 7 - Subsequent Events

     On  September  5,  1997,  the  Company  sold all of the  stock of Anvil for
$217,000,  which  approximated  book value.  In  connection  with the sale,  the
Company's  $250,000  subordinated  loan agreement  with Anvil was cancelled.  As
such, the Company liquidated the $300,000 face value of U.S. Treasury securities
that had been  pledged  as  collateral  for the  agreement  and such  funds were
transferred back to the Company.

     During the fiscal second quarter, the Company's  management decided,  based
on a number of factors, to close the four existing branch offices of NDB located
in Chicago,  Dallas,  West Palm Beach and Los  Angeles.  In addition to the cost
savings,  management believes that NDB's Webstation and the accessibility of its
automated trading facilities have diminished the need for branch locations.  The
costs  associated  with  the   discontinuation  of  the  branch  operations  are
immaterial to the consolidated financial statements of the Company and have been
reflected at August 31, 1997 in the books and records of NDB.


















                                                        (8)
Item - 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS


Results of Operations

     The results of The Sherwood Group,  Inc. and  subsidiaries  (the "Company")
for the three months ended August 31, 1997 reflect  primarily the  activities of
Sherwood  Securities Corp.  ("Sherwood  Securities"),  National Discount Brokers
("NDB"), a division of the Company's subsidiary,  Triak Services Corp. ("Triak")
and Equitrade Partners  ("Equitrade").  Sherwood Securities is primarily engaged
in the securities business as a wholesale market maker in NASDAQ National Market
System  and  Small-Cap  securities.  NDB  is  a  deep  discount  brokerage  firm
specializing  in trade  execution for individual  investors while Equitrade is a
registered  specialist  in  equity  securities  on The New York  Stock  Exchange
("NYSE").  During May 1996,  the Company  commenced  operations  of a new wholly
owned subsidiary,  MXNet Inc. ("MXNet").  MXNet delivers comprehensive technical
solutions to trading  organizations.  Finally,  on January 24, 1997, the Company
acquired,   from  its  joint  venture  partner,   the  remaining  51%  of  Anvil
Institutional  Services  Company  (the "Anvil  Joint  Venture")  that it did not
previously  own.  The  Company,  therefore,  became  the  100%  owner  of  Anvil
Institutional Services Inc. ("Anvil"),  a broker-dealer  previously owned by the
Anvil Joint  Venture.  See  "Subsequent  Event"  regarding the Company's sale of
Anvil on September 5, 1997.

     The Company's consolidated net income for the three months ended August 31,
1997 was $2,708,000 compared to $3,003,000 for the three months ended August 31,
1996.  For the  quarter  ended  August 31,  1997,  the  principal  subsidiaries,
Sherwood  Securities  and Triak,  had a net income of  $1,299,000  and $453,000,
respectively,  compared to net income of $3,120,000  and $78,000 for the quarter
ended August 31, 1996,  respectively.  Equitrade  had a net profit of $2,653,000
for the three  months  ended  August  31,  1997 (of which the  Company's  share,
inclusive of that earned by SHD, was  $1,512,000) as compared to a net profit of
$400,000  for the three  months  ended  August 31, 1996 (of which the  Company's
share was $386,000).

     Total revenue for the Company decreased by approximately $2,253,000, or 5%,
for the three months ended August 31, 1997,  as compared with the same period of
the previous year. The reasons for the decrease in revenues are set forth below.

     Revenue from firm securities transactions decreased $5,757,000, or 19%, for
the three month  period ended  August 31,  1997,  as compared  with the previous
year.  Revenues  from  firm  securities   transactions  at  Sherwood  Securities
decreased  approximately  $7,677,000,  or 25%,  for the three month period ended
August  31,  1997,  when  compared  to the  prior  year,  even  though  Sherwood
Securities'  overall  ticket  volume  increased  approximately  19% for the same
period as trading  profits  per ticket  continued  to decline.  Several  factors
contributed to this decrease.  Regulatory  changes enacted by the Securities and
Exchange Commission ("SEC") and the National  Association of Securities Dealers,
such as limit order  protection,  have  resulted in an increase in the number of
transactions  executed on an "even" basis.  Tightened  spreads between "bid" and
"ask" prices,  the new limit order display  rules,  increased  volatility in the
marketplace and increased Small Order Execution  Systems ("SOES")  activity have
also been factors in the decrease in trading  profits per ticket.  These changes
may  have  an  adverse   impact  on  Sherwood   Securities'   trading   profits.
Substantially  offsetting the decrease in trading profits at Sherwood Securities
was an increase in revenues from securities  transactions at Equitrade,  for the
three months ended August 31, 1997, of approximately $1,920,000.

     The Company's  commission income,  primarily generated by NDB, increased by
$2,007,000,  or 26%, for the three months ended August 31, 1997,  when  compared
with the prior year.  The increase is due largely to the fact that NDB's average
daily ticket count increased from approximately  4,400 to 5,700 tickets per day,
an increase of 30%, for the three months  ended August 31, 1997,  when  compared
with the previous year.

     Floor brokerage income increased by approximately  $1,341,000,  or 46%, for
the three months ended August 31,  1997,  when  compared to the prior year.  The
increase  was  the  result  of  increases  in both  the  volume  of  Equitrade's
transactions  and an  increase in the number of stocks in which  Equitrade  is a
specialist.  The  increase  from 97 stocks at August  31,  1996 to 155 stocks at
August 31, 1997 was due principally to the  acquisition,  on May 2, 1997, of SHD
Corporation, which added 54 stocks to Equitrade's specialist list.

     For the three months ended August 31, 1996, the principal portion of equity
loss  in  partnerships  was an  equity  loss  from  the  Company's  49%  limited
partnership  interest it held in the Anvil Joint  Venture.  For the three months
ended  August 31,  1997,  Anvil's  results  are  consolidated  with those of the
Company.  See  "Subsequent  Event"  regarding  the  Company's  sale of  Anvil on
September 5, 1997.

                                                        (9)
     Interest income  decreased by approximately  $96,000,  or 5%, for the three
months ended August 31, 1997, as compared to the previous  year. The decrease is
primarily  due to the  availability  of lesser  amounts of cash for  investment.
During the past year, the Company has used approximately $28,000,000 for capital
expenditures.  A significant  rise in NDB's customer  debit and credit  balances
held with the Company's  clearing  broker led to an increase in interest  earned
from that source and  substantially  offset the  decline in  interest  income as
described above.

     Fee income increased by $332,000, or 78%, for the three months ended August
31,  1997,  as compared to the prior year.  The increase is  principally  due to
higher 12b-1 fees  received  from mutual funds as NDB's  customers'  balances in
those funds have increased since the prior year.

     Total  expenses  for the three  months  ended  August  31,  1997  decreased
approximately  $2,342,000,  or 6%, from  $36,955,000  in 1996 to  $34,613,000 in
1997. The reasons for the net decrease in expenses are set forth below.

     Compensation and benefits decreased $2,282,000, or 15%, for the three month
period ended August 31, 1997,  compared with the prior year. The decrease is due
primarily to lower commissions paid to Sherwood  Securities'  traders because of
the decrease in trading profits for that subsidiary, and the resulting reduction
in accruals for executive bonuses based on profitability computations.

     Clearing and related charges  decreased by approximately  $523,000,  or 4%,
for the three month period ended August 31, 1997, as compared to the prior year.
The  decrease  is due  principally  to lower  correspondence  fees being paid by
Sherwood Securities based on the improvement in the overall size and type of the
order flow received.  Partially offsetting this decrease was increased clearance
charges at NDB due to the 30% rise in ticket count.  However,  during the fiscal
second quarter that ends on November 30, 1997, certain clearing  agreements have
been negotiated by the Company on more favorable terms than those  prevailing in
prior  periods.  As a result,  clearing  costs as a  percentage  of  revenues is
expected  to decline  during  the fiscal  second  quarter as  compared  to prior
periods.  However,  there can be no assurance  that this result  will,  in fact,
occur, because expenses are impacted by a number of other factors including, but
not limited to, ticket count, the size of orders and other fees.

     Communications   expense,   which   includes   quotations,   decreased   by
approximately  $339,000,  or 12%, for the three months ended August 31, 1997, as
compared to the previous  year.  The decline is mainly due to the upgrade of the
Powerbrokersm IVR System and development of an in-house quote server at NDB.

     Depreciation and amortization increased by approximately  $836,000, or 86%,
for the three months ended August 31, 1997, as compared to the prior year.  This
increase can be attributed to depreciation  and  amortization  incurred on fixed
asset, leasehold  improvement,  computer software and intangible asset additions
by the  Company  aggregating  approximately  $18,000,000  during the period from
September 1996 through August 1997.

     Occupancy and equipment rental expenses decreased $66,000,  or 10%, for the
three month period ended  August 31,  1997,  as compared to the prior year.  The
decline  is  due  to  a  decrease  for  NDB  which,  last  year,  incurred  rent
concurrently  on two  main  office  locations  as it  awaited  the  move  of its
headquarters to 7 Hanover Square.

     Other expenses  decreased by approximately  $111,000,  or 3%, for the three
months ended August 31, 1997, as compared to the prior year. A decrease in legal
fees  offset  by an  increase  in the cost to  maintain  the  recently  upgraded
technological infrastructure of NDB led to the net decrease in other expenses.

     Interest  expense  increased by  approximately  $143,000,  or 200%, for the
three months ended August 31, 1997, as compared to the previous year. During the
three  months  ended  August 31, 1997,  Sherwood  Securities  incurred  interest
charges on the remaining  unpaid  balance of  approximately  $4,600,000  owed in
connection with its settlement  agreement,  as amended,  in the case entitled In
Re: NASDAQ Market-Makers Antitrust Litigation. In addition, the Company incurred
interest  expense on short-term  borrowings  made in connection with its trading
activities.

     Income of Equitrade  allocated to minority partners represents the share of
Equitrade's  net income  allocated to the partners of Equitrade,  other than the
Company and its  subsidiary,  SHD, during the three months ended August 31, 1997
and 1996, respectively.

     The Company's  effective tax rate decreased from  approximately 50% for the
three  months ended  August 31, 1996 to  approximately  46% for the three months
ended August 31, 1997.



                                                       (10)
For the three  months ended August 31,  1997,  deferred  taxes of  approximately
$106,000,  included in income tax expense,  relate to the future  taxability  of
certain  temporary  book to tax  basis  differences.  In  conjunction  with  the
deferred tax asset the Company has recorded,  the Company has booked a valuation
allowance  of  approximately  $217,000  due  to  management's  judgment  of  the
likelihood of realization of the deferred tax asset.



Liquidity

     The Company's tangible assets are highly liquid with more than 66% of these
tangible assets consisting of cash or assets readily  convertible into cash. The
Company's operations have generally been financed by internally-generated funds.
In addition,  at August 31, 1997,  margin  account  borrowings of  approximately
$151,000,000 were available to the Company from its clearing brokers.

     The Company's broker-dealer entities,  Sherwood Securities,  NDB, Equitrade
and, previously,  Anvil, are subject to SEC's minimum net capital requirement of
the SEC which is  designed  to  measure  the  general  financial  soundness  and
liquidity  of  broker-dealers.  On July  10,  1997,  SHD  filed  its  notice  of
withdrawal from registration as a broker-dealer with the SEC. As such, SHD is no
longer  required  to  compute  net  capital.  As of August  31,  1997,  Sherwood
Securities, NDB, Equitrade and Anvil had approximately $20,696,000,  $3,361,000,
$25,532,000 and $469,000,  respectively,  in excess of the required  minimum net
capital.  The net capital  rule imposes  financial  restrictions  upon  Sherwood
Securities',  NDB's,  Equitrade's and Anvil's  businesses  which are more severe
than those imposed on most other businesses.

     From time to time,  the Company has borrowed  funds 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.

     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  security positions in relation to the market as a
whole.  The  portfolio  mix also  affects the  regulatory  capital  requirements
imposed on Sherwood Securities, NDB, Equitrade and Anvil, which directly affects
the amount of funds available for operating, investing and financing activities.

     The Company  anticipates  that it will spend an additional  $1,100,000 over
the next 3 months for its  subsidiaries'  ongoing  technological  infrastructure
upgrades and intends to finance these upgrades with internally generated funds.

     The operations of the Company's  American Stock  Exchange  Specialist  book
continue to be funded by the income generated by the book.

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

     During  the three  months  ended  August  31,  1997,  the  Company  did not
repurchase  any additional  shares in connection  with its December 1992 plan to
buy back up to 1,500,000  shares of the Company's common stock from time to time
in the open market or through privately  negotiated  transactions.  As of August
31, 1997,  1,351,482  shares had been reacquired  under this plan. The source of
funds for these purchases was internally-generated.



Subsequent Events

     On  September  5,  1997,  the  Company  sold all of the  stock of Anvil for
$217,000,  which  approximated  book value.  In  connection  with the sale,  the
Company's  $250,000  subordinated  loan agreement  with Anvil was cancelled.  As
such, the Company liquidated the $300,000 face value of U.S. Treasury securities
that had been  pledged  as  collateral  for the  agreement  and such  funds were
transferred back to the Company.





                                                          (11)


     During the fiscal second quarter, the Company's  management decided,  based
on a number of factors, to close the four existing branch offices of NDB located
in Chicago,  Dallas,  West Palm Beach and Los  Angeles.  In addition to the cost
savings,  management  believes that NDB's  Webstationsm and the accessibility of
its automated trading  facilities have diminished the need for branch locations.
The costs  associated  with the  discontinuation  of the branch  operations  are
immaterial to the consolidated financial statements of the Company and have been
reflected at August 31, 1997 in the books and records of NDB.


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 communication,  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 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.


New Accounting Pronouncement

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 128, "Earnings per Share" ("Statement 128"),
for periods ending after  December 15, 1997.  Statement 128 replaces the current
standard used to calculate  primary  earnings per share,  Accounting  Principles
Board Opinion No. 15 ("APB 15").  Statement 128 requires a calculation  of basic
earnings per share, as well as a dual presentation of basic and diluted earnings
per share on the face of the  statement  of  income.  Basic  earnings  per share
differs from primary earnings per share under APB 15 in that dilution for common
stock equivalents is excluded. Basic earnings per share under Statement 128, for
the three and nine months ended  August 31, 1997 would not have been  materially
different than primary earnings per share under APB 15.



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  government  policy or  regulation  and  unforeseen  costs and other
effects  related to legal  proceedings or  investigations  of  governmental  and
self-regulatory organizations.













                                                       (12)



PART II - OTHER INFORMATION

Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits:
                       Exhibit 11 - Computation of Net Income Per Common Share

                       Exhibit 27 - Financial Data Schedule

          (b) The Company  filed no reports on Form 8-K during the quarter ended
August 31, 1997.
















































                                                       (13)


<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.



                                               The Sherwood Group, Inc.

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

      Date: October 6, 1997                    By: Dennis Marino
            -----------------                  --------------------------------
                                                   Dennis Marino
                                                   Executive Vice President
                                                   and Chief Administrative
                                                   Officer


      Date: October 6, 1997                    By: Denise Isaac
            -----------------                  --------------------------------
                                                   Denise Isaac
                                                   Chief Financial Officer and
                                                   Principal Accounting Officer



































                                                       (14)




               THE SHERWOOD GROUP, INC. AND SUBSIDIARIES           EXHIBIT 11
               COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>

<CAPTION>

                                                                  Three Months Ended August 31,
                                                            ---------------------------------------
                                                                      1997                 1996
                                                            -------------------  ------------------

<S>                                                         <C>                  <C>
Common stock and common stock equivalents:
  Average common stock outstanding                                  12,694,665          13,017,406
  Average common stock equivalents
    issuable under stock options                                       145,419              32,776
                                                            -------------------  ------------------

Total average common stock and common stock
  equivalents used for earnings per share computation               12,840,084          13,050,182
                                                            ===================  ==================

Income:
              
    Net income                                              $        2,708,472   $       3,003,041
                                                            ===================  ==================

Net income per common and common equivalent share (a):
    Net income                                              $             0.21   $            0.23
                                                            ===================  ==================

<FN>
(a) For presentation purposes, primary and fully diluted are identical.
</FN>
</TABLE>