U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

  X      Quarterly report pursuant to Section 13 or 15(d)
-----    of the Securities Exchange Act of 1934


                For the quarterly period ended September 30, 2005
                                               ------------------

        Transition report under Section 13 or 15(d) of the Exchange Act of 1934
-----
             For the transition period from __________ to __________

                          Commission file number 1-9224

                                 CNE GROUP, INC.
                                 ---------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

           DELAWARE                                             56-2346563
           --------                                             ----------
(State or Other Jurisdiction of                             (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

              255 West 36th Street, Suite 800, New York, N.Y. 10018
              -----------------------------------------------------
                    (Address of Principal Executive Offices)

                                  212-300-2112
                                  ------------
                (Issuer's Telephone Number, Including Area Code)

      Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
                                   ---          ---

      The number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

            Class                                Outstanding at November 1, 2005
            -----                                -------------------------------

Common stock - par value $.00001                        12,374,248 shares
--------------------------------                        -----------------


<PAGE>



                                    PART I

                              FINANCIAL INFORMATION


Item l.  Financial Statements.










                                       1
<PAGE>

CNE GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

<TABLE>
<CAPTION>

                                                         September 30,     December 31,
                                                             2005              2004
                                                         ------------------------------
                                                          (Unaudited)
<S>                                                      <C>              <C>
ASSETS
  Current:
    Cash and cash equivalents                            $      79,641    $      84,408
    Accounts receivable, net of allowance for doubtful
      accounts of $66,000 in 2005 and $51,000 in 2004          250,541          172,010
    Inventory                                                  466,477          260,487
    Other current assets                                         9,642            8,273
                                                         -------------    -------------
      Total current assets                                     806,301          525,178

  Fixed assets, net                                            315,099          394,509
  Intellectual property rights, net                          1,312,140        1,361,948
  Goodwill                                                   7,285,894        7,285,894
  Marketing and distribution agreement                     125,000,000
  Other assets                                                                   21,265
                                                         -------------    -------------
      Total assets                                       $ 134,719,434        9,588,794
                                                         =============    =============

LIABILITIES
  Current:
    Accounts payable and accrued expenses                $    2,330,43    $   1,476,124
    Interest payable                                           250,481          128,050
    Short-term credit arrangements                                  --          191,395
    Line of credit                                                  --           19,199
    Current portion of notes payable                            12,148           17,243
    Due to related party                                     1,282,918               --
    Notes and debenture payable                                502,455          850,000
    10% subordinated notes payable                           1,300,000          966,710
    12% Debentures payable                                     100,000               --
    Tax assessment payable                                       7,500               --
    Senior secured note payable due to related party       124,649,990
    Other notes payable                                             --           23,330
                                                         -------------    -------------
      Total current liabilities                            130,435,926        3,672,051
  Notes payable, net of current portion                             --           22,059
  Deferred grant revenue                                            --          300,000
                                                         -------------    -------------
      Total liabilities                                    130,435,926        3,994,110
                                                         -------------    -------------

Commitments and contingencies

STOCKHOLDERS' EQUITY
  Preferred stock                                                  145              134
  Common stock                                                     127              121
  Paid-in surplus                                           30,243,169       29,919,185
  Accumulated deficit                                      (23,086,833)     (21,451,656)
                                                         -------------    -------------
                                                             7,156,608        8,467,784
    Less treasury stock, at cost - 1,238,656 shares         (2,873,100)      (2,873,100)
                                                         -------------    -------------
      Total stockholders' equity                             4,283,508        5,594,684
                                                         -------------    -------------
      Total liabilities and stockholders' equity         $ 134,719,434    $   9,588,794
                                                         =============    =============
</TABLE>

See Notes to Consolidated Financial Statements.

                                                2
<PAGE>

CNE GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                     Three Months                    Nine Months
                                                  Ended September 30,            Ended September 30,
                                             ------------------------------------------------------------
                                                 2005            2004            2005            2004
                                             ------------------------------------------------------------
                                              (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
<S>                                          <C>             <C>             <C>             <C>
Revenues:
  Product sales                              $    288,628    $    385,711    $    801,589    $  1,279,111
  Service fee income                              170,327         215,364         522,741         798,017
  Internet related income                          12,750          41,920          77,703          99,127
                                             ------------------------------------------------------------
                                                  471,705         642,995       1,402,033       2,176,255
  Cost of goods sold                               72,298         300,574         400,167       1,085,889
                                             ------------------------------------------------------------

     Gross profit                                 399,407         342,421       1,001,866       1,090,366


Other expenses:
  Advertising                                      19,257           5,909          53,542          42,837
  Compensation and related costs                  (65,340)        207,324         335,947       1,028,916
  Organizational costs                             36,860                          36,860
  General and administrative                    1,759,692         322,507       2,219,384         985,806
  Product development                                              92,904                         130,513
  Depreciation and amortization                    17,269          48,848         114,816         145,204
                                             ------------------------------------------------------------
                                                1,767,738         677,492       2,760,549       2,333,276

Loss before other income (expenses)            (1,368,331)       (335,071)     (1,758,683)     (1,242,910)

Other income (expenses):
  Amortization of debt discount                        --         (24,963)        (33,290)       (174,747)
  Grant income                                         --              --         300,000              --
  Gain on sale of subsidiary                          341              --             341              --
  Interest expense                                 (9,444)       (110,757)       (143,569)       (278,099)
  Interest income                                     (67)            277              24             576
                                             ------------------------------------------------------------
                                                   (9,170)       (135,443)        123,506        (452,270)
                                             ------------------------------------------------------------
                                               (1,377,501)       (470,514)     (1,635,177)     (1,695,180)

  Provision for income taxes                           --              --              --              --
                                             ------------------------------------------------------------
Net loss
                                             $ (1,377,501)   $   (470,514)   $ (1,635,177)   $ (1,695,180)
                                             ============================================================

Loss per common share - basic and diluted:   $      (0.12)   $      (0.04)   $      (0.15)   $      (0.16)
                                             ============================================================
Weighted average number of common
  shares outstanding - basic and diluted:      11,640,915      10,640,915      11,263,137      10,349,260
                                             ============================================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                                     3
<PAGE>

CNE GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                             Nine Months Ended September 30,
                                                                             -------------------------------
                                                                                 2005             2004
                                                                             -------------------------------
                                                                             (Unaudited)       (Unaudited)
<S>                                                                          <C>              <C>
Cash flows from operating activities:
Net loss                                                                      $(1,635,177)     $(1,695,180)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization                                                     114,816          145,204
Provision for doubtful accounts                                                    15,000           13,207
Issuance of common stock for services                                              54,000           50,000
Amortization of debt discount                                                      33,290          174,747
Changes in:
Accounts receivable                                                               (93,531)          42,249
Inventory                                                                        (205,990)        (109,439)
Prepaid expenses and other assets                                                  69,704           11,003
Accounts payable, accrued expenses and deferred grant revenue                     643,453          346,686
                                                                              ----------------------------

Net cash used in operating activities                                          (1,004,435)      (1,021,523)

Cash flows from investing activities:
Purchase of furniture and equipment                                               (35,406)         (30,224)

Net cash used in investing activities                                             (35,406)         (30,224)

Cash flows from financing activities:
Proceeds from issuance of Series G Preferred Stock                                220,000               --
Proceeds from sale of 333,333 shares of restricted common stock                    50,000               --
Proceeds from short-term credit arrangements                                     (191,396)          20,853
Net proceeds from issuance of 1,750,000 shares of common stock                         --          571,000
Proceeds from issuance of 10% notes payable                                            --          150,000
Proceeds from issuance of 18% notes payable                                            --          300,000
Proceeds from issuance of 24% notes payable                                            --          150,000
Principal repayments on short-term credit arrangements                                 --         (144,581)
Due to related party                                                              956,470               --
Principal repayments on notes payable - other                                          --         (404,655)

Net cash provided by financing activities                                       1,035,074          642,617

Increase (decrease) in cash and cash equivalents                                   (4,767)        (409,130)
Cash and cash equivalents at beginning of period                                   84,408          460,832

Cash and cash equivalents at end of period                                         79,641           51,702

Supplemental disclosures of cash flow information related to continuing
operations:
  Cash paid during the period for:
    Interest                                                                  $    16,666      $   212,769
                                                                              ============================
    Income taxes                                                              $        --      $        --
                                                                              ============================

Non-cash investing and financing activities relating to conversion of debt
to preferred stock, and forgiveness of interest indebtedness to an officer
and an employee of the Company:
  Interest payable                                                                     --           40,000
                                                                              ============================
  8% notes payable                                                                     --        1,000,000
                                                                              ============================
  Issuance of preferred stock, at par                                                  --              (10)
                                                                              ============================
  Issuance of common stock, at par                                                     --               (2)
                                                                              ============================
  Paid in surplus                                                                      --       (1,089,988)
                                                                              ============================

Purchase of marketing and distribution  agreement in exchange for senior
secured note payable due to related party:

  Marketing and distribution agreement asset                                  $125,000,000.00  $        --
                                                                              ============================

  Liability for senior secured note payable                                   $125,000,000.00  $        --
    Less:  Deferred transaction costs                                          350,010.00               --
                                                                              ----------------------------
Net senior secured note payable                                               $124,649,990.00  $        --
                                                                              ============================

Advances made by related party and disbursed on behalf of the
Company:

  Operating expenses paid by related party                                    $932,908.00      $        --

  Deferred transaction costs paid by related party                                350,010               --
                                                                              ----------------------------

  Amount due to related party                                                 $ 1,282,918      $        --
                                                                              ============================
</TABLE>

See Notes to Consolidated Financial Statements.

                                                 4

<PAGE>

NOTE A - THE COMPANY

The  following   consolidated  financial  statements  of  CNE  Group,  Inc.  and
subsidiaries  (collectively  referred to as the  "Company  or "CNE,"  unless the
context  requires  otherwise)  are  prepared  in  accordance  with the rules and
regulations  of the  Securities  and  Exchange  Commission  for Form  10-QSB and
reflect  all  adjustments   (consisting  of  normal   recurring   accruals)  and
disclosures  which,  in the  opinion of  management,  are  necessary  for a fair
statement of results for the interim  periods  presented.  It is suggested  that
these financial  statements be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB for the
year ended  December 31, 2004,  which was filed with the Securities and Exchange
Commission.

The results of operations for the three months ended  September 30, 2005 are not
necessarily indicative of the results to be expected for the entire fiscal year.

Business

CNE Group, Inc. is a holding company whose primary operating subsidiaries, as of
September 30, 2005, were SRC Technologies,  Inc. ("SRC"),  U.S.  Commlink,  Ltd.
("USCL") and Arrow  Resources  Development,  Ltd.  ("Arrow") SRC, also a holding
company, is the parent of Connectivity,  Inc.  ("Connectivity")  and Econo-Comm,
Inc. (d/b/a Mobile Communications) ("ECI").  Connectivity,  ECI and USCL market,
manufacture,  repair and  maintain  remote  radio and  cellular-based  emergency
response  products  to  a  variety  of  federal,   state  and  local  government
institutions,  and other  vertical  markets  throughout  the United  States.  On
November  3,  2005,  the  Company  sold SRC and USCL  pursuant  to  transactions
described in Note J - subsequent Events.

Arrow, a development  stage  enterprise,  was incorporated in Bermuda 0n May 20,
2005.  It intends to provide  marketing  and  distribution  services  for lumber
products  pursuant to a marketing and distribution  agreement with Arrow Pacific
Resources PNG Ltd ("PNG"), an affiliate of Arrow Pacific Resources (s) Pte. Ltd.
("APR"). See Note E below.

The Company also  generates  revenue from its  subsidiary,  CareerEngine,  Inc.,
which  is  engaged  in  the  business  of  e-recruiting.  This  segment  is  not
significant to the operations of the Company.

Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  The Company has incurred  substantial
losses,  sustained substantial operating cash outflows and has a working capital
deficit at both  September  30, 2005 and December 31,  2004.  The above  factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  The  Company's  continued  existence  depends on its ability to obtain
additional equity and/or debt financing to fund its operations and ultimately to
achieve profitable operations. There is no assurance that the Company can obtain
additional financing or achieve profitable  operations or generate positive cash
flow.  The 2005 and 2004  financial  statements  do not include any  adjustments
relating to the  recoverability  or  classification of recorded asset amounts or
the amount and classification of liabilities that might be necessary as a result
of this going concern uncertainty.


                                       5
<PAGE>


NOTE A - THE COMPANY (CONTINUED)

Private Financings

1.       On or about  April 1,  2005,  two  individuals,  both of whom are adult
         children of the Company's Chief Executive  Officer,  purchased  545,000
         shares of the  Company's  Series G Preferred  Stock at a price of $0.20
         per  share.  The  Series  G  Preferred  Stock  is  non  voting,  has no
         liquidating  preference  over  the  Common  Stock  and  each  share  is
         automatically  convertible  into two  shares of Common  Stock when such
         conversion has been approved by the Company's Common Stockholders.

2.       On or about April 12, 2005, four  individuals,  three of whom are adult
         children or related thereto of the Company's  Chief Executive  Officer,
         purchased 500,000 shares of the Company's Series G Preferred Stock at a
         price of $0.20 per share.

3.       On or about April 20, 2005, an individual  purchased  100,000 shares of
         the Company's Series G Preferred Stock at a price of $0.20 per share.

On November 3, 2005, the Company  exchanged all of its Series G Preferred  Stock
pursuant to transactions described in Note J - Subsequent Events.


American Stock Exchange Listing

On August 25, 2005 the Company's  common stock was suspended from trading on the
American Stock Exchange and delisted on September 26, 2005. It now trades on the
over the counter Bulletin Board.


                                       6
<PAGE>

NOTE A - THE COMPANY (CONTINUED)

At September 30, 2005, our Stockholders'  Equity was  approximately  $4,283,508,
our current assets were $806,301,  and our current liabilities were $130,435,926
that primarily  included a note payable in the principal  amount of $125,000,000
due  from  our  subsidiary,  Arrow,  to  Empire  Advisory,  LLC.  and  notes  to
noteholders,  who  include  certain  of our  current  and former  directors.  On
November  2,  2005,  we  satisfied  Arrow's  note to  Empire by  issuing  Empire
10,000,000  shares of our Series AAA  Preferred  Stock and  satisfied  the other
notes in  exchange  for  shares of our common  stock  pursuant  to  transactions
described in Note J - Subsequent Events.

NOTE B - SIGNIFICANT ACCOUNTING POLICIES

[1]      Inventory:

         Inventory  is  stated  at the lower of cost  (determined  by  first-in,
         first-out method) or market.  The Company's  inventory  consists of the
         following:

                                                   September 30,  December 31,
                                                      2005             2004
                                                   --------         ---------

                  Raw materials                    $ 390,669        $ 242,061
                  Work in progress                    73,308           15,926
                  Finished goods                       2,500            2,500
                                                   --------         ---------
                           Total                   $466,477         $ 260,487
                                                   =========        =========

[2]      Fair value of financial instruments:

         For  financial  statement  instruments,  including  cash,  accounts and
         accrued expenses  payable and amounts due to Empire Advisory,  LLC. the
         carrying  amounts  approximated  fair  value  because  of  their  short
         maturity.

[3]      Use of estimates:

         The  preparation of financial  statements in conformity with accounting
         principles  generally accepted in the United States of America requires
         management to make estimates and  assumptions  that affect the reported
         amounts of assets and liabilities  and disclosure of contingent  assets
         and  liabilities  at the  date  of the  financial  statements  and  the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from those estimates.

[4]      Accounting basis:

         The  Company  uses  the  accrual  basis  of  accounting  for  financial
         statement reporting.  Accordingly revenues are recognized when services
         are rendered and expenses realized when the obligation is incurred.

[5]      Income (loss) per share:

         Basic and diluted  earnings  (loss) per common share have been computed
         in accordance  with SFAS No. 128,  "Earnings Per Share." Basic earnings
         per share  ("BEPS") is computed  by dividing  net income  (loss) by the
         weighted-average  number of common shares  outstanding during the three
         month  periods  ended  September  30,  2005  and  2004.   Common  Stock
         equivalents  to  purchase   Common  Stock  of  the  Company  that  were
         outstanding  at  September  30, 2005 and 2004 were not  included in the
         computation  of diluted net loss per share as their  effect  would have
         been anti-dilutive.


                                       7
<PAGE>

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[6]      Stock-based compensation:

         As  permitted   under  SFAS  No.  123,   Accounting   for   Stock-based
         Compensation  (SFAS No.  123),  the  Company has elected to continue to
         follow the guidance of APB Opinion No. 25,  Accounting for Stock Issued
         to Employees  (APB No. 25), and Financial  Accounting  Standards  Board
         Interpretation  No. 44, Accounting for Certain  Transactions  Involving
         Stock  Compensation--an  interpretation  of APB Opinion No. 25 (FIN No.
         44),  in  accounting   for  its   stock-based   employee   compensation
         arrangements.  Accordingly,  no compensation cost is recognized for any
         of the  Company's  fixed stock  options  granted to employees  when the
         exercise  price of each option  equals or exceeds the fair value of the
         underlying  Common  Stock as of the grant date for each  stock  option.
         Changes in the terms of stock option grants,  such as extensions of the
         vesting  period or changes in the  exercise  price,  result in variable
         accounting  in  accordance  with  APB  Opinion  No.  25.   Accordingly,
         compensation  expense is  measured  in  accordance  with APB No. 25 and
         recognized  over the vesting  period.  If the  modified  grant is fully
         vested, any additional  compensation  costs is recognized  immediately.
         The Company accounts for equity  instruments issued to non-employees in
         accordance with the provisions of SFAS No. 123.

         At  September  30,  2005 and  December  31,  2004,  the  Company  had a
         stock-based employee compensation plan - the 2003 Plan.

         As  permitted   under  SFAS  No.  148,   Accounting   for   Stock-Based
         Compensation--Transition  and  Disclosure,  which amended SFAS No. 123,
         the  Company has  elected to  continue  to follow the  intrinsic  value
         method  in  accounting  for  its  stock-based   employee   compensation
         arrangements  as  defined  by APB No.  25 and  related  interpretations
         including FIN No. 44. The following table illustrates the effect on net
         loss and loss per  share if the  Company  had  applied  the fair  value
         recognition   provisions  of  SFAS  No.  123  to  stock-based  employee
         compensation for options granted under its plan.

<TABLE>
<CAPTION>
                                                          Nine Month Period Ended September 30,
                                                              2005                2004

<S>                                                          <C>                 <C>
 Net loss, as reported                                       $(1,635,177)        $(1,695,180)
                                                             -----------         -----------
 Less, Total stock-based employee compensation
 expense determined under fair value-based method
 for all awards, net of related tax effects                           --            (246,430)
                                                             -----------         -----------

 Pro forma net loss                                          $(1,635,177)        $(1,941,610)
                                                             ============        ============

 Net loss per share - basic and diluted:
      As reported                                                 $(0.15)             $(0.16)
                                                                  =======             =======
      Pro forma                                                   $(0.15)             $(0.18)
                                                                  =======             =======
</TABLE>

         On May 10, 2005,  pursuant to a  litigation  Settlement  Agreement  the
         Company tendered an aggregate of 850,000 shares of the Company's Common
         Stock to three  former  officers  and  directors in exchange for all of
         their (i) incentive stock


                                       8
<PAGE>

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         options (1,550,000), (ii) Series AA Preferred Stock (1,000,000),  (iii)
         Series  A  Preferred  Stock  (305,336)  and  related  Class A  Warrants
         (305,336),  and (iv) Series C Preferred  Stock  (4,867,937) and related
         Class C Warrants (4,867,937).  On or about July 9, 2005, they delivered
         those securities  required to be delivered by the settlement  agreement
         to the Company. The Company subsequently retired these securities.

[7]      Recent accounting pronouncements:

         In May 2003,  the FASB  issued  SFAS No.  150,  Accounting  for Certain
         Financial  Instruments  with  Characteristics  of Both  Liabilities and
         Equity. SFAS No. 150 establishes standards for how an issuer classifies
         and measures certain financial instruments with characteristics of both
         liabilities and equity. It requires that an issuer classify a financial
         instrument that is within its scope as a liability (or an asset in some
         circumstances). Many of those instruments were previously classified as
         equity.  SFAS No. 150 is effective  for financial  instruments  entered
         into or modified after May 31, 2003. The Company  adopted this standard
         during 2003 and the  adoption  did not have an impact on the  Company's
         consolidated financial statements in 2004 or 2003.During December 2004,
         the Financial  Accounting Standards Board ("FASB") issued SFAS No. 153,
         Exchanges of Nonmonetary  Assets -- An Amendment of APB Opinion No. 29.
         APB Opinion No. 29, Accounting for Nonmonetary  Transactions ("APB 29")
         required  that  nonmonetary  exchanges be accounted  for at fair value,
         subject to certain  exceptions.  SFAS 153 has removed the exception for
         nonmonetary  exchanges of similar  productive  assets,  and replaced it
         with an exception for exchanges  that lack  commercial  substance.  The
         provisions of SFAS 153 are effective  prospectively for all nonmonetary
         asset  exchanges in fiscal periods  beginning  after June 15, 2004. The
         adoption  of this  standard  did not have an  impact  on the  Company's
         consolidated financial statements in 2005 and 2004.

         During  December  2004,  FASB  issued  SFAS  No.  123  (Revised  2004),
         Share-Based  Payment  ("SFAS  123R").  SFAS 123R replaces SFAS No. 123,
         Accounting for Stock-Based  Compensation (SFAS 123), and supersedes APB
         Opinion No. 25,  Accounting  for Stock Issued to  Employees.  SFAS 123R
         requires  companies  to  recognize  the  compensation  cost  related to
         share-based


                                       9
<PAGE>


NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         payment  transactions with employees in the financial  statements.  The
         compensation  cost  is  measured  based  upon  the  fair  value  of the
         instrument issued. Share-based compensation transactions with employees
         covered within SFAS 123R include share options, restricted share plans,
         performance-based awards, share appreciation rights, and employee share
         purchase  plans.  SFAS  123  included  a  fair-value-based   method  of
         accounting for share-based  payment  transactions  with employees,  but
         allowed  companies to continue to apply the guidance in APB 25 provided
         that they disclose in the footnotes to the financial statements the pro
         forma net  income if the  fair-value-based  method  been  applied.  The
         Company is currently reporting  share-based  payment  transactions with
         employees  in  accordance   with  APB  25  and  provides  the  required
         disclosures.  SFAS 123R will be  effective  for the  Company  beginning
         January 1, 2006.

         In  implementing   SFAS  123R  the  Company  will  apply  the  modified
         prospective  application  transition method.  The modified  prospective
         application transition method requires the application of this standard
         to:

            o     All new awards issued after the effective date;

            o     All  modifications,  repurchased or  cancellations of existing
                  awards after the effective date; and

            o     Unvested awards at the effective date.

         For unvested  awards,  the  compensation  cost related to the remaining
         "requisite  service' that has not been  rendered at the effective  date
         will be determined by the  compensation  cost calculated  currently for
         either recognition or pro forma disclosures under SFAS 123. The Company
         will be adopting the modified prospective application of SFAS 123R.

NOTE C - RESTRUCTURING OF CERTAIN NOTES PAYABLE

As of September 30, 2005, the Company's (i) 10% Subordinated  Notes amounting to
$1,000,000,  (ii) 18% Promissory  Note amounting to $300,000,  (iii) 10% Secured
Note  amounting to $150,000,  and (iv) 24% Secured Notes  amounting to $150,000,
were all due and payable.  Unpaid interest  relating to these notes amounting to
approximately  $220,000  was also due and  payable.  On  November  2,  2005,  we
satisfied  these notes in exchange  for shares of our common  stock  pursuant to
transactions described in Note J - Subsequent Events.

NOTE D - LITIGATION

The Company is a party to various  vendor  related  litigations.  Management has
accrued a liability of approximately  $100,000 and, accordingly,  this liability
has been reflected in accounts payable and accrued expenses.

NOTE E - AGREEMENT AND PLAN OF MERGER BETWEEN ARROW RESOURCES DEVELOPMENT,  LTD.
AND CNE GROUP, INC.

On  August  1,  2005,  the  Company  entered  into  an  agreement  (the  "Merger
Agreement")  with PNG and Arrow,  pursuant  to which,  among other  things,  the
Company  would  merge  with  Arrow and  issue  non-voting  shares of Series  AAA
Preferred Stock to PNG. This stock would automatically convert into an aggregate
of 624 million  shares of the Company's  Common Stock,  which would equal 96% of
the Company's outstanding shares of Common Stock when the Company's stockholders
approved the  conversion and an increase in the number of shares of Common Stock
the Company is authorized to issue so that the conversion could be effected.

                                       10
<PAGE>

Arrow had initially been formed by the Company in anticipation of issuing 97% of
its  stock  to PNG  in  consideration  for  the  execution  of a  marketing  and
distribution agreement (the "Marketing Agreement") between Arrow and PNG and its
affiliated  companies,  and  distributing the 3% balance of Arrow's stock to the
Company's stockholders.  Pursuant to the Marketing Agreement,  the term of which
would  extend  through  July 31,  2103,  PNG  would  retain  Arrow to act as the
exclusive  worldwide  marketer  and  distributor  for  all  of  its  timber  and
derivative products. It would provide for Arrow to retain 10% of the gross sales
generated by all  plantation  operations  from all resources and all  derivative
products, such as paper, pulp and chips.

On or about July 12, 2005, the Company began discussions with representatives of
PNG and APR,  the parent of PNG,  to modify the  transaction  with PNG,  APR and
their  affiliates  so that Arrow would merge  directly  into the Company.  These
discussions led to the execution of the Merger Agreement.

On August 1, 2005,  Arrow entered into the Marketing  Agreement with APR and its
subsidiaries in consideration for Arrow issuing a non-interest bearing note (the
"Note")  in the  principal  amount  of  $125,000,000  to Empire  Advisory,  LLC,
("Empire"), due on or before December 31, 2005. Empire is APR's merchant banker.
The Note permitted the Company,  as Arrow's sole stockholder,  to cause Arrow to
repay it in cash or with 10,000,000  shares of the Company's  non-voting  Series
AAA Preferred Stock.

After the Merger  Agreement  was executed the parties  determined  to change the
form but not the substance of the  transaction.  Rather than merging the Company
and Arrow,  the  parties  agreed  that,  subject  to the  Company  receiving  an
independent   valuation  of  the  Marketing   Agreement  and  audited  financial
statements  of Arrow  acceptable  to it, the  Company,  instead of merging  with
Arrow,  would satisfy the Note by issuing to Empire 10 million shares of voting,
instead of  non-voting,  Series AAA  Preferred  Stock.  Each share of this stock
would grant the holder  thereof the right to cast 62.4  votes,  which,  together
with all  other  shares of Series  AAA  Preferred  Stock,  would  constitute  an
aggregate  of 96% of all  votes on all  matters  brought  before  the  Company's
stockholders  for a vote.  The Company  received the valuation and the financial
statements  and, on November 2, 2005,  satisfied  Arrow's  $125,000,000  note to
Empire by issuing Empire 10 million shares of Series AAA Preferred Stock.

NOTE F - DEFERRED TRANSACTION COSTS

Arrow  has  incurred  certain   transactional   costs  in  connection  with  the
transaction  noted above in Note E. As of September 30, 2005, Arrow had totaling
$350,010 of deferred  transaction costs. These costs include legal fees incurred
by both Arrow and the Company in  contemplation  of the planned  transaction and
other  offering  costs  incurred to Empire.  As of  September  30,  2005,  these
deferred  transaction  costs have been offset  against the  transitional  senior
notes  payable by Arrow to Empire,  since these costs will be deducted  from the
proceeds  received  from  the  issuance  of  convertible  preferred  stock  upon
successful consummation of the transaction described in Note E.

NOTE G - MARKETING AND DISTRIBUTION  AGREEMENT AND RELATED  TRANSACTIONAL SENIOR
NOTE PAYABLE DUE TO EMPIRE ADVISORY, LLC

                                       11
<PAGE>

As already  discussed in August 2005,  Arrow  executed the Marketing  Agreement.
This  Agreement was valued at fair value as determined  based on an  independent
appraisal,  which approximates the market value of 96% of the CNE's public stock
to be issued in the transaction.

The  Marketing  Agreement  will be  amortized  over 99  years  (the  life of the
Agreement)  once Arrow  commences  operations.  As of September  30,  2005,  the
Company  had  recorded  a  $125,000,000  amortizable  intangible  asset for this
agreement and a  corresponding  credit to the  liability for the senior  secured
note  payable to Empire in the same amount  (see Note E) pending  success of the
transaction.  No  amortization of the agreement was taken during the period from
Arrow's  inception  (May 20,  2005)  to  September  30,  2005,  as the  relevant
operations had not yet  commenced.  Operations are expected to commence no later
than the first quarter of 2006.

The senior secured note payable is  non-interest  bearing and could be repaid in
cash or in the form of the  Preferred  Stock  (See  Note  E).  It was due on the
earlier of December 31, 2005 without  further  notice or on events of default as
defined therein.  The senior secured note payable and any Preferred Stock issued
there under are considered  restricted as to the sale thereof under SEC Rule 144
as unregistered  securities.  As noted above, the note was repaid by CNE issuing
10 million shares of its Series AAA Preferred Stock to Empire.

NOTE H - RELATED PARTY TRANSACTIONS

[1]   Management Agreement with Empire Advisory, LLC

      Effective August 1, 2005,  Arrow entered into a Management  Agreement with
      Empire  under  which  Empire   provides   chief   executive   officer  and
      administrative services to the Company in exchange for a) an annual fee of
      $300,000  for  overhead  expenses,   b)$25,000  per  month  for  rent,  c)
      $1,000,000  per annum  (subject  to  increases  in  subsequent  years) for
      executive services, and d) a one-time fee of $150,000 for execution of the
      proposed transaction.

      As of September 30, 2005,  Arrow had  short-term  borrowings of $1,282,918
      due to Empire, consisting of working capital raised by Empire on behalf of
      Arrow. These amounts are non-interest bearing and due on demand.

      Peter Frugone is a member of Arrows Board of Directors and is the owner of
      Empire Advisory,  LLC. It is anticipated that on November 22, 2005 he will
      the Company's Chief Executive  Officer and a member of the Company's Board
      of Directors.

      "Consulting  fees and services"  charged in the  "Statement of Operations"
      for the  period  from  inception  (May 20,  2005) to  September  30,  2005
      incurred to Empire totaled $641,666.

[2]   Engagement  and  Management   Agreements  entered  into  with  individuals
      affiliated with Arrow Pacific Resources (s) Pte. Ltd. ("Arrow PNG")

      "Consulting  fees and services"  charged in the  "Statement of Operations"
      for the period from Arrow's inception (May 20, 2005) to September 30, 2005
      incurred to Hans Karundeng and Rudolph  Karundeng  under  "Engagement  and
      Management  Agreements" totaled $532,877. In addition, as of September 30,
      2005 Arrow owed them a total of $452,876.  These  agreements are discussed
      in detail in Note I.

NOTE I - COMMITMENTS AND OTHER MATTERS

                                       12
<PAGE>

[1]   Engagement  and  Management   Agreements  entered  into  with  individuals
      affiliated with Arrow Pacific Resources (s) Pte. Ltd. ("Arrow PNG")

      Effective as of May 20, 2005,  Arrow entered into an Engagement  Agreement
      with Hans  Karundeng  for business and financial  consulting  services for
      fees of  $1,000,000  per annum.  The term of the  agreement is five years.
      Hans Karundeng is also a 43% owner of Arrow PNG.

      Effective as of August 1, 2005, Arrow entered into an Employment Agreement
      with Rudolph  Karundeng for his services as Chairman of the Board of Arrow
      for fees of $1,000,000 per annum. The term of the agreement is five years.
      Rudolph  Karundeng is a son of Hans Karundeng.  It is anticipated  that on
      November  22, 2005 he will the  Company's  Chief  Operating  Officer and a
      member of the Company's Board of Directors

[2]   Management Agreement with Empire Advisory, LLC

      See Note H above.

-CONSULTING AGREEMENT

      On May 11, 2005 the Company  entered into a consulting  Agreement  with an
      individual  that included the issuance of 300,000 shares of its restricted
      Common Stock and  three-year  warrants to purchase an aggregate of 250,000
      shares  at  $0.46  per  share,   subject  to   appropriate   anti-dilution
      provisions.  The individual has since returned the warrants to the Company
      and they have been cancelled.

[3] 5 Year Table of obligations under [1] and [2] above:

      The minimum  future  obligations  for  consulting  fees and services under
      agreements outlined in [1] and [2] are as follows:

         Years Ending
         September 30,                              Amounts

             2006                                $ 3,041,667
             2007                                  3,302,083
             2008                                  3,627,604
             2009                                  4,034,505
             2010                                  3,506,755
                                                 -----------

                                                 $17,512,614
                                                 ===========

The Company also  engages  certain  consultants  to provide  services  including
management of the corporate citizenship program and investor relations services.
These agreements contain  cancellation  clauses with notice with periods ranging
from zero to sixty days.

NOTE J - SUBSEQUENT EVENTS

Background of the Transaction and Change in Control

                                       13
<PAGE>

         On  November  2, 2005,  we issued  10,000,000  shares of our Series AAA
Preferred  Stock to Empire in payment  for the note in the  principal  amount of
$125,000,000 issued by Arrow. In connection therewith,  Empire has agreed to pay
certain  of our  expenses,  including  expenses  relating  to this  transaction,
aggregating approximately $350,000, of which approximately $70,000 has been paid
as of November 2, 2005,  and the balance  will be paid on or about  November 22,
2005.  George W. Benoit,  our Chief Executive  Officer,  will be paid $60,000 of
this amount. Also on November 22, 2005, our current directors plan to resign and
appoint designees of the Preferred Stockholders to be the Company's directors.

Subsequent to September 30, 2005, we:

(i)           exchanged all of our 1,392,630  shares of Series A Preferred Stock
              for our common stock at the rate of one share of  Preferred  Stock
              for  one  share  of  common  stock  and  thereafter  retired  this
              Preferred Stock;
(ii)          purchased all of our 4,400 shares of Series B Preferred  Stock for
              an  aggregate  price  of  $20,000  and  thereafter   retired  this
              Preferred Stock;
(iii)         exchanged  all of our  1,145,000  Series G Preferred  Stock at the
              rate of one  share of  Preferred  Stock  for two  shares of common
              stock and thereafter retired this Preferred Stock
(iv)          exchanged all of our  outstanding  debt,  exclusive of accrued but
              unpaid salaries,  directors' and  professional  fees and expenses,
              and  exclusive  of the debt  cancelled  pursuant to a  transaction
              described  below  relating  to the  sale  of one  of  SRC,  in the
              aggregate amount of  approximately  $1,370,000 for an aggregate of
              2,837,533 shares of common stock;
(v)           issued 373,277  shares of common stock to independent  contractors
              for services they rendered to us; (vi) except for the warrants and
              options referred to in the transaction relating to the sale of our
              subsidiary,  exchanged  all of our  warrants  and  options  for an
              aggregate of 6,275,772  shares of common stock; and (vii) executed
              mutual general  releases with certain of our creditors  including,
              among others, our officers and directors, pursuant to which all of
              our accrued but unpaid salaries,  directors' and professional fees
              and expenses in the aggregate amount of  approximately  $1,350,000
              were released.

         Subsequent to September 30, 2005, we obtained releases from our current
directors and a former director,  pursuant to which, for nominal  consideration,
they have each released us from our obligation to pay him any accrued but unpaid
compensation,  directors fees and/or  advances,  as the case may be, that we may
owe him. We have also  released  them from all actions we may have  against them
except for those  prohibited by applicable law. The following table sets for the
amounts that they have released:

Name                                                 Amount Released
----                                                 ---------------
Joseph G. Anastasi                                    $        30,000

George W. Benoit                                      $     1,307,050
Anthony S. Conigliaro                                 $       223,333
Charles W. Currie                                     $        28,000
David W. Dube                                         $        35,000

         Subsequent to September 30, 2005, we also entered into  agreements with
Messrs. Anastasi, Benoit,  Conigliaro,  Currie and Dube, members of Mr. Benoit's
family, and Grace C. Lindblom and Frank Ciolli,  each a beneficial owner of more

                                       14
<PAGE>

than 10% of our outstanding common stock at the time of the agreements, pursuant
to which we issued them our common stock in exchange for debt owed by us, Series
G Preferred Stock and/or options or warrants,  each to purchase one share of our
common  stock at various  prices.  We were paid $0.20 per share for the Series G
Preferred Stock. The following table sets forth certain information  relating to
these transactions:

<TABLE>
<CAPTION>

Name                                    Consideration Exchanged             Number of Shares Issued
----                                    ------------------------            -----------------------
<S>                                 <C>                <C>                                      <C>
Joseph G. Anastasi                  25,000 options and $26,667 debt                             116,894

George W. Benoit (1)(2)(4)                  600,000  options                                    479,887
Maureen Benoit (1)                           3,007,903 options and $515,000 debt              2,656,326

George W. Benoit, Jr. (2)            49,600 shares of preferred stock                           496,000

Kevin J. Benoit (2)(3)               59,400 shares of preferred stock,

                                     514,277 options and $56,667 debt                           712,750
Frank Ciolli (3)                             1,542,833 options and $181,625 debt                377,324
Anthony S. Conigliaro                   1,314,277 warrants and
                                        options and $56,667 debt                              1,857,538
Charles W. Currie                   25,000 options and $26,667 debt                             112,639
David W. Dube                               100,000 options                                      72,117
Grace C. Lindblom (3)                        2,081,550 options and $250,000 debt                545,167
Anne B. Mullen (2)                    22,913 shares of preferred stock                          228,930
Michael Mullen (4)                    8,000 shares of preferred stock                            80,000
Nancy C. Zucco (2)                    43,003 shares of preferred stock                          430,230

</TABLE>

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


(1) Maureen Benoit is George W. Benoit's wife.
(2) This person is an adult childof George W. Benoit.
(3) This  person was a holder of 10% or more of our common  stock at the time of
    the agreement.
(4) Mr. Mullen is George W. Benoit's son-in-law.

      We issued all of our common stock in the transactions  referred to in this
Note  pursuant  to  the  exemptions  from  the  registration  provisions  of the
securities Act of 1933 provided by Sections 3(a)(9) and 4(2) thereof.

On November 3, 2005, we entered into an agreement  with Gary L..  Eichsteadt,  a
former director,  Thomas L. Sullivan,  a former executive officer,  and David B.
Batzer  pursuant  to which we sold SRC and  SRC-ECI,  Inc.,  SRC's  wholly-owned
subsidiary, and a patent associated with these businesses, to Messrs. Eichsteadt
and Sullivan in  consideration  for the  cancellation  of debt in the  aggregate
amount of $50,000 we owed to Messrs.  Eichsteadt and Sullivan,  the cancellation
of debt in the  aggregate  amount  of  approximately  $150,000  SRC  owed to Mr.
Eichstead,  the  cancellation of debt in the aggregate  amount of  approximately
$300,000 SRC owed to Mr. Batzer, and the return to us by Messrs.  Eichsteadt and
Sullivan of an aggregate of  1,000,000  shares of our Series AA Preferred  Stock
and 4,867,938  shares of our Series C Preferred  Stock and the return by Messrs.
Eichsteadt,  Sullivan  and  Batcher of  options  and  warrants  to  purchase  an
aggregate of 486,000  shares of our common stock.  We have since retired  and/or
canceled all of the  securities  returned to us pursuant to this  agreement.  As
part of this  transaction  Mr.  Eichsteadt  resigned  as a  director.  All inter
company debt was eliminated prior to closing.

                                       15


On November 3, 2005,  we entered  into an  agreement  with USCL and Thomas Leyen
pursuant to which all inter company debt was eliminated prior to closing, and we
transferred  USCL and two patents related to that business to Mr. Leyen and will
pay certain of USCL's  obligations in the aggregate amount not to exceed $86,000
in  consideration  for Mr.  Leyen  canceling  Options  currently  held by him to
purchase an aggregate of 300,000 shares of Common Stock.

                                       16
<PAGE>

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

                  General

                  We are a holding company whose primary operating subsidiaries,
                  as of  September  30,  2005,  were SRC, US Commlink  and Arrow
                  Resources  Development,  Ltd. SRC, also a holding company,  is
                  the parent of  Connectivity  and ECI. On November 3, 2005,  we
                  sold SRC and US Commlink.  Arrow remains our primary operating
                  subsidiary

                  On  August  1,  2005,  Arrow  entered  into  a  marketing  and
                  distribution  agreement (the "Marketing Agreement") with Arrow
                  Pacific  Resources  PNG Ltd.  ("PNG"),  an  affiliate of Arrow
                  Pacific  Resources  (S)  Pte.  Ltd  ("APR").  APR and PNG have
                  represented  to us that  they and their  affiliated  companies
                  have initiated the commercial  development of timber resources
                  and a eucalyptus  plantation  operation in Papua,  New Guinea.
                  Pursuant  to the  Marketing  Agreement  Arrow  will act as the
                  exclusive  worldwide marketer and distributor for all of APR's
                  timber and derivative  products.  This Agreement terminates on
                  July  31,  2103  unless   sooner   terminated  or  renewed  in
                  accordance  with its terms.  APR has been granted a license by
                  the  government of Papua,  New Guinea for the  development  of
                  plantation  operations  on more than 100,000  hectares of land
                  and has  entered  into  land  leases  with the  owners of this
                  property.  The  license  terminates  in  2098.  The  Marketing
                  Agreement  provides for Arrow to retain 10% of the gross sales
                  generated by all plantation  operations from all resources and
                  all derivative products, such as paper, pulp and chips.

                  In addition, we engage in the business of e-recruiting through
                  our subsidiary,  CareerEngine,  Inc. The e-recruiting business
                  does not generate a  significant  part of our revenue,  and is
                  not significant to our operations.

                  Critical Accounting Policies and Estimates

                  The  preparation  of financial  statements in accordance  with
                  U.S. generally accepted  accounting  principles requires us to
                  make  estimates  and  assumptions  that  affect  the  reported
                  amounts of assets and liabilities at the date of the financial
                  statements  and  the  reported  amounts  of  net  revenue  and
                  expenses during the reporting  period. On an ongoing basis, we
                  evaluate  our  estimates,   including  those  related  to  our
                  allowance for doubtful accounts,  inventory reserves, goodwill
                  and  purchased   intangible   asset   valuations,   and  asset
                  impairments.  We base our estimates on  historical  experience
                  and  on  various  other  assumptions  that  we  believe  to be
                  reasonable under the circumstances,  the results of which form
                  the basis for making  judgments  about the carrying  values of
                  assets and  liabilities.  Actual results may differ from these
                  estimates under different assumptions or conditions.

                                       17
<PAGE>

                  We believe the following critical accounting  policies,  among
                  others,  affect the significant judgments and estimates we use
                  in the preparation of our consolidated financial statements:

                  Allowance for Doubtful Accounts, Revenue Recognition

                  We evaluate  the  collectibility  of our  accounts  receivable
                  based on a combination of factors.  In circumstances  where we
                  are  aware  of a  specific  customer's  inability  to meet its
                  financial obligations to us, we record a specific allowance to
                  reduce the net receivable to the amount we reasonably  believe
                  will  be  collected.   For  all  other  customers,  we  record
                  allowances  for doubtful  accounts based on the length of time
                  the  receivables   are  past  due,  the  prevailing   business
                  environment  and our historical  experience.  If the financial
                  condition of our customers  were to deteriorate or if economic
                  conditions  were  to  worsen,  additional  allowances  may  be
                  required in the future.

                  We recognize  product revenue when  persuasive  evidence of an
                  arrangement  exists,  the sales price is fixed, the service is
                  performed or products are shipped to customers,  which is when
                  title  and  risk  of  loss  transfers  to the  customers,  and
                  collectibility is reasonably assured.

                  At September 30, 2005, our allowance for doubtful accounts was
                  $66,000 for 20.8 % of gross  receivables,  compared to $51,000
                  or 22.9% of gross  receivables  as of December 31,  2004.  The
                  decrease in the reserve as a percentage  of gross  receivables
                  at  September  30, 2005 as  compared  to December  31, 2004 is
                  primarily the result a decreased  requirement for an allowance
                  for doubtful  accounts at September  30, 2005 than at December
                  31, 2004.

                  Inventory Valuation

                  At each balance sheet date, we evaluate our ending inventories
                  for  excess  quantities  and  obsolescence.   This  evaluation
                  includes  analyses of sales levels by product and  projections
                  of  future  demand.  If  inventories  on hand are in excess of
                  forecasted  demand, we provide  appropriate  reserves for such
                  excess inventory.  If we have previously recorded the value of
                  such inventory determined to be in excess of projected demand,
                  or if we determine  that  inventory is obsolete,  we write off
                  these  inventories  in the period the  determination  is made.
                  Remaining  inventory  balances are adjusted to approximate the
                  lower of our cost or market value.  If future demand or market
                  conditions are less  favorable  than our projects,  additional
                  inventory write-downs may be required,  and would be reflected
                  in cost of revenues in the period the revision is made.

                  Valuation  of  Goodwill.   Purchased   Intangible  Assets  and
                  Long-Lived Assets

                                       18
<PAGE>

                  We perform goodwill impairment tests on an annual basis and on
                  an interim basis if an event or circumstance indicates that it
                  is more  likely  than not that  impairment  has  occurred.  We
                  assess the impairment of other  amortizable  intangible assets
                  and   long-lived   assets   whenever   events  or  changes  in
                  circumstances  indicate  that the  carrying  value  may not be
                  recoverable.  Factors we consider important that could trigger
                  an impairment review include  significant  underperformance to
                  historical or projected operating results, substantial changes
                  in our business strategy and significant  negative industry or
                  economic trends.  If such indicators are present,  we evaluate
                  the fair value of the goodwill.  For other  intangible  assets
                  and  long-lived  assets we  determine  whether  the sum of the
                  estimated  undiscounted cash flows  attributable to the assets
                  in  question  is less than their  caring  value.  If less,  we
                  recognize  an  impairment  loss  based  on the  excess  of the
                  carrying  amount of the  assets  over  their  respective  fair
                  values.  Fair  value  of  goodwill  is  determined  by using a
                  valuation model based on market capitalization.  Fair value of
                  other intangible assets and long-lived assets is determined by
                  future  cash  flows,  appraisals  or  other  methods.  If  the
                  long-lived  asset  determined to be impaired is to be held and
                  used,  we  recognize  an  impairment  charge to the extent the
                  anticipated net cash flows  attributable to the asset are less
                  than  the  asset's  carrying  value.  The  fair  value  of the
                  long-lived  asset then becomes the asset's new carrying value,
                  which we depreciate over the remaining  estimated  useful life
                  of the asset.

                  Recent Accounting Pronouncements

                  In May 2003,  the FASB  issued SFAS No.  150,  Accounting  for
                  Certain  Financial  Instruments with  Characteristics  of Both
                  Liabilities and Equity. SFAS No. 150 establishes standards for
                  how  an  issuer  classifies  and  measures  certain  financial
                  instruments  with  characteristics  of  both  liabilities  and
                  equity.  It  requires  that an  issuer  classify  a  financial
                  instrument  that is  within  its scope as a  liability  (or an
                  asset in some  circumstances).  Many of those instruments were
                  previously classified as equity. SFAS No. 150 is effective for
                  financial  instruments  entered into or modified after May 31,
                  2003.  We adopted this  standard  during 2003 and the adoption
                  did  not  have  an  impact  on  our   consolidated   financial
                  statements in 2005 or 2004.

                  During December 2004, the Financial Accounting Standards Board
                  ("FASB") issued SFAS No. 153,  Exchanges of Nonmonetary Assets
                  -- An  Amendment  of APB  Opinion  No. 29. APB Opinion No. 29,
                  Accounting for  Nonmonetary  Transactions  ("APB 29") required
                  that  nonmonetary  exchanges be  accounted  for at fair value,
                  subject  to  certain  exceptions.  SFAS  153 has  removed  the
                  exception  for  nonmonetary  exchanges  of similar  productive
                  assets,  and replaced it with an exception for exchanges  that
                  lack  commercial  substance.  The  provisions  of SFAS 153 are
                  effective prospectively for all nonmonetary asset exchanges in
                  fiscal periods  beginning after June 15, 2004. The adoption of
                  this  standard  did not  have an  impact  on our  consolidated
                  financial statements in 2005 or 2004.

                                       19
<PAGE>

                  During December 2004, FASB issued SFAS No. 123 (Revised 2004),
                  Share-Based Payment ("SFAS 123R"). SFAS 123R replaces SFAS No.
                  123,  Accounting for Stock-Based  Compensation (SFAS 123), and
                  supersedes APB Opinion No. 25,  Accounting for Stock Issued to
                  Employees.  SFAS 123R  requires  companies  to  recognize  the
                  compensation cost related to share-based payment  transactions
                  with employees in the financial  statements.  The compensation
                  cost is measured  based upon the fair value of the  instrument
                  issued.  Share-based compensation  transactions with employees
                  covered  within SFAS 123R include  share  options,  restricted
                  share  plans,  performance-based  awards,  share  appreciation
                  rights, and employee share purchase plans. SFAS 123 included a
                  fair-value-based  method of accounting for share-based payment
                  transactions with employees, but allowed companies to continue
                  to apply the guidance in APB 25 provided that they disclose in
                  the  footnotes to the financial  statements  the pro forma net
                  income if the  fair-value-based  method been  applied.  We are
                  currently  reporting  share-based  payment  transactions  with
                  employees in accordance  with APB 25 and provides the required
                  disclosures.  SFAS 123R  will be  effective  for us  beginning
                  January 1, 2006.

                  In   implementing   SFAS  123R  we  will  apply  the  modified
                  prospective   application   transition  method.  The  modified
                  prospective   application   transition   method  requires  the
                  application of this standard to:

                        o     All new awards issued after the effective date;
                        o     All modifications, repurchased or cancellations of
                              existing awards after the effective date; and
                        o     Unvested awards at the effective date.

                  For  unvested  awards,  the  compensation  cost related to the
                  remaining  "requisite  service'  that has not been rendered at
                  the effective date will be determined by the compensation cost
                  calculated  currently  for  either  recognition  or pro  forma
                  disclosures  under SFAS 123. We will be adopting  the modified
                  prospective application of SFAS 123R.

         A.       Results of Operations:

                  Three-Month  Period Ended  September  30, 2005 Compared to the
                  Three-Month Period Ended September 30, 2004

                  Revenues

                  Total revenues were $471,705 for the three-month  period ended
                  September 30, 2005 decreased from $642,995 for the three-month
                  period ended September 30, 2004 primarily due to a decrease of
                  the contracts awarded to Connectivity, ECI and Commlink.

                                       20
<PAGE>

                  Product sales income decreased to $288,628 for the three-month
                  period  ended   September  30,  2005  from  $385,711  for  the
                  three-month period ended September 30, 2004 primarily due to a
                  reduction of the contracts  awarded to  Connectivity,  ECI and
                  Commlink.

                  Service fee income  decreased to $170,327 for the  three-month
                  period  ended   September  30,  2005  from  $215,364  for  the
                  three-month period ended September 30, 2004 primarily due to a
                  reduction of the contracts  awarded to  Connectivity,  ECI and
                  Commlink.

                  Internet   related   income   decreased  to  $12,750  for  the
                  three-month  period ended  September 30, 2005 from $41,920 for
                  the  three-month  period  ended  September  30,  2004  as  the
                  operations  of  our  subsidiary,  Career  Engine,  Inc.,  have
                  continued to decline due to our  relatively  small size in the
                  e-recruiting industry.

                  Cost of Goods Sold

                  Costs of goods  sold,  which  relates  to  product  sales  and
                  related  service  fee  income  decreased  to  $72,298  for the
                  three-month  period ended September 30, 2005 from $300,574 for
                  the  three-month  period ended  September  30, 2004 due to the
                  related decrease in revenues.

                  Other Expenses

                  Total  other   expenses   increased  to  $1,767,738   for  the
                  three-month  period ended September 30, 2005 from $677,497 for
                  the  three-month  period  ended  on  September  30,  2004  due
                  primarily  to  the  activity  of  our  subsidiary,   Arrow,  a
                  development stage company.

                  Advertising  expenses increased to $19,257 for the three-month
                  period   ended   September   30,  2005  from  $5,909  for  the
                  three-month period ended September 30, 2004.

                  Compensation  and related  costs  decreased to $65,340 for the
                  three-month  period ended  September 30, 2005 from $207,32 for
                  the three-month period ended September 30, 2004. We instituted
                  certain payroll reduction  initiatives,  primarily,  the third
                  quarter of 2004,  including  the  reduction  of our  executive
                  personnel and the reversal of previous accrued salaries.

                  General and  administrative  expenses  increased to $1,759,692
                  for the  three-month  period  ended  September  30,  2005 from
                  $322,507 for the  three-month  period ended September 30, 2004
                  due to the activity of our subsidiary, Arrow.

                  Product   development   expenses  decreased  to  nil  for  the
                  three-month  period ended  September 30, 2005 from $92,904 for
                  the  three-month  period ended  September  30, 2004 due to the
                  cessation of certain initiatives commenced by Commlink and SRC
                  and  its   subsidiaries  to  develop   products  to  meet  our
                  customers' future requirements.

                                       21
<PAGE>

                  Depreciation  and amortization  expenses  decreased to $17,269
                  for the  three-month  period  ended  September  30,  2005 from
                  $48,857 for the three-month period ended September 30, 2004

                  Other Items

                  Amortization  of  debt  discount  decreased  to  nil  for  the
                  three-month  period ended  September 30, 2005 from $24,963 for
                  the  three-month  period ended  September 30, 2004 as the debt
                  discount was fully  amortized at April 30, 2005.  There was no
                  amortization in the three-month  period  September 30, 2005 as
                  compared to the three-month period ended September 30, 2004.

                  Interest  expense  decreased  to  $9,444  for the  three-month
                  period  ended   September  30,  2005  from  $110,751  for  the
                  three-month period ended September 30, 2004 due primarily to a
                  decrease in the use, by SRC and its subsidiaries,  of accounts
                  receivable   financing  commonly  referred  to  as  factoring.
                  Factoring,  when  utilized,  has an  annual  interest  rate in
                  excess of 36%.

                  Operating Loss

                  On a pre-tax  basis,  we had a net loss before income taxes of
                  $1,377,501 for the three-month period ended September 30, 2005
                  compared  with a net loss before  income taxes of $470,514 for
                  the three-month period ended September 30, 2004.

                  Our net loss for the  three-month  period ended  September 30,
                  2005 was  $1,377,501  compared with a net loss of $470,514 for
                  the  three-month  period ended  September  30,  2004.  For the
                  three-month  period ended  September  30,  2005,  net loss per
                  common share, basic and diluted,  was $0.12 per share. For the
                  three-month  period ended  September  30,  2004,  net loss per
                  common share, basic and diluted, was $0.04 per share.

                  Nine-Month  Period Ended  September  30, 2005  Compared to the
                  Nine-Month Period Ended September 30, 2004

                  Revenues

                  Total  revenues  decreased to  $1,402,033  for the  nine-month
                  period ended  September 30, 2005 from $2,176,205 for the month
                  period ended September 30, 2004 primarily due to a decrease in
                  the dollar  amount of the contracts  awarded to  Connectivity,
                  ECI and Commlink.

                  Product sales income  decreased to $801,589 for the nine-month
                  period  ended  September  30,  2005  from  $1,279,111  for the
                  nine-month  period ended September 30, 2004 primarily due to a
                  decrease  in the  dollar  amount of the  contracts  awarded to
                  Connectivity, ECI and Commlink.

                                       22
<PAGE>

                  Service fee income  decreased to $522,741  for the  nine-month
                  period  ended   September  30,  2005  from  $798,017  for  the
                  nine-month  period ended September 30, 2004 primarily due to a
                  decrease  in the  dollar  amount of the  contracts  awarded to
                  Connectivity, ECI and Commlink I.

                  Internet   related   income   decreased  to  $77,703  for  the
                  nine-month  period ended  September  30, 2005 from $99,127 for
                  the month period ended September 30, 2004 as the operations of
                  our subsidiary,  CareerEngine,  Inc., as the operations of our
                  subsidiary, Career Engine, Inc., have continued to decline due
                  to our relatively small size in the e-recruiting industry .

                  Cost of Goods Sold

                  Costs of goods  sold,  which  relates  to  product  sales  and
                  related  service  fee income  decreased  to  $400,167  for the
                  nine-month period ended September 30, 2005 from $1,085,889 for
                  the  nine-month  period  ended  September  30, 2004 due to the
                  related decrease in revenues.

                  Other Expenses

                  Total  other   expenses   increased  to  $2,760,549   for  the
                  nine-month period ended September 30, 2005 from $2,333,276 for
                  the month period ended September 30, 2004 due primarily to the
                  activity of our subsidiary, Arrow.

                  Advertising  expenses  increased to $53,542 for the nine-month
                  period  ended   September   30,  2005  from  $42,837  for  the
                  nine-month period ended September 30, 2004. These expenditures
                  relate  to  the   operations  of  Commlink  and  SRC  and  its
                  subsidiaries.

                  Compensation  and related costs  decreased to $335,947 for the
                  nine-month period ended September 30, 2005 from $1,028,916 for
                  the nine-month  period ended September 30, 2004. We instituted
                  certain payroll reduction  initiatives,  primarily,  the third
                  quarter of 2004,  including  the  reduction  of our  executive
                  personnel.

                  Organization  cost increased for the  nine-month  period ended
                  September  30,  2005 to  $36,860  from nil for the  nine-month
                  period  ended  September  30,  2004  due to  the  amortization
                  related to our subsidiary, Arrow.

                  General and  administrative  expenses  increased to $2,219,386
                  for the  nine-month  period  ended  September  30,  2005  from
                  $985,806 for the  nine-month  period ended  September 30, 2004
                  due to activity of our subsidiary, Arrow.

                                       23
<PAGE>

                  Product  development  expenses  decreased to nil for the month
                  period  ended   September  30,  2005  from  $130,513  for  the
                  nine-month   period  ended  September  30,  2004  due  to  the
                  cessation  of  certain  initiatives   commenced  by  Commlink,
                  Conectivity and ECI to develop products to meet our customers'
                  future requirements.

                  Depreciation and amortization  expenses  decreased to $114,816
                  for the  nine-month  period  ended  September  30,  2005  from
                  $145,204 for the nine-month period ended September 30, 2004.

                  Other Items

                  Amortization  of debt  discount  decreased  to $33,290 for the
                  nine-month  period ended  September 30, 2005 from $174,747 for
                  the  nine-month  period  ended  September  30,  2004  due  the
                  combined  effect  of a  decreased  period  of  time  that  the
                  amortization of the debt discount ($699,000),  relating to the
                  10% subordinated  notes issued in April 2003,  pertained,  and
                  the  change in the rate of  amortization  when the notes  were
                  extended  for an  additional  year in  March  2004.  The  debt
                  discount was fully amortized on April 30, 2005.

                  Interest  expense  decreased  to $143,569  for the  nine-month
                  period  ended   September  30,  2005  from  $278,099  for  the
                  nine-month  period ended September 30, 2004 due primarily to a
                  decrease in the use, by SRC and its subsidiaries,  of accounts
                  receivable   financing  commonly  referred  to  as  factoring.
                  Factoring,  when  utilized,  has an  annual  interest  rate in
                  excess of 36%.

                  Grant income  increased to $300,000 for the nine-month  period
                  ended  September 30, 2005 from nil for the  nine-month  period
                  ended September 30, 2004 as the  restrictions set forth in the
                  grant have expired.

                  Operating Loss

                  On a pre-tax  basis,  we had a net loss before income taxes of
                  $1,635,177 for the nine-month  period ended September 30, 2005
                  compared with a net loss before income taxes of $1,695,180 for
                  the nine-month period ended September 30, 2004.

                  Our net loss for the  nine-month  period ended  September  30,
                  2005 was $1,635,177 compared with a net loss of $1,635,177 for
                  the  nine-month  period  ended  September  30,  2004.  For the
                  nine-month  period  ended  September  30,  2005,  net loss per
                  common share, basic and diluted,  was $0.15 per share. For the
                  nine-month  period  ended  September  30,  2004,  net loss per
                  common share, basic and diluted, was $0.16 per share.

         B.       Liquidity and Capital Resources

                                       24
<PAGE>

                  We have incurred  substantial  losses,  sustained  substantial
                  cash  outflows  from  operating  activities  and had a working
                  capital  deficit at September  30, 2005 and December 31, 2004.
                  The above factors raise substantial doubt about our ability to
                  continue as a going concern.  Our continued  existence depends
                  on  our  ability  to  obtain  additional  equity  and/or  debt
                  financing to fund our  operations,  financial  obligations  as
                  they  become  due,  and   ultimately  to  achieve   profitable
                  operations.   There  is  no  assurance   that  we  can  obtain
                  additional  financing  or  achieve  profitable  operations  or
                  generate  positive  cash  flow.  Our 2005  and 2004  financial
                  statements  do not  include  any  adjustments  relating to the
                  recoverability  or classification of recorded asset amounts or
                  the amount and  classification  of  liabilities  that might be
                  necessary as a result of this ongoing concern uncertainty..

                  On August  25,  2005,  our  common  stock was  suspended  from
                  trading  on  the  American  Stock  Exchange  and  delisted  on
                  September  26,  2005.  It now  trades on the over the  counter
                  Bulletin Board.

                  At  September   30,  2005,   our   Stockholders'   Equity  was
                  approximately  $4,283,508,  our current  assets were $806,301,
                  and our current  liabilities were  $130,435,926 that primarily
                  included   a  note   payable  in  the   principal   amount  of
                  $125,000,000   due  from  Arrow  to  Empire   Advisory,   LLC.
                  ("Empire") and notes to noteholders,  who included  certain of
                  our directors and officers.  On November 2, 2005, we satisfied
                  Arrow's note to Empire by issuing Empire  10,000,000 shares of
                  our  Series AAA  Preferred  Stock and we  satisfied  the other
                  notes  by  exchanging  them for  shares  of our  common  stock
                  pursuant to transactions described below.

                  On August 1, 2005,  we entered into an agreement  (the "Merger
                  Agreement") with PNG and Arrow, pursuant to which, among other
                  things,  we would merge with Arrow and issue non-voting shares
                  of  Series  AAA  Preferred  Stock  to PNG.  This  stock  would
                  automatically  convert into an aggregate of 624 million shares
                  of our Common Stock,  which would equal 96% of our outstanding
                  shares of Common  Stock  when our  stockholders  approved  the
                  conversion  and an  increase in the number of shares of Common
                  Stock we are authorized to issue so that the conversion  could
                  be effected.

                  We had initially formed Arrow as a Bermuda  corporation on May
                  20, 2005, in  anticipation  of issuing 97% of Arrow's stock to
                  PNG in  consideration  for  the  execution  of  the  Marketing
                  Agreement, and distributing the 3% balance of Arrow's stock to
                  our  stockholders.  On  or  about  July  12,  2005,  we  began
                  discussions with  representatives of PNG and APR to modify the
                  transaction  with  PNG,  APR and their  affiliates  so that we
                  would merge directly with Arrow.  These discussions led to the
                  execution of the Merger Agreement.

                  On August 1, 2005, Arrow entered into the Marketing  Agreement
                  with  APR and its  subsidiaries  in  consideration  for  Arrow
                  issuing  a  non-interest  bearing  note  (the  "Note")  in the
                  principal  amount of $125,000,000 to Empire,  due on or before
                  December 31, 2005.  Empire is APR's merchant banker.  The Note
                  permitted us, as Arrow's sole  stockholder,  to cause Arrow to
                  repay it in cash or with  10,000,000  shares of the  Company's
                  non-voting Series AAA Preferred Stock.

                                       25
<PAGE>

                  After the Merger Agreement was executed the parties determined
                  to change the form but not the  substance of the  transaction.
                  Rather than  merging us and Arrow,  the parties  agreed  that,
                  subject  to our  receiving  an  independent  valuation  of the
                  Marketing Agreement and audited financial  statements of Arrow
                  acceptable  to us,  instead of merging  with  Arrow,  we would
                  satisfy  the Note by issuing to Empire,  on behalf of APR,  10
                  million shares of voting,  instead of  non-voting,  Series AAA
                  Preferred  Stock.  Each  share of this stock  would  grant the
                  holder thereof the right to cast 62.4 votes,  which,  together
                  with all other  shares of Series AAA  Preferred  Stock,  would
                  constitute  an  aggregate  of 96% of all votes on all  matters
                  brought  before our  stockholders  for a vote. We received the
                  valuation  and the  financial  statements  and, on November 2,
                  2005, satisfied Arrow's $125,000,000 note to Empire by issuing
                  Empire 10 million  shares of Series AAA  Preferred  Stock.  In
                  connection therewith,  Empire has agreed to pay certain of our
                  expenses,  including  expenses  relating to this  transaction,
                  aggregating  approximately  $350,000,  of which  approximately
                  $70,000 has been paid as of November 2, 2005,  and the balance
                  will be paid on or about November 22, 2005.  George W. Benoit,
                  our Chief  Executive  Officer,  will be paid  $60,000  of this
                  amount.  Also on November 22, 2005, our current directors plan
                  to resign and appoint designees of the Preferred  Stockholders
                  to be the Company's directors.

                  Off-Balance Sheet Arrangements

                  At  September  30,  2005  and  December  31,  2004,  we had no
                  off-balance sheet arrangements.

                  Operating Activities

                  We utilized $1,004,435 of cash in operating  activities during
                  the nine-month  period ended  September 30, 2005. We had a net
                  loss of  $1,635,177  during  this  period,  which  included an
                  aggregate   of   $207,106   of   non-cash   items,   including
                  depreciation and  amortization,  amortization of debt discount
                  and allowance for doubtful accounts. In addition to the impact
                  of non-cash items, our operating activities for the nine-month
                  period ended  September 30, 2005 also reflected an increase in
                  accounts receivable,  inventory, and accounts payable, accrued
                  expenses,  and  deferred  grant  revenue,  and a  decrease  in
                  prepaid expenses and other assets.

                  We utilized $1,021,523 of cash in operating  activities during
                  the nine-month  period ended  September 30, 2004. We had a net
                  loss of  $1,695,180  during  this  period,  which  included an
                  aggregate   of   $383,518   of   non-cash   items,   including
                  depreciation and  amortization,  amortization of debt discount
                  and allowance for doubtful accounts. In addition to the impact
                  of non-cash items, our operating activities for the nine-month
                  period ended  September 30, 2004 also reflected an increase in
                  accounts receivable, inventory, and accrued expenses and other
                  liabilities,  and a  decrease  in prepaid  expenses  and other
                  assets.

                                       26
<PAGE>

                  On January 21, 2004,  we took several  initiatives  to address
                  our operating cash  deficiency,  which included,  but were not
                  limited  to,  the  reduction  and/or  elimination  of  certain
                  executive  salaries,  waiving of certain interest payments due
                  officers  and/or   directors,   waiving  of  certain  accounts
                  receivable  due an officer and employee,  and the reduction of
                  certain  administrative  costs.  In addition,  we raised gross
                  proceeds of  $700,000  in  February  2004 from the sale of our
                  Common  Stock,  and  restructured  certain  short-term  credit
                  arrangements  into a $300,000  note  payable  due in  February
                  2005.   Furthermore,   in  July  through   December   2004  we
                  restructured  and issued  approximately  $450,000  of our debt
                  securities.  The note  payable and debt  securities  have been
                  satisfied   subsequent  to  September  30,  2005  pursuant  to
                  transactions described below. See Subsequent Events.

                  Subsequent Events.

                  On November 3, 2005, we entered into an agreement with Gary L.
                  Eichsteadt,  a former director,  Thomas L. Sullivan,  a former
                  executive  officer,  and David B. Batzer  pursuant to which we
                  sold SRC, its  subsidiary and a patent  associated  with these
                  businesses,    to   Messrs.   Eichsteadt   and   Sullivan   in
                  consideration  for the  cancellation  of debt in the aggregate
                  amount of $50,000 we owed to Messrs.  Eichsteadt and Sullivan,
                  the   cancellation   of  debt  in  the  aggregate   amount  of
                  approximately   $150,000  SRC  owed  to  Mr.  Eichstead,   the
                  cancellation of debt in the aggregate  amount of approximately
                  $300,000  SRC  owed to Mr.  Batzer,  and the  return  to us by
                  Messrs.  Eichsteadt  and Sullivan of an aggregate of 1,000,000
                  shares of our Series AA Preferred  Stock and 4,867,938  shares
                  of our  Series C  Preferred  Stock and the  return by  Messrs.
                  Eichsteadt,  Sullivan  and Batcher of options and  warrants to
                  purchase an aggregate of 486,000  shares of our Common  Stock.
                  We have since retired  and/or  canceled all of the  securities
                  returned  to us pursuant  to this  agreement.  As part of this
                  transaction Mr. Eichsteadt  resigned as a director.  All inter
                  company debt was eliminated prior to closing.

                  On November 3, 2005, we entered into an agreement  with,  U.S.
                  Commlink, Ltd. ("Commlink"),  our wholly owned subsidiary, and
                  Thomas  Leyen  pursuant  to which all inter  company  debt was
                  eliminated prior to closing,  and we transferred  Commlink and
                  two patents related to that business to Mr. Leyen and will pay
                  certain of Commlink's  obligations in the aggregate amount not
                  to exceed  $86,000 in  consideration  for Mr. Leyen  canceling
                  Options  currently  held by him to  purchase an  aggregate  of
                  300,000 shares of our Common Stock.

                  Subsequent to September 30, 2005, we:

                           (i)      exchanged  all of our  1,392,630  shares  of
                                    Series  A  Preferred  Stock  for our  common
                                    stock at the rate of one share of  Preferred
                                    Stock  for one  share of  common  stock  and
                                    thereafter retired this Preferred Stock;

                                       27
<PAGE>

                           (ii)     purchased  all of our 4,400 shares of Series
                                    B Preferred  Stock for an aggregate price of
                                    $20,000.00  and   thereafter   retired  this
                                    Preferred Stock;
                           (iii)    exchanged  all of  our  1,145,000  Series  G
                                    Preferred  Stock at the rate of one share of
                                    Preferred  Stock  for two  shares  of common
                                    stock and thereafter  retired this Preferred
                                    Stock
                           (iv)     exchanged  all  of  our  outstanding   debt,
                                    exclusive  of accrued  but unpaid  salaries,
                                    directors'   and   professional   fees   and
                                    expenses,   and   exclusive   of  the   debt
                                    cancelled   pursuant   to  the   transaction
                                    described above relating to the sale of SRC,
                                    in the  aggregate  amount  of  approximately
                                    $1,370,000  for an  aggregate  of  2,837,533
                                    shares of common stock;
                           (v)      issued  373,277  shares of  common  stock to
                                    independent  contractors  for services  they
                                    rendered to us; (vi) except for the warrants
                                    and options  referred to in the  transaction
                                    relating to the sale of our
                                    subsidiary,  exchanged  all of our  warrants
                                    and options for an  aggregate  of  6,275,772
                                    shares of common  stock;  and  (vii)executed
                                    mutual general  releases with certain of our
                                    creditors   including,   among  others,  our
                                    officers  and  directors,  pursuant to which
                                    all  of our  accrued  but  unpaid  salaries,
                                    directors'   and   professional   fees   and
                                    expenses   in  the   aggregate   amount   of
                                    approximately $1,350,000 were released.

                  Subsequent to September  30, 2005,  we obtained  releases from
                  our  current  directors  and a former  director,  pursuant  to
                  which, for nominal  consideration,  they have each released us
                  from  our  obligation  to  pay  him  any  accrued  but  unpaid
                  compensation, directors' fees and/or advances, as the case may
                  be, that we may owe him. We have also  released  them from all
                  actions we may have against  them except for those  prohibited
                  by applicable  law. The  following  table sets for the amounts
                  that they have released:

                  Name                               Amount Released
                  ----                               ---------------
                  Joseph G. Anastasi                  $        30,000

                  George W. Benoit                    $     1,307,050
                  Anthony S. Conigliaro               $       223,333
                  Charles W. Currie                   $        28,000
                  David W. Dube                       $        35,000

                  Subsequent  to  September  30,  2005,  we  also  entered  into
                  agreements with Messrs. Anastasi, Benoit,  Conigliaro,  Currie
                  and  Dube,  members  of Mr.  Benoit's  family,  and  Grace  C.
                  Lindblom and Frank  Ciolli,  each a  beneficial  owner of more
                  than 10% of our  outstanding  Common  Stock at the time of the
                  agreements,  pursuant to which we issued them our Common Stock

                                       28
<PAGE>

                  in  exchange  for debt owed by us,  Series G  Preferred  Stock
                  and/or options or warrants,  each to purchase one share of our
                  Common Stock at various  prices.  We were paid $0.20 per share
                  for the Series G Preferred  Stock.  The  following  table sets
                  forth certain information relating to these transactions:

<TABLE>
<CAPTION>

                  Name                            Consideration Exchanged             Number of Shares Issued
                  ----                            ------------------------            -----------------------
<S>                                            <C>                <C>                           <C>
                  Joseph G. Anastasi           25,000 options and $26,667 debt                  116,894

                  George W. Benoit (1)(2)(4)    600,000  options                                479,887
                  Maureen Benoit (1)           3,007,903 options and $515,000 debt            2,656,326

                  George W. Benoit, Jr. (2)   49,600 shares of preferred stock                  496,000

                  Kevin J. Benoit (2)(3)     59,400 shares of preferred stock,

                                               514,277 options and $56,667 debt                 712,750
                  Frank Ciolli (3)           1,542,833 options and $181,625 debt                377,324
                  Anthony S. Conigliaro           1,314,277 warrants and
                                             options and $56,667 debt                          1,857,538
                  Charles W. Currie          25,000 options and $26,667 debt                     112,639
                  David W. Dube             100,000 options                                       72,117
                  Grace C. Lindblom (3)      2,081,550 options and $250,000 debt                 545,167
                  Anne B. Mullen (2)       22,913 shares of preferred stock                      228,930
                  Michael Mullen (4)       8,000 shares of preferred stock                        80,000
                  Nancy C. Zucco (2)       43,003 shares of preferred stock                      430,230

</TABLE>


                        (1)   Maureen Benoit is George W. Benoit's wife.
                        (2)   This person is an adult child of George W. Benoit.
                        (3)   This  person  was a  holder  of 10% or more of our
                              common stock at the time of the agreement.
                        (4)   Mr. Mullen is George W. Benoit's son-in-law.

                  We issued all of our Common Stock in the transactions referred
                  to above  pursuant  to the  exemptions  from the  registration
                  provisions of the  securities Act of 1933 provided by Sections
                  3(a)(9) and 4(2) thereof.

         C.       Inflation

                  Due  to  the  nature  of  our  business,  inflation  does  not
                  significantly impact our operations.


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<PAGE>

Item 3.           Controls and Procedures

                  Our Chief Executive  Officer,  who is also acting as our Chief
                  Financial   Officer,   has  conducted  an  evaluation  of  the
                  effectiveness of disclosure  controls and procedures  pursuant
                  to Rule 13a-14 of the Exchange Act. Based on that  evaluation,
                  he has concluded that our  disclosure  controls and procedures
                  are  effective  in  ensuring  that  all  material  information
                  required to be filed in this  Quarterly  Report on Form 10-QSB
                  has been made  known to him in a timely  fashion.  There  have
                  been no significant changes in internal controls,  or in other
                  factors that could  significantly  affect  internal  controls,
                  subsequent to the date they completed his evaluation.


                                       30
<PAGE>

                                     PART II

                                OTHER INFORMATION

Item 1.           Legal Proceedings.

                  We are a party to various vendor related litigations. Based on
                  the  opinion  of  management,  we have  accrued  an  estimated
                  liability of approximately $100,000.

Item 5.           Other Information.

                  None

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

                  (a)   Exhibits:

                        2.1   Designations  of Rights and Preferences for Series
                              AAA Preferred Stock.

                        31.1  Certification  pursuant  to  Section  302  of  the
                              Sarbanes-Oxley  Act of  2002  from  the  Company's
                              Chief Executive Officer

                        31.2  Certification  pursuant  to  Section  302  of  the
                              Sarbanes-Oxley  Act of  2002  from  the  Company's
                              Chief Financial Officer

                        32.1  Certification  of  the  Chief  Executive   Officer
                              pursuant to Section 906 of the  Sarbanes-Oxley Act
                              of 2002

                        32.2  Certification  of  the  Chief  Financial   Officer
                              pursuant to Section 906 of the  Sarbanes-Oxley Act
                              of 2002

                              A statement regarding the computation of per share
                              earnings  is omitted  because the  computation  is
                              described  in Note B of the Notes to  Consolidated
                              Financial  Statements  (Unaudited)  in  this  Form
                              10-QSB.

                  (b)   Reports on Form 8-K:

                        The  Company  filed a report on Form 8-K on  August  18,
                        2005,  a report  on Form 8-K on  September  6,  2005,  a
                        report on Form 8-K/A on October  24,  2005,  a report on
                        Form 8-K/A  November 8, 2005 and a report on Form 8-K on
                        November 9, 2005.


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<PAGE>

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                        CNE GROUP, INC.



                                          /s/ George W. Benoit
                                        ---------------------------------------
Date: November 21, 2005                 George W. Benoit, Chairman of the Board
                                        of Directors, Chief Executive
                                        Officer and Chief Financial Officer


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