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 June 30, 2003

|_|   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.)

               200 West 57th Street, Suite 507, New York, NY 10019
                    (Address of Principal Executive Offices)

                                  212-977-2200
                (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 July 31, 2003

      Common stock - par value $.00001                6,490,920 shares

<PAGE>

                                     PART I

                              FINANCIAL INFORMATION

Item l. Financial Statements.

      The following consolidated financial statements of CNE Group, Inc. and
      subsidiaries (collectively referred to as the "Company," 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, 2002, which was filed with the
      Securities and Exchange Commission.

      The results of operations for the three and six months ended June 30, 2003
      are not necessarily indicative of the results to be expected for the
      entire fiscal year.


                                       1
<PAGE>

                        CNE Group, Inc. and Subsidiaries
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                     June 30,             December 31,
                                                                                       2003                   2002
                                                                                -----------------       -----------------
                                                                                   (Unaudited)              (Audited)
<S>                                                                             <C>                     <C>
ASSETS

Current:
   Cash and cash equivalents                                                    $         317,049       $         183,200
   Accounts receivable, net                                                               258,377                  35,144
   Insurance claims receivable                                                                                     63,912
   Inventory                                                                              228,359
   Other                                                                                   26,901
                                                                                -----------------       -----------------
      Total current assets                                                                830,686                 282,256
Fixed assets, net                                                                         450,462                  33,250
Intellectual property rights                                                            1,550,609
Intangibles                                                                             7,285,894
Other                                                                                      45,550
                                                                                -----------------       -----------------
           Total assets                                                         $      10,163,201       $         315,506
                                                                                =================       =================

LIABILITIES

Current:
   Accounts payable and accrued expenses                                        $         452,902       $         392,307
   Interest payable (Note 13)                                                              48,067                 216,000
   Lines of credit                                                                        164,324
   Notes payable - other                                                                  160,000
   10% Subordinated notes                                                                 417,500
   Other                                                                                   26,670
   Tax assessment payable (Note 13)                                                                               913,461
   Debentures payable (Note 13)                                                                                 2,400,000
   Excess of liabilities over assets of activities
    to be disposed (Notes 8 and 13)                                                     4,502,243
                                                                                -----------------       -----------------
      Total current liabilities                                                         5,771,706               3,921,768
Notes payable                                                                              30,033
8% Subordinated notes                                                                   2,000,000
Deferred grant revenue                                                                    291,827                 291,827
                                                                                -----------------       -----------------
        Total liabilities                                                               8,093,566               4,213,595
                                                                                -----------------       -----------------

Commitments and contingencies (Note 4)

CAPITAL

Preferred stock (Notes 1 and 9)                                                               119
Common stock (Notes 1 and 10)                                                                  77                 682,960
Paid-in surplus                                                                        24,070,485              16,290,691
Accumulated deficit                                                                   (19,127,946)            (17,998,640)
                                                                                -----------------       -----------------
                                                                                        4,942,735              (1,024,989)
Less treasury stock, at cost - 1,238,656 shares                                        (2,873,100)             (2,873,100)
                                                                                -----------------       -----------------
        Total capital                                                                   2,069,635              (3,898,089)
                                                                                -----------------       -----------------
           Total liabilities and capital                                        $      10,163,201       $         315,506
                                                                                =================       =================
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       2
<PAGE>

                        CNE Group, Inc. and Subsidiaries
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                             Three Months Ended                    Six Months Ended
                                                                   June 30,                            June 30,
                                                         -----------------------------       -----------------------------
                                                             2003              2002             2003              2002
                                                         -----------       -----------       -----------       -----------
                                                         (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)
<S>                                                      <C>               <C>               <C>               <C>
Revenues:
   Product sales                                         $   356,093                         $   356,093
   Service fee income                                        168,519                             168,519
   Internet related income                                    34,819       $    58,428            79,858       $   133,116
                                                         -----------       -----------       -----------       -----------
                                                             559,431            58,428           604,470           133,116
   Costs of goods sold                                       278,353                             278,353
                                                         -----------       -----------       -----------       -----------

      Gross profit                                           281,078            58,428           326,117           133,116

Other expenses:
   Selling                                                    17,091                              17,091            10,000
   Compensation and related costs                            313,704           168,716           403,935           356,503
   General and administrative                                340,419           146,916           438,021           251,591
   Depreciation and amortization                              11,083            67,532            23,270           133,928
                                                         -----------       -----------       -----------       -----------
                                                             682,297           383,164           882,317           752,022
                                                         -----------       -----------       -----------       -----------
Loss from continuing operations before other
income and expenses                                         (401,219)         (324,736)         (556,200)         (618,906)

   Amortization of debt discount                            (116,500)           (7,442)         (116,500)          (14,884)
   Interest expense                                         (148,901)          (87,136)         (236,843)         (173,851)
   Gain on fixed assets (Note 1)                                                20,887                             152,934
   Reversal of Director fees accrual                                                                                55,000
                                                         -----------       -----------       -----------       -----------

Loss from continuing operations before
income taxes                                                (666,620)         (398,427)         (909,543)         (599,707)
   Income tax provision                                                                                              5,250
                                                         -----------       -----------       -----------       -----------

Loss from continuing operations                             (666,620)         (398,427)         (909,543)         (604,957)

Discontinued operations:
   Income from discontinued operations                                                                           3,712,884
                                                         -----------       -----------       -----------       -----------

Net income (loss)                                        $  (666,620)      $  (398,427)      $  (909,543)      $ 3,107,927
                                                         ===========       ===========       ===========       ===========

Per common share - basic and diluted:
   Loss from continuing operations                       $      (.10)      $      (.07)      $      (.15)      $      (.11)
   Income from discontinued operations                            --                --                --               .67
                                                         -----------       -----------       -----------       -----------
Net income (loss)  per common share                      $      (.10)      $      (.07)      $      (.15)      $       .56
                                                         ===========       ===========       ===========       ===========

Weighted average number of common
   shares outstanding - basic and diluted                  6,490,920         5,590,944         6,040,932         5,580,944
                                                         ===========       ===========       ===========       ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       3
<PAGE>

                        CNE Group, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                  Six Months Ended
                                                                                      June 30,
                                                                             ---------------------------
                                                                                2003              2002
                                                                             -----------       ---------
                                                                             (Unaudited)      (Unaudited)
<S>                                                                          <C>               <C>
Cash flows from operating activities:
   Loss from continuing operations                                           $  (909,543)      $(604,957)
   Adjustments to reconcile loss from continuing operations to net cash
      provided by (used in) operating activities:
        Depreciation and amortization                                             23,270         133,928
        Issuance of common stock for services                                     81,250          31,500
        Amortization of debt discount                                            116,500          14,884
        Reversal of fees due to Directors                                                        (55,000)
        Gain on fixed assets destroyed in catastrophe                                           (152,934)
        Changes in:
           Accounts and insurance claims receivable                               42,727         185,769
           Inventory                                                               8,600
           Other assets                                                          (10,584)         32,274
           Accrued expenses and other liabilities                                  8,642         258,807
           Deferred grant revenue                                                                116,740
                                                                             -----------       ---------
Cash used in continuing operations                                              (639,138)        (38,989)
Cash provided by discontinued operations                                                         200,000
                                                                             -----------       ---------

              Net cash provided by (used in) operating activities               (639,138)        161,011
                                                                             -----------       ---------

Cash flows from investing activities:
   Purchase of furniture and equipment                                           (17,013)
                                                                             -----------       ---------

              Net cash used in investing activities                              (17,013)
                                                                             -----------       ---------

Cash flows from financing activities:
   Proceeds from issuance of 10% notes payable                                 1,000,000
   Principal repayments on notes payable - other                                (110,000)
   Payment of accounts receivable due Sellers of Econo-Comm, Inc.               (100,000)
                                                                             -----------       ---------

              Net cash provided by financing activities                          790,000
                                                                             -----------       ---------

Increase in cash and cash equivalents                                            133,849         161,011
Cash and cash equivalents at beginning of period                                 183,200         200,782
                                                                             -----------       ---------

Cash and cash equivalents at end of period                                   $   317,049       $ 361,793
                                                                             ===========       =========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       4
<PAGE>

                        CNE Group, Inc. and Subsidiaries
                Consolidated Statements of Cash Flows, continued

<TABLE>
<CAPTION>
                                                                                           Six Months Ended
                                                                                               June 30,
                                                                                      ---------------------------
                                                                                         2003            2002
                                                                                      -----------     -----------
                                                                                      (Unaudited)     (Unaudited)
<S>                                                                                   <C>               <C>
Supplemental disclosures of cash flow information related to
   continuing operations:
      Cash paid during the period for:
        Interest                                                                      $    12,615       $144,000
        Income taxes                                                                  $        --       $  5,250

      Non-cash investing and financing activities relating to the acquisition of
      subsidiaries and certain intellectual property rights:
           Accounts receivable                                                        $   102,048
           Inventory                                                                      236,959
           Intellectual property rights                                                 1,550,609
           Intangibles                                                                  7,285,894
           Other assets                                                                   518,586
           Accrued expenses and other liabilities                                      (1,622,015)
           8% notes payable                                                            (2,000,000)
           Issuance of preferred stock, at par                                               (119)
           Issuance of common stock, at par                                                    (9)
           Paid in surplus                                                             (6,048,075)
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       5
<PAGE>

                        CNE Group, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                                   (Unaudited)

1.    General

      Business

      CNE Group, Inc. (the "Company" or "CNE") is a holding company whose
      primary operating subsidiaries are SRC Technologies, Inc. ("SRC") and
      Econo-Comm, Inc. (d/b/a Mobile Communications) ("ECI"). SRC, also a
      holding company, is the parent of Connectivity, Inc. ("Connectivity") and
      US. Commlink, Ltd. ("USCL"). Connectivity, USCL and ECI, the "SRC group of
      companies," 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. SRC and the Company have intellectual property rights
      to certain key elements of these products - specifically, certain
      communication, data entry and telemetry devices.

      The Company also generates revenue from its CareerEngine division that is
      engaged in the business of e-recruiting.

      The Company and CareerEngine are located at 200 West 57th Street, New
      York, NY 10019 (212- 977-2200). SRC, Connectivity and ECI are located at
      3733 NW 16th Street, Lauderhill, FL 33311 (954-587-1414). USCL is located
      at 6244 Preston Avenue, Livermore, CA 94550 (925-960-0097).

      Corporate Matters

      On April 17, 2003, pursuant to the terms of Section 251(g) of the Delaware
      General Corporation Law, CareerEngine Network, Inc. ("CareerEngine")
      became a wholly-owned subsidiary of the Company. Pursuant to this
      transaction, the Company acquired all of the assets of CareerEngine and
      all former stockholders of CareerEngine became the stockholders of the
      Company, which is the entity that is now publicly traded on the American
      and Pacific Stock Exchanges under the symbol "CNE." As a successor entity
      to CareerEngine, the Company's shares are deemed to be registered under
      Section 12(g) of the Securities Exchange Act of 1934 and Rule 12g-3
      promulgated thereunder. The shares were issued without registration in
      reliance upon exemptions provided in Section 3(a)(9) of the Securities Act
      of 1933 and Rule 145 promulgated thereunder.

      In addition, the officers and directors of CareerEngine became the
      officers and directors of the Company. On April 23, 2003, three directors
      of the Company resigned (Kevin J. Benoit, Edward A. Martino and James J.
      Murtha) and their replacements were appointed (Michael J. Gutowski, Larry
      M. Reid and Carol L. Gutowski). Ms. Gutowski is the wife of Michael J.
      Gutowski. Messrs. Gutowski and Reid were also appointed the President and
      Chief Operating Officer and the Executive Vice President of the Company,
      respectively. See "Acquisition of all of the outstanding stock of SRC and
      ECI" below.

                 See Notes to Consolidated Financial Statements


                                       6
<PAGE>

      In addition, on April 23, 2003, the Board of Directors and majority of the
      stockholders of the Company approved an increase in the authorized number
      of shares of common stock to 40,000,000 with a par value of $0.00001 per
      share and approved an increase in the authorized number of shares of
      preferred stock to 25,000,000 with a par value of $0.00001 per share. The
      preferred stock may be issued in one or more series at the discretion of
      the Board of Directors.

      Acquisition of all of the outstanding stock of SRC and ECI

            SRC

      On April 23, 2003, the Company issued to Mr. and Mrs. Gutowski, the former
      principal common stockholders of SRC, an aggregate of 4,867,937 shares of
      its non-voting Series C Preferred Stock and a like number of ten year
      Class C Warrants, each to purchase one share of its Common Stock at $1.00
      per share. The Class C Warrants are not exercisable and are not detachable
      from the C Preferred Stock prior to 66 months after their issuance. See
      Note 9 - Preferred Stock.

      The Company issued to the other former common stockholders of SRC,
      including Larry M. Reid, an aggregate of 899,976 shares of its Common
      Stock, 1,697,961 shares of its non-voting Series A Preferred Stock and a
      like number of ten year non-detachable Class A Warrants, each to purchase
      one share of its Common Stock at $1.00 per share. The Class A Warrants are
      not exercisable and are not detachable from the Series A Preferred Stock
      prior to 66 months after their issuance. See Note 9 - Preferred Stock.

      The Company issued an aggregate of 440,000 shares of its Series B
      Preferred Stock to the former holders of the SRC Series B Preferred Stock.
      See Note 9 - Preferred Stock.

      The Series A Preferred Stock has an aggregate liquidating preference over
      all other CNE equity of $1,697,961 and the Series B Preferred Stock has an
      aggregate liquidating preference over all other CNE equity except the
      Series A Preferred Stock of $440,000. The Series C Preferred Stock has no
      liquidating preference.

            ECI

      On April 23, 2003, the Company issued to Gary Eichsteadt and Thomas
      Sullivan, the former stockholders of ECI, an aggregate of 4,867,938 shares
      of its Series C Preferred Stock and a like number of Class C Warrants. In
      addition, Messrs. Eichsteadt and Sullivan retained certain of ECI's trade
      receivables aggregating approximately $100,000. The Company also acquired
      a patent related to the operation of ECI's business from Mr. Eichsteadt
      for notes in the aggregate principal amount of $2,000,000, bearing
      interest at the annual rate of 8%, payable quarterly, and due on October
      31, 2008. Messrs. Eichsteadt and Sullivan remained executive officers ECI.

      There were no relationships between the Company or any of its affiliates
      and any of the sellers of the assets acquired by the Company prior to the
      acquisition transactions.

                 See Notes to Consolidated Financial Statements


                                       7
<PAGE>

      Private Financing

      On April 23, 2003, the Company also effected a private financing pursuant
      to which it issued notes (the "Notes") in the aggregate principal amount
      of $1,000,000, of which $650,000 was to the officers of the Company, and
      3,124,350 ten year Class B Warrants, each to purchase one share of its
      Common Stock at $0.50 per share. The Notes bear interest at the annual
      rate of 10% payable quarterly and are due on April 30, 2004. The Warrants
      are anti-dilutive until the Notes have been repaid. The due date of the
      Notes may be extended at the Company's option for an additional year in
      consideration for the issuance of 10-year warrants to purchase 5% of the
      Company's then outstanding common stock at $0.50 per share. These Warrants
      would also be anti-dilutive until the Notes have been repaid. In addition,
      the Company valued the warrants, utilizing the Black-Scholes Pricing
      Model, at $699,000 which is being accounted for as debt discount and is
      being amortized ratably over the one-year term of the Notes.

      The Company is using the funds obtained from this financing to pay certain
      ECI notes payable and for working capital. The financing was effected
      pursuant to the exemption from the registration provisions of the
      Securities Act of 1993 provided by Section 4(2) thereof.

      2003 Stock Incentive Plan

      On April 30, 2003 a majority of the stockholders and the Board of
      Directors of the Company approved the 2003 Stock Incentive Plan (the "2003
      Plan"), which provides, among other matters, for incentive and
      non-qualified stock options to purchase 3,500,000 shares of Common Stock.
      The purpose of the 2003 Plan is to provide incentives to officers, key
      employees, directors, independent contractors and agents whose performance
      will contribute to the long-term success and growth of the Company, to
      strengthen the ability of the Company to attract and retain officers, key
      employees, directors, independent contractors and agents of high
      competence, to increase the identity of interests of such people with
      those of the Company's stockholders and to help build loyalty to the
      Company through recognition and the opportunity for stock ownership. The
      2003 Plan is administered by the Incentive Compensation Committee of the
      Board. On April 30, 2003, options to purchase 1,987,500 shares of the
      Company's common stock, at a weighted average exercise price of $1.32,
      were granted to five officers (1,800,000) and one employee (187,500) of
      the Company. No options granted have been exercised. In addition, on April
      30,2003, options to purchase 605,000 shares of the Company's common stock
      were granted to independent contractors of the Company and the Company
      recorded a charge of $81,250, relating to the 325,000 options that were
      vested at June 30, 2003, on its Statement of Operations for the three and
      six month ended June 30, 2003.

      Catastrophe of September 11, 2001

      The Company's headquarters were located at Suite 2112 of Two World Trade
      Center in New York City. The catastrophe of September 11, 2001 involved no
      injury to any of the Company's employees. However, with the complete
      destruction of the building, all of the Company's leasehold improvements,
      furniture and fixtures, and office and computer equipment located at this
      site were also destroyed. Since the attack through the date of the
      acquisitions and financing set forth above, the Company's management had
      been preoccupied with the relocation and reestablishment of its
      businesses, assessing and processing of insurance claims with the
      assistance of a risk manager with its insurers, and

                 See Notes to Consolidated Financial Statements


                                        8
<PAGE>

      seeking sources of financing. In 2002, the Company received insurance
      proceeds in amounts that have exceeded the net carrying value of the
      destroyed assets and, accordingly, recorded a $152,934 gain on assets
      destroyed due to this catastrophe which was recorded in the six months
      ended June 30, 2002. The Company also had insurance coverage for other
      than assets destroyed. As of June 30, 2003 all outstanding insurance
      claims relating to the catastrophe have been received.

      In addition, the Company applied for governmental assistance grants
      related to the catastrophe. In April and September 2002, the Company
      received grants aggregating $291,827. The grants have a restriction that
      could require their repayment, specifically if the Company were to
      relocate a substantial portion its operations outside of New York City
      before May 1, 2005. Until such time as this restriction shall no longer
      apply, the grants will be classified as a liability of the Company. Upon
      the satisfaction or lapse of the restrictions, the Company will remove the
      liability and record grant income on its financial statements or,
      alternatively, have to repay such grants if the above condition is not
      satisfied.

2.    Significant Accounting Policies

      The accounting policies followed by the Company are set forth in Note B to
      the Company's financial statements included in its Form 10-KSB, for the
      year ended December 31, 2002, which was filed with the Securities and
      Exchange Commission.

      In the opinion of management, the unaudited consolidated financial
      statements include all adjustments necessary for a fair presentation of
      the Company's financial position as of June 30, 2003 and the results of
      its operations and its cash flows for the three-month and six-month
      periods ended June 30, 2003 and 2002. The financial statements as of June
      30, 2003 and for the three and six months then ended are not necessarily
      indicative of the results that may be expected for the year ending
      December 31, 2003.

      The Company has incurred substantial losses from continuing operations,
      sustained substantial operating cash outflows and has a working capital
      deficit. The above factors raise substantial doubt about the Company's
      ability to continue as a going concern. The Company's continued existence
      is dependent on its ability to obtain additional equity and/or debt
      financing to fund its operations and ultimately to achieve profitable
      operations. However, there is no assurance that the Company will achieve
      profitable operations or cash flow.

      Management believes that such working capital deficit, losses and negative
      operating cash flows will ultimately be positively addressed by (i) the
      acquisitions and related financing disclosed within these financial
      statements as of June 30, 2003 and 2002 and the three month periods then
      ended and (ii) the expected results of our current fund raising
      activities.

      Revenue Recognition

      The Company's operations relating to manufacturing, marketing and
      servicing its remote and cellular-based emergency response products
      recognizes revenue from the sale of a product upon installation or
      delivery to the customer, depending on the terms of the underlying sales
      agreement

                 See Notes to Consolidated Financial Statements


                                        9
<PAGE>

      Fees from E-recruiting are earned on the placement of job placement and
      sponsorship advertisements on the Company's web site and are recognized
      over the period during which the advertisements are exhibited. Revenues
      derived from co-branding arrangements with content providers are of a
      similar nature and are recognized over the period during which the
      advertisements are exhibited. Website construction fees are recognized
      ratably over the construction period. Monthly hosting and maintenance fees
      for such sites are recognized ratably over the period of the underlying
      contract.

      Trade Receivables

      The Company evaluates collectability of trade receivables based on the
      creditworthiness of each customer. An allowance for doubtful accounts is
      established, if necessary, based on the results of management's
      assessment.

      Concentration of Credit Risk

      The Company is exposed to credit risks in the event of default by
      financial institutions in which balances are maintained in excess of
      insured limits. At June 30, 2003 such exposure aggregated $140,392.

      The Company's sales are primarily provided to customers throughout the
      United States. Historically, there have been no material concentration,
      and credit losses have not been significant.

      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 revenue and expenses during the reporting period. Actual
      results could differ from those estimates.

      Inventory

      Inventory consists primarily of electronic parts and cellular phones.
      Inventory is stated at the lower of cost (first-in, first-out) or market.

      Startup Activities

      Costs associated with the organization and start-up activities of the
      Company were expensed as incurred.

      Income (Loss) Per Share

      Basic income (loss) per share is based on the weighted average number of
      common shares outstanding. Employee incentive stock options and
      outstanding warrants did not have an effect on the computation of diluted
      earnings per share since they were anti-dilutive.

                 See Notes to Consolidated Financial Statements


                                       10
<PAGE>

      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 June 30, 2003, the Company and two of its subsidiaries each had
      separate stock-based employee compensation plans. On March 14, 2003 all
      recipients of options granted to them under the plans of the subsidiaries
      rescinded their interests. 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>
                                                                        Six Months Ended
                                                                            June 30,
                                                                    --------------------------
                                                                      2003             2002
                                                                    ---------       ----------
<S>                                                                 <C>             <C>
      Net (loss) income, as reported                                $(909,543)      $3,107,927
      Less, Total stock-based employee compensation expense
      determined under fair value-based method for all awards,
      net of related tax effects                                            0                0
                                                                    ---------       ----------

      Pro forma net (loss) income                                   $(909,543)      $3,107,927
                                                                    =========       ==========

      Net (loss) income per share:
               Basic and diluted - as reported                      $   (0.15)      $     0.56
                                                                    =========       ==========
               Basic and diluted - pro forma                        $   (0.15)      $     0.56
                                                                    =========       ==========
</TABLE>

      On April 30, 2003, options to purchase 1,987,500 shares were granted to
      five officers (1,800,000) and one employee (187,500) of the Company at
      exercise prices equal to the market price of the Company's common stock on
      the date of the grant. No options granted have been exercised. In
      addition, on April 30, 2003, options to purchase 605,000 shares were
      granted to independent contractors of the Company. See Note 1 - General:
      2003 Stock Incentive Plan.

                 See Notes to Consolidated Financial Statements


                                       11
<PAGE>

      Impairment of Long-Lived Assets

      Impairment losses are recognized for long-lived assets used in operations
      when indicators of impairment are present and the undiscounted cash flows
      estimated to be generated by those assets are not sufficient to recover
      the assets' carrying amount. The impairment loss is measured by comparing
      the fair value of the asset to its carrying amount. No write-down of
      assets for impairment losses were required during the three and six month
      periods ended June 30, 2003 and the year ended December 31, 2002.

3.    Discontinued Operations

      In 1997, the Company entered into a triple net, credit type lease with
      Carmike Cinemas, Inc. ("Carmike"), pursuant to which the Company leased to
      Carmike six parcels of land and the improvements thereon. Concurrently,
      the Company issued $72,750,000 principal amount of its adjustable rate
      tender securities due November 1, 2015 (the "Bonds"). The Bonds were
      secured by irrevocable letters of credit issued by a group of banks. In
      connection therewith the Company entered into a Reimbursement Agreement
      with Wachovia, as agent for the banks, under which the Company was
      obligated to remit all rent received under the lease to Wachovia to
      reimburse the banks for the Bond payments made by draws on their letters
      of credit.

      On August 8, 2000, Carmike filed a petition under Chapter 11 of the United
      States Bankruptcy Code. As a result of that filing and Carmike's
      subsequent failure to pay rent to date under the lease, the Company failed
      to make required payments to Wachovia under the Reimbursement Agreement.
      Accordingly, Wachovia declared a default under the Reimbursement Agreement
      and accelerated all amounts due by the Company thereunder. Wachovia also
      directed the Trustee under the related Indenture to redeem the Bonds. Such
      amounts were paid entirely through draws on the related letters of credit
      and were not paid with funds of the Company. However, as the Bonds are no
      longer outstanding, all unamortized financing costs (amounting to
      $804,667) relating thereto were expensed. In addition, Carmike has not
      disaffirmed the lease and continues to occupy the six theaters.

      Interest and fees which have been accrued on the reimbursement obligations
      through December 2001 have been recorded with a corresponding amount of
      accrued rent receivable from Carmike.

      On January 31, 2002 title to the six theaters was transferred to the banks
      in payment of the non-recourse debt under the Reimbursement Agreement and
      the Company recognized a gain of $3,512,884, representing the excess of
      the liabilities over the carrying value of the assets relating to the real
      estate leased to Carmike. In addition, the Company received $294,755 in
      connection with the sale of its common membership interest in Movieplex
      relating to the transfer of title of the movie theaters to Wachovia.

                 See Notes to Consolidated Financial Statements


                                       12
<PAGE>

      Income from discontinued operations for the three and six month periods
      ended June 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                              Three Months                       Six Months
                                                                 Ended                             Ended
                                                                June 30,                          June 30,
                                                    --------------------------------   -------------------------------
                                                         2003             2002              2003            2002
                                                    ---------------  ---------------   --------------  ---------------
<S>                                                 <C>              <C>               <C>             <C>
                  Revenues:
                      Rental income                 $            --  $            --   $           --  $     1,249,710
                      Gain on extinguishment
                        of debt                                                                              3,512,884
                      Common membership
                        interest transfer fee                                                                  294,755
                                                    ---------------  ---------------   --------------  ---------------
                                                                                                             5,057,349
                                                    ---------------  ---------------   --------------  ---------------
                  Expenses:
                      Interest                                                                               1,249,710
                      Other                                                                                     94,755
                                                    ---------------  ---------------   --------------  ---------------
                                                                                                             1,344,465
                                                    ---------------  ---------------   --------------  ---------------
                                                    $            --  $            --   $           --  $     3,712,884
                                                    ===============  ===============   ==============  ===============
</TABLE>

4.    Litigation

      The Company is a party to various vendor related litigation. Based on the
      advise of legal counsel, the Company has accrued a liability of
      approximately $100,000.

5.    Debentures Payable

      In 2000, the CareerEngine privately placed 48 units of its securities.
      Each unit consisted of a $50,000 subordinated convertible debenture,
      12,500 Class A Common Stock Warrants and 12,500 Class B Common Stock
      Warrants. Each $50,000 debenture is convertible into 25,000 shares of
      common stock. The Class A and B Warrants are exercisable at $4 and $6,
      respectively. The debentures bear interest at 12%, payable quarterly,
      commencing October 1, 2000 and mature March 31, 2010. The Class A Warrants
      expired on March 31, 2003 and the Class B Warrants are exercisable at any
      time until March 31, 2005. In the private placement, officers,
      stockholders and directors of the Company acquired 10.5 units for
      $525,000.

      At June 30, 2003, the aggregate number of shares issuable upon the
      exercise of all the outstanding warrants and the conversion of all the
      debentures is 1,800,000.

      CareerEngine incurred an interest charge of $246,875 due to the beneficial
      conversion feature of the debentures. In addition, CareerEngine valued the
      warrants at $740,000 which was
      being accounted for as debt discount and was being amortized through the
      period the debentures were callable. The amounts ascribed to the
      beneficial conversion feature and the warrants aggregating $986,875 were
      credited to paid-in-surplus.

                 See Notes to Consolidated Financial Statements


                                       13
<PAGE>

      CareerEngine paid the placement agent cash of $375,025 and granted the
      agent a warrant exercisable through June 2005 (valued at $200,000) to
      purchase 5 units at $60,000 per unit. Of the total consideration, $426,658
      was accounted for as deferred financing costs which was being amortized
      over the life of the debentures and $148,367 deemed attributable to the
      warrant portion of the unit, was charged to paid-in surplus.

      Interest accrued on debentures payable, relating to the period from April
      1, 2002 through June 30, 2003, aggregating $360,000 has not been paid
      through July 1, 2003. Accordingly, since the CareerEngine had not paid the
      interest due on July 1, 2002 by July 16, 2002 (the "grace period"),
      CareerEngine's obligation is considered callable by the debenture holders.
      However, for the debentures to be in default, the holders of no less then
      51% in principal amount of the debentures must notify the Company that an
      event of default has occurred and may thereafter declare all debentures
      and related interest immediately due and payable. As of August 18, 2003,
      no such demand had been made by any debenture holder.

      As a result of the nonpayment of interest as set forth above and the
      reclassification of the debentures as a current obligation, the remaining
      (i) unamortized debt discount on the debentures ($661,980) was recognized
      as interest expense and (ii) unamortized deferred financing costs
      associated with the debentures ($320,350) was recognized as expense, in
      2002.

      See Note 13 "Subsequent Events: Conversion of Debentures Payable."

6.    Income Taxes

      Commencing in August 2000, pursuant to an understanding with the IRS, the
      Company began paying $30,000 per month until the assessed tax deficiency
      relating to the years 1985 through 1989 and interest thereon is fully
      satisfied. However, after a technical review by special tax counsel of the
      tax deficiency and related interest, management of the Company believed
      that there may be a basis for its reduction. Pending the ultimate
      resolution of this matter with the IRS, in September 2001 the Company
      temporarily suspended making monthly payments. At June 30, 2003, the
      outstanding balance of the liability amounted to approximately $946,000
      including related interest.

      See Note 13 "Subsequent Events: Settlement of Tax Assessment Payable."

7.    Director Fees

      At June 30, 2003, the Company's five outside directors have similarly
      agreed to forego previously accrued and unpaid directors' fees earned
      through December 31, 2001 and agreed to forgo future compensation until
      further notice. The reversal of previously accrued fees has been reflected
      in the Company's Consolidated Statement of Operations for the three and
      six-month period ended June 30, 2002. Due to the nature of the Company's
      operations prior to the acquisitions and related financing in April, 2003,
      appropriate director compensation was deemed to be a nominal amount by the
      Company.

                 See Notes to Consolidated Financial Statements


                                       14
<PAGE>

8.    Excess of Liabilities over Assets of Activities to be Disposed

      Two subsidiaries of the Company have remaining liabilities of $4,605,447
      that are substantially in excess of their remaining assets of $103,204.
      Each of these subsidiaries created a trust for the benefit of their
      creditors. The assets of each trust consists of the remaining assets of
      the subsidiary (or if the assets were not transferred to the trust, their
      cash value determined by independent appraisals obtained for the trusts).
      The Trustees of each of the trusts are required to utilize such remaining
      assets to satisfy the remaining liabilities of such subsidiaries. The
      creditors who are subject to such trust arrangements have not approved or
      been asked to approve the extinguishment of these obligations. Company's
      counsel has opined that the creditors of the two subsidiaries cannot reach
      the assets of the Company or any of its other subsidiaries to satisfy the
      obligations of these two subsidiaries to such creditors. The Company
      expects that the creditors of these two subsidiaries will look directly to
      the Trustees and the remaining assets of the trusts for the satisfaction
      of their claims and that the Company will be freed from dealing with these
      issues.

      Excess of liabilities over assets of activities to be disposed consists of
      the following at June 30, 2003

                                                                 June 30, 2003
                                                                 -------------
      Transferred liabilities:
          Accounts payable and accrued expenses                   $   444,910
          Interest payable                                            360,000
          Debentures payable                                        2,400,000
          Tax assessments payable                                   1,373,948
          Other                                                        26,589
                                                                  -----------
                                                                    4,605,447
      Transferred assets:                                            (103,204)
                                                                  -----------
               Excess of liabilities over assets
                 of activities to be disposed                     $ 4,502,243
                                                                  ===========

      See Note 13 "Subsequent Events: Settlement of Tax Assessment Payable,
      Conversion of Debentures Payable, and Sale of Subsidiary."

9.    Preferred Stock

      Preferred Stock consists of the following at June 30, 2003 and December
      31, 2002:

                                                     June 30,       December 31,
                                                       2003             2002
                                                    ----------      ------------
      Par value per share:                          $   .00001      $     .10000
      Authorized number of shares                   25,000,000         1,000,000
      Issued and outstanding number of shares:
          Series A                                   1,697,961                --
          Series B                                     440,000                --
          Series C                                   9,735,875                --
          Series E                                          --                --
                                                    ----------      ------------
               Total                                11,873,836                --
                                                    ==========      ============

                 See Notes to Consolidated Financial Statements


                                       15
<PAGE>

10.   Common Stock

      Common Stock consists of the following at June 30, 2003 and December 31,
      2002:

                                                    June 30,      December 31,
                                                      2003             2002
                                                   ----------     ------------
      Par value per share:                         $   .00001      $   .10000
      Authorized number of shares                  40,000,000      10,000,000
      Issued and outstanding number of shares       7,729,576       6,829,600

11.   Acquisitions and related Unaudited Pro forma Financial Information

      The purchase price of the acquisition of SRC and ECI was allocated to the
      Company's assets and liabilities, tangible and intangible (as determined
      by an independent appraiser), with the excess of the purchase price over
      the fair value of the net assets acquired of $7,285,894 being recorded as
      Intangibles. The value of the intellectual property rights, amounting to
      $1,550,609, acquired in the related financing was also determined by an
      independent appraiser. SRC and its subsidiaries Connectivity and USCL, and
      ECI, collectively 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. Due to these acquisitions and related
      financing, the Company has acquired intellectual property rights to
      certain key elements of these products - specifically, certain
      communication, data entry and telemetry devices.

      The Company's consolidated financial statements include the results of
      operations of SRC and ECI from their respective acquisition dates. The
      following unaudited pro forma information presents a summary of our
      consolidated results of operations as if the SRC and ECI acquisitions and
      the related financing had taken place on January 1, 2002 for the three and
      six month periods ended June 30, 2002 and on January 1, 2003 for the three
      and six month periods ended June 30, 2003. The SRC and ECI acquisitions
      have been recorded in accordance with SFAS No. 141; therefore, no
      amortization of goodwill or intangible assets without determinable lives
      related to SRC and ECI is reflected in the prior year amounts. These pro
      forma results have been prepared for comparative purposes only and do not
      purport to be indicative of the results of operations which actually would
      have resulted had the acquisitions occurred on January 1, 2002 or January
      1, 2003, as the case may be, or which may result in the future.

<TABLE>
<CAPTION>
                                         Three Months Ended                  Six Months Ended
                                               June 30,                           June 30,
                                    -----------------------------       -----------------------------
                                        2003              2002              2003              2002
                                    -----------       -----------       -----------       -----------
<S>                                 <C>               <C>               <C>               <C>
      Revenues                      $   673,251       $   794,399       $ 1,201,933       $ 1,949,196
      Expenses                        1,522,113         1,565,223         2,694,324         3,253,931
                                    -----------       -----------       -----------       -----------
          Loss from continuing
          operations                $  (848,862)      $  (770,824)      $(1,492,391)      $(1,304,735)
                                    ===========       ===========       ===========       ===========

      Loss from continuing
      operations per share:
          Basic and diluted         $     (0.13)      $     (0.14)       $     (0.15)      $    (0.23)
                                    ===========       ===========       ===========       ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       16
<PAGE>

12.   American Stock Exchange Listing

      The Company has sustained losses from continuing operations for five of
      its most recent fiscal years and, accordingly, pursuant to certain
      requirements of the American Stock Exchange the Company must have
      Stockholders' Equity or Capital in excess of $6,000,000 to meet the
      Exchange's continuing listing requirements.

      At June 30, 2003 the Company's Capital was $2,069,635. The subsequent
      events set forth in Note 13 below increases its Capital to $6,142,757 as
      follows:

      Capital at June 30, 2003                                $2,069,635
          Effect of settlement of tax assessment payable         895,622
          Effect of debentures payable conversion              2,587,500
          Effect of sale of subsidiary                           590,000
                                                              ----------
      Capital at June 30, 2003, as adjusted by the
         Subsequent Events as per Note 13                     $6,142,757
                                                              ==========

      The Company is actively seeking additional equity and/or debt financing
      for its business operations.

13.   Subsequent Events

      Settlement of Tax Assessment Payable

      On July 16, 2003, the Internal Revenue Service accepted an Offer in
      Compromise submitted on April 24, 2003 by a subsidiary of the Company to
      settle its Tax Assessment Payable amounting to approximately $946,000,
      including related interest, at June 30, 2003. The accepted Offer in
      Compromise provides for payment of $50,000 cash, payable on or before
      October 14, 2003. The subsidiary paid $30,000 of the settlement in July
      2003 with the balance to be paid prior to October 14, 2003.

      The Company will recognized an adjustment to income in the amount of
      approximately $895,000 relating to this transaction when the settlement is
      paid in full.

      Conversion of Debentures Payable

      In August 2003, 93.75% of the holders of the Debentures Payable issued by
      a subsidiary of the Company elected to (i) convert the entire outstanding
      principal balance of the debentures amounting to approximately $2,250,000,
      (ii) return (562,500) of the related outstanding B Warrants of the
      Company, and (iii) waive all accrued and unpaid interest relating thereto
      ($337,500), in consideration of (i) 1,125,000 shares of the common stock
      of the Company and (ii) 1,125,000 five-year common stock warrants
      exercisable at $3.00 per share. One half of these warrants are exercisable
      immediately with the balance exercisable commencing January 1, 2004. The
      conversion of the Debentures Payable will increase the Company's Common
      Stock, par value $.00001, by $11.00, and increased Paid-in-surplus by
      $2,587,489.

                 See Notes to Consolidated Financial Statements


                                       17
<PAGE>

      Sale of Subsidiary

      On August 15, 2003 the Company, for a nominal amount, sold all the stock
      of one of the subsidiaries whose remaining assets and liabilities were
      transferred to a trust for the benefit of its creditors and will recognize
      a gain amounting to approximately $590,000.

                 See Notes to Consolidated Financial Statements


                                       18
<PAGE>

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

      Special Note Regarding Forward Looking Statements

      Certain statements in this Quarterly Report on Form 10-QSB constitute
      "forward-looking statements" relating to the Company within the meaning of
      the Private Securities Litigation Reform Act of 1995. All statements
      regarding future events, our financial performance and operating results,
      our business strategy and our financing plans are forward-looking
      statements. In some cases you can identify forward-looking statements by
      terminology, such as "may," "will," "would," "should," "could," "expect,"
      "intend," "plan," "anticipate," "believe," "estimate," "predict,"
      "potential," or "continue," the negative of such terms or other comparable
      terminology. These statements are only predictions. Known and unknown
      risks, uncertainties and other factors could cause actual results to
      differ materially from those contemplated by the statements. In evaluating
      these statements, you should specifically consider various factors that
      may cause our actual results to differ materially from any forward-looking
      statements.

      General

      CNE Group, Inc. (the "Company" or "CNE") is a holding company whose
      primary operating subsidiaries are SRC Technologies, Inc. ("SRC" and
      Econo-Comm, Inc. (d/b/a Mobile Communications) ("ECI"). SRC, also a
      holding company, is the parent of Connectivity, Inc. ("Connectivity") and
      US. Commlink, Ltd. ("USCL"). Connectivity, USCL and ECI, the "SRC group of
      companies," 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. SRC and the Company have intellectual property rights
      to certain key elements of these products - specifically, certain
      communication, data entry and telemetry devices.

      The Company also generates revenue from its CareerEngine division that is
      engaged in the business of e-recruiting.

      2003 Stock Incentive Plan

      On April 30, 2003 a majority of the stockholders and the Board of
      Directors of the Company approved the 2003 Stock Incentive Plan (the "2003
      Plan"), which provides, among other matters, for incentive and
      non-qualified stock options to purchase 3,500,000 shares of Common Stock.
      The purpose of the 2003 Plan is to provide incentives to officers, key
      employees, directors, independent contractors and agents whose performance
      will contribute to the long-term success and growth of the Company, to
      strengthen the ability of the Company to attract and retain officers, key
      employees, directors, independent contractors and agents of high
      competence, to increase the identity of interests of such people with
      those of the Company's stockholders and to help build loyalty to the
      Company through recognition and the opportunity for stock ownership. The
      2003 Plan is

                 See Notes to Consolidated Financial Statements


                                       19
<PAGE>

      administered by the Incentive Compensation Committee of the Board. On
      April 30, 2003, options to purchase 1,987,500 shares of common stock of
      the Company, at a weighted average exercise price of $1.32, were granted
      to five officers (1,800,000) and one employee (187,500) of the Company. No
      options granted have been exercised. In addition, on April 30, 2003,
      options to purchase 605,000 shares of common stock of the Company were
      granted to independent contractors of the Company and the Company recorded
      a charge of $81,250 relating to the 325,000 options that were vested at
      June 30, 2003 on its Statement of Operations for the three and six month
      periods ended June 30, 2003.

      Catastrophe of September 11, 2001

      The Company's headquarters were located at Suite 2112 of Two World Trade
      Center in New York City. The catastrophe of September 11, 2001 involved no
      injury to any of the Company's employees. However, with the complete
      destruction of the building, all of the Company's leasehold improvements,
      furniture and fixtures, and office and computer equipment located at this
      site were also destroyed. Since the attack through the date of the
      acquisitions and financing set forth above, the Company's management had
      been preoccupied with the relocation and reestablishment of its
      businesses, assessing and processing of insurance claims with the
      assistance of a risk manager with its insurers, and seeking sources of
      financing. In 2002, the Company received insurance proceeds in amounts
      that have exceeded the net carrying value of the destroyed assets and,
      accordingly, recorded a $152,934 gain on assets destroyed due to this
      catastrophe which was recorded in the six months ended June
      30, 2002. The Company also had insurance coverage for other than assets
      destroyed. As of June 30, 2003 all outstanding insurance claims relating
      to the catastrophe have been received.

      In addition, the Company applied for governmental assistance grants
      related to the catastrophe. In April and September 2002, the Company
      received grants aggregating $291,827. The grants have a restriction that
      could require their repayment, specifically if the Company were to
      relocate a substantial portion its operations outside of New York City
      before May 1, 2005. Until such time as this restriction shall no longer
      apply, the grants will be classified as a liability of the Company. Upon
      the satisfaction or lapse of the restrictions, the Company will remove the
      liability and record grant income on its financial statements or,
      alternatively, have to repay such grants if the above condition is not
      satisfied.

      Critical Accounting Policies

      The Company's consolidated financial statements have been prepared in
      accordance with the accounting principles generally accepted in the United
      States of America. Certain accounting policies have a significant impact
      on amounts reported in the financial statements. A summary of those
      significant accounting policies can be found in Note B to the Company's
      financial statements included in its Annual Report on Form 10-KSB for the
      year ended December 31, 2002. The Company has not adopted any significant
      new accounting policies during the six-month period ended June 30, 2003.

      A significant judgment made by management in the preparation of the
      Company's financial statements is the determination of the allowance for
      doubtful accounts. This determination is made periodically in the ordinary
      course of business.

                 See Notes to Consolidated Financial Statements


                                       20
<PAGE>

A.    Results of Operations:

      Three-Month Period Ended June 30, 2003 Compared to the Three-Month Period
      Ended June 30, 2002

      Revenues

      Total revenues from continuing operations increased to $559,431 for the
      three-month period ended June 30, 2003 from $58,428 for the three-month
      period ended June 30, 2002.

      Product sales income increased to $356,093 for the three-month period
      ended June 30, 2003 from nil for the three-month period ended June 30,
      2002 due to the acquired operations, in April 2003, of SRC Technologies,
      Inc. and its subsidiaries and Econo-Comm, Inc.

      Service fee income increased to $168,519 for the three-month period ended
      June 30, 2003 from nil for the three-month period ended June 30, 2002 due
      to the acquired operations, in April 2003, of SRC Technologies, Inc. and
      its subsidiaries and Econo-Comm, Inc.

      Internet related income decreased to $34,819 for the three-month period
      ended June 30, 2003 from $58,428 for the three-month period ended June 30,
      2002 as the operations of our subsidiary, CareerEngine, Inc. have been
      significantly reduced since January 2001.

      In July 2003, (i) a subsidiary of the Company entered into a product
      supply, license and distribution agreement for its wireless call box
      products with the Commercial, Government and Industrial Solutions Sector
      of Motorola, Inc. and (ii) another subsidiary of the Company was awarded a
      $655,000 contract to replace outmoded motorist emergency call box stations
      in the Posey/Webster Tubes located in Alameda, California.

      Cost of Goods Sold

      Costs of goods sold, which relates to product sales and related service
      fee income increased to $278,353 for the three-month period ended June 30,
      2003 from nil for the three-month period ended June 30, 2002 due to the
      acquired operations, in April 2003, of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc.

      Other Expenses

      Total other expenses from continuing operations increased to $682,297 for
      the three-month period ended June 30, 2003 from $383,164 for the
      three-month period ended June 30, 2002.

                 See Notes to Consolidated Financial Statements


                                       21
<PAGE>

      Selling expenses increased to $17,091 for the three-month period ended
      June 30, 2003 from nil for the three-month period ended June 30, 2002 due
      to the acquired operations, in April 2003, of SRC Technologies, Inc. and
      its subsidiaries and Econo-Comm, Inc.

      Compensation and related costs increased to $313,704 for the three-month
      period ended June 30, 2003 from $168,716 for the three-month period ended
      June 30, 2002 due to the acquired operations and related increase in
      personnel, in April 2003, of SRC Technologies, Inc. and its subsidiaries
      and Econo-Comm, Inc.

      General and administrative expenses increased to $340,419 for the
      three-month period ended June 30, 2003 from $146,916 for the three-month
      period ended June 30, 2002 due to the costs associated with the
      acquisition and related operations of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc., and the costs associated with the
      private financing, both completed in April 2003.

      Other Items

      Amortization of debt discount increased to $116,500 for the three-month
      period ended June 30, 2003 from $7,442 for the three-month period ended
      June 30, 2002 due to cessation of amortization of the debt discount
      related to debentures payable and the commencement of amortization of the
      debt discount ($699,000) related to the 10% subordinated notes over a
      period of one year.

      Interest expense increased to $148,901 for the three-month period ended
      June 30, 2003 from $87,136 for the three-month period ended June 30, 2002
      due primarily to the issuance of the Company's 10% and 8% subordinated
      notes in April 2003.

      Gain on fixed assets destroyed in catastrophe decreased to nil for the
      three-month period ended June 30, 2003 from $20,887 for the three-month
      period ended June 30, 2002 due to the destruction of the World Trade
      Center where the Company was headquartered.

      Operating Loss

      On a pre-tax basis, we had a loss of $666,620 for the three-month period
      ended June 30, 2003 from continuing operations compared with a loss of
      $398,427 for the three-month period ended June 30, 2002.

      Our loss from continuing operations for the three-month period ended June
      30, 2003 was $666,620 compared with a loss from continuing operations of
      $398,427 for the three-month period ended June 30, 2002. For the
      three-month period ended June 30, 2003, loss per common share from
      continuing operations, basic and diluted, was $.10 per share. For the
      three-month period ended June 30, 2002, loss per common share from
      continuing operations, basic and diluted, was $.07 per share.

                 See Notes to Consolidated Financial Statements


                                       22
<PAGE>

      Our net loss for the three-month period ended June 30, 2003 was $666,620
      compared with a net loss of $398,427 for the three-month period ended June
      30, 2002. For the three-month period ended June 30, 2003, net loss per
      common share, basic and diluted, was $.10 per share. For the three-month
      period ended June 30, 2002, net loss per common share, basic and diluted,
      was $.07 per share.

      Six-Month Period Ended June 30, 2003 Compared to the Six-Month Period
      Ended June 30, 2002

      Revenues

      Total revenues from continuing operations increased to $604,470 for the
      six-month period ended June 30, 2003 from $133,116 for the six-month
      period ended June 30, 2002.

      Product sales income increased to $356,093 for the six-month period ended
      June 30, 2003 from nil for the six-month period ended June 30, 2002 due to
      the acquired operations, in April 2003, of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc.

      Service fee income increased to $168,519 for the six-month period ended
      June 30, 2003 from nil for the six-month period ended June 30, 2002 due to
      the acquired operations, in April 2003, of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc.

      Internet related income decreased to $79,858 for the six-month period
      ended June 30, 2003 from $133,116 for the six-month period ended June 30,
      2002 as the operations of our subsidiary, CareerEngine, Inc. have been
      significantly reduced since January 2001.

      In July 2003, (i) a subsidiary of the Company entered into a product
      supply, license and distribution agreement for its wireless call box
      products with the Commercial, Government and Industrial Solutions Sector
      of Motorola, Inc. and (ii) another subsidiary of the Company was awarded a
      $655,000 contract to replace outmoded motorist emergency call box stations
      in the Posey/Webster Tubes located in Alameda, California.

      Cost of Goods Sold

      Costs of goods sold, which relates to product sales and related service
      fee income increased to $278,353 for the six-month period ended June 30,
      2003 from nil for the six-month period ended June 30, 2002 due to the
      acquired operations, in April 2003, of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc.

      Other Expenses

      Total other expenses from continuing operations increased to $882,317 for
      the six-month period ended June 30, 2003 from $752,0224 for the six-month
      period ended June 30, 2002.

                 See Notes to Consolidated Financial Statements


                                       23
<PAGE>

      Selling expenses increased to $17,091 for the six-month period ended June
      30, 2003 from $10,000 for the six-month period ended June 30, 2002 due to
      the acquired operations, in April 2003, of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc.

      Compensation and related costs increased to $403,935 for the six-month
      period ended June 30, 2003 from $356,503 for the six-month period ended
      June 30, 2002 due to the acquired operations and related increase in
      personnel, in April 2003, of SRC Technologies, Inc. and its subsidiaries
      and Econo-Comm, Inc.

      General and administrative expenses increased to $438,021 for the
      six-month period ended June 30, 2003 from $251,591 for the six-month
      period ended June 30, 2002 due to the costs associated with the
      acquisition and related operations of SRC Technologies, Inc. and its
      subsidiaries and Econo-Comm, Inc., and the costs associated with the
      private financing, both completed in April 2003.

      Other Items

      Amortization of debt discount increased to $116,500 for the six-month
      period ended June 30, 2003 from $14,884 for the six-month period ended
      June 30, 2002 due to cessation of amortization of the debt discount
      related to debentures payable and the commencement of amortization of the
      debt discount ($699,000) related to the 10% subordinated notes over a
      period of one year.

      Interest expense increased to $236,843 for the six-month period ended June
      30, 2003 from $173,851 for the six-month period ended June 30, 2002 due
      primarily to the issuance of the Company's 10% and 8% subordinated notes
      in April 2003.

      Gain on fixed assets destroyed in catastrophe decreased to nil for the
      six-month period ended June 30, 2003 from $152,934 for the six-month
      period ended June 30, 2002 due to the destruction of the World Trade
      Center where the Company was headquartered.

      Reversal of Directors fees decreased to $55,000 for the six-month period
      ended June 30, 2003 from nil for the six-month period ended June 30, 2002.
      This amount relates to the forgiveness of fees earned by the outside
      Directors and their agreement to forego these fees until further notice.

      Operating Loss

      On a pre-tax basis, we had a loss of $909,543 for the six-month period
      ended June 30, 2003 from continuing operations compared with a loss of
      $599,707 for the six-month period ended June 30, 2002 from continuing
      operations primarily due to start-up expenses associated with the
      acquisition of SRC Technologies, Inc. and its subsidiaries and the related
      private financing.

                 See Notes to Consolidated Financial Statements


                                       24
<PAGE>

      Our loss from continuing operations for the six-month period ended June
      30, 2003 was $909,543 compared with a loss from continuing operations of
      $604,957 for the six-month period ended June 30, 2002. For the six-month
      period ended June 30, 2003, loss per common share from continuing
      operations, basic and diluted, was $.15 per share. For the six-month
      period ended June 30, 2002, loss per common share from continuing
      operations, basic and diluted, was $.11 per share.

      Our income from discontinued operations for the six-month period ended
      June 30, 2003 was nil compared with income from discontinued operations of
      $3,712,884 for the six-month period ended June 30, 2002 due primarily to
      the transfer of title to the six theaters leased to Carmike Cinemas, Inc.
      by the Company to the banks in payment of the related non-recourse debt,
      and the consequential recognition of the related gain representing the
      excess of liabilities over the carrying value of the theaters. For the
      six-month period ended June 30, 2003, income per common share from
      discontinued operations, basic and diluted, was nil per share. For the
      six-month period ended June 30, 2002, income per common share from
      discontinued operations, basic and diluted, was $.67 per share.

      Our net loss for the six-month period ended June 30, 2003 was $909,543
      compared with net income of $3,107,927 for the six-month period ended June
      30, 2002. For the six-month period ended June 30, 2003, net loss per
      common share, basic and diluted, was $.15 per share. For the six-month
      period ended June 30, 2002, net income per common share, basic and
      diluted, was $.56 per share.

B.    Liquidity and Capital Resources

      The Company has incurred substantial losses from continuing operations,
      sustained substantial operating cash outflows and has a working capital
      deficit. The above factors raise substantial doubt about the Company's
      ability to continue as a going concern. The Company's continued existence
      is dependent on its ability to obtain additional equity and/or debt
      financing to fund its operations and ultimately to achieve profitable
      operations. However, there is no assurance that the Company will achieve
      profitable operations or cash flow.

      On April 23, 2003, the Company also effected a private financing pursuant
      to which it issued notes (the "Notes") in the aggregate principal amount
      of $1,000,000, of which $650,000 was from the officers of the Company, and
      3,124,350 ten year Class B Warrants, each to purchase one share of its
      Common Stock at $0.50 per share. The Notes bear interest at the annual
      rate of 10% payable quarterly and are due on April 30, 2004. The Warrants
      are non-dilutive until the Notes have been repaid. The due date of the
      Notes may be extended at the Company's option for an additional year in
      consideration for the issuance of 10-year warrants to purchase 5% of the
      Company's then outstanding common stock at $0.50 per share. These Warrants
      will also be non-dilutive until the Notes have been repaid. In addition,
      the Company valued the warrants at $699,000 which is being accounted for
      as debt discount and is being amortized ratably over the one-year term of
      the Notes.

                 See Notes to Consolidated Financial Statements


                                       25
<PAGE>

      The Company is using the funds obtained from this financing to pay certain
      ECI notes payable and for working capital. The financing was effected
      pursuant to the exemption from the registration provisions of the
      Securities Act of 1993 provided by Section 4(2) thereof.

      Management believes that such working capital deficit, losses and negative
      operating cash flows will ultimately be positively addressed by (i) the
      acquisitions and related financing disclosed within these financial
      statements as of June 30, 2003 and 2002 and the three month periods then
      ended and (ii) the expected results of our current fund raising
      activities.

      We do not have any material commitments for capital expenditures as of
      June 30, 2003.

C.    American Stock Exchange

      The Company has sustained losses from continuing operations for five of
      its most recent fiscal years and, accordingly, pursuant to certain
      requirements of the American Stock Exchange the Company must have
      Stockholders' Equity or Capital in excess of $6,000,000 to meet the
      Exchange's continuing listing requirements. At June 30, 2003 the Company's
      Capital was $2,069,635.

<TABLE>
<S>                                                                   <C>
      Capital at June 30, 2003                                  $     2,069,635
          Effect of settlement of tax assessment payable                895,622
          Effect of debentures payable conversion                     2,587,500
          Effect of sale of subsidiary                                  590,000
                                                                ---------------
      Capital at June 30, 2003, as adjusted by the
         Subsequent Events as per Note 13 of the financial
         statements filed with this Form 10-QSB                     $ 6,142,757
                                                                ===============
</TABLE>

      The Company is actively seeking additional equity and/or debt financing
      for its business operations.

      D.    Inflation

      The Company believes that inflation does not significantly impact its
      current operations.

Item 3. Controls and Procedures

            The Chief Executive Officer and Chief Financial Officer of the
            Company have conducted an evaluation of the effectiveness of
            disclosure controls and procedures pursuant to Exchange Act Rule
            13a-14. Based on that evaluation, they have concluded that the
            Company's 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 them 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 their
            evaluation.

                 See Notes to Consolidated Financial Statements


                                       26
<PAGE>

                                     PART II

                                OTHER INFORMATION

Item 1. Legal Proceedings.

      The Company is a party to various vendor related litigations. Based on the
      advise of legal counsel, the Company has accrued a liability of
      approximately $100,000.

Item 2. Changes in Securities and Use of Proceeds.

      During the three months ended June 30, 2003, the Company issued notes and
      warrants in a private transaction pursuant to the exemption from
      registration provided by Section 4(2) of the Securities Act of 1933. For
      information on these issuances, see "Part I - Item 2: Management's
      Discussion and Analysis of Financial Condition and Results of Operations -
      Liquidity and Capital Resources." The Company issued preferred stock,
      common stock, warrants and notes in connection with its acquisition of SRC
      and ECI pursuant to the exemption from registration provided by Regulation
      D promulgated under the Securities Act. For information on these
      issuances, see "Part II - Item 5: Other Information."

Item 3. Defaults in Senior Securities.

      None

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

      None

Item 5. Other Information.

      Corporate Matters

      On April 17, 2003, pursuant to the terms of Section 251(g) of the Delaware
      General Corporation Law, CareerEngine Network, Inc. ("CareerEngine")
      became a wholly-owned subsidiary of the Company. Pursuant to this
      transaction the Company acquired all of the assets of CareerEngine and all
      former stockholders of CareerEngine became the stockholders of the
      Company, which is the entity that is now publicly traded on the American
      and Pacific Stock Exchanges under the symbol "CNE." As a successor entity
      to CareerEngine, the Company's shares are deemed to be registered under
      Section 12(g) of the Securities Exchange Act of 1934 and Rule 12g-3
      promulgated thereunder. The shares were issued without registration in
      reliance upon exemptions provided in Section 3(a)(9) of the Securities Act
      of 1933 and Rule 145 promulgated thereunder.

      In addition, the officers and directors of CareerEngine became the
      officers and directors of the Company. On April 23, 2003, three directors
      of the Company resigned (Kevin J. Benoit, Edward A. Martino and James J.
      Murtha) and their replacements were appointed (Messrs. Michael J. Gutowski
      and Larry M. Reid

                 See Notes to Consolidated Financial Statements


                                       27
<PAGE>

      and Ms. Carol L. Gutowski). Ms. Gutowski is the wife of Mr. Gutowski.
      Messrs. Gutowski and Reid were also appointed the President and Chief
      Operating Officer and the Executive Vice President of the Company,
      respectively. See "Acquisition of all of the outstanding stock of SRC and
      ECI" below.

      Acquisition of all of the outstanding stock of SRC and ECI

            SRC

      On April 23, 2003, the Company issued to Mr.. and Mrs.. Gutowski, the
      former principal common stockholders of SRC, an aggregate of 4,867,937
      shares of its non-voting Series C Preferred Stock and a like number of ten
      year Class C Warrants, each to purchase one share of its Common Stock at
      $1.00 per share. The Class C Warrants are not exercisable and are not
      detachable from the C Preferred Stock prior to 66 months after their
      issuance.

      The Company issued to the other former common stockholders of SRC,
      including Mr. Reid, an aggregate of 899,976 shares of its Common Stock,
      1,697,961 shares of its non-voting Series A Preferred Stock and a like
      number of ten year non-detachable Class A Warrants, each to purchase one
      share of its Common Stock at $1.00 per share. The Class A Warrants are not
      exercisable and are not detachable from the A Preferred Stock prior to 66
      months after their issuance.

      The Company issued an aggregate of 440,000 shares of its Series B
      Preferred Stock to the former holders of the SRC Series B Preferred Stock.

      The A Preferred Stock has an aggregate liquidating preference over all
      other CNE equity of $1,697,961 and the B Preferred Stock has an aggregate
      liquidating preference over all other CNE equity except the A Preferred
      Stock of $440,000. The C Preferred Stock has no liquidating preference.

            ECI

      On April 23, 2003, the Company issued to Gary Eichsteadt and Thomas
      Sullivan, the former stockholders of ECI, an aggregate of 4,867,938 shares
      of its Series C Preferred Stock and a like number of Class C Warrants. In
      addition, Messrs. Eichsteadt and Sullivan retained certain of ECI's trade
      receivables aggregating approximately $100,000. The Company also acquired
      a patent related to the operation of ECI's business from Mr. Eichsteadt
      for the aggregate principal amount of $2,000,000, bearing interest at the
      annual rate of 8%, payable quarterly, and due on October 31, 2008. Messrs.
      Eichsteadt and Sullivan remained executive officers ECI.

      There were no relationships between the Company or any of its affiliates
      and any of the sellers of the assets acquired by the Company prior to the
      acquisition transactions.

                 See Notes to Consolidated Financial Statements


                                       28
<PAGE>

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

      (a)   Exhibits

            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 2 of the Notes
            to Consolidated Financial Statements (Unaudited) in this Form
            10-QSB.

      (b)   Reports on Form 8-K:

            During the six months ended June 30, 2003 and the period July 1,
            2003 to the date of this Form 10-QSB the Company filed reports on
            Form 8K on May 6, 2003 as amended on Form 8-K/A on July 7, 2003, on
            June 30, 2003 as amended on Form 8-K/A on July 7, 2003, and on July
            28, 2003. These Form 8-K's and related Form-8K/A's and the Exhibits
            attached thereto are incorporated herein by reference.

                 See Notes to Consolidated Financial Statements


                                       29
<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: August 19, 2003              George W. Benoit, Chairman of the Board
                                   of Directors, President, and Chief Executive
                                   Officer


                                   /s/ Anthony S. Conigliaro
                                   --------------------------------------------
Date: August 19, 2003              Anthony S. Conigliaro, Vice President and
                                   Chief Financial Officer

                 See Notes to Consolidated Financial Statements


                                       30