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

                                   FORM 10-QSB

                                   (Mark One)

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

                For the quarterly period ended September 30, 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 November 14, 2003
               -----                      --------------------------------

Common stock - par value $.00001                   8,890,920 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 nine months ended September
      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>
                                                               September 30,           December 31,
                                                                   2003                    2002
                                                             -----------------       -----------------
                                                                (Unaudited)              (Audited)
<S>                                                          <C>                     <C>
ASSETS
Current:
   Cash and cash equivalents                                 $         122,734       $         183,200
   Accounts receivable, net                                            250,508                  35,144
   Subscription receivable (Note 1)                                    500,000
   Insurance claims receivable                                                                  63,912
   Inventory                                                           274,724
   Other                                                                 7,981
                                                             -----------------       -----------------
      Total current assets                                           1,155,947                 282,256
Fixed assets, net                                                      462,078                  33,250
Intellectual property rights, net                                    1,520,609
Goodwill                                                             7,285,894
Other                                                                   87,636
                                                             -----------------       -----------------
           Total assets                                      $      10,512,164       $         315,506
                                                             =================       =================

LIABILITIES
Current:
   Accounts payable and accrued expenses                     $         632,186       $         392,307
   Interest payable (Notes 5 and 8)                                     77,215                 216,000
   Lines of credit                                                     464,291
   Notes payable - other                                               160,000
   10% Subordinated notes                                              592,250
   Other                                                                16,075
   Tax assessment payable (Note 6)                                                             913,461
   Debentures payable (Notes 5 and 8)                                                        2,400,000
   Excess of liabilities over assets of
     activities to be disposed (Notes 5 and 8)                         341,220
                                                             -----------------       -----------------
      Total current liabilities                                      2,283,237               3,921,768
Notes payable                                                           28,137
8% Subordinated notes                                                1,000,000
Deferred grant revenue                                                 300,000                 291,827
                                                             -----------------       -----------------
        Total liabilities                                            3,611,374               4,213,595
                                                             -----------------       -----------------

Commitments and contingencies (Note 4)

STOCKHOLDERS' EQUITY
Preferred stock (Notes 1 and 9)                                            124
Common stock (Notes 1 and 10)                                              101                 682,960
Paid-in surplus                                                     28,230,455              16,290,691
Accumulated deficit                                                (18,456,790)            (17,998,640)
                                                             -----------------       -----------------
                                                                     9,773,890              (1,024,989)
Less, treasury stock, at cost - 1,238,656 shares                    (2,873,100)             (2,873,100)
                                                             -----------------       -----------------
        Total stockholders' equity                                   6,900,790              (3,898,089)
                                                             -----------------       -----------------
           Total liabilities and stockholders' equity        $      10,512,164       $         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                  Nine Months Ended
                                                                    September 30,                       September 30,
                                                          --------------------------------    -------------------------------
                                                               2003              2002             2003              2002
                                                          --------------    --------------    --------------   --------------
                                                            (Unaudited)       (Unaudited)       (Unaudited)      (Unaudited)
<S>                                                       <C>               <C>               <C>              <C>
Revenues:
   Product sales                                          $      268,591                      $      624,684
   Service fee income                                            244,413                             412,932
   Internet related income                                        39,592    $       58,702           119,450   $      191,118
                                                          --------------    --------------    --------------   --------------
                                                                 552,596            58,702         1,157,066          191,118
   Costs of goods sold                                           294,863                             573,216
                                                          --------------    --------------    --------------   --------------

      Gross profit                                               257,733            58,702           583,850          191,118

Other expenses:
   Selling                                                         6,591                              23,682           10,000
   Compensation and related costs                                387,467           134,256           791,402          490,759
   General and administrative                                    341,657            20,373           779,678          256,380
   Depreciation and amortization                                  70,193            57,890            93,463          191,818
                                                          --------------    --------------    --------------   --------------
                                                                 805,908           212,519         1,688,225          948,957
                                                          --------------    --------------    --------------   --------------
Loss from continuing operations before other
income and expenses                                             (548,175)         (153,817)       (1,104,375)        (757,839)

   Amortization of debt discount                                (175,750)           (7,442)         (292,250)         (22,326)
   Interest expense                                              (82,320)          (94,841)         (319,163)        (283,576)
   Tax settlement adjustment (Note 6)                            895,622                             895,622
   Gain on fixed assets destroyed in
     catastrophe (Note 1)                                                                                             152,934
   Reversal of Director fees accrual                                                                                   55,000
                                                          --------------    --------------    --------------   --------------

Income (loss) from continuing operations
before income taxes                                               89,377          (256,100)         (820,166)        (855,807)
   Income tax provision                                                                                                 5,250
                                                          --------------    --------------    --------------   --------------

Income (loss) from continuing operations                          89,377          (256,100)         (820,166)        (861,057)

Discontinued operations:
   Income from discontinued
   operations (Note 3)                                           533,634                             533,634        3,712,884
                                                          --------------    --------------    --------------   --------------

Net income (loss)                                         $      623,011    $     (256,100)   $     (286,532)  $    2,851,827
                                                          ==============    ==============    ==============   ==============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       3
<PAGE>

                        CNE Group, Inc. and Subsidiaries
                Consolidated Statements of Operations, continued

<TABLE>
<CAPTION>
                                                             Three Months Ended                         Nine Months Ended
                                                                September 30,                              September 30,
                                                      ----------------------------------         ---------------------------------
                                                          2003                  2002                  2003                2002
                                                      -------------        -------------         -------------       -------------
                                                       (Unaudited)           (Unaudited)           (Unaudited)         (Unaudited)
<S>                                                   <C>                  <C>                   <C>                 <C>
Income (loss) per common share:
   Basic:
      Income (loss) from continuing operations        $         .01        $        (.05)        $        (.12)      $        (.15)
      Income from discontinued operations                       .07                   --                   .08                 .66
                                                      -------------        -------------         -------------       -------------
        Net income (loss)                             $         .08        $        (.05)        $        (.04)      $         .51
                                                      =============        =============         =============       =============
   Diluted:
      Income (loss) from continuing operations        $         .01        $        (.05)        $        (.12)      $        (.15)
      Income from discontinued operations                       .07                   --                   .08                 .66
                                                      -------------        -------------         -------------       -------------
        Net income (loss)                             $         .08        $        (.05)        $        (.04)      $         .51
                                                      =============        =============         =============       =============

Weighted average number of common
   shares outstanding:
   Basic                                                  7,674,253            5,590,944             6,585,372           5,584,278
                                                      =============        =============         =============       =============
   Diluted                                                7,970,808            5,590,944             6,741,610           5,584,278
                                                      =============        =============         =============       =============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                       Nine Months Ended
                                                                                                         September 30,
                                                                                                ---------------------------------
                                                                                                    2003                 2002
                                                                                                -------------        ------------
                                                                                                 (Unaudited)          (Unaudited)
<S>                                                                                             <C>                  <C>
Cash flows from operating activities:
   Loss from continuing operations                                                              $    (820,166)       $   (861,057)
   Adjustments to reconcile loss from continuing operations to net cash
      provided by (used in) operating activities:
        Depreciation and amortization                                                                  93,463             191,818
        Issuance of common stock for services                                                          96,250              31,500
        Amortization of debt discount                                                                 292,250              22,326
        Reversal of fees due to Directors                                                                                 (55,000)
        Gain on fixed assets destroyed in catastrophe                                                                    (152,934)
        Changes in:
           Accounts and insurance claims receivable                                                  (149,404)            485,610
           Inventory                                                                                  (37,765)
           Other assets                                                                               (33,750)             49,315
           Accounts payable and accrued expenses, and other liabilities                              (563,945)            (44,970)
           Deferred grant revenue                                                                       8,173             291,827
                                                                                                -------------        ------------
Cash used in continuing operations                                                                 (1,114,894)            (41,565)
Cash provided by discontinued operations                                                                                  200,000
                                                                                                -------------        ------------

              Net cash provided by (used in) operating activities                                  (1,114,894)            158,435
                                                                                                -------------        ------------

Cash flows from investing activities:
   Purchase of furniture and equipment                                                                (35,572)
                                                                                                -------------        ------------

              Net cash used in investing activities                                                   (35,572)
                                                                                                -------------        ------------

Cash flows from financing activities:
   Proceeds from issuance of 10% notes payable                                                      1,000,000
   Proceeds from short-term credit arrangements                                                       300,000
   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                                             1,090,000
                                                                                                -------------        ------------

Increase (decrease) in cash and cash equivalents                                                      (60,466)            158,435
Cash and cash equivalents at beginning of period                                                      183,200             200,782
                                                                                                -------------        ------------

Cash and cash equivalents at end of period                                                      $     122,734        $    359,213
                                                                                                =============        ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                       Nine Months Ended
                                                                                                         September 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                                                                                $      58,882       $    72,000
        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                                                                                  230,886
           Intellectual property rights                                                             1,550,609
           Goodwill                                                                                 7,285,894
           Other assets                                                                               524,659
           Accrued expenses and other liabilities                                                  (1,645,893)
           8% notes payable                                                                        (2,000,000)
           Issuance of preferred stock                                                                   (119)
           Issuance of common stock                                                                        (9)
           Paid in surplus                                                                         (6,048,075)
      Non-cash investing and financing activities relating to the conversion of
      certain notes and debentures, and the sale of common stock:
           8% notes payable                                                                         1,000,000
           Debentures payable and related interest payable                                          2,645,000
           Subscription receivable                                                                    500,000
           Issuance of preferred stock                                                                    (10)
           Issuance of common stock                                                                       (24)
           Paid in surplus                                                                         (4,144,966)
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       6
<PAGE>

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

1.    Nature of Business and Operations

      Business

      CNE Group, Inc. (the "Company" or "CNE") is a holding company whose
      primary operating subsidiary is SRC Technologies, Inc. ("SRC"). SRC, also
      a holding company, is the parent of Connectivity, Inc. ("Connectivity"),
      Econo-Comm, Inc. (d/b/a Mobile Communications ("ECI"), and U.S. Commlink,
      Ltd. ("USCL"). Connectivity, ECI and USCL, 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 has 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.


                                       7
<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 shares 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 shareswith 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

      On April 23, 2003 the Company issued (i) 899,976 shares of its common
      stock, (ii) 1,697,961 shares of its non-voting Series A Preferred Stock
      and a like number of ten year non-detachable Class A Warrants, (iii) 4,400
      shares of its Series B Preferred Stock, and (iv) 9,735,875 shares of its
      non-voting Series C Preferred Stock and a like number of ten year Class C
      Warrants, for 100% ownership of SRC and ECI. In addition, ECI's sellers
      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 in exchange for notes aggregating $2,000,000 bearing 8%
      interest. The details of such transactions are set forth below.

            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 Series 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 4,400 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.


                                       8
<PAGE>

      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. Mr. Sullivan remained an executive officer ECI. On July
      31, 2003, the Company transferred all the stock of ECI to SRC and ECI
      became a wholly-owned subsidiary of SRC. In addition, the Company
      transferred its title to the aforementioned patent to SRC.

      On May 19, 2003, Mr. Eichsteadt assigned $1,500,000 of the aforementioned
      8% notes equally to Mr. Sullivan, Mr. Gutowski and Mrs. Gutowski. Further
      on August 31, 2003, Mr. and Mrs. Gutowski converted their notes
      aggregating $1,000,000 into 1,000,000 shares of the Company's Series AA
      Preferred Stock.

      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.

      Private Financings:

      1.    On April 23, 2003, the Company also completed 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.

      2.    On September 17, 2003, the Company sold 1,250,000 shares of its
            Common Stock at $0.40 per share to an existing noteholder and
            shareholder of the Company. At September 30, 2003 a subscription
            receivable related to this sale of common stock, in the amount of
            $500,000, was recorded. The funds were received by the Company on
            October 10, 2003.

            The Company is using the funds obtained from these financings 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 the Board of Directors of the Company approved the 2003
      Stock Incentive Plan, which provided, among other matters, for incentive
      and non-qualified stock options to purchase 3,500,000 shares of Common
      Stock. On November 4, 2003, the 2003 Stock Incentive Plan was amended by
      the Board of Directors of the Company to increase the number of incentive
      and non-qualified stock options that may be granted from 3,500,00 to
      5,000,000 shares of Common Stock. The purpose of the 2003 Stock Incentive
      Plan, as amended (the "2003 Plan") is to provide incentives to officers,
      key employees, directors, independent contractors and agents whose
      performance will


                                       9
<PAGE>

      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, incentive stock options to purchase 1,987,500 shares of
      the Company's common stock were granted by the Incentive Compensation
      Committee of the Board of Directors to five officers (1,800,000) and one
      employee (187,500) of the Company at a weighted average exercise price of
      $1.32 per share. On November 4, 2003, incentive stock options to purchase
      950,000 shares of the Company's common stock were granted by the Incentive
      Compensation Committee of the Board of Directors to three officers of the
      Company at a weighted average exercise price of $1.09 per share. On April
      30, 2003 (605,000) and November 4, 2003 (220,000), non-qualified stock
      options to purchase an aggregate 825,000 shares of the Company's common
      stock were granted by the Board of Directors of the Company to certain
      independent contractors of the Company. The Company recorded a charge of
      $96,250 in general and administrative expense, relating to the 385,000
      options that were vested at September 30, 2003, on its Statement of
      Operations for the nine months ended September 30, 2003. No options
      granted have been exercised.

      The aforementioned actions of the Board of Directors and the Incentive
      Compensation Committee of the Board of Directors is subject to the
      ratification of the 2003 Plan by a majority of the stockholders of the
      Company at the Company's next Annual Meeting of Stockholders which will be
      on December 18, 2003 pursuant to a Notice of Annual Meeting of
      Stockholders to be mailed on or about November 18, 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 nine months ended September 30,
      2002. The Company also had insurance coverage for other than assets
      destroyed. As of September 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, and August 2003,
      the Company received grants aggregating $300,000. 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


                                       10
<PAGE>

      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. The Company has no intention of relocating
      outside of New York City.

      Going Concern

      The Company has incurred substantial losses from continuing operations,
      sustained substantial operating cash outflows and has a working capital
      deficit at both September 30, 2003 and December 31, 2002. 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
      positive cash flow.

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

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 September 30, 2003 and the results
      of its operations and its cash flows for the three-month and nine-month
      periods ended September 30, 2003 and 2002. The financial statements as of
      September 30, 2003 and for the three and nine months then ended are not
      necessarily indicative of the results that may be expected for the year
      ending December 31, 2003.

      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.

      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.


                                       11
<PAGE>

      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 September 30, 2003 the Company maintained balances
      below such limits.

      The Company's sales are primarily provided to customers throughout the
      United States. There have been no concentrations of ten percent (10%) or
      more 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 is stated at the lower of cost (first-in, first-out) or market.
      At September 30, 2003 the Company's inventory consisted of the following:

                      Raw materials              $ 185,723
                      Work in progress              69,731
                      Finished goods                19,270
                                                 ---------
                                                 $ 274,724
                                                 =========

      Startup Activities

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

      Income (Loss) Per Share

      Basic and diluted net income (loss) per common share have been computed in
      accordance with SFAS No. 128, "Earnings Per Share." Basic earnings per
      share (basic EPS) is computed by dividing net income (loss) by the
      weighted-average number of common shares outstanding during the year.
      Diluted earnings per share (diluted EPS) is computed by dividing net
      income (loss) used in determining basic EPS by the weighted average number
      of commons hares outstanding during the period, plus the incremental
      shares, if any, that would have been outstanding upon the assumed exercise
      of dilutive stock options.


                                       12
<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 September 30, 2003, the Company has a stock-based employee compensation
      plan - the 2003 Plan. Two of Company's subsidiaries each had separate
      stock-based employee compensation plans. These plans were contractually
      terminated by the Company upon the acquisition of SRC and ECI on April 23,
      2003. Furthermore, on March 14, 2003 all recipients of options granted
      pursuant to these plans rescinded all 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>
                                                                                  Nine Months Ended
                                                                                    September 30,
                                                                            -------------------------------
                                                                                 2003              2002
                                                                            -------------     -------------
<S>                                                                         <C>               <C>
            Net (loss) income, as reported                                  $    (286,532)    $   2,851,827
            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                                     $    (286,532)    $   2,851,827
                                                                            =============     =============

            Net (loss) income per share:
                 As reported:
                     Basic                                                  $       (0.04)    $        0.51
                                                                            =============     =============
                     Diluted                                                $       (0.04)    $        0.51
                                                                            =============     =============
                 Pro forma:
                     Basic                                                  $       (0.04)    $        0.51
                                                                            =============     =============
                     Diluted                                                $       (0.04)    $        0.51
                                                                            =============     =============
</TABLE>


                                       13
<PAGE>

      On April 30, 2003, incentive stock options to purchase 1,987,500 shares of
      the Company's common stock were granted by the Incentive Compensation
      Committee of the Board of Directors to five officers (1,800,000) and one
      employee (187,500) of the Company at a weighted average exercise price of
      $1.32 per share. On November 4, 2003, incentive stock options to purchase
      950,000 shares of the Company's common stock were granted by the Incentive
      Compensation Committee of the Board of Directors to three officers of the
      Company at a weighted average exercise price of $1.09 per share. On April
      30, 2003 (605,000) and November 4, 2003 (220,000), non-qualified stock
      options to purchase an aggregate 825,000 shares of the Company's common
      stock were granted by the Board of Directors of the Company to certain
      independent contractors of the Company. The Company recorded a charge of
      $96,250, relating to the 385,000 options that were vested at September 30,
      2003, on its Statement of Operations for the nine months ended September
      30, 2003. See Note 1 - Nature of Business and Operations: 2003 Stock
      Incentive Plan. No options granted have been exercised.

      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 nine month
      periods ended September 30, 2003 and the year ended December 31, 2002.

3.    Discontinued Operations

      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 recognized a
      gain amounting to approximately $533,634.

      Gain of Extinguishment of Debt

      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


                                       14
<PAGE>

      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.

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

<TABLE>
<CAPTION>
                                                      Three Months                      Nine Months
                                                         Ended                             Ended
                                                     September 30,                     September 30,
                                            ------------------------------     -------------------------------
                                                 2003             2002             2003              2002
                                            ---------------   ------------     -------------     -------------
<S>                                         <C>               <C>              <C>               <C>
          Revenues:
              Rental income                                   $         --                       $   1,249,710
              Gain on sale of subsidiary    $       533,634                    $     533,634
              Gain on extinguishment
                of debt                                                                              3,512,884
              Common membership
                interest transfer fee                                                                  294,755
                                            ---------------   ------------     -------------     -------------
                                                    533,634                          533,634         5,057,349
                                            ---------------   ------------     -------------     -------------
          Expenses:
              Interest                                                                               1,249,710
              Other                                                                                     94,755
                                            ---------------   ------------     -------------     -------------
                                                                                                     1,344,465
                                            ---------------   ------------     -------------     -------------
                                            $       533,634   $         --     $     533,634     $   3,712,884
                                            ===============   ============     =============     =============
</TABLE>

4.    Litigation

      Two of the Company's subsidiaries (see Footnote 8: Excess of Liabilities
      over Assets of Activities to be Disposed) are parties to various vendor
      related litigation of which the related liabilities have been recorded
      within these consolidated financial statements at September 30, 2003.
      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.

5.    Conversion of Debentures Payable

      In August and September 2003, 95.83% of the holders of the $2,400,000
      Debentures Payable issued by a subsidiary of the Company elected to (i)
      convert the entire outstanding principal balance of the debentures
      amounting to $2,300,000, (ii) return 575,500 of the related 600,000
      outstanding B Warrants of the Company, and (iii) waive


                                       15
<PAGE>

      all accrued and unpaid interest relating thereto ($345,000), in
      consideration of (i) 1,150,000 shares of the common stock of the Company
      and (ii) 1,150,000 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 increased the Company's Common Stock, par value
      $.00001, by $12.00, and increased Paid-in-surplus by $2,644,988.

6.    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 provided for payment of $50,000 cash on or before October 14,
      2003. The $50,000 cash was paid in July and September 2003. The Company
      recognized an adjustment to income in the amount of $895,622 relating to
      this transaction in the three and nine month periods ended September 30,
      2003.

7.    Director Fees

      At September 30, 2003, the Company's outside directors agreed to forego
      any previously  accrued and unpaid directors'fees earned through December
      31,2001 and agreed to forgo compensation  through September 30, 2003.  The
      reversal of  previously accrued fees has been  reflected in the  Company's
      Consolidated  Statement of  Operations  for the  nine-month  period  ended
      September 30, 2002. Due to the nature of the Company's  operations prior
      to the acquisitions and related financing in April, 2003, appropriate
      compensation  was deemed to be a nominal amount by the Company. Commencing
      director October 1, 2003, the Company will pay each of its three outside
      directors a fee of $2,000 per month.

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

      A subsidiary of the Company has remaining liabilities of $370,541
      that are substantially in excess of its remaining assets of $29,321.
      The subsidiary created a trust for the benefit of its
      creditors. The assets of the 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 Trustee of  the trust is required to utilize such remaining
      assets to satisfy the remaining liabilities of the subsidiary. 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  subsidiary cannot reach
      the assets of the Company or any of its other subsidiaries to satisfy the
      obligations of this subsidiary to such creditors. The Company
      expects that the creditors of this subsidiary will look directly to
      the Trustee and the remaining assets of the trust for the satisfaction
      of their claims and that the Company will be freed from dealing with these
      issues.


                                       16
<PAGE>

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

                                                            September 30,
                                                                2003
                                                             ---------
            Transferred liabilities:
                Accounts payable and accrued expenses        $ 255,541
                Interest payable                                15,000
                Debentures payable                             100,000
                                                             ---------
                                                               370,541
            Transferred assets:                                (29,321)
                                                             ---------
                  Excess of liabilities over assets
                  of activities to be disposed               $ 341,220
                                                             =========

9.    Preferred Stock

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

<TABLE>
<CAPTION>
                                                              September 30,     December 31,
                                                                  2003              2002
                                                            ----------------  ----------------
<S>                                                         <C>               <C>
            Par value per share:                            $         .00001  $         .10000
            Authorized number of shares                           25,000,000         1,000,000
            Issued and outstanding number of shares:
                Series AA                                          1,000,000                --
                Series A                                           1,697,961                --
                Series B                                               4,400                --
                Series C                                           9,735,875                --
                Series E                                                  --                --
                                                            ----------------  ----------------
                     Total                                        12,438,236                --
                                                            ================  ================
</TABLE>

10.   Common Stock

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

<TABLE>
<CAPTION>
                                                         September 30,      December 31,
                                                             2003               2002
                                                           ----------        ----------
<S>                                                        <C>               <C>
            Par value per share:                           $   .00001        $   .10000
            Authorized number of shares                    40,000,000        10,000,000
            Issued and outstanding number of shares        10,129,567         6,829,600
</TABLE>

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
      Goodwill. 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, ECI and
      USCL, 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


                                       17
<PAGE>

      acquisitions and related financing, SRC 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 from its 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 nine month
      periods ended September 30, 2002 and on January 1, 2003 for the three and
      nine month periods ended September 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                      Nine Months Ended
                                                                    September 30,                           September 30,
                                                           -------------------------------         -------------------------------
                                                               2003                2002                2003                2002
                                                           -----------         -----------         -----------         -----------
<S>                                                        <C>                 <C>                 <C>                 <C>
            Revenues                                       $   552,596         $   794,399         $ 1,754,529         $ 2,743,595
            Expenses                                         1,358,841           1,565,223           4,053,165           4,819,154
                                                           -----------         -----------         -----------         -----------
                Loss from continuing
                operations                                 $  (806,245)        $  (770,824)        $(2,298,636)        $(2,075,559)
                                                           ===========         ===========         ===========         ===========

            Loss from continuing operations per share:
                Basic                                      $     (0.11)        $     (0.14)        $     (0.35)        $     (0.37)
                                                           ===========         ===========         ===========         ===========
                Diluted                                    $     (0.11)        $     (0.14)        $     (0.35)        $     (0.37)
                                                           ===========         ===========         ===========         ===========
</TABLE>

12.   American Stock Exchange Listing

      Pursuant to certain requirements of the American Stock Exchange the
      Company must (i) continuously maintain its Stockholders' Equity in excess
      of $6,000,000, and (ii) hold, annually, a meeting of its stockholders, to
      meet the Exchange's continuing listing requirements. At June 30, 2003, the
      Company's  Stockholders'  Equity was $2,069,635  however, at September 30,
      2003 the Company's  Stockholders'  Equity was $6,900,790 and, accordingly,
      the Company  believes it is currently in compliance with this requirement.
      The Company's  last annual meeting of its  stockholders  was June 1, 2000,
      however,   pursuant  to  a  Preliminary  Proxy  Statement filed  with  the
      Securities  and  Exchange  Commission  on November  7, 2003,  the  Company
      anticipates  its  2003  Annual  Meeting  of Stockholders  will  be held on
      December 18, 2003 so that it will also comply with this other requirement.
      During 2004, the Company will be periodically  reviewed by the Exchange to
      insure its continuing compliance with its requirements.

13.   Conversion of 8% Promissory Notes

      On August 31, 2003, the holders who are also directors and officers of the
      Company, converted $1,000,000 of the Company's 8% Promissory Notes into
      1,000,000 shares of the Company's Series AA Preferred Stock, par value
      $.00001 per share. The Series AA Preferred Stock has a liquidating
      preference to all other equity securities of the Company. It also has an
      8% cumulative dividend, payable in common stock or cash.


                                       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 subsidiary is SRC Technologies, Inc. ("SRC"). SRC, also
      a holding company, is the parent of Connectivity, Inc. ("Connectivity"),
      Econo-Comm, Inc. (d/b/a Mobile Communications ("ECI"), and U.S. Commlink,
      Ltd. ("USCL"). Connectivity, ECI and USCL, 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 has 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 the Board of Directors of the Company approved the 2003
      Stock Incentive Plan, which provided, among other matters, for incentive
      and non-qualified stock options to purchase 3,500,000 shares of Common
      Stock. On November 4, 2003, the 2003 Stock Incentive Plan was amended by
      the Board of Directors of the Company to increase the number of incentive
      and non-qualified stock options that may be granted from 3,500,00 to
      5,000,000 shares of Common Stock. The purpose of the 2003 Stock Incentive
      Plan, as amended (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


                                       19
<PAGE>

      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, incentive stock options to purchase 1,987,500 shares of
      the Company's common stock were granted by the Incentive Compensation
      Committee of the Board of Directors to five officers (1,800,000) and one
      employee (187,500) of the Company at a weighted average exercise price of
      $1.32 per share. On November 4, 2003, incentive stock options to purchase
      950,000 shares of the Company's common stock were granted by the Incentive
      Compensation Committee of the Board of Directors to three officers of the
      Company at a weighted average exercise price of $1.09 per share. On April
      30, 2003 (605,000) and November 4, 2003 (220,000), non-qualified stock
      options to purchase an aggregate 825,000 shares of the Company's common
      stock were granted by the Board of Directors of the Company to certain
      independent contractors of the Company. The Company recorded a charge of
      $96,250, relating to the 385,000 options that were vested at September 30,
      2003, on its Statement of Operations for the nine months ended September
      30, 2003. No options granted have been exercised.

      The aforementioned actions of the Board of Directors and the Incentive
      Compensation Committee of the Board of Directors is subject to the
      ratification of the 2003 Plan by a majority of the shareholders of the
      Company at the Company's next Annual Meeting of Stockholders which will be
      on December 18, 2003 pursuant to a Notice of Annual Meeting of
      Stockholders to be mailed approximately November 18, 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 nine months ended September 30,
      2002. The Company also had insurance coverage for other than assets
      destroyed. As of September 30, 2003, all outstanding insurance claims
      relating to the catastrophe have been received.


                                       20
<PAGE>

      In addition, the Company applied for governmental assistance grants
      related to the catastrophe. In April and September 2002, and August 2003,
      the Company received grants aggregating $300,000. 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 nine-month period ended September 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.

      In addition, a significant judgment made by management in the preparation
      of the Company's financial statements is the determination of impairment
      losses relating to 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. This determination is made
      annually.

      In accordance with SAB Topic 4, Item E, the Company is presenting the
      Subscription Receivable as an asset as payment was received prior to the
      issuance of these financial statements.

A.    Results of Operations:

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

      Revenues

      Total revenues from continuing operations increased to $552,596 for the
      three-month period ended September 30, 2003 from $58,702 for the
      three-month period ended September 30, 2002, as a result of the Company's
      acquisitions of SRC and its subsidiaries in April 2003.


                                       21
<PAGE>

      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. In
      October 2003, a subsidiary of the Company received a "Notice to Proceed"
      from the Nevada Department of Transportation relating to a $488,000
      contract for the installation of wireless emergency callboxes and video
      poles on Interstate-15 from the California state border to the Las Vegas
      city limits. These two aforementioned contracts will significantly
      increase the Company's revenues in the three-month period ending December
      31, 2003.

      Product sales income increased to $268,591 for the three-month period
      ended September 30, 2003 from nil for the three-month period ended
      September 30, 2002 due to the acquired operations, in April 2003, of SRC
      Technologies, Inc. and its subsidiaries.

      Service fee income increased to $244,413 for the three-month period ended
      September 30, 2003 from nil for the three-month period ended September 30,
      2002 due to the acquired operations, in April 2003, of SRC Technologies,
      Inc. and its subsidiaries.

      Internet related income decreased to $39,592 for the three-month period
      ended September 30, 2003 from $58,702 for the three-month period ended
      September 30, 2002 as the operations of our subsidiary, CareerEngine,
      Inc., have continued to decline.

      Cost of Goods Sold

      Costs of goods sold, which relates to product sales and related service
      fee income increased to $294,863 for the three-month period ended
      September 30, 2003 from nil for the three-month period ended September 30,
      2002 due to the acquired operations, in April 2003, of SRC Technologies,
      Inc. and its subsidiaries.

      Other Expenses

      Total other expenses from continuing operations increased to $805,908 for
      the three-month period ended September 30, 2003 from $212,519 for the
      three-month period ended September 30, 2002.

      Selling expenses increased to $6,591 for the three-month period ended
      September 30, 2003 from nil for the three-month period ended September 30,
      2002 due to the acquired operations, in April 2003, of SRC Technologies,
      Inc. and its subsidiaries.

      Compensation and related costs increased to $387,467 for the three-month
      period ended September 30, 2003 from $134,256 for the three-month period
      ended


                                       22
<PAGE>

      September 30, 2002 due to the acquired operations and related increase in
      personnel, in April 2003, of SRC Technologies, Inc. and its subsidiaries.

      General and administrative expenses increased to $341,657 for the
      three-month period ended September 30, 2003 from $20,373 for the
      three-month period ended September 30, 2002 due to the costs associated
      with the acquisition and related operations of SRC Technologies, Inc. and
      its subsidiaries, and the costs associated with the two private
      financings, primarily completed in April and September 2003.

      Depreciation and amortization expenses increased to $70,193 for the three
      month period ended September 30, 2003 from $57,890 for the three month
      period ended September 30, 2002, due to the increase in depreciation and
      amortization expense relating to the fixed assets and patents associated
      with the acquisition of SRC Technologies, Inc. and its subsidiaries.

      Other Items

      Amortization of debt discount increased to $175,750 for the three-month
      period ended September 30, 2003 from $7,442 for the three-month period
      ended September 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 decreased to $82,320 for the three-month period ended
      September 30, 2003 from $94,841 for the three-month period ended September
      30, 2002 due primarily to the issuance of the Company's 10% and 8%
      subordinated notes in April 2003 and the cessation of interest expense on
      a subsidiary's 12% Debentures Payable and Tax Assessment Payable.

      Tax Settlement adjustment of $895,622 relates to the accepted and paid
      Offer in Compromise with the Internal Revenue Service ($50,000) pertaining
      to a $945,000 tax liability of a subsidiary of the Company.

      Operating Loss

      On a pre-tax basis, we had income from continuing operations of $89,377
      for the three-month period ended September 30, 2003 compared with a loss
      from continuing operations of $256,100 for the three-month period ended
      September 30, 2002 primarily due to the effect of (i) the tax settlement
      adjustment and (ii) start-up expenses associated with the acquisition of
      SRC Technologies, Inc. and its subsidiaries and the related private
      financings.

      Our income from continuing operations for the three-month period ended
      September 30, 2003 was $89,377 compared with a loss from continuing
      operations of $256,100 for the three-month period ended September 30, 2002
      primarily due to the effect of (i) the tax settlement adjustment and (ii)
      start-up expenses associated with the acquisition of SRC Technologies,
      Inc. and its subsidiaries and the related private financings. For the
      three-month period ended September 30, 2003, income per common share from
      continuing operations,


                                       23
<PAGE>

      basic and diluted, was $.01 per share. For the three-month period ended
      September 30, 2002, loss per common share from continuing operations,
      basic and diluted, was $.05 per share.

      Our income from discontinued operations for the three-month period ended
      September 30, 2003 was $533,634 compared with nil from discontinued
      operations for the three-month period ended September 30, 2002 due to a
      gain on the sale of a subsidiary of the Company. For the three-month
      period ended September 30, 2003, income per common share from discontinued
      operations, basic and diluted, was $.07 per share. For the three-month
      period ended September 30, 2002, income per common share from discontinued
      operations, basic and diluted, was nil per share.

      Our net income for the three-month period ended September 30, 2003 was
      $623,011 compared with a net loss of $256,100 for the three-month period
      ended September 30, 2002. For the three-month period ended September 30,
      2003, net income per common share, basic and diluted, was $.08 per share.
      For the three-month period ended September 30, 2002, net loss per common
      share, basic and diluted, was $.05 per share.

      Nine-Month Period Ended September 30, 2003 Compared to the Nine-Month
      Period Ended September 30, 2002

      Revenues

      Total revenues from continuing operations increased to $1,157,066 for the
      nine-month period ended September 30, 2003 from $191,118 for the
      nine-month period ended September 30, 2002.

      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. In
      October 2003, a subsidiary of the Company received a "Notice to Proceed"
      from the Nevada Department of Transportation relating to a $488,000
      contract for the installation of wireless emergency callboxes and video
      poles on Interstate-15 from the California state border to the Las Vegas
      city limits. These two aforementioned contracts will significantly
      increase the Company's revenues in the three-month period ending December
      31, 2003.

      Product sales income increased to $624,684 for the nine-month period ended
      September 30, 2003 from nil for the nine-month period ended September 30,
      2002 due to the acquired operations, in April 2003, of SRC Technologies,
      Inc. and its subsidiaries.

      Service fee income increased to $412,932 for the nine-month period ended
      September 30, 2003 from nil for the nine-month period ended September 30,
      2002 due to the acquired operations, in April 2003, of SRC Technologies,
      Inc. and its subsidiaries.


                                       24
<PAGE>

      Internet related income decreased to $119,450 for the nine-month period
      ended September 30, 2003 and $191,118 for the nine-month period ended
      September 30, 2002 as the operations of our subsidiary, CareerEngine, Inc.
      have continued to decline.


                                       25
<PAGE>

      Cost of Goods Sold

      Costs of goods sold, which relates to product sales and related service
      fee income increased to $573,216 for the nine-month period ended September
      30, 2003 from nil for the nine-month period ended September 30, 2002 due
      to the acquired operations, in April 2003, of SRC Technologies, Inc. and
      its subsidiaries.

      Other Expenses

      Total other expenses from continuing operations increased to $1,688,225
      for the nine-month period ended September 30, 2003 from $948,957 for the
      nine-month period ended September 30, 2002.

      Selling expenses increased to $23,682 for the nine-month period ended
      September 30, 2003 from $10,000 for the nine-month period ended September
      30, 2002 due to the acquired operations, in April 2003, of SRC
      Technologies, Inc. and its subsidiaries.

      Compensation and related costs increased to $791,402 for the nine-month
      period ended September 30, 2003 from $490,759 for the nine-month period
      ended September 30, 2002 due to the acquired operations and related
      increase in personnel, in April 2003, of SRC Technologies, Inc. and its
      subsidiaries.

      General and administrative expenses increased to $779,678 for the
      nine-month period ended September 30, 2003 from $256,380 for the
      nine-month period ended September 30, 2002 due to the costs associated
      with the acquisition and related operations of SRC Technologies, Inc. and
      its subsidiaries, and the costs associated with the private financings,
      primarily completed in April and September 2003.

      Depreciation and amortization expenses decreased to $93,463 for the
      nine-month period ended September 30, 2003 from $191,818 for the
      nine-month period ended September 30, 2002, due to the increase in
      depreciation and amortization expense relating to the fixed assets and
      patents associated with the acquisition of SRC Technologies, Inc. and its
      subsidiaries, and the decrease in depreciation due to certain assets of
      the Company becoming fully depreciated.

      Other Items

      Amortization of debt discount increased to $292,250 for the nine-month
      period ended September 30, 2003 from $22,326 for the nine-month period
      ended September 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 $319,163 for the nine-month period ended
      September 30, 2003 from $283,576 for the nine-month period ended September
      30, 2002 due primarily to the issuance of the Company's 10% and 8%
      subordinated notes in April 2003 and the cessation of interest expense on
      a


                                       26
<PAGE>

      subsidiary's 12% Debentures Payable and Tax Assessment Payable in July and
      August 2003.

      Tax Settlement adjustment of $895,622 relates to the accepted and paid
      Offer in Compromise with the Internal Revenue Service ($50,000) pertaining
      to a $945,000 tax liability of a subsidiary of the Company.

      Gain on fixed assets destroyed in catastrophe decreased to nil for the
      nine-month period ended September 30, 2003 from $152,934 for the
      nine-month period ended September 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 nine-month period
      ended September 30, 2003 from nil for the nine-month period ended
      September 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. The Company will compensate its outside Directors,
      commencing October 1, 2003, at a monthly rate of $2,000 per Director.

      Operating Loss

      On a pre-tax basis, we had a loss from continuing operations of $820,166
      for the nine-month period ended September 30, 2003 compared with a loss
      from continuing operations of $855,807 for the nine-month period ended
      September 30, 2002.

      Our loss from continuing operations for the nine-month period ended
      September 30, 2003 was $820,166 compared with a loss from continuing
      operations of $861,057 for the nine-month period ended September 30, 2002.
      For the nine-month period ended September 30, 2003, loss per common share
      from continuing operations, basic and diluted, was $.12 per share. For the
      nine-month period ended September 30, 2002, loss per common share from
      continuing operations, basic and diluted, was $.15 per share.

      Our income from discontinued operations for the nine-month period ended
      September 30, 2003 was $533,634 compared with income from discontinued
      operations of $3,712,884 for the nine-month period ended September 30,
      2002 due to a gain on the sale of a subsidiary of the Company in 2003 and
      primarily a gain on the extinguishment of debt in 2002. For the
      three-month period ended September 30, 2003, income per common share from
      discontinued operations, basic and diluted, was $.08 per share. For the
      three-month period ended September 30, 2002, income per common share from
      discontinued operations, basic and diluted, was $.66 per share.

      Our net loss for the nine-month period ended September 30, 2003 was
      $286,532 compared with net income of $2,851,827 for the nine-month period
      ended September 30, 2002. For the nine-month period ended September 30,
      2003, net loss per common share, basic and diluted, was $.048 per share.
      For the nine-month period ended September 30, 2002, net income per common
      share, basic and diluted, was $.51 per share.


                                       27
<PAGE>

      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 completed 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.

            In addition, on September 17, 2003, the Company sold 1,250,000
            shares of its Common Stock at $0.40 per share to an existing
            noteholder and shareholder of the Company. At September 30, 2003 a
            subscription receivable related to this sale of common stock, in the
            amount of $500,000, was recorded. The funds were received by the
            Company on October 10, 2003.

            The Company is using the funds obtained from this financing to pay
            certain ECI notes payable and for working capital. The financings
            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 addressed by (i)
            the acquisitions and related financing disclosed within these
            financial statements as of September 30, 2003 and 2002 and the three
            month periods then ended and (ii) the expected results of our
            continuing fund raising activities.

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

      C.    New Accounting Standards

            In December 2002, the FASB issued Statement of Financial Accounting
            Standards No. 148 (SFAS 148), "Accounting for Stock-Based
            Compensation - Transition and Disclosure." SFAS 148 amends SFAS 123,
            "Accounting for Stock-Based Compensation," to provide alternative
            methods of transition for an entity that voluntarily changes to the
            fair value based method of accounting for


                                       28
<PAGE>

            stock-based employee compensation. The adoption of this
            pronouncement did not have a material effect on the consolidated
            financial statements as the Company continues to apply the intrinsic
            value method in accordance with APB No. 25.

      D.    American Stock Exchange

          Pursuant to certain requirements of the American Stock Exchange the
          Company must (i) continuously maintain its Stockholders' Equity in
          excess of $6,000,000, and (ii) hold, annually, a meeting of its
          stockholders, to meet the Exchange's continuing listing requirements.
          At June 30, 2003, the Company's Stockholders' Equity was $2,069,635
          however, at September 30, 2003 the Company's Stockholders' Equity was
          $6,900,790 and, accordingly, the Company believes it is currently in
          compliance with this requirement. The Company's last annual meeting of
          its stockholders was June 1, 2000, however, pursuant to a Preliminary
          Proxy Statement filed with the Securities and Exchange Commission on
          November 7, 2003, the Company anticipates its 2003 Annual Meeting of
          Stockholders will be held on December 18, 2003 so that it will also
          comply with this other requirement. During 2004, the Company will be
          periodically reviewed by the Exchange to insure its continuing
          compliance with its requirements.








      E.    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.


                                       29
<PAGE>

                                     PART II

                                OTHER INFORMATION

Item 1. Legal Proceedings.

      None

Item 2. Changes in Securities and Use of Proceeds.

      During the three months ended September 30, 2003, the Company issued
      common stock, notes and warrants in private transactions 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

                                       30
<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 nine months ended September 30, 2003 and the period
            October 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,
            on July 28, 2003, September 18, 2003 and September 29, 2003. These
            Form 8-K's and related Form-8K/A's and the Exhibits attached thereto
            are incorporated herein by reference.


                                       31
<PAGE>

                                   SIGNATURES

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

                                    CNE GROUP, INC.


                                      /s/ George W. Benoit
                                    --------------------------------------------
Date: November 14, 2003             George W. Benoit, Chairman of the Board
                                    of Directors, President, and Chief Executive
                                    Officer


                                      /s/ Anthony S. Conigliaro
                                    --------------------------------------------
Date: November 14, 2003             Anthony S. Conigliaro, Vice President and
                                    Chief Financial Officer


                                       32