UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB


            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 2005

                        Commission file number 000-25831

                             NetWolves Corporation
             (Exact name of registrant as specified in its charter)

            New York                                 11-2208052
 (State or other jurisdiction of                   (I.R.S. Employer
  incorporation or organization)                   Identification No.)


                  4805 Independence Pkwy, Tampa, Florida 33634
                    (Address of principal executive offices)

                                 (813) 286-8644
              (Registrant's telephone number, including area code)

                                      None
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by checkmark  whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                Yes    [X]        No  [  ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [  ] No [X]

Indicate the number of shares  outstanding of each of issuer's classes of common
stock as of the latest practicable date:

                                        NUMBER OF SHARES OUTSTANDING ON
        TITLE OF CLASS                           October 31,2005
--------------------------------
Common Stock, $.0033 par value                     29,929,380
                                                   ----------
<PAGE>


                                     INDEX


PART I - FINANCIAL INFORMATION


     ITEM 1 - FINANCIAL STATEMENTS

     CONDENSED CONSOLIDATED BALANCE SHEETS
         September 30, 2005 (unaudited) and June 30, 2005                1 - 2

     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         For the three months ended September 30, 2005 (unaudited)
         and September 30, 2004 (unaudited)                              3 - 4

     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         For the three months ended September 30, 2005 (unaudited)
         and September 30, 2004 (unaudited)                              5 - 6

     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS               7 - 12

     ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
              OF OPERATION                                             13 - 17

     ITEM 3 - CONTROLS AND PROCEDURES                                       18


PART II - OTHER INFORMATION

     ITEM 1 - LEGAL PROCEEDINGS                                             19

     ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   19

     ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                               19

     ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           19

     ITEM 5 - OTHER INFORMATION                                             19

     ITEM 6 - EXHIBITS                                                      19

SIGNATURES                                                                  20

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                            September 30,         June 30,
                                                                                2005                2005
                                                                           -------------       -------------
                                                                            (Unaudited)
<S>                                                                       <C>                   <C>
ASSETS

Current assets
     Cash and cash equivalents                                            $   2,131,910         $   3,325,318
     Restricted cash                                                               -                   25,958
     Accounts receivable, net of allowance of $515,317 and
      $515,317 at September 30, 2005 and June 30, 2005,
      respectively                                                            3,622,897             4,206,658
     Inventories                                                                417,467               468,705
     Prepaid expenses                                                           244,751               354,637
                                                                           ------------         -------------
         Total current assets                                                 6,417,025             8,381,276



Property and equipment, net                                                     229,159               245,474

Identifiable intangible assets, net                                           1,757,164             2,625,537

Goodwill and other indefinite lived intangible assets
                                                                              3,783,687             3,783,687

Other assets                                                                     89,813                72,296
                                                                           ------------         -------------
         Total assets                                                      $ 12,276,848         $  15,108,270
                                                                           ============         =============
</TABLE>

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

                                       1
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

(continued)
<TABLE>
<CAPTION>
                                                                            September 30,         June 30,
                                                                                2005                2005
                                                                           -------------       -------------
                                                                             (Unaudited)
<S>                                                                        <C>                  <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Accounts payable and accrued expenses                                  $  5,563,246         $   6,808,695
    Deferred revenue                                                            520,589               692,930
    Advance from shareholder                                                    210,000                  -
    Current maturities of long term debt                                        100,000               300,000
                                                                           ------------         -------------
         Total current liabilities                                            6,393,835             7,801,625

Long term debt, net of current maturities                                        50,000               750,000
                                                                           ------------         -------------
         Total liabilities                                                    6,443,835             8,551,625
                                                                           ------------         -------------
Shareholders' equity
    Series A convertible preferred stock, $.0033 par value;
      $5,516,860 liquidation preference; 1,000,000 shares authorized;
      182,881 and 160,719 shares issued and outstanding on September 30,
      2005 and June 30, 2005, respectively                                    2,163,420             1,830,979

    Series B convertible preferred stock, $.0033 par value;
      $6,216,570 liquidation preference; 500,000 shares authorized; 207,219
      shares issued and outstanding on September 30, 2005 and
      June 30, 2005                                                           2,729,977             2,729,977

    Series C convertible preferred stock, $.0033 par value;
      $429,630 liquidation preference; 100,000 shares authorized; 14,321 and
      16,028 shares issued and outstanding on September 30, 2005 and June
      30, 2005, respectively                                                    286,901               365,269

    Preferred stock, $.0033 par value; 400,000 shares authorized; no shares
      issued and outstanding on September 30, 2005
       and June 30, 2005                                                           -                     -

    Common stock, $.0033 par value; 65,000,000 shares
      authorized;  29,926,625 and 29,824,205
      shares issued and outstanding on September 30, 2005 and
      June 30, 2005, respectively                                                98,758                98,420

      Additional paid-in capital                                             78,950,516            79,080,423
      Unamortized value of equity compensation                                  (14,800)              (43,000)
      Accumulated deficit                                                   (78,381,759)          (77,505,423)
                                                                           ------------         -------------
       Total shareholders' equity                                             5,833,013             6,556,645
                                                                           ------------         -------------
                                                                           $ 12,276,848         $  15,108,270
                                                                           ============         =============
</TABLE>
The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.

                                       2
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                              For the three months ended
                                                                                      September 30,
                                                                           ---------------------------------
                                                                                2005               2004
                                                                           --------------     --------------
<S>                                                                          <C>                <C>
Revenue
       Voice services                                                        $  3,829,418       $   5,017,381
       Managed service charges                                                  2,205,656           1,871,433
       Equipment and consulting                                                     1,126             186,955
                                                                             ------------       -------------
                                                                                6,036,200           7,075,769
                                                                             ------------       -------------
Cost of revenue
       Voice services                                                           2,377,447           3,137,097
       Managed service charges                                                  1,452,720           1,074,256
       Equipment and consulting                                                      -                131,108
                                                                             ------------       -------------
                                                                                3,830,167           4,342,461
                                                                             ------------       -------------
Gross profit                                                                    2,206,033           2,733,308
                                                                             ------------       -------------
Operating expenses
    General and administrative                                                  1,735,984           1,579,089
    Engineering and development                                                   209,951             234,765
    Sales and marketing                                                         1,292,073             911,093
                                                                             ------------       -------------
                                                                                3,238,008           2,724,947
                                                                             ------------       -------------
(Loss) income before other income                                              (1,031,975)              8,361
                                                                             ------------       -------------
Other income
   Other income                                                                   144,002                -
   Interest income                                                                 16,951               6,004
                                                                             ------------       -------------
                                                                                  160,953               6,004
                                                                             ------------       -------------
(Loss) Income before income taxes                                                (871,022)             14,365

Provision for income taxes                                                         (5,314)               -
                                                                             ------------       -------------
Net (loss) income                                                               $(876,336)      $      14,365
                                                                             ============       =============
</TABLE>
The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.

                                       3
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

(continued)
<TABLE>
<CAPTION>
                                                                              For the three months ended
                                                                                     September 30,
                                                                           ---------------------------------
                                                                                2005               2004
                                                                           -------------       -------------
<S>                                                                         <C>                 <C>
Basic and diluted net loss per share

Net (loss) income                                                           $    (876,336)      $      14,365

    Dividends and beneficial conversion feature on convertible
       preferred stock                                                           (203,778)           (406,645)
                                                                             ------------       -------------
Net loss attributable to common shareholders                                $  (1,080,114)      $    (392,280)
                                                                             ============       =============

Basic and diluted net loss per share                                        $        (.04)      $        (.02)
                                                                             ============       =============
 Weighted average common shares
    outstanding, basic and diluted                                             29,851,142          21,538,183
                                                                             ============       =============
</TABLE>

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

                                       4
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                              For the three months ended
                                                                                     September 30,
                                                                           ---------------------------------
                                                                                2005               2004
                                                                           -------------       -------------
<S>                                                                         <C>                 <C>
Cash flows from operating activities
     Net (loss) income                                                      $    (876,336)      $      14,365

Adjustments to reconcile net (loss) income to net cash used in
operating activities
         Depreciation                                                              38,998              52,726
         Amortization                                                             188,373             177,943
         Inventory write off                                                       51,238                -
         Other income                                                            (144,002)               -
         Bad debt expense                                                            -                 70,974
         Non-cash charge to operations with respect to
           stock and warrants issued for services and amortization of
           previously issued warrants                                              24,000              83,400


     Changes in operating assets and liabilities
       Restricted cash                                                             25,958                 (72)
       Accounts receivable                                                        583,761          (1,650,563)
       Inventories                                                                   -               (259,722)
       Prepaid expenses                                                           109,886               1,165
       Other assets                                                               (17,517)             14,804
       Accounts payable and accrued expenses                                   (1,092,744)            443,576
       Accrued loss on disposal of discontinued operations                           -                (28,481)
       Deferred revenue                                                          (172,341)           (259,015)
                                                                             ------------       -------------

         Net cash used in operating activities                                 (1,280,726)         (1,338,900)
                                                                             ------------       -------------

Cash flows from investing activities
       Patent cost paid                                                              -                 (3,137)
       Payment on existing customer lists                                        (100,000)               -
       Purchases of property and equipment                                        (22,682)            (13,145)
                                                                             ------------       -------------
         Net cash provided by (used in) investing activities                     (122,682)            (16,282)
                                                                             ------------       -------------

Cash flows from financing activities
       Advances from shareholder                                                  210,000                -

</TABLE>

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

                                       5
<PAGE>

(continued)
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                              For the three months ended
                                                                                     September 30,
                                                                           ---------------------------------
                                                                                2005               2004
                                                                           -------------       -------------
<S>                                                                            <C>                 <C>
Net decrease in cash and cash equivalents                                      (1,193,408)         (1,355,182)


Cash and cash equivalents, beginning of period                                  3,325,318           5,439,345
                                                                             ------------       -------------
Cash and cash equivalents, end of period                                     $  2,131,910        $  4,084,163
                                                                             ============      ==============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Dividends accrued on convertible preferred stock                             $    203,778        $    272,636
                                                                             ============      ==============
Dividends paid-in-kind on Series A convertible preferred stock               $    332,441        $    285,916
                                                                             ============      ==============
Purchase price adjustment - reduction of long term debt and customer list    $    800,000        $      -
                                                                             ============      ==============
Conversion of Series C preferred stock to common stock                       $     78,000        $      -
                                                                             ============      ==============
</TABLE>
The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.

                                       6
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

1    Interim financial information

     The summary financial information  contained herein is unaudited;  however,
     in the opinion of management,  all adjustments  (consisting  only of normal
     recurring  accruals)  necessary for a fair  presentation  of such financial
     information have been included.  These financial statements,  including the
     condensed  consolidated  balance sheet as of June 30, 2005,  which has been
     derived from audited financial statements, are presented in accordance with
     the  requirements  of Form  10-QSB and  consequently  may not  include  all
     disclosures  normally required by generally accepted accounting  principles
     or those normally made in the Company's  Annual Report on Form 10-KSB.  The
     accompanying  condensed consolidated financial statements and related notes
     should be read in  conjunction  with the  Company's  Annual  Report on Form
     10-KSB for the fiscal year ended June 30, 2005.  The results of  operations
     for  the  three  months  ended  September  30,  2005  are  not  necessarily
     indicative of the results to be expected for the full year.

2    The Company

     The  consolidated  financial  statements  include the accounts of NetWolves
     Corporation  and  its  subsidiaries,   NetWolves  Technologies  Corporation
     ("NWT"),  Norstan Network Services,  Inc., d/b/a NetWolves Network Services
     ("NNS")  and  TSG  Global   Education  Web,  Inc.   ("TSG")   (collectively
     "NetWolves" or the "Company").

     NetWolves   provides  network  security   solutions  coupled  with  network
     management   and   communication   services.   NetWolves'   products  offer
     applications  such  as  firewalls,   virtual  private  networks,  intrusion
     detection   systems,   content  filtering,   virus  detection,   congestion
     management,  and intelligent  failover.  Additionally,  NetWolves  provides
     network design, provisioning, monitoring, and management services.

3    Significant accounting policies

     Principles of consolidation

     The  consolidated  financial  statements  include the accounts of NetWolves
     Corporation and its subsidiaries. All significant intercompany transactions
     and balances have been eliminated in consolidation.

     Basic and diluted net loss per share

     The diluted loss per share does not include the impact of potential  shares
     to be issued upon  exercise of  convertible  preferred  stock,  options and
     warrants  aggregating  approximately  23.2  million  and  26.7  million  at
     September  30, 2005 and 2004,  respectively,  because the Company had a net
     loss attributable to common shareholders and,  therefore,  the effect would
     be antidilutive.

     Inventories

     Inventories  consist of raw materials and finished  goods.  Inventories are
     valued at the lower of cost or net  realizable  value  using the  first-in,
     first-out method. Additionally, raw material and finished goods amounted to
     $240,920 and $ 176,547,  respectively,  at September  30, 2005 and $274,775
     and $193,930, respectively, at June 30, 2005.

                                       7
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004


     Reclassifications

     Certain  reclassifications  have  been made to the  condensed  consolidated
     financial  statements  shown  for the  prior  period  in order to have them
     conform to the current period's classifications.

     Stock-based compensation

     Statement of Financial  Accounting  Standards ("SFAS") No. 123, "Accounting
     for Stock-Based  Compensation"  ("SFAS 123") establishes a fair value-based
     method of accounting for stock based  compensation  plans.  The Company has
     chosen  to adopt  the  disclosure  requirements  of SFAS 123 and SFAS  148,
     "Accounting  for  Stock-Based  Compensation  - Transition  and  Disclosure"
     ("SFAS 148") and continue to record stock  compensation  for its  employees
     and outside  directors  using the  intrinsic  value  method  prescribed  in
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees"  ("APB 25").  Under APB 25,  charges are made to  operations  in
     accounting  for stock options  granted to employees  and outside  directors
     when the  option  exercise  prices are below the fair  market  value of the
     common stock at the measurement date.

     If the Company had elected to recognize compensation expense based upon the
     fair value at the date of grant consistent with the methodology  prescribed
     by SFAS 123 and SFAS 148, the effect on the Company's net loss and net loss
     per share would be as follows:

<TABLE>
<CAPTION>
                                                                                    For the three months
                                                                                     ended September 30,
                                                                                 -------------------------
                                                                                    2005          2004
                                                                                 -----------   -----------

<S>                                                                           <C>                  <C>
       Net (loss) income, as reported                                         $  (876,336)     $   14,365

       Add: Total stock based employee compensation expense included in
         reported net (loss) income, net of related tax effects                       -              -

       Deduct:  Total stock-based employee compensation expense
         determined under fair value based method for all awards, net
         of related tax effects                                                   (95,194)       (122,592)
                                                                              ------------     -----------

       Pro forma net loss                                                     $  (971,530)     $ (108,227)
                                                                              ============     ===========
       Basic and diluted net loss per share
                As reported                                                   $      (.04)      $    (.02)
                Pro forma                                                     $      (.04)      $    (.02)

</TABLE>

Equity issuances to non-employees in exchange for services are charged to
operations over the period the services are provided using the fair value method
on the measurement date.


                                       8

<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

     Summary of recent accounting pronouncements

     In November 2004, the Financial  Accounting Standards Board ("FASB") issued
     SFAS No. 151,  "Inventory  Costs,  an amendment  of ARB No. 43,  Chapter 4"
     ("SFAS 151").  SFAS 151 clarifies  that  abnormal  inventory  costs such as
     costs of idle  facilities,  excess freight and handling  costs,  and wasted
     materials (spoilage) are required to be recognized as current period costs.
     The Company's adopted SFAS 151 effective July 1, 2005 and it did not have a
     material impact on the Company's financial position, results of operations,
     or cash flows.

     In December 2004, the FASB  finalized SFAS No. 123R  "Share-Based  Payment"
     ("SFAS 123R"), amending SFAS No. 123. SFAS 123R will require the Company to
     expense stock options based on grant date fair value. Further, the adoption
     of SFAS 123R will require  additional  accounting related to the income tax
     effects and additional disclosure regarding the cash flow effects resulting
     from  share-based  payment  arrangements.  The  effect of  expensing  stock
     options on the results of operations  using a Black-Scholes  option-pricing
     model is presented in Note 2. The adoption of SFAS 123R will have no effect
     on the Company's cash flows or financial position, but will have an adverse
     impact on the Company's  financial position and results of operations.  The
     provisions of SFAS 123R are effective  for the Company  commencing  July 1,
     2006.

     In December 2004,  the FASB issued SFAS No. 153,  "Exchanges of Nonmonetary
     Assets - an amendment of APB Opinion No. 29" ("SFAS 153").  This  statement
     amends APB  Opinion  No. 29 to  eliminate  the  exception  for  nonmonetary
     exchanges  of  similar  productive  assets and  replaces  it with a general
     exception for exchanges of nonmonetary  assets that do not have  commercial
     substance.  A nonmonetary  exchange has commercial  substance if the future
     cash flows of the entity are expected to change  significantly  as a result
     of the exchange. The Company adopted SFAS 153 effective July 1, 2005 and it
     did not have a  material  impact on the  Company's  consolidated  financial
     position, results of operations or cash flows.

     Accounts payable and accrued expenses

     Accounts payable and accrued expenses consist of the following:

<TABLE>
<CAPTION>

                                                                            September 30,    June 30,
                                                                                2005           2005
                                                                            -------------    ---------
<S>                                                                        <C>              <C>
              Trade accounts payable and other accrued operating
                 expenses                                                  $ 3,317,900      $ 4,463,057
              Sales, excise and universal services charges payable           1,277,358        1,190,545
              Dividends and registration penalties payable                     393,151          520,068
              Compensated absences                                             372,862          361,506
              Other liabilities                                                106,702          143,907
              Bonuses and commissions payable                                   90,972          112,556
              Accrued taxes                                                      4,301            8,379
              Accrued losses of discontinued operations                           -               8,677
                                                                           -----------      -----------
                                                                           $ 5,563,246      $ 6,808,695
                                                                           ===========      ===========
</TABLE>
                                       9

<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004


4    Acquisition of customer list

     On October 1, 2004,  the Company  acquired a customer  list from  Education
     Communications  Consortia,  Inc.  ("ECCI")  for a total  purchase  price of
     $1,444,277,  including $144,277 in acquisition costs, of which $500,000 was
     paid in cash on the date of closing.  The remaining $800,000 was originally
     recorded  as a note  payable due in four  annual  installments  of $200,000
     commencing November 30, 2005, bearing interest of 4% per annum. The payment
     of each of the four annual installments is contingent upon achieving annual
     revenue of $2 million for each twelve month  period  ending  September  30,
     2005  to  2008.  The  purchase  price,   including  the  entire  contingent
     liability,  was  originally  recorded  as an  intangible  asset,  as it was
     initially  believed that payment was assured beyond a reasonable doubt, and
     was amortized over its expected useful life of 5 years.

     The  Company  has  determined  that gross  revenues  derived  from the ECCI
     customer list did not reach the annual revenue of $2 million as required by
     the purchase  agreement and also no longer believes that the balance of the
     payments are assured beyond a reasonable  doubt.  Accordingly,  the Company
     has recorded a decrease in the customer  list in the amount of $800,000 and
     a  corresponding  decrease in notes payable.  As a result,  the Company has
     reversed  previously  recorded  amortization  expense and accrued  interest
     totaling  $144,002,  which is reflected as other income in the accompanying
     condensed consolidated  statements of operations.  The adjustment will also
     have the effect of reducing  future  amortization  expense by $160,000  per
     annum.  The Company will record the remaining  $600,000 of the  performance
     payment when it becomes probable that the payments will become due.

     In April 2005,  the  Company  acquired a customer  list and entered  into a
     non-compete for $200,000 and $200,00 respectively. The customer list has an
     estimated  useful of 5 years and the non- compete will be amortized over 27
     months.  The Company made a cash payment of $150,000 with three  additional
     annual  payments  commencing  July 31,  2005 in the  amounts  of  $100,000,
     $100,000 and $50,000.  As of September 30, 2005, the Company made the first
     annual payment in the amount of $100,000.

5    Related party transactions

     During  the three  months  ended  September  30,  2005,  the  Company  paid
     approximately  $  33,000  for  legal  services  to law  firms  in  which an
     employee/stockholder is affiliated.

     The Company  received a non-interest  bearing advance from a shareholder in
     the amount of $210,000 during the quarter ended September 30, 2005, with no
     scheduled repayment terms.

6    Shareholders' equity

     Preferred stock

     On July 1, 2005, stock dividends totaling 22,162 shares were paid in Series
     A  Preferred  Stock to  Series A  Preferred  Stock  investors  representing
     accrued dividends through June 30, 2005.

                                       10

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004


     For the three months ended  September 30, 2005,  investors  converted 1,707
     shares of Series C Preferred Stock resulting in issuances of 102,420 shares
     of common stock.

     Dividends  on the Series A, B and C Preferred  Stock  accrue at the rate of
     12%, 12% and 9% per annum, respectively. Aggregate dividends accrued during
     the quarter ended September 30, 2005 was $203,778.


7    Segment information

     The Company reports  segments in accordance with SFAS No. 131  "Disclosures
     about Segments of an Enterprise and Related  Information" ("SFAS 131"). The
     Company and its subsidiaries  operate in three separate business  segments:
     Voice Services, Managed Service Charges and Equipment and Consulting.

     The Voice  Services  segment,  which  operates  worldwide,  provides  voice
     services including switched and dedicated outbound,  switched and dedicated
     toll-free inbound,  dedicated T1 access loops, calling and debit cards, and
     conference  calling.  The Managed Services Charges segment,  which operates
     worldwide,  provides  network  and  security  technology  and a variety  of
     recurring  managed data  services.  The Equipment and  Consulting  segment,
     which operates  worldwide,  delivers  networking and security equipment and
     software as well as provides  consulting services on an as needed basis for
     certain existing and/or future customers.


                                       11
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004


<TABLE>
<CAPTION>
                                                                                    For the three months
                                                                                     ended September 30,
                                                                                 -------------------------
                                                                                    2005          2004
                                                                                 -----------   -----------
<S>                                                                            <C>              <C>
         Revenue
              Voice Services                                                   $  3,829,418     $  5,017,381
              Managed Service Charges                                             2,205,656        1,871,433
              Equipment and Consulting                                                1,126          186,955
                                                                               ------------     ------------
                 Total                                                            6,036,200        7,075,769
                                                                               ------------     ------------
         Cost of revenue
              Voice Services                                                      2,377,447        3,137,097
              Managed Service Charges                                             1,452,720        1,074,256
              Equipment and Consulting                                                -              131,108
                                                                               ------------     ------------
                 Total                                                            3,830,167        4,342,461
                                                                               ------------     ------------
         Operating (loss) income
              Voice Services                                                       (650,144)         114,513
              Managed Service Charges                                              (381,831)          21,179
              Equipment and Consulting                                                 -            (127,331)
                                                                               ------------     ------------
                 Total                                                          $(1,031,975)         $ 8,361
                                                                               ============     ============

</TABLE>

     The Company is not  disclosing  total  assets for each  reportable  segment
     because  the chief  operating  decision  maker  reviews  total  assets on a
     consolidated basis.

     The Company had one major customer which  accounted for  approximately  18%
     and 27% of  consolidated  revenue for the three months ended  September 30,
     2005 and September 30, 2004, respectively. The agreement with this customer
     terminated on June 30, 2005.

     The Company has two  agreements  with Sprint  Communications  Company  L.P.
     ("Sprint")  to  supply  telecommunication  services  to  the  Company.  The
     agreement  for switched  services has a term of 28 months and the agreement
     for the data and private line services has a term of 24 months. The Company
     made purchases from Sprint that aggregated approximately 58% and 68% of the
     total  cost of  revenue  for the  quarters  ended  September  30,  2005 and
     September 30, 2004, respectively. The Company currently has a commitment to
     purchase a minimum of $650,000 of  telecommunication  services monthly from
     Sprint, which expires October 2008.

8   Income taxes

     The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                       For the three months ended
                                                             September 30,
                                                       --------------------------
                                                           2005         2004
                                                       ------------  ------------
<S>                                                    <C>           <C>
              Current - Federal and States             $    5,314    $    -
              Deferred - Federal                             -            -
              Deferred - States                              -            -
                                                       ----------    -----------
              Provision for income taxes               $    5,314    $    -
                                                       ===========   ===========
</TABLE>

                                       12
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004


     Due to the history of net  operating  losses for income tax  purposes,  the
     Company has provided for full  valuation  allowances  on the  Company's net
     deferred  tax asset due to it being more likely than not that the  deferred
     tax asset will not be utilized.

     A portion or all of the Company's net tax operating loss  carryforwards may
     be subject to Section 382 of the Internal  Revenue Code and  therefore  not
     available to offset future income tax liabilities.  The carryforward losses
     expire in the years 2014 through 2025 and have not been  recognized  in the
     accompanying  consolidated  financial statements as a result of a valuation
     allowance against the deferred tax asset.

9    Nasdaq

     In March 2005,  Nasdaq  informed the Company that its common stock would be
     de-listed if it did not comply with Nasdaq's minimum bid price  requirement
     by  September  27, 2005.  In order to comply,  the closing bid price of its
     common  stock  had to equal or  exceed  $1.00  per  share  for at least ten
     consecutive  trading  days prior to that date.  While the  Company  did not
     comply with this  requirement by that date,  the Company  continued to meet
     the other continued listing criteria for the Nadaq SmallCap Market and have
     been granted by Nasdaq an additional six-month period, until March 2006, to
     achieve the minimum bid price requirement.

10   Commitments and contingencies

     Leases

     On August 1, 2005 the Company  consolidated their office space in Tampa and
     successfully  renegotiated  their  lease.  The term of the  lease  has been
     extended by five years,  commencing on February 1, 2006 and  terminating on
     January 31, 2011.

     At  September  30,  2005,  the  approximate  future  minimum  annual  lease
     payments, are summarized as follows:
<TABLE>
<CAPTION>
                  Fiscal year ending June 30,

<S>                    <C>                 <C>
                       2006                $        262,937
                       2007                         346,245
                       2008                         360,141
                       2009                         374,037
                       2010                         377,933
                       Thereafter                         0
                                              -------------
                                              $   1,721,293
                                              =============
</TABLE>
     Management's Plan

     Historically,   the  Company  has  experienced  significant  recurring  net
     operating  losses as well as  negative  cash  flows  from  operations.  the
     Company's  main source of liquidity  has been equity  financing,  which was
     used to fund  historical  losses from  operating  activities.  Based on the
     Company's current cash position of approximately $2.1 million,  significant
     cost  cutting  initiatives,  including  vendor  negotiations  with  Sprint,
     BellSouth,   Vartec  (carriers),   DA  Colonial  (Tampa  facility),   staff
     reductions  and  indefinite  executive  pay  deferrals,  along with current
     forecasts  based on sales growth,  the Company  believes it has  sufficient
     cash to meet its funding needs for at least the next 12 months

                                       13
<PAGE>

ITEM 2 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


     Forward-Looking Statements

     This  Form  10-QSB  includes,   without   limitation,   certain  statements
     containing the words "believes." "anticipates", "estimates", "expects", and
     words of a similar nature, constitute  "forward-looking  statements" within
     the meaning of the Private  Securities  Litigation Reform Act of 1995. This
     Act provides a "safe  harbor" for  forward-looking  statements to encourage
     companies to provide  prospective  information  about themselves so long as
     they identify these  statements as forward looking and provide  meaningful,
     cautionary statements identifying important factors that could cause actual
     results to differ from the projected  results.  All  statements  other than
     statements of historical fact made in this Form 10-QSB are forward-looking.
     In  particular,  the statements  herein  regarding  industry  prospects and
     future  results of  operations or financial  position are forward-  looking
     statements.   Forward-looking   statements  reflect   management's  current
     expectations and are inherently uncertain. The Company's actual results may
     differ significantly from management's  expectations based on certain risks
     and  uncertainties,  including the risk factors referenced in the Company's
     filings with the Securities and Exchange Commission.  Readers are cautioned
     not to place  undue  reliance  on  these  forward-looking  statements.  The
     Company does not undertake any obligation to release publicly any revisions
     to  these   forward-looking   statements   to  reflect   future  events  or
     circumstances or to reflect the occurrence of unanticipated events.

     Overview

     NetWolves   Corporation   ("NetWolves"  or  the  "Company")  is  a  network
     continuity  and  security  provider  that offers  high-performance  network
     security solutions coupled with robust network management and communication
     services.  The Company  designs,  develops,  assembles  and sells  Internet
     infrastructure  security  platforms,  coupled with network based management
     services,  designed to significantly  reduce the up-front and ongoing costs
     associated with small,  medium and remote offices' global Internet  access.
     NetWolves' patent pending system technology enables organizations to obtain
     their short, middle and long term IT and e-business initiatives through the
     deployment of our plug 'n' play perimeter office security platform, coupled
     with our secure  remote  monitoring  and  management  ("SRM2  TM")  system.
     Additionally, NetWolves' advanced, centralized, reporting module offers the
     ability  for  corporate   executives  to  view,  via  the  Internet,   both
     statistical and performance based metrics for their global network.

     We operate in three segments.  The Voice Services  segment,  which operates
     worldwide,   provides  voice  services  including  switched  and  dedicated
     outbound,  switched and dedicated  toll-free  inbound,  dedicated T1 access
     loops,  calling  and debit  cards,  and  conference  calling.  The  Managed
     Services  Charges  ("MSC" or  Managed  Services)  segment,  which  operates
     worldwide,  provides  network  and  security  technology  and a variety  of
     recurring  managed data  services.  The Equipment and  Consulting  segment,
     which operates  worldwide,  delivers  networking and security equipment and
     software as well as provides  consulting  services on an as needs basis for
     certain existing or potential customers.

     We have created an offering of managed  products and services that meet the
     necessary requirements for organizations to move off expensive private data
     networks  while  attaining  the  benefits  and  flexibility  of public data
     network.  Additionally, our proprietary technology provides a high level of
     security  through its  integrated  approach to  management,  monitoring and
     interoperability   for  small  and  medium  remote   enterprise   locations
     (locations  with less than 500 network users).  We sell a Managed  Services
     Offering (MSO) that provides  complete  system  solutions to  organizations
     needing cost-effective network security features (firewall, virtual private
     networking,  routing, intrusion detection,  content filtering, email, etc.)
     delivered on low-cost  commodity  hardware with Internet-  based  expansion
     capabilities. Our patent-pending system technology enables organizations to
     achieve corporate  Information  technology (IT) and e-business  initiatives
     through the  deployment of easily  installable  perimeter  office  security

                                       14
<PAGE>


     platforms,  coupled with our secure remote monitoring and management ("SRM2
     TM")  system.  SRM2 TM provides  centralized  management  capabilities  for
     hundreds  or  thousands  of remote  locations  without  risking  networking
     integrity because it does not require an administrative  port on the remote
     device,   which  is  common   network   vulnerability.   We  also   provide
     cost-effective,  value-added  expansion  technologies  such as  Intelligent
     Failover, which means that if one circuit for gaining access to information
     fails,  the system would  automatically  switch to an  alternative  circuit
     based upon customer defined parameters.

     Critical accounting policies

     The  Company's  discussion  and  analysis of its  financial  condition  and
     results of operations is based upon the consolidated  financial statements,
     which  have  been  prepared  in  accordance  with U.S.  generally  accepted
     accounting   principles.   The  preparation  of  financial   statements  in
     conformity with U.S.  generally  accepted  accounting  principles  requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities,  the disclosure of contingent assets and
     liabilities  as of the date of the financial  statements,  and the reported
     amounts of revenue and  expenses  during the periods.  Estimates  have been
     made by management in several areas, including, but not limited to, revenue
     recognition, allowance for doubtful accounts, the realizability of deferred
     tax assets,  stock based  compensation  and goodwill  and other  intangible
     assets. We base our estimates on historical experience and on various other
     assumptions  that we  believe  to be  reasonable  under the  circumstances.
     Actual results may differ  materially  from these estimates under different
     assumptions or conditions.

     We believe  the  following  critical  accounting  policies  affect our more
     significant  judgments  and  estimates  used  in  the  preparation  of  our
     consolidated financial statements.

     Revenue recognition

     We record  revenue in accordance  with Statement of Position 97-2 "Software
     Revenue  Recognition"  ("SOP  97-2"),  issued by the American  Institute of
     Certified  Public  Accountants  (as modified by Statement of Position 98-9)
     and SEC Staff  Accounting  Bulletin 104 "Revenue  Recognition"  ("SAB 104")
     regarding revenue  recognition in financial  statements.  SOP 97-2 provides
     additional guidance with respect to multiple element arrangements; returns,
     exchanges,  and  platform  transfer  rights,  resellers,  services,  funded
     software development arrangements, and contract accounting.

     Revenues  generated  from the resale of voice  services are  recognized  as
     services are provided and are included within Voice Services revenue in the
     accompanying condensed consolidated statements of operations.

     Revenues  generated from the sale of recurring  services within the Managed
     Service  charged  ("MSC")  segment are recognized as services are provided.
     Maintenance or monitoring  revenue that is bundled with an initial licenses
     fee  is  deferred  and   recognized   ratably  within  the  period  in  the
     accompanying consolidated statement of operations.

     Revenue from the sale of hardware,  where our software is not essential, is
     recognized within Equipment and Consulting  revenue at the time of delivery
     of  hardware  products  to  the  customer,   when  the  fee  is  fixed  and
     determinable,  collectibility  is  probable  and a contract  signed by both
     parties  has been  obtained.  Maintenance  or  monitoring  revenue  that is
     bundled  with an initial  license fee is deferred  and  recognized  ratably
     within  MSC  revenue  over the  maintenance  or  monitoring  period  in the
     accompanying  condensed  consolidated  statements  of  operations.  Amounts
     deferred  for  maintenance  or  monitoring  are based on the fair  value of
     equivalent  maintenance  or monitoring  services sold  separately.  We have
     established  vendor specific objective evidence ("VSOE") on all undelivered
     elements of our  software  arrangements,  which  consists  of  maintenance,
     monitoring  and, at times,  training  and  consulting.  We use the residual
     method for delivered  elements.  Our consulting  projects are short-term in
     nature and are recorded as revenue in Equipment and Consulting  revenues in
     the  accompanying  condensed  consolidated  statements of  operations  when
     services are provided.

                                       15
<PAGE>

     Revenue for  shipping  and  handling  are  included  within  Equipment  and
     Consulting revenue and the related costs are included in cost of revenue in
     the accompanying condensed consolidated statements of operations.

     Allowance for doubtful accounts

     The Company provides  allowances for doubtful accounts for estimated losses
     from the  inability of customers to satisfy  their  accounts as  originally
     contemplated at the time of sale and charges actual losses to the allowance
     when  incurred.  The  calculation  for  these  allowances  is  based on the
     detailed  review  of  certain  individual  customer  accounts,   historical
     satisfaction  rates and the Company's  estimation  of the overall  economic
     conditions   affecting  the  Company's  customer  base.  If  the  financial
     condition of the Company's  customers were to deteriorate,  resulting in an
     impairment of their ability to make payments,  additional allowances may be
     required.

     Income taxes

     As part of the process of preparing our consolidated  financial  statements
     we are required to prepare our income taxes in each of the jurisdictions in
     which we operate.  This process involves  estimating our actual current tax
     exposure  together with  assessing  temporary  differences  resulting  from
     differing  treatment  of  items  for tax  and  accounting  purposes.  These
     differences  result in  deferred  tax  assets  and  liabilities,  which are
     included  within our condensed  consolidated  balance  sheet.  We must then
     assess the  likelihood  that our deferred tax assets will be recovered from
     future  taxable  income and to the extent we believe  that  recovery is not
     likely, we must establish a valuation allowance. We have fully reserved our
     deferred  tax  assets  at  September   30,  2005  and  June  30,  2005.  If
     expectations  for  future  performance,  the  timing  of  deductibility  of
     expenses,  or tax statutes change in the future,  we could decide to adjust
     the valuation allowance, which may increase or decrease income tax expense.

     Stock-based compensation

     The  Company  applies  the  intrinsic   value-based  method  of  accounting
     prescribed  by  Accounting   Principles   Board  ("APB")  Opinion  No.  25,
     "Accounting for Stock Issued to Employees", and related interpretations, to
     account for stock-based  employee  compensation plans and reports pro forma
     disclosures  by estimating the fair value of options issued and the related
     expense in accordance with SFAS 123. Under this method,  compensation  cost
     is  recognized  for  awards of shares of common  stock or stock  options to
     directors,  officers and employees of the Company only if the quoted market
     price of the stock at the grant date (or other  measurement date, if later)
     is greater than the amount the grantee must pay to acquire the stock.

     Goodwill and other intangible assets

     We evaluate the recoverability of goodwill and other intangibles of each of
     our reporting  units as required under SFAS 142 by comparing the fair value
     of each  reporting  unit with its  carrying  value.  The fair values of our
     reporting  units are determined  using a combination  of a discounted  cash
     flow  analysis and market  multiples  based upon  historical  and projected
     financial  information.  We apply  our best  judgment  when  assessing  the
     reasonableness  of the  financial  projections  used to determine  the fair
     value of each reporting unit.

     Results of Operations

     We currently operate in three business segments, the Voice Services segment
     ("Voice  Services"),  the MSC  segment  and the  Equipment  and  Consulting
     segment ("Equipment and Consulting").

                                       16
<PAGE>

     Three months ended September 30, 2005 and 2004

     Revenue

     Revenue  decreased to $6.0 million for the three months ended September 30,
     2005,  compared to $7.1 million for the same period in the prior year.  The
     decrease  in  revenue is  primarily  attributable  to a  decrease  in Voice
     Services segment and the Equipment and Consulting  segment of approximately
     $1.2 million and $0.2 million respectively. This was partially offset by an
     increase in revenue in the MSC segment of approximately  $0.3 million.  The
     decrease in the Voice Services  segment was attributable to the loss of two
     customers  resulting in attrition of approximately  $1.4 million  partially
     offset by growth from new customers and purchased  customer  lists totaling
     approximately  $0.2 million.  The decrease in the Equipment and  Consulting
     segment of approximately $0.2 is the result of limited product sales as the
     Company has elected to focus  primarily on MSC growth.  The increase in the
     MSC  segment  is  primarily  attributable  to new  customer  growth of $0.5
     million and purchased  customer lists of $0.1 million,  partially offset by
     customer   attrition  of  $0.2  million.   As  of  September  2005,   Swift
     Transportation  accounted for 18% of overall revenues as compared to 27% in
     the same  period in the prior  year.  The  contract  with Swift  terminated
     effective June 30, 2005.

     Cost of revenue and gross profit

     Cost of  revenue  decreased  to $3.8  million  for the three  months  ended
     September  30,  2005  compared  to $4.3  million for the same period in the
     prior  year.  Cost of revenue  within  the MSC  segment  increased  to $1.5
     million or 34%  profit  margin,  compared  to $1.1  million,  or 43% profit
     margin for the same period in the prior year.  The decreased  profit margin
     is primarily attributable to non-recurring charges in the current period as
     well as  credits  received  from  vendors in the prior  period.  Based upon
     current forecast and continued growth in the MSC segment, the Company would
     expect to  achieve  gross  margins  of  approximately  37% to 40% in future
     periods.  Cost of revenue within the Voice Services segment  decreased to $
     2.4 million or 38% profit  margin  compared  to $3.1  million or 37% profit
     margin for the same period in the prior year. This increased  profit margin
     is primarily  attributable to our negotiation  with current and new vendors
     to lower voice rates.  Cost of revenue  within the Equipment and Consulting
     segment had a non-material impact on gross profit.

     Overall  gross profit was 36.5% for the three months  ended  September  30,
     2005, compared to 38.6% for the same period in the prior year. The decrease
     in profit margin of our services and products are  attributable to one time
     charges and the cost associated with the loss of Swift Transportation.

     General and administrative

     General and administrative  expenses were $1.7 million and $1.6 million for
     the three  months  ended  September  30,  2005 and 2004  respectively.  The
     increase in general and administrative  expenses were due to an increase in
     accounting  fees of $0.08  million,  professional  fees of  $0.05  million,
     amortization  expense  relating  to  the  customer  list  and  non  compete
     agreements of $0.01 million and additional  supplies and equipment of $0.03
     million.  This  increase  was offset by a  decrease  in rent as a result of
     renegotiating  our lease in the amount of approximately  $0.3 million and a
     decrease in  consulting  expense of  approximately  $0.08  million from the
     prior period.

     Engineering and development

     Engineering  and  development  expenses did not  experience  a  significant
     change for the three months ended September 30, 2005,  compared to the same
     period in the prior year.

     Sales and marketing

     Sales and marketing expenses increased to $1.3 million for the three months
     ended  September 30, 2005,  compared to $0.9 million for the same period in
     the prior year. The increase in sales and marketing  expenses was primarily

                                       17
<PAGE>

     the  result  of an  increase  in the  number  of sales  and  sales  support
     personnel  and  associated  travel and  entertainment,  which  resulted  in
     increased  salary of $0.3 million as well as  compensation  for consultants
     which increased $0.04 million compared to the same period in the prior year
     and an  increase  in  marketing  expenses  associated  with  the  purchased
     customer list of  approximately  $0.1  million.  We have made a significant
     investment in the sales force,  which we anticipate will continue to have a
     positive impact in future periods.

     Other income (expenses)

     Other  income  (expenses)  increased  to $0.2  million for the three months
     ended  September  30, 2005 compared to $.006 million for the same period in
     the prior year. The increase was primarily  attributable to $0.1 million of
     gain on the reduction in short and long term notes payable.

     Liquidity and Capital Resources

     Our operating activities used cash of approximately $1.3 million during the
     three months ended  September 30, 2005, as compared to using  approximately
     $1.3 million for the same period in the prior year. Cash used in operations
     for the three months ended September 30, 2005 was primarily attributable to
     a net loss of approximately $0.9 million, a decrease in accounts payable of
     approximately $1.1 million, a decrease in deferred revenue of approximately
     $0.2  million and other income of  approximately  $0.1  million,  partially
     offset by  non-cash  charges  for  depreciation  and  amortization,  equity
     compensation and inventory write off of approximately  $0.2 million,  $0.02
     million and $0.1 million, respectively.  Additionally,  accounts receivable
     and  prepaid   expenses   decreased  by  $0.6  million  and  $0.1  million,
     respectively.  Cash used in operations for the three months ended September
     30, 2004 was primarily  attributable to an increase in accounts  receivable
     of  approximately  $1.7 million,  partially  offset by non-cash charges for
     depreciation and amortization,  equity compensation and bad debt expense of
     approximately  $0.2 million,  $0.1 million and $0.1 million,  respectively,
     and an increase in deferred revenue of approximately $0.3 million.

     Our  investing  activities  used  approximately  $0.1 million for the three
     months ended  September  30, 2005 as compared to using $0.02 million in the
     same  period  in the prior  year.  Cash used in  investing  activities  was
     primarily  attributable to payments on customers lists previously  acquired
     in the amount of $100,000 and  purchases  of property and  equipment in the
     amount of approximately  $0.02 million.  Cash used by investing  activities
     for the three months ended  September 30, 2004, was primarily  attributable
     to purchases of equipment.

     Our financing activities provided  approximately $0.2 million for the three
     months ended September 30, 2005. Cash provided by financing  activities was
     primarily  attributable  to an advance  from a  shareholder.  There were no
     financing activities for the same period in the prior year.

     Summary

     Historically,   the  Company  has  experienced  significant  recurring  net
     operating  losses as well as  negative  cash  flows  from  operations.  the
     Company's  main source of liquidity  has been equity  financing,  which was
     used to fund  historical  losses from  operating  activities.  Based on the
     Company's current cash position of approximately $2.1 million,  significant
     cost  cutting  initiatives,  including  vendor  negotiations  with  Sprint,
     BellSouth,   Vartec  (carriers),   DA  Colonial  (Tampa  facility),   staff
     reductions  and  indefinite  executive  pay  deferrals,  along with current
     forecasts  based on sales growth,  the Company  believes it has  sufficient
     cash to meet its funding needs for at least the next 12 months


                                       18
<PAGE>

ITEM 3 - CONTROLS AND PROCEDURES

     CEO and CFO Certifications
     --------------------------
     As of the end of the period covered by this quarterly  report,  the Company
     carried  out,  under  the  supervision  and with the  participation  of the
     Company's  management,  including the Company's Chief Executive Officer and
     Chief Financial Officer ("the Certifying  Officers"),  an evaluation of the
     effectiveness   of  its   "disclosure   Controls   and   procedures".   The
     certifications  of the CEO and the CFO  required  by  Rules  13a-14(a)  and
     15d-14(c)  of  the  Securities  Exchange  Act  of  1934,  as  amended  (the
     "Certifications") are filed as exhibits to this report. This section of the
     report contains the information  concerning the evaluation of the Company's
     disclosure  controls  and  procedures  (as  defined in  Exchange  Act Rules
     13a-15(e) and  15d-15(e))  ("Disclosure  Controls") and changes to internal
     control  over  financial  reporting  (as  defined  in  Exchange  Act  Rules
     13a-15(f)  and  15d-  15(f))  ("Internal  Controls")  referred  to  in  the
     Certifications  and this information should be read in conjunction with the
     Certifications for a more complete understanding of the topics presented.

     Evaluation of Disclosure Controls
     ---------------------------------
     The Company maintains controls and procedures designed to ensure that it is
     able to collect the  information  that is required to be  disclosed  in the
     reports it files with the SEC, and to process,  summarize and disclose this
     information  within the time period  specified in the rules of the SEC. The
     Company's Chief Executive and Chief Financial  Officers are responsible for
     establishing,  maintaining  and enhancing these  procedures.  They are also
     responsible,  as  required  by the rules  established  by the SEC,  for the
     evaluation of the effectiveness of these procedures.

     Based on our management's  evaluation (with  participation of our principal
     executive officer and principal  financial  officer),  as of the end of the
     period  covered  by  this  report,  our  principal  executive  officer  and
     principal financial officer have concluded that its disclosure controls and
     procedures were effective.


     Changes in Internal Controls
     ----------------------------
     The Company  maintains a system of  internal  controls  designed to provide
     reasonable  assurance  that  transactions  are executed in accordance  with
     management's general or specific  authorization;  transactions are recorded
     as necessary to permit  preparation  of financial  statements in conformity
     with  Generally   Accepted   Accounting   Principles  (GAAP)  and  maintain
     accountability for assets. Access to assets is permitted only in accordance
     with management's general or specific authorization. There was no change in
     our Internal Controls during Fiscal 2005 that has materially  affected,  or
     is reasonably likely to materially affect, our Internal Controls.

     During the prior reporting period ending June 30, 2005 management concluded
     that a deficiency was identified which  constituted a "material  weakness".
     Accordingly,  management  implemented  changes to remedy the  circumstances
     which created the deficiency and has concluded that the condition no longer
     exists.  The additional staff has been added and trained.


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<PAGE>
PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        None

ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
        SECURITIES

        None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.

ITEM 5. OTHER INFORMATION

        Not applicable.


ITEM 6. EXHIBITS


31  CEO and CFO certifications pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.

32  CEO and CFO certifications pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.




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<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                BY:     NETWOLVES CORPORATION

                                        /s/Walter M. Groteke
                                        -----------------------------------
                                        Walter M. Groteke
                                        Chairman of the Board and President


                                        /s/Peter C. Castle
                                        -----------------------------------
                                        Peter C. Castle
                                        Secretary and Treasurer
                                        Principal Financial Officer and
                                        Principal Accounting Officer




Date: November 21, 2005

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