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


                                  FORM 10-Q/A
                                AMENDMENT NO. 2



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

                For the quarterly period ended September 30, 1999
                                               ------------------
                        Commission file number 000-25831

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

          New York                                    11-3439392
(State  or other  jurisdiction  of                (I.R.S.  Employer
  incorporation  or organization)                 Identification No.)


                 200 Broadhollow Road, Melville, New York 11747
                    (Address of principal executive offices)

                                 (516) 393-5016
              (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 the number of shares  outstanding of each of issuer's classes of common
stock as of the latest practicable date:
<TABLE>
<CAPTION>
                                   NUMBER OF SHARES OUTSTANDING ON
        TITLE OF CLASS                   November 19, 1999
        --------------             ---------------------------------

<S>                                         <C>
Common Stock, $.0033 par value              6,346,370
</TABLE>

Registrant became subject to the filing  requirements of the Securities Exchange
Act of 1934 on April 20, 1999,  when it filed a  Registration  Statement on Form
10.

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES
                         FORM 10-Q - SEPTEMBER 30, 1999
                                      INDEX

PART I - FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
 September 30, 1999 and June 30, 1999                                    1

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
 For the three months ended September 30, 1999 and September 30, 1998    2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the three months ended September 30, 1999 and September 30, 1998    3

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                     4 - 10

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                            11 - 15

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK      15


PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS                                              16

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS                      16

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                                16

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS            16

ITEM 5 - OTHER INFORMATION                                              16

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                               16

SIGNATURES                                                              17

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                   September 30,      June 30,
                                                      1999             1999
                                                   -------------      --------
                                                   (Unaudited)

<S>                                                 <C>             <C>
ASSETS
Current assets
 Cash and cash equivalents                          $5,376,269      $5,585,981
 Marketable securities, available for sale,
   at market value                                     527,500         606,000
 Accounts receivable, net of allowance of $40,000       87,429          76,907
 Inventories                                            64,790         118,354
 Prepaid expenses and other current assets             171,760         153,099
                                                   -----------     -----------
   Total current assets                              6,227,748       6,540,341
                                                   -----------     -----------
Property and equipment, net                            278,560         224,691
Intangible assets, net                               5,522,111       6,024,121
Other assets                                            26,181          22,781
                                                   -----------     -----------
                                                   $12,054,600     $12,811,934
                                                   ===========     ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
 Accounts payable and accrued expenses             $   530,987     $   453,336
 Deferred compensation                                 100,000         100,000
 Loans and advances from TSG officer                    37,203         144,348
 Current maturities of long-term debt                   44,616          43,411
                                                   -----------     -----------
  Total current liabilities                            712,806         741,095

Long term debt, net of current maturities              254,921         266,537
                                                   -----------     -----------
  Total liabilities                                    967,727       1,007,632
                                                   -----------     -----------
Minority interest                                      692,072         704,500

Commitment and contingencies

Shareholders' equity
  Common stock, $.0033 par value; 10,000,000 shares
    authorized; issued and outstanding;
    6,163,870  on September 30, 1999
    and 6,063,870  on June 30, 1999                     20,341          20,011
        Additional paid-in capital                  22,965,044      17,726,374
        Unamortized value of warrant grants         (2,290,417)            -
        Accumulated deficit                        (10,597,512)     (7,022,428)
        Accumulated other comprehensive income         297,345         375,845
                                                   -----------     -----------
          Total shareholders' equity                10,394,801      11,099,802
                                                   -----------     -----------
                                                   $12,054,600     $12,811,934
                                                   ===========     ===========
<FN>
            See notes to condensed consolidated financial statements
</FN>
</TABLE>

                                       1
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLDIATED STATEMENTS OF OPERATIONS
                        AND COMPREHENSIVE INCOME (LOSS)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                  For the three months ended
                                                        September 30,
                                                  --------------------------
                                                     1999            1998
                                                     ----            ----
<S>                                               <C>             <C>
Sales                                             $   137,951     $   44,753
Cost of sales                                          96,169         16,299
                                                  -----------     ----------
Gross profit                                           41,782         28,454
Operating expenses                                -----------     ----------
  General and administrative                        2,868,808        835,699
  Research and development                            184,718         13,104
  Sales and marketing                                 606,007      1,001,156
                                                  -----------     ----------
                                                    3,659,533      1,849,959
                                                  -----------     ----------
Loss before other income (expense)                 (3,617,751)    (1,821,505)

Other income (expense)
  Investment income                                    45,730         15,716
  Minority interest                                     7,428           -
  Interest expense                                    (10,491)          -
                                                  -----------     ----------
Net loss                                           (3,575,084)    (1,805,789)

Other comprehensive income (loss):
  Marketable securities valuation adjustment           78,500        (41,186)
                                                  -----------     ----------
Comprehensive income (loss)                       $(3,496,584)   $(1,846,975)
                                                  ===========     ==========
Basic and diluted net loss per share              $      (.59)   $      (.42)
                                                  ===========     ==========
Weighted average common
  shares outstanding                                6,068,218      4,313,870
                                                  ===========     ==========
</TABLE>

            See notes to condensed consolidated financial statements

                                        2
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                  For the three months ended
                                                        September 30,
                                                  --------------------------
                                                     1999            1998
                                                     ----            ----
<S>                                               <C>             <C>

INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS

Cash flows from operating activities
   Net loss                                      $(3,575,084)    $(1,805,789)
   Adjustments to reconcile net loss to net
     cash used in operating activities
   Depreciation and amortization                     516,719           3,541
   Noncash charge to operations with respect to
     common stock and warrants issued for
     services                                      1,553,583       1,246,375
   Minority interest                                 (12,428)           -

Changes in operating assets and liabilities
   Accounts receivable                               (10,522)        (44,809)
   Inventories                                        53,564        (127,931)
   Other assets                                          -               993
   Prepaid expenses and other current assets         (73,661)           -
   Accounts payable and accrued expenses              77,651          78,900
                                                  ----------      ----------
     Net cash used in operating activities        (1,470,178)       (648,720)
                                                  ----------      ----------

Cash flows from investing activities
  Purchase of marketable securities                    -              (3,034)
  Proceeds from assets held for sale, net              -              40,764
  Issuance of note receivable                        (50,000)           -
  Purchase of property and equipment                 (68,578)        (34,753)
  Payments of security deposits                       (3,400)         (4,211)
                                                  ----------      ----------
     Net cash used in investing activities          (121,978)         (1,234)
                                                  ----------      ----------
Cash flows from financing activities
  Repayment of advances from TSG officer            (107,145)           -
  Repayment of long term debt                        (10,411)           -
  Cash proceeds from private sale of common stock  1,500,000            -
                                                  ----------      ----------
    Net cash provided by financing activities      1,382,444            -
                                                  ----------      ----------
Net decrease in cash and cash equivalents           (209,712)       (649,954)

Cash and cash equivalents, beginning of period     5,585,981       1,118,416
                                                  ----------      ----------
Cash and cash equivalents, end of period          $5,376,269      $  468,462
                                                  ==========      ==========
</TABLE>

            See notes to condensed consolidated financial statements

                                       3
<PAGE>

                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998


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.  The accompanying  condensed  consolidated
     financial  statements,  footnotes and discussions of NetWolves  Corporation
     ("NetWolves"  or the  "Company")  should  be read in  conjunction  with the
     Company's  consolidated  financial  statements,  and notes thereto, for the
     year ended June 30, 1999 and the period from February 13, 1998  (inception)
     to June 30,  1998.  The results of  operations  for the three  months ended
     September  30,  1999 are not  necessarily  indicative  of the results to be
     expected  for the  full  year.

2    The  Company

     NetWolves, LLC was an Ohio limited liability company formed on February 13,
     1998, which was merged into Watchdog Patrols, Inc. ("Watchdog") on June 17,
     1998.  Watchdog,  the legal surviving entity of the merger was incorporated
     under the laws of the State of New York on January 5, 1970.  As a result of
     the merger and subsequent sale of Watchdog's business, Watchdog changed its
     name to NetWolves Corporation.

     NetWolves is an Internet systems  developer that has designed and developed
     a multi-functional product that is a secure,  integrated,  modular Internet
     gateway.  The primary  product,  the FoxBox,  supports secure access to the
     Internet for multiple  users through a single  connection  and, among other
     things,  provides  electronic mail,  firewall security and web site hosting
     and also contains a network file server.  Since inception,  the Company has
     been developing its business plan and building its  infrastructure in order
     to effectively  market its products and shipped its first significant order
     in March 1999.

     Additionally,  in conjunction  with the acquisition of Sales and Management
     Consulting,  Inc.  (d/b/a The  Sullivan  Group,  see Note 4),  the  Company
     provides consulting, educational and training services primarily to the oil
     and gas and automotive industries throughout the United States.

3    Significant accounting policies

     Use of estimates

     In preparing condensed consolidated financial statements in conformity with
     generally accepted  accounting  principles,  management makes estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosures  of  contingent  assets  and  liabilities  at the  date  of the
     condensed  consolidated  financial  statements,  as  well  as the  reported
     amounts of revenue and expenses during the reporting period. Actual results
     could differ from those estimates.

     Risks and other factors

     As  a  company  that  has  developed  a  software  product  for  use  as  a
     multi-functional  Internet  communications device,  NetWolves faces certain
     risks.  These  include,  among  other  items,  the  ability to  continue to
     implement its business plan,  dependence on proprietary  technology,  rapid
     technological  change,  challenges  in  recruiting  personal  and a  highly
     competitive market place.

                                       4
<PAGE>

                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998

3    Significant accounting policies (continued)

     Principles of consolidation

     The condensed consolidated financial statements include the accounts of the
     Company and its subsidiaries. All significant intercompany transactions and
     balances have been eliminated in consolidation.  The separate  ownership of
     one of the Company's  subsidiaries is reflected in the Company's  condensed
     consolidated  financial  statements  as  minority  interest  (Note 4).  The
     minority   interest   includes  common  stock   representing  1.7%  of  the
     outstanding shares of the subsidiary, plus preferred stock.

     The subsidiary has issued 250,000 shares of non-voting  Series A Cumulative
     Convertible  Preferred Stock with a $1 par value. The preferred stockholder
     is  entitled to  preferential  liquidation  rights and is also  entitled to
     cumulative  dividends  that are included in minority  interest  expense and
     accrue at the rate of 8% per annum, which commenced on June 30, 1999. On or
     after January 1, 2000, the preferred  stockholder  may elect to convert the
     preferred  stock into  NetWolves  common stock (at fair market value at the
     time of  conversion).  However,  within 15 days of receiving the conversion
     notice,  NetWolves  may elect to make a cash  redemption  of the  preferred
     stock at par value (including any unpaid cumulative  dividends) and thereby
     terminate the conversion right.

     Revenue recognition

     The Company  records  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).  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.  Accordingly,  revenue from the sale of perpetual and
     term software  licenses are recognized,  net of provisions for returns,  at
     the time of delivery and  acceptance of software  products by the customer,
     when the fee is fixed and  determinable  and  collectibility  is  probable.
     Maintenance revenue that is bundled with an initial license fee is deferred
     and recognized  ratably over the maintenance  period.  Amounts deferred for
     maintenance are based on the fair value of equivalent  maintenance services
     sold separately.

     The Company  recognizes  revenue from consulting and training fees when the
     services are provided.

     Basic and diluted net loss per share

     The Company  displays  earnings per share in accordance  with  Statement of
     Financial Accounting  Standards No.128,  "Earnings Per Share" ("SFAS 128").
     SFAS 128  requires  dual  presentation  of basic and diluted  earnings  per
     share.  Basic  earnings  per share  includes no dilution and is computed by
     dividing net income (loss) available to common shareholders by the weighted
     average  number  of  common  shares  outstanding  for the  period.  Diluted
     earnings per share  includes  the  potential  dilution  that could occur if
     securities  or other  contracts  to issue  common  stock were  exercised or
     converted into common stock.

                                       5
<PAGE>

                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998

3    Significant accounting policies (continued)

     Basic and diluted net loss per share (continued)

     Outstanding  stock  options and warrants  have not been  considered  in the
     computation  of  diluted  per  share  amounts,  since  the  effect of their
     inclusion would be  antidilutive.  Accordingly,  basic and diluted earnings
     per share amounts are identical.

     Intangible assets

     Intangible  assets at  September  30,  1999  consist of assets  acquired in
     connection with the Company's purchase business combination  effective June
     30, 1999 (Note 4). These assets  consist of training  content  (including a
     training  library,   industry   benchmarking  data  and  the  Profit  Coach
     profitability  analysis  module)  with  a fair  value  of  $1,000,000.  The
     remaining  portion of the intangible  asset  (approximately  $5,024,000) is
     allocated  to  goodwill.  The  training  content and the  goodwill  will be
     amortized over their estimated usseful lives of 3 years.

4    Purchase acquisition

     On July 7, 1999, NetWolves and Sales and Management Consulting, Inc. (d/b/a
     The Sullivan  Group)  ("SMCI")  executed a merger  agreement (the "Merger")
     pursuant to which NetWolves acquired the outstanding capital stock of SMCI.
     Under the terms of the Merger,  TSG Global  Education Web, Inc.  ("TSG") (a
     subsidiary  of   NetWolves),   with   4,150,000   shares  of  common  stock
     outstanding, purchased all of the outstanding shares of SMCI's common stock
     in exchange for 180,000 shares of NetWolves'  restricted  common stock. The
     shareholders  are restricted  from selling,  transferring  or pledging such
     shares for an eighteen-month  period.  Upon consummation of the Merger SMCI
     merged into TSG and TSG was the surviving entity.

     Concurrent  with the Merger,  the  shareholders  of SMCI  purchased  70,000
     shares of TSG common stock at $.35 per share for aggregate cash proceeds of
     $24,500.  This  represents  1.7% of the  outstanding  common  stock of TSG.
     Additionally,  TSG issued  250,000  shares of TSG Series A Cumulative  (8%)
     Convertible  Preferred  Stock to one of the SMCI  shareholders,  which  was
     issued  in  partial  settlement  of  outstanding  liabilities  owed  to the
     shareholder.  This TSG common and  preferred  stock has been  reflected  as
     minority interest in the accompanying consolidated financial statements.

     The purchase price approximated  $4,095,000 (exclusive of acquisition costs
     of  $82,875),  which  consisted of 180,000  shares of NetWolves  restricted
     common stock valued at $22.75 per share (fair value of the common stock was
     based on its quoted market price on the effective date of the acquisition).
     The  acquisition  has been accounted for with an effective date of June 30,
     1999  using the  purchase  method of  accounting.  Accordingly,  assets and
     liabilities  were  recorded at their fair values as of June 30,  1999,  and
     operations  of  SMCI  have  been   included  in  the  Company's   condensed
     consolidated statements of operations commencing July 1, 1999.

                                       6
<PAGE>


                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998


4    Purchase acquisition (continued)

     An  allocation  of the fair value of the assets  acquired  and  liabilities
     assumed at June 30, 1999 is as follows:

<TABLE>

           <S>                                                  <C>

           Purchase price
             NetWolves common stock issued                       $4,095,000
             Acquisition costs                                       82,875
                                                                 ----------
                                                                 $4,177,875
                                                                 ==========
           Allocation of purchase price
            Fair value of tangible assets and liabilities
             Current assets                                      $   70,221
             Non-current assets                                      35,255
             Current liabilities                                   (443,909)
             Non-current liabilities                               (266,537)
             Advances to TSG, net of cash acquired of $412,224     (536,776)
                                                                 ----------
                                                                 (1,141,746)
                                                                 ----------
         Minority interest
           Common stock and additional paid-in capital             (454,500)
           Preferred stock                                         (250,000)
                                                                 ----------
                                                                   (704,500)
                                                                 ----------
        Intangible assets acquired                                6,024,121
                                                                 ----------
                                                                 $4,177,875
                                                                 ==========

</TABLE>

At the time of the Merger and in accordance with TSG's newly formed stock option
plan,  the SMCI  shareholders  (who are all employees of TSG)  received  605,000
five-year  options to purchase TSG common stock at an exercise price of $.35 per
share. The options were issued in proportion to the SMCI shareholders' ownership
interest.  The  intrinsic  value of these options (plus the 70,000 shares of TSG
common stock) totalled  $430,000,  which has been reflected in the allocation of
the  purchase  price.  Additionally,  the SMCI  shareholders  are entitled to an
additional  175,000 options to purchase TSG common stock (with an exercise price
at fair value at the time of grant),  subject to TSG meeting  specific  earnings
targets over the three years ending June 30, 2000, 2001 and 2002.  These options
will be accounted  for as  compensation  expense in accordance  with  Accounting
Principles  Board Opinion No. 25,  "Accounting for Stock Issued to Employees" in
such  future  periods.  All of the  shareholders  of SMCI  entered  into  3-year
employment agreements with TSG.

     The  Merger  also  provides  for  NetWolves  to  make up to  $4,750,000  of
     non-interest  bearing open account working capital advances to TSG pursuant
     to an agreed upon schedule through November 15, 1999. Through September 30,
     1999,  $2,600,000  has been  advanced and an  additional  $850,000 has been
     advanced from October 1, 1999 through  November 10, 1999.  Should NetWolves
     decide not to make  further  working  capital  advances,  the number of TSG
     shares owned by NetWolves will be reduced in accordance with the agreement.

                                       7
<PAGE>

                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998



4    Purchase acquisition (continued)

     Based upon the  $3,450,000  advanced  through  November  10,  1999  (should
     NetWolves  decide not to make any  further  advances),  NetWolves  could be
     required to return  400,000 TSG shares to the  treasury of TSG.  This would
     reduce  NetWolves'  current  ownership  interest from  4,150,000  shares to
     3,750,000  (from 98.34% to 98.17%).  Subject to  NetWolves'  first  refusal
     rights,  TSG has the  right  to sell any  shares,  ultimately  returned  by
     NetWolves,  to third  parties at fair  value,  which could  further  reduce
     NetWolves' ownership interest.

     In  accordance  with the Merger,  the Board of Directors of TSG consists of
     three members  designated  by NetWolves  and two members  designated by the
     SMCI shareholders.  A four-fifths majority of the TSG Board is required for
     specified  significant  actions including:  sale or merger of the business,
     changes  to  the  TSG  capital  structure,  declaration  of  dividends  and
     repayment  of the working  capital  advances  made by  NetWolves.  A simple
     majority of the TSG Board is required  for all general  operating  matters.
     Included in the consolidated  entity's cash and cash equivalents balance at
     September  30, 1999 is  approximately  $1,300,000 of cash held by TSG to be
     used for working capital purposes.

     The  following  unaudited  pro forma  financial  information  for the three
     months  ended  September  30,  1998 has  been  prepared  assuming  that the
     acquisition  of SMCI  had  taken  place  at the  beginning  of such  period
     presented.  The pro forma  information is not necesarily  indicative of the
     combined  results that would have occurred had the acquisition  taken place
     at the  beginning of the period,  nor is it  necessarily  indicative of the
     results that may occur in the future.  Pro forma  information for the three
     months ended September 30, 1999 is not presented, since the results of SMCI
     are reflected in the Company's consolidated results for the entire period.
<TABLE>
<CAPTION>
                                                        Three months
                                                           ended
                                                        September 30,
                                                           1998
                                                        -------------
                                                         (unaudited)
                <S>                                      <C>

                Revenue                                  $   408,000
                Net loss                                 $(1,800,000)
                Basic and diluted net loss per share     $      (.41)
</TABLE>
5    Shareholders' equity

     Common stock issuances

     On September  29, 1999,  the Company  sold 100,000  shares of  unregistered
     common  stock  to an  accredited  investor  at $15 per  share  (a  total of
     $1,500,000) exclusive of commissions totaling $105,000.

     Warrants

     --   On July 26, 1999 and in connection  with the Company  entering into an
          agreement with  Comdisco,  Inc.  ("Comdisco"),  Comdisco was granted a
          five-year   warrant  to  purchase  125,000  shares  of  the  Company's
          unregistered  common stock, at an exercise price of $10 per share. The
          warrants  are  immediately  exercisable.  The value of the warrants of
          $2,390,000  will be amortized  over the initial term of the  agreement
          (four  years)  and  has  been  calculated   using  the   Black-Scholes
          option-pricing  model  with the  following  assumptions:  no  dividend
          yield,  expected  volatility of 65%, risk-free interest rate of 5.84%,
          and an expected term of five years.

     --   For services rendered, on July 31, 1999, a financial consultant of the
          Company was granted a five-year  warrant to purchase 100,000 shares of
          common stock, at an exercise price of $12 per share.  The warrants are
          immediately  exercisable  and  the  shares  issuable  pursuant  to the
          warrants have piggyback registration rights. The value of the warrants
          of 1,704,000  will be amortized  over a period of three months and has
          been calculated using the Black-Scholes  option-pricing model with the
          following assumptions:  no dividend yield, expected volatility of 65%,
          risk-free interest rate of 5.84%, and an expected term of five years.

                                       8

<PAGE>

                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998


6    Segment information

     The  Company  reports  segments in  accordance  with  Financial  Accounting
     Standards  Board  Statement  No.  131  "Disclosures  about  Segments  of an
     Enterprise  and Related  Information."  The  Company  and its  subsidiaries
     operate in two separate business  segments,  the Technology segment and the
     Training   and   consulting   segment.   These   operating   segments   are
     representative  of the Company's  management  approach to its evaluation of
     its  operations.  The  accounting  policies  of  the  reportable  operating
     segments  are the same as those  described  in the  summary of  significant
     accounting  policies.  The Technology segment,  which operates  principally
     domestically,  is primarily engaged in the design,  development,  marketing
     and support of information  delivery  hardware  products and software.  The
     Training and  consulting  segment,  which operates  domestically,  provides
     consulting,  educational and training services primarily to the oil and gas
     and automotive industries throughout the United States.

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                          September 30,
                                                       -------------------
                                                       1999          1998
                                                       ----          ----
        <S>                                         <C>           <C>
        Revenue
          Technology                                $    13,200   $    44,753
          Training and consulting                       124,751         -
                                                    -----------   -----------
            Total                                   $   137,951   $    44,753
                                                    ===========   ===========

        Operating income (loss)
          Technology                                $(2,692,352)  $(1,821,505)
          Training and consulting                      (925,399)        -
                                                    ------------  -----------
            Total                                   $(3,617,751)  $(1,821,505)
                                                    ============  ===========
        Identifiable assets
          Technology                                $ 5,030,452
          Training and consulting                     7,024,148
                                                    ------------
            Total                                   $12,059,600
                                                    ============
</TABLE>

     The Company had two major  customers,  both  included in the  Training  and
     consulting  segment,  which accounted for 57% and 24% of consolidated sales
     for the three months ended September 30, 1999.

7    Commitments and contingencies

     Legal matters

     Certain  claims,  suits and  complaints  arising in the normal  course with
     respect to the Company's  uniformed security guard services operations have
     been filed or are pending against the Company. Generally, these matters are
     all  covered by a general  liability  insurance  policy.  In the opinion of
     management,  all such  matters  are without  merit or are of such kind,  or
     involve  such  matters,  as would  not  have a  significant  effect  on the
     financial position or results of operations of the Company,  if disposed of
     unfavorably.

                                       9
<PAGE>

                             NETWOLVES CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                 THREE MONTHS ENDED SEPTEMBER 30, 1999 and 1998



7    Commitments and contingencies (continued)

     Comdisco, Inc. agreement

     On July 26,  1999 the  Company  entered  into an  agreement  with  Comdisco
     whereby  Comdisco  will provide  management,  installation  and  technology
     services to the Company's  proprietary  Internet  distribution  system.  In
     addition,  the agreement  provides for the creation of a credit facility to
     be utilized in connection  with the sale and  installation of the FoxBox in
     up to 40,000 locations over a four-year  period.  However,  there can be no
     assurances  that the Company  will  actually  require the use of the credit
     facility.

     Under  the  agreement,  the  Company  intends  to lease  the  FoxBox to its
     customers for 48 months at a monthly fee  estimated  under the agreement at
     $200.  Comdisco will then acquire all of the rights,  title and interest in
     the equipment with the exception of intellectual rights,  software upgrades
     and software  application  and content and take an  assignment of the lease
     from the Company,  without  recourse.  At the time of assignment,  Comdisco
     will pay the Company 95% of the present value of the rental stream using an
     interest  rate   commensurate   with  each  customer's  credit  rating  and
     prevailing market rates.

     In connection with the agreement,  Comdisco was granted a five-year warrant
     to purchase 125,000 shares of the Company's  unregistered  common stock, at
     an exercise price of $10 per share (Note 5).

8    Subsequent events

     Private placement

     In November 1999, the Company sold 182,500  shares of  unregistered  common
     stock  to a group  of  accredited  investors  at $15 per  share (a total of
     $2,737,500) exclusive of commissions and fees of approximately 7%.

9    Restatement of condensed consolidated financial statements

     The  Company  has  restated  previously  issued  financial  results for the
     quarters ended September 30, 1999 and 1998. The restated  financial results
     primarily  reflect  an  adjustment  made to the values  assigned  to equity
     instruments  issued as  compensation  to employees and  consultants  and in
     connection  with the  Company's  acquisition  of SMCI (Note 4).  Management
     originally  determined the fair value of the equity  instruments  using the
     quoted  market  price on the day of  issuance  less a  discount  due to its
     restricted  nature.  Subsequently,  management  determined that it would be
     more objectively verifiable to use the undiscounted quoted market price. As
     a result of this  adjustment,  the net loss for the quarter ended September
     30, 1999 was increased from $2,794,941 to $3,575,084,  the net loss for the
     quarter  ended   September  30,  1998  was  increased  from  $1,581,570  to
     $1,805,789 and the value of the Company's acquisition of SMCI was increased
     from $1,432,875 to $4,177,875.

                                       10
<PAGE>


ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     Forward-looking statements

     The Form 10-Q includes,  without limitation,  certain statements containing
     the words "believes."  "anticipates",  "estimates",  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-Q 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.

     Overview

     The Company is a corporation with a limited  operating  history,  formed in
     February  1998,  when it  commenced  field trial and  limited  sales of its
     primary product,  "The FoxBox".  Additionally,  efforts were made to obtain
     operating  capital and convert  the  Company to a public  entity.  This was
     successfully  accomplished  through a reverse merger with Watchdog Patrols,
     Inc.,  a publicly  traded  (OTCBB),  non-reporting  corporation.  Operating
     expenses have increased  significantly since the Company's inception.  This
     reflects the cost  associated  with the formation of the Company as well as
     increased  efforts to promote sales of the FoxBox (Multi- services Internet
     communications gateway),  recruit personnel, build operating infrastructure
     and continued product development. The FoxBox is a multi-functional product
     that connects  business  networks [Local Area Networks (LANs) and Wide Area
     Networks (WANs)] to the Internet. It supports secure access to the Internet
     for  3  to  400  users  through  a  single  connection,  provides  advanced
     electronic  mail  functions  for  unlimited  users  and  delivers  firewall
     security.  The Company's  initial target markets are the end users in small
     and mid-size  businesses and large organizations with satellite offices. In
     January 1999 the Company was able to secure two  Agreements  which have the
     potential to generate significant revenue the terms of the agreements.  The
     first of which would be the TSG  ("Sullivan")  agreements  whereby Sullivan
     appointed  the  Company  as  its   exclusive   provider  of  the  Company's
     multi-service  Internet  delivery  system (known as "FoxBox") to be used in
     conjunction  with  Sullivan's  proprietary  interactive  distance  learning
     training programs. The period of the agreement is for a term of five years.
     In July 1999,  the Company  acquired  TSG and in July 1999 secured a credit
     facility  with  Comdisco,  Inc.  to  finance  the  anticipated  sales to be
     generated  from the  application  of the FoxBox  technology to TSG's client
     base.  Comdisco  also has agreed to provide  management,  installation  and
     technology  services  for  FoxBoxes  sold to this client  base.  The second
     agreement  is with  Anicom,  Inc.  ("Anicom").  The Company  entered into a
     five-year  exclusive  master  distribution  agreement with Anicom,  Inc. to
     distribute the FoxBox throughout North America.

                                       11
<PAGE>
     Overview (continued)

     The Company has a limited  operating history in which to base an evaluation
     of the business and prospects.  The Company's  prospects must be considered
     in light of the risks  frequently  encountered  by companies in their early
     stages,  particularly  for  companies  in the rapidly  evolving  technology
     industry.  Certain risks for the Company include, but are not limited to an
     unproven business model,  capital  requirements and growth  management.  To
     counter  this risk,  the Company  must,  among other  things,  increase its
     customer  base,  continue to develop its  distribution  network and product
     offerings, successfully execute its business and marketing plan, and expand
     the operating  infrastructure.  There can be no assurance  that the Company
     will be successful in addressing such risks, and the failure to do so could
     have a material  adverse  effect on the Company's  financial  condition and
     results  of  operations.   Since   inception,   the  Company  has  incurred
     significant losses and as of September 30, 1999 had an accumulated  deficit
     of  approximately  $10.4  million.  The Company  believes  that its success
     depends  in large  part on its  ability  to  create  market  awareness  and
     acceptance  for the  FoxBox,  raise  additional  operating  capital to grow
     operations, build technology and non-technology infrastructures, expand the
     sales force and distribution network, and continue new product R&D.

     Results of Operations

     As a  result  of the  July  1999  acquisition  of  TSG,  NetWolves  and its
     subsidiaries operated in two business segments,  the Technology segment and
     the Training and consulting  segment.  The net sales from  operations  were
     $137,951  and $44,753 for the three  months  ended  September  30, 1999 and
     September  30, 1998,  respectively.  Sales for the first  quarter of fiscal
     2000 were primarily  attributable  to the training and consulting  business
     segment. Although training and consulting revenue is currently derived from
     traditional  leader-lead  training and  benchmark  studies,  the  Company's
     strategic  focus is on distance  learning.  The Company is currently  "beta
     testing"  products  utilizing  the FoxBox  technology  to deliver  distance
     learning to existing clients in the petroleum industry. In fiscal 1999, the
     Company  delivered an initial stocking order of 500 FoxBoxes ($1.7 million)
     to Anicom. As of July 1999 the Company has dedicated resources to train and
     support the Anicom  sales force in  developing  demand in the Anicom  sales
     channel.  $45,730 of investment  income was generated through September 30,
     1999 as compared to $15,716 for the period ended  September  30, 1998.  The
     increase is primarily  attributable to the additional amounts of securities
     held with respect to the prior period.

     NetWolves had gross profit of 31% for the period ended  September 30, 1999.
     As of yet,  the Company has not had a full year of  production  in order to
     have a basis of comparison. However, the Company believes that gross profit
     greater than 31% are  achievable  at  increased  production  levels.  These
     results will depend, in part, on the effects of economies-of-scale, the use
     of third-party assemblers and the ability to competitively purchase rapidly
     evolving commodity hardware,  which is a significant  component of "cost of
     goods sold." The use of  non-Proprietary  hardware is one of many  inherent
     design  features of the FoxBox  which  facilitates  an  efficient  and cost
     effective production cycle. Additionally,  this allows the Company to focus
     its core R&D efforts on developing  cutting edge Software.  There can be no
     assurance that the Company will be successful in increasing its margins due
     to one or more  factors.  These  factors  include,  but are not  limited to
     increases/decreases in direct labor and material cost, as well as increased
     competition and general economic conditions in the future.

     Operating  expenses were  $3,659,533  and  $1,849,959  for the three months
     ended September 30, 1999 and September 30, 1998, respectively. The increase
     in  operating  expense  is  primarily  due to the  continued  growth of the
     Company and the addition of the training and consulting  business  segment.
     The  operating  expenses  for  September  30, 1999  consisted  primarily of
     $2,868,808 of

                                       12
<PAGE>
     Results of Operations (continued)

     general  and  administrative  costs  relating to the  establishment  of the
     infrastructure  and the continued  operations of the business.  $184,718 of
     costs were  incurred  relating to research  and  development,  and $606,007
     related to selling and marketing. Included in the above mentioned operating
     expenses are $1,553,583 of non-cash  compensation  for services in the form
     of the  Company's  common  stock and  options.  Operating  expenses for the
     period June 30,  1998 were  limited  and  provide an  inadequate  basis for
     comparability purposes.

     Liquidity and Capital Resources

     On June 17,  1998 the  Company  executed  a reverse  merger  with  Watchdog
     Patrols,  Inc.  a  publicly  traded  non-reporting  company  engaged in the
     activity of providing armed and unarmed security guard services for the New
     York/Metropolitan   Area.  This  merger  made  available  to  the  Company,
     approximately  $2.3  million  of  cash,  cash  equivalents  and  marketable
     securities  to be used as  operating  capital.  On  November  22,  1998 the
     Company sold  substantially  all the assets of the security guard business,
     consisting primarily of uniforms,  vehicles, computer systems and furniture
     to a third party. This generated an additional $600,000 of cash flow to the
     Company. On June 29, 1999 NetWolves concluded a private offering of 800,000
     shares of common stock which  generated $5.4 million (net of $.6 million of
     expenses).  Additionally,  on  September  29, 1999 the Company  completed a
     private  placement  of  100,000  shares of common  stock to one  accredited
     investor  for $1.4  million  (net of  100,000  of  expenses)  to be used in
     operations.

     NetWolves  had cash and cash  equivalents  of $5.3 million at September 30,
     1999.  In  November  1999,  the  Company  completed  a  private  sale of an
     additional 182,500 shares of common stock to accredited  investors for $2.5
     million (net of expenses of approximately 7%). Management believes that the
     Company has adequate  capital  resources to meet its working  capital needs
     for at least the next twelve months based upon its current operating level.
     However,  there can be no assurance  that the Company will have  sufficient
     capital  to  finance  its  planned  growth.  The  Company  intends to raise
     additional  monies  from the sale of its  capital  stock to fund its growth
     over the next 24 to 36 months.

     Year 2000 Issues

     Background  Some   computers,   software,   and  other  equipment   include
     programming  code in which  calendar year data is  abbreviated  to only two
     digits. As a result of this design  decisions,  some of these systems could
     fail to operate or fail to produce  correct  results if "00" is interpreted
     to commonly referred to as the "Millennium Bug" or "Year 2000 problem.

     Assessment  The Year 2000 problem  could affect  computers,  software,  and
     other equipment which NetWolves  Corporation uses, operates,  or maintains.
     Accordingly,  NetWolves  Corporation  has reviewed  its  internal  computer
     programs  and systems to ensure that the programs and systems are Year 2000
     complaint.  NetWolves  Corporation  presently  believes  that its  computer
     systems are Year 2000 complaint. However, while the estimated cost of these
     efforts is not expected to be material to its overall  financial  position,
     or any year's  results of  operations,  there can be no  assurance  to this
     effect.

     Products  Sold to  Consumers  NetWolves  Corporation  believes  that it has
     substantially identified and resolved all potential Year 2000 problems with
     the software  products it develops and markets.  However,  it also believes
     that is not possible to determine  with  complete  certainty  that all Year
     2000 problems  affecting its products have been identified or corrected due
     to the  complexity  of these  products  and the fact  that  these  products
     interact  with other third party  vendor  products  and operate  with other
     systems which are not under its control.

                                       13
<PAGE>

     Year 2000 Issues (continued)

     NetWolves Corporation recognizes the significance of the Year 2000 issue as
     it relates to internal  systems,  including IT and non-IT systems.  To that
     extent NetWolves Corporation has achieved the following:

     Internal  Information  Technology   Infrastructure   NetWolves  Corporation
     believes  that  it  has   identified,   modified   upgraded,   or  replaced
     substantially  all of  the  major  computers,  software  applications,  and
     related equipment used in connection with its internal  operations in order
     to minimize the possibility of a material disruption to its business. While
     most of the upgrades were planned as part of a general  enhancement  to its
     infrastructure,  the  timing  of the  upgrades  also  result  in Year  2000
     compliance.

     Systems Other than Information  Technology Systems In addition to computers
     and related systems, the operation of office and facilities equipment, such
     as  fax  machines,  photocopiers,  telephone  switches,  security  systems,
     elevators,  and  other  common  devices  may be  affected  by the Year 2000
     problem.  NetWolves  Corporation  has assessed and remediated the effect of
     the Year 2000  problem  on its office and  facilities  equipment  under its
     control,  and the total  costs  associated  with  completing  the  required
     modifications, upgrades, or replacements of these internal systems were not
     material.

     Suppliers  NetWolves  Corporation has initiated  communications,  including
     surveys,  with  business  critical  third  party  suppliers  of  the  major
     computers,  software,  and  other  equipment  which it uses,  operates,  or
     maintains  to  identify  and,  to the extent  possible,  to resolve  issues
     involving the Year 2000 problem.  NetWolves Corporation has received vendor
     certification  that all of its  business  critical  information  technology
     systems, including internal communications systems,  accounting and finance
     systems,  customer  service  systems,  and  sales  and  marketing  tracking
     systems, are Year 2000 compliant.  Accordingly,  NetWolves Corporation does
     not  anticipate  any  significant  Year 2000 problems  with these  systems;
     however,  it cannot ensure that these  suppliers will resolve any or all of
     their Year 2000  problems  with these  systems  before the  occurrence of a
     material  disruption  to its business or that of its  customers.  NetWolves
     Corporation believes that its primary exposure is presently with respect to
     public  utilities and  telecommunications  suppliers.  Any failure of these
     third  parties to resolve Year 2000 problems with their systems in a timely
     manner  could  have a  material  adverse  affect on  NetWolves  Corporation
     business, financial condition, and results of operation.

     Additionally, NetWolves Corporation has initiated communications, including
     surveys,  with all other vendors or  businesses  that supply any service to
     NetWolves Corporation. While it has limited or no control over responses to
     its  inquiries  and the actions of these third party  suppliers,  NetWolves
     Corporation does not view this category of services to be business critical
     and in the event of a Year 2000 problem with a particular vendor,  believes
     that those goods or services could easily be obtained from other sources.

     Banking  Relationships  NetWolves  Corporation  has  confined  its  banking
     relationships to top tier financial  institutions who have represented that
     their  respective  systems  are Year 2000  complaint.  Any failure of these
     banks to resolve Year 2000  problems  with their systems in a timely manner
     would result in financial inconvenience and, depending upon the duration of
     the failure,  could have a material adverse affect on NetWolves Corporation
     financial condition and results of operation.

     Most  Likely  Consequences  of Year  2000  Problems  NetWolves  Corporation
     believes  that  it  has  identified  all  Year  2000  problems  that  could
     materially adversely affect its business  operations.  However, it does not
     believe that it is possible to determine  with complete  certainty that all
     Year 2000 problems which effect it have been identified or corrected.

                                       14
<PAGE>

    Year 2000 Issues (continued)

     The number of devices  that could be affected  and the  interactions  among
     these devices are simply too numerous.  In addition,  one cannot accurately
     predict  how many Year 2000  problem-  related  failures  will occur or the
     severity,  duration, or financial  consequences of these perhaps inevitable
     failures.  In addition,  NetWolves  Corporation is unable to determine with
     any degree of  certainty  the  changes in buying  habits of its current and
     potential  customers  due to their  concerns  over Year 2000  issues.  As a
     result,  NetWolves  Corporation  expects that it could likely  experience a
     significant number of operational  inconveniences  and inefficiencies  that
     may divert  management's  time and  attention  and its  financial and human
     resources from its ordinary  business  activities.  In addition,  NetWolves
     Corporation  may experience a lesser number of serious system failures that
     may  require  significant  efforts  by it or its  customers  to  prevent or
     alleviate material business disruptions.

ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.

                                       15
<PAGE>
ITEM 1. LEGAL PROCEEDINGS

     None.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     On September 29, 1999, the Company sold 100,000  shares of  unregistered
     common stock to an accredited investor at $15 per share.


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 AND REPORTS ON FORM 8-K

     (a)  Exhibits:   Exhibit  27  Financial   Data  Schedule  (for   electronic
          submission only).

     (b)  Reports  on Form  8-K:  Report  on Form 8-K  dated  July 7,  1999,  as
          amended.


                                       16
<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                    BY:     NETWOLVES CORPORATION


                                        /s/ Walter M. Groteke
                                        --------------------------
                                        Walter M. Groteke
                                        Chief Executive Officer

                                       /s/  Peter C. Castle
                                       --------------------------
                                       Peter C. Castle
                                       Secretary -Treasurer



Date: March 9, 2000