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, 2004

                        Commission file number 000-25831

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

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


                  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 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                            November 12, 2004
       --------------                       --------------------------------

Common Stock, $.0033 par value                      22,169,909

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES
                        form 10-QSB - SEPTEMBER 30, 2004


                                     INDEX


PART I - FINANCIAL INFORMATION


   ITEM 1 - FINANCIAL STATEMENTS

   CONDENSED CONSOLIDATED BALANCE SHEETS
     September 30, 2004 (unaudited) and June 30, 2004                    1 - 2

   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the three months
     ended September 30, 2004 (unaudited)
     and September 30, 2003 (unaudited and as restated)                  3 - 4

   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months
     ended September 30, 2004 (unaudited)
     and September 30, 2003 (unaudited)                                  5 - 6

   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                 7 - 11

   ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
            OF OPERATION                                               12 - 16

   ITEM 3 - CONTROLS AND PROCEDURES                                         17


PART II - OTHER INFORMATION

   ITEM 1 - LEGAL PROCEEDINGS                                               18

   ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS     18

   ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                                 18

   ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS             18

   ITEM 5 - OTHER INFORMATION                                               18

   ITEM 6 - EXHIBITS                                                        18

SIGNATURES                                                                  19

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  September 30,           June 30,
                                                                                      2004                  2004
                                                                                 --------------         --------------
                                                                                   (Unaudited)
ASSETS

<S>                                                                           <C>                    <C>
Current assets
     Cash and cash equivalents                                                $        4,084,163     $       5,439,345
    Accounts receivable, net of allowance of $165,370 and $131,678 at
      September 30, 2004 and June 30, 2004, respectively                               5,000,774             3,421,185
     Inventories                                                                         339,486                79,764
     Prepaid expenses                                                                    276,704               277,869
     Other current assets                                                                 16,189                30,993
                                                                              ------------------     ------------------
         Total current assets                                                          9,717,316             9,249,156
                                                                              ------------------     ------------------
Restricted cash                                                                           25,638                25,566
                                                                              ------------------     ------------------
Property and equipment, net                                                              359,774               399,355
                                                                              ------------------     ------------------
Internally developed software, net                                                         6,522                12,594
                                                                              ------------------     ------------------
Identifiable intangible assets
Patent                                                                                    61,243                58,106
Licenses                                                                                 203,000               203,000
Contractual customer relationships, net                                                1,401,980             1,526,851
Computer billing software, net                                                           521,043               568,043
                                                                              ------------------     ------------------
         Total identifiable intangible assets                                          2,187,266             2,356,000
                                                                              ------------------     ------------------
Goodwill                                                                               3,515,698             3,515,698
                                                                              ------------------     ------------------
Other assets                                                                              60,312                60,312
                                                                              ------------------     ------------------
                                                                              $       15,872,526     $      15,618,681
                                                                              ==================     ==================

   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.
</TABLE>


                                       1
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS



(continued)
<TABLE>
<CAPTION>
                                                                                  September 30,           June 30,
                                                                                      2004                  2004
                                                                                ----------------      ----------------
                                                                                   (Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                           <C>                    <C>
Current liabilities
    Accounts payable and accrued expenses                                     $        4,818,800     $       4,345,225
    Dividends payable                                                                  1,796,900             1,810,179
    Accrued losses of discontinued operations                                             97,874               107,841
    Deferred revenue                                                                     131,407               369,088
                                                                              ------------------     ------------------
       Total current liabilities                                                       6,844,981             6,632,333

Deferred revenue                                                                           8,333                29,667

Accrued losses of discontinued operations                                                 -                     18,514
                                                                              ------------------     ------------------
         Total liabilities                                                             6,853,314             6,680,514
                                                                              ------------------     ------------------
Commitment and contingencies

Shareholders' equity
    Series A convertible preferred stock, $.0033 par value; $6,363,554
      liquidation preference; 1,000,000 shares authorized;
      206,025 and 190,616 shares issued and outstanding on September 30,
      2004 and June 30, 2004                                                           2,368,292             2,112,039
    Series B convertible preferred stock, $.0033 par value; $9,137,930
      liquidation preference; 500,000 shares authorized;
      270,269 shares issued and outstanding on September 30, 2004
      and June 30, 2004                                                                3,301,774             3,257,037
    Series C convertible preferred stock, $.0033 par value; $6,940,308
      liquidation preference; 100,000 shares authorized; 55,785 and
      72,461 shares issued and outstanding on September 30, 2004 and
      June 30, 2004, respectively                                                      2,244,365             3,013,771
    Preferred stock, $.0033 par value; 400,000 shares authorized;
      no shares issued and outstanding on September 30, 2004 and
      June 30, 2004                                                                         -                     -
    Common stock, $.0033 par value; 50,000,000 shares authorized;
      22,019,240 and 20,925,261 shares issued and outstanding on
      September 30, 2004 and June 30, 2004, respectively                                  72,664                69,054
     Additional paid-in capital                                                       73,947,959            73,631,120
     Unamortized value of equity compensation                                           (265,554)             (480,201)
     Accumulated deficit                                                             (72,650,288)          (72,664,653)
                                                                              ------------------     ------------------
       Total shareholders' equity                                                      9,019,212             8,938,167
                                                                              ------------------     ------------------
                                                                              $       15,872,526     $      15,618,681
                                                                              ==================     ==================

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

</TABLE>

                                       2
<PAGE>

                    NETWOLVES CORPORATIOIN AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                        For the three months ended
                                                                                              September 30,
                                                                                        ---------------------------
                                                                                                        (As restated)
                                                                                            2004            2003
                                                                                    ------------------  ----------------
 Revenue
<S>                                                                                 <C>                <C>
       Voice services                                                               $       5,017,381  $     4,161,074
       Managed service charges                                                              1,871,433        1,399,776
       Equipment and consulting                                                               186,955          440,696
                                                                                    -----------------  ----------------
                                                                                            7,075,769        6,001,546
                                                                                    -----------------  ----------------
 Cost of revenue
       Voice services                                                                       3,137,097        2,747,932
       Managed service charges                                                              1,074,256          920,813
       Equipment and consulting                                                               131,108          289,666
                                                                                    -----------------  ----------------
                                                                                            4,342,461        3,958,411
                                                                                    -----------------  ----------------
 Gross profit                                                                               2,733,308        2,043,135
                                                                                    -----------------  ----------------

Operating expenses
    General and administrative                                                              1,579,089        1,646,116
    Engineering and development                                                               234,765          253,399
    Sales and marketing                                                                       911,093        1,037,717
                                                                                    -----------------  ----------------
                                                                                            2,724,947        2,937,232
                                                                                    -----------------  ----------------
 Income (loss) before other income                                                              8,361         (894,097)
                                                                                    -----------------  ----------------
 Other income
    Investment income                                                                           6,004            1,391

    Minority interest                                                                            -                 307
                                                                                    -----------------  ----------------
                                                                                                6,004            1,698
                                                                                    -----------------  ----------------
Income (loss) before income taxes                                                              14,365         (892,399)
Provision for income taxes                                                                       -              32,000
                                                                                    -----------------  ----------------
 Net income (loss)                                                                  $          14,365  $      (924,399)
                                                                                    =================  ================

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

</TABLE>
                                       3
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)



 (continued)
<TABLE>
<CAPTION>

                                                                                           For the three months ended
                                                                                                  September 30,
                                                                                           -------------------------------
                                                                                                            (As restated)
                                                                                                2004            2003
                                                                                           ---------------  ---------------
 Basic and diluted net loss per share

<S>                                                                                     <C>                <C>
 Net income (loss)                                                                      $          14,365  $      (924,399)

    Dividends and beneficial conversion feature on convertible preferred stock                   (406,645)      (3,425,607)
                                                                                        -----------------  ----------------

Net loss atributable to common shareholders                                              $       (392,280)  $    (4,350,006)
                                                                                        =================  ================

Basic and diluted net loss per share                                                    $           (.02)  $         (.27)
                                                                                        =================  ================
 Weighted average common shares
    outstanding, basic and diluted                                                             21,538,183       15,996,335
                                                                                        =================  ================

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

</TABLE>

                                       4
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

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

                                                                                      2004                  2003
                                                                                ------------------  ------------------
<S>                                                                             <C>                  <C>
Cash flows from operating activities
     Net income (loss)                                                          $       14,365       $     (924,399)
     Adjustments to reconcile net income (loss) to net cash used in
     operating activities
           Depreciation                                                                 52,726               56,285
           Amortization                                                                177,943              180,774
           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                                               83,400              272,585
           Minority interest                                                              -                    (307)

     Changes in operating assets and liabilities
       Restricted cash                                                                     (72)                -
       Accounts receivable                                                          (1,650,563)            (406,701)
       Inventories                                                                    (259,722)             (27,692)
       Prepaid expenses                                                                  1,165               79,453
       Other current assets                                                             14,804               (2,252)
       Accounts payable and accrued expenses                                           443,576             (165,732)
       Accrued loss on disposal of discontinued operations                             (28,481)             (26,711)
       Deferred revenue                                                               (259,015)            (269,710)
                                                                                ---------------      ---------------

         Net cash used in operating activities                                      (1,338,900)           (1,234,407)
                                                                                ---------------      ---------------
Cash flows from investing activities
     Release of letter of credit                                                          -                 272,330
     Patent costs paid                                                                  (3,137)                -
     Payments for security deposits                                                       -                    (580)
     Purchases of property and equipment                                               (13,145)              (6,180)
                                                                                ---------------      ---------------
         Net cash provided by (used in) investing activities                         $(16,282)      $       265,570
                                                                                ---------------      ---------------

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

</TABLE>


                                       5
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

(continued)
<TABLE>
<CAPTION>

                                                                                     For the three months ended
                                                                                           September 30,
                                                                                --------------------------------------

                                                                                      2004                  2003
                                                                                ------------------  ------------------
<S>                                                                                 <C>                   <C>
Cash flows from financing activities
     Cash proceeds from private sale of convertible preferred stock
       and warrants                                                             $         -          $    4,477,600

     Cash proceeds from private sale of common stock and warrants                         -               1,200,000
     Financing costs paid
                                                                                          -                (562,760)
     Repayment of advances from related parties                                           -                (150,000)
                                                                                ---------------      ---------------

       Net cash provided by financing activities                                          -               4,964,840
                                                                                ---------------      ---------------

Net (decrease) increase in cash and cash equivalents                                (1,355,182)           3,996,003

Cash and cash equivalents, beginning of period                                       5,439,345            1,336,191
                                                                                ---------------      ---------------
Cash and cash equivalents, end of period                                        $    4,084,163       $    5,332,194
                                                                                ===============       ==============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES


Dividends accrued on convertible preferred stock                                $      272,636       $      200,012
                                                                                ===============       ==============
Dividends paid-in-kind on convertible preferred stock                           $      285,916       $         -
                                                                                ===============       ==============

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

</TABLE>

                                       6
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003



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, 2004,  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, 2004.  The results of  operations
     for  the  three  months  ended  September  30,  2004  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    Restatement of financial statements

     As  disclosed  in the  previously  filed 10-KSB for the year ended June 30,
     2004,  subsequent  to the filing of form 10-QSB for March 31, 2004,  and in
     conjunction  with  preparation  and  review of our  consolidated  financial
     statements for the year ended June 30, 2004, the Company determined that it
     had not  properly  calculated  and  recorded  convertible  preferred  stock
     dividends  and  related  beneficial   conversion  feature  charges  on  the
     issuances  of  the  Series  A,  B  and C  convertible  preferred  stock  in
     accordance with Emerging Issues Task Force ("EITF") No. 00-27  "Application
     of Issue No. 98-5 to Certain Convertible Instruments".

     Included in the periods restated were the balance sheet as of September 30,
     2003 and  statements  of  operations  for the three months then ended.  The
     following  amounts  during that  period  were  restated as a result of this
     change:

                                       7
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>

                                                          As previously
                                                             filed                Adjustment            As restated
                                                          ---------------         -----------           -----------
              Fiscal 2004:
              <S>                                          <C>                  <C>                  <C>
              Quarter ended September 30, 2003
              (unaudited)
              Accounts payable and accrued expenses       $     4,647,532       $      385,580       $    5,033,112
              Convertible preferred stock:
              Series A                                          2,613,315              150,285            2,763,600
              Series B                                          3,055,770              245,903            3,301,673
              Series C                                          3,264,108              (73,188)           3,190,920
              Additional paid-in capital                       73,219,584             (708,581)          72,511,003
              Net loss attributable to common
              shareholders                                     (1,205,128)          (3,144,878)          (4,350,006)
              Basic and diluted net loss per share
                                                                    (0.08)               (0.19)               (0.27)
</TABLE>

4    Significant accounting policies

     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  26.7  million  and  29.5  million  at
     September  30, 2004 and 2003,  respectively,  because the Company had a net
     loss attributable to common shareholders and,  therefore,  the effect would
     be antidilutive.

     Reclassifications

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

Stock-based compensation

     Statement of  Financial  Accounting  Standards  ("SFAS"),  "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:

                                       8
<PAGE>


                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>

                                                                                    For the three months
                                                                                    ended September 30,
                                                                                ----------------------------------
                                                                                                    (As restated)
                                                                                  2004                  2003
                                                                          ------------------    -------------------
<S>                                                                          <C>                   <C>
       Net loss atrributable to common shareholders, as reported             $     (392,280)       $   (4,350,006)

       Add: Total stock based employee compensation expense included in
         reported net income (loss), 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                                                    (122,592)             (229,164)

       Pro forma net loss attributable to common shareholders                $     (514,872)       $   (4,579,170)

       Basic and diluted net loss per share
                As reported                                                  $         (.02)       $         (.27)
                Pro forma                                                    $         (.02)       $         (.29)

</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.

5    Related party transactions

     During  the three  months  ended  September  30,  2004,  the  Company  paid
     approximately  $50,000  for  legal  services  to  law  firms  in  which  an
     employee/stockholder is affiliated.

6    Shareholders' equity

     Preferred stock

     On July 1, 2004, stock dividends totaling 19,058 shares were paid in Series
     A  Preferred  Stock to  Series A  Preferred  Stock  investors  representing
     accrued dividends through June 30, 2004.

     For the three months ended  September 30, 2004,  investors  converted 3,649
     shares of Series A Preferred  Stock and 16,676 shares of Series C Preferred
     Stock resulting in issuances of 1,068,979 shares of common stock.

     During July 2003,  the Company  entered  into a one-year  agreement  with a
     consultant.  In return for  services,  the Company was  obligated  to issue
     50,000 shares of  unregistered  common stock.  These shares of unregistered
     common  stock were  issued as  follows:  25,000 of the shares  were  issued
     during  fiscal  2004 and the  remaining  25,000  shares were issued in July
     2004.

7    Segment information

     The Company reports  segments in accordance with SFAS No. 131  "Disclosures
     about Segments of an Enterprise and Related  Information"  ("SFAS 131"). As
     of September  30, 2003,  the Company and its  subsidiaries  operated in two
     separate business segments, the Technology segment and the Network Services
     segment.  Effective  January 1, 2004, the Company  instituted a new segment
     reporting  format to include  three  reportable  business  segments:  Voice
     Services,  Managed  Service  Charges and  Equipment  and  Consulting.  This
     segment reporting change was made to better reflect  management's  approach
     to  operating  and  directing  the  businesses  and to more  closely  align
     financial and  managerial  reporting.  As required by SFAS 131,  prior year
     operating  information in the following  table has been restated to conform
     with the current year presentation.

                                       9
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


     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.

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

                                                                                  2004                2003
                                                                              -----------        ------------
<S>                                                                           <C>                  <C>
         Revenue
              Voice Services                                                  $  5,017,381         $  4,161,074
              Managed Service Charges                                            1,871,433            1,399,776
              Equipment and Consulting                                             186,955              440,696
                                                                              ------------         ------------

                  Total                                                       $  7,075,769         $  6,001,546
                                                                              ============         ============

         Cost of revenue
              Voice Services                                                  $  3,137,097         $  2,747,932
              Managed Service Charges                                            1,074,256              920,813
              Equipment and Consulting                                             131,108              289,666
                                                                              ------------         ------------
                Total                                                           $4,342,461           $3,958,411
                                                                              ============         ============

         Operating income (loss)
              Voice Services                                                     $ 114,513          $ (447,649)
              Managed Service Charges                                               21,179            (273,703)
              Equipment and Consulting                                           (127,331)            (172,745)
                                                                              ------------         ------------

                  Total                                                            $ 8,361          $ (894,097)
                                                                              ============         ============
</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 two major  customers which accounted for a total of 37%, or
     individually,  27% and 10%, of  consolidated  revenue for the three  months
     ended  September  30,  2004 and one  customer  which  accounted  for 32% of
     consolidated  revenue  for the  three  months  ended  September  30,  2003.
     Additionally, the Company had three customers that accounted for a total of
     49%, or  individually,  21%,  16% and 12%,  respectively,  of  consolidated
     accounts receivable at September 30, 2004 and two customers which accounted
     for a  total  of  31%,  or  individually,  20% and  11%,  respectively,  of
     consolidated  accounts  receivable  at June  30,  2004.  Additionally,  the
     Equipment  and  Consulting  segment was dependent  upon one  customer,  who
     accounted  for 26% and 91% of the  segment's  revenues for the three months
     ended September 30, 2004 and 2003, respectively.

     The  Company  made  purchases  from two data and  voice  service  providers
     included  within the Managed  Service  Charges and Voice Services  segments
     that aggregated approximately 68% and 18% and 81% and 12% of the total cost
     of  revenue  for the  three  months  ended  September  30,  2004 and  2003,
     respectively.

                                       10
<PAGE>


                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003



8    Income taxes

     The provision for income taxes consists of the following:

<TABLE>
<CAPTION>

                                                       For the three months ended
                                                              September 30,
                                                       --------------------------
                                                          2004               2003
                                                       ------------     ------------

              <S>                                     <C>              <C>
              Current - Federal and States            $                $      32,000
              Deferred - Federal                            -                  -
              Deferred - States                             -                  -

              Provision for income taxes              $                $      32,000
</TABLE>

     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 2024 and have not been  recognized  in the
     accompanying  consolidated  financial statements as a result of a valuation
     allowance against the deferred tax asset.


                                       11
<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 and/or future 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

                                       12
<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  a  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 segment are recognized as services are provided.

     Revenue from the sale of hardware,  where our software is not essential, is
     recognized within Equipment & 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.

                                       13
<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,  2004  and  June  30,  2004.  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").

                                       14
<PAGE>

     Three months ended September 30, 2004 and 2003

          Revenue

     Revenue  increased to $7.1 million for the three months ended September 30,
     2004,  compared to $6.0 million for the same period in the prior year.  The
     increase  in revenue  is  attributable  to our MSC  segment  where  revenue
     increased  by $0.5 million and the Voice  Services  segment  where  revenue
     increased $0.9 million,  offset by a decrease of approximately $0.3 million
     in our Equipment and Consulting segment. The increase in Voice Services and
     MSC is attributable to sales to new customers  totaling  approximately $1.0
     million,  of which $0.7  million in Voice  Services is  non-recurring,  new
     sales  within  our  existing  customer  base  totaling  approximately  $1.0
     million,  offset by attrition in the customer  base of  approximately  $0.8
     million.  Customer attrition is caused by two primary factors. The first is
     existing  customers  signing  a new,  reduced  priced  contract,  known  as
     "reterms".  Reterms account for approximately 62% of overall attrition. The
     second primary factor is customers  selecting a different  service provider
     for rate  competitiveness  or  relationship  reasons,  which  accounted for
     approximately  38% of overall  attrition.  The  decrease in  Equipment  and
     Consulting is the result of stronger  equipment  sales in the prior year of
     approximately $0.4 million.

          Cost of revenue and gross profit

     Cost of  revenue  increased  to $4.3  million  for the three  months  ended
     September  30,  2004,  compared to $4.0  million for the same period in the
     prior  year.  Cost of revenue  within  the MSC  segment  increased  to $1.1
     million or 43%  profit  margin,  compared  to $0.9  million,  or 34% profit
     margin for the same period in the prior year. The improved profit margin is
     primarily attributable to our sale of more profitable MSC services. Cost of
     revenue within the Voice Services segment  increased to $3.1 million or 37%
     profit  margin  compared to $2.7 million or 34% 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
     decreased to $0.1 million, or 30% profit margin compared to $0.3 million or
     34% profit  margin for the same period in the prior year.  The  decrease in
     profit margin is due to the product mix making up the segment.

     Overall gross profit was 39% for the three months ended September 30, 2004,
     compared  to 34% for the same  period in the prior  year.  The  increase in
     profit margin reflects increased sales of our more profitable  services and
     products and the effect of rate negotiations with vendors.

          General and administrative

     General and administrative  expenses were $1.6 million for the three months
     ended  September 30, 2004 and 2003. The only  significant  change was a net
     decrease in equity  compensation  of consultants  for the current period of
     $0.1 million.

          Engineering and development

     Engineering  and  development  expenses  decreased  to $0.2 million for the
     three months  ended  September  30, 2004,  compared to $0.3 million for the
     same period in the prior year. Engineering and development expenses did not
     experience significant change for the three months ended September 30, 2004
     compared to the same period in the prior year.

          Sales and marketing

     Sales and marketing expenses decreased to $0.9 million for the three months
     ended  September 30, 2004,  compared to $1.0 million for the same period in
     the prior year. The decrease in sales and marketing  expenses was primarily

                                       15
<PAGE>

     the result of a net decrease in equity  compensation of consultants for the
     current period of approximately $0.1 million,  offset by an increase in the
     number  of  sales   personnel,   which  resulted  in  increased  salary  of
     approximately  $0.1 million.  We have made a significant  investment in the
     sales  force,  which is  anticipated  to have a  positive  impact in future
     periods.

     Liquidity and Capital Resources

     Our operating activities used cash of approximately $1.3 million during the
     three months ended  September 30, 2004, as compared to using  approximately
     $1.2 million for the same period in the prior year. 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. Cash used in operations for the three months
     ended  September  30,  2003  was  primarily  attributable  to a net loss of
     approximately  $0.9  million  and an increase  in  accounts  receivable  of
     approximately  $0.4  million,  partially  offset by  non-cash  charges  for
     depreciation and amortization and equity compensation of approximately $0.2
     million and $0.3 million, respectively, and an increase in deferred revenue
     of approximately $0.3 million.

     Cash used in investing  activities for the three months ended September 30,
     2004 was primarily attributable to purchases of equipment. Cash provided by
     investing  activities  for the three months ended  September 30, 2003,  was
     primarily  attributable  the  release  of a letter of credit  related  to a
     leased facility and to purchases of equipment.

     We had no financing  activity  during the three months ended  September 30,
     2004,   as  compared  to  financing   activities   providing  net  cash  of
     approximately  $5.0 million during the same period in the prior year.  Cash
     provided by financing  activities for the three months ended  September 30,
     2003 was due to the private  sale of the  Company's  convertible  preferred
     stock and warrants  aggregating  approximately  $4.0 million as well as the
     private sale of the Company's  common stock and warrants  aggregating  $1.0
     million, partially offset by financing costs of approximately $0.6 million.

     Summary

     Historically,  we have  experienced  significant  recurring  net  operating
     losses as well as negative cash flows from  operations.  Our main source of
     liquidity  has been  equity  financing,  which was used to fund  historical
     losses from  operating  activities.  Based on our current cash  position of
     approximately  $4.1  million and our trend  toward cash flow  positive  and
     profitability,  there is no plan or requirement  for additional  financing.
     Additionally,  we  believe  the  Company  has  sufficient  cash to meet our
     funding needs for at least the next 12 months.



                                       16
<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
     ---------------------------------

     Based  on  our  management's  evaluation  (with  the  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  believed that our  Disclosure  Controls were
     designed to provide reasonable assurance of achieving their objectives and,
     at  the  "reasonable  assurance"  level,  were  effective  to  ensure  that
     information  required  to be  disclosed  by us in reports we file or submit
     under the  Exchange  Act is recorded,  processed,  summarized  and reported
     within the time periods specified in SEC rules and forms.

     Subsequent  to the  filing  of form  10-QSB  for  March  31,  2004,  and in
     conjunction  with  preparation  and  review of our  consolidated  financial
     statements for the year ended June 30, 2004, the Company determined that it
     had not  properly  calculated  and  recorded  convertible  preferred  stock
     dividends  and  related  beneficial   conversion  feature  charges  on  the
     issuances  of  the  Series  A,  B  and C  convertible  preferred  stock  in
     accordance  with  EITF  00-27  "Application  of Issue No.  98-5 to  Certain
     Convertible Instruments". As a result, the following periods were restated:
     September  30, and December 31, 2002;  March 31, June 30, and September 30,
     2003; and March 31, 2004.  The Company  concluded that the errors which led
     to the  restatement  was the result of a  material  weakness,  however  the
     Company believed that the additional  resources and review procedures added
     prior to the filing of the 10-KSB on September 28, 2004, were sufficient to
     prevent a  recurrence  of the matter in the  future and that no  additional
     changes to the Company's disclosure, controls and procedures were needed.

     Subsequent to the filing of our 10-KSB,  our auditors informed us there was
     a  material  weakness  relating  to the lack of  accounting  resources  and
     inadequate review and supervision of accounting  related to the calculation
     of preferred stock beneficial  conversion  features and dividends in fiscal
     2003 and during the various quarters in fiscal 2004.

     Changes in Internal Controls
     ----------------------------

     As a result of the notification of the Company's  auditors,  management and
     the Audit Committee determined that education and professional  development
     of accounting staff and the adding of additional  accounting resources will
     be sufficient.

                                       17
<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.




                                       18
<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 15, 2004