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

                                   FORM 10-Q


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

                 For the quarterly period ended March 31, 2003

                        Commission file number 000-25831

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

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


                 4002 Eisenhower Blvd, Tampa, Florida 33634-7511
                    (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                            May 5, 2003
------------------------------          -------------------------------
Common Stock, $.0033 par value                    12,907,119
                                                --------------
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                            FORM 10-Q MARCH 31, 2003


                                     INDEX


PART I - FINANCIAL INFORMATION


   ITEM 1 - FINANCIAL STATEMENTS

   CONDENSED CONSOLIDATED BALANCE SHEETS
      March 31, 2003 (unaudited) and June 30, 2002                         1 - 2

   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
    COMPREHENSIVE LOSS
      For the three and nine months ended March 31, 2003 (unaudited)
       and March 31, 2002 (unaudited)                                      3 - 4

   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
      For the nine months ended March 31, 2003 (unaudited)
       and March 31, 2002 (unaudited)                                      5 - 6

   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                   7 - 18

   ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS                          19 - 26

   ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK          26

   ITEM 4  CONTROLS AND PROCEDURES                                            26


PART II - OTHER INFORMATION

   ITEM 1  LEGAL PROCEEDINGS                                                  27

   ITEM 2  CHANGES IN SECURITIES AND USE OF PROCEEDS                          27

   ITEM 3  DEFAULTS UPON SENIOR SECURITIES                                    27

   ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                27

   ITEM 5  OTHER INFORMATION                                                  27

   ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                                  27

SIGNATURES                                                                    28

OFFICERS' CERTIFICATIONS                                                 29 - 30
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                     March 31,             June 30,
                                                                       2003                  2002
                                                                ------------------   -------------------
                                                                    (Unaudited)
<S>                                                             <C>                   <C>
ASSETS

Current assets
     Cash and cash equivalents                                  $        1,522,894    $          656,880
     Restricted cash                                                       296,676               366,276
     Marketable securities, available for sale, at market value               -                   82,250
     Accounts receivable, net                                            2,366,053               107,178
     Inventories                                                           112,240               136,930
     Prepaid expenses                                                      259,976               129,293
     Purchase deposits                                                        -                  841,000
     Other current assets                                                   33,726                13,491
                                                                ------------------    ------------------
         Total current assets                                            4,591,565             2,333,298

Property and equipment, net                                                635,632               682,395

Software, net                                                              867,190               104,874

Intangible assets, net                                                   2,331,726                45,394

Goodwill                                                                 3,515,698                 -

Other assets                                                                63,493                58,493
                                                                ------------------    ------------------
                                                                $       12,005,304    $        3,224,454
                                                                ==================    ==================


The accompanying notes to the financial statements are an integral part of these
condensed consolidated balance sheets.

                                       1
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

(continued)                                                          March 31,             June 30,
                                                                       2003                  2002
                                                                ------------------   -------------------
                                                                    (Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Accounts payable and accrued expenses                       $        4,051,542    $          675,321
    Accrued losses of discontinued operations                              105,097               137,958
    Deferred revenue                                                       662,212                46,780
    Due to Norstan, Inc.                                                    27,977                 -
    Advances from related parties                                          150,000                 -
    Current maturities of long-term debt                                   120,000               362,982
                                                                ------------------    ------------------
       Total current liabilities                                         5,116,828             1,223,041

Accrued losses of discontinued operations                                  159,139               235,012
                                                                ------------------    ------------------
         Total liabilities                                               5,275,967             1,458,053
                                                                ------------------    ------------------
Minority interest                                                          276,510               272,533
                                                                ------------------    ------------------
Commitment and contingencies

Shareholders' equity
    Series A Preferred stock, $.0033 par value; $8,521,208
     liquidation preference; 1,000,000 and no shares authorized on
     March 31, 2003 and June 30, 2002, respectively; 269,462 and
     no shares issued and outstanding on March 31, 2003
     and June 30, 2002, respectively                                     2.843.456                  -
    Series B Preferred stock, $.0033 par value; $8,837,902
     liquidation preference; 500,000 and no shares authorized on
     March 31, 2003 and June 30, 2002, respectively; 290,663 and
     no shares issued and outstanding on March 31, 2003 and
     June 30, 2002, respectively                                         3,058,371                  -
    Preferred stock, $.0033 par value; 500,000 and 2,000,000
     shares authorized on March 31, 2003 and June 30, 2002,
     respectively; no shares issued and outstanding on March 31,
     2003 and June 30, 2002                                                   -                     -
    Common stock, $.0033 par value; 50,000,000 shares authorized
     on March 31, 2002 and June 30, 2002; 12,907,119 and
     12,607,119 shares issued and outstanding on March 31, 2003
     and June 30, 2002, respectively                                        42,593                41,604
    Additional paid-in capital                                          67,314,621            65,176,647
    Accumulated deficit                                                (66,806,213)          (63,611,478)
    Accumulated other comprehensive loss                                      -                 (112,905)
                                                                ------------------    ------------------
      Total shareholders' equity                                         6,452,827             1,493,868
                                                                ------------------    ------------------
                                                                $       12,005,304    $        3,224,454
                                                                ==================    ==================

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

                                       2
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                        AND COMPREHENSIVE INCOME (LOSS)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                            For the three months ended                 For the nine months ended
                                                    March 31,                                 March  31,
                                     -----------------------------------------  ----------------------------------------
                                             2003                   2002               2003                   2002
                                     -------------------  --------------------  ------------------    -------------------
 <S>                                 <C>                  <C>                   <C>                   <C>

 Revenue
    Products                         $         5,320,288  $             62,237  $       15,130,625    $           181,341
    Services                                     190,155               121,319             464,805                377,874
                                     -------------------  --------------------  ------------------    -------------------
                                               5,510,443               183,556          15,595,430                559,215
                                     -------------------  --------------------  ------------------    -------------------
 Cost of revenue
    Products                                   3,541,067                35,493          10,080,202                112,858
    Services                                      84,543                89,767             275,859                307,901
                                     -------------------  --------------------  ------------------    -------------------
                                               3,625,610               125,260          10,356,061                420,759
                                     -------------------  --------------------  ------------------    -------------------

 Gross profit                                  1,884,833                58,296           5,239,369                138,456
                                     -------------------  --------------------  ------------------    -------------------
Operating expenses
    General and administrative                 1,494,137             1,625,427           5,237,984              4,905,039
    Engineering and development                  384,950               479,891           1,237,853              1,406,964
    Sales and marketing                          897,450               583,854           2,381,041              1,963,487
                                     -------------------  --------------------  ------------------    -------------------
                                               2,776,537             2,689,172           8,856,878              8,275,490
                                     -------------------  --------------------  ------------------    -------------------
 Loss before other income (expense)             (891,704)           (2,630,876)         (3,617,509)            (8,137,034)

 Other income (expense)
    Investment income                              4,980                16,882              10,316                104,126

                                                                                                                     -
    Gain on extinguishment of debt               716,014                  -                716,014                   -
    Realized loss on sale of                                                                                         -
      marketable securities                         -                     -               (115,201)                  -
    Minority interest                             (4,729)                1,009              (3,977)                 5,600
    Interest expense                             (56,623)               (5,150)           (184,378)               (32,800)
                                     -------------------  --------------------  ------------------    -------------------
Net loss from continuing operations             (232,062)           (2,618,135)         (3,194,735)            (8,060,108)

 Discontinued business
    Loss on disposal of
      discontinued operations                       -                 (265,534)               -                  (735,534)
                                     -------------------  --------------------  ------------------    -------------------
 Net loss                                       (232,062)           (2,883,669)         (3,194,735)            (8,795,642)

Other comprehensive income (loss)
      Marketable securities
        valuation adjustment                        -                    9,500                -                     9,000
                                     -------------------  --------------------  ------------------    -------------------
 Comprehensive loss                  $          (232,062) $         (2,874,169) $       (3,194,735)   $        (8,786,642)
                                     ===================  ====================  ==================    ===================

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

                                       3

<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                                   (Unaudited)



(continued)                                 For the three months ended                 For the nine months ended
                                                    March 31,                                 March  31,
                                     -----------------------------------------  ----------------------------------------
                                             2003                   2002               2003                   2002
                                     -------------------  --------------------  ------------------    -------------------

 Basic and diluted net loss per share

 Net loss                            $         (232,062)  $       (2,883,669)   $      (3,194,735)    $       (8,795,642)

    Beneficial conversion on preferred
       stock                                   (103,293)                -                (138,672)                  -
    Dividends on preferred stock               (134,858)                -                (277,680)                  -
                                     -------------------  --------------------  ------------------    -------------------

Net loss available to common
   shareholders                      $         (470,213)  $       (2,883,669)   $      (3,611,087)    $       (8,795,642)
                                     ===================  ====================  ==================    ===================

Basic and diluted net loss per share

   Loss from continuing operations   $             (.04)  $             (.21)   $            (.29)    $             (.70)
   Loss from discontinued operations                 -                  (.02)                  -                    (.06)

                                     -------------------  --------------------  ------------------    -------------------
                                     $             (.04)  $             (.23)   $            (.29)    $             (.77)
                                     ===================  ====================  ==================    ===================
 Weighted average common shares
    outstanding, basic and diluted           12,662,202           12,490,132           12,625,212             11,475,994
                                     -------------------  --------------------  ------------------    -------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of these
condensed consolidated statements.


                                       4
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   For the nine months ended
                                                                             March 31,
                                                                    -------------------------

                                                                       2003            2002
                                                                  --------------  --------------
<S>                                                               <C>             <C>
Cash flows from operating activities
   Net loss                                                       $   (3,194,735) $   (8,795,642)
   Adjustments to reconcile net loss to net cash used in
   operating activities
       Depreciation                                                      176,610         175,841
       Amortization                                                      532,607          34,419
       Non-cash charge to operations with respect to
        stock and warrants issued for services and
        amortization of previously issued warrants                        79,250        2,180,498
       Minority interest                                                   3,977           (5,600)
       Provision for impairment on discontinued operations                  -             100,000
       Gain on extinguishment of debt                                   (716,014)            -
       Loss on sale of marketable securities                             115,201             -
       Amortization of imputed interest                                  184,378             -
       Loss on disposal of property and equipment                          4,412           82,526

   Changes in operating assets and liabilities
    Restricted cash                                                       69,600             -
    Accounts receivable                                                 (388,789)         196,949
    Inventories                                                           24,690           32,243
    Prepaid expenses                                                    (130,683)         (65,817)
    Other current assets                                                  45,284          119,235
    Accounts payable and accrued expenses                              1,441,074         (194,939)
    Accrued loss on disposal of discontinued operations                 (108,734)        (304,103)
    Deferred revenue                                                     201,476          (67,177)
    Due to Norstan, Inc.                                                 874,451             -
                                                                  --------------   --------------
     Net cash used in operating activities                              (785,945)      (6,511,567)
                                                                  --------------   --------------
Cash flows from investing activities
   Capitalized software costs                                               -            (125,715)
   Proceeds from sale of marketable securities                            79,954             -
     Payment to purchase Norstan Network Services, Inc.               (3,350,000)        (400,000)
     Acquisition costs paid                                             (129,500)        (350,000)
     Patent costs paid                                                    (2,255)         (11,690)
     (Payments for) refunds of security deposits                          (5,000)           4,693
     Purchases of property and equipment                                 (77,959)         (79,690)
                                                                  --------------   --------------
       Net cash used in investing activities                      $   (3,484,760)  $     (962,402)
                                                                  --------------   --------------

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

                                       5
<PAGE>
                                       NETWOLVES CORPORATION AND SUBSIDIARIES

                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (Unaudited)

(continued)                                                        For the nine months ended
                                                                             March 31,
                                                                    -------------------------

                                                                       2003            2002
                                                                  --------------  --------------
Cash flows from financing activities

   Cash proceeds from private sale of preferred stock and
    warrants                                                      $   8,692,472   $        -
   Cash proceeds from private sale of common stock                         -          6,325,000
   Repayment of notes payable                                        (2,907,500)           -
   Financing costs paid                                                (798,253)       (310,000)
   Advances from related parties                                        600,000            -
   Repayment of advances from related parties                          (450,000)           -
                                                                  -------------   -------------
       Net cash provided by financing activities                      5,136,719       6,015,000
                                                                  -------------   -------------
Net increase (decrease) in cash and cash equivalents                    866,014      (1,458,969)

Cash and cash equivalents, beginning of period                          656,880       4,411,657
                                                                  -------------   -------------
Cash and cash equivalents, end of period                          $   1,522,894   $   2,952,688
                                                                  =============   =============


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
   AND FINANCING ACTIVITIES

Issuance of non-interest bearing promissory note to Norstan,
   Inc. (Note 4)                                                  $   3,479,850   $        -
                                                                  =============   =============

Common stock issued in partial repayment of non-interest
   bearing promissory note to Norstan, Inc. (Note 4)              $     345,000   $        -
                                                                  =============   =============

Warrants issued in connection with Preferred Stock
  issuance                                                        $     470,990   $        -
                                                                  =============   =============
</TABLE>

The accompanying notes to the financial statements
  are an integral part of these condensed consolidated
  statements.
                                        6


<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


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, 2002,  which has been
     derived from audited financial statements, are presented in accordance with
     the  requirements  of  Form  10-Q  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-K.  The
     accompanying  condensed consolidated financial statements and related notes
     should be read in conjunction with the Company's Annual Report on Form 10-K
     for the fiscal year ended June 30, 2002.  The results of operations for the
     three and nine months ended March 31, 2003 are not  necessarily  indicative
     of the results to be expected for the full year.

2    The Company

     The condensed  consolidated  financial  statements  include the accounts of
     NetWolves   Corporation  and  its  subsidiaries,   NetWolves   Technologies
     Corporation ("NWT"),  Norstan Network Services, Inc. ("NNSI"),  ComputerCOP
     Corporation  ("ComputerCOP")  and its majority  owned TSG Global  Education
     Web, Inc. ("TSG") (collectively "NetWolves" or the "Company").

     NWT 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.  NNSI provides  multiple
     source data and voice  services  and related  consulting  and  professional
     services   throughout  the  United  States.  TSG  provides  management  and
     consulting services to the automotive industry.  Effective August 31, 2002,
     the  Company  ceased all  operations  of  ComputerCOP  and  terminated  all
     remaining employees of ComputerCOP.

3    Significant accounting policies

     Use of estimates

     In preparing condensed consolidated financial statements in conformity with
     accounting  principles generally accepted in the United States,  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.

     Principles of consolidation

     The 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
     consolidated  financial  statements  as  minority  interest.  The  minority
     interest  consists of common  stock  representing  1.7% of the  outstanding
     shares of the subsidiary.

                                       7
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002




3    Significant accounting policies (continued)

     Inventories

     Inventories  consist of raw materials and finished  goods.  Inventories are
     valued at the lower of cost or net  realizable  value  using the  first-in,
     first-out  method.  Raw material and finished goods amounted to $76,938 and
     $35,302,  respectively,  at  March  31,  2003  and  $108,079  and  $28,851,
     respectively, at June 30, 2002.

     Business combinations and goodwill

     In June 2001, the Financial  Accounting Standards Board (the "FASB") issued
     Statement of Financial  Standards  ("SFAS") No. 141, Business  Combinations
     ("SFAS No.  141") and SFAS No. 142,  Goodwill and Other  Intangible  Assets
     ("SFAS No. 142"). SFAS No. 141 addresses financial accounting and reporting
     for business combinations while SFAS No. 142 addresses financial accounting
     and reporting for acquired goodwill and other intangible  assets.  SFAS No.
     141 applies to all  business  combinations  initiated  after June 30, 2001,
     while SFAS No. 142 is  required  to be  applied in fiscal  years  beginning
     after  December 15, 2001.  Identifiable  intangible  assets with other than
     indefinite lives will continue to be amortized in the financial statements,
     however,  goodwill and identifiable intangible assets with indefinite lives
     will no longer be amortized.  In connection  with the  acquisition of NNSI,
     the  adoption  of SFAS No. 141 has had a material  impact on the  Company's
     financial  statements.  The  adoption of SFAS No. 142 has not had  material
     impact on the Company's  financial  statements although the Company will be
     required to review its intangibles and goodwill  annually for indicators of
     impairment  and this  review  could  result in  recognition  of  impairment
     losses.  SFAS No. 142  requires  that the  Company  test all  goodwill  for
     impairment within six months of  implementation.  The Company has performed
     the  required  first  step of  testing  for  impairment  by  utilizing  the
     discounted cash flow method and did not find any impairment of goodwill.

     Basic and diluted net loss per share

     The diluted loss per share does not include the impact of potential  shares
     to be issued upon  exercise of  convertible  preferred  stock,  options and
     warrants  aggregating  approximately  23.7 million and 7.4 million at March
     31,  2003 and 2002,  respectively,  because the Company had a net loss from
     operations and, therefore, the effect would be antidilutive.

     Revenue recognition

     NWT 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)
     and SEC Staff  Accounting  Bulletin No. 101 ("SAB 101")  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.  Accordingly,  revenue from the sale
     of hardware and software  licenses are  recognized  at the time of delivery
     and acceptance of hardware and software products by the customer,  when the
     fee is fixed and determinable and  collectibility is probable.  Maintenance
     or  monitoring  revenue  that is  bundled  with an initial  license  fee is
     deferred and recognized  ratably over the maintenance or monitoring period.
     Amounts  deferred for maintenance or monitoring are based on the fair value
     of equivalent  maintenance  or monitoring  services  sold  separately.  The
     Company has established  vendor specific objective evidence ("VSOE") on all
     undelivered  elements  of its  software  arrangements,  which  consists  of
     maintenance,   monitoring  and,  at  times,  training  and  consulting.

                                       8
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


3    Significant accounting policies (continued) Revenue recognition (continued)

     The  Company  uses the  residual  method for the  delivered  elements.  The
     Company's  consulting projects are short-term in nature and are recorded as
     revenue when the project is complete.

     Revenues from NNSI generated from the resale of long distance  services are
     recognized as services are provided.  Revenues from NNSI primarily  consist
     of monthly  fees,  which are  recognized  over the monthly  period and long
     distance  charges,  which are  recognized as incurred.  These  revenues are
     included  within  products  in the  condensed  consolidated  statements  of
     operations.

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

     Shipping  and  handling  costs  are  included  in  cost of  revenue  in the
     accompanying consolidated statements of operations.

     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.

     Summary of recent accounting pronouncements

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation   Transition  and  Disclosure".   This  statement  amends  the
     transition  and  disclosure  provisions  of SFAS No.  123,  Accounting  for
     Stock-Based  Compensation.   Specifically,   SFAS  No.  148  provides  more
     transition  alternatives  for companies  that wish to adopt the  fair-value
     based  provisions of SFAS No. 123 and increases the disclosure  required of
     companies that continue to account for their stock-based compensation under
     the  intrinsic-value  method  prescribed under Accounting  Principals Board
     Opinion  ("APB") No. 25,  Accounting  for Stock  Issued to  Employees.  The
     annual  disclosure and transition  provisions of SFAS No. 148 are effective
     for fiscal  years ending after  December 15, 2002.  The interim  disclosure
     provisions are effective for interim  periods  beginning after December 15,
     2002.  The  Company has elected to continue to apply APB No. 25 and related
     interpretations  in accounting for its stock option plans and warrants,  as
     permitted under SFAS No. 123 and SFAS No. 148. The adoption of SFAS 148 has
     no material effect on the Company.

     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 No. 123 and No. SFAS 148, the effect on the  Company's net loss and
     net loss per share would be as follows:

                                       9
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


3    Significant accounting policies (continued)

     Summary of recent accounting pronouncements (continued)
<TABLE>
<CAPTION>
                                               For the three months                 For the nine months
                                               ended March 31,                         ended March 31,
                                 ----------------------------------------  ---------------------------------

                                         2003                 2002                 2003                  2002
                                 ------------------   -----------------    -----------------     ----------------
<S>                              <C>                  <C>                  <C>                   <C>
Net loss available to common
  shareholders, as reported      $        (470,213)   $      (2,883,669)   $      (3,611,087)    $      (8,795,642)

Deduct:  Total stock-based
  employee compensation
  expense determined under
  fair value based method for
  all awards, net of related
  tax effects                             (161,259)            (170,170)            (483,735)             (510,508)
                                 -----------------    -----------------    -----------------     -----------------

Pro forma net loss               $      (  631,472)   $      (3,053,839)   $      (4,094,822)    $      (9,306,150)
                                 =================    =================    =================     =================
Basic and diluted net loss per
share
         As reported             $            (.04)   $            (.23)   $            (.29)    $            (.77)
         Pro forma               $            (.05)   $            (.24)   $            (.32)    $            (.81)
</TABLE>

     The fair value of equity securities issued to non-employees in exchange for
     services is expensed in the accompanying  condensed  consolidated statement
     of operations and comprehensive loss as the services are provided.

     In  November  2002,  the FASB  issued  Statement  of  Financial  Accounting
     Standards  Interpretation  No. 45,  "Guarantor's  Accounting and Disclosure
     Requirements for Guarantees,  Including Indirect Guarantees of Indebtedness
     of Others" ("FIN 45"). FIN 45 addresses the  accounting and  disclosures to
     be made by a guarantor about obligations  under certain  guarantees that it
     has issued. It clarifies that a guarantor is required to recognize,  at the
     inception  of certain  guarantees,  a  liability  for the fair value of the
     obligation  undertaken in issuing those  guarantees on a prospective  basis
     for guarantees  issued or modified after December 31, 2002. FIN 45 requires
     disclosure in all financial statement  presentations  issued after December
     15, 2002. The adoption of FIN 45 has no material effect on the Company.

4    Business combination

     On July 9, 2002, the Company acquired all of the outstanding  capital stock
     of NNSI  pursuant  to a Stock  Purchase  Agreement  dated as of January 30,
     2002, as amended,  among Norstan,  Inc. ("Seller") and NNSI, both Minnesota
     corporations and the Company.  NNSI provides multiple source data and voice
     services and related  consulting and professional  services  throughout the
     United States.

                                       10
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002



4    Business combination (continued)

     The Company paid to the Seller $7,500,000,  $3,750,000 of which was paid in
     cash on or prior to closing and $3,750,000 was payable under the terms of a
     non-interest  bearing  promissory  note due July 9, 2003. The $3,750,000 in
     cash paid by the  Company  to the  Seller was  primarily  obtained  through
     equity and debt financing and to a lesser extent from working capital.

     On March 18, 2003, the Company agreed to pay Norstan,  Inc. $2.9 million in
     cash and issued  300,000  shares of its common stock in full  settlement of
     its  outstanding  $3.75  million   non-interest  bearing  promissory  note.
     Management  determined  the fair value of the common shares issued based on
     the  quoted  market  price on such  date.  This  note  repayment  and share
     issuance resulted in recognition of a gain on extinguishment of debt, which
     is reflected  in the  accompanying  condensed  consolidated  statements  of
     operations and comprehensive loss.

     The total purchase  price,  including  acquisition  costs, is summarized as
     follows:
<TABLE>
       <S>                                                     <C>
       Cash paid to Norstan, Inc., on or prior to closing      $   3,750,000
       Promissory note payable*                                    3,479,850
       Finders fee                                                   350,000
       Professional fees                                             225,500
                                                               -------------
                                                               $   7,805,350
                                                               =============
</TABLE>
          *The non-interest bearing promissory note payable with a face value of
          $3,750,000 was discounted  using a rate of 7.5% and was due on July 9,
          2003.

     The  results  of NNSI's  operations  have been  included  in our  condensed
     consolidated financial statements commencing July 9, 2002.

     The following  table  summarizes  the  estimated  fair values of the assets
     acquired and liabilities assumed at the July 9, 2002 acquisition date.

<TABLE>
          <S>                                                              <C>
          Current assets                                                   $       2,782,079
          Equipment                                                                   56,300
          Intangible assets not subject to amortization - licenses                   203,000
          Intangible  assets  subject to  amortization  (estimated 5
           year useful life)                                                       3,376,000
          Goodwill                                                                 3,515,698
                                                                           -----------------
          Total assets acquired                                                    9,933,077
                                                                           -----------------
          Current liabilities                                                     (2,127,727)
                                                                           -----------------
          Total liabilities assumed                                               (2,127,727)
                                                                           -----------------
          Net assets acquired                                              $       7,805,350
                                                                           =================
</TABLE>

                                       11
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


4    Business combination (continued)

     The fair value of acquired  intangible  assets subject to amortization,  as
     well as their respective estimated useful lives, is as follows:
<TABLE>
<CAPTION>
                                                    Estimated
                                                    Useful Life        Fair Value
                                                -----------------  -----------------
        <S>                                          <C>           <C>
        Contractual customer relationships           5 Years       $       2,436,000
        Computer billing software                    5 Years                 940,000
                                                                   -----------------
        Total intangible assets                                    $       3,376,000
                                                                   =================
</TABLE>

     All of the  goodwill  arising  from  this  acquisition  is  expected  to be
     deductible  for  income  tax  purposes  over a period  of 15  years  and is
     included in the Company's  Telecommunications  segment. Based on intangible
     assets held at March 31,  2003,  estimated  amortization  of the  Company's
     identifiable intangible assets will equal approximately $675,000 in each of
     the  five  succeeding  fiscal  years.   Accumulated  amortization  on  such
     intangibles was $491,880 at March 31, 2003.

     The following  unaudited pro forma financial  information has been prepared
     assuming that the  acquisition  of NNSI had taken place at the beginning of
     the  periods  presented.  The  pro  forma  information  is not  necessarily
     indicative  of the  combined  results  that  would  have  occurred  had the
     acquisition  taken  place  at  the  beginning  those  periods,  nor  is  it
     necessarily  indicative  of the results  that may occur in the future.  The
     quarter  ended March 31, 2003 is  included  in the  accompanying  condensed
     consolidated statements of operations and comprehensive loss.
<TABLE>
<CAPTION>
                                                     For the quarter         For the nine months ended
                                                         ended                      March 31,
                                                        March 31,
                                                          2002                  2003                 2002
                                                   -------------------  -------------------  ------------------
     <S>                                           <C>                  <C>                  <C>

     Revenue                                       $        5,521,911   $        15,947,252  $       16,457,999
     Net loss from continuing operations
         available to common shareholders          $       (1,813,771)  $        (3,545,568)         (5,807,835)
     Basic and diluted net loss per share from
         continuing operations                     $             (.15)  $              (.28) $            (.51)
     Net loss available to common shareholders
         (including discontinued operations)       $       (2,079,305)  $        (3,545,568)         (6,543,369)
     Basic and diluted net loss per share
         (including discontinued operations)       $             (.17)  $              (.28) $            (.57)
</TABLE>


                                       12
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


5    Balance sheet components
<TABLE>
<CAPTION>
                                                                         March 31,           June 30,
                                                                           2003                2002
                                                                   -----------------    -----------------
      <S>                                                          <C>                  <C>
      Property and equipment, net
         Machinery and equipment                                   $         877,916    $         755,045
         Furniture and fixtures                                              218,497              218,497
         Leasehold improvements                                              142,353              140,875
                                                                   -----------------    -----------------
                                                                           1,238,766            1,114,417
         Less: accumulated depreciation and amortization                    (603,134)            (432,022)
                                                                   -----------------    -----------------
         Property and equipment, net                               $         635,632    $         682,395
                                                                   =================    =================

                                                                          March 31,           June 30,
                                                                            2003                2002
                                                                   -----------------    -----------------
      Accounts payable and accrued expenses
         Trade accounts payable and other accrued
            operating expenses                                     $       2,436,166    $         490,311
         Sales, excise and universal services charges payable                396,919                 -
         Compensated absences                                                347,462              182,671
         Dividends payable                                                   277,680                 -
         Provider settlement obligation                                      250,000                 -
         Other liabilities                                                   184,564                1,039
         Bonuses and commissions payable                                     158,751                1,300
                                                                   -----------------    -----------------
                                                                   $       4,051,542    $         675,321
                                                                   =================    =================
</TABLE>

6    Related party transactions

     On July 10, 2002, the Company received advances from four individuals,  one
     of whom is an officer  and  director  of the  Company  and another who is a
     director of the  Company,  aggregating  $600,000,  of which,  $450,000  was
     subsequently  repaid  to three  of  those  individuals.  The  advances  are
     non-interest  bearing, due on demand and have no scheduled repayment terms.
     On November 1, 2002, the Company entered into a consulting agreement with a
     corporation whose majority owner is also a shareholder of the Company,  for
     marketing and new business development opportunities,  as well as strategic
     advisory services.  The agreement  commenced effective November 1, 2002 and
     requires payments of $20,000 per month,  cancelable at the Company's option
     upon 30 days notice. 7 Shareholders' equity Preferred stock

     On July 16, 2002 the Company amended its Certificate of  Incorporation,  as
     authorized by its Board of Directors,  by designating  1,000,000  shares of
     its 2,000,000  shares of preferred stock as Series A Convertible  Preferred
     Stock, par value $.0033 per share ("Series A Preferred Stock").

                                       13
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


7    Shareholders' equity (continued)

     Preferred stock (continued)

     Cumulative dividends on the Series A Preferred Stock accrue at a rate of 8%
     per annum from the date of issuance through June 30, 2004 and thereafter at
     a rate of 12% per  annum  and will be  payable  annually  at the  Company's
     option in cash or Series A  Preferred  Stock.  Each  share of the  Series A
     Preferred  Stock was originally  convertible at the holders' option into 10
     shares of common  stock.  Pursuant  to the  antidilution  provision  of the
     Series A Preferred  Stock,  each share of Series A  Preferred  Stock is now
     convertible  into  18.75  shares of common  stock.  Each  share of Series A
     Preferred  Stock  will have 10 votes and will vote as a single  class  with
     holders of the Company's common stock.

     Through March 31, 2003, the Company has issued 269,462 shares of its Series
     A Preferred Stock for a total cash consideration of $4,041,972.  The shares
     were  issued  in  connection  with a  private  offering  of  the  Company's
     securities  pursuant  to  which  shareholders  also  received  warrants  to
     purchase shares of the Company's  common stock at an initial exercise price
     equal to $1.65 per  share.  Five  warrants  were  issued  for each share of
     Series A Preferred  Stock.  The  warrants  have an exercise  price equal to
     $1.65 per share and are exercisable for five years from the issuance date.

     Approximately  $3,000,000  of the  proceeds  from the sale of the  Series A
     Preferred Stock was used to purchase the outstanding  capital stock of NNSI
     (Note 4).

     On October 30, 2002, the Company amended its Certificate of  Incorporation,
     as authorized by its Board of Directors,  by designating  500,000 shares of
     its 2,000,000  shares of preferred stock as Series B Convertible  Preferred
     Stock, par value $.0033 per share ("Series B Preferred Stock").

     Cumulative dividends on the Series B Preferred Stock accrue at a rate of 8%
     per annum from the date of issuance through January 31, 2005 and thereafter
     at a rate of 12% per annum and will be payable  annually  at the  Company's
     option in cash or Series A  Preferred  Stock.  Each  share of the  Series B
     Preferred  Stock is  convertible  at the holders'  option into 20 shares of
     common  stock.  Each share of Series B Preferred  Stock will have ten votes
     and will vote as a single class with holders of the Company's common stock.

     Through March 31, 2003, the Company has issued 290,663 shares of its Series
     B Preferred Stock for a total cash consideration of $4,650,500.  The shares
     were  issued  in  connection  with a  private  offering  of  the  Company's
     securities  pursuant  to  which  shareholders  also  received  warrants  to
     purchase shares of the Company's  common stock at an initial exercise price
     equal to $1.25 per  share.  Five  warrants  were  issued  for each share of
     Series B Preferred  Stock.  The  warrants  have an exercise  price equal to
     $1.25 per share and are exercisable for five years from the issuance date.

     Proceeds  from the  issuance  of the  preferred  stock  and  warrants  were
     allocated to preferred  stock and to additional  paid-in capital based upon
     their relative fair value. Additionally, after allocating the proceeds, the
     Company  determined that there was a beneficial  conversion feature for the
     Series A  Preferred  Stock and  Series B  Preferred  Stock,  which has been
     included in the condensed consolidated statements of operations.

                                       14
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


7    Shareholders' equity (continued)

     Stock option plan

     In June 2002, the Company's  Board of Directors  authorized the creation of
     the 2002 stock option plan (the "2002 Plan") to grant  non-qualified  stock
     options to employees,  directors and  consultants to purchase up to a total
     of 3,000,000  shares of the Company's  common stock. If any award under the
     2002 Plan terminates,  expires unexercised,  or is canceled,  the shares of
     common stock that would otherwise have been issuable  pursuant thereto will
     be available for issuance  pursuant to the grant of new awards. On December
     20, 2002, the Company issued  approximately  815,000  options to employees,
     none of whom were  officers or directors  of the Company,  with an exercise
     price of $1.00 per share and a term of 5 years.

     Material issuances for the quarter

     In  January  2003,  the  Company  entered  into  a  three-year   consulting
     agreement.  In return for  services,  the  Company  granted an  immediately
     exercisable  five-year  warrant to purchase 350,000 shares of the Company's
     common  stock at an exercise  price of $1.50 per share.  Additionally,  the
     consultant  was  immediately  entitled to the issuance of 100,000 shares of
     the  Company's  unregistered  common  stock.  The value of the  warrant and
     unregistered common stock, aggregating $217,000 and $101,000, respectively,
     are being amortized over the life of the agreement.

8    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 three separate business segments,  the Technology  segment,  the
     Telecommunications segment and the Management 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  worldwide,  is  primarily  engaged  in the  design,  development,
     marketing  and  support  of  information  delivery  hardware  products  and
     software.  The  Telecommunications  segment,  which operates  domestically,
     provides multiple source data and voice services and related consulting and
     professional   services.  The  Management  and  Consulting  segment,  which
     operates   domestically,   provides   management  and  consulting  services
     primarily to the automotive industry throughout the United States.
<TABLE>
<CAPTION>
                                      For the three months ended     For the nine months ended
                                               March 31,                      March 31,
                                      --------------------------     -------------------------
                                          2003          2002             2003         2002
                                      ----------    ----------       ------------   ----------
         <S>                          <C>           <C>               <C>           <C>

         Revenue
            Technology                $  142,215    $  102,661        $   382,723   $  321,135
            Telecommunications         5,287,377          -            14,970,586         -
            Management and
              Consulting
                                          80,851        80,895            242,121      238,080
                                      ----------    ----------        -----------   ----------
                Total                 $5,510,443    $  183,556        $15,595,430   $  559,215
                                      ==========    ==========        ===========   ==========
</TABLE>
                                       15
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


8    Segment information (continued)
<TABLE>
     <S>                              <C>               <C>              <C>            <C>
     Operating income (loss)
        Technology                    $ (1,571,219)     $ (2,573,659)    $ (4,945,047)  $ (7,810,917)
        Telecommunications                 791,040                 -        1,484,885           -
        Management and
          Consulting                       (10,173)          (57,217)         (55,751)      (326,117)
                                          (101,352)             -            (101,596)          -
                                      ------------      ------------     ------------    ------------
            Total                     $   (891,704)     $ (2,630,876)    $ (3,617,509)   $ (8,137,034)
                                      ============      ============     ============    ============

                                                                            March 31,       June 30,
                                                                              2003            2002
                                                                         ------------    ------------
        Identifiable assets
            Technology                                                   $  1,692,025    $  3,114,692
            Telecommunications                                             10,241,274            -
            Management and Consulting                                          30,207          45,143
            Other                                                                 573            -
                                                                         ------------    ------------
                                                                           11,964,079       3,159,835
            Net assets of discontinued operations                              41,225          64,619
                                                                         ------------    ------------
                Total                                                    $ 12,005,304    $  3,224,454
                                                                         ============    ============
</TABLE>


     The  Company  had  two  major  customers,  both  in the  Telecommunications
     segment,  which  accounted for 32% and 10%,  respectively,  of consolidated
     revenue for the nine months ended March 31, 2003 and one major  customer in
     the Technology segment which accounted for 39% of consolidated  revenue for
     the nine months  ended March 31,  2002.  Additionally,  the Company had one
     customer  in  the  Telecommunication  segment  that  accounted  for  14% of
     consolidated accounts receivable at March 31, 2003 and four customers,  one
     in the  Technology  segment  and  three in the  Management  and  Consulting
     segment that accounted for 29%, 10%, 13% and 21% of  consolidated  accounts
     receivable at June 30, 2002.

     The  Company  made  purchases  from two data and  voice  service  providers
     included   within   the   Telecommunications    segment   that   aggregated
     approximately  85% and 13% of the total cost of revenue for the nine months
     ended March 31, 2003.

9    Disposal of business segment

     During June 2001, the Company  formally  adopted a plan to discontinue  its
     ComputerCOP software operations.  At that time, this consisted primarily of
     ComputerCOP software technology,  inventory and property and equipment.  At
     June 30, 2001, the Company accrued a provision for estimated  losses during
     the phase out period of approximately $497,000.  During the year ended June
     30, 2002, the Company recorded additional charges  aggregating  $1,053,275,
     which  primarily  represented  the cost of  salaries  through  an  extended
     disposal date of August 31, 2002,  coupled with an equity  settlement of an
     employment  contract and a revised  estimate of the total  leased  facility
     costs, net of a sublease.

                                       16
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002

9    Disposal of business segment (continued)

     Effective   August  31,  2002,   the  Company   ceased  all  operations  of
     ComputerCOP,   terminated  all  remaining   employees  of  ComputerCOP  and
     subleased a majority of the space  previously  occupied by ComputerCOP  for
     $5,000 per month for a period of six months. The sublease also provided the
     lessee  use of certain  furniture  and  equipment  during the period of the
     lease.  Accrued  losses of  discontinued  operations  included  within  the
     condensed  consolidated  balance sheets at March 31, 2003  represent  lease
     payment obligations on the ComputerCOP facility.

10   Provider liabilities and credits

     During the transition  period of the Company's  newly acquired  subsidiary,
     NNSI, the Company was the target of a theft of telecommunications services.
     The Company is currently working with one of its major providers to resolve
     this issue and currently  believes its obligation to approximate  $250,000.
     Accordingly,  the  Company has accrued  such amount and has  expensed  such
     amount  in  general  and  administrative   expenses  within  the  condensed
     consolidated statements of operations.

     As a result of this theft of  telecommunications  services,  management has
     since  enacted new internal  controls at the  subsidiary  level in order to
     deter future  occurrences  of this nature.  It is the opinion of management
     that the outcome of this matter will not have a material  adverse effect on
     the Company's operations or financial condition.

     Additionally,  in November  2002,  the  Company  was  notified by this same
     provider, of credits of approximately  $195,000 due to the Company from the
     misapplication  of payments by the provider.  The Company has recorded such
     amount as a receivable and as an offset within  general and  administrative
     expenses in its condensed consolidated financial statements for the quarter
     ended March 31, 2003.

11   Gain on extinguishment of debt

     On March 26,  2003,  the Company  paid $7,500 in full  settlement  of notes
     payable to the Duffy- Vinet  Institute,  Inc., which were assumed by TSG in
     connection with its acquisition of Sales and Management Consulting, Inc. At
     the  time,  the  notes  had a  carrying  value  of  approximately  $304,000
     representing unpaid principal and accrued interest. The settlement resulted
     in a gain on  extinguishment  of debt of approximately  $297,000,  which is
     included  in  the  accompanying   condensed   consolidated   statements  of
     operations.

     On March 18, 2003, the Company agreed to pay Norstan,  Inc. $2.9 million in
     cash and issued  300,000  shares of its common stock in full  settlement of
     its  outstanding  $3.75  million   non-interest  bearing  promissory  note.
     Management  determined  the fair value of the common shares issued based on
     the quoted market price on such date,  $345,000.  The Company  recorded the
     difference  between the  consideration  given and the carrying value of the
     note  as of  March  18,  2003 as a gain  on  extinguishment  of debt in the
     accompanying   condensed   consolidated   statements  of   operations   and
     comprehensive loss.

12   Liquidity

     Historically,  the  Company has  experienced  significant  reoccurring  net
     operating  losses as well as  negative  cash  flows  from  operations.  The
     Company's main source of liquidity has been equity  financing which is used
     to fund losses from operating  activities.  From July 1, 2002 through March
     31, 2003, the Company has raised,  exclusive of commissions,  approximately
     $8.7 million from the sale of its preferred stock.  While  approximately $6
     million of the proceeds was  utilized to purchase the  outstanding  capital
     stock of NNSI and repay a note payable due to Norstan,  Inc., the remainder
     of the proceeds  has been and will  continue to be utilized to fund ongoing
     operations.
                                       17
<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                   NINE MONTHS ENDED MARCH 31, 2003 AND 2002


12   Liquidity

     The  Company   will   continue   to  utilize   cash   generated   from  its
     Telecommunications segment to fund the operations of its other segments and
     is seeking to raise  additional  monies from the sale of its capital  stock
     and/or  obtain debt  financing  to meet its funding  needs over the next 12
     months.  Additionally,  management has instituted cost saving measures over
     the past 12 months intended to reduce its overhead expenses,  most notably,
     a reduction of staffing within its Technology  segment and its discontinued
     ComputerCOP  operations,  aggregating  approximately $2.5 million in annual
     salaries and related benefits.

     Currently,  the Company does not have sufficient  capital resources to fund
     operations for a period of 12 months from the filing of this current report
     and there can be no  assurance  that the  Company  will  obtain  sufficient
     capital  to  finance  its  operations.  If the  Company  is unable to raise
     sufficient  funding  to  sustain  its  operations,   it  will  curtail  the
     operations of certain business segments.  However, even if the Company does
     raise sufficient operating capital, there can be no assurances that the net
     proceeds will be sufficient to enable it to develop its business to a level
     where it will generate profits and cash flows from  operations.  Due to the
     factors  listed  above,  these matters  raise  substantial  doubt about the
     Company's ability to continue as a going concern, as noted in the report of
     independent  certified public accountants dated October 9, 2002,  contained
     in the  Company's  Form 10-K for the fiscal year ended June 30,  2002.  The
     accompanying  consolidated  financial  statements  have been  prepared on a
     going concern  basis,  which  contemplates  the  realization  of assets and
     satisfaction of liabilities in the normal course of business. The financial
     statements do not include any adjustments relating to the recoverability of
     the recorded assets or the  classification of the liabilities that might be
     necessary should the Company be unable to continue as a going concern.


                                       18
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


     Forward-Looking Statements

     This Form 10-Q 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-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  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")  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.

     NetWolves   products  and  services  offer  complete  system  solutions  to
     organizations  needing cost effective network security (firewall,  routing,
     intrusion  detection,   content  filtering,  email,  intranet,  FTP,  etc.)
     complete with advanced integrated hardware, a user-friendly  interface, and
     Internet-  based  expansion  capabilities.  As  companies  migrate from the
     traditional  private leased lines  (dedicated  point to point data or voice
     circuits)  to  public  network  connectivity  to  reduce  costs,  NetWolves
     provides cost-effective, value-added expansion technologies such as virtual
     private   networking   ("VPN"),   a  process  used  to  allow  secure  data
     transmissions  on a local area network,  a wide area network,  or to secure
     wireless network  connections.  This feature affords the user virtually all
     the benefits of lease-line service without the attendant recurring costs.

     NetWolves  differentiates itself from its competitors primarily through its
     proprietary patent pending  technology,  which provides  centralized remote
     monitoring and management  facilities.  While other,  more  labor-intensive
     management  systems  currently  exist,  such  systems  require  an  inbound
     administrative  port to provide  remote  monitoring  and  management.  Most
     Fortune  1000  companies  are  unwilling  to take the risk of opening up an
     inbound  administrative  port while  having their  entire  enterprise  on a
     public broadband medium.  "Hackers",  using simple port scanning tools, can
     easily locate these  administrative  inbound ports. SRM2 TM has the ability
     to  monitor  thousands  of  locations   concurrently   without  opening  an
     administrative  inbound port and allows the secure,  remote  management and
     monitoring of multiple  all-in-one gateway servers located worldwide.  This
     monitoring  can be  performed  in  real-time  from one or numerous  central
     sites.  This  technology  also allows a network  administrator  to create a

                                       19
<PAGE>

     configuration  template with all necessary  information changes required to
     manage  all-in-one  units.  This template can be applied to each unit via a
     secure  configuration  mechanism  from  the  central  monitoring  location,
     without compromising network security. It is this SRM2 TM system that forms
     the basis of the Company's agreement with the General Electric Company.

     Acquisition of Norstan Network Services, Inc.

     On July 9, 2002, the Company acquired all of the outstanding  capital stock
     of Norstan Network Services,  Inc. ("NNSI"). The Company paid to the Seller
     $7,500,000, $3,750,000 of which was paid in cash on or prior to closing and
     $3,750,000  that was  payable  under  the term of a non-  interest  bearing
     promissory note due July 9, 2003.  Subsequently,  the Company negotiated an
     early payoff of the note for $2.9 million in cash and issued 300,000 shares
     of its common stock.  This note  repayment and share  issuance  resulted in
     recognition of a gain on  extinguishment of debt, which is reflected in the
     accompanying  condensed  consolidated  balance statements of operations and
     comprehensive loss.

     NNSI provides  multiple source data and voice services to approximately 400
     customers  throughout  the United  States.  NNSI's  products  include voice
     services  consisting  of  switched  and  dedicated   inbound/outbound  long
     distance,  travel cards,  conference  calling and local services,  and data
     services  consisting  of IP  dedicated  and  dial  up  services,  broadband
     services, frame relay and private line.

     NNSI's selling methodology  includes completing a thorough needs assessment
     to understand the current  infrastructure  and future  requirements  of the
     prospective  customer.  Upon completion of the  assessment,  NNSI designs a
     custom, unique and flexible solution utilizing  multi-carrier  alternatives
     under one contract,  one invoice and support structure.  Its account teams,
     strategic industry  relationships and consolidated  information and billing
     platform allow NNSI to deliver a single source solution  utilizing the best
     of what is  available  to solve the  customer's  communication  and network
     needs.

     As a result  of the  acquisition,  the  Company  expects  to  increase  its
     security  solution  revenues  within its  Technology  segment by leveraging
     NNSI's  existing  customer  base.  In  addition,  the  Company  expects the
     acquisition will enable it to expand the range of services it can offer its
     existing customers as well as future customers.

     Agreement with General Electric

     On September 26, 2002, the Company entered into a three year agreement with
     General  Electric  Consumer  Finance,  the  consumer  financing  arm of the
     General  Electric  Company.  The agreement  covers the use of the Company's
     technology  by General  Electric  Consumer  Finance  in all of its  offices
     worldwide,  encompassing  36 countries.  Beginning in December 2002 Company
     has  commenced  the rollout of its products  initially  within  Germany and
     Japan.

                                       20

<PAGE>


     Results of Operations

     The Company currently operates in three business  segments,  the technology
     segment      ("Technology"),       the      telecommunications      segment
     ("Telecommunications")   and  the   management   and   consulting   segment
     ("Management  and  Consulting").  During June 2001,  the  Company  formally
     adopted  a  plan  to  discontinue  its  ComputerCOP   software  operations,
     eliminating the Computer Software  segment.  Effective August 31, 2002, the
     Company  ceased all  operations of  ComputerCOP,  terminated  all remaining
     employees of ComputerCOP  and subleased a majority of the space  previously
     occupied by ComputerCOP.

     Nine months ended March 31, 2003 and 2002

            Revenue

     Revenue from  continuing  operations  increased to $15,595,430 for the nine
     months  ended March 31,  2003,  compared to $559,215 for the same period in
     the prior year.  The  increase in revenue was  primarily  the result of the
     inclusion of the results of Norstan Network Services, Inc., commencing July
     9, 2002, which resulted in revenue from the  Telecommunications  segment of
     $14,970,586.  Revenues from the Company's  Technology  and  Management  and
     Consulting  segments  did not  experience  significant  change for the nine
     months ended March 31, 2003  compared to the same period in the prior year.
     The  Company  anticipates  a  significant  increase  in  revenue  from  its
     Technology segment due to the rollout of its products in fulfillment of the
     Company's  September 2002 contract with General Electric  Consumer Finance,
     including  its current  rollout in Germany and Japan.  The Company does not
     anticipate  any  material  change  in  revenues  from  its  Management  and
     Consulting segment in this fiscal year.

            Cost of revenue and gross profit

     Cost of revenue in connection with the Telecommunications  segment includes
     costs of multiple source data and voice service providers.  Cost of revenue
     in connection with the Technology segment include costs associated with the
     sale  of  the  Company's   Internet   products  and  services  and  include
     manufacturing,  packaging and shipping  costs,  amortization of capitalized
     software costs, and warranty  expenses.  Cost of revenue in connection with
     the  Management  and  Consulting   segment   include  direct   expenses  of
     consultants utilized in the generation of management and consulting revenue
     and software  licensing costs. Cost of revenue increased to $10,356,061 for
     the nine months  ended March 31,  2003,  compared to $420,759  for the same
     period in the prior year. The increase in cost of revenue was primarily the
     result of the inclusion of the results of Norstan Network  Services,  Inc.,
     commencing  July 9,  2002,  which  resulted  in cost of  revenue  from  the
     Telecommunications  segment  of  $9,988,061.  Cost of  revenue  within  the
     Technology  segment decreased to $193,017 compared to $211,929 for the same
     period in the prior year.  This  decrease  was  primarily  the result of an
     aggregate  reduction of inventory  obsolescence  for the period of $17,700.
     Cost of revenue within the Management and Consulting  segment  decreased to
     $174,983  compared to $208,830 for the same period in the prior year.  This
     decrease  was  primarily  the  result of the  consolidation  of  consulting
     services.

     Overall  gross  profit was at 34% for the nine months ended March 31, 2003,
     compared  to 25% for the same  period in the prior  year.  The  increase in
     gross profit was  primarily  the result of the  inclusion of the results of
     Norstan Network Services,  Inc., commencing July 9, 2002, which resulted in
     gross profit from the Telecommunications segment of 33%.


                                       21
<PAGE>

            General and administrative

     General and  administrative  expenses  consist  primarily  of salaries  and
     related  expenses for executive,  finance,  facilities and human  resources
     personnel,   recruiting   expenses  and  professional   fees.  General  and
     administrative  expenses  increased to $5,237,984 for the nine months ended
     March 31,  2003,  compared to  $4,905,039  for the same period in the prior
     year. The increase was primarily the result of the inclusion of the results
     of Norstan  Network  Services,  Inc.,  totaling  $2,120,068  for the period
     commencing July 9, 2002 through March 31, 2003.  This was partially  offset
     by a reduction of costs related to a settlement expense and a net reduction
     of  equity   compensation   of   consultants  of  $487,500  and  $1,003,248
     respectively,   compared  to  the  prior  period.  We  expect  general  and
     administrative costs to increase in absolute dollars in the future.

            Engineering and development

     Engineering  and  development  expenses,  which are  expensed as  incurred,
     consist  primarily of salaries and related expenses for personnel  utilized
     in  designing,  maintaining  and enhancing our products as well as material
     costs for test units and prototypes.  Costs associated with the development
     of  software   products  are  generally   capitalized  once   technological
     feasibility is reached.  Engineering and development  expenses decreased to
     $1,237,853 for the nine months ended March 31, 2003, compared to $1,406,964
     for the same period in the prior year.  The  decrease  in  engineering  and
     development  costs was  primarily  the  result of a  limited  reduction  of
     engineering and development personnel,  which resulted in reduced salary of
     $105,418  for the  current  period.  We  expect  to incur  engineering  and
     development  costs in the future as we continue to  maintain  our  existing
     product line as well as develop new products and features,  as evidenced by
     the  development of our intelligent  Failover and continued  development of
     our SRM2 TM technology.

            Sales and marketing

     Sales and marketing expenses consist primarily of salaries, commissions and
     related  expenses for personnel  engaged in  marketing,  sales and customer
     support   functions,   as  well  as  costs  associated  with  trade  shows,
     promotional  activities,   advertising  and  public  relations.  Sales  and
     marketing  expenses increased to $2,381,041 for the nine months ended March
     31, 2003, compared to $1,963,487 for the same period in the prior year. The
     increase in sales and  marketing  expenses was  primarily the result of the
     inclusion  of the  results  of Norstan  Network  Services,  Inc.,  totaling
     $1,377,572 for the period  commencing  July 9, 2002 through March 31, 2003.
     This was partially  offset a reduction in the number of sales personnel and
     associated salaries in the Company's  Technology segment totaling $659,915.
     Additionally,  the Company has been changing its marketing efforts to focus
     primarily on direct sales to Fortune 1000 customers. The Company intends to
     continue to  aggressively  promote its  current  and future  products  and,
     therefore,  expects  sales and  marketing  costs to  increase  in  absolute
     dollars in the future.

            Other income (expenses)

     Other income (expenses)  consists primarily of realized gains and losses on
     marketable securities, interest expense and investment portfolio income and
     increased to $422,774 for the nine months ended March 31, 2003, compared to
     $76,926 for the same period in the prior year.  The increase was  primarily
     due to an increase in interest expense on the note payable to Norstan, Inc.
     of $184,378  and a loss on the sale of  marketable  securities  of $115,201
     offset  by a gain on  extinguishment  of debt  within  the  Management  and
     Consulting  segment  of  $296,786  and the  telecommunications  segment  of
     $419,228.

                                       22
<PAGE>

     Three months ended March 31, 2003 and 2002

            Revenue

     Revenue from  continuing  operations  increased to $5,510,443 for the three
     months  ended March 31,  2003,  compared to $183,556 for the same period in
     the prior year.  The  increase in revenue was  primarily  the result of the
     inclusion of the results of Norstan Network Services,  Inc. for the period,
     which   resulted  in  revenue  from  the   Telecommunications   segment  of
     $5,287,377.  Revenues  from the Company's  Technology  and  Management  and
     Consulting  segments did not  experience  significant  change for the three
     months ended March 31, 2003  compared to the same period in the prior year.
     The  Company  anticipates  a  significant  increase  in  revenue  from  its
     Technology segment due to the rollout of its products in fulfillment of the
     Company's  September 2002 contract with General Electric  Consumer Finance.
     The Company does not anticipate any significant change in revenues from its
     Management and Consulting segment in the near term.

            Cost of revenue and gross profit

     Cost of revenue  increased to  $3,625,610  for the three months ended March
     31, 2003,  compared to $125,260 for the same period in the prior year.  The
     increase in cost of revenue was  primarily  the result of the  inclusion of
     the  results  of Norstan  Network  Services,  Inc.  for the  period,  which
     resulted  in  cost  of  revenue  from  the  Telecommunications  segment  of
     $3,522,948.  Cost of revenue from the Company's  Technology  and Management
     and Consulting segments did not experience significant change for the three
     months ended March 31, 2003 compared to the same period in the prior year.

     Overall  gross profit was at 35% for the three months ended March 31, 2003,
     compared  to 32% for the same  period in the prior  year.  The  increase in
     gross profit was  primarily  the result of the  inclusion of the results of
     Norstan  Network  Services,  Inc. for the period,  which  resulted in gross
     profit from the Telecommunications segment of 33%.

            General and administrative

     General and  administrative  expenses decreased to $1,494,137 for the three
     months ended March 31, 2003,  compared to $1,625,427 for the same period in
     the prior year. The decrease was primarily the result of a net reduction in
     equity compensation of consultants of $556,948 for the current period and a
     reduction  of general  and  administrative  personnel,  which  resulted  in
     reduced  salary of $107,377  for the  current  period.  This was  partially
     offset by the inclusion of the results of Norstan Network  Services,  Inc.,
     totaling  $511,495  for the period.  We expect  general and  administrative
     costs to increase in absolute dollars in the future.

            Engineering and development

     Engineering  and development  expenses  decreased to $384,950 for the three
     months  ended March 31,  2003,  compared to $479,891 for the same period in
     the prior year.  The  decrease in  engineering  and  development  costs was
     primarily  the  result  of  a  reduction  of  engineering  and  development
     personnel,  which  resulted  in reduced  salary of $74,495  for the current
     period.  We expect to incur engineering and development costs in the future
     as we continue to maintain our existing product line as well as develop new
     products and features,  as evidenced by the  development of our intelligent
     Failover and continued development of our SRM2 TM technology.

                                       23
<PAGE>
            Sales and marketing

     Sales and  marketing  expenses  increased  to $897,450 for the three months
     ended March 31, 2003, compared to $583,854 for the same period in the prior
     year. The increase in sales and marketing expenses was primarily the result
     of the inclusion of the results of Norstan Network Services, Inc., totaling
     $461,311 for the period  commencing  July 9, 2002  through  March 31, 2003.
     This was partially  offset a reduction in the number of sales  personnel in
     the Company's  Technology  segment  totaling  $192,739.  Additionally,  the
     Company has been  changing  its  marketing  efforts to focus  primarily  on
     direct sales to Fortune 1000 customers.  The Company intends to continue to
     aggressively  promote  its  current  and future  products  and,  therefore,
     expects  sales and marketing  costs to increase in absolute  dollars in the
     future.

            Other income (expenses)

     Other  income  (expenses)  increased to $659,642 for the three months ended
     March 31, 2003,  compared to $12,741 for the same period in the prior year.
     The increase was primarily due to a gain on  extinguishment  of debt within
     the   Management    and   Consulting    segment   of   $296,786   and   the
     telecommunications segment of $419,228, both during the current period.

     Liquidity and Capital Resources

     Our operating  activities  used cash of $.8 million  during the nine months
     ended March 31, 2003, as compared to using $6.5 million for the same period
     in the prior year.  Cash used in operations for the nine months ended March
     31,  2003  was  primarily  attributable  to a net  loss  of  $3.6  million,
     partially  offset by non-cash  charges for depreciation and amortization of
     $.7 million and an  increase  in accounts  payable and accrued  expenses of
     $1.4 million.  Cash used in operations  for the nine months ended March 31,
     2002 was primarily  attributable  to a net loss of $8.8 million,  partially
     offset by non-cash equity compensation totaling $2.1 million.

     Our investing  activities  used cash of $3.5 million during the nine months
     ended March 31,  2003,  as compared to $1.0  million for the same period in
     the prior year. Cash used in investing activities for the nine months ended
     March 31, 2003 was  primarily  attributable  to a payment of $3.4  million,
     exclusive  of  acquisition  costs paid of $.1 million,  to acquire  Norstan
     Network  Services,  Inc.  Cash used in  investing  activities  for the nine
     months ended March 31, 2002 was  primarily  attributable  to the  Company's
     purchase   deposit  and  acquisition  fees  paid  in  connection  with  its
     acquisition of Norstan Network Services, Inc., aggregating $.8 million.

     Our  financing  activities  provided  cash of $5.1 million  during the nine
     months ended March 31, 2003, as compared to providing  cash of $6.0 million
     during  the same  period in the prior  year.  Cash  provided  by  financing
     activities  for the nine months ended March 31, 2003 was due to the private
     sale  of the  Company's  preferred  stock  and  warrants  aggregating  $8.7
     million,  partially  offset by the early  repayment  of the note payable to
     Norstan,  Inc. totaling $2.9 million. Cash provided by financing activities
     for the nine months ended March 31, 2002 was due to the private sale of the
     Company's common stock.

                                       24
<PAGE>

Following is a listing of the Company's contractual obligations as of March 31,
2003:
<TABLE>
<CAPTION>
   ---------------------------- -------------------------------------------------------------------------------------
                                                               Payments Due by Period
   ---------------------------- -------------------------------------------------------------------------------------
   Contractual Obligations           Total         Less than 1       1-3 years        4-5 years       After 5 years
                                                      year
   ---------------------------- ---------------- ---------------- ---------------- ----------------- ----------------
   <S>                          <C>              <C>              <C>              <C>               <C>
   Long Term Debt               $     120,000    $      120,000   $        -       $          -      $         -
   ============================ ================ ================ ================ ================= ================
   Operating Leases             $   1,737,363    $      685,815   $   1,043,712    $         7,836   $         -
   ============================ ================ ================ ================ ================= ================
   Total Contractual Cash       $   1,857,363    $      805,815   $   1,043,712    $         7,836   $         -
   ---------------------------- ---------------- ---------------- ---------------- ----------------- ----------------
</TABLE>

     In the fall of 2002 and during the transition period of the Company's newly
     acquired  subsidiary,  NNSI,  the  Company  was the  target  of a theft  of
     telecommunications  services.  The Company is currently working with one of
     its major  providers  to resolve  this issue and  currently  believes  this
     obligation to the provider approximates $250,000.  Accordingly, the Company
     has  accrued  such amount and  included  it in general  and  administrative
     expenses within the condensed consolidated statements of operations.

     Additionally,  in November  2002,  the  Company  was  notified by this same
     provider, of credits of approximately  $195,000 due to the Company from the
     misapplication  of payments by the provider.  The Company has recorded such
     amount  within its  condensed  consolidated  financial  statements  for the
     quarter ended March 31, 2003.

     On March 18, 2003, the Company agreed to pay Norstan,  Inc. $2.9 million in
     cash and issued  300,000  shares of its common stock in full  settlement of
     its  outstanding  $3.75  million   non-interest  bearing  promissory  note.
     Management  determined  the fair value of the common shares issued based on
     the  quoted  market  price on such  date.  This  note  repayment  and share
     issuance  resulted in no gain recognition and a modification of goodwill of
     approximately  $420,000,  which is reflected in the accompanying  condensed
     consolidated balance sheets.

     On March 26,  2003,  the Company  paid $7,500 in full  settlement  of notes
     payable to the Duffy- Vinet Institute,  Inc., which were assumed by the TSG
     in connection with its acquisition of Sales and Management Consulting, Inc.
     At the time,  the  notes had a  carrying  value of  approximately  $304,000
     representing unpaid principal and accrued interest. The settlement resulted
     in a gain on  extinguishment  of debt of approximately  $297,000,  which is
     included  in  the  accompanying   condensed   consolidated   statements  of
     operations.

     Management's plan

     Historically,  the  Company has  experienced  significant  reoccurring  net
     operating  losses as well as  negative  cash  flows  from  operations.  The
     Company's main source of liquidity has been equity  financing which is used
     to fund losses from operating  activities.  From July 1, 2002 through March
     31, 2003, the Company has raised,  exclusive of commissions,  approximately
     $8.7 million from the sale of its preferred stock.  While  approximately $6
     million of the proceeds was  utilized to purchase the  outstanding  capital
     stock of NNSI and repay a note payable due to Norstan,  Inc., the remainder
     of the proceeds  has been and will  continue to be utilized to fund ongoing
     operations.

     The  Company   will   continue   to  utilize   cash   generated   from  its
     Telecommunications segment to fund the operations of its other segments and
     is seeking to raise  additional  monies from the sale of its capital  stock
     and/or  obtain debt  financing  to meet its funding  needs over the next 12
     months.  Additionally,  management has instituted cost saving measures over
     the past 12 months intended to reduce its overhead expenses,  most notably,
     a reduction of staffing within its Technology  segment and its discontinued
     ComputerCOP  operations,  aggregating  approximately $2.5 million in annual
     salaries and related benefits.  The Company  anticipates that negative cash
     flow from  operations  will  average  less than  $150,000 per month for the
     quarter ended June 30, 2003. Currently, the Company does not have

                                       25
<PAGE>

     sufficient  capital  resources to fund operations for a period of 12 months
     from the filing of this current  report and there can be no assurance  that
     the Company will obtain  sufficient  capital to finance its operations.  If
     the  Company  is  unable  to  raise  sufficient   funding  to  sustain  its
     operations,  it will curtail the operations of certain  business  segments.
     However, even if the Company does raise sufficient operating capital, there
     can be no assurances  that the net proceeds will be sufficient to enable it
     to develop its business to a level where it will generate  profits and cash
     flows from operations. Due to the factors listed above, these matters raise
     substantial  doubt  about the  Company's  ability  to  continue  as a going
     concern, as noted in the report of independent certified public accountants
     dated October 9, 2002,  contained in the Company's Form 10-K for the fiscal
     year  ended  June  30,  2002.  The  accompanying   consolidated   financial
     statements have been prepared on a going concern basis,  which contemplates
     the  realization  of assets and  satisfaction  of liabilities in the normal
     course of business. The financial statements do not include any adjustments
     relating to the recoverability of the recorded assets or the classification
     of the liabilities  that might be necessary should the Company be unable to
     continue as a going concern.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.

ITEM 4 - CONTROLS AND PROCEDURES

     Within  90  days  prior  to the  filing  date  of this  report,  under  the
     supervision of our Chief Executive Officer and Chief Financial Officer,  we
     evaluated  our  disclosure  controls  and  procedures  (as defined in rules
     13a-14(c) and 15d-14(c) under the Securities  Exchange Act of 1934).  Based
     on that evaluation, our Chief Executive Officer and Chief Financial Officer
     concluded that our disclosure  controls and procedures  were  sufficient to
     provide reasonable assurances that the information required to be disclosed
     by us in the reports that we file or submit under the  Securities  Exchange
     Act of 1934 is recorded, processed, summarized and reported within the time
     periods  specified in the  Securities and Exchange  Commission's  rules and
     forms.

     In the fall of 2002 and during the transition period of the Company's newly
     acquired  subsidiary,  NNSI,  the  Company  was the  target  of a theft  of
     telecommunications  services.  The Company is currently working with one of
     its major  providers  to resolve  this issue and  currently  believes  this
     obligation to the provider approximates $250,000.  Accordingly, the Company
     has  accrued  such amount and  included  it in general  and  administrative
     expenses within the condensed consolidated statements of operations.

     As a result of this theft of  telecommunications  services,  management has
     since  enacted new internal  controls at the  subsidiary  level in order to
     deter future  occurrences  of this nature.  It is the opinion of management
     that the outcome of this matter will not have a material  adverse effect on
     the Company's operations or financial condition.

     Other than the event listed above,  there have been no significant  changes
     in our  internal  controls  or in other  factors  that could  significantly
     affect those  internal  controls  subsequent to the date of our  evaluation
     thereof.

                                       26

<PAGE>
PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

     None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     For the quarter ended March 31, 2003, the Company has issued 243,469 shares
     of  its  Series  B  Preferred  Stock  for a  total  cash  consideration  of
     $3,895,400.  Cumulative dividends on the Series B Preferred Stock accrue at
     a rate of 8% per annum from the date of issuance  through  January 31, 2005
     and thereafter at a rate of 12% per annum and are payable  annually on July
     1 of each year at the Company's option in cash or Series B Preferred Stock.
     Each share of the Series B Preferred  Stock is  convertible at the holders'
     option  into 20 shares of common  stock.  Each share of Series B  Preferred
     Stock  has ten  votes  and  votes as a single  class  with  holders  of the
     Company's common stock. The shares were issued in connection with a private
     offering of the Company's  securities  pursuant to which  shareholders also
     received  warrants to purchase  shares of the Company's  common stock at an
     initial exercise price equal to $1.25 per share.  Five warrants were issued
     for each share of Series A Preferred  Stock. A portion of the proceeds were
     used to retire the note payable to Norstan Inc. and the remaining  proceeds
     are to be used for working capital purposes.


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

     99.1 Certification  of Walter M.  Groteke  pursuant  to Section  906 of the
          Sarbanes-Oxley Act of 2002.
     99.2 Certification  of Peter  C.  Castle  pursuant  to  Section  906 of the
          Sarbanes-Oxley Act of 2002.

          (b) Reports on Form 8-K

          Current report on Form 8-K dated March 25, 2003.

                                       27

<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
                                Chairman of the Board and President


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












Date: May 14, 2003

                                       28
<PAGE>


                             OFFICER CERTIFICATIONS

I, Walter M. Groteke, certify that:

     1. I have  reviewed  this  quarterly  report  on  Form  10-Q  of  NetWolves
Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: May 14, 2003


                                      /s/ Walter M. Groteke
                                      -----------------------------------
                                      Walter M. Groteke
                                      Chairman of the Board, President and Chief
                                      Executive Officer


                                       29
<PAGE>

                             OFFICER CERTIFICATIONS

I, Peter C. Castle, certify that:

     1. I have  reviewed  this  quarterly  report  on  Form  10-Q  of  NetWolves
Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: May 14, 2003



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


                                       30