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 December 31, 2000

                        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.)


             One Corporate Drive, Suite 103, Bohemia, New York 11716
                    (Address of principal executive offices)

                                 (631) 589-6299
              (Registrant's telephone number, including area code)

                 200 Broadhollow Road, Melville, New York 11747
              (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                              January 15, 2001
        --------------                       --------------------------------

Common Stock, $.0033 par value                          8,742,613


<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

                         FORM 10-Q - DECEMBER 31, 2000


                                     INDEX


PART I - FINANCIAL INFORMATION


  ITEM 1 - FINANCIAL STATEMENTS

  CONDENSED CONSOLIDATED BALANCE SHEETS
    December 31, 2000 (unaudited) and June 30, 2000                       1

  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
   COMPREHENSIVE LOSS
    For the three and six months ended December 31, 2000 (unaudited)
    and December 31, 1999 (unaudited)                                     2

  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the six months ended December 31, 2000 (unaudited)
    and December 31, 1999 (unaudited)                                     3

  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                 4 - 8

  ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS                        9 - 13

  ITEM 3 -QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK       14


PART II - OTHER INFORMATION

  ITEM 1 - LEGAL PROCEEDINGS                                         15 - 16

  ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS                      16

  ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                                16

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

  ITEM 5 - OTHER INFORMATION                                              16

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

SIGNATURES                                                                17

<PAGE>


                             NETWOLVES CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                        December 31,        June 30,
                                                           2000              2000
                                                       ------------       ---------
                                                        (Unaudited)

<S>                                                    <C>                <C>
ASSETS
Current assets
   Cash and cash equivalents                           $ 10,626,323       $ 20,204,309
   Marketable securities, available for sale,
        at market value                                      78,000             99,500
   Accounts receivable, net                                 620,469            248,861
   Inventories                                              672,663            633,453
   Prepaid expenses and other current assets                524,219            284,614
                                                       ------------       ------------
     Total current assets                                12,521,674         21,470,737

Property and equipment, net                                 837,597            590,906

Software, net                                               424,047          3,427,688

Intangible assets, net                                         -                  -

Other assets                                                 86,392             53,799
                                                       ------------       ------------
                                                       $ 13,869,710       $ 25,543,130
                                                       ============       ============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable and accrued expenses               $    997,691       $  1,792,030
   Deferred revenue                                         121,058             11,173
   Current maturities of long-term debt                      51,160            208,435
                                                       ------------       ------------
     Total current liabilities                            1,169,909          2,011,638

Long term debt, net of current maturities                   311,822            418,102
                                                       ------------       ------------
     Total liabilities                                    1,481,731          2,429,740
                                                       ------------       ------------
Minority interest                                           289,677            305,761

Commitment and contingencies

Shareholders' equity
   Common stock, $.0033 par value, shares authorized;
       50,000,000 on December 31, 2000 and 10,000,000
       on June 30, 2000; issued and outstanding;
       8,742,613 on December 31, 2000
       and 8,592,613 on June 30, 2000                        28,851             28,356
   Additional paid-in capital                            56,383,702         56,076,197
   Unamortized value of equity warrants                  (1,548,343)        (1,851,893)
   Accumulated deficit                                  (42,648,753)       (31,349,376)
   Accumulated other comprehensive loss                    (117,155)           (95,655)
                                                       ------------       ------------
     Total shareholders' equity                          12,098,302         22,807,629
                                                       ------------       ------------
                                                       $ 13,869,710       $ 25,543,130
                                                       ============       ============
</TABLE>

            See notes to condensed consolidated financial statements

                                       1

<PAGE>



                     NETWOLVES CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                         For the three months ended         For the six months ended
                                               December 31,                       December 31,
                                         ---------------------------        -------------------------
                                            2000             1999              2000           1999
                                            ----             ----              ----           ----
<S>                                     <C>              <C>                <C>             <C>
Revenue
  Products                              $   238,781      $    25,929        $   283,517     $    39,129
  Services                                  319,266          308,269            740,314         433,020
                                        -----------      -----------        -----------     -----------
                                            558,047          334,198          1,023,831         472,149
                                        -----------      -----------        -----------     -----------
Cost of revenue
  Products                                   90,687           10,302            103,002          19,146
  Services                                  241,773          102,393            543,803         189,718
                                        -----------      -----------        -----------     -----------
                                            332,460          112,695            646,805         208,864
                                        -----------      -----------        -----------     -----------
Gross profit                                225,587          221,503            377,026         263,285
                                        -----------      -----------        -----------     -----------
Operating expenses
  General and administrative              3,390,565        5,305,343          6,332,097       8,095,759
  Engineering and development               411,795          331,598            880,108         594,708
  Sales and marketing                       970,783          169,360          2,937,259         775,367
  Impairment charges                      2,000,000             -             2,000,000            -
                                        -----------      -----------        -----------     -----------
                                          6,773,143        5,806,301         12,149,464       9,465,834
                                        -----------      -----------        -----------     -----------

Loss before other income (expense)       (6,547,556)      (5,584,798)       (11,772,438)     (9,202,549)

Other income (expense)
  Investment income                         199,699           55,841            471,499         101,571
  Minority interest                           7,940           15,791             16,084          23,219
  Interest expense                           (7,298)          (8,139)           (14,522)        (18,630)
                                        -----------      -----------        -----------     -----------
Net loss                                 (6,347,215)      (5,521,305)       (11,299,377)     (9,096,389)

Other comprehensive loss
  Marketable securities valuation
    adjustment                              (20,000)        (378,000)           (21,500)       (456,500)
                                        -----------      -----------        -----------     -----------
Comprehensive loss                      $(6,367,215)     $(5,899,305)      $(11,320,877)    $(9,552,889)
                                        ===========      ===========        ===========     ===========

Basic and diluted net loss per share    $      (.73)     $      (.88)      $      (1.30)    $     (1.47)
                                        ===========      ===========        ===========     ===========

Weighted average common
  shares outstanding                      8,742,613        6,303,801          8,705,113       6,183,835
                                        ===========      ===========        ===========     ===========
</TABLE>

            See notes to condensed consolidated financial statements

                                        2


<PAGE>

                             NETWOLVES CORPORATION

                CONDENSED CONSOLDIATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                For the six months ended
                                                                      December 31,
                                                               ------------------------
                                                                 2000            1999
                                                                 ----            ----
<S>                                                          <C>             <C>
Cash flows from operating activities
  Net loss                                                   $(11,299,377)   $ (9,096,389)
  Adjustments to reconcile net loss to net cash used in
    operating activities
     Depreciation                                                  90,581          34,378
     Amortization                                               1,071,985       1,004,020
     Noncash charge to operations with respect to
       stock and warrants issued for services and
       amortization of previously issued warrants               1,316,550       4,880,629
     Provision for impairment                                   2,000,000            -
     Recovery of bad debt                                         (24,747)           -
     Minority interest                                            (16,084)        (33,219)
  Changes in operating assets and liabilities
     Accounts receivable                                         (346,861)       (142,439)
     Inventories                                                 (102,720)       (155,524)
     Prepaid expenses and other current assets                   (239,605)         30,668
     Deferred revenue                                             109,885            -
     Deferred compensation                                           -            (50,000)
     Accounts payable and accrued expenses                       (794,339)        140,707
                                                              -----------     -----------
       Net cash used in operating activities                   (8,234,732)     (3,387,169)
                                                              -----------     -----------
Cash flows from investing activities
    Capitalized software costs                                    (68,344)          -
    Issuance of note receivable                                      -            (50,000)
    Purchases of property and equipment                          (273,762)       (224,489)
    Payments of security deposits                                 (32,593)         (6,123)
                                                              -----------     -----------
      Net cash used in investing activities                      (374,699)       (280,612)
                                                              -----------     -----------
Cash flows from financing activities
    Repayment of advances from TSG officer                           -           (144,348)
    Repurchase of warrants                                       (705,000)           -
    Repayment of long term debt                                  (263,555)        (21,111)
    Cash proceeds from private sale of common stock                  -          3,981,675
                                                              -----------     -----------
     Net cash (used in) provided by financing activities         (968,555)      3,816,216
                                                              -----------     -----------
     Net (decrease) increase in cash and cash equivalents      (9,577,986)        148,435

Cash and cash equivalents, beginning of period                 20,204,309       5,585,981
                                                              -----------     -----------
Cash and cash equivalents, end of period                      $10,626,323       5,734,416
                                                              ===========     ===========
Taxes paid                                                    $    25,000     $      -
                                                              ===========     ===========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       3

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                  SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999




1    Interim financial information

     The summary financial information  contained herein is unaudited;  however,
     in the opinion of management,  all adjustments  (consisting  only of normal
     recurring  accruals)  necessary for a fair  presentation  of such financial
     information  have been included.  The accompanying  condensed  consolidated
     financial  statements,  footnotes and discussions of NetWolves  Corporation
     ("NetWolves"  or the  "Company")  should  be read in  conjunction  with the
     Company's  consolidated  financial  statements,  and notes thereto, for the
     years ended June 30, 2000 and 1999 and the period  from  February  13, 1998
     (inception)  to June 30, 1998. The results of operations for the six months
     ended December 31, 2000 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 three subsidiaries,  NetWolves  Technologies
     Corporation,  ComputerCOP  Corporation  and its  majority  owned TSG Global
     Education Web, Inc. ("TSG") (collectively "NetWolves" or the "Company").

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

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

     TSG  provides  consulting,  educational  and  training  services
     primarily  to the  oil and gas and  automotive  industries  throughout  the
     United States.  ComputerCOP  Corporation sells software designed to provide
     non  computer  literate  owners the ability to identify  threats as well as
     objectionable  material  that may be viewed by users of the computer on the
     Internet.

3    Significant accounting policies

     Use of estimates

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

     Principles of consolidation

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

                                       4

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                  SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999



3    Significant accounting policies (continued)
     Principles of consolidation (continued)

     consolidation.  The separate ownership of one of the Company's subsidiaries
     is reflected in the Company's condensed  consolidated  financial statements
     as  minority   interest.   The  minority  interest  includes  common  stock
     representing  1.7% of the  outstanding  shares of TSG and preferred  stock,
     until January 24, 2000, at which time the preferred  stockholder elected to
     convert the preferred stock into shares of NetWolves common stock.

     Inventories

     Inventories  consist of raw materials and finished goods valued at $300,130
     and $372,533, respectively, at December 31, 2000. Inventories are valued at
     the lower of cost or net  realizable  value using the  first-in,  first-out
     method.

     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.

4    Balance sheet components

<TABLE>
<CAPTION>
                                                     December 31,        June 30,
                                                        2000               2000
                                                     ------------      ------------
<S>                                                 <C>              <C>
Property and equipment, net
  Machinery and equipment                            $   827,530       $   510,849
  Furniture and fixtures                                 164,862           145,839
  Leasehold improvements                                  45,846            44,278
                                                     -----------       -----------
                                                       1,038,238           700,966
  Less: accumulated depreciation and amortization       (200,641)         (110,060)
                                                     -----------       -----------
  Property and equipment, net                        $   837,597       $   590,906
                                                     ===========       ===========
Software, net
  ComputerCOP technology                             $ 2,217,520       $ 4,217,520
  Other capitalized software costs                       239,257           170,913
                                                     -----------       -----------
                                                       2,456,777         4,388,433
  Less: accumulated amortization                      (2,032,730)         (960,745)
                                                     -----------       -----------
  Software, net                                      $   424,047       $ 3,427,688
                                                     ===========       ===========
Accounts payable and accrued expenses
  Trade accounts payable                             $   756,556       $ 1,083,526
  Finders fee payable                                       -              300,000
  Other accrued operating expenses                        96,795           153,794
  Accrued advertising                                       -              106,172
  Compensated absences                                   128,552            95,793
  Commissions payable                                      1,555            32,410
  Payroll/sales taxes payable                             14,233            20,335
                                                     -----------       -----------
                                                     $   997,691       $ 1,792,030
                                                     ===========       ===========
</TABLE>

                                       5

<PAGE>

                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                  SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999



5    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
     Training and Consulting  segment and the Computer Software  segment.  These
     operating segments are representative of the Company's  management approach
     to its  evaluation  of  its  operations.  The  accounting  policies  of the
     reportable  operating  segments  are the  same as  those  described  in the
     summary of significant  accounting policies.  The Technology segment, which
     operates  principally  domestically,  is  primarily  engaged in the design,
     development,   marketing  and  support  of  information  delivery  hardware
     products and software.  The Training and Consulting segment, which operates
     domestically,   provides  consulting,  educational  and  training  services
     primarily  to the  oil and gas and  automotive  industries  throughout  the
     United  States.   The  Software   segment,   which   operates   principally
     domestically,  is primarily engaged in the design,  development,  marketing
     and support of software products which are designed to provide non computer
     literate  owners the ability to identify  threats as well as  objectionable
     material which may be viewed by users of the computer on the Internet.

<TABLE>
<CAPTION>
                                         For the three months ended         For the six months ended
                                               December 31,                       December 31,
                                         ---------------------------        -------------------------
                                            2000             1999              2000           1999
                                            ----             ----              ----           ----
<S>                                     <C>              <C>                <C>             <C>
Revenue
  Technology                            $   215,645      $    25,929       $    248,128     $    39,129
  Training and consulting                   319,266          308,269            740,314         433,020
  Computer software                          23,136             -                35,389            -
                                        -----------      -----------       ------------     -----------
                                        $   558,047      $   334,198       $  1,023,831     $   472,149
                                        ===========      ===========       ============     ===========
Operating loss

  Technology                            $(3,100,964)     $(4,507,041)      $ (6,978,317)    $(7,199,393)
  Training and consulting                  (475,741)      (1,077,757)          (969,372)     (2,003,156)
  Computer software                      (2,970,851)            -            (3,824,749)           -
                                        -----------      -----------       ------------     -----------
                                        $(6,547,556)     $(5,584,798)      $(11,772,438)    $(9,202,549)
                                        ===========      ===========       ============     ===========

</TABLE>

<TABLE>
<CAPTION>
                                                               December, 31             June 30,
                                                                    2000                   2000
                                                               ------------           ------------
        <S>                                                    <C>                    <C>
        Identifiable assets
           Technology                                          $ 12,340,726           $ 21,231,907
           Training and consulting                                  708,597                708,678
           Computer software                                        820,387              3,602,545
                                                               ------------           ------------
              Total                                            $ 13,869,710           $ 25,543,130
                                                               ============           ============
</TABLE>


     The  Company  had one  customer  included in the  Training  and  Consulting
     segment,  which accounted for 28% of consolidated  revenue and one customer
     included in the Technology segment, which accounted for 18% of consolidated
     revenue for the six months ended  December  31,  2000.  The Company had two
     customers,  both  included in the Training and  Consulting  segment,  which
     accounted for 40% and 28% of consolidated  revenue for the six months ended
     December  31,  1999.  Additionally,  the  Company  had two  customers  that
     accounted for 44% and 29% of consolidated  accounts  receivable at December
     31, 2000 and one customer that accounted for 40% of  consolidated  accounts
     receivable at June 30, 2000.

                                       6

<PAGE>


                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                  SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999




6    Commitments and contingencies

     Anicom, Inc.

     On April 19, 2000, Anicom,  Inc. commenced an action against the Company in
     the U.S. District Court for the Northern  District of Illinois.  The action
     was based upon NetWolves' alleged failure to deliver  approximately  74,842
     shares  of its  common  stock to  Anicom,  upon  exercise  by Anicom of the
     Company's warrants.  The action sought specific  performance as well as any
     damages  that may have  resulted  from a  diminution  in value of NetWolves
     common stock.  On November 16, 2000, and in connection with the litigation,
     the Company and Anicom reached a settlement (the  "Settlement  Agreement").
     Under  the  Settlement  Agreement  the  allegations  for the  breach of the
     warrant  agreement by the Company and  unasserted  claims for the breach of
     the  distribution  agreement  by Anicom and the Company were  settled.  The
     Company paid  $1,150,000 to Anicom  pursuant to the  Settlement  Agreement,
     which included the repurchase of all unvested warrants. As of September 30,
     2000,  the  Company  reduced  additional  paid in  capital in the amount of
     $705,000, representing the fair value of the warrants, calculated using the
     Black-Scholes option pricing model with the following assumptions: dividend
     yield of none, expected volatility of 65%, risk free interest rate of 5.85%
     and an expected  term of 3.17 years - the  remaining  life to the  maturity
     date. The remaining  portion of the settlement,  in the amount of $445,000,
     has been charged to operations  and included in general and  administrative
     expenses for the period end.

     Employment agreements

     In August 2000 the Company  entered in to employment  agreements  with four
     employees.  One of the agreements is for a period of three years and grants
     the  employee  warrants to purchase  250,000  shares of common stock of the
     Company  at a  purchase  price of $5.25  per  share,  subject  to a vesting
     schedule  as  specified  in  such  agreement.  Another  agreement  is for a
     thirty-month  period and  provides  for a monthly  salary of $12,000,  plus
     reimbursement  of certain  expenses of $3,000 per month.  In addition,  the
     agreement also grants the employee  warrants to purchase  350,000 shares of
     common stock of the Company at a purchase price of $5.00 per share, subject
     to a vesting  schedule as  specified  in such  agreement.  In July 2000 and
     before  commencement of employment,  this individual  received  $250,000 in
     consulting fees relating to the Company's  agreement with General  Electric
     Company.  Another  agreement  is for a period of three years and grants the
     employee/stockholder,  who is affiliated with a law firm who provided legal
     services to the  Company,  warrants to  purchase  275,000  shares of common
     stock of the Company at a purchase price of $5.125 per share,  subject to a
     vesting schedule as specified in such agreement;  and the last agreement is
     for a period of three  years  and  provides  for  monthly  compensation  of
     $20,000,  and the agreement  also grants the employee  warrants to purchase
     200,000  shares of common stock of the Company at a purchase price of $5.25
     per share, subject to a vesting schedule as specified in such agreement.

     The Company  entered into an employment  agreement  effective  October 2000
     with its Chief Executive Officer. The agreement is for a term of five years
     at an annual salary of $275,000,  subject to cost of living increments. The
     employment  agreement further provides for certain payments following death
     or  disability,  for certain  fringe  benefits  such as  reimbursement  for
     reasonable expenses and participation in medical plans, and for accelerated
     payments in the event of change of control of the Company.

                                       7
<PAGE>


                     NETWOLVES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                  SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999




6    Commitments and contingencies (continued)
     Lease agreement

     In September  2000, the Company entered into a five-year lease agreement in
     Tampa,  Florida covering  approximately 20,000 sq. ft. of space with annual
     lease payments  approximating  $390,000, to which it intends to relocate in
     or about  February  2001.  The Company  believes  that  combining its Tampa
     operations  into one facility  will increase  efficiency of operations  and
     facilitate  large scale  deployment.  The Company  intends to sublease  its
     other facilities in Tampa, Florida.


7    Related party transaction

     On August 16, 2000,  150,000 shares were issued to a consulting firm who is
     also a shareholder  of the Company for services  rendered  during the three
     months ending  September 30, 2000, which resulted in a charge to operations
     of $807,000. Management determined the fair value of the common stock based
     on its quoted market price at the time of the issuance.  In December  2000,
     the  Company  reduced the  exercise  price of 300,000  warrants  previously
     issued to this  consulting firm to $5 per share and shortened the remaining
     term of the  warrants to three  years.  The market  price of the  Company's
     common  stock  at the  time of this  reduction  was  $4.125  per  share.

8    Impairment

     On December 31, 2000, the Company  recorded a writedown of its  ComputerCOP
     technology (computer software segment) in the amount of $2,000,000 reducing
     the carrying value of the asset to $202,395 at December 31, 2000. The asset
     was  determined  to be impaired  because of the  inability  of the software
     technology to generate future  operating income without  substantial  sales
     volume increases,  which are uncertain.  Fair value was based on discounted
     future cash flows.  Accordingly,  actual  results could vary  significantly
     from such estimates.

9    Commitments and contingencies

     On or about November 22, 2000 the Company  commenced a lawsuit ("Action 1")
     in the United States  District Court for the Southern  District of New York
     against certain defendants who were officers and/or directors of TSG Global
     Education  Network,  Inc.  ("TSG") (the "Sullivan  Group  Defendants")  and
     against an Ohio  Corporation,  ProCare,  Inc.  ("ProCare").  In response to
     Action 1, on or about  December 19, 2000,  the  Sullivan  Group  Defendants
     commenced a lawsuit  ("Action 2") in the United States  District  Court for
     the Southern District of New York against the Company and other defendants.
     The Company  claims that it was induced to enter into the merger  agreement
     and   consummate   the   merger    transaction    based   upon   fraudulent
     misrepresentations  and the purposeful  concealment of material information
     by the  Sullivan  Group  Defendants.  The  Sullivan  Group  Defendants  are
     contending,  correspondingly,  that it was the  Company  and certain of the
     current and former  officers and directors  who induced the Sullivan  Group
     Defendants to enter into the merger  agreement by making false or negligent
     misrepresentations  regarding  the  Company's  principal  product.  Service
     revenue from the TSG subsidiary will be  substantially  reduced as a result
     of the reduction in its operations and the continuing  disputes between the
     parties.

     The Company  believes that its claims against the Sullivan Group Defendants
     are meritorious based on the facts and circumstances.  Further, the Company
     believes that the claims by the Sullivan Group Defendants lack merit and it
     intends to engage in a vigorous defense.

                                       8

<PAGE>



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

     Forward-looking statements


     The Form 10-Q includes,  without limitation,  certain statements containing
     the words  "believes"  "anticipates",  "estimates",  and words of a similar
     nature, which constitute "forward-looking statements" within the meaning of
     the Private  Securities  Litigation Reform Act of 1995. This act provides a
     "safe  harbor" for  forward-looking  statements  to encourage  companies to
     provide  prospective  information about themselves so long as they identify
     these  statements  as forward  looking and provide  meaningful,  cautionary
     statements identifying important factors that could cause actual results to
     differ from the projected results.  All statements other than statements of
     historical fact made in this Form 10-Q are forward-looking.  In particular,
     the statements  herein regarding  industry  prospects and future results of
     operations  or  financial   position  are  forward-   looking   statements.
     Forward-looking  statements reflect  management's  current expectations and
     are  inherently   uncertain.   The  Company's  actual  results  may  differ
     significantly from management's expectations.

     Overview

     NetWolves  Corporation  ("NetWolves" or the "Company")  designs,  develops,
     manufactures and sells Internet  infrastructure  security products designed
     to provide secure,  manageable  Internet access. The Company was founded to
     introduce a new innovative  Internet  security and access device called the
     "FoxBox?". NetWolves' state-of-the-art enabling technology for the Internet
     connects people and computer networks  securely to the Internet.  NetWolves
     designs Internet  solutions that provide the services that companies desire
     without  confusion,  complication,   limitation  and  the  exorbitant  cost
     associated with traditional offerings.

     NetWolves'  multi-services  Internet  communications  gateway  products are
     designed to meet all business needs packaged  together,  (e-mail,  firewall
     security, router, Web hosting, Intranet, FTP, etc.), complete with advanced
     integrated hardware and software,  a simple to use interface,  and room for
     expansion.  As companies  combine data and  communications to reduce costs,
     NetWolves'  value-added  expansion  technologies  such as  Virtual  Private
     Networking  ("VPN"), a process for encrypting data for secure  transmission
     over public networks,  will provide significant  cost-efficient services in
     an all-in-one, enterprise-wide gateway solution.

     NetWolves   differentiates   itself  from  its   competitors   through  its
     proprietary patent pending technology, which provides a centralized, remote
     network  monitoring,  managing and  security  software  ("Mother").  Mother
     allows the secure,  remote management and monitoring of multiple all-in-one
     gateway  servers  located  worldwide.  This  monitoring can be performed in
     real-time,  and from one or  numerous  central  sites.  This  advanced  new
     technology  also allows a network  administrator  to create a configuration
     template with all the  configuration  information and changes  required for
     all-in-one  units.  This  template  can be applied to each unit,  all via a
     secure  configuration  mechanism  from  the  central  monitoring  location,
     without compromising network security. It is this Mother system which forms
     the basis of the  Company's  recent  agreement  with the  General  Electric
     Company.

     NetWolves products are designed for our partners' present and future needs.
     The  Company's  initial  target  markets are the end users in the small and
     mid-sized businesses and large organizations with satellite offices. Larger
     end users to whom the product is intended to be marketed are companies with
     multi-state   locations,   government  agencies  and  educational  markets.
     NetWolves products are designed to service numerous markets,  including the
     financial,  medical, legal, travel, hospitality,  entertainment,  hotel and
     auto and petroleum industries.

     The  Company's  strategy is to  establish  the FoxBox as the  standard  for
     enterprise-wide  network connectivity  worldwide. To achieve its objectives

                                       9

<PAGE>


     worldwide,   NetWolves  has  sought  to  form  relationships  with  leading
     companies  in  their  respective  areas  to  deliver   application-specific
     Internet  solutions to  organizations  worldwide.  In February 2000, and in
     exchange for 1,775,000  restricted  shares of the  Company's  common stock,
     NetWolves   acquired   ComputerCOP   Corporation,   whose  assets  included
     ComputerCOP  technology,  inventory  and $20.5  million in cash intended to
     fund future growth. The shares issued by the Company in connection with the
     acquisition are subject to a voting trust agreement,  wherein the Company's
     chief executive officer has been granted the right to vote all Trust Shares
     for two years,  subject to  earlier  termination  on the sale of the shares
     based on certain parameters.

     On June 29, 2000,  NetWolves and General  Electric  Company  ("GE") entered
     into a six year  agreement  for the master  purchase,  license  and support
     services  of  NetWolves'  security,  remote  monitoring  and  configuration
     management  system.  GE, after  extensive  due diligence in looking for the
     all-in-one small office solution for network management,  interconnectivity
     and security management,  chose the FoxBox for deployment  throughout their
     enterprise.  In addition  to  agreeing to sell the FoxBox to GE,  NetWolves
     receives (a) a one-time installation fee for each FoxBox unit installed and
     (b) a monthly  service and maintenance fee for which GE pays NetWolves upon
     installation  for the first twelve months.  GE will be using the FoxBox for
     managed,  secure  interconnectivity  of worldwide offices.  The FoxBox will
     enable  GE's  offices to  interact  with each  other,  utilizing  NetWolves
     advanced firewall security.  NetWolves believes that this agreement further
     validates the Company's  technology and innovations within the firewall and
     network  security  markets.  Network security is one of the most formidable
     challenges facing Fortune 500 companies,  and with its new "Mother System,"
     NetWolves  can offer  the  appropriate  solutions.  The  Company  commenced
     significant  deliveries  of products  and  services  to its major  customer
     totaling approximately $285,000 during the quarter ended December 31, 2000.

     The Company has a limited  operating history in which to base an evaluation
     of the business and prospects.  The Company's  prospects must be considered
     in light of the risks  frequently  encountered  by companies in their early
     stages,  particularly  for  companies  in the rapidly  evolving  technology
     industry.  Certain risks for the Company include, but are not limited to an
     unproven business model,  capital  requirements and growth  management.  To
     counter  this risk,  the Company  must,  among other  things,  increase its
     customer base,  continue to develop its product  offerings and successfully
     execute its business and marketing plan which includes full  implementation
     of the GE contract and securing  contracts from other Fortune 500 companies
     based on its patent pending "Mother" technology.  There can be no assurance
     that the Company  will be  successful  in  addressing  such risks,  and the
     failure  to do so could  have a material  adverse  effect on the  Company's
     financial condition and results of operations. Since inception, the Company
     has  incurred  significant  losses  and  as of  December  31,  2000  had an
     accumulated deficit of approximately $42 million. The Company believes that
     its success depends in large part on its ability to create market awareness
     and further acceptance for the FoxBox,  raise additional  operating capital
     to  grow  operations,  continue  to  build  technology  and  non-technology
     infrastructures and continue new product research and development.

     Results of Operations

     The  Company  has  operated  in three  business  segments,  the  technology
     segment,  the training  and  consulting  segment and the computer  software
     segment.


     Three months ended December 31, 2000 and 1999

        Revenue

     Revenue  increased to $558,047  for the three  months  December 31, 2000 as
     compared to $334,198 for the same period in the prior year. The increase in

                                       10

<PAGE>




     revenue was primarily the result of an increase in sales from the Company's
     technology  segment through  shipments to its major  customer.  The Company
     commenced significant  deliveries of products and services to this customer
     totaling approximately $285,000 during the quarter ended December 31, 2000,
     of which,  approximately $97,000 has been deferred under applicable revenue
     recognition rules. The Company intends to generate  continuing revenue from
     the sale of FoxBoxes  for the third  fiscal  quarter  including  continuing
     revenue from this customer, as the focus will be on the production and sale
     of its core  technology.  Service  revenue from the TSG subsidiary  will be
     substantially  reduced as a result of the reduction in its  operations  and
     the  continuing  disputes  between  the  parties  (See  "Item  One -  Legal
     Proceedings").  Further,  the Company  has not  generated  any  significant
     revenue from its ComputerCOP software technology and recorded an impairment
     of capitalized  software of $2 million for this  subsidiary at December 31,
     2000.

        Cost of revenue and gross profit

     Cost of revenue for sale of the  Company's  FoxBox  includes  manufacturing
     costs, which we have outsourced,  packaging and shipping costs and warranty
     expenses.  Cost of revenue in connection  with  management  and  consulting
     services  include direct expenses of employees and consultants  utilized in
     the  generation  of  management  and  consulting  revenue.  Cost of revenue
     increased  to $332,460  for the three  months  ended  December  31, 2000 as
     compared to $112,695 for the same period in the prior year.

     Overall gross profit  decreased to 40.4% for the three months  December 31,
     2000 as compared  to 66.2% for the same period in the prior year.  This was
     primarily  attributable  to  decreasing  margins in its  revenue  generated
     within the training and consulting  segment  partially offset by increasing
     margins from the  Company's  contract  with its major  customer  within the
     technology segment.

        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 increased to
     $411,795 for the three months December 31, 2000 as compared to $331,598 for
     the same period in the prior year.  In  addition,  the company  capitalized
     approximately  $9,000 in software  development  costs for the three  months
     December 31, 2000. The increase in engineering  and  development  costs was
     primarily  the  result of the  employment  of  additional  engineering  and
     development personnel. 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 "Mother" 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 $970,783 for the three months December 31,
     2000 as  compared to  $169,360  for the same period in the prior year.  The
     increase in sales and  marketing  expenses was  primarily the result of the
     employment  of  additional  sales  personnel,  cash  payments  to sales and
     marketing  consultants,  and an increase in marketing efforts to effectuate
     brand awareness designed for future growth.

        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 decreased to $3,390,565 for the three months ended


                                       11

<PAGE>





     December  31,  2000 as compared  to  $5,305,343  for the same period in the
     prior year. The decrease was primarily the result of limited  executive and
     consulting  compensation in the form of the Company's common stock, options
     and warrants  (excluding the  amortization of previously  issued  warrants)
     during for the three  months  December 31,  2000,  partially  offset by the
     addition  of the  Company's  computer  software  segment,  as  well  as the
     employment   of   additional   administrative   personnel  and  payment  of
     professional fees for services rendered. The Company expects a reduction in
     general  and   administrative   expenses  resulting  from  the  substantial
     curtailment  in  operations  of its TSG  subsidiary  and the  reduction  in
     expenses in its ComputerCop subsidiary.

        Other income (expenses)

     Other  income  (expenses)   consists  primarily  of  portfolio  income  and
     increased to $200,341 for the three months December 31, 2000 as compared to
     $63,493 for the same period in the prior year.  The increase was  primarily
     due to an increase in interest  income the three  months  December 31, 2000
     due to the increase  average cash balance from the ComputerCOP  Corporation
     transaction.

        Impairment charges

     On December 31, 2000, the Company  recorded a writedown of its  ComputerCOP
     technology  (computer  software  segment) in the amount of $2,000,000.  The
     asset  was  determined  to be  impaired  because  of the  inability  of the
     software technology to generate future operating income without substantial
     sales volume increases, which are uncertain.

     Six months ended December 31, 2000 and 1999

        Revenue

     Revenue  increased to  $1,023,831  for the six months  December 31, 2000 as
     compared to $472,149 for the same period in the prior year. The increase in
     revenue  was  primarily  the  result of an  increase  in  revenue  from the
     Company's technology segment through shipments to its major customer and an
     increase in revenue from its training and consulting  segment.  The Company
     commenced significant  deliveries of products and services to this customer
     totaling approximately $285,000 during the quarter ended December 31, 2000,
     of which,  approximately $97,000 has been deferred under applicable revenue
     recognition rules. The Company intends to generate  continuing revenue from
     the sale of FoxBoxes  for the third  fiscal  quarter  including  continuing
     revenue from this customer, as the focus will be on the production and sale
     of its core  technology.  Service  revenue from the TSG subsidiary  will be
     substantially  reduced as a result of the reduction in its  operations  and
     the  continuing  disputes  between  the  parties  (See  "Item  One -  Legal
     Proceedings").  Further,  the Company  has not  generated  any  significant
     revenue from its ComputerCOP software technology and recorded an impairment
     of capitalized software of $2 million at December 31, 2000.

        Cost of revenue and gross profit

     Cost of revenue increased to $646,805 for the six months ended December 31,
     2000 as compared to $208,864 for the same period in the prior year.

     Overall  gross profit  decreased  to 36.8% for the six months  December 31,
     2000 as compared  to 55.7% for the same period in the prior year.  This was
     primarily  attributable  to  decreasing  margins in its  revenue  generated
     within the training and consulting  segment  partially offset by increasing
     margins from the  Company's  contract  with its major  customer  within the
     technology segment.

        Engineering and development

     Engineering  and  development  expenses  increased  to $880,108 for the six
     months December 31, 2000 as compared to $594,708 for the same period in the
     prior year. In addition,  the company capitalized  approximately $68,000 in
     software  development  costs for the six  months  December  31,  2000.  The
     increase in engineering and  development  costs was primarily the result of
     the employment of additional  engineering  and  development  personnel.  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 "Mother"
     technology.

                                       12

<PAGE>




        Sales and marketing

     Sales and marketing  expenses  increased to  $2,937,259  for the six months
     December  31, 2000 as compared to $775,367 for the same period in the prior
     year. The increase in sales and marketing expenses was primarily the result
     of the employment of additional sales personnel, common stock issuances and
     cash  payments  to sales and  marketing  consultants,  and an  increase  in
     marketing efforts to effectuate brand awareness designed for future growth.
     Included in sales and marketing  expenses for the six months ended December
     31, 2000 is $706,000 of non-cash  compensation  for services in the form of
     the Company's common stock, options and warrants as compared to none in the
     prior period.

        General and administrative

     General and  administrative  expenses  decreased to $6,332,097  for the six
     months  ended  December  31, 2000 as compared  to  $8,095,759  for the same
     period in the prior year.  The decrease was primarily the result of limited
     executive and consulting  compensation in the form of the Company's  common
     stock,  options and warrants  (excluding  the  amortization  of  previously
     issued  warrants)  during for the six months  December 31, 2000,  partially
     offset by the  addition  of the  Company's  computer  software  segment,  a
     settlement  with Anicom,  Inc.,  as well as the  employment  of  additional
     administrative  personnel  and payment of  professional  fees for  services
     rendered.  On November 16,  2000,  the Company and Anicom,  Inc.  reached a
     settlement (the "Settlement  Agreement").  Under the Settlement  Agreement,
     the allegations for the breach of the warrant  agreement by the Company and
     unasserted  claims for the breach of the  distribution  agreement by Anicom
     and the Company were settled. The Settlement Agreement resulted in a charge
     to operations of $445,000 for the six months ended  December 31, 2000.  The
     Company  expects  a  reduction  in  general  and  administrative   expenses
     resulting  from  the  substantial  curtailment  in  operations  of its  TSG
     subsidiary and the reduction in expenses in its ComputerCop subsidiary.

        Other income (expenses)

     Other income  (expenses)  increased to $473,061 for the six months December
     31, 2000 as compared to $106,160 for the same period in the prior year. The
     increase was primarily due to an increase in interest income the six months
     December  31,  2000  due to the  increase  average  cash  balance  from the
     ComputerCOP Corporation transaction.

        Impairment charges

     On December 31, 2000, the Company  recorded a writedown of its  ComputerCOP
     technology  (computer  software  segment) in the amount of $2,000,000.  The
     asset  was  determined  to be  impaired  because  of the  inability  of the
     software technology to generate future operating income without substantial
     sales  volume  increases,  which  are  uncertain.

     Liquidity  and  Capital Resources

     NetWolves had cash and cash  equivalents of $10.6 million and $20.2 million
     at December 31, 2000 and June 30, 2000,  respectively.  Management believes
     that the Company has adequate capital resources to meet its working capital
     needs for at least the next twelve months based upon its current  operating
     level and an  anticipated  reduction  in  operating  costs  resulting  from
     focusing  on  our  core  technology  and  eliminating   substantial  sales,
     marketing  and general  and  administrative  costs  incurred in its TSG and
     ComputerCOP  subsidiaries.  To the extent necessary, the Company intends to
     raise  additional  monies  from the sale of its  capital  stock to fund its
     growth over the next 24 to 36 months;  however,  there can be no  assurance
     that the  Company  will have  sufficient  capital  to finance  its  planned
     growth.

                                       13

<PAGE>



ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Not applicable.



































                                       14

<PAGE>


                          PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     1)   On April 19, 2000,  Anicom,  Inc. had commenced an action  against the
          Company  in the U.S.  District  Court  for the  Northern  District  of
          Illinois.  The  action was based upon  NetWolves'  alleged  failure to
          deliver  approximately  74,842  shares of its common  stock to Anicom,
          upon exercise by Anicom of the Company's  warrants.  The action sought
          specific  performance  as well as any damages  that may have  resulted
          from a diminution in value of NetWolves  common stock. On November 16,
          2000, and in connection  with the  litigation,  the Company and Anicom
          reached  a  settlement  (the   "Settlement   Agreement").   Under  the
          Settlement  Agreement  the  allegations  for the breach of the warrant
          agreement by the Company and  unasserted  claims for the breach of the
          distribution  agreement  by Anicom and the Company were  settled.  The
          Company  paid   $1,150,000  to  Anicom   pursuant  to  the  Settlement
          Agreement,  which included $950,000 for the repurchase of all unvested
          warrants. As of September 30, 2000, the Company has reduced additional
          paid in capital in the amount of $705,000, representing the fair value
          of the warrants,  calculated  using the  Black-Scholes  option pricing
          model with the following assumptions: dividend yield of none, expected
          volatility  of 65%,  risk free  interest rate of 5.85% and an expected
          term of 3.17 years - the  remaining  life to the  maturity  date.  The
          remaining  portion of the settlement,  in the amount of $445,000,  has
          been charged to operations.

     2)   NetWolves   Corporation  (the  "Company")  on  behalf  of  itself  and
          derivatively on behalf of TSG Global  Education Web, Inc. vs. David H.
          Sullivan, et al. - ("Action 1")

          David H. Sullivan, et al. vs. NetWolves Corporation,  et al.- ("Action
          2")

          On or about  November 22, 2000 the Company  commenced  Action 1 in the
          United  States  District  Court for the Southern  District of New York
          against certain  defendants who were officers and/or  directors of TSG
          Global   Education   Network,   Inc.   ("TSG")  (the  "Sullivan  Group
          Defendants")   and  against  an  Ohio   Corporation,   ProCare,   Inc.
          ("ProCare").

          By way  of  background,  as  more  fully  articulated  in the  amended
          complaint,  TSG,  which  has been  named as a nominal  defendant,  was
          created by the Company as a wholly owned  subsidiary to facilitate the
          acquisition  from the Sullivan  Group  Defendants  all of the stock of
          Sales  Management  Consulting  Inc.  ('SMCI"),  d/b/a as the  Sullivan
          Group,  pursuant to an Agreement and Plan of Merger dated July 7, 1999
          among the Company,  TSG, SMCI and the Sullivan Group  Defendants  (the
          "Merger  Agreement").  The Company claims that it was induced to enter
          into the Merger Agreement and consummate the Merger  Transaction based
          upon fraudulent  misrepresentations  and the purposeful concealment of
          material  information by the Sullivan Group Defendants.  In connection
          with the Merger Transaction,  the Company became obliged to provide to
          the Sullivan Group Defendants lucrative employment agreements with TSG
          (the  "Employment  Agreements"),  to  transfer to the  Sullivan  Group
          Defendants 180,000 shares of the Company's stock, to commit itself to,
          and actually  contribute more than five million dollars to the working
          capital of TSG pursuant to a stockholders  agreement that  effectively
          deprived the Company of any of the control that conceptually  would be
          commensurate   with,  and  exercisable  by,  the  Company  over  TSG's
          operations as a result of its majority stock ownership,  and otherwise
          to make available to the Sullivan Group Defendants valuable technology
          of the Company which they indiscriminately utilized for the benefit of
          ProCare,  a  company  in  which it is  contended  the  Sullivan  Group
          Defendants  enjoy a  beneficial  interest.  The  Company  additionally
          stated claims against the Sullivan Group Defendants to redress what it
          alleges  was the  wasting  and  mismanagement  of TSG's  assets by the

                                       15


<PAGE>

          Sullivan Group Defendants, the breach by the Sullivan Group Defendants
          of their  fiduciary  and  contractual  obligations  to TSG under their
          employment  agreements  with TSG and otherwise,  and the usurpation by
          the Sullivan Group  Defendants of corporate  opportunities  rightfully
          belonging to TSG.

          In addition to  injunctive  relief,  the Company is seeking to recover
          from the Sullivan Group  Defendants  compensatory and punitive damages
          in excess of ten million dollars.

          In response to Action 1, on or about  December 19, 2000,  the Sullivan
          Group  Defendants  commenced  Action 2 in the United  States  District
          Court for the  Southern  District of New York  against the Company and
          other  defendants.  According to their  complaint,  the Sullivan Group
          Defendants are  contending,  correspondingly,  that it was the Company
          and certain of its  current  and former  officers  and  directors  who
          induced  the  Sullivan  Group  Defendants  to enter  into  the  Merger
          Agreement by making false or  negligent  misrepresentations  regarding
          the Company's  principal  product.  Based upon this factual predicate,
          the Sullivan Group Defendants have asserted claims against the Company
          and the other  defendants for violations of Section 10-b of the of the
          Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder,
          common  law  fraud,  and  against  TSG,  for  breach  by TSG of  their
          employment  agreements  with TSG. The Sullivan  Group  Defendants  are
          seeking to recover  from the Company  and the other  named  defendants
          compensatory and punitive damages in excess of sixteen million dollars
          plus  liquidated  compensation  amounts  to which  they claim they are
          entitled under the Employment Agreements.

          The Sullivan Group Defendants and Procare have moved to dismiss Action
          1 based upon their  contention  that the Court  lacks  subject  matter
          jurisdiction to adjudicate the controversy. Correspondingly, NetWolves
          and TSG will be  moving  in  Action 2 to  dismiss  the  claims  of the
          Sullivan Group Defendants  against them therein on the ground that the
          Federal Rules of Civil Procedure  compel the Sullivan Group Defendants
          to interpose such claims, if at all, as counterclaims in Action 1.

          The  Company  believes  that its claims  against  the  Sullivan  Group
          Defendants  are  meritorious  based on the  facts  and  circumstances.
          Further,  the Company  believes that the claims by the Sullivan  Group
          Defendants lack merit and it intends to engage in a vigorous defense.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

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

          Not applicable.

ITEM 5.   OTHER INFORMATION

          Not applicable.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          None

                                       16
<PAGE>


                                   SIGNATURES


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


                                        BY:     NETWOLVES CORPORATION


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


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

Date: February 13, 2001