UNITED STATES

               SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC 20549


                            FORM 10-Q

                           (Mark One)

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

        For the Quarterly Period Ended December 31, 2002

                               OR

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

 For the Transition Period From _____________ to ______________


                 COMMISSION FILE NUMBER 0-28579


                       NOVO NETWORKS, INC.
      (Exact Name of Registrant as Specified in Its Charter)


          Delaware                           75-2233445
(State or Other Jurisdiction              (I.R.S. Employer
     of Incorporation)                    Identification No.)


               2311 Cedar Springs Road, Suite 400
                       Dallas, Texas 75201
            (Address of Principal Executive Offices)

                         (214) 777-4100
      (Registrant's Telephone Number, Including Area Code)


     Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes   X    No
    -----     -----

     Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes        No   X
   -----      -----

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

On February 10, 2003, 52,323,701 shares of the registrant's
common stock, $.00002 par value per share, were outstanding.



<PAGE>



                       NOVO NETWORKS, INC.

                   QUARTERLY REPORT FORM 10-Q
                              INDEX



                                                       PAGE NO.
PART I:   FINANCIAL INFORMATION

  Item 1. Financial Statements

            Consolidated Balance Sheets as of
              December 31, 2002 and June 30, 2002.......   3

            Consolidated Statements of Operations
              for the Three and Six Months Ended
              December 31, 2002 and 2001................   4

            Consolidated Statements of Cash Flows
              for the Six Months Ended December
              31, 2002 and 2001.........................   5

            Notes to Consolidated Financial Statements..   6

  Item 2. Management's Discussion and Analysis
            of Financial Condition and Results
            of Operations...............................  12

  Item 3. Quantitative and Qualitative
            Disclosures About Market Risk...............  25

  Item 4. Controls and Procedures.......................  25


PART II:    OTHER INFORMATION

  Item 1. Legal Proceedings.............................  25

  Item 2. Changes in Securities and Use of Proceeds.....  25

  Item 3. Defaults Upon Senior Securities...............  26

  Item 4. Submission of Matters to Vote of
            Securities Holders..........................  27

  Item 5. Other Information.............................  27

  Item 6. Exhibits and Reports on Form 8-K..............  27

SIGNATURES..............................................  28

CERTIFICATIONS..........................................  29


                               -2-


<PAGE>


                       NOVO NETWORKS, INC.
                   CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 December 31,       June 30,
                                                                     2002             2002
                                                                 ------------     ------------
                                                                  (unaudited)

                                                              <c>              <c>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                     $  5,764,780     $  9,871,305
   Note receivable and other receivables,
     net of allowance ($3,835,110 and $3,603,299, respectively)             -                -
   Prepaid expenses                                                   503,484          275,324
                                                                 ------------     ------------
                                                                    6,268,264       10,146,629
                                                                 ------------     ------------

LONG-TERM ASSETS
   Prepaid expenses                                                   106,944          187,153
   Deposits                                                             5,745            5,745
   Property and equipment, net                                        452,892          526,775
   Equity investments                                               2,500,000          264,751
                                                                 ------------     ------------
                                                                    3,065,581          984,424
                                                                 ------------     ------------
                                                                 $  9,333,845     $ 11,131,053
                                                                 ============     ============

LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                              $     12,006     $     28,335
   Accrued other                                                    1,482,718        1,841,465
   Customer deposits                                                    2,000            2,000
                                                                 ------------     ------------
                                                                    1,496,724        1,871,800
                                                                 ------------     ------------

COMMITMENTS AND CONTINGENCIES                                               -                -

STOCKHOLDERS' EQUITY

   Preferred stock, $0.00002 par value, $1,000 liquidation
      preference per share, authorized 25,000,000, issued
      and outstanding 26,999 and 26,839, liquidation value -
      $26,999,000 and $26,839,000, respectively                             -                -
   Common stock, $0.00002 par value, authorized 200,000,000,
      issued and outstanding, 52,323,701                                1,050            1,050
   Additional paid-in capital                                     256,834,658      256,511,879
   Accumulated deficit                                           (248,998,587)    (247,221,732)
   Deferred compensation                                                    -          (31,944)
                                                                 ------------     ------------
                                                                    7,837,121        9,259,253
                                                                 ------------     ------------
                                                                 $  9,333,845     $ 11,131,053
                                                                 ============     ============
</TABLE>


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

                               -3-

<PAGE>


                       NOVO NETWORKS, INC.
              CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                      For the Three Months            For the Six Months
                                                       Ended December 31,             Ended December 31,
                                                  ---------------------------     ---------------------------
                                                      2002           2001             2002          2001
                                                  ------------   ------------     ------------   ------------
                                                          (unaudited)                      (unaudited)

                                               <c>            <c>              <c>            <c>
Revenues                                          $          -   $  1,799,305     $          -   $ 10,486,982

Operating expenses:
   Direct costs                                              -      4,982,849                -     14,520,735
   Selling, general and administrative expenses        793,969      2,501,505        1,517,995      8,492,117
   Depreciation and amortization                        38,595        641,064           76,457      1,285,284
                                                  ------------   ------------     ------------   ------------
                                                       832,564      8,125,418        1,594,452     24,298,136
                                                  ------------   ------------     ------------   ------------
Loss from operations, before
   other (income) expense                             (832,564)    (6,326,113)      (1,594,452)   (13,811,154)

Other (income) expense:
   Interest (income) expense, net                      (72,554)        81,840         (154,022)       122,245
   Equity in loss of investments                             -        643,357          264,751      1,062,649
   Foreign currency loss                                     -         88,695                -         95,128
   Net gain on liquidation of debtor subsidiaries     (214,000)   (15,701,336)        (214,000)   (15,701,336)
   Other income                                         (1,661)        (4,458)         (37,105)      (450,247)
                                                  ------------   ------------     ------------   ------------
                                                      (288,215)   (14,891,902)        (140,376)   (14,871,561)
                                                  ------------   ------------     ------------   ------------

Net income (loss)                                     (544,349)     8,565,789       (1,454,076)     1,060,407

Series D preferred dividends                          (163,000)      (152,814)        (322,779)      (302,568)
                                                  ------------   ------------     ------------   ------------

Net income (loss) allocable to
   common shareholders                            $   (707,349)  $  8,412,975     $ (1,776,855)  $    757,839
                                                  ============   ============     ============   ============

Basic
   Net income (loss) per share                    $      (0.01)  $       0.16     $      (0.03)  $       0.01
                                                  ============   ============     ============   ============

   Weighted average number of shares outstanding    52,323,701     52,323,701       52,323,701     52,323,701
                                                  ============   ============     ============   ============

Diluted
   Net income (loss) per share                    $      (0.01)  $       0.15     $      (0.03)  $       0.01
                                                  ============   ============     ============   ============

   Weighted average number of shares outstanding    52,323,701     54,553,469       52,323,701     54,553,469
                                                  ============   ============     ============   ============

</TABLE>


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


                               -4-

<PAGE>




                       NOVO NETWORKS, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                 Six Months Ended
                                                                    December 31,
                                                            ---------------------------
                                                                2002           2001
                                                            ------------   ------------
                                                                    (unaudited)

                                                         <c>            <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                         $ (1,454,076)  $  1,060,407
  Adjustments to reconcile net income (loss) to
    net cash used in operating activities:
     Depreciation and amortization                                76,457      1,285,284
     Other non-cash charges and credits:
       Stock-based compensation                                   31,944        330,090
       Bad debt expense                                          231,811      2,460,000
       Equity in loss of investments                             264,751      1,062,649
       Net gain on sale of fixed assets                           (1,661)        (3,086)
       Impairment loss                                                 -        121,932
       Net gain on liquidation of debtor subsidiaries           (214,000)   (15,701,336)
     Change in operating assets and liabilities:
       Accounts receivable                                             -       (668,024)
       Note receivable and other receivables                    (231,811)             -
       Prepaid expenses and other receivables                   (147,951)        36,458
       VAT receivable                                                  -      1,405,929
       Restricted cash                                                 -         (7,345)
       Accounts payable                                          (16,329)     7,883,553
       Accrued other                                            (144,747)      (840,124)
       Accrued interest payable                                        -        115,688
       Customer deposits and deferred revenue                          -       (259,693)
                                                            ------------   ------------
Net cash used in operating activities                         (1,605,612)    (1,717,618)
                                                            ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Deposits (made) received                                             -        (11,865)
  Purchase of property and equipment                             (11,633)             -
  Sale of property and equipment                                  10,720        170,642
  (Investments in) distributions from investments             (2,500,000)       386,998
                                                            ------------   ------------
Net cash (used in) provided by investing activities           (2,500,913)       545,775
                                                            ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital leases                                           -     (1,119,486)
                                                            ------------   ------------
Net cash used in financing activities                                  -     (1,119,486)
                                                            ------------   ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                       (4,106,525)    (2,291,329)
CASH HELD BY SUBSIDIARIES IN BANKRUPTCY TO BE LIQUIDATED               -        (42,120)
CASH AND CASH EQUIVALENTS, beginning of year                   9,871,305     16,696,537
                                                            ------------   ------------
CASH AND CASH EQUIVALENTS, end of period                    $  5,764,780   $ 14,363,088
                                                            ============   ============

---------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

  Cash paid for:
     Interest                                               $          -   $    496,839
                                                            ============   ============
     Taxes                                                  $          -   $          -
                                                            ============   ============

</TABLE>




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



                               -5-

<PAGE>


                       NOVO NETWORKS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.Business

(a)  General

Novo Networks, Inc. is a company that, through its operating
subsidiaries, previously engaged in the business of providing
telecommunications services over a facilities-based network.
References to "Novo Networks," "Company", "we," "us" or "our"
refer to Novo Networks, Inc., the ultimate parent of the
operating subsidiaries and the registrant under the Securities
Exchange Act of 1934. Prior to September 22, 1999, we were a
publicly held company with no material operations. We were
formerly known as eVentures Group, Inc., and prior thereto, as
Adina, Inc., which was incorporated in Delaware on June 24, 1987.

During fiscal 2002, our principal telecommunications operating
subsidiaries, including AxisTel Communications, Inc. ("AxisTel"),
e.Volve Technology Group, Inc. ("e.Volve") and Novo Networks
Operating Corp. ("NNOC") filed voluntary petitions under Title 11,
Chapter 11 of the United States Code (the "Bankruptcy Code")
as described more fully below. We will refer to the subsidiaries
that have filed for bankruptcy protection as our "debtor
subsidiaries" throughout this quarterly report (this "Quarterly
Report"). During the second quarter of fiscal 2003, we purchased
an ownership interest in an Italian gelato company, as described
more fully below.

Due to the ongoing liquidation of substantially all of our debtor
subsidiaries' assets, we currently have no operations or
revenues. We are not providing any products or services of any
kind (including telecommunications services) to any customers.

(b)  Current Opportunity

On December 19, 2002, we executed a purchase agreement (the
"Purchase Agreement") with Ad Astra Holdings LP, a Texas limited
partnership ("Ad Astra"), Paciugo Management LLC, a Texas limited
liability company and the sole general partner of Ad Astra
("PMLLC"), and the collective equity owners of both Ad Astra and
PMLLC, being Ugo Ginatta, Cristiana Ginatta and Vincent Ginatta
(collectively, the "Equity Owners"). Pursuant to the Purchase
Agreement, we purchased a 33% membership interest in PMLLC and a
32.67% limited partnership interest in Ad Astra, which results in
our holding an aggregate interest, including the PMLLC general
partnership interest, in Ad Astra equal to 33% (the "Initial
Interest"), for a purchase price of $2.5 million.

In addition, we hold an option, exercisable for a period of two
years from December 19, 2002, to purchase a 17.3% membership
interest in PMLLC and a 17.127% interest in Ad Astra (the
"Subsequent Interest") for $1.5 million. Together, the Initial
Interest and the Subsequent Interest would result in our holding
a 50.3% membership interest in PMLLC and a 49.797% limited
partnership interest in Ad Astra, for a total aggregate interest
in Ad Astra, including the PMLLC general partner interest, of
50.3%.

Collectively, Ad Astra and PMLLC, through a number of wholly
owned subsidiaries, own and manage a gelato manufacturing,
retailing and catering business operating under the brand name
"Paciugo." Throughout this Quarterly Report, we refer
collectively to Ad Astra, PMLLC, and their subsidiaries as
"Paciugo." Under the terms of the Purchase Agreement, we will
provide services to support the business operations of Paciugo,
including administrative, accounting, financial, human resources,
information technology, legal, and marketing services (the
"Support Services"). The Support Services expressly exclude
providing certain capital expenditures as well as services that
are customarily performed by third party professionals. In
exchange for our providing the Support Services, we will receive
an annual amount equal to the greater of $0.25 million or 2% of
the consolidated gross revenues of Paciugo (excluding any gross
revenues shared with third parties under existing contractual
arrangements). We will receive a monthly payment from Paciugo
in the amount of $20,833, with the positive cumulative difference,
if any, between 2% of such gross revenues and $20,833 per month
to be paid within ten days of the end of such month. Paciugo may
not cancel or alter the scope of the Support Services without
our prior approval or consent.



                               -6-

<PAGE>



We are entitled, under the terms of the Purchase Agreement, to
such representation on the governing board of PMLLC (the "Board
of Managers") as is proportionate to our ownership interests
therein. Effective as of December 19, 2002, PMLLC's Board of
Managers was composed of Ugo Ginatta and Cristiana Ginatta, as
the Equity Owners' designees, and Barrett N. Wissman, as our
designee. PMLLC, as the sole general partner of Ad Astra, is
empowered to make all decisions associated with Ad Astra, except
for those requiring the approval of the limited partners, as set
forth in the limited partnership agreement of Ad Astra or under
applicable law.

(c)  Bankruptcy Proceedings

On April 2, 2001, another one of our subsidiaries, Internet
Global Services, Inc. ("iGlobal") filed a voluntary petition for
protection under Chapter 7 of the Bankruptcy Code in the United
States Bankruptcy Court for the Northern District of Texas due
to iGlobal's inability to service its debt obligations and
contingent liabilities, as well as our inability to raise
sufficient capital to fund operating losses at iGlobal. As a
result of the filing, we recorded an impairment loss of $62.4
million during fiscal 2001, the majority of which related to
non-cash goodwill recorded in connection with our acquisition
of iGlobal.

On July 30, 2001, the debtor subsidiaries filed voluntary
petitions for protection under the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (the
"Delaware Bankruptcy Court") in order to stabilize their
operations and protect their assets while attempting to
reorganize their businesses.

We have set forth below a table summarizing the current status of
our wholly owned subsidiaries.

<TABLE>
<CAPTION


                                                               Status as of     Subject to
                                                               February 14,   Bankruptcy Plan
        Wholly Owned Subsidiary            Date Acquired          2003*       or Proceedings?
  --------------------------------------   -------------      --------------  ----------------
  
                                         <c>             <c>             <c>
  Novo Networks Operating Corp.               2/8/00**        Inactive        Yes, Chapter 11
  AxisTel Communications, Inc.                9/22/99         Inactive        Yes, Chapter 11
  Novo Networks International                 9/22/99         Inactive        Yes, Chapter 11
  Services, Inc.
  Novo Networks Global Services, Inc.         9/22/99         Inactive        Yes, Chapter 11
  Web2Dial Communications, Inc.               9/22/99         Inactive              No
  Novo Networks Metro Services, Inc.          9/22/99         Inactive        Yes, Chapter 11
  Novo Networks Metro Services                9/22/99         Inactive              No
  (Virginia), Inc.
  Novo Networks Media Services, Inc.          9/22/99         Inactive              No
  Novo Networks (UK) Ltd.                     9/22/99         Inactive              No
  e.Volve Technology Group, Inc.              10/19/99        Inactive        Yes, Chapter 11
  Internet Global Services, Inc.              3/10/00         Inactive        Yes, Chapter 7
  eVentures Holdings, LLC                     9/7/99**        Active***             No
</TABLE>





     *    "Active" status indicates current operations within the
          respective entity; "Inactive" status indicates no
          current operations, but may include certain activities
          associated with the administration of an estate
          pursuant to a bankruptcy filing or plan.

     **   Indicates date of incorporation, if organized by us.

     ***  This entity has no operations other than to hold
          certain equity interests.



                               -7-

<PAGE>



As of September 28, 2001, the goal of the reorganization effort
was to preserve the going concern value of our debtor
subsidiaries' core assets and to provide distributions to their
creditors. However, after that date, and based largely on the
fact that our debtor subsidiaries ceased receiving traffic from
their sole remaining customer, Qwest Communications Corporation
(and its affiliates) ("Qwest"), a determination was made that the
continued viability of the debtor subsidiaries was not realistic.
An amended plan and disclosure statement were filed with the
Delaware Bankruptcy Court on December 31, 2001. The amended plan
provides for a liquidation of substantially all of the assets of
our debtor subsidiaries, pursuant to the Bankruptcy Code, instead
of a reorganization as previously planned.

On January 14, 2002, the Delaware Bankruptcy Court approved the
amended disclosure statement, with certain minor modifications,
and on March 1, 2002, the Delaware Bankruptcy Court confirmed the
amended plan, again with minor modifications. On April 3, 2002,
the amended plan became effective and a liquidating trust was
formed, with funding provided by us in the amount of $0.2
million. Assets to be liquidated of $0.7 million were transferred
to the liquidating trust during the fourth quarter of fiscal
2002. The purpose of the liquidating trust is to collect,
liquidate and distribute the remaining assets of the debtor
subsidiaries and prosecute certain causes of action against
various third parties, including, without limitation, Qwest.
During the first quarter of fiscal 2003, we provided additional
funding of $0.1 million to the liquidating trust. No assurance
can be given that the liquidating trust will be successful in
liquidating substantially all of the debtor subsidiaries assets
pursuant to the amended plan. Also, it is not possible to predict
the outcome of the prosecution of causes of action against third
parties, including, without limitation, Qwest as described in the
amended plan and disclosure statement.

(d)  Litigation Against Qwest

On June 17, 2002, we, along with the liquidating trust, filed a
lawsuit seeking damages resulting from numerous disputes over
business dealings and agreements with Qwest, a former customer
and vendor, and John L. Higgins, a former employee and
consultant. For further details regarding this litigation, see
Item 8 "Legal Proceedings." No assurances can be given that any
recoveries will result from the prosecution of such causes of
action against Qwest and Mr. Higgins. Furthermore, if there are
any recoveries, they may or may not inure to our benefit.

2.   Liquidity and Capital Resources

At December 31, 2002, we had consolidated current assets of $6.3
million, including cash and cash equivalents of approximately
$5.8 million and net working capital of $4.8 million.
Historically, we have funded our subsidiaries' operations primarily
through the proceeds of private placements of our common and
preferred stock and borrowings under loan and capital lease
agreements. We do not currently believe that either of these
funding sources will be available in the near term. Principal
uses of cash have been to fund (i) operating losses; (ii)
acquisitions and strategic investments; (iii) working capital
requirements and (iv) expenses related to the bankruptcy plan
administration process. Due to our financial performance, the
lack of stability in the capital markets and the economy's
downturn, our only current source of funding is expected to be
cash on hand.

As discussed in Item 1(c), our debtor subsidiaries filed
bankruptcy proceedings under the Bankruptcy Code. As the ultimate
parent, we agreed to provide our debtor subsidiaries with up to
$1.6 million in secured debtors-in-possession financing.
Immediately prior to the confirmation hearing, we increased this
credit facility to approximately $1.9 million, which was advanced
as of March 31, 2002. The credit facility made funds available to
permit the debtor subsidiaries to pay employees, vendors,
suppliers, customers and professionals consistent with the
requirements of the Bankruptcy Code. The credit facility provided
for interest at the rate of prime plus 3.0% per annum and
provided "super-priority" lien status, meaning that we had a
valid first lien, pursuant to the Bankruptcy Code, on
substantially all of the debtor subsidiaries' assets. In
addition, the credit facility maintained a default interest rate
of prime plus 5.0% per annum.


                               -8-

<PAGE>

In connection with the amended plan being confirmed by the
Delaware Bankruptcy Court and becoming effective on April 3,
2002, the credit facility was converted into a new secured note
in the principal amount of approximately $2.5 million,
representing the principal amount of the debtors-in-possession
financing, certain payroll expenses and applicable attorneys'
fees. Subsequent to June 30, 2002, the new secured note was
amended to approximately $2.9 million, representing additional
trust funding, certain payroll expenses and applicable attorneys'
fees. The new secured note is guaranteed by the debtor
subsidiaries under an agreement in which the debtor subsidiaries
have pledged substantially all of their remaining assets as
collateral. During the first quarter of fiscal 2003, we provided
additional funding of $0.1 million to the liquidating trust.
Interest for the new secured note is accrued for on a monthly
basis and included in the outstanding balance of the new secured
note. Due to the uncertainty surrounding the collection of the
new secured note, it has been fully reserved.

For the six months ended December 31, 2001, two of our indirect
wholly owned operating subsidiaries, AxisTel and e.Volve,
provided telecommunications services. These subsidiaries ceased
operations effective September of 2001 and December of 2001,
respectively. Since the latter date, neither we nor any of the
debtor subsidiaries have conducted operations or generated
revenue. We are currently not providing any products or services
of any kind (including telecommunications services) to any
customers. During fiscal 2002, e.Volve's only significant
customer had been Qwest, which accounted for approximately 70% of
consolidated revenues. e.Volve is no longer providing services to
Qwest, and as part of our debtor subsidiaries' amended plan,
certain causes of action have been brought against Qwest.

We currently anticipate that we will not generate any revenue
from operations in the near term based on (i) the termination of
the operations of our debtor subsidiaries, which have
historically provided all of our significant revenues on a
consolidated basis, (ii) the early stages of our relationship
with Paciugo and the promulgation of its business plan and (iii)
the uncertainties surrounding other potential business
opportunities that we may consider, if any. However, if we choose
to purchase the Subsequent Interest in Paciugo, we expect to
consolidate its revenues and operations into our consolidated
financial statements at that time. In the meantime, we expect to
record other income from the provision of certain support
services to Paciugo as agreed upon in the Purchase Agreement. For
further details regarding the support services, see Item 1(b)
entitled "Business - Current Opportunity."

As noted above, we do not believe that any of the traditional
funding sources will be available to us and that our only option
will likely be cash on hand. Consequently, our failure to
(i) purchase the Subsequent Interest in Paciugo, (ii)
implement a successful business plan for Paciugo and (iii)
identify any other potential business opportunities that we may
consider, if any, will jeopardize our ability to continue as a
going concern. Due to these factors, we are unable to determine
whether current available financing will be sufficient to meet
the funding requirements of (i) our debtor subsidiaries
bankruptcy plan administration process, (ii) our ongoing general
and administrative expenses and (iii) the undetermined capital
requirements of Paciugo and such other business opportunities as
may arise in the future, if any.

3.   General

The accompanying consolidated financial statements as of and for
the three and six month periods ended December 31, 2002 and 2001,
have been prepared by us, without audit, pursuant to the interim
financial statements rules and regulations of the United States
Securities and Exchange Commission ("SEC"). In our opinion, the
accompanying consolidated financial statements include all
adjustments necessary to present fairly the results of our
operations and cash flows at the dates and for the periods
indicated. The results of operations for the interim periods are
not necessarily indicative of the results for the full fiscal
year. The accompanying consolidated financial statements should
be read in conjunction with the audited consolidated financial
statements included in our Annual Report on Form 10-K for the
fiscal year ended June 30, 2002.

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates. The consolidated financial statements include
our accounts and those of our wholly owned subsidiaries not
currently involved in the bankruptcy plan administration process.


                               -9-

<PAGE>


The consolidated financial statements for us and our subsidiaries
that are not involved in such bankruptcy proceedings, have been
prepared in accordance with accounting principles generally
accepted in the United States of America applicable to a going
concern. As of June 30, 2002, the assets and liabilities of the
debtor subsidiaries were deconsolidated, as the liquidating trust
controls their assets. For further details regarding the
bankruptcy proceedings, see Item 1(c) entitled "Business -
Bankruptcy Proceedings." We have recorded an accrual of
approximately $1.0 million in the accompanying financial
statements for the estimated costs of liquidating substantially
all of the assets and liabilities of the debtor subsidiaries. The
estimated realizable values and settlement amounts may be
different from the proceeds ultimately received or payments
ultimately made.

Certain fiscal 2002 balances have been reclassified for
comparative purposes to be consistent with the fiscal 2003
presentation.  Such reclassifications have no impact on the
reported net loss. All significant intercompany accounts have
been eliminated.

4.   Long-lived Assets

Our long-lived assets consist of property and equipment.  We
evaluate impairment of our long-lived assets in accordance with
the Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
establishes one accounting model to be used for long-lived assets
to be disposed of by sale and broadens the presentation of
discontinued operations to include more disposal transactions.
SFAS No. 144 supercedes SFAS No. 121,  "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed of" and the accounting and reporting provisions of APB
Opinion No. 30. SFAS No.144 is effective for fiscal years
beginning after December 15, 2001.

We assess the recoverability of long-lived assets by determining
whether the net book value of the assets can be recovered through
projected undiscounted future cash flows.  The amount of
impairment, if any, is measured based on fair value and is
charged to operations in the period in which the impairment
occurs. No impairment losses were recorded during the six months
ended December 31, 2002. However, during the prior reporting
period certain network elements were rejected as part of the
bankruptcy proceedings, resulting in an impairment charge of $0.1
million.  During fiscal 2002, long-lived assets related to the
debtor subsidiaries were written off by recording a charge of
approximately $15.7 million to the net gain on liquidation of the
debtor subsidiaries' account.

Property and equipment consist of leasehold improvements,
computer equipment and furniture and fixtures.  Each class of
assets is depreciated over its estimated useful life using the
straight-line method.

5.   Net Earnings (Loss) Per Share

We calculate earnings (loss) per share in accordance with SFAS
No. 128, "Earnings Per Share" ("EPS"). SFAS No. 128 requires dual
presentation of basic EPS and diluted EPS on the face of the
income statement for all entities with complex capital
structures. Basic EPS is computed as net income (loss) less
preferred dividends divided by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur from common shares
issuable through stock options, warrants and convertible
debentures. For the six months ended December 31, 2002, diluted
EPS is not calculated, as the assumed conversion would be
antidilutive. For the six months ended December 31, 2001, diluted
EPS is presented for the effects of convertible preferred stock.
If the preferred stock had been converted, the amount of common
stock outstanding would increase by approximately 2.2 million
shares. For purposes of computation of EPS, the shares issued for
the acquisition of 67% of e.Volve (11,365,614 shares during 1999)
were deemed to have been in existence for the entire period.

6.   Equity Investments

Subsidiaries whose results are not consolidated, but over whom we
exercise significant influence, are generally accounted for under
the equity method of accounting.  Whether we exercise significant
influence with respect to a subsidiary depends on an evaluation
of several factors, including, without limitation, representation
on the subsidiary's governing board and ownership level, which is
generally a 20% to 50% interest in the voting securities of the
subsidiary, including voting rights associated with our holdings
in common stock, preferred stock and other convertible
instruments in the subsidiary. Under the equity method of
accounting, investee's accounts will not be reflected in our
consolidated financial statements. Our proportionate share of an
investee's operating earnings and losses will be included in the
caption "Equity in Loss of Investments" in our consolidated
statements of operations.


                              -10-

<PAGE>


Currently, we have minority equity interests in Paciugo, a gelato
manufacturing, retailing and catering business, and certain
development stage Internet and communications companies. During
the current quarter, we purchased the Initial Interest in
Paciugo. For further details regarding this transaction, see Item 1(b)
"Business - Current Opportunity." The Initial Interest is accounted for
under the equity method. If the Subsequent Interest is acquired
and the aggregate ownership interest in Paciugo is increased to
50.3%, we will use the consolidation method of accounting.
Companies in which we directly or indirectly own more than 50% of
the outstanding voting securities are generally accounted for
in such a way. Under the consolidation method, Paciugo's accounts
will be reflected within our financial statements.

We account for the majority of our interests using the equity
method. For the six months ended December 31, 2002, our
proportionate share of equity losses totaled approximately $0.3
million. The value of our outstanding equity interests, other than
Paciugo, have been reduced to zero either by recording our
proportionate share of losses incurred by the investee up to the
cost of that interest or from impairment losses. Due to declining
market conditions, negative operating results of the investee
companies, lack of investee liquidity and other uncertainties
surrounding the recoverability of these interests, we recorded
impairment losses of $13.2 million in prior fiscal periods. For
those equity interests previously impaired completely, we ceased
recording our share of losses incurred by the investee.

Equity interests consists of the following at December 31, 2002:

<TABLE>
<CAPTION>

                                                % Ownership      Accounting
        Accounting Company Name              Common    Preferred   Method      Balance
-------------------------------------------------------------------------------------------

                                          <c>       <c>        <c>        <c>
Paciugo                                       33.0%     33.0%     Equity     $    2,500,000
Gemini Voice Solutions (f/k/a PhoneFree)      17.2%     31.7%     Equity                  -
ORB Communications & Marketing, Inc           19.0%    100.0%     Equity                  -
FonBox, Inc.                                  14.0%     50.0%     Equity                  -
Launch Center 39 ("LC39")                      0.0%      2.1%     Cost                    -
Spydre Labs                                    5.0%      0.0%     Cost                    -
                                                                             --------------
                                                                             $    2,500,000
                                                                             ==============

</TABLE>


At December 31, 2002, Paciugo met the criteria for a "significant
subsidiary" as set forth in Rule 1.02(w) of Regulation S-X under
the Exchange Act. Summarized unaudited financial information for
Paciugo as of and for the twelve months ended December 31, 2002
is as follows:

Financial position information:
 Current assets                     $   2,345,308
 Non-current assets                     1,815,832
 Current liabilities                      408,134
 Non-current liabilities                  873,637
 Net assets                             2,879,369
Income statement information:
 Revenues                               1,773,649
 Gross profit                           1,455,402
 Net loss                                (777,630)

Our equity in Paciugo's net loss        $       -

8.   Legal Proceedings

On December 19, 2002, Eos Partners, LP, Eos Partners SBIC, LP,
Eos Partners (Offshore), LP, Kuwait Fund for Arab Economic
Development and TBV Holdings Ltd. (collectively, the
"Plaintiffs") filed a lawsuit against us, Fred Vierra, Barrett N.
Wissman, Clark K. Hunt, Mark R. Graham, Olaf Guerrand-Hermes,
Stuart Subotnick, Jan Robert Horsfall, Stuart Chasanoff, John
Stevens Robling, Jr., Samuel Litwin, Mitchell Arthur, BDO
Seidman, LP, Hunt Asset Management, LLC, HW Partners, LP, HW
Finance, LLC, HW Capital, LP and HW Group, LLC (collectively,
the "Defendants") in the 190th Judicial District Court of
Harris County, Texas, for alleged breach of contract, fraud and
conspiracy in connection with the Plaintiffs' purchase of certain
of our Series C Convertible Preferred Stock in December of 1999
and January of 2000. The Defendants have denied the allegations
and intend to vigorously defend against the Plaintiffs' claims
and seek all other appropriate relief.  Since the process has not
proceeded beyond the initial pleadings stage, no realistic  assessment
can be made with respect to potential exposure, except to refer to
the amounts paid for the Series C Convertible Preferred Stock,
approximately $12 million, and note that the Plaintiffs seek to
recover compensatory and exemplary damages, interest, costs of
court and attorneys' fees.


                              -11-

<PAGE>

As previously reported, we, along with the liquidating trust,
filed a lawsuit against Qwest and Mr. Higgins in the Eighth
Judicial District Court of Clark County, Nevada, on June 17,
2002, and Qwest filed a motion to stay the litigation and compel
arbitration on August 14, 2002. On Janaury 28, 2003, a hearing
was held to determine the proper forum for the various claims.
After listening to oral arguments the judge continued the hearing
until February 27, 2003, at which time a decision is expected to
be rendered.

We have previously disclosed in other reports filed with the SEC
certain other legal proceedings pending against us and our
subsidiaries. Consistent with the rules promulgated by the SEC,
descriptions of these matters have not been included in this
quarterly report because they have not been terminated and there
have not been any material developments during the period ended
December 31, 2002. Readers are encouraged to refer to our prior
reports for further information concerning other legal proceedings
affecting us and our subsidiaries.

We and our subsidiaries are involved in other legal proceedings
from time to time, none of which we believe, if decided adversely
to us or our subsidiaries, would have a material adverse effect
on our business, financial condition or results of operations.

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

The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking
statements. We have based these forward-looking statements on our
current expectations and projections about future events.

Forward-looking statements include, without limitation, the
following:

     *    statements regarding our future capital requirements
          and our ability to satisfy our capital needs, as well
          as any capital needs of Paciugo;

     *    statements regarding our ability to successfully
          redeploy our remaining cash assets through our purchase
          of the Subsequent Interest or otherwise;

     *    statements regarding our ability to continue as a going
          concern;

     *    statements regarding the ability of our debtor
          subsidiaries to successfully liquidate and distribute
          substantially all of their assets, pursuant to the
          amended plan, without causing a material adverse impact
          on us;

     *    statements regarding our ability to collect
          amounts owed by Qwest and other third parties and to
          successfully pursue causes of action against Qwest and
          other third parties;

     *    statements regarding the estimated liquidation value of
          assets and settlement amounts of liabilities; and

     *    statements that contain words like "believe,"
          "anticipate," "expect" and similar expressions are also
          used to identify forward-looking statements.

You  should  be  aware that these forward-looking statements  are
subject to a number of risks, assumptions and uncertainties, such
as:

     *    uncertainties in the implementation of the amended plan
          and the liquidation of substantially all of the
          remaining assets of our debtor subsidiaries;

     *    risks inherent in our ability to deploy our remaining
          assets in any new business venture;

     *    risks that, after deploying our cash to purchase our
          interest in Paciugo, our remaining resources will not
          allow us to pursue other potential business
          opportunities;

     *    our ability to successfully prosecute claims against
          Qwest and other third parties;

     *    risks associated with not having any current operations
          or revenues;

     *    risks associated with preserving the net operating loss
          carryforwards of our debtor subsidiaries;

     *    risks associated with competition in a new business
          sector or industry; and

     *    changes in the laws and regulations that govern us.




                              -12-

<PAGE>


This list is only an example of some of the risks that may affect
the forward-looking statements. If any of these risks or
uncertainties materialize (or if they fail to materialize), or if
the underlying assumptions are incorrect, then actual results may
differ materially from those projected in the forward-looking
statements.

Additional factors that could cause actual results to differ
materially from those reflected in the forward-looking statements
include those discussed in this section, elsewhere in this
Quarterly Report and the risks discussed in the "Business
Considerations" section included in our Annual Report on Form 10-
K for our fiscal year ended June 30, 2002.  Readers are cautioned
not to place undue reliance on these forward-looking statements,
which reflect our analysis, judgment, belief or expectation only
as of the date of this Quarterly Report. We undertake no
obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date of this
report.

Acquisition of the Initial Interest in Paciugo
----------------------------------------------

On December 19, 2002, we executed a purchase agreement (the
"Purchase Agreement") with Ad Astra Holdings LP, a Texas limited
partnership ("Ad Astra"), Paciugo Management LLC, a Texas limited
liability company and the sole general partner of Ad Astra
("PMLLC"), and the collective equity owners of both Ad Astra and
PMLLC, being Ugo Ginatta, Cristiana Ginatta and Vincent Ginatta
(collectively, the "Equity Owners"). Pursuant to the Purchase
Agreement, we purchased a 33% membership interest in PMLLC and a
32.67% limited partnership interest in Ad Astra, which results in
our holding an aggregate interest, including the PMLLC general
partnership interest, in Ad Astra equal to 33%, (the "Initial
Interest"), for a purchase price of $2.5 million.

In addition, we hold an option, exercisable for a period of two
years from December 19, 2002, to purchase a 17.3% membership
interest in PMLLC and a 17.127% interest in Ad Astra (the
"Subsequent Interest") for $1.5 million. Together, the Initial
Interest and the Subsequent Interest would result in our holding
a 50.3% membership interest in PMLLC and a 49.797% limited
partnership interest in Ad Astra, for a total aggregate interest
in Ad Astra, including the PMLLC general partner interest, of
50.3%.

Collectively, Ad Astra and PMLLC, through a number of wholly
owned subsidiaries, own and manage a gelato manufacturing,
retailing and catering business operating under the brand name
"Paciugo." Throughout this Quarterly Report, we refer
collectively to Ad Astra, PMLLC, and their subsidiaries as
"Paciugo." Under the terms of the Purchase Agreement, we will
provide services to support the business operations of Paciugo,
including administrative, accounting, financial, human resources,
information technology, legal, and marketing services (the
"Support Services"). The Support Services expressly exclude
providing certain capital expenditures as well as services that
are customarily performed by third party professionals. In
exchange for our providing the Support Services, we will receive
an annual amount equal to the greater of $0.25 million or 2% of
the consolidated gross revenues of Paciugo (excluding any gross
revenues shared with third parties under existing contractual
arrangements). We will receive a monthly payment from Paciugo in
the amount of $20,833, with the positive cumulative difference,
if any, between 2% of such gross revenues and $20,833 per month
to be paid within ten days of the end of such month. Paciugo may
not cancel or alter the scope of the Support Services without our
prior approval or consent.

We are entitled, under the terms of the Purchase Agreement, to
such representation on the governing board of PMLLC (the "Board
of Managers") as is proportionate to our ownership interests
therein. Effective as of December 19, 2002, PMLLC's Board of
Managers was composed of Ugo Ginatta and Cristiana Ginatta, as
the Equity Owners' designees, and Barrett N. Wissman, as our
designee. PMLLC, as the sole general partner of Ad Astra, is
empowered to make all decisions associated with Ad Astra, except
for those requiring the approval of the limited partners, as set
forth in the limited partnership agreement of Ad Astra or under
applicable law.



                              -13-

<PAGE>

Bankruptcy Proceedings
----------------------

During fiscal 2002, our principal telecommunications operating
subsidiaries, including AxisTel Communications, Inc. ("AxisTel"),
e.Volve Technology Group, Inc. ("e.Volve") and Novo Networks
Operating Corp. ("NNOC") filed voluntary petitions under Title 11,
Chapter 11 of the United States Code (the "Bankruptcy Code").
We will refer to the subsidiaries that have filed for bankruptcy
protection as our "debtor subsidiaries" throughout this quarterly
report (this "Quarterly Report"). At this same time, we announced
that we were exploring the option of diversifying our business by
entering into other lines of business.

On April 2, 2001, another one of our subsidiaries, Internet
Global Services, Inc. ("iGlobal") filed a voluntary petition for
protection under Chapter 7 of the Bankruptcy Code in the United
States Bankruptcy Court for the Northern District of Texas due to
iGlobal's inability to service its debt obligations and contingent
liabilities, as well as our inability to raise sufficient capital
to fund operating losses at iGlobal. As a result of the filing, we
recorded an impairment loss of $62.4 million during fiscal 2001,
the majority of which related to non-cash goodwill recorded in
connection with our acquisition of iGlobal.

On July 30, 2001, the debtor subsidiaries filed voluntary
petitions for protection under the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (the
"Delaware Bankruptcy Court") in order to stabilize their
operations and protect their assets while attempting to
reorganize their businesses.

As of September 28, 2001, the goal of the reorganization effort
was to preserve the going concern value of our debtor
subsidiaries' core assets and to provide distributions to their
creditors. However, after that date, and based largely on the
fact that our debtor subsidiaries ceased receiving traffic from
their sole remaining customer, Qwest Communications Corporation
(and its affiliates) ("Qwest"), a determination was made that the
continued viability of the debtor subsidiaries was not realistic.
An amended plan and disclosure statement were filed with the
Delaware Bankruptcy Court on December 31, 2001. The amended plan
provides for a liquidation of substantially all of the assets of
our debtor subsidiaries, pursuant to the Bankruptcy Code, instead
of a reorganization as previously planned.

On January 14, 2002, the Delaware Bankruptcy Court approved the
amended disclosure statement, with certain minor modifications,
and on March 1, 2002, the Delaware Bankruptcy Court confirmed the
amended plan, again with minor modifications. On April 3, 2002,
the amended plan became effective and a liquidating trust was
formed, with funding provided by us in the amount of $0.2
million. Assets to be liquidated of $0.7 million were transferred
to the liquidating trust during the fourth quarter of fiscal
2002. The purpose of the liquidating trust is to collect,
liquidate and distribute the remaining assets of the debtor
subsidiaries and prosecute certain causes of action against
various third parties, including, without limitation, Qwest.
During the first quarter of fiscal 2003, we provided additional
funding of $0.1 million to the liquidating trust. No assurance
can be given that the liquidating trust will be successful in
liquidating substantially all of the debtor subsidiaries assets
pursuant to the amended plan. Also, it is not possible to predict
the outcome of the prosecution of causes of action against third
parties, including, without limitation, Qwest, as described in the
amended plan and disclosure statement.

As of December 31, 2002, we effectively had no operations, no
sources of revenue and no profits, and we do not anticipate being
in a position to resume operations until such time, if any, we
choose to purchase the Subsequent Interest in Paciugo and
promulgate and implement a new business plan, either as it
relates to Paciugo or any other opportunity, if at all. During
the current quarter, we purchased an Initial Interest in Paciugo.
For further details regarding Paciugo, see Item 2 entitled
"Acquisition of the Initial Interest in Paciugo." We cannot
predict when or if our business plans for Paciugo will be put
into place, what they may entail or whether we will be successful
in such a new business venture or any other potential business
opportunities that we may consider, if any.

During the six months ended December 31, 2002, no revenues from
operations were generated based on (i) the termination of
operations of our debtor subsidiaries, which have historically
provided all significant revenues for us, (ii) the early stages
of our relationship with Paciugo and the promulgation of a
business plan and (iii) the uncertainties surrounding other
potential business opportunities that we may consider, if any.
However, if we choose to purchase the Subsequent Interest in
Paciugo, we expect to consolidate its revenues and operations
into our consolidated financial statements at that time. In the
meantime, we expect to record other income from the Support
Services that we will provide Pacuigo as agreed upon in the
Purchase Agreement. For further details regarding the Support
Services, see Item 2 entitled "Acquisition of the Initial
Interest in Paciugo."


                              -14-

<PAGE>


During the six months ended December 31, 2001, revenues were
generated from operations of two of our debtor subsidiaries;
AxisTel and e.Volve. e.Volve's only significant customer was
Qwest, which accounted for approximately 70% of consolidated
revenues for the six months ended December 31, 2001. Subsequent
to December 31, 2001, AxisTel and e.Volve ceased all operations,
and as part of our debtor subsidiaries' amended plan,
substantially all of the assets associated with such services
were liquidated.

We currently anticipate that we will not have any revenue from
telecommunications or any other services in the near term. In
addition, and as part of the amended plan, substantially all of
the telecommunications assets of the debtor subsidiaries were
sold and they will be unable to provide such services in the
future.

Basis of Presentation
---------------------

The accompanying consolidated financial statements for the six
months ended December 31, 2002, include our accounts and those of
our non-debtor subsidiaries. The debtor subsidiaries assets and
liabilities were deconsolidated effective June 30, 2002. The
financial statements, consisting primarily of cash, investments
and office equipment, have been prepared in accordance with
generally accepted accounting principles applicable to a going
concern.

For the six months ended December 31, 2001, the consolidated
financial statements include us and our wholly owned
subsidiaries, including the debtor subsidiaries. The consolidated
financial statements as of and for the six month period ended
December 31, 2001, as contained in this Quarterly Report, are
reflective of two separate accounting methodologies. For us and
our subsidiaries not involved in the bankruptcy plan
administration process (such subsidiaries have nominal
operations), the financial statements, consisting primarily of
cash, investments and office equipment, have been prepared in
accordance with generally accepted accounting principles
applicable to a going concern. For our debtor subsidiaries, which
are involved in the bankruptcy plan administration process, the
financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a
liquidating entity. We recorded an accrual estimate of $1.0
million in the accompanying financial statements for the costs of
completing such bankruptcy proceedings, including, without
limitation, liquidating the assets of these entities. The
estimated realizable values and settlement amounts may be
different from the proceeds ultimately received or payments
ultimately made. During the six months ended December 31, 2001,
all of the revenues and direct costs reflected in our
consolidated financial statements resulted from the operations of
e.Volve and AxisTel.

REVENUES.  For the quarter ended December 31, 2002, there were no
revenues generated. Historically, we derived substantially all of
our consolidated revenues from the sale of telecommunications
services of AxisTel and e.Volve, two of our indirect wholly owned
operating subsidiaries. For the quarter ended December 31, 2001,
e.Volve's only significant customer was Qwest, which accounted
for approximately 98% of consolidated revenues for the quarter.
These subsidiaries ceased operations in connection with their
bankruptcy filings, effective September of 2001 and December of
2001, respectively. Since that date, neither we nor our debtor
subsidiaries have conducted operations or generated revenue. We
are currently not providing any products or services of any kind
(including telecommunications services) to any customers. We
currently do not anticipate that AxisTel, e.Volve or any of the
debtor subsidiaries will have revenue from telecommunications or
any other services.

We do not expect to generate any revenues from operations until
such time, if any, we choose to purchase the Subsequent Interest
in Paciugo, at which time we would consolidate its operations
into our financial statements, or we successfully redeploy some
or all of our remaining cash assets in another business venture,
if at all. No assurances can be given that we will purchase the
Subsequent Interest in Paciugo or generate revenues from
operations in the future.

DIRECT COSTS.  For the quarter ended December 31, 2002, there
were no direct costs incurred. Historically, direct costs
included per minute termination charges, lease payments and fees
for fiber optic cable.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  These expenses
include general corporate expenses, management salaries,
professional fees, travel expenses, benefits, rent and
administrative expenses. Currently, we maintain our corporate
headquarters in Dallas, Texas. We provided administrative
services to our debtor subsidiaries pursuant to an administrative
services agreement approved by the Bankruptcy Court. Initially,
the agreement dictated that our debtor subsidiaries pay us $30,000
per week for legal, accounting, human resources and other
services. The original agreement expired on April 2, 2002, and an
interim agreement was reached whereby, the liquidating trust, as
successor-in-interest to our debtor subsidiaries, paid us $40,000
per month for some of the same services. The interim agreement
expired on August 15, 2002. We are currently negotiating the
terms of an on-going agreement with the liquidating trust. As of
December 31, 2002, we had an outstanding receivable from the
debtor subsidiaries relating to the provision of such
administrative services of approximately $0.6 million. Due to the
uncertainty surrounding the collection of the receivable, it has
been fully reserved.


                              -15-

<PAGE>


DEPRECIATION AND AMORTIZATION.  Depreciation and amortization
represents the depreciation of property and equipment. Due to the
significant impairment losses recorded during fiscal years 2002
and 2001, and the liquidation accounting for our debtor
subsidiaries, our depreciation and amortization costs have
decreased significantly and we do not expect these costs to
increase in the near term.

EQUITY IN LOSS OF INVESTMENTS.  Equity in loss of investments
results from our minority ownership interests that are accounted
for under the equity method of accounting. Under the equity
method, our proportionate share of each of our investee's
operating loss is included in equity in loss of investments.
During the current quarter, we purchased the Initial Interest in
Paciugo. For further details regarding Paciugo, see  Item 2
entitled "Acquisition of the Initial Interest in Paciugo." The
value of our outstanding equity interests, other than Paciugo,
have been reduced to zero either by recording our proportionate
share of prior period losses incurred by each investee up to the
cost of that investment or from impairment losses. We anticipate
that our previous strategic investments will continue to incur
operating losses, however we do not expect to record future
charges related to those losses as they are completely impaired.
We expect to record our proportionate share of future earnings or
losses related to our interest in Paciugo, unless we purchase the
Subsequent Interest, at which time, we would begin to consolidate
its operations into our financial statements.

NET GAIN ON LIQUIDATION OF DEBTOR SUBSIDIARIES.  Net gain on
liquidation of debtor subsidiaries results from liquidation
accounting for our debtor subsidiaries, which are involved in the
bankruptcy plan administration process. All debtor subsidiary
assets were stated at estimated realizable values. Similarly,
liabilities were reflected at estimated settlement amounts,
subject to the approval of the Delaware Bankruptcy Court, with
those liabilities secured by specific assets being offset against
such assets, as allowed. The estimated realizable values and
settlement amounts may be different from the proceeds ultimately
received or payments ultimately made.

OTHER INCOME.  Other income results from administrative services
we provided to our debtor subsidiaries pursuant to an
administrative services agreement approved by the Delaware
Bankruptcy Court. Initially, the agreement dictated that our debtor
subsidiaries pay us $30,000 per week for legal, accounting, human
resources and other services. The original agreement expired on
April 2, 2002, and an interim agreement was reached whereby, the
liquidating trust, as successor-in-interest to our debtor
subsidiaries, paid us $40,000 per month for some of the same
services. The interim agreement expired on August 15, 2002. We
are currently negotiating the terms of an on-going agreement with
the liquidating trust. As of December 31, 2002, we had an
outstanding receivable from the debtor subsidiaries relating to
the provision of such administrative services of approximately
$0.6 million. Due to the uncertainty surrounding the collection
of the receivable, it has been fully reserved. We expect to
record other income from the provision of certain support
services to Pacuigo as defined in the Purchase Agreement. For
further details regarding the Support Services, see Item 2
entitled "Acquisition of the Initial Interest in Paciugo."




                               -16-

<PAGE>


Summary of Operating Results
----------------------------

The table below summarizes our operating results.

<TABLE>
<CAPTION>
                                                    Three Months Ended December 31,           Six Months Ended December 31,
                                                  -----------------------------------     -----------------------------------
                                                      2002           2001         %           2002           2001         %
                                                  ------------   ------------   -----     -----------    ------------   -----
                                                           (unaudited)                           (unaudited)

                                               <c>             <c>           <c>       <c>            <c>            <c>
Revenues                                          $          -    $ 1,799,305   100.0%    $         -    $ 10,486,982   100.0%

Operating expenses:
  Direct costs                                               -      4,982,849   276.9%              -      14,520,735   138.5%
  Selling, general and administrative expenses         793,969      2,501,505   139.0%      1,517,995       8,492,117    81.0%
  Depreciation and amortization                         38,595        641,064    35.6%         76,457       1,285,284    12.3%
                                                  ------------   --------------------     -----------    --------------------
                                                       832,564      8,125,418               1,594,452      24,298,136
Loss from operations, before
  other (income) expense                              (832,564)    (6,326,113) (351.6%)    (1,594,452)    (13,811,154) (131.7%)

Other (income) expenses:
  Interest (income) expense, net                       (72,554)        81,840     4.5%       (154,022)        122,245     1.2%
  Equity in loss of investments                              -        643,357    35.8%        264,751       1,062,649    10.1%
  Foreign currency loss                                      -         88,695     4.9%              -          95,128     0.9%
  Net gain on liquidation of debtor subsidiaries      (214,000)   (15,701,336) (872.6%)      (214,000)    (15,701,336) (149.7%)
  Other income                                          (1,661)        (4,458)   (0.2%)       (37,105)       (450,247)   (4.3%)
                                                  ------------   --------------------     -----------    --------------------
                                                      (288,215)   (14,891,902) (827.6%)      (140,376)    (14,871,561) (141.8%)
                                                  ------------   --------------------     -----------    --------------------

Net loss                                          $   (544,349)  $  8,565,789            $ (1,454,076)   $  1,060,407
                                                  ============   ============            ============    ============

  Series D dividends for the period               $   (163,000)  $   (152,814)           $   (322,779)   $   (302,568)
                                                  ------------   ------------            ------------    ------------


Net loss allocable to common, net of dividends    $   (707,349)  $  8,412,975            $ (1,776,855)   $    757,839
                                                  ============   ============            ============    ============

Basic
  Net income (loss) per share                     $      (0.01)  $       0.16            $      (0.03)   $       0.01
                                                  ============   ============            ============    ============

  Weighted average number of shares outstanding     52,323,701     52,323,701              52,323,701      52,323,701
                                                  ============   ============            ============    ============
Diluted
  Net income (loss) per share                     $      (0.01)  $       0.15            $      (0.03)   $       0.01
                                                  ============   ============            ============    ============

  Weighted average number of shares outstanding     52,323,701     54,553,469              52,323,701      54,553,469
                                                  ============   ============            ============    ============
</TABLE>





Three months ended December 31, 2002 Compared to Three months
ended December 31, 2001
-------------------------------------------------------------

REVENUES.  During the three months ended December 31, 2002, no
revenues were generated as compared to approximately $1.8 million
during the three months ended December 31, 2001. No revenues were
generated based on (i) the termination of operations of our
debtor subsidiaries, which have historically provided all of our
significant revenues, and (ii) the early stages of our
relationship with Paciugo and its promulgation of a business
plan. However, if we choose to purchase the Subsequent Interest
in Paciugo, we expect to consolidate its revenues and operations
into our consolidated financial statements at that time. For
further details regarding Paciugo, see Item 2 entitled
"Acquisition of the Initial Interest in Paciugo." Prior to the
elimination of our operations, revenues for the three months
ended December 31, 2001, were generated through the sale of (i)
98% voice services and (ii) 2% broadband services.

No minutes were transmitted during the three months ended
December 31, 2002, versus 23.4 million minutes during the three
months ended December 31, 2001. No revenues were generated during
the three months ended December 31, 2002, due to the termination
of AxisTel's operations of data, wholesale and prepaid card
businesses, as well as the cessation of the wholesale business of
e.Volve.



                              -17-

<PAGE>

We do not expect to generate any revenue from operations until
such time, if any, as we choose to purchase the Subsequent
Interest in Paciugo, at which time we would consolidate its
operations into our financial statements, or we successfully
redeploy some or all of our remaining cash assets in a revenue
producing business venture, if at all. No assurances can be given
that we will generate revenues from operations in the future.

Direct costs.  No direct costs were incurred during the three
months ended December 31, 2002, as compared to approximately $5.0
million during the three months ended December 31, 2001, as we
currently have no operations.

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and
administrative expenses decreased to approximately $0.8 million
during the three months ended December 31, 2002, from $2.5
million in the prior quarter period, a decrease of 68%. The drop
in selling, general and administrative expenses is primarily due
to (i) downsizing of the workforce, (ii) termination of
operations as a result of the various bankruptcy proceedings and
(iii) reduction in professional fees relating to the bankruptcy
plan administrative process.

Selling, general and administrative expenses for the three months
ended December 31, 2002, consisted primarily of approximately (i)
$0.2 million of salaries and benefits, (ii) $0.2 million of legal
and professional fees, (iii) $0.1 million of bad debt expense,
(iv) $0.15 million of business insurance and (v) $0.15 million of
other operating expenses. Selling, general and administrative
expenses for the three months ended December 31, 2001, consisted
primarily of approximately (i) $0.6 million of salaries and
benefits, (ii) $0.8 million of legal and professional fees, (iii)
$0.3 million of office rent, (iv) $0.2 million of stock based
compensation, (v) $0.15 million of business insurance and (vi)
$0.45 million of other operating expenses. We anticipate that
selling, general and administrative expenses will remain
relatively constant as (i) we currently have no operations, (ii)
we completed the personnel reductions and (iii) we continue to
work toward the conclusion of the various bankruptcy proceedings.
We expect our selling, general and administrative expense to
continue to be approximately $0.2 million per month until such
time, if any, as we choose to purchase the Subsequent Interest
in Paciugo or we are able to develop an alternative business
strategy, if at all.

DEPRECIATION AND AMORTIZATION.  During fiscal 2001, all of our
goodwill was written off. Therefore, no amortization of goodwill
was recorded during the three months ended December 31, 2002 and
2001, respectively. Depreciation recorded on fixed assets during
the three months ended December 31, 2002, totaled approximately
$39,000 compared to approximately $0.6 million for the three
months ended December 31, 2001. The decrease in depreciation
expense during the current quarter is the result of asset
impairment charges taken during prior fiscal periods. We expect
our depreciation expense to remain relatively constant until such
time, if any, as we choose to purchase the Subsequent Interest in
Paciugo or we are able to develop an alternative business
strategy, if at all.

INTEREST (INCOME) EXPENSE, NET.  We recorded interest income from
cash investments and the new secured note from our debtor
subsidiaries, of approximately $0.1 million for the three months
ended December 31, 2002, compared to interest expense, net of
interest income from cash investments of $0.1 million for the
three months ended December 31, 2001. The overall increase in
interest income during the current quarter is a result of (i)
recording interest income related to the new secured note that
has been reserved for as bad debt expense in selling, general and
administrative expenses, (ii) no longer having interest expense
from debtor subsidiary capital lease obligations and (iii) a
general reduction in interest income resulting from lower cash
balances.

EQUITY IN LOSS OF INVESTMENTS.  Equity in loss of investments
resulted from our minority ownership in certain non-impaired
interests that are accounted for under the equity method of
accounting. Under the equity method, our proportionate share of
each of our investee's operating loss is included in equity in
loss of affiliates. During the three months ended December 31,
2002, there was no equity in loss of investments expense compared
to $0.6 million during the three months ended December 31, 2001.
During December of 2002, we purchased the Initial Interest in
Paciugo. For further details regarding Paciugo, see Item 2
entitled "Acquisition of the Initial Interest in Paciugo." The
value of our outstanding equity interests, other than Paciugo,
have been reduced to zero either by recording our proportionate
share of prior period losses incurred by each investee up to the
cost of that investment or from impairment losses. We anticipate
that our previous strategic interests will continue to incur operating
losses, however we do not expect to record future charges related
to those interests as they are completely impaired. We expect to
record our proportionate share of future earnings or losses
related to our interest in Paciugo, unless we purchase the
Subsequent Interest, at which time, we would begin to consolidate
its operations into our financial statements.


                              -18-

<PAGE>


FOREIGN CURRENCY LOSS.  There was no foreign currency loss during
the three months ended December 31, 2002, compared to a loss of
approximately $0.1 million during the prior period quarter. This
variance was the result of the unfavorable exchange rate
fluctuations in the Mexican peso compared to the United States
dollar from wholesale telecommunication services previously
offered through e.Volve's operations. Since we have no plans to
re-enter the telecommunications business, we do not expect to
have any foreign currency risk in the near future.

NET GAIN ON LIQUIDATION OF DEBTOR SUBSIDIARIES.  During the three
months ended December 31, 2002, we recorded a net gain on
liquidation of debtor subsidiaries of approximately $0.2 million
related to a reduction of estimated liquidation costs for the
debtor subsidiaries. For the three months ended December 31,
2001, we recorded a net gain on liquidation of debtor
subsidiaries of approximately $15.7 million consisting primarily
of (i) a write down of long-lived assets of $7.5 million, (ii) a
gain on the write off of capital lease obligations of $7.7
million and (iii) a net gain on the write off of debtor
subsidiary assets and liabilities of $15.5 million.

Six Months Ended December 31, 2002 Compared to Six Months Ended
December 31, 2001
---------------------------------------------------------------

REVENUES.  During the six months ended December 31, 2002, no
revenues were generated as compared to approximately $10.5
million during the six months ended December 31, 2001. No
revenues were generated based on (i) the termination of
operations of our debtor subsidiaries, which have historically
provided all of our significant revenues and (ii) the early
stages of our relationship with Paciugo and the promulgation of
its business plan. However, if we choose to purchase the
Subsequent Interest in Paciugo, we expect to consolidate its
revenues and operations into our consolidated financial
statements at that time. For further details regarding Paciugo,
see Item 2 entitled "Acquisition of the Initial Interest in
Paciugo." Prior to the elimination of our operations, revenues
for the six months ended December 31, 2001, were generated
through the sale of (i) 97% voice services and (ii) 3% broadband
services.

No minutes were transmitted during the six months ended December
31, 2002, versus 134.1 million minutes during the six months
ended December 31, 2001. No revenues were generated during the
six months ended December 31, 2002, due to the termination of
AxisTel's operations of data, wholesale and prepaid card
businesses, as well as the cessation of the wholesale business of
e.Volve.

We do not expect to generate any revenue from operations until
such time, if any, as we choose to purchase the Subsequent
Interest in Paciugo, at which time, we would consolidate its
operations into our financial statements, or we successfully
redeploy some or all of our remaining cash assets, if at all. No
assurances can be given that we will generate revenues from
operations in the future.

DIRECT COSTS.  No direct costs were incurred during the six
months ended December 31, 2002, as compared to approximately
$14.5 million during the six months ended December 31, 2001, as
we have no operations.

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and
administrative expenses decreased to approximately $1.5 million
during the six months ended December 31, 2002, from approximately
$8.5 million in the prior reporting period, a decrease of 82%.
The drop in selling, general and administrative expenses is
primarily due to (i) downsizing of the workforce, (ii)
termination of operations as a result of the various bankruptcy
proceedings and (iii) reduction in professional fees relating to
the bankruptcy plan administrative process.

Selling, general and administrative expenses for the six months
ended December 31, 2002, consisted primarily of approximately (i)
$0.5 million of salaries and benefits, (ii) $0.2 million of legal
and professional fees, (iii) $0.2 million of bad debt expense,
(iv) $0.3 million of business insurance and (v) $0.3 million of
other operating expenses. Selling, general and administrative
expenses for the six months ended December 31, 2001, consisted
primarily of approximately (i) $1.4 million of salaries and
benefits, (ii) $2.2 million of legal and professional fees, (iii)
$2.5 million of bad debt expense, (iv) $0.8 million of office
rent, (v) $0.3 million of stock based compensation, (vi) $0.3
million of business insurance and (vii) $1.0 million of other
operating expenses. We anticipate that selling, general and
administrative expenses will remain relatively constant as (i) we
currently have no operations, (ii) we completed the personnel
reductions and (iii) we continue to work toward the conclusion of
the various bankruptcy proceedings. We expect our selling,
general and administrative expense to continue to be
approximately $0.2 million per month until such time, if any, as
we choose to purchase the Subsequent Interest in Paciugo or we
are able to develop an alternative business strategy, if at all.



                              -19-

<PAGE>



DEPRECIATION AND AMORTIZATION.  During fiscal 2001, all of our
goodwill was written off. Therefore, no amortization of goodwill
was recorded during the six months ended December 31, 2002 and
2001, respectively. Depreciation recorded on fixed assets during
the six months ended December 31, 2002, totaled approximately
$0.1 compared to approximately $1.3 million for the six months
ended December 31, 2001. The decrease in depreciation expense
during the current quarter is the result of asset impairment
charges taken during prior fiscal periods. We expect our
depreciation expense to remain relatively constant until such
time, if any, as we choose to purchase the Subsequent Interest in
Paciugo or we are able to develop an alternative business
strategy, if at all.

INTEREST (INCOME) EXPENSE, NET.  We recorded interest income from
cash investments and the new secured note from our debtor
subsidiaries, of approximately $0.15 million for the six months
ended December 31, 2002, compared to interest expense, net of
interest income from cash investments of $0.1 million for the six
months ended December 31, 2001. The overall increase in interest
income during the current period is a result of (i) recording
interest income related to the new secured note that has been
reserved for as bad debt expense in selling, general and
administrative expenses, (ii) no longer having interest expense
from debtor subsidiary capital lease obligations and (iii) a
general reduction in interest income resulting from lower cash
balances.

EQUITY IN LOSS OF INVESTMENTS.  Equity in loss of investments
resulted from our minority ownership interests that are accounted
for under the equity method of accounting. Under the equity
method, our proportionate share of each of our investee's
operating loss is included in equity in loss of investments. For
the six months ended December 31, 2002, equity in loss of
investments decreased to approximately $0.3 million compared to
$1.1 million during the six months ended December 31, 2001, a
decrease of 73%. The current period loss resulted from our 22%
equity interest in Gemini Voice Solutions (formerly
PhoneFree.com). During December of 2002, we purchased the Initial
Interest in Paciugo. For further details regarding Paciugo, see
Item 2 entitled "Acquisition of the Initial Interest in Paciugo."
Prior to our interest in Paciugo, the value of our outstanding
equity interests, other than Paciugo, have been reduced to zero
either by recording our proportionate share of prior period losses
incurred by each investee up to the cost of that interest or from
impairment losses. We anticipate that our previous strategic
interests will continue to incur operating losses, however we do
not expect to record future charges related to those interests as
they are completely impaired. We expect to record our
proportionate share of future earnings or losses related to our
interest in Paciugo unless we purchase the Subsequent Interest,
at which time, we would begin to consolidate its operations into
our financial statements.

FOREIGN CURRENCY LOSS.  There was no foreign currency loss during
the six months ended December 31, 2002, compared to a loss of
approximately $0.1 million during the prior period. This variance
was the result of the unfavorable exchange rate fluctuations in
the Mexican peso compared to the United States dollar from
wholesale telecommunication services previously offered through
e.Volve's operations. Since we have no plans to re-enter the
telecommunications business, we do not expect to have any foreign
currency risk in the near future.

NET GAIN ON LIQUIDATION OF DEBTOR SUBSIDIARIES.  During the six
months ended December 31, 2002, we recorded a net gain on
liquidation of debtor subsidiaries of approximately $0.2 million
related to a reduction of estimated liquidation costs for the
debtor subsidiaries. For the six months ended December 31, 2001,
we recorded a net gain on liquidation of debtor subsidiaries of
approximately $15.7 million consisting primarily of (i) a write
down of long-lived assets of $7.5 million, (ii) a gain on the
write off of capital lease obligations of $7.7 million and (iii)
a net gain on the write off of debtor subsidiary assets and
liabilities of $15.5 million.

OTHER INCOME.  For the six months ended December 31, 2001, we
received a liquidation payment from Launch Center 39 of
approximately $0.45 million.  The distribution was for the
recovery of a previously written off equity investment. We expect
to record other income from the provision of certain support
services to Pacuigo as defined in the Purchase Agreement. For
further details regarding the Support Services, see Item 2
entitled "Acquisition of the Initial Interest in Paciugo."


                              -20-

<PAGE>


Liquidity and Capital Resources
-------------------------------

At December 31, 2002, we had consolidated current assets of $6.3
million, including cash and cash equivalents of approximately
$5.8 million and net working capital of $4.8 million. We
currently have a monthly cash requirement of approximately $0.2
million to fund recurring corporate general and administrative
expenses, excluding costs associated with the debtor
subsidiaries' bankruptcy plan administration process.
Historically, we have funded our subsidiaries' operations primarily
through the proceeds of private placements of our common and
preferred stock and borrowings under loan and capital lease
agreements. We do not currently believe that either of these
funding sources will be available in the near term. Principal
uses of cash have been to fund (i) operating losses; (ii)
acquisitions and strategic investments; (iii) working capital
requirements and (iv) expenses related to the bankruptcy plan
administration process. Due to our financial performance, the
lack of stability in the capital markets and the economy's
downturn, our only current source of funding is expected to be
cash on hand.

During December of 2002, we purchased the Initial Interest in
Paciugo for $2.5 million. For further details regarding Paciugo,
see Item 2 entitled "Acquisition of the Initial Interest in
Paciugo." Assuming we choose to purchase the Subsequent Interest
in Paciugo within the next two years, with no current return on
that investment, except as defined in the Purchase Agreement for
Support Services, given our current obligations for two years, we
expect to have approximately $0.6 million of cash available at
the end of that period with which to continue our operations.
Consequently, our purchase of the Initial Interest, and
potentially the Subsequent Interest, may be the only such
interests we are able to purchase with our remaining cash
assets. Further diversification is possible, should we find
another suitable opportunity, but it seems unlikely at the
present time.

Current obligations include (i) funding working capital, (ii)
funding the liquidating trust and (iii) funding the Qwest
litigation. No assurances can be given that we will choose to
purchase the Subsequent Interest in Paciugo or that we will
successfully redeploy some or all of our remaining cash assets in
another business venture, if at all, or that, if deployed, we can
continue as a going concern with the new business model.

As discussed in Item 2 entitled "Bankruptcy Proceedings", our
debtor subsidiaries filed bankruptcy proceedings under the
Bankruptcy Code. As the ultimate parent, we agreed to provide our
debtor subsidiaries with up to $1.6 million in secured debtors-in-
possession financing. Immediately prior to the confirmation
hearing, we increased this credit facility to approximately $1.9
million, which was advanced as of March 31, 2002. The credit
facility made funds available to permit the debtor subsidiaries
to pay employees, vendors, suppliers, customers and professionals
consistent with the requirements of the Bankruptcy Code. The
credit facility provided for interest at the rate of prime plus
3.0% per annum and provided "super-priority" lien status, meaning
that we had a valid first lien, pursuant to the Bankruptcy Code,
on substantially all of the debtor subsidiaries' assets. In
addition, the credit facility maintained a default interest rate
of prime plus 5.0% per annum.

In connection with the amended plan being confirmed by the
Delaware Bankruptcy Court and becoming effective on April 3,
2002, the credit facility was converted into a new secured note
in the principal amount of approximately $2.5 million,
representing the principal amount of the debtors-in-possession
financing, certain payroll expenses and applicable attorneys'
fees. Subsequent to June 30, 2002, the new secured note was
amended to approximately $2.9 million, representing additional
trust funding, certain payroll expenses and applicable attorneys
fees. The new secured note is guaranteed by the debtor
subsidiaries under an agreement in which the debtor subsidiaries
have pledged substantially all of their remaining assets as
collateral. During the first quarter of fiscal 2003, we provided
additional funding of $0.1 million to the trust. Interest for the
new secured note is accrued for on a monthly basis and included
in the outstanding balance of the new secured note. Due to the
uncertainty surrounding the collection of the new secured note,
it has been fully reserved.

For the six months ended December 31, 2001, two of our indirect
wholly owned operating subsidiaries, AxisTel and e.Volve,
provided telecommunications services. These subsidiaries ceased
operations effective September of 2001 and December of 2001,
respectively. Since the latter date, neither we nor any of the
debtor subsidiaries have conducted operations or generated
revenue. We are currently not providing any products or services
of any kind (including telecommunications services) to any
customers. During fiscal 2002, e.Volve's only significant
customer had been Qwest, which accounted for approximately 70% of
consolidated revenues. e.Volve is no longer providing services to
Qwest, and as part of our debtor subsidiaries' amended plan,
certain causes of action have been brought against Qwest. We do
not expect to generate any revenues from operations in the near
term until such time, if any, as we choose to purchase the
Subsequent Interest in Paciugo, at which time we would
consolidate its operations into our financial statements or we
successfully redeploy some or all of our remaining cash assets in
another business venture, if at all. No assurances can be given
that we will purchase the Subsequent Interest in Paciugo or
generate revenues from operations in the future.



                              -21-

<PAGE>



We currently anticipate that we will not generate any revenue
from operations in the near term based on (i) the termination of
the operations of our debtor subsidiaries, which have
historically provided all of our significant revenues on a
consolidated basis, (ii) the early stages of our relationship
with Paciugo and the promulgation of its business plan and (iii)
the uncertainties surrounding other potential business
opportunities that we may consider, if any. However, if we choose
to purchase the Subsequent Interest in Paciugo, we expect to
consolidate its revenues and operations into our consolidated
financial statements at that time. In the meantime, we expect to
record other income from the provision of certain support
services to Paciugo as agreed upon in the Purchase Agreement. For
further details regarding the Support Services, see Item 2
entitled "Acquisition of the Initial Interest in Paciugo."

As noted above, we do not believe that any of the traditional
funding sources will be available to us and that our only option
will likely be cash on hand. Consequently, our failure
to (i) purchase the Subsequent Interest in Paciugo, (ii)
implement a successful business and (iii) identify any other
potential business opportunities that we may consider, if any,
will jeopardize our ability to continue as a going concern. Due
to these factors, we are unable to determine whether current
available financing will be sufficient to meet the funding
requirements of (i) our debtor subsidiaries bankruptcy plan
administration process, (ii) our ongoing general and
administrative expenses and (iii) the undetermined capital
requirements of Paciugo and such other business opportunities
as may arise in the future, if any.

CASH FLOWS USED IN OPERATING ACTIVITIES.  Cash used in operating
activities for the six months ended December 31, 2002, totaled
approximately $1.6 million compared to approximately $1.7 million
for the six months ended December 31, 2001. During the six months
ended December 31, 2002, cash flow used by operating activities
primarily resulted from (i) operating losses, net of non-cash
charges, totaling approximately $1.0 million (ii) increase in
prepaid expenses for annual renewal of business insurance during
the current quarter, net of monthly amortization of approximately
$0.1 million and (iii) an increase in accounts payable and
accrued liabilities of approximately $0.2 million. During the six
months ended December 31, 2001, cash flow used by operating
activities primarily resulted from operating losses, net of non-
cash charges, totaling approximately $9.4 million and an increase
in accounts receivable of approximately $0.7 million, partially
offset by a net increase in accounts payable and accrued
liabilities of approximately $7.0 million.

CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES.  Net cash
used in investing activities was approximately $2.5 million for
the six months ended December 31, 2002, compared to net cash
provided by investing activities of approximately $0.5 million
for the six months ended December 31, 2001. Net cash used in
investing activities in the current period consisted primarily of
the purchase of our Initial Interest in Paciugo. Investing
activities in the prior period presented consisted primarily of
cash received from one of our equity interests of approximately
$0.4 million.

CASH FLOWS USED IN FINANCING ACTIVITIES.  No financing activities
occurred during the six months ended December 31, 2002, as
compared to net cash used in financing activities for the six
months ended December 31, 2001, of approximately $1.1 million for
capital lease payments.

Ability to Continue as a Going Concern
--------------------------------------

Our independent accountants have previously included an
explanatory paragraph in their report on our financial statements
for the year ended June 30, 2002, contained in our most recent
Annual Report on Form 10-K, which states that our financial
statements have been prepared assuming that we will continue as a
going concern, but that substantial doubt exists as to our
ability to do so.





                              -22-

<PAGE>


Plan of Operation
-----------------

On August 21, 2001, we announced that we were attempting to
redeploy some or all of our existing cash assets into one or more
new business ventures. During December of 2002, we purchased an
Initial Interest in Paciugo for $2.5 million. For further details
regarding Paciugo, see Item 2 entitled "Acquisition of the
Initial Interest in Paciugo." Before purchasing our Initial
Interest, we discussed and conducted preliminary due diligence on
various investment opportunities, including Paciugo, and
considered many factors, including, without limitation, the
following in deciding upon an appropriate use for our remaining
cash assets:

     *    the historical liquidity, financial condition and
          results of operation of the business or opportunity, if
          any;

     *    the growth potential and future capital requirements of
          the business or opportunity;

     *    the nature, competitive position and market potential
          of the products, processes or services of the business
          or opportunity;

     *    the relative strengths and weaknesses of the
          intellectual property of the business or opportunity;

     *    the education, experience and abilities of management
          and key personnel of the business or opportunity;

     *    the regulatory environment within the business industry
          or opportunity; and

     *    the market performance of equity securities of
          similarly companies in the particular industry or
          opportunity.

The foregoing is not an exhaustive list of the factors that we
considered in our evaluation of potential business opportunities.
Eventually, we determined that the Initial Interest in Paciugo
was the best opportunity for us to pursue in an attempt to forge
a new operating model and maximize shareholder value.

Our plan of operation for the upcoming twelve months calls for
the following:

     *    continuing the liquidation of substantially all of the
          assets of our debtor subsidiaries in accordance with
          the bankruptcy plan administration process;

     *    minimizing, to the extent possible, the expenses and
          liabilities incurred by us as the ultimate parent of
          the debtor subsidiaries;

     *    determining, whether a viable plan exists to redeploy
          our assets in other business opportunities, if any, in
          addition to the development of our interest in Paciugo;

     *    maintaining the current number of employees until such
          time as we locate additional business opportunities, if
          any or we purchase the Subsequent Interest in Paciugo;
          and

     *    avoiding significant expenses outside of our historical
          burn rate pending our decision to purchase the
          Subsequent Interest in Paciugo or location of another
          investment opportunity, if any.

Our plan of operation for the upcoming twelve months as it
relates to Paciugo calls for the following:

     *    opening approximately two new locations and six small
          "store within a store" outlets in Texas;

     *    improving operations through the use of automatic
          production equipment or strategic partnering;



                              -23-

<PAGE>


     *    improving labor costs by staffing stores with the
          minimum full-time personnel and additional part-time
          staff during peak store hours;

     *    improving utilization of inventory levels at both the
          production facility and the individual retail sales
          outlets;

     *    expanding product availability at the store outlets
          including, without limitation, gelato pies, Italian
          chocolates and candies and other complementary items;
          and

     *    increasing marketing and advertising for the retail
          outlets as well as the catering and wholesale services.

Funding for these items will come from the proceeds of our
Initial Interest in Paciugo, current cash flow from operations,
the possibility of refinancing existing bank debt on more
favorable terms, the possibility of additional bank financing, as
well as the possibility of the proceeds of our Subsequent
Interest.

Some of the risks and difficulties that we expect to encounter in
our new business venture with Paciugo include, without
limitation:

     *    we lack specific industry experience;

     *    we will be functioning as an early stage company;

     *    we may not be in a position to diversify our business
          beyond the Initial or Subsequent Interest in Paciugo;

     *    we may not be able to adequately fund our new business
          venture with Paciugo;

     *    we may not be able to continue as a going concern; and

     *    we could be negatively affected by the bankruptcy
          proceedings of our debtor subsidiaries.

As of December 31, 2002, we maintained cash and cash equivalents
of approximately $5.8 million. Assuming we choose to purchase the
Subsequent Interest in Paciugo within the next two years, with no
current return on that investment, except as defined in the
Purchase Agreement for support services, given our current
obligations, we expect to have approximately $0.6 million of cash
available at the end of the two year period with which to
continue our operations. Consequently, our purchase of the
Initial Interest, and potentially the Subsequent Interest, may be
the only such interests we are able to purchase with our
remaining cash assets. Further diversification is possible,
should we find another suitable business opportunity, but it seems
unlikely at the present time.

Current obligations include (i) funding working capital, (ii)
funding the liquidating trust and (iii) funding the Qwest
litigation. We do not currently believe that additional funding
sources will be available to us in the near term. Accordingly,
the cash assets potentially available for redeployment will be
limited. Consequently, we will probably not be in a position to
make additional investments and broad diversification is
unlikely. Our probable lack of diversification may subject us to
a variety of economic, competitive and regulatory risks, any or
all of which may have a substantial adverse impact on our
continued viability.

We do not intend to provide information to our stockholders
regarding the decision to purchase the Subsequent Interest in
Paciugo or to take action on any other potential business
opportunities that we may consider, if any. Our Board of
Directors has the executive and voting power to unilaterally
approve all corporate actions related to the redeployment of our
cash assets. As a result, our stockholders will have no effective
voice in decisions made by our Board of Directors and will be
entirely dependent on its judgment in the selection of an
appropriate investment opportunity and the negotiation of the
specific terms thereof.



                              -24-

<PAGE>

Subsequent Event
----------------

On January 24, 2003, our Board of Directors met and approved,
among other things, the resignation of Barrett N. Wissman as our
President and his subsequent selection as our new Chairman. The
position of Chairman had been vacant since Jeffrey A. Marcus
resigned on June 5, 2001. In light of Mr. Wissman's resignation,
our Board of Directors appointed Steven W. Caple to serve as our
new President. Prior to his selection as President, Mr. Caple
served as one of our Senior Vice Presidents.













                              -25-

<PAGE>


ITEM 3.   QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT  MARKET
          RISK

We are exposed to the impact of interest rate and other risks. We
have investments in money market funds of approximately $5.8
million at December 31, 2002. Due to the short-term nature of our
investments, we believe that the effects of changes in interest
rates are limited and would not materially affect profitability.

ITEM 4.   CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this Quarterly Report,
we carried out an evaluation, under the supervision and with the
participation of our Principal Executive Officer and Principal
Accounting Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as
defined in Rule 13a-14 of the Securities Exchange Act of 1934.
Based upon that evaluation, the Principal Executive Officer and
the Principal Accounting Officer concluded that our disclosure
controls and procedures are effective in timely alerting them to
material information relating to us (including our consolidated
subsidiaries) required to be included in this Quarterly Report.
There have been no significant changes in our internal
controls or in other factors, which could significantly affect
such internal controls, subsequent to the date we carried out our
evaluation.

PART II:  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

On December 19, 2002, Eos Partners, LP, Eos Partners SBIC, LP,
Eos Partners (Offshore), LP, Kuwait Fund for Arab Economic
Development and TBV Holdings Ltd. (collectively, the
"Plaintiffs") filed a lawsuit against us, Fred Vierra, Barrett N.
Wissman, Clark K. Hunt, Mark R. Graham, Olaf Guerrand-Hermes,
Stuart Subotnick, Jan Robert Horsfall, Stuart Chasanoff, John
Stevens Robling, Jr., Samuel Litwin, Mitchell Arthur, BDO
Seidman, LP, Hunt Asset Management, LLC, HW Partners, LP, HW
Finance, LLC, HW Capital, LP and HW Group, LLC (collectively,
the "Defendants") in the 190th Judicial District Court of
Harris County, Texas, for alleged breach of contract, fraud and
conspiracy in connection with the Plaintiffs' purchase of certain
of our Series C Convertible Preferred Stock in December of 1999
and January of 2000. The Defendants have denied the allegations
and intend to vigorously defend against the Plaintiffs' claims
and seek all other appropriate relief.  Since the process has not
proceeded beyond the initial pleadings stage, no realistic assessment
can be made with respect to potential exposure, except to refer to
the amounts paid for the Series C Convertible Preferred Stock,
approximately $12 million, and note that the Plaintiffs seek to
recover compensatory and exemplary damages, interest, costs of
court and attorneys' fees.

As previously reported, we, along with the liquidating trust,
filed a lawsuit against Qwest and John L. Higgins in the Eighth
Judicial District Court of Clark County, Nevada, on June 17,
2002, and Qwest filed a motion to stay the litigation and compel
arbitration on August 14, 2002. On Janaury 28, 2003, a hearing
was held to determine the proper forum for the various claims.
After listening to oral arguments the judge continued the hearing
until February 27, 2003, at which time a decision is expected to
be rendered.

We have previously disclosed in other reports filed with the SEC
certain other legal proceedings pending against us and our
subsidiaries. Consistent with the rules promulgated by the SEC,
descriptions of these matters have not been included in this
Quarterly Report because they have not been terminated and there
have not been any material developments during the period ended
December 31, 2002. Readers are encouraged to refer to our prior
reports, as filed with the SEC, for further information
concerning other legal proceedings affecting us and our
subsidiaries.

We  and  our subsidiaries are involved in other legal proceedings
from time to time, none of which we believe, if decided adversely
to  us  or our subsidiaries, would have a material adverse effect
on our business, financial condition or results of operations.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.




                              -26-

<PAGE>


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

None.

ITEM 5.   OTHER INFORMATION

None.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

  (a)  Exhibits

  10.1   Amendment No. 2 to That Certain Agreement Between
          Barrett N. Wissman and Novo Networks, Inc. Dated April
          4, 2000.

  99.1   Certifications Pursuant to Section 906 of the Sarbanes-
          Oxley Act of 2002.

  (b)  Reports on Form 8-K

  On December 3, 2002, we filed a Report on Form 8-K, disclosing
  the resignation of Mark R. Graham as a Class I Director.

  On December 12, 2002, we filed a Report on Form 8-K,
  disclosing the appointment of Russell W. Beiersdorf as a Class
  I Director.

  On December 20, 2002, we filed a Report on Form 8-K, incorporating
  by reference our press release disclosing our acquisition of an
  interest in Ad Astra Holdings LP and Paciugo Management LLC.

  On January 3, 2003, we filed a Report on Form 8-K, disclosing
  that we executed a purchase agreement with Ad Astra Holdings LP ("Ad
  Astra"), Paciugo Management LLC, the sole general partner of Ad Astra
  ("PMLLC"), and the collective equity owners of both Ad Astra and PMLLC,
  being Ugo Ginatta, Cristiana Ginatta and Vincent Ginatta on
  December 19, 2002, and describing the material terms.

  On January 30, 2003, we filed a Report on Form 8-K, disclosing
  the resignation of Barrett N. Wissman as our President, his
  subsequent selection as our new Chairman and the appointment
  of Steven W. Caple as our new President.





                              -27-

<PAGE>



SIGNATURES

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



NOVO NETWORKS, INC.


Date:  February 14, 2003      By:   /s/ Steven W. Caple
                                 --------------------------------
                                   Steven W. Caple
                                   President
                                   (Principal Executive Officer)



Date:  February 14, 2003      By:     /s/ Susie C. Holliday
                                 --------------------------------
                                   Susie C. Holliday
                                   Senior Vice President
                                   (Principal Accounting Officer)








                              -28-

<PAGE>


I, Steven W. Caple, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q (this
     "Quarterly Report") of Novo Networks, Inc. ("Novo Networks").

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 Novo
     Networks as of, and for, the periods presented in this
     Quarterly Report.

4.   The other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and
     procedures (as defined in Exchange Act Rules 13a-14 and 15d-
     14) for Novo Networks and have:

     a)   designed such disclosure controls and procedures to
          ensure that material information relating to Novo
          Networks, 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 our 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 the evaluation as of the Evaluation
          Date.

5.   The other certifying officer and I have disclosed, based on
     the most recent evaluation, to Novo Networks' auditors and
     audit committee:

     a)   all significant deficiencies in the design or operation
          of internal controls that could adversely affect the
          ability to record, process, summarize and report
          financial data and have identified for the Novo Networks'
          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 Novo Networks' internal controls.

6.   The other certifying officer 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 the most recent evaluation, including any corrective
     actions with regard to significant deficiencies and material
     weaknesses.

Date: February 14, 2003

   /s/ Steven W. Caple
-----------------------------
Steven W. Caple
President
(Principal Executive Officer)







                              -29-

<PAGE>



I, Susie C. Holliday, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q (this
     "Quarterly Report") of Novo Networks, Inc. ("Novo Networks").

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 Novo
     Networks as of, and for, the periods presented in this
     Quarterly Report.

4.   The other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and
     procedures (as defined in Exchange Act Rules 13a-14 and 15d-
     14) for Novo Networks and have:

     a)   designed such disclosure controls and procedures to
          ensure that material information relating to Novo
          Networks, 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 our 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 the evaluation as of the Evaluation
          Date.

5.   The other certifying officer and I have disclosed, based on
     the most recent evaluation, to Novo Networks' auditors and
     audit committee:

     a)   all significant deficiencies in the design or operation
          of internal controls that could adversely affect the
          ability to record, process, summarize and report
          financial data and have identified for the Novo Networks'
          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 Novo Networks' internal controls.

6.   The other certifying officer 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 the most recent evaluation, including any corrective
     actions with regard to significant deficiencies and material
     weaknesses.

Date: February 14, 2003

   /s/ Susie C. Holliday
-----------------------------
Susie C. Holliday
Senior Vice President
(Principal Accounting Officer)






                              -30-

<PAGE>


                        INDEX TO EXHIBITS

EXHIBIT
 NUMBER                          DESCRIPTION
---------      ------------------------------------------------

  10.2         Amendment No. 2 to That Certain Agreement Between
               Barrett N. Wissman and Novo Networks, Inc. Dated
               April 4, 2000.

  99.1         Section 906 Certifications Pursuant to Section 906
               of the Sarbanes-Oxley Act of 2002.