<PAGE>

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

                               AMENDMENT NO. 2 TO
                                   FORM 10-QSB
 (Mark One)
[X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

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

             FOR THE TRANSITION PERIOD FROM __________ TO __________

                         Commission file number: 0-28560

                                  NETGURU, INC.
        (Exact name of small business issuer as specified in its charter)

                DELAWARE                                22-2356861
   (State or other jurisdiction of       (I.R.S. Employer Identification No.)
   incorporation or organization)

  22700 SAVI RANCH PARKWAY, YORBA LINDA, CA               92887
  (Address of principal executive offices)             (Zip Code)

                    Issuer's telephone number: (714) 974-2500

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

The number of shares outstanding of the registrant's only class of Common Stock,
$.01 par value, was 17,405,150 on January 17, 2003.



<PAGE>

<TABLE>
                                     PART I
                              FINANCIAL INFORMATION

<CAPTION>
                                                                                  PAGE
<S>        <C>                                                                    <C>
Item 1.    Financial Statements

           Condensed Consolidated Statements of Operations for the three
           month periods ended June 30, 2002 and 2001(unaudited).................  3

           Condensed Consolidated Balance Sheets as of
           June 30, 2002 (unaudited) and March 31, 2002..........................  4

           Condensed Consolidated Statements of Cash Flows for the
           three month periods ended June 30, 2002 and 2001 (unaudited)..........  5

           Notes to Condensed Consolidated Financial Statements (unaudited)......  6

Item 2.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations................................................. 13

                                     PART II
                                OTHER INFORMATION

Item 1.    Legal Proceedings..................................................... 23

Item 2.    Changes in Securities and Use of Proceeds............................. 23

Item 3.    Defaults Upon Senior Securities....................................... 23

Item 4.    Submission of Matters to a Vote of Security Holders................... 23

Item 5.    Other Information..................................................... 23

Item 6.    Exhibits and Reports on Form 8-K...................................... 23

Signatures....................................................................... 24

Certifications of Principal Executive Officer and Principal Financial Officer.... 25

Exhibits Filed with this Report on Form 10-QSB................................... 26
</TABLE>

                                       2


<PAGE>

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
                              NETGURU, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (Unaudited)
                     (In thousands except share and per share amounts)

<CAPTION>
                                                                   THREE MONTHS ENDED
                                                                        JUNE 30,
                                                             -----------------------------
                                                                 2002             2001
                                                             -------------   -------------
<S>                                                          <C>             <C>
Net revenues:
    Engineering and collaborative software solutions         $      1,871    $      2,395
    IT services                                                     1,414           3,348
    Web-based telecommunication and travel services                 1,132           1,038

                                                             -------------   -------------
           Total net revenues                                       4,417           6,781

Cost of revenues:
    Engineering and collaborative software solutions                  292             352
    IT services                                                     1,076           2,345
    Web-based telecommunication and travel services                   987             914
                                                             -------------   -------------
           Total cost of sales                                      2,355           3,611

                                                             -------------   -------------
           Gross profit                                             2,062           3,170
                                                             -------------   -------------

Operating expenses:
    Selling, general and administrative                             2,616           3,114
    Research and development                                          464             487
    Amortization of goodwill                                           --             334
    Depreciation and other amortization                               268             273
    Restructuring                                                      93              --

                                                             -------------   -------------
           Total operating expenses                                 3,441           4,208
                                                             -------------   -------------

           Operating loss                                          (1,379)         (1,038)
                                                             -------------   -------------

Other expense (income):
    Interest, net                                                      62              32
    Other                                                              (2)             (8)
                                                             -------------   -------------
           Total other expense                                         60              24
                                                             -------------   -------------

Loss before income taxes                                           (1,439)         (1,062)
Income tax (benefit) expense                                         (369)             89
                                                             -------------   -------------

           Net loss                                          $     (1,070)   $     (1,151)
                                                             =============   =============

Net loss per common share:
    Basic                                                    $      (0.06)   $      (0.07)
                                                             =============   =============
    Diluted                                                  $      (0.06)   $      (0.07)
                                                             =============   =============
Common shares used in computing net loss per common share:
    Basic                                                      17,285,977      16,877,539
                                                             =============   =============
    Diluted                                                    17,285,977      16,877,539
                                                             =============   =============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3



<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

                                                            JUNE 30,   MARCH 31,
                                                             2002        2002
                                                           ---------   ---------
                                                          (Unaudited)

                                     ASSETS
Current assets:
    Cash and cash equivalents                              $  2,485    $  3,466
    Accounts receivable (net of allowance for
      doubtful accounts of $973 and $981, as of June
      30, 2002 and March 31, 2002, respectively)              3,013       3,325
    Income tax receivable                                       309         305
    Notes and related party loans receivable                    198         269
    Prepaid expenses and other current assets                 1,011       1,543
                                                           ---------   ---------

           Total current assets                               7,016       8,908

Property, plant and equipment, net                            4,014       4,169
Goodwill (net of accumulated amortization of
    $4,438 as of June 30, 2002 and March 31, 2002)            9,105       9,105
Other assets                                                    948         884
                                                           ---------   ---------
                                                           $ 21,083    $ 23,066
                                                           =========   =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term bank debt                 $    257    $    259
    Current portion of capital lease obligations                428         417
    Accounts payable                                          1,091       1,012
    Accrued expenses                                            630       1,082
    Income taxes payable                                         --         196
    Deferred revenues                                         1,652       1,760
    Deferred income taxes                                        --          60
    Other liabilities                                           152         199
    Accrued restructuring costs                                 237         157
                                                           ---------   ---------

           Total current liabilities                          4,447       5,142

Long-term bank debt, net of current portion                     456         567
Capital lease obligations, net of current portion               926       1,027
Deferred income taxes, non-current                               --         112
Deferred gain on sale-leaseback                                 870         887
                                                           ---------   ---------

           Total liabilities                                  6,699       7,735
                                                           ---------   ---------

Stockholders' equity:
    Preferred stock, par value $.01
      (Authorized 5,000,000 shares; no shares
      issued and outstanding)                                    --          --
    Common stock, par value $.01; authorized
      150,000,000 shares; issued and outstanding
      17,296,650 and 17,265,850 shares (net of
      10,965 treasury shares) as of June 30,
      2002 and March 31, 2002, respectively                     173         173
    Additional paid-in capital                               33,086      33,057
    Accumulated deficit                                     (17,875)    (16,805)
    Accumulated other comprehensive loss:
       Cumulative foreign currency translation adjustments   (1,000)     (1,094)
                                                           ---------   ---------

           Total stockholders' equity                        14,384      15,331
                                                           ---------   ---------
                                                           $ 21,083    $ 23,066
                                                           =========   =========

See accompanying notes to condensed consolidated financial statements.

                                       4



<PAGE>

<TABLE>
                              NETGURU, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Unaudited)
                                      (In thousands)
<CAPTION>
                                                                       THREE MONTHS   THREE MONTHS
                                                                           ENDED          ENDED
                                                                       JUNE 30, 2002  JUNE 30, 2001
                                                                       ------------   ------------
<S>                                                                    <C>            <C>
Cash flows from operating activities:
    Net loss                                                           $    (1,070)   $    (1,151)
    Adjustments to reconcile net loss to net cash used in operating
      activities:
        Depreciation and amortization                                          311            661
        Bad debt expense                                                        25             --
        Deferred income taxes                                                 (172)            (7)
        Compensation expense recognized on issuance of stock options           (23)            34
        Restructuring                                                           93             --
        Changes in operating assets and liabilities (net of
          acquisitions):
          Accounts receivable                                                  361          1,094
          Notes and related party loans receivable                              71             (1)
          Income tax receivable                                                 (4)            --
          Prepaid expenses and other current assets                            535           (294)
          Other assets                                                         (88)           153
          Accounts payable                                                      69            (57)
          Accrued expenses                                                    (456)          (437)
          Income taxes payable                                                (199)            68
          Accrued restructuring costs                                          (13)            --
          Other current liabilities                                            (73)            38
          Deferred revenues                                                   (140)          (525)
          Deferred gain on sale-leaseback                                      (17)           (29)
                                                                       ------------   ------------

                  Net cash used in operating activities                       (790)          (453)
                                                                       ------------   ------------

Cash flows from investing activities:
    Purchase of property, plant and equipment                                  (88)          (167)
    Payments to acquire companies, net of cash acquired                         --            (67)
                                                                       ------------   ------------

                  Net cash used in investing activities                        (88)          (234)
                                                                       ------------   ------------

Cash flows from financing activities:
    Proceeds from issuance of bank debt                                          1             19
    Repayment of bank debt                                                    (115)          (109)
    Repayment of capital lease obligations                                     (84)           (36)
    Issuance of common stock                                                    52             27
    Repurchase common stock                                                     --           (140)
                                                                       ------------   ------------

                  Net cash used in financing activities                       (146)          (239)
                                                                       ------------   ------------

    Effect of exchange rate changes on cash and cash equivalents                43            (68)
                                                                       ------------   ------------

                  Decrease in cash and cash equivalents                       (981)          (994)

Cash and cash equivalents, beginning of period                               3,466          7,958
                                                                       ------------   ------------

Cash and cash equivalents, end of period                               $     2,485    $     6,964
                                                                       ============   ============

Supplemental disclosure of cash flow information:
    Amounts paid for:
         Interest                                                      $        63    $        21
         Income taxes                                                  $         1    $        14
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                            5



<PAGE>

                         NETGURU, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2002
                                   (UNAUDITED)

     BASIS OF PRESENTATION

         These condensed consolidated financial statements include the accounts
of netGuru, Inc. and its wholly owned subsidiaries (the "Company"). All
significant transactions among the consolidated entities have been eliminated
upon consolidation.

         These condensed consolidated financial statements have been prepared by
the Company and include all adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position at June 30, 2002 and
the results of operations and the cash flows for the three months ended June 30,
2002 and 2001, pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for annual consolidated financial statements. Results of
operations for the three months ended June 30, 2002 are not necessarily
indicative of the results to be expected for the full year ending March 31,
2003.

     USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards ("SFAS") No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires management to
disclose the estimated fair value of certain assets and liabilities defined by
SFAS No. 107 as financial instruments. Financial instruments are generally
defined by SFAS No. 107 as cash or contractual obligations that convey to one
entity a right to receive cash or other financial instruments from another
entity, as well as impose on the other entity the obligation to deliver cash or
other financial instruments to the first entity. At June 30, 2002, management
believes the carrying amounts of cash and cash equivalents, receivable and
payable amounts, and accrued expenses approximate fair value because of the
short maturity of these financial instruments. The Company also believes that
the carrying amounts of its long-term debt and capital lease obligations
approximate their fair value as the interest rates approximate a rate that the
Company could obtain under similar terms at the balance sheet date.

     SOFTWARE DEVELOPMENT COSTS AND PURCHASED TECHNOLOGY

         The Company capitalizes costs related to the development of certain
software products. Capitalization of costs begins when technological feasibility
has been established and ends when the product is available for general release
to customers. As of June 30, 2002, capitalized costs of approximately $657,000,
net of accumulated amortization, were included in other assets. Approximately
$303,000 of this amount represents software developed in-house and $261,000
represents the cost of software developed on the Company's behalf by third
parties. The remaining $93,000 represents purchased technology. Additions to
capitalized software were $28,000 and $2,500 during the quarters ended June 30,
2002 and 2001, respectively.

         The Company amortizes capitalized software development costs and
purchased technology using the straight-line method over three to five years, or

                                       6



<PAGE>

the ratio of actual sales to anticipated sales, whichever is greater.
Amortization of software development costs and purchased technology charged to
cost of revenues was approximately $43,000 and $54,000 for the quarter ended
June 30, 2002 and 2001, respectively. Accumulated amortization on capitalized
software was $533,000 and $432,000 as of June 30, 2002 and 2001, respectively.

     REVENUE RECOGNITION

         The Company recognizes revenue when the following criteria are met: 1.
persuasive evidence of an arrangement such as agreements, purchase orders or
written or online requests exists; 2. delivery has been completed and no
significant obligations remain; 3. the Company's price to the buyer is fixed and
determinable; and 4. collectibility is reasonably assured. The Company's
revenues arise from the following segments: enterprise engineering and
collaborative software solutions (including digital media products and animation
services); IT services; and Web-based telecommunication and travel services.

         Revenue from software sales is recognized upon shipment, provided that
no significant post-contract support obligations remain outstanding and
collection of the resulting receivable is reasonably assured. The Company's
software sales do not provide a specific right of return. At the time of sale,
the Company typically provides 120-day initial maintenance and support to the
customer. Costs relating to this initial 120-day support period, which include
primarily telephone support, are not considered material. After the initial
support period, customers may choose to purchase ongoing maintenance contracts
that include telephone, e-mail and other methods of support, and the right to
receive upgrades. Revenue from these maintenance contracts is deferred and
recognized ratably over the life of the contract, usually twelve months.
Revenues from digital media and animation services are recognized upon
achievement of certain pre-determined milestones.

         In October 1997, the Accounting Standards Executive Committee ("AcSEC")
of the American Institute of Certified Public Accountants ("AICPA") issued
Statement of Position ("SOP") 97-2, SOFTWARE REVENUE RECOGNITION. The Company
adopted SOP 97-2 in the first quarter of fiscal 1999. SOP 97-2 distinguishes
between significant and insignificant vendor obligations as a basis for
recording revenue, with a requirement that each element of a software licensing
arrangement be separately identified and accounted for based on relative fair
values of each element. We determine the fair value of each element in
multi-element transactions based on vendor-specific objective evidence ("VSOE").
VSOE for each element is based on the price charged when the same element is
sold separately. In 1998, the AICPA issued SOP 98-9, MODIFICATION OF SOP 97-2,
SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS, which
modifies SOP 97-2 to allow for use of the residual method of revenue recognition
provided that certain criteria have been met. The Company adopted SOP 98-9 in
the first quarter of fiscal 2000. If evidence of fair value of all undelivered
elements exists but evidence does not exist for one or more delivered elements,
then revenue is recognized using the residual method. Under the residual method,
the fair value of the undelivered elements is deferred and the remaining portion
of the transaction fee is recognized as revenue.

         Revenue from providing IT services are recognized primarily on a time
and materials basis, with time at a marked-up rate and materials and other
reasonable expenses at cost, once the services are completed and no significant
obligations remain. Certain IT services contracts are fixed price contracts
where progress toward completion is measured by mutually agreed upon
pre-determined milestones for which the Company recognizes revenue upon
achieving such milestones. The Company's fixed price IT contracts are typically
for a short duration of one to three months.

         Revenues from Web-based telecommunication and travel services are
predominantly recognized net of purchase costs when the products and services
are delivered and collectibility is reasonably assured. Revenues from certain
phone card transactions are deferred and recognized on the basis of usage.
Revenues from call termination services are recognized when the services are
completed and the costs of these services are recognized when incurred. Certain
travel services, based on their nature, are recognized at the gross sales value
with purchase costs stated as a separate cost of revenues in accordance with
Emerging Issues Task Force Issue No. 99-19, RECORDING REVENUE GROSS AS A
PRINCIPAL VERSUS NET AS AN AGENT.

                                       7



<PAGE>

     RECLASSIFICATIONS

         Certain reclassifications have been made to the fiscal 2002
consolidated financial statements to conform to the fiscal 2003 presentation.

     PROVISION FOR RESTRUCTURING OPERATIONS

         In March 2001, the Company announced plans to restructure its
operations. As a result of this restructuring plan, the Company recorded a
restructuring charge of $2,400,000 in fiscal 2001. The restructuring plan
consisted of four major points: 1) refocused strategic direction of Internet
service provider ("ISP") initiatives; 2) refocused strategic direction of
Internet portal initiatives; 3) consolidation of the Company's technical support
activities; and 4) elimination of the Company's in-house legal department.

         With regard to the Company's ISP initiatives in India, the Company
redirected its primary focus towards the communication and connectivity services
targeted at the corporate market. The total amount charged for the refocus of
ISP operations in fiscal 2001 was $1,998,000. This total charge consisted of
$117,000 in contractual obligations and $1,827,000 in asset write-offs related
to ISP operations in India. These charges did not include any employee costs.
The restructuring related to the ISP operations resulted in elimination of
depreciation and amortization expenses that would have resulted from the ISP
related assets.

         With regard to the Internet portal business, the Company redirected its
primary focus towards the telephony and travel services offered through the
portal. The initial restructuring charge related to the refocus of the portal
business was $194,000, of which $168,000 was related to asset write-offs, and
$26,000 was related to contractual obligations. The entire $194,000 was paid in
fiscal 2001. During fiscal 2002, an additional $67,000 relating to contractual
obligations for the portal operations was paid.

         In March 2001, the Company closed its Boston technical support office.
Technical support activities previously offered from the Boston office were
consolidated into the California facility. The closing of this office resulted
in the termination of two employees. The restructure charge related to the
consolidation of technical support facilities was $166,000, of which $49,000
related to accrued severance payments for the two terminated employees and
$117,000 related to contractual lease obligations for the vacated space. The
Company made cash payments totaling $58,000 and $13,000 in fiscal 2002 and
during the three months ended June 30, 2002, respectively, towards settlement of
obligations related to this activity. The Company expects that employee costs,
and the facility costs (once the lease obligations are satisfied) would decrease
as a result of this restructure charge.

         The elimination of the in-house legal department primarily consisted of
the termination of one employee whose position was not refilled. Legal services
are being obtained from the Company's continuing external legal counsel. In
fiscal 2001, the Company estimated the restructure charge related to the
elimination of the in-house legal department to be $42,000. In fiscal 2002, the
Company paid $52,000 toward this restructure charge. Additional charges of
$41,000 and $109,000 were recorded in fiscal 2002 and during the first quarter
of fiscal 2003, respectively, since the original estimate of severance expenses
was insufficient.

                                       8



<PAGE>

     Activity relating to the restructuring charge is as follows (in thousands):

<TABLE>
<CAPTION>
                                  REFOCUS OF       REFOCUS OF       CONSOLIDATION       ELIMINATION
                                      ISP            PORTAL          OF TECHNICAL         OF LEGAL          TOTAL
                                  OPERATIONS       OPERATIONS          SUPPORT           DEPARTMENT
                                --------------   --------------   -----------------   ---------------   ------------
       <S>                      <C>              <C>              <C>                 <C>               <C>
       March 31, 2000                      --               --                  --                --             --

       Restructuring charge     $       1,998    $         194    $            166    $           42    $     2,400

       Cash payments                   (1,897)            (194)                 --                --         (2,091)
                                --------------   --------------   -----------------   ---------------   ------------

       March 31, 2001           $         101    $          --    $            166    $           42    $       309
                                --------------   --------------   -----------------   ---------------   ------------

       Cash payments                       --              (67)                (58)              (52)          (177)

       Adjustments                        (67) a            67  a              (16) b             41  b          25
                                --------------   --------------   -----------------   ---------------   ------------

       March 31, 2002           $          34    $          --    $             92    $           31    $       157
                                --------------   --------------   -----------------   ---------------   ------------

       Cash payments                       --               --                 (13)                             (13)

       Adjustments                        (16) c            --                                   109  c          93
                                --------------   --------------   -----------------   ---------------   ------------

       June 30, 2002            $          18    $          --    $             79    $          140    $       237
                                ==============   ==============   =================   ===============   ============
</TABLE>

       a.   Represents reversal of over-accrual for contractual obligations
            for ISP operations and additional amounts accrued for contractual
            obligations related to the portal operations.

       b.   Represents reversal of over-accrual for technical support
            severance costs and additional amounts accrued for anticipated
            severance costs for the elimination of the legal department.

       c.   Represents reversal of over-accrual for contractual obligation for
            ISP operations and additional amounts accrued for anticipated
            severance costs for the elimination of the legal department.

         The balance at June 30, 2002 includes $54,000 of lease payments for
vacated office space scheduled for payment through September 2003. The remaining
personnel costs and contractual obligations are expected to be completed by the
end of the third quarter of fiscal 2003.

     STOCKHOLDERS' EQUITY

         In April 2000, the Company issued 25,000 shares of common stock as a
portion of the purchase price for the acquisition of Allegria Software, Inc
("Allegria"). The recipients of these shares were given the right to demand the
Company to repurchase these shares at a price of $28.60 per share at the end of
one year. In April 2001, each of the three former owners exercised this right.
The total repurchase price was $715,000. Agreements were reached with the former
owners to extend the cash payment for this repurchase over a period of twelve
months.

         As of June 30, 2002, the Company had paid $146,000 to one of the former
owners for the repurchase of 6,000 shares. The remaining $26,000 is to be paid
by November 30, 2002, and has been accrued under "accrued expenses." The
repurchase of 6,000 shares from another former owner was settled for a total of
$100,000, and the entire amount was paid as of June 30, 2002.

                                       9



<PAGE>

         The owner of the remaining 13,000 shares is holding the stock
certificates until full payment is received for these shares. The total cash to
be paid for this repurchase was $372,000, of which $128,000 has been paid as of
June 30, 2002. Due to a dispute as a result of an apparent breach of the
purchase agreement by the former owner, the Company believes that it is probable
that the balance of $244,000 will not be paid and therefore has not accrued this
amount as a liability.

     FOREIGN CURRENCY TRANSLATION

         The financial position and results of operations of the Company's
foreign subsidiaries are accounted for using the local currency as the
functional currency. Assets and liabilities of the subsidiaries are translated
into U.S. dollars (the reporting currency) at the exchange rate in effect at the
period-end. Statements of operations accounts are translated at the average rate
of exchange prevailing during the respective periods. Translation adjustments
arising from the use of differing exchange rates from period to period are
included in accumulated other comprehensive loss in the consolidated balance
sheets. Gains and losses resulting from foreign currency transactions are
included in operations and are not material to the first quarter of fiscal 2003
and the first quarter of fiscal 2002.

     COMPREHENSIVE INCOME (LOSS)

         The Company applies the provisions of SFAS No. 130, REPORTING
COMPREHENSIVE INCOME, which prescribes rules for the reporting and display of
comprehensive income (loss) and its components. SFAS No. 130 requires foreign
currency translation adjustments, which are reported separately in stockholders'
equity, to be included in other comprehensive income (loss). Total comprehensive
loss was $976,000 and $1,242,000 for the quarter ended June 30, 2002 and 2001,
respectively.

     NET LOSS PER SHARE

         Basic earnings (loss) per share ("EPS") is calculated by dividing net
income (loss) by the weighted-average common shares outstanding during the
period. Diluted EPS reflects the potential dilution to basic EPS that could
occur upon conversion or exercise of securities, options, or other such items,
to common shares using the treasury stock method based upon the weighted-average
fair value of the Company's common shares during the period.

         The following table illustrates the computation of basic and diluted
net loss per share (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                                                          JUNE 30,
                                                                 -----------------------
                                                                    2002          2001
                                                                 -----------   ---------
         <S>                                                     <C>           <C>
         Numerator:
         Net loss & numerator for basic and diluted loss per
         share                                                   $   (1,070)   $ (1,151)
                                                                 ===========   =========

         Denominator:
         Denominator for basic net loss per share - average
         number of common shares outstanding during the period       17,286      16,877
         Incremental common shares attributable to exercise of
         outstanding options, warrants and other common stock
         equivalents                                                     --          --
                                                                 -----------   ---------
         Denominator for diluted net loss per share                  17,286      16,877
                                                                 ===========   =========

         Basic net loss per share                                $    (0.06)   $  (0.07)
                                                                 ===========   =========
         Diluted net loss per share                              $    (0.06)   $  (0.07)
                                                                 ===========   =========
</TABLE>

         Options, warrants and other common stock equivalents amounting to
737,000 and 608,000 potential common shares were excluded from the computation
of diluted EPS for the quarters ended June 30, 2002 and 2001, respectively,
because the Company reported net losses and, therefore, the effect would be
antidilutive.

                                       10



<PAGE>

     SEGMENT AND GEOGRAPHIC DATA

         The Company is an integrated information technology and services
company operating in three primary business segments: 1) enterprise engineering
and collaborative software solutions; 2) IT services; and 3) Web-based
telecommunication and travel services.

         The Company has provided computer-aided engineering software solutions
to customers for over 20 years. During the past 18 years, the Company has
supported the engineering software business with India-based software
programming and IT resources. In addition, based upon the Company's knowledge
and understanding of the engineering software market, combined with the
Company's Internet technology resources and experience, the Company launched
Web4engineers.com, an engineering applications service provider ("ASP") portal
hosting the Company's engineering software applications online and providing ASP
services to engineering software providers and their licensees worldwide. With
the acquisitions of R-Cube Technologies in February 1999 and NetGuru Systems
completed in December 1999, the Company further expanded its IT resources and
capabilities and its presence in the IT services industry, providing expertise
in data-mining and embedded technologies, Internet/Intranet design and
development and systems and software integration and implementation to companies
in North America. The Company has expanded its IT services business into Europe
and intends to further expand its services in India and Southeast Asia.

         The Company applies the provisions of SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE and RELATED INFORMATION. SFAS No. 131 requires
segments to be determined and reported based on how management measures
performance and makes decisions about allocating resources.

         The significant components of worldwide operations by reportable
operating segment (in thousands) are:

                                                     THREE MONTHS ENDED JUNE 30,
                                                      --------------------------
                                                         2002            2001
                                                      -----------    -----------
                                                           (IN THOUSANDS)
          NET REVENUE
              Engineering and collaborative software  $    1,871     $    2,395
                solutions
              IT services                                  1,414          3,348
              Web-based telecommunication and travel       1,132          1,038
                services

                                                      ===========    ===========
                   Consolidated                       $    4,417     $    6,781
                                                      ===========    ===========

          OPERATING (LOSS)/INCOME
              Engineering and collaborative software  $   (1,135)    $     (763)
                solutions
              IT services                                    (67)           183
              Web-based telecommunication and travel        (177)          (458)
                services

                                                      ===========    ===========
                   Consolidated                       $   (1,379)    $   (1,038)
                                                      ===========    ===========

                                       11



<PAGE>

         The Company's operations are based worldwide through foreign and
domestic subsidiaries and branch offices in the United States, India, the United
Kingdom, France, Germany and Asia-Pacific. The following are significant
components of worldwide operations by geographic location:

                                                           THREE MONTHS ENDED
                                                                JUNE 30,
                                                       -------------------------
                                                           2002          2001
                                                       -----------   -----------
                                                            (IN THOUSANDS)
                NET REVENUE
                United States                          $    3,200    $    5,718
                The Americas (other than U.S.)                107           120
                Europe                                        495           497
                Asia-Pacific                                  615           446
                                                       -----------   -----------

                         Consolidated                  $    4,417    $    6,781
                                                       ===========   ===========

                EXPORT SALES
                United States                          $      232    $      124
                                                       ===========   ===========

                                                         JUNE 30,      JUNE 30,
                                                          2002          2001
                                                       -----------   -----------
                                                            (IN THOUSANDS)
                LONG-LIVED ASSETS
                United States                          $   12,342    $   14,105
                Europe                                        365           386
                Asia-Pacific                                1,360         2,570
                                                       -----------   -----------

                         Consolidated                  $   14,067    $   17,061
                                                       ===========   ===========

     CONTINGENCIES

         The Company is party to various litigation matters arising in the
normal course of business. Management believes the resolution of these matters
will not have a material adverse effect on the Company's results of operations
or financial condition.

                                       12



<PAGE>

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

FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. We intend that those forward-looking statements be subject to the
safe harbors created by those sections. These forward-looking statements
generally include the plans and objectives of management for future operations,
including plans and objectives relating to our future economic performance, and
can generally be identified by the use of the words "believe," "intend," "plan,"
"expect," "forecast," "project," "may," "should," "could," "seek," "pro forma,"
"estimates," "continues," "anticipate" and similar words. The forward-looking
statements and associated risks may include, relate to, or be qualified by other
important factors, including, without limitation:

         o    our ability to return to profitability and obtain additional
              working capital, if required;
         o    our ability to successfully implement our future business plans;
         o    our ability to attract strategic partners, alliances and
              advertisers;
         o    our ability to hire and retain qualified personnel;
         o    the risks of uncertainty of trademark protection;
         o    risks associated with existing and future governmental regulation
              to which we are subject; and
         o    uncertainties relating to economic conditions in the markets in
              which we currently operate and in which we intend to operate in
              the future.

         These forward-looking statements necessarily depend upon assumptions
and estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in the forward-looking statements are
reasonable, we cannot guarantee that we will achieve our plans, intentions or
expectations. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ in
significant ways from any future results expressed or implied by the
forward-looking statements. We do not undertake to update, revise or correct any
forward-looking statements.

         Any of the factors described above or in the "Risk Factors" section of
our most recent annual report on Form 10-KSB could cause our financial results,
including our net income (loss) or growth in net income (loss) to differ
materially from prior results, which in turn could, among other things, cause
the price of our common stock to fluctuate substantially.

OVERVIEW

         We were incorporated in 1981 under the name Research Engineers, Inc.
and changed our name to netGuru, Inc. in 2000. We are a Delaware corporation.
Our primary business offerings are:

         o    Engineering and collaborative software solutions (including
              related services) for businesses worldwide;
         o    Information technology, or IT, services (including value-added IT
              services); and
         o    Web-based telecommunications and travel services (including
              long-distance communication services that include call termination
              services and prepaid phone cards, and travel services).

         We have provided computer-aided engineering software solutions to our
customers for over 20 years. For the past 18 years, we have supported our
engineering software business with our India-based software programming and IT
resources. In 1999, we acquired two IT services companies in the U.S., which
further expanded our IT resources and capabilities. Our Internet portal services
were started in 1999 and were refocused in fiscal 2001 toward telecommunications
and travel services. A more expansive discussion of our business and services is
contained in the "Business" section of our most recent annual report on Form
10-KSB.

                                       13



<PAGE>

CRITICAL ACCOUNTING POLICIES

         We have identified the following as accounting policies critical to our
company: revenue recognition, capitalization of software development, allowances
for accounts receivable, impairment of long-lived assets including goodwill, and
deferred income taxes.

     REVENUE RECOGNITION
     -------------------

         We recognize revenue when the following criteria are met: 1. persuasive
evidence of an arrangement exists, such as agreements, purchase orders or
written or online requests; 2. delivery has been completed and no significant
obligations remain; 3. our price to the buyer is fixed and determinable; and 4.
collectibility is reasonably assured. Our revenues arise from the following
segments: enterprise engineering and collaborative software solutions (including
digital media products and animation services); IT services; and Web-based
telecommunication and travel services.

         Revenue from software sales is recognized upon shipment, provided that
no significant post-contract support obligations remain outstanding and
collection of the resulting receivable is reasonably assured. Our software sales
do not provide a specific right of return. At the time of sale, we typically
provide 120-day initial maintenance and support to the customer. Costs relating
to this initial 120-day support period, which consist primarily of telephone
support, are not considered material. After the initial support period,
customers may choose to purchase ongoing maintenance contracts that include
telephone, e-mail and other methods of support, and the right to receive
upgrades. Revenue from these maintenance contracts is deferred and recognized
ratably over the life of the contract, usually twelve months. Revenues from
digital media and animation services are recognized upon achievement of certain
pre-determined milestones.

         In October 1997, the Accounting Standards Executive Committee ("AcSEC")
of the American Institute of Certified Public Accountants ("AICPA") issued
Statement of Position ("SOP") 97-2, SOFTWARE REVENUE RECOGNITION. We adopted SOP
97-2 in the first quarter of fiscal 1999. SOP 97-2 distinguishes between
significant and insignificant vendor obligations as a basis for recording
revenue, with a requirement that each element of a software licensing
arrangement be separately identified and accounted for based on relative fair
values of each element. We determine the fair value of each element in
multi-element transactions based on vendor-specific objective evidence ("VSOE").
VSOE for each element is based on the price charged when the same element is
sold separately. In 1998, the AICPA issued SOP 98-9, MODIFICATION OF SOP 97-2,
SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS, which
modifies SOP 97-2 to allow for use of the residual method of revenue recognition
provided that certain criteria have been met. We adopted SOP 98-9 in the first
quarter of fiscal 2000. If evidence of fair value of all undelivered elements
exists but evidence does not exist for one or more delivered elements, then
revenue is recognized using the residual method. Under the residual method, the
fair value of the undelivered elements is deferred, and the remaining portion of
the transaction fee is recognized as revenue.

         Revenues from providing IT services are recognized primarily on a time
and materials basis, with time at a marked-up rate and materials and other
reasonable expenses at cost, as services are performed. Certain IT services
contracts are fixed price contracts where progress toward completion is measured
by mutually agreed upon pre-determined milestones for which we recognize revenue
upon achieving such milestones. Our fixed price IT contracts are typically for a
short duration of one to three months.

         With regard to the Web-based telecommunication services, revenues from
call termination services are recognized at gross sales value, with the
applicable cost separately stated in the cost of revenues. Revenues from the our
own phone cards are deferred and recognized on the basis of usage, whereas
revenues from re-sale of third-party phone cards are recognized net of returns
since no significant obligations remain once product is delivered. Certain
travel services, based on their nature, are recognized at the gross sales value
with purchase costs stated as a separate cost of revenues in accordance with
Emerging Issues Task Force Issue No. 99-19, RECORDING REVENUE GROSS AS A
PRINCIPAL VERSUS NET AS AN AGENT. Other products and services sold via Internet
portals, including certain travel services, where we are a travel discounter or

                                       14



<PAGE>

an agent, are recognized net of purchase costs when the products and services
are delivered and collectibility is reasonably assured.

     ACCOUNTING FOR SOFTWARE DEVELOPMENT COST AND PURCHASED TECHNOLOGY
     -----------------------------------------------------------------

         We develop software in-house, employ third parties to develop software
for us and purchase software technology. Costs related to the development of
certain software products are capitalized. Capitalization of costs begins when
technological feasibility has been established and ends when the product is
available for general release to customers. Additional costs to enhance products
after release are expensed as they are incurred.

         Capitalized software development costs and purchased technology are
amortized using the straight-line method over three to five years, or the ratio
of actual sales to anticipated sales, whichever is greater. The resulting net
book value of the capitalized software asset is reviewed periodically for
recoverability based on estimated future revenues from products based on that
particular technology. When significant uncertainties exist with respect to the
recoverability of the capitalized cost of the asset, we write the cost of the
asset down to its potential recoverable value.

     ALLOWANCE FOR ACCOUNTS RECEIVABLE
     ---------------------------------

         We sell to our customers on credit and grant credit to those who are
deemed credit worthy based on our analysis of their credit history. We review
our accounts receivable balances and the collectibility of these balances on a
periodic basis. Based on our analysis of the length of time that the balances
have been outstanding, the pattern of customer payments, our understanding of
the general business conditions of our customers and our communications with the
customers, we estimate the recoverability of these balances. When recoverability
is uncertain and the unrecoverable amounts can be reasonably estimated, we
record bad debt expense and increase the allowance for accounts receivable by an
amount equal to the amount estimated to be unrecoverable.

     IMPAIRMENT OF LONG-LIVED ASSETS
     -------------------------------

         Through March 31, 2002, we applied the provisions of SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF. This statement required that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net undiscounted cash
flows expected to be generated by the asset. If the asset is considered to be
impaired, the impairment to be recognized was measured as the amount by which
the carrying amount of the asset exceeded the fair value of the asset. Assets to
be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR
THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. This statement addresses
financial accounting and reporting for the impairment of long-lived assets and
supersedes SFAS No. 121, and the accounting and reporting provisions of APB No.
30, REPORTING THE RESULTS OF OPERATIONS FOR A DISPOSAL OF A SEGMENT OF A
BUSINESS. SFAS No. 144 is effective for fiscal years beginning after December
15, 2001. We have adopted SFAS No. 144 beginning April 1, 2002. The adoption of
SFAS No. 144 does not have a material impact on our consolidated financial
position or results of operations. We apply the provisions of SFAS No. 86,
ACCOUNTING FOR THE COST OF COMPUTER SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE
MARKETED, for evaluating unamortized capitalized software development costs. At
each balance sheet date, we compare the unamortized software development cost of
each product to the net realizable value of the product. The amount by which the
unamortized software development cost exceeds the net realizable value of the
product is written off.

     DEFERRED INCOME TAXES
     ---------------------

         We account for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement

                                       15



<PAGE>

carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

         In assessing the realizability of the net deferred tax assets, we
consider whether it is more likely than not that some or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon either the generation of future taxable income during the periods
in which those temporary differences become deductible or the carryback of
losses to recover income taxes previously paid during the carryback period.

     RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of our net revenues.

                                                             THREE MONTHS ENDED
                                                                  JUNE 30,
                                                            ---------  ---------
                                                              2002        2001
                                                            ---------  ---------

               Net revenues                                   100.0%     100.0%
               Cost of revenues                                53.3       53.3
                                                            ---------  ---------

               Gross profit                                    46.7       46.7
                                                            ---------  ---------

               Selling, general and administrative expenses    59.2       45.9
               Research and development expenses               10.6        7.2
               Amortization of goodwill                          -         4.9
               Depreciation and software amortization           6.0        4.0
               Restructuring                                    2.1         -
                                                            ---------  ---------
                      Total operating expenses                 77.9       62.0

               Operating loss                                 (31.2)     (15.3)

               Interest expense, net                            1.4        0.5
               Other income, net                                 -        (0.1)
                                                            ---------  ---------

               Loss before income taxes                       (32.6)     (15.7)
               Income tax benefit (expense)                     8.4       (1.3)
                                                            ---------  ---------

               Net loss                                       (24.2)%    (17.0)%
                                                            =========  =========

         NET REVENUES. Net revenues decreased by $2,364,000 (34.9%) to
$4,417,000 for the quarter ended June 30, 2002 from $6,781,000 for the quarter
ended June 30, 2001. Our total revenues for the current period primarily
consisted of revenues from (1) enterprise engineering and collaborative software
solutions (including digital media products and animation services), (2) IT
services, and (3) Web-based telecommunication and travel services.

         Engineering and collaborative software solutions net revenues,
increased as a percentage of total net revenues to 42.4% for the quarter ended
June 30, 2002 from 35.3% for the quarter ended June 30, 2001 primarily due to
greater declines in other segments. In dollar terms, net revenues from
engineering and collaborative software solutions decreased by $524,000 (21.9%)
to $1,871,000 for the quarter ended June 30, 2002 from $2,395,000 for the
quarter ended June 30, 2001. The decrease was primarily due to a decline in
collaborative software revenues. Collaborative software revenues decreased by
$384,000 for the quarter ended June 30, 2002 to $79,000 from $463,000 for the
quarter ended June 30, 2001. The majority of our collaborative software revenue
is generated from service-oriented projects, where the revenue is not recognized

                                       16



<PAGE>

until the entire project is completed. The decrease in collaborative software
revenue was due to a decrease in the number of large contracts being completed
in the quarter ended June 30, 2002 as compared to the same period in the prior
year. In addition, the decrease was due to a general decline in the engineering
software market. We expect our software sales from the Far East and Asia to
improve during the remainder of the fiscal year as a result of our efforts to
refocus our sales initiatives and to re-engage our international distributors as
well as due to improvements in the Asian economy.

         IT services net revenues decreased as a percentage of total net
revenues to 32.0% of total net revenues for the quarter ended June 30, 2002 from
49.4% for the quarter ended June 30, 2001. In dollar terms, IT services net
revenues decreased by $1,934,000 (57.8%) to $1,414,000 for the quarter ended
June 30, 2002 from $3,348,000 for the quarter ended June 30, 2001. During the
past year, the IT services industry has been adversely affected by a slow
economy and many of our customers reduced spending on technology consulting and
systems integration services. In addition, the demand for some of our services
decreased during the quarter ended June 30, 2002, which caused us to reduce our
billing rates from the same period in the prior year. We do not anticipate
significant recovery to occur in the IT services segment as we expect that this
period of economic uncertainty may continue to impact our IT services revenue
throughout fiscal 2003.

         Telecommunication and travel services net revenues increased as a
percentage of total revenues to 25.6% for the quarter ended June 30, 2002 from
15.3% for the quarter ended June 30, 2001, due primarily to declines in other
segments. In dollar terms, net revenues from this segment increased by $94,000
(9.1%) to $1,132,000 for the quarter ended June 30, 2002 from $1,038,000 for the
quarter ended June 30, 2001. This increase was due to a $363,000 increase in
call terminations revenues, offset by a $95,000 decrease in travel services
revenues and a $136,000 decrease in phone card revenues. The ramp-up of the call
termination services did not start until the beginning of the current fiscal
year. The increase in net revenues from call termination services during the
quarter ended June 30, 2002 is the result of comparison to the comparable period
in the prior year when the call-termination services were being started and no
ramp-up had taken place. Although telecommunications services revenues increased
during the quarter ended June 30, 2002 as compared to the same period in the
prior year, the recent turmoil in the telecommunications industry has increased
the uncertainty of the viability of smaller service providers, some of whom are
our customers. As a result, we anticipate that, during the remainder of the
current fiscal year, net revenues from telecommunications services will not
improve from current levels. Travel services net revenues decreased due to
competition from other online travel services and reductions in travel agency
commissions. We do not anticipate that net revenues from travel services will
improve from current levels during the remainder of the current fiscal year.

         GROSS PROFIT. Gross profit as a percentage of net revenues remained
flat at 46.7% for the quarter ended June 30, 2002. In dollar terms, total gross
profit decreased by $1,108,000 (35.0%) to $2,062,000 for the quarter ended June
30, 2002 from $3,170,000 for the quarter ended June 30, 1001. The decrease is
mainly due to the decline in gross profit from the IT services business. To a
lesser extent, the decrease in gross profit from the travel services also
contributed to the decline in total gross profit.

         Engineering and collaborative software solutions gross profit
percentage decreased to 84.4% for the quarter ended June 30, 2002 from 85.3% for
the quarter ended June 30, 2001, due to slightly lower revenues from higher
margin products within this segment. Our engineering and collaborative software
solutions segment generally produces a higher gross margin than our other
segments due to the low costs associated with each sale. The cost of revenues
for the engineering and collaborative software segment includes printing
services, direct supplies such as hardware locks, which are security devices
that are attached to the central processing unit to prevent unauthorized access
to licensed software, salaries for the technical support employees, freight out,
and capitalized software amortization expense.

         IT service gross profit percentage decreased to 23.9% for the quarter
ended June 30, 2002 from 30.0% for the quarter ended June 30, 2001. As a result
of the market slowdown for the IT industry, revenues from this segment decreased
significantly without proportionate decreases in our IT services costs, which
resulted in lower gross profit. Historically, the IT services gross profit
percentage has been lower than the engineering and collaborative software

                                       17



<PAGE>

solutions gross profit percentage because service revenue has a higher cost of
labor associated with it. The cost of revenues for IT services includes the
salaries, bonuses, and benefits for all of the consulting employees. Our IT
service consultants generally receive higher salaries than our technical support
employees and we have employed more consultants than technical support staff,
both of which contributed to the lower gross margin for IT services segment as
compared to the engineering and collaborative software solutions segment.

         Telecommunication and travel services gross profit percentage increased
to 12.8% for the quarter ended June 30, 2002 from 11.9% for the quarter ended
June 30, 2001. The cost of revenues for Web-based telecommunications and travel
services includes the cost of buying minutes from another carrier and the cost
of purchasing certain airline tickets. Continuing threats in the worldwide
political climate, competition from other online travel services and reductions
in travel agency commissions due to pricing pressures, may impact the gross
profit from our travel business in the near future.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased by $498,000 (16.0%) to $2,616,000 for
the quarter ended June 30, 2002 from $3,114,000 for the quarter ended June 30,
2001, primarily due to a decrease in sales commissions and our continuing
emphasis on cost control. The decrease in SG&A expenses for the quarter ended
June 30, 2002 consisted of a $197,000 reduction in salaries and benefits due to
employee terminations, a $190,000 reduction in advertising expenses, a $48,000
reduction in IT sales commissions due to decreased IT revenues, and a $37,000
reduction in marketing consulting expenses.

         RESEARCH AND DEVELOPMENT EXPENSES. Research and development ("R&D")
expenses consist primarily of software developers' wages. R&D expenses decreased
by $23,000 (4.7%) to $464,000 for the quarter ended June 30, 2002 from $487,000
for the quarter ended June 30, 2001. The decrease in R & D expenses in fiscal
2003 is the result of our continuing efforts to control costs.

         DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and other
amortization expenses (excluding goodwill amortization) decreased by $5,000
(1.8%) to $268,000 for the quarter ended June 30, 2002 from $273,000 for the
quarter ended June 30, 2001, primarily due to the disposal of fixed assets in
our European offices in the quarter ended March 31, 2002.

         RESTRUCTURING. In March 2001, we announced plans to restructure our
operations. As a result of this restructuring plan, we recorded a restructuring
charge of $2,400,000 in the quarter ended March 31, 2001. The restructuring plan
consisted of four major points: 1) refocused strategic direction of ISP
initiatives; 2) refocused strategic direction of Internet portal initiatives; 3)
consolidation of technical support activities; and 4) elimination of our
in-house legal department. In the Internet portal business, we redirected our
primary focus towards the Web-based telecommunication and travel services. In
March 2001, we closed our Boston technical support office. Technical support
activities previously offered from that office have been consolidated into the
California facility. The elimination of the in-house legal department primarily
consisted of the termination of one employee whose position was not filled.
Legal services are being obtained, as needed, through our continuing external
legal counsel. During the quarter ended June 30, 2002, we provided an additional
$93,000 toward additional expenses from the restructuring plans announced in
March 2001 due to additional amounts needed for severance costs for the
elimination of the legal department.

         INTEREST EXPENSE. Net interest for the quarter ended June 30, 2002
increased by $30,000 to $62,000 from $32,000 for the quarter ended June 30,
2001. The increase was primarily due to a decrease in investment interest income
of $28,000 and an increase of $7,000 in interest expense related to capital
lease obligations.

         INCOME TAXES. We recorded an income tax benefit of $369,000 for the
quarter ended June 30, 2002 as compared to a net income tax expense of $89,000
for the quarter ended June 30, 2001. Due to our net operating loss position, we
reversed tax liabilities recorded in prior periods that are no longer required,
which resulted in a tax benefit in the quarter ended June 30, 2002. Tax expense
for the quarter ended June 30, 2001 resulted from provisions for local and state
taxes.

                                       18



<PAGE>

     LIQUIDITY AND CAPITAL RESOURCES

         Currently we finance our operations (including capital expenditures)
primarily through existing cash and cash equivalent balances. We have used debt
and equity financing when appropriate and practicable. Our principal sources of
liquidity at June 30, 2002 consisted of $2,485,000 of cash and cash equivalents.
Cash and cash equivalents decreased by $981,000 (28.3%) during the quarter ended
June 30, 2002. The primary reasons for this decline were cash used in
operations, capital expenditures, repayment of bank debt and payments toward
capital lease obligations.

         Net cash used in operations was $790,000 for the quarter ended June 30,
2002 as compared to $453,000 for the quarter ended June 30, 2001. Net loss was
the primary contributor to net cash used in both periods. Decrease in accrued
expenses of $456,000, decrease in income tax payable of $199,000, decrease in
deferred income taxes of $172,000 and decrease in deferred revenues of $140,000
contributed to the usage of cash for the quarter ended June 30, 2002. This was
offset by cash provided by a decrease of $535,000 in prepaid expenses and other
current assets, and a decrease of $361,000 in accounts receivable, net of bad
debt expense. For the quarter ended June 30, 2001, the primary reason for net
cash used in operations was the net loss, offset largely by a decrease in
accounts receivable balance of $1,094,000. Increases in prepaid expenses and
other assets of $294,000, decrease in deferred revenue of $525,000, and a
decrease in accrued expenses of $437,000 were primary contributors to cash used
in operations during the quarter ended June 30, 2001.

         Net cash used in investing activities in the quarter ended June 30,
2002 consisted of capital expenditures of $88,000 as compared to $167,000 and
$67,000 of cash used to acquire companies during the quarter ended June 30,
2001.

         In the quarter ended June 30, 2002, we used $146,000 primarily to repay
bank debt and to pay capital lease obligations. In the first quarter ended June
30, 2001, we used $239,000 primarily to repay bank debt, to pay capital lease
obligations and to repurchase common stock.

         We incurred net losses of $1,070,000 and $1,151,000 and used cash in
operations of $790,000 and $453,000 in quarters ended June 30, 2002 and 2001,
respectively. Our future capital requirements will depend upon many factors,
including sales and marketing efforts, the development of new products and
services, possible future strategic acquisitions, the progress of research and
development efforts, and the status of competitive products and services. We
believe we will be able to generate cash from operations or through additional
sources of debt and equity financing. We have continued our program to reduce
costs and expenses. If adequate funds are not available, we may be required to
delay, scale back, or eliminate our research and development programs and our
marketing efforts or to obtain funds through arrangements with partners or
others who may require us to relinquish rights to certain of our technologies or
potential products or assets.

                                       19



<PAGE>

         The following tables summarize our contractual obligations and
commercial commitments at June 30, 2002 (in thousand dollars):

<TABLE>
<CAPTION>
                                          ---------------------------------------------------------------
                                                              PAYMENTS DUE BY PERIOD
                                          ---------------------------------------------------------------
                                                           LESS
                                                          THAN 1
     CONTRACTUAL OBLIGATIONS                  TOTAL        YEAR     1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
     -----------------------              ------------  ----------  ----------  ----------  -------------
     <S>                                        <C>         <C>         <C>           <C>          <C>
     Long-Term Debt                               713         257         430          16             10

     Capital Lease Obligations                  1,354         428         670         256             --

     Operating Leases                           4,428         579         811         672          2,366

                                          ------------  ----------  ----------  ----------  -------------
     Total Contractual Cash Obligations         6,495       1,264       1,911         944          2,376
                                          ============  ==========  ==========  ==========  =============

                                         TOTAL AMOUNTS  LESS THAN
OTHER COMMERCIAL COMMITMENTS               COMMITTED     1 YEAR     1-3 YEARS   4-5 YEARS   OVER 5 YEARS
----------------------------              ------------  ----------  ----------  ----------  -------------
Letter of Credit                                   55          55          --          --             --
Purchase Commitment                               800         800
                                          ------------  ----------  ----------  ----------  -------------
Total Commercial Commitments                      855         855          --          --             --
                                          ============  ==========  ==========  ==========  =============
</TABLE>

         Subsequent to the quarter ended June 30, 2002, one of our major
stockholders executed a letter of commitment to provide us with a revolving line
of credit expiring March 31, 2003, in the amount of $500,000 at annual interest
rates varying from 2.0% over prime rate to 10.0% over prime rate depending on
the outstanding balance. The revolving line of credit has no loan covenant or
ratio requirements.

         Although we expect our existing cash and cash equivalent balances to
decline further during the next twelve months, we believe that our current cash
and cash equivalents balances along with the line of credit mentioned above will
be sufficient to meet our working capital needs at currently anticipated levels
through March 31, 2003. We have made, and will continue to make budget cuts to
maintain adequate capital reserves. However, if we are unable to execute our
operational plan for the next twelve months, we may be required to raise
additional funds through public or private equity or debt financing. We cannot
be certain that additional financing will be available, if needed, or, if
available, will be on terms satisfactory to us.

     IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 141, BUSINESS COMBINATIONS, and
SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method of
accounting. SFAS No. 141 specifies criteria that intangible assets acquired in a
business combination must meet to be recognized and reported separately from
goodwill. SFAS No. 142 also requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their estimated
residual values. In addition, SFAS No. 142 includes provisions, upon adoption,
for the reclassification of certain existing recognized intangibles as goodwill,
reclassification of certain intangibles out of previously reported goodwill,
reassessment of the useful lives of recognized intangibles and testing for
impairment of those intangibles.

                                       20



<PAGE>

         We adopted the provisions of SFAS No. 141 as of July 1, 2001, and SFAS
No. 142 became effective for us on April 1, 2002. Intangible assets identified
as having indefinite useful lives were required to be tested for impairment in
accordance with the provisions of SFAS No. 142. Impairment is measured as the
excess of carrying value over the fair value of an intangible asset with an
indefinite life. We did not record an impairment loss as of the date of adoption
because we determined that we did not have any identifiable intangible assets
other than goodwill.

         In connection with the SFAS No. 142 transitional goodwill impairment
evaluation, the statement requires us to perform an assessment of whether there
is an indication that goodwill is impaired as of the date of adoption. To
accomplish this, we identified our reporting units and determined the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill, to those reporting units as of April 1, 2002. Pursuant to
paragraphs 30-31 of SFAS No. 142, we identified three "reporting units" as
defined in paragraph 17 of SFAS No. 131:

           1) Engineering and collaborative software solutions;
           2) IT Services; and
           3) Web-based telecommunications and travel services.

         Each of these reporting units was identical to its related operating
segment and met the specified criteria as distinct operating units: the
component constitutes a business; discrete financial data is available for the
component; and segment management routinely reviews the component's operating
results. The aggregation criteria for each of the components met the test of:

           (a) similar economic characteristics over the long term;
           (b) similar products or services;
           (c) similar production processes; and
           (d) similar types or classes of customers.

         We have until October 1, 2002 to determine the fair value of each
reporting unit and compare it to the carrying amount of the reporting unit. To
the extent the carrying amount of a reporting unit exceeds the fair value of the
reporting unit, and an indication exists that the reporting unit goodwill may be
impaired, we must perform the second step of the transitional impairment test.
The second step is required to be completed as soon as possible, but no later
than March 31, 2003, the end of the year of adoption. In the second step, we
must compare the implied fair value of the reporting unit goodwill with the
carrying amount of the reporting unit goodwill, both of which would be measured
as of the date of adoption. The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit to all of the assets (recognized
and unrecognized) and liabilities of the reporting unit in a manner similar to a
purchase price allocation, in accordance with SFAS No. 141. The residual fair
value after this allocation is the implied fair value of the reporting unit
goodwill. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in our statement of operations.

         As of June 30, 2002, we had unamortized goodwill in the amount of
$9,105,000, all of which will be subject to the transition provisions of SFAS
No. 142. No amortization expense was recorded for the quarter ended June 30,
2002. We will continue to assess for impairment at each reporting date or at any
time we become aware of factors or circumstances that would warrant the
assessment for impairment, including whether we will be required to recognize
any transitional impairment losses as the cumulative effect of a change in
accounting principles.

                                       21



<PAGE>

         The following table reconciles previously reported net income (loss) as
if the provisions of SFAS No. 142 were in effect in fiscal year 2002 and at
fiscal year end 2002 and 2001 (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           YEAR ENDED
                                                      JUNE 30,                 MARCH 31,
                                              -----------------------   -----------------------
                                                 2002         2001         2002         2001
                                              ----------   ----------   ----------   ----------

       <S>                                    <C>          <C>          <C>          <C>
       Reported net loss                      $  (1,070)   $  (1,151)   $  (8,944)   $  (6,637)
       Add back:  Goodwill amortization,
       net of taxes                                  --          198        1,052        1,282
                                              ----------   ----------   ----------   ----------

       Adjusted net loss                      $  (1,070)   $    (953)   $  (7,892)   $  (5,355)

       Reported basic and diluted loss per
       common share                           $   (0.06)   $   (0.07)   $   (0.53)   $   (0.45)
       Add back: Goodwill amortization, net
       of taxes                                      --         0.01         0.06         0.09
                                              ----------   ----------   ----------   ----------
       Adjusted basic and diluted loss per
       common share                           $   (0.06)   $   (0.06)   $   (0.47)   $   (0.36)
                                              ----------   ----------   ----------   ----------
</TABLE>

         In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS. This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development, or normal use of the
asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.
We do not expect the adoption of SFAS No. 143 to have a material impact on our
consolidated financial position or results of operations.

         In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. This statement addresses financial
accounting and reporting for the impairment of long-lived assets and supersedes
SFAS No. 121, and the accounting and reporting provisions of APB No. 30,
REPORTING THE RESULTS OF OPERATIONS FOR A DISPOSAL OF A SEGMENT OF A BUSINESS.
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. We
have adopted SFAS No. 144 beginning April 1, 2002. The adoption of SFAS No. 144
does not have a material impact on our consolidated financial position or
results of operations.

         In April 2002, the FASB issued SFAS No. 145, RESCISSION OF THE FASB
STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS. SFAS No. 145 eliminates the requirement to classify gains and
losses from the extinguishment of indebtedness as extraordinary, requires
certain lease modifications to be treated the same as sale-leaseback
transactions, and makes other non-substantive technical corrections to existing
pronouncements. SFAS No. 145 is effective for fiscal years beginning after May
15, 2002, with earlier adoption encouraged. We do not expect the adoption of
SFAS No. 145 to have a material impact on our consolidated financial position or
results of operations.

         In July 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL Activities. SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operations, plant closing, or other exit or disposal activities.
SFAS No. 146 is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption encouraged. As the
provisions of SFAS No. 146 are required to be applied prospectively after the
adoption date, we cannot determine the potential effects that adoption of SFAS
No. 146 will have on our consolidated financial statements.

                                       22



<PAGE>

PART II -- OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           None

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

           None

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None

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

              During the quarter ended June 30, 2002, no matters were
           submitted for vote to our common stockholders.

ITEM 5.    OTHER INFORMATION

           None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)   Exhibit 99-1: Certifications of chief executive officer and
                 chief financial officer pursuant to 18 U.S.C section 1350, as
                 adopted pursuant to section 906 of the Sarbanes-Oxley Act of
                 2002.

           (b)   Reports on Form 8-K

                 On April 16,2002, we filed a current report on Form 8-K
                 announcing the appointment of Bruce K. Nelson as Chief
                 Financial Officer. This disclosure was made under Item 5,
                 Other Events.

                 On August 14, 2002, we filed a current report on Form 8-K
                 announcing a scheduled conference call and clarifying our
                 acquisition, merger, public offering or similar activities
                 in India. This disclosure was made under Item 5, Other
                 Events, and included a press release that was attached as
                 an exhibit to Item 7, Financial Statements and Exhibits.

                                       23



<PAGE>

                                   SIGNATURES
                                   ----------

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

Date:  January 27, 2003

                                          NETGURU, INC.

                                          By: /S/ BRUCE K. NELSON
                                              -------------------
                                              Bruce K. Nelson
                                              Chief Financial Officer (principal
                                              financial and accounting officer)

                                       24



<PAGE>

                                 CERTIFICATIONS

         I, Amrit K. Das, certify that:

         1. I have reviewed this amendment no. 2 to quarterly report on Form
10-QSB of netGuru, Inc. ("quarterly report");

         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; and

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

Date: January 27, 2003                 /s/ AMRIT K. DAS
                                           ------------
                                           Amrit K. Das, Chief Executive Officer
                                           (Principal executive officer)

         I, Bruce Nelson, certify that:

         1. I have reviewed this amendment no. 2 to quarterly report on Form
10-QSB of netGuru, Inc. ("quarterly report");

         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; and

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

Date: January 27, 2003                 /s/ BRUCE K. NELSON
                                           ---------------
                                           Bruce Nelson, Chief Financial Officer
                                           (Principal financial officer)

                                       25



<PAGE>

        EXHIBITS FILED WITH THIS AMENDMENT NO. 2 TO REPORT ON FORM 10-QSB

Exhibit 99.1  Certifications of chief executive officer and chief financial
              officer pursuant to 18 U.S.C section 1350, as adopted pursuant to
              section 906 of the Sarbanes-Oxley Act of 2002.

                                       26