<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



                                   FORM 10-Q/A

                                   (Mark One)

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
                                       OR

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

         For the transition period from _____________ to ______________

                         COMMISSION FILE NUMBER 0-28579


                               NOVO NETWORKS, INC.
             (Exact name of registrant as specified in its charter)

          DELAWARE                                       75-2233445
(State or other jurisdiction                (I.R.S. Employer Identification No.)
     of incorporation)


                         300 CRESCENT COURT, SUITE 1760
                               DALLAS, TEXAS 75201
                    (Address of principal executive offices)
                                 (214) 777-4100
              (Registrant's telephone number, including area code)

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



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

On November 14, 2001, 52,323,701 shares of the registrant's common stock,
$.00002 par value per share, were outstanding.


<PAGE>


                               NOVO NETWORKS, INC.

                           QUARTERLY REPORT FORM 10-Q
                                      INDEX



<Table>
<Caption>
                                                                                                        PAGE NO.
<S>           <C>                                                                                       <C>
PART I:       FINANCIAL INFORMATION

Item 1.       Financial Statements

              Consolidated Balance Sheets as of September 30, 2001
              and June 30, 2001..................................................................              3

              Consolidated Statements of Operations for the three months ended
              September 30, 2001 and 2000........................................................              4

              Consolidated Statements of Cash Flows for the three months ended
              September 30, 2001 and 2000........................................................              5

              Notes to Consolidated Financial Statements.........................................              6

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

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.........................             17


PART II:      OTHER INFORMATION

Item 1.       Legal Proceedings..................................................................             18

Item 2.       Changes in Securities and Use of Proceeds..........................................             18

Item 3.       Defaults Upon Senior Securities....................................................             18

Item 4.       Submission of Matters to a Vote of Securities Holders..............................             18

Item 5.       Other Information..................................................................             19

Item 6.       Exhibits and Reports on Form 8-K...................................................             19

Signatures.......................................................................................             20
</Table>



                                       2


<PAGE>





                               NOVO NETWORKS, INC.
                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                                                     September 30,      June 30,
                                                                                                         2001             2001
                                                                                                     -------------    -------------
                                                                                                      (unaudited)
<S>                                                                                                  <C>              <C>
                                                    ASSETS
CURRENT ASSETS
     Cash and cash equivalents ................................................................      $  16,362,086    $  16,696,537
     Accounts receivable, less allowances for doubtful accounts ($6,884,647 and $4,589,647,
          respectively) .......................................................................          1,745,994        2,521,408
     Prepaid expenses and other receivables ...................................................          1,290,850        1,066,518
     Deposits .................................................................................            617,387          420,379
     VAT receivable ...........................................................................          1,737,376        1,405,929
                                                                                                     -------------    -------------
                                                                                                        21,753,693       22,110,771
                                                                                                     -------------    -------------

LONG-TERM ASSETS
     Restricted cash ..........................................................................            101,525           94,180
     Deposits .................................................................................            629,991          811,482
     Network equipment under capital leases, net ..............................................          4,213,448        4,404,587
     Property and equipment, net ..............................................................          5,035,956        5,699,577
     Investments in affiliates ................................................................          3,970,483        4,776,772
                                                                                                     -------------    -------------
                                                                                                        13,951,403       15,786,598
                                                                                                     -------------    -------------
                                                                                                     $  35,705,096    $  37,897,369
                                                                                                     =============    =============

                                       LIABILITIES & STOCKHOLDERS' EQUITY

LIABILITIES NOT SUBJECT TO COMPROMISE
     Capital leases ...........................................................................      $   2,437,584    $   8,865,698
     Accounts payable .........................................................................          3,260,215        3,601,650
     Accrued other ............................................................................          3,189,823        7,480,259
     Restructuring accrual ....................................................................                 --          426,297
     Accrued interest payable .................................................................             39,737          134,683
     Customer deposits and deferred revenues ..................................................                 --          742,486
                                                                                                     -------------    -------------
                                                                                                         8,927,359       21,251,073
                                                                                                     -------------    -------------

LIABILITIES SUBJECT TO COMPROMISE (Note 1) ....................................................         17,502,254               --

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Preferred stock, $0.00002 par value, $1,000 liquidation preference,
          authorized 25,000,000 shares, issued and outstanding, 26,545 and
          26,395 shares, respectively .........................................................                 --               --
     Common stock, $0.00002 par value, authorized 200,000,000 shares, issued and outstanding,
          52,323,701 shares ...................................................................              1,050            1,050
     Additional paid-in capital ...............................................................        256,058,202      255,908,448
     Accumulated deficit ......................................................................       (246,478,900)    (238,823,764)
     Deferred compensation ....................................................................           (304,869)        (439,438)
                                                                                                     -------------    -------------
                                                                                                         9,275,483       16,646,296
                                                                                                     -------------    -------------
                                                                                                     $  35,705,096    $  37,897,369
                                                                                                     =============    =============
</Table>


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



                                       3


<PAGE>




                               NOVO NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                          For the Three Months
                                                          Ended September 30,
                                                     ----------------------------
                                                         2001            2000
                                                     ------------    ------------
                                                             (unaudited)
<S>                                                  <C>             <C>
Revenues .........................................   $  8,687,677    $ 18,597,027
Direct costs (except for depreciation and
     amortization set forth below)................      9,537,886      17,341,332
                                                     ------------    ------------
  Gross profit (loss) ............................       (850,209)      1,255,695

Selling, general and administrative expenses .....      5,856,043       6,712,161
Stock-based compensation .........................        134,569         431,417
Depreciation and amortization ....................        644,220       6,468,935
                                                     ------------    ------------
Loss from operations, before
    other (income) expense .......................     (7,485,041)    (12,356,818)

Other (income) expense
    Interest expense (income), net ...............         40,405        (306,055)
    Equity in loss of affiliates .................        419,292       4,070,989
    Foreign currency loss (gain) .................          6,433          (2,845)
    Other ........................................       (445,789)         75,031
                                                     ------------    ------------
                                                           20,341       3,837,120
                                                     ------------    ------------
Net loss .........................................   $ (7,505,382)   $(16,193,938)
                                                     ============    ============

Net loss per share - (basic and diluted) .........   $      (0.15)   $      (0.31)
                                                     ============    ============
Weighted average number of shares
    outstanding - (basic and diluted) ............     52,323,701      51,989,562
                                                     ============    ============
</Table>



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




                                       4


<PAGE>


                               NOVO NETWORKS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                       Three Months Ended September 30,
                                                                       --------------------------------
                                                                           2001                2000
                                                                       ------------       -------------
                                                                                (unaudited)
<S>                                                                    <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss ...................................................      $ (7,505,382)      $(16,193,938)
     Adjustments to reconcile net loss to net cash used in
        net operating activities:
        Depreciation and amortization ...........................           644,220          6,468,935
        Other non-cash charges:
          Stock-based compensation ..............................           134,569            431,417
          Bad debt expense ......................................         2,460,000            381,440
          Equity in loss of affiliates ..........................           419,292          4,070,989
          Loss on sale of fixed assets ..........................             1,373             77,270
          Impairment loss .......................................           121,932                 --
        Change in operating assets and liabilities:
          Accounts receivable ...................................        (1,684,586)        (2,240,273)
          Prepaid expenses and other receivables ................          (224,332)          (485,741)
          VAT receivable ........................................          (331,447)           267,122
          Restricted cash .......................................            (7,345)                --
          Accounts payable ......................................         5,905,932           (864,630)
          Accrued other .........................................            17,876          4,389,041
          Accrued interest payable ..............................            60,466            (78,016)
          Customer deposits and deferred revenue ................          (259,693)           107,162
                                                                       ------------       ------------
Net cash used in operating activities ...........................          (247,125)        (3,669,222)
                                                                       ------------       ------------

CASH FLOWS USED IN INVESTING ACTIVITIES:
     Deposits (made) received ...................................           (15,517)            64,128
     Purchase of property and equipment .........................                --           (832,800)
     Sale of property and equipment .............................            87,235                 --
     (Investments in) Distributions from affiliates .............           386,997            (50,772)
                                                                       ------------       ------------
Net cash provided by (used in) investing activities .............           458,715           (819,444)
                                                                       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Shareholder repayment of note receivable ...................                --             96,984
     Payments on capital leases .................................          (546,041)          (506,640)
     Repayments on notes payable ................................                --            350,000
     Issuance of notes receivable - affiliate, net ..............                --           (307,096)
                                                                       ------------       ------------
Net cash used in financing activities ...........................          (546,041)          (366,752)
                                                                       ------------       ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS .........................          (334,451)        (4,855,418)
CASH AND CASH EQUIVALENTS, beginning of year ....................        16,696,537         40,764,246
                                                                       ------------       ------------
CASH AND CASH EQUIVALENTS, end of period ........................      $ 16,362,086       $ 35,908,828
                                                                       ============       ============


SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

     Cash paid for:
        Interest ................................................      $    130,224       $    374,726
                                                                       ============       ============
        Taxes ...................................................      $         --       $         --
                                                                       ============       ============


SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING,
     INVESTING AND FINANCING ACTIVITIES:

     Purchases of equipment under capital leases ................      $         --       $  1,224,841
                                                                       ============       ============
</Table>

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



                                       5

<PAGE>

                               NOVO NETWORKS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BUSINESS

     (a) General

     Novo Networks, Inc., through its operating subsidiaries, is a communication
services company currently providing international voice services over a
facilities-based network, which consists of digital switching, routing and
signal management equipment, as well as digital fiber optic cable lines.
References to "Novo Networks," "we," "us" and "our" shall refer to Novo
Networks, Inc., the ultimate parent of these operating subsidiaries and the
registrant under the Securities Act of 1934. We will refer to those subsidiaries
in bankruptcy under Chapter 11 as our "debtor subsidiaries" throughout this
Quarterly Report. Our debtor subsidiaries are debtors-in-possession under
Chapter 11 of the Bankruptcy Code. Our network presently reaches 2 domestic and
3 international cities in North America and Mexico. Prior to December 12, 2000,
Novo Networks was known as eVentures Group, Inc.

     Our common stock is currently listed on the Nasdaq National Market. On July
30, 2001, the Nasdaq Stock Market Inc. temporarily suspended the trading of our
common stock pending satisfactory resolution of its concerns related to our
ability to satisfy certain of the minimum listing requirements and our debtor
subsidiaries' bankruptcy proceedings. On October 24, 2001, Nasdaq notified us
that our common stock would be delisted on November 1, 2001. On October 30,
2001, we filed an appeal with Nasdaq. Such appeal will stay the delisting date
until a hearing occurs on December 13, 2001.

     (b) Bankruptcy Proceedings

     On April 2, 2001, one of our subsidiaries, Internet Global Services, Inc.,
or iGlobal, filed a voluntary petition under Chapter 7 of the Bankruptcy Code in
the United States Bankruptcy Court for the Northern District of Texas due to
iGlobal's inability to service its debt obligations, contingent liabilities and
Novo Networks' inability to raise sufficient capital to continue to fund
operating losses at iGlobal. As a result of the Chapter 7 filing, during the
year ended June 30, 2001, Novo Networks recorded an impairment loss of $62.4
million, the majority of which related to non-cash goodwill recorded in
connection with the acquisition of iGlobal.

     During the quarter ended September 30, 2001, certain of our remaining
subsidiaries filed voluntary petitions for protection under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware in order to stabilize their operations and protect their assets while
attempting to reorganize their businesses. The subsidiaries that filed for
bankruptcy protection were Novo Networks Operating Corp., AxisTel
Communications, Inc., e.Volve Technology Group, Inc., Novo Networks
International Services, Inc., Novo Networks Metro Services, Inc. and Novo
Networks Global Services, Inc., collectively referred to as our debtor
subsidiaries.

     As of September 28, 2001, the goal of the reorganization effort was to
preserve the going concern value of our subsidiaries' core assets, to provide
distributions to creditors of our subsidiaries and to retain our common equity
ownership of the core network business of these subsidiaries.

     Our debtor subsidiaries continue to operate and manage their business as
debtors-in-possession under Chapter 11 of the Bankruptcy Code.

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

<Table>
<Caption>
                                                                                                       SUBJECT TO
                                                                      DATE                             BANKRUPTCY
               WHOLLY OWNED SUBSIDIARY                              ACQUIRED        STATUS*           PROCEEDINGS?
               -----------------------                              --------        -------           ------------
<S>                                                                 <C>             <C>              <C>
Novo Networks Operating Corp.                                        2/8/00**        Active          Yes, Chapter 11

AxisTel Communications, Inc.                                        9/23/99         Inactive         Yes, Chapter 11

Novo Networks International Services, Inc.                          9/23/99         Inactive         Yes, Chapter 11

Novo Networks Global Services, Inc.                                 9/23/99         Inactive         Yes, Chapter 11

Web2Dial Communications, Inc.                                       9/23/99         Inactive                No

Novo Networks Metro Services, Inc.                                  9/23/99         Inactive         Yes, Chapter 11

Novo Networks Metro Services (Virginia), Inc.                       9/23/99         Inactive                No

Novo Networks Media Services, Inc.                                  9/23/99         Inactive                No

e.Volve Technology Group, Inc.                                     10/20/99          Active          Yes, Chapter 11

e.Volve Technology Group de Mexico, S.A. de C.V.                   10/20/99          Active                 No

Internet Global Services, Inc.                                      3/10/00         Inactive         Yes, Chapter 7

eVentures Holdings, LLC                                              9/7/99**        Active                 No

Novo Networks (UK)Ltd.                                              9/23/99         Inactive                No
</Table>

----------------
*   "Active" status indicates current operations within the respective entity;
    "Inactive" status indicates no current operations.

**  Indicates date of incorporation.

     It is not possible to predict the outcome of either the iGlobal bankruptcy
or the bankruptcy of our debtor subsidiaries in general or the effects of such
cases on the business of Novo Networks or our subsidiaries, or on the interests
of our creditors and stockholders. Our debtor subsidiaries filed a plan of
reorganization on October 4, 2001 and anticipate amending it prior to the
disclosure statement hearing on December 7, 2001. No assurance can be given that
the debtor subsidiaries will be successful in reorganizing their affairs within
the Chapter 11 bankruptcy proceedings. A creditors committee has not yet formed.
However, the possibility exists that prior to the approval of the plan of
reorganization such a committee could form and challenge the plan of
reorganization.

     The consolidated financial statements contained herein have been prepared
in accordance with generally accepted accounting principles applicable to a
going concern, and do not purport to reflect or to provide for all of the
possible consequences of the ongoing Chapter 11 reorganization cases.
Specifically, the consolidated financial statements do not present the amount
which will ultimately be paid to settle liabilities and contingencies which may
be required in the Chapter 11 reorganization cases or the effect of any changes
which may be made in connection with our debtor subsidiaries' capitalization or
operations resulting from a plan of reorganization. The reorganization plan, as
amended, is subject to acceptance by our debtor subsidiaries' compromised
creditors and approval by the Delaware Bankruptcy Court.


                                       6
<PAGE>

     Because of the ongoing nature of the reorganization cases, the outcome of
which is not presently determinable, the consolidated financial statements
contained herein are subject to material uncertainties and may not be indicative
of the results of the future operations or financial position of Novo Networks.

     (c) Ability to Continue as a Going Concern

     The accompanying financial statements have been prepared assuming that Novo
Networks will continue as a going concern. The bankruptcy filings of our debtor
subsidiaries raise substantial doubt about Novo Networks' ability to continue as
a going concern. The financial statements do not include any adjustments related
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should Novo Networks be
unable to continue as a going concern. Our independent accountants have
previously included an explanatory paragraph in their report on our financial
statements for the year ended June 30, 2001 contained in our most recent Annual
Report on Form 10-K that states that our financial statements have been prepared
assuming that we will continue as a going concern, but that substantial doubt
exists as to our ability to do so.

     (d) Accounting Under Bankruptcy

     The September 30, 2001 financial statements have been prepared in
accordance with AICPA Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code" (SOP 90-7). Pursuant to
SOP 90-7, an objective of financial statements issued by an entity in Chapter 11
is to reflect its financial evolution during the proceeding. For that purpose,
the financial statements for periods including and subsequent to filing the
Chapter 11 petition distinguishes transactions and events that are directly
associated with the reorganization from the ongoing operations of the business.

     The filing of the Chapter 11 cases by our debtor subsidiaries (i)
automatically stayed actions by creditors and other parties with an interest to
recover any claim that arose prior to the commencement of the cases, and (ii)
served to accelerate, for purposes of allowance, all pre-petition liabilities,
whether or not those liabilities were liquidated or contingent as of the
petition date. The following table sets forth the liabilities of Novo Networks
subject to compromise as of September 30, 2001:

     Liabilities Subject to Compromise:

<Table>
     <S>                                                  <C>
     Accounts payable .................................   $ 6,247,367
     Accrued other ....................................     4,734,609
     Accrued interest payable .........................       155,412
     Customer deposits and deferred revenues ..........       482,793
     Capital leases ...................................     5,882,073
                                                          -----------
                                                          $17,502,254
                                                          ===========
</Table>


     Generally, the creditors of our debtor subsidiaries had until October 19,
2001 to file proofs of claim. Our debtor subsidiaries must reconcile any
differences between such claim amounts and any corresponding liabilities as set
forth in the records of Novo Networks. Under the Bankruptcy Code, our debtor
subsidiaries may elect to assume or reject real estate leases, personal property
leases, service contracts and other unexpired executory pre-petition contracts,
subject to approval by the Delaware Bankruptcy Court. We cannot presently
determine with certainty the aggregate liability that will result from the
filing of claims relating to such contracts, which have been or may be rejected.
The Bankruptcy Code accords priority, subject to certain limits and conditions,
to claims and expenses in the following order: administrative expenses of the
bankruptcy, wages and salaries, contributions to employee benefit plans, certain
customer deposits and certain tax claims.


2.   LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 2001, Novo Networks had consolidated current assets of
$21.8 million, including cash and cash equivalents of $16.4 million. Total
liabilities including liabilities subject to compromise at September 30, 2001
were $26.4 million. Historically, we have funded our operations primarily
through the proceeds of private placements of our common and preferred stock and
borrowings under loan and capital lease agreements. Principal uses of cash have
been to fund (i) operating losses; (ii) acquisitions and strategic investments;
(iii) working capital requirements and (iv) capital expenditures, primarily
related to network



                                       7
<PAGE>

equipment and capacity. Due to our financial performance, the lack of stability
in the capital markets and the economy's recent downturn, our only source of
funding, in the near term, is expected to be cash on hand. Furthermore, our
principal subsidiaries are currently operating as debtors-in-possession under
the Bankruptcy Code. Novo Networks, as the ultimate parent to our debtor
subsidiaries, has agreed to provide up to $1.6 million in secured
debtors-in-possession financing. No assurances can be given that such a facility
will prove to be adequate. The parties are currently reviewing the advisability
of extending the debtors-in-possession financing, which expires on November 30,
2001. No amount has been advanced under this financing to date. The credit
facility makes available up to $1.6 million to permit the debtors to obtain
necessary goods and services, to pay employees, to restore confidence and
support from their vendors, suppliers, customers and employees and to operate
their businesses consistent with the requirements of the bankruptcy code. This
credit facility provides for interest at the rate of prime plus 3.0% per annum
and has been provided "superpriority" lien status, meaning that we have a valid
first lien pursuant to the bankruptcy code on substantially all of the debtors'
assets, including all cash and bank accounts. The facility maintains a default
interest rate of prime plus 5.0% per annum. The following non-debtor
subsidiaries of Novo Networks have unconditionally guaranteed the credit
facility to us:

     o    e.Volve Technology Group de Mexico, S.A. de C.V.

     o    Novo Networks (UK) Ltd.

     o    Web2Dial Communications, Inc.

     o    Servicios Professionales J.R.J.S., S.A. de C.V.

     o    Novo Networks Metro Services, Inc.

     o    Novo Networks Media Services, Inc.

     o    Novo Networks Metro Services (Virginia), Inc.


     Accordingly, our debtor subsidiaries may be required to obtain additional
outside funding which could be difficult to obtain on acceptable terms, if at
all. Failure to obtain adequate funding will jeopardize Novo Networks' ability
to continue as a going concern. Due to this level of uncertainty, our management
is unable to determine whether current available financing will be sufficient to
meet the funding requirements of the operating subsidiaries for the upcoming
twelve months.

     Novo Networks' consolidated revenues are principally derived from the
provision of voice services by e.Volve, which typically generate minimal, if
any, gross margin. As of September 30, 2001, Qwest Communications International,
Inc. is e.Volve's only customer. No assurances can be given that Qwest will
remain a customer in future periods. Subsequent to September 30, 2001, Qwest
significantly reduced its traffic to e.Volve. While e.Volve hopes to be able to
increase the volume of voice traffic and therefore operate at a gross profit
from the sale of voice services, Novo Networks has historically not been able to
fund our operations from such voice services. As a result, during fiscal 2001,
we recorded write-downs of communication assets, goodwill and other strategic
investments, which cannot reasonably be expected to be recovered from positive
future cash flows. Additionally, without access to additional capital, e.Volve
might not be able to add enough capacity to its remaining network to accommodate
the volume of voice traffic required to generate sufficient gross profit to meet
operational and capital expenditure requirements.

     Qwest accounted for approximately 64% of Novo Networks' consolidated
revenues for the three months ended September 30, 2001. We currently anticipate
that Qwest will continue to account for all of our revenues in the near term.
Our agreement with Qwest is currently on a service delivery basis and neither
party has commitments to take or provide service on a long-term basis.


3.   GENERAL

     The accompanying consolidated financial statements as of and for the three
month periods ended September 30, 2001 and 2000, have been prepared by Novo
Networks, without audit, pursuant to the interim financial statements rules and
regulations of the United States Securities and Exchange Commission. In the
opinion of our management, the accompanying consolidated financial statements
include all adjustments necessary to present fairly the results of Novo
Networks' operations and cash flows at the dates and for the periods indicated.
The results of operations for the interim periods are not necessarily indicative
of the results for the full fiscal year. The accompanying consolidated financial
statements should be read in conjunction with our audited consolidated financial
statements included in Novo Networks' Annual Report on Form 10-K for the fiscal
year ended June 30, 2001 as filed with the SEC.

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The consolidated financial statements include the accounts of Novo Networks and
all wholly owned subsidiaries. The consolidated financial statements of Novo
Networks presented as of September 30, 2001 do not include the accounts of
iGlobal due to management's decision to abandon iGlobal operations during the
quarter ended March 31, 2001. On April 2, 2001, iGlobal filed a voluntary
petition for bankruptcy under Chapter 7 of the United States Bankruptcy Code.

     Certain fiscal 2001 balances have been reclassified for comparative
purposes to be consistent with the fiscal 2002 presentation. Such
reclassifications have no impact on reported net loss. All significant
inter-company accounts have been eliminated.



                                       8
<PAGE>

4.   LONG-LIVED ASSETS

     Novo Networks' long-lived assets consist of property and equipment. In
accordance with the Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to be Disposed of," Novo Networks
assesses the recoverability of long-lived assets by determining whether the net
book value of the assets can be recovered through projected undiscounted future
cash flows. The amount of impairment, if any, is measured based on fair value
and is charged to operations in the period in which impairment is determined by
management.

     During the three months ended September 30, 2001, we recorded an impairment
loss of $0.1 million related to the write-off of certain network elements.
During fiscal 2001, we recorded an impairment loss related to goodwill and
certain property and equipment totaling $120.5 million. In light of the
bankruptcy proceedings initiated by our subsidiaries, we will continue to
evaluate the recoverability of the remaining long-lived assets based on the
estimated future cash flows from the use of such assets. We may be required to
take additional impairment charges in future periods depending upon such
evaluations.


5.   NET LOSS PER SHARE

     Novo Networks calculates earnings (loss) per share in accordance with SFAS
No. 128, "Earnings Per Share" (EPS). SFAS No. 128 requires dual presentation of
basic EPS and diluted EPS on the face of all income statements for entities with
complex capital structures. Basic EPS is computed as net income less preferred
dividends of $149,754, divided by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock options, warrants,
convertible preferred stock and convertible debentures. Diluted EPS has not been
presented for the effects of stock options, warrants, convertible preferred
stock and convertible debentures as the effect would be antidilutive.
Accordingly, basic and diluted EPS did not differ for any period presented.


6.   PROPERTY AND EQUIPMENT

     Property and equipment consists of leasehold improvements, network
equipment under capital leases, IRU fiber optic circuits, network equipment and
furniture and fixtures. Each class of assets is depreciated over its estimated
useful life using the straight-line method. During the three months ended
September 30, 2001, certain network elements were rejected as part of the
bankruptcy proceedings, resulting in an impairment charge of $0.1 million. The
impairment charge is included in selling, general and administrative expenses on
the accompanying consolidated statement of operations.


7.   INVESTMENTS IN AFFILIATES

     Novo Networks has minority investments in development stage Internet and
communications companies. We account for the majority of our investments using
the equity method. For the three months ended September 30, 2001, we continued
to record our proportionate share of equity losses, which totaled $0.4 million.
Due to declining market conditions, negative operating results of the investee
companies, lack of investee liquidity and other uncertainties surrounding the
recoverability of these investments, an impairment loss of $10.8 million was
recorded during fiscal 2001. For those investments in affiliates, which have
been impaired completely, we ceased recording our share of losses incurred by
the investee. During the quarter ended September 30, 2001, we were notified by
an investee of a distribution of our investment and received payment on October
29, 2001 of approximately $0.4 million. This distribution is recorded in other
receivables and other income.



                                       9
<PAGE>

8.  DISPOSAL OF IGLOBAL

    In March 2001, Novo Networks made the decision to dispose of our investment
in iGlobal. On April 2, 2001, iGlobal filed a voluntary petition for bankruptcy
under Chapter 7 of the Bankruptcy Code. All of iGlobal's product offerings have
been discontinued or abandoned. As a result of the disposition, we recorded an
impairment loss of $62.4 million during fiscal 2001, related to non-cash
goodwill recorded in connection with the initial acquisition of iGlobal. We no
longer control the operations of iGlobal and, accordingly, have not included the
accounts of iGlobal in our consolidated balance sheet. The iGlobal results of
operations have been included from March 10, 2000, the date of acquisition,
through April 2, 2001. As a result of the disposition, we eliminated $3.7
million in assets excluding goodwill and $9.1 million in liabilities from our
consolidated balance sheet. We believe we have no further liabilities or
contingencies resulting from the iGlobal disposition.

    The following unaudited pro forma financial information assumes the
disposition of iGlobal took place at the beginning of the fiscal period
presented:

<Table>
<Caption>
                                                       For the Three Months
                                                     Ended September 30, 2000
                                                     ------------------------
<S>                                                  <C>
Revenues .........................................   $             18,097,872
Loss from operations, before other income ........   $            (13,162,925)
Net loss available to common shareholders ........   $            (17,133,028)
Net loss per share - (basic and diluted) .........   $                  (0.33)
                                                     ========================
</Table>


9.   RESTRUCTURING CHARGE

    In October 2000, Novo Networks began execution of a plan to consolidate the
assets, network and management of our wholly owned operating subsidiaries into a
single broadband network and communication services company. The plan had a
focus on providing broadband and voice services to other service providers,
which resulted in the discontinuation of retail Internet access services
offered, principally, digital subscriber line access and dial-up access. We
recorded reorganization and restructuring expense totaling approximately $4.3
million during the quarter ended December 31, 2000. Amounts not utilized for
their intended purpose of $0.4 million were reversed to operating expense as of
June 30, 2001.

    The restructuring charge, net of reversals, of $3.9 million includes cash
expenditures totaling $1.5 million related to (i) personnel severance of $0.6
million, (ii) lease abandonment of $0.6 million, and (iii) other costs of $0.3
million and non-cash charges of $2.4 million, primarily for the write-down of
impaired assets and the fair value of stock options granted to a former employee
as part of his separation agreement. The positions eliminated included three
senior management positions as a result of the management consolidation and 16
technical and support positions related to the discontinuation of retail
Internet access services.

     A summary of the completed and planned reorganization and restructuring
activities follows:

<Table>
<Caption>
                                             BALANCE AT          FISCAL         BALANCE AT
                                              JUNE 30,            2002         SEPTEMBER 30,
                                                2001          UTILIZATION           2001
                                           --------------    --------------    --------------
<S>                                        <C>               <C>               <C>
Abandonment of leased facilities .......          426,297          (426,297)               --

                                           --------------    --------------    --------------
                                           $      426,297    $     (426,297)   $           --
                                           ==============    ==============    ==============
</Table>



                                       10
<PAGE>

10.  SUMMARIZED FINANCIAL INFORMATION FOR NON-BANKRUPTCY FILING SUBSIDIARIES

     As discussed in Note 1, Novo Networks' principal operating subsidiaries
filed voluntary petitions for protection under Chapter 11 of the Bankruptcy
Code. The following table summarizes financial information as of and for the
three months ended September 30, 2001 for our non-bankruptcy and bankruptcy
filing subsidiaries:


<Table>
<Caption>
                                               Non-Bankrupt       Bankrupt
                                                Companies        Companies        Eliminations      Consolidated
                                              --------------   --------------    --------------    --------------
<S>                                           <C>              <C>               <C>               <C>
Current assets                                $   16,913,223   $    4,840,470    $           --    $   21,753,693
Network equipment under capital leases, net               --        4,213,448                --         4,213,448
Property and equipment, net                        1,098,666        3,937,290                --         5,035,956
Investments in affiliates                         65,114,679       52,179,777      (113,323,973)        3,970,483
Other long-term assets                               108,425          623,091                --           731,516
                                              --------------   --------------    --------------    --------------

Total Assets                                  $   83,234,993   $   65,794,076    $ (113,323,973)   $   35,705,096
                                              ==============   ==============    ==============    ==============

Liabilities Not Subject to Compromise:
Capital leases                                $           --   $    2,437,584    $           --    $    2,437,584
Accounts payable                                       4,288        3,255,927                --         3,260,215
Accrued other                                      1,149,392        2,040,431                --         3,189,823
Other current liabilities                                 --           39,737                --            39,737
Due to Intercompany                                3,567,505       (3,567,505)               --                --

Liabilities subject to compromise                         --       17,502,254                --        17,502,254
Stockholders' equity                              78,513,808       44,085,648      (113,323,973)        9,275,483
                                              --------------   --------------    --------------    --------------

Total Liabilities and Stockholders' Equity    $   83,234,993   $   65,794,076    $ (113,323,973)   $   35,705,096
                                              ==============   ==============    ==============    ==============
</Table>



<Table>
<Caption>
                                             Non-Bankrupt        Bankrupt
                                              Companies         Companies        Eliminations      Consolidated
                                            --------------    --------------    --------------    --------------
<S>                                         <C>               <C>               <C>               <C>
Revenues                                    $           --    $    9,755,746    $   (1,068,069)   $    8,687,677
Loss from operations, before other income       (1,540,418)       (5,944,623)               --        (7,485,041)
Net loss                                        (1,470,739)       (6,034,643)               --        (7,505,382)
</Table>



                                       11
<PAGE>

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


The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These statements include, but are not limited to:

     o    statements regarding our future capital requirements and our ability
          to satisfy our capital needs;

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

     o    statements regarding our ability to collect amounts owed by Qwest and
          our ability to retain Qwest as a customer in future periods;

     o    statements regarding our ability to compete in the market we currently
          serve;

     o    statements regarding our ability to diversify our business into the
          financial services industry;

     o    statements regarding our ability to continue trading on the Nasdaq
          Stock Market and the effects of becoming delisted therefrom; and

     o    statements regarding the ability of our debtor subsidiaries to
          successfully reorganize in bankruptcy.

Factors that could cause actual results to differ materially from those
reflected in the forward-looking statements include, but are not limited to,
those discussed in this section, elsewhere in this report and the risks
discussed in the "Risk Factors Related to Our Company" section included in our
Annual Report on Form 10-K for our fiscal year ended June 30, 2001 filed with
the United States Securities and Exchange Commission. Readers are cautioned not
to place undue reliance on these forward-looking statements, which reflect
management's analysis, judgment, belief or expectation only as of the date
hereof. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date of this
report.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of Novo
Networks and our wholly owned subsidiaries for all periods presented. On April
2, 2001, iGlobal, one of our subsidiaries, filed a voluntary petition under
Chapter 7 of the Bankruptcy Code. The financial results of iGlobal are included
in the financial statements since its acquisition on March 10, 2000 through its
bankruptcy filing on April 2, 2001. The consolidated balance sheet of Novo
Networks for both periods presented does not include the accounts of iGlobal due
to the decision to dispose of iGlobal during the quarter ended March 31, 2001.
During the quarter ended September 30, 2001, our principal subsidiaries,
including AxisTel and e.Volve, filed voluntary petitions under Chapter 11 of the
Bankruptcy Code. During the three months ended September 30, 2001, all of the
revenues and direct costs reflected in the consolidated financial statements of
Novo Networks resulted from the operations of e.Volve and AxisTel.

OVERVIEW

Due to the lack of stability in the capital markets, and sharp downturns in both
the telecommunications industry and the United States economy as a whole, we did
not raise the additional capital required to complete the build-out of our
subsidiaries' global broadband network. As a result, during the third quarter
ended March 31, 2001, we took the following measures in an effort to reduce
costs and streamline operations: (i) delayed capital expenditures relating to
the expansion of the global broadband network, (ii) downsized the workforce by
approximately 30% and (iii) discontinued the operations of iGlobal.

Following the March 2001 restructuring, we undertook a strategic review of our
businesses. Our board of directors determined after such a review that it was
appropriate to examine the possible sale or merger of our voice business
subsidiaries in order to maximize the potential value thereof to our
shareholders. We retained JP Morgan to assist in this regard. However, JP Morgan
was unable to locate a buyer.

Faced with a continuing deterioration of their businesses and a calamitous
downturn in the telecommunications markets generally, our subsidiaries took the
following actions during June of 2001:

     o    further reduced their workforce by 23, a 24% reduction; and

     o    evaluated their strategic options.

During this same period, our chief executive officer, chief operating officer
and certain directors tendered their resignations in order to pursue other
interests. None of these officers or directors resigned, to the knowledge of
current management, because of a disagreement with Novo Networks relating to our
operations, policies or practices.

During the quarter ended September 30, 2001, certain of our remaining
subsidiaries filed voluntary petitions for protection under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware in order to stabilize their operations and protect their assets while
attempting to reorganize their businesses. The subsidiaries that filed for
bankruptcy protection were Novo Networks Operating Corp., AxisTel
Communications, Inc., e.Volve Technology Group, Inc.



                                       12
<PAGE>

Novo Networks International Services, Inc., Novo Networks Metro Services, Inc.
and Novo Networks Global Services, Inc., collectively referred to as our debtor
subsidiaries. Our debtor subsidiaries continue to operate and manage their
business as debtors-in-possession under Chapter 11 of the Bankruptcy Code. It is
not possible to predict the outcome of either the iGlobal bankruptcy or the
bankruptcy of our debtor subsidiaries in general, or the effects of such cases
on the business of Novo Networks or our subsidiaries, or the interests of our
creditors or stockholders. No assurances can be given that our debtor
subsidiaries will be successful in reorganizing their affairs within the Chapter
11 bankruptcy proceedings.

At September 30, 2001, our subsidiaries operate in one business segment, the
provision of communication services over a private network, which uses
communications technologies that allow for the simultaneous high speed,
large-scale transmission of voice, video and data. On August 21, 2001, we
announced that Novo Networks is attempting to diversify our business into
financial services. No assurances can be given concerning whether we will be
able to diversify our business into the financial services industry, if at all.

The common stock of Novo Networks is currently listed on the Nasdaq National
Market. On July 30, 2001, the Nasdaq Stock Market Inc. temporarily suspended the
trading of our common stock pending satisfactory resolution of its concerns
related to our ability to satisfy certain of the minimum listing requirements
and our subsidiaries' bankruptcy proceedings. On October 24, 2001, Nasdaq
notified us that our common stock would be delisted on November 1, 2001. On
October 30, 2001, we filed an appeal with the Nasdaq. Such appeal will stay the
delisting date until a hearing occurs on December 13, 2001.

Revenues. For the quarter ended September 30, 2001, revenues were generated
through the sale of products and services, which can be divided into two product
groups: broadband services and voice services. Broadband services consisted of
transport services such as private line, Asynchronous Transfer Mode and frame
relay, co-location services. Voice services included the delivery of
communications services to end-users. Voice services consisted principally of
packet-based voice services and prepaid calling services. Product and service
revenues are generally measured and billed on a per minute basis.

Historically, Novo Networks has derived substantially all of our consolidated
revenues from the sale of voice and broadband services of e.Volve and AxisTel,
subsidiaries of Novo Networks. Agreements with wholesale customers for the
provisions of these services are typically short term in duration and rates are
subject to change from time to time. For the three months ended September 30,
2001, Qwest accounted for substantially all of the consolidated revenues.
Subsequent to September 30, 2001, Qwest has significantly reduced its traffic to
e.Volve. Currently, we are only providing voice services.

Direct Costs. Direct costs include per minute termination charges, lease
payments and fees for fiber optic cable. Historically, the call termination
expense component of these direct costs has declined as measured on a cost per
minute basis. Additionally, while direct costs incurred for leasing
communications network capacity have declined, existing lease agreements are
generally at fixed rates for periods of one year or longer.

As of September 30, 2001, we provided international telecommunication services
only from the United States to Mexico through e.Volve's operations. The majority
of e.Volve's termination fees and certain fiber optic lease payments are payable
in Mexican pesos. As a result, e.Volve was and continues to be exposed to
exchange rate risk due to fluctuation in the Mexican peso compared to the United
States dollar. Management does not maintain financial hedges against the effects
of fluctuations in the peso to dollar exchange rate. Continued fluctuation in
the exchange rate may make it cheaper or more expensive to purchase pesos to
meet e.Volve's peso denominated expenses.

Selling, General and Administrative Expenses. These expenses include general
corporate expenses, management and operations salaries and expenses,
professional fees, sales and marketing expenses, travel expenses, benefits,
facilities costs and administrative expenses. Currently we maintain our
corporate headquarters in Dallas, Texas. The operating subsidiaries have
facilities in Jersey City, New Jersey, Kansas City (Overland Park), Kansas,
Dallas, Texas, Miami, Florida and Mexico City, Mexico. On July 29, 2001, Novo
Networks and our debtor subsidiaries entered into an Administrative Services
Agreement pursuant to which we agreed to provide our debtor subsidiaries with
accounting, billing and collections, human resources, payroll, information
systems, operational and network support, limited non-bankruptcy legal and
regulatory services and various related secretarial and administrative services.
In return for these services, our debtor subsidiaries pay a weekly fee of
$30,000. The parties are currently reviewing the advisability of extending the
Administrative Services Agreement, which expires on November 30, 2001.



                                       13
<PAGE>

Depreciation and Amortization. Depreciation and amortization represents the
depreciation of property, plant and equipment and the amortization of goodwill
resulting from the reorganization transactions and the acquisition of iGlobal.
Due to the significant impairment losses recorded during fiscal 2001, we expect
our depreciation and amortization costs to decrease significantly.

Equity in Loss of Affiliates. Equity in loss of affiliates results from our
minority ownership in certain investments that are accounted for under the
equity method of accounting. Under the equity method, Novo Networks'
proportionate share of each affiliate's operating losses and amortization of our
net excess investment over our equity in each affiliate's net assets is included
in equity in loss of affiliates. As a result of declining market conditions and
the uncertainties surrounding the recoverability of our investments, we expect
to record additional losses related to our affiliates.


SUMMARY OF OPERATING RESULTS

The table below summarizes our operating results:

<Table>
<Caption>
                                                                                Three Months Ended September 30,
                                                        -------------------------------------------------------------------------
                                                             2001                 %                   2000               %
                                                        --------------     --------------        --------------    --------------
                                                                                         (unaudited)
<S>                                                     <C>                <C>                   <C>               <C>
Revenues .........................................      $    8,687,677              100.0%       $   18,597,027             100.0%
Direct costs (except for depreciation and
     amortization shown below) ...................           9,537,886              109.8%           17,341,332              93.2%
                                                        --------------     --------------        --------------    --------------
  Gross profit (loss) ............................            (850,209)              (9.8)%           1,255,695               6.8%

Selling, general and administrative expenses .....           5,856,043               67.4%            6,712,161              36.1%
Stock-based compensation .........................             134,569                1.5%              431,417               2.3%
Depreciation and amortization ....................             644,220                7.4%            6,468,935              34.8%
                                                        --------------     --------------        --------------    --------------
Loss from operations, before other
     (income) expense ............................          (7,485,041)             (86.2)%         (12,356,818)            (66.4)%

Other (income) expenses:
     Interest expense (income), net ..............              40,405                0.5%             (306,055)             (1.6)%
     Equity in loss of affiliates ................             419,292                4.8%            4,070,989              21.9%
     Foreign currency loss (gain) ................               6,433                0.1%               (2,845)             (0.0)%
     Other .......................................            (445,789)              (5.1)%              75,031               0.4%
                                                        --------------     --------------        --------------    --------------
                                                                20,341                0.2%            3,837,120              20.6%
                                                        --------------     --------------        --------------    --------------
Net loss .........................................      $   (7,505,382)                          $  (16,193,938)
                                                        ==============                           ==============

Net loss per share - (basic and diluted) .........      $        (0.15)                          $        (0.31)
                                                        ==============                           ==============
Weighted average number of shares
     outstanding - (basic and diluted) ...........          52,323,701                               51,989,562
                                                        ==============                           ==============
</Table>


THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000

Revenues. Revenues decreased to $8.7 million during the three months ended
September 30, 2001 from $18.6 million during the three months ended September
30, 2000, a decrease of 53%. Revenues for the three months ended September 30,
2001 were generated through the sale of (i) 96% voice services and (ii) 4%
broadband services. Revenues for the three months ended September 30, 2000 were
generated through the sale of (i) 94% voice services, (ii) 4% broadband services
and (iii) 2% Internet services.

During the three months ended September 30, 2001, we transmitted 110.8 million
minutes versus 133.4 million minutes during the three months ended September 30,
2000, a decrease of 17%. The decrease in revenues during the three months ended
September 30, 2001 resulted from the significant decrease and eventual downturn
of the data, wholesale and prepaid card businesses for AxisTel, as well as
reduced minutes to Mexico. The decrease can also be attributed to lower rates
per minute earned on all voice traffic during the current quarter. As a result
of the iGlobal bankruptcy filing there was no Internet service revenue during
the current reporting period.



                                       14
<PAGE>

Direct Costs. Direct costs decreased to $9.5 million during the three months
ended September 30, 2001 from $17.3 million during the three months ended
September 30, 2000, a decrease of 45%. Direct costs decreased approximately $7.8
million during the current year period as a result of the decreased volume of
minutes transmitted over our network. However, direct costs as a percentage of
revenues increased to 110% in the three months ended September 30, 2001 from 93%
in the three months ended September 30, 2000 as a result of significant
increases in termination rates.

Selling, General and Administrative. Selling, general and administrative
expenses decreased to $5.9 million during the three months ended September 30,
2001 from $6.7 million in the prior year period, a decrease of 13%. Selling,
general and administrative expenses during the three months ended September 30,
2001 decreased primarily due to (i) downsizing of the workforce, (ii) closing
facilities and (iii) reduction in operations as a result of the bankruptcy
proceedings, offset by nonrecurring increases in bad debt expenses and
professional fees related to the subsidiaries bankruptcy. We anticipate that
selling, general and administrative expenses will continue to decrease
significantly as a result of the recent measures implemented to reduce costs.

Depreciation and Amortization. As a result of the reorganization transactions in
September 1999 and October 1999 and the acquisition of iGlobal in March 2000, we
recorded approximately $116.0 million in goodwill. During fiscal 2001 all of the
goodwill was written-off, therefore no amortization of goodwill was recorded
during the three months ended September 30, 2001. Amortization of goodwill
during the three months ended September 30, 2000 totaled $5.2 million. To the
extent there are no future acquisitions, we do not anticipate incurring any
additional amortization expense due to the goodwill impairment charges recorded
during the March 2001 period. Depreciation recorded on fixed assets during the
current period totaled $0.6 million compared to $1.3 million for the prior
period. The decrease in depreciation expense during the current quarter is the
result of an asset impairment charge taken during the fiscal year ended June 30,
2001.

Interest Expense, (Income) Net. We recorded interest expense, net of interest
income from cash investments, of $41,000 for the three months ended September
30, 2001 compared to interest income of $0.3 million for the three months ended
September 30, 2000. The decrease in interest income during the September 30,
2001 quarter resulted from lower cash balances generating interest.

Equity in Loss of Affiliates. Equity in loss of affiliates resulted from our
minority ownership in certain investments that are accounted for under the
equity method of accounting. Under the equity method, our proportionate share of
each affiliate's operating losses and amortization of our net excess investment
over equity in each affiliate's net assets is included in equity in loss of
affiliates. Equity in loss of affiliates was $0.4 million during the three
months ended September 30, 2001 compared to $4.1 million in the prior year
period. This loss primarily resulted from our 22% equity interest in Gemini
Voice Solutions (formerly PhoneFree.com). We anticipate that our strategic
investments accounted for under the equity method will continue to recognize
operating losses, which will result in future charges to earnings as we record
our proportionate share of such losses. For those investments in affiliates,
that were impaired completely in fiscal 2001, we have ceased recording our share
of losses incurred by the investee.

Foreign Currency Loss (Gain). Foreign currency loss during the three months
ended September 30, 2001 was $6,400 compared to a gain of $2,800 during the
prior year period. This variance was the result of the unfavorable exchange rate
fluctuations in the Mexican peso compared to the United States dollar.

Other. During the quarter ended September 30, 2001, we were notified by Launch
Center 39 of a distribution of our investment and received payment on October
29, 2001 of approximately $0.4 million. This distribution is the recovery of a
previously written off investment in affiliate and is recorded in other
receivables and other income.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2001, we had consolidated current assets of $21.8 million,
including cash and cash equivalents of $16.4 million. Total liabilities
including liabilities subject to compromise at September 30, 2001 were $26.4
million. Historically, we have funded our operations primarily through the
proceeds of private placements of our common and preferred stock and borrowings
under loan and capital lease agreements. Principal uses of cash have been to
fund (i) operating losses; (ii) acquisitions and strategic investments; (iii)
working capital requirements and (iv) capital expenditures, primarily related to
network equipment and capacity. Due to our financial performance, the lack of
stability in the capital markets and the economy's recent downturn,



                                       15
<PAGE>

our only source of funding, in the near term, is expected to be cash on hand.
Furthermore, our principal subsidiaries are currently operating as
debtors-in-possession under the Bankruptcy Code. Novo Networks, as the ultimate
parent to our debtor subsidiaries, has agreed to provide the Debtors with up to
$1.6 million in secured debtors-in-possession financing. No assurances can be
given that such a facility will prove to be adequate. The parties are currently
reviewing the advisability of extending the debtors-in-possession financing,
which expires on November 30, 2001. No amount has been advanced under this
financing to date. The credit facility makes available up to $1.6 million to
permit the debtors to obtain necessary goods and services, to pay employees, to
restore confidence and support from their vendors, suppliers, customers and
employees and to operate their businesses consistent with the requirements of
the bankruptcy code. This credit facility provides for interest at the rate of
prime plus 3.0% per annum and has been provided "superpriority" lien status,
meaning that we have a valid first lien pursuant to the bankruptcy code on
substantially all of the debtors' assets, including all cash and bank accounts.
The facility maintains a default interest rate of prime plus 5.0% per annum. The
following non-debtor subsidiaries of Novo Networks have unconditionally
guaranteed the credit facility to us:

               o    e.Volve Technology Group de Mexico, S.A. de C.V.

               o    Novo Networks (UK) Ltd.

               o    Web2Dial Communications, Inc.

               o    Servicios Professionales J.R.J.S., S.A. de C.V.

               o    Novo Networks Metro Services, Inc.

               o    Novo Networks Media Services, Inc.

               o    Novo Networks Metro Services (Virginia), Inc.

         Accordingly, our debtor subsidiaries may be required to obtain
additional outside funding which could be difficult to obtain on acceptable
terms, if at all. Failure to obtain adequate funding will jeopardize Novo
Networks' ability to continue as a going concern. Due to the uncertainty
surrounding Novo Networks, our management is unable to determine whether current
available financing will be sufficient to meet the funding requirements of the
operating subsidiaries for the upcoming twelve months.

Novo Networks' consolidated revenues are principally derived from the provision
of voice services by e.Volve, which typically generate minimal, if any, gross
margin. As of September 30, 2001, Qwest Communications International, Inc. is
e.Volve's only customer. No assurances can be given that Qwest will remain a
customer in future periods. Subsequent to September 30, 2001, Qwest
significantly reduced its traffic to e.Volve. While e.Volve hopes to be able to
increase the volume of voice traffic and therefore operate at a gross profit
from the sale of voice services, we have historically not been able to fund our
operations from such voice services. As a result, during fiscal 2001, Novo
Networks recorded write-downs of communication assets, goodwill and other
strategic investments, which cannot reasonably be expected to be recovered from
positive future cash flows. Additionally, without access to additional capital,
e.Volve might not be able to add enough capacity to its remaining network to
accommodate the volume of voice traffic required to generate sufficient gross
profit to meet operational and capital expenditure requirements.

Qwest, accounted for approximately 64% of Novo Networks' consolidated revenues
for the three months ended September 30, 2001. We currently anticipate that
Qwest will continue to account for all of our revenues in the near term. Our
agreement with Qwest is currently on a service delivery basis and neither party
has commitments to take or provide service on a long-term basis.

Cash flows from operating activities. Cash used in operating activities for the
three months ended September 30, 2001 totaled $0.2 million compared to $3.7
million for the three months ended September 30, 2000. The decreased use of cash
in our operating activities is primarily attributable to the downturn of
operations resulting from the bankruptcy proceedings. During the three months
ended September 30, 2001, cash flow used by operating activities primarily
resulted from operating losses, net of non-cash charges, totaling $3.7 million
and an increase in accounts receivable of $1.7 million, partially offset by a
net increase in accounts payable of $5.9 million. During the three months ended
September 30, 2000 cash flow used by operating activities primarily resulted
from operating losses, net of non-cash charges, totaling $4.8 million and an
increase in accounts receivable of $2.2 million, partially offset by a net
increase in accounts payable and accrued liabilities of $3.5 million.

Cash flows from investing activities. Net cash provided by investing activities
was $0.5 million for the three months ended September 30, 2001 compared to net
cash used of $0.8 million for the same period in the prior year period. Net cash
provided by investing activities in the current period consisted primarily of
cash received from one of our investees of $0.4 million. Investing activities in
the prior year period consisted primarily of purchases of network equipment.

Cash flows from financing activities. Cash flows used in financing activities
during the three months ended September 30, 2001 totaled $0.5 million for
capital lease payments. Cash flows used in financing activities during the prior
year period totaled $0.4 million and consisted principally of capital lease
payments of $0.5 million and amounts advanced to an affiliate company pursuant
to a note agreement of $0.3 million, offset partially by borrowings under a
credit agreement for equipment purchases.

ABILITY TO CONTINUE AS A GOING CONCERN

The bankruptcy proceedings initiated by our debtor subsidiaries raise
substantial doubt about Novo Networks' ability to continue as a going concern.
To the extent our existing subsidiaries are permitted to remain operating
entities in the future, we currently expect to incur losses in such future
periods. Accordingly, we may voluntarily cease, or may be forced to cease
operations altogether. Our independent accountants have previously included an
explanatory paragraph in their report on our financial statements for the year
ended June 30, 2001 contained in our most recent Annual Report on Form 10-K that
states that our financial statements have been prepared assuming that we will
continue as a going concern, but that substantial doubt exists as to our ability
to do so.


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<PAGE>

RECENT DEVELOPMENTS

Nasdaq Delisting. Our common stock is currently listed on the Nasdaq National
Market. On July 30, 2001, Nasdaq temporarily suspended the trading of our common
stock pending satisfactory resolution of its concerns related to our ability to
satisfy certain of the minimum listing requirements and our subsidiaries'
bankruptcy proceedings. On October 24, 2001, Nasdaq notified us that our common
stock would be delisted on November 1, 2001. On October 30, 2001, we filed an
appeal with the Nasdaq. Such appeal will stay the delisting date until a hearing
occurs on December 13, 2001.

Qwest Relationship. Qwest is currently our only customer. For the quarter ended
September 30, 2001, Qwest, accounted for approximately 64% of Novo Networks'
consolidated revenues. We currently anticipate that Qwest will continue to
account for all of our revenues in the near term. Our agreement with Qwest is
currently on a service delivery basis and neither party has commitments to take
or provide service on a long-term basis. We are currently engaged in discussions
with Qwest concerning amounts billed by us for services rendered to Qwest. Given
our business relationship with Qwest and the nature of the issues being
discussed, our management fully expects to resolve the issues with Qwest in a
manner deemed acceptable to both parties; however, no assurances can be given
that such a resolution will be reached. No assurances can be given that Qwest
will continue to be our customer in future periods. Failure to retain Qwest as a
customer (even after obtaining new or additional customers) would jeopardize our
ability to continue as a going concern.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Novo Networks, through our operating subsidiary, e.Volve, is exposed to the
impact of political instability, foreign currency, interest rate and other
risks.

Political Instability Risks. e.Volve has relationships with foreign suppliers in
Mexico. e.Volve has not experienced any negative economic consequences as a
result of relationships with foreign suppliers, but may be negatively affected
should political instability develop.

Foreign Currency Risks. Since the agreements e.Volve has entered into with
certain Mexican suppliers are denominated in Mexican pesos, e.Volve may be
exposed to fluctuations in the Mexican peso, as well as to downturns in the
Mexican economy, all of which may affect profitability. During the three months
ended September 30, 2001, U.S. $5.6 million of e.Volve's direct costs were
denominated in Mexican pesos. e.Volve's foreign currency loss during the three
months ended September 30, 2001 totaled U.S. $6,400. Management does not
currently maintain any financial hedges against future fluctuations in the peso
to dollar exchange rate.

Interest Rate Risks. Novo Networks has investments in money market funds of
approximately $15.2 million at September 30, 2001. Due to the short-term nature
of our investments, we believe that the effects of changes in interest rates are
limited and would not materially impact profitability.



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<PAGE>

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

It is not possible to predict the outcome of either the iGlobal bankruptcy case
or the jointly administered bankruptcy of our debtor subsidiaries in general, or
the effects of these cases on the business of Novo Networks or our subsidiaries,
or the interests of our creditors or stockholders. No assurances can be given
that our debtor subsidiaries will be successful in reorganizing their affairs
within the Chapter 11 bankruptcy proceedings.

RSL COM USA, Inc. and Novo Networks International Services, Inc. have been
involved in an ongoing dispute over the obligation of RSL to continue to provide
services to Novo Networks International and over the right of RSL to receive
payments for services previously rendered to Novo Networks International. RSL
has contended that Novo Networks International owes it approximately $1,500,000,
and it has sought to collect that amount from Novo Networks International and
pursuant to a guaranty agreement, dated October 12, 2000, by and between Novo
Networks, Novo Networks International and RSL. Conversely, we and Novo Networks
International have contended that RSL disrupted service, increased rates, and
engaged in debt collection efforts that violated the automatic stay protections
afforded to Novo Networks International when it filed a voluntary petition under
Chapter 11 of the Bankruptcy Code on July 30, 2001. In an effort to avoid the
uncertainty associated with litigation, Novo Networks, Novo Networks
International and RSL have agreed in principle to settle this dispute. In
consideration of the payment of $158,000 from Novo Networks International, the
payment of $50,000 from Novo Networks, the waiver of any obligation to continue
to provide service to Novo Networks International, and the release of all
preference, contempt, debt, business destruction, and other claims by Novo
Networks International and Novo Networks, RSL has agreed to waive all rights
under the October 12, 2000 guaranty agreement and release all debt and other
claims. Counsel for RSL, Novo Networks International, and Novo Networks are in
the process of preparing appropriate settlement documentation. However, because
RSL made a similar bankruptcy filing on March 16, 2001, the terms of the
settlement must be approved by the United States Bankruptcy Court for the
District of Delaware and the United States Bankruptcy Court for the Southern
District of New York.

Novo Networks International, Novo Networks Global Services, Inc. and e.Volve
have commenced certain adversary proceedings within their jointly administered
bankruptcy case, which is pending in the Delaware Bankruptcy Court, against
various customers, vendors, and landlords in an effort to collect certain
accounts receivable and force the return of certain security deposits. These
lawsuits are for purposes of debt collection or asset turnover only, and since
they have only recently been commenced, their outcomes remain uncertain.

We have previously disclosed in other reports filed with the SEC certain other
legal proceedings pending against or by Novo Networks and/or our subsidiaries.
Consistent with the rules promulgated by the SEC, a description of these matters
has not been included here because such matters have not been terminated nor
have there been any material developments therein during the quarter ended
September 30, 2001. Readers are encouraged to refer to our prior reports filed
with the SEC for further information concerning other legal proceedings
affecting Novo Networks.

Novo Networks and our subsidiaries are involved in other legal proceedings from
time to time, none of which management believes, if decided adversely to us or
our subsidiaries, would have a material adverse effect on the business,
financial condition or results of operations of Novo Networks. All actions and
proceedings commenced against the Debtors prior to the respective filing dates
have been stayed in accordance with the applicable provisions of the Bankruptcy
Code.


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

None.



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<PAGE>

ITEM 5. OTHER INFORMATION

None.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


(a) Exhibits

     None.

(b) Reports on Form 8-K

     On August 21, 2001, we filed a Report on Form 8-K announcing that (i) on
     July 30, 2001 certain of our direct and indirect subsidiaries filed
     voluntary petitions for relief under Chapter 11 of the United States Code
     with the United States Bankruptcy Court for the District of Delaware, Case
     No. 01-10005 (RJN); (ii) that we were exploring opportunities in the
     financial services field and (iii) that we received notice from the Nasdaq
     that, among other things, our securities fail to meet the minimum bid price
     requirement for continued listing under the Nasdaq rules.



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<PAGE>

SIGNATURES

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



NOVO NETWORKS, INC.


Date: February 14, 2002        By:  /s/ Barrett N. Wissman
                                   ---------------------------------------------
                                   Barrett N. Wissman
                                   (Principal Executive Officer)



Date: February 14, 2002        By:  /s/ Daniel J. Wilson
                                   ---------------------------------------------
                                   Daniel J. Wilson
                                   (Principal Financial and Accounting Officer)


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