|SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549



FORM 10-QSB



QUARTERLY REPORT UNDER
SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934



For Quarter Ended
September 30, 2001 - Commission file Number 333-86873



Netword, Inc.(Exact
name of registrant as specified in its charter)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware(State or other Jurisdictionof Incorporation) | 52-2143430(I.R.S. EmployerIdentification No.)
|----------------------------------------------------- | ---------------------------------------------

|702 Russell Avenue,
Third Floor, Gaithersburg, MD 20877(Address of principal executive offices) (Zip code)



240/631-1100
(Registrants telephone number, including area code)



Check whether the issuer
(1) 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___



The number of outstanding
shares of the issuers common stock, par value $.01 per share, as of
November 6, 2001, was 19,348,083.


Transitional Small Business
Disclosure Format (check one):


Yes _X_ No ___
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NETWORD, INC.

INDEX TO FORM 10-QSB


September 30, 2001
|--------------------------------------------------------

|                               |    | PAGE                                                         
|------------------------------ | -- | -------------------------------------------------------------
|PART I - FINANCIAL INFORMATION |    |                                                              
|                               |    |                                                              
|Item - 1. -                    |    | Balance Sheets as of September 30, 2001 and December 31, 2000
|                               |   
|                               |    | Statements of Operations for the Three                       
|                               |    | Months Ended September 30, 2001 and 2000                     
|                               |   
|                               |    | Statements of Operations for the Nine                        
|                               |    | Months Ended September 30, 2001 and 2000                     
|                               |   
|                               |    | Statements of Cash Flows for the Nine                        
|                               |    | Months Ended September 30, 2001 and 2000                     
|                               |   
|                               |    | Notes to Financial Statements                                
|                               |   
|Item - 2. -                    |    | Managements Discussion and Analysis or Plan of Operation    
|                               |   
|PART II - OTHER INFORMATION    | 9  |                                                              
|                               |   
|SIGNATURE                      | 11 |                                                              

|NETWORD, INC.Balance
Sheets
|---------------------------

|                                              | September 30,2001(Unaudited) | December 31,2000(Note)
|--------------------------------------------- | ---------------------------- | ----------------------
|ASSETS                                        |                              |                       
|Current assets:                               |                             
|Cash                                          |                              | $   1,623,483         
|Prepaid expenses and other current assets     |                              | 2,489                 
|                                              |                              |                       
|Total current assets                          |                              | 1,625,972             
|                                              |                             
|Property and equipment, net                   |                              | 15,279                
|                                              |                             
|Intangible assets:                            |                             
|Trademark, net                                |                              | 19,754                
|Intellectual property, net                    |                              | 1,250                 
|                                              |                              |                       
|Total intangible assets                       |                              | 21,004                
|                                              |                             
|Other asset - loan receivable                 |                              | 8,000                 
|                                              |                              |                       
|                                              |                              | $   1,670,255         
|                                              |                              |                       
|                                              |                             
|LIABILITIES AND STOCKHOLDERS EQUITY          |                             
|Current liabilities:                          |                             
|Current portion of long-term liability        |                              | $          4,800      
|Accounts payable                              |                              | 184,761               
|Loans payable                                 |                              | 33,027                
|                                              |                              |                       
|Total current liabilities                     |                              | 222,588               
|                                              |                             
|Long-term liability, net of current portion   |                              | 4,800                 
|                                              |                             
|Note payable                                  |                              | 31,064                
|                                              |                             
|Convertible note payable                      |                              | 23,003                
|                                              |                             
|Stockholders equity:                         |                             
|Common stock, $.01 par value;                 |                             
|Authorized - 40,000,000 shares                |                             
|Issued and outstanding - 19,348,083 shares at |                             
|9/30/01 and 12/31/00                          |                              | 193,481               
|Additional paid-in capital                    |                              | 10,218,022            
|Accumulated deficit                           |                              | (9,011,404            
|Subscriptions receivable                      |                              | (11,299               
|                                              |                              |                       
|Total stockholders equity                    |                              | 1,388,800             
|                                              |                              |                       
|                                              |                              | $   1,670,255         
|                                              |                              |                       

|Note: The balance sheet at
December 31, 2000 has been derived from the audited financial statements at that
date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.


See accompanying notes.


1
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NETWORD, INC.
Statements of Operations(Unaudited)
|-------------------------------------------------

|                                             | Three MonthsEnded September 30,
|-------------------------------------------- | -------------------------------
|
|                                             |                                
|Sales                                        |                                
|                                             |                                
|Selling, general and administrative expenses |                                
|                                             |                                
|                                             |                                
|Operating loss                               |                                
|                                             |                                
|Interest income                              |                                
|                                             |                                
|                                             |                                
|Net loss                                     |                                
|                                             |                                
|                                             |                                
|Basic and diluted loss per common share      |                                
|                                             |                                
|                                             |                                
|Weighted average number of shares            |                                
|outstanding                                  |                                
|                                             |                                

|See accompanying notes.


2
|---------------------------

|NETWORD, INC.
Statements of Operations(Unaudited)
|-------------------------------------------------

|                                             | Nine MonthsEnded September 30,
|-------------------------------------------- | ------------------------------
|
|                                             |                               
|Sales                                        |                               
|                                             |                               
|Selling, general and administrative expenses |                               
|                                             |                               
|                                             |                               
|Operating loss                               |                               
|                                             |                               
|Interest income                              |                               
|                                             |                               
|                                             |                               
|Net loss                                     |                               
|                                             |                               
|                                             |                               
|Basic and diluted loss per common share      |                               
|                                             |                               
|                                             |                               
|Weighted average number of shares            |                               
|outstanding                                  |                               
|                                             |                               

|See accompanying notes.


3
|---------------------------

|NETWORD, INC.
Statements of Cash Flows(Unaudited)
|-------------------------------------------------

|                                                    | Nine MonthsEnded September 30,
|--------------------------------------------------- | ------------------------------
|
|                                                    |                               
|Net loss                                            |                               
|Adjustments to reconcile net loss to cash           |                               
|used in operating activities:                       |                               
|Depreciation and amortization                       |                               
|Accrued interest on notes payable                   |                               
|Loan to employee for moving expense                 |                               
|Amortization of prepaid expense                     |                               
|Change in assets and liabilities:                   |                               
|Prepaid expenses and other current assets           |                               
|Accounts payable                                    |                               
|                                                    |                               
|                                                    |                               
|Net cash used in operating activities               |                               
|                                                    |                               
|                                                    |                               
|Cash flows from investing activities:               |                               
|Acquisition of property and equipment               |                               
|                                                    |                               
|                                                    |                               
|Cash used in investing activities                   |                               
|                                                    |                               
|                                                    |                               
|Cash flows from financing activities:               |                               
|                                                    |                               
|Principal payments of long-term liability           |                               
|Exercise of warrants                                |                               
|Redemption of called warrants                       |                               
|                                                    |                               
|                                                    |                               
|Net cash provided by (used in) financing activities |                               
|                                                    |                               
|                                                    |                               
|Net increase (decrease) in cash                     |                               
|                                                    |                               
|Cash, beginning of period                           |                               
|                                                    |                               
|                                                    |                               
|Cash, end of period                                 |                               
|                                                    |                               

|-Continued-



See accompanying notes.


4
|------------------------------------------

|NETWORD, INC.
Statements of Cash Flows - Continued(Unaudited)



Supplemental Schedule
of Non-Cash Investing and Financing Activities
|-------------------------------------------------------------------------------------------------------------------------------------

|                                           |  |             
|------------------------------------------ |  | ------------
|Exchange of note payable for               |  |             
|accounts payable                           |  | $  30,000   
|                                           |  |             
|Issuance of stock options and warrants for | 
|consulting, legal and marketing services   |  | $          
|                                           |  |             
|Conversion of redeemable common stock      | 
|and common stock warrants to common        | 
|stock and common stock warrants            |  | $          
|                                           |  |             

|See accompanying notes.


5
|---------------------------

|NETWORD, INC.NOTES TO
FINANCIAL STATEMENTSSeptember 30, 2001(Unaudited)


Note 1 - Basis of Presentation


Netword,
Inc. (the Company, us, we, or
our) owns and operates an Internet utility known as the Netword
System, which we believe offers a comprehensive solution to problems created by
a lack of consumer-friendly addresses or URLs for Internet resources.


The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of our management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
nine month periods ended September 30, 2001 are not necessarily indicative of
the results that may be expected for the full year ended December 31, 2001,
These unaudited financial statements should be read in conjunction with the
financial statements and footnotes thereto included in our Annual Report on Form
10-KSB for the year ended December 31, 2000.


6
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 2. Managements
Discussion and Analysis or Plan of Operation


Third Quarter
2001 Overview


During the quarter ended
September 30, 2001, we concentrated our research and development activities on
the development of a new product which is intended to facilitate Internet
users (Users) viewing of movie previews and other online video
clips.


Results of
Operations


Quarter ended September
30, 2001 compared to the quarter ended September 30, 2000


During the quarter ended
September 30, 2001, compensation costs increased to approximately $232,500
versus approximately $223,900 for the comparable period of last year due to
salary increases for certain key technical personnel.


Marketing and advertising
costs decreased to approximately $7,700 versus approximately $765,300 for the
same period last year as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Description                                             |  | 2001      | 2000
|------------------------------------------------------- |  | --------- | ----
|Amortization attributable to the Net2Phone warrant(1)   |  | $        |     
|Payments to InfoSpace for Internet advertising(2)       |  |          |     
|Advertising costs related to an advertising campaign(3) |  |          |     
|Public relations and miscellaneous marketing expense    |  | 7,700     |     
|                                                        |  |           |     
|                                                        | 
|Totals                                                  |  | $  7,700  |     
|                                                        |  |           |     

|(1) The Net2Phone warrant was fully
amortized in the 4th quarter of 2000.


(2) The InfoSpace contract
terminated in 2000.


(3) The advertising campaign ran
during the 3rd and 4th quarters of 2000 and the 1st quarter of 2001.



Nine Months ended
September 30, 2001 compared to the nine months ended September 30, 2000


During the nine months
ended September 30, 2001, compensation costs increased to approximately $703,000
versus approximately $598,200 for the comparable period of last year due to
hiring support personnel and salary increases for certain key technical
personnel. The additional personnel were utilized to enhance the Netword System
and develop new Internet applications.


Marketing and advertising
costs decreased to approximately $366,100 versus approximately $1,792,800 for
the same period last year as follows:


7
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|Description                                             |  | 2001         | 2000
|------------------------------------------------------- |  | ------------ | ----
|Amortization attributable to the Net2Phone warrant(1)   |  | $           |     
|Payments for Internet advertising(2)                    |  | 28,300       |     
|Advertising costs related to an advertising campaign(3) |  | 334,800      |     
|Refund of trade show depsoit(4)                         |  | (7,500       | )   
|Public relations and miscellaneous marketing expense    |  | 10,500       |     
|                                                        |  |              |     
|                                                        | 
|Totals                                                  |  | $ 366,100    |     
|                                                        |  |              |     

|(1) The
Net2Phone warrant was fully amortized in the 4th quarter of 2000.



(2) Contracts with InfoSpace, Netaxi and others terminated in 2000
and were replaced by smaller Internet advertising contracts with Mac Publishing
and others for the 1st quarter of 2001.



(3) The
advertising campaign ran during the 3rd and 4th quarters
of 2000 and the 1st quarter of 2001.



(4) The Company
elected not to participate in the Internet World trade show and its deposit was
refunded.


Liquidity and
Capital Resources


Our cash balance at
September 30, 2001 was approximately $1,623,500. Our net cash used in operations
during the 3rd quarter was $342,550. Based upon our current operations it is
unlikely that additional funds will be required during the next twelve months.


Forward
Looking Statements


Some of the statements in
this 10-QSB that are not historical facts are forward-looking statements.
Forward-looking statements can be identified by the use of words such as
estimates, projects, anticipates, expects, intends, believes or the negative
thereof or other variations thereon or by discussions of strategy that involve
risks and uncertainties. We caution you that all the forward-looking statements
contained in this 10-QSB are only estimates and predictions. Our actual results
could differ materially from those anticipated in the forward-looking statements
due to risks, uncertainties or actual events differing from the assumptions
underlying these statements. The risks, uncertainties and assumptions include,
but are not limited to, those discussed in this 10-QSB.


8
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II - OTHER
INFORMATION


Item 1. Legal Proceedings
|-------------------------------------------------------

| | In
July 1998, we filed a patent infringement suit against Centraal Corporation, now known as
RealNames Corporation, in the U.S. District Court for the Eastern District of Virginia.
We sought an injunction and damages in an amount to be determined by the court.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 8, 1999, the court granted RealNames motion for summary judgement, holding that
the RealNames system did not infringe our patent, without ruling on the validity of our
patent. We appealed the decision. On March 15, 2001, the United States Court of Appeals
for the Federal Circuit upheld the decision of the District Court.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 2. Changes in Securities
|-----------------------------

| | None
| | ----

|Item 3. Defaults upon Senior
Securities
|---------------------------------------

| | None
| | ----

|Item 4. Submission of Matters to a
Vote of Security Holders
|-----------------------------------------------------------

| | None
| | ----

|Item 5. Other Information
|-------------------------

| | None
| | ----

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

| | a)
Exhibits:
| | ------------

| |  |  |  | 3.1(1) |  | Certificate
of Incorporation of Netword, Inc.
| |  |  |  | ------ |  | ---------------------------------------------

| |  |  |  | 3.2(1) |  | Bylaws
of Netword, Inc.
| |  |  |  | ------ |  | -----------------------

| |  |  |  | 4.1(1) |  | Stock
option plan of Netword, Inc.
| |  |  |  | ------ |  | ----------------------------------

| |  |  |  | 4.2(1) |  | Form
of award letter for optionees
| |  |  |  | ------ |  | ----------------------------------

| |  |  |  | 10.1(1) |  | Contract
regarding assignment of trademarks and trade names Netword and Netword, Inc.
| |  |  |  | ------- |  | -----------------------------------------------------------------------------------------

|9
|-

|
|

| |  |  |  | 10.2(1) |  | Internet
Data Center Services Agreement between Netword, Inc. and Exodus Communications, Inc.
| |  |  |  | ------- |  | ---------------------------------------------------------------------------------------------

| |  |  |  | 10.3(1) |  | Agreement
dated September 29, 1999 between Netword, Inc. and Net2Phone, Inc.
| |  |  |  | ------- |  | ----------------------------------------------------------------------------

|(1) |  | Filed
as an Exhibit to Networds registration statement on Form SB-1 (Commission File No.
333-86873) and incorporated herein by reference.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

| | b)
Reports on Form 8-K:
| | -----------------------

| | None
| | ----

|10
|--

|S I G N A T U R E



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


Dated: November 6, 2001
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Netword, Inc.
          (Registrant)By: /s/ Murray M. RubinName: Murray M. Rubin
          Title: Treasurer and Chief Financial Officer(Principal Financial Officer and Officer Duly
          Authorized to Sign on behalf of Registrant)
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11
|--