|SECURITIES AND
EXCHANGE COMMISSIONWashington, 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, 2000 - 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, Gaitherburg, 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 8, 2000, was
19,348,059.


Transitional Small Business
Disclosure Format (check one):


Yes [X]      No[_]
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|NETWORD, INC.(A
Development Stage Company)


INDEX TO FORM 10-QSB


September 30, 2000
|--------------------------------------------------------------------------------------

|                                                                         | PAGE
|------------------------------------------------------------------------ | ----
|PART I - FINANCIAL INFORMATION                                           |     
|Item -1. - Balance Sheets as of September 30, 2000 and December 31, 1999 |     
|Statements of Operations for the Three                                   |     
|Months Ended September 30, 2000 and 1999                                 |     
|Statements of Operations for the Nine                                    |     
|Months Ended September 30, 2000 and 1999                                 |     
|Statements of Cash Flows for the Nine                                    |     
|Months Ended September 30, 2000 and 1999                                 |     
|Notes to Financial Statements                                            |     
|Item - 2. -Managements Discussion and Analysis or Plan of Operation     |     
|PART II - OTHER INFORMATION                                              |     
|SIGNATURE                                                                |     

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|NETWORD, INC.(A
Development Stage Company)Balance Sheets
|--------------------------------------------------------

|                                                  | September 30,2000(Unaudited) | December 31,1999(Note)
|------------------------------------------------- | ---------------------------- | ----------------------
|ASSETS                                            |                              |                       
|Current assets:                                   |                             
|Cash                                              |                              | $   3,012,173         
|Prepaid expenses and other current assets         |                              | 587,727               
|                                                 
|Total current assets                              |                              | 3,599,900             
|Property and equipment, net                       |                              | 49,158                
|Intangible assets:                                |                             
|Trademark, net                                    |                              | 23,577                
|Intellectual property, net                        |                              | 6,250                 
|Deferred offering costs                           |                              |                      
|                                                 
|Total intangible assets                           |                              | 29,827                
|                                                 
|                                                  |                              | $   3,678,885         
|                                                 
|LIABILITIES AND STOCKHOLDERS EQUITY              |                             
|Current liabilities:                              |                             
|Current portion of long-term liability            |                              | $          4,800      
|Accounts payable                                  |                              | 375,547               
|Loans payable                                     |                              | 33,027                
|                                                 
|Total current liabilities                         |                              | 413,374               
|Long-term liability, net of current portion       |                              | 9,600                 
|Convertible note payable                          |                              | 21,803                
|Redeemable common stock and common stock warrants |                              |                      
|Stockholders equity:                             |                             
|Common stock, $.01 par value;                     |                             
|Authorized - 40,000,000 shares                    |                             
|Issued and outstanding - 19,348,059 shares at     |                             
|9/30/00 and 16,923,924 shares at 12/31/99         |                              | 193,480               
|Additional paid-in capital                        |                              | 10,200,625            
|Deficit accumulated in the development stage      |                              | (7,148,698            
|Subscriptions receivable                          |                              | (11,299               
|                                                 
|Total stockholders equity                        |                              | 3,234,108             
|                                                 
|                                                  |                              | $   3,678,885         
|                                                 

|Note: The balance sheet at December
31, 1999 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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|NETWORD, INC.(A
Development Stage Company)Statements of Operations (Unaudited)
|------------------------------------------------------------------------------

|                                        | Three MonthsEnded September 30,
|--------------------------------------- | -------------------------------
|
|Revenue                                 |                                
|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.
|-----------------------

---

|NETWORD, INC.(A
Development Stage Company)Statements of Operations(Unaudited)
|-----------------------------------------------------------------------------

|                                        | Nine MonthsEnded September 30, | Period FromDecember 2, 1996(Inception) toSeptember 30,
|--------------------------------------- | ------------------------------ | ------------------------------------------------------
|
|Revenue                                 |                                | $          8,096                                      
|General and administrative expenses     |                                | 2,725,594                                             
|Operating loss                          |                                | (2,717,498                                            
|                                       
|Other income (expense):                 |                               
|Interest income                         |                                | 127,357                                               
|Loss on disposition of property and     |                               
|equipment                               |                                |                                                      
|Loss on impairment of assets            |                                |                                                      
|                                       
|Net other income (expense)              |                                | 127,357                                               
|                                       
|Net loss                                |                                | $(2,590,141                                           
|                                       
|Basic and diluted loss per common share |                                | $(.14                                                 
|                                       
|Weighted average number of shares       |                               
|outstanding                             |                                | 18,633,335                                            
|                                       

|See accompanying notes.
|-----------------------

---

|NETWORD, INC.(A
Development Stage Company) Statements of Cash Flows(Unaudited)
|------------------------------------------------------------------------------

|                                          | Nine MonthsEnded September 30, | Period FromDecember 2, 1996(Inception) toSeptember 30,
|----------------------------------------- | ------------------------------ | ------------------------------------------------------
|
|Net loss                                  |                                | $(2,590,141                                           
|Adjustments to reconcile net loss to cash |                               
|used in operating activities:             |                               
|Issuance of stock options and warrants    |                               
|for consulting and legal services         |                                |                                                      
|Depreciation and amortization             |                                | 35,635                                                
|Amortization of prepaid expense           |                                | 1,204,000                                             
|Issuance of convertible note payable for  |                               
|legal services                            |                                |                                                      
|Loss on disposition of property and       |                               
|equipment                                 |                                |                                                      
|Loss on impairment of assets              |                                |                                                      
|Change in assets and liabilities:         |                               
|Prepaid expenses                          |                                | (418,687                                              
|Other current assets                      |                                | (11,040                                               
|Accounts payable                          |                                | 13,243                                                
|                                         
|Net cash used in operating                |                               
|activities                                |                                | (1,766,990                                            
|                                         
|Cash flows from investing activities:     |                               
|Proceeds from sale of property and        |                               
|equipment                                 |                                |                                                      
|Acquisition of property and equipment     |                                | (5,576                                                
|Acquisition of trademark                  |                                |                                                      
|                                         
|Net cash used in                          |                               
|investing activities                      |                                | (5,576                                                
|                                         
|Cash flows from financing activities:     |                               
|Proceeds from long-term liability         |                                |                                                      
|Principal payments of long-term liability |                                |                                                      
|Proceeds from loans                       |                                |                                                      
|Exercise of warrants                      |                                | 2,052,698                                             
|Redemption of called warrants             |                                | (10,000                                               
|Issuance of common stock and units, net   |                               
|of offering and registration costs        |                                |                                                      
|                                         
|Net cash provided by financing            |                               
|activities                                |                                | 2,042,698                                             
|                                         
|Net increase in cash (carried forward)    |                                | $    270,132                                          
|                                         

|See accompanying notes.
|-----------------------

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|NETWORD, INC. (A
Development Stage Company)Statements of Cash Flows (Concluded)(Unaudited)
|------------------------------------------------------------------------------------------

|                                                                     | Nine MonthsEnded September 30, | Period FromDecember 2, 1996(Inception) toSeptember 30,
|-------------------------------------------------------------------- | ------------------------------ | ------------------------------------------------------
|
|Cash, beginning of period                                            |                                | 2,742,041                                             
|                                                                    
|Cash, end of period                                                  |                                | $3,012,173                                            
|                                                                    
|Supplemental Schedule of
Non-Cash Investing and Financing Activities
|Subscriptions receivable                                             |                                | $                                                    
|                                                                    
|Issuance of Class A Units and Class C                                |                               
|Units in exchange for:                                               |                               
|Intellectual property                                                |                                | $                                                    
|Net assets acquired                                                  |                                |                                                      
|                                                                    
|Issuance Class A Units for Birdshell Assets                          |                                | $                                                    
|                                                                    
|Conversion of loans to Class A Units                                 |                                | $                                                    
|                                                                    
|Conversion of accounts payable to                                    |                               
|warrants                                                             |                                | $                                                    
|                                                                    
|Issuance of stock options and warrants                               |                               
|for consulting, legal and marketing services                         |                                | $   237,000                                           
|                                                                    
|Issuance of warrants for contract services                           |                                | $                                                    
|                                                                    
|Issuance of convertible note payable for                             |                               
|legal services                                                       |                                | $                                                    
|                                                                    
|Conversion of redeemable common stock                                |                               
|and common stock warrants to common                                  |                               
|stock and common stock warrants                                      |                                | $   977,500                                           
|                                                                    

|See accompanying notes.
|-----------------------

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|NETWORD, INC.(A
Development Stage Company)NOTES TO FINANCIAL STATEMENTSSeptember 30, 2000(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 nine month period ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the full year ended December 31, 2000,
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, 1999.


Note 2 - Exercise of
Warrants


During
the nine months ended September 30, 2000, certain outstanding warrants to purchase our
common stock were exercised as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Number of Shares | Exercise Price | Proceedsof Exercise
| | ---------------- | -------------- | -------------------
| |                  | 1,642,159      |                    

|In
addition, the owner of a Warrant representing 200,000 of our common shares elected not to
exercise that warrant and, accordingly, that warrant was redeemed by us in accordance
with its terms for $.05 per share, or $10,000.


Note 3 - Subsequent Event


On
October 30, 2000 we entered into an agreement with New Internet Computer Co. (NIC), a
company co-founded by Larry Ellison of Oracle, Inc., to integrate the Netword System into
the NIC computer, a new device that is a complete, low-cost, personal computer dedicated
solely to Web access and e-mail. Under the agreement, the NIC version of the Netscape
browser will incorporate our software and allow users to employ Networds in the browser
line without first having to download and install the Netword Agent.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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


Third Quarter 2000
Overview


We are
a development stage Internet company and have not derived significant revenues from
operations. Revenues recorded by us to date are incidental and not the result of
proactive marketing. Our revenues have stemmed from persons who recognize the utility of
the Netword System and wish to protect their products, brands and other marks.


During
the quarter, we continued to enter into and pursue various agreements with other Internet
businesses. Affiliate agreements were signed during the quarter with well-known Web sites
including Amazon.com, Tech TV (formerly ZDTV), Mac Publishing (publishers of Macworld,
the leading publication and Web site for the Apple Macintosh computer and related
software), FogDog (a leading sports-related site) and GetMy (new Web portal site. These
are primarily referral agreements providing for the creation of Commercial Networds that
point to various pages on the Web sites of our affiliates which entitles us to revenues
based on use of Commercial Networds directing Internet traffic to those sites; however,
some of those agreements also include traditional advertising and revenue sharing
opportunities. During the quarter, we also completed new versions of our software agent
for the Linux and Apple Macintosh computer operating systems, as well as an upgrade to
our existing software in order to support the new Microsoft Windows 2000 operating system.


During
the three months ended September 30, 2000 we invested an additional $98,058 in the
production of an advertising campaign (the Campaign) featuring Leonard Nimoy, a
well-known movie and television actor and director, as our spokesperson. The aggregate
invested to date in the production of the Campaign is $726,807. The Campaign commenced
during the third quarter and these costs are being amortized through March 31, 2001.


Results of Operations


The quarter ended
September 30, 2000.


Compensation
costs were $223,841 due to hiring additional marketing, sales, business development and
software engineering personnel to enhance the Netword System and implement the Campaign.


Ongoing
enhancement of the Netword System includes software development efforts to meet the needs
of new affiliates as described herein and development of additional versions of the
Netword Agent for new operating systems and browsers. New affiliations will create
additional technology requirements for us.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Marketing
costs were $765,326 primarily because of the final $375,000 of amortization attributable
to the Net2Phone warrant issued in the 4th quarter of 1999 and $242,269 of amortization
of Campaign expenses. In subsequent quarters in addition to direct advertising costs
associated with the Campaign, we expect to incur additional administrative costs to
manage the Campaign and anticipate that we will require additional sales and customer
support personnel to manage our anticipated growth.


We
have incurred and will continue to incur expenses related to our status as a public
company, including accounting and audit fees, SEC filing fees, transfer agent costs,
printing costs, legal fees and investor relations.


Equipment
costs are not expected to increase significantly until next fiscal year, when we expect
to establish additional clusters of computers in North America and/or abroad to meet the
expected growth in usage of the Netword System following implementation of the Campaign.


Nine months ended
September 30, 2000.


Compensation
costs were $598,189 because we hired additional marketing, sales, business development
and software engineering personnel to enhance the Netword System and implement the
Campaign.


Ongoing
enhancement of the Netword System includes software development efforts to meet the needs
of new affiliates as described herein and development of additional versions of the
Netword Agent for new operating systems and browsers. New affiliations will create
additional technology requirements for us.


Marketing
costs were $1,792,837 primarily because of $1,125,000 of amortization attributable to the
Net2Phone warrant issued in the 4th quarter of 1999, $337,850 to marketing consultants
and strategic partners, including InfoSpace which was initiated in the 1st quarter of
2000 and terminated in the 3rd quarter of 2000 (see Part II - Other Information, Item 1 -
Legal Proceedings) and $242,269 of Campaign costs amortized in the 3rd quarter. In
subsequent quarters in addition to direct advertising costs associated with the Campaign,
we expect to incur additional administrative costs to manage the Campaign and anticipate
that we will require additional sales and customer support personnel to manage our
anticipated growth.


Liquidity and Capital
Resources


Our cash balance at September 30,
2000 was $3,012,173. Based upon our current operations it is unlikely that additional
funds will be required during the next twelve months. Our ability to increase
expenditures for the Campaign will be dependent upon additional funding from revenues
and/or external sources, including exercise of warrants
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|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.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|PART II - OTHER
INFORMATION


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

| | On
January 18, 2000, we entered into an agreement with InfoSpace, Inc. under which it was to
have performed certain marketing and other services for us. In our opinion, InfoSpace did
not adequately perform those services and accordingly, although payments due under that
agreement have been accrued in our financial statements, we are in litigation with
InfoSpace regarding the agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | No
significant developments with regard to previously existing litigation.
| | --------------------------------------------------------------------------

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

| | On
August 8, 2000 the U.S. Patent Office issued U.S. Patent # 6,101,537 to us for a second
patent on the Netword System. The new patent includes a centralized mechanism to store
and instantaneously resolve Networds for any Internet resource, and client software to
make Networds accessible from all leading browsers.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.
| | ------- |  | -----------------------------------------------------------------------------------------

| | 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.
| | ------- |  | ----------------------------------------------------------------------------

| | 10.4(1) |  | Agreement
dated as of November 12, 1999 between Netword, Inc. and Nettaxi Online Communities, 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
| | ----

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|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 9, 2000
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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