|SECURITIES AND EXCHANGE
COMMISSIONWashington, DC 20549




FORM 10-QSB



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



For Quarter Ended
September 30, 2002 - 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.)
|----------------------------------------------------- | ---------------------------------------------

|285 Tanglewood
Crossing, Lawrence, NY 11559 (Address of principal executive offices) (Zip code)


1-516-239-8067
(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 11, 2002, was
21,010,289.


Transitional Small Business
Disclosure Format (check one):

Yes |X| No |_|
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NETWORD, INC.



INDEX TO FORM 10-QSB



September 30, 2002
|-----------------------------------------------------------

|PART I  FINANCIAL INFORMATION | PAGE
|------------------------------ | ----

| | Item 1. |  | Consolidated Balance Sheets as ofSeptember 30, 2002 and December 31, 2001 |  | 1
| | ------- |  | ------------------------------------------------------------------------- |  | -

| |  |  | Consolidated Statements of Operations for the ThreeMonths Ended September 30, 2002 and 2001 |  | 2
| |  |  | ------------------------------------------------------------------------------------------- |  | -

| |  |  | Consolidated Statements of Operations for the NineMonths Ended September 30, 2002 and 2001 |  | 3
| |  |  | ------------------------------------------------------------------------------------------ |  | -

| |  |  | Consolidated Statements of Cash Flows for the NineMonths Ended September 30, 2002 and 2001 |  | 4
| |  |  | ------------------------------------------------------------------------------------------ |  | -

| |  |  | Notes to Consolidated Financial Statements |  | 5
| |  |  | ------------------------------------------ |  | -

| | Item 2. |  | Managements Discussion and Analysis or Plan of Operation |  | 8
| | ------- |  | --------------------------------------------------------- |  | -

| | Item 3. |  | Controls and Procedures |  | 12
| | ------- |  | ----------------------- |  | --

|PART II  OTHER INFORMATION |  | 13
|--------------------------- |  | --

|SIGNATURE |  | 15
|--------- |  | --

|CERTIFICATIONS |  | 16
|-------------- |  | --

|EXHIBIT 99.1 |  | 19
|------------ |  | --

|EXHIBIT 99.2 |  | 20
|------------ |  | --

|
|

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

|                                            | September 30,2002 (Unaudited) | December 31,2001 (Note)
|------------------------------------------- | ----------------------------- | -----------------------
|                                            |                              
|ASSETS                                      |                               |                        
|Current assets:                             |                              
|Cash                                        |                               | $   1,016,354          
|Investment in and note receivable           |                              
| Home Director (Note 2)                    |                               | 284,400                
|Prepaid expenses                            |                               | 3,087                  
|                                            |                               |                        
|Total current assets                        |                               | 1,303,841              
|Property and equipment, net                 |                               | -0                     
|Intangible asset  Trademark, net           |                               | 23,700                 
|                                            |                               |                        
|                                            |                               | $   1,327,541          
|                                            |                               |                        
|                                            |                              
|LIABILITIES AND STOCKHOLDERS EQUITY        |                              
|Current liabilities:                        |                              
|Current portion of long-term liability      |                               | $          4,800       
|Convertible note payable                    |                               | -0                     
|Loans payable                               |                               | -0                     
|Note payable                                |                               | 32,958                 
|Accounts payable                            |                               | 287,436                
|Due to shareholders                         |                               | 42,000                 
|                                            |                               |                        
|Total current liabilities                   |                               | 367,194                
|                                            |                               |                        
|Long-term liability, net of current portion |                               | 22,334                 
|                                            |                               |                        
|Note payable                                |                               | -0                     
|                                            |                               |                        
|Stockholders equity:                       |                              
|Common stock, $.01 par value;               |                              
|Authorized  40,000,000 shares              |                              
|Issued and outstanding  21,010,289 shares  |                              
|at 9/30/02 and 19,348,083 shares at         |                              
|12/31/01                                    |                               | 210,103                
|Additional paid-in capital                  |                               | 10,397,877             
|Accumulated deficit                         |                               | (9,669,967             
|                                            |                               |                        
|Total stockholders equity                  |                               | 938,013                
|                                            |                               |                        
|                                            |                               | $   1,327,541          
|                                            |                               |                        

|Note: The balance sheet at December
31, 2001 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. AND
SUBSIDIARIESConsolidated Statements of Operations(Unaudited)
|------------------------------------------------------------------------------

|                                             | Three MonthsEnded September 30,
|-------------------------------------------- | -------------------------------
|
|                                             |                                
|Sales                                        |                                
|                                             |                                
|Selling, general and administrative expenses |                                
|                                             |                                
|Operating loss                               |                                
|                                             |                                
|Other income:                                |                                
|Interest income                              |                                
|Write-off of loan payable (Note 5)           |                                
|                                             |                                
|Total other income                           |                                
|                                             |                                
|Net loss                                     |                                
|                                             |                                
|Basic and diluted loss per common share      |                                
|                                             |                                
|Weighted average number of shares            |                                
|outstanding                                  |                                
|                                             |                                

|See accompanying notes.



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

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

|                                             | Nine MonthsEnded September 30,
|-------------------------------------------- | ------------------------------
|
|                                             |                               
|Sales                                        |                               
|                                             |                               
|Selling, general and administrative expenses |                               
|                                             |                               
|Operating loss                               |                               
|                                             |                               
|Other income:                                |                               
|Interest Income                              |                               
|Write-off of loan payable (Note 5)           |                               
|                                             |                               
|Total other income                           |                               
|                                             |                               
|Net loss                                     |                               
|                                             |                               
|Basic and diluted loss per common share      |                               
|                                             |                               
|Weighted average number of shares            |                               
|outstanding                                  |                               
|                                             |                               

|See accompanying notes.



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

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

|                                                    | Nine Months
Ended September 30,
|--------------------------------------------------- | -------------------------------
|
|                                                    |                                
|Net loss                                            |                                
|Adjustments to reconcile net loss to cash           |                                
|used in operating activities:                       |                                
|Depreciation and amortization                       |                                
|Loss on abandonment of property and equipment       |                                
|Interest on notes payable                           |                                
|Write-off of loan payable                           |                                
|Interest on note receivable                         |                                
|Loan to employee for moving expense                 |                                
|Change in assets and liabilities:                   |                                
|Prepaid expenses                                    |                                
|Accounts payable                                    |                                
|Due to shareholders                                 |                                
|                                                    |                                
|Net cash used in operating activities               |                                
|                                                    |                                
|Cash used in investing activities:                  |                                
|Investment in and note receivable  Home Director   |                                
|                                                    |                                
|Cash used in investing activities                   |                                
|                                                    |                                
|Cash flows from financing activities:               |                                
|Repayment of note payable                           |                                
|Exercise of stock options                           |                                
|                                                    |                                
|Net cash provided by (used in) financing activities |                                
|                                                    |                                
|Net decrease in cash                                |                                
|                                                    |                                
|Cash, beginning of period                           |                                
|                                                    |                                
|Cash, end of period                                 |                                
|                                                    |                                
|Supplemental Schedule of Non-Cash Investing and     |                                
|Financing Activities                                |                                
|Exchange of note payable for                        |                                
|accounts payable                                    |                                
|                                                    |                                
|                                                    |                                

|See accompanying notes.



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

|NETWORD, INC. AND
SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2002(Unaudited)



Note 1  Basis of
Presentation


The
accompanying consolidated financial statements include the accounts of Netword, Inc.
(Netword) and its wholly-owned subsidiaries, Rabbit Media, Inc.
(Rabbit) and Webspeak Acquisition Corp. (Webspeak), (collectively,
the Company, us, we, or our). All
significant intercompany balances and transactions have been eliminated in consolidation.


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.
Consolidated operating results for the nine month period ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the full year ended
December 31, 2002, These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes thereto included in
our Annual Report on Form 10-KSB for the year ended December 31, 2001.


Note 2  Investment in and
Proposed Merger with Home Director, Inc.


In
February 2002, the Company invested $270,000 in Home Director, Inc. (HDI),
with a view to a possible merger of the two companies. For its investment, the Company
received a $270,000 Senior Exchangeable Note (Note) and warrants
(Warrants) to purchase up to 385,714 shares of HDIs common stock. The
Note which bears interest at 8% per annum was exchanged in May, 2002 for HDIs
convertible note due May 8, 2003. The Warrants are exercisable at a price of $0.70 per
share, commencing August 6, 2002 and expire on February 5, 2005. The number of shares
subject to the Warrants and the exercise price for such shares are adjusted to give effect
to a 1-for-10 reverse split of Home Directors common stock on May 3, 2002.


Subsequent
to the investment in HDI, the Company, HDI and Webspeak entered into an Agreement and Plan
of Merger dated as of April 9, 2002, as amended on July 31, 2002 and October 25, 2002 (the
Merger Agreement), providing for the merger of Webspeak with and into HDI.
Pursuant to the terms of the Merger Agreement, upon the merger, the stockholders of HDI
will receive shares of Netword common stock in exchange for their shares of HDI stock and
HDI will become a wholly-owned subsidiary of Netword. Based upon the formula contained in
the Merger Agreement, we estimate that the shares held by our stockholders immediately
prior to the merger will represent approximately 15% of our common stock outstanding
immediately after the merger. The merger is subject to various conditions set forth in the
Merger Agreement. If the merger is completed, the Note and the Warrants held by the
Company will be canceled.


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

|Although
Netword will acquire Home Director in the merger, Home Directors stockholders will
hold a majority of the voting interests in Netword upon completion of the merger.
Accordingly, for accounting purposes, the acquisition will be a reverse
acquisition, and Home Director will be the accounting acquirer.



Note 3 
Restructuring of Operations


During
the quarter ended March 31, 2002, the Company terminated all of its employees and retained
consultants to maintain the Netword System. These actions resulted in a significant
reduction of overhead and effectively terminated the Companys marketing and sales
efforts. The Company has offered the Netword System, the Rabbit Media Player and their
technologies and related intellectual property for sale. As of November 11, 2002, there
were no prospects of a sale of any of these assets and the Netword System was being
maintained at a remote site by consultants.


To
further reduce overhead, the Company negotiated the termination of its lease of the
Gaithersburg facility on May 31, 2002 and vacated that facility on that date. At March 31,
2002 the Company had established a $15,000 reserve for expenses related to its
restructuring, including the termination of its Gaithersburg lease. At September 30, 2002,
approximately $3,000, representing the write off of the net book value of furniture and
fixtures and approximately $5,200 representing the lease termination fee, had been charged
to the reserve. The unused balance of the reserve of approximately $6,800 was reversed in
the quarter ended September 30, 2002.



Note 4  Option
Repricing and Exercise of Options


On
January 2, 2002, the Companys Board of Directors reduced the exercise price of
options to purchase 2,173,537 shares of Netword common stock from $0.1666 per share to
$0.125 per share, the fair market value of those shares on that date, as represented by
their closing price. Thereafter, options to purchase 1,662,206 shares of Netword common
stock subject to the repriced options were exercised, including options to purchase
1,526,072 shares exercised by Companys officers and directors. In connection with
the exercise of the options, the Company received $207,776. The price paid for the shares
of the Companys common stock upon exercise of the options approximated the market
price of the Companys common stock at that time; accordingly, no compensation cost
was recorded. On February 17, 2002, the remaining repriced options expired unexercised.



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

|Note 5  Write-off
of Loan Payable


In
May 1997, the Companys predecessor offered its members rights to subscribe to their
pro rata share of a $500,000 loan (the 97 Loan), together with five year
warrants exercisable by application of all or a portion of the loan. The 97 Loan was fully
subscribed; however, certain subscribers did not fully fund their subscriptions to that
loan and, accordingly, did not qualify for exercise of their warrants. $33,027 of partial
subscription payments have been deemed canceled as a result of the subscriber defaults and
were written off in the quarter ended September 30, 2002.



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

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




Third Quarter 2002
Overview



Operations


During
the quarter ended September 30, 2002, we filed a registration statement on Form S-4 under
the Securities Act to register the shares of our common stock to be issued pursuant to our
Merger Agreement with Home Director, Inc. and we continued discussions with Home Director
regarding the completion of the proposed merger (see Relationship with Home Director,
below). We continued to maintain the Netword System at a remote site through consultants.



Relationship
with Home Director


In
February 2002, we invested $270,000 in Home Director with a view to a possible merger of
the two companies. For our investment, we received a one-year secured promissory note in
the principal amount of $270,000 and warrants to purchase Home Director common stock. If
we complete the merger, the Note and Warrants will be retired and canceled without
payment. Home Director is a private company that designs, manufactures, sells and installs
integrated home networking solutions that connect home security systems, audio systems,
video services, televisions, utilities, PCs and the Internet. For a further
description of Home Director and its business, please refer to the prospectus, dated
October 29, 2002, included in our registration statement on Form S-4 (file no. 333-97615).
The prospectus is also an information statement to our stockholders and a proxy statement
to Home Directors stockholders.


Subsequent
to our investment in Home Director, in April 2002, we and our newly formed, wholly-owned
subsidiary, Webspeak Acquisition Corp., entered into an Agreement and Plan of Merger with
Home Director. The merger agreement provides for the merger of Webspeak with and into Home
Director. Upon the completion of the merger, Home Directors stockholders would
receive shares of our common stock in exchange for their shares of Home Director stock,
Home Director would become a wholly-owned subsidiary of Netword, we would change our name
to Home Director, Inc., members of Home Directors board of directors would become a
majority of our board of directors, and we would continue Home Directors current
business as our primary business activity. Based upon the formula contained in the merger
agreement, we estimate that the shares of common stock held by our stockholders
immediately before the merger would represent approximately 15% of our common stock
outstanding immediately after the merger.


Although
Netword will acquire Home Director in the merger, Home Directors stockholders will
hold a majority of the voting interests in Netword upon completion of the merger.
Accordingly, for accounting purposes, the acquisition will be a reverse
acquisition, and Home Director will be the accounting acquirer.



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

|The
merger is subject to the various conditions set forth in the merger agreement, including
approval by Home Directors stockholders, completion of a one-for-40 reverse split of
our common stock immediately before the merger, our having adjusted cash (net of accrued
expenses and liabilities other than those related to our transactions with Home Director)
of at least $800,000 at the time of the merger, and registration under the Securities Act
of our common stock to be issued in the merger. Effective as of September 27, 2002, we
obtained the written consent of holders of a majority of our outstanding stock approving
the reverse split, an increase in the number of shares of our common stock available for
options under our stock option plan after the reverse split, and other changes to our
certificate of incorporation to be effective immediately after the merger with Home
Director, including, without limitation, a change of our name to Home Director, Inc.
and an increase in the number of authorized shares of our preferred stock from 10,000 to 2,000,000 shares.
We expect to have sufficient cash on hand to satisfy the cash availability
condition. The required registration of our common stock became effective on October 29,
2002. Home Directors stockholders meeting to approve the merger agreement is
scheduled for November 22, 2002. If the merger agreement is approved by Home
Directors stockholders and the other conditions of the merger are satisfied, we
would expect the merger to become effective late in November 2002.


For
a discussion of possible consequences of our failure to complete the merger with Home
Director, please refer to the section entitled Risk Factors contained in the
prospectus. Please also refer to the prospectus for a full discussion of the terms of the
merger, including various amendments to our certificate of incorporation and bylaws that
are to become effective at the time of the merger.


Results of Operations for the quarter
ended September 30, 2002 compared to the quarter ended September 30, 2001


Selling,
general and administrative expense was $164,545 for the quarter ended September 30, 2002,
compared to selling, general and administrative expense of $334,949 for the same period
last year, a decrease of $170,404. The decrease was primarily due to the restructuring of
our operations. As a result of the restructuring, compensation cost for the quarter ended
September 30, 2002 was $42,000, compared to compensation cost of $232,500 for the same
period last year. There were no marketing and advertising costs for the quarter ended
September 30, 2002, compared to $7,700 for the same period last year.


In
connection with our restructuring, we negotiated the termination of our lease of the
Gaithersburg facility on May 31, 2002 and vacated that facility on that date. At March 31,
2002 we had established a $15,000 reserve for expenses related to the restructuring,
including the termination of our Gaithersburg lease. At September 30, 2002, approximately
$3,000, representing the write off of the net book value of furniture and fixtures and
approximately $5,200 representing the lease termination fee, had been charged to the
reserve. The balance of approximately $6,800 was reversed in the quarter ended September
30, 2002.



9
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|During
the quarter ended September 30, 2002, we wrote off $33,027 of notes payable for
uncompleted subscriptions to the 97 Loan which we deemed canceled as a result of
subscriber defaults (see Note 5 of the Notes to our Consolidated Financial Statements).


Results of Operations for the nine
months ended September 30, 2002 compared to the nine months ended September 30, 2001


Selling,
general and administrative expense was $484,552 for the nine months ended September 30,
2002, compared to $1,330,092 for the same period last year, a decrease of $845,540. The
decrease was primarily due to the restructuring of our operations. As a result of the
restructuring, compensation costs decreased to $184,800 for the nine months ended
September 30, 2002, compared to $703,000 for the same period last year. There were no
marketing and advertising costs for the nine months ended September 30, 2002, compared to
$396,100 for the same period last year.


During
the nine months ended September 30, 2002, we wrote off $33,027 of notes payable which we
deemed canceled as a result of defaults by subscribers to the 97 Loan.



Liquidity and Capital
Resources


Our
cash balance at September 30, 2002 was $1,016,354. Our net cash used in operations during
the nine months ended September 30, 2002 was $305,270, which includes $142,800 of
non-recurring compensation costs. As described above, during this period we used $270,000
to make an investment in Home Director, received proceeds of $207,776 in connection with
the exercise of options to purchase 1,662,206 shares of our common stock and we repaid a
note in the amount of $23,303.


One
of the conditions of our merger with Home Director, is that we have adjusted cash (net of
accrued expenses and liabilities other than those related to our transactions with Home
Director) of at least $800,000 at the time of the merger. Based on our current financial
statements and current cash requirements, we expect to have sufficient cash to satisfy
this condition of the merger. If we require additional cash to consummate the merger or,
if the merger is not accomplished and we require cash for the purpose of acquiring other
businesses, we may raise cash through the private sale of our securities. Such sales may
include sales to affiliates and others at prices prevailing in the market and could result
in substantial dilution to our existing stockholders. There is no assurance that we will
be able to obtain any additional cash that may be necessary to consummate the merger or
any other acquisition.


If
we consummate the merger with Home Director, we may require additional capital to fund our
operations (which would be the operations presently conducted by Home Director). The
amount of capital we might require following the merger would depend on a variety of
factors not now determinable. Certain information concerning Home Directors
financing is set forth in the prospectus.



10
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|If
the merger with Home Director or an acquisition of another business is not consummated, it
is unlikely that we will require additional funds during the next 12 months. However, in
such event, we will continue to incur additional expenses related to our public status,
including accounting and audit fees, SEC filing fees, transfer agent costs and legal fees.



11
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 3. Controls and
Procedures


Under
the supervision and with the participation of our management, including our chief
executive officer and chief financial officer, we have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures within 90 days of the
filing of this report, and, based on their evaluation, our chief executive officer and
chief financial officer have concluded that these controls and procedures are effective.
There were no significant changes in our internal controls or in other factors that
significantly affect these controls subsequent to the date of their evaluation.



Forward Looking Statements


Some of the statements in this Report
on Form 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 forward-looking statements contained in this report 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 report, our most recent report on Form
10-KSB and our registration statement on Form S-4 which became effective on October 29,
2002.


12
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II  OTHER INFORMATION


Item 1. Legal Proceedings


None


Item 2. Changes in Securities


None


Item 3. Defaults upon
Senior Securities

None

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


Effective
as of September 27, 2002, holders of 12,410,305 shares of our outstanding common stock (approximately 59.1%) consented
in writing to (1) a one-for-40 reverse split of our common stock to be effected
immediately before the merger with Home Director, (2) certain other amendments to our
certificate of incorporation and bylaws to be effective immediately after the merger, including,
without limitation, a change of our name to Home Director, Inc. and
an increase in the number of authorized shares of our preferred stock from
10,000 to 2,000,000 shares. and (3) an increase in the number of shares of common stock available for issuance under our
stock option plan effective immediately after the merger. An information statement (which
also serves as a proxy statement and prospectus for certain purposes), dated October 29,
2002, describing the actions consented to, is included in our registration statement on
Form S-4 and was mailed to our stockholders on or about October 31, 2002.

Item 5. Other Information



None

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

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

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

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

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

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

| |  |  |  | 10.1 |  | Agreement and
Plan of Merger, dated as of April 9, 2002, by and among Netword, Inc., Webspeak
Acquisition Corp., and Home Director, Inc. (2)
| |  |  |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|13
|--

|
|

| |  |  |  |  |  | Amendment No. 1 to
Agreement and Plan of Merger, dated as of July 31, 2002 (3)
| |  |  |  |  |  | ------------------------------------------------------------------------------

| |  |  |  |  |  | Amendment No. 2 to Agreement
and Plan of Merger, dated as of October 25, 2002 (3)
| |  |  |  |  |  | ---------------------------------------------------------------------------------

| |  |  |  | 99.1 |  | Certification of Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(4)
| |  |  |  | ---- |  | ------------------------------------------------------------------------------------------------------

| |  |  |  | 99.2 |  | Certification of Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(4)
| |  |  |  | ---- |  | ------------------------------------------------------------------------------------------------------

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

| | (2)
Filed as an exhibit to Networds Report on Form 8-K filed on April 12, 2002
and incorporated herein by reference.
| | ---------------------------------------------------------------------------------------------------------------------

| | (3)
Filed as an exhibit to Networds Registration Statement on Form S-4 (file
no. 333-97615), effective October 29, 2002, and incorporated herein by
reference.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4)
Filed herewith.
| | -------------------

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

| | None.
| | -----

|14
|--

|SIGNATURES


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



Dated: November 11, 2002
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Netword, Inc.
(Registrant)
By: /s/ Michael L. Wise
      
Name: Michael L. Wise
Title: President and Chief Executive Officer
| |  | ------------------------------------------------------------------------------------------------------------------------------------------

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

|15
|--

|CERTIFICATIONS


I, Michael L. Wise, certify that:
|--------------------------------------------------

|1. |  | I have reviewed this quarterly report on Form 10-QSB of Netword, Inc. (the
          Company).
|-- |  | ------------------------------------------------------------------------------------------------

|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
          statement of a material fact or omit to state a material fact necessary to make
          the statements made, in light of the circumstances under which such statements
          were made, not misleading with respect to the period covered by this quarterly
          report.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. |  | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | evaluated
the effectiveness of the registrants disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date); and
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) |  | presented in
this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of the registrants board of directors (or persons performing the
          equivalent functions):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | all
significant deficiencies in the design or operation of internal controls which
could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weakness in internal controls; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
|--

|
|

|b) |  | any
fraud, whether or not material, that involves management or other employees  who
have a significant role in the registrants internal controls; and
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The
registrants other certifying officers and I have indicated in this quarterly report
whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective action with regard to significant
deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:  November 11, 2002 |  | /s/ Michael L. Wise
      
      Michael L. Wise      President & CEO
|------------------------ |  | -----------------------------------------------------------------------------------

I, Murray M. Rubin, certify that:

|1. |  | I have reviewed this quarterly report on Form 10-QSB of Netword, Inc. (the
          Company).
|-- |  | ------------------------------------------------------------------------------------------------

|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
          statement of a material fact or omit to state a material fact necessary to make
          the statements made, in light of the circumstances under which such statements
          were made, not misleading with respect to the period covered by this quarterly
          report.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. |  | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | designed
such disclosure controls and procedures to ensure that material  information
relating to the registrant, including its consolidated subsidiaries,   is made
known to us by others within those entities, particularly during the   period in
which this quarterly report is being prepared;
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--

|
|

|b) |  | evaluated
the effectiveness of the registrants disclosure controls and  procedures
as of a date within 90 days prior to the filing date of this  quarterly report
(the Evaluation Date); and
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) |  | presented
in this quarterly report our conclusions about the effectiveness of  the
disclosure controls and procedures based on our evaluation as of the  Evaluation
Date;
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of the registrants board of directors (or persons performing the
          equivalent functions):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | all
significant deficiencies in the design or operation of internal controls which
could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weakness in internal controls; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | any
fraud, whether or not material, that involves management or other employees  who
have a significant role in the registrants internal controls; and
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The registrants other certifying officers and I have indicated in this
               quarterly report whether or not there were significant changes in internal
               controls or in other factors that could significantly affect internal controls
               subsequent to the date of our most recent evaluation, including any corrective
               action with regard to significant deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:  November 11, 2002 |  | /s/ Murray M. Rubin
      
      Murray M. Rubin      Treasurer and CFO
|------------------------ |  | -------------------------------------------------------------------------------------

|18
|--