UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                Quarterly Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


                 For the quarterly period ended: September 30, 2007


                          Commission File No. 333-86873
                                     -------

                               HOME DIRECTOR, INC
                             ----------------------
        (Exact name of small business issuer as specified in its charter)


                                    DELAWARE
                                    --------
         (State or other jurisdiction of incorporation or organization)


                                   52-2143430
                                   ----------
                     (I.R.S. Employer Identification Number)


                           900 East Hamilton Avenue #550
                               Campbell, CA 95008
                                 (408) 559-3100
                                 --------------
                          (Address and telephone number
                        of principal executives offices)


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

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one).

Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [_]  No [X]

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

The Company had 14,067,105 shares of common stock outstanding as of October 31,
2007

Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No


<PAGE>





INDEX

PART I - FINANCIAL INFORMATION


Item 1. FINANCIAL INFORMATION


        Consolidated Balance Sheet - September 30, 2007(unaudited)..........  3
        Consolidated Statements of Operations for the three
            months ended September 30, 2007 and 2006(unaudited).............  4
        Consolidated Statements of Operations for the nine
            months ended September 30, 2007 and 2006(unaudited).............  5
        Consolidated Statement of Stockholders' Equity (Deficit) for the nine
            months ended September 30, 2007 and the year ended
                  December 31, 2006 (unaudited).............................. 6
        Consolidated Statements of Cash Flows for the nine months
            ended September 30, 2007 and 2006 (unaudited) ..................  7
        Notes to Consolidated Financial Statements (Unaudited)..............  8

Item 2. Management's Discussion and Analysis or Plan of Operation .......... 20

Item 3. Controls and Procedures ...........................................  23


PART II - OTHER INFORMATION ...............................................  23


Item 2. Unregistered Sales of Securities and Use of Proceeds...............  23

Item 6. Exhibits...........................................................  24


Signatures ................................................................  25


                                        2

<PAGE>




                              EXPLANATORY STATEMENT


On September 28, 2005, Home Director, Inc. (the "Company" or "HDI") and its
direct subsidiary Home Director Technologies, Inc. ("HDT") and its indirect
subsidiary Digital Interiors, Inc. ("DII")(collectively, "the Companies") filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code")in U.S. Bankruptcy Court for the Northern District
of California, Oakland Division (the Bankruptcy Court") (Case No. 05-45812,
05-45814 and 05-45815, respectively). On June 26, 2006, the Companies filed with
the Bankruptcy Court a Second Amended Joint Plan of Reorganization, dated June
26, 2006 and Second Amended Disclosure Statement, dated June 26, 2006 (the
"Disclosure Statement"). The Bankruptcy Court approved the Disclosure Statement
by that certain Order Approving Disclosure Statement, Fixing Time for Filing
Acceptances or Rejections of Plan and Setting Hearing on Confirmation entered on
June 27, 2006. Thereafter, on October 9, 2006, the Companies filed a Second
Amended Joint Plan of Reorganization dated June 26, 2006 (As
Modified)("Reorganization Plan"). On October 12, 2006, the Bankruptcy Court
entered an Order Confirming Chapter 11 Plan and the Reorganization Plan became
effective on October 23, 2006 (the "Effective Date".) For accounting purposes,
the effective date is determined to be October 31, 2006. In the consolidated
financial statements provided herein, all results for periods prior to and
including October 31, 2006 are referred to as those of the "Predecessor Company"
and all results for periods including and subsequent to November 1, 2006 are
referred to as those of the "Reorganized Company." Due to the effects of the
"fresh start" accounting, results for the Predecessor Company and the
Reorganized Company are not comparable (see Note 1, "Organization and Summary of
Significant Accounting Policies - Basis of Presentation," of the notes to the
consolidated financial statements.)

A more detailed description of the bankruptcy filing and its effect on the
Company is set forth in our Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2006, filed with the Securities Exchange Commission (the
"SEC").

References in this report to the "Company", "Home Director" and "we" or similar
or related terms refer to Home Director, Inc. and its wholly owned subsidiaries
together, unless the context of such references requires otherwise.




                                       2A
<PAGE>



                               HOME DIRECTOR, INC.
                           Consolidated Balance Sheet
                         September 30, 2007 (Unaudited)

                                                                    Reorganized
                                                                      Company
                                                                   September 30,
                                                                        2007
                                                                    -----------
                                     ASSETS
Current assets:
Cash and cash equivalents                                           $   137,925
Accounts receivable                                                     343,940
Inventory                                                               398,492
Other current assets                                                    452,276
                                                                    -----------
                Total current assets                                  1,332,633

Property and equipment, net                                              79,445
Goodwill and other intangible assets                                  4,001,027
Other long-term assets                                                   80,656
                                                                    -----------
                                                                    $ 5,493,761
                                                                    ===========

                  LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses                               $ 3,744,870
Bankruptcy obligations - short term                                     491,130
Convertible notes payable                                             4,026,860
                                                                    -----------
             Total current liabilities                                8,262,860
Bankruptcy obligations - long term                                    1,508,652
                                                                    -----------
                 Total liabilities                                    9,771,512
                                                                    -----------
Commitments and contingencies (Note 13) Shareholders' equity:
Preferred stock, $0.01 par value, Authorized                                 --
2,000,000 as of September 30, 2007; Issued and
outstanding - none
Common stock, $0.01 par value,  Authorized                               72,500
40,000,000; Issued and outstanding 7,250,000 as of
September 30, 2007
Common stock payable - 6,817,105 shares, as of                           68,171
September 30, 2007
Additional paid in capital                                            5,231,468
Accumulated deficit                                                  (9,649,890)
                                                                    -----------
        Total shareholders' equity (deficit)                         (4,277,751)
                                                                    -----------
                                                                    $ 5,493,761
                                                                    ===========

                             See accompanying notes.
                                        3







<PAGE>
                               HOME DIRECTOR, INC.
                      Consolidated Statements of Operations
       For The Three Months Ended September 30, 2007 (Reorganized Company) and
     The Three Months Ended September 30, 2006 (Predecessor Company) (Unaudited)

                                                   Reorganized      Predecessor
                                                     Company          Company
                                                      July 1 -        July 1 -
                                                   September 30,   September 30,
                                                      2007             2006
                                                   ------------    ------------
Revenue                                            $    870,215    $     26,262
Costs and expenses:
Cost of sales                                           665,161          17,426
General and administrative                              869,565         313,552
Sales and marketing                                     451,006         121,858
Research and development                                194,440         195,000
Depreciation and amortization                            12,626             570
                                                   ------------    ------------
Total costs and expenses                              2,192,798         648,406
                                                   ------------    ------------

Loss from operations                                 (1,322,582)       (622,144)
Other income (expense):
Interest and other income                                 5,269           2,626
Interest and other expense                             (192,234)        (29,838)
                                                   ------------    ------------
Net other income (expense)                             (186,965)        (27,212)
                                                   ------------    ------------

Net loss                                           $ (1,509,547)   $   (649,356)
                                                   ============    ============

Net loss per common share - basic and diluted:
Shares used in computing basic and diluted
net loss per common share                            14,067,105*     16,035,715
                                                   ============    ============

Loss per share                                     $      (0.11)   $      (0.04)
                                                   ============    ============

* Includes 6,817,105 shares which are not issued but payable as of September 30,
2007(see Note 2)



                             See accompanying notes.
                                        4

<PAGE>


<PAGE>



                               HOME DIRECTOR, INC.
                      Consolidated Statements of Operations
       For The Nine Months Ended September 30, 2007 (Reorganized Company) and
     The Nine Months Ended September 30, 2006 (Predecessor Company) (Unaudited)

                                                    Reorganized     Predecessor
                                                      Company         Company
                                                     January 1 -     January 1 -
                                                    September 30,  September 30,
                                                       2007            2006
                                                   ------------    ------------
Revenue                                            $  1,588,929    $     38,753
Costs and expenses:
Cost of sales                                         1,351,646          23,062
General and administrative                            4,601,252       1,010,518
Sales and marketing                                   1,329,981         364,051
Research and development                                656,384         520,000
Depreciation and amortization                            34,778           1,709
                                                   ------------    ------------
Total costs and expenses                              7,974,041       1,919,340
                                                   ------------    ------------

Loss from operations                                 (6,385,112)     (1,880,587)
Other income (expense):
Interest and other income                                 6,064          40,586
Interest and other expense                             (367,524)        (67,720)
                                                   ------------    ------------
Net other income (expense)                             (361,460)        (27,134)
                                                   ------------    ------------

Net loss                                           $ (6,746,572)   $ (1,907,721)
                                                   ============    ============

Net loss per common share - basic and diluted:
Shares used in computing basic and diluted
net loss per common share                            13,822,776*     16,035,715
                                                   ============    ============

Loss per share                                     $      (0.49)   $      (0.12)
                                                   ============    ============

* Includes 6,817,105 shares which are not issued but payable as of September 30,
2007(see Note 2)



                             See accompanying notes.
                                        5


<PAGE>
<TABLE>
<CAPTION>

                               HOME DIRECTOR, INC.
      Consolidated Statements of Changes in Shareholders' Equity (Deficit)
                    For The Year Ended December 31, 2006 and
                The Nine Months Ended September 30, 2007 (Unaudited)

                                                Common      Stock    Additional
                                                ------      -----      Paid In      Accumulated    Shareholders'
Predecessor Company                             Shares     Amount      Capital        Deficit         Equity
-------------------                          -----------  ---------  -----------   -------------   ------------
<S>                                           <C>          <C>       <C>           <C>             <C>
Balance at December 31, 2005                  16,035,715   $160,357  $82,899,887   $(90,142,129)   $(7,081,885)

Retirement of all old common stock in       (16,035,715)  (160,357)      160,357              --             --
connection with reorganization
Fresh start accounting adjustments                    --         --  (91,416,360)      91,835,972        419,612
including elimination of accumulated
deficit
Net loss                                              --         --           --     (1,693,843)    (1,693,843)

Reorganized Company
-------------------
Issuance of new common stock in connection     7,250,000     72,500    5,800,000              --      5,872,500
with reorganization
Shares of common stock payable as employee     2,416,667     24,167    1,280,833              --      1,305,000
compensation*
Shares of common stock payable as consideration  600,000      6,000      318,000              --        324,000
for services*
Expenses related to granting of options to            --         --       33,429              --         33,429
purchase common stock
Net loss                                              --         --           --     (2,903,318)    (2,903,318)
                                              ----------   --------   ----------     -----------    -----------
Balance at December 31, 2006                  10,266,667    102,667    (923,754)     (2,903,318)    (3,724,405)

Shares of common stock payable in connection   1,750,000     17,500    1,400,000              --     1,417,500
with acquisition of Destiny Networks, Inc.*
Shares of common stock payable in connection   2,050,438     20,504    2,029,934              --     2,050,438
with acquisition of Novus Technologies,
Inc.*
Expenses related to granting of options and           --         --    2,425,288              --     2,425,288
and warrants purchase common stock
Proceeds from the sale of warrants to
Purchase common stock                                 --         --      300,000              --       300,000
Net loss                                              --         --           --     (6,746,572)    (6,746,572)
                                              ----------   --------   ----------    ------------   ------------
Balance at September 30, 2007                 14,067,105   $140,671   $5,231,468    $(9,649,890)   $(4,277,751)
                                              ==========   ========   ==========    ============   ============
</TABLE>

* The certificates for these shares of common stock are not issued as of
September 30, 2007 (see Note 2)



                             See accompanying notes.
                                        6

<PAGE>
<TABLE>
<CAPTION>
                               HOME DIRECTOR, INC.
                      Consolidated Statements of Cash Flows
       For The Nine Months Ended September 30, 2007 (Reorganized Company) and
     The Nine Months Ended September 30, 2006 (Predecessor Company) (Unaudited)

                                                       Reorganized    Predecessor
                                                         Company        Company
                                                        January 1 -    January 1 -
                                                      September 30,   September 30,
                                                          2007           2006
                                                       -----------    -----------
Cash flows from operating activities:
<S>                                                    <C>            <C>
  Net loss                                             $(6,746,572)   $(1,907,721)
  Adjustments to reconcile net loss to net
cash used in operating activities:
    Change to allowance for doubtful accounts               (3,550)            --
    Change to inventory reserve                            (47,043)            --
    Change to deferred rent                                 53,617             --
    Depreciation and amortization                           34,778          1,709
    Expense from grant of stock options                  2,425,288             --
    Interest accrued on convertible notes                  198,860             --
   Changes in operating assets and liabilities:
    Accounts receivable                                    (56,660)        72,062
    Inventories                                           (102,951)             --
    Other assets                                          (283,659)        14,777
    Accounts payable and accrued expenses                1,170,875      1,081,670
    Bankruptcy obligations (short and long
term)                                                     (360,756)            --
                                                       -----------    -----------

      Net cash used in operating activities             (3,717,773)      (737,503)
                                                       -----------    -----------
 Cash flows from investing activities:
   Acquisitions of businesses                              (17,156)            --
   Purchases of property and equipment                      (7,968)            --
                                                       -----------    -----------
    Net cash used in investing activities                  (25,124)            --
                                                       -----------    -----------
 Cash flows from financing activities:
   Net proceeds from Debtor in Possession lender                --        732,400
   Proceeds from convertible notes                       3,578,000             --
   Proceeds from sale of warrants                          300,000             --
                                                       -----------    -----------
     Net cash provided by financing activities           3,878,000        732,400
                                                       -----------    -----------
Net increase (decrease) in cash and cash equivalents       135,103         (5,103)

Cash and cash equivalents at beginning of period             2,822          8,853
                                                       -----------    -----------
Cash and cash equivalents at end of period             $   137,925    $     3,750
                                                       ===========    ===========

Supplemental Disclosure of Cash Flow Information
Cash paid during the periods for:
  Interest                                             $   116,886    $        --
                                                       ===========    ===========
</TABLE>
                             See accompanying notes.
                                        7
<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   Organization and Summary of Significant Accounting Policies

Organization and Description of Business

The Company, which is headquartered in Campbell, California, commenced
operations in December 1999, subsequent to acquiring the assets of and assuming
certain liabilities of IBM Corporation's Home Director business unit. The
Company operates in a single industry, the provision of infrastructure
components for home networking, and is engaged in the design, sale and
manufacturing of home networking products for the new home construction market.

Basis of Presentation

The accompanying unaudited consolidated financial statements of Home Director,
Inc. (the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States of America applicable to interim
financial statements, and include the accounts of Home Director, Inc. and its
subsidiaries. In the opinion of management, all adjustments that are necessary
for a fair and comparable presentation have been included. All material
intercompany balances and transactions have been eliminated. The preparation of
consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates. The
results for interim periods are not necessarily indicative of results that may
be expected for any other interim period or for the full year. The unaudited
consolidated financial statements should be read in conjunction with the
December 31, 2006 consolidated financial statements and notes thereto included
in the Company's 2006 Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission.

In September 2005, the Company filed voluntary petitions for reorganization
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Company's
Reorganization Plan was confirmed on October 12, 2006 and became effective on
the Effective Date. For accounting purposes, the Company used an effective date
of October 31, 2006. References in these financial statements to Predecessor
Company refer to the Company prior to and including October 31, 2006. References
to Reorganized Company refer to the Company subsequent to and including November
1, 2006, after giving effect to the cancellation of all outstanding securities
of the Predecessor Company and the issuance of new securities of the Reorganized
Company in accordance with the Reorganization Plan and implementation of "fresh
start" accounting.

Going Concern

The financial statements are prepared assuming that the Company will continue as
a going concern. The Company has incurred losses from operations of
approximately $6.7 million for the nine months ended September 30, 2007, and has
an accumulated deficit of approximately $9.6 million as of September 30, 2007.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. From December 2006 through September 2007, the Company raised
approximately $3.8 million in convertible notes, and completed acquisitions of
Destiny Networks, Inc. and Novus Technologies, Inc. as described in Note 2
"Significant Events". It is anticipated that these acquisitions, as well as
other potential acquisitions, growth in revenues and cost control measures will
enable the Company to meet its financial commitments and continue the
development of its products and services. The Company believes that it can raise
additional funds or long-term financing. In February 2007, the Company entered
an agreement to engage Trenwith Securities, LLC as the Company's exclusive
investment banking agent to arrange and negotiate a $25 million private
placement of securities to be issued by the Company

                                        8

<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNUADITED)


1.   Organization and Summary of Significant Accounting Policies (continued)

and any of its subsidiaries. However, there can be no assurances that this or
subsequent fundraising or long-term financing will be successful. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Significant Accounting Policies

Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
or remaining maturity of less than three months at the date of purchase to be
cash equivalents.

Inventories
Inventories consist of components and are stated at the lower of cost or market.
Cost is determined by the weighted average costing method. The following table
represents the major components of inventory at September 30, 2007.

                                                          September 30, 2007
                                                           --------------
Finished goods                                               $  23,235
Components                                                     422,300
Less:  Allowance for obsolescence                              (47,043)
                                                             ---------
                                                             $ 398,492
                                                             =========
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments, including
cash and cash equivalents, accounts receivable and accrued liabilities
approximate fair value because of their short maturities.

Credit Risk, Significant Customers and Concentrations
Financial instruments that potentially subject the Company to credit risk
consist principally of accounts receivable and cash investments. Receivables are
unsecured. The Company provides an allowance for doubtful accounts equal to the
estimated losses expected to be incurred in the collection of accounts
receivable. The balance of the allowance for doubtful accounts was $3,550 as of
September 30, 2007.

Cash and cash equivalents consist of cash deposits held at banks. Deposits held
at banks may at times exceed the amount of insurance provided. Generally, these
deposits may be redeemed upon demand and therefore bear minimal risk.

Three customers accounted for 47% of the accounts receivable balance as of
September 30, 2007. Three customers accounted for 48% of the revenue for the
three months ended September 30, 2007 and two customers accounted for 34% of the
revenue for nine months ended September 30, 2007. Three customers accounted for
91% of the revenue for the three months ended September 30, 2006 and two
customers accounted for 73% of the Predecessor Company revenue for the nine
months ended September 30, 2006.

The Company is not currently dependent upon any single supplier and it believes
that alternative supply sources would be readily available without material
delay in the event of the interruption of supplies from any of its current
sources.

Loss Per Share
In accordance with SFAS 128, basic and diluted net loss per common share has
been computed using the weighted-average number of shares of common stock
outstanding during

                                        9

<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.   Organization and Summary of Significant Accounting Policies (continued)

the periods reported. The Reorganized Company has 14,067,105 common shares
issued or issuable as of September 30, 2007 and the Predecessor Company had
16,035,715 common shares issued as of September 30, 2006, and those shares were
included in the basic and diluted net loss per common share calculations. The
shares outstanding at September 30, 2006were subsequently cancelled in
conjunction with the confirmation of our Reorganization Plan. The effect of
options to purchase the Reorganized or Predecessor Company's common stock
outstanding were not included in the computations of diluted net loss per share
because their effect would be antidilutive. The effect of warrants to purchase
the Reorganized or Predecessor Company's common stock outstanding were not
included in the computation of diluted net loss per share because their effect
would be antidilutive.

Revenue Recognition
The Company's revenues consist primarily of sales of home networking products.
The Company generally recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is reasonably assured. The Company accrues for sales returns,
rebate programs and warranty costs based on its experience.

Property and Equipment
Property and equipment is recorded at cost and depreciated using the
straight-line method over their estimated useful lives which generally range
from two to five years. Property and equipment can include certain equipment
under capital leases. When such capital leases exist, these items are
depreciated over the shorter of the lease period or the estimated useful life of
the equipment.

Intangible Assets
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," which is required to be applied for fiscal years beginning after
December 15, 2001. The Company adopted SFAS 142 as of January 1, 2002. SFAS 142
eliminates the amortization of goodwill and certain other intangible assets. It
also requires the Company to complete a test for impairment of these assets
annually. The Company has approximately $4.0 million of goodwill or other
intangible assets as of September 30, 2007.

Research and Development Costs
Research and development costs are charged to operations as incurred.

Advertising Costs
The Company expenses advertising costs (including trade show expenses) as
incurred. The amount of advertising expensed during the nine months ended
September 30, 2007 and 2006 was $44,697 and $0, respectively.

Shipping and handling costs
The Company's policy is to classify shipping and handling costs as part of cost
of goods sold in the statement of operations.

Income Taxes
The Company accounts for income taxes using the liability method which requires
the recognition of deferred tax assets or liabilities for the temporary
differences between the financial reporting and tax bases of the Company's
assets and liabilities and for tax carryforwards at enacted statutory rates in
effect for the years in which the differences are expected to reverse. The
effect on deferred taxes of a change in tax rates is


                                       10
<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.   Organization and Summary of Significant Accounting Policies (continued)

recognized in income in the period that includes the enactment date. In
addition, valuation allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized. The Company has not recorded
any income tax expense or benefit as a result of its available net operating
loss carryforwards, which are fully reserved by a valuation allowance.Accounting
for Stock-Based Compensation The Company has adopted the provisions of SFAS No.
123R, "Share-based Payment." See Note 9 for expenses related to options granted
during the three and nine months ended September 30, 2007.

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS 155 "Accounting for Certain Hybrid
Financial Instruments, an amendment of FASB Statements No. 133" and in February
2006, the FASB issued SFAS 155 "Accounting for Certain Hybrid Financial
Instruments, an amendment of FASB Statements No. 133 and 140. This Statement
amends FASB Statements No. 133, Accounting for Derivative Instruments and
Hedging Activities, and No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. This Statement resolves
issues addressed in Statement 133 Implementation Issue No. D1, Application of
statement 133 to Beneficial Interests in Securitized Financial Assets. This
Statement:

a.   Permits fair value re-measurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation;

b.   Clarifies which interest-only strips and principal-only strips are not
subject to the requirements of Statement 133;

c.   Establishes a requirement to evaluate interests in securitized financial
assets to identify interests that are freestanding derivatives or that are
hybrid financial instruments that contain an embedded derivative requiring
bifurcation;

d.   Clarifies that concentrations of credit risk in the form of subordination
are not embedded derivatives; and

e.   Amends Statement 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial
instrument.

This Statement is effective for all financial instruments acquired or issued
after the beginning of an entity's first fiscal year that begins after September
15, 2006. The fair value election provided for in paragraph 4 of this Statement
may also be applied upon adoption of this Statement for hybrid financial
instruments that had been bifurcated under paragraph 12 of Statement 133 prior
to the adoption of this Statement. Earlier adoption is permitted as of the
beginning of an entity's fiscal year, provided the entity has not yet issued
financial statements, including financial statements for any interim period for
that fiscal year. Provisions of this Statement may be applied to instruments
that an entity holds at the date of adoption on an instrument-by-instrument
basis. The Company has evaluated the effect of the adoption of SFAS 155 and does
not believe the impact will be significant to the Company's results of
operations or financial condition.

In March 2006, the FASB issued SFAS No. 156 ("FAS 156"), "Accounting for
Servicing of Financial Assets--An Amendment of FASB Statement No. 140." Among
other requirements, FAS 156 requires a company to recognize a servicing asset or
servicing liability when it undertakes an obligation to service a financial
asset by entering into a servicing contract under certain situations. Under FAS
156 an election can also be made for

                                       11
<PAGE>

                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   Organization and Summary of Significant Accounting Policies (continued)

subsequent fair value measurement of servicing assets and servicing liabilities
by class, thus simplifying the accounting and provide for income statement
recognition of potential offsetting changes in the fair value of servicing
assets, servicing liabilities and related derivative instruments. The Statement
will be effective beginning the first fiscal year that begins after September
15, 2006. The Company has evaluated the effect of the adoption of SFAS 156 and
does not believe the impact will be significant to the Company's results of
operations or financial condition.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value Measurements." The standard provides guidance for using fair
value to measure assets and liabilities. Under the standard, fair value refers
to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. The standard clarifies the principle that
fair value should be based on the assumptions market participants would use when
pricing the asset or liability. In support of this principle, the standard
establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. The Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. The Company is currently evaluating the Statement to
determine what impact, if any, it will have on the Company.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)" ("SFAS 158"). This statement requires balance sheet recognition of the
funded status, which is the difference between the fair value of plan assets and
the benefit obligation, of pension and postretirement benefit plans as a net
asset or liability, with an offsetting adjustment to the accumulated other
comprehensive income in shareholders' equity. In addition, the measurement date,
the date at which plan assets and the benefit obligation are measured, is
required to be the company's fiscal year end. The Company has evaluated the
effect of the adoption of SFAS 158 and does not believe the impact will be
significant to the Company's results of operations or financial condition.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-Including an amendment of FASB
Statement No. 115" ("SFAS 159"). SFAS 159 expands the use of fair value
accounting but does not affect existing standards which require assets or
liabilities to be carried at fair value. Under SFAS 159, a company may elect to
use fair value to measure accounts and loans receivable, available-for-sale and
held-to-maturity securities, equity method investments, accounts payable,
guarantees and issued debt. Other eligible items include firm commitments for
financial instruments that otherwise would not be recognized at inception and
non-cash warranty obligations where a warrantor is permitted to pay a third
party to provide the warranty goods or services. If the use of fair value is
elected, any upfront costs and fees related to the item must be recognized in
earnings and cannot be deferred, e.g., debt issue costs. The fair value election
is irrevocable and generally made on an instrument-by-instrument basis, even if
a company has similar instruments that it elects not to measure based on fair
value. At the adoption date, unrealized gains and losses on existing items for
which fair value has been elected are reported as a cumulative adjustment to
beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in
fair value are recognized in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007 and is required to be adopted by the Company
in the first quarter of fiscal 2009. The Company is currently is determining
whether fair value accounting is appropriate for any of its eligible items and
cannot estimate the impact, if any, which SFAS 159 will have on its consolidated
results of operations and financial condition.

                                       12


<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.   Significant Events

Acquisition of Destiny Networks, Inc.

On December 28, 2006, Home Director, Inc. acquired substantially all the assets
and assumed certain liabilities of Destiny Networks, Inc. ("Destiny") pursuant
to the terms of an Asset Purchase Agreement, dated December 28, 2006, among Home
Director, Destiny and Brent Bilger (the "Destiny APA".) For accounting purposes,
the acquisition was deemed to have occurred on January 1, 2007.

The purchase price for the acquired Destiny assets was (a) 1,750,000 shares of
Home Director unregistered common stock issuable upon completion of the
acquisition; (b) $5,000,000 payable upon the achievement of certain milestones
on or before December 31, 2007; (c) 1,500,000 shares of Home Director
unregistered common stock issuable upon the achievement of certain milestones on
or before December 31, 2007; and (d) 250,000 shares of Home Director
unregistered common stock issuable upon the one year anniversary of completion
of the acquisition, subject to withholding in satisfaction of any indemnity
obligations arising under the Destiny APA.

Pursuant to the Destiny APA, Home Director has agreed to assume certain
liabilities of Destiny, including, but not limited to, certain accounts payable
and obligations under assumed contracts.

Mark Stiving, the President of Home Director, is a director, executive officer
and stockholder of Destiny. Brent Bilger, the Chief Marketing Officer of Home
Director, is also a director, executive officer and stockholder of Destiny.

The shares of Home Director's common stock issuable under the Destiny APA will
not be registered under the Securities Act of 1933 (the "Act") and will be
issued in reliance on an exemption from registration under Section 4(2) of the
Act.

As a condition to the Destiny APA Mark Stiving and Brent Bilger entered into
non-competition agreements with the Company pursuant to which Messrs. Stiving
and Bilger will agree not to engage in the business of the Company other than
for and on behalf of the Company for a period of three years, subject to certain
exceptions.

Acquisition of Novus Technologies, Inc.

On March 7, 2007, Home Director, Inc. acquired substantially all the assets and
assumed certain liabilities of Novus Technologies, Inc. ("Novus") pursuant to
the terms of an Asset Purchase Agreement, dated February 28, 2007, among Home
Director, Novus and Mike Springer (the "Novus APA".) For accounting purposes,
the acquisition was deemed to have occurred on March 1, 2007.

The purchase price for the acquired Novus assets was (a) 1,260,558 shares of
Home Director unregistered common stock issuable upon completion of the
acquisition; (b) $628,883.85 convertible promissory note; and (c) 375,000 shares
of Home Director unregistered common stock issuable to an Escrow Fund upon
completion of the acquisition, subject to withholding in satisfaction of any
indemnity obligations arising under the Asset Purchase Agreement.

Pursuant to the Novus APA, Home Director has agreed to assume certain
liabilities of Novus, including, but not limited to, certain accounts payable
and obligations under assumed contracts. The Company also intends to issue
414,880 shares of its unregistered common stock to certain creditors of Novus as
consideration in exchange for elimination of the debt.

                                       13
<PAGE>

                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.   Significant Events (continued)

Mike Springer, the Vice President-Sales of Home Director, is also a director,
executive officer and stockholder of Novus.

The shares of Home Director's common stock issuable under the Agreement will not
be registered under the Securities Act of 1933 (the "Act") and will be issued in
reliance on an exemption from registration under Section 4(2) of the Act.

Also, as conditions to the consummation of the transactions contemplated by the
Novus APA: (i) the Company entered into non-competition agreements with Mr.
Springer pursuant to which Mr. Springer agreed not to engage in the business of
the Company for a period of three years, subject to certain terms and
conditions, and (ii) the Company entered into an employment agreement with Mr.
Springer pursuant to which Mr. Springer will be employed by the Company for a
period of two years.

Pro-Forma Comparative Statements of Operations

The following table presents Condensed Consolidated Statements of Operations as
if the acquisitions described above had taken place as of January 1, 2006:

                                             Reorganized       Predecessor
                                               Company           Company
                                               July 1 -          July 1 -
                                          September 30, 2007 September 30, 2006
                                            -------------     -------------
Revenues                                     $   870,215       $   588,228
Total operating expenses                       2,192,798         2,052,995
Net loss                                     $(1,509,547)      $(1,697,182)
Loss per share - basic and diluted           $     (0.11)      $     (0.11)

                                             Reorganized       Predecessor
                                               Company           Company
                                             January 1 -       January 1 -
                                         September 30, 2007 September 30, 2006
                                            -------------      -------------
Revenues                                     $ 1,832,907       $ 1,792,939
Total operating expenses                       8,239,212         5,663,468
Net loss                                     $(6,779,759)      $(4,440,013)
Loss per share - basic and diluted           $     (0.49)      $     (0.28)

Due to the Company's emergence from bankruptcy and the implementation of fresh
start reporting, the presentation is not meaningful for the periods presented
above (see Note 3).

Note 3 - Reorganization Plan and Fresh Start Reporting Adjustments

The Company adopted fresh start reporting as defined in SOP 90-7 upon its
emergence from bankruptcy on October 31, 2006. Under terms of the Reorganization
Plan, Home Director Investors LLC (the "DIP Lender") agreed to convert its debt
to equity and its assignees received a pro rata share of 90% of the new common
stock and holders of certain unsecured claims received a pro rata share of 10%
of the new common stock issued pursuant to the Reorganization Plan. Each holder
of old common stock had its shares retired and received no consideration.

                                       14


<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3 - Reorganization Plan and Fresh Start Reporting Adjustments (continued)

Bankruptcy obligations pursuant to the Reorganization Plan as of September 30,
2007, are summarized in the table below:

                                                    Bankruptcy     Bankruptcy
                                                   obligations-   obligations-
           Description                              short term     long term
           -----------                             -----------    -----------
General unsecured creditors                        $  150,000 *   $  150,000
Priority wage claims                                    1,538             --
Priority tax claims**                                 339,592      1,358,652
                                                   ----------     ----------
                                                   $  491,130     $1,508,652
                                                   ==========     ==========
* Due upon the first anniversary of the effective date of the Reorganization
Plan.
** To be paid over a five-year period from the effective date of the
Reorganization Plan with interest payable at 8% per annum. Interest expense for
the three and nine months ended September 30, 2007 were $37,350 and $113,087,
respectively.

Note 4 - Property and Equipment consists of:
                                                                 September 30,
                                                                      2007
                                                                   ---------
Machinery and equipment                                            $  81,686
Computer equipment and software                                       17,900
Furniture and fixtures                                                14,503
Vehicles                                                               1,944
Leasehold improvements                                                 1,167
                                                                   ---------
                                                                     117,200
Less:  Accumulated depreciation and amortization                     (37,755)
                                                                   ---------
                                                                   $  79,445
                                                                   =========

Depreciation and amortization expense were $12,626 and $570 for the three months
ended September 30, 2007 and 2006, and were $34,778 and $1,709 for the nine
months ended September 30, 2007 and 2006.

Note 5 - Other Current Assets consists of:

                                                                  September 30,
                                                                      2007
                                                                    --------
Prepaid acquisition costs                                           $387,638
Prepaid rent                                                          39,627
Prepaid insurance                                                     23,244
Other                                                                  1,767
                                                                    --------
                                                                    $452,276
                                                                    ========
                                       15


<PAGE>

                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Note 6 - Accounts Payable and Accrued Expenses consists of:

                                                                  September 30,
                                                                      2007
                                                                   ----------
Wages and other payroll related liabilities                        $1,680,254
Trade payables                                                      2,064,616
                                                                   ----------
                                                                   $3,744,870
                                                                   ==========


Note 7 - Convertible Notes Payable

In December 2006, the Company commenced a private placement of convertible notes
payable (the "Note"), and, through September 30, 2007, has generated gross
proceeds of $3,828,000 and issued warrants to purchase 3,730,500 of the
Company's common stock.

The Notes bear interest at 15% per annum, interest payable quarterly in cash,
or, at the option of the Maker, by adding the interest otherwise then due to the
principal owing under the Notes. The Notes provide for full repayment of
principal and interest ("Due Value") within one year of date of Notes unless
previously converted to equity securities of the Company. The Holder is entitled
to convert said Note upon the occurrence of a Conversion Triggering Event (a
private offering or series of related private offering of its equity securities
(collectively, an "Offering") consisting of or convertible or exercisable into
shares of common stock, for aggregate cash consideration of not less than $10
million) into that of securities that would have been issued and sold to the
Holder in the Offering as of the Conversion Date if the Holder had purchased
such shares in the Offering for the Due Value. The Company determined that the
Notes were issued without a beneficial conversion feature ("BCF"), thus, no
discount has been applied to reduce the carry-value of the Notes and no non-cash
amortization expense has been recorded related to a BCF.

The warrants are immediately exercisable at an exercise price of $1.00 per
shares and expire five years from issuance. The warrants do not meet the
requirements of and are not accounted for as permanent equity. The exercise
price of $1.00 is above the fair value of the underlying shares of common stock.
Thus, no discount has been applied to reduce the carrying-value of the Notes and
no non-cash amortization expense has been recorded related to the warrant.

During the three and nine months ended September 30, 2007, the Company recorded
approximately $133,000 and $199,000, respectively, in interest expense related
to the Notes, all of which was converted to principal.

Note 8 - Capital Stock

As of September 30, 2007, the Company has authorized 40.0 million shares of
common stock with a par value of $0.01. The Company also has authorized 2.0
million shares of preferred stock, which are undesignated, with a par value of
$0.01. During 2007, the Company shall issue 1,750,000 common shares
(unregistered), fair value $0.81 per share, as consideration for the acquisition
of substantially all the assets of Destiny (see Note 2); and, shall issue
2,050,438 common shares, fair value $1.00 per share, as consideration for the
acquisition of substantially all the assets of Novus and in exchange for the
retirement of certain debt of Novus (see Note 2.) During 2006, upon confirmation
of its Reorganization Plan, the Company cancelled all 16,035,715 shares of
issued and outstanding common stock; issued 7,250,000 common shares registered
pursuant

                                       16
<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8 - Capital Stock (continued)

to Section 1145 of the Code, fair value of $0.81 per share, to certain creditors
of the Company in exchange for compromise of their claims against the Company;
and, issued 2,417,667 common shares (unregistered), fair value of $0.54 per
share, to certain employees for services rendered to the Company. In addition,
the Company issued 600,000 common shares (unregistered), fair value of $0.54 per
share, as consideration for consulting and other services rendered to the
Company. There were no preferred stock transactions in 2007 or 2006.

Note 9 - Stock-Based Compensation

The Company has reserved a total of 2,500,000 shares of common stock for
issuance under its stock option plan (the "Plan"). The Plan permits the granting
of incentive stock options and non-qualified stock options. The terms of stock
option grants are determined by the Board of Directors. The Company's stock
options generally vest over three years and have a maximum life of ten years.
Separate from the Plan, the Company can grant stock options and warrants to
consultants as compensation for their consulting services.

The following summarizes the stock option activity for the nine months ended
September 30, 2007:
                                                                      Weighted-
                                                                       Average
                                                          Options     Exercise
                                                        Outstanding     Price
                                                        -----------   --------
Balance at December 31, 2006                              3,460,363   $   0.54
Granted (exercise price = fair value)                       272,727       1.00
Exercised                                                        --         --
Cancelled                                                  (114,750)      0.54
                                                        -----------   --------
Balance at September 30, 2007                             3,618,340   $   0.57
                                                        ===========   ========

The Company entered into an agreement with certain of its officers under which
such officers agreed not to exercise options and warrants to purchase an
aggregate of 1,118,340 shares of common stock until such time, if ever, as the
Company amends its certificate of incorporation to increase its shares of common
stock reserved for the Plan to a number that is sufficient to permit exercise of
all of its outstanding options to acquire shares of its common stock. In
exchange, the Company agreed to use its best efforts to seek stockholder
approval of such an amendment at its next annual stockholders meeting.

Selected information regarding stock options as of September 30, 2007 follows:

                                                Weighted-
                                 Number          Average      Number
                                   of           Remaining       of
                                 Options         Life in     Options
Exercise Prices                Remaining          Years     Exercisable
---------------                ---------        ---------   -----------
     $0.54                     3,354,613          9.08        1,029,597
     $1.00                       272,727          9.75           22,727
                               ---------                    -----------
                               3,618,340                      1,052,324
                               =========                    ===========

                                       17

<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 9 - Stock-Based Compensation (continued)

On October 24, 2006, options to purchase 3,440,363 shares of common stock at
$0.54 per share (the fair market value of which were $0.54 per share) were
granted which vest ratably over 36 months and expire ten years after grant. A
fair value of $0.118 per share was calculated using the Black-Scholes model
using volatility of zero and a risk free interest rate of 8.25%. All options are
assumed to be held to maturity as the option holders are primarily employees who
have remained with the Company throughout the Reorganization period. The total
expense related to these options is $407,321 and will be amortized ratably over
36 months. On January 9, 2007, warrants to purchase 50,000 shares of common
stock at $0.81 per share (the fair market value of which were $0.81 per share)
were granted which are fully vested upon grant and expire ten years after grant.
A fair value of $0.81 per share was calculated using the Black-Scholes model
using volatility of zero and a risk free interest rate of 8.25%. The total
expense related to these warrants is $40,500 and was recorded as compensation
expense in the period ended March 31, 2007. On April 13, 2007, warrants to
purchase 310,000 shares of common stock at $0.81 per share (the fair market
value of which were $0.81 per share) were granted which are fully vested upon
grant and expire ten years after grant. A fair value of $0.81 per share was
calculated using the Black-Scholes model using volatility of zero and a risk
free interest rate of 8.25%. The total expense related to these warrants is
$251,100 and was recorded as compensation expense in the period ended June 30,
2007. Also, on April 13, 2007, warrants to purchase 805,000 shares of common
stock at $1.00 per share (the fair market value of which were $1.00 per share)
were granted which are fully vested upon grant and expire ten years after grant.
A fair value of $1.00 per share was calculated using the Black-Scholes model
using volatility of zero and a risk free interest rate of 8.25%. The total
expense related to these warrants is $805,000 and was recorded as compensation
expense in the period ended June 30, 2007. On June 29, 2007, warrants to
purchase 1,210,000 shares of common stock at $1.00 per share (the fair market
value of which were $1.00 per share) were granted which are fully vested upon
grant and expire ten years after grant. A fair value of $1.00 per share was
calculated using the Black-Scholes model using volatility of zero and a risk
free interest rate of 8.25%. The total expense related to these warrants is
$1,210,000 and was recorded as compensation expense in the period ended June 30,
2007. In July 2007, options to purchase 272,727 shares of common stock at $1.00
per share (the fair value of which were $1.00 per share) were granted which vest
ratably over 36 months and expire ten years after grant. A fair value of $0.219
per share was calculated using the Black-Scholes model using volatility of zero
and a risk free interest rate of 8.25%. All options are assumed to be held to
maturity as the option holder is an executive expected to remain with the
Company for a relatively long time period. The total expense related to these
options is $59,795 and will be amortized ratably over 36 months. In total, the
Company recorded compensation expense of approximately $52,000 and $2,425,000
for the fair value of options granted to purchase the Company's common stock,
during the three and nine months ended September 30, 2007, respectively.

Note 10 - Common Stock Reserved for Future Issuance

At September 30, 2007, the Company had reserved a total of 15,193,840 of its
authorized 40.0 million shares of common stock for future issuance as follows:

Outstanding common stock warrants                                     11,075,500
Possible future issuance of common stock warrants                        500,000
Outstanding stock options                                              3,618,340
Possible future issuance under stock option plans                             --
                                                                      ----------
                                                                      15,193,840
                                                                      ==========

                                       18

<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 11 - Leases

Future minimum payments under operating leases at September 30, 2007 are as
follows:

      Year Ending                                      Operating Leases
      -----------                                      ----------------
          2007                                             $ 73,902
          2008                                              472,341
          2009                                              432,924
          2010                                              445,474
          2011                                              459,012
          2012                                              222,364
                                                          ---------
 Total minimum payments                                  $2,106,017
                                                          =========

Rent expense charged to operations during the three months ended September 30,
2007 and 2006 were approximately $164,000 and $20,000, and were approximately
$248,000 and $62,000 for the nine months ended September 30, 2007 and 2006.
There were no capital leases during the periods reported herein.

Note 12 - Related Party Transactions

In 2006, certain officers and directors (including the spouse of an officer)
purchased $200,000 aggregate units of Home Director Investors, LLC (the "DIP
Lender"), as part of a Secured Super Priority Debtor in Possession Credit
Agreement between the DIP Lender and the Company totaling approximately
$2,894,000. In October 2006, pursuant to the Reorganization Plan, the entire
$200,000 principal amount of the notes purchased by these officers and directors
was automatically converted into units for 329,933 shares of the Company's
registered common stock.

The Company issued 600,000 unregistered common shares, fair value of $0.54 per
share, as consideration for consulting and other services rendered to the
Company (see Note 8.) 250,000 of the unregistered common shares were issued to
A. Stone Douglass, as his sole compensation for services provided to the Company
in his capacity as Chief Reorganization Officer and Director of the Company.
350,000 of the unregistered common shares were issued to Brent Bilger (Chief
Marketing Officer of the Company), as assignee of Destiny Networks, Inc., as
consideration for R&D consulting services provided to the Company.

In 2007, certain officers and directors participated in the Company's private
placement of convertible notes payable (see Note 7), generating gross proceeds
of $738,000 and issuance of warrants to purchase 738,000 of the Company's common
stock.

Note 13 - Commitments and Contingencies

The Company is subject to various legal proceedings and claims, which have
arisen in the ordinary course of its business and have not been fully
adjudicated. It is not possible at this time for the Company to predict with any
certainty the outcome of such litigation. However, management is of the opinion,
based upon information presently available, that it is unlikely that any such
liability, to the extent not provided for through insurance or otherwise, would
be material in relation to the Company's consolidated financial position or
results of operations.

The Company has received written notice from a third party alleging breach of
contract and violation of trademark law in connection with the use of the "Home
Director" trademark. The Company has taken what it believes is appropriate
remedial action and does not believe that there is any remaining basis for a
claim by the third party, nor has the third party taken further action to pursue
its claim. Nevertheless, it is possible that

                                       19
<PAGE>
                               HOME DIRECTOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 13 - Commitments and Contingencies (continued)

the third party will initiate legal action seeking damages and/or injunctive
relief against the Company. If any such litigation should be resolved adversely,
the Company could be compelled to pay damages and/or royalties to the third
party for its use of the Home Director name and/or limit or discontinue its use
as a trademark.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion regarding the financial statements of Home Director,
Inc. ("we," "our" and the "Company") should be read in conjunction with the
consolidated financial statements and Notes to the Consolidated Financial
Statements included herewith.

FORWARD-LOOKING STATEMENTS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ TOGETHER WITH THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED
ELSEWHERE IN THIS REPORT. SOME OF THE STATEMENTS IN THIS SECTION THAT ARE NOT
HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS. ALL STATEMENTS THAT EXPRESS
EXPECTATIONS, ESTIMATES, FORECASTS OR PROJECTIONS ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE ACT. IN ADDITION, OTHER WRITTEN OR ORAL STATEMENTS
WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS MAY BE MADE BY US OR ON OUR BEHALF.
WORDS SUCH AS "EXPECTS," "ANTICIPATES," "INTENDS," "PLANS," "BELIEVES," "SEEKS,"
"ESTIMATES," "PROJECTS," "FORECASTS," "MAY," "SHOULD," VARIATIONS OF SUCH WORDS
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND
INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS WHICH ARE DIFFICULT TO PREDICT.
THEREFORE, ACTUAL OUTCOMES AND RESULTS MAY DIFFER MATERIALLY FROM WHAT IS
EXPRESSED OR FORECASTED IN OR SUGGESTED BY SUCH FORWARD-LOOKING STATEMENTS. WE
UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. THE RISKS,
UNCERTAINTIES, AND ASSUMPTIONS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCLOSED
IN OUR ANNUAL REPORT ON FORM 10-KSB FOR OUR FISCAL YEAR ENDED DECEMBER 31, 2006.

Overview
Our revenues consist primarily of revenues from the sale of home networking
products. Our home networking products are sold primarily to distributors for
use by integrators who install the products in homes, throughout North America,
as they are being constructed.

Research and development expenses consist primarily of salaries and related
personnel expenses and subcontracted research expenses. Through September 30,
2007, all research and development costs had been expensed as incurred. We
believe that continued investment in research and development is critical to
attaining our strategic objectives, and we expect such expenses to increase for
the remainder of 2007, subject to liquidity constraints described below.

General and administrative expenses consist primarily of expenses for executive,
finance and administrative personnel, professional fees, and other general
corporate expenses. As we add personnel and incur additional costs related to
the anticipated growth of our business, general and administrative expenses will
also increase, subject to the liquidity constraints.

On September 28, 2005, we filed voluntary petitions for relief under Chapter 11
of the Bankruptcy Code. On October 12, 2006, the Bankruptcy Court entered an
Order Confirming Chapter 11 Plan and the Reorganization Plan became effective on
October 23, 2006 (the "Effective Date".) For accounting purposes, the effective
date is determined to be October 31, 2006 (see Explanatory Statement on page
2A.)


                                       20


<PAGE>



On December 28, 2006, we acquired substantially all the assets and assumed
certain liabilities of Destiny Networks, Inc. ("Destiny") and on March 7, 2007
we acquired substantially all the assets and assumed certain liabilities of
Novus Technologies, Inc. ("Novus") (see Note 2 - Significant Events in the
Unaudited Notes to the Consolidated Financial Statements.) These acquisitions
help broaden our product offerings, add research and development resources and
provide us our own manufacturing facility.

Critical accounting policies
A "critical accounting policy" is one which is both important to the portrayal
of our financial condition and results of operations and requires management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain. In
applying these policies, our management uses its judgment to determine the
appropriate assumptions to be used in the determination of certain estimates.
These estimates are based on our historical experience, terms of existing
contracts, our observance of trends in the industry and information available
from other outside sources, as appropriate. We believe that the following
accounting policies fit this definition (also, see Note 1 "Organization and
Summary of Significant Accounting Policies").

Going concern
The financial statements are prepared assuming that we will continue as a going
concern. We have incurred losses from operations of approximately $6.7 million
for the nine months ended September 30, 2007, and have an accumulated deficit of
approximately $9.6 million as of September 30, 2007. These factors raise
substantial doubt about our ability to continue as a going concern. From
December 2006 through September 2007, we raised approximately $3.8 million in
convertible notes, and completed acquisitions of Destiny and Novus as described
in Note 2 - Significant Events to the accompanying unaudited financial
statements. It is anticipated that these acquisitions, as well as other
potential acquisitions, growth in revenues and cost control measures will enable
us to meet our financial commitments and continue the development of our
products. We believe that we can raise additional funds or long-term financing
and, in February 2007, we entered an agreement to engage Trenwith Securities,
LLC as our exclusive investment banking agent to arrange and negotiate a $25
million private placement of securities to be issued by us and any of our
subsidiaries. However, there can be no assurances that this or subsequent
fundraising or long-term financing will be successful. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

Fair value of equity instruments issued
In assessing the fair value of equity instruments, our Management has estimated
the fair value of our shares at the commitment date (based upon a number of
factors including but not limited to the per share value of the common stock
issued to the DIP Lender in the Reorganization Plan) to determine the fair
value. With regard to the fair value of options and warrants issued to employees
and purchasers of convertible notes payable, we value them using the
Black-Scholes model and used the estimated fair value of our shares and other
relevant data required by the model at the commitment date.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
2007 COMPARED TO THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006

Revenues were approximately $870,000 for the three months ended September 30,
2007 (Reorganized Company) compared to approximately $26,000 for the three
months ended September 30, 2006 (Predecessor Company). Our revenues for the nine
months ended September 30, 2007 and 2006 were approximately $1,589,000 and
$39,000, respectively. The increase in both periods was primarily attributable
to businesses acquired during the first quarter of 2007 and the balance is
attributable to our emergence from bankruptcy, as described in Overview and
Outlook and Note 2 above. We anticipate that our 2007 revenues will continue to
compare favorably with our 2006 revenues primarily as a result of the revenues
produced by the acquired businesses, potential future acquisitions and organic
growth from the sale of our own products.

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Total costs and expenses were approximately $2.2 million for the three months
ended September 30, 2007 as compared to approximately $0.6 million for the three
months ended September 30, 2006. Our total costs and expenses for the nine
months ended September 30, 2007 and 2006 were approximately $8.0 million and
$1.9 million, respectively. Our expenses significantly increased in 2007 as
compared to 2006, primarily due to compensation expense related to the issuance
of stock options (approximately $2.4 million for the nine months ended September
30, 2007 and no such expense in 2006), increased number of personnel, personnel
related expenses (we had 40 employees as of September 30, 2007 as compared to
five as of September 30, 2006) and cost of sales in support of our increased
revenues. We believe that increased research & development, sales & marketing
and general & administrative expenses, which began in 2006, resulting primarily
from hiring additional engineering personnel, sales and support personnel and
executive personnel are required to improve and broaden our product offerings
and sell them to our customers. From time-to-time, we may also incur additional
professional fees and other costs in connection with possible future attempts to
expand our product offerings and increase our revenues through organic growth
and acquisitions. In addition, we expect our general & administrative expenses
to increase as a result of the corporate governance, outside audits and other
activities that are related, generally, to being a publicly-traded company.

Net other expense was approximately $187,000 and $361,000 for the three and nine
months ended September 30, 2007 as compared to net other expense of
approximately $27,000 and $27,000 for the three and nine months ended September
30, 2006. The increase in interest expense in both periods in 2007 is primarily
a result of the interest accrued in 2007 on the convertible notes sold in late
2006 and the first three quarters of 2007 to provide us working capital.

Our net loss for the three months ended September 30, 2007 was approximately
$1.5 million, as compared to a net loss of approximately $0.6 million in the
three months ended September 30, 2006. Our net loss for the nine months ended
September 30, 2007 and 2006 was approximately $6.7 million and $1.9 million,
respectively. The increased net loss was primarily attributable to:

o    an increase of approximately $0.1 million and $2.4 million for the three
     and nine months ended September 30, 2007 for compensation expense related
     to issuance of stock options of which there was no such expense in 2006;

o    for the three months ended September 30, 2007 and 2006 a net increase of
     approximately $0.9 million and for the nine months ended September 30, 2007
     and 2006 a net increase of approximately $2.3 million of research &
     development, sales & marketing and general & administrative expenses
     primarily due to increased number of personnel and personnel related costs.

o    an increase of approximately $0.2 million and $0.3 million for the three
     and nine months ended September 30, 2007 for interest expense resulting
     from interest accrued on the convertible notes sold in late 2006 and the
     first three quarters of 2007; offset in part by,

o    an increase of approximately $0.2 million and $0.2 million for the three
     and nine months ended September 30, 2007 for gross margins produced by
     increased revenues.

LIQUIDITY AND CAPITAL RESOURCES
Historically, our operations have never been self-sustaining, and we have
financed our continuing operations through a series of private offerings of debt
and equity and by obtaining advances under loan agreements. From December 2006
through October 2007, we received gross proceeds of approximately $3.8 million
from a private offering of debt and equity. We cannot predict when, if ever, our
business will produce sufficient cash to reduce or eliminate our dependence on
external financing as our primary source of working capital. As discussed above,
on September 28, 2005, we and our subsidiaries, HDT and DI filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code. The
financial statements do not reflect the results of these proceedings.

                                       22
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Cash
As of September 30, 2007, we had cash and cash equivalents totaling
approximately $138,000. Net cash increased in 2007 by approximately $135,000.
The net cash increase in 2007 is primarily due to proceeds from convertible
notes and warrants (approximately $3.9 million), changes in operating assets and
liabilities - primarily accounts payable and accrued expenses (approximately
$1.2 million), offset in part by approximately $4.9 million used to fund the
cash operating loss.

Net cash used in operating activities was approximately $3.7 million for the
nine months ended September 30, 2007 and approximately $0.7 million for the same
period in 2006. Net cash used for both periods in operating activities was
primarily for funding of operating losses, offset in part by changes in
operating assets and liabilities - primarily accounts payable and accrued
expenses.

Net cash provided by financing activities was approximately $3.9 million for
2007 and approximately $0.7 million for 2006. Net cash provided by financing
activities during 2007 resulted primarily from the issuance of convertible
notes. Net cash provided by financing activities during 2006 resulted primarily
from net proceeds from DIP loans.

ITEM 3. CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure controls and procedures.

     The Company's principal executive officer, president and its principal
financial officer, based on their evaluation of the Company's disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) 15d-15(e))
as of the end of the period covered by this Report on Form 10-QSB, have
concluded that the Company's disclosure controls and procedures are effective
for ensuring that information required to be disclosed by the Company in the
report that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time period specified in
the SEC's rules and forms.

     (b) Changes in Internal Controls.

     There were no changes in the Company's internal control over financial
reporting that occurred during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
         SECURITIES

During the nine months ended September 30, 2007 the Company received $3,878,000
from the sale of convertible notes and warrants. The convertible notes are
convertible at the option of the holders into shares of common stock. The
warrants related to the convertible notes are exercisable by the holders into an
aggregate of 2,970,500 shares of common stock at $1.00 per share for five years.
The Company relied on Section 4(2) of the Securities Act in connection with
these transactions. All of the investors are sophisticated, able to bear the
risk of loss of their investment, and are knowledgeable about the Company's
business and financial condition and risk factors related to its securities.

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ITEM 6. EXHIBITS

    The following exhibits are filed in connection with this Report:

    No.      Description
    ---      -----------

    31.1     CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act
             of 2002.

    31.2     President Certification pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002.

    31.3     CFO Certification pursuant to Section 302 of the Sarbanes-Oxley
             Act of 2002.

    32       CEO, President and CFO Certification pursuant to Section 906 of
             the Sarbanes-Oxley Act of 2002.







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                                   SIGNATURES


In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf on November 16, 2007 by
the undersigned, thereunto duly authorized.

                                    HOME DIRECTOR, INC


                                    /s/ Michael Liddle
                                    -----------------
                                    Michael Liddle
                                    Chief Executive Officer


                                    /s/ Mark Stiving
                                    -----------------
                                    Mark Stiving
                                    President


                                    /s/ Daryl Stemm
                                    ------------------
                                    Daryl Stemm
                                    Chief Financial Officer





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