UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                       OR

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

             FOR THE TRANSITION PERIOD FROM __________ TO __________


                         Commission File Number 0-26707


                              NETWORK COMMERCE INC.
             (Exact name of registrant as specified in its charter)


               WASHINGTON                               91-1628103
       (State or other jurisdiction of                 (IRS Employer
        incorporation or organization)              Identification Number)

                              411 1st AVENUE SOUTH
                                 SUITE 200 NORTH
                                SEATTLE, WA 98104
                    (Address of principal executive offices)


                                 (206) 223-1996
              (Registrant's telephone number, including area code)




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


     As of November 12, 2002,  there were  5,893,110  shares  outstanding of the
Registrant's common stock.

<PAGE>

                          CHAPTER 11 BANKRUPTCY FILING

On November 1, 2002,  Network Commerce Inc. a Washington  corporation  ("Network
Commerce"),  filed a petition for relief under  Chapter 11 of the United  States
Bankruptcy  Code  ("Chapter 11") in the United States  Bankruptcy  Court for the
Western District of Washington.

Network  Commerce  will ask the  Bankruptcy  Court to  allow it to  oversee  its
operations  as a  debtor-in-possession,  subject  to Court  approval  of matters
outside the ordinary  course of business.  No trustee,  receiver or examiner has
been appointed,  and Network Commerce will act as a  debtor-in-possession  while
being subject to the supervision and orders of the Bankruptcy Court.

While in Chapter  11,  Network  Commerce  intends  to  continue  to operate  NCI
Hosting,  which provides domain registration,  hosting and other online business
services and license certain products, services and data. Additionally,  Network
Commerce will evaluate  several  alternatives,  including,  without  limitation,
management-directed  sales  of one  or  more  of  Network  Commerce's  operating
divisions  as going  concerns,  the sale of portions of the business in separate
transactions,  and the liquidation of certain  assets.  Regardless of any action
taken while in Chapter 11, Network Commerce  believes that the total proceeds of
any or all  sales  or  liquidation  of  its  business  and  assets  will  not be
sufficient to satisfy fully the claims of its  creditors.  Accordingly,  Network
Commerce   believes  that  its  equity  has  no  value  and  that  its  existing
shareholders  will not receive any  distributions  on account of their shares of
common stock under any plan that may be confirmed by the Bankruptcy  Court under
Chapter 11.

Following  filing of its bankruptcy  petition,  Network  Commerce  terminated 25
active  employees,  reducing  its payroll to 14 persons.  Network  Commerce  has
scaled back operations with the focus of protecting its remaining assets.












                                       2
<PAGE>





                              Network Commerce Inc.


                                    Form 10-Q

                                      Index

<TABLE>
<CAPTION>

                                                                                                           PAGE
<S>               <C>                                                                                      <C>
PART I            FINANCIAL INFORMATION

ITEM 1:           Financial Statements

                  Condensed Consolidated Balance Sheets as of September 30, 2002
                     and December 31, 2001..............................................................     3
                  Condensed Consolidated Statements of Operations for the three- and nine-month
                     periods ended September 30, 2002 and 2001 .........................................     4
                  Condensed Consolidated Statements of Cash Flows for the nine-month
                     periods ended September 30, 2002 and 2001..........................................     5
                  Notes to Interim Condensed Consolidated Financial Statements..........................     6

ITEM 2:           Management's Discussion and Analysis of Financial
                     Condition and Results of Operations................................................    16

ITEM 3:           Quantitative and Qualitative Disclosures about Market Risk............................    24

ITEM 4:           Controls and Procedure................................................................    24


PART II           OTHER INFORMATION

ITEM 1:           Legal Proceedings.....................................................................    25

ITEM 5:           Other Information.....................................................................    25

ITEM 6:           Exhibits and Reports on Form 8-K......................................................    25


SIGNATURES        ......................................................................................    26

</TABLE>












                                       3
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.

<TABLE>
<CAPTION>
                                                            Network Commerce Inc.
                                                     Condensed Consolidated Balance Sheets
                                                      (in thousands, except share amounts)
                                                                  (unaudited)

                                                                                                       September 30,   December 31,
                                                                                                       ----------------------------
                                                                                                           2002             2001
                                                                                                       ----------        ----------
    <S>                                                                                                <C>              <C>
                                           ASSETS
Current assets:
   Cash and cash equivalents ...................................................................        $     390         $   1,879
   Restricted cash .............................................................................               57               164
   Short-term investments ......................................................................                5                 5
   Marketable equity securities ................................................................                7             2,547
   Accounts receivable, net of allowance for bad debts of $1,274 and $1,468  ...................              397             1,366
   Prepaid expenses and other current assets ...................................................              952             1,275
                                                                                                        ---------         ---------
      Total current assets .....................................................................            1,808             7,236
Property and equipment, net ....................................................................            1,024             1,705
Other intangible assets, net ...................................................................                7               168
Cost-basis investments .........................................................................              570               720
Other assets, net ..............................................................................              601               561
                                                                                                        ---------         ---------
        Total assets ...........................................................................        $   4,010         $  10,390
                                                                                                        =========         =========

                            LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ............................................................................        $   1,883         $   2,200
   Accrued liabilities .........................................................................            2,513             2,860
   Current portion of notes and leases payable .................................................            1,684               723
   Deferred revenues ...........................................................................              901               750
                                                                                                        ---------         ---------
        Total current liabilities ..............................................................            6,981             6,533
Notes and leases payable, less current portion .................................................              131             1,630
Deferred revenues ..............................................................................              267               155
                                                                                                        ---------         ---------
        Total liabilities ......................................................................            7,379             8,318
                                                                                                        ---------         ---------
Commitments and contingencies (Note 13)
Shareholders' equity:
   Convertible preferred stock, $0.001 par value:  authorized shares - 5,000,000;
       none issued and outstanding .............................................................             --                --
   Common stock, $0.001 par value:  authorized shares - 200,000,000; issued
        and outstanding shares - 5,893,110 at September 30, 2002 and 5,878,030
        at December 31, 2001 ...................................................................          556,615           556,574
   Subscriptions receivable ....................................................................             --                 (41)
   Common stock warrants .......................................................................           18,248            18,248
   Deferred compensation .......................................................................           (1,378)           (3,193)
   Accumulated other comprehensive loss ........................................................              (23)              (85)
   Accumulated deficit .........................................................................         (576,831)         (569,431)
                                                                                                        ---------         ---------
        Total shareholders' equity .............................................................           (3,369)            2,072
                                                                                                        ---------         ---------
        Total liabilities and shareholders' equity .............................................        $   4,010         $  10,390
                                                                                                        =========         =========
</TABLE>

     The accompanying notes are an integral part of these condensed consolidated
balance sheets.


                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                   Network Commerce Inc.
                                     Condensed Consolidated Statements of Operations
                                           (in thousands, except share amounts)
                                                      (unaudited)

                                                                   For the Three Months Ended         For the Nine Months Ended
                                                                         September 30,                      September 30,
                                                                --------------------------------   -------------------------------
                                                                     2002              2001             2002              2001
                                                                --------------    --------------   --------------    -------------
<S>                                                             <C>               <C>              <C>               <C>
Revenues ...................................................      $     1,199       $     1,594       $     4,492       $    17,982
Cost of revenues ...........................................              533               454             1,556             4,702
                                                                  -----------       -----------       -----------       -----------
          Gross profit .....................................              666             1,140             2,936            13,280
                                                                  -----------       -----------       -----------       -----------
Operating expenses:
     Sales and marketing ...................................            1,096             3,151             4,097            27,230
     Research and development ..............................              203             1,299               835             8,693
     General and administrative ............................            1,260             2,742             3,817             9,899
     Amortization of intangible assets .....................                2             1,039               162            24,378
     Stock-based compensation ..............................              626               498             1,854             1,765
     Restructuring and other impairment charges ............             --               3,842              --              65,915
     Impairment of certain long-lived assets ...............             --               3,826              --              46,962
     Unusual item - settlement of claim ....................             --                --                --               4,559
                                                                  -----------       -----------       -----------       -----------
          Total operating expenses .........................            3,187            16,397            10,765           189,401
                                                                  -----------       -----------       -----------       -----------
          Loss from operations .............................           (2,521)          (15,257)           (7,829)         (176,121)
                                                                  -----------       -----------       -----------       -----------
Nonoperating income (expense):
     Loss on sale of investments ...........................             --                --                (584)             (150)
     Interest income .......................................                4                90                32               713
     Interest expense ......................................              (51)             (445)             (156)           (5,985)
     Other .................................................              (87)               61               721                22
     Impairment of cost-basis investments ..................              (75)           (9,407)             (150)          (28,227)
                                                                  -----------       -----------       -----------       -----------
          Total nonoperating income (expense), net .........             (209)           (9,701)             (137)          (33,627)
                                                                  -----------       -----------       -----------       -----------
          Loss before extraordinary gains ..................           (2,730)          (24,958)           (7,966)         (209,748)
Extraordinary gains ........................................                1             6,505               566            15,479
                                                                  -----------       -----------       -----------       -----------
          Net loss .........................................      $    (2,729)      $   (18,453)      $    (7,400)      $  (194,269)
                                                                  ===========       ===========       ===========       ===========
Basic loss per share:
  Loss before extraordinary gains ..........................      $     (0.49)      $     (4.82)      $     (1.43)      $    (41.81)
  Extraordinary gains ......................................             0.00              1.26              0.10              3.09
                                                                  -----------       -----------       -----------       -----------
  Basic loss per share .....................................      $     (0.49)      $     (3.56)      $     (1.33)      $    (38.72)
                                                                  ===========       ===========       ===========       ===========

Weighted average shares outstanding used to
     compute basic loss per share ..........................        5,560,760         5,182,958         5,559,237         5,016,138
                                                                  ===========       ===========       ===========       ===========
</TABLE>

     The accompanying notes are an integral part of these condensed consolidated
statements.


                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                       Network Commerce Inc.
                                          Condensed Consolidated Statements of Cash Flows
                                                        (in thousands)
                                                          (unaudited)
                                                                                                         For the Nine Months Ended
                                                                                                                September 30,
                                                                                                        ---------------------------
                                                                                                           2002             2001
                                                                                                        ---------         ---------
<S>                                                                                                     <C>               <C>
Operating activities:
      Net loss .................................................................................        $  (7,400)        $(194,269)
      Adjustments to reconcile net loss to net cash used in operating activities-
         Depreciation and amortization .........................................................              930            31,004
         Accretion of promissory note payable ..................................................               88             4,671
         Provision for bad debts ...............................................................               66               888
         Amortization of deferred compensation .................................................            1,854             1,765
         Restructuring and impairment charges ..................................................             --              71,347
         Impairment of certain long-lived assets ...............................................             --              46,962
         Impairment of investments .............................................................              150            28,228
         Extraordinary gains ...................................................................             (566)          (15,479)
         Unusual item - settlement of claim ....................................................             --               4,559
         Realized loss from sale of marketable equity securities ...............................              584               150
         Changes in operating assets and liabilities -
              Accounts receivable ..............................................................              902            13,514
              Prepaid expenses and other current assets ........................................              324             1,212
              Other assets .....................................................................              (40)             (105)
              Accounts payable and accrued liabilities .........................................              (97)          (24,117)
              Deferred revenue .................................................................              263            (1,903)
                                                                                                        ---------         ---------
Net cash used in operating activities ..........................................................           (2,942)          (31,573)
                                                                                                        ---------         ---------
Investing activities:
      Sales of short-term investments ..........................................................              106            38,586
      Proceeds from sale of investments ........................................................            2,018               920
      Purchases of property and equipment ......................................................              (87)              (53)
      Investments in other assets ..............................................................             --                  (4)
                                                                                                        ---------         ---------
Net cash provided by investing activities ......................................................            2,037            39,449
                                                                                                        ---------         ---------
Financing activities:
      Payments on line of credit ...............................................................             --             (10,146)
      Payments on long-term debt ...............................................................             (627)           (6,564)
      Proceeds from sale of common stock and exercise of stock options .........................                2                16
      Proceeds from collection of subscription receivable ......................................               41                 3
                                                                                                        ---------         ---------
Net cash used in financing activities ..........................................................             (584)          (16,691)
                                                                                                        ---------         ---------
Net decrease in cash and cash equivalents ......................................................           (1,489)           (8,815)
Cash and cash equivalents at beginning of period ...............................................            1,879            11,715
                                                                                                        ---------         ---------
Cash and cash equivalents at end of period .....................................................        $     390         $   2,900
                                                                                                        =========         =========
Supplementary disclosure of cash flow information:
      Cash paid during the period for interest .................................................        $      68         $     714
                                                                                                        =========         =========
      Cash paid during the period for income taxes .............................................        $      91         $     126
                                                                                                        =========         =========
      Non-cash investing and financing activities:
         Assets acquired under capital leases ..................................................        $    --           $     160
                                                                                                        =========         =========
</TABLE>

     The accompanying notes are an integral part of these condensed consolidated
statements.




                                       6
<PAGE>

                              Network Commerce Inc.

              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)

Note 1. Organization and Background:

The Company

Network Commerce Inc. (the Company), a Washington  corporation,  is a technology
infrastructure  and online  services  company.  Prior to filing  its  bankruptcy
petition  on  November  1, 2002,  the  Company  provided  technology  and online
business services  solutions  through its two operating groups,  NCI Hosting and
NCI  Marketing,  and also  pursued  licenses of certain  software  patents.  NCI
Hosting  includes  domain  registration,   hosting  and  other  online  business
services,  and NCI Marketing includes online database marketing  services.  As a
result of the bankruptcy filing, the Company has substantially halted operations
of NCI  Marketing  and is  continuing  limited  operations  of NCI Hosting.  The
Company's headquarters are located in Seattle, Washington.

The Company  established  NCI Hosting and NCI Marketing in January 2001 out of a
restructuring of the Company's two then-existing commerce networks, known as the
Network Commerce Consumer Network, which aggregated businesses and shoppers over
a distributed  network of Web sites, and the Network Commerce  Business Network,
which enabled  businesses to engage in online  activities and transactions  with
other  businesses.  The Company also previously  operated an eBusiness  Services
division,  which provided consulting,  custom commerce solutions, and integrated
marketing  services for businesses  conducting  commerce  online,  and which was
shutdown in January 2001 as part of the restructuring process. In addition, as a
result of the restructuring  efforts in 2001,  certain of the Company's previous
business units and offerings were shut down or sold, including  SpeedyClick.com,
GO Software, Ubarter, Internet Domain Registrars and FreeMerchant.com.

The Company is subject to similar  risks and  challenges  associated  with other
companies  at a  similar  stage  of  development,  including  dependence  on key
management  personnel,  on successful  development and marketing of its products
and services and the  continued  acceptance of the  Internet.  Additional  risks
include  competition  from substitute  products and services from companies with
greater  financial,  technical,  management  and  marketing  resources and risks
associated  with recent  restructuring  activities.  Further,  during the period
required  to develop  commercially  viable  products,  services  and  sources of
revenues,  the  Company  may  require  additional  funds  that may or may not be
readily available.

Going Concern

The Company's condensed  consolidated  financial  statements for the nine months
ended  September  30, 2002 have been prepared on a going  concern  basis,  which
contemplates  the realization of assets and the settlement of liabilities in the
normal course of business.  In all  likelihood,  this basis of  accounting  will
change  as a  result  of the  Company's  bankruptcy  petition,  to  either  that
prescribed  by Statement of Position  90-7  "Financial  Reporting by Entities in
Reorganization  under  the  Bankruptcy  Code"  or to the  liquidation  basis  of
accounting.  The  Company  has  incurred  a net  loss  of $7.4  million  for the
nine-month  period  ended  September  30, 2002 and has  accumulated  deficits of
$576.8 million as of September 30, 2002. The Company has  continuously  incurred
losses  from  operations  and as of  September  30,  2002 had a working  capital
deficit of $5.2 million. The condensed  consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Note 2. Summary of Significant Accounting Policies:

Unaudited Interim Financial Data

The  condensed  consolidated  financial  statements  are unaudited and have been
prepared  pursuant to the rules and  regulations  of the Securities and Exchange
Commission (SEC). Certain information and footnote disclosures normally included


                                       7
<PAGE>

in  financial   statements   prepared  in  accordance  with  generally  accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the  Company's  December 31, 2001 Form 10-K as filed with the SEC on
April  1,  2002.  The  financial   information   included  herein  reflects  all
adjustments (consisting only of normal recurring adjustments), which are, in the
opinion of  management,  necessary  for a fair  presentation  of the results for
interim periods. The results of operations for the three- and nine-month periods
ended September 30, 2002 and 2001 are not necessarily  indicative of the results
to be expected for the full year.

Principles of Consolidation

The Company's condensed  consolidated  financial  statements include 100% of the
assets,  liabilities and results of operations of all  subsidiaries in which the
Company has a controlling  ownership  interest.  Equity investments in which the
Company  holds  less  than  a 20%  ownership  interest  and  does  not  exercise
significant  influence  are  recorded  at cost and are  included  in  cost-basis
investments in the  accompanying  condensed  consolidated  balance  sheets.  The
Company  monitors these cost-basis  investments for impairment.  When cost-basis
investments are deemed to be permanently  impaired,  the difference between cost
and  market  value  is  charged  to  operations.  All  significant  intercompany
transactions and balances have been eliminated.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities,  the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Revenue Recognition

Since restructuring in January 2001, the Company derives revenues primarily from
the sale of online database  marketing  services within NCI Marketing and domain
registration,  hosting and other online  business  services  within NCI Hosting.
Revenues from online database  marketing services are recognized as the services
are delivered to the businesses over the term of the agreement,  which typically
range  from  one  to  three  months.  Revenues  from  domain  registrations  are
recognized over the  registration  term, which typically range from one to three
years.  Revenues from hosting and online  business  services are recognized over
the term of the agreements, which are generally twelve months. Unearned revenues
are classified as either current or long-term deferred revenues depending on the
future recognition of those revenues.

Revenues are also  generated  from fees to license the Company's  technology and
patents: transaction processing, fraud prevention, and online payment system, as
well as other e-commerce enabling  technologies.  Revenues may include licensing
fees,   per-transaction   fees  and,  in  certain  cases,  monthly  hosting  and
maintenance fees, which are recognized in the period earned.  Revenues generated
from technology  licensing are recognized in accordance with American  Institute
of Certified Public Accountants,  Statement of Position 97-2,  "Software Revenue
Recognition."

The Company  recognized  revenues  from barter  transactions  when  earned.  The
Company valued the barter  transactions  based on the value of the consideration
received  from the  customer or from the value of the  services  provided to the
customer, whichever was more readily determinable. The Company recognized $0 and
$1.4  million in revenues on such  transactions  during the  nine-month  periods
ended September 30, 2002 and 2001, respectively.

The  Company  recognized  revenues  from the sale of online  database  marketing
services,  leads and orders,  advertising and merchandising in which the Company
received  equity in the customer.  The Company  valued the equity  received from
these  transactions  as  cost-basis  investments  based  on  the  value  of  the
consideration  received  from the  customer  or from the  value of the  services
provided to the customer,  whichever was more readily determinable.  The Company
monitors  these   cost-basis   investments  for   impairment.   When  cost-basis
investments are deemed to be permanently  impaired,  the difference between cost
and market value is charged to  operations.  There can be no assurance  that the
Company's  investments  in  these  early-stage   technology  companies  will  be
realized.  The  Company  recognized  $0 and  $205,000 in revenues on such equity
transactions  during the nine-month  periods ended  September 30, 2002 and 2001,
respectively.


                                       8
<PAGE>

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 141,  "Business  Combinations."
SFAS No.  141  establishes  accounting  and  reporting  standards  for  business
combinations to use the purchase  method.  The effective date of SFAS No. 141 is
June 30, 2001. All acquisitions by the Company have been accounted for using the
purchase method. There have been no business combinations since June 30, 2001.

In June 2001,  the FASB  issued  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets."  SFAS No.  142  establishes  accounting  and  reporting  standards  for
acquired  goodwill and other  intangible  assets.  The statement  eliminates the
amortization of goodwill over its estimated useful life.  Rather,  goodwill will
be  subject  to at least an annual  assessment  for  impairment  by  applying  a
fair-value-based  test.  SFAS No. 142 is effective  for fiscal  years  beginning
after December 14, 2001. The Company adopted SFAS No. 142 on January 1, 2002 and
the impact was immaterial.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets."  SFAS  No.  144  establishes  accounting  and
reporting  standards for the  impairment  or disposal of  long-lived  assets and
supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for  Long-Lived  Assets to Be Disposed Of." The Company  adopted SFAS No. 144 on
January 1, 2002 and the impact was immaterial.

In April 2002,  the FASB issued SFAS No. 145,  "Rescission of FASB Statement No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
This  statement  rescinds  SFAS No.  4,  "Reporting  Gains and  Losses  from the
Extinguishment  of Debt",  and an  amendment  of that  statement,  SFAS No.  64,
"Extinguishments  of  Debt  Made to  Satisfy  Sinking-Fund  Requirements".  This
statement also rescinds SFAS No. 44,  "Accounting for Intangible Assets of Motor
Carriers".  In addition,  this  statement  amends SFAS No. 13,  "Accounting  for
Leases" and amends other existing  authoritative  pronouncements to make various
technical  corrections,  clarify meanings or describe their  applicability under
changed  conditions.  The effective  date of SFAS No. 145 is for the fiscal year
beginning after May 15, 2002.  Adoption of this statement is expected to have an
immaterial impact on the Company's consolidated financial statements.

Reclassifications and Reverse Stock Split Adjustments

Certain  information  reported in  previous  periods  has been  reclassified  to
conform to the current period presentation. Effective June 18, 2001, the Company
initiated a 1-for-15  reverse split of the Company's  outstanding  common stock.
All common stock shares and per share  amounts have been adjusted to reflect the
reverse split.

Note 3. Prior Acquisitions and Dispositions:

All  acquisitions   have  been  accounted  for  using  the  purchase  method  of
accounting.

In June 1999, the Company  acquired GO Software,  Inc.  ("GO").  GO develops and
markets transaction  processing software. In May 2001, the Company completed the
sale of all the stock of GO.

Also in June 1999, the Company acquired  CardSecure,  Inc.  ("CardSecure") for a
purchase price of $3.5 million.  CardSecure is a developer of e-commerce enabled
Web sites.  The excess  purchase price of $3.5 million was allocated to acquired
technology and was amortized over the three-year period ending May 2002.

In November 1999, the Company acquired  SpeedyClick,  Corp.  ("SpeedyClick"),  a
California  corporation  that  maintained  an Internet  Web site that focused on
entertainment  and  interactivity.  In March  2001,  the  Company  shut down the
operations and wrote-off the remaining intangible assets.

In January 2000, the Company  acquired Pronet  Enterprises  Ltd.  ("Pronet"),  a
Canadian company,  that operated a  business-to-business  portal and marketplace
that aggregates  businesses  that seek to transact with one another.  In January
2001,  the  Company  revised  its  estimated  useful  life for these  assets and
amortized the remaining  carrying  value of Pronet over the first nine months of
2001.

                                       9
<PAGE>

In April 2000, the Company acquired FreeMerchant.com,  Inc. ("FreeMerchant"),  a
Delaware  corporation,   that  developed  online  store-builder  technology  and
provides  hosting  services to those  businesses.  In December 2001, the Company
sold substantially all of the assets of FreeMerchant.

In  June  2000,  the  Company   acquired   Ubarter.com   Inc.   ("Ubarter"),   a
business-to-business  e-commerce  enterprise,  which  utilizes  its  proprietary
barter exchange  system.  In February 2001, the Company sold the  Canadian-based
operations  of  Ubarter  and  in  June  2001,  the  Company  sold  the  US-based
operations.

In August  2000,  the Company  acquired  Ivebeengood.com,  d.b.a.  UberWorks,  a
developer of multi-merchant  e-commerce  purchasing tools and universal shopping
cart  technology.  In March  2001,  the Company  abandoned  the  technology  and
wrote-off the remaining intangible assets.

In  December  2000,  the  Company  acquired  ePackets.Net,  Inc.,  a provider of
permission-based  one-to-one  email  solutions.  In March 2001, the Company shut
down the operations and wrote-off the remaining intangible assets.

In December 2000, the Company acquired  Internet Domain  Registrars  Corporation
("IDR"), a domain name  infrastructure  company.  In June 2001, the Company sold
substantially all of the assets and liabilities of IDR.

Note 4. Restructuring, Impairment and Extraordinary Gains:

Restructurings and related impairments

During the first quarter 2001, the Company continued its restructuring  efforts,
which commenced in fourth quarter 2000. The restructuring  included the shutdown
of  SpeedyClick,  the sale of Ubarter  Canada,  which resulted in a loss of $2.3
million,  the lay off of 245 employees,  which resulted in severance and related
payroll  charges  of  $580,000  and  the  write-off  of  impaired  goodwill  and
intangible assets of $55.2 million,  and of tenant  improvements,  fixed assets,
software and supporting  technologies and  infrastructure  related to businesses
that were shut down of $13.0 million.

During the second quarter 2001, the Company further  restructured its operations
by selling  Ubarter USA, IDR and GO for total  proceeds of $6.0 million cash and
$3.0 million of marketable equity securities, which were subject to lockup until
November 2001. The Company recorded a gain in the second quarter of $5.8 million
related to these sales.  The gains on these sales in the second quarter resulted
from the fact that the Company wrote down these  business units by $23.6 million
in first  quarter  2001,  based on the best  available  evidence  of fair market
value.  On an  aggregate  basis,  for the six months  ended June 30,  2001,  the
Company  recognized  losses totaling $17.8 million on the sale of these business
units.

During the third quarter 2001, the Company continued its restructuring  efforts,
including  the  write-down  of  additional  fixed assets and other items,  which
resulted in a charge of $3.8 million.

Impairment of Certain Long-Lived Assets

During  the first  quarter  2001,  the  Company  determined  that  goodwill  and
intangible  assets  associated with acquired  businesses had a carrying value in
excess of the  discounted  cash flow  expected to be received  from the business
units.  As a  result,  the  Company  recognized  an  impairment  charge of $43.1
million.

During the third quarter 2001, the Company,  due to the continued  deterioration
of the stock market,  determined that goodwill and intangible  assets associated
with acquired  businesses had a carrying value in excess of the potential  sales
value of the business units. As a result,  the Company  recognized an additional
impairment charge of $3.8 million.

Impairment of cost-basis investments

During the first  quarter  2002,  the  Company  determined  that  certain of its
cost-basis  investments were permanently  impaired  relative to their historical
values.  As a result,  the Company  recognized an impairment  charge of $75,000,
which is  included  as a  component  of  nonoperating  (expense)  income  in the
accompanying September 30, 2002 condensed consolidated statements of operations.
Permanent impairments in the Company's cost-basis investments were determined by



                                       10
<PAGE>

examining the operations of each company, and when possible, by reviewing recent
private-placement   valuations  for   comparable   companies  and  by  obtaining
professional  business valuations.  During the third quarter 2002, an additional
$75,000  of  its  cost-basis  investments  were  determined  to  be  permanently
impaired.

During the first and third quarters of 2001, the Company  recognized  impairment
charges of $18.8 million and $9.4 million, respectively.

Extraordinary gains

The Company  negotiated  with various  creditors to settle  liabilities for less
than the recorded invoices.  These settlements resulted in an extraordinary gain
of $566,000 and $9.0 million for the nine months  ended  September  30, 2002 and
2001, respectively.

During the third quarter 2001,  the Company  restructured  and reduced its $11.0
million  convertible note from Capital Ventures  International  (CVI). Under the
terms of the  restructuring,  the  Company  paid $2.2  million and issued a $1.5
million convertible  promissory note. The promissory note will be due in January
2003 and is  convertible,  at any time into common stock at an exercise price of
$2.00 at the option of CVI. This settlement resulted in an extraordinary gain of
$6.5 million.

Note 5. Unusual Item:

During the first quarter 2001,  the Company  recorded a charge  resulting from a
settlement  of  potential  claims  held  by Mr.  Dwayne  Walker,  the  Company's
Chairman,  and then Chief Executive  Officer and President,  against the Company
arising from the withdrawal of Mr. Walker's shares of the Company's common stock
from the Company's secondary public offering completed in February 2000.

Note 6. Marketable Equity Securities:

In February  2002, the Company sold 700,000 shares of ROI at $2.50 per share and
recognized a loss of $371,000 on the sale.  During the second  quarter 2002, the
Company returned 3,333 shares to ROI in payment of certain expenses and sold the
remaining  130,000  shares  of ROI at $1.85  per  share,  recognizing  a loss of
$156,000   on  the  sale.   Realized   gains  and   losses   from  the  sale  of
available-for-sale securities are determined on a specific identification basis.
Dividend and interest  income are  recognized  as earned.  Any changes in market
values that are  considered  other than temporary are recorded as realized gains
or losses in current operations.

Note 7. Deferred Revenues:

Unearned revenues related to domain  registrations  represent the unexpired term
of  registration  fees  and  are  recognized   ratably  over  the  term  of  the
registration.  Revenues from online database  marketing  services are recognized
when services are delivered.

Note 8. Debt Obligations:

As discussed in Note 14 below, on November 1, 2002, the Company filed a petition
for relief under Chapter 11 of the U.S.  Bankruptcy Code in the Western District
of Washington.  Except as otherwise may be determined by the  Bankruptcy  Court,
the stay protection  afforded by the bankruptcy  filing prevents any action from
being taken against the Company assets. The Company cannot predict the impact of
the Company's Chapter 11 bankruptcy filing on the debt obligations listed below.

In September  2000,  the Company  sold $20.0  million of  convertible  notes and
warrants to Capital  Ventures  International  ("CVI")  pursuant to a  securities
purchase  agreement.  The notes had a one-year  term. In April 2001, the Company
received  a notice of  default  from CVI for an  alleged  violation  of  certain
covenants.  CVI filed suit against the Company in May 2001 in the United  States
District  Court for the  Southern  District of New York under  Civil  Action No.
01CV-4390.

In July 2001,  the Company  entered  into a settlement  agreement  with CVI with
respect to certain claims arising out of the securities purchase agreement. As a
result, convertible notes with a face value of $11 million and all warrants were



                                       11
<PAGE>

retired. The Company paid $2.2 million and delivered a $1.5 million non-interest
bearing  convertible   promissory  note,  which  is  due  January  2003  and  is
convertible,  at any time at the option of CVI, into common stock at an exercise
price of $2.00 per share.  Additionally,  CVI agreed that the Company  satisfied
all of past, present and future obligations to CVI under the securities purchase
agreement  and  all  related  documents  other  than  the  Registration   Rights
Agreement.  However, CVI did not release its claim against the Company,  certain
current and former  officers and directors for the alleged  security  violations
and for fraudulent inducement. The Company is vigorously defending against these
claims.  Nevertheless,  an  unfavorable  resolution of these claims could have a
material adverse effect on the Company in one or more future periods.

Note 9. Income Taxes:

The Company is subject to tax laws of the United States, various state and local
jurisdictions within the United States and in foreign jurisdictions. The Company
has recorded no provision for taxes in any of these  jurisdictions,  however the
Company may be subject to claims by these taxing  jurisdictions,  which would be
material to the financial  position of the Company.  The Company believes it has
reasonable and defendable positions in all of its taxing jurisdictions and would
vigorously defend itself against any such claim.

Note 10. Equity Financing:

In July 2001,  the Company  entered into an agreement  with Cody  Holdings  Inc.
(Investor)  to provide  the Company  with up to $18 million in equity  financing
(Equity  Line).  Under the terms of the  agreement,  the  Company  will have the
right,  but not the  obligation  during the 18-month term of the  agreement,  to
obtain equity financing  through the issuance of common stock to the Investor in
a series of periodic draw downs at a discount to the market price at the time of
sale to the Investor.  The maximum available amount for draw down each period is
determined  using a formula  that  utilizes a weighted  average  stock price and
stock volume over a sixty-day period.  The shares of common stock may be sold to
the  Investor  during this  period at times and in  amounts,  subject to certain
minimum and maximum volumes, determined at the discretion of the Company. If the
Company chooses to draw down on the Equity Line, it will use the proceeds of the
financing for general corporate purposes. In October 2001, the Company completed
a draw down of $25,000.  Based on the Company's  stock price and average trading
volume as of September 30, 2002, the Company is unable to make a draw down.

Note 11. Segment Information:

The Company's  segment  information for each of the nine-months  ended September
30, 2002 and 2001, as follows (in thousands):






                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                                                    Nine Months Ended September 30,
                                                                                                  ----------------------------------
                                                                                                     2002                     2001
                                                                                                  ---------                 --------
<S>                                                                                               <C>                       <C>
Revenues:
      Continuing operations:
          NCI Marketing .........................................................                 $  2,633                  $  2,937
          NCI Hosting ...........................................................                    1,784                       668
          Other .................................................................                       75                      --
                                                                                                  --------                  --------
                                                                                                     4,492                     3,605
      Operations shutdown or sold during 2001 ...................................                     --                      14,377
                                                                                                  --------                  --------
                                                                                                     4,492                    17,982
                                                                                                  --------                  --------
Cost of revenues:
      Continuing operations:
          NCI Marketing .........................................................                      949                       301
          NCI Hosting ...........................................................                      550                       253
          Other .................................................................                     --                        --
                                                                                                  --------                  --------
                                                                                                     1,499                       554
      Operations shutdown or sold during 2001 ...................................                       57                     4,148
                                                                                                  --------                  --------
                                                                                                     1,556                     4,702
                                                                                                  --------                  --------
Gross Profit:
      Continuing operations:
          NCI Marketing .........................................................                    1,684                     2,636
          NCI Hosting ...........................................................                    1,234                       415
          Other .................................................................                       75                      --
                                                                                                  --------                  --------
                                                                                                     2,993                     3,051
      Operations shutdown or sold during 2001 ...................................                      (57)                   10,229
                                                                                                  --------                  --------
                                                                                                  $  2,936                  $ 13,280
                                                                                                  ========                  ========
</TABLE>

Note 12. Option Repricing and Grants:

In June 2002, the Company  repriced  2,139,686  options to purchase  shares to a
price of $0.10.  This repricing  resulted in variable  accounting  treatment for
these stock options.  Variable accounting treatment will result in unpredictable
stock-based  compensation  dependent on  fluctuations  in quoted  prices for the
Company's common stock.

In June 2002, the Company granted 4,595,000 stock options with an exercise price
of $0.05 to its  employees.  The options  vest  ratably  from April 2002 through
December  2002.  The stock  options  covered  under this  grant  will  result in
stock-based compensation expense that will be amortized over the vesting period.
Additionally, the stock options covered under this grant will result in variable
accounting treatment. Variable accounting treatment will result in unpredictable
stock-based  compensation charges dependent on fluctuations in quoted prices for
the Company's common stock.

Note 13. Litigation:

The Company and Mr. Walker,  the Company's  chairman of the board, were named as
defendants  in multiple  putative  class  actions  pending in the United  States
District Court for the Western District of Washington in Seattle.  Those actions
are Jan Sherman, et al v. Dwayne M. Walker and Network Commerce Inc.,  C01-0675L
(filed May 10, 2001);  Joseph Carreiro v. Network  Commerce,  Inc. and Dwayne M.
Walker,  C01-0767L (filed May 25, 2001); Steven Leong v. Network Commerce,  Inc.
and Dwayne M. Walker,  C01-0770L  (filed May 25,  2001);  Alan Danse,  et al. v.
Dwayne M.  Walker and Network  Commerce,  Inc.,  C01-852L  (filed June 7, 2001);
James Lindsay v. Dwayne M. Walker and Network Commerce,  Inc.,  C01-0918R (filed



                                       13
<PAGE>

June 20, 2001); and Kelly Christianson v. Dwayne M. Walker and Network Commerce,
Inc.,  C01-1063L  (filed July 11,  2001).  The judge in the class  actions,  the
Honorable Robert Lasnik,  entered an order  consolidating the class actions.  On
September 26, 2001, prior to the date the consolidated  complaint was due in the
consolidated  class actions,  certain of the plaintiffs  filed another  putative
class action in the United  States  District  Court for the Western  District of
Washington in Seattle, titled Jan Sherman; James Michaelson;  and Jason Elkin v.
Dwayne M. Walker; Network Commerce Inc.; Jacob I. Friesel; Alan D. Koslow; David
M.  Lonsdale;  Bret R.  Maxwell;  Mark C.  McClure;  John R.  Snedegar;  Mark H.
Terbeek;  Dain Rauscher Inc.; U.S. Bancorp Piper Jaffray;  SoundView  Technology
Group,  Inc.; J.P. Morgan Chase & Co.; CIBC World Markets Corp.; and PaineWebber
Inc., C01-0675L.  This last action was filed under the consolidated cause number
for the other  consolidated  class actions  pending in Seattle.  On November 13,
2001,   plaintiffs  filed  the   Court-ordered   consolidated   complaint.   The
consolidated  complaint named as defendants all the institutions  (including the
Company)  named  in the  prior  complaints,  but  named  only Mr.  Walker  as an
individual  defendant,  and not the  other  individual  defendants  named in the
September 26, 2001  complaint.  The  consolidated  complaint  purports to allege
claims on behalf of all persons who purchased the Company's  common stock during
the period that begins on  September  28, 1999 and ends on April 16,  2001.  The
consolidated  complaint alleges  violations of the federal securities laws based
on alleged  misrepresentations  and omissions  made by defendants to the market.
The suits seek  unspecified  damages.  On January 28, 2002,  the Company and Mr.
Walker filed a motion to dismiss the  consolidated  class action  complaint  for
failure to state a claim on which legal relief can be granted.  On September 24,
2002,  Judge Laznik entered an order  dismissing the  consolidated  actions with
prejudice,  and without  permitting  the  plaintiffs  to amend the  consolidated
complaint.  No appeal of that order has yet been  filed.  If an appeal is filed,
the  Company  and Mr.  Walker  intend  to  vigorously  defend  the  appeal,  but
unfavorable  resolution of these suits could have a material  adverse  effect on
the Company in one or more future periods. A judgment was entered dismissing the
case on October 15, 2002. The deadline for the appeal is November 15, 2002.

On May 22, 2001, Capital Ventures  International  ("CVI") filed suit against the
Company and Mr. Walker,  the Company's  chairman of the board and other past and
current  members of the  Company's  board of  directors  alleging,  among  other
things, a breach of the securities  purchase  agreement dated September 28, 2000
entered into between CVI and Network  Commerce Inc.,  fraudulent  inducement and
violations of certain  federal  securities  laws. The lawsuit seeks  unspecified
damages and rescission.  On July 25, 2001, the Company entered into a settlement
agreement  with CVI with respect to certain claims arising out of the securities
purchase  agreement.  As a result, the Company paid $2.2 million and delivered a
$1.5  million  promissory  note.  Additionally,  CVI  agreed  that  the  Company
satisfied  all of its past,  present  and  future  obligations  to CVI under the
securities  purchase agreement and all documents related to such agreement other
than the Registration Rights Agreement dated September 28, 2000. Notwithstanding
the  settlement,  CVI did not release its claim  against  the  Company,  certain
current and former  officers and directors for the alleged  security  violations
and for fraudulent inducement.

Except  as  otherwise  may be  determined  by the  Bankruptcy  Court,  the  stay
protection  afforded by the  bankruptcy  filing  prevents  any action from being
taken against the Company  assets.  In most cases,  pre-existing  litigation and
claims against the Company will have the status of general  unsecured  claims in
the Chapter 11 bankruptcy case.

The Company cannot predict the outcome of the litigation matters described above
or the extent to which the costs of defense and any  settlement or award will be
covered by the Company's  insurance  policies.  The Company has been  vigorously
defending against these claims. However, an adverse determination on one or more
of these  matters  could result in a material  adverse  effect on the  Company's
financial condition and results of operations.

From time to time the  Company  has been  named in other  claims  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated financial position, results of operations or liquidity.

Note 14. Subsequent Events:

On November 1, 2002, the Company filed a petition for relief under Chapter 11 of
the United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy
Court  for  the  Western  District  of  Washington.  The  Company  will  ask the
Bankruptcy    Court   to   allow   it   to   oversee   its   operations   as   a
debtor-in-possession,  subject to Court approval of matters outside the ordinary
course of business. No trustee, receiver or examiner has been appointed, and the
Company  will  act  as  a  debtor-in-possession   while  being  subject  to  the
supervision and orders of the Bankruptcy Court. While in Chapter 11, the Company
intends to continue to operate NCI Hosting,  which provides domain registration,
hosting and other  online  business  services.  Additionally,  the Company  will
evaluate    several     alternatives,     including,     without     limitation,
management-directed sales of one or more of the Company's operating divisions as
going concerns,  the sale of portions of the business in separate  transactions,


                                       14
<PAGE>

and the  liquidation of the remainder of assets not used in the operation of NCI
Hosting.  Regardless  of any  action  taken  while in Chapter  11,  the  Company
believes  that the  total  proceeds  of any or all sales or  liquidation  of its
business and assets will not be  sufficient  to satisfy  fully the claims of its
creditors.  Accordingly,  the Company  believes that its equity has no value and
that its existing  shareholders will not receive any distributions on account of
their  shares  of common  stock  under  any plan  that may be  confirmed  by the
Bankruptcy Court under Chapter 11.

On November 6, 2002,  the Company  received  notification  from its  independent
auditors,  Moss Adams LLP, of its decision to resign and of the cessation of the
client-auditor  relationship.  The Company  previously engaged Moss Adams LLP as
its independent auditors effective as of April 4, 2002, subsequent to the filing
of the  Company's  Annual  Report on Form 10-K for the year ended  December  31,
2001. Accordingly, Moss Adams LLP did not complete the SAS 71 review of the Form
10-Q for the quarterly  period ended September 30, 2002. Also, see Item II, Part
5 Other Information.















                                       15
<PAGE>

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

The matters  discussed in this report contain  forward-looking  statements  that
involve  known and unknown  risks and  uncertainties,  such as statements of our
plans,  objectives,  expectations and intentions.  Words such as "may," "could,"
"would," "expect,"  "anticipate,"  "intend," "plan," "believe,"  "estimate," and
variations of such words and similar  expressions  are intended to identify such
forward-looking  statements.  You  should  not  place  undue  reliance  on these
forward-looking  statements,  which are based on our  current  expectations  and
projections about future events, are not guarantees of future  performance,  are
subject to risks,  uncertainties  and  assumptions  (including  those  described
below) and apply only as of the date of this report.  Our actual  results  could
differ  materially  from those  anticipated in the  forward-looking  statements.
Factors that could cause or contribute to such differences  include, but are not
limited to,  those  discussed  below in "Factors  That May Affect Our  Operating
Results,  Business and Stock Price" and elsewhere in this report,  and the risks
discussed  in our  December  31,  2001 Form 10-K filed on April 1, 2002 with the
Securities  and  Exchange  Commission  and in our other  quarterly  and periodic
reports filed with the Commission.

Overview

Established  in 1994,  we are a technology  infrastructure  and online  services
company.  Prior to filing our  bankruptcy  petition  on  November  1,  2002,  we
provided  technology  and online  business  services  through our two  operating
groups,  NCI Hosting and NCI Marketing,  and we also pursued licenses of certain
of our software patents. NCI Hosting provides domain registration,  hosting and
other online  business  services,  and NCI Marketing  provides  online  database
marketing  services.  As a result of our recent bankruptcy filing on November 1,
2002,  we  have  substantially  halted  operations  of  NCI  Marketing  and  are
continuing limited  operations of NCI Hosting.  We are headquartered in Seattle,
Washington.

We  established  NCI  Hosting  and  NCI  Marketing  in  January  2001  out  of a
restructuring of our two then-existing  commerce networks,  known as the Network
Commerce  Consumer  Network,  which  aggregated  businesses  and shoppers over a
distributed  network of Web sites,  and the Network Commerce  Business  Network,
which enabled  businesses to engage in online  activities and transactions  with
other  businesses.  We also previously  operated an eBusiness  Services division
that provided  consulting,  custom commerce solutions,  and integrated marketing
services for businesses conducting commerce online, which we shutdown in January
2001 as part of the restructuring. In addition, as a result of the restructuring
efforts in 2001,  certain of our previous business units and offerings were sold
or shut down, including SpeedyClick.com,  GO Software,  Ubarter, Internet Domain
Registrars and FreeMerchant.com.

On November 1, 2002, the Company filed a petition for relief under Chapter 11 of
the United States  Bankruptcy Code in the United States Bankruptcy Court for the
Western  District of Washington.  The Company will ask the  Bankruptcy  Court to
allow it to oversee its operations as a  debtor-in-possession,  subject to Court
approval  of matters  outside  the  ordinary  course of  business.  No  trustee,
receiver  or  examiner  has  been  appointed,  and  the  Company  will  act as a
debtor-in-possession  while being subject to the  supervision  and orders of the
Bankruptcy  Court.  While in Chapter  11, we intend to  continue  to operate NCI
Hosting,  which provides domain registration,  hosting and other online business
services.  Additionally,  we  will  evaluate  several  alternatives,  including,
without  limitation,  management-directed  sales of one or more of our operating
divisions  as going  concerns,  the sale of portions of the business in separate
transactions,  and the  liquidation  of the  remainder of assets not used in the
operation of NCI Hosting. Regardless of any action taken while in Chapter 11, we
believe  that the  total  proceeds  of any or all  sales or  liquidation  of the
business and assets will not be  sufficient  to satisfy  fully the claims of our
creditors.  Accordingly,  we believe that the Company's  equity has no value and
that our existing  shareholders will not receive any distributions on account of
their  shares  of common  stock  under  any plan  that may be  confirmed  by the
Bankruptcy Court under Chapter 11.

Our  condensed  consolidated  financial  statements  for the nine  months  ended
September  30,  2002  have  been  prepared  on  a  going  concern  basis,  which
contemplates  the realization of assets and the settlement of liabilities in the
normal  course of business.  We have incurred a net loss of $7.4 million for the
nine months ended  September  30, 2002 and have  accumulated  deficits of $576.8
million as of September 30, 2002. The Company has  continuously  incurred losses
from  operations and as of September 30, 2002 has a working  capital  deficit of
$5.2 million.


                                       16
<PAGE>


Critical Accounting Policies And Estimates

Our critical accounting policies and estimates are as follows:

Revenue  recognition.  Since  restructuring in January 2001, we derived revenues
primarily from the sale of online  database  marketing  services  within our NCI
Marketing  group and domain  registration,  hosting  and other  online  business
services within our NCI Hosting group.  Revenues from online database  marketing
services  are  recognized  as the services  are  delivered  over the term of the
agreement, which typically ranges from one to three months. Revenues from domain
registrations  are recognized over the registration  term, which typically range
from one to three years.  Revenues from hosting and online business services are
recognized over the term of the agreements,  which are generally  twelve months.
Unearned  revenues  are  classified  as either  current  or  long-term  deferred
revenues depending on the future recognition of those revenues.

Revenues  have also been  generated  from fees to  license  our  technology  and
patents; transaction processing, fraud prevention, and online payment system, as
well as other e-commerce enabling  technologies.  Revenues may include licensing
fees,   per-transaction   fees  and,  in  certain  cases,  monthly  hosting  and
maintenance fees, which are recognized in the period earned.  Revenues generated
from technology  licensing are recognized in accordance with American  Institute
of Certified Public Accountants,  Statement of Position 97-2,  "Software Revenue
Recognition."

We  recognized  revenues  from barter  transactions  when earned.  We valued the
barter  transactions  based on the value of the consideration  received from the
customer or from the value of the services  provided to the customer,  whichever
was more readily determinable.  We recognized $0 and $1.4 million in revenues on
such  transactions  during the nine-month  periods ended  September 30, 2002 and
2001, respectively.

We recognized  revenues  from the sale of online  database  marketing  services,
leads and orders,  advertising and  merchandising in which we received equity in
the  customer.  We  valued  the  equity  received  from  these  transactions  as
cost-basis investments based on the value of the consideration received from the
customer or from the value of the services  provided to the customer,  whichever
was more readily  determinable.  We monitor  these  cost-basis  investments  for
impairment.  When cost-basis  investments are deemed to be permanently impaired,
the difference between cost and market value is charged to operations. There can
be no assurance that our investments in these early-stage  technology  companies
will be  realized.  We  recognized  $0 and  $205,000  in revenues on such equity
transactions  during the nine-month  periods ended  September 30, 2002 and 2001,
respectively. Many of these investments were written down in 2001.

Impairment of  cost-basis  investments.  We  periodically  evaluate  whether any
permanent declines in the fair value of our cost-basis investments has occurred.
Significant  judgments and estimates  must be made to assess whether a permanent
decline in fair value of investments has occurred and to estimate the fair value
of investments in privately held companies.  We determined  permanent impairment
in privately held  companies by examining the business  results and prospects of
each company, and when possible by reviewing recent private-placement valuations
for comparable companies and by obtaining  professional business valuations.  We
recognized permanent impairments of cost-basis investments of $150,000 and $28.2
million  in  the  nine-month   periods  ended   September  30,  2002  and  2001,
respectively.

Impairment  of  long-lived  assets and  goodwill.  We assess the  impairment  of
long-lived  assets and  goodwill  whenever  events or  changes in  circumstances
indicate  that the carrying  value may not be  recoverable.  Factors we consider
important which could trigger an impairment  review include the following:  poor
economic  performance  relative  to  expected  historical  or  projected  future
operating results;  significant negative industry,  economic or company specific
trends;  and changes in the manner of our use of the assets or the plans for our
business.  Where we determine  that the carrying  value of long-lived  assets or
goodwill may not be  recoverable  based upon the existence of one or more of the
above indicators of impairment,  we measure  impairment based on a comparison of
the  carrying  amount  of an asset  to  discounted  cash  flows  expected  to be
generated by the asset.  If such  analysis  indicates  assets are  impaired,  an
impairment is recognized equal to the amount by which the carrying amount of the
assets exceeds the discounted cash flows expected to be received.  We recognized
impairments  of  long-lived  assets and goodwill of $0 and $47.0  million in the
nine-month  periods ended September 30, 2002 and 2001,  respectively.  We cannot
predict whether the bankruptcy case will result in further impairment charges.


                                       17
<PAGE>

Restructuring and related impairments.  As part of our restructuring  efforts in
2001, we made  significant  estimates in determining the  appropriate  amount of
loss that  resulted  from the  shutdown of  business  units.  The loss  included
write-off of impaired goodwill,  intangible assets,  tenant improvements,  fixed
assets, software and supporting  technologies and infrastructure.  We recognized
restructuring and related  impairments of $0 and $65.9 million in the nine-month
periods ended September 30, 2002 and 2001, respectively.

Results of Operations

Overview.  In light of the recent instability within the technology and Internet
infrastructure  sectors and our current  position  within those  sectors and our
Chapter 11 filing,  we lack  visibility to our future revenues and related costs
of revenues. As a result of our recent bankruptcy filing on November 1, 2002, we
have substantially halted operations of NCI Marketing and are continuing limited
operations  of NCI Hosting.  Our best  estimate for 2002,  is that our revenues,
cost of revenues and operating  expenses  will be less than our 2001 levels.  We
expect that our sales and marketing,  research and  development  and general and
administrative  expenses will decrease in absolute dollars from 2001 to 2002 but
may increase as a percentage  of revenues.  We cannot  predict the impact of the
Chapter 11 filing on our on-going operations.

Revenues.  Total revenues for the three- and nine-month  periods ended September
30, 2002 were $1.2 million and $4.5  million  compared to $1.6 million and $18.0
million  for the  comparable  periods in 2001.  The  decrease in revenue was due
primarily  to the  shutdown of  ShopNow.com  and  SpeedyClick.com  during  first
quarter 2001, the elimination of product sales and the sale of Ubarter, Internet
Domain  Registrars,  GO Software and Free  Merchant  during  2001.  In addition,
revenues for first quarter 2001 included $1.4 million in barter transactions and
$205,000 in revenues on equity transactions (See "Note 2. Summary of Significant
Accounting  Policies:  Revenue  Recognition"),  for which no such  revenues were
recognized in 2002 or second and third quarters of 2001. However,  revenues from
continuing  operations (which excludes results from the businesses and divisions
shut down or sold during 2001) were $1.2 million and $4.5 million for the three-
and  nine-month  periods  ended  September 30, 2002 compared to $1.2 million and
$3.6 million for the comparable periods in 2001.

Cost of  Revenues.  The cost of revenues for the three- and  nine-month  periods
ended September 30, 2002 was $533,000 and $1.6 million  compared to $454,000 and
$4.7  million  for the  comparable  periods  in 2001.  The  decrease  in cost of
revenues was directly  attributable  to the decrease in revenues during the same
period and due to the shutdown of ShopNow.com and  SpeedyClick.com  during first
quarter 2001, and the sale of Ubarter,  Internet Domain Registrars,  GO Software
and Free  Merchant  during  2001.  However,  cost of  revenues  from  continuing
operations were $533,000 and $1.5 million for the three- and nine-month  periods
ended  September 30, 2002  compared to $387,000 and $554,000 for the  comparable
periods in 2001.

Gross Profit. Gross profit for the three- and nine-month periods ended September
30,  2002,  was  $666,000  and $2.9  million  compared to $1.1 million and $13.3
million for the comparable periods in 2001.

Sales and Marketing.  Sales and marketing  expenses  consist  primarily of costs
associated with marketing programs such as advertising and public relations,  as
well as salaries and  commissions.  Sales and marketing  expenses for the three-
and  nine-month  periods  ended  September  30, 2002 were $1.1  million and $4.1
million compared to $3.2 million and $27.2 million for the comparable periods in
2001.  The  decrease  was due  primarily  to a decrease  in sales and  marketing
personnel resulting from the restructuring in 2001 and related costs.

Research and Development. Research and development expenses consist primarily of
salaries and related costs  associated  with the development of new products and
services, the enhancement of existing products and services, and the performance
of quality  assurance and  documentation  activities.  Research and  development
expenses for the three- and  nine-month  periods  ended  September 30, 2002 were
$203,000  and  $835,000  compared  to $1.3  million  and  $8.7  million  for the
comparable  periods in 2001.  The  decrease was  primarily  due to a decrease in
personnel  and  related  costs  and  to  a  decreased  emphasis  on  development
activities.

General  and  Administrative.   General  and  administrative   expenses  consist
primarily of salaries and other personnel-related costs, including benefits, for
executive,   financial,   human  resources,   information   services  and  other
administrative  personnel,  as well as legal,  accounting  and insurance  costs.



                                       18
<PAGE>

General and administrative  expenses for the three- and nine-month periods ended
September  30, 2002 were $1.3 million and $3.8 million  compared to $2.7 million
and $9.9 million for the comparable  periods in 2001. The decrease was primarily
due to a decrease in personnel and related costs, including benefits,  offset by
an increase in legal fees. During second quarter 2002 we reduced the accrual for
self  insurance  by $300,000 due to the  reduction in employees  during the last
twelve months and the decrease in estimated  outstanding claims. As of September
30, 2002, we had approximately 43 employees, compared to approximately 80 at the
end of the third quarter 2001.  Following the filing of the Chapter 11 petition,
we  terminated  a total of 25  active  employees,  reducing  our  payroll  to 14
persons.

Amortization of Intangible  Assets.  Amortization of intangible assets resulting
from our prior  acquisitions  primarily  relate to the  amortization of customer
lists,  domain  names,  acquired  technology,  proprietary  concepts,  assembled
workforce and goodwill. Amortization of intangible assets expense for the three-
and nine-month periods ended September 30, 2002 was $2,000 and $162,000 compared
to $1.0  million and $24.4  million  for the  comparable  periods in 2001.  This
decrease  was due  primarily to the  decrease in  intangible  assets and related
amortization  expenses  from  the  sale  of  businesses  and the  write-down  of
intangible  assets.  Intangible  assets acquired in business  combinations  were
being amortized over a three-year  period,  which were fully amortized as of May
2002.

Stock-Based Compensation.  Stock-based compensation expense is primarily related
to amortization of deferred  compensation  resulting from stock option grants to
employees with an option exercise price below the estimated fair market value of
our common  stock as of the date of grant.  The amount of deferred  compensation
resulting  from these grants is  generally  amortized  over a one to  three-year
vesting period.  Additionally,  in April and July 2001, we offered two voluntary
stock option  exchange  programs to our  employees.  Under these  programs,  the
employees,  if they so chose,  could  exchange a certain number of highly priced
options for one option  priced at the then fair market  value.  In June 2002, we
initiated  another stock option exchange program in which 2,139,686 options were
exchanged for options  priced at $0.10 per share.  These stock option  repricing
and  voluntary  stock  option  exchange   programs  have  resulted  in  variable
accounting  treatment for the new priced stock  options.  Additionally,  certain
stock  option  grants made within nine months of the  re-pricing  and  voluntary
exchange programs resulted in variable  accounting  treatment for those options.
In June 2002,  4,595,000  stock  options  were granted to employees at $0.05 per
share.  The stock options  covered  under this grant will result in  stock-based
compensation   expense  that  will  be  amortized   over  the  vesting   period.
Additionally, the stock options covered under this grant will result in variable
accounting treatment.  Variable accounting treatment can result in unpredictable
stock-based  compensation  dependent on  fluctuations  in quoted  prices for our
common stock.  Stock-based  compensation  expense for the three- and  nine-month
periods  ended  September  30, 2002 was $626,000  and $1.9  million  compared to
$498,000 and $1.8 million for the  comparable  periods in 2001.  As of September
30, 2002,  we had $1.4  million of deferred  compensation  to be amortized  over
future periods.

Restructuring and Other Impairment Charges.  We had no restructuring  charges in
the three- and nine-month  periods ended  September 30, 2002 compared to charges
of $3.8 million and $65.9  million in the three- and  nine-month  periods  ended
September   30,  2001.   During  the  first   quarter  2001,  we  continued  our
restructuring  efforts, which commenced in fourth quarter 2000, and included the
shutdown of  SpeedyClick.com,  the sale of Ubarter Canada and the lay off of 245
employees.  The restructuring  charges in first quarter 2001 consisted primarily
of severance and related payroll charges of $580,000,  the write-off of impaired
goodwill and  intangible  assets of $55.2 million,  and of tenant  improvements,
fixed assets, software and supporting technologies and infrastructure related to
businesses that were shut down of $13.1 million. During the second quarter 2001,
we further  restructured our operations by selling Ubarter USA,  Internet Domain
Registrars  and GO Software  for total  proceeds of $6.0  million  cash and $3.0
million of  marketable  equity  securities  which were  subject to lockup  until
November 2001. We recorded a gain in second quarter 2001 of $5.8 million related
to these sales. The gains on these sales in the second quarter resulted from the
fact that we wrote down these  business  units by $23.6 million in first quarter
2001,  based on the best  available  evidence of fair market  value.  During the
third  quarter  2001,  we continued  our  restructuring  efforts  including  the
write-down of additional fixed assets and other items which resulted in a charge
of $3.8 million.  On an aggregate basis, for the nine months ended September 30,
2001, we recognized  losses totaling $18.5 million on the sale of these business
units.  Additionally,  we recognized gains totaling $3.1 million, primarily from
revising   estimates  on  unused   operating  leases  and  adjustment  of  other
liabilities related to businesses previously shut down in first quarter 2001. We
are unable to predict  whether  the  Chapter 11 case will  result in  additional
restructuring or impairment charges in the future.

Impairment of Certain  Long-Lived  Assets. As part of the restructuring in 2001,
we  determined  that goodwill and  intangible  assets  associated  with acquired
businesses had a carrying  value in excess of the discounted  cash flow receipts
of the business units.  As a result,  we recognized  impairment  charges of $3.8
million and 47.0 million during the three and nine-month periods ended September
30, 2001. We had no such  impairment  charges in the first nine months of fiscal

                                       19
<PAGE>

2002.  We are  unable to predict  whether  the  Chapter  11 case will  result in
additional impairment charges in the future.

Unusual Item - Settlement of Claim. During the first quarter 2001, we recorded a
charge  resulting  from a  settlement  of  potential  claims held by Mr.  Dwayne
Walker, the Company's Chairman,  and then Chief Executive Officer and President,
against us arising  from the  withdrawal  of Mr.  Walker's  shares of our common
stock from our secondary public offering completed in February 2000.

Loss on Sale of Investments.  Gain or loss on sale of investments occurs when we
sell certain of our  investments  in  marketable  equity  securities  and/or our
cost-basis  investments  for cash proceeds in excess or below our  cost-basis in
these  investments  at the time of  sale.  Loss on sale of  investments  for the
three- and  nine-month  periods  ended  September  30, 2002 was $0 and  $584,000
compared to $0 and $150,000 in the comparable periods in 2001.

Interest Income.  Interest income is earned on our cash and cash equivalents and
short-term  investments.  Interest income for the three- and nine-month  periods
ended September 30, 2002 was $4,000 and $32,000 compared to $90,000 and $713,000
in the comparable  periods in 2001.  Interest income decreased due to a decrease
in our cash and cash equivalents and short-term investments.

Interest  Expense.   Interest  expense  is  incurred  on  our  outstanding  debt
obligations  and the  accretion of our  convertible  promissory  note.  Interest
expense  for the three- and  nine-month  periods  ended  September  30, 2002 was
$51,000 and $156,000  compared to $445,000  and $6.0 million for the  comparable
periods in 2001.  Interest  expense  decreased due to reduced  outstanding  debt
obligations.

Other  Nonoperating  Income  (Expense).  Other  non-operating  expense  for  the
three-month period ended September 30, 2002 was $87,000 and other  non-operating
income for the nine-month  period ended September 30, 2002 was $721,000 compared
to income of  $61,000  and  $22,000  for the  comparable  periods  in 2001.  The
increase  between the periods was  primarily  due to a gain of $824,000 from the
sale of  FreeMerchant,  which sale  occurred in December 2001 but which gain was
recognized in the first and second quarters of 2002.

Impairment  of  Cost-Basis  Investments.  We  determined  that  certain  of  our
cost-basis  investments  were  permanently  impaired  based on our  analysis  of
changes  in  investees  business  operations  and  prospects.  As a  result,  we
recognized  an impairment  charge of $75,000 and $150,000  during the three- and
nine-month periods ended September 30, 2002 compared to a charge of $9.4 million
and $28.2 million in the comparable periods in 2001.

Extraordinary  Gains.  We have  negotiated  with  various  creditors  to  settle
liabilities for less than the recorded invoices.  These settlements  resulted in
gains of $1,000  and  $566,000  for the  three-  and  nine-month  periods  ended
September 30, 2002 and $6.5 million and $9.0 million for the comparable  periods
in 2001.  During the third quarter 2001, we  restructured  and reduced our $11.0
million convertible note from CVI. Under the terms of the restructuring, we paid
$2.2  million  and  issued  a $1.5  million  convertible  promissory  note.  The
promissory note will be due in January 2003 and is convertible, at any time into
common stock at an exercise price of $2.00 at the option of CVI. This settlement
resulted in an extraordinary gain of $6.5 million.

Net Loss.  Net loss for the three- and  nine-month  periods ended  September 30,
2002 was $2.7  million and $7.4  million  compared  to $18.5  million and $194.3
million  for the  comparable  periods  in 2001.  The net loss in the  three- and
nine-month  periods  ended  September  30, 2002 was due  primarily  to operating
expenses.  The net loss in the  three-months and nine months ended September 30,
2001 was due primarily to impairment  charges related to cost-basis  investments
and intangible assets and  restructuring  charges related to closure of business
units.

Liquidity and Capital Resources

On November 1, 2002, the Company filed a petition for relief under Chapter 11 of
the United States  Bankruptcy Code in the United States Bankruptcy Court for the
Western  District of Washington.  The Company will ask the  Bankruptcy  Court to
allow it to oversee its operations as a  debtor-in-possession,  subject to Court
approval  of matters  outside  the  ordinary  course of  business.  No  trustee,
receiver  or  examiner  has  been  appointed,  and  the  Company  will  act as a
debtor-in-possession  while being subject to the  supervision  and orders of the
Bankruptcy  Court.  While in Chapter  11, we intend to  continue  to operate NCI
Hosting,  which provides domain registration,  hosting and other online business



                                       20
<PAGE>

services.  Additionally,  we  will  evaluate  several  alternatives,  including,
without  limitation,  management-directed  sales of one or more of our operating
divisions  as going  concerns,  the sale of portions of the business in separate
transactions,  and the  liquidation  of the  remainder of assets not used in the
operation of NCI Hosting. Regardless of any action taken while in Chapter 11, we
believe  that the  total  proceeds  of any or all  sales or  liquidation  of the
business and assets will not be  sufficient  to satisfy  fully the claims of our
creditors.  Accordingly,  we believe that the Company's  equity has no value and
that our existing  shareholders will not receive any distributions on account of
their  shares  of common  stock  under  any plan  that may be  confirmed  by the
Bankruptcy Court under Chapter 11.

Since  inception,  we have  experienced  losses  and  negative  cash  flows from
operations.  For the nine months ended  September  30, 2002, we used net cash of
$2.9  million in  operating  activities  and funded the  shortfall  in cash flow
needed for operations primarily through the sale of investments. As of September
30, 2002, we had an accumulated  deficit of $576.8 million. We have financed our
activities  largely through  issuances of common stock and preferred stock, from
the  issuance  of short- and  long-term  obligations  and from  capital  leasing
transactions  for certain of our fixed asset  purchases.  Through  September 30,
2002,  our aggregate net proceeds have been $272.2  million from issuing  equity
securities and $52.4 million from issuing debt securities.

As of  September  30,  2002,  we had  $452,000  in cash,  cash  equivalents  and
short-term investments compared to approximately $2.0 million as of December 31,
2001, of which $57,000 of such amounts is  characterized  as restricted  cash to
secure our  obligation  under a certain  letter of credit.  As of September  30,
2002, we had $7,000 in marketable equity securities, compared to $2.5 million in
marketable  equity  securities as of December 31, 2001. The decrease in our cash
position is primarily attributable to losses from operations and payments on our
debt obligations  during the first nine months of 2002,  offset by the sale of a
substantial portion of our marketable equity securities portfolio.

Net cash used in operating activities was $2.9 million for the nine-month period
ended September 30, 2002, compared to $31.6 million for the same period in 2001.
The  decrease  was  due  primarily  to the  decrease  in our  net  loss  for the
nine-month  period ended  September 30, 2002 of $7.4 million  compared to $194.3
million  for the same  period in 2001.  The change in the amount of cash used in
operations  during the  comparable  nine-month  periods  was also  significantly
impacted by a decrease in depreciation  and amortization of $930,000 in the nine
months of 2002 (compared to $31.0 million for the same period in 2001), by $0 in
restructuring  and  impairment  charges in the nine months of 2002  (compared to
$71.3  million in the same period in 2001),  by $0 in  impairment  of long-lived
assets in the nine months of 2002 (compared to $47.0 million for the same period
in 2001) and by a decrease in the  impairment of  investments of $150,000 in the
nine months of 2002 (compared to $28.2 million for the same period in 2001).

Net cash provided by investing  activities  was $2.0 million for the  nine-month
period ended  September 30, 2002,  compared to $39.4 million for the same period
in 2001.  Amounts from  investing  activities  for the first nine months of 2002
consisted of $2.0  million in proceeds  from sales of  investments  and $106,000
from sales of short-term  investments,  partially offset by $87,000 in purchases
of certain  equipment.  In  contrast,  amounts for the first nine months of 2001
consisted  primarily of $38.6 million from sales of short-term  investments  and
$920,000 in proceeds from sales of investments.

Net cash used in financing  activities  was $584,000 for the  nine-month  period
ended  September  30, 2002  (consisting  primarily of $627,000 for  repayment of
long-term  debt  obligations),  compared to $16.7 million for the same period in
2001  (consisting  primarily of $10.1 million for repayment of a line of credit,
$1.8 million for repayment of a credit  agreement and $4.8 million for repayment
of long-term debt obligations). Neither of these credit facilities are currently
available to us.

In September  2000, we sold $20.0 million of  convertible  notes and warrants to
CVI, a private  institution,  pursuant to a securities purchase  agreement.  The
notes had a one-year  term.  In April 2001, we received a notice of default from
CVI for an alleged violation of certain covenants.  Subsequently,  in July 2001,
we restructured the convertible notes with CVI, with a face value of $11 million
and all warrants,  with a payment of $2.2 million and issuance of a $1.5 million
non-interest bearing convertible  promissory note, which is due January 2003 and
is  convertible,  at any time at the  option  of CVI,  into  common  stock at an
exercise  price of $2.00 per share.  CVI did not release  its claim  against us,
certain  current and former  officers  and  directors  for the alleged  security
violations and for fraudulent inducement.  Except as otherwise may be determined
by the Bankruptcy  Court, the stay protection  afforded by the bankruptcy filing
prevents any action from being taken against the Company assets.  In most cases,


                                       21
<PAGE>

pre-existing  litigation  and claims  will have the status of general  unsecured
claims in the Chapter 11 bankruptcy case.

In July 2001, we entered into an agreement with Cody Holdings Inc. to provide us
with up to $18 million in equity financing  ("Equity Line").  Under the terms of
the agreement,  we have the right,  but not the  obligation  during the 18-month
term of the Agreement,  to obtain equity  financing  from Cody Holdings  through
draw downs  under this Equity  Line,  and the  issuance of common  stock to Cody
Holdings  at a discount  to the market  price at the time of the draw down.  The
shares of common stock may be sold to Cody Holdings  during this period at times
and in amounts,  subject to certain minimum and maximum  volumes,  determined at
our discretion.  The agreement restricts our ability to make draw downs based on
a formula  calculated on our stock trading volume and stock price.  Accordingly,
if our stock price and trading volume fall below established levels, we will not
be able to draw down funds from the Equity Line. During the first nine months of
2002,  our stock  price  ranged from a high of $0.18 to a low of $0.01 per share
and our average daily trading volume was 11,678 shares.  Based on these numbers,
through  September  30, we were  unable to draw down any funds  from the  Equity
Line.  In  addition,  as a result of the  Chapter  11  filing,  there will be no
availability of funds under the Equity Line.


















                                       22
<PAGE>

FACTORS THAT MAY AFFECT OUR OPERATING RESULTS, BUSINESS AND STOCK PRICE

You  should  carefully   consider  the  risks  described  below  and  the  other
information  in this quarterly  report.  While we have attempted to identify the
primary known risks that are material to our business,  additional risks that we
have not yet  identified  or that we  currently  think are  immaterial  may also
impair our business operations.  These risks and uncertainties  include, but are
not limited to,  uncertainties  relating to our recent bankruptcy filing, and to
general economic and business conditions,  the availability and cost of capital,
government and regulatory policies and changes in the competitive environment in
which the Company  operates.  Our business may be  adversely  affected,  and the
trading  price of our common stock could  decline due to any of these risks.  In
assessing  these risks,  you should also refer to the other  information in this
quarterly report,  including the Condensed Consolidated Financial Statements and
related Notes and the more detailed information  regarding risks,  uncertainties
and other factors  discussed in the "Factors  Affecting  Our Operating  Results,
Business  and Stock Price"  section  included in our December 31, 2001 Form 10-K
filed on April 1, 2002 with the  Securities  and Exchange  Commission and in our
other quarterly and periodic reports filed with the Commission. The Company does
not undertake to update any forward-looking statements in this Form 10-Q or with
respect to matters described herein.

Factors that you should consider include, among others, the following:

     o    the impact of our filing of a bankruptcy  petition  under  Chapter 11,
          including   effects  on  our  business  and   operations,   employees,
          suppliers, creditors, strategic partners and customers;

     o    our belief that the proceeds of any or all sales or liquidation of our
          business and assets will not be sufficient to satisfy fully the claims
          of our creditors,  and that our existing shareholders will not receive
          any distributions on account of their shares of common stock under any
          plan that may be confirmed by the Bankruptcy Court under Chapter 11;

     o    our history of operating losses and negative cash flows;

     o    the recent  significant  loss of employees  and our future  ability to
          retain and attract qualified personnel;

     o    changes in our business model and strategy;

     o    our   inability   to   generate   sufficient   revenues   to   achieve
          profitability;

     o    disruptions in our business; and

     o    competition.






                                       23
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We currently have  instruments  sensitive to market risk relating to exposure to
changing  interest  rates and  market  prices.  We do not enter  into  financial
instruments  for trading or  speculative  purposes and do not currently  utilize
derivative financial instruments.  Our operations are conducted primarily in the
United States and as such are not subject to material foreign currency  exchange
rate risk.

The fair  value of our  investment  portfolio  or  related  income  would not be
significantly  impacted  by either a 100 basis  point  increase  or  decrease in
interest rates due mainly to the  short-term  nature of the major portion of our
investment  portfolio.  All of the  potential  changes  noted above are based on
sensitivity  analyses  performed  on our  investment  portfolio  balances  as of
September 30, 2002.

ITEM 4. CONTROLS AND PROCEDURE

Within the 90 days prior to the filing  date of this  report,  we carried out an
evaluation,  under the supervision and with the participation of our management,
including  our Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our
Chief  Executive   Officer  and  Chief  Financial  Officer  concluded  that  our
disclosure  controls  and  procedures  are  effective.  Disclosure  controls and
procedures  are  controls  and  procedures  that are  designed  to  ensure  that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded,  processed,  summarized  and reported  within the time
periods specified in the Securities and Exchange Commission's rules and forms.

There have been no  significant  changes in our  internal  controls  or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation.












                                       24
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS..

Reference is made to "Item 3. Legal  Proceedings" in the Company's Annual Report
on Form 10-K for the year ended  December  31, 2001 and the  Company's  Form 8-K
filed on September  24, 2002.  Except as  previously  disclosed in reports filed
with the SEC,  there have been no material  developments  with respect to any of
the legal proceedings previously disclosed.

From  time to time we are  and  expect  to  continue  to be,  subject  to  legal
proceedings  and  claims in the  ordinary  course of  business.  If the  Company
suffers  an  adverse  judgment  in any  such  legal  proceeding  or if we  incur
significant  expenses to defend against such proceedings,  it will likely have a
material  adverse effect on our results of operations  and financial  condition;
and could affect our ability to continue business on as a going concern.


ITEM 5: OTHER INFORMATION

On  November 6, 2002,  Network  Commerce  Inc.  received  notification  from its
independent  auditors,  Moss Adams  LLP,  of its  decision  to resign and of the
cessation of the  client-auditor  relationship.  The Company  previously engaged
Moss  Adams  LLP as its  independent  auditors  effective  as of April 4,  2002,
subsequent  to the filing of the  Company's  Annual  Report on Form 10-K for the
year ended  December  31, 2001.  The Company has not retained a new  independent
auditor to replace Moss Adams LLP.

From the time of their appointment on April 4, 2002, there were no disagreements
between the Company and Moss Adams LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements,  if not  resolved  to Moss Adams LLP's  satisfaction,  would have
caused  Moss  Adams  LLP  to  make  reference  to  the  subject  matter  of  the
disagreement in connection with its reports. In addition, from the time of their
appointment on April 4, 2002 through November 6, 2002, there were no "reportable
events" (as defined in Item  304(a)(1)(v)  of Regulation S-K  promulgated by the
Securities and Exchange Commission (the "Commission")).

Moss  Adams LLP has not  issued  any audit or review  reports  on the  Company's
financial  statements  for the past two fiscal years ended December 31, 2001 and
2000 or any interim period. Accordingly, Moss Adams LLP has not issued any audit
or review reports that contained an adverse opinion or disclaimer of opinion, or
were modified as to uncertainty, audit scope, or accounting principles.

The Company has provided Moss Adams LLP with a copy of the  disclosures  made in
this Part II, Item 5 of its Quarterly  Report on Form 10-Q in advance of the day
that these  disclosures were filed by the Company with the Commission.  Included
as Exhibit  16.1 to this  Quarterly  Report on Form 10-Q is a copy of Moss Adams
LLP's letter stating its agreement with such statements.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

Number     Description

16.1       Letter of Moss Adams LLP regarding change in certifying accountant

99.1       Certification  pursuant to 18 U.S.C.  Section 1350, as adopted
           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(b)  Reports on Form 8-K

The  Company  filed a Form 8-K on  September  24, 2002 to report that the United
States  District  Court for the Western  District of Washington  issued an order
dismissing   with   prejudice   the   consolidated   securities   class  actions
(consolidated under case no. C01-0675L) against Network Commerce Inc. and Dwayne
Walker,  the  Company's  Chairman  of the Board of  Directors  and former  Chief
Executive Officer and President.

                                       25
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized on November 12, 2002.

                                     NETWORK COMMERCE INC.



                                     By: /s/ N. Scott Dickson
                                         _______________________________
                                         N. Scott Dickson
                                         Chief Executive Officer and
                                         Chief Financial Officer















                                       26
<PAGE>

      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER


     I, N. Scott Dickson, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Network Commerce
          Inc.

     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  in  order  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 registrant 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 to the
          audit  committee of the  registrant's  board of directors  (or persons
          performing the equivalent function):

          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
               weaknesses 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.

     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   actions  with  regard  to
          significant deficiencies and material weaknesses.


Dated: November 12, 2002             By:  /s/ N. Scott Dickson
                                          ________________________________
                                          N. Scott Dickson
                                          Chief Executive Officer and
                                          Chief Financial Officer
                                         (Principal Executive Officer and
                                          Principal Financial Officer)





                                       27
<PAGE>




                                 EXHIBIT INDEX






Number     Description

16.1       Letter of Moss Adams LLP regarding change in certifying accountant

99.1       Certification  pursuant to 18 U.S.C.  Section 1350, as adopted
           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.