NETWORD INC, SB-1/A, 2000-02-04

NETWORD INC
SB-1/A, 2000-02-04
BUSINESS SERVICES, NEC

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As filed with the Securities and Exchange Commission on February 4, 2000

Registration No. 333-86873

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 4

FORM SB-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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NETWORD, INC.
(Name of Small Business Issuer in its Charter)

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<TABLE>
<CAPTION>
<S> <C> <C>

Delaware 51410 52-2143430
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.
</TABLE>

702 Russell Avenue, Third Floor
Gaithersburg, Maryland 20877
1-800-NETWORD
(Address and Telephone Number of Principal
Executive Offices and Principal Place of Business )

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Michael Wise
President and Chief Executive Officer
702 Russell Avenue, Third Floor
Gaithersburg, Maryland 20877
1-800-NETWORD
(Name, Address, and Telephone number of Agent for Service)

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Copies to:

Russell S. Berman, Esq.
Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798

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Approximate date of Proposed Sale to the Public: From time to time after
the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

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CALCULATION OF REGISTRATION FEE

<TABLE>
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============================== ======================= ========================== ========================== ======================
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price per Share Aggregate Offering Price Registration Fee
<S> <C> <C> <C> <C>
- ------------------------------ ----------------------- -------------------------- -------------------------- ----------------------
Common Stock, $.01 par value 6,351,148 shares (1) $0.875(2) $5,557,254.50(2) $1,650.40(3)
============================== ======================= ========================== ========================== ======================
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(1) Includes 1,650,000 outstanding shares and 4,701,148 shares issuable upon
exercise of outstanding warrants. Pursuant to Rule 416, an indeterminate
number of additional shares are registered for issuance in the event that
antidilution provisions in the outstanding warrants become operative.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the last reported
bid and asked prices of the Common Stock in the over-the-counter-market, as
reported by the National Quotation Bureau, on September 7, 1999.

(3) Previously paid.

_____________________

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date or dates as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.

Disclosure alternative used (check one): Alternative 1 _____
Alternative 2 __X__

<PAGE>

PROSPECTUS

NETWORD, INC.

Common Stock

6,351,148 shares

This prospectus is being used in connection with the resale by certain of our
stockholders of up to:

o 4,701,148 shares of our common stock issuable upon the exercise of
outstanding redeemable warrants

o 1,650,000 shares of our outstanding common stock

The selling stockholders may sell shares either directly to purchasers or
through brokers, dealers or agents. We will receive no proceeds from the sale of
shares by the selling stockholders, although we may receive up to $5,876,435
from the exercise of the outstanding warrants before or in connection with the
resale of the underlying shares.

Shares of our common stock are traded in the over-the-counter-market
through the NQB Pink Sheets under the symbol "NTWD." On February 2, 2000 the
average of the last reported bid and asked prices of our common stock in the
over-the-counter-market, as reported by the National Quotation Bureau, was
$1.7875 per share.

Investment in our common stock involves substantial risks. See "Risk Factors"
beginning on page 3.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state or foreign jurisdiction where the offer or sale is not
permitted.

The date of this prospectus is February 4, 2000.

<PAGE>

TABLE OF CONTENTS

Page No.

About Netword, Inc. ....................................................... 2

Risk Factors .............................................................. 3

Our failure to achieve a sustained revenue rate in excess
of $2,500 per month since we began sales in May 1997 may
indicate that the Netword System is not sufficiently useful to
Internet users to support a successful business ......................... 3

Our inability to obtain additional financing might require
us to curtail the marketing program which we regard as
critical to our business and could force us to cease operation .......... 3

We are appealing a decision that could impair the
protective scope of our patent. Denial of our appeal would
increase our vulnerability to competition ............................... 3

The staff of the Securities and Exchange Commission has
indicated that it believes the finder in a recent securities
offering by us may have acted as an unregistered broker-dealer
in violation of the Securities Exchange Act. If this violation
were established, it would subject us to a potential
repurchase obligation of close to $1 million that could
significantly reduce our working capital and make it difficult
for us to continue in business .......................................... 3

Our ability to capture the market share on which our
business depends will be severely hampered by the presence in
the market of branded and other competitors, including some
that already dominate related markets and may restrict our
access to potential Netword users and registrants. If we do
not achieve a significant market share and a corresponding
revenue base, we may be unable to attract further investment
and may not have sufficient funds to sustain operations ................. 4

The Netword System could quickly become obsolete if we fail
to accommodate rapidly changing Internet technologies. If the
Netword System becomes obsolete we may be forced to expend
significant sums to update the system or, alternatively, cease
operation ............................................................... 4

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Existing rights to acquire shares of our common stock
represent nearly 50% of our fully-diluted shares and could
hamper our ability to raise additional equity capital which we
need to fund future operations and continue in business ................. 4

Less than 20% of the total of the shares of our common
stock issued or reserved for issuance is currently eligible
for public sale, trading volume is extremely limited, and
there are no analysts who follow our shares, dealers who hold
significant positions in our shares or past or present
underwriters of our shares. In light of these factors, the
public market for our common stock is illiquid and could be
overwhelmed as virtually all of our shares that are currently
issued or are issuable pursuant to existing rights become
eligible for public sale over a period that may be as short as
12 months. Consequently, purchasers of shares offered by this
prospectus who desire to resell their shares may find it
difficult to find buyers and/or to sell shares at reported
trading prices .......................................................... 4

Forward Looking Statements ................................................ 6

Our Business and Property ................................................. 7

Selling Stockholders ...................................................... 17

Plan of Distribution ...................................................... 24

Use of Proceeds ........................................................... 25

Directors, Executive Officers and Significant Employees ................... 26

Disclosure of Commission Position on Indemnification for
Securities Act Liabilities ................................................ 28

Remuneration of Directors and Officers .................................... 29

Security Ownership of Management and Certain Security Holders ............. 31

Interest of Management and Others in Certain Transactions ................. 35

Securities Being Offered .................................................. 35

Description of Securities ................................................. 35

Significant Parties ....................................................... 40

Legal Proceedings ......................................................... 41

Legal Matters ............................................................. 42

Experts ................................................................... 42

Where You Can Find Additional Information ................................. 42

Index to Financial Statements ............................................. F-1

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ABOUT NETWORD, INC.

Netword, Inc. owns and operates the Netword System, a patented Internet
utility which offers a simple, consumer-friendly way to reach any destination on
the Internet. The Netword System enables individual and business users of the
Internet to create simple and memorable words, phrases, numbers or other
sequences of characters, called Networds, to use as Internet keywords. Each
Netword is an alias or nickname for one of the more complex Internet addresses
known as universal resource locators or URLs.

Unlike limited keyword systems within the infrastructure of a proprietary
network, such as America-On-Line's keyword system, or bookmarks generated by
Internet users for use on their own computers, Networds are universal and may be
used from any computer linked to the Internet.

The Netword System is currently available and in use, but our business is
still in an early stage. We expect to earn revenues from registration of
specific Networds by commercial Web resource owners, payments by these owners
for hits on their sites, sales of banner ads and other advertising on our Web
site, and expanded service offerings to users of FREE Networds.

Our principal offices are located at 702 Russell Avenue, Third Floor,
Gaithersburg, Maryland 20877. Our telephone number is 1-800-NETWORD.

As used in this prospectus, the terms "we", "us" and "Netword" refer to
Netword, Inc. and its predecessors, unless the context otherwise requires.

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RISK FACTORS

Our failure to achieve a sustained revenue rate in excess of $2,500 per month
since we began sales in May 1997 may indicate that the Netword System is not
sufficiently useful to Internet users to support a successful business.

Although an early version of the Netword System was introduced on the Internet
more than 30 months ago, we have not achieved significant revenues or revenue
growth for any period. Our failure to develop revenues will result in the
continuation of operating deficits for a potentially indefinite period. From
December 2, 1996 through September 30, 1999, we achieved total revenues of
$58,427 and incurred cumulative net losses of $3,855,068.

Our inability to obtain additional financing might require us to curtail the
marketing program which we regard as critical to our business and could force us
to cease operation.

We cannot accurately predict the cost of achieving our business and marketing
plans, but we will certainly need to raise additional capital to implement our
marketing strategy and achieve sufficient sales to become self-sustaining. If we
cannot raise sufficient financing when we need it, we will be unable to complete
our marketing strategy and may be forced to cease operation.

We are appealing a decision that could impair the protective scope of our
patent. Denial of our appeal would increase our vulnerability to competition.

As discussed in detail under "Legal Proceedings" on page 41, we are currently
engaged in litigation to enforce our patent. An adverse decision on our pending
appeal in that litigation could impair the protective scope of our patent.

The staff of the Securities and Exchange Commission has indicated that it
believes the finder in a recent securities offering by us may have acted as an
unregistered broker-dealer in violation of the Securities Exchange Act. If this
violation were established, it would subject us to a potential repurchase
obligation of close to $1 million that could significantly reduce our working
capital and make it difficult for us to continue in business.

In July and August of 1999, we sold $977,500 of common stock and warrants to
accredited investors in an offering pursuant to Rule 506 under the Securities
Act. Mr. David Segal introduced us to most of the investors and we issued him
warrants as a finder's fee. The staff of the Securities and Exchange Commission
has advised us that it believes that Mr. Segal may have acted as an unregistered
broker-dealer in violation of Section 15 of the Securities Exchange Act by
introducing us to the investors and receiving a finder's fee. If Mr. Segal acted
as an unregistered broker-dealer in violation of the Securities Exchange Act,
then under Section 29 of the Securities Exchange Act (1) the warrants we issued
to Mr. Segal as a finder's fee would be voidable by us, and (2) each investor
introduced to us by Mr. Segal would have the right to rescind his purchase.
While we do not contemplate making a rescission offer, we will notify each of
the investors introduced to us by Mr. Segal of the position of the Securities
and Exchange Commission and the investor's potential rights under Section 29 of
the Securities Exchange Act. If all of the investors in the offering, including
those who were not introduced to us by Mr. Segal, were able to successfully
rescind their investments, our working capital would be significantly reduced
with a potentially adverse impact on our ability to continue in business.

3
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Our ability to capture the market share on which our business depends will be
severely hampered by the presence in the market of branded and other
competitors, including some that already dominate related markets and may
restrict our access to potential Netword users and registrants. If we do not
achieve a significant market share and a corresponding revenue base, we may be
unable to attract further investment and may not have sufficient funds to
sustain operations.

Keyword systems tend to be mutually exclusive, and the competition among
providers of such systems to capture users or access to users in this early
stage of the market's development may determine the ultimate success of each of
the competing systems. We currently face competition from a number of recognized
industry players, including Netscape, Microsoft and America-On-Line, as well as
RealNames. Most of our actual and potential competitors are better situated,
financially and by virtue of brand recognition, to market competing products.
Unless we are able to rapidly establish market share and/or marketing
relationships which give us a strong competitive position, we may become
irrelevant to, or limited to a small portion of the Internet keyword system
market.

The Netword System could quickly become obsolete if we fail to accommodate
rapidly changing Internet technologies. If the Netword System becomes obsolete
we may be forced to expend significant sums to update the system or,
alternatively, cease operation.

Internet technologies are constantly evolving. If we fail to foresee and respond
quickly and successfully to technological advances in the systems by which the
Internet operates, the Netword System could become useless and inoperative.

Existing rights to acquire shares of our common stock represent nearly 50% of
our fully-diluted shares and could hamper our ability to raise additional equity
capital which we need to fund future operations and continue in business.

We have issued outstanding options, warrants and other rights to acquire a total
of 15,963,271 shares of our common stock at prices from $0.16 to $1.50 per
share. Included in these rights are outstanding warrants held by Net2Phone, Inc.
to purchase an indeterminate number of shares representing 15% of our
fully-diluted common stock for approximately $3,000,000. If all of these
warrants and other rights were to be exercised as of a current date, the
underlying shares would constitute approximately 47% of our outstanding common
stock. The existence of these potentially dilutive rights could interfere with
our efforts to raise additional equity capital.

Less than 20% of the total of the shares of our common stock issued or reserved
for issuance is currently eligible for public sale, trading volume is extremely
limited, and there are no analysts who follow our shares, dealers who hold
significant positions in our shares or past or present underwriters of our
shares. In light of these factors, the public market for our common stock is
illiquid and could be overwhelmed as virtually all of our shares that are
currently issued or are issuable pursuant to existing rights become eligible for
public sale over a period that may be as short as 12 months. Consequently,
purchasers of shares offered by this prospectus who desire to resell their
shares may find it difficult to find buyers and/or to sell shares at reported
trading prices.

4
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The public market for our stock is currently limited to the NQB pink sheets,
where there is little volume and only 6,000,000 of our shares plus the
approximately 6,000,000 shares offered by this prospectus are eligible for
public sale. In the absence of reports from analysts and/or support from
dealers, the development of additional liquidity in the market cannot be
predicted. During the next 12 months, the lapse of restrictions on the sale of
other outstanding shares and the exercise of outstanding rights to acquire
shares could increase the total shares of our common stock eligible for public
sale by 21,318,047 to a total of 33,669,195 shares. Efforts by stockholders to
sell a significant number of these additional shares could (1) prevent other
stockholders from selling their shares when they desire to do so and (2) compel
other stockholders who desire to sell their shares to accept prices
substantially below those quoted by dealers.

5
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FORWARD LOOKING STATEMENTS

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

<PAGE>

OUR BUSINESS AND PROPERTY

The Netword System

We believe that the growth of the Internet, resulting in the
proliferation of its resources and the increasing scarcity of user-friendly
URLs, has created a business opportunity for Internet keyword systems. The
Netword System has been developed to take advantage of this opportunity. In
short, Networds are meant to make it easier for people to navigate the Internet.
We offer all Internet users the opportunity to use the Netword System without
charge to reach all Internet resources.

Any Internet user or owner of an Internet resource can create a Netword
to facilitate direct access to a specific Internet resource. After logging on to
the Internet, a user merely enters an existing Netword, like The Yankees or
SesameStreet, in any Netword-enabled browser or slot and is instantly
transferred to the Internet address corresponding to the Netword. If the entry
is not an existing Netword, the Netword System offers the user a variety of
default options which may include the use of search engines to seek out URLs
employing the entered term and the opportunity to create a Netword for the
desired site.

A user may enter Networds at the user's own Netword-enabled browser,
our Web site at www.netword.com, Netword slots at sites belonging to other
entities operating under arrangements with us, or a Netword-enabled slot on the
user's home page. A user can Netword-enable a browser or homepage by installing
our software agent, which is available as a free one-minute download from our
own Web site. As soon as the download is completed, the user can access any Web
site for which a Netword exists, or for which the user creates a FREE Netword,
merely by entering the Netword in the user's own browser.

To date, our promotional and marketing strategy has focused on
establishing teaming agreements with Web communities, such as affinity groups
which offer various Web-related services to their members, through which
Internet users can learn about Networds and create and use FREE Networds. We
believe that as more Internet users employ our system to help navigate the Web,
more commercial Web resource owners will recognize a need to register Networds
to encourage access to their sites.

An early version of the Netword System was introduced on the Internet
in May, 1997, and we have continued to improve it since then. Until recently,
however, we lacked the resources to market Networds. We have used the proceeds
of recent financings to initiate a marketing effort, which is described below.
Nevertheless, we continue to be a development stage business. Our ability to
generate revenues sufficient to sustain the Netword System and to achieve
profitability will probably depend initially upon the outcome of our expanded
marketing efforts.

Our History

Netword, Inc. is a Delaware corporation which was formed on February
18, 1999. Immediately following its formation, it merged with Netword Inc., LLC,
a Delaware limited liability company which owned and operated the Netword
System. The sole purpose of the merger was to reorganize Netword LLC as a
corporation.

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Netword LLC was formed in December, 1996, when it acquired the assets
of Birdshell Corporation, L.L.C., comprising various computer programs and
systems that were key elements of the Netword System as it then existed.
Birdshell had been formed in April, 1995, to develop and market the concept that
became the Netword System.

Industry Background

According to reports published by International Data Corporation,
commerce conducted over the Web will exceed $1 trillion by 2003 and the number
of users who make purchases over the Web will increase from 31,000,000 in 1998
to more than 183,000,000 in 2003. Forrester Research, Inc. estimates that online
advertising will reach $33 billion by 2004.

The Netword Opportunity And Solution

We expect the increased use of the Internet to create a heightened
demand for quick, easy and direct access to Web resources. The proliferation of
complex URLs is an obstacle to satisfaction of this demand.

The protocol currently governing the registration of Internet domain
names requires the inclusion of .com or another suffix in every URL that
identifies a top level Internet domain. Creating a separate top level domain
name for every resource is theoretically possible but is not currently
practicable because of constraints resulting from the way the Internet is
administered and the systems through which it operates. Below the level of the
top level domain names, the density and diversity of information available on
many Web sites and the methods of indexing and accessing information within
these sites lead to the denomination of various levels and sublevels of
identification. The layering of resources within any site can result in extended
URLs characterized by multiple words or characters or combinations of words or
characters separated by reverse slashes. As these URLs become increasingly
lengthy and complex, they become increasingly difficult to remember and, when
identified or remembered, are subject to greater risk of faulty entry.

It seems obvious that commercial Web resource owners can benefit from
systems which simplify the names by which their customers can identify and
access their resources.

We believe Networds offer an efficient and affordable solution. Using
the Netword System, commercial Web resource owners can identify each of their
resources with a Netword which may be a familiar product or service name or
slogan that is easy to remember. The entry of the designated Netword will
provide direct access to the resource.

Creating Networds

A Netword for any URL may be created or edited at our Web site at any
time by following a simple on-line procedure. FREE Networds may be created
without charge. Registered Networds may be created by opening an account with us
and following a registration procedure described at our Web site,
www.netword.com. A FREE Netword may, however, be bumped or displaced by a
Registered Netword. Networds can be created for both commercial and
non-commercial purposes.

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To create a Netword:

o The user enters the proposed name, phrase or number into
our database by following simple online instructions at
our Web site.

o If the proposed name, phrase or number is not available,
either because of trademark restrictions or prior use for
another URL, the Netword System immediately reports the
conflict and offers the user the option to propose an
alternative.

o The creation of the new Netword is confirmed to the user
in its browser and by e-mail and becomes instantly
available to all other users.

o The user who created a Netword can revisit our Web site to
edit or change the Netword online at any time.

Our terms and conditions are printed in full on our Web site and
explain, among other things, that Networds are registered on a priority basis to
countries, government agencies, established companies, public figures, and
registered holders of trademarks, service marks, and other similar intellectual
property rights. Subject to these priorities, Networds are registered on a
first-come, first-served basis.

To support our policy of protecting registered trademarks and trade
names, before a Netword is created we conduct a rapid online search of the U.S.
Patent and Trademark Office files to determine if use of the proposed Netword
will conflict with a federally registered trademark or tradename. We do not
conduct any other independent investigation, such as an investigation of
registered corporate or other business names or state trademark or tradename
filings, to seek out potentially conflicting rights to the use of a proposed
Netword.

Registration of Networds

Owners of Web resources can register a Netword for any of their sites
for a fee of $30 per year. Volume discounts are available. Branch Networds or
subcategories of Networds (for example, a name like cnnfood as opposed to
www.cnn.com/food) can be registered for $10 per Netword per year. Registrants
agree to pay us $.03 per Netword-generated hit on each Web site in excess of
1,000 hits per month. Networds can be registered on a first-come first-served
basis, subject to our standard terms and conditions.

Revenues, Extent of Netword Use and Expenditures

Our revenues for the first nine months of 1999 were $7,677 and were
derived exclusively from Netword registrations.

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Approximately 250,000 Networds are available on the Netword System.
Specifically:

o We have placed approximately 55,000 familiar Networds in our
database. These Networds provide links to a number of U.S.
businesses, TV and radio stations, mainstream publications,
manufactured products, government sites, movie and TV programs and
sports teams. We receive no payment for the creation or use of these
Networds.

o Internet users have created approximately 200,000 FREE Networds.

Over the two fiscal years ended December 31, 1998, we spent
approximately $746,000 for research and development.

Marketing Strategy

Our marketing strategy is to promote the convenience of FREE Networds
in order to increase the number of Internet users who are familiar with
Networds. As substantial numbers of users come to understand the benefits of
Networds, we will market that information to owners of commercial Web resources
willing to pay appropriate fees to register Networds for their resources.

To implement our marketing strategy, we have begun and intend to
continue to expose the Netword System to consumers through programs that:

o Promote and give access to the Netword System on Web community sites
like Nettaxi, GeoCities, Tripod, FortuneCity, Angelfire and
Homestead. Although we have contacted a number of Web communities,
we currently only have one agreement with Nettaxi.

o Promote and advertise Networds in online and offline publications,
and on television and radio.

o Establish alliances with Internet service providers like Verio. At
present, we have no such alliances.

o Establish alliances with owners of search engines, especially those
willing to provide a Netword logo and slot on their sites and
promote Networds to users and customers who establish Web sites on
their sites. At present we have no such alliances.

We have also created and continue to expand our existing Logo program,
an initiative to assist not-for-profit organizations in promoting their
Networds. This program allows members to display a Netword logo and slot on
their sites to enable visitors to download our software and enter Networds
directly in their own browsers. Revenue sharing is not offered as part of this
program. Approximately 25 organizations are currently participating in this
program and have been important factors in driving traffic to our Web site.

<PAGE>

From November, 1998 until June, 1999, we had an active teaming
agreement with GeoCities, Inc., a Web community, under which GeoCities promoted
FREE Networds to its members. Under this agreement we paid GeoCities certain
fees and a percentage of related revenues. This agreement was terminated
following Yahoo!, Inc.'s acquisition of GeoCities in June, 1999. The GeoCities
relationship resulted in more than 2,000,000 hits to our Web site by GeoCities
members, and they created more than 50,000 FREE Networds which are linked to
their personal GeoCities Web pages. More than 3,000 members placed our logo and
slot on personal homepages at their GeoCities Web sites.

Apart from occasional press releases, several articles about us in
local papers and trade publications and publicity generated by our Web site and
under our teaming agreement with GeoCities, there has not been significant
publicity about the Netword System.

Net2Phone Agreement. In connection with our efforts to expand the
distribution of the Netword System, we have recently entered into an agreement
with Net2Phone, Inc. under which a newly developed version of our software agent
will be shipped with Net2Phone's software, together with our logo and slot and a
direct link to our Web site. Net2Phone's software enables low-cost high quality
calls to be placed from computers, telephones or fax machines to any world wide
telephone or fax machine.

Under the new agreement, we granted Net2Phone rights to freely register
Networds to facilitate use of its system. The agreement also provides that
Net2Phone is responsible for maintaining a database of URLs and associated phone
numbers and is entitled to 50% of all revenues attributable to the registration
and use of Networds sourced from Net2Phone's Web site. The agreement has an
initial one-year term expiring September 29, 2000, subject to renewal for
successive additional one-year terms and to early termination by Net2Phone. In
connection with the new agreement, we granted Net2Phone warrants to acquire up
to 15% of our fully-diluted common stock for approximately $3,000,000.

Nettaxi Agreement. As part of our marketing efforts to promote and give
access to the Netword System on Web community sites, we recently entered into an
agreement with Nettaxi Online Communities, Inc., a community and portal Web site
with over 120 million page views per month. Pursuant to the agreement, Nettaxi
will be obligated to promote the Netword System, enable its users to use and
create Networds and place our logo, slot and a direct link to our Web site on
its Web site. The agreement also provides that Nettaxi is entitled to receive
30% of revenues received for the first year, and 20% of revenues received for
the second year, from customers who open an account at our Web site through a
link or button from the Nettaxi Web site. We have guaranteed to Nettaxi a
revenue share amount equal to $5,000 per month for the first year. The agreement
has an initial one-year term expiring November 12, 2000, subject to renewal for
successive additional one-year terms and to early termination by either party.

The Netword Directory

In July 1999, we introduced the Netword Directory, an on-line facility
at our Web site which organizes all Networds by subject categories. We intend to
offer advertising in this directory as a potential additional source of revenue.

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<PAGE>

Netword System Components

The Netword System currently runs on our own cluster of five PCs
installed at the McLean Virginia facility of Exodus Communications, Inc., a
tier-1 communications and co-location provider. We also maintain a back-up
cluster of PCs at our Maryland offices. Our current services agreement with
Exodus is for a one-year period, expiring August 23, 2000, subject to successive
one year renewals. The cost of this services agreement is $4,830 per month. This
services agreement provides us with round the clock Internet access, manned
security and technical monitoring.

In June, 1999, we purchased additional equipment to facilitate
installation of additional network access points for Internet connections in
North America and Europe to provide additional redundancy and assure effective
administration of traffic.

Most of the non-proprietary components of the hardware and operations
software in the Netword System are generally available from conventional
commercial sources. The custom program software for the Netword System is
written by our senior software engineers and maintained in a version control
database, which is backed up and stored in a secure facility. Although we rely
for programming on our current senior software engineers, we believe we can find
comparable substitute engineers if and when we need them.

We believe that the operation of the Netword System is subject to
minimal security risks. Our PC cluster is accessible only by layered passwords.
If a fire or other major disaster were to destroy our co-location provider's
facility, we believe that we could provide effective substitute service within
24 to 48 hours through the PC cluster at our offices and could return to 100%
capacity with an alternate co-location provider within one to two weeks. If one
of the five PCs in a cluster fails, any of the other four has capacity to serve
as an immediately effective substitute. We have established a firewall which
limits access to the Netword System and helps to insulate it from viruses.

Impact of Year 2000

The year 2000 issue, commonly referred to as Y2K, is a result of the
way some computer systems store dates. In many cases, when a date is stored by a
computer, a two digit field has been used to store the year (i.e., 01/01/99 =
January 1, 1999). The system assumes that the first two digits in the year field
are "19." With the end of the century approaching, those same systems should
reflect 01/01/00 as being "January 1, 2000." However, a non-compliant system
will read 01/01/00 as January 1, 1900.

We have been focused on year 2000 issues since our inception. The
hardware and software we currently use to operate our business was developed or
purchased with Y2K readiness in mind. However, none of our employees or
consultants was hired for the primary purpose of assessing Y2K issues. In the
case of purchased software and hardware we relied solely on representations of
our vendors as to the Y2K capabilities of their respective products. For our
developed software, we relied solely on the capabilities of our senior software
engineers. In addition, we have relied solely on the assurances of our
co-location provider, who provides us with Internet access, that it is Y2K
compliant.

We do not have external costs specifically allocated to and do not
break down our internal costs for time spent on Y2K issues.

14
<PAGE>

Since we are relying solely on the assurances and
representations of our vendors and co-location provider as to the Y2K
capabilities of their respective products and services, our greatest risk is
that some or all of their assurances and representations will be incorrect and
that their products and services will not be Y2K compliant. If this were to
occur, our access to the Internet and ability to provide our service would be
interrupted until we could replace the defective software and hardware and
situate our system at another co-location provider. The loss of electric power
or phone service could also limit our access to the Internet.

We believe that our software and hardware could be replaced with
products generally available from conventional commercial sources or modified by
our software engineers. Additionally, we believe that if our co-location
provider failed to provide access to the Internet we could provide effective
substitute service within 24 to 48 hours through the PC cluster at our offices
and return to 100% capacity with an alternate co-location provider within one to
two weeks. However, we have made no contingency plans in the event of any
failure of our software, hardware or co-location provider to be Y2K compliant
and cannot predict the availability or cost at the beginning of the year 2000 of
replacement software and hardware or alternate co-location providers.

Patent and Other Intellectual Property

On June 9, 1998, we were issued patent No. 5764906 which
describes the Netword System as a Universal Electronic Resource Denotation,
Request and Delivery System that shares information and aliases among owners of
Internet Web sites and other resources and Internet users. A recent court
decision which we have appealed could impair the patent's protective scope. See
"Legal Proceedings" on page 41.

We also own various copyrighted software with special purpose
components not found in any existing off-the-shelf software of which we are
aware.

Netword is registered as a trademark with the U.S. Patent and
Trademark Office. On April 30, 1996, we acquired the exclusive rights to the
common law and registered trademarks and trade names "Netword" and "Netword,
Inc." for aggregate payments of $40,600 over seven years.

The potential success of the Netword System may depend on our
ability to maintain proprietary rights to our technology. To protect these
rights, we rely primarily upon our patent and employee and third party
confidentiality and non-disclosure agreements. Although our patent provides some
protection against third parties copying the Netword System, it may not preclude
third parties from creating systems similar to the Netword System. The steps we
have taken may not deter unauthorized use of our proprietary information, and we
may not be able to afford the high cost of enforcing our intellectual property
rights through litigation.

Competition

The market for Internet services is relatively new, intensely
competitive, quickly evolving and subject to rapid technological changes. The
Netword System already faces significant competition which may be expected to
continue and intensify in the future. We have limited financial, marketing,
research and development resources, but we need to continue to invest in the
development of the Netword System and the expansion and enhancement of our
marketing and customer support services in order to compete effectively. There
are no assurances that we will have sufficient resources to make the required
investments.

15
<PAGE>

We classify the systems currently offered by competitors into
the following categories:

o keyword systems which operate through browsers, such as
Netscape's Communicator versions 4.5 and higher and
Microsoft's Internet Explorer 5.0, and RealNames
Corporation's keyword system which operates in a manner
similar to the Netword System;

o keyword systems within a proprietary network, such as
America-On-Line's keyword system; and

o Internet search engines and directories, such as Yahoo,
AltaVista and Hotbot.

These competitive systems are operated or backed by
established companies which have significant presences on the Internet and
vastly greater financial, marketing, research and development resources than
ours. Microsoft, AltaVista and Network Solutions have invested in or entered
into agreements with RealNames, and RealNames has substantially greater
financial resources than ours. Additionally, we believe that RealNames has
allied itself and intends to pursue additional relationships with third party
Internet browser providers and providers of search, directory, e-commerce,
portal and content services as a means of distributing its service. Other
established companies may decide to expand their operations to offer a full
range of Internet services which could potentially include a service such as
ours.

Despite this array of competition, we believe we can compete
effectively in our marketplace based upon our quick, efficient, easy-to use
product that is free to Internet users and reasonably priced to owners of
commercial Web resources. Other than RealNames' system, which is an Internet
keyword system that directly competes with the Netword System, we are not aware
of any service currently offered by our competitors which provides the range of
functions made available through the Netword System.

In practice, our system is broadly aimed to allow users to
employ Networds across the entire Web. By contrast, we believe that the
RealNames' system is more narrowly focused on the use of keywords in the search
engines of RealNames' search partners. We believe the RealNames system
materially infringes our patent rights. See, however, "Legal Proceedings" on
page 41 for a description of pending litigation involving RealNames which may
impair the protective scope of our patent.

Services currently offered by our principal competitors have
certain comparative limitations:

o America-On-Line's keyword system registers keywords which
point only to content on the America-On-Line network.
This system does not permit Internet users to create
their own free America-On-Line keywords, and owners of
commercial content who desire to create keywords for use
within America-On-Line's network are subject to a limited
and expensive registration process.

16
<PAGE>

o Netscape's keyword system which operates through certain
recent versions of its Communicator does not permit
private registration of keywords. The keywords are
created by Netscape and point to NetCenter portal content
and other Web resources.

o Microsoft's Internet Explorer 5.0 browser does not permit
Internet users or owners of commercial Web resources to
register keywords.

o The registration of a keyword on RealName's system can be
a lengthy process and costs more than registration of a
Netword. RealNames' keyword system offers a facility for
Internet users to create one free Internet keyword for
their homepage on a selected list of Internet
communities. It does not offer them the opportunity to
create unlimited numbers of free Internet keywords that
can point to any resource.

o Search engines provide multiple responses to a keyword
entry and many of the responses may be unrelated to a
user's query.

Government Approvals and Regulation

We are not currently subject to direct federal, state or local
government regulation, other than regulations applicable to businesses
generally. There is only a small body of laws and regulations directly
applicable to access to or commerce on the Internet.

Due to the increasing popularity and use of the Internet, it
is likely that a number of additional laws and regulations may be adopted at the
federal, state and local levels with respect to the Internet, covering issues
such as intellectual property rights, user privacy, taxation, access charges,
characteristics and quality of products and services, liability for third-party
activities, transmission of sexually explicit material and jurisdiction. The
adoption of any such laws or regulations might decrease the growth of the
Internet, which in turn could decrease the demand for Networds or increase the
cost of doing business or in some other manner harm our business. In addition,
applicability to the Internet of existing laws governing issues such as
intellectual property, taxation, obscenity and personal privacy is uncertain.
The vast majority of such laws were adopted before the advent of the Internet
and related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies.

In particular, the creation and use of Networds entails the
potential risk of possible infringement of third party rights which could
subject us to litigation and possible liability. The law regarding liability for
contributory trademark infringement or facilitation of unfair competition on the
Internet is still unsettled. Our published terms and conditions and operating
procedures include measures to protect the rights of owners of registered
trademarks. These measures and the scope and extent of our insurance however,
may not be adequate to shield or indemnify us from liability and costs of
litigation in the event of trademark infringement, dilution or unfair
competition by the creator of a Netword.

17
<PAGE>

Employees

As of December 10, 1999, we had 10 full time employees and six
consultants who provided services on an as-needed basis. We believe that our
success will depend in part on our continued ability to attract, hire and retain
qualified personnel. The competition for such personnel is intense and we may
not be able to readily identify, attract and retain such personnel in the
future. We believe that our relationship with our employees is satisfactory. As
of the date hereof, we believe that we have an appropriate mix of employee
skills for our current business needs. None of our employees is represented by a
labor union or retained under an employment contract. All of our employees are
bound by confidentiality agreements.

Description of Property

We do not own real property. Our principal offices located at
702 Russell Avenue, Third Floor, Gaithersburg, Maryland 20877 are leased until
September 2003 and cover approximately 2000 square feet of office space at a
monthly rent of approximately $3,300. We do not consider this leased location to
be material to our operations, and we believe that equally suitable alternative
locations are available.

<PAGE>

SELLING STOCKHOLDERS

The table below provides, as of February 4, 2000, information
regarding the number and percentage of shares held by the selling stockholders
before and after this offering. The calculations are based on 17,705,924
outstanding shares. If an * appears in a column next to a stockholder's name,
that stockholder owns less than one percent of our common stock. If a U appears
next to a stockholder's name, that stockholder received warrants in our merger
with Netword LLC. Unless disclosed in the footnotes to the table, no selling
stockholder has held any position or office or had any other material
relationship with us during the past three years.

For purposes of this table, a person is deemed to be the
beneficial owner of our common stock if such person:

o has or shares the power to vote or direct the voting of
the common stock or to dispose or direct the disposition
of the common stock; or

o has the right to acquire beneficial ownership of the
common stock within 60 days.

Accordingly, more than one person may be deemed to be a beneficial owner of the
same securities. Except as otherwise indicated in a footnote to this chart, each
stockholder has sole voting and dispositive power with respect to the shares of
common stock he holds. The shares of common stock of each stockholder other than
Batya Wise do not include shares held by that person's spouse or children.

The number of shares offered for sale for the account of a
stockholder and the number and percentage of shares owned by a stockholder
before this offering includes the shares of common stock held by the stockholder
as of the date of this prospectus and shares that are issuable upon the exercise
of warrants which were issued to the stockholder in our merger with Netword LLC
or in our Regulation S offering. See "Description of Securities" on page 35. The
number and percentage of shares beneficially owned by each stockholder after
this offering assumes the sale of all shares offered for sale for the account of
that stockholder.

19
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------- ------------------------------------ -------------------- --------------------------------
Number of Shares
Beneficially Owned by Offered for Sale Beneficially Owned by
Name of Selling Stockholder Before for the Account of Stockholder after
Stockholder this Offering Stockholder this Offering
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Number Percentage Number of Percentage of
of Shares of Shares Shares Shares
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Keith B. Ballurio(check mark) 1,833 * 482 1,351 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Wendy L. Beck(check mark) 365 * 96 269 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Vincent H. Bono (3)(check mark) 15,627 * 4,110 11,517 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Shepard C. Bostin (4)(check mark) 402,236 2.2% 6,625 395,611 2.2%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Cheltenham Capital Enterprises
Limited (5) 610,000 3.4% 360,000 250,000 1.4%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
John J. Curley(check mark) 46,652 * 12,270 34,382 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
G. Mark Curry 180,000 1.0% 180,000 0 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Amy Diamond(check mark) 167 * 44 123 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Steven Dattels 180,000 1.0% 180,000 0 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
EcomPark Inc. (6) 512,500 2.9% 450,000 62,500 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

Matthew R. Edelstein
(7)(check mark) 106,748(31) * 24,390 82,358 *

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Estate of Robert Simons(check mark) 331,193 1.9% 87,108 244,085 1.4%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Falling Brook
Investments Ltd.(8) 307,500 1.7% 270,000 37,500 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Anitra Feit(check mark) 90,890 * 20,767 70,123 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Elliot Feit(check mark) 90,887 * 20,766 70,121 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Jeffrey Feit(check mark) 25,968 * 5,933 20,035 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Neal Feit(check mark) 25,968 * 5,933 20,035 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Lynn Gettenberg(check mark) 207,812 1.2% 47,482 160,330 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
John W. Gildea(check mark) 117,454 * 26,836 90,618 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Joel H. Golovensky(check mark) 91,624 * 20,935 70,689 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Mary Hamlin(check mark) 7,771 * 2,044 5,727 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------- ------------------------------------ -------------------- --------------------------------
Number of Shares
Beneficially Owned by Offered for Sale Beneficially Owned by
Name of Selling Stockholder Before for the Account of Stockholder after
Stockholder this Offering Stockholder this Offering
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Number Percentage Number of Percentage of
of Shares of Shares Shares Shares
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Lucy Hansen(check mark) 68,160 * 15,951 52,209 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Ronald I. and Joyce Heller(check mark) 779,234 4.4% 178,043 601,191 3.4%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Murray Horowitz(check mark) 127,389 * 29,106 98,283 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Hurlow Partners Inc. (9) 205,000 1.2% 180,000 25,000 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
International Project
FinanceLtd. (10) 102,500 * 90,000 12,500 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Jayvee & Co. (11) 205,000 1.2% 180,000 25,000 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Jesurum (1994) Family Limited
Partnership, Robert Jesurum and
Toby Jesurum, Trustees(check mark)(12) 630,212 3.5% 147,484 482,728 2.7%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Kenneth R. Johnsen(check mark) 246,709 1.4% 56,369 190,340 1.1%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Gladys H. Karanfilian(check mark) 166,986 * 39,078 127,908 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

James Karanfilian(check mark)(13) 1,154,798(32) 6.4% 288,269 866,529 4.8%

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Jordan Klineman(check mark) 996,924 5.6% 227,782 769,142 4.3%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Justine Klineman(check mark) 996,924 5.6% 227,782 769,142 4.3%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Kent M. Klineman (14)(check mark) 2,581,802 13.3% 249,050 2,332,752 12.0%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Klondike Resources
Inc.(check mark)(15) 695,372 3.9% 158,882 536,490 3.0%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Alan B. Miller(check mark) 119,279 * 27,914 91,365 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Srinivas Nagaraj (16)(check mark) 20,235 * 5,322 14,913 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
David S. and Bette Nagelberg
(17)(check mark) 779,234 4.4% 178,043 601,191 3.4%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------- ------------------------------------ -------------------- --------------------------------
Number of Shares
Beneficially Owned by Offered for Sale Beneficially Owned by
Name of Selling Stockholder Before for the Account of Stockholder after
Stockholder this Offering Stockholder this Offering
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Number Percentage Number of Percentage of
of Shares of Shares Shares Shares
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert C. O'Mara(check mark) 93,843 * 24,682 69,161 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Omnitrade Investments
Limited (18) 102,500 * 90,000 12,500 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Anthony and Emily
Pantaleoni(19)(check mark) 239,940 1.4% 56,151 183,789 1.0%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Ppon Pictet & Cie (20) 717,500 4.0% 630,000 87,500 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Brian Puckett (21)(check mark) 6,195 * 1,629 4,566 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Donald Puckett(check mark) 167 * 44 123 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Jerry H. Pyle(check mark) 119,279 * 27,914 91,365 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

Regent Mercantile
Bancorp, Inc.(22) 200,000 1.1% 200,000 0 *

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Joseph S. Reiss(check mark) 519,520 2.9% 118,702 400,818 2.2%
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

Murray M. Rubin (23)(check mark) 197,143 1.1% 29,673 167,470 *

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Nadine V. Rubin(check mark) 129,868 * 29,673 100,195 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

Shlomo Segev (24)(check mark) 150,262 * 16,753 133,509 *

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Davinder Sethi(check mark) 49,648 * 13,058 36,590 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
David Smith(check mark) 993 * 261 732 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

Smith Vincent & Co.
Ltd. (25) 205,000 1.2% 180,000 25,000 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Stilwell Holding LLCU (26) 535,155 3.0% 122,275 412,880 2.3%

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Ike Suri(check mark) 17,893 * 4,706 13,187 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Dennis J. and Ann A.
Wilkinson(check mark) 108,352 * 28,498 79,854 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
</TABLE>

<PAGE>

Batya Wise (27)(check mark) 1,849,288(33) 10.2% 422,534 1,426,754 7.9%

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Daniel Wise(check mark) 207,812 1.2% 47,482 160,330 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

Gidon Wise (28)(check mark) 333,756(34) 1.9% 47,482 286,274 1.6%

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Marshall M. Wise(check mark) 117,454 * 26,836 90,618 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------

John P. Young (29)(check mark) 4,011 * 938 3,073 *
- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
Richard D. and Ragna
B. Young (30)(check mark) 114,850 * 30,207 84,643 *

- --------------------------------- ------------------- ---------------- -------------------- ---------------- ---------------
</TABLE>

(1) Mr. Abrams served as Vice President, Marketing of Netword LLC from December
1996 to March 3, 1997.

(2) Joseph L. Rotman is the sole director and Amaranth Canadian Holdings Ltd.
is the controlling entity of Amaranth Resources Limited.

(3) Mr. Bono served as manager of Internet Information Research of Netword LLC
until August 1997.

(4) Mr. Bostin is presently the Chief Operating Officer of Netword, Inc. From
August 1997 to February 1999 he served as the Chief Operating Officer of
Netword LLC. From April 1997 to August 1997, he served as Director of
Marketing of Netword LLC.

(5) Ernesto Crespo is the sole director and shareholder of Cheltenham Capital
Enterprises Limited. Craig G. Brown and Paul Lemmon are the respective
president and secretary.

(6) EcomPark Inc., formerly known as Storage One, Inc., is traded on the
Alberta stock exchange (symbol EKP.al) and is a reporting company with
Canadian regulatory authorities.

(7) Mr. Edelstein founded Birdshell Corporation, L.L.C. in April 1995 and
served as President until its assets were acquired by Netword LLC in
December 1996.

(8) Philip Strathy and John Strathy are the respective President and Vice
President and each controls 50% of this entity.

<PAGE>

(9) Gerald Hurlow is the controlling shareholder and Gerald Hurlow, Terrence
Smith and Philip Deck are the directors of Hurlow Partners Inc.

(10) Bruce Twa is the controlling shareholder of International Project Finance
Ltd. Logberg Directors Ltd. is the sole director of International Project
Finance Ltd. and Bruce Twa is the sole director of Logberg Directors Ltd.
Logberg Secretaries Ltd. is the secretary and sole officer of International
Project Finance Ltd. and Bruce Twa is the secretary and sole officer of
Logberg Secretaries Ltd.

(11) Jayvee & Co. acts as bank nominee for Harmony North American Small Cap
Fund. Harmony North American Small Cap Fund is owned by AGF, a Canadian
mutual fund group.

(12) Robert Jesurum and Toby Jesurum and their immediate family are the
principals of this entity.

(13) Mr. Karanfilian served as a Manager of Netword LLC from December 1996 to
February 1999 and thereafter as a director of Netword, Inc. until April
1999. He served as Chairman of Birdshell until its assets were acquired by
Netword LLC in December 1996.

(14) Mr. Klineman served as a Manager of Netword LLC from December 1996 to
February 1999 and thereafter as a director and officer of Netword, Inc.

(15) Sherry Mallin is the principal of this entity.

(16) Mr. Nagaraj was employed by Netword LLC from December 1996 to August 1997.

(17) Mr. and Mrs. Nagelberg hold our common stock and warrants to purchase
common stock as joint tenants.

(18) Hebron Shyng is the controlling shareholder and sole director of Omnitrade
Investments Limited.

(19) Mr. Pantaleoni served as counsel to Birdshell before its acquisition by
Netword LLC in December 1996.

(20) Nicholas Campiche is the controlling shareholder and sole officer and
director of Ppon Pictet & Cie.

(21) Mr. Puckett served as the registered agent for Birdshell before its
acquisition by Netword LLC in December 1996.

(22) Stephen R. Dattels is the secretary and Jennifer Dattels is the president
and sole owner of Regent Mercantile Bancorp, Inc.

(23) Mr. Rubin has been Treasurer and Chief Financial and Accounting Officer of
Netword, Inc. since September 1999. He has provided accounting and tax
preparation services to us since December 1996.

(24) Mr. Segev served as a software engineer for Netword LLC from December 1996
to February 1998 and for Birdshell before December 1996.

<PAGE>

(25) M. Kitson Vincent and the Estate of Arthur J. Vincent are the shareholders
of and control this entity. The directors of the entity are M. Kitson
Vincent, Gerald R. Vincent and Esther Jarrett. M. Kitson Vincent is the
President and Gerald R. Vincent is the Vice President.

(26) Before February 1999, K.A. Taipale, the managing partner and principal of
Stilwell Holding LLC, was a member of the Board of Managers of Netword LLC.
K.A. Taipale and Nicole Taipale are the controlling members of Stilwell
Holding LLC.

(27) Ms. Wise is the wife of Michael Wise, the President and Chief Executive
Officer of Netword, Inc. Mr. Wise disclaims beneficial ownership of shares
beneficially owned by his wife and his sons, David Wise and Gidon Wise.

(28) Mr. Wise is employed as a system and software analyst for Netword, Inc. He
also serves as a consultant for Netword, Inc.

(29) Mr. Young served as Vice President and General Counsel of Netword LLC from
December 1996 to August 1997, and of Birdshell from May 1996 to December
1996.

(30) Mr. and Mrs. Young's common stock and warrants to purchase common stock are
held as community property.

(31) Excludes (a) 85,473 shares of common stock currently outstanding and (b)
30,503 shares of common stock issuable upon exercise of outstanding
warrants held by James Karanfilian. An option to purchase such shares was
granted to Matthew R. Edelstein in September 1996 at Mr. Karanfilian's
original cost of $256,666 plus 10% annual interest until January 26, 2000.

(32) Includes (a) 85,473 shares of common stock currently outstanding and (b)
30,503 shares of common stock issuable upon exercise of outstanding
warrants held by James Karanfilian. An option to purchase such shares was
granted to Matthew R. Edelstein in September 1996 at Mr. Karanfilian's
original cost of $256,666 plus 10% annual interest until January 26, 2000.

(33) Includes (a) 89,639 shares of common stock held by Ms. Wise in a custodial
account in her name as custodian for her minor son, David Wise, and (b)
26,546 shares of common stock issuable upon the exercise of warrants also
held by Ms. Wise as custodian for David Wise. Excludes (a) 160,330 shares
of common stock, (b) 47,482 shares of common stock issuable upon the
exercise of warrants and (c) 125,944 options to purchase shares of common
stock held by Ms. Wise's son, Gidon Wise, as the record holder and
beneficial owner, and by Ms. Wise as beneficial owner.

(34) Includes (a) 160,330 shares of common stock, (b) 47,482 shares of common
stock issuable upon the exercise of warrants and (c) 125,944 options to
purchase shares of common stock held by Mr. Gidon Wise, as the record
holder and beneficial owner, and by his mother, Batya Wise, as beneficial
owner.

<PAGE>

PLAN OF DISTRIBUTION

Sales by selling stockholders may be made pursuant to this prospectus
from time to time as each selling stockholder determines. Sales may be made
directly to purchasers or through brokers, dealers or agents. Brokers, dealers
or agents who participate in sales of shares may receive discounts, concessions
or commissions from the sellers or purchasers.

Since the selling stockholders and any participating brokers, dealers
or agents may be deemed to be underwriters within the meaning of the Securities
Act, any profits they receive on the sale of the shares and any related
discounts, commissions or concessions may be deemed to be underwriting discounts
and commissions under the Securities Act.

The shares may be sold in one or more transactions:

o on any exchange on which the shares may be listed at the time of
the sale

o in the over-the-counter markets

o in negotiated transactions other than on such exchange or in the
over-the counter market; or

o through the writing of options

The selling stockholders may sell the shares from time to time in one
or more transactions at:

o fixed prices

o prevailing market prices at the time of sale

o varying prices determined at the time of sale; or

o negotiated prices

In addition, subject to applicable state and foreign laws, the shares
which qualify for sale under an applicable exemption from registration under the
Securities Act may be sold pursuant to the exemption rather than this
prospectus.

To the best of our knowledge, there are currently no plans,
arrangements or understandings regarding the sale of shares between any of the
selling stockholders and any broker, dealer, agent or underwriter. There is no
certainty that any selling stockholder will sell any or all of the shares
offered by it under this prospectus or that any selling stockholder will not
transfer, devise or donate such shares by means not described in this
prospectus.

The selling stockholders and any other person participating in the
offering will be subject to applicable provisions of the Securities Exchange Act
and the rules and regulations thereunder, which provisions may limit the timing
of purchases and sales of the shares by the selling stockholders. These
restrictions may affect the marketability of the shares and the ability of any
person to engage in market-making activities with respect to the shares.

We will pay substantially all of the expenses incidental to the
registration, offering and sale of the shares covered by this prospectus, except
expenses for discounts, commissions and concessions of brokers, dealers and
agents participating in sales.

<PAGE>

We have entered into an indemnification agreement with each of the
selling stockholders which provides that we and each selling stockholder will be
indemnified by the other against certain liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection with any such liabilities.

We will make copies of this prospectus available to the selling
stockholders. At or before the time of any sale of shares by a selling
stockholder pursuant to this prospectus, the selling stockholder must deliver a
copy of this prospectus to the purchaser.

USE OF PROCEEDS

We will receive no proceeds from the sale of shares by selling
stockholders.

We will receive $1.25 per share from any exercise of outstanding
warrants to purchase an aggregate of 4,701,148 shares which may be resold
pursuant to this prospectus. If all of these warrants were exercised, we would
receive gross proceeds of $5,876,435. There is no assurance that any of the
warrants will be exercised. Any proceeds from the exercise of the warrants will
be added to our working capital and used primarily for marketing, advertising
and promotional activities.

27
<PAGE>

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Our directors, officers and significant employees(1) and biographical
information about them are provided below. Each director will hold office until
our first annual meeting and until his successor is duly elected and qualified,
or until his earlier resignation or removal.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C>
Michael L. Wise 56 President, Chief Executive Officer, Director
Kent M. Klineman 67 Secretary, Director
W. Edward Scheetz 34 Director
Shepard C. Bostin 33 Chief Operating Officer, Vice President of Marketing
Murray M. Rubin 56 Chief Financial and Accounting Officer, Treasurer
Thomas Sweeting 36 Senior Software Engineer
Simon Janes 28 Senior Software Engineer
</TABLE>

Michael Wise joined Netword LLC in December 1996 as chairman of the
Board of Managers and became its President and Chief Executive Officer in August
1997. Additionally, he is Vice-Chairman of nStor Technologies, Inc. (AMEX: NSO),
a manufacturer of RAID subsystems and information storage solutions for PC-LAN
and Unix. Since 1988, Mr. Wise has been a director (Chairman of the Board from
1992-1997) and officer of nStor. He founded IMNET Systems, Inc. (NASDAQ: IMNT),
an imaging and information solutions systems provider, and served as a director
and officer of that company from 1986-1995. Mr. Wise has a Ph.D. in Theoretical
Physics from Brandeis University.

Kent M. Klineman joined Netword LLC in December 1996 and acts as our
in-house counsel. Since 1994, he has owned and operated Klineman Holding Corp.,
a New York venture capital firm. In 1999, he became the President and Chief
Executive Officer of Hudson Investment Corp. He is also a founder, director and
the secretary of EIS International, Inc. (NASDAQ: EISI), a manufacturer of
computerized telemarketing systems, and a director and a member of the executive
and audit committees of Concord Camera Corp. (NASDAQ:LENS). Mr. Klineman is a
graduate of Dartmouth College and Harvard Law School and holds a masters in
taxation from N.Y.U. Law School's graduate tax program.

W. Edward Scheetz is a founder and is currently Co-Chief Executive
Officer of NorthStar Capital Investment Corp. where he has overseen the
investment of more than $1 billion in real estate assets and operating
companies. Before joining NorthStar Capital in July 1997, Mr. Scheetz was a
partner of Apollo Real Estate Advisors from 1993 to 1997 and a principal of
Trammell Crow Ventures from 1989 to 1993. Mr. Scheetz has an A.B. in economics
from Princeton University.

- -----------
(1) "Significant employees" means such persons as production managers, sales
managers or research scientists, who are not executive officers, but who
make or are expected to make significant contributions to our business.

28
<PAGE>

Shepard C. Bostin joined Netword LLC in March 1997 as director of
marketing and became its Chief Operating Officer in August 1997. Before working
for us, from March 1995 to March 1997, he was Vice President of Product
Marketing for SelectStar, Inc. From June 1994 to March 1995 he was an employee
of Intersolv, Inc. Mr. Bostin holds a B.S., with honors, in Information and
Decision Systems from Carnegie Mellon University.

Murray M. Rubin is a certified public accountant and has served as the
Executive Vice President and Chief Financial Officer of Klineman Holding Corp.
and various related companies controlled by Mr. Klineman since 1982. He is a
member of the American Institute of Certified Public Accountants and
Pennsylvania Institute of Certified Public Accountants. Mr. Rubin holds a B.S.
in Business Administration from The Pennsylvania State University and a
Certificate of International Studies from the University of Heidelberg.

Thomas Sweeting joined Netword LLC in March 1997. He oversees the
development of our customer account management and billing software, and our
download agent software. From March 1994 to February 1997 he was an employee of
Highland Technologies, Inc. From 1992 to February 1994 he was an employee of
Intrafed Inc. He received a B.S. in Computer Science from the University of
Maryland.

Simon Janes was employed as a systems administrator by Netword LLC from
January 1997 to August 1997. After an eight month leave to attend George Mason
University, he returned to us in April 1998 as a systems administrator and
software engineer. He manages the development of our query, registration and Web
servers and is responsible for our hardware installation, configuration and
maintenance. From May 1994 to December 1996, he was employed as a systems
administrator for Network and Communications Management. He is a recognized
expert in the Linux operating system and related software, and, in addition to
developing the EQL device driver for Linux, is among fewer than 100 Certified
Linux Administrators in the world.

Directors do not receive a salary for their services as directors or a
fee for attendance in person at meetings of the board of directors. Directors
are reimbursed for travel expenses and other out-of-pocket expenses incurred in
connection with their attendance at meetings.

Executive officers serve at the discretion of our board of directors.
Significant employees serve at the discretion of our executive officers and
board of directors. None of our officers or significant employees have entered
into employment agreements. Accordingly, such employees may leave, and we may
terminate, their employment at any time, with or without cause.

29
<PAGE>

Limitations on liability and indemnification matters.

The Delaware General Corporation Law provides that a company may
indemnify its directors and officers against certain liabilities. Our
certificate of incorporation and bylaws provide for the indemnification of our
directors and officers to the fullest extent permitted by law. The effect of
such provisions is to indemnify our directors and officers against all costs,
expenses and liabilities incurred by them in connection with actions, suits or
proceedings in which they are involved because of their affiliation with us.

Disclosure of Commission Position on Indemnification for Securities Act
Liabilities

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

30
<PAGE>

REMUNERATION OF DIRECTORS AND OFFICERS

The table below provides the remuneration of our directors and officers
for fiscal year 1998.

<TABLE>
<CAPTION>
- ------------------------------------------------------- -------------------- ------------- ------------------
Name and Principal Position Fiscal Year Salary Other Compensation
- ------------------------------------------------------- -------------------- ------------- ------------------
<S> <C>
Michael L. Wise 1998 None None.
President, Chief Executive Officer, Director
- ------------------------------------------------------- -------------------- ------------- ------------------
Kent M. Klineman 1998 None None.
Secretary, Director
- ------------------------------------------------------- -------------------- ------------- ------------------
W. Edward Scheetz, Director 1998 None None.
- ------------------------------------------------------- -------------------- ------------- ------------------
Shepard C. Bostin 1998 $102,000 None.
Chief Operating Officer, Vice President of Marketing
- ------------------------------------------------------- -------------------- ------------- ------------------
Murray M. Rubin 1998 None None.
Chief Financial and Accounting Officer, Treasurer
- ------------------------------------------------------- -------------------- ------------- ------------------
Three highest paid officers and directors as a group. 1998 $102,000 None.
- ------------------------------------------------------- -------------------- ------------- ------------------
</TABLE>

Additionally, for the current portion of fiscal year 1999, the
remuneration of our directors and officers was as follows:

o From May 1, 1999 through August 31, 1999, we paid Mr. Wise a
business consulting fee of $8,000 per month. As of August 31, 1999,
he began receiving a salary at the same rate.

o As of May 1, 1999, we commenced payment to Mr. Klineman of a
retainer for legal services at the monthly rate of $4,000. This
retainer is applied against charges for Mr. Klineman's services at
the rate of $250 per hour.

From September 1997 to date, our directors and officers received the following
options:

o Michael L. Wise was granted options to purchase (a)1,000 units of
Netword, LLC on September 30, 1997 and (b) 2,331.30 units of
Netword, LLC on March 1, 1998. In connection with our merger with
Netword LLC in February, 1999, these options were canceled and Mr.
Wise was granted new options to purchase (a) 824,557 shares of our
common stock at an exercise price of $0.1666 per share and (b)
294,265 shares of our common stock at an exercise price of $1.25 per
share. Each option to purchase common stock at $0.1666 per share
will expire on February 17, 2002. Each option to purchase common
stock at $1.25 per share will expire on February 17, 2004.
Additionally, on March 15, 1999, Mr. Wise was granted options to
purchase 825,000 shares of our common stock at an exercise price of
$1.25 per share. These options will expire on February 17, 2004. He
received all of these options in his capacity as a manager, director
or officer.

31
<PAGE>

o Kent M. Klineman was granted options to purchase (a)1,000 units of
Netword, LLC on September 30, 1997 and (b) 1,804.20 units of
Netword, LLC on March 1, 1998. In connection with our merger with
Netword LLC in February, 1999, these options were canceled and Mr.
Klineman was granted new options to purchase (a) 694,090 shares of
our common stock at an exercise price of $0.1666 per share and (b)
247,705 shares of our common stock at an exercise price of $1.25 per
share. Each option to purchase common stock at $0.1666 per share
will expire on February 17, 2002. Each option to purchase common
stock at $1.25 per share will expire on February 17, 2004.
Additionally, on March 15, 1999, Mr. Klineman was granted options to
purchase 550,000 shares of our common stock at an exercise price of
$1.25 per share. These options will expire on February 17, 2004. He
received all of these options in his capacity as a manager or
director.

o Shepard C. Bostin was granted options to purchase (a) 520.76 units
of Netword, LLC on September 30, 1997 and (b) 590.57 units of
Netword, LLC on March 1, 1998. In connection with our merger with
Netword LLC in February, 1999, these options were canceled and Mr.
Bostin was granted new options to purchase (a) 275,074 shares of our
common stock at an exercise price of $0.1666 per share and (b)
98,167 shares of our common stock at an exercise price of $1.25 per
share. Each option to purchase common stock at $0.1666 per share
will expire on February 17, 2002. Each option to purchase common
stock at $1.25 per share will expire on February 17, 2004. He
received all of these options in his capacity as an employee.

o Murray M. Rubin was granted options to purchase 30 units of Netword,
LLC on March 1, 1998. In connection with our merger with Netword LLC
in February, 1999, these options were canceled and Mr. Rubin was
granted new options to purchase (a) 7,425 shares of our common stock
at an exercise price of $0.1666 per share and (b) 2,650 shares of
our common stock at an exercise price of $1.25 per share. Each
option to purchase common stock at $0.1666 per share will expire on
February 17, 2002. Each option to purchase common stock at $1.25 per
share will expire on February 17, 2004. Additionally, on September
7, 1999, Mr. Rubin was granted options to purchase 50,000 shares of
our common stock at an exercise price of $1.50 per share. These
options will expire on September 7, 2001. He received all of these
options in his capacity as a consultant or officer.

o We agreed to issue immediately exercisable warrants, expiring on
June 30, 2004, to purchase 336,000 shares of common stock at an
exercise price of $1.50 per share to NorthStar Capital Partners LLC.
Mr. Scheetz holds a 50% interest in NorthStar Capital and disclaims
beneficial ownership as to 50% of the shares owned by NorthStar
Capital.

32
<PAGE>

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

Voting Securities and Principal Holders Thereof .

The table below provides information as of February 4, 2000 with respect to
shares of our common stock held of record by:

o the three highest paid persons who are officers;
o all directors;
o all directors and officers as a group; and
o each person, other than an officer or director, who we know owns
more than 10% of our outstanding common stock.

The address for each stockholder, other than Net2Phone, is in our care
at our principal offices. All calculations in the table are based on 17,705,924
shares of common stock outstanding. The amounts shown for each stockholder
include shares underlying currently exercisable options, warrants and
convertible securities held by the stockholder.

Except as otherwise indicated in a footnote to this chart, each
stockholder has sole voting and dispositive power with respect to the shares of
common stock he holds. The shares of common stock of each stockholder other than
Batya Wise do not include shares held by that person's spouse or children. The
amount and percentage of shares owned after the offering assumes the exercise of
outstanding warrants at $1.25 per share and resale of all shares received upon
such exercise.

<TABLE>
<CAPTION>
- -------------------- ------------ ------------------- ------------- --------------------
Percentage of
Amount owned common stock Amount owned Percentage of common
Name and address of before the owned before after the stock owned after
stockholder offering the offering offering the offering
- -------------------- ------------ ------------------- ------------- --------------------
<S> <C> <C> <C> <C>
Shepard C. Bostin
(1) 492,236 2.71% 485,611 2.67%
- -------------------- ------------ ------------------- ------------- --------------------
Kent M. Klineman
(2) 2,581,802 13.3% 2,332,752 12.0%
- -------------------- ------------ ------------------- ------------- --------------------
W. Edward Scheetz
(3) 1,056,000 5.8% 1,056,000 5.8%
- -------------------- ------------ ------------------- ------------- --------------------
Michael Wise (4) 1,943,822 9.9% 1,943,822 9.9%
- -------------------- ------------ ------------------- ------------- --------------------
Batya Wise (5) 1,849,288 10.2% 1,426,754 7.9%
- -------------------- ------------ ------------------- ------------- --------------------
Net2Phone, Inc. (6)
171 Main St.
Hackensack, NJ
07601 5,050,380 22.19% 5,050,380 22.19%
- -------------------- ------------ ------------------- ------------- --------------------
All officers and
directors as a
group (3)(7) 6,271,003 27.74% 5,985,655 26.47%
- -------------------- ------------ ------------------- ------------- --------------------
</TABLE>

33
<PAGE>

(1) Shepard C. Bostin is an officer. His shares include 463,241 shares
underlying currently exercisable options and 6,625 shares underlying
currently exercisable warrants.

(2) Kent M. Klineman is both an officer and a director. His shares include
1,491,795 shares underlying currently exercisable options and 249,050
shares underlying currently exercisable warrants.

(3) W. Edward Scheetz's shares include (a) 320,000 shares underlying currently
exercisable warrants which are held by NorthStar Capital Partners LLC, in
which Mr. Scheetz has 50% of the voting power and economic interest, and
(b) 336,000 shares underlying warrants which will be granted to NorthStar
Capital. Mr. Scheetz disclaims beneficial ownership as to 50% of the shares
owned by NorthStar Capital.

(4) Michael Wise is both an officer and a director. His shares consist of
1,943,822 shares underlying currently exercisable options.

(5) Batya Wise owns more than 10% of the outstanding common stock. Her shares
include 89,639 shares which she holds as custodian for her son David Wise,
and an aggregate of 422,534 shares underlying currently exercisable
warrants which she holds either individually or as custodian for David
Wise. She does not hold any options. Ms. Wise is the wife of Michael Wise,
who disclaims beneficial ownership of shares held by his wife.

(6) Net2Phone holds currently exercisable warrants to purchase up to 15% of our
fully-diluted common stock. As of the date hereof, the warrants entitle
Net2Phone to purchase 5,050,380 shares of our common stock.

(7) Includes 3,958,933 shares underlying currently exercisable options and
944,548 shares underlying currently exercisable warrants.

Options, Warrants and Rights.

The table below provides information as of February 4, 2000 with respect to
options, warrants and rights to purchase shares of common stock which are held
of record by:

o the three highest paid persons who are officers;
o all directors;
o all directors and officers as a group; and
o each person, other than an officer or director, who we know
owns more than 10% of our outstanding common stock.

34
<PAGE>

All of the options and warrants are currently exercisable. Shares
underlying warrants and options of each stockholder other than Batya Wise
exclude shares underlying warrants or options held by the named person's spouse
or children. Except for the warrants held by Northstar Capital Partners LLC (in
which Mr. Scheetz has 50% of the voting power and economic interest) and
warrants for 3,200 shares held by Murray M. Rubin, our Chief Financial and
Accounting Officer, all of which may be transferred only pursuant to exemption
from registration under the securities laws, none of the other warrants or
options are transferable, except by will or the laws of descent and
distribution.

The expiration dates for the warrants and options are as follows:

o warrants to purchase 320,000 shares of our common stock which are
beneficially held Northstar Capital Partners LLC (in which Mr.
Scheetz has 50% of the voting power and economic interest) and
warrants to purchase 3,200 shares of our common stock which are
beneficially held by Mr. Rubin expire on June 30, 2004
o warrants to purchase 336,000 shares of our common stock to be issued
to NorthStar Capital Partners LLC will expire on June 30, 2004
o warrants to purchase up to 15% of our fully-diluted common stock
which are beneficially held by Net2Phone, Inc. expire on September
29, 2003.
o all other warrants expire on February 17, 2002
o all options to purchase shares of common stock for $0.1666 per share
expire on February 17, 2002
o all options to purchase shares of common stock for $1.25 per share
expire on February 17, 2004
o options to purchase 108,773 shares of common stock for $1.50 per
share expire on September 7, 2001
o options to purchase 299,000 shares of common stock for $1.50 per
share expire on September 30, 2004, subject to earlier expiration in
the event the option holders are no longer our employees

All warrants, other than those granted to Net2Phone, are subject to
prior redemption under certain circumstances. See "Description of Securities" on
page 35 for the terms under which a redemption may occur.

35
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------- --------------------- --------------------- ----------------- ------------------
Common stock Common stock Exercise price
Name of stockholder underlying warrants Exercise price underlying options
- ----------------------------- --------------------- --------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Shepard C. Bostin 6,625 $1.25 275,074 $0.1666

98,167 $1.25

90,000 $1.50
- ----------------------------- --------------------- --------------------- ----------------- ------------------
Kent M. Klineman 249,050 $1.25 694,090 $0.1666

797,705 $1.25
- ----------------------------- --------------------- --------------------- ----------------- ------------------
W. Edward Scheetz (1) 656,000 $1.50 None ---

- ----------------------------- --------------------- --------------------- ----------------- ------------------
Michael Wise None 824,557 $0.1666

1,119,265 $1.25
- ----------------------------- --------------------- --------------------- ----------------- ------------------
Batya Wise (2) 422,534 $1.25 None --
- ----------------------------- --------------------- --------------------- ----------------- ------------------
Net2Phone, Inc. (3) 5,050,380 Approximately None --
$3,000,000
- ----------------------------- --------------------- --------------------- ----------------- ------------------
All executive officers and 285,348 $1.25 1,801,146 $0.1666
directors as a group. (2) 659,200 $1.50 2,017,787 $1.25
140,000 $1.50
- ----------------------------- --------------------- --------------------- ----------------- ------------------
</TABLE>

(1) Mr. Scheetz is a director. All warrants are held by NorthStar Capital
Partners LLC, in which Mr. Scheetz has 50% of the voting power and
economic interest. The number of warrants includes warrants to purchase
336,000 shares of our common stock to be issued to NorthStar Capital
Partners LLC in connection with Mr. Scheetz's election to our board of
directors. Mr. Scheetz disclaims beneficial ownership as to 50% of the
shares owned by NorthStar Capital.

(2) Batya Wise is the wife of Michael Wise, who disclaims beneficial
ownership of all warrants and shares beneficially owned by his wife.
Shares underlying warrants held by Batya Wise include shares underlying
warrants which she holds as custodian for her son, David Wise.

(3) Net2Phone holds currently exercisable warrants to purchase up to 15% of
our fully-diluted common stock. As of the date hereof, the warrants
entitle Net2Phone to purchase 5,050,380 shares of our common stock.

There are no other classes of common stock and no shares of preferred
stock outstanding. We have no parents or subsidiaries.

36
<PAGE>

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Certain of our officers and directors received options to purchase
shares of our common stock and are currently paid consulting fees. See
"Remuneration of Directors and Officers" on page 29.

SECURITIES BEING OFFERED

Shares of our common stock are the only securities being offered by
this prospectus.

All shares of our common stock are identical in all respects. Each
shares entitles the holder to the same rights and privileges enjoyed by other
holders of shares of common stock and is subject to the same qualifications,
limitations and restrictions as all other shares of common stock.

Holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders.
Accordingly, subject to the voting rights that holders of preferred stock may
then possess, holders of a plurality of the shares of common stock present at a
meeting at which a quorum is present can elect all of the directors eligible for
election in a given year. The holders of a majority of the voting power of the
issued and outstanding capital stock constitutes a quorum. Our bylaws state that
any action which may be taken by our stockholders at a meeting may also be taken
without a meeting, without prior notice and without a vote, if such action is
set forth in a written consent signed by the minimum number of stockholders
required to approve that action. In most cases, a written consent will only
require the signatures of the holders of a majority of the voting power of our
issued and outstanding capital stock.

The holders of common stock are entitled to dividends when declared by
our board of directors from legally available funds. The holders of common stock
are also entitled to share pro rata in any distribution to stockholders upon our
liquidation or dissolution. We do not anticipate declaring or paying any cash
dividends in the foreseeable future.

The holders of our common stock:

o may not convert the common stock into another security;
o have no right to require us to redeem the common stock;
o have no right to subscribe in any new issuance of common stock in
order to maintain their percentage of ownership of our common stock;
and
o are not responsible to provide us with additional capital or other
funds.

DESCRIPTION OF SECURITIES

We are authorized to issue 40,000,000 shares of common stock, par value
$.01 per share, and 10,000 shares of preferred stock, par value $.01 per share.
If all of the warrant shares covered by this prospectus are issued, we will have
22,407,072 outstanding shares of common stock, including 1,520,000 shares
issuable upon exercise of all of the Regulation S warrants and 3,181,148 shares
issuable upon exercise of all of the merger warrants. We have reserved
11,262,183 shares of our common stock for issuance upon the exercise of other
outstanding warrants, options and other convertible securities, including the
warrants for 336,000 shares to be issued to NorthStar Capital Partners LLC. We
have also reserved 2,611,235 shares of common stock for

<PAGE>

issuance upon exercise of options that may be granted in the future under our
stock option plan. If we issued all of the shares reserved for issuance pursuant
to warrants, options and convertible notes outstanding as of December 30, 1999
February 4, 2000 and warrants to be issued to NorthStar Capital Partners LLC, we
would have 33,669,195 outstanding shares of common stock.

Common Stock

For a description of our common stock, see "Securities Being Offered"
directly preceding this section of the prospectus.

Preferred Stock

We may issue 10,000 shares of preferred stock in one or more series.
Our board of directors may determine the terms of our preferred stock at the
time of its issuance without action by the stockholders. The terms of any
issuance of preferred stock may include:

o voting rights, including the right to vote as a series on particular
matters, which could be superior to those of the shares of common
stock;
o preferences over the shares of common stock as to dividends and
distributions in liquidation;
o conversion and redemption rights, including the right to convert into
shares of common stock; and
o sinking fund provisions.

None of the preferred stock is currently outstanding.

Our board of directors has the authority to issue up to 10,000 shares
of preferred stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any vote or
action by the stockholders. The rights of the holders of our common stock may be
adversely affected by the rights of the holders of any preferred stock that may
be issued in the future.

Stock Option Plan

On March 18, 1999, our board of directors and a majority of our
stockholders adopted a stock option plan. Under the stock option plan options to
acquire an aggregate of 7,500,000 shares of common stock may be granted to our
employees, officers, directors and consultants, as well as other persons, at the
discretion of our board of directors.

The stock option plan authorizes our board of directors to issue
incentive stock options, as defined in Section 422A(b) of the Internal Revenue
Code, and stock options that do not conform to the requirements of that code
section which are referred to as non-incentive stock options. Our board of
directors has discretionary authority to determine the types of stock options to
be granted, the persons among those eligible to whom options may be granted, the
number of shares to be subject to such options and the terms thereof. Officers,
directors, consultants and other persons who are not our employees may only be
granted non-incentive stock options. The exercise price of an incentive stock
option will be equal to or greater than the fair market value of the underlying

<PAGE>

shares of stock as of the date of the grant. The exercise price of a
non-incentive stock option will be determined by our board of directors at the
time the option is granted. The exercise price may be paid in cash, certified or
bank check or by promissory note on terms prescribed by our board of directors.

Outstanding Options

In connection with our merger with Netword LLC, options to purchase
9,229.14 units of Netword LLC held by a total of 14 members of Netword LLC, all
of whom were employees, former employees and managers of Netword LLC, were
canceled. For each canceled option to purchase one unit, we granted the holder a
replacement option under our newly adopted stock option plan to purchase (a)
247.518331 shares of our common stock at an exercise price of $0.1666 per share
and (b) 88.333682 shares of our common stock at an exercise price of $1.25 per
share. In sum, we granted replacement options to purchase a total of up to
2,284,374 shares of common stock at an exercise price of $0.1666 per share, of
which options for 43,315 shares have since been terminated, and up to 815,239
shares of common stock at an exercise price of $1.25 per share, of which options
for 31,556 shares have since been terminated. The outstanding options to
purchase common stock at $0.1666 per share will expire on February 17, 2002. The
outstanding options to purchase common stock at $1.25 per share will expire on
February 17, 2004.

On March 15, 1999, we granted additional options to purchase an
aggregate of 1,456,250 shares of our common stock at an exercise price of $1.25
per share to two of our directors and two consultants. As of September, 1999, we
granted additional options to purchase an aggregate of 407,773 shares of our
common stock at exercise prices ranging from $0.1666 to $1.50 per share to nine
of our employees and one consultant. As of February 4, 2000, none of these
options had been exercised.

Outstanding Warrants and Convertible Notes

Merger Warrants. Upon our merger with Netword LLC, each unit in Netword
LLC was changed into (a) 247.518331 shares of our common stock and (b) warrants
to purchase 88.333682 shares of our common stock at an exercise price of $1.25
per share. Accordingly, on February 18, 1999, we issued to former members of
Netword LLC warrants to purchase a total of 3,184,733 shares of our common
stock. Each of these warrants is currently exercisable and expires on February
17, 2004, subject to prior redemption as described below. As of February 4,
2000, none of these warrants had been exercised. The warrants issued in the
merger are exercisable only by the original holder or a transferee who received
the warrant by will or the laws of descent and distribution.

The exercise price of these warrants and the number of warrant shares
issuable upon their exercise are subject to adjustment in certain circumstances.
These circumstances include a stock split of, stock dividend on, or a
subdivision, combination or recapitalization of, the common stock. The warrants
do not confer upon the holder any voting or any other rights of a stockholder.

We may redeem all or any of the merger warrants, at a price of $0.05
per underlying share, at any time after the first date on which the average of
the closing bid prices for our shares of common stock in any inter-dealer
quotation system on which the common stock has been the subject of both bid and
ask quotations shall have exceeded $2.50 per share on 10 consecutive trading
days. After the date fixed for redemption by written notice delivered to the
warrant holders, the right to exercise the redeemed portion of any warrant will

<PAGE>

cease, and the holder will be entitled only to receive payment of the redemption
price for the redeemed portion of the warrant. Upon a holder's surrender of a
warrant, we will deliver to the holder a new warrant of like tenor and date with
respect to any unredeemed portion of the warrant.

Regulation S Warrants. In an offering in accordance with Rule 903 of
Regulation S under the Securities Act, on March 19, 1999, we sold warrants to
purchase 1,600,000 shares of our common stock at $1.25 per share. These warrants
are currently exercisable at $1.25 per share and will expire on the earlier of
March 19, 2004 or 150 days from the effective date of this registration
statement, subject to prior redemption as described below. As of February 4,
2000, none of the warrants had been exercised.

The exercise price of these warrants and the number of shares issuable
upon their exercise are subject to adjustment in certain circumstances. These
circumstances include a stock split of, stock dividend on, or a subdivision,
combination or recapitalization of, our common stock. The warrants do not confer
upon the holder any voting or any other rights of a stockholder.

Regulation S warrants are exercisable only by the original holder or by
a transferee, provided, that we are satisfied that the transfer was made in any
of the following circumstances:

o The transfer was made to a non-U.S. person who purchased and received
the warrant outside the United States in compliance with Rule 903 or
Rule 904 of Regulation S under the Securities Act; or

o The transfer was made under an exemption from registration under the
Securities Act and we have received an opinion to that effect from
counsel acceptable to us.

We may redeem all or any of the Regulation S warrants, at a price of
$0.05 per underlying share, at any time after the first date on which the
average of the closing bid prices for our shares of common stock in any
inter-dealer quotation system on which the common stock has been the subject of
both bid and ask quotations shall have exceeded $2.00 per share on 10
consecutive trading days. After the date fixed for redemption by written notice
delivered to the warrant holders, the right to exercise the redeemed portion of
any warrant will cease, and the holder will be entitled only to receive payment
of the redemption price for the redeemed portion of the warrant. Upon a holder's
surrender of a warrant, we will deliver to the holder a new warrant of like
tenor and date with respect to any unredeemed portion of the warrant.

We have filed this registration statement to fulfill our obligation
under the terms of the Reg S offering.

Additional Warrants. We have also privately issued or agreed to issue
warrants to purchase an aggregate of 6,269,773 shares of our common stock at
exercise prices ranging from $0.1666 to $1.50 per share, including the warrants
granted to Net2Phone described below. All of these warrants are outstanding and
exercisable on the date hereof, except that warrants to purchase 336,000 shares
at $1.50 per share which we have agreed to issue will be exercisable upon their
issuance.

<PAGE>

In connection with our agreement with Net2Phone, we granted Net2Phone
four-year warrants expiring September 29, 2003 to purchase up to 15% of our
fully-diluted common stock for approximately $3,000,000. These warrants are
exercisable on one occasion, in whole and not in part. The number of shares
issuable upon exercise of these warrants depends on the number of our fully
diluted shares as of the date of exercise or an earlier date fixed by the
warrants. Under these warrants, Net2Phone currently has the right to purchase
5,050,380 shares of our common stock.

The warrants grant Net2Phone the right to require us, under specified
circumstances, to effect a registration of all or some of its warrant shares.
Specifically:

o At any time after we have effected an initial public offering,
Net2Phone can require us to effect one registration of its warrant shares, and
two registrations on Form S-3, if we are eligible to use that form.

o At any time we propose to register any of our shares, Net2Phone may
request that some or all of its warrant shares be included in the registration
statement. We are required to use our best efforts to include the warrant shares
subject to the advice of a managing underwriter to limit or exclude warrant
shares. These rights do not apply to shares eligible for resale under Rule 144
of the Securities Act or registrations of an initial public offering, business
combinations, employee stock options, or an exchange offer or offering to
stockholders and are subject to rights which existed prior to the issuance of
the Net2Phone warrants in favor of other stockholders.

Convertible Notes. We have issued convertible notes totaling $20,000,
due March 31, 2002, which are convertible into common stock at $1.00 per share.

Transfer Agent and Registrar

Our transfer agent and registrar is Continental Stock Transfer
& Trust Company, located at Two Broadway, New York, New York 10004. Its
telephone number is (212) 509-4000.

Listing

Shares of our common stock are currently quoted in the NQB Pink Sheets
under the trading symbol "NTWD."

<PAGE>
<TABLE>
<CAPTION>
SIGNIFICANT PARTIES
- ---------------------------------------------------------------------------------------------------------------------
Name Address Relationship to Netword, Inc.
- ---- ------- -----------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shepard C. Bostin c/o Netword, Inc. Chief Operating Officer, Vice
702 Russell Avenue, Third Floor President of Marketing
Gaithersburg, MD 20877
- ---------------------------------------------------------------------------------------------------------------------
Kent M. Klineman 1270 Avenue of the Americas Secretary, Director, beneficial
Suite 1800 owner of more than 5% of our
New York, NY 10020 common stock.
- ---------------------------------------------------------------------------------------------------------------------
Murray M. Rubin 1270 Avenue of the Americas Chief Financial and Accounting
Suite 1800 Officer, Treasurer
New York, NY 10020
- ---------------------------------------------------------------------------------------------------------------------
W. Edward Scheetz c/o NorthStar Capital Investment Director and upon the issuance of
Group warrants to NorthStar Capital
527 Madison Avenue Partners LLC to purchase 336,000
16th Floor shares of our common stock, he
New York, New York 10022 will become a beneficial owner of
more than 5% of our common stock.

Mr. Scheetz has 50% of the voting
power and economic interest in
and shares control of NorthStar
Capital. Accordingly, Mr. Scheetz
disclaims beneficial ownership of
50% of the shares held by
NorthStar Capital.
- ---------------------------------------------------------------------------------------------------------------------
Michael Wise c/o Netword, Inc. President, Chief Executive
702 Russell Avenue, Third Floor Officer, Director, beneficial owner
Gaithersburg, MD 20877 of more than 5% of our common stock.
- ---------------------------------------------------------------------------------------------------------------------
Batya Wise c/o Netword, Inc. Beneficial owner of more than 5%
702 Russell Avenue, Third Floor of our common stock.
Gaithersburg, MD 20877
- ---------------------------------------------------------------------------------------------------------------------
James Karanfilian 235 South Dwight Place Beneficial owner of more than 5%
Englewood, NJ 07631 of our common stock.
- ---------------------------------------------------------------------------------------------------------------------
Jordan Klineman 1270 Avenue of the Americas, Beneficial owner of more than 5%
Suite 1800 of our common stock.
New York, NY 10020
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
42

<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Justine Klineman 1270 Avenue of the Americas, Beneficial owner of more than 5%
Suite 1800 of our common stock.
New York, NY 10020
- ---------------------------------------------------------------------------------------------------------------------
Net2Phone, Inc. 171 Main Street Beneficial owner of more than 5%
Hackensack, NJ 07601 of our common stock.
- ---------------------------------------------------------------------------------------------------------------------
NorthStar Capital 527 Madison Avenue Upon receipt of the warrants to
Partners LLC 16th Floor purchase 336,000 shares of our
New York, New York 10022 common stock, NorthStar Capital
Partners LLC will become a
beneficial owner of more than 5%
of our common stock.
- ---------------------------------------------------------------------------------------------------------------------
Kronish Lieb Weiner 1114 Avenue of the Americas Counsel to Netword, Inc. in
& Hellman LLP New York, New York 10036 connection with this registration
statement.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
LEGAL PROCEEDINGS

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

The substance of our claim is that our patent covers the methodology
used by the RealNames system. The patent claims a universal electronic resource
denotation, request and delivery computer system that allows a computer or
Internet user to locate a URL by entering an alias without knowing the related
URL. The alias must be registered in a database in order to reach the URL
through a computer system or network. The claimed system generally operates by
having a local server computer that is linked to a central registry computer,
maintains aliases and is linked to one or more client computers.

The RealNames systems operates like the system claimed in our patent.
The Real Names system allows an Internet user, for a fee, to obtain an alias
which is associated with a particular URL so that the user can locate the URL
without having to remember a complex address. We believe the Real Names system
infringes our patent, since it has a Resolver (a local server computer) which is
linked to a central registry computer, maintains aliases and is linked to a
customer/user computer (i.e., a client computer).

<PAGE>

After discovery in our patent infringement case, each party moved for
summary judgement. On January 8, 1999, the court granted RealNames' motion for
summary judgment, holding that the RealNames system did not infringe our patent,
without ruling on the validity of our patent. On February 11, 1999, we filed
notice of appeal of the decision, and on April 30, 1999, we filed our appellate
brief with the United States Court of Appeals for the Federal Circuit. The
appeal was argued on November 2, 1999. If the decision of the District Court is
upheld on appeal, the protective scope of our patent would be impaired.

In August 1997, eight of our former employees, including the former
chief executive officer, resigned and made claims against Netword LLC. Claims by
four of those former employees have since been settled. In June, 1998, one of
the former employees instituted an action against Netword LLC and its managers
in the Circuit Court of Arlington, Virginia seeking to recover $69,281 for,
among other things, vacation pay, the dilution of his interest in Netword LLC
and the repayment of the funded portion of his subscription to a loan made by
members to Netword LLC. We are defending that action, which is currently
inactive. We do not believe that our financial exposure with respect to the
pending action or claims of these former employees is material.

LEGAL MATTERS

The legality of the securities offered hereby has been passed upon for
us by Kronish Lieb Weiner & Hellman LLP, 1114 Avenue of the Americas, New York,
New York 10036-7798. Kronish Lieb Weiner & Hellman LLP holds our $20,000
promissory note due March 31, 2002, convertible into shares of our common stock
at $1.00 per share.

EXPERTS

Our financial statements at December 31, 1998 and for the years ended
December 31, 1997 and 1998, appearing in this prospectus and the registration
statement, have been audited by Mahoney Cohen & Company, CPA, P.C. , independent
auditors, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

This prospectus is part of a registration statement on Form SB-1 under
the Securities Act that we filed with the Securities and Exchange Commission
with respect to the securities offered by this prospectus. This prospectus does
not contain all of the information in the registration statement and the
exhibits and schedule filed with it. For further information about us and the
securities offered by this prospectus, reference is made to the registration
statement and the exhibits and schedule filed with it. Statements contained in
this prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement. Each such statement is qualified in all
respects by reference to the corresponding exhibit.

A copy of the registration statement and the exhibits and schedule
filed with it may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at the Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of all or
any part of the registration statement may be obtained from such offices upon
the payment of the fees prescribed by the Commission. Please call the Commission
at 1-800-SEC-0330 for further information about its public reference room.

<PAGE>

The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants,
including us, that file electronically with the Commission. The address of the
site is http://www.sec.gov. Our registration statement and the exhibits and
schedule we filed electronically with the Commission are available on this site.

----------------------------------------

The information on our Web site, www.netword.com, is not part of this
prospectus. ----------------

Netword is a registered trademark. This prospectus also contains
trademarks and trade names of other companies.

<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)

Financial Statements

December 31, 1998

<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)

Index

Page

Independent Auditor's Report F-1

Balance Sheets as of December 31, 1998 and September 30, 1999
(Unaudited) F-2

Statements of Operations for the Years Ended December 31, 1998
and 1997; for the Nine Months Ended September 30, 1999 and
1998 (Unaudited); and for the Period from December 2, 1996
(Inception) to September 30, 1999 (Unaudited) F-3

Statements of Members' Deficit/Stockholders' Equity for the
Years Ended December 31, 1998 and 1997; for the Nine Months
Ended September 30, 1999 (Unaudited); and for the Period
from December 2, 1996 (Inception) to September 30, 1999
(Unaudited) F-4

Statements of Cash Flows for the Years Ended December 31, 1998
and 1997; for the Nine Months Ended September 30, 1999 and
1998 (Unaudited); and for the Period from December 2, 1996
(Inception) to September 30, 1999 (Unaudited) F-6

Notes to Financial Statements F-8

<PAGE>

INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Stockholders
Netword, Inc.

We have audited the accompanying balance sheet of Netword, Inc.
(formerly Netword, LLC) (A Development Stage Company) as of December 31, 1998,
and the related statements of operations, members' deficit/stockholders' equity
and cash flows for the years ended December 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Netword, Inc.
(formerly Netword, LLC) as of December 31, 1998 and the results of its
operations and its cash flows for the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.

/s/ Mahoney Cohen & Company, CPA, P.C.

New York, New York
August 9, 1999, except for Note 11,
paragraphs 4 and 5, as to which the
dates are September 29, 1999 and
November 12, 1999, respectively

F-1
<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Balance Sheets

<TABLE>
<CAPTION>
ASSETS
December 31, September 30,
1998 1999
---------- =-----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 59,110 $ 3,152,049
Prepaid expense (Note 11) - 1,500,000
Other current assets 877 -
---------- ---------
Total current assets 59,987 4,652,049
Property and equipment, net (Note 3) 92,331 84,307
Intangible assets:
Trademark, net 30,267 27,400
Intellectual property, net (Note 4) 15,000 11,250
Deferred offering and financing costs (Note 11) - 120,000
---------- ------------
Total intangible assets 45,267 158,650
---------- ------------
$ 197,585 $ 4,895,006
========== ============

LIABILITIES AND MEMBERS' DEFICIT/STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term liability (Note 6) $ 4,800 $ 9,600
Accounts payable 493,330 387,164
Loans payable (Note 5) 33,027 53,630
---------- ------------
Total current liabilities 531,157 450,394
Long-term liability, net of current portion (Note 6) 19,200 12,000
Commitments and contingencies (Note 10)
Redeemable common stock and common stock
warrants (Note 11) - 977,500
Members' deficit/stockholders' equity (Note 8):
Common stock, $.01 par value;
Authorized - 40,000,000 shares
Issued and outstanding - 16,923,924 shares at
September 30, 1999 - 169,239
Additional paid-in capital - 7,152,240
Deficit accumulated in the development stage (311,794) (3,855,068)
Less: Subscriptions receivable (40,978) (11,299)
---------- ------------
Total members' deficit/stockholders' equity (352,772) 3,455,112
---------- ------------
$ 197,585 $ 4,895,006
========== ============
</TABLE>

See accompanying notes.

F-2
<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Statements of Operations

<TABLE>
<CAPTION>
Period from
December
2, 1996
Year Ended Nine Months Ended (Inception)
December 31, September 30, to
--------------------------- ------------------------- September 30,
1998 1997 1999 1998 1999
------------ ------------ ------------ ---------- ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Sales $ 27,650 $ 23,100 $ 7,677 $ 24,415 $ 58,427

General and administrative expenses 1,096,402 1,532,067 862,066 658,559 3,551,995
------------ ------------ ------------ ---------- ------------

Operating loss (1,068,752) (1,508,967) (854,389) (634,144) (3,493,568)

Other income (expense):
Interest income - - 64,714 - 64,714
Loss on disposition of property
and equipment (43,639) - - - (43,639)
Loss on impairment of assets
(Note 4) - (382,575) - - (382,575)
------------ ------------ ------------ ---------- ------------
Net other income
(expense) (43,639) (382,575) 64,714 - (361,500)
------------ ------------ ------------ ---------- ------------

Net loss $ (1,112,391) $ (1,891,542) $ (789,675) $ (634,144) $ (3,855,068)
============ ============ ============ ========== ============

Pro forma basic and diluted loss per
common share attributable to
common stockholders $ (.13) $ (.54) $ (.05) $ (.08)
============ ============ ============ ==========

Pro forma weighted average number
of shares outstanding 8,443,359 3,507,964 14,550,298 8,293,059
============ ============ ============ ==========

</TABLE>

See accompanying notes.

F-3
<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Statements of Members' Deficit/Stockholders' Equity

Number of
--------------------- Common Stock Additional
Class A Class C ---------------- Paid-in
Units Units Shares Amount Capital
------- ------- ------ ------ ----------
<S> <C> <C> <C>
December 2, 1996 (inception) - - - $ - $ -

Cash contribution by Netword Partners
in December 1996 (Note 1) 5,100.00 - - - -

Assets acquired from Birdshell Corp-
oration LLC in exchange for
equity units (Note 1) 2,125.59 54.21 - - -

Net loss - - - - -
-------- ------- ------ ------ -------
Balance, December 31, 1996 7,225.59 54.21 - - -

Cash contributions by Netword
Partners from January
through April 1997 - - - - -

Class A Units issued in May 1997 8,560.50 - - - -

Class A Units issued in September
1997 4,806.94 - - - -

Subscriptions receivable - - - - -

Net loss - - - - -
--------- ------- ------ ------ -------
Balance, December 31, 1997 20,593.03 54.21 - - -

Class A Units issued from February
through December 1998 15,406.45 - - - -

Subscriptions receivable - - - - -

Net loss - - - - -
--------- ------- ------ ------ -------
Balance, December 31, 1998
(carried forward) 35,999.48 54.21 - $ - $ -
========= ======= ====== ====== =======

</TABLE>
<PAGE>
[RESTUBBED]
<TABLE>
<CAPTION>
Deficit Total
Accumulated Members'
in the Deficit/
Development Subscription Stockholders'
Stage Receivable Equity
----------- ------------ ------------
<S> <C> <C>
December 2, 1996 (inception) $ - $ - $ -

Cash contribution by Netword Partners
in December 1996 (Note 1) 250,000 - 250,000

Assets acquired from Birdshell Corp-
oration LLC in exchange for
equity units (Note 1) 428,571 - 428,571

Net loss (61,460) - (61,460)
----------- -------- ----------
Balance, December 31, 1996 617,111 - 617,111

Cash contributions by Netword
Partners from January
through April 1997 750,000 - 750,000

Class A Units issued in May 1997 428,027 - 428,027

Class A Units issued in September
1997 300,001 - 300,001

Subscriptions receivable - (16,251) (16,251)

Net loss (1,891,542) - (1,891,542)
----------- -------- ----------
Balance, December 31, 1997 203,597 (16,251) 187,346

Class A Units issued from February
through December 1998 597,000 - 597,000

Subscriptions receivable - (24,727) (24,727)

Net loss (1,112,391) - (1,112,391)
----------- -------- ----------
Balance, December 31, 1998
(carried forward) $ (311,794) $(40,978) $ (352,772)
=========== ======== ==========

</TABLE>
See accompanying notes.

F-4
<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Statements of Members' Deficit/Stockholders' Equity(Concluded)

Exchange of Class A and Class C
Units for common stock in
February 1999 (35,999.48) (54.21) 8,923,924 89,239 2,664,360

Conversion of accounts payable to
warrants in March 1999 - - - - 114,000

Issuance of common stock in March
1999 - - 6,000,000 60,000 940,000

Issuance of common stock and warrants
in March 1999 - - 2,000,000 20,000 1,980,000

Offering costs - - - - (75,000)

Issuance of warrants for legal
services - - - - 14,000

Subscriptions receivable - - - - -

Issuance of stock options for
consulting services - - - - 14,880

Issuance of warrant to Net2Phone - - - - 1,500,000

Net loss - - - - -
---------- --------- ---------- --------- -----------
Balance, September 30, 1999
(Unaudited) - - 16,923,924 $ 169,239 $ 7,152,240
========== ========= ========== ========= ===========

</TABLE>

<PAGE>
[RESTUBBED]

<TABLE>
<CAPTION>
Deficit Total
Accumulated Members'
in the Deficit/
Development Subscription Stockholders'
Stage Receivable Equity
----------- ------------ ------------
<S> <C> <C>
Balance, December 31, 1998
(brought forward) $ (311,794) $(40,978) $(352,772)

Exchange of Class A and Class C
Units for common stock in
February 1999 (2,753,599) - -

Conversion of accounts payable to
warrants in March 1999 - - 114,000

Issuance of common stock in March
1999 - - 1,000,000

Issuance of common stock and warrants
in March 1999 - - 2,000,000

Offering costs - - (75,000)

Issuance of warrants for legal
services - - 14,000

Subscriptions receivable - 29,679 29,679

Issuance of stock options for
consulting services - - 14,880

Issuance of warrant to Net2Phone - - 1,500,000

Net loss (789,675) - (789,675)
----------- -------- ----------
Balance, September 30, 1999
(Unaudited) $(3,855,068) $(11,299) $3,455,112
=========== ======== ==========
</TABLE>

See accompanying notes.

F-5

<PAGE>
NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Statements of Cash Flows

Period from
December 2, 1996
Year Ended Nine Months Ended (Inception)
December 31, September 30, to
------------------------- ------------------------ September 30,
1998 1997 1999 1998 1999
----------- ----------- --------- --------- ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net loss $(1,112,391) $(1,891,542) $(789,675) $(634,144) $(3,855,068)
Adjustments to reconcile net loss to
cash used in operating activities:
Issuance of stock options and
warrants for consulting and
legal services - - 28,880 - 28,880
Depreciation and amortization 104,951 103,549 48,484 81,564 261,853
Loss on disposition of property
and equipment 43,639 - - - 43,639
Loss on impairment of assets - 382,575 - - 382,575
Change in assets and liabilities:
Other current assets (877) - 877 (1,232) -
Deposits 4,214 - - - -
Accounts payable 390,697 94,904 7,834 221,214 501,164
----------- ----------- --------- --------- -----------
Net cash used in
operating activities (569,767) (1,310,514) (703,600) (332,598) (2,636,957)
----------- ----------- --------- --------- -----------
Cash flows from investing activities:
Proceeds from sale of property
and equipment 10,000 - - - 10,000
Acquisition of property and
equipment - (199,774) (33,843) - (354,540)
Acquisition of trademark - - - - (37,913)
----------- ----------- --------- --------- -----------
Net cash provided by
(used in) investing
activities 10,000 (199,774) (33,843) - (382,453)
----------- ----------- --------- --------- -----------
Cash flows from financing activities:
Proceeds from long-term debt - - - - 33,600
Principal payments of long-term
debt (4,800) (4,800) (2,400) - (12,000)
Proceeds from loans - 461,054 20,603 - 481,657
Redeemable common stock and
common stock warrants - - 977,500 - 977,500
Deferred offering costs - - (120,000) - (120,000)
Contributions from members
and stockholders 572,273 1,033,750 2,954,679 300,220 4,810,702
----------- ----------- --------- --------- -----------
Net cash provided by
financing activities 567,473 1,490,004 3,830,382 300,220 6,171,459
----------- ----------- --------- --------- -----------
Net increase (decrease) in cash
(carried forward) $ 7,706 $ (20,284) $ 3,092,939 $ (32,378) $ 3,152,049
=========== =========== ============ =========== ===========
</TABLE>

See accompanying notes.

F-6
<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Statements of Cash Flows (Concluded)

Period from
December 2, 1996
Year Ended Nine Months Ended (Inception)
December 31, September 30, to
----------------------------- -------------------------- September 30,
1998 1997 1999 1998 1999
------------- ------------ ----------- ------------ --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net increase (decrease) in cash
(brought forward) $ 7,706 $ (20,284) $ 3,092,939 $ (32,378) $ 3,152,049

Cash, beginning of period 51,404 71,688 59,110 51,404 -
------------- -------------- ------------ ----------- --------------
Cash, end of period $ 59,110 $ 51,404 $ 3,152,049 $ 19,026 $ 3,152,049
============= ============== ============ =========== ==============

Supplemental Schedules of Non-Cash Investing and Financing Activities

Subscriptions receivable $ 24,727 $ 16,251 $ - $ 12,393 $ 11,299
============= ============== ============ =========== ==============

Issuance of Class A Units and Class C
Units in exchange for:
Intellectual property $ - $ - $ - $ - $ 407,575
Net assets acquired - - - - 20,996
------------- -------------- ------------ ----------- --------------
$ - $ - $ - $ - $ 428,571
============= ============== ============ =========== ==============

Conversion of loans to Class A Units $ - $ 428,027 $ - $ - $ 428,027
============= ============== ============ =========== ==============

Conversion of accounts payable to
warrants $ - $ - $ 114,000 $ - $ 114,000
============= ============== ============ =========== ==============

Issuance of stock options and
warrants for consulting and
legal services $ - $ - $ 28,880 $ - $ 28,880
============= ============== ============ =========== ==============

Issuance of warrant for future
services $ - $ - $ 1,500,000 $ - $ 1,500,000
============= ============== ============ =========== ==============

</TABLE>

See accompanying notes.

F-7

<PAGE>

NETWORD, INC.
(Formerly Netword, LLC)
(A Development Stage Company)
Notes to Financial Statements
(unaudited with respect to the nine months ended September
30, 1999 and 1998 and for the period from December 2, 1996
(inception) to September 30, 1999)

Note 1 - The Company

Netword, LLC (the "Company") owns and operates an Internet utility
known as the Netword System which the Company believes offers a comprehensive
solution to problems created by a lack of consumer-friendly addresses for
Internet resources. The Company was formed as a limited liability company under
the laws of the State of Delaware, to acquire the business and assets of
Birdshell Corporation, L.L.C. ("Birdshell"). The Company has been in the
development stage since its organization on December 2, 1996.

The Company was organized by Netword Partners and acquired certain
assets and assumed certain liabilities of Birdshell as provided for in a Limited
Liability Company Agreement dated as of December 2, 1996 (the "Agreement").
Birdshell was formed in April 1995 to develop the Netword System. The Birdshell
acquisition was accounted for using the purchase method of accounting. The
acquired assets primarily consisted of proprietary rights to intellectual
property, including U.S. and foreign patent applications, trademarks and
Internet domain registrations, and certain other property and equipment having
an aggregate original estimated value of $960,000. The liabilities assumed
consisted of various computer and telephone leases, obligations under a
trademark purchase agreement and certain accrued expenses. In exchange for the
acquired assets, the Birdshell investors received membership interests in the
Company ("Units") consisting of 4,900 Class A Units, representing 49% of the
Company's equity, subject to reduction to 268.42 Class C Units if the Company
did not achieve various milestones at various dates. As a result of the
Company's failure to achieve these milestones, in July 1997, the 4,900 Class A
Units were converted into 268.42 Class C Units. In September 1997, the Company
proposed an amendment to the Agreement that was accepted by 214.21 of the Class
C Unit holders which resulted in the conversion of their Class C Units into
2,125.59 Class A Units, representing 29.42% of the Company's equity; the holders
of the remaining 54.21 Class C Units did not convert their Class C Units into
Class A Units. The reduction in the equity interests of the Birdshell investors
required a $532,213 reduction in the intellectual property and members' equity.

Pursuant to the Agreement, Netword Partners loaned the Company
$1,000,000 (the "Loan") and also received 5,100 Class B-2 Units. In 1997,
pursuant to the Agreement, the Loan was converted into 5,100 Class A Units and
the 5,100 Class B-2 Units were cancelled. The above transactions are reflected
in the statements of members' deficit/stockholders' equity as if the
transactions occurred in December 1996.

F-8

<PAGE>

Note 1 - The Company (Continued)

On February 18, 1999, the Company was merged into Netword, Inc., a
Delaware corporation (the "Merger"). The Merger was accounted for as a reverse
acquisition on the pooling of interest method and gave effect to the issuance by
Netword, Inc. to members of the Company of 8,923,924 shares of common stock and
3,184,733 warrants to purchase common stock at $1.25 per share, in exchange for
35,999.48 Class A Units and 54.21 Class C Units. Options on 2,284,374 shares of
common stock at $.167 per share and 815,239 shares of common stock at $1.25 per
share were issued by Netword, Inc. to replace outstanding options to purchase
units previously granted by the Company. In addition, options on 1,456,250
shares of common stock at $1.25 were issued by Netword, Inc. to certain Company
directors and employees.

Note 2 - Summary of Significant Accounting Policies

Interim Financial Statements

The interim financial statements at September 30, 1999 and for the nine
months ended September 30, 1999 and 1998 and for the period from December 2,
1996 (inception) to September 30, 1999 are unaudited; however, in the opinion of
management, all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation have been included. Results of interim periods
are not necessarily indicative of results to be expected for the entire year.

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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Property and Equipment

Property and equipment is recorded at cost. Furniture and fixtures and
computer equipment are depreciated using an accelerated method over the
estimated useful lives of the related assets, ranging from three to five years.
Amortization of the computer software is computed using the straight-line method
over three years. Major additions and betterments are capitalized and repairs
and maintenance are charged to operations in the period incurred.

F-9

<PAGE>

Note 2 - Summary of Significant Accounting Policies (Continued)

Trademark

The trademark is stated at cost and is amortized using the
straight-line method over ten years. The trademark is reported net of
accumulated amortization of $7,965 at December 31, 1998.

Intellectual Property

The intellectual property consists of the Netword System which is
stated at appraised value, which is below cost, net of accumulated amortization.
The intellectual property is amortized using the straight-line method over five
years.

Income Taxes

The Company is organized as a limited liability company and has elected
not to be a tax paying entity. The members are individually responsible for
their shares of the Company's income or loss for income tax reporting purposes.
Accordingly, there is no provision for federal and state income taxes.

Pro Forma Basic and Diluted Loss Per Share (Unaudited)

The Company has elected to disclose pro forma loss per share, as if it
had adopted Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128") giving effect to the merger discussed in Note 1. Under SFAS
128, companies that are publicly held or have complex capital structures are
required to present basic and diluted earnings per share ("EPS") on the face of
the income statement. SFAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS and, if applicable, diluted EPS. Basic EPS excludes
dilution and is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted and the resulting
additional shares are dilutive because their inclusion decreases the amount of
EPS. The effects on pro forma loss per share of the Company's outstanding
options are antidultive and therefore not included in the calculation of the pro
forma weighted average number of common shares outstanding.

F-10

<PAGE>

Note 2 - Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

The Company applies the provisions of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("SFAS 107"). SFAS 107 requires all entities to disclose the fair value of
financial instruments, both assets and liabilities recognized and not recognized
on the balance sheet, for which it is practicable to estimate fair value. SFAS
107 defines fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
At December 31, 1998, management believes the fair value of all financial
instruments approximated carrying value.

Stock-Based Compensation

The Company applies the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", ("SFAS No. 123")
which requires entities to recognize as expense over the vesting period the fair
value as of the date of grant of all stock awards. Alternatively, SFAS No. 123
allows entities to apply the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations, and to provide pro forma net income and pro forma net income
per share disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to apply the provisions of APB Opinion No. 25, under which
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price, and provide
the pro forma disclosure provisions of SFAS No. 123 in its annual financial
statements (see Note 7).

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," (SFAS No. 121"), long-lived assets are evaluated for possible
impairment through a review of undiscounted expected future cash flows. The
carrying value of a long-lived asset is considered impaired if the sum of the
undiscounted expected future cash flows is less than the carrying amount of that
asset. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived assets.

F-11

<PAGE>

Note 2 - Summary of Significant Accounting Policies (Continued)

Advertising and Marketing Expenses

Advertising expenses are charged to operations in the period in which
they are incurred. Advertising expenses for the years ended December 31, 1998
and 1997 were approximately $63,200 and $117,300, respectively.

Research and Development

Research and development costs amounted to approximately $210,00 and
$536,000 for the years ended December 31, 1998 and 1997, respectively.

Note 3 - Property and Equipment

Property and equipment consists of:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(Unaudited)
<S> <C> <C>
Furniture and fixtures $ 29,556 $ 29,556
Computer equipment 95,352 129,195
Computer software 92,523 92,523
-------- --------
217,431 251,274
Less: Accumulated depreciation
and amortization 125,100 166,967
-------- --------
$ 92,331 $ 84,307
======== ========
</TABLE>
Note 4 - Intellectual Property

In connection with the acquisition of the Birdshell assets, the Company
acquired proprietary rights to intellectual property relating to the Netword
System having an initial value of $939,788. Subsequently, in September 1997, as
discussed in Note 1, the holdings of the former Birdshell investors were reduced
from 49% to 29.42%, resulting in a reduction of the intellectual property and
members' equity by $532,213.

F-12

<PAGE>

Note 4 - Intellectual Property (Continued)

In connection with the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed Of", based upon an appraisal, the intellectual property was considered
to be impaired. Accordingly, a loss of $382,575 was recognized during the year
ended December 31, 1997.

Note 5 - Loans Payable

In May 1997, the Company offered its members rights to subscribe to
their pro rata share of a $500,000 loan (the "97 loan"), together with five year
warrants to purchase 10,000 Class A Units at $50 per unit. The exercise price of
a warrant was payable in cash or by the forgiveness of all or a portion of the
97 loan. The 97 loan was fully subscribed; however, certain subscribers did not
fully fund their subscriptions to that loan and, accordingly, did not qualify
for conversion of their shares of the 97 loan into Class A Units. The members
who funded all installments of their subscriptions to the 97 loan subsequently
converted their interests in that loan into Class A Units. At December 31, 1998,
the Company had $33,027 of loans payable to subscribers to the 97 loan who did
not fully fund their subscriptions.

Note 6 - Long-Term Liability

In connection with the acquisition of the Birdshell assets, the Company
assumed a long-term liability related to the purchase of the Netword trademark.
This liability is payable in equal installments of $4,800 per year concluding on
April 30, 2003.

Note 7 - Options

The Company has granted options to purchase the Company's Class A Units
to managers and key employees responsible for the direction and management of
the Company. At December 31, 1998, after giving effect to the recapitalization
described in Note 1, there were 3,099,613 shares of common stock reserved for
issuance pursuant to such options.

Pro forma information regarding net loss and net loss per share is
required by SFAS No. 123 and has been determined as if the Company had accounted
for its applicable options under the fair value method of the statement.

F-13

<PAGE>

Note 7 - Options (Continued)

The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the weighted-average assumptions
for 1998, including a risk free interest rate of 5%, a volatility factor of the
expected market price of the Company's common stock of .84 and a
weighted-average remaining contractual life of the option of 60 months.

This model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Because the
Company's options have characteristics significantly different from those of
traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option vesting period. The effects of
applying SFAS No. 123 for pro forma disclosures are not likely to be
representative of the effects on reported net income or losses for future years.
The Company's pro forma information follows:

Years Ended
December 31,
-------------------------------
1998 1997
------------ ------------

Pro forma net loss $(1,161,528) $(1,893,184)
Pro forma net loss per share (.14) (.54)

F-14

<PAGE>

Note 7 - Options (Continued)

A summary of applicable option activity and related information for the
years ended December 31, 1998 and 1997, after giving effect to the
recapitalization described in Note 1, is as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price

<S> <C> <C> <C> <C>
Outstanding, beginning of year 1,036,187 $ .45 - $ -
Granted 2,077,429 .45 1,036,187 .45
Exercised - - - -
Forfeited 14,003 .45 - -
--------- -----
Outstanding, end of year 3,099,613 $ .45 1,036,187 .45
========= =========
Exercisable, end of year 1,417,907 $ .45 129,323 $ .45
========= =========
</TABLE>
The weighted-average fair value of options granted during 1998 and 1997
was $.26 and $.31, respectively. Exercise prices for options outstanding ranged
as of December 31, 1998 from $.17 to $1.25. These options expire at various
times through February 2004.

Note 8 - Equity Transactions

Pursuant to the Agreement, during 1997 the Loan was converted into
5,100 Class A Units and the Class B-2 Units were cancelled. $250,000 of the Loan
was funded in December 1996; the $750,000 balance was funded during the period
from January 1, 1997 through April 15, 1997.

In May 1997, the Company sold 8,560.50 Class A Units at $50.00 per Unit
resulting in proceeds of $428,027. In September 1997, the Company sold 4,806.94
Class A Units at $62.41 per Unit, resulting in proceeds of $300,001.

F-15

<PAGE>

Note 8 - Equity Transactions (Continued)

In February 1998, the Company offered its members rights to subscribe
to their pro rata share of a $600,000 offering, consisting of 15,483.87 Class A
Units at $38.75 per Unit. In addition, to protect option holders from dilution
resulting from the $600,000 offering, the Company also granted option holders
their pro rata share of 2,313.93 new options to purchase Class A Units at an
exercise price of $38.75. The members subscribed to 15,406.45 Class A Units for
total proceeds of $597,000.

Note 9 - Related Party Transaction

During the year ended December 31, 1997, the Company incurred
$10,000 for consulting services to an entity owned by the Company's president.

Note 10 - Commitments and Contingencies

Operating Lease

The Company leases an office under a non-cancellable operating
lease expiring in 2003. Future minimum lease payments are as follows:

Year Ending
December 31,
------------

1999 $ 40,000
2000 40,000
2001 42,000
2002 43,000
2003 29,000
--------
$194,000
========

Total rent charged to operations for the years ended December 31, 1998
and 1997 was approximately $66,000 and $84,000, respectively.

F-16

<PAGE>

Note 10 - Commitments and Contingencies (Continued)

Litigation

In August 1997, eight employees, including the former chief executive
officer, resigned and made claims against the Company. Claims by four of those
former employees have since been settled. One of the former employees instituted
an action against the Company and its managers in June 1998, in the Circuit
Court of Arlington, Virginia, seeking to recover approximately $70,000 for,
among other things, the dilution of his interest in the Company and the
repayment of the funded portion of his subscription to the 97 loan (see Note 5).
The Company is defending that action which is currently inactive. The Company
does not believe that its financial exposures with respect to the pending action
or unsettled claims of the other former employees is material.

Note 11 - Subsequent Events

In February 1999, the Company settled fees of $655,000 for legal
services by payment of $200,000 and an agreement to deliver warrants to purchase
150,000 shares of Netword, Inc. common stock at $.1667 per share (subsequently
delivered by Netword, Inc.). The fair value for the warrants was estimated to be
$.76 per warrant at the date of the agreement, using the Black-Scholes option
pricing model.

On March 19, 1999, Netword, Inc. privately placed 6,000,000 shares of
common stock at $.1666 per share or a total of $1,000,000. On the same date, in
an offering to foreign investors, Netword, Inc. sold units consisting of
2,000,000 shares of common stock and warrants to purchase an additional
1,600,000 shares of common stock (at $1.25 per share) for total consideration of
$2,000,000. Offering costs for the two offerings aggregated $75,000.

On July 28, 1999 and August 5, 1999, Netword, Inc. privately placed
units consisting of 782,000 shares of common stock and warrants to purchase an
additional 625,600 shares of common stock (at $1.50 per share) for total
consideration of $977,500. The individual who introduced the Company to most of
the investors was issued warrants (for an additional 85,293 shares of common
stock at $1.50 per share) as a finder's fee. The staff of the Securities and
Exchange Commission has advised the Company that such individual may have acted
as an unregistered broker-dealer in violation of Section 15 of the Securities
Exchange Act by introducing the Company to the investors and receiving a
finder's fee. If such individual acted as an unregistered broker-dealer in
violation.

F-17

<PAGE>

Note 11 - Subsequent Events (Continued)

of the Securities Exchange Act, then under Section 29 of the Securities Exchange
Act (1) the warrants issued to such individual as a finder's fee would be
voidable by the Company and (2) each investor introduced to the Company would
have the right to rescind his purchase. While the Company does not contemplate
making a rescission offer, it will notify each of the investors introduced to
the Company by such individual of the position of the Securities Exchange
Commission and the investor's potential rights under Section 29 of the
Securities Exchange Act. Accordingly, such proceeds are classified as redeemable
common stock and common stock warrants in the accompanying balance sheet.
Offering costs were approximately $50,000 and are included in deferred financing
and offering costs.

On September 29, 1999, the Company entered into an agreement with
Net2Phone, Inc. ("Net2Phone") under which a newly developed version of the
Company's software agent will be shipped with Net2Phone's software, together
with the Company's logo and slot and a direct link to the Company's web site.
The agreement also provides that Net2Phone is responsible for maintaining a
database of URLs and associated phone numbers and is entitled to 50% of all
revenue attributable to the registration and use of Networds sourced from
Net2Phone's web site. The agreement has an initial one-year term (expiring
September 29, 2000), subject to renewal for successive additional one-year terms
and to early termination by Net2Phone. In connection with the agreement, the
Company granted Net2Phone four-year warrants (expiring September 29, 2003) to
acquire up to 15% of the Company's fully diluted common stock for approximately
$3,000,000. The fair value of such warrants was $1,500,000, based upon a
Black-Scholes option pricing model. The value of such warrants is recorded as a
prepaid expense at September 30, 1999 with a corresponding credit to additional
paid-in capital and will be charged to expense over the initial term of the
agreement.

On November 12, 1999, the Company entered into an agreement with
Nettaxi Online Communities, Inc. ("Nettaxi"), under which Nettaxi will be
obligated to promote the Netword System, enable its users to use and create
Networds and place the Company's logo, slot and a direct link to the Company's
web site on Nettaxi's web site. The agreement also provides that Nettaxi is
entitled to receive 30% of revenue received for the first year, and 20% of the
revenue for the second year, from customers who open an account at the Company's
web site, through a link from the Nettaxi web site. The Company has guaranteed
to Nettaxi a revenue share amount equal to $5,000 per month for the first year.
The agreement has a one-year initial term (expiring November 12, 2000), subject
to renewal for successive additional one-year terms and to early termination by
either party.

F-18

================================================================================

NETWORD, INC.

Common Stock

6,351,148 shares

-------------------

PROSPECTUS

-------------------

February 4, 2000

================================================================================

<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 1. Indemnification of Directors and Officers.

Under our Certificate of Incorporation (the "Charter") and our Bylaws
(the "Bylaws"), our directors and officers are entitled to be indemnified by us
to the fullest extent permitted by Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL"). Additionally, under the Charter and the Bylaws,
our directors are not subject to personal liability for monetary damages
resulting from a breach of fiduciary duty or failure to exercise any applicable
standard of care, except that our directors may be subject to personal liability
for monetary damages in circumstances involving:

o a breach of the duty of loyalty;

o acts or omissions not in good faith which involve intentional
misconduct or a knowing violation of law;

o unlawful payments of dividends, stock purchases or redemptions
under the DGCL; or

o transactions from which the director derives an improper
personal benefit.

ITEM 2. Other Expenses of Issuance and Distribution.

The following statement sets forth the estimated expenses payable in
connection with this Registration Statement, all of which will be paid by us:

Registration Fee .............................................. $1,650.40
Legal Fees and Expenses ....................................... $75,000.00
Accountant's Fees and Expenses ................................ $20,000.00
Printing Costs ................................................ $15,000.00
-----------
Total ......................................................... $111,650.40

Item 3. Undertakings.

(1) We hereby undertake to file, during any period in which securities
included in this Registration Statement may be sold, a post-effective amendment
to this Registration Statement to:

(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;

(b) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement, and

II-1
<PAGE>

(2) We also undertake to treat each post-effective amendment as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering, for the purposes
of determining liability under the Securities Act.

(3) We also undertake to file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.

(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the provisions described above, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than our payment of expenses incurred or paid by any of our directors,
officers or controlling persons in the successful defense of any action, suit or
proceeding) is asserted by any of our directors, officers or controlling persons
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of competent jurisdiction the question of whether our
indemnification is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

Item 4. Unregistered Securities Issued or Sold Within One Year.

All of the persons who acquired our securities in the transactions
described below (other than certain of them who are specifically named in this
Item) are named in the table under Selling Stockholders in Part I of this
Registration Statement.

Each of the persons named in the table under Selling Stockholders in
Part I of this Registration Statement who has a [check mark] next to his, her or
its name received our securities in the merger. In addition, Samuel Bergman and
Donald Rubin, who are not named in Part I of this Registration Statement,
received our securities in the merger.

(a) On February 18, 1999, Netword LLC merged into Netword, Inc. which
was formed immediately prior to the merger and had no assets, liabilities or
outstanding securities at the time of the merger. The sole purpose of the merger
was to convert Netword LLC from a limited liability company to a corporation.
Upon the merger, all of the outstanding units of membership interest in Netword
LLC were cancelled and the holders of such units received, on a pro rata basis

II-2
<PAGE>

in place of each unit, (1) 247.518331 shares of common stock of Netword, Inc.
and (2) warrants to purchase 88.333682 shares of common stock of Netword, Inc.
at an exercise price of $1.25 per share (a total of 8,923,924 shares of common
stock and warrants to purchase up to 3,184,733 additional shares of common
stock). No other consideration was issued or paid to or received by security
holders in connection with the merger. As a result of the merger, the unit
holders of Netword LLC became the sole security holders of Netword, Inc. in
exactly the same proportions as they had held profits interests in Netword LLC
immediately prior to the merger. The ratio of securities of Netword, Inc. issued
in the merger to securities of Netword LLC cancelled in the merger was
determined arbitrarily by the managers of Netword LLC. No vote of unit holders
in Netword LLC was solicited or required to effect the merger, since the
managers of Netword LLC controlled sufficient units and had contractual
authority to conclude the merger without the consent of other members of Netword
LLC. All of the securities issued in the merger bear a legend and are subject to
stop orders restricting transfer in the absence of registration under the
Securities Act or an available exemption. None of these securities has been
transferred since the merger.

Of the 56 unit holders in Netword LLC immediately prior to the merger,
33 were known to be accredited investors and the remaining 23 were sophisticated
investors, all of whom had access to all relevant information regarding Netword,
Inc., Netword LLC and the merger.

Accordingly, with respect to the merger, the persons who received
securities of Netword Inc. in the merger were either accredited investors or
sophisticated investors for purposes of the Securities Act and had access to all
relevant information; therefore, they did not require the protection that would
have been afforded by registration under the Securities Act, and the issuance of
such securities to such persons was exempt from such registration pursuant to
Section 4(2) of the Securities Act as a transaction by an issuer not involving
any public offering.

(b) As a result of the merger, options to purchase 9,229.14 units of
Netword LLC previously issued to a total of 14 employees (including former
employees) and managers of Netword LLC, all of whom were members of Netword LLC,
were cancelled, and each person who held such an option was granted a new option
under a newly adopted stock option plan of Netword, Inc. to purchase (1)
247.518331 shares of common stock of Netword, Inc. at an exercise price of

II-3
<PAGE>

$0.1666 per share and (2) 88.333682 shares of common stock of Netword, Inc. at
an exercise price of $1.25 per share for each cancelled option to purchase one
unit of Netword LLC. In sum, Netword, Inc. granted to these persons options to
acquire a total of up to 2,284,374 shares of its common stock at an exercise
price of $0.1666 per share (of which options for 43,315 shares have since been
terminated) and up to 815,239 shares of its common stock at an exercise price of
$1.25 per share (of which options for 31,556 shares have since been terminated).
The ratio of new options to cancelled options was determined arbitrarily by the
Board of Directors of Netword, Inc., but the new options were granted only to
holders of cancelled options on a pro rata basis without payment or receipt of
any additional consideration. Further, on March 15, 1999, additional options to
purchase an aggregate of 1,456,250 shares of common stock of Netword, Inc. at an
exercise price of $1.25 per share were granted to two of our directors and two
consultants. These options expire on February 17, 2004. As of September, 1999,
additional options to purchase an aggregate of 407,773 shares of common stock of
Netword, Inc. at exercise prices ranging from $0.1666 to $1.50 per share were
granted to nine of our employees and one consultant. None of the outstanding
options is exercisable except pursuant to registration under the Securities Act
or the availability of an applicable exemption from registration. Recipients of
options who were not directors, employees of or consultants to Netword Inc. were
all former directors or employees of or consultants to Netword LLC who had
received options to acquire units in Netword LLC in accordance with the
exemption from registration available pursuant to Rule 701 under the Securities
Act. No consideration was paid by any of these persons for their receipt of new
options in Netword Inc. and they made no investment decision with respect to
such receipt, since they had no rights to vote on the merger pursuant to which
their prior options in Netword LLC were cancelled. It is our position that the
grant of the new options to these persons was not a sale within the meaning of
the Securities Act. To the extent the grant of the new options to these persons
may be deemed to constitute a sale within the meaning of the Securities Act,
these persons had historically participated directly in our activities, had
direct access to all information available to our stockholders and did not
require the protection that would have been afforded by registration under the
Securities Act; accordingly, the grant did not involve a public offering and was
therefore exempt from registration under the Securities Act pursuant to Section
4(2) of the Securities Act. To the extent the persons to whom new options were
granted were directors or employees of or consultants to Netword, Inc. at the
time of their receipt of new options and the grants of these new options
constituted sales within the meaning of the Securities Act, such grants were
exempt from registration pursuant to Rule 701 under the Securities Act.

The following option holders (each of whom was an employee of or
consultant to Netword Inc. at the time he or she was granted options) are not
named in Part I of this Registration Statement: Amanda Howlett, Debbie Bostin,
Erik Dove, Simon Janes, Stephen Williams, Thomas Sweeting, R.B. Rattey, Marshall
Mosely, Hiu Fung Ho, Crystal Sikora and Louis Libin.

(c) On March 19, 1999, Netword, Inc. sold 6,000,000 shares of its
common stock to 35 of its stockholders, 28 foreign investors and two other U.S.
investors at a price of $.01666 per share for total consideration of $1,000,000
(the maximum amount of the offering). All stockholders of Netword, Inc. were
offered the opportunity to subscribe for shares in the offering on a pro rata
basis. To the extent any of these stockholders declined to purchase the shares

II-4
<PAGE>

offered to him, the shares were purchased by other stockholders. The sale price
of the shares was determined arbitrarily by the Board of Directors of Netword,
Inc. The sale of the shares was exempt from registration under the Securities
Act pursuant to Rule 504 under the Securities Act.

The investors in this offering who are not named in Part I of this
Registration Statement were: 679212 Albert Ltd., Christopher Morris, E. Ann
Curry, Geoff Whitlam, International Pursuit Corporation, Irwin Singer, Jayvee &
Co. Account 0002002, Alize Limited, Palmerston Investments Limited, Hemery
Nominees (2), Lake & Co., Val D'Sol Holdings, John McMahon, Joshua Rizack,
Librion Group Inc., Marilia Costa, Melbourne Investments Ltd., Patstar Inc.,
Peter C. Halsall, Pullen Family Holdings Inc. and Ross McMaster. Other than Mr.
Rizack and Librion Group, Inc., all of these investors have represented to us
that they are non-U.S. persons. Other than Mr. Rizack, who is a consultant to
us, none of the investors is related to us other than as a securityholder.

(d) Also on March 19, 1999, Netword, Inc. sold 2,000,000 units
comprising 2,000,000 shares of its common stock and warrants to purchase
1,600,000 shares of its common stock at an exercise price of $1.25 per share for
total consideration of $2,000,000. The sale price of the units ($1 per unit) was
arbitrarily determined by the Board of Directors. The units were sold to
non-U.S. persons (most of whom also purchased shares in the Rule 504 offering)
in an offshore transaction that was exempt from registration under the
Securities Act pursuant to Rule 903 of Regulation S under the Securities Act.

The investors in this offering who are not named in Part 1 of this
Registration Statement were: Alize Limited, Palmerston Investments Limited,
Hemery Nominees (2), Lake & Co. and Val D'Sol Holdings.

(e) On March 19, 1999, pursuant to an agreement negotiated by Netword
LLC, Netword, Inc. issued warrants to purchase 150,000 shares of its common
stock at an exercise price of $0.1666 per share to Fulbright & Jaworski LLP in
partial payment for legal services provided to Netword LLC. We believe that
Fulbright & Jaworski LLP is an accredited investor. The issuance of the warrants
did not involve a public offering and was therefore exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act.

(f) On April 1, 1999, in a negotiated transaction, Netword, Inc. issued
its $20,000 convertible note due March 31, 2001 to Kronish Lieb Weiner & Hellman
LLP in partial payment for legal services provided to Netword, Inc. and Netword
LLC. The note is convertible into common stock at $1.00 per share. We believe
that Kronish Lieb Weiner & Hellman LLP is an accredited investor. The issuance
of the note did not involve a public offering and was therefore exempt from
registration under the Securities Act pursuant to Section 4(2) of the Securities
Act.

(g) On May 1, 1999, in a negotiated transaction, Netword, Inc. issued
warrants to purchase 22,500 shares of its common stock at an exercise price of
$0.1666 per share to Pryor Cashman Sherman & Flynn LLP in partial payment for
legal services provided to Netword, Inc. We believe that Pryor Cashman Sherman &

II-5
<PAGE>

Flynn LLP is an accredited investor. The issuance of the warrants did not
involve a public offering and was therefore exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act.

(h) In separate closings on July 28, 1999 and August 5, 1999, Netword,
Inc. privately sold a total of 782,000 units comprising 782,000 shares of its
common stock and warrants to purchase 625,600 shares of its common stock at an
exercise price of $1.50 per share for total consideration of $977,500. The sale
price of the units ($1.25 per unit) was arbitrarily determined by the Board of
Directors. The units were sold to a total of 14 persons, all of whom we believe
are accredited investors within the meaning of Rule 501 under the Securities
Act, and the sale was therefore exempt from registration under the Securities
Act pursuant to Rule 506 under the Securities Act. In connection with this
transaction, we issued warrants to acquire 85,293 shares of common stock at
$1.50 per share to David Segal as a finders fee. We believe that Mr. Segal is an
accredited investor. The issuance of warrants to Mr. Segal did not involve a
public offering and was therefore exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act.

The investors in this offering were: NorthStar Capital Partners LLC,
Barington Capital Group, Charlie Humber, Martin Lamb, Gregory Peck, Meister
Brother Investments LP, G2 Investments, Andrew Davidoff, Double A. Ventures
Ltd., Mr. E. Das, Richard J. McCready, David G. King, Jr., Murray M. Rubin and
Francisco J. Gonzalez-Paez. Other than (i) NorthStar Capital Partners LLC, of
which W. Edward Scheetz, a director of Netword, is a 50% owner, and (ii) Mr.
Rubin, who is our Chief Financial and Accounting Officer and Treasurer, none of
these investors is related to us other than as a securityholder.

(i) In July, 1999, we agreed to issue warrants to purchase 336,000
shares of our common stock at an exercise price of $1.50 per share to NorthStar
Capital Partners LLC, of which W. Edward Scheetz is a 50% partner, upon Mr.
Scheetz's election to our Board of Directors. Mr. Scheetz has been elected to
our Board of Directors, and we are preparing to issue the warrant. We believe
that Mr. Scheetz is an accredited investor. To the extent the issuance of the
warrants may be deemed to constitute a sale within the meaning of the Securities
Act, such sale will be exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act.

(j) In a negotiated transaction involving an agreement by Netword, Inc.
and Net2Phone, Inc. for the inclusion of our software in Net2Phone's software
package, we issued to Net2Phone warrants to purchase up to 15% of our
fully-diluted common stock for approximately $3,000,000. We believe that
Net2Phone is an accredited investor. The issuance of the warrants did not
involve a public offering and was therefore exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act.

Item 5. Index to Exhibits.

- --------- ----------------------------------------------------------------- ----
Number Exhibit Page
- --------- ----------------------------------------------------------------- ----
2.1 (1) Certificate of Incorporation of Netword, Inc.
- --------- ----------------------------------------------------------------- ----

II-6
<PAGE>

- --------- ----------------------------------------------------------------- ----
2.2 (1) Bylaws of Netword, Inc.
- --------- ----------------------------------------------------------------- ----
2.3 (1) Certificate of Merger between Netword LLC and Netword, Inc. dated
February 18, 1999.
- --------- ----------------------------------------------------------------- ----
2.4 (1) Agreement and Plan of Merger between Netword, LLC and
Netword, Inc. dated February 18, 1999.
- --------- ----------------------------------------------------------------- ----
3.1 (1) Form of Warrant issued to members of Netword LLC in connection
with the merger of Netword, LLC and Netword, Inc.
- --------- ----------------------------------------------------------------- ----
3.2 (1) Form of Subscription Agreements executed in connection with the
Rule 504 sale of 6,000,000 shares of common stock consummated on
March 19, 1999.
- --------- ----------------------------------------------------------------- ----
3.3 (1) Form of Subscription Agreement executed in connection with the
Regulation S sale of 2,000,000 units consummated on March 19,
1999.
- --------- ----------------------------------------------------------------- ----
3.4 (1) Form of Warrant issued to purchasers in the Regulation S offering.
- --------- ----------------------------------------------------------------- ----
3.5 (1) Warrant dated March 19, 1999 issued to Fulbright & Jaworski LLP.
- --------- ----------------------------------------------------------------- ----
3.6 (1) Convertible note dated April 1, 1999 issued to Kronish Lieb
Weiner & Hellman LLP.
- --------- ----------------------------------------------------------------- ----
3.7 (1) Warrant dated May 1, 1999 issued to Pryor, Cashman, Sherman &
Flynn LLP.
- --------- ----------------------------------------------------------------- ----
3.8 (1) Form of Subscription Agreement executed in connection with the
Rule 506 sale of 782,000 units consummated on July 28, 1999 and
August 5, 1999.
- --------- ----------------------------------------------------------------- ----
3.9 (1) Form of warrant issued to purchasers in the Rule 506 offering,
to David Segal and to be issued to NorthStar Capital Partners LLC
- --------- ----------------------------------------------------------------- ----
3.10 (2) Warrant dated September 29, 1999 issued to Net2Phone, Inc.
- --------- ----------------------------------------------------------------- ----
3.11 (1) Stock option plan of Netword, Inc.
- --------- ----------------------------------------------------------------- ----
3.12 (1) Form of award letter for optionees.
- --------- ----------------------------------------------------------------- ----
6.1 (1) Contract regarding assignment of trademarks and trade names
"Netword" and "Netword, Inc."
- --------- ----------------------------------------------------------------- ----

II-7
<PAGE>

- --------- ----------------------------------------------------------------- ----
6.2 (3) Internet Data Center Services Agreement between Netword, Inc. and
Exodus Communications, Inc.
- --------- ----------------------------------------------------------------- ----
6.3 (2) Agreement dated September 29, 1999 between Netword, Inc. and
Net2Phone, Inc.
- --------- ----------------------------------------------------------------- ----
6.4 (3) Agreement dated as of November 12, 1999 between Netword, Inc.
and Nettaxi Online Communities, Inc.
- --------- ----------------------------------------------------------------- ----
10.1 (4) Consent of Mahoney Cohen & Company, CPA, P.C.
- --------- ----------------------------------------------------------------- ----
10.2 Consent of Kronish Lieb Weiner & Hellman LLP is contained in
their opinion filed as Exhibit 11.1
- --------- ----------------------------------------------------------------- ----
11.1 (1) Opinion of Kronish Lieb Weiner & Hellman LLP.
- --------- ----------------------------------------------------------------- ----
12.1 (3) Consent of W. Edward Scheetz.
- --------- ----------------------------------------------------------------- ----

(1) Previously filed with Netword, Inc.'s Form SB-1 Registration Statement No.
333-86873 filed with the Securities and Exchange Commission on September 10,
1999.

(2) Previously filed with Netword, Inc.'s Amendment No. 1 to Form SB-1
Registration Statement No. 333-86873 filed with the Securities and Exchange
Commission on November 16, 1999.

(3) Previously filed with Netword, Inc.'s Amendment No. 2 to Form SB-1
Registration Statement No. 333-86873 filed with the Securities and Exchange
Commission on December 16, 1999.

(4) Filed herewith.

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<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 4 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on February 4, 2000.

NETWORD, INC.
(Registrant)

By: /s/ MICHAEL L. WISE
-------------------
Name: Michael L. Wise
Title: President and Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 4 to the Registration Statement has been signed below by the
following persons in the capacities indicated on February 4, 2000.

Signature Title Date
- --------- ----- ----

/s/ MICHAEL L. WISE President and Chief Executive February 4, 2000.
- ------------------- Officer, Director
Michael L. Wise

/s/ MURRAY M. RUBIN Chief Financial and Accounting February 4, 2000.
- ------------------- Officer, Treasurer
Murray M. Rubin

/s/ KENT M. KLINEMAN Secretary, Director February 4, 2000.
- --------------------
Kent M. Klineman

Director February 4, 2000.
- --------------------
W. Edward Scheetz

II-9

<PAGE>
Exhibit 10.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated August 9, 1999, except for Note 11, paragraphs 4
and 5 as to which the dates are September 29, 1999 and November 12, 1999,
respectively, in the Registration Statement and related Prospectus of Netword,
Inc. (formerly Netword, LLC).

/s/ Mahoney Cohen & Company, CPA, P.C.

New York, New York
February 4, 2000