formsb20112

SB-2/A 1 formsb20112.htm formsb20112

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON January 30, 2002
REGISTRATION NO. 333-65416
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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iDial Networks, Inc.
(Exact name of small business issuer as specified in its charter)

NEVADA 4813 75-2863583
(State or other (Primary standard (I.R.S. Employer
jurisdiction of industrial classification Identification No.)
incorporation or code number)
organization)
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1211 S. Parker Road, Suite 203,
Denver, CO 80231
(954) 351-9860
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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Mark T. Wood
Chairman and Chief Executive Officer
1211 S. Parker Road, Suite 203,
Denver, CO 80231
(954) 351-9860
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
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Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman & Ference LLP
1065 Avenue Avenue of the Americas, 21st Floor
New York, New York 10018
(212) 930-9700
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Approximate date of proposed sale to public:
As soon as practicable after this registration statement becomes effective.
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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 a 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. [ ]
--------------------------

CALCULATION OF REGISTRATION FEE
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DOLLAR PROPOSED PROPOSED AMOUNT OF
AMOUNT TO MAXIMUM MAXIMUM REGISTRATION
TITLE OF EACH CLASS OF BE OFFERING AGGREGATE FEE
SECURITIES TO BE REGISTERED PRICE PER OFFERING
REGISTERED SECURITY(1) PRICE(1)

Common stock, $.001 par
value, underlying 36,450,000 $0.03 $1,093,500 $273.38
convertible notes (2)

Common stock, $.001 par
value underlying 166,666 $0.03 $5,000 $1.25
warrants (3)

TOTAL Up to N/A $1,098,500 $274.62
36,616,666

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(1) Estimated solely for the purpose of determining the registration fee.
(2) This represents the maximum amount of shares of our common sock that
Laurus Master Fund Ltd. can convert its $750,000 principal amount
convertible note into. The actual number of shares to be issued on
conversion is dependent, in part, on the price of the common stock at
the time of conversion.
(3) Represents 166,666 shares of common stock issuable upon the conversion
of warrants issued to Laurus Master Fund Ltd.

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

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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 the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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 is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

PROSPECTUS
________, 2002

iDial Networks, Inc.
Up to 36,616,666 Shares of our Common Stock

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This prospectus relates to the resale by the selling stockholder of up to
$1,098,500 worth of our common stock. The selling stockholder is deemed to be an
underwriter of the shares of common stock, which it is offering.

We will not receive any proceeds from the sale of shares by the selling
stockholder. However, we will receive proceeds upon the exercise of any warrants
that may be exercised by the selling stockholder, if any.

Our common stock is quoted on the Over-The-Counter Bulletin Board under the
symbol "IDNW." On December 31, 2001, the closing price of our common stock was
$0.03 per share.

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This investment involves a high degree of risk. See the "Risk Factors"
beginning on page 6.

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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is complete or accurate. Any representation to the contrary is a
criminal offense.

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TABLE OF CONTENTS

Section
-------

Prospectus Summary
Risk Factors
The Offering
Use of Proceeds
Market For Common Equity and Related Stock
Dividend Policy
Selected Financial Data
Business
Management's Discussion and Analysis of Financial Condition and Results of Operations
Directors, Officers and Control Persons
Executive Compensation
Certain Relationships and related Transactions
Security Ownership of Certain Beneficial Owners and Management
Selling Stockholder
Plan of Distribution
Description of Our Capital Stock
Shares Eligible for Future Sale
How to Obtain More Information About iDial Networks, Inc.
Legal Matters
Experts
Change In Registrant's Certifying Accountant
Index to Financial Statements

PROSPECTUS SUMMARY

iDial Networks, Inc.

We provide Internet-based telephone calling services to customers around
the world. We operate selected telecommunication services, including pre-paid
calling cards, pre-paid long distance calling service, facsimile and e-mail
services providing "mass-mailing" services, and have recently opened an Internet
based storefront.

Our calling services are Internet-triggered, meaning calls are initiated by
a customer inputting their account information and the telephone number they
wish to call, at which time our service will then dial the customer's telephone
and connect the customer's desired call for them. This method utilizes the
Internet and data networks, rather than traditional long distance phone
networks, to bypass certain tariffs and provide for a more economical service.
If the customer does not have access to a computer, they can call our service
via a toll free number to execute their telephone calls.

We sell virtual prepaid calling cards over the Internet and physical
prepaid cards through traditional retail outlets. Our Internet calling cards are
considered virtual because we do not issue physical phone cards. Once our
Internet phone cards are sold, they can be used immediately to make
international and domestic long distance phone calls via computer or traditional
phones.

Last year we decided to change our business model from being a telephone
services provider to a more diversified sales company. Consequently, we
purchased Whoofnet.com through which we offer a one-stop destination for
information, communication and shopping services on the Internet. We have
created our own ATM/Debit Card called iDial Gold Advantage Card. The iDial Gold
Advantage Card can be funded and re-funded and can be used around the world. Our
2Sendit.com, Inc. subsidiary is an established fax-messaging service that
provides "mass-mailing" service via facsimile to cut down on the cost and time
of traditional "mass-mailings."

As explained more fully in the Risk Factors section that follows this
Summary, our auditors have expressed substantial doubt as to our ability to
continue as a going concern without additional funding. We have a limited
operating history, have generated significant net losses and negative cash flow,
and have a significant working capital deficit and stockholder's deficiency.
This deficit indicates that we will be unable to meet our future obligations
unless additional funding sources are obtained. To date we have been able to
obtain funding and meet our obligations in a timely manner. However, if in the
future we are unsuccessful in attracting new sources of funding then we will be
unable to continue in business.

We were incorporated in May 1997, as a Nevada limited liability corporation
as WoodComm LLC. In April 1999, WoodComm LLC was reorganized from an LLC to a
Nevada Corporation, WoodComm International, Inc. In December 1999, Desert
Springs Acquisition Corporation, a Colorado Corporation, acquired all of the
issued and outstanding common shares of WoodComm International, Inc. in exchange
for 15,316,000 shares of common stock of Desert Springs Acquisition Corporation.
In January 2000, Desert Springs Acquisition Corporation moved its state of
incorporation to Nevada by merger of the Colorado Corporation with and into
iDial Networks, Inc., a Nevada corporation.

Our administrative offices are located at 1211 S. Parker Road, Suite 203,
Denver, CO 80231. Our telephone number is (954) 351-9860 and our website can be
found at www.iDialnetworks.com.

RISK FACTORS

You should carefully consider the following factors as well as other
information contained in this prospectus before deciding to invest in shares of
our securities.

Risks Relating to our Business:

We have a history of losses, which may continue, requiring us to seek additional
sources of capital, which may not be available, requiring us to curtail or cease
operations.

We incurred net losses from operations of $9,115,497 and $560,760 for the
fiscal years ended December 31, 2000 and 1999, respectively. For the nine months
ended September 30, 2001, we incurred a net loss of $2,722,376. We cannot assure
you that we can achieve or sustain profitability on a quarterly or annual basis
in the future. If revenues grow more slowly than we anticipate, or if operating
expenses exceed our expectations or cannot be adjusted accordingly, we will
continue to incur losses. In addition, we may require additional funds to
sustain and expand our sales and marketing activities, research and development,
and our strategic alliances, particularly if a well-financed competitor emerges
or if there is a rapid technological shift in the telecommunications industry.
There can be no assurance that financing will be available in amounts or on
terms acceptable to us, if at all. The inability to obtain sufficient funds from
operations or external sources would require us to curtail or cease operations.

The Telecommunications And Internet Telephony Markets Are Highly Competitive And
Our Failure To Compete Effectively Could Result in Additional Losses.

With respect to prepaid calling cards, we compete with the largest
telecommunications providers in the United States, as well as smaller, emerging
carriers. We may also compete with large operators in other countries. An
increasing number of large, well-capitalized companies are entering the market
for Internet telephony products and services. These competitors include a number
of companies that have introduced services that make Internet telephony
solutions available to businesses and consumers, and that permit voice
communications over the Internet. Many of our competitors are substantially
larger and have greater financial, technical, engineering, personnel and
marketing resources, longer operating histories, greater name recognition and
larger customer bases than we do. Competition from existing or new competitors
could reduce our revenues from the sale of our virtual prepaid calling cards and
other services. A general decrease in telecommunication rates charged by
international long distance carriers could also have a negative effect on our
operations. Our ability to compete also depends on our ability to anticipate and
adapt to rapid technological and other changes occurring in the
telecommunications industry. We may not be able to compete successfully against
current or future competitors, and competitive pressures could significantly
harm us, resulting in more significant financial losses.

If The Internet Telephony And Prepaid Calling Card Markets Do Not Gain Market
Acceptance By Potential Customers Our Operating Results Will Be Adversely
Affected.

We cannot be certain that Internet telephone service will gain market
acceptance or prove to be a viable alternative to traditional telephone service.
If the Internet telephony market fails to develop or develops more slowly than
we expect, then our operating results will adversely affected.

We Have Experienced Delays In Upgrading Our Platforms In The Past And May
Experience Delays In The Future.

In the past, we have experienced delays when we have tried to upgrade our
platform. If there are significant delays when upgrading our platform in the
future with respect to developing new products, we may elect to abandon a
potential product or service in favor of one that can be timely developed on a
cost effective basis. There can be no assurances that we can successfully
develop the software to enable us to offer new products or services. This may
lead to losses incurred from abandoning a product or service that we have
previously expended money to develop.

If we are not able to identify, develop, assemble, market or support our
products successfully or respond effectively to technological changes or product
announcements by competitors, we may not remain competitive.

Rapidly changing technology and new product introductions characterize the
markets for our products. Accordingly, we believe that our future success will
depend on our ability to enhance our existing products and to develop or procure
and introduce in a timely fashion new products that achieve market acceptance.
We cannot assure you that we will be able to identify, develop, procure,
assemble, market or support our products successfully or that we will be able to
respond effectively to technological changes or product announcements by
competitors.

We Rely On Third Party Contracts For Our Operations

Our success depends, in part, on our ability to continue to lease long
distance telephone capacity from third parties at economic rates to serve the
foreign countries we target. It also depends, in part, on our ability to
maintain our contractual relationships with local terminating parties in those
countries where we have Internet gateways. If we lose our leases or contracts or
if these parties are unable to provide these services, we believe we could
replace them. However, it would cause a disruption of our business until they
are replaced. Also, any replacement leases or contracts may not be at rates or
on terms as favorable to us.

We depend on Internet service providers to provide Internet access to us
and our customers. Our local terminating parties in foreign countries also rely
on local Internet service providers for access to the Internet in their
countries. If we lost our connection with our Internet service providers, we
could not sell our virtual calling cards through our website, and web initiated
calls could not be made by our customers, until the connection was
reestablished. If a local terminating party in a foreign country loses its
Internet connection, we could not route calls over the Internet to that
destination until the connection was reestablished. These failures could cause
us to lose customers and our ability to sell virtual calling cards and telephone
services would be affected.

In addition, we rely on suppliers for our Internet storefront. There can be
no assurance that any relationship between the Company and any such third party
will continue to be beneficial to the Company. There can also be no assurance
that the third parties will continue to produce products in the future that
retain their current level of market acceptance, that the products will continue
to be available in adequate quantities at the times required by the Company or
that such third party products will not contain defects or errors. The Company
may experience lost revenues due to the third party's delay in correcting
defects in their products, delay in getting an adequate supply of their products
to the Company, or from any resulting loss of market share.

Our Failure To Comply With Government Regulations Relating To The Internet Could
Harm Our Operations

Uncertainties regarding the applicability of foreign, federal and state
laws and regulations to the Internet may result in our violation of these laws
and regulations. Our failure to comply with the laws and governmental regulatory
requirements may result in, among other things, indemnification liability to
business customers and others doing business with us, administrative enforcement
actions and fines, and civil and criminal liability. The occurrence of one or
more of these events could materially harm our business, results of operations
and financial condition.

The parties conducting business with us may be subject to similar foreign,
federal and state regulation. These parties act as independent contractors and
not as our agents in their solicitations and transactions with consumers.
Consequently, we cannot ensure that these entities will comply with applicable
laws and regulations at all times. Failure on the part of a business customer to
comply with these laws or regulations could result in, among other things,
claims of vicarious liability or a negative impact on our reputation. The
occurrence of one or more of these events could materially harm our business,
results of operations, and financial condition.

We May Face Risks If New Laws Or Government Regulations Regarding The Internet
Are Enacted

The laws relating to our business and operations are evolving and few clear
legal precedents have been established. Most of the laws governing Internet
transactions have not been substantially revised or updated to fully accommodate
electronic commerce. Moreover, it may take years to determine the extent to
which existing laws relating to issues such as intellectual property ownership
and infringement and personal privacy are applicable to the Internet. Many of
these laws were adopted prior to 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. Until these laws, rules, and
regulations are revised to clarify their applicability to transactions conducted
through electronic commerce, particularly content, marketing, advertising and
taxation related to Internet operations, any company providing services through
the Internet or other means of electronic commerce will face compliance
uncertainty. Further, the adoption of new laws or the application of existing
laws may decrease the growth in the use of the Internet. These results could
decrease the demand for our services or increase our cost of doing business,
each of which would cause our revenues to decline and harm our business.

The Failure To Manage Our Growth In Operations And Hire Additional Qualified
Employees Could Result In Additional Losses And Lower Revenue.

The expected growth of our operations place a significant strain on our
current management resources. To manage this expected growth, we will need to
improve our:

- transaction processing methods;
- operations and financial systems;
- procedures and controls; and
- training and management of our employees.

Competition for personnel is intense, and we cannot assure stockholders that we
will be able to successfully attract, integrate or retain sufficiently qualified
personnel. Our failure to attract and retain the necessary personnel or to
effectively manage our employee and operations growth could result in additional
losses and lower revenue.

We Have Tangible Net Worth Deficit And A Going-Concern Qualification In Our
Certifying Accountant's Financial Statement Report, Either Or Both Of Which May
Make Capital Raising More Difficult And May Require Us To Scale Back Or Cease
Operations.

We have a net worth deficit as of our latest balance sheet date. This
deficit indicates that we will be unable to meet our future obligations unless
additional funding sources are obtained. To date we have been able to obtain
funding and meet our obligations in a timely manner. However, if in the future
we are unsuccessful in attracting new sources of funding then we will be unable
to continue in business. In addition, the report of our auditors includes a
going concern qualification which indicates an absence of obvious or reasonably
assured sources of future funding that will be required by us to maintain
ongoing operations. To date we have successfully funded iDial Networks, Inc. by
attracting additional equity investments and small issues of debt. However,
there is no guarantee that our efforts will be able to attract additional
necessary equity and/or debt investors. If we are unable to obtain this
additional funding, we may not be able to continue operations.

Risks Relating to our Current Financing Agreement:

There are a Large Number of Shares Underlying our Convertible Note, and Warrants
That May be Available for Future Sale and the Sale of These Shares May Depress
the Market Price of our Common Stock.

As of December 31, 2001, we have 87,144,454 shares of common stock issued
and outstanding and a convertible promissory note outstanding that may be
converted into 36,450,000 shares of common stock, based on the current market
price of $0.03 per share, and outstanding warrants to purchase 166,666 shares of
common stock. In addition, the number of shares of common stock issuable upon
conversion of the outstanding convertible note may increase if the market price
of our stock declines. All of the shares, including all of the shares issuable
upon conversion of the note and upon exercise of our warrants, may be sold
without restriction. The sale of these shares may adversely affect the market
price of our common stock.

The Issuance Of Shares Upon Conversion Of The Convertible Note And Exercise Of
Outstanding Warrants May Cause Immediate And Substantial Dilution To Our
Existing Stockholders.

The issuance of shares upon conversion of the convertible note (including
the conversion of interest earned on the convertible note) and exercise of
warrants may result in substantial dilution to the interests of other
stockholders since the selling stockholder may ultimately convert and sell the
full amount issuable on conversion. Although the selling stockholder may not
convert their convertible note and/or exercise their warrants if such conversion
or exercise would cause them to own more than 4.99% of our outstanding common
stock, this restriction does not prevent the selling stockholder from converting
and/or exercising some of their holdings and then converting the rest of their
holdings. In this way, the selling stockholder could sell more than this limit
while never holding more than this limit. There is no upper limit on the number
of shares that may be issued which will have the effect of further diluting the
proportionate equity interest and voting power of holders of our common stock,
including investors in this offering.

Interest On The Convertible Note Is Convertible Into Stock And The Conversion
Ratio Is Based Upon Our Stock Price, Which May Lead To Increased Dilution To Our
Existing Stockholders.

Interest on the Convertible note accrues at a rate of 8% per annum and is
payable quarterly in arrears, commencing September 30, 2001. As of September 30,
2001, $13,972.30 in interest has accrued. The holders of the convertible note
may convert all interest accrued and payable under the convertible note. The
conversion ratio is based upon our stock price and the lower the price of our
common stock, the more shares of common stock they will receive, assuming the
holders of the convertible note exercise their right to convert the interest
owed to them. Declining prices in our common stock will cause increased dilution
to our existing stockholders.

The Number Of Shares Of Common Stock Issuable Upon Conversion Of The Outstanding
Convertible Note Will Increase If The Market Price Of Our Stock Declines, Which
Will Cause Dilution To Our Existing Stockholders.

The following is an example of the amount of shares of our common stock
that are issuable, upon conversion of the note, based on market prices 25%, 50%
and 75% below the market price, as of December 31, 2001, of $0.03.

Price Per Share Discount of 20% Number of Shares Issuanble
--------------- --------------- --------------------------
.0225 .018 60,750,000
.0150 .012 91,125,000
.0075 .006 182,250,000

As illustrated, the number of shares of common stock issuable upon conversion of
the outstanding convertible note will increase if the market price of our stock
declines, which will cause dilution to our existing stockholders.

If we are required for any reason to repay the $750,000 of convertible
debentures we issued in July 2001, we would be required to deplete our working
capital, if available, or raise additional funds. Our failure to repay the
convertible notes, if required, could result in legal action against us which
could require the sale of substantial assets.

In July 2001, we issued $750,000 principal amount of convertible
debentures. The convertible debentures are due and payable, with 8% interest, in
July 2003, unless sooner converted into shares of our common stock. In addition,
any event of default as described in the convertible notes could require the
early repayment of the convertible notes, including a premium of 30% of the
outstanding principal balance of the note at the time of the default. We
anticipate that the full amount of the convertible notes, together with accrued
interest, will be converted into shares of our common stock, in accordance with
the terms of the convertible notes. If we are required to repay the convertible
notes, we would be required to use our limited working capital and raise
additional funds. If we were unable to repay the notes when required, the note
holders could commence legal action against us to recover the amounts due which
ultimately could require the disposition of some or all of our assets. Any such
action would require us to curtail or cease operations.

Risks Relating to our Stock:

The Lack of a Mature Trading Market for our Common Stock May Cause our Stock
Price to Decline Significantly and Limit the Liquidity of our Common Stock.

We do not meet the listing requirements for the listing or quotation of our
common stock on any national or regional securities exchange or on Nasdaq.
Currently, our common stock is traded on the Over-The-Counter Bulletin Board. As
a result, accurate current quotations as to the value of our common stock are
unavailable making it more difficult for investors to dispose of our common
stock. The lack of current quotations and liquidity can cause our stock price to
decline or to trade lower than the prices that might prevail if our securities
were listed or quoted on an exchange or on Nasdaq.

Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the
Trading Market in our Securities is Limited, Which Makes Transactions in our
Stock Cumbersome and May Reduce the Value of an Investment in our Stock.

Since our common stock is not listed or quoted on any exchange or on
Nasdaq, and no other exemptions currently apply, trading in our common stock on
the Over-The-Counter Bulletin Board is subject to the "penny stock" rules of the
SEC. These rules require, among other things, that any broker engaging in a
transaction in our securities provide its customers with a risk disclosure
document, disclosure of market quotations, if any, disclosure of the
compensation of the broker and its salespersons in the transaction, and monthly
account statements showing the market values of our securities held in the
customer's accounts. The brokers must provide bid and offer quotations and
compensation information before making any purchase or sale of a penny stock and
also provide this information in the customer's confirmation. Generally, brokers
may be less willing to execute transactions in securities subject to the "penny
stock" rules. This may make it more difficult for investors to dispose of our
common stock and cause a decline in the market value of our stock.

THE OFFERING

In this prospectus, and pursuant to a common stock purchase agreement with
Laurus Master Fund, Ltd., dated July 6, 2001, we are registering 36,616,666
shares of common stock, based upon a current market value of $0.030 per share,
underlying 1) $750,000 of 8% convertible debentures, due July 6, 2003; and 2) a
warrant to purchase 166,666 shares of common stock, both of which have been
issued to a single investor pursuant to a Subscription Agreement dated July 6,
2001. Interest only payments are due quarterly commencing September 30, 2001,
and the principal is due in one lump sum on July 6, 2003, or upon certain events
of default.

The conversion price for the convertible debentures is the lesser of
$0.0424* or 80% percent of the average of the three lowest closing prices for
the common stock for the 30 trading days prior to conversion date. The maximum
number of shares of common stock that any subscriber or group of affiliated
subscribers may own after conversion at any given time is 4.99%. The exercise
price for the warrants is the lesser of $0.064, or 120% percent of the average
of the three lowest closing prices for the common stock for the 10 trading days
prior to exercise of the warrant date. The maximum number of shares of common
stock that any subscriber or group of affiliated subscribers may own after
conversion at any given time is 4.99%. The number of shares of common stock
issuable upon conversion of the convertible debentures and the exercise of the
warrants is 36,616,666, based on a current market value of $0.030 per share, and
166,666 warrants with a current exercise price of $0.036. The actual conversion
price will depend on the market price of our common stock prior to the
conversion.

The parties have made mutually agreeable standard representations and
warranties. We have also entered into certain covenants including, but not
limited to, the following:

1. we may not redeem the convertible debentures without the consent of the
holder;
2. we will pay to certain finders a cash fee of 10% of the aggregate gross
purchase price of the convertible debentures, and 10% of the aggregate gross
proceeds from the exercise of the warrants, for location of the financings; and
3. we have agreed to incur certain penalties for untimely delivery of the
shares.

Upon any event of default, including the failure to register or deliver
shares of common stock in a timely manner upon conversion, the note holders can
require us to immediately pay a sum equal to 130% of the unconverted principal
amount of the notes, together with accrued but unpaid interest.

As of December 31, 2001, we had 87,144,454 shares of common stock
outstanding.

* This price represents eighty percent of the average of the three lowest
closing prices for the Common Stock for the thirty trading days prior to but not
including the closing date of the July 6, 2001 common stock purchase agreement
with Laurus Master Fund, Ltd.

USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered
and sold from time to time by the selling stockholder. We will receive no
proceeds from the sale of shares of common stock in this offering. However, we
will receive proceeds upon the exercise of any warrants that may be exercised by
the selling stockholder. We anticipate receiving approximately $5,000 if all of
the warrants are exercised, which proceeds we will use for general corporate
purposes.

MARKET FOR COMMON EQUITY AND RELATED STOCK MATTERS

Our common stock is publicly traded on the Over-The-Counter Bulletin Board
under the ticker symbol "IDNW." There are approximately 2,723 holders of our
common stock. We have never paid dividends on our common stock and have no
current plans to do so. The following table presents the high and low closing
bid prices of the common stock for the periods indicated. The quotations were
obtained from the website located at www.chart.yahoo.com and reflect
inter-dealer prices, without retail mark-up, mark-down or commissions and may
not represent actual transactions. In addition, the following is adjusted to
reflect a 2:1 stock split effective November 2000.

High Low
------------ ------------
2001
Fourth Quarter $ 0.05 $ 0.03
Third Quarter $ 0.08 $ 0.03
Second Quarter $ 0.13 $ 0.03
First Quarter $ 0.156 $ 0.016

2000
Fourth Quarter $ 0.44 $ 0.05
Third Quarter $ 0.94 $ 0.34
Second Quarter $ 2.03 $ 0.53
First Quarter $ 3.50 $ 0.76

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DIVIDEND POLICY

Holders of our common stock are entitled to receive such dividends as may
be declared by our Board of Directors. On November 15, 2000, a 2:1 stock split
was declared by our board of directors. We do not anticipate that dividends will
be paid on our common stock in the next fiscal year.

SELECTED FINANCIAL INFORMATION

The information set forth below for the years ended December 31, 2000 and
1999, which is derived from our audited financial statements, and for the nine
months ended September 30, 2001 and 2000, which is derived from our unaudited
financial statements, should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, including the notes thereto and other
financial information, appearing elsewhere in this registration statement.

Consolidated Statement of Operations:

Years Ended December 31, Nine Months Ended September 30,
--------------------------- ---------------------------
1999 2000 2000 2001
----------- ----------- ----------- -----------

Sales $ 1,575,826 $ 1,796,897 $ 949,670 $ 4,404,059
Gross profit (loss) $ 73,790 $ (272,677) $ (601,376) $ 189,685
Net loss $ (560,760) $(9,115,497) $(4,244,761) $(2,722,316)
Net loss per share $ (0.07) $ (0.19) $ (0.11) $ (0.03)

Consolidated Balance Sheet Data:

As of December 31, As at September 30,
1999 2000 2001
-------------- -------------- ------------------

Total current assets $ 138,095 $ 265,141 $ 601,300
Total current liabilities $ 642,961 $ 1,379,489 $ 3,079,878
Total stockholders' equity $ (173,809) $ 7,030,857 $ 5,214,380
(deficit)

BUSINESS

History

We provide telecommunication services to customers around the world. These
services include pre-paid telephone calling cards and reduced rate telephone
calls using the Internet. Telephone calls that are initiated over the Internet
combine user-friendly account tracking (i.e. monitoring on-line billing and call
records) with the low tariffs of Unites States based telecommunications
carriers, via calling centers accessed directly from home to anywhere in the
world. During 2000, we decided to change our business model from being a
telephony service provider, which provides the ability to send voice data (as
opposed to digital data) over the Internet, to a more diversified company.

As part of our change in business model, in August 2000, we acquired 100%
of the stock of Whoofnet.com, Inc. in exchange for the issuance of 9,893,500
shares of our common stock.

Whoofnet.com is an Internet company designed for direct selling utilizing
the latest advances available on the Internet. In particular, Whoofnet.com's
major product is an Internet portal for use by the general public, where users
can search the web through the use of search engines and links to other sites.
Whoofnet.com was formed under the laws of Florida on March 6, 2000. Whoofnet.com
also develops, tests and markets other products, such as the iDial Gold
Advantage card, a reloadable debit card, which it has recently completed
field-testing and plans to begin sales within the next several months. All costs
associated with the startup phase of the organization have been expensed in the
current period.

Whoofnet.com also formed six subsidiary Delaware Corporations between the
months of March and May 2000, and two foreign subsidiary corporations for the
operations of various aspects of its business. As of the dated of this
prospectus, none of the subsidiaries have been active or funded.

In November 2000, we acquired 100% of the stock of 2sendit.com, Inc. in
exchange for the issuance of 4,199,998 shares of our common stock.

2sendit.com provides a marketing service by advertising products and
services through a variety of media with a primary focus on the use of fax, mail
and email. With fax and email distribution servers located in Dallas, TX and
Denver CO, 2sendit.com is able to offer high capacity, low cost services. In
addition, we maintain a small company attitude, allowing us to assist other
small companies in need of our services.

Overview

iDial Networks develops applications that are delivered to its customers
over the internet, providing internet and wireless services. The Internet is an
increasingly significant interactive global medium for communication,
information and commerce. International Data Corporation, a market research
firm, estimates that the number of users who make purchases over the Internet
worldwide will grow from 31 million in 1998 to more than 183 million in 2003.

The Company has two material lines of business, providing Internet-based
voice telecommunications to customers around the world, and providing marketing
services for various businesses. Revenue attributable to the Internet based
voice communications was approximately $1,729,000 and $1,576,000 for the years
ended December 31, 2000 and 1999, respectively. Revenue attributable to
marketing services was approximately $67,000 an $0.00 for the years ended
December 31, 2000 and 1999, respectively.

Emergence of Internet Telephony. Internet telephony, the ability to make
voice-based telephone calls over the internet, has emerged as a low cost
alternative to traditional long distance telephone services. Internet telephone
calls are less expensive than traditional international long distance calls
primarily because these calls are routed over the Internet or through data
networks. The use of the Internet bypasses a significant portion of
international long distance networks and the relevant tariffs. Also, routing
calls over the Internet is more cost-effective than routing calls over
traditional telephone lines because the packet-switching technology that enables
Internet telephony is more efficient than traditional telephone technology.
Packet-switching, unlike traditional telephone networks, do not require a fixed
amount of bandwidth to be reserved for each call. This allows voice and data
calls to be pooled, which means that packet networks can carry more calls with
the same amount of bandwidth. This greater efficiency creates cost savings that
can be passed on to the consumer in the form of lower long distance rates.

Prepaid Calling Card Industry. The market for prepaid calling cards has
grown significantly since 1993. This growth is attributed to three trends
according to industry sources. First, the larger telecommunications companies
have come to understand the strategic and financial benefits of prepaid calling
cards. Second, consumers are becoming more aware of various advantages of
prepaid cards. Third, businesses are beginning to purchase prepaid calling cards
as a means of controlling telephony costs and simplifying record keeping. We
believe that the affordable pricing, convenience and enhanced features of
prepaid calling cards has attracted price sensitive customers, business
travelers, international callers and other users of long distance service. Also,
while prepaid calling cards are relatively new in the United States, they have
been widely used and accepted method of making telephone calls in Europe and
Asia since the 1970's.

Our Telephone Service Products

Calling Cards

We sell virtual prepaid calling cards over the Internet and physical
prepaid cards through traditional retail outlets. We consider our Internet Phone
Cards "virtual" because we do not issue a physical card. Once sold, the calling
card can be used immediately to make international and domestic long distance
calls.

Our web system functions as follows: 1) A potential customer accesses our
website; 2) the customer follows the prompt to enter the credit card information
to purchase the virtual calling card; 3 we verify the credit card within seconds
and the confidential PIN and display a toll free number customer to record; and
4) the virtual calling card can be used immediately to place a call via the
Internet or traditional phones. We then store the customer information on our
database for future reference.

Our Internet calling cards give us the flexibility of promptly changing the
rates and features to respond to changing consumer demand, rather than having an
inventory of physical cards with set features that cannot be changed until all
are recalled or used. This also allows us to offer and test several different
types of virtual calling cards with varying pricing features, thus providing a
greater selection to our customers.

Our website is accessible 24 hours per day, seven days a week, so we are
not constrained by the hours that a traditional retail store would be open for
business. Our website may also be reached from the customer's home or office.
This means the customer is not required to physically travel to another location
to make a purchase and receive delivery. Our online purchasing and delivery also
allows us to deliver a broad selection of products to customers worldwide in
rural or other locations that do not have convenient access to physical stores.

U.S. Access. Our U.S. Access calling cards provide access to our network
from the United States to more than 241 countries and territories. When using
the U.S. Access calling card for a call from the United States to another
country, the customer uses a touch tone telephone to dial a toll free number and
enters the PIN and the telephone number the customer seeks to reach. Our
enhanced services platform determines the calling card is valid and the number
of call minutes remaining on it, based on the rate for the country being called.
The platform then completes the call and reduces the available credit balance on
the calling card at the conclusion of the call.

World Access. When using the World Access calling card for a call from
another country to the United States or from country to country outside the
United States, the customer initiates the call through the Internet by accessing
our website. On our web page, a form is displayed and the customer enters the
telephone number where he or she is, the telephone number he or she wants to
call and his or her PIN and then "clicks" on the call button. This information
is transmitted over the Internet to our platform. The platform determines the
virtual calling card is valid and has a sufficient balance and then routes a
call to the customer at the number where he or she is. When the customer
answers, the platform completes the call by connecting to the number the
customer wanted to call. From our website, these features allow customers to
make calls from anywhere in the world at our international United States long
distance rates using the virtual calling card and Internet access to our website
and platform.

We have integrated the economics of Voice-Over-Internet-Protocol
technology, the conversion of voice data into digital data for transmission over
the Internet, with the convenience of conventional telephone services to enable
Internet initiated telephone services. With this iDial technology, we are able
to offer consumers and businesses telephone services at costs approaching the
wholesale rates of carriers. Unlike some competitors who offer personal computer
to phone services, iDial's web based services are provisioned via the Internet
but all calls are currently made phone to phone. The majority of PC owners do
not have microphones and telephony services. iDial delivers high-quality
traditional and Voice-Over-Internet-Protocol telephony services to consumers and
businesses, with the following benefits:

Low Cost. Telephone calls are a fraction of the cost of traditional long
distance service.

High Quality Voice Transmissions. We offer high quality voice transmissions
by integrating traditional telephone services and packet-switching technologies.

Ease of Use and Access. Designed for convenience and ease of access from
anywhere in the world, an Internet connection and a standard Internet browser
such as Netscape or Microsoft Internet Explorer is all that is required. Lacking
an Internet connection, the customer may dial a toll free or local access number
from any telephone or fax machine in the US to access our network as well.

One-Click Online Calling. iDial services enable users to speak with anyone
worldwide with a single click of a button. On-line retailers could use this
technology to connect customers to sales representatives when browsing their web
sites and increase the likelihood of consummating the on-line sale.

Reliable/Flexible Service. The technologically advanced design allows for
the expansion of the network capacity by the simple addition of switches, and
the ability to seamlessly reroute traffic if problems arise.

Ease of Payment and Online Account Access. iDial customers are able to make
calls by opening a prepaid account using credit cards, wire transfers or checks,
and can access their accounts via the Internet to view their call history,
account balances, or to increase their prepaid amounts.

Customer Support. We offer real-time customer support in multiple
languages, and the integrated billing and call management system provides
service representatives with immediate access to customer accounts.

Product Description. iDial has integrated the economics of
Voice-Over-Internet-Protocol and Wireless Application Protocol technology with
the convenience of conventional telephony to enable web initiated telephone
services. With this iDial technology, were able to offer consumers and
businesses telephone services at costs approaching the wholesale rates of
carriers.

Our Wireless Services

Wireless Application Protocol is an industry term for the standard
technology used to provide Internet communications and advanced telephony
services on digital mobile phones, pagers, personal digital assistants, and
other wireless terminals. The wireless market is embracing Wireless Application
Protocol technology, with a predicted 600 million phones using Wireless
Application Protocol by the end of 2003. Europe is leading the way in Wireless
Application Protocol, and Forrester Research predicts that 219 million Europeans
will be accessing the Internet on a daily basis by 2003. iDial, through its
marketing arm of Whoofnet.com, will enter the European market with its own
Voice-Over-Internet-Protocol and Wireless Application Protocol applications. In
a joint venture with a Swedish government agency, we are in the process of
building a customer services center in Bracke Kommun in Sweden.

We have developed a plan to be "first to market" with Wireless Application
Protocol connectivity to our iDial services. We believe that a tremendous
opportunity exists to:

o Immediately provide low cost international long distance services to
Wireless Application Protocol enabled phones through our technology; and

o Incorporate Wireless Application Protocol access into the our portal,
giving them the same carrier choices as our traditional users.

iDial has developed and applied for patents for applications to enable
Personal Digital Assistants such as the Palm Pilot VII to instantly connect with
the iDial site and avail themselves of our long distance services. A similar
application for the new Microsoft Pocket PC has also been completed. iDial will
continue to develop Wireless Application Protocol enabled products and services
to insure that its core products will always be easily accessible by wireless
devices.

Additional Services

Additionally we are currently offering traditional prepaid phone cards and
Voice-Over-Internet-Protocol services based on iDial technology under the
following brand names for which various trade and service marks are registered.

NetPhoneCard - www.netphonecard.com Web initiated worldwide phone calls
with US dial tone and low tariffs.

iDialDirect - www.iDialdirect.com A complete communications portal offering
flat-rate US products and worldwide access products.

Phone-Me-Now - www.phonemenow.com An iDial e-commerce tool. A Phone-Me-Now
button is placed on a website that allows a customer to initiate a call to his
phone from a representative of the company that is hosting the site.

SendaCall - www.sendacall.com Prepaid calls sent within a virtual greeting
card by-mail to recipients anywhere in the world, allowing recipient to place
free call to sender.

Wireless Services - We will continue to expand wireless development to
include areas such as Wireless Access Protocol.

Our International Networks

Our Enhanced Services Platform. Our enhanced services platform is a
specialized telephone switch based on technologies from Cisco, Microsoft and
Dialogic (a wholly owned subsidiary of Intel Corp.). It is connected to our
website, data base, and to our network of outgoing and incoming telephone lines
and Internet lines. It sets up all customer account and PIN information when a
calling card is purchased and immediately activates the calling card so it can
be used at the time of purchase. The platform also accepts and evaluates all
calls from calling card holders over the toll free number and over the Internet
and confirms the validity of the calling card and remaining balance. We have
also programmed into the platform a lowest cost routing matrix, which is simply
a program that selects the lowest priced route from our multiple carriers. This
means our platform will select the cheapest route to send a call based upon
where we have established gateways, which are central locations housing the
equipment necessary to send and receive calls internationally. We believe our
platform can currently support approximately 288 simultaneous calls and process
over 4 million minutes of traffic per month. Our platform is expandable to carry
more traffic by adding additional telephone lines and equipment. Focusing on the
international market, the use of our platform is spread throughout the day as a
result of the different world time zones.

We plan to develop and offer new products and services, which may require
modifications and enhancements to our platform. For any modifications or
enhancements, we will either contract with the manufacturer to develop new
software or we may develop the software, or a combination of both. In the past,
we have experienced delays when we have tried to upgrade our platform. If the
software cannot be developed cost effectively, or there will be significant
delays, we may elect to abandon a potential product or service in favor of one
that can be timely developed on a cost effective basis. There can be no
assurances that we can successfully develop the software to enable us to offer
new products or services.

Our Internet Gateway Network. As of December 31, 2000, we had international
gateways operational in Sri Lanka, Laos, Thailand and Holland. As of such date,
we also had domestic gateways operational in Dallas and in Los Angeles and
Denver. We intend to place Internet gateways in various other countries. Before
we place a gateway in another country, we enter into contractual relationships
with local persons or entities to operate them. We typically own or lease the
gateway or have the right to purchase it and the local person or entity is
responsible for procuring local Internet provider connection and local telephone
lines and complying with local law. Our contracts with the local person or
entity are generally for a one-year term and are renewable unless either party
declines to renew. We pay the local person or entity a negotiated rate per
minute for terminating or originating calls through the gateway.

Our gateways allow for high quality transmission through the Internet. The
historical poor sound quality of voice transmission through the Internet is due
to the fact that the Internet was not created for simultaneous voice traffic.
Unlike conventional telephone communication lines, in which the entire line is
reserved for a call, Internet telephony, the transmission of voice data over the
Internet, uses packet-switching technology, which translates and divides voice
data into discrete packets of digital data that are transmitted individually
over the Internet and then retranslated into voice data at their destination.
These packets of data travel through several separate routes in order to reach
their destination, which may increase the chances of misrouting, and delays in
transmission and reception. The software in our gateways connect the packet
switched data transmitted over the Internet to traditional public telephone
networks in such a manner that virtually eliminates the delay in transmission
normally involved in Internet voice transmission and the resulting pause and
echo effect.

Our Internet gateways enable us to route voice quality calls through our
enhanced services platform to and from the country via the public Internet or
private intranet networks such as a frame relay network. The cost of these calls
is based on the local telephone rates for the country where the gateway is
located. They are not based on internationally or local long distance rates.

Our Leased Lines Network. We also lease international telephone lines to
transmit calls. Our lease agreements obligate the carriers to complete the
transmission of calls routed by us to them at different rates for different
countries and territories.

With these agreements, we have access to more than 241 countries and
territories. Leased capacity is typically obtained on a per-minute basis or
point-to-point basis. Our agreements are typically one-year agreements with
30-day cancellation rights by either party. Rates are based on volume and
adjusted approximately every 30 days. Our rates generally decline as volume
increases. We are dependent on these carriers to complete the transmission of
our calls, and the loss of one or more of them as a source for completion of our
calls could have a material adverse affect on us. However, we believe there are
numerous international long distance carriers that transport calls to the
countries we desire to target and we believe we could replace a carriers if
lost. If the rates of any replacement carrier are higher, or our existing
carriers raise their rates, our profit margins would decrease. We may sell to
other long distance carriers any excess line capacity we have. Excess line
capacity is the remaining capacity on our telephone lines not used by us to
transmit our own calls during any given month.

Our Third Party Contracts. Our success depends, in part, on our ability to
continue to lease long distance telephone capacity from third parties at
economic rates to serve the foreign countries we target. It also depends, in
part, on our ability to maintain our contractual relationships with local
parties completing the transmission of our calls in those countries where we
have Internet gateways. If we lose these relationships, we believe we could
replace them. However, it would cause a disruption of our business until they
are replaced, and the replacement leases or contracts may not be at favorable
rates or on terms.

Growth Strategy

While a large number of companies specializing in the conversion of voice
data to digital data for transmission over the internet, or
Voice-Over-Internet-Protocol, have been formed in recent years, most focus on
the build out and development of international networks in the effort to capture
a high margin revenue base. We believe that in this very competitive landscape,
offering many voice and data transmission options, leasing time (or purchasing
minutes) on Voice-Over-Internet-Protocol networks will quickly become a
commodity business, as the various competitors whittle margins to gain growth
and market share.

We intend to leverage our position in the Internet telephone communications
market to make communications services readily available worldwide. Our strategy
includes the following key elements:

o Promote our services through direct sales and marketing and, through
relationships with resellers and leading Internet hardware, software and
content companies.

o In addition to minutes-based revenue, we intend to pursue new web-based
revenue opportunities from banner and audio advertising.

o Strengthen and enhance our brand recognition by cooperatively marketing our
Internet telephone communications services with leading companies in other
market segments.

Many e-commerce sites have discovered the necessity of having a customer
service representative talk with potential buyers. However, traditional 800
numbers are still relatively expensive, and require some effort on the part of
the customer to initiate the call. With our "Phone-me-now" technology, a simple
click of a button will connect the customer with the seller's representative at
very low rates. To further lower operating costs, we are exploring joint
ventures with customer service centers in English speaking countries where wages
are lower to make customer service more affordable for e-commerce companies.

Sales and Marketing

We have developed a marketing strategy based on increasing customer traffic
to our website and strengthening our brand name.

Internet Advertising. We have taken a selective approach in our advertising
strategy. We attempt to maximize the return from promotional expenditures by
choosing advertising media based on the cost relative to the likely audience and
ability to generate increased traffic for our website. We identify a country and
customer group to whom we desire to market our virtual calling cards.

We place advertisements on various websites and Internet portals frequently
visited by this customer group in the United States and abroad. These
advertisements usually take the form of banner ads that encourage readers to
click through directly to our website. We believe that placing banner
advertising on these websites and portals may significantly increase our
targeted exposure to prospective customers and increase our name identity.

Customer Electronic Mail Broadcasts. We actively market to our base of
customers through e-mail broadcasts, which is an electronic form of mass
mailing. All new virtual calling card purchasers are automatically added to our
electronic mailing list. We e-mail messages on a periodic basis to our customers
announcing new rates, new countries, new products and new features.

Electronic Mail to Select Mailing Lists. We also deliver e-mail broadcasts
to certain select mailing lists from time to time announcing pertinent
information, including the addition of a new country, new products and rates.

Other Methods. We will continually review other potential cost-effective
methods of advertising and marketing our products and services through the
Internet. Such methods may include the use of an affiliate program, chat rooms,
video e-mail and other methods.

Customer Support and Service

We believe that our ability to establish and maintain long-term
relationships with our customers and encourage repeat purchases is dependent, in
part, on the strength of our customer support and service operations and staff.
Our customer support and service personnel are available Monday through Friday
from 8:00 a.m. to 9:00 p.m. Pacific Standard Time and Saturday from 10:00 a.m.
to 6:00 p.m. Pacific Standard Time, via telephone. In addition, we provide
e-mail support staff 24 hours a day, seven days a week. These services include
pre and post-sales support for orders and usage of our products and our customer
service department responds immediately.

Our website has been designed around industry standard architectures to
reduce downtime in the event of outages or catastrophic occurrences. Our website
provides 24 hour a day, seven days a week availability. Our website operations
staff consists of systems administrators who manage, monitor and operate our
website. The continued uninterrupted operation of our website is essential to
our business, and it is the job of the site operations staff to ensure, to the
greatest extent possible, the reliability of our website. We provide our own
connection to the Internet through voice and data network services provided by a
company named Global Crossing. We believe that these telecommunications and
Internet service facilities are essential to our operation and we anticipate
upgrading these facilities as volume and demand for our service grow.

Technology

We use a combination of our own proprietary software applications and
commercially available licensed technology to conduct our Internet and telephone
routing operations.

Proprietary Technology. We have developed proprietary customer software
which permits a customer to purchase and receive our virtual calling cards on
our website by using a credit card. We have also developed proprietary customer
software to allow our world access virtual calling cards and phone collect PINs
to initiate calls through regular telephone lines using our website and enhanced
services platform. We have also developed various proprietary credit and fraud
management applications, which aid us in checking credit and limiting fraudulent
transactions.

Our engineering staff consists of software development engineers and
consultants based on our wholly owned subsidiary in Sri Lanka. We historically
have developed and expect to continue to develop proprietary software
internally. Our engineering strategy focuses on the development of our website,
which includes the enhancement of features and functionally of our existing
software components, the development of additional new software components, and
the integration of off-the-shelf components into our systems.

Commercially Available Licensed Technology. Our strategy has also been to
license commercially available technology whenever possible rather than seek a
custom-made or internally-developed solution. We believe that this strategy
enables us to reduce our operating costs and to respond to changing demands due
to growth and technological shifts. This strategy also allows us to focus our
development efforts on creating and enhancing the specialized, proprietary
software applications that are unique to our business. Listed below are some of
our key architectural components:

o High speed links to the Internet through Global Crossing's network
services;
o Dell clustered Servers for web and data base applications running Windows
NT, Linux and Microsoft SQL Server 7.0;
o Microsoft Internet Information Server 4.0 has been chosen for its ability
to secure sensitive customer information through SSL encryption; and
o Microsoft SQL Server 7.0 is a relational database. All customer names and
addresses, PINs, number of purchases and call records are stored within
this database.

We depend on a Internet service provider to provide Internet access to us
and our customers. The parties responsible for completing the transmission of
our calls in foreign countries also rely on local Internet service providers for
access to the Internet in their countries. If we lost our connection with our
Internet service providers, we could not sell our virtual calling cards through
our website, and web initiated calls could not be made by our customers, until
the connection was reestablished. If a local party responsible for completing
the transmission of our calls in a foreign country loses its Internet
connection, we could not route calls over the Internet to that destination until
the connection was reestablished. These failures could cause us to lose
customers and our ability to sell virtual calling cards and telephone services
would be affected.

Our customers also rely on Internet service providers for access to the
Internet. If our customers cannot access Internet, they cannot access our
website to purchase virtual calling cards or make web initiated calls.

Government Regulation

Regulation of the Internet. The United States Congress and the Federal
courts have taken actions that, in some cases impose some forms of regulation on
the Internet, and in other cases protect the Internet from regulation. This
includes restrictions on some forms of content placed on the Internet. These
regulations have had mixed success in the Federal courts. Conversely, Congress
passed legislation in 1998 that imposed a three-year moratorium on the
imposition of new taxes on Internet transactions. At the same time, numerous new
bills have been proposed that would further regulate various aspects of Internet
commerce, and ensure the continued deregulation of others. It is impossible to
say at this time whether and to what extent the Internet may ultimately be
regulated by the United States government.

The European Union has also enacted several directives relating to the
Internet, including one permitting European consumers to sue in their own
country persons from another country retailing goods over the Internet. On the
other hand, the G8 countries have recommended that digital products (such as our
virtual calling cards) should be exempt from all import taxes and custom duties.
As with the United States Congress, the European Union, and the governments of
individual foreign countries, are actively considering propose legislation that
could result in new regulations on the Internet. Increased regulation of the
Internet may decrease its growth, which may negatively impact the cost of doing
business via the Internet or otherwise materially adversely affect our business,
results of operations and financial condition. In addition, applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, jurisdiction to
sue, libel, obscenity and personal privacy is uncertain. The vast majority of
such laws were adopted prior to the advent of Internet and related technologies.
As a result, these laws do not contemplate or address the unique issues of the
Internet and related technologies.

Potential Regulation of Internet Telephony. To our knowledge, there are
currently no domestic and few international laws or regulations that prohibit
the transmission of voice communications over the Internet. If Congress, the
FCC, state regulatory agencies or governments of other countries impose
substantial regulations relating to Internet telephony, the growth of our
business could be adversely affected. In the United States, several efforts have
been made to enact federal legislation that would either regulate or exempt from
regulation telecommunication services provided over the Internet. State public
utility commissions may also attempt to regulate the provision of intrastate
Internet telephony services. In late 1998 and early 1999, however, the FCC
issued two decisions that suggest that all transmissions over the Internet may
be jurisdictionally interstate, and these decisions may restrict the ability of
state public utility commissions to regulate Internet telephony. Recently,
however, a Colorado court ruled that Internet telephone service companies would
be subject to payment of originating and terminating access charges to the
incumbent provider. Imposition of such charges on our services would increase
our costs. Internationally, a number of countries that currently prohibit
competition in the provision of voice telephony have also prohibited Internet
telephony. Other countries permit but regulate Internet telephony.

On April 10, 1998, the FCC issued a Report to Congress concerning its
implementation of the universal service provisions of the Telecommunications
Act. In the Report, the FCC indicated that it would examine the question of
whether any forms of "phone-to-phone" Internet Protocol telephony are
information services, which are unregulated, or telecommunications services,
which are fully regulated. The Report noted that the FCC did not have, as of the
date of the Report, an adequate record on which to make any definitive
pronouncements. The FCC did, however, note that the record before it suggested
that some forms of phone-to-phone Internet telephony appear to have the same
functionally as non- Internet Protocol telecommunications services.

While the FCC found that it needed a more complete record to establish new
rules, it tentatively concluded that providers of phone-to-phone Internet
telephony services should be treated like other providers of telephone service.
This means that they should be required to make payments into Federal universal
service subsidy programs. To date, the FCC has taken no further action, and has
not imposed this obligation on Internet telephony providers. It may do so at
some time in the future, however, and such a decision could have a material
adverse effect on our business, increasing our costs, and the price at which we
can offer our Internet telephony services.

Regulation of Leased Lines and Carriers. When we lease long distance
telephone capacity from third-party carrier, we rely on them to comply with
local laws and regulations. We have no control over the manner in which these
companies operate in these countries. Foreign regulatory, judicial, legislative
or political entities may raise issues regarding the compliance of these
companies with local laws or regulations, or limit their ability to carry our
calls.

State Laws. Several states have also proposed legislation that would limit
the uses of personal user information gathered online or require online services
to establish privacy policies. Changes to existing laws or the passage of new
laws intended to address these issues could reduce demand for our services or
increase the cost of doing business. In addition, because our services are
accessible worldwide, and we facilitate the sale of goods to users worldwide,
other jurisdictions may claim that we are required to comply with their laws. We
are qualified to do business in Nevada, Florida, Colorado, California and Texas
only, the failure by us to qualify as a foreign corporation in a jurisdiction
where we are required to do so could subject us to taxes and penalties for the
failure to qualify and could result in our inability to enforce contracts in
such jurisdictions. Any such new legislation or regulation, or the application
of laws or regulations from jurisdictions whose laws do not currently apply to
our business, could have a material adverse effect on our business, financial
condition and operating results.

Sales Taxes. We do not currently collect sales or other similar taxes for
virtual calling cards or other services sold through our website, other than for
virtual calling sold to Texas residents. However, one or more states may seek to
impose sales tax or similar collection obligations on out-of-state companies,
such as ours, which engage in Internet commerce. A number of proposals have been
made at the state and local level that would impose additional taxes on the sale
of goods and services through the Internet. Such proposals, if adopted, could
substantially impair the growth of online commerce, and could adversely affect
our opportunity to derive financial benefit from such activities. Moreover, a
successful assertion by one or more states or any foreign country that we should
collect sales or other taxes on the sale of virtual calling cards or services on
our system could have a material adverse effect on our operations.

Legislation imposing a moratorium on the ability of states to impose new
taxes on Internet-based transactions was passed by the United States Congress in
1998. The tax moratorium will be in effort only until October 2001 but
moratorium expires at the end of its three-year term, there can be no assurance
that the moratorium could allow various states to impose new taxes on
Internet-based commerce. The imposition of such taxes could have a material
adverse effect on our business, financial condition and operating results. The
same legislation that imposed the moratorium also established an Advisory
Commission to consider methods by which states could impose sales taxes on
Internet transactions.

Competition

With respect to prepaid calling cards, we compete with many of the largest
telecommunications providers, including AT&T, MCI WorldCom, Cable & Wireless and
Sprint. These companies are substantially larger and have greater financial,
technical, engineering, personnel and marketing resources, longer operating
histories, greater name recognition and larger customer bases than we do. We
also compete with smaller, emerging carriers in the prepaid calling card market,
including Ursus Telecom Corporation, RSL Communications, IDT Corp. and ValuComm
Communications Corp. We may also compete with large operators in other
countries. These companies may have larger, more established customer bases and
other competitive advantages. Deregulation in other countries could also result
in significant rate reductions. We believe that additional competitors will be
attracted to the prepaid card market. These competitors include Internet-based
service providers and other telecommunications companies. Competition from
existing or new competitors could substantially reduce our revenues from the
sale of these cards. A general decrease in telecommunication rates charged by
international long distance carriers could also have a negative effect on our
operations.

An increasing number of large, well-capitalized companies are entering the
market for Internet telephony products and services. As a result, we may not be
able to compete effectively with our competitors in this market, or to increase
our customer base. Various major long distance providers, including AT&T, Bell
Atlantic Corporation and Deutsche Telekom AG, as well as other major companies,
including Motorola, Inc., Intel Corporation and AOL-Time Warner, Inc., have all
entered or plan to enter the Internet telephony market, in some cases by
investing in companies engaged in the development of Internet telephony
products. Our competitors also include a number of companies that have
introduced services that make Internet telephony solutions available to
businesses and consumers. Net2Phone, Delta Three, ITXC Corp., iBasis, Inc., and
MCI WorldCom provide a range of Internet telephony services to consumers and
businesses that are similar to the ones we offer. Several other companies,
including AT&T, Sprint and Qwest Communications, have announced their intention
to offer these services on a wider bases in both the United States and
internationally.

In addition, we compete in the market for Internet telephone services with
companies that produce software and other computer equipment that may be
installed on a user's computer to permit voice communications over the Internet.
Current Internet telephony products include VocalTec Communications, Ltd.'s
Internet Phone, QuarterDeck Corporation's WebPhone and Microsoft's NetMeeting.
Also, a number of large companies, including Cisco Systems, Inc., Lucent
Technologies, Inc., Northern Telecom Limited, Neura Communications, Clarent
Communications and Dialogic Corp. offer or plan to offer server-based Internet
telephony products. These products are expected to allow communications over the
Internet between parties using a multimedia PC and a telephone and between two
parties using telephones.

We believe that the principal competitive factors affecting our market in
no particular order are;

o price and rates;
o quality of transmission;
o product accessibility and ease of use;
o customer service;
o brand recognition;
o website convenience and accessibility;
o targeted marketing directly to probable users of the services;
o quality of search tools; and
o system reliability.

Increased competition may result in reduced operation margins, loss of
market share and diminished value in our brand. We cannot assure you that we
will be able to compete successfully against current and future competitors. As
a strategic response to changes in the competitive environment, we may, from
time to time, make certain prices, service or marketing decisions that could
have a material adverse effect on our business, financial condition and
operating results.

New technologies and the expansion of existing technologies may increase
competitive pressures by enabling our competitors to offer lower-cost services.
Certain web based applications that direct Internet traffic to other websites
may channel users to services that compete with us. In addition, companies that
control access to transactions through network access or web browsers could
promote our competitors or charge us substantial fees for inclusion. The
occurrence of any of these events could have a material adverse effect on our
business, financial condition and operating results.

Our New Product Lines

Whoofnet.com

iDial Networks wholly owned subsidiary, Whoofnet.com, holds offices in
Florida, London and Sweden. Whoofnet.Com, Inc. is a network of interactive
services, web brands, e-commerce services and marketing services. Similar to
web-sites such as Yahoo, Whoofnet.Com provides a central site where a customer
can access third party content by using Whoofnet.Com's Web search and directory
services, community and personalization features, personal Web publishing, and
online shopping. Whoofnet.Com seeks to draw a large number of viewers to its web
sites by providing a one-stop destination for information, communication and
shopping services on the Web. The company will generate revenue through a
variety of sources including, but not limited to, selling advertising and
sponsorships, electronic commerce and by licensing its products and technology.
Whoofnet.Com is also an Application Service Provider, which is a company that
develops software application that are delivered to customers over the Internet,
and has several Internet brands including Whoofnet.Com portal, WhoofBiz,
WhoofTelCo and WhoofMail. Through its strategic alliances, Whoofnet will develop
and offer easy to deploy, end-to-end e-commerce solutions for companies
operating in the Internet market.

In addition to Whoofnet.com's internet site, it also provides marketing
services to test and market products to customers, such as the iDial Gold
Advantage Card. Our strategy is to use Whoofnet.com to market goods and services
for itself and others with emphasis on the European market. This strategy will
produce income from actual sales made by Whoofnet or those with whom we are
allied.

iDial Gold Advantage Card

The iDial Gold Advantage Card is an ATM/Debit Card that offers an extensive
Consumer Benefits Package. It is an inexpensive, fast and secure way to transfer
funds domestically and internationally. It is a reloadable debit card that can
be used at ATM's all around the world. It can be used to buy gas, groceries or
other items from merchants with debit card capability and has an extensive
Consumer Benefits Package offering savings on pharmacy, vision, dental, hearing,
travel, gifts, vitamins, and more. iDial Gold Advantage Card comes with a
primary card and a family card enabling them to save up to 75% on National and
International money transfers. The customer receives two (2) identical cards
when they join the program. The second card can be used to transfer money
domestically or internationally, just by forwarding the second card to a family
member or friend anywhere in the world. This enables the second cardholder to
withdraw funds from any ATM machine worldwide.

Fax Messaging

2Sendit.com Inc. is an established fax-messaging provider for the
information dissemination market. Fax messaging is simply the process of
delivering mass mailings via facsimile. Due to today's desire for immediate
delivery of information, fax messaging has become a popular means to deliver
information quickly.

Fax Messaging has emerged as a low cost source of communication for
companies to get a message out, where messages range from newsletters to
restaurant menus. Fax messaging has proven to a less expensive than traditional
mail. Traditional mail remains as a popular choice for getting a message out,
however, with costs of postage, envelope and printed material all necessary
pieces, today's budget constraints find that these expenses limit the number of
recipients. Fax messaging provides a low cost, high volume method of getting the
same material out of the recipients. An underlying benefit is that the results
are almost immediate. While a traditional mail piece may take up to a week to
deliver, fax messaging usually takes less than an hour to reach the same
audience. Fax messaging also has a cost related only to completed messages. With
traditional mail, the cost is paid up front and there are no refunds for lost
mail, unused postage, or damaged material.

Products

Fax messaging is simply the ability to send a message via facsimile to an
intended recipient. Customer normally provide a recipient list, however, we do
provide lists for some customers. We do offer additional services such as
database management, fax removal, and limited email messaging.

Growth Strategy

While several fax messaging companies have emerged in the recent years,
many others have been unable to sustain volume and have subsequently merged with
competitors. We have chosen to maintain a slow growth cycle by adding customers
through new advertising and marketing. We offer highly competitive rates along
with the capacity to complete jobs in a timely manner.

We use the following websites as a primarily method of advertising:

a) www.2sendit.com
b) www.2faxit.net
c) www.2faxitnow.com
d) www.mailing-solutions.com

2sendit.com is also researching the possibility of merging with competitors
as a method of growing the business.

Technology

2sendit.com uses licensed software along with both Dialogic and Brooktrout
fax cards. These cards are connected to third party high capacity digital lines.
This technology allows the mass transmission of faxes through each fax server.

Governing Laws

While the laws of each state are changing daily, most of the governing laws
are federal. 2sendit.com works with each municipality to make sure that it is in
full compliance with these changing laws. 2sendit.com makes sure that each
transmission has the required pieces of information on it before sending. The
federal laws require that each fax have the sender information as well a method
for removal.

Employees

As of December 31, 2001, we had 15 full-time and 7 part-time employees. None of
our employees are represented by a labor union. We have not experienced any work
stoppages and consider our employees relations to be good.

Our future performance depends in significant part upon the continued
service of our key technical and senior management personnel, none of whom are
bound by an employee agreement requiring service for any defined period of time.
The loss of services of one or more of our key employees could have a material
adverse effect on our business, financial condition and operating results. Our
future success also depends in part upon our continued ability to attract, hire,
train and retain highly qualified technical and managerial personnel.
Competition for such personnel is intense and there can be no assurance that we
can retain our key personnel in the future.

We maintain a facility of approximately 1,300 square feet at 5825 Sunset
Blvd., Suite 202, Hollywood, CA 90028. The rent for this facility is
approximately $1,625 per month and is leased on a month-by-month basis.

We maintain our administrative offices at 1211 S. Parker Road, Suite 203,
Denver CO 80231 for use by our wholly owned subsidiary 2sendit.com. The facility
is approximately 1,038 square feet. The rent is approximately $1,340 per month.

We maintain a facility in Colombo, Sri Lanka of approximately 2,500 square
feet. The rent is approximately $1,500 per month and is used as a customer
service and R&D staff facility.

We believe that our space is adequate for our current needs. As we expand,
we expect that suitable additional space will be available on commercially
reasonable terms, although no assurance can be made in this regard. We also
believe our property is adequately covered by insurance.

Legal Proceedings

We occasionally become involve in litigation arising out of the normal
course of business. There are no legal proceedings against us at this time.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

We were incorporated in May 1997 as a Nevada Limited Liability Corporation
as WoodComm LLC. In April 1999 WoodComm LLC was reorganized from an LLC to a
Nevada Corporation WoodComm International, Inc.

In December 1999, Desert Springs Acquisition Corporation acquired all of
the issued and outstanding common shares of WCI in exchange for 30,930,000
shares of common stock of Desert Springs. For financial reporting purposes, the
business combination was accounted for as an additional capitalization (a
reverse acquisition with WCI as the acquirer). WCI is considered the surviving
entity. The historical financial statements prior to the merger are those of
WCI. Desert Springs only assets and liabilities consisted of a liability for
$80,346. The liabilities were not assumed in the merger.

In January 2000, Desert Springs Acquisition Corp moved its state of
incorporation to Nevada by merger of the Colorado Corporation with and into
iDial Networks, Inc., a Nevada corporation.

We developed an international Voice-Over-Internet-Protocol, also know as
Voice-Over-Internet-Protocol, telecommunications service business. In August
2000 we began to expand and change over business model. In August 2000, we
purchased an Internet portal and marketing company Whoofnet.com. In November
2000, we purchased 2sentit.com, an enhanced service provider providing enhanced
communications services. We own a 100% interest in both acquisitions and have
consolidated the financial position and results of operations in the
accompanying financial statements.

Revenues

We derive our revenues from two different sources, through the direct sales
of our products over the Internet and through our own direct sales force and
secondly through the wholesale of our products and services through independent
retail and wholesale channels of distribution. Revenues from the sale of our
phone card products, whether sold directly by us or through our independent
retail and wholesale channel, are deferred and recognized as calling services
are used. All other products revenues are recognized as the product upon
shipment and invoicing of the product to the customer.

All Internet sales of our products are made over the Internet primarily
through credit card purchases. We use credit card processing companies to verify
credit cards.

Accounts receivable consists of amounts owed by our retail and wholesale
channel relating to product sales. At December 31, 2000 and 1999, three
companies accounted for 46% and less than 1% of total accounts receivable. At
December 31, 2000, two companies accounted for 36% of total accounts receivable,
while one receivable accounted for 72% of accounts receivable on December 31,
1999. Customers purchase our Internet products primarily using major credit
cards, which are reimbursed by credit card processing companies. Accordingly, we
do not routinely perform on-going credit evaluations of our Internet customers,
but do perform evaluations of our credit card processors. Our receivables are
generally unsecured. During 1999, one customer accounted for more than 50% of
total sales. During 2000, no one customer accounted for more than 10% of total
sales.

Expenses

Selling, general and administrative expenses consist of advertising and
promotional expenditures, payroll and related expenses for executive and
administrative personnel, facilities expenses, professional services expenses,
travel and other general corporate expenses. Selling, general and administrative
expenses increased to $8,686,190 for 2000 from $543,896 for 1999. These expenses
for 2000 included a non-cash charge of $6,293,205 for the value of stock issued
at fair market value to officers and directors for compensation ($1,754,884 )
and to various consultants for services ($4,538,321 ) (see Note 8 to Notes To
Consolidated Financial Statements). During 2000, our capital expenditures and
payments on capital leases totaled $200,074. These expenditures and payments on
expenditures were $26,651 during 1999. As we continue to grow, we expect to
expand our infrastructure by increasing our capital expenditures and leases. We
expect these expenditures will represent a smaller percentage of sales as our
sales volume grows.

Since inception, we have incurred significant losses and, as of December
31, 2000, had an accumulated deficit of $9,970,307. We expect operating losses
and negative cash flow to continue through at least the forth quarter of 2001.
We expect to incur additional costs and expenses related to:

- marketing and advertising related to product sales and brand development;
- purchases of equipment for our operations and network infrastructure;
- the expansion of our telecommunications network into other countries;
- the continued development of our website transaction processing and network
infrastructure;
- development and improvement of additional products and services;
- the hiring of additional personnel; and
- the payment of commissions to various Internet companies for marketing
products to their customers.

We have a limited operating history on which to base an evaluation of our
business and prospects. You must also consider our prospects in light of the
risks, expense and difficulties frequently encountered by companies in their
early stage of development, particularly companies in new and rapidly evolving
markets such as e-commerce. Such risks for us include, but are not limited to,
an evolving and unpredictable business model and management of growth. To
address these risks, we must, among other things, maintain and expand our
customer case, implement and successfully execute our business and marketing
strategy, continue to develop and upgrade our technology and systems that we use
to process customers' orders and payments, improve our Web site, provide
superior customer service, respond to competitive developments and attract,
retain and motivate qualified personnel. We cannot assure stockholders that we
will be successful in addressing such risks, and our failure to do so could have
a material adverse effect on our business, prospects, financial condition and
results of operations.

Results of Operations

The following table sets forth statement of operations data as a percentage of
revenues for the periods indicated:

Years Ended December 31, Nine Months Ended September 30,
--------------------------- ---------------------------
1999 2000 2001 2000
----------- ----------- ----------- -----------

Total revenue 100.0% 100.0% 100.0% 100.0%

Cost of sales 95.3 115.2 95.7 163.3
----------- ----------- ----------- -----------

Gross profit (loss) 4.7 (15.2) 4.3 (63.3)

Selling, general and
administrative 34.5 483.4 55.5 378.6
----------- ----------- ----------- -----------

Net operating loss (29.8) 498.6 (50.7) (441.9)

Interest expense (5.8) (8.7) (11.2) (5.1)
----------- ----------- ----------- -----------

Net loss (35.6) (507.3) (61.8) (447.0)

Other comprehensive - (2.3) - -
---------- ----------- ---------- --------
loss

Comprehensive loss (35.6)% (509.6)% (61.8)% (447.0)%
============ =========== =========== ===========

Comparison of Nine Months Ended September 30, 2001 and 2000

Sales increased $3,454,839 or 364% for the nine months ended September 30,
2001 compared to the nine months ended September 30, 2000. This is primarily
attributable to the increase in revenue related to the acquisition of
2Sendit.com ($1,744,105) and the expansion of our VoIP calling services
($2,660,404).

Selling, General and administrative expenses decreased $1,174,287 or 32.7%
for the nine months ended September 30, 2001 compared to the same period in
2000. This decrease is primarily due to the increase in amortization expense of
$564,045 and a decrease of approximately $1,600,000 in consulting and
professional fees for the nine months ended September 30, 2001 compared to the
same period in 2000

Cost of sales consist primarily of the costs of transmission of long
distance traffic over our networks and the wholesale cost of products purchased
for resale by us. Cost of sales increased to $4,214,825 (including $753,004 of
depreciation) for the nine month period ended September 30, 2001 from $1,551,046
(including $619,156 of depreciation) for the nine month period ended September
30, 2000. This $2,663,779 increase was attributable to our increased sales
volume in primarily both retail and wholesale and costs associated with
additional sales attributable to our 2 acquisitions, 2 Sendit.com and
Whoofnet.com.

Gross profit for the period increased from approximately (63.3%) in 2000 to
4.3% in 2001. This decrease is primarily related to the decrease in costs
attributable to certain foreign country regulation over our VoIP network.

Interest expense increased to $491,208 from $48,245 primarily as a result
of additional amortization expense of $367,004 from discounts recorded on
in-the-money conversion features associated with our convertible notes payable.
We also had more debt outstanding during the nine months ended September 30,
2001 than the prior year.

Comprehensive loss decreased to $2,722,376 or 35.8% for the nine months
ended September 30, 2001 compared to the nine months ended September 30, 2000.
This increase is primarily related to the increase in depreciation from assets
purchased for the expansion of our VoIP network and for amortization of goodwill
associated with the purchase of Whoofnet.Com and 2Sendit.Com.

Comparison of Years Ended December 31, 2000 and December 31, 1999

Sales. Sales increased to $1,796,897 million for the year ended December
31, 2000 from $1,575,826 for 1999 as a result of the growth of our network and
retail customer base. This represents a 14% increase over 1999 as a result of
this growth.

Cost of Sales. Cost of sales consists primarily of the costs of
transmission of long distance traffic over our networks and the wholesale cost
of products purchased for resale by us. Cost of sales increased to $2,069,574
(including $461,743 of depreciation) for the year ended December 31, 2000 from
$1,502,036 (including $113,333 of depreciation) for 1999. This $567,538 increase
was primarily attributable to our increased sales volume in both retail and
wholesale. Gross profit was (15%) in 2000 compared to a gross profit of 5% in
1999. This 20% decrease was primarily attributable to an increase of
depreciation due to the expansion of our VoIP network. We expect the dollar
amount of cost of sales to increase in future periods to the extent that our
sales volume increases.

Selling, General and Administrative. Selling, general and administrative
expenses consist of advertising and promotional expenditures, payroll and
related expenses for executive and administrative personnel, facilities
expenses, professional services expenses, travel and other general corporate
expenses. Selling, general and administrative expenses increased to $8,686,191
for 2000 from $543,896 for 1999. These expenses for 2000 included a non-cash
charge of $ 6,293,205 for the value of stock issued at fair market value to
officers and directors for compensation ($ 1,754,884) and to various consultants
for services ($4,538,321) (see Note 8 to Notes To Consolidated Financial
Statements). Non-cash depreciation and amortization expense increased to
$1,212,867 from $113,333in 1999 as a result of the Whoofnet.com and 2Sendit.com
acquisitions. Excluding these non-cash items, selling, general and
administrative expenses increased to $1,180,119 in 2000, from $543,896 in 1999.
This increase is attributable to including Whoofnet.com and 2Sendit.com's
selling, general and administrative expenses from the date of acquisition.
Selling, general and administrative expenses are expected to decrease as a
percentage of revenue in future periods because our existing company
infrastructure will allow increases in revenues without having to incrementally
add overhead. However, we expect these expenses to increase in absolute dollars
as we continue to pursue advertising and marketing efforts, expand our network
termination locations worldwide, expand our staff and incur additional costs
related to the growth of our business and being a public company.

Other Expenses. Other expenses consist of a $156,630 of interest expense in
2000 from $90,654 in 1999. The increase is primarily due to additional capital
lease obligations.

Net Loss. We incurred a net loss of $9,115,498for the year ended December
31, 2000 as compared to $560,760 for 1999. The net loss for 2000 was affected by
non-cash charges of $ 6,293,205, non-cash depreciation and amortization charges
of $1,212,867 and interest expense of $156,630, as described above.

Income Taxes. As of December 31, 2000, we had approximately $9,970,000 of
net operating loss carry forwards for federal income tax purposes, which expire
beginning in 2011. We have provided a full valuation allowance on the deferred
tax asset, consisting primarily of net operating loss carry forwards, because of
uncertainty regarding its future reliability. Limitations on the utilization of
these carry forwards may result if we experience a change of control, as defined
in the Internal Revenue Code of 1986, as amended, as a result of changes in the
ownership or our common stock.

Liquidity and Financial Position

During the nine months ended September 30, 2001, our net cash used in
operations was, $253,889 attributed to a net loss of $2,722,376 mitigated by non
cash charges for non cash interest expense amortization, depreciation and
amortization of $2,326,703. The shortfall was primarily funded through accounts
payable.

As of December 31, 2000, we had approximately $67,410 of cash and cash
equivalents. As of that date, our principal commitments consisted of obligations
under leases and contracts for long distance transmissions.

Net cash used in operating activities was $723,439 for the year ended
December 31, 2000 and $31,246 in 1999. Net cash used in operating activities for
2000 and 1999 primarily consisted of net operating losses as well as increases
in other assets, offset by depreciation and amortization, non-cash charges for
stock issued for services and compensation, increases in accounts payable,
accrued expenses and accrued interest.

Net cash from (used in) investing activities consists of additions to
property and equipment, including computer equipment, cash from acquisitions,
fax equipment and internet gateways for voice over the Internet transmission.
Net cash from (used in) investing activities was $103,002 for the year ended
December 31, 2000 and $(26,651) in 1999.

Net cash provided by (used in) financing activities was $676,368 for the
year ended December 31, 2000 and $(49,115) for 1999. Net cash used in financing
activities for 2000 was impacted by an increase in stockholder loans and
proceeds from the issuance of common stock.

iDial currently is in the process of raising the necessary capital for
continuing its growth through the following activities:

1. Bank Loan - we expect to close on a facility that provides the necessary
capital for continuing operations. Negotiations are currently taking place
to secure the loan.

2. Acquisition - We will pursue acquisition opportunities to rapidly expand
its revenue and profits. This will also strengthen our cash flow and
operating position.

3. Financing - We continue to seek additional debt or equity sales from time
to time.

In July 2001, we issued an 8% convertible note in the principal amount of
$750,000 to an unrelated investor, Laurus Master Fund, Ltd. Net proceeds of
$610,250 (after legal fees of $61,500, a fund managers fee of $75,000 and other
expenses of $3250) is being used to fund working capital and expansion.

The company commenced a review of its operations in January 2001 and instituted
a program to consolidate the operations and reduce or eliminate redundant and
certain other costs. Included in such costs are the expenses related to office
facilities (approximately $14,000 per month), internet charges and telephone
line expenses (approximately $4,000 per month), and the elimination of outsource
mail server costs (approximately $25,000 per month). In addition, the company
reduced payroll and related fringe benefits costs (approximately $12,000 per
month) and renegotiated its carrier agreement in June 2001 to reduce the related
costs 14%. In addition, the Company has brought in house many of the services it
was outsourcing in prior years, thereby further reducing overhead related to
consulting and professional services (approximately $175,000 per month). The
impact of these cost reductions commenced in the 2nd Quarter of 2001 and the
full effect will begin to reflected in the company's 3rd Quarter 2001 results.
The company anticipates achieving positive cash flow by the 2nd Quarter of 2002

The company believes that the current cash on hand is sufficient to allow the
company to sustain its current operations. However, without additional funding
of $1,000,000, the company believes that it will not generate net income during
fiscal year 2002. As described above, the company is discussing the possibility
of additional financing. The company also anticipates quarterly revenue of
$1,300,000 or more on a going forward basis, which will allow the company's cash
flow to improve.

We do not have existing capital resources or credit lines available that
are sufficient to fund our operations and capital requirements as presently
planned over the next twelve months. We are actively pursuing additional funds
through the issuance of debt and/or equity instruments. Currently, we are
discussing with Laurus Master Fund, Ltd. the possibilities of additional
financing. However, no formal agreements have been reached and no assurances can
be given that such financing will be forthcoming.

DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS

The following table sets forth the names of all of our current directors
and executive officers as of December 31, 2001, with each position and office
held by them and their periods of service in the capacities listed.

Month and
Year First
Elected or
Name Age Position With the Company Appointed
---- --- ------------------------- ---------

Mark T. Wood 40 Chairman of the Board, January
Chief Executive Officer, 2000
President & Secretary
Carl K. Battie 44 Vice Chairman August 2000
Klaus Scholz 50 Chief Operating Officer, January
Treasurer and Director 2000
Edward J. Janusz 52 Director January
2000
Gerald Lesher 62 Director August 2000
Thomas G. Seifert, 29 Chief Financial Officer December
CFO 2001

Mark T. Wood, Chairman of the Board. From 1996-1997, Mr. Wood was Vice
President and General Manager of Loxcomm America, Inc. From 1995-1996, Mr. Wood
was the Chief Operating Officer of WorldQuest Networks. From 1992-1995, Mr. Wood
was the Vice President of International Sales at Intellical, Inc.

Carl K. Battie, Vice Chairman. Mr. Battie's skills as an
achievement-oriented business professional experienced in strategic traditional
marketing, sales and public relations encompass the past 24 years. Mr. Battie
consistently identifies and capitalizes upon new product/business opportunities
resulting in increased revenue, expanded market penetration and dominant market
share. Mr. Battie also specializes in developing cross promotion platforms
integrating current business relationship models as well as bringing in new
partners for maximizing expansion and exposure. Through entrepreneurial
initiative, Mr. Battie has developed and executed many large comprehensive sales
and marketing programs. Most of his clients include large national and
multi-national companies in the United Kingdom such as British Gas, London
Electricity, Easter Electricity, ACC Telecom (part of AT&T) and BUPA, the
largest private healthcare provider in the United Kingdom.

Klaus Scholz, Chief Operating Officer and Director. Mr. Scholz joined iDial
in 1999 and has been responsible for the network operations of company. A native
of Germany, Mr. Scholz has held several senior management positions in
international technology companies. He served for 10 years as Country Manager,
Southeast Europe for Hewlett Packard before moving to Asia in 1987. In Thailand,
he became Managing Director of Semiconductor Ventures International LTD, a
publicly traded company. In that capacity, he worked with the Chinese government
to improve quality and safety standards for the Taiwanese semiconductor
industry. Mr. Scholz also served as Vice President, Business Development for
Loxley Public Companies, Ltd., a publicly traded international conglomerate
based in Bangkok, Thailand.

Edward J. Janusz, Director. Mr. Janusz is a seasoned sales and operations
executive serving the Company as a Director. Since 1997, Mr. Janusz has been the
Vice President of Cap Gemini, a leading worldwide IT consulting firm serving
Fortune 500 companies.

Gerald Lesher, Director. Mr. Lesher is a practicing licensed attorney in
Pennsylvania and Florida. He was the Senior Partner, for Baskin & Sears
(Pittsburgh), for bankruptcy, corporate reorganization and banking litigation
and the manager for the Palm Beach Office of Lesher, Allen & Macmillan in Palm
Beach (Florida). Mr. Lesher was also the founder and Chairman of Sterling Bank,
Florida. Mr. Lesher has developed numerous business plans for clients and a
variety of industries. He concentrates on commercial litigation, bankruptcy,
banking, real estate, real estate broker, corporate, and entertainment areas;
Mr. Lesher was lead counsel for 17 banks in Western Pennsylvania and specializes
in business plans for domestic and international clients. He has strong
negotiating skills and substantial negotiating experience.

Thomas G. Seifert, CFO. Mr. Seifert is a graduate of Colorado State
University and graduated with a Bachelor's of Science in Finance with a minor in
Accounting. Mr. Seifert has worked as the controller for Integrated Telephony
Products, Inc., as well as controller for Mountain Vacations, Inc. and assisted
with the sale of each company to a publicly traded company. He was also a
cofounder of 2Sendit.com, Inc.

Directors are elected and serve for a term of two years or until a
successor is duly elected, unless the office is vacated in accordance with our
Articles of Incorporation. The directors have served in their respective
capacities since their election or appointment and will serve until the next
election of directors. The executive officers are appointed by the Board of
Directors to serve until the earlier of their resignation or removal with or
without cause by the directors.

There are no family relationships between any directors or executive
officers.

EXECUTIVE COMPENSATION

The following table is a summary of the compensation paid to our Chief
Executive Officer and each executive officer that earned over $100,000 in total
salary and bonus for each of our three most recently completed fiscal years.

SUMMARY COMPENSATION TABLE

Annual Compensation Awards Payouts
---------------------------------------- ------------------------- -----------
(e) Other (f) (g) (i)All
(a) Name and Annual Restricted Underlying (h) other
Principal (b) (c) (d) Compen- Stock Options/ LTIP Compen-
Position Year Salary($) Bonus($) sation($) Award(s)($) SARs(#) Payouts($) sation
-------------- --------- --------- ---------- ------------ ----------- ----------- ---------- ---------

Mark T. Wood* 2000 1,176,000
Chief Executive
Officer 1999
1998

We have never issued stock appreciation rights.

We did not issue options in the last fiscal year.

None of our officers exercised any options in the last fiscal year.

* We have not had the resources to compensate Mark T. Wood with a salary
for his services as our Chief Executive Officer.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have entered into the following related transactions with our directors,
officers, or affiliates:

Mauricio Vega, a shareholder of the Company, loaned the Company $100,000 on
June 22, 2000.

Mark Wood, the Company's Chairman of the Board, loaned the Company a total
of $1,232,797 in various loans from December 31, 1999 through December 2000.

Karl Rodriguez, a shareholder of the Company, loaned the Company $44,820.50
on May 27, 2000.

Charmon Malhotra, a shareholder of the Company, loaned the Company $7,500
on July 18, 2000.

Carl Battie, the Company's Vice Chairman of the Board, loaned the Company
$242,043.10 in various loans from September 14, 2000 through December 13, 2000.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of September 30, 2001 information about
the amount and nature of beneficial ownership of the common stock held by:

o Each person who we know is a beneficial owner of more than 5% of our
outstanding common stock;

o Each person who is a director or executive officer of iDial; and

o All of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC
and includes generally voting powers and investment power with respect to
securities. We believe that each individual named has sole investment and voting
power with respect to shares of common stock indicated as beneficially owned by
him, subject to community property laws, where applicable and except where
otherwise noted.

Beneficial ownership is calculated based on 87,144,454 common shares issued
and outstanding as of December 31, 2001, under Rule 13d-3(d) of the Securities
Exchange Act of 1934. Shares subject to unexercised options, warrants, rights or
conversion privileges exercisable within 60 days of September 30, 2001, are
deemed outstanding for the purpose of calculating the number and percentage
owned by that person, but not deemed outstanding for the purpose of calculating
the percentage owned by each other person listed. The first column of the
following chart represents the total number of actual outstanding shares owned
by the named individual, including options and warrants exercisable within 60
days of December 31, 2001.

Total
Name of Amount of Percent
Beneficial Owner Beneficial of Class
---------------- -----
Ownership
---------

Mark T. Wood, Chairman of the Board
19009 Preston Road, Suite 215 PMB #236 18,100,000 20.8%
Dallas, TX 75252

Carl K. Battie, Vice Chairman
7771 W. Oakland Park Blvd, Suite 217 13,100,000 15%
Sunrise, FL 33351

Klaus Scholz, Director and COO
19019 Preston Road, Suite 616
Dallas, TX 75252 3,040,000 3.5%

Thomas G. Seifert
1211 S. Parker Road, Suite 201
Denver, CO 80231 1,463,204 1.7%

Edward J. Janusz, Director
7 Lacewing Place
The Woodlands, TX 100,000 .01%

Gerald Lesher
1555 Palm Beach Lakes Blvd., Suite 1510 1,200,000 1.4%
West Palm Beach, FL 33404

All Directors and Officers Total 37,003,204 42.4%
---------- -----
George V. Stein
1640 E. Layton
Englewood, CO 80110 5,000,000 5.7%

Lynn Lasarow
18 Tobacco Road
Weston, CT 06883 4,000,000 4.6%

David Lifson
1930 Young Street, Box 1182
Toronto, Ontario
CANADA 7,054,710 8.1%

To our knowledge, there are no arrangements that may, at a subsequent date,
result in a change in control of iDial.

SELLING STOCKHOLDER

The table below sets forth information concerning the resale of the shares
of common stock by the selling stockholder. We will not receive any proceeds
from the resale of the common stock by the selling stockholder. We will receive
proceeds from the exercise of the warrants. Assuming all the shares registered
below are sold by the selling stockholder, the selling stockholder will not
continue to own any shares of our common stock.

The following table also sets forth the name of the selling stockholder who
is offering the resale of shares of common stock by this prospectus, the number
of shares of common stock beneficially owned by the selling stockholder, the
number of shares of common stock that may be sold in this offering and the
number of shares of common stock the selling stockholder will own after the
offering, assuming it sells all of the shares offered.

Total Shares of Percentage of Percentage of
Common Stock Total Shares of Common Common
Issuable Upon Percentage of, Common Beneficial Stock Beneficial Stock
Conversion of Common Stock, Stock Ownership Owned Ownership Owned
Notes and/or Assuming Full Included in Before the Before After the After
Name Warrants(2) Conversion(2) Prospectus(1) Offering(2) Offering Offering(3) Offering(3)
------------- --------------- ------------- ------------- ----------- ------------- ----------- ---------------

Laurus Master 36,616,666 30.29% 36,616,666 4,576,895 4.99% -- --
Fund, Ltd.

The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the conversion
of the convertible note is subject to adjustment depending on, among other
factors, the future market price of the common stock, and could be materially
less or more than the number estimated in the table.

(1) Because the number of shares of common stock issuable upon conversion of
the convertible note is dependent in part upon the market price of the
common stock prior to a conversion, the actual number of shares of common
stock that will be issued upon conversion will fluctuate daily and cannot
be determined at this time. However the selling stockholder has
contractually agreed to restrict its ability to convert or exercise its
warrants and receive shares of our common stock such that the number of
shares of common stock held by it and its affiliates after such conversion
or exercise does not exceed 4.99% of the then issued and outstanding shares
of common stock. As a result of the contractual agreement not to exceed
4.99% beneficial ownership, the selling shareholder does not believe it is
a control person as defined in the Securities Exchange Act of 1934 or is
required to file a Schedule 13D.

(2) Assumes the three lowest closing prices of our common stock for the thirty
days immediately prior to this conversion date is $0.03. Includes 166,666
shares underlying warrants that are currently exercisable at an exercise
price of $0.036 per share. In accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, Laurus Capital Management, L.L.C. may be
deemed a control person of the shares owned by such entity. David Grin and
Eugene Grin are the principals of Laurus Capital Management, L.L.C.

(3) Assumes that all securities registered will be sold.

PLAN OF DISTRIBUTION

The selling stockholder may, from time to time, sell any or all of its
shares of common stock on any stock exchange, market, or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. There is no assurance that the selling stockholder
will sell any or all of the common stock in this offering. The selling
stockholder may use any one or more of the following methods when selling
shares:

o Ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers.

o Block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction.

o An exchange distribution following the rules of the applicable exchange.

o Privately negotiated transactions.

o A combination of any such methods of sale any other lawful method.

The selling stockholder may also engage in:

o Other transactions in our securities or in derivatives of our securities
and the subsequent sale or delivery of shares by the stockholder.

o Pledging shares to their brokers under the margin provisions of customer
agreements. If the selling stockholder defaults on a margin loan, the
broker may, from time to time, offer to sell the pledged shares.

The selling stockholder may not engage in short sales or sales of shares not
previously owned

Broker-dealers engaged by the selling stockholder may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from selling stockholder in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission from the purchaser in amounts to be negotiated. The selling
stockholder does not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.

The selling stockholder is, and any broker-dealers or agents that are
involved in selling the shares may be, considered to be "underwriters" within
the meaning of the Securities Act for such sales. An underwriter is a person who
has purchased shares from an issuer with a view towards distributing the shares
to the public. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
considered to be underwriting commissions or discounts under the Securities Act.

Because the selling stockholder is deemed to be an "underwriter" within the
meaning of Section 2(11) of the Securities Act, it will be subject to the
prospectus delivery requirements.

We are required to pay all fees and expenses incident to the registration
of the shares in this offering. However, we will not pay any commissions or any
other fees in connection with the resale of the common stock in this offering.
We have agreed to indemnify the selling stockholder and its officers, directors,
employees and agents, and each person who controls the selling stockholder, in
certain circumstances against certain liabilities, including liabilities arising
under the Securities Act. The selling stockholder has agreed to indemnify us and
our directors and officers in certain circumstances against certain liabilities,
including liabilities arising under the Securities Act.

If the selling stockholder notifies us that it has a material arrangement
with a broker-dealer for the resale of the common stock, then we would be
required to amend the registration statement of which this prospectus is a part,
and file a prospectus supplement to describe the agreements between the selling
stockholder and the broker-dealer.

DESCRIPTION OF OUR CAPITAL STOCK

Common Stock

Our authorized common stock consists of 500,000,000 shares of common stock,
par value $.001 per share. The holders of common stock are entitled to
dividends, pro rata, as and when declared by the Board of Directors, to one vote
per share at a meeting of stockholders and, upon winding up or liquidation, to
receive those of our assets that are distributable to the holders of the common
stock upon winding up or liquidation. No common stock has been issued subject to
call or assessment. There are no preemptive or conversion rights and no
provisions for redemption, purchase for cancellation, surrender or sinking
funds.

Preferred Stock

Our authorized shares of preferred stock consists of 30,000,000 shares, no
par value per share. Our directors are authorized by our Certificate of
Incorporation to issue preferred stock in one or more series and to create and
attach special rights and restrictions to a series of shares. No shares of
preferred stock have been issued.

Warrants

Set forth below is a table showing the number of warrants to purchase our
common stock that are outstanding as of July 1, 2001, the exercise prices
payable upon an election to exercise, and the term of each of these warrants:

Currently Exercise
Original Issuance Date Outstanding Price/share Expiration
----------- ----------- ----------

July 6, 2001 (1) 166,666 $0.036 July 6, 2006

Total 166,666
=======

(1) The exercise price for the warrants is the lesser of $0.064, or 120%
percent of the average of the three lowest closing prices for the common
stock for the 10 trading days prior to exercise of the warrant date. The
exercise price per share reflected in this table is based upon the current
market value of $0.030, as of October 31, 2001.

Registrar and Transfer Agent

The registrar and transfer agent of our common stock is Madison Stock
Transfer, Brooklyn, New York.

SHARES ELIGIBLE FOR FUTURE SALE

Shares Outstanding and Freely Tradable After Offering. Upon completion of
this offering, we will have approximately 113,411,120 shares of common stock
outstanding, assuming the conversion of all convertible notes at current market
prices and the exercise of all warrants held by the selling stockholder. The
shares to be sold by the selling stockholder in this offering will be freely
tradable without restriction or limitation under the Securities Act, except for
any such shares held our by "affiliates", as such term is defined under Rule 144
of the Securities Act, which shares will be subject to the resale limitations
under Rule 144.

Rule 144. In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned shares for at
least one year, including an affiliate of us, would be entitled to sell, within
any three-month period, that number of shares that does not exceed the greater
of 1% of the then-outstanding shares of common stock (approximately 113,411,120
shares after this offering) or the average weekly trading volume in the common
stock during the four calendar weeks immediately preceding the date on which the
notice of sale is filed with the Commission, provided certain manner of sale and
notice requirements and requirements as to the availability of current public
information about us is satisfied. In addition, affiliates of ours must comply
with the restrictions and requirements of Rule 144, other than the one-year
holding period requirement, in order to sell shares of common stock. As defined
in Rule 144, an "affiliate" of an issuer is a person who, directly or
indirectly, through the use of one or more intermediaries controls, or is
controlled by, or is under common control with, such issuer. Under Rule 144(k),
a holder of "restricted securities" who is not deemed an affiliate of the issuer
and who has beneficially owned shares for at least two years would be entitled
to sell shares under Rule 144(k) without regard to the limitations described
above.

Effect of Substantial Sales on Market Price of Common Stock. We are unable
to estimate the number of shares that may be sold in the future by our existing
shareholders or the effect, if any, that such sales will have on the market
price of the common stock prevailing from time to time. Sales of substantial
amounts of common stock, or the prospect of such sales, could adversely affect
the market price of the common stock.

HOW TO OBTAIN MORE INFORMATION ABOUT IDIAL NETWORKS, INC.

We are subject to the informational requirements of the Securities Exchange
Act of 1934, and in accordance therewith file reports, proxy or information
statements and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. In addition, the Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's web site is http://www.sec.gov.

We have filed with the Commission a registration statement on Form SB-2
under the Securities Act of 1933 with respect to the shares of common stock
being offered by its selling stockholder. As permitted by the rules and
regulations of the Commission, this prospectus does not contain all the
information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to our common stock
offered by the selling stockholder, reference is made to the registration
statement, and such exhibits and schedules. A copy of the registration
statement, and the exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Commission at the
addresses set forth above, and copies of all or any part of the registration
statement may be obtained from such offices upon payment of the fees prescribed
by the Commission. In addition, the registration statement may be accessed at
the Commission's web site. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Sichenzia Ross Friedman & Ference LLP, New York, New York.

EXPERTS

Kenneth Lieberman, CPA, P.A., independent auditors, have audited our
consolidated financial statements as of December 31, 2000, and for the year then
ended, as set forth in their report thereon, which financial statements and
report are included elsewhere in this Registration Statement. These consolidated
financial statements are included in reliance on their report, given on their
authority as experts in accounting and auditing.

Enrhardt, Keefe, Steiner & Hottman , P.C. , independent auditors, have
audited our consolidated financial statements as of December 31, 1999, and for
the year then ended, as set forth in their report thereon, which financial
statements and report are included elsewhere in this Registration Statement.
These consolidated financial statements are included in reliance on their
report, given on their authority as experts in accounting and auditing.

CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT

We changed our independent auditors from Ehrhardt, Keefe, Steiner &
Hottman PC, 7979 E. Tufts Ave., Suite 400, Denver, Colorado 80237-24843 to
Kenneth Lieberman, CPA, P.A., 9690 West Sample Road, Suite 202, Coral Springs,
Florida 33065. There has been no disagreement with any auditor about any item.
No adverse opinion, disclaimer of opinion or opinions qualified or modified as
to any uncertainly, audit scope or accounting has been rendered, issued or
expressed, during the two preceding years or at any time. The opinions did
contain an explanatory paragraph regarding a going concern uncertainty. During
the two most recent fiscal years and any subsequent interim period preceding the
change, there were no disagreements with the former accountants on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which if not resolved to the satisfaction of the former
accountants, would have caused it to make reference to the subject matter in its
reports

INDEX TO FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statement of Cash Flows

Consolidated Statements of Stockholders' Equity (Deficit)

Notes to Consolidated Financial Statements

Idial Networks, Inc.
And Subsidiaries

Consolidated Financial Statements

December 31, 2000 and 1999
and September 30, 2001 And 2000

IDIAL NETWORKS, INC.
AND SUBSIDIARIES

TABLE OF CONTENTS

Auditors' Reports

Consolidated Balance Sheet

Consolidated Statement of Operations

Consolidated Statement of Cash Flow

Consolidated Statement of Stockholder's Equity

Notes to Consolidated Financial Statements

Kenneth Lieberman C.P.A., P.A. (954) 971-8020
4400 W. Sample Road, Suite 216 Fax (954) 971-1623
Coconut Creek, FL. 33077

To the Board of Directors and Stockholders
IDial Networks, Inc.
The Woodlands, Texas

We have audited the accompanying consolidated balance sheet of IDial Networks,
Inc. and Subsidiaries as of December 31, 2000 and the related consolidated
statements of operations, stockholders equity and cash flows for the period then
ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IDial Networks,
Inc and Subsidiaries as of December 31, 2000 and the results of their
operations, and their cash flows for the period then ended, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 11 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a working capital deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 11. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

As discussed in Note 13 to the consolidated financial statements, the
consolidated financial statements have been restated to reflect the Company's
correction of an error in accounting for business combinations and to correct an
error in the value assigned to common stock issued to consultants, officers and
directors.

Kenneth Lieberman CPA, PA.
Coconut Creek, Florida
July 19, 2001, except for Note 13, as to which the date is November 6, 2001

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
iDial Networks, Inc.
Dallas, Texas

We have audited the accompanying balance sheet of iDial Networks, Inc as of
December 31, 1999, and the related statements of operations,
accumulated deficit and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides 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 iDial Networks, Inc. as of
December 31, 1999 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's history of operating losses raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
March 6, 2000
Denver, Colorado

IDIAL NETWORKS, INC.
and SUBSIDIARIES

Consolidated Balance Sheets

December 31,
------------------------------ September 30,
2000 1999 2001
------------- ------------- -------------
(Unaudited)
(Restated) (Restated)
Current assets
Cash and cash equivalents ................. $ 67,410 $ 11,481 $ 308,384
Accounts receivable - trade ............... 51,531 26,614 127,138
Marketable securities ..................... 31,200 -- 31,200
Other receivables ......................... 105,000 100,000 123,238
Prepaid expenses .......................... -- -- 1,340
Inventory ................................. 10,000 -- 10,000
------------- ------------- -------------
Total current assets ................... 265,141 138,095 601,300
------------- ------------- -------------

Fixed assets (net) .......................... 2,576,928 255,587 1,954,306
------------- ------------- -------------

Notes receivable ............................ -- -- 10,000
Intangibles, net ............................ 7,254,636 215,000 6,073,944
Deposits .................................... 52,618 8,855 54,460
------------- ------------- -------------
Total other assets ..................... 7,307,254 223,855 6,138,404
------------- ------------- -------------

Total assets ................................ $ 10,149,323 $ 617,537 $ 8,694,009
============= ============= =============

Current liabilities
Accounts payable .......................... $ 1,186,824 $ 347,445 $ 1,362,700
Advances from stockholders' ............... -- 119,100 --
Accrued expenses .......................... -- -- 82,007
Accrued consulting fees ................... -- 55,000 --
Accrued wages ............................. -- 25,000 --
Accrued interest .......................... 49,786 -- 46,450
Deferred revenue .......................... 31,256 -- 15,518
Current portion of long-term debt, net of
discount of $101,506 (2001) .............. 111,623 96,416 1,573,203
------------- ------------- -------------
Total current liabilities .............. 1,379,489 642,961 3,079,878

Long-term liabilities
Advances from stockholder's and related
parties .................................. 1,624,103 -- --
Notes payable, net of discount of
$437,389 (2001) .......................... 16,435 26,741 333,253
Capital leases payable .................... 98,439 121,644 66,498
------------- ------------- -------------
Total long-term liabilities ............ 1,738,977 148,385 399,751
------------- ------------- -------------
Total liabilities ...................... 3,118,466 791,346 3,479,629
------------- ------------- -------------

Commitments

Common stock, $001 par value, 500,000,000
shares at September 30, 2001 and
100,000,000 shares at December 31,
2000 authorized, 87,144,454 shares issued
and outstanding in 2001 and 2000,
37,085,000 shares issued and
outstanding in 1999 ....................... 87,144 37,085 435,722

Preferred stock, no par value, 30,000,000
shares authorized, no shares issued and
outstanding ............................... -- -- --
Additional paid in capital .................. 16,956,020 643,915 17,513,341
Accumulated deficit ......................... (9,970,307) (854,809) (12,692,683)
Accumulated other comprehensive income (loss) (42,000) -- (42,000)
------------- ------------- -------------
Stockholder's equity (deficiency) ...... 7,030,857 (173,809) 5,214,380
------------- ------------- -------------

Total liabilities and stockholder's equity
(deficiency) ................................ $ 10,149,323 $ 617,537 $ 8,694,009
============= ============= =============

IDIAL NETWORKS, INC.
and SUBSIDIARIES

Consolidated Statements of Operations

For the Years Ended For the Nine Months Ended
December 31, September 30,
---------------------------- ----------------------------
2000 1999 2001 2000
------------ ------------ ------------ ------------
(Unaudited)
(Restated) (Restated) (Unaudited)

Sales ............................. $ 1,796,897 $ 1,575,826 $ 4,404,509 $ 949,670
Cost of sales (exclusive of
depreciation) ................... 1,607,831 1,388,703 3,461,821 931,890
Depreciation ...................... 461,743 113,333 753,004 619,156
------------ ------------ ------------ ------------

Gross profit (loss) ............... (272,677) 73,790 189,685 (601,376)

Selling, general and administrative
expenses ........................ 8,686,190 543,896 2,420,853 3,595,140
------------ ------------ ------------ ------------

Net operating loss ................ (8,958,867) (470,106) (2,231,168) (4,196,516)

Other expenses
Interest expense ................ (156,630) (90,654) (491,208) (48,245)
------------ ------------ ------------ ------------

Net loss .......................... (9,115,497) (560,760) (2,722,376) (4,244,761)

Other comprehensive loss
Unrealized loss on
available-for-sale securities ... (42,000) -- -- --
------------ ------------ ------------ ------------

Comprehensive loss ................ $ (9,157,497) $ (560,760) $ (2,722,376) $ (4,244,761)
============ ============ ============ ============

Net loss per share ................ $ (.19) $ (.07) $ (0.03) $ (0.11)
============ ============ ============ ============

Weighted average per common share . 48,479,304 7,744,452 87,112,594 37,085,000
============ ============ ============ ============

IDIAL NETWORKS, INC.
and SUBSIDIARIES

Consolidated Statements of Cash Flow

For the Years Ended For the Nine Months Ended
December 31, September 30,
-------------------------- --------------------------
2000 1999 2001 2000
----------- ----------- ----------- -----------
(Unaudited)
(Restated) (Restated) (Unaudited)

Cash flow from operating activities
Net loss ......................... $(9,115,497) $ (560,760) $(2,722,376) $(4,244,761)
Adjustments to reconcile net loss
to net cash used in operating
activities
Writeoff of accrued interest .... -- 60,000 -- 2,321,198
Stock issued for services ....... 4,583,321 69,600 -- --
Stock issued for compensation ... 1,754,884 -- -- 619,156
Write off of loan acquisition
costs ............................ -- 16,765 -- --
Amortization of discount on
convertible notes payable ...... -- -- 367,004 --
Depreciation .................... 596,220 113,333 779,007 --
Amortization .................... 616,647 -- 1,180,692 --
Changes in assets and liabilities
Accounts receivable ........... (3,661) (109,562) (75,606) (16,214)
Other receivable .............. (105,000) -- (18,238) 92,772
Prepaid expenses .............. -- -- (1,340) (40,500)
Inventory ..................... (8,000) 0 -- --
Deposits ...................... (27,596) 2,154 (1,842) (5,869)
Accounts payable .............. 1,029,200 317,224 175,876 412,776
Accrued expenses .............. -- -- 82,008 (2,288)
Accrued interest .............. (30,214) 60,000 (3,336) --
Deferred revenue .............. 31,256 -- (15,737) 220,285
----------- ----------- ----------- -----------
Net cash used in operating
activities .................. (723,439) (31,246) (253,890) (643,445)
----------- ----------- ----------- -----------

Cash flow from investing activities
Purchase of property and equipment (26,700) (26,651) (156,385) (17,871)
Acquisition of subsidiaries, net
of cash acquired ................ 129,702 -- -- --
Notes receivable ................. -- -- (10,000) --
----------- ----------- ----------- -----------
Net cash from (used in)
investing activities ........ 103,002 (26,651) (166,385) (17,871)
----------- ----------- ----------- -----------

Cash flows from financing activities
Proceeds from issuance of long
term debt ....................... -- 35,000 754,207 --
Payment of long term debt ........ (7,920) (16,371) -- --
Proceeds from stockholder loans .. 757,662 -- 41,905 752,313
Proceeds from issuance of common
stock ........................... 100,000 -- -- --
Net (repayment to) advances from
members ......................... -- (67,744) -- --
Payment of stockholder loans ..... -- -- (75,000) --
Payments of long term capital
lease ........................... (173,374) -- (59,863) --
----------- ----------- ----------- -----------
Net cash provided from (used
in) financing activities ........ 676,368 (49,115) 661,249 752,313
----------- ----------- ----------- -----------

Net increase (decrease) in cash and
cash equivalents ................ 55,931 (107,012) 240,974 90,997

Cash and cash equivalents beginning
of period ....................... 11,481 118,493 67,410 11,481
----------- ----------- ----------- -----------

Cash and cash equivalents end of
period .......................... $ 67,412 $ 11,481 $ 308,384 $ 102,478
=========== =========== =========== ===========

IDIAL NETWORKS, INC.
and SUBSIDIARIES

Consolidated Statements of Cash Flow

Supplemental disclosures of cash flow information:

Cash paid during the year for:
Interest ........................ $ 156,630 $ 30,654 $ 124,205 $ 48,245
Income taxes .................... -- -- -- --

Supplemental schedule of noncash
investing and financing
activities:

Property and equipment acquired
under capital lease obligations . $ 117,544 $ 169,601 $ -- $ --

Issuance of common stock in
connection with acquisition of
subsidiaries .................... $10,068,959 $ -- $ -- $ --

Issuance of common stock by a
stockholder for satisfaction of
property and equipment
obligations incurred by the
Company recorded as advances from
stockholders and related parties $ 190,265 $ -- $ -- $ --

Issuance of common stock by a
stockholder for satisfaction of
obligations incurred by the
Company in connection with
services rendered to the Company
recorded as advances from
stockholders and related parties $ 557,076 $ -- $ -- $ 2,321,198

Additionally, during the year ended December 31, 1999, the Company issued common
stock for the following:

Fair Value Reduction
of Shares of Accounts
Description Shares Issued Receivable Totals
------------------------------------ ------------ ----------- ------------- -------------

Acquisition of trademark for common
stock and reduction of accounts
receivable 500,000 $ 165,000 50,000 $ 215,000

Issuance of common stock for
telephone equipment 380,000 125,000 - 125,000

Issuance of common stock and
reduction of accounts receivable
for settlement of note receivable
and accrued interest on equipment
purchased 170,000 56,100 120,097 176,197

Stock issued for consulting services 20,000 6,600 - 6,600

Issuance of common stock for
subscription receivable,
collected in full in January 2000 300,000 100,000 - 100,000

IDIAL NETWORKS, INC.
and SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)

Woodcom International, Inc. (prior to Idial Networks, Inc. (formerly Desert Springs
merger) Acquisition Corp.)
------------------------------------------ -----------------------------------------------------
Common Stock $.01 Par Value Common Stock $.001 Par Value
------------------------------------------ ---------------------------------------

Accumulated
Other Total
Additional Additional Comprehensive Stockholder's
Paid-in Paid-in Accumulated Income Equity
Shares Amount Capital Shares Amount In Capital Deficit (Loss) (Deficiency)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 1998 ...................................................... 2,000 $ 20 $ 280 $ -- $ -- $ -- $ (294,049) $ -- $ (293,749)

Exchange of all the outstanding common stock of Woodcom International, Inc. for
common stock of Idial Networks, Inc. (formerly Desert Springs Acquisition Corp.)
and the related charge to retained earning to effect the merger of the companies (2,000) (20) (280) 36,015,000 36,015 292,285 -- -- 328,000

Stock issued for retirement debt ................................................ -- -- -- 170,000 170 55,930 -- -- 56,100

Stock issued for fixed assets ................................................... -- -- -- 380,000 380 124,620 -- -- 125,000

Stock issued for intangible assets .............................................. -- -- -- 500,000 500 164,500 -- -- 165,000

Stock issued for consulting services ............................................ -- -- -- 20,000 20 6,580 -- -- 6,600

Net loss ........................................................................ -- -- -- -- -- -- (560,760) -- (560,760)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 1999 ...................................................... -- -- -- 37,085,000 37,085 643,915 (854,809) -- (173,809)

Stock issued with acquisition - Whoofnet.com, Inc. .............................. -- -- -- 19,787,000 19,787 8,080,213 -- -- 8,100,000

Stock issued with acquisition - 2 Sendit.com, Inc. .............................. -- -- -- 8,399,994 8,400 1,960,559 -- -- 1,968,959

Stock issued to officers and directors .......................................... -- -- -- 5,908,460 5,908 1,748,976 -- -- 1,754,884

Stock issued for consulting services ............................................ -- -- -- 15,964,000 15,964 4,522,357 -- -- 4,538,321

Other comprehensive losses ...................................................... -- -- -- -- -- -- -- (42,000) (42,000)

Net loss from operations (restated) ............................................. -- -- -- -- -- -- (9,115,498) -- (9,115,498)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 2000 (restated) ........................................... -- -- -- 87,144,454 87,144 16,956,020 (9,970,307) (42,000) 7,030,857

Change in par value of common stock ............................................. -- -- -- -- 348,578 (346,578) -- -- --

Intrinsic value of in-the-money conversion features related to convertible
notes payable (restated) ....................................................... -- -- -- -- -- 905,899 -- -- 905,899

Net loss (restated) ............................................................. -- -- -- -- -- -- (2,722,376) -- (2,722,376)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance at September 30, 2001 (restated) ........................................ -- $ -- $ -- $87,144,454 $ 435,722 $17,513,341 $(12,692,683) $ (42,000) $ 5,214,380
=========== =========== =========== =========== =========== =========== =========== =========== ===========

IDIAL NETWORKS, INC.
and SUBSIDIARIES

Notes To Consolidated Financial Statements
(Information pertaining to the nine-month periods ended
September 30, 2001 and 2000 are unaudited)

Note 1 - Organization, Summary of Significant Accounting Policies and
Principal Business Activity

Organization, Principal Business Activity and Principles of Consolidation

The consolidated financial statements include the accounts of Idial Networks,
Inc., (Idial) and it's wholly owned subsidiaries, Whoofnet.com, Inc,
(Whoofnet) and 2Sendit.Com, Inc. (2Sendit) (collectively the Company). All
significant inter-company transactions and balances have been eliminated.
(See note 8 for stock split).

The Company provides Internet-based services including voice
telecommunication to customers around the world. The Company operates
selected communication services, including phone cards and Internet enabled
telephony. The Internet triggered calls combine the flexibility of a
computer (on-line billing and call records) with the low tariffs of USA based
carriers via calling centers or direct from home anywhere in the world.

Woodcomm, LLC was established in May 1997 in the state of Nevada and began
commercial operations in June 1998 as a facilities-based wholesale provider
of international long-distance telephone services into South East Asia from
the United States. In April 1999, Woodcomm, LLC was reorganized changing from
an LLC to a Nevada Corporation, Woodcomm International, Inc. (WCI).

In December 1999, Desert Springs Acquisition Corporation (Desert Springs), a
Colorado corporation acquired all of the issued and outstanding common shares
of WCI in exchange for 30,930,000 shares of common stock of Desert Springs.
For financial reporting purposes, the business combination was accounted for
as an additional capitalization of WCI (a reverse acquisition with WCI as the
acquirer). WCI is considered the surviving entity. The historical financial
statements prior to the merger are those of WCI. Desert Springs' only assets
and liabilities consisted of a liability for $80,346, which was not assumed
in the merger. The former shareholders of Desert Springs owned approximately
14% of the common stock after the merger.

In January 2000, Desert Springs moved its state of incorporation from
Colorado (with 500,000,000 shares of common stock authorized, $.0001 par
value) to Nevada (with 100,000,000 shares of common stock authorized, $.001
par value) and changed its name to Idial Networks, Inc. (a Nevada
corporation).

On August 7, 2000, Idial acquired 100% of the stock of Whoofnet in exchange
for the issuance of approximately 19.8 million shares of Idial common stock
with a fair market value of $8,100,000. The acquisition was accounted for
using the purchase method and accordingly the purchase price has been
allocated to the assets acquired aggregating $ 2,479,365 and the liabilities
assumed aggregating $ 104,353 based on their estimated fair values at the
date of acquisition. The excess of purchase price over the estimated fair
value of the net assets acquired, totaling approximately $5.7 million, has
been recorded as goodwill and is being amortized using the straight-line
method over 5 years. The operating results of this acquisition are included
in the Company's consolidated results of operations from the date of
acquisition.

Whoofnet is a next generation Internet Company designed for direct selling.
The company was formed under the laws of Florida on March 6, 2000. The major
product is an Internet portal for use by the general public. The Company has
recently completed its field-testing and management plans to begin sales
within the next several months. All costs associated with the startup phase
of the organization has been expensed in the current period as per Statement
of Position 98-5.

Whoofnet also formed 6 subsidiary Delaware Corporations between the months of
March and May 2000, and 2 foreign subsidiary corporations for the operations
of various aspects of its business.

1) Whoofbiz, Inc. organized in March 2000 is planned to provide small
business services, which includes a 24-hour customer service center,
product fulfillment, merchant account fulfillment, and low cost high
quality telecommunications services.

2) Whoofhealth, Inc. sells its own homeopathic herbal branded products to
the general public. The product is marketed through various media
including TV, Direct Sales and the Internet. The Company was organized
April 28, 2000.

3) Whoofmail, Inc. was organized to provide free multilingual email services
to be offered to the general public, in order to build the customer
base. The Company was organized April 28, 2000.

4) Whoofmall, Inc. will provide a shopping mall on the Internet, whereby
other vendors can advertise and sell their products to the general
public. The Company will receive its revenue through various services
offered to the vendors who are participating in the mall. The
Company was organized May 2000.

5) Whoofmusic.com, Inc. was created to sell its own label specializing in
music from the 60's, 70's, 80's and 90's and related products. Marketing
will be done through TV Press media and the Internet. The Company was
organized May 2000.

6) Whooftelco, Inc. will be a low cost high quality telecommunications
provider to the European and Asian wireless community and to the low
cost domestic and international calls customer in the United States.
The Company was organized March 2000.

7) Whoofnet.Com AC is a Swedish corporation that was formed on January 16,
2001 subsequent to the year-end. The purpose is to act as the
European call center for Whoofnet.Com. The Company received a
$10,000,000 grant from the Swedish Government to provide the development
and expansion of a telephone customer call center for the Swedish
government..

8) Whoofstore.Com AB was formed on January 16, 2000 is also a Swedish
corporation as a duty free sales center. Management estimates that the
licenser granting the Company a tax-free status has a market value
between $5 to 10 million US dollars.

As of the date of these financial statements none of the subsidiaries were
active or funded.

On October 12, 2000 Idial acquired 100% of the stock of 2sendit in exchange
for the issuance of approximately 8.4 million shares of Idial common stock
with a fair market value of $1,968,959. The acquisition was accounted for
using the purchase method and accordingly the purchase price has been
allocated to the assets acquired aggregating $ 204,132 and the liabilities
assumed aggregating $166,468 based on their estimated fair values at the
date of acquisition. The excess of purchase price over their estimated fair
value of the net assets acquired, totaling approximately $1.9 million, has
been recorded as goodwill and is being amortized using the straight-line
method over 5 years. The operating results of this acquisition are included
in the Company's consolidated results of operations from the date of
acquisition.

2sendit provides a marketing service by advertising the products and services
through a variety of media with a primary focus on the use of fax mail,
direct mail and email. In addition the company provides ancillary
services, which include the sales of mailing lists, and consultation
services.

The primary customer has been the investment market but the company has
recently expanded its integration into the general business market.

The following summary, pro forma, unaudited data of the Company reflects the
acquisitions of Whoofnet and 2Sendit as if they had occurred on January 1,
2000 and 1999, respectively:

Pro forma (Unaudited)
Fiscal
-----------------------------
2000 1999
------------- -----------

Sales $ 2,173,583 $ 1,827,301

Net Loss $(11,035,991) $(2,330,478)

Net Loss Per Common Share $ (0.23) $ (0.30)

Interim Financial Statements

The accompanying unaudited interim financial statements include all
adjustments (consisting of normal recurring adjustments), which in the
opinion of management, are necessary for a fair presentation of the results
of the interim periods shown.

Concentration of Credit Risk

The Company's financial instruments that are exposed to concentration of
credit risk consist primarily of cash and accounts receivable. Additionally,
the Company maintains cash balances in bank deposit accounts, which, at
times, may exceed federally insured limits. During the year ended December
31, 1999, predominantly all of the Company's sales were generated from one
company whose accounts receivable balance at December 31, 1999 aggregated
$20,611 or 77% of total trade accounts receivable.

Cash and cash Equivalents

The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.

Marketable Securities

Marketable securities consist of common stock . Marketable securities are
stated at market value as determined by the most recently traded price of
each security at the balance sheet date. By policy, the Company invests
primarily in high-grade marketable securities. All marketable securities are
defined as trading securities or available-for-sale securities under the
provisions of the Statement of Financial Accounting Standards No. ("SFAS")
115, "Accounting for Certain Investments in Debt and Equity Securities."

Management determines the appropriate classification of its investment in
marketable securities at the time of purchase and reevaluates such
determination at each balance sheet date. Securities that are bought and held
principally for the purpose of selling them in the near term are classified
as trading securities and unrealized holding gains and losses are included in
earnings. Available-for-sale securities are carried at fair value with the
unrealized gain and losses, net of tax, reported as a separate component of
other comprehensive loss. The cost of investments sold is determined on the
specific identification or the first-in-first-out method.

Advertising Costs

The Company expenses advertising costs as incurred.

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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Property and Equipment

Property and equipment are stated at cost, equipment under capital leases are
stated at the lower of fair market value or net present value of minimum
lease payments at inception of the leases. Depreciation is computed using
the straight-line method over the estimated useful lives or lease terms of
the related assets.

Goodwill and Other Intangible Assets

Goodwill and other Intangible assets are amortized over 5 years using the
straight line method and consist of trademarks aggregating $215,000 as of
December 31, 1999 and 2000 and September 30, 2001 net of accumulated
amortization of $43,000 and $75,250 as of December 31, 2000 and September 30,
2001, respectively. In addition, goodwill aggregating $7,656,283 as September
30, 2001 and December 31, 2000 arising from business acquisitions during the
year ended December 31, 2000, accounted for under the purchase method, net of
accumulated amortization of $1,722,089 and $573,647 as of September 30, 2001
and December 31, 2000 are also included.

Revenue Recognition

The Company has adopted the SEC Staff Accounting Bulletin (SAB) No. 101 -
Revenue Recognition in Financial Statements in January 2000 as its formal
guidelines for the recognition of revenue. The effect of this adoption has
had no effect on the financial statements because past revenue recognition
practices followed the precepts of SAB 101.

The Company sells long distance service through a network of various
distributors. The consumer of the product receives a credit card representing
a prepaid set of minutes allowing them access to long distance telephone
services. In addition to a fixed amount of time allotted to each prepaid
calling card, each card has a three (3) month life before the unused minutes
expire. Revenue is initially recognized in the fiscal period when the
individual cards are used for their intended purpose. As cards expire, based
on their 3-month life, the balances of the remaining unused funds are
recognized as revenue in the period of expiration. Un-expired cards with
balances are recorded as deferred revenue.

The Company recognizes revenue from its marketing services, when the services
contracted for are completed. In some circumstances, contracts will require
services to be performed over a period of two months In those cases, fees
are specifically identified with the various services to be provided and
revenue is recognized as each of the individual tasks are completed. Funds
received as deposits from future services are recorded as deferred revenues.

Revenue from product sales are recognized when the products are shipped. Due
to the nature of the product, customers are not given the right to return
product. Therefore, management has elected not to allow for a reserve for
future returns.

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value as
of December 31, 2000, as a result of the relatively short maturity of these
instruments.

The fair value of the notes payable approximate the carrying value as both
the stated rate and discount rate on the notes approximates the estimated
current market rate.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may
not be recovered. The Company looks primarily to the undiscounted future
cash flows in its assessment of whether or not long-lived assets have been
impaired. At December 31, 1999, 2000 and September 30, 2000 and 2001 the
Company determined there was no impairment.

Convertible Notes Payable

The Company accounts for convertible notes payable with in-the-money
conversion features in accordance with EITF 98-5 and EITF 00-27; accordingly,
the intrinsic value of the conversion feature is initially recorded as an
addition to paid-in-capital and a discount on the related convertible notes
with the discount being amortized over the remaining contractual life of the
respective note. Any unamoritzed discount remaining upon conversion prior to
the stated maturity date of the note is immediately recognized as interest
expense. The respective discount on the convertible notes is presented as a
reduction to the notes payable in the accompanying balance sheet at September
30, 2001.

Income Taxes

The Company employs the liability method of accounting for income taxes
pursuant to SFAS No. 109 "Accounting for Income Taxes," under which method
the Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax basis of assets and liabilities using the enacted tax rates in effect
for the year in which the differences are expected to reverse. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized. The Company provides a valuation allowance that reduces deferred
tax assets to their net realizable value.

Net Loss Per Share

The Company computes net loss per share in accordance with the provisions of
SFAS No. 128, "Earnings Per Share" ("SFAS 128"). Under the provisions of SFAS
128, basic earnings per share (EPS) is computed by dividing the net loss from
operations for the period by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur from common stock issuable through stock based compensation
including stock options, restricted stock awards, warrants and other
convertible securities. Diluted EPS is not presented since the effect is
antidilutive.

During July 2001, the Company issued a convertible note and warrants to
acquire shares of the Company's common stock to the note holder (see Note
12). In accordance with SAB No. 98, the net loss per share has been
presented to reflect the dilutive effect of the convertible note and related
warrants. Diluted Net Loss Per Share has been adjusted for interest expense
on the convertible debt. For purposes of this computation shares of common
stock and shares of common stock issuable upon the exercise of warrants to
purchase common stock and conversion of debt to common stock have been
included in the weighted average number of shares outstanding for all periods
presented utilizing the treasury stock or if converted method, as appropriate.
^
In December 2000 the company issued a two-for-one stock split effected in the
form of a 100% stock dividend. Previously reported shares have been
retroactively restated (See note 8).
Reclassification

The consolidated statement of operations for the year ended December 31, 1999
and nine-month period ended September 30, 2000 have been reclassified to
conform to the presentation for the year ended December 31, 2000.

Recently Issued Accounting Pronouncements

The Company does not believe that any recently issued but not yet effective
accounting standards, have a material effect on the Company's consolidated
financial position, results of operations or cash flows except for the effect
of adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS
No. 142") which effect has not yet been determined. SFAS No. 142 addresses
the financial accounting and reporting for acquired goodwill and other
intangible assets. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon
their acquisition. SFAS 142 also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in
the financial statements. The Company will be adopting the provisions of this
new standard beginning with the first quarter of 2002.

During June 2001 SFAS No. 141, "Business Combinations" ("SFAS No. 141") was
released. This standard addresses financial accounting and reporting for
business combinations. All business combinations within the scope of SFAS 141
are to be accounted for using one method - the purchase method. The
provisions of SFAS 141 apply to all business combinations initiated after
June 30, 2001. Use of the pooling - of - interests method for those business
combinations is prohibited. It also applies to all business combinations
accounted for using the purchase method for which the date of acquisition is
July 1, 2001 or later.

Note 2 - Property and Equipment

Property and equipment consists of the following:

December 31,
------------------------- September 30,
Estimated
Useful
Life or
Term Of
2000 1999 2001 Lease
----------- ----------- ----------- ------------
(Unaudited)

Telephone equipment $ 440,158 $ 137,158 $ 548,344 2-5 years
Computers and equipment 729,714 277,893 736,565 5 years
Software 1,996,614 - 2,035,595 3 years
Furniture and fixtures 159,876 - 166,988 5 years
----------- ----------- -----------
3,326,362 415,051 3,487,492
Less accumulated depreciation (749,434) (159,464) (1,533,186)
----------- ----------- -----------

$ 2,576,928 $ 255,587 $ 1,954,306
=========== =========== ===========

Property and equipment includes assets acquired under capital leases in the
aggregate amount of $161,139 as of December 31, 1999, $278,683 as of December
31, 2000 and $408,221 as of September 30, 2001 net of accumulated
depreciation of $ 71,955, $164,849 and $304,612 as of December 31, 1999 and
2000 and September 30, 2001, respectively.

Note 3 - Marketable Securities

The following is a summary of available-for-sale securities:

December 31, 2000 September 30, 2001 (unaudited)
------------------------------ ------------------------------
Gross Gross
Fair Unrealized Fair Unrealized
Market Holding Market Holding
Cost Value Loss Cost Value Loss
-------- -------- -------- -------- -------- --------

Equity Securities $ 73,200 $ 31,200 $ 42,000 $ 73,200 $ 31,200 $ 42,000
======== ======== ======== ======== ======== ========

The Company's marketable securities were acquired in connection with the
Whoofnet acquisition. There were no investments in marketable securities
during the year ended December 31, 1999. The Company did not have any trading
securities at December 31, 2000 or September 30, 2001. There were no sales
of available-for-sale securities during the year ended December 31, 2000 or
the nine month period ended September 30, 2001. Accumulated other
comprehensive income (loss) included in stockholder's equity (deficiency) at
December 31, 2000 and September 30, 2001 includes an unrealized holding loss,
net of related tax effect, on available-or-sale securities of $42,000.

Note 4 - Long-Term Debt

Long-term debt consists of the following:

December 31,
----------------------- September 30,
2000 1999 2001
---------- ---------- ----------
(Unaudited)
Capital leases with monthly installments
totaling $6,552 and $3,295 at September 30,
2001 and December 31, 2000 and $3,295 at
December 31, 1999, including interest at
23% per annum and expiring at various dates
through August 2003. $ 202,641 $ 213,025 $ 127,963

Equipment note payable in monthly
installments of $ 795 including interest
at 12.9 % expiring May 2003. 23,856 31,776 43,498

(1) Convertible note payable accruing
interest at 8% - - 750,000

Stockholder loans payable issued with
interest payable annually at 7% per annum
(Note 5). 1,624,103 - 1,590,388
---------- ---------- ----------
1,850,600 244,801 2,511,849
Less current portion 111,623 96,416 1,674,709
---------- ---------- ----------

Long Term Debt $1,738,977 $ 148,385 $ 837,140
========== ========== ==========

Maturities of long-term debt as of December 31, 2000 are as follows:

Long-Term Capital
Year Ending December 31, Debt Leases Total
------------------------ ---------- ---------- ----------

2001 $ 7,421 $ 147,401 $ 154,822
2002 12,588 63,606 76,194
2003 3,847 44,194 48,041
---------- ---------- ----------
23,856 255,201 279,057
Less amount representing interest - (52,560) (52,560)
---------- ---------- ----------
23,856 202,641 226,497
Less current portion (7,421) (104,202) (111,623)
---------- ---------- ----------

$ 16,435 $ 98,439 $ 114,874
========== ========== ==========

On July 6, 2001, the Company issued an 8% convertible note with 166,666
warrants for the principal amount of $750,000. The net proceeds aggregating
$610,250 was used to fund working capital and expansion. The terms of the
note allow the holder to convert the note at their option for a period of 5
years from the date of the note. The unconverted portion of the note is due
July 6, 2003. The agreement also provides the holder demand and piggyback
registration rights.
The note is convertible into common stock at the lesser of $0.0424 or 80% of
the average of the three lowest closing prices of our common stock for the
thirty days immediately prior to the conversion date.
The warrants have an exercise price of $0.64 or 120% of the average of the
three lowest closing prices of common stock.

Note 5 - Stockholder Loans Payable

The Company received loans from stockholders to fund operations. The loans
are interest bearing at 7% per annum and are convertible at the option of the
stockholders into restricted common stock at the current market price less
20% at the time of conversion. As of December 31, 1999 the loans from
stockholders totaled $186,844 and as of December 31, 2000 and September 30,
2001 totaled $1,624,103. The debt has been reclassified as long-term at
December 31, 2000 since the stockholders had entered into an agreement during
October, 2000 that requires the Company to convert the obligation into equity
securities or to repay such obligation on January 15th 2002.

Note 6 - Income Taxes

The tax effect of loss carry forwards and the valuation allowance that gives
rise to deferred tax assets are as follows:

December 31,
------------------------ September 30,
2000 1999 2000
----------- ----------- -----------

Net operating loss carry forwards $ 1,501,846 $ 128,221 $ 1,887,717
Less valuation allowance (1,501,846) (128,221) (1,887,717)
----------- ----------- -----------

Deferred tax assets $ - $ - $ -
=========== =========== ==========

As of December 31, 2000, the Company had net operating loss carry forwards
available to offset future taxable income of approximately $9,970,000,
which expire in various years through 2015. Between December 1999 and
December 2000 the Company completed a reverse merger and two acquisitions in
exchange for common stock. Under section 382 of the Internal Revenue Code
(the "Code") these activities effected an ownership change and thus may
severely limit, on an accrual basis, the Company's ability to utilize its net
operating loss carry forwards. The Company uses the lowest marginal U.S.
corporate tax rate of 15% to determine deferred tax amounts and the related
valuation allowance because the Company has had no taxable earnings through
September 30, 2001.

The reconciliation of income tax benefit resulting from applying US federal
statutory tax rates to pretax loss and the reported amount of income tax
benefit is as follows:

December 31, September 30,
---------------------- ---------------------
2000 1999 2001 2000
---------- ---------- ---------- ---------

Tax benefit at federal statutory $ 84,114 $ 336,550 $ 385,872 $ 636,714
rate of 15%
Increases in valuation allowance (84,114) (336,550) (385,872) (636,714)
---------- ---------- ---------- ---------

$ - $ - $ - $ -
========== ========== ========== =========

For the year ended December 31, 2000 and nine month period ended September
30, 2001, the Company and each of its' subsidiaries had losses. Idial,
Whoofnet and 2Sendit each file their own tax return.

Note 7 - Commitments

The Company leases office space and furniture and equipment under
non-cancelable operating leases, which expire at various dates through July
2003.

Rent expense charged to operation under the operating leases was $149,146 and
$41,954 for the years ended December 31, 2000 and 1999, respectively, and
$103,289 and $74,598 for the nine-month period ended September 30, 2001 and
2000 respectively.

Future minimum obligations under the non-cancelable operating leases at
December 31, 2000 are as follows:

December 31,
------------

2001 $ 55,700
2002 29,960
-----------

Total $ 85,660
===========

Note 8- Common Stock

As of January 1, 1999 the financial statements have been restated to reflect
the recapitalization pursuant to the Desert Springs reverse merger
transaction.

Effective December 15, 2000, the Company's Board of Directors approved a 2
for 1 stock split whereby the number of shares of outstanding common stock
increased from 43,572,225 to
87,144,454. A total of $435,722 was reclassified from the Company's
additional paid in capital account to the Company's common stock account. All
share and per share amounts have been restated to retroactively reflect the
stock split.

During December 1999, the stockholders of WCI were issued 22,770,000 shares
of common stock in exchange for $165,000 of accrued wages. Additionally,
various consultants were issued common stock in the amount of 7,860,000
shares in exchange for services of $63,000.00. The fair market value of the
common stock on the date of these issuances was determined using quoted
market prices on the date of issuance as that amount was more readily
determinable and reliably measurable than the fair market value of the common
stock transferred.

The following schedule details the stock issuances during the year ended
December 31, 2000:
Transaction Common Stock Additional
---------- ---------------------- Paid-in Price Per
Date Recipient Description Shares Amount Capital Total Share
-------- ----------------- ----------------------------------------- ----------- --------- ----------- ----------- -------------
08/07/00 Woofnet.Com (4) Corporate acquisition 19,787,000 19,787 8,080,213 8,100,000 0.4094
10/12/00 2Sendit (3) Corporate acquisition 8,399,994 8,400 1,960,559 1,968,959 0.2344
----------- --------- ----------- ----------- -------------
28,186,994 28,187 10,040,772 10,068,959
----------- --------- ----------- ----------- -------------
08/30/00 Carl Battie (2) Director Compensation 800,000 800 415,200 416,000 0.5200
08/30/00 Supree Wanapun (2)Director Compensation 20,000 20 10,380 10,400 0.5200
08/30/00 Klaus Scholz (2) Employee compensation 40,000 40 20,760 20,800 0.5200
08/30/00 Mark T. Wood (1) Employee compensation 800,000 800 415,200 416,000 0.5200
10/16/00 Mark T. Wood (1) Employee compensation 4,000,000 4,000 756,000 760,000 0.1900
09/25/00 Gerald Lesher (1) Stock issued for consulting services 80,460 80 42,564 42,644 0.5300
09/25/00 Kevin Wright (1) Stock issued for consulting services 40,000 40 21,160 21,200 0.5300
09/25/00 Supree Wanapun (1)Stock issued for consulting services 128,000 128 67,712 67,840 0.5300
----------- --------- ----------- ----------- -------------
5,908,460 5,908 1,748,976 1,754,884
----------- --------- ----------- ----------- -------------
08/30/00 Charlie Macari Stock issued for consulting services 836,734 837 434,265 435,102 0.5200
08/30/00 Frank Katana Stock issued for consulting services 5,160 5 2,678 2,683 0.5200
08/30/00 Gary Hanson Stock issued for consulting services 6,664 7 3,458 3,465 0.5200
08/30/00 Ivana Servalle Stock issued for consulting services 932 1 484 485 0.5200
08/30/00 Jeannette CallahanStock issued for consulting services 1,904 2 988 990 0.5200
08/30/00 Joe Spence Stock issued for consulting services 2,704 3 1,403 1,406 0.5200
09/25/00 Joseph Alloca Stock issued for consulting services 128,000 128 67,712 67,840 0.5300
09/25/00 Julie Crosby Stock issued for consulting services 128,000 128 67,712 67,840 0.5300
08/30/00 Karl E. Rodriquez Stock issued for consulting services 120,000 120 62,280 62,400 0.5200
09/25/00 Karl E. Rodriquez Stock issued for consulting services 410,000 410 216,890 217,300 0.5300
10/16/00 Karl E. Rodriquez Stock issued for consulting services 500,000 500 94,500 95,000 0.1900
09/25/00 Kenneth Lieberman Stock issued for consulting services 80,000 80 42,320 42,400 0.5300
10/16/00 Lanette J. SeifertStock issued for consulting services 200,000 200 37,800 38,000 0.1900
08/30/00 Lazo Sopov Stock issued for consulting services 13,332 13 6,920 6,933 0.5200
09/25/00 Louie Sopov Stock issued for consulting services 120,000 120 63,480 63,600 0.5300
08/30/00 Maribeth Callahan Stock issued for consulting services 3,808 4 1,976 1,980 0.5200
08/30/00 Mark Berman Stock issued for consulting services 1,332 1 692 693 0.5200
08/30/00 Mary Callahan Stock issued for consulting services 1,904 2 988 990 0.5200
09/25/00 Pamela Zelman Stock issued for consulting services 800,000 800 423,200 424,000 0.5300
10/16/00 Pamela Zelman Stock issued for consulting services 800,000 800 151,200 152,000 0.1900
09/25/00 Paulina Gidziela Stock issued for consulting services 40,000 40 21,160 21,200 0.5300
08/30/00 Richard Borrow Stock issued for consulting services 664 1 344 345 0.5200
10/16/00 Richard Borrow Stock issued for consulting services 2,000,000 2,000 378,000 380,000 0.1900
08/30/00 Ron Ardt Stock issued for consulting services 140,000 140 72,660 72,800 0.5200
09/25/00 Ron Ardt Stock issued for consulting services 760,000 760 402,040 402,800 0.5300
08/30/00 Sheba Berkovits Stock issued for consulting services 13,332 13 6,920 6,933 0.5200
08/30/00 Stan Majorum Stock issued for consulting services 105,258 105 54,629 54,734 0.5200
08/30/00 Tom Callahan Stock issued for consulting services 1,904 2 988 990 0.5200
08/30/00 Tom Schutte Stock issued for consulting services 2,704 3 1,403 1,406 0.5200
08/30/00 Valeria Servalle Stock issued for consulting services 1,332 1 692 693 0.5200
09/25/00 William Stocker Stock issued for consulting services 410,000 410 216,890 217,300 0.5300
09/25/00 Ziyon Shaky Stock issued for consulting services 128,000 128 67,712 67,840 0.5300
10/16/00 Charlie Macari Stock issued for consulting services 4,000,000 4,000 756,000 760,000 0.1900
09/25/00 Daffney Austin Stock issued for consulting services 200,000 200 105,800 106,000 0.5300
10/16/00 Daffney Austin Stock issued for consulting services 2,000,000 2,000 378,000 380,000 0.1900
08/30/00 David Schild Stock issued for consulting services 332 - 173 173 0.5200
10/16/00 David Schild Stock issued for consulting services 2,000,000 2,000 378,000 380,000 0.1900
----------- --------- ----------- ----------- -------------
15,964,000 15,964 4,522,357 4,538,321
----------- --------- ----------- ----------- -------------

$50,059,454 $ 50,059 $16,312,105 $16,362,164 $
=========== ========= =========== =========== =============

(1) - Officers and directors of Idial.
(2) - Directors of Idial
(3) - Conversion ratio of Idial Stock for 2Sendit stock was 32.68:1
(4) - Conversion ratio of Idial Stock for Whoofnet stock was 1:1
(5) - All share and market value per share amount have been retroactively
restated to reflect the stock split.

In December 1999, subsequent to the reverse acquisition, the Company issued
common shares in exchanged for debt to acquire various assets and in payment
of consulting services. In December 1999, the fair market value of the common
stock on the date of these issuances was determined to be $.33 based on the
issuance of 300,000 common shares of stock for $100,000 in December 1999. The
various stock transactions which occurred in December 1999 are as follows:

The Company issued 170,000 shares of common stock to an equipment vendor and
customer in exchange for satisfaction of a note payable and related accrued
interest totaling $482,443. This amount was netted with an accounts
receivable balance due the Company which totaled $120,097. The related
equipment's acquisition cost was reduced by approximately $306,000 as a
result of this transaction.

The Company issued 500,000 shares of common stock in exchange for an
intangible asset in connection with this transaction, the Company also
settled an accounts receivable balance of $50,000. The fair value of the
intangible assets was determined to be $215,000 and is reflected in the
accompanying financial statements.

A consultant was granted 380,000 shares of common stock in exchange for
equipment with a fair value of $125,000 and 20,000 share of common stock in
exchange for $6,600 of consulting services. The accompanying financial
statements reflect the consulting expense and the fair value of the equipment
as a result of this transaction.

In December 1999, prior to the reverse merger, Idial agreed to transfer
300,000 share of common stock in exchange for $100,000. This amount was
received in full in January 2000.

Note 9 - Segment information

The Company has three principal operating segments which are (1) providing
Internet-based voice telecommunication to customers around the world, (2)
providing a marketing service for various businesses and (3) marketing a next
generation Internet Company designed for direct selling to the general public
through an internet portal. These operating segments were based on the nature
of the product and the services offered. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision-maker
in deciding how to allocate resources and in assessing performance. The
Companies chief executive officer and chief financial officer have been
identified as the chief decision-makers. The Company's chief operating
decision makers direct the allocation of resources to operating segments
based on the profitability and cash flow of the respective segments.

The Company has determined that there are two reportable segments (1)
providing Internet-based voice telecommunication to customers around the
world and (2) providing a marketing service for various businesses. The other
segment was not reported because it does not meet any of the quantitative
thresholds under SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information".

The accounting policies of the segments are the same as those described in
the Summary of significant accounting policies.

The following table summarizes the Company's different reportable segments:

Internet-
Based Voice
Tele- Marketing
communications Services Other (a) Total
----------------------------------------------------------
December 31, 2000
------------- ------------- ----------- ------------
Net sales from
external customers 1,728,562 66,965 1,370 1,796,897
Intersegment net sales - - - -
Gross profit (loss) (323,408) 50,731 - (272,677)
Net operating loss (8,812,036) (146,832) - (8,958,868)
Interest expense 152,523 771 3,336 156,630
Depreciation and
amortization 617,698 11,089 584,080 1,212,867
Total assets 665,847 232,238 9,251,238 10,149,323
Capital expenditures 26,700 - - 26,700

December 31, 1999
----------------------------------------------------------
Net sales from
external customers 1,575,826 - - 1,575,826
Intersegment net sales - - - -
Gross profit (loss) 73,790 - - 73,790
Net operating loss (470,106) - - (470,106)
Interest expense 90,654 - - 90,654
Depreciation and
amortization 113,333 - - 113,333
Total assets 617,537 - - 617,537
Capital expenditures 26,651 - - 26,651

September 30, 2001
----------------------------------------------------------
Net sales from
external customers 2,660,404 1,744,105 - 4,404,509
Intersegment net sales - - - -
Gross profit (loss) (86,777) 276,462 - 189,685
Net operating loss (2,368,481) 137,312 - (2,231,168)
Interest expense 489,064 1,188 956 491,208
Depreciation and
amortization 222,974 327,605 1,409,119 1,959,699
Total assets 6,175,237 350,171 2,168,601 8,694,009
Capital expenditures 149,755 6,630 - 156,385

September 30, 2000
----------------------------------------------------------
Net sales from
external customers 949,670 - - 949,670
Intersegment net sales - - - -
Gross profit (loss) (601,376) - - (601,376)
Net operating loss (4,196,516) - - (4,196,516)
Interest expense 48,245 - - 48,245
Depreciation and
amortization 619,156 - - 619,156
Total assets 8,335,413 - - 8,335,413
Capital expenditures 17,871 - - 17,871

Note 10 - Other Comprehensive Income (Loss)

The pretax and after-tax effects of the components of other comprehensive
income (loss) for 2000 are as follows:
Pretax Tax After Tax

Unrealized holding loss on available-for-sale
securities $ (42,000) $ - $ (42,000)

Note 11 - Going Concern

The Company has suffered recurring losses from operations and has a working
capital deficiency at December 31, 2000. The Company's financial statements
have been prepared on the assumption that the Company will continue as a
going concern. Management has instituted a cost reduction program that
includes a reduction of labor and fringe benefit costs. In addition the
Company has consolidated several of its operations, increased marketing
efforts on its product lines, adjusted sales prices of certain products to
bring them in line with costs and negotiated more favorable contracts to
provide services at more efficient costs. As a result of these efforts sales
during the nine month period ended September 30, 2001 have improved
significantly and management believes that profitability will be achieved in
the near future. In addition, during July 2001 the Company issued a
convertible note in the aggregate amount of $750,000 and warrants to acquire
common stock to the convertible note holder (see note 12), to fund working
capital and expansion. If the actions described above are not successful in
achieving profitability or additional financing cannot be obtained, the
Company would be materially and adversely affected and there is substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments necessary if the Company
becomes unable to continue operations for any reason.

Note 12 - Restatement of Consolidated Financial Statements

The consolidated financial statements for the year ended December 31, 2000
have been restated to reflect a correction in the company's method of
accounting for business combinations to be in accordance with Accounting
Principles Board Opinion No. 16 ("APB 16"). Pursuant to APB 16, the purchase
method requires the reported income of an acquiring corporation include the
operations of the acquired company after acquisition, based on the cost to
the acquiring corporation. The consolidated financial statements have been
restated to reflect the operating results of the Whoofnet and 2Sendit
acquisitions from the respective dates of acquisition. The previously issued
consolidated financial statements included in the company's registration
statement on Form SB-2/A filed on August 2, 2001 included the operating
results of Whoofnet for the period from March 6, 2000 (date of inception) to
December 31, 2000 and 2 Sendit for the period from January 1, 2000 to
December 31, 2000 in error. The effect of the correction on net loss for
the year ended December 31, 2000 was a decrease in net loss of $930,732 or
$.02 per share. In addition, the consolidated financial statements for the
year ended December 31, 2000 included in the company's registration statement
on Form SB-2 Amendment No. 2 filed on October 12, 2001 have been restated to
reflect a correction in the computation of goodwill in the amount of
$276,476, a correction in the computation of amortization of goodwill of
($165,488) and a correction in the value assigned to common stock issued to
consultants, officers and directors (see Note 8) to record these
transactions at their fair market value. The effect of such corrections on
net loss for the year ended December 31, 2000 was an increase in net loss of
$2,597,102 or $.05 per share.

The effect of the corrections on net loss were as follows:

Net Loss Per
Net Loss Share
----------- -------------

As previously stated on Form SB-2/A filed August 2,
2001 $(7,449,128) $ (0.25)

Correction in method of accounting for business
combinations in accordance with APB 16 930,732 0.02

Change in net loss per share to reflect retroactive
restatement for stock split - 0.09
----------- ------------

As previously stated on Form SB-2 Amendment No. 2
filed October 12, 2001 (6,518,396) (0.14)

Correction in the computation of amortization of
goodwill 165,488 -

Correction in the value assigned to common stock
issued to consultants officers and directors (2,762,590) (0.05)
----------- ------------

As restated on the consolidated statement of
operations $(9,115,498) $ (0.19)
=========== ============

Restatement of Consolidated Financial Statements

The Company has also restated its financial statements for a correction of an
error in accounting for in-the-money conversion features associated with its
convertible notes payable. The Company has adjusted previously reported
amounts in its financial statements to comply with EITF 98-5 and EITF 00-27
related to accounting for convertible instruments with in-the-money
conversion features, resulting in additional interest expense of $367,004
being recorded for the nine months ended September 30, 2001. The effect of
the error correction is as follows:

Nine months ended September 30, 2001, as previously
reported $ (2,355,372) $ (0.03)

Nine months ended September 30, 2001, as restated $ (2,722,376) $ (0.03)

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

Up to 36,616,666 Shares of our

Common Stock

IDIAL NETWORKS, INC.

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

PROSPECTUS

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

THE DATE OF THIS PROSPECTUS IS
_____, 2002

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Indemnification of Directors and Officer

Subsection 1 of Section 78.7302 of Chapter 78 of the Nevada General Corporation
Law ("NGCL") provides that a corporation may indemnify any person who was or is
a party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (except in an action brought by or on behalf of the corporation)
if that person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by that person in connection with
such action, suit or proceeding, if that person acted in good faith and in a
manner which that person reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, alone, does not
create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in, or not opposed to, the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, the person had reasonable cause to believe his action was unlawful.

Subsection 2 of Section 78.7502 of the NGCL provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit brought by or on behalf
of the corporation to procure a judgment in its favor because the person acted
in any of the capacities set forth above, against expenses, including amounts
paid in settlement and attorneys' fees, actually and reasonably incurred by that
person in connection with the defense or settlement of such action or suit, if
the person acted in accordance with the standard set forth above, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged by a court of competent jurisdiction after
exhaustion of all appeals therefrom to be liable to the corporation or for
amounts paid in settlement to the corporation unless and only to the extent that
the court in which such action or suit was brought or other court of competent
jurisdiction determines that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.

Section 78.751 of the NGCL provides that unless indemnification is ordered
by a court, the determination to provide indemnification must be made by the
stockholders, by a majority vote of a quorum of the board of directors who were
not parties to the action, suit or proceeding, or in specified circumstances by
independent legal counsel in a written opinion. In addition, the articles of
incorporation, bylaws or an agreement made by the corporation may provide for
the payment of the expenses of a director or officer of the expenses of
defending an action as incurred upon receipt of an undertaking to repay the
amount if it is ultimately determined by a court of competent jurisdiction that
the person is not entitled to indemnification. Section 78.751 of the NGCL
further provides that, to the extent a director or officer of a corporation has
been successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in subsection (1) and (2), or in the defense of any
claim, issue or matter therein, that person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by that
person in connection therewith; that indemnification provided for by Section
78.751 of the NGCL shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled and that the scope of indemnification
shall continue as to directors, officers, employees or agents who have ceased to
hold such positions, and to their heirs, executors and administrators.

Finally, Section 78.752 of the NGCL provides that a corporation may
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the authority to indemnify him against such
liabilities and expenses.

The Registrant's bylaws provide for indemnification of officer, directors
and others to the fullest extent permitted by the laws of the State of Nevada.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities offered hereby.

SEC registration fee $ 222
Accountants' fees and expenses 6,000
Legal fees 25,000
Transfer agent's and warrant agent's
fees and expenses 500
-------

Total $31,722
=======

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Private Placements of Common Stock and Warrants for Cash

We sold common stock for cash at the prices and during the periods provided
as follows: during the third quarter of 2000, one purchaser bought 10,000 shares
at a price of $0.75 per share.

The offers and sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of Regulation
D promulgated thereunder. No advertising or general solicitation was employed in
offering the securities. The securities were offered to a limited number of
persons, all of whom were business associates or vendors of iDial or its
executive officers and directors, and transfers of the shares were restricted by
iDial in accordance with the requirements of the Securities Act of 1933 (the
"Securities Act"). All persons were accredited investors, represented that they
were capable of analyzing the merits and risks of their investment, acknowledged
in writing that they were acquiring the securities for investment and not with a
view toward distribution or resale and that they understood the speculative
nature of their investment. Proceeds from the above sales of common stock were
used for working capital and for general corporate purposes.

Sales of Debt and Warrants for Cash

A convertible note was issued to Laurus Master Fund, Ltd. during the second
quarter of 2001. The note was in the aggregate principal amount of $750,000. The
note is convertible into common stock at a conversion price of the lower of
$0.0424 or 80% of the average of the three lowest closing prices of the common
stock for the thirty trading days immediately preceding the conversion date. In
addition, this same purchaser received 166,666 warrants to purchase common
stock. The offering of convertible notes and warrants was exempt from
registration under Rule 506 of Regulation D and under Section 4(2) of the
Securities Act. No advertising or general solicitation was employed in offering
the securities.

Issuances of Stock for Services or in Satisfaction of Obligations

In December 1999, we issued 30,930,000 shares of our common stock in
connection with the acquisition of Desert Springs.

In December 1999, we issued 5,085,000 share of our common stock in
connection with the acquisition of Desert Springs

In June 2000, we issued 40,000 shares of our restricted common stock to
InsiderStreet.com, Inc. as a retainer for consulting services.

In August 2000, we issued 19,787,000 shares of our common stock in
connection with the acquisition of 100% of the outstanding common stock of
Whoofnet.com, Inc.

In November 2000, we issued 8,399,994 shares of our common stock in
connection with the acquisition of 100% of the outstanding common stock of
2sendit.com, Inc.

The above offerings and sales were deemed to be exempt under Regulation D
and Section 4(2) of the Securities Act. No advertising or general solicitation
was employed in offering the securities. The offerings and sales were made to a
limited number of persons, all of whom were business associates of iDial or
executive officers and/or directors of iDial, and transfer was restricted by
iDial in accordance with the requirements of the Securities Act. All persons
were accredited or sophisticated investors, represented that they were capable
of analyzing the merits and risks of their investment, acknowledged in writing
that they were acquiring the securities for investment and not with a view
toward distribution or resale and that they understood the speculative nature of
their investment.

ITEM 27. EXHIBITS

INDEX TO EXHIBITS

2.1 Plan of Reorganization, dated November 30, 1999. (1)

3.1 Certificate of Incorporation of iDial.(2)

3.2 Bylaws of iDial.(2)

4.1 Convertible Note issued to Laurus Master Fund dated July 6, 2001.*

4.2 Warrant issued to Laurus Master Fund dated July 6, 2001.*
4.3 Security Agreement dated July 6, 2001.*
5.1 Opinion of Sichenzia, Ross, Friedman & Ference LLP.*

10.1 Subscription Agreement between iDial and Laurus Master Fund dated
July 6, 2001.*
16.1 Letter on Change in Certifying Accountant (3)
23.1 Consent of Kenneth Lieberman CPA, P.A. .
23.2 Consent of Sichenzia, Ross, Friedman & Ference LLP (included as part
of its opinion filed as Exhibit 5.1 and incorporated herein by
reference).

23.3 Consent of Enrhardt, Keefe, Steiner & Hottman

* Previously filed
(1) Incorporated by reference to the Company's Form 8-K filed on December
20, 1999
(2) Incorporated by reference to the Company's Form 10-SB filed on April
13, 2000
(3) Incorporated by reference to the Company's Form 8-K filed on August 2,
2001

ITEM 28. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) To file a post-effective amendment to this Registration Statement
during any period in which offers or sales are being made:

(i) to include any Prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the Prospectus any facts or events which, individually
or together, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and

(iii)to include any additional or changed material information on the plan
of distribution.

(2) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.

(3) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and this offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(4) That, insofar as indemnification for liabilities arising from the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the 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 the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(5) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

SIGNATURES

In accordance the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirement for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Dallas, Texas on January 30, 2002.

IDIAL NETWORKS, INC.

By /s/Mark T. Wood
Mark T. Wood, President,
Chief Executive Officer and Chairman

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the Company in the capacities and on the dates indicated.

By /s/ Mark T. Wood Chairman of the Board and CEO Date: January 30, 2002
Mark T. Wood

By /s/ Carl K. Battie Vice Chairman of the Board Date: January 30, 2002
Carl K. Battie

By /s/ Klaus Scholz Chief Operating Officer and Date: January 30, 2002
Klaus Scholz Director

By /s/ Edward Janusz Director Date: January 30, 2002
Edward Janusz

/s/ Thomas G. Seifert Principal Accounting Officer Date: January 30, 2002
Thomas G. Seifert and Chief Financial Officer