UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

(Mark One)

/X/ Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2004.

/ /  Transition  Report  pursuant  to  Section  13 or 15 (d)  of the  Securities
Exchange Act of 1934 for the transition  period from  ______________________  to
_________.

                          Commission File No. 000-30294

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

DELAWARE                                                          87-0394290
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                           Identification Number)

TWELFTH FLOOR, 257 PARK AVENUE SOUTH, NEW YORK, NY                 10010
    (Address of Principal Executive Offices)                     (Zip Code)

212.254.1917
(Issuer's Telephone Number)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15 (d) of the  Securities  Exchange Act of 1934 during the past 12
months (or such  shorter  period that the  registrant  was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days:

Yes /X/  No /  /

Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes /X/ No / /

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

      At May 12, 2004 there were 87,796,266 shares of common stock, par value
$.001 per share outstanding.

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


<PAGE>


                       DIALOG GROUP, INC. AND SUBSIDIARIES

                                      INDEX

 Page
NUMBER

                    PART I.        FINANCIAL INFORMATION

                  Item 1            Financial Statements

F-1   Condensed Consolidated Balance Sheets as of December 31, 2003 (audited)
      and March 31, 2004 (unaudited)

F-2   Condensed Consolidated Statements of Operations and Comprehensive Loss for
      the Three Months Ended March 31, 2004 (unaudited) and March 31, 2003
      (unaudited)

F-3   Condensed Consolidated Statements of Cash Flows for the Three Months Ended
      March 31, 2004 (unaudited) and March 31, 2003 (unaudited)

F-4 to
F-18  Notes to Condensed Consolidated Financial Statements (unaudited)

2-9   Item 2. Management's Discussion and Analysis or Plan of Operation

9     Item 3. Controls and Procedures

                           PART II.         OTHER INFORMATION

10    Item 2(c)     Recent Sales of Unregistered Securities

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


<PAGE>


                       DIALOG GROUP, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                            ASSETS                                      March 31,        December 31
                                                                          2004              2003
                                                                          -----             ----
                                                                       (Unaudited)
<S>                                                                      <C>               <C>
CURRENT ASSETS:
  Cash                                                                          --           147,246
  Accounts receivable (Net)                                              1,013,234           716,879
  Notes receivable                                                          75,000           100,000
  Prepaid expenses and other current assets                                 62,531            87,591
                                                                                 -
     Total current assets                                                1,150,765         1,051,716
-----------------------------------------------------------------------------------------------------
                                                                                --                --
PROPERTY AND EQUIPMENT, NET                                                 15,240            16,708

OTHER ASSETS:
  Data Assets (Net)                                                        588,970           656,996
  Website (Net)                                                            135,334           122,792
  Other assets                                                              43,288            89,342
    Total other assets                                                     767,592           869,130
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                             1,933,597         1,937,554
=====================================================================================================
                          LIABILITIES
CURRENT LIABILITIES:
  Bank overdraft                                                            97,711
  Accounts payable                                                       2,111,552         2,156,021
  Accrued expenses                                                         834,085           937,065
  Deferred revenue                                                         984,439           757,540
  Current portion of long-term debt                                        221,260           230,177
  Other current liabilities                                                136,701            12,500
  Due to related parties                                                        --             4,920
     Total current liabilities                                           4,385,749         4,098,223
-----------------------------------------------------------------------------------------------------

LONG TERM DEBT

STOCKHOLDERS' EQUITY (DEFICIENCY):

  Preferred stock                                                              322               322
  Common stock                                                              85,890            85,813
  Additional paid-in-capital                                             5,425,803         5,370,879
  Accumulated deficit                                                   (7,893,166)       (7,582,883)
  Dividends- Preferred Stock                                               (71,000)          (34,800)
Total stockholders' equity (deficiency)                                 (2,452,152)       (2,160,669)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)                  1,933,597         1,937,554
=====================================================================================================

   The accompanying notes are an integral part of these financial statements.

                                      F-1
</TABLE>

<PAGE>


                       DIALOG GROUP, INC. AND SUBSIDIARIES

     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                       Restated for
                                                                                       Discontinued
                                                                                        Operations
                                                                      2004                  2003
                                                                      ----                  ----
<S>                                                                <C>                  <C>
REVENUES                                                           $1,945,432           $1,132,424

COST OF REVENUES                                                      939,970              686,790
                                                                   ----------           ----------

GROSS PROFIT                                                        1,005,462              445,634

OPERATING EXPENSES:
  Selling, General and Administrative Expenses                      1,390,901              495,694
                                                                   ----------           ----------

             Total Operating Expenses                               1,390,901              495,694
                                                                   ----------           ----------

LOSS FROM OPERATIONS                                                 (385,440)             (50,060)

OTHER INCOME (EXPENSES):
  Interest expense                                                    (18,504)            (106,344)
  Other (Expenses)                                                      1,400
  Other income                                                         92,264                    2
                                                                   ----------                  --

             Net Other Income (Expenses)                               75,160             (106,342)
                                                                   ----------           ----------

NET LOSS BEFORE DISCOUNTINUED OPERATIONS                             (310,280)            (156,402)

DISCONTINUED OPERATIONS                                                     0              (45,417)
                                                                            -           ----------

TOTAL COMPREHENSIVE LOSS                                           $ (310,280)          $ (201,819)
                                                                   ===========          ==========

NET LOSS PER SHARE, BASIC AND DILUTED                              $    (0.01)          $    (0.01)
                                                                   ===========          ==========

NET LOSS PER SHARE, BASIC AND DILUTED -
  PRO-FORMA                                                        $    (0.01)          $       --
                                                                   ==========           ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
  BASIC AND DILUTED                                                85,851,379           37,195,429
                                                                   ==========           ==========


   The accompanying notes are an integral part of these financial statements.

                                      F-2
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                       DIALOG GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

                                   (UNAUDITED)
                                                                                    2004              2003
                                                                             ------------------------------------
<S>                                                                                  <C>              <C>
Cash Flows from Operating Activities:
  Net loss                                                                           $ (310,280)      $ (201,819)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
        Depreciation and amortization                                                    82,994           20,096
        Accounts receivable                                                            (311,022)        (158,772)
 (Increase) decrease in:
        Provisions for Bad Debit                                                         11,447
        Other current receivable                                                         (1,320)          22,715
        Prepaid expenses and other current assets                                        18,877           18,871
 Increase (decrease) in:
        Accounts payable and accrued expenses                                           196,676          182,190
        Other current liabilities                                                       (98,536)        (100,937)
        Deferred revenue                                                                226,900          (80,583)
                                                                                     ----------       -----------
            Net Cash Used in Operating Activities                                      (184,264)        (298,239)
                                                                                     -----------      -----------

Cash Flows from Investing Activities:
        Purchase of property and equipment                                              (13,543)         (40,802)
                                                                                     ----------       ----------
            Net Cash Used in  Investing Activities                                      (13,543)         (40,802)
                                                                                     ----------       ----------


Cash Flows from Financing Activities:
        Loans from shareholders                                                                           30,250
        Notes Receivable - Findstar                                                      25,000
        Borrowing from related parties                                                       --           19,792
        Sale of common stock                                                             35,000          173,666
        Short-term borrowing, net                                                        (9,439)          25,203
                                                                                     ----------       ----------
             Net Cash Provided by Financing Activities                                   50,561          248,911
                                                                                     ----------       ----------

Net decrease in cash                                                                   (147,246)         (90,130)

Effect of exchange rate on cash                                                              --            4,148

Cash, beginning of period                                                               147,246          311,596
                                                                                     ----------       ----------

Cash, end of period                                                                  $       (0)      $ 225,614
                                                                                     ==========       =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

        Interest paid during the period                                              $   17,982       $       --
                                                                                     ==========       ==========
        Income taxes paid during the period                                          $       --       $       --
                                                                                     ==========       ==========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
 AND FINANCING ACTIVITIES:

Shares issued in acquistion of HCD                                                   $       --       $1,017,139
                                                                                     ==========       ==========
Shares issued in acquistion of IP2M                                                  $       --       $  260,908
                                                                                     ==========       ==========
Conversion of Debt to Equity                                                         $   20,000       $       --
                                                                                     ==========       ==========
Dividends Payable Class E Preferred                                                  $   36,200       $       --
                                                                                     ==========       ==========


   The accompanying notes are an integral part of these financial statements.

                                      F-3
</TABLE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND CAPITALIZATION

IMX  Pharmaceuticals,  Inc.,  formerly IMX Corporation,  was organized under the
laws of the State of Utah on June 2, 1982.  The Company  changed its name to IMX
Pharmaceuticals, Inc. on June 30, 1997.

Dialog Group,  Inc., was incorporated under the laws of the State of Delaware on
October 4, 2002.  The  Company's  authorized  capital  stock  consisted of 1,000
shares with no par value.

On November 12, 2002, IMX  Pharmaceutical,  Inc. and Dialog Group,  Inc.  merged
into a single  Delaware  corporation  (the  "Company")  for the sole  purpose of
reincorporating IMX Pharmaceutical,  Inc. in Delaware. The name of the surviving
corporation is Dialog Group, Inc.

In conjunction with the merger,  the Company's  Certificate of Incorporation was
restated  to  increase  the total  number of shares of  capital  stock  that the
Company  has the  authority  to  issue  to  101,000,000.  The  total  number  of
authorized  shares of common stock,  $0.001 par value,  is  100,000,000  and the
total number of authorized preferred stock, $0.001 par value, is 1,000,000.  The
Board of Directors is authorized to establish the preferred stock in one or more
series and to fix the rights, preferences, privileges, and restrictions thereof,
including  dividend  rights,   conversion  rights,   voting  rights,   terms  of
redemption,  liquidation  preferences and the number of shares constituting each
series or the designation of such series.

On May 23, 2003,  the Company  further  increased  the total number of shares of
capital  stock of authorized  shares of $0.001 par value common stock  available
for issuance to 175,000,000 and the total number of authorized  $0.001 par value
preferred stock available for issuance to 1,500,000.

BUSINESS ACTIVITY

The Company,  which is  headquartered  in New York, NY, has offices in Valencia,
California;  Sunrise,  Florida; and Houston, Texas. The Company's two divisions,
Data  Dialog  and  Healthcare  Dialog,  provide  a  combination  of  traditional
advertising (print, broadcast) and marketing services (broadcast, new media, and
internet-based  promotional  venues); as well as a broad spectrum of proprietary
and  exclusive   databases   for   healthcare,   pharmaceutical,   consumer  and
business-to-business  market  clients.  The Company  owns  and/or has  exclusive
licensing rights to 75 Web sites, 9 databases, and 5 products.

Additionally,   the  Company   maintains   exclusive   contracts   with  leading
multi-national pharmaceutical companies to operate, maintain and provide content
for their consumer-directed Web sites.


                                      F-4
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


Both Dialog Group's divisions currently market its product and service offerings
through three branded,  business organizations.  The Healthcare Dialog division:
nFusion,  +Media,  and iData. The Data Dialog division:  Data Dialog  Marketing,
Data Dialog Digital and Mail Mogul.

ACCOUNTS RECEIVABLE

The Company conducts  business and extends credit based on the evaluation of its
customers' financial condition, generally without requiring collateral. Exposure
to losses on  receivables  is expected to vary by customer due to the  financial
condition of each  customer.  The Company  monitors  credit losses and maintains
allowances for anticipated losses considered  necessary under the circumstances.
Recoveries of accounts  previously  written off are  recognized as income in the
periods in which the recoveries are made.

REVENUE RECOGNITION

The Company  recognizes  revenues in accordance with SAB 101, which reflects the
basic  principles  of  revenue   recognition  in  existing   generally  accepted
accounting  principles.  Accordingly,  revenues are recognized  upon delivery of
goods,  services,  or licenses to customers.  Revenues  derived from the sale of
twelve-month  subscriptions  to the  Company's  mailing  lists are  deferred and
included in income on a monthly basis as revenues are earned.

WEBSITE DEVELOPMENT

The Company accounts for website development and maintenance costs in accordance
with the guidance of EITF 00-2  "Accounting for Website  Development  Costs" and
Statement of Position 98-1  "Software  Developed or Obtained for Internal  Use".
Costs incurred in the planning stage are expensed as incurred. Costs incurred in
connection  with the development  stage are  capitalized  during the application
development stage and amortized over a 3-year period.  Costs incurred during the
post-implementation  operation  stage,  and fees  incurred for web hosting,  are
expensed as incurred.

NET LOSS PER COMMON SHARE AND DILUTIVE SECURITIES

Earnings  (loss)  per share  are  computed  in  accordance  with  SFAS No.  128,
"Earnings  per Share".  Basic  earnings  per share is  computed by dividing  net
income, after deducting preferred stock dividends accumulated during the period,
by the weighted-average number of shares of common stock outstanding during each
period.  Diluted  earnings  per share is computed by dividing  net income by the
weighted-average  number of shares of common stock, common stock equivalents and
other potentially dilutive securities outstanding during the period.

The Company has convertible  preferred stock, options and warrants that were not
included  in the  computation  of  diluted  loss  per  share  because  they  are
anti-dilutive.


                                      F-5
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


In January  2003,  the FASB issued  Interpretations  No. 46,  "Consolidation  of
Variable  Interest  Entities".  FIN No. 46 addresses  consolidation  by business
enterprises of variable interest entities  (formerly special purpose entities or
"SPEs").  The Company does not have any variable interest entities as defined by
FIN No. 46.

In April 2003,  the FASB issued  Statement No. 149,  "Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities". This statement amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities  under  Statement  No.  133,   "Accounting  for  Derivatives
Instruments  and Hedging  Activities."  The  provisions  of this  statement  are
effective for all derivatives and hedging activities entered into after June 30,
2003. The Company does not participate in such  transactions,  and  accordingly,
adoption  of this  statement  did not have a  material  effect on the  Company's
financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2003,  the FASB issued  SFAS No. 150  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes   standards  on  the   classification  and  measurement  of  certain
instruments with  characteristics of both liabilities and equity. The provisions
of SFAS No. 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other  instruments  that exist as of the beginning
of the first interim  financial  reporting period beginning after June 15, 2003.
The Company does not have such  instruments,  and accordingly,  adoption of this
statement did not have a material effect on the Company's financial statements.

NOTE 1 - BASIS OF PRESENTATION

The condensed  consolidated  balance  sheet as of March 31, 2004,  the condensed
consolidated  statements of operations for the three months ended March 31, 2004
and 2003 and the condensed  consolidated  statements of cash flows for the three
months ended March 31, 2004 and 2003 are unaudited.  However,  in the opinion of
management,   all  adjustments  (which  include   reclassifications  and  normal
recurring  adjustments)  necessary  to present  fairly the  financial  position,
results  of  operations  and cash  flows at March  31,2004  and for all  periods
presented,  have been made. The results of operations for the three-month period
ended March 31, 2004 are not necessarily indicative of the operating results for
the full year.

These  condensed  consolidated  financial  statements and notes are presented in
accordance with rules and regulations of the Securities and Exchange Commission.
Certain   information  and  footnote   disclosures   normally  included  in  the
consolidated   financial  statements  prepared  in  accordance  with  accounting
principles  generally  accepted  in the  United  States  of  America  have  been
condensed  or  omitted.  It  is  suggested  that  these  condensed  consolidated
financial  statements be read in  conjunction  with the  Company's  consolidated
financial  statements and notes thereto  included in the Company's  December 31,
2003 Form  10-KSB,  and the  consolidated  financial  statements  of  Healthcare
Dialog, Inc. and Subsidiaries ("HCD") and the financial statements of IP2M, Inc.
("IP2M") (see Note 2), filed with the Company Form 8-K/A.


                                      F-6
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


PRINCIPLES OF CONSOLIDATION

The  condensed  consolidated  financial  statements  include the accounts of the
Company,  Dialog Group,  Inc.,  and its  wholly-owned  subsidiaries;  Healthcare
Dialog, Inc., IP2M, Inc., Mail Mogul, Inc., and Data Dialog, Inc. All
significant intercompany  balances and transactions have been eliminated in
consolidation.

REPORTING PERIOD

As further  explained in Note 2, the  acquisition of HCD effective March 1, 2003
was accounted for as a reverse acquisition.  HCD was deemed to be the accounting
acquirer  and the  Company  was  deemed  the legal  acquirer.  The  accompanying
condensed consolidated financial statements for the three months ended March 31,
2004 depict the results of operations  and cash flows of HCD,MMI , IP2M, and DGI
for the three months ended March 31, 2004 and the results of operations and cash
flows  of  HCD  DGI, MMI,and IP2M from March 1, 2003,  (effective  date  of  the
acquisition)  to  March  31,  2003.  The  accompanying   condensed  consolidated
financial  statements  for the three  months  ended  March 31,  2003  depict the
results of operations and cash flows of HCD, MMI, IP2M, and DGI.

NOTE 2 - ACQUISITIONS

ACQUISITION OF HCD

On  November 6, 2002,  the Company  entered  into an  Agreement  for Merger (the
"Agreement")  with HCD. On February 27, 2003,  the Agreement was amended and the
merger was consummated. It became effective on March 1, 2003.

The  consideration  paid  by  the  Company  for  the  acquisition  consisted  of
30,075,219  shares  of the  Company's  common  stock and  183,235  shares of the
Company's  Class B-1 preferred  stock.  The  agreement  called for an additional
$1,650,000 in financing.  One of the Company's major  shareholders had agreed to
assure that at least  $650,000 will be raised and had agreed to post  negotiable
collateral  against its  obligation  to purchase up to  3,513,514  shares of the
Company's  common stock.  The parties  subsequently  canceled the  shareholder's
guarantee  that  $650,000  will be raised and its  obligation  to purchase up to
$3,513,514  shares of the Company's  common stock.  In return,  the  shareholder
returned to the Company  3,500,000 of the company's  common stock that it owned.
The 3,500,000  shares were  accounted for as a reduction of the purchase  price,
resulting  in net  shares  of common  stock of  26,575,219  issued  to HCD.  The
consideration also included $76,958 of estimated transactions costs.


                                      F-7
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


Of the  approximately  70,203,000  shares of common stock  outstanding after the
consummation  of both  transactions  (giving  effect  to the  conversion  of the
preferred stock),  HCD controlled 48.45% of the combined entity,  DGI controlled
40.29% of the combined entity,  with IP2M controlling the remaining  11.26%.  In
addition, HCD currently controls the Board of Directors, with two of the current
four  members  being  former  officers of HCD.  As a result,  HCD was deemed the
accounting  acquirer and the  acquisition  of HCD was accounted for as a reverse
acquisition.

The  following  set forth the  consideration  paid by the Company,  which may be
subject to certain adjustments:

       Restricted common shares (26,575,219 at $0.03 per share)         $797,257
       Restricted preferred shares (183,235 at $1.20 per share)          219,882
       Estimated transaction costs                                        76,958
                                                                     -----------
         Total Purchase Price                                        $ 1,094,097
                                                                     ===========

For purpose of determining  the price of the common stock,  management  believed
that the best  reference  is the price of recent sales of the  Company's  common
stock.  During the month of March 2003,  the  Company  sold shares of its common
stock in reliance of Regulation S to foreign investors at $0.06 per share. Since
the shares issued in this acquisition were not sold in reliance of Regulation S,
which is less  restrictive,  and there are additional  restrictions,  management
believed that an  additional  discount of 50% should be applied to the $0.06 per
share, resulting in a price of $0.03 per share.

Similarly,  since each preferred  share is convertible  into 40 shares of common
stock,  management  believed  that the  preferred  shares should be valued at 40
times $0.03, or $1.20 per share.

NOTE 2 - ACQUISITIONS (CONTINUED)

ACQUISITION OF HCD (CONTINUED)

The following table set forth the  preliminary  allocation of the purchase price
to DGI's tangible and intangible  assets acquired and liabilities  assumed as of
December 31, 2002:

       Cash                                                          $   54,111
       Accounts receivable                                              461,099
       Inventory                                                         12,858
       Prepaid expenses and other current assets                        256,289
       Property and equipment                                           128,300
       Other receivable                                                 100,000
       Other assets                                                      15,457
       Goodwill                                                       3,820,664
       Accounts payable and accrued expenses                         (2,581,957)
       Deferred revenue                                                (405,442)
       Other current liabilities                                       (227,039)
       Short term debt                                                 (540,243)
                                                                     ----------
          Total                                                      $1,094,097
                                                                     ==========


                                      F-8
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)

ACQUISITION OF IP2M

On November 23, 2002,  the Company  entered into a Letter of Intent  relative to
its proposed  acquisition  of IP2M. On February 24, 2003,  the  acquisition  was
finalized and the merger was consummated. It became effective on March 1, 2003.

The consideration paid by the Company for the acquisition consisted of 6,191,029
shares of the Company's  common stock and 44,312 shares of the Company Class B-1
preferred stock. In addition, the agreement provided for IP2M to receive 589,710
shares of common  stock and 3,593  shares  of  preferred  stock  subject  to the
Company acquiring the outstanding  shares of Healthcare  Horizons,  Inc. and the
assets of  Azimuth  Target  Marketing,  Inc.  On April  18,  2003,  the  Company
completed  the two  acquisitions  (See Note 9) and the  additional  shares  were
issued to the IP2M's  shareholders.  In  addition,  IP2M's  shareholders  may be
issued  approximately  700,000  shares of the Company's  common stock if certain
financial goals are met. The  consideration  also included  $69,274 of estimated
transactions costs

The  following  set forth the  consideration  paid by the Company,  which may be
subject to certain adjustments:

       Restricted common shares (6,780,739 at $0.03 per share)        $ 203,422
       Restricted preferred shares (47,905 at $1.20 per share)           57,486
       Estimated transaction costs                                       69,274
                                                                      ---------
         Total Purchase Price                                         $ 330,182
                                                                      =========


NOTE 2 - ACQUISITIONS (CONTINUED)

ACQUISITION OF IP2M (CONTINUED)

The prices of the common shares and preferred  shares issued in this acquisition
were determined as described in the acquisition of HCD.

The following table set forth the  preliminary  allocation of the purchase price
of IP2M's tangible and intangible assets acquired and liabilities  assumed as of
December 31, 2002:

       Cash                                                          $    7,014
       Accounts receivable                                               61,973
       Prepaid expenses and other current assets                         94,230
       Property and equipment                                            72,653
       Goodwill                                                         654,224
       Accounts payable and accrued expenses                            (52,319)
       Deferred revenue                                                (394,646)
       Short term debt                                                 (103,530)
       Long-term debt                                                    (9,417)
                                                                     ----------
          Total                                                      $  330,182
                                                                     ==========


                                      F-9
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)

PRO-FORMA RESULTS OF OPERATIONS

The following set forth the Company's results of operations for the three months
ended March 31, 2004 with comparitive results of operations for the 3 months
ending March 31, 2003, as if the acquisitions of HCD and IP2M had taken place
at the beginnning of 2003. The 2004 amounts include the results of operations
for all entities excluding Data Dialog, Inc. The 2003 proforma amounts have
been restated to include only the remaining entities.



                                           Three Months       Three Months
                                              Ending             Ending
                                          March 31, 2004     March 31, 2003
                                          --------------     --------------
REVENUE                                      1,747,554          1,929,333

COST OF SALES                                  887,427          1,172,612

GROSS  PROFIT                                  860,127            756,721

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

OPERATING EXPENSES:

Selling, General and Administrative Expense    996,054          1,080,836

TOTAL OPERATING EXPENSE                        996,054          1,080,836
---------------------------------------------------------------------------

INCOME (LOSS) FROM OPERATION                  (135,927)          (324,115)
---------------------------------------------------------------------------

Other Income (Expenses):

Interest expenses                              (18,504)          (106,344)
Othr expense                                         -                 --
Other income                                    92,264                252

Total other income (expenses)                   73,760           (106,092)
---------------------------------------------------------------------------

Profit/Loss from continuing operations         (62,167)          (430,207)
---------------------------------------------------------------------------

Discontinued Operations                              0           (177,876)
---------------------------------------------------------------------------

Net Profit/Loss                                (62,167)          (608,083)
===========================================================================



                                      F-10
<PAGE>


                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


NOTE 3 - GOING CONCERN CONSIDERATIONS

The accompanying condensed consolidated financial statements have been presented
assuming the continuity of the Company as a going concern.  However, the Company
has incurred substantial losses resulting in an accumulated deficit of$7,893,166
as of March 31, 2004 These conditions raise  substantial doubt as to the ability
of the Company to continue as a going concern.

Management's plans with regards to this issue are as follows:

LIQUIDITY

o     The Company is continuing  the sale of its equity  securities,  as further
      discussed in Note 9. During the first quarter of 2004,  the Company raised
      approximately   $35,000  in  such   activities   The   Company   converted
      approximately $20,000 of accrued expenses to equity.

PROFITABILITY

The Company  intends to develop new and increased  revenues and gross margins in
all areas of operations. Specifically, the Company intends to:


o     Restructure  its  sales  organization  to allow for more  effective  sales
      processes.   These  steps  include,  among  others,   consolidating  sales
      operations  for  subscription  sales in  offices  in  Florida,  as well as
      expansion of sales organization.

o     Reduce   expenses   through  office   consolidation   and  improved  labor
      utilization.

o     Enter into  strategic  relationships  with data suppliers that will return
      higher levels of match rate with a better quality of data.

o     Reduce operating costs through improved procurement procedures.

Presently,  the Company cannot  ascertain the eventual  success of  management's
plans with any degree of  certainty.  The  accompanying  condensed  consolidated
financial  statements do not include any adjustments  that might result from the
eventual outcome of the risks and uncertainty described above.

NOTE 4 - LOANS AND NOTES PAYABLE

Loans and notes payable consisted of the following as of March 31, 2004


                                      F-11
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


Convertible  notes in the  aggregate  amount of  $100,000  due to
three former IP2M note holders assumed by the Company.  The notes
are due August 31, 2004.  The notes bear  interest at the rate of
10% per  annum.  The notes  are  convertible  into  shares of the
Company's  common  stock.  The number of shares to be issued upon
conversion  will be  determined  by the  closing bid price of the
Company's common stock on the date of conversion.  Each holder is
entitled to convert up to 25% of the initial  balance of the note
(including accrued interest) each month.                                100,000


$115,000  revolving  credits  agreement  with a  commercial  bank
renewable  every year until October 13, 2004.  The line of credit
bears  interest  at prime  plus 2% per  annum  and is  personally
guaranteed by one of the Company's shareholders.                        104,500

Small  business loan assumed upon the purchase of Azimuth  Target
Marketing.  The loan  bears  interest  at prime  plus 2 1/4 % per
annum, due in equal installments over 36 months,  maturing during
2004.                                                                     7,794

Line of credit  agreement  with Dell  Financial  Corporation  for
equipment  purchase.  The agreement provides for monthly payments
of $414.                                                                  8,966

Total loans and notes payable                                           221,260

Less: Current maturities                                               (221,260)
                                                                      ---------

Long Tem Debt                                                          $      0
                                                                      =========


                              F-12
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


NOTE 5 - EQUITY

SHARES ISSUED IN ACQUISITION OF HCD

As  discussed in Note 2, during the quarter  ended March 31,  2003,  the Company
issued net shares of common stock of 26,575,219 in the HCD acquisition valued at
$0.03 per share and 183,235 shares of preferred stock valued at $1.20 per share.

SHARES ISSUED IN ACQUISTION OF IP2M

As  discussed in Note 2, during the quarter  ended March 31,  2003,  the Company
issued  6,780,739  shares of common  stock in the  acquisition  of IP2M value at
$0.03 per share and 47,905 shares of preferred stock valued at $1.20 per share.

ISSUANCE OF COMMON STOCK TO FORMER HDC SHAREHOLDERS

During the quarter ended March 31, 2003, an aggregate number of 1,238,599 shares
of the Company's common stock were issued to former HCD shareholders for certain
services  provided to the Company.  These shares were issued at $0.03 per share,
which was the value of the shares issued in the acquisition of HCD.

ISSUANCE OF COMMON STOCK AND WARRANTS IN CONNECTION WITH BRIDGE LOAN

As discussed in Note 4, in connection  with the bridge loan,  the Company issued
1,100,000  shares of common stock and warrants to issue 350,000 shares of common
stock to the lender,  in lieu of  origination  fee and interest on the loan. The
shares and warrants were valued at $36,500,  based on their fair value, and this
amount was charged to interest expense.


                                      F-13
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


DEBT CONVERSION

During the quarter ended March 31, 2003, Carter Barnard converted  $2,354,815 of
debt into 9,274,280 shares of the Company's common stock,  immediately  prior to
the  acquisition  of HCD and  IP2M.  This  conversion  was  accounted  for as of
December 31, 2002. During the first quarter of 2004 an additional $20,000 in
debt was converted to Class E Preferred Stock.

CONVERSION OF PREFERRED STOCK INTO COMMON STOCK

During the quarter ended March 31, 2003, 151,060 shares of the Company's Class B
preferred  stock were converted into  6,042,400  shares of the Company's  common
stock. During the first quarter of 2004, two former TDMI shareholders converted
1,193 shares of Class B Preferred Stock into 47,720 shares of Common Stock.


NOTE 6 - RELATED PARTY TRANSACTIONS

RENT FROM RELATED PARTIES

The  Company  leases  an  apartment  from  a  company  controlled  by two of its
shareholders and executives. Rent expense paid to these related parties amounted
to $11,400 during the quarter ended March 31,2004.



                                      F-14
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)

NOTE 7 - SEGMENT DISCLOUSURES

The Company's reportable operating segments are categorized in three components:
(1) Healthcare; which includes Healthcare Dialog, Inc., and IP2M, Inc., (2)
Data; which includes Mail Mogul, Inc., and Data Dialog, Inc., (3) Corporate
which is Dialog Group, Inc.

         HEALTHCARE

         Healthcare  Dialog  designs,  develops  and  distributes  products  and
         services that  automate and  streamline  direct  marketing and customer
         relationship management processes to the healthcare industry.

         IP2M provides,  maintains and delivers healthcare  information over the
internet and television.

         DATA

         Mail  Mogul is an online  market  place  for  sellers  of direct  mail,
         providing leads, website applications,  mailing lists, mailing supplies
         as well as other products and services.

         Data Dialog  provides online  marketing list,  direct mail programs and
         creates target lists for specific direct marketing categories for small
         to medium sized businesses.

The company  allocates  the costs of revenues and direct  operating  expenses to
these segments.

<TABLE>
<CAPTION>

Quarter ending March 31, 2004

Proforma                                                                                         Consolidated
                                                       DGI        Healthcare          Data          Totals
                                                       ---        ----------          ----          ------
<S>                                                                 <C>            <C>           <C>
REVENUE                                                  --         933,816.51     813,737.24    1,747,553.75

COST OF SALES

                                                         --         423,817.79      438,109.03       861,926.82

GROSS PROFIT

                                                         --         509,998.72      375,628.21       885,626.93

OPERATING EXPENSES:
Selling, General and Administrative Expenses        605,242.99      199,146.63      217,164.38     1,021,554.00


TOTAL OPERATING EXPENSE                             605,242.99      199,146.63      217,164.38     1,021,554.00

INCOME (LOSS) FROM OPERATION                       (605,242.99)     310,852.09      158,463.83      (135,927.07)

Other Income (Expenses):

Interest expenses                                   (10,336.38)      (8,167.53)          --          (18,503.91)
Other expenses                                           --              --              --               --

Other income                                         92,263.63           --              --           92,263.63


Total other income (expenses)                        81,927.25       (8,167.53)          --           73,759.72

INCOME/(LOSS) FROM CONTINUING OPERATIONS           (523,315.74)     302,684.56      158,463.83       (62,167.35)

</TABLE>


                                      F-15
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


Quarter ended March 31, 2003(Pro-Forma)

<TABLE>
<CAPTION>
                                                  DGI        Healthcare        Data           Total
                                              ----------     ----------     ----------     ----------
<S>                                           <C>             <C>              <C>          <C>
REVENUE                                                       1,304,510        624,823      1,929,333

COST OF SALES                                                   759,270        413,342      1,172,612

GROSS  PROFIT                                          0        545,240        211,481        756,721

OPERATING EXPENSES:

Selling and marketing                                            20,441          5,976         26,417
Advertising                                                                                         0
Salaries and wages                                69,074        228,674        129,810        427,558
Depreciation and amortization                                    18,374                        18,374
Loss on goodwill impairment                                                                         0
Loss on fixed assets impairment                                                                     0
Other general and administrative expense         328,930        229,596         49,961        608,487

TOTAL OPERATING EXPENSE                          398,004        497,085        185,747      1,080,836

INCOME (LOSS) FROM OPERATION                    (398,004)        48,155         25,734       (324,115)

OTHER INCOME (EXPENSES)

Interest income                                      250              2                           252
Interest expense                                 (48,333)       (58,011)             0       (106,344)
Gain on debt settlements                                                                            0
Net loss on sale of fixed assets                                                                    0
Foreign currency transactions loss                                                                  0
(Other expense)                                                                                     0
Other income                                                                                        0
                                                                                                    0
TOTAL OTHER INCOME (EXPENSES)                    (48,083)       (58,009)             0       (106,092)
                                                                                                    0
INCOME/(LOSS) FROM CONTINUING OPERATIONS        (446,087)        (9,854)        25,734       (430,207)
                                                                                                    0
Income (loss) from discontinued operations                       (2,963)      (174,913)      (177,876)
                                                                                                    0
NET INCOME/(LOSS)                               (446,087)       (12,817)      (149,179)      (608,083)
                                                                                                    0
                                                                                                    0
</TABLE>


                                      F-16
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


STOCK OPTIONS

Effective  January 1, 2003, the Company  adopted the  recognition  provisions of
SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure.  Prior to 2002,  the Company  accounted  for employee  stock options
using the  provisions of APB No. 25  "Accounting  for Stock Issued to Employees"
and related  interpretations.  During the quarter ended March 31, 2004,  200,000
stock options were granted to employees,  non-employee  directors,  officers and
consultants. 97,565 of these options vested during the quarter.

Stock options activity for the 1st quarter 2004  is as follows:

                                                  Number       Weighted Average
                                                 Of Shares      Exercise Price
                                                 ---------     ----------------
Balance, December 31, 2003                       1,737,448           $0.25
Options Granted                                    200,000           $0.05
Options Forfeited                                        0               0
Options Expired                                          0               0
Options Excerised                                        0               0
Options outstanding, March 31, 2004              1,937,488           $0.17


LITIGATION

SUPPLIERS

During  July  of  2003,   Axciom   Corporation   commenced  an  action   against
ThinkDirectMarketing,  Inc., a  discontinued  subsidiary.  The  complaint  seeks
$400,000 on a note payable,  and $295,415 for unpaid data usage,  and $1,250,000
for unused minimum usage  requirements for 2003 and 2004. The debts, if any, are
those of the  discontinued  entity  however  an amount  for legal  fees has been
accrued  to  contest  any claim for  charges  made  against  the  Company.  This
litigation  is still in the  preliminary  stages and no other  amounts have been
accrued.

In June of 2003, a Company vendor commenced an action against Healthcare Dialog,
Inc, a  subsidiary.  The  complaint  seeks  $85,076 for  printing  services  and
attorney's  fees. The Company has accrued an amount for which it believes that a
settlement will be reached.


                                      F-17
<PAGE>

                       DIALOG GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (Unaudited)


In December  2003,  the Company was named in a suit with Chrisom,  Inc. Prior to
the  Company's  acquisition  of  Healthcare  Horizon,  a judgment was awarded to
Chrisom.  The  amount is  accrued  in the  financial  statements  of  Healthcare
Horizon, Inc.

A Healthcare  Horizons,  Inc., a discontinued  subsideray vendor filed an action
against the subsidiary  claiming unpaid invoices of approximately  $54,000.  The
Company is working  directly  with the vendor's  lawyers to resolve this matter.
The full amount is accrued in the financial  statements of Healthcare  Horizons,
Inc.

An action was filed against the Company by Wells Fargo Financial  Leasing,  Inc.
for non payment of equipment lease commitments made by Healthcare  Dialog,  Inc.
Subsequent  to year end, a settlement  was reached and the  agreement is pending
execution  by both  parties.  The  amount  is  fully  accrued  in the  financial
statements.


EMPLOYEES

In April 2003,  Dialog Group  received a summons from a Colorado  State District
Court seeking to enforce a former employee's termination agreement. A settlement
agreement  was  reached for  $47,330.  TDMI,  a  discontinued  subsidiary,  made
payments of  approximately  $33,000  during 2003.  The balance is accrued in the
Company's financial statements

In April 2003, two former employees commenced arbitration proceeding against the
Company relating to their termination of employment.  The employees seek damages
totaling $375,789. TDMI, a discontinued subsidiary, has accrued $147,000 against
this potential liability and is contesting both claims. This potential liability
is relieved through the disposition of the subsidiary.

During December 2001, a shareholder,  who was also a former employee of P.V.D. &
Partners,  Inc., filed a complaint to recover unpaid salary and expenses,  which
the  employee  claimed  were owed and  attempted  to exchange  shares of PVD for
shares of  Healthcare  Dialog,  a  subsidiary.  An agreement was reached and the
settlement has been accrued by the Company.

The Company has reached a possible  settlement with a former employee for claims
against it under an employment contract. Settlement documents have been prepared
awaiting execution.  The Company accrued for a liability sufficient to cover the
settlement.



                                      F-18

<PAGE>

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

GENERAL

      During 2003, Dialog Group acquired  Healthcare Dialog, Inc. and IP2M, Inc.
During the fourth quarter of that year, it shut down  operations of Think Direct
Marketing  because of the failure of its  operating  platform and the quality of
its data.  The new operating  platform,  utilizing  superior  data sources,  was
launched as of December 1, 2003.  It is operated by Dialog  Group's  Data Dialog
subsidiary.

      At the end of the fiscal year,  ThinkDirectMarketing,  Inc and  Healthcare
Horizons  were sold to an unrelated  party.  In addition,  Software  Dialog plc,
which  distributed  the Panda  anti-virus  software in England,  was sold to its
managers and a group of English investors.

      Dialog  Group's  consolidated   operations  reflected  in  this  quarter's
financial statements include only both its remaining divisions. The consolidated
results of operations  for the quarters  ended March 31, 2004 and 2003 are being
presented on a pro-forma  basis,  which  includes the results of  operations  of
Dialog  Group  and its  subsidiaries.  These  reports  exclude  the  results  of
operations for the two  subsidiaries  which were sold before the end of the last
fiscal year.  Management  believes these  comparative  results of operations are
more meaningful  then the actual results of operations  that include  operations
from the date of acquisition only for the accounting acquirees and would include
the results of discontinued  operations.  Dialog Group's  consolidated result of
operations  and  consolidated  balance sheet for both 2003 and 2004 include only
remaining units.

DESCRIPTION OF THE DIVISIONS

      Dialog Group, Inc. (DLGG) is a publicly traded corporation,  headquartered
at 257 Park Avenue  South,  12 Floor New York,  New York 10010,  with offices in
Valencia,  California;  Sunrise,  Florida; and Houston, Texas. The company's two
divisions,   Data  Dialog  and  Healthcare  Dialog,  provide  a  combination  of
traditional  advertising (print,  broadcast) and marketing services  (broadcast,
new media, and internet-based  promotional  venues); as well as a broad spectrum
of proprietary and exclusive databases for healthcare, pharmaceutical,  consumer
and  business-to-business  market clients. The company owns and/or has exclusive
licensing rights to 75 Web sites, 9 databases, and 5 products.

      Additionally,  Dialog Group  maintains  exclusive  contracts  with leading
multi-national  pharmaceutical  companies  to  operate,  maintain,  and  provide
content for their consumer-directed Web sites.

      Both Dialog  Group's  divisions  currently  market its product and service
offerings through three branded,  business organizations.  The Healthcare Dialog
division:  nFusion,  +Media,  and iData. The Data Dialog  Division:  Data Dialog
Marketing, Data Dialog Digital and Mail Mogul.


<PAGE>

      HEALTHCARE DIALOG DIVISION

      NFUSION delivers  advertising,  relationship  marketing and communications
services to the  healthcare  industry.  Clients use its  strategic  and creative
services  to  build   comprehensive   programs  for  healthcare   professionals,
consumers,  and  sales  representatives.   These  include,   training  materials
development,  patient and professional  education  materials  distribution,  and
targeted  direct  mail and  advertising  campaigns.  Clients  rely on  nFusion's
interactive services to produce sophisticated promotional Web sites, educational
Web sites,  interactive training and educational CD-ROMs,  Internet advertising,
e-mail campaigns, and proprietary marketing programs.

      +MEDIA'S platform  provides,  maintains,  and delivers  healthcare content
across a national network of local TV and radio station Web sites. The content -
over 15,000 text articles attracts millions of health information seekers to the
broadcast  stations' Web sites for a combined US household  penetration  of 80%.
Here, client public relations, promotional, and educational material are blended
into a seamless  presentation  for maximum  viewer  impact.  To maintain  repeat
traffic, all features are refreshed daily.

      IDATA  uses   proprietary   technologies   to  support   health  care  and
pharmaceutical  clients  in  their  direct  marketing  efforts,  clinical  trial
recruitment,  and  consumer/patient  market research  efforts.  It offers unique
healthcare data on over 1.2 million households, and serves as the foundation for
the  highly  targeted  and  efficient   communication  plans  of  pharmaceutical
companies,  retailers,  and other  healthcare  companies.  Its exclusive data is
compiled  from  respondents  who  agree to  telephone  interviews.  The  primary
function  of this  business  unit is to  identify  patient/consumer  targets and
enhance patient/consumer databases.  Working with +Media, iData also offers data
gathering programs over the Internet.

      DATA DIALOG DIVISION

      DATA  DIALOG  MARKETING  serves the direct  marketing  needs of small- and
medium-sized  businesses  with  systems  and tools that  generate  business  and
consumer prospect leads,  data services,  and streamline  business  processes by
integrating  the  collection and  distribution  of data.  Data Dialog  Marketing
offers  a host of  data-related  services,  such as  targeted  marketing  lists,
turnkey direct mail programs,  and  data-cleansing  to multiple  market segments
including insurance, financial planning, real estate, auto dealerships and other
segments  that are users of direct  mail and  prospect  marketing.  Data  Dialog
Marketing  also offers a unique  subscription-based  product  featuring  limited
selections of  high-quality  data  specifically  designed for the small business
segment.  The unit markets a proprietary  online list creation tool, Data Dialog
Select.

      DATA  DIALOG  DIGITAL  is  a  customer  data   integration   product  that
automatically  appends names and addresses to telephone numbers on calls made by
consumer and business  customers to telephone call centers.  Data Dialog Digital
primarily  markets its  products to  telephone  bureaus  operating  in-bound and
blended  call  centers with 5 to 500 seats.  This  represents  more than 100,000
sites worldwide.  Data Dialog Digital  currently has contracts and sub-contracts
with 27 businesses in this market  segment and an additional 20 agreements  with

<PAGE>

resellers  which  service  this  market.  The real time  format  of this  unit's
products gives customers instant access to data, and speeds up their promotional
efforts and improves customer service.

      MAIL MOGUL brings  one-stop  shopping to the small- to  medium-sized  mail
shop industry.  Its "Hot Leads"  product is this market's first online  commerce
center to link  customers  who need  direct  mail job quotes with mail shops and
direct marketing service organizations with letter-shop capabilities. Mail Mogul
helps   mail   shops   improve   their   business    opportunities   through   a
total-business-solutions approach.

RESULTS OF OPERATIONS

      Dialog Group

      Revenues  for the quarter  ended March 31, 2004 were  $1,945,000  compared
with  $1,929,000  for the quarter ended March 31, 2003.  Sales were split almost
evenly between the two groups:  the Healthcare Dialog division accounted for 48%
of sales  for the  first  quarter  while the Data  Dialog  division  made up the
remaining 52%. Data sales  constituted a greater portion of total revenue in the
first  quarter of 2004 than in 2003.  Sales from the data  businesses  including
sales of data to  healthcare  clients will  continue to make up an  increasingly
greater percentage of total revenue for the balance of 2004 and in the future.

      Costs of Revenues for the quarter ended March 31, 2004 were $940,000, just
over 48% of sales, compared with $1,173,000 or approximately 60% of sales in the
quarter ended March 31, 2003.  Management's continuing efforts to reduce Cost of
Revenue  began to reach  fruition in this quarter and were the most  significant
factor  in  the  overall   improvement  in  the   performance  of  the  company.
Relationships with new data suppliers and the utilization of company data assets
rather than  relying on  external  sources  will  continue to drive down Cost of
Revenue in the  quarters  ahead.  The  sources of the revenue and costs for each
division are discussed below.

      Operating  Expenses  for the quarter  ended March 31, 2004 was  $1,391,000
compared with  $1,081,000  for the quarter  ended March 31, 2003.  The company's
efforts  to  invest  in  additional  sales  staff  that  is  traditionally  less
productive  in  generating  sales during their  initial  employment  period,  an
investment  in an online data  delivery  platform,  expenses  associated  with a
public  company and an  increase  in  depreciation  and  amortization  make up a
majority of the increase in operating expenses.

      Losses from  Operations were $310,000 for the quarter ended March 31, 2004
compared with $430,000 for the quarter ended March 31, 2003 and  improvement  of
$100,000

      Net Other Income was $94,000 for the quarter ended March 31, 2004 compared
with ($106,000) for the quarter ended March 31, 2003 an improvement of $177,000.
The  company's  other  income  for  this  year  included  interest  expenses  of
approximately  $18,000 and income of $94,000  arising  primarily  from review of
accrued expenses and adjustment to current estimates.

      All of the other income for 2003 was interest expense.



<PAGE>

      The Net Loss for the quarter  ended March 31, 2004 was  $310,000  compared
with $430,000 in the quarter ended March 31, 2003,  representing  an improvement
of $131,000 from the same quarter a year ago.

      Healthcare Dialog Division

      For  the  three  months  ended  March  31,  2004,  the  Healthcare  Dialog
division's total consolidated  revenues were approximately  $934,000 as compared
to approximately $1,305,000 for the same period ended March 31, 2003, a decrease
of about  $400,000 or about 30%. The entire  decline in sales in the  Healthcare
division is attributable to the +Media platform.  In the second half of 2003 the
organization  responsible for sales of +Media was moved from Houston to New York
City in a effort  to be  closer  to  healthcare  advertising  agencies  that are
responsible  for  purchasing  internet   advertising  for  large  pharmaceutical
companies. As expected, the move had a negative impact on local Houston clients.
Management  believes  this decline in sales is temporary and expects the current
strategy  to yield more  revenue  than in the past once the  efforts to increase
profitable online inventory bear fruit.

      Sales in NFUSION  were  constant  from the same  period a year ago.  While
management does not expect sales to decline from NFUSION,  resources that in the
past were devoted to NFUSION are being diverted to other businesses.

      The remaining healthcare segment,  IDATA, had its first international data
sale in the first quarter of 2004  capitalizing on the growing trend of citizens
of the United States  filling  medical  prescriptions  from Canadian  companies.
Management  expects  this  relationship  to yield  significant  sales during the
balance of 2004.  In addition  during the first quarter of 2004  groundwork  was
laid to launch the syndicated telephone healthcare survey later in the year.

      The division's  Costs of Revenue were $424,000 for the quarter ended March
31, 2004;  representing 45% of revenue compared with $759,000 and 57% of revenue
for the quarter  ended March 31,  2003.  This  reduction in Cost of Revenues was
$333,000.  The Cost of  Revenue  improvement  as a  percentage  of  revenue  was
effected by several  factors.  Management  believed the +MEDIA cost of inventory
associated  with almost one thousand  radio  station web sites made in difficult
for this platform to produce sales at an acceptable gross profit rate and in the
forth quarter of 2003 discontinued the relationship with the media  organization
which owns the radio  stations.  The current  strategy is to capitalizing on the
more profitable TV station web site  relationships  and to find  alternative web
inventory which fits into the overall healthcare  marketing plan while providing
+MEDIA the margins budgeted for.

      The Healthcare dialog  Division's  consolidated  Total Operating  Expenses
were  approximately  $199,000 for the three  months  ended March 31, 2004.  This
compares  favorably  with the  approximately  $497,000 for the same period ended
March 31, 2003.  Expenses as a percentage  of sales in the first quarter of 2004
were 20%  compared to  approximately  25% for the same period a year ago. In the
first quarter of 2003  Healthcare  expenses  included the salaries of executives
that in the first  quarter of 2004 were charged to Dialog  Group  directly and a
reduction in the overall number of employees.  In addition,  Healthcare  rent in
the first quarter of 2004 was reduced from 2003 as a result of the relocation of
the Houston  office and the expense  related to the rent for offices in New York
City being shared with Dialog Group.


<PAGE>

      For the three months ended March 31, 2004,  this  division's  consolidated
Net Income from  Operations  was  approximately  $311,000.  This  represents  an
improvement  from net losses of about  $25,000 in the  period  ending  March 31,
2003, an improvement of $336,000. Despite a decrease in sales, this division was
able to improve Net Income  from  Operations  as a result of a reduction  in the
Cost of Revenue and a reduction in actual expenses  including a reduction in the
number of  employees,  coupled  with  expenses  being moved to  corporate  and a
decrease in depreciation.

      Data Dialog Division:

      The analysis of the Data Dialog  Division focus on the business  remaining
after the sale of TDMI:  Mail  Mogul for the both 2004 and 2003 and Data  Dialog
2004 only.

      Mail Mogul's  revenues  were $814,000 for the quarter ended March 31, 2004
compared  with $625,000 for the same period ended March 31, 2003, an increase of
about $190,000 or 30%. Sales in this business unit continued strong into the New
Year.  The company's  efforts to increase sales of data in its mail shop channel
proved  successful.  Mailing  List sales  nearly  doubled  in the first  quarter
compared to the same period a year ago.  Improved  results were primarily due to
additional  sales staff,  new customer  acquisitions,  and the growth of current
customer purchases resulting from increased marketing efforts.  For the quarter,
as a result of the increase in data sales,  ancillary  services  offered by Mail
Mogul  to its  customers,  such as  National  Change  of  Address  (NCOA),  also
increased.  During the first  quarter  of 2004 Mail  Mogul's  "Hot  Lead"  sales
remained  constant from a year ago.  Sale of  consumables  decreased  during the
quarter as a result of the company's  conscious decision not to support this low
margin  category and the  investment  of cash from this  category  into the data
potion of the business.


      Data Dialog had sales of $198,000 for the first quarter of 2004. Specialty
List sales provided the greatest proportion of the revenue from Data Dialog with
sales of the company's  subscription products making up the balance of direct to
the end user category.  This division's  Digital Data Dialog call center reverse
append  product was the second  largest  revenue  producer for the quarter.  The
company entered into two new call center client agreements with full application
rollout  impacting  sales  expected in May 2004.  In addition,  an agreement was
completed with a current client to expand the scope of the  relationship  from a
basic data reseller to a strategic partner relationship. The client will develop
the grammar tables for Data Dialog's  Digital  product to enable real time voice
response systems.  Digital will be the exclusive reverse append offering for the
clients new mid-tier modular voice enabled customer service products.

      Mail Mogul's  Costs of Revenue were  $438,000 for the quarter  ended March
31,  2004,  representing  52.5% of revenue  compared  with  $413,000  and 66% of
revenue for the quarter  ended March 31,  2003.  The mix of the business was the
major reason for the reduction in the Cost of Revenues percent for Mail Mogul in
the first quarter. Sales of consumables were down from a year ago while sales of
higher  margin  data and  overall  sales were up from the same  period.  Cost of
Revenue  dollars were up from the first  quarter of 2003 by $14,000  while sales
were up $190,000.


<PAGE>

      Data  Dialog's  Costs of Revenue  for the first  three  months of 2004 was
$53,000 some 65% of sales.  As sales  continue to improve in the quarters  ahead
Cost of Revenue should  improve as a result of fixed  expenses  relating to data
acquisition and Internet marketing.

      Mail Mogul's Operating  Expenses were $217,000 for the quarter ended March
31, 2004 compared  with  $186,000 for the quarter ended March 31, 2003.  Some of
the factors contributing to the increase were the increased rent associated with
the larger  offices the company  leases this year than it did a year ago and the
investment   in   additional   sales  staff  that  have  yet  to  reach  maximum
productivity.

      Data  Dialog's  Operating  Expenses for the three month period ended March
31, 2004 were $395,000  Payroll  related expense made up almost $200,000 of this
figure.  Initial  investments  in new sales  staff and the cost of the  existing
sales group made up the single greatest expense.

      Mail Mogul's Net Income from  Operations  for the quarter  ended March 31,
2004 was $160,000 compared with $26,000 for the same quarter in 2003. Mail Mogul
was able to convert 70% of the $190,000 sales increase from the first quarter of
last year into a Net Income  improvement  of $132,000  for the same period 2004.
Changes  in the mix of sales to more  profitable  data sales  while  consumables
sales were off from a year ago,  coupled with sourcing  data at more  advantages
pricing, were the primary factors contributing to this performance.

      Data Dialog's Net Loss from  Operations was $250,000 for the first quarter
of 2004. Investments made in sales staff and an online platform requires a sales
level  above that  reached  during the first  quarter in order for this group to
show a profit.  Management is budgeting for profitable sale from Dialog Group in
the later quarters of 2004.

      Mail Mogul's Net Profit for the quarter ended March 31, 2004 was $$160,400
compared with a net income of $26,000 for the quarter ended March 31, 2003. Data
Dialog's first quarter Net Loss for 2004 was $248,100

LIQUIDITY & CAPITAL RESOURCES

      DGI  had  a  consolidated   working  capital   deficit  of   approximately
$(3,235,000)  on March  31,  2004 as  compared  to a  deficit  of  approximately
$(3,046,000)  at  December  31,  2003.  The  lion's  share is the  result in the
increase in deferred  revenues.  The Company  raised  $55,000 in the 1st quarter
through  the  sale of 5.5  shares  of  series E  preferred  stock  through  debt
forgiveness and cash sales.

      On March 31, 2004, the Healthcare  Dialog Division's  financial  condition
included a working capital deficit, of about $1,371,000 as compared to a deficit
of approximately $(1,311,000) at December 31, 2003.

      At the end of  March,  the Data  Dialog  Division  had a  working  capital
deficit of approximately $(893,000) as compared to a deficit of about $(716,000)
on December 31, 2003. This is the result of current assets essentially remaining
unchanged while current liabilities increased.


<PAGE>

INFLATION

      Inflation rates in the United States have not had a significant  impact on
operating results for the periods presented.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      Certain  statements  contained  in this item and  elsewhere in this report
regarding matters that are not historical facts are  forward-looking  statements
(as such term is  defined in the  Private  Securities  Litigation  Reform Act of
1995). Because such forward-looking  statements include risks and uncertainties,
actual  results may differ  materially  from those  expressed or implied by such
forward-looking  statements.  All statements that address operating performance,
events or developments  that  management  expects or anticipates to incur in the
future, including statements relating to sales and earnings growth or statements
expressing general optimism about future operating results,  are forward-looking
statements.  The  forward-looking  statements are based on management's  current
views and assumptions  regarding future events and operating  performance.  Many
factors could cause actual results to differ materially from estimates contained
in management's  forward-looking  statements. The differences may be caused by a
variety of factors,  including but not limited to adverse  economic  conditions,
competitive pressures,  inadequate capital, unexpected costs, lower revenues and
net incomes and forecasts,  the possibility of fluctuation and volatility of the
Company's operating results and condition,  inability to carry out marketing and
sales plans, and loss of key executives, among other things.

ITEM 3. CONTROLS AND PROCEDURES.

      Management  continues its focus on the issue of internal control.  To that
end, it is continuing the process of  centralizing  the accounting  function and
developing policies and procedures that enhance the Company's internal controls.
With the  assistance of a recently  hired  consultant,  Management  continues to
evaluate and test present  measures while at the same time reviewing  areas that
require  improvement.  Additionally,  it continues the process of hiring persons
with the skill sets appropriate to fill the Company's needs.


<PAGE>


PART II.     OTHER INFORMATION

      Items 1, 3, 4, and 5 are omitted as they are either not applicable or have
been included in Part I.

ITEM 2            (C)      RECENT SALES OF UNREGISTERED SECURITIES

      Class E Preferred Stock

      During  January and March  2004,  two  employees  purchased a total of 5.5
shares of the Company's Class E Preferred Stock at $10,000 per share.  They also
received  warrants  to purchase a total of 137,500  shares of Common  Stock at a
price  of  $0.16  per  share.  Both  represented  themselves  in  writing  to be
accredited  investors who were purchasing  these shares for their own investment
and agreed to  restrictions  on resale placed with the Company's  transfer agent
and the printing of a legend on his certificate.  Because of these factors, this
sale is exempt from  registration  under the  Securities  Act as not involving a
public distribution under section 4(2).

      Other issuances

      In March  2004,  two  bankruptcy  creditors  were issued a total of 29,215
shares  for their  Class 8  bankruptcy  claims at the rate of one share for each
four  dollars of court  approved  claim.  The  issuance  of the common  stock to
creditors  is exempt  from the  registration  requirements  of  Section 5 of the
Securities Act pursuant to section 1145 of the United States Bankruptcy Act.

      Conversions

      During this quarter,  two former TDMI shareholders  converted 1,193 shares
of  Class B  Preferred  Stock  into  47,720  shares  of  Common  Stock.  All the
certificates  issued upon conversion bore Securities Act legends and stop orders
have been recorded with the transfer agent.  These transactions were exempt from
registration  under Section  3(a)(9) of the  Securities Act of 1933 because they
were exchanged by Dialog Group with the holders of its existing  preferred stock
exclusively and no commission or other remuneration is paid or given directly or
indirectly for soliciting the exchange.

      The proceeds of all shares issued for cash were used for general  business
purposes.


<PAGE>


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)      EXHIBITS

Exhibit No.          Description

31(i)                    302 Certification of Chief Executive Officer
31(ii)                   302 Certification of Chief Financial Officer
32(i)                    906 Certification of Chief Executive Officer
32(ii)                   906 Certification of Chief Financial Officer

(B)      REPORTS ON FORM 8-K.

         None


<PAGE>


                                   SIGNATURES

      In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                DIALOG GROUP, INC.

Date: May 14, 2004

                                By:       /S/ PETER V. DECRESCENZO
                                Peter V. DeCrescenzo, President and Chief
                                Executive Officer


SIGNATURE                                       TITLE                   DATE

/S/ PETER V. DECRESCENZO                  Chief Executive Officer  May 14, 2004
Peter V. DeCrescenzo

/S/  VINCENT DECRESCENZO                  Chief Financial          May 14, 2004
Vincent DeCrescenzo                       and Accounting Officer


<PAGE>


                                INDEX TO EXHIBITS

  Exhibit         Page
  NUMBER          NUMBER         DESCRIPTION

  31(i)           __             302 Certification of Chief Executive Officer
  31(ii)          __             302 Certification of Chief Financial Officer
  32(i)           __             906 Certification of Chief Executive Officer
  32(ii)          __             906 Certification of Chief Financial Officer


                                 CERTIFICATIONS

                                                                   EXHIBIT 31(I)

CHIEF EXECUTIVE OFFICER

I, Peter V. DeCrescenzo, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Dialog Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact  necessary to make the statements
made, in light of the  circumstances  under which such statements were made, not
misleading  with respect to the period  covered by this  report;  3. Based on my
knowledge, the financial statements, and other financial information included in
this report,  fairly present in all material  respects the financial  condition,
results of  operations  and cash flows of the small  business  issuer as of, and
for, the periods  presented in this report. 4. The small business issuer's other
certifying  officer(s) and I are  responsible for  establishing  and maintaining
disclosure  controls and procedures (as defined in Exchange Act Rules  13a-15(e)
and  15d-15(e))  and internal  control over  financial  reporting (as defined in
Exchange Act Rules  13a-15(f) and 15d-15(f))  for the small business  issuer and
have:

      a.    Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      b.    Designed such internal control over financial  reporting,  or caused
            such internal control over financial  reporting to be designed under
            our  supervision,  to provide  reasonable  assurance  regarding  the
            reliability of financial  reporting and the preparation of financial
            statements  for  external  purposes  in  accordance  with  generally
            accepted accounting principles;


<PAGE>

      c.    Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      d.    Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      a.    All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      b.    Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.

Date: May 14, 2004

                                                       /S/ PETER V. DECRESCENZO
                                                      -------------------------
                                                      Peter V. DeCrescenzo, CEO