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SECURITIES
        AND EXCHANGE COMMISSIONWASHINGTON, D.C.
  20549
FORM 10-QSB

(Mark One)

Quarterly
  Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
  for the quarterly period ended September 30, 2003.

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.(Exact name of Small Business Issuer in its Charter)

|Delaware(State or Other Jurisdiction of Incorporation
      or Organization)                          | 87-0394290(I.R.S. Employer Identification
        Number)
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------
|                                                                                                      |                                                          
|Twelfth Floor, 257 Park Avenue
      South, New York, NY
    (Address of Principal Executive Offices) | 10010
    (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     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
    No

State the number of shares outstanding
    of each of the issuers classes of common equity, as of the latest practicable
    date. At December 26, 2003 there were 86,297,911
        shares of common stock, par value $.001 per share outstanding. Transitional Small Business Disclosure Format
        (check one):                Yes     No


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Dialog Group, INC. AND SUBSIDIARIES

INDEX

|PageNumber | 
|---------- | 

Part I.          Financial
Information

|        | Item
    1        Financial Statements                                                                                                   
|------- | -----------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                          
|2       | Condensed Consolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002                                         
|        |                                                                                                                                          
|3       | Condensed Consolidated Statements of Operations and Comprehensive Loss for the three Months Ended September 30, 2003 and 2002 (Unaudited)
|        |                                                                                                                                          
|4       | Condensed Consolidated Statements of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2003 and 2002 (Unaudited) 
|        |                                                                                                                                          
|5       | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 (Unaudited)                        
|        |                                                                                                                                          
|6 to 27 | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                         
|        |                                                                                                                                          
|28 - 35 | Item 2. Management’s
    Discussion and Analysis or Plan of Operation                                                                    
|        |                                                                                                                                          
|36      | Item 3. Controls and Procedures                                                                                                          

Part II.          Other
Information

|37 - 38     | Item
            1.           Legal
    Proceedings                     
|----------- | ------------------------------------------------------------------------
|            |                                                                         
|38
    - 41 | Item 2(c)Recent Sales
    of Unregistered Securities                    
|            |                                                                         
|41          | Item
            6.           Exhibits
          and Reports on Form 8-K



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DIALOG GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

|                                                        | September 30,2003 |            | December 31,2002 |  
|------------------------------------------------------- | ----------------- | ---------- | ---------------- | -
|                                                        |                   |            |                  |  
|                                                        | (Unaudited)       |            |                  |  
|CURRENT ASSETS:                                         |                   |            |                  |  
|Cash                                                    | $                 | 51,826     |                  | $
|Accounts
    receivable, net                            |                   | 1,272,319  |                  |  
|Inventories                                             |                   | 7,172      |                  |  
|Prepaid expenses
    and other current assets           |                   | 186,620    |                  |  
|                                                        |                   |            |                  |  
|                                                        |                   |            |                  |  
|Total current
    assets                                |                   | 1,517,937  |                  |  
|                                                        |                   |            |                  |  
|PROPERTY AND EQUIPMENT, NET                             |                   | 305,495    |                  |  
|DATABASE, NET                                           |                   | 965,910    |                  |  
|                                                        |                   |            |                  |  
|OTHER ASSETS:                                           |                   |            |                  |  
|Note receivable                                         |                   | 100,000    |                  |  
|Goodwill                                                |                   | 4,575,776  |                  |  
|Other assets                                            |                   | 41,798     |                  |  
|                                                        |                   |            |                  |  
|Total other assets                                      |                   | 4,717,574  |                  |  
|                                                        |                   |            |                  |  
|TOTAL ASSETS                                            | $                 | 7,506,916  |                  | $
|                                                        |                   |            |                  |  
|                                                        |                   |            |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)       |                   |            |                  |  
|CURRENT LIABILITIES:                                    |                   |            |                  |  
|Accounts
    payable                                    | $                 | 2,425,242  |                  | $
|Notes and
    obligations payable, current              |                   | 608,023    |                  |  
|Accrued expenses                                        |                   | 1,726,739  |                  |  
|Deferred
    revenue                                    |                   | 506,348    |                  |  
|Other current
    liabilities                           |                   | 24,694     |                  |  
|Due to related
    parties                              |                   | 116,364    |                  |  
|                                                        |                   |            |                  |  
|Total current liabilities                               |                   | 5,407,410  |                  |  
|                                                        |                   |            |                  |  
|LONG TERM DEBT                                          |                   | 6,486      |                  |  
|                                                        |                   |            |                  |  
|STOCKHOLDERS EQUITY (DEFICIENCY):                      |                   |            |                  |  
|                                                        |                   |            |                  |  
|Preferred
    stock                                     |                   | 83,330     |                  |  
|Common stock                                            |                   | 84,147     |                  |  
|Additional
    paid-in capital                          |                   | 6,193,926  |                  |  
|Accumulated
    deficit                                 |                   | (4,153,678 | )                |  
|Accumulated
    other comprehensive income              |                   | 16,554     |                  |  
|Less: deferred
    compensation                         |                   | (131,259   | )                |  
|                                                        |                   |            |                  |  
|Total
          stockholders equity
    (deficiency)   |                   | 2,093,020  |                  |  
|                                                        |                   |            |                  |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY) | $                 | 7,506,916  |                  | $
|                                                        |                   |            |                  |  

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

F-2

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DIALOG GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
            COMPREHENSIVE LOSSFOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND
            2002(Unaudited)

|                                                           | 2003 |            | 2002 |  
|---------------------------------------------------------- | ---- | ---------- | ---- | -
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|REVENUES                                                   |      | 2,486,200  |      |  
|                                                           |      |            |      |  
|COST OF REVENUES                                           |      | 1,362,295  |      |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|GROSS PROFIT                                               |      | 1,123,905  |      |  
|                                                           |      |            |      |  
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:              |      |            |      |  
|Loss
        on goodwill impairment                        |      | 74,650     |      |  
|Other                                                      |      | 1,736,918  |      |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|Total
        selling, general and administrative expenses |      | 1,811,568  |      |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|LOSS FROM OPERATIONS                                       |      | (687,663   | )    |  
|                                                           |      |            |      |  
|OTHER INCOME (EXPENSES):                                   |      |            |      |  
|Interest
        expense                                   |      | (16,515    | )    |  
|Interest
        income                                    |      | 3,317      |      |  
|Other
        income                                       |      | 229,455    |      |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|Net
        Other Income (Expenses)                        |      | 216,257    |      |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|NET LOSS                                                   |      | (471,406   | )    |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|OTHER COMPREHENSIVE LOSS:                                  |      |            |      |  
|Foreign
        currency translation adjustments           |      | (4,556     | )    |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|TOTAL COMPREHENSIVE LOSS                                   | $    | (475,962   | )    | $
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|NET LOSS PER SHARE, BASIC AND DILUTED                      | $    | (0.01      | )    | $
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|NET LOSS PER SHARE, BASIC AND DILUTED -                    |      |            |      |  
|PRO-FORMA                                                  | $    |           |      | $
|                                                           |      |            |      |  
|                                                           |      |            |      |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                 |      |            |      |  
|BASIC
        AND DILUTED                                  |      | 82,381,465 |      |  
|                                                           |      |            |      |  

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

F-3

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DIALOG GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                AND COMPREHENSIVE LOSSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND
                2002(Unaudited)

|                                                               | 2003 |            | 2002 |  
|-------------------------------------------------------------- | ---- | ---------- | ---- | -
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|REVENUES                                                       |      | 6,868,998  |      |  
|                                                               |      |            |      |  
|COST OF REVENUES                                               |      | 3,839,932  |      |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|GROSS PROFIT                                                   |      | 3,029,066  |      |  
|                                                               |      |            |      |  
|OPERATING EXPENSES:                                            |      |            |      |  
|Loss
            on goodwill impairment                        |      | 74,650     |      |  
|Loss
            on website impairment                         |      |           |      |  
|Loss
            on trademark impairment                       |      |           |      |  
|Loss
            on fixed assets impairment                    |      |           |      |  
|Other                                                          |      | 4,311,089  |      |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|Total
            selling, general and administrative expenses |      | 4,385,739  |      |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|LOSS FROM OPERATIONS                                           |      | (1,356,673 | )    |  
|                                                               |      |            |      |  
|OTHER INCOME (EXPENSES):                                       |      |            |      |  
|Interest
            expense                                   |      | (144,852   | )    |  
|Interest
            income                                    |      | 12,396     |      |  
|Other
            income                                       |      | 294,735    |      |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|Net
            Other Income                                   |      | 162,279    |      |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|NET LOSS                                                       |      | (1,194,394 | )    |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|OTHER COMPREHENSIVE LOSS:                                      |      |            |      |  
|Foreign
            currency translation adjustments           |      | (18,140    | )    |  
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|TOTAL COMPREHENSIVE LOSS                                       | $    | (1,212,534 | )    | $
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|NET LOSS PER SHARE, BASIC AND DILUTED                          | $    | (0.02      | )    | $
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|NET LOSS PER SHARE, BASIC AND DILUTED -                        |      |            |      |  
|PRO-FORMA                                                      | $    |           |      | $
|                                                               |      |            |      |  
|                                                               |      |            |      |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                     |      |            |      |  
|BASIC
            AND DILUTED                                  |      | 66,263,184 |      |  
|                                                               |      |            |      |  

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

F-4

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DIALOG GROUP, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS
                    OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTEMBER
                    30, 2003 AND 2002(UNAUDITED)

|                                                                                 | 2003 |            | 2002 |  
|-------------------------------------------------------------------------------- | ---- | ---------- | ---- | -
|Cash Flows from Operating Activities:                                            |      |            |      |  
|Net
                loss                                                         | $    | (1,194,394 | )    | $
|Adjustments
                to reconcile net loss to net cash                    |      |            |      |  
|used
                in operating activities:                                    |      |            |      |  
|Depreciation
                and amortization                                    |      | 262,607    |      |  
|Loss
                on goodwill impairment                                      |      | 74,650     |      |  
|Loss
                on website impairment                                       |      |           |      |  
|Loss
                on trademark impairment                                     |      |           |      |  
|Loss
                on fixed assets impairment                                  |      |           |      |  
|Gain
                on debt forgiveness                                         |      |           |      |  
|Common
                stock, warrants and stock options issued for services     |      | 210,999    |      |  
|Changes
                in operating assets and liabilities:                     |      |            |      |  
|(Increase)
                decrease in:                                          |      |            |      |  
|Accounts
                receivable                                              |      | (334,507   | )    |  
|Inventory                                                                        |      | 4,352      |      |  
|Other
                current receivable                                         |      | 26,915     |      |  
|Prepaid
                expenses and other current assets                        |      | (54,073    | )    |  
|Increase
                (decrease) in:                                          |      |            |      |  
|Accounts
                payable and accrued expenses                            |      | 1,036,309  |      |  
|Other
                current liabilities                                        |      | (202,146   | )    |  
|Deferred
                revenue                                                 |      | (700,018   | )    |  
|                                                                                 |      |            |      |  
|Net
                Cash Used in Operating Activities                            |      | (869,306   | )    |  
|                                                                                 |      |            |      |  
|Cash Flows from Investing Activities:                                            |      |            |      |  
|Purchase
                of database                                             |      | (180,620   | )    |  
|Purchase
                of property and equipment                               |      | (148,433   | )    |  
|Net
                cash acquired from HCH and Azimuth                           |      | 13,911     |      |  
|                                                                                 |      |            |      |  
|Net
                Cash Used in Investing Activities                            |      | (315,142   | )    |  
|                                                                                 |      |            |      |  
|Cash Flows from Financing Activities:                                            |      |            |      |  
|Shareholders
                loans, net                                          |      | (50,200    | )    |  
|Proceeds
                from sale of common stock                               |      | 995,549    |      |  
|Short-term
                borrowing, net                                        |      | 5,144      |      |  
|                                                                                 |      |            |      |  
|Net
                Cash Provided by Financing Activities                        |      | 950,493    |      |  
|                                                                                 |      |            |      |  
|Net decrease in cash                                                             |      | (233,955   | )    |  
|Effect of exchange rate on cash                                                  |      | (25,815    | )    |  
|Cash, beginning of period                                                        |      | 311,596    |      |  
|                                                                                 |      |            |      |  
|Cash, end of period                                                              | $    | 51,826     |      | $
|                                                                                 |      |            |      |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                |      |            |      |  
|Interest
                paid during the period                                  | $    | 23,996     |      | $
|                                                                                 |      |            |      |  
|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                                              | $    | 236,027    |      | $
|                                                                                 |      |            |      |  
|Shares issued in acquisition of HCH                                              | $    | 264,033    |      | $
|                                                                                 |      |            |      |  
|Shares issued in acquisition of Azimuth                                          | $    | 528,067    |      | $
|                                                                                 |      |            |      |  
|Conversion of accounts payable into Series E
                    Preferred Stock | $    | 355,253    |      | $
|                                                                                 |      |            |      |  
|Conversion of accrued expenses into Series E
                    Preferred Stock | $    | 148,370    |      | $
|                                                                                 |      |            |      |  

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

F-5

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 1 BASIS
                        OF PRESENTATION
|-----------------------------------------------------
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     

F-6

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 1 BASIS OF PRESENTATION
                (CONTINUED)
|---------------------------------------------------------
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|NOTE 2 ACQUISITIONS                                     
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                         

F-7

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 2 ACQUISITIONS (CONTINUED)
|--------------------------------
|                                
|                                
|                                
|                                
|                                
|                                
|                                

| | 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 was 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                       

| | 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:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 2 ACQUISITIONS (CONTINUED)
|--------------------------------
|                                
|                                
|                                

| | 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  |  
| |                                                               |   |            |  
| |                                                               |   |            |  

| | 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 below) 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-9

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 2 ACQUISITIONS
                (CONTINUED)
|------------------------------------------------
|                                                
|                                                
|                                                
|                                                
|                                                

| | 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 | 
| |                                                                             |   |         | 
| |                                                                             |   |         | 

| | 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                                                         
| | Accounts receivable                                          
| | Prepaid expenses
                    and other current assets
| | Property and equipment                                       
| | Goodwill                                                     
| | Accounts payable
                    and accrued expenses    
| | Deferred revenue                                             
| | Short term debt                                              
| | Long-term debt                                               
| |                                                              
| | Total                                                        
| |                                                              
| |                                                              

| | Shares Cancelled                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | During the quarter
                    ended September 30, 2003, the Company cancelled 829,425 common
                    shares issued to IP2M’s former shareholders that were
                    kept in escrow, valued at $24,882 as a result of asset valuation
                discrepancies.                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ACQUISTIONS OF
                      HEALTHCARE HORIZON, INC. (“HCH”) AND AZIMUTH
                TARGET MARKETING, INC. (“AZIMUTH”)                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | On April 18, 2003,
                    the Company acquired the outstanding shares of Healthcare
                    Horizons, Inc. (“HCH”), a company that was partially
                    owned by HCD, and the assets of Azimuth Target Marketing,
                Inc. (“Azimuth”) and assumed certain liabilities
                of Azimuth. HCH and Azimuth are owners and distributors of demographic,
                disease, and healthcare information.

F-10

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 2  ACQUISITIONS
                (CONTINUED)
|-------------------------------------------------
|                                                 
|                                                 
|                                                 
|                                                 
|                                                 

| | Cash                                                      | $ | 1,911    |  
| | --------------------------------------------------------- | - | -------- | -
| | Accounts receivable                                       |   | 938      |  
| | Database                                                  |   | 550,000  |  
| | Goodwill                                                  |   | 94,179   |  
| | Accounts payable
                    and accrued expenses |   | (382,995 | )
| |                                                           |   |          |  
| | Total                                                     | $ | 264,033  |  
| |                                                           |   |          |  

| | The price in the
                    acquisition of Azimuth was $528,067, consisting of 3,538,261
                    shares of the Company’s common stock and 21,557 shares
                    of the Company’s Class B-1 preferred stock. The prices
                    of the common shares and preferred shares issued in this
                    acquisition were determined as described in the acquisition
                    of HCH.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | The following table
                    set forth the preliminary allocation of the purchase price
                    of Azimuth’s tangible and intangible assets acquired
                    and liabilities assumed effective April 1, 2003:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                 

| | Cash                                                      | $ | 12,000  |  
| | --------------------------------------------------------- | - | ------- | -
| | Accounts receivable                                       |   | 130,338 |  
| | Database                                                  |   | 405,000 |  
| | Goodwill                                                  |   | 6,708   |  
| | Accounts payable
                    and accrued expenses |   | (12,785 | )
| | Loan payable                                              |   | (13,194 | )
| |                                                           |   |         |  
| | Total                                                     | $ | 528,067 |  
| |                                                           |   |         |  

F-11

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)

|NOTE 2 ACQUISTIONS
                (CONTINUED)
|-----------------------------------------------
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               

| |                                                                   | Three Months
                Ended
                September 30, 2003 |            | Three Months
                Ended
                September 30, 2002 |  
| | ----------------------------------------------------------------- | --------------------------------------------------------------------- | ---------- | --------------------------------------------------------------------- | -
| |                                                                   |                                                                       |            |                                                                       |  
| | REVENUE                                                           | $                                                                     | 2,476,488  |                                                                       | $
| | COST OF REVENUES                                                  |                                                                       | 1,354,012  |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| | GROSS PROFIT                                                      |                                                                       | 1,122,476  |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| | OPERATING EXPENSES:                                               |                                                                       |            |                                                                       |  
| | Loss
                on goodwill impairment                       |                                                                       | 74,650     |                                                                       |  
| | Other
                selling, general and administrative expense |                                                                       | 1,680,124  |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| | Total
                Operating Expenses                          |                                                                       | 1,754,774  |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| | LOSS FROM OPERATION                                               |                                                                       | (632,298   | )                                                                     |  
| |                                                                   |                                                                       |            |                                                                       |  
| | OTHER INCOME (EXPENSES)                                           |                                                                       |            |                                                                       |  
| | Interest
                income                                   |                                                                       | 3,994      |                                                                       |  
| | Interest
                expenses                                 |                                                                       | (16,515    | )                                                                     |  
| | Other
                income                                      |                                                                       | 228,778    |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| | Net
                Other Income (Expenses)                       |                                                                       | 216,257    |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  
| | NET LOSS                                                          | $                                                                     | (416,041   | )                                                                     | $
| |                                                                   |                                                                       |            |                                                                       |  
| | PRO-FORMA NET LOSS PER SHARE - BASIC AND                          |                                                                       |            |                                                                       |  
| | DILUTED                                                           | $                                                                     | (0.01      | )                                                                     | $
| |                                                                   |                                                                       |            |                                                                       |  
| | PRO-FORMA WEIGHTED AVERAGE COMMON SHARES                          |                                                                       |            |                                                                       |  
| | OUTSTANDING                                                       |                                                                       | 82,381,465 |                                                                       |  
| |                                                                   |                                                                       |            |                                                                       |  

F-12

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DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)



|NOTE
                2 ACQUISITIONS
                (CONTINUED)
|----------------------------------------------------------------
|                                                                

| | The following set
                    forth the Company’s results of operations for the nine
                    months ended September 30, 2003, with comparative results
                    of operations for the nine months ended September 30, 2002,
                    as if the acquisitions of HCD and IP2M had taken place at
                    the beginning of the periods.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                           

Ended
                  September 30,
                  2003
                  
                  Ended
                  September 30,
                  2002REVENUE
                  $
                  8,179,828
                  
                  $
                  7,786,861COST OF REVENUES
                  
                  4,502,363
                  
                  
                  4,277,461GROSS PROFIT
                  
                  3,677,465
                  
                  
                  3,509,400SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:Loss
                  on goodwill impairment
                  
                  74,650
                  
                  
                  1,727,068Loss
                  on website impairment
                  
                  
                  
                  
                  300,000Loss
                  on trademark impairment
                  
                  
                  
                  
                  95,067Loss
                  on fixed asset impairment
                  
                  
                  
                  
                  15,625Other
                  selling, general and administrative expense
                  
                  5,326,505
                  
                  
                  7,643,002Total
                  Operating Expenses
                  
                  5,401,155
                  
                  
                  9,780,762LOSS FROM OPERATION
                  
                  (1,723,690
                  )
                  
                  (6,271,362
                  )OTHER INCOME (EXPENSES)Interest
                  income
                  
                  10,752
                  
                  
                  902Interest
                  expenses
                  
                  (151,388
                  )
                  
                  (304,209
                  )Gain
                  on debt settlement
                  
                  
                  
                  
                  830,626Gain
                  on sale of options
                  
                  
                  
                  
                  240,307Other
                  income
                  
                  294,735
                  
                  
                  437,489Other
                  expense
                  
                  
                  
                  
                  (206
                  )Net
                  Other Income
                  
                  154,099
                  
                  
                  1,204,909NET LOSS
                  $
                  (1,569,591
                  )
                  $
                  (5,066,453
                  )PRO-FORMA NET LOSS PER SHARE - BASIC ANDDILUTED
                  $
                  (0.02
                  )
                  $
                  (0.08
                  )PRO-FORMA WEIGHTED AVERAGE COMMON SHARESOUTSTANDING
                  
                  66,263,184
                  
                  
                  66,263,184 F-13   Back to Contents
            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 3 GOING CONCERN
                CONSIDERATIONSThe 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 approximately $4,154,000 as
                    of September 30, 2003. 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
                The Company is continuing the
                    sale of its equity securities, as further discussed in Note
                    5. During the third quarter of 2003, the Company raised approximately
                    $255,000 in such activities.DISPOSITION OF
                      UNPROFITABLE LINE OF BUSINESS
                During the fourth quarter the
                    Company sold three non-profitable subsidiaries. The Company
                    sold ThinkDirectMarketing Inc. and Healthcare Horizons, Inc.
                    to two unrelated parties for nominal consideration. The Company
                    also sold Software Dialog to its management group and a group
                    of English investors for approximately $450,000.PROFITABILITYThe Company intends
                    to develop new and increased revenues and gross margins in
                    all areas of operations. Specifically, the Company intends
                    to:
                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.
                Reduce expenses through office
                    consolidation and payroll reduction.
                Enter into strategic relationships
                    with data suppliers that will return higher levels of match
                    rate with a better quality of data.F-14
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
NOTE 3 GOING CONCERN
                CONSIDERATIONS (CONTINUED)Many of these profitability
                    objectives have been met early in the second quarter.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 PAYABLELoans and notes
                payable consisted of the following as of September 30, 2003Convertible notes in the aggregate
                    amount of $100,000 due to three former IP2M non related party 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.
                $
                100,000Note payable to Axciom Corporation in the original
                    amount of $400,000. The maturity of the
                    note was extended to February 2003 and the note is now in default. See Note
9. The note bears interest at 8% per annum.
                
                400,000$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.
                
                105,544Line of credit agreement with Dell Financial
                    Corporation for equipment purchase. The agreement provides
                    for monthly payments of $414.
                
                8,965Total loans and notes payable
                
                614,509Less: Current maturities
                
                (608,023
                )Long Tem Debt
                $
                6,486Maturities of long-term debt consist
                    of the following as of June 30, 2003:2004
                $
                614,5092005
                
                6,486Total
                $
                620,995F-15
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 5 EQUITYINCREASE IN NUMBER
                OF AUTHORIZED SHARESOn June 24, 2003,
                    the Company’s Certificate of Incorporation was restated
                    to increase the number of authorized shares of $0.001 par
                    value common stock to 175,000,000 and to increase the number
                    of authorized shares of $0.001 par value preferred stock
                to 1,500,000.ELIMINATION OF
                CLASS C PREFERRED STOCK AND CLASS D PREFERRED STOCKAlso on June 24,
                    2003, The Company’s Certificate of Incorporation was
                    restated to eliminate the Class C preferred stock and the
                    Class D preferred stock. None of the authorized Class C and
                Class D preferred stock shares was outstanding.CREATION OF CLASS
                C-1 CONVERTIBLE PREFERRED STOCKOn May 30, 2003,
                    The Company’s Certificate of Incorporation created
                    and authorized a series of preferred stock of 34,500 shares
                    entitled Class C-1 convertible preferred stock. Each Class
                    C-1 preferred stock is convertible into 1,000 shares of common
                    stock. The Class C-1 preferred stock has no voting rights,
                    is not entitled to receive dividends and is entitled to certain
                liquidation rights.CREATION OF CLASS
                C-2 CONVERTIBLE PREFERRED STOCKOn May 30, 2003,
                    The Company’s Certificate of Incorporation created
                    and authorized a series of preferred stock of 5,000 shares
                    entitled Class C-2 convertible preferred stock. Each Class
                    C-2 preferred stock is convertible into 1,000 shares of common
                    stock. The Class C-2 preferred stock has no voting rights,
                    is not entitled to receive dividends and is entitled to certain
                liquidation rights.CREATION OF CLASS
                C-3 CONVERTIBLE PREFERRED STOCKOn June 30, 2003,
                    The Company’s Certificate of Incorporation created
                    and authorized a series of preferred stock of 5,000 shares
                    entitled Class C-3 convertible preferred stock. Each Class
                    C-3 preferred stock is convertible into 1,000 shares of common
                    stock. The Class C-3 preferred stock has no voting rights,
                    is not entitled to receive dividends and is entitled to certain
                liquidation rights.F-16
            
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 5 EQUITY (CONTINUED)CREATION OF CLASS
                      E CUMULATIVE CONVERTIBLE PREFERRED STOCKOn September 25,
                    2003, The Company’s Certificate of Incorporation created
                    and authorized a series of preferred stock of 200 shares
                    entitled Class E convertible preferred stock. Each Class
                    E preferred stock has a stated value of $10,000 and is convertible
                    into 83,333 shares of common stock commencing January 1,
                    2004. The Class E preferred stock has voting rights based
                    on the number of shares of common stock into which each share
                    of preferred stock may be converted, is entitled to receive
                    quarterly dividends of $400 commencing on December 31, 2003,
                    and is callable by the Company at 120% of its liquidation
                    value at any time after October 1, 2005. The Class E preferred
                stock is also entitled to certain liquidation rights.SHARES
                ISSUED IN ACQUISTION OF HCH AND AZIMUTHAs discussed in
                    Note 2, during the quarter ended June 30, 2003, the Company
                    issued 5,307,392 shares of common stock in the acquisition
                    of HCH and Azimuth valued at $0.12 per share and 32,336 shares
                of preferred stock valued at $4.80 per share.SALES OF COMMON
                STOCK IN PRIVATE PLACEMENTSDuring the quarter
                    ended September 30, 2003, the Company sold 66,666 shares
                    of common stock in private placements at $0.15 per share,
                for total proceeds of $10,000.ISSUANCE OF COMMON
                STOCK FOR SERVICESDuring the quarter
                    ended September 30, 2003, the Company issued an aggregate
                    of 2,561,275 shares of its common stock to consultants. The
                    shares were valued at $167,009, based on the price of the
                    Company’s common stock on the date of the agreements,
                    less a discount for restriction. Of this amount, $41,009
                related to past services and was included in accrued expenses.ISSUANCE OF PENALTY
                SHARESDuring the year
                    ended December 31, 2002, the Company had sold shares of its
                    common stock in private placements. During the third quarter
                    of 2003, 127,200 additional shares were issued to ten investors.
                    The Company had not complied with its obligation to register
                shares previously sold to these holders.F-17
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 5 EQUITY
                (CONTINUED)EXERCISE OF STOCK
                OPTIONSDuring the quarter
                    ended June 20, 2003, the Company entered into a consulting
                    agreement providing, among other things, for the consultant
                    to purchase a number of shares of the Company’s common
                    stock valued at up to $3,000,000, at the thirty day low price
                    of the Company’s common stock. The consultant exercised
                    800,000 options during the quarter and purchased 800,000
                shares at $0.125 per share.In addition, the
                    agreement provided for the consultant to receive at the end
                    of each month in which options were exercised 15% of the
                    number of shares purchased. As a result, the Company issued
                    an additional 120,000 of common stock to the consultant.
                    The shares were valued at $0.12 per share, which was the
                    price used to value the common stock issued in the acquisitions
                    of HCH and Azimuth. The Company recognized consulting expense
                of $14,400 during the quarter related to this transaction.ISSUANCE OF COMMON
                STOCK IN LIEU OF DIRECTOR COMPENSATIONDuring the quarter
                    ended June 20, 2003, Carter Barnard plc, one of the Company’s
                    shareholders, compensated two of the Company’s directors
                    and in return, was allowed to purchase 288,000 shares of
                    the Company’s common stock at par value. The shares
                    were valued at $0.12 a share, which was the price used to
                    value the common stock issued in the acquisitions of HCH
                and Azimuth.SALE OF CLASS
                E PREFERRED STOCKDuring the quarter
                    ended September 30, 2003, the Company sold 25 shares of Class
                    E preferred stock for total consideration of approximately
                    $255,000. For each share of Class E preferred stock sold,
                    the Company issued a warrant to purchase 25,000 shares of
                    the Company’s common stock at $0.16 per share for a
                    period commencing on January 1, 2004 and ending October 1,
                2008.During the quarter,
                    the Company also issued 46 shares of Class E preferred stock
                    to settle approximately $463,000 of debt. 8 of those shares
                    were issued to employees and management of the Company for
                    past payroll and the remaining 38 shares were issued to outside
                creditors.F-18
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 6 RELATED PARTY
                TRANSACTIONSDUE TO RELATED
                PARTIESAs of June 30, 2003,
                    the Company was indebted to four shareholders in the aggregate
                    amount of $108,364. The loans bear interest at the rate of
                    10.5% per annum and are due on demand. The remaining balance
                    of $8,000 due to a related party is non-interest bearing.RENT FROM RELATED
                PARTIESThe 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 and $34,200 during the three months and
                nine months ended September 30, 2003, respectively.NOTE 7 STOCK
                OPTIONSEffective 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.
                    As of December 31, 2002, there were 71,015 employee stock
                    options outstanding. However, due to the lack of marketability
                    of the Company’s common stock, the Company was unable
                to value the options.During the six months
                    ended June 30, 2003, 2,437,700 stock options were granted
                    to employees, non-employee directors, officers and consultants.
                    812,553 of these options vested during the quarter, and the
                Company recognized compensation expense of $9,535.NOTE 8 SEGMENT
                DISCLOSURESDuring the quarter
                    ended June 30, 2003, The Company restructured its reportable
                    operating segments to include HealthCare Dialog (“Healthcare”),
                    Data Dialog (“Data”), and Software. Healthcare
                    includes HCD and its wholly-owned subsidiaries, IP2M and
                    HCH. Data includes TDMI and its wholly-owned subsidiary,
                DMQ. Software includes Findstar and its wholly-owned subsidiary.F-19
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
NOTE 8 SEGMENT DISCLOSURE (CONTINUED)
                Healthcare provides pharmaceutical
                    companies with a suite of integrated healthcare-specific
                    campaign creation and management capabilities  including
                    strategic and creative services, media placement, interactive
                communication services, patient/consumer
                    target identification, and database enhancement and management
                    services.
                Data offers small and mid size
                    businesses the ability to target, create, print and execute
                    a direct marketing compaign online from their desktop computer
                    as well as offering a reverse telephone append service to
                    inbound
                    telephone call center.
                Software is the exclusive distributor
                    of Panda Anti-Virus software in the United Kingdom. Panda
                    Software International S.L., Software’s licensor, is
                    a leading international developer of antivirus software for
                    all types of client types including corporations, small and
                    medium size businesses, and home users.The Company allocates the
                    costs of revenues and direct operating expenses to these
                segments.As noted in note
                    1, the acquisition of HCD was accounted for as a reverse
                    acquisition. As a result, the condensed consolidated statements
                    of operations for the three and nine months ended September
                    30, 2002 depicts the results of operations of HCD only and
                    the company was deemed to have one segment for those periods.
                    The condensed consolidated statements of operations for the
                    three and nine months ended September 30, 2003 depict the
                    results of operations of HCD from the beginning period being
                    reported, and the results of operations of the other segments
                    from the dates of acquisition.F-20
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
NOTE 8  SEGMENT
                        DISCLOSURE (CONTINUED)Quarter ended
                September 30, 2003Healthcare
                  
                  Data
                  
                  Software
                  
                  Corporate
                  
                  TotalRevenues
                  $
                  929,467
                  
                  $
                  1,011,322
                  
                  $
                  545,411
                  
                  $
                  
                  
                  $
                  2,486,200Cost of revenues
                  
                  653,986
                  
                  
                  513,187
                  
                  
                  195,122
                  
                  
                  
                  
                  
                  1,362,295Gross profit
                  
                  275,481
                  
                  
                  498,135
                  
                  
                  350,289
                  
                  
                  
                  
                  
                  1,123,905Depreciation andamortization
                  
                  74,251
                  
                  
                  11,121
                  
                  
                  8,166
                  
                  
                  33,750
                  
                  
                  127,288Loss on goodwillimpairment
                  
                  74,650
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  74,650Other selling,general andadministrative
                  
                  206,202
                  
                  
                  517,054
                  
                  
                  375,509
                  
                  
                  510,865
                  
                  
                  1,609,630Loss fromoperations
                  
                  (79,622
                  )
                  
                  (30,040
                  )
                  
                  (33,386
                  )
                  
                  (544,615
                  )
                  
                  (687,663
                  )Interest expense
                  
                  (6,015
                  )
                  
                  (8,000
                  )
                  
                  
                  
                  
                  (2,500
                  )
                  
                  (16,515
                  )Other income(expense)
                  
                  677
                  
                  
                  228,778
                  
                  
                  3,317
                  
                  
                  
                  
                  
                  232,772Net income (loss)
                  $
                  (84,960
                  )
                  $
                  190,738
                  
                  $
                  (30,069
                  )
                  $
                  (547,115
                  )
                  $
                  (471,406
                  )Goodwill
                  $
                  4,569,068
                  
                  $
                  6,708
                  
                  $
                  
                  
                  $
                  
                  
                  $
                  4,575,776Total assets
                  $
                  5,844,692
                  
                  $
                  619,471
                  
                  $
                  589,794
                  
                  $
                  452,958
                  
                  $
                  7,506,915F-21
              
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 8  SEGMENT
                        DISCLOSURES (CONTINUED)Nine Months Ended
                September 30, 2003Healthcare
                  
                  Data
                  
                  Software
                  
                  Corporate
                  
                  TotalRevenues
                  $
                  3,290,034
                  
                  $
                  2,503,649
                  
                  $
                  1,075,315
                  
                  $
                  
                  
                  $
                  6,868,998Cost of revenues
                  
                  2,291,159
                  
                  
                  1,154,586
                  
                  
                  394,187
                  
                  
                  
                  
                  
                  3,839,932Gross profit
                  
                  998,875
                  
                  
                  1,349,063
                  
                  
                  681,128
                  
                  
                  
                  
                  
                  3,029,066Depreciation andamortization
                  
                  106,499
                  
                  
                  24,517
                  
                  
                  18,258
                  
                  
                  113,333
                  
                  
                  262,607Loss on goodwillimpairment
                  
                  74,650
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  74,650Other selling,general andadministrative
                  
                  824,173
                  
                  
                  1,166,560
                  
                  
                  759,410
                  
                  
                  1,298,339
                  
                  
                  4,048,482Income (loss) fromoperations
                  
                  (6,447
                  )
                  
                  157,986
                  
                  
                  (96,540
                  )
                  
                  (1,411,672
                  )
                  
                  (1,356,673
                  )Interest expense
                  
                  (71,106
                  )
                  
                  (18,667
                  )
                  
                  (1,746
                  )
                  
                  (53,333
                  )
                  
                  (144,852
                  )Other income(expense)
                  
                  2,573
                  
                  
                  235,284
                  
                  
                  69,274
                  
                  
                  
                  
                  
                  307,131Net income (loss)
                  $
                  (74,980
                  )
                  $
                  374,603
                  
                  $
                  (29,012
                  )
                  $
                  (1,465,005
                  )
                  $
                  (1,194,394
                  )
            NOTE 9  LITIGATIONSUPPLIERSAs discussed in
                    Note 4, the note payable of $400,000 due to Axciom Corporation
                    is now in default. During July of 2003, Axciom Corporation
                    commenced an action against the Company. The complaint seeks
                    $400,000 on the note, and $295,415 for unpaid data usage,
                    and $1,250,000 for unused minimum usage requirements for
                    2003 and 2004. The Company has accrued approximately $209,000
                    for the unpaid data usage but intends to vigorously contest
                the claims.In June of 2003,
                    one of the Company’s vendors commenced an action against
                    HCD. The complaint seeks $85,076 for printing services and
                    attorney’s fees. The Company has accrued approximately
                    $75,000 and believes that a settlement will be reached with
                the vendor for that amount.F-22
            
             
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE
                      9 LITIGATION
                (CONTINUED)SUPPLIERS (CONTINUED)In December 2003,
                    the Company was named in a suit with Chriscom, Inc. Prior
                    to the Company’s acquisition of Healthcare Horizon,
                    a judgement was awarded to Chriscom. The full remaining amount
                    of $10,000 is accrued in Healthcare Horizons’ financial
                statements.One of HCH’s
                    vendors filed an action against HCH claiming unpaid invoices
                    of about $54,000. The Company is working directly with the
                    vendor’s lawyers to resolve this matter. The full amount
                is accrued on HCH’s books.EMPLOYEESIn 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 worked out for $47,330.
                    The full amount is accrued in the Company’s financial
                statements.In April 2003, two
                    former employees commenced an arbitration proceeding against
                    the Company relating to their termination of employment.
                    They seek damages totaling $375,789. Dialog Group has accrued
                    $137,916 against this potential liability and is contesting
                both claims.In December 2003,
                    Software Dialog was sued for $45,000 for recruitment fees.
                The case was settled and the amount due paid.NOTE 10 THIRD
                QUARTER ADJUSTMENTSDuring the third
                    quarter of 2003, total revenues of $2,486,200 included approximately
                    $130,000 of deferred revenue of the Healthcare Dialog Division
                    that should have been recognized during the second quarter
                    of 2003. In addition, total other income included a reversal
                    of approximately $188,000 of accounts payable transactions
                    recorded in prior periods and other adjustments totaling
                    approximately $50,000, attributable to the Data Dialog group.
                    Had the revenue of $130,000 and the $238,000 been recognized
                    in prior periods, net loss for the quarter ended September
                    30, 2003 would have been approximately $839,000, compared
                with the reported net loss of $471,406.
            F-23
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 11 SUBSEQUENT
                EVENTSDuring the fourth
                    quarter, Dialog Group reorganized the Data Dialog division,
                    replacing its out of date platforms and acquiring new data
                    sources. In connection with the reorganization, it wrote
                    off its investment in the old defunct platform as the problems
                    became apparent and formed a new corporate entity, Digital
                    Data, Inc. to hold the investments made in the new platforms
                    and web interfaces and the contract with the new data sources,
                    and sold the corporation, ThinkDirectMarketing, Inc., which
                    owned the old technology and held the no longer functioning
                    data contracts to an unrelated party for nominal consideration.During the fourth
                    quarter, Dialog Group sold the Software Dialog division to
                    its management and a group of English investors for approximately
                    $450,000.Finally, during
                    the fourth quarter the Healthcare Dialog division sold Healthcare
                    Horizons, Inc. to an unrelated party and, as a part of the
                    sale, accepted access to HCH’s data assets as full
                    settlement of any inter-company obligations owed by HCH to
                    its parent.NOTE 12 RECENTLY
                ISSUED ACCOUNTING PRONOUNCEMENTSIn April 2002, the
                    FASB issued SFAS No. 145, “Rescission of FASB Statements
                    No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
                    Technical Corrections”. This statement, among other
                    things, requires that gains and losses related to extinguishment
                    of debt be classified as extraordinary items only if they
                    meet the criteria in Opinion No. 30. The provision of Statement
                    No. 145 related to the rescission of Statement No.4 should
                    be applied in fiscal years beginning after May 15, 2002.
                    Any gain or loss on extinguishment of debt that was classified
                    as an extraordinary item in prior periods presented that
                    does not meet the criteria in Opinion No. 30 for classification
                    as an extraordinary item should be reclassified. The provision
                    of Statement No. 145 did not affect the Company’s financial
                    statements.In June 2002, the
                    FASB issued SFAS No. 146, “Accounting for Costs Associated
                    with Exit or Disposal Activities”. This statement addresses
                    financial accounting and reporting for costs associated with
                    exit or disposal activities and replaces Emerging Issues
                    Task Force (EITF) Issue No. 94-3, “Liability Recognition
                    for Certain Employee Termination Benefits and Other Costs
                    to Exit an ActivityF-24
            
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
            NOTE 12  RECENTLY
                ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)(including Certain
                    Costs Incurred in a Restructuring).” This standard
                    requires that a liability for a cost associated with an exit
                    or disposal activity be recognizedwhen the liability
                    is incurred rather than the date of an entity’s commitment
                    to an exit plan. This statement is effective for exit or
                    disposal activities that are initiated after December 31,
                    2002, with early application encouraged. The provision of
                    Statement No. 146 did not affect the Company’s financial
                    statements.In November 2002,
                    the FASB issued Interpretation No. 45, Guarantor’s
                    Accounting and Disclosure Requirements for Guarantees, Including
                    Indirect Guarantees of Indebtedness of Others” which
                    expands previously issued accounting guidance and disclosure
                    requirements for certain guarantees. The interpretation requires
                    an entity to recognize an initial liability for the fair
                    value of an obligation assumed by issuing a guarantee. The
                    initial recognition and initial measurement provisions of
                    FIN No. 45 are applicable to a company on a prospective basis
                    to guarantees issued or modified after December 31, 2002.
                    However, the disclosure requirements in FIN No. 45 are effective
                    for a company’s financial statements for periods ending
                    after December 15, 2002. The Company is not a party to any
                    agreement in which it is a guarantor of indebtedness of others
                    therefore the interpretation did not affect the Company’s
                    financial position, results of operations or cash flows.In December 2002,
                    the FASB issued SFAS No. 148, “Accounting for Stock-Based
                    Compensation  Transition and Disclosure”. SFAS
                    No. 148 does not alter the provisions of SFAS 123, nor does
                    it require stock-based compensation to be measured under
                    the fair-value method. Rather, SFAS 148 provides alternative
                    transition methods to companies that elect to expense stock-based
                    compensation using the fair-value approach under SFAS No.
                    123. Effective January 1, 2003, the Company adopted the provisions
                    of SFAS 148 and elected to expense stock-based compensation.
                    The Company also adopted the disclosure provisions of SFAS
                    No. 148. The adoption of SFAS 148 did not have a material
                    effect on the Company’s results of operations.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.F-25
            
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            DIALOG GROUP,
                      INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
                    FINANCIAL STATEMENTSSEPTEMBER 30, 2003(Unaudited)
NOTE
                      12
                RECENTLY
                ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
                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 certaininstruments 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, 2002 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 expect SFAS No. 150 to have a material effect on
                    its financial statements.F-26
  
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Item 2. Management’s Discussion and Analysis or Plan of Operation.



General Dialog Group, Inc. (formerly IMX Pharmaceuticals,
        Inc.) (“Dialog Group”) is a publicly traded corporation (OTCBB:DLGG)
        with headquarters in New York City and offices in Valencia, California;
        Sunrise, Florida; Houston, Texas and Cambridge and Haywards Heath, United
        Kingdom. Dialog Group is comprised of three divisions,
        the Healthcare Dialog division, the Data Dialog division and the Software
        Dialog division. The Healthcare Dialog, with revenues of $920,000 and
        $3,638,000 pro forma for the quarter ended and nine months ended respectively
        is comprised of three business units, Healthcare Dialog, IP2M and Healthcare
        Horizons. The Data Dialog division, with revenues of $1,011,000 and $3,137,000
        pro forma for the quarter ended and nine months ended respectively is
        comprised of three business units, Data Dialog Direct, Mail Mogul and
        Azimuth Data. The Software Dialog division, with revenues of $545,000
        and $1,404,000 pro forma for the quarter ended and nine months ended
        respectively is primarily comprised of Panda Software International.


Subsequent Events

During the fourth quarter, Dialog Group reorganized
  the Data Dialog division, replacing its out of date platforms and acquiring
  new data sources. In connection with the reorganization, the division abandoned
  its efforts to utilize the old platform, the division having previously written
  off its investment as the problems became apparent and formed a new corporate
  entity, Digital Data, Inc. to hold the investments made in the new platforms
  and web interfaces and the contract with the new data sources, and sold the
  corporation, ThinkDirectMarketing, Inc., which owned the old technology and
  held the no longer functioning data contracts to an unrelated party for nominal
  consideration. During the fourth quarter, Dialog Group sold
        the Software Dialog division to its management and a group of English
        investors for approximately $450,000. Finally, during the fourth quarter the Healthcare
        Dialog division sold Healthcare Horizons, Inc. to an unrelated party
        and, as a part of the sale, accepted access to HCH’s data assets
        as full settlement of any inter-company obligations owed by HCH to its
        parent. Dialog Group provides its clients a suite
        of products that are available as either a turnkey solution or as a component
        for their marketing plan. Dialog Group provides online and offline support
        for the healthcare, small business, telephone service bureau, financial
        services and direct marketing industries in the United States.


Description of the Healthcare Dialog Division

The Healthcare Dialog division is a provider of marketing and communications strategies, products, printed and web based, and other services including the sale and or placement of advertising media to the healthcare industry.


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Healthcare Dialog, prior to its acquisition by Dialog
  Group, had long provided companies with a variety of healthcare-specific marketing
  strategies and the ability to execute and management marketing programs, including
  creating, designing and producing printed or interactive communications. In
  addition Healthcare Dialog can identify patients/consumers for it clients from
  its databases. Clients rely on Healthcare Dialog to help establish and build
  more valuable and longer lasting relationships with physicians, patients, and
  consumers over a broad array of permission-based contact points, including
  Internet websites, digital on-demand print, direct mail and telemarketing.
  Healthcare provides clients with healthcare expertise, access to databases
  of more than 100 million households and experience in scalable mass personalization
  distribution technology. The acquisition of IP2M, effective in March
        2003, and since renamed +Media, has broadened the services the HealthCare
        Dialog division can use to reach its clients’ targets. +Media operates
        a marketing platform for healthcare that integrates radio, television,
        and the Internet to assist clients in targeting patients/consumers. +Media
        offers national reach using local radio and television stations on air
        messages and key search words to drive traffic to its’ clients
        content and advertising within the +Media platform. For example a TV
        station will run an on air story about allergies and inform their viewers
        that additional information is available on the TV stations Website.
        +Media provides the additional information and charges companies to advertise
        or provide content Typically, +Media will provide healthcare-related
        content to a media partners branded website and sell the entire package of
        radio, television and online media to its healthcare customers.  Through
        its media partnerships, +Media has immediate access to nearly 1,000 radio
        and television stations and an audience in excess of 100,000,000 people.  +Medias
        technology allows it to distribute different content and advertising
        to each site based on market and demographics. Healthcare Horizons owns, collects and distributes
        demographic, disease, and healthcare information through their permission-based
        data acquisition and management system. Healthcare Horizon offers clients
        an opportunity to market on a one-to-one basis. As part of its marketing
        services, Healthcare Horizons provides a co-op telephone interview in
        which custom questions are asked to develop prospects for their products
        and services. After sale of Healthcare Horizons, the previously collected
        data will still be available to Healthcare Dialog and the division will
        contract with outside services to gather this special data. Description of Data Dialog Division The Data Dialog Division consists of two business
        units, Data Dialog Direct and Mail Mogul, and the Azimuth Data. Data Dialog Direct implemented the new Data
        Dialog Select platform and web interface in December 2003. This new data
        platform and web interface provides small and mid-size businesses the
        ability to target, create, print and execute a direct marketing program
        online from their desktop computer. Data Dialog Direct offers online
        subscribers access to consumer and business databases containing information
        on over 100 million US businesses and consumers that can be searched
        by geographic and demographic information including age, income, and
        other demographic profiles. In addition, Data Dialog Direct offers thousands
        of specialized consumer and business lists from the nation’s largest
        data compilers. Data Dialog Direct also offers data services and products
        such as mail shop supplies, data appending and list cleansing.


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Data Dialog’s call center data
    platform, DigitalData, is designed to save inbound telephone call centers
    time and money by identifying
  the name and address of an incoming call by matching the phone number to information
  in the Digital Data database and providing the call center telephone operator
  information relative to the caller in real time. Mail Mogul provides corporate mailrooms and
        independent letter shops with mailing lists, mailing supplies, National
        Change of Address for data cleansing and enhancement, and a sales lead
        generation service. Mail Mogul is one of five organizations that work
        with the United States Postal Service to promote and facilitate direct
        mail and assist direct mailers. The Data Dialog division has consolidated
        its operations in Florida, California, and New York, closed its offices
        in Colorado and Connecticut, and dismissed its senior executive leadership.
        As discussed below in the “Management Discussion”, these
        changes have improved the operating results. There are no plans for further
        consolidation; indeed, during the second quarter of 2003 the sales staff
        in Florida and California offices was expanded. In addition, all investments
        in the former platform and data sources were written off during the fourth
        quarter. Description of Software Dialog Division Software Dialog, which was sold during the
        fourth quarter (see “Subsequent Events”, above), is
        a sales and technical support organization with telemarketing capabilities
        currently selling and distributing on an exclusive basis the Panda Software
        anti-virus software and products in the United Kingdom. The current product
        range consists of a complete set of antivirus solutions covering all
        home and business applications. Software Dialog sells exclusively through
        distributors and resellers. The products are also sold directly to corporate
        and business end users. Software Dialog holds an exclusive distribution
        license from Panda Software International for the sale, marketing, and
        distribution of Panda Software products throughout England, as well as
        in Scotland and Wales. The licence has a five-year term ending in January
        2006. After that, it automatically extends for two additional two year
        periods unless cancelled by either party. All of the anti-virus product users are initially
        licensed for 1, 2 or 3 years. Renewals, necessary to keep the virus list
        current, are an important part of the Software’s sales.


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Results of Operations

Dialog Group’s
      consolidated operations reflected in this quarter’s financial statements
      include all three divisions. The operations conducted by Healthcare Horizons
      and Azimuth are included in this quarter but not the first quarter as they
      were not acquired until April. The consolidated results of operations for
      the three months ended September 30, 2003 and 2002 are being presented
      on a pro-forma basis, which includes the results of operations of Dialog
      Group
      and its subsidiaries (except Healthcare Horizon, which results are immaterial)
      from July 1 to September 30 for the three month periods and from January
      1 to September 30 for the nine month periods. 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. Three Months ended September 30, 2003


Dialog Group Revenues for the three month period ended
        September 30, 2003 were $2,476,000 compared with $2,629,000 for the same
        period in 2002. Costs of Revenues for the three month period
        ended September 30, 2003 were $1,354,000 compared with $1,452,000 in
        the same period in 2002. The sources of the revenue and costs for each
        division are discussed below. Operating Expenses for the three month period
        ended September 30, 2003 were $1,755,000 compared with $1,939,000 for
        the same period in 2002. Central and administration costs were $545,000
        during the three month period ended September 30, 2003 compared with
        $96,000 for the same period in 2002. Increases in Administration Costs
        included reallocation of executive and office related costs from HealthCare
        Dialog, addition of accounting and financial staff, technical staff and
        additional expenses associated with regulatory requirements. Losses from Operations were $632,000 for the
        three months ended September 30, 2003 compared with $761,000 for the
        same period in 2002. Net Other Income was $216,000 for the three
        month period ended September 30, 2003 compared with ($71,000) for the
        same period in 2002. Other income in the quarter was comprised of $16,000
        in interest expense offset by other income of $233,000 due to a reduction
        in aged payables and other adjustments. The Net Loss for the three months ended September
        30, 2003 was $416,000 compared with $832,000 in the same period in 2002.


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Healthcare Dialog For the three months ended September
    30, 2003, the Healthcare Dialog’s revenues were $920,000 compared with
    $1,392,000 for the same period in 2002, a decrease of about $472,000 or 34%. The reduction
  in revenues during the third quarter of 2003 was due to two major marketing
  programs Healthcare Dialog sold to a pharmaceutical client being in the design
  and production stage simultaneously in 2002. Those programs did not repeat in
  2003 although Healthcare Dialog has contracted with the client in 2003 to manage
  these programs for fixed monthly retainers contributing revenues of approximately
  $70,000. In addition approximately $125,000 of +Media sales were lost during
  the third quarter as a result of a major client electing to work directly with
  TV and Radio stations rather than utilizing the company. Costs of Revenues for the three month period
        ended September 30, 2003 were $646,000 representing 70% of third quarter
        revenue compared with $799,000 and 57% of revenues for the same period
        in 2002. In the third quarter of 2003, a greater percentage of revenues
        were spent on subsidiary company marketing programs that did not result
        in revenues for Healthcare Dialog compared with 2002, increasing Healthcare
        Dialog’s cost ratios. Operating expenses for the three month period
        ended September 30, 2003 were $298,000 compared with $675,000 for the
        same period in 2002. The decrease between periods resulted from staff
        reductions and office consolidations ($211,000) and reduction and reallocation
        of certain executive expenses to Dialog Group administrative cost ($196,000). Net loss from operations for the three month
        period ended September 30, 2003 were $30,000 compared with a loss of
        $125,000 in the same period in 2002. While sales during the quarter were
        lower, reduced marketing and administrative expenses during 2003 improved
        the bottom line by almost $100,000. Data Dialog: Data Dialog’s revenues were $1,011,000
        for the three months ended September 30, 2003 compared with $961,000
        for the same period ended September 30, 2002, an increase of about $50,000
        or 5%. Revenues in the third quarter were buoyed by strong demand for
        Mail Mogul’s mail shop channel but were negatively impacted by
        problems with the ThinkDirectMail online subscription platform and its
        data sources that resulted in end users inability to purchase directly
        from the Web. The problems became worse during the fourth quarter and
        sales declines continued until the new platform and data sources could
        be launched in December 2003. Costs of Revenue were $513,000 for the three
        months ended September 30, 2003, representing 51% of third quarter revenue
        compared with $551,000 and 57% of revenue for the same period in 2002.
        In the third quarter Data Dialog’s efforts to obtain data from
        new supplies that offer higher margins and to offer data from recently
        acquired assets began to reduce the Costs of Revenue. Operating expenses were $528,000 for the three
        months ended September 30, 2003 compared with $860,000 for the same period
        in 2002. The decreases were due to a reduction of executive positions,
        consolidation of staff, specifically technology and management staffing,
        and closure of offices.


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Net Loss from Operations for the three months ended
  September 30, 2003 was $30,000 compared with $450,000 for the same period in
  2002. This improvement was as a result of increased revenues and higher margins.
  The higher margins were realized as a result of the utilization of recently
  acquired data and the sourcing of data from suppliers willing to accept lower
  prices. Net Other Income was $221,000 for the quarter
        compared with $0 for the same period in 2002. Other income in the quarter
        was comprised of $8,000 in interest expense offset by other income of
        $229,000 due to a reduction in aged payables and other adjustments. Net Profit for the three months ended September
        30, 2003 was $191,000 compared with a net loss of $450,000 for the same
        period in 2002. Software Dialog: For the three months ended September 30, 2003,
        the Software Dialog’s net revenues were $545,000 as compared with
        $275,000 for the same period in 2002. This increase represents almost
        a 100% improvement and is attributable to the opening up new sales routes
        and the continuing expansion of channel sales through resellers and distributors. Costs of Revenue were $195,000 for the three
        months ended September 30, 2003, representing 36% of revenue compared
        with Costs of Revenue of $102,000 for the same period in 2002 representing
        37% of Revenue. Operating expenses were $384,000 for the three
        months ended September 30, 2003 compared with $287,000 for same period
        in 2002 an increase of 34%. The increases in expenses were mainly in
        marketing and depreciation. Net Other Income was $3,000 for the three
        months ended September 30, 2003 compared with ($2,000) for the same period
        in 2002. Net loss for the three months ended September
        30, 2003 was approximately $30,000, compared with a loss of $115,000
        for the in 2002. Nine Months ended September 30, 2003 Dialog Group Revenues for the nine months ended September
        30, 2003 were $8,180,000 compared with $7,787,000 for the same period
        in 2002. The Costs of Revenue for the nine months ended
        September 30, 2003 period were $4,502,000 in 2003 compared with $4,277,000
        in 2002. The sources of the revenue and costs for each division are discussed
        below.


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Operating Expenses for the nine months
    ended September 30, 2003 were $5,401,000 compared with $9,781,000 for the
    same period in 2002.
  These amounts include each division’s operating costs and the Dialog
  Group’s central administrative costs. Central and administrative costs for the nine
        months ended September 30, 2003 were $1,693,000 compared with $1,069,000
        for the same period in 2002. Increases in Administration Costs included
        reallocation of executive, technical, administrative and general office
        related costs from HealthCare Dialog (approximately $475,000, along with
        the addition of accounting and financial staff, and additional expenses
        associated with regulatory requirements.) Losses from Operations were $1,724,000 for
        the nine months ended September 30, 2003 compared with $6,271,000 for
        the same period in 2002. Other Income was $154,000 for the nine months
        ended September 30, 2003 compared with $1,205,000 for the same period
        in 2002. The 2003 Other Income was comprised of $11,000 of interest income,
        $151,000 in interest expense, and $295,000 of other income. The 2002
        Other Income is comprised of $303,000 of interest expense and $831,000
        of gain on debt settlements, $240,000 of gain on the sale of options,
        and $437,000 of other income. The Net Loss for the nine months ended September
        30, 2003, was $1,569,000 compared with $5,066,000 for the same period
        in 2002.


Healthcare Dialog

Revenues for the nine months ended September
      30, 2003, were $3,638,000 compared with $4,486,000 for the same period
      in 2002, a decrease of $848,000, a decline of 22 %. The reduction
      in revenues due to two major marketing programs Healthcare Dialog sold
      to a pharmaceutical client being in the design and production stage simultaneously
      in 2002. That did not occur in 2003 although Healthcare Dialog has contracted
      with the client in 2003 to manage these programs for fixed monthly retainers.
      During the third quarter a major client elected to work directly with TV
      and Radio stations rather than utilizing the company. Costs of Revenue for the nine months
              ended September 30, 2003 were $2,494,000 or 69% compared with $2,517,000
              or 56% for the same period in 2002. In the third quarter of 2003,
              a greater percentage of revenues came from print and media products
              as compared with 2002, increasing Healthcare Dialog’s cost
              ratios. Operating expenses for the nine months
              ended September 30, 2003 were $1,127,000 compared with $3,751,000
              for the same period in 2002. The decrease of $2,624,000 resulted
              from staff reductions, office consolidations and reallocation of
              certain executive expenses (over $500,000) to Dialog Group administrative
              cost as well as management’s decision in 2002 to recognize
              a loss on goodwill impairment of $625,000, loss on website impairment
of $300,000 and loss on fixed assets disposal of $95,000.


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Net loss for the nine months ended September 2003
  was $53,000 compared with a net loss of $1,799,000 for the same period in 2002.
  Reduced marketing and administrative expenses along with the 2002 asset write
  downs combined to improve the bottom line by over $1,700,000. Data Dialog: Revenues were $3,137,000 for the nine months
        ended September 30, 2003 compared with $2,535,000 for the same period
        in 2002, an increase of $602,000 or 24%. The higher sales were despite
        problems with the Division’s platform and web interface, the disruption
        to sales caused by the relocation of Data Dialog’s sales offices
        from Colorado to Florida and the integration of new assets. During the
        third quarter the company’s website was not fully fictional, as
        a result customers were unable to access data online and had to rely
        on assistance from the company’s telemarketing staff. These problems
        were offset by new strong sales in the Mail Mogul business. Costs of Revenue were $1,489,000 for the nine
        months ended September 30, 2003, representing 47% of revenue compared
        with $1,538,000 and 61% for the same period in 2002. The reduction of
        $49,000 is a result of contracting with vendors that offer better margins
        that those used during the same period in 2002. Operating expenses for the nine months ended
        September 30, 2003 were $1,605,000 compared with $2,755,000 for the same
        period in 2002. These decreases were accomplished by a reduction of executive
        positions, consolidation of staff, specifically technology and management
        staffing, and closure of offices. Net income from operations for the nine months
        ended September 30, 2003 were $43,000 compared with a net loss of $1,757,000
        for the same period in 2002. Increased sales and improved margins combined
        with reduced salary, marketing, and administrative expenses combined
        to improve the profitability of this division. Other Income was $211,000 for the nine months
        ended September 30, 2003 compared with other losses of $64,000 for the
        same period in 2002. The 2003 Other Income was comprised of $6,000 of
        interest income, $24,000 in interest expense, and $229,000 of other income.
        The 2002 Other Loss is comprised of $67,000 of interest expense and $3,000
        of other income. Net income for the nine months ended September
        30, 2003 was $254,000 compared with a loss of $1,822,000 for the same
        period in 2002. Software Dialog: Revenues for the nine months ended September
        30, 2003 were $1,404,000 compared with $766,000 for the same period in
        2002. The increase of $638,000 or 83% is attributable to the opening
        up of new sales routes and the continuing expansion of channel sales
        through resellers and distributors.


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Costs of revenue for the nine months ended September
  30, 2003 were $520,000 or 37% compared with $223,000 or 29% for the same period
  in 2002. Operating expenses for the nine months ended
        September 30, 2003 were $976,000 compared with $2,206,000 for same period
        in 2002. The 2002 expenses included a loss on goodwill impairment of
        $1,102,000. Loss from operations for the nine months ended
        September 30, 2003 was $91,000 compared with $1,663,000 for the same
        period in 2002. The losses in 2003 were reduced as a result of increased
        revenue from Software Dialogs new channel approach, changes in the commission
        system, and control of overhead. Other Income was $66,000 for the nine months
        ended September 30, 2003 compared with $345,000 for the same period in
        2002. The 2003 Other Income was comprised of $3,000 of interest income,
        $3,000 in interest expense, and $66,000 of other income. The 2002 Other
        Income is comprised of $35,000 of interest expense and $380,000 of other
        income. Net loss for the nine months ended September
        30, 2003 was $25,000 compared with $1,318,000 for the same period in
        2002. Liquidity & Capital Resources Dialog Group had a consolidated working capital
        deficit of approximately $3,389,000 on September 30, 2003 as compared
        to a deficit of approximately $3,121,000 at December 31, 2002. The year
        end deficit did not include the December 31, 2002 working capital deficits
        of the two acquired companies, HealthCare and IP2M. Their working capital
        deficits as of year end were approximately $908,000 and $1,379,000, respectively.
        During the quarter ended September 2003, Dialog Group raised $250,000
        through the sale of its Class E preferred stock. In addition, creditors,
        including Company executives, accepted Class E preferred stock in settlement
        of $463,000 of current liabilities.


Inflation

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


Currency exchange risk

Software Dialog sells
    its products, pays its expenses, and keeps its records in British Pounds
    Sterling. Although currency fluctuations do not represent and economic risk
    to Software Dialog, changes in exchange rates between the US Dollar and the
    British Pound can cause changes in the dollar value of assets and liabilities
    on Dialog Group’s balance sheet and may make period results not strictly
    comparable.


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Item  3. Controls and Procedures

During all of 2003, Dialog Group’s disclosure
  controls and internal control over financial reporting were central concerns
  of management and the Board of Directors. Accounting operations at all United
  States offices were centralized in New York and Florida and a professional
  accounting and control staff has been appointed. At the Annual Meeting in May,
  Dialog Group’s first independent directors were elected and an audit
  committee was appointed. As Dialog Group has consolidated financial
        operations, they can be under the direct supervision of the Chief Financial
        Officer. Management believes that much progress towards integrating the
        operations of its acquisitions, but the need for extensions of time to
        file financial reports shows that progress is still required.


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|Part II. | Other Information
|-------- | -----------------
|         |                  

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


|       |                  
|------ | -----------------
|Item 1 | Legal Proceedings
|       |                  

Eviction As the result of a continuing dispute with
        the landlord of the Connecticut office, ThinkDirectMarketing was served
        with a Summary Process Complaint on March 12, 2003. The Plaintiff,
        Seaboard Stamford Investors Associates, Inc. seeks termination of the
        lease and damages. ThinkDirectMarketing also wished to terminate the
        lease. ThinkDirectMarketing has been withholding rent since the beginning
        of the year. A hearing in the State of Connecticut Superior Court has
        set a return date of March 21, 2003. In addition on June 24, 2003 Seaboard
        also filed a complaint in the United States District Court, District
        of Connecticut. ThinkDirectMarketing has retained a local attorney to
        respond in this matter and the return date has been postponed. In October
        the action was dismissed, but the landlord is expected to refile its
        action. On or about December 14 of 2001 Lisa Pelatti
        a shareholder and former employee of P.V.D.& Partners, Inc. filed
        a complaint with the United States District Court for the Southern District
        of New York against P.V.D. & Partners, Inc., Peter V. DeCrescenzo
        and Healthcare Dialogue, Inc. to recover unpaid salary and expenses which
        she claimed are owed. She also attempted to exchange shares of PVD for
        shares of Healthcare Dialog. An agreement has been reached under which
        final payments totaling $12,500 need to be made prior to the end of November
        2003. The full amount of the settlement has been accrued on Dialog Group’s
        books. Suppliers On July 25, 2003 Acxiom Corporation commenced
        an action against Dialog Group and its ThinkDirectMarketing subsidiary
        in the Circuit Court of Faulkner County, Arkansas. The action is for
        a breach of written contracts, including a promissory note and a Data
        License Agreement. Acxiom seeks $400,000 on a note and $295,414.67 for
        unpaid data usage, and $1,250,000 for unused minimum usage requirements
        for 2003 and 2004. Dialog Group and its subsidiary have appeared in the
        proceeding and plan to vigorously contest the claims. Dialog Group has
        moved to be dismissed as a party because it never joined in the agreements
        which are the basis of the lawsuit. As of the end of June, the note for
        $400,000 and payables of $209,526 are accrued in the financial statements. Immequire, LLC filed an action against Healthcare
        Horizons in the Superior Court of New Jersey, Morris County claiming
        unpaid invoices of about $54,000. The attorney for Healthcare Horizon,
        who was handling this matter before the acquisition, has withdrawn from
        the case. Dialog Group has been working directly with the lawyers for
        Immequire to resolve this matter. The full amount is accrued in the Healthcare
Horizons’ financial statements.


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Prior to the acquisition of Healthcare
    Horizon, a judgment was awarded to Chriscom, Inc. At this time $10,000 is
    still due
  Chriscom. The full amount is accrued in Healthcare Horizons’ financial
  statements. In December Chriscom named Dialog Group in its suit. On May 30, 2003 Demkin Printing filed a complaint
        against Healthcare Dialog in the Supreme Court of the State of New York,
        New York County. The complaint seeks $85,076.27 for printing services
        and attorney’s fees. The Company has filed an answer and has been
        working with Demkin. The parties have agreed in principal to settle the
        claim for $69, 352.87. Employees On or about April 1, 2003, Dialog Group received
        a summons from a Colorado state District Court seeking enforcement of
        Dialog Group’s termination agreement with Keith Goodman requiring
        the payment of money. Dialog Group is attempting to resolve this matter
        on the basis of the existing agreement and will retain local counsel
        to defend itself. The full amount due under the termination agreement
        has been accrued in Dialog Group’s financial statements. After
        a Colorado court awarded Mr. Goodman a judgment, Dialog Group was able
        to work out a settlement totaling $47,330. As of December 1, 2003 $14,666
        remains to be paid. In April 2003, Dean Eaker and Bruce Biegel
        commenced an arbitration proceeding against Dialog Group relating to
        the termination of their employment before the American Arbitration Association
        in New York City. They seek monetary damages in the amounts of $258,789
        and $117,000, respectively. Dialog Group is vigorously contesting the
        claims, but it has already accrued a total of $137,916 against this liability.
        As of this date, although both sides continue to exchange documents,
        neither Eaker nor Biegel has deposited the fee necessary to begin the
        arbitration. Software Dialog has sued by Selection One
        Ltd, in regard to recruitment fees in the sum of £28,000 ($45,000)
        on December 15th at Dartford District Court. This case was settled and
        the amount due paid. Except as specified above, there are no material
        presently pending legal proceedings to which Dialog Group is a party,
        or to which any of its properties or assets are subject.


|Item 2(c) Recent Sales of Unregistered Securities
|-------------------------------------------------
|                                                 

Regulation S Transactions On October 4, 2002 Dialog Group authorized
        Starz Investments Limited to sell up to 10,000,000 shares of its Common
        Stock to investors located outside of the United States. The shares were
        offered pursuant to an exemption from registration afforded by Regulation
        S to the Securities Act of 1933. Shares sold pursuant to Regulation S
        are deemed restricted and may not be sold to any U.S. Person (as that
        term is defined in the Regulation) for a period of one (1) year from
        date of sale. During the quarter, 428,875 shares were issued for a total
        consideration of $25,252 at an average price of $0.06. All of these funds
        were used to pay commissions related to the sale of shares by Starz Investments
        Limited.


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Related Purchases Two of the Company’s outside directors
        agreed to accept 211,765 shares of common stock in lieu of the Company’s
        obligation to pay them director’s fees aggregating $36,000 each.
        The per share value used for this conversion was $0.17, the closing price
        on May 28, 2003, the date of the Company’s annual meeting. This
        transaction is exempt from registration under the Securities Act pursuant
        to section 4(2) because was a private sale with no intention to redistribute
        the securities. A restrictive legend was placed on the certificate and
        a stop order was placed with Dialog Group’s transfer agent. Other issuances On September 26, 2003, 127,200 additional
        shares were issued to ten investors. These were issued without additional
        compensation because Dialog Group had not complied with its obligation
        to register shares previously sold to these holders. Each holder had
        previously represented himself in writing to be an accredited investor
        who was purchasing their shares for investment. A restriction on resale
        has been placed with the Dialog Group’s transfer agent and a legend
        has been placed on each 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). On February 12th, 2003 Dialog Group
        agreed to issue 200,000 shares to Knightsbridge Capital for consulting
        services. 67,600 shares were issued during the second quarter of 2003.
        During this quarter, the remaining 132,400 shares were issued to Knightsbridge’s
        Capital’s designees pursuant to this agreement. Dialog Group valued
        these shares at $0.119 per share. The issuance of these shares is exempt
        from registration under section 4(2) of the Securities Act as a private
        transaction because the shares were acquired for investment and each
        certificate bears restrictive legends and is subject to a stop transfer
        order. Issuance of the additional shares is still pending. On September 11, 2003, Dialog Group entered
        into an agreement with Triple Crown Consulting, Inc. under which Triple
        Crown will inform the brokerage community, the Dialog Group’s shareholders
        and the general public concerning financial public relations and promotional
        matters relating to the Dialog Group and its business. The term of the
        agreement is six months. Triple Crown has received 2,000,000 shares for
        common stock for its services. Dialog Group valued these shares at $0.063
        per share. The issuance of these shares is exempt from registration under
        section 4(2) of the Securities Act as private transactions because the
        shares were acquired for investment and the certificates bear restrictive
        legends and are subject to stop orders. On July 22, 2003, 66,666 shares were sold
        for a total consideration of $10,000 or 15 cents a share. The individual
        represented himself in writing to be an accredited investor who was purchasing
        these shares for investment. A restriction on resale has been placed
        with the Dialog Group’s transfer agent and a legend has been placed
        on each 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).


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During September and October 2003
    an investor purchased 10 shares of Dialog Group’s new Class E Preferred
    Stock at a price of $10,000 per share. At the same time a retirement fund
    for the benefit of Peter
  DeCrescenzo purchased fifteen shares at $10,000 per share and a group of Dialog
  Group creditors, including retirement funds for the benefit of Peter and Rita
  DeCrescenzo, Vincent DeCrescenzo, Sr., and Cindy Lanzendoen, Vincent DeCrescenzo
  Sr., and Ms. Lanzendoen, individually, and other unrelated trade creditors
  exchanged $620,000 of current debt for a total of 62 shares of Class E Preferred
  Stock. Each Class E Share has a liquidation preference
        of $10,000, pays a quarterly dividend of $400, which Dialog Group may
        elect to pay in Common Stock, and is convertible, commencing July 1,
        2004, into 83,333 shares of Common Stock. After October 1, 2005, Dialog
        Group may redeem the Preferred Shares at 120% of their liquidation preference.
        Each share will cast 83,333 votes which will be counted as part of the
        vote of the Common Shares for all purposes. In connection with the sale or exchange for
        debt for the Class E Preferred Shares, each purchaser received a warrant
        to purchase, after July 1, 2004, 25,000 shares of Common Stock for a
        price of $0.16 per share. Warrants to purchase a total of 2,175,000 shares
        have been issued to the purchasers of the Class E Preferred Stock. The
        warrants are exercisable until September 30, 2008. Each Class E purchaser represented himself
        in writing to be an accredited investor who was purchasing these shares
        for investment. A legend has been placed on each certificate and each
        warrant restricting transfer in accordance with the Securities Laws.
        These is no market for these securities and they are not now convertible
        into or exercisable for securities for which there is a market Because
        of these factors, this sale is exempt from registration under the Securities
        Act as not involving a public distribution under section 4(2). The proceeds of all shares issued for cash
        were used for general business purposes.


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

(a)Exhibits


|              |                                             
|------------- | --------------------------------------------
|ExhibitNumber | 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

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SIGNATURES

In accordance with the
    requirements of the Securities Exchange Act of 1934, the registrant has caused
    this quarterly report on Form 10-QSB to be signed in its behalf by the undersigned
    thereunto duly authorized on the 7th day of January 2004.


Dialog Group, Inc. By:/s/
  Peter V. DeCrescenzoPeter V. DeCrescenzo, Chairman, President & CEO




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INDEX TO EXHIBITS



|Exhibit
Number |  | Page
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 | 

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