`FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



  [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                       Commission File Number: 33-12029-D

                      for the year ended December 31, 2002


                              IDIAL NETWORKS, INC.

                                    formerly
                        Desert Springs Acquisitions, Inc.

                Nevada                                   75-2863583
  (Jurisdiction of Incorporation)           (I.R.S. Employer Identification No.)

2204 Timberloch Place Suite 225, The Woodlands, TX              77380
   (Address  of  principal  executive  offices)              (Zip  Code)

Registrant's  telephone  number,  including  area  code:         (281) 465-3100

Securities  registered  pursuant  to  Section  12(b)  of  the  Act:     None

Securities  registered  pursuant  to  Section  12(g)  of  the  Act:
Common Stock, $.005 par value per share

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

Not[]  (Indicate  by check  mark  whether if  disclosure  of  delinquent  filers
('229.405)  is not  and  will  not to the  best  of  Registrant's  knowledge  be
contained  herein,  in definitive proxy or information  statements  incorporated
herein by reference or any amendment hereto.)

The Company's revenues for the year ending December 31, 2002 were $11,575,278.



As  of  December  31,  2002:

the  number  of  shares  outstanding  of  the  Registrant's   Common  Stock  was
106,442,055.

the  aggregate  number  of  shares  held  by  non-affiliates  was  approximately
73,488,851.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company was $734,888.51 as of March 28, 2003, based on the average bid and asked
price of $.01 per share as of that date.

                       Exhibit Index is found on PAGE 35.



Introduction

PART  I

Item  1.  Description of Business.
      (a)  Historical  Information
      (b)  Our  Business

Item  2.  Description  of  Property

Item  3.  Legal  Proceedings

Item  4.  Submission  of  Matters  to  a  Vote  of  Security  Holders

Item  5.  Market  for  Common  Equity  and  Stockholder  Matters
      (a)  Market  Information
      (b)  Holders
      (c)  Dividends
      (d)  Sales  of  Unregistered  Common  Stock  2000

Item  6.  Managements  Discussion  and  Analysis  or  Plan of Operation

Item  7.  Financial  Statements

Item  8.  Changes  in  and  Disagreements  with  Accountants on  Accounting  and  Financial  Disclosure

Item  9.  Directors  and  Executive  Officers,  Promoters  and Control Persons; Compliance with Section 16(a) of the Exchange Act.

Item  10.  Executive  Compensation

Item  11.  Security  Ownership  of  Officers and Directors and 5% Owners

Item  12.  Certain  Relationships  and  Related  Transactions

Item  13.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)  Financial  Statements
      (b)  Form  8-K  Reports

Item 14.   Controls and Procedures






                                     PART I


                         ITEM 1. DESCRIPTION OF BUSINESS


(A)  HISTORICAL  INFORMATION.  We were  incorporated  in May  1997,  as a Nevada
Limited Liability  Corporation as WoodComm LLC. In April 1999,  WoodComm LLC was
reorganized from an LLC to a Nevada  Corporation  WoodComm  International,  Inc.
(WCI). In December 1999, Desert Springs Acquisition Corporation (Desert Springs)
acquired all of the issued and outstanding  common shares of WCI in exchange for
30,903,000  shares of common stock of Desert  Springs.  For financial  reporting
purposes,   the  business   combination  was  accounted  for  as  an  additional
capitalization of the Company (a reverse  acquisition with WCI as the acquirer).
WCI is considered  the surviving  entity.  The historical  financial  statements
prior to the merger are those of WCI. Desert Springs only assets and liabilities
consisted of a liability for $80,346.  The  liabilities  were not assumed in the
merger.

In January 2000,  Desert Springs moved its state of  incorporation  to Nevada by
merger of the Colorado Corporation with and into iDial Networks,  Inc. (a Nevada
corporation).  Our  administrative  offices are located at 2204 Timberloch Place
Suite 225, The Woodlands,  Texas 77380.  Our telephone  number is (281) 465-3100
and our website can be found at  www.idialnetworks.com.  The  information on our
website is not part of this Form 10-KSB.

We provide  telecommunication  services  to  customers  around the world.  These
services  include  pre-paid  telephone  calling cards and reduced rate telephone
calls using the Internet.  Telephone  calls that are initiated over the Internet
combine user-friendly account tracking (i.e. monitoring on-line billing and call
records)  with  the  low  tariffs  of  Unites  States  based  telecommunications
carriers,  via calling  centers  accessed  directly from home to anywhere in the
world.

In August 2000, we acquired 100% of the stock of Whoofnet.com,  Inc. in exchange
for  the  issuance  of  9,893,500  shares  of  our  common  stock.  In  2001  we
discontinued   the  operations  of   Whoofnet.com   due  to  alleged  fraud  and
misrepresentation  by the former owner.  In 2002 in  conjunction  with a default
judgment in our favor against the former owner of Whoofnet.com, we wrote off the
remaining liabilities of Whoofnet.com.

In November 2000, we acquired 100% of the stock of 2sendit.com, Inc. in exchange
for  the  issuance  of  4,199,998  shares  of  our  common  stock.  In  2002  we
discontinued the operations of 2Sendit,  due to loss of a major customer in late
2001 and overall tighter restrictions in the broadcast fax industry.


In April of 2002 the Company  incorporated a new wholly owned subsidiary,  Dibz,
Inc. Dibz produces and markets the "Dibz card" which is a prepaid "stored value"
card that can be used to purchase  online  digital  content and to make discount
phone  calls.  For the year  ended  December  31,  2002  Dibz  was  still in the
development phase and had no significant revenue.

Overview

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

The Company has two material lines of business,  providing  Internet-based voice
telecommunications to customers around the world via retail pre-paid phone cards
and the  wholesaling  of phone  minutes over our growing VOIP  network.  Revenue
attributable to the Internet based voice  communications  phone card segment was
approximately  $4,316,000  and  $3,232,000 for the years ended December 31, 2002
and 2001, respectively. Revenue attributable to the wholesaling of phone minutes
was approximately  $7,259,000 and $631,000 for the years ended December 31, 2002
and 2001, respectively.

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

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

Our Telephone Service Products

Calling Cards

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our Wireless Services

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

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

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

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

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

Additional Services

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

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

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

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

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

Our International Networks

Our Enhanced Services Platform.  Our enhanced services platform is a specialized
telephone  switch based on  technologies  from Cisco,  Microsoft and Dialogic (a
wholly owned  subsidiary of Intel Corp.).  It is connected to our website,  data
base, and to our network of outgoing and incoming  telephone  lines and Internet
lines. It sets up all customer  account and PIN information  when a calling card
is purchased and immediately activates the calling card so it can be used at the
time of purchase. The platform also accepts and evaluates all calls from calling
card  holders  over the toll free number and over the  Internet and confirms the
validity of the calling card and remaining balance. We have also programmed into
the  platform  a lowest  cost  routing  matrix,  which is simply a program  that
selects  the lowest  priced  route from our  multiple  carriers.  This means our
platform will select the cheapest  route to send a call based upon where we have
established  gateways,   which  are  central  locations  housing  the  equipment
necessary to send and receive calls internationally. We believe our platform can
currently  support  approximately  4128  simultaneous  calls and process over 60
million  minutes of traffic per month.  Our platform is expandable to carry more
traffic by adding  additional  telephone  lines and  equipment.  Focusing on the
international  market, the use of our platform is spread throughout the day as a
result of the different world time zones.

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

Our Internet  Gateway  Network.  As of December 31, 2002,  we had  international
gateways  operational  in Sri Lanka and  Thailand.  As of such date, we also had
domestic  gateways  operational  in Los Angeles and New York. We intend to place
Internet  gateways  in  various  other  countries.  Before we place a gateway in
another country,  we enter into contractual  relationships with local persons or
entities  to operate  them.  We  typically  own or lease the gateway or have the
right to purchase it and the local person or entity is responsible for procuring
local Internet provider  connection and local telephone lines and complying with
local law. Our  contracts  with the local person or entity are  generally  for a
one-year term and are renewable  unless either party  declines to renew.  We pay
the local  person or entity a  negotiated  rate per  minute for  terminating  or
originating calls through the gateway.

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

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

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

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

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

During 2002 and 2003,  we began  rolling  out our state of the art SIP  (Session
Initiation  Protocol)  infrastructure.  Our SIP network powers our new broadband
focus.  The SIP protocol is one of the most advanced  VoIP  protocols and unlike
its predecessors,  which were modeled after traditional telephony protocols, SIP
has the ability to scale with a  distributed  architecture  and at a lower cost.
SIP's  superior   attributes   also  include  faster  and  more  cost  effective
development  and lower  hardware  requirements,  which  allows us to incur lower
capital  expenditure  costs.  During  2003,  we intend to migrate  our  existing
products  and  services to this new  network.  At the same time,  we continue to
build our SIP  expertise  through  relationships  with other SIP leaders such as
Cisco and Microsoft.

Growth Strategy

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

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

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

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

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

Sales and Marketing

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

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

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


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

Customer Support and Service

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

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


Technology

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

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

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

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

o    Multiple  High speed links (10 megabits per second or greater  each) to the
     Internet;

o    Clustered Servers for web and data base  applications  running Windows 2000
     Server, Linux and Microsoft SQL Server 2000;

o    Microsoft  Internet  Information Server 5.0 has been chosen for its ability
     to secure sensitive customer information through SSL encryption; and

o    Microsoft SQL Server 2000 is a relational database.  All customer names and
     addresses,  PINs,  number of  purchases  and call  records  are secured and
     stored within this database.

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

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

Future Products

The market for broadband access services is projected to grow significantly over
the next several  years.  Broadband  access  alone,  however,  is not a complete
solution.  As infrastructure  pipes become  commodities,  maintaining margin and
profitability on them is becoming increasingly  difficult for service providers.
We believe that  broadband  market  success will be determined by the ability to
layer high-margin  enhanced  services and applications over the  infrastructure.
Market  leaders  will  need  innovative,   value-added   solutions  to  maintain
customers, reduce churn and grow their customer base.

We have been developing a suite of next-generation Broadband Phone products that
we believe will encompass a rich sub-set of the voice-related services broadband
providers will seek to deploy in the near-term. These products will build on our
current  service  offerings,  and include a more  diverse  set of devices  (both
hardware  devices as well as  "soft-phones")  along with additional  value-added
functionality  and features that will appeal to a wide  potential  customer-base
such as voice mail and conference calling.

Government Regulation

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

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

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

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

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

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

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

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

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

Competition

With  respect to prepaid  calling  cards,  we compete  with many of the  largest
telecommunications  providers,  including AT&T, MCI WorldCom,  Qwest and Sprint.
These companies are substantially larger and have greater financial,  technical,
engineering,  personnel and marketing  resources,  longer  operating  histories,
greater name  recognition  and larger customer bases than we do. We also compete
with smaller,  emerging  carriers in the prepaid calling card market,  including
Net2Phone,  IDT Corp.  and Delta  Three  Corp.  We may also  compete  with large
operators in other countries.  These companies may have larger, more established
customer bases and other competitive advantages. Deregulation in other countries
could also result in significant  rate  reductions.  We believe that  additional
competitors  will be attracted to the prepaid  card  market.  These  competitors
include Internet-based service providers and other telecommunications companies.
Competition  from existing or new  competitors  could  substantially  reduce our
revenues from the sale of these cards. A general  decrease in  telecommunication
rates charged by international long distance carriers could also have a negative
effect on our operations.

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

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

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

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

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

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


     PROPRIETARY  TECHNOLOGY.  We  use a  combination  of  our  own  proprietary
software applications and commercially  available licensed technology to conduct
Internet  and  telephone  routing  operations.  We  have  developed  proprietary
software  which  permits a customer  to purchase a virtual  calling  card on the
website  using a credit  card  and to have  the  virtual  calling  card  account
activated  while on the website.  Also  proprietary are various credit and fraud
management  applications,  which aid in checking credit and limiting  fraudulent
transactions.  Additionally,  we have developed proprietary software that allows
for the real-time provisions of customers on the network using a credit card and
have immediate access to multiple accounts and services serving the wireless and
residential/soho markets.

     FINANCING PLANS. For information, please see Item 6 of Part II Management s
Discussion and Analysis.

     POSSIBLE  GROWTH  THROUGH  ACQUISITIONS.  We will seek to grow our business
through  acquisitions of other companies in our business or a rebated  business.
We review  acquisition  candidates  from time to time. If a candidate  meets our
criteria, we may elect to acquire it using cash, Common Stock, or combination of
both.

     EMPLOYEES.  As of  December  31,  2002,  we had 25  full-time,17  part-time
Employees,  and 3 parties that provided  services as  independent  contractors..
None of our employees are  represented by a labor union. We have not experienced
any work stoppages and consider our employees relations to be good.

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

     YEAR 2000/2001.  We have not experienced any "Year 2000/2001"  technical or
computer  deficiencies or compliance issues to date,  including  problems of our
vendors or suppliers that might indirectly have effected the productivity of our
Company.



                        ITEM 2. DESCRIPTION OF PROPERTY.

     We maintain our administrative  offices at 2204 Timberloch Place Suite 225,
The Woodlands, Texas 77380. The facility is approximately 1,800 square feet. The
rent is  approximately  $3,300 per month.  The lease  expires in August 2003. We
also maintain a facility at 10800 E. Bethany Drive,  Suite 380 Denver,  Colorado
80014.  The office site is  approximately  1,500 square feet where the rental is
approximately  $1,340 per month.  The  facility  is leased for two years  ending
September  30,  2003.   We  maintain  a  facility  in  Colombo,   Sri  Lanka  of
approximately 2,500 square feet. The rent is approximately  $1,500 per month and
is used as a customer service and R&D staff facility.  We believe that our space
is  adequate  for our  current  needs.  As we expand,  we expect  that  suitable
additional space will be available on commercially reasonable terms, although no
assurance can be made in this regard. We also believe our property is adequately
covered by insurance.

On April 1, 2003, our main administrative  offices in the Woodlands,  Texas will
be moving to a suite 140 in the same building.  The rent will increase to $3,500
per month and the square  footage  will  increase to  approximately  3000 square
feet.


                           ITEM 3. LEGAL PROCEEDINGS.

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

o    On  August  7,  2000,  in   accordance   with  an  Agreement  and  Plan  of
     Reorganization   (the   "Agreement"),   the   Company   agreed  to  acquire
     Whoofnet.Com,  Inc., a Florida  Corporation  ("Whoofnet"),  for issuance of
     10,000,000 shares of common stock of the Company.  Thereafter,  the Company
     instituted legal proceedings against Whoofnet and Mr. Carl Battie (Whoofnet
     and  Mr.   Battie  are   hereinafter   collectively   referred  to  as  the
     "Defendants") in the District Court for Dallas County,  Texas (the "Court")
     alleging that the Defendants  violated certain terms of the Agreement.  The
     Company was seeking damages  resulting from the violations of the Agreement
     as well as the rescission of the Agreement. On September 9, 2002, a Default
     Judgment was entered against the Defendants as a result of their failure to
     appear and the Court held that,  among  other  items,  all shares of common
     stock of the Company issued to  shareholders of Whoofnet should be canceled
     and returned to the Company. The Company, pursuant to the Default Judgment,
     canceled  17,949,499 shares of common stock,  which is the number of shares
     issued in connection with the Agreement on a post-forward  split basis that
     was implemented in November 2000.


          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

            ITEM 5. MARKET FOR COMMON EQUITY AND STOCKHOLDER MATTERS.


(A) MARKET  INFORMATION.  We are authorized to issue up to 500,000,000 shares of
common  stock,  par value  $.005.  . As of the date of this Annual  Report,  the
securities of the Company are traded on the Over-The-Counter Bulletin Board, but
the  market is young and  sporadic.  Quotations  for,  and  transactions  in the
Securities  so traded are  capable  of rapid  fluctuations,  resulting  from the
influence of supply and demand on relatively thin volume. There may be buyers at
a time  when  there are no  sellers,  and  sellers  when  there  are no  buyers,
resulting in significant  variations of bid and ask quotations by  market-making
dealers,  attempting to adjust  changes in demand and supply.  A young market is
also particularly vulnerable to short selling , sell orders by persons owning no
shares of stock,  but intending to drive down the market price so as to purchase
the shares to be  delivered  at a price below the price at which the shares were
sold short .

     Of the Company's issued and outstanding  106,442,055 shares of Common Stock
outstanding as of December 31, 2002, all shares, subject to an exception for the
32,953,204 shares owned by affiliates of the Company, might be presently sold in
compliance with Rule 144, in brokerage  transactions,  at such time as there may
be trading in the common stock of this  Company.  Rule 144 provides  among other
things and  subject  to certain  limitations  that a person  holding  Restricted
Securities  for a period of two years,  who is not an  affiliate of the Company,
may sell  those  securities,  free of  restriction  in  brokerage  transactions.
Further,  shares  issued  pursuant to 1933 Act  Registration,  again  subject to
exceptions for affiliate ownership, are not Restricted Securities and are freely
tradable in brokerage transaction.  Affiliates are permitted by Rule 144 to sell
affiliate-owned securities (Restricted Securities held for more than on year and
Registered  Affiliate Control  Securities however long held) in limited amounts.
Possible  or  actual  sales of the  Company  s Common  Stock  under  Rule 144 or
otherwise might have a depressive  effect upon the price of the Company s Common
Stock,  at such time,  if and when the  common  stock of this  Company  might be
tradable in brokerage transactions.

     Our Common Stock is quoted Over-The-Counter on the Bulletin Board ( OTCBB).
The Company's trading symbol is IDNW.OB.

     Period     High  bid     Low  bid
     ------     ---------     --------
     1st  2002     0.04          0.02
     2nd  2002     0.05          0.01
     3rd  2002     0.05          0.01
     4th  2002     0.08          0.02

     1st  2001     0.156         0.016
     2nd  2001     0.13          0.03
     3rd  2001     0.08          0.03
     4th  2001     0.05          0.03





The foregoing price information is based upon inter-dealer prices without retail
mark-up,  markdown or commissions and may not reflect actual transactions and is
adjusted for 2-to-1 split effective in November 2000.

(B)  HOLDERS.  Management  calculates that the approximate number of holders the
     Company s Common Stock, as of December 31, 2002 was 768.

(C)  DIVIDENDS.  No cash  dividends  have been paid by the Company on its Common
     Stock and no such payment is anticipated in the foreseeable future.

(D)  SALES OF UNREGISTERED COMMON STOCK IN 2002. None.

(E)  EQUITY  COMPENSATION  PLAN:  The Company does not presently  have an equity
     compensation plan.

        ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

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

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

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

     GENERATION OF REVENUES:

We derive our revenues from two different  sources,  through the direct sales of
our  products  over the  Internet  and  through  our own direct  sales force and
secondly through the wholesale of our products and services through  independent
retail and  wholesale  channels of  distribution.  Revenues from the sale of our
phone card  products,  whether  sold  directly by us or through our  independent
retail and wholesale  channel,  are deferred and recognized as calling  services
are used.  Revenue from our  wholesale  phone  services are  recognized as phone
traffic flows over our network.

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

     Since inception,  we have incurred  significant  losses and, as of December
31, 2002, had an accumulated deficit of $20,995,310.  We expect operating losses
and negative  cash flow to continue  through at least the forth quarter of 2003.
We expect to incur additional costs and expenses related to:

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

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

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

                                                 Year ended
                                                December  31,
                                          -----------------------
                                           2002             2001
                                          -----             -----

Total revenue .......................     100.0%            100.0%
Cost of sales .......................      87.1              77.4
                                          -----             -----

Gross margin ........................      12.9              22.6
Selling, general and administrative .      26.1              53.4

Operating loss ......................     (13.2)            (30.8)
Interest income (expense)  ..........      (4.7)            (18.3)
                                          -----             -----
Loss on extinguishment of debt ......      (3.5)              --
Gain from write off of liabilities ..       6.8               --
Gain from settlement of vendor
 Contract ...........................      10.1               --

Net loss from continuing operations .      (4.5)            (49.1)
Loss from discontinued operations ...     (10.1)           (192.6)

                                          -----             -----
Comprehensive Loss ..................     (14.6)           (241.7)
                                          =====             =====

Years ended December 31, 2002 and 2001

Revenue increased approximately $7,713,963 (200%) from $3,861,315 to $11,575,278
for the years  ended  December31,  2001 and 2002,  respectively.  Sales of phone
cards  increased  approximately  1.3 million due to the  addition of a new phone
card, and increasing  market share of our existing  cards.  Revenues from resale
services increased approximately 6.2 million from 2001. This increase was due to
profitable  contracts for resale minutes over our VoIP network.  These contracts
were lost in 2002.  As of the date of this  filing the Company has not been able
to replace the revenue generated by the contracts.  Management believes that the
loss of the contracts is an ordinary  business risk and that the revenue will be
replaced.

Cost of sales  consists  primarily of the costs of  termination of long distance
traffic over our  networks  and the  wholesale  cost of products  purchased  for
resale  by  us.  Cost  of  sales  increased  $7,097,328   (237%)from  $2,724,783
(including  $262,014 of  depreciation)  to  $10,084,125  (including  $211,708 of
depreciation) for the years ended December 31, 2001 and 2002, respectively.  The
increase was primarily attributable to our increased sales volume in both retail
and  wholesale.  Gross  profit(including  depreciation)  decreased from 22.6% at
December 31, 2001 to 12.8% at December 31, 2002. This 43% decrease was primarily
attributable to an increase in vendor rates for phone card traffic.  The Company
is continuously  negotiating and renegotiating  contracts in its current and new
markets.  As a result,  existing  margins may not  necessarily  be indicative of
future margins.

Selling,   general  and  administrative  expenses  consist  of  advertising  and
promotional  expenditures,  payroll  and  related  expenses  for  executive  and
administrative personnel,  facilities expenses,  professional services expenses,
travel and other general corporate expense.  Selling, general and administrative
expenses net of  depreciation  increased  $1,271,953  (78.5%) from $1,620,229 to
2,892,182  for the years ended  December  31, 2001 and 2002,  respectively.  The
increase  is  primarily  due  to  expenses   related  to  our  Dibz  product  of
approximately $780,000 in 2002, and increase in stock issued for services in the
amount of approximately $490,000.  Selling,  general and administrative expenses
are expected to decrease as a percentage  of revenue in future  periods  because
our existing  company  infrastructure  will allow increases in revenues  without
having to  incrementally  add  overhead.  However,  we expect these  expenses to
increase in absolute dollars as we continue to pursue  advertising and marketing
efforts,  expand our network termination  locations worldwide,  expand our staff
and incur  additional  costs  related to the growth of our  business and being a
public company.

Interest expense decreased  $163,933 (23.2%),  from $706,955 to $543,022 for the
years ended December 31, 2001 and 2002, respectively.  This non-cash decrease is
due to the  extinguishment  of convertible debt in the 2002. The Company expects
interest  expense to remain constant or increase in 2003, due to the convertible
note issued in February of 2003, and other debt the company may incur in 2003.

The  Company  incurred  a  $400,258  loss  from  the  early   extinguishment  of
convertible  debt issued in 2001.  The debt was retired with  available  cash to
reduce dilution of the Company's stockholders interests

The Company recorded $787,992 gain from  extinguishment of accounts payable to a
phone services carrier.  This payable was originally  incurred previous to iDial
Networks,  Inc. becoming a public entity.  However, this payable was incurred by
an entity that was not brought forward into the corporation that was acquired by
Desert Springs Acquisition  Corporation.  The Company believes that it no longer
has liability to this carrier for the above stated reasons.


The Company recorded a $1,169,589 gain on settlement of a vendor contract with a
provider of telephone  services for the  Company's  Voice-over-Internet-Protocol
Network.  The Company  signed a settlement  agreement  and release of all claims
related to the contract,  and, as a result,  recorded a gain on the contract due
to payables  incurred  under the contract  that were forgiven by the provider at
settlement.

The Company had a net loss from continuing operations of ($519,478) for the year
ended 31, 2002 or a decrease in loss of 72.5% from the year ended  December  31,
2001. This overall increase in  profitability  is due to favorable  contracts in
2002 for resale  services as well as the Companies  efforts to  consolidate  its
operations and focus on developing its Voice over internet protocol network.

In 2002 the Company recorded a loss from the disposal of discontinued operations
of  ($1,176,081)  compared  to a loss of  ($7,501,297)  in 2001.  The 2001  loss
resulted from the write off of the  operations  and net assets of Whoofnet.  The
loss recorded in 2002 consists of several factors; 1) a gain of $229,620 for the
write off of the  remaining  Whoofnet  liabilities  due to the default  judgment
against  Whoofnet  allowing us to effectively  reverse the purchase of Whoofnet.
Based on this  judgment in our favor the Company  believes that it no longer has
obligations  related  to  Whoofnet.  2) The write  off of  2Sendit  goodwill  of
$1,448,472 and 3) a gain of $42,771 was generated by the  discontinuation of the
profitable operations of 2Sendit. 2Sendit was discontinued due to changes in the
broadcast fax market that would have restricted  future revenue  generation,  as
well as the  loss of a  significant  customer  at the  end of  2001.  Management
believes that the discontinuation of these two segments has and will continue to
free  up  resources   needed  to  continue   development   the  Companies   core
telecommunications network.

     Liquidity and Financial Position

As of  December  31,  2002,  we had  approximately  $21,767  of  cash  and  cash
equivalents. As of that date, our principal commitments consisted of obligations
for long  distance  transmissions,  and other  payables  incurred  in the normal
course  of  business.  At year end and into 2003  iDial's  cash  generated  from
operations has not been sufficient to meet all of our operating obligations. Due
to this shortfall the Company issued a convertible  note in the principal amount
of $750,000 to an unrelated investor. Net proceeds of $616,590 (after legal fees
of $45,000,  and fund  manager fee of  $88,410)  are being used to fund  current
obligations and revenue expansion.

Net cash  provided by operating  activities  was  $1,230,356  for the year ended
December  31, 2002 and  $131,717 in 2001.  The  increase  was  primarily  due to
proceeds  from  contracts  for  resale  phone  minutes  sold over our Voice over
internet  protocol  network.  iDial is also  actively  working on expanding  its
prepaid  phone card  business.  In late  November 2002 the Company added a sales
agent to distribute a new phone card to new international  markets.  At December
31, 2002 this agent had added approximately  $260,000 to phone card revenue. The
Company expects phone card sales to these new international  markets to continue
to grow. The Company is also continuing to add new agents.

Net cash from (used in)  investing  activities  was  $604,140 for the year ended
December 31, 2002 and $201,622  for 2001.  This amount  consists of additions to
property and equipment,  including  computer  equipment,  network  servers,  and
internet gateways for voice over the Internet transmission. These purchases have
significantly  expanded the Companies network allowing for greater opportunities
in both our wholesale and retail segments.

Net cash provided by (used in) financing  activities was $(986,252) for the year
ended  December  31,  2002 and  $384,298  for 2000.  Net cash used in  financing
activities for 2002 was impacted by the settlement of convertible debt issued in
2001 with a cash payment of $969,191. The Company also received cash proceeds of
$90,000 from two officers of the Company to fund short-term cash requirements.


iDial  currently  is  in  the  process  of  finalizing  and  reviewing   several
opportunities to expand its revenue and obtain new technology that will allow it
to gain a competitive advantage in the market place.


The company  believes  that the current cash on hand is  sufficient to allow the
company to sustain its current operations for a finite period of time.  However,
without additional funding of $1,000,000,  the company believes that it will not
generate net income during fiscal year 2004. As described  above, the company is
discussing the possibility of additional financing.


We do not have existing  capital  resources or credit lines  available  that are
sufficient to fund our operations and capital  requirements as presently planned
over the next twelve months. We are actively  pursuing  additional funds through
the issuance of debt and/or equity instruments.


     Recently Issued Accounting Pronouncements

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

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


                                  RISK FACTORS

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

Risks Relating to our Business:

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

     We  incurred  net  losses  from  continuing   operations  of  $519,478  and
$1,894,349 for the fiscal years ended December 31, 2002 and 2001,  respectively.
We cannot assure you that we can achieve or sustain profitability on a quarterly
or annual basis in the future.  If revenues grow more slowly than we anticipate,
or  if  operating  expenses  exceed  our  expectations  or  cannot  be  adjusted
accordingly,  we will  continue to incur  losses.  In  addition,  we may require
additional  funds to  sustain  and expand  our sales and  marketing  activities,
research  and  development,  and  our  strategic  alliances,  particularly  if a
well-financed  competitor emerges or if there is a rapid  technological shift in
the telecommunications  industry.  There can be no assurance that financing will
be available in amounts or on terms  acceptable  to us, if at all. The inability
to obtain  sufficient funds from operations or external sources would require us
to curtail or cease operations.

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

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

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

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

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

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

We Rely On Third Party Contracts For Our Operations

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

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

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

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

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

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

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

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

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

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

Risks Relating to our Stock:

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

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

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

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

Forward  Looking  Statements.

Certain  statements  in  this  Form  10-KSB,  including  statements  of our  and
management's expectations,  intentions, plans, objectives and beliefs, including
those contained in or implied by  "Management's  Discussion and Analysis or Plan
of Operation", are "forward-looking  statements",  within the meaning of Section
21E of the Securities  Exchange Act of 1934, that are subject to certain events,
risks and uncertainties that may be outside our control.  These  forward-looking
statements   may  be   identified  by  the  use  of  words  such  as  "expects,"
"anticipates,"   "intends,"  "plans"  and  similar  expressions.   They  include
statements  of our future plans and  objectives  for our future  operations  and
statements of future economic  performance,  information regarding our expansion
and possible results from expansion, our expected growth, our capital budget and
future capital  requirements,  the availability of funds and our ability to meet
future  capital  needs,  the  realization  of our deferred  tax assets,  and the
assumptions described in this report underlying such forward-looking statements.
Actual results and developments  could differ materially from those expressed in
or implied by such  statements  due to a number of  factors,  including  without
limitation,  those described in the context of such forward-looking  statements,
our  expansion  and  acquisition  strategy,  our  ability to  achieve  operating
efficiencies,    our   dependence   on   network    infrastructure,    capacity,
telecommunications carriers and other suppliers,  industry pricing an technology
trends,  evolving  industry  standards,  domestic and  international  regulatory
matters,  general economic and business  conditions,  the strength and financial
resources of our competitors,  our ability to find and retain skilled personnel,
the political  and economic  climate in which we conduct  operations,  the risks
discussed  above under "Risk Factors That May Effect  Results of Operations  and
Financial  Condition," and other risk factors described from time to time in our
other  documents and reports filed with the Securities  and Exchange  Commission
(the  "Commission").  We do not assume any responsibility to publicly update any
of our forward-looking  statements regardless whether factors change as a result
of new  information,  future  events or for any other  reason.  We advise you to
review any additional  disclosures we make in our 10-QSB, 8-K and 10-KSB reports
filed with the Commission.


                          ITEM 7. FINANCIAL STATEMENTS.

     Reference is made to Auditors  Report of December 31, 2002 filed  herewith.
Those financial  statements,  attached thereto are  incorporated  herein by this
reference as though fully set forth herein.


     ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                             FINANCIAL DISCLOSURE.

     On March 15, 2002, the Company  dismissed its former  independent  auditor,
Kenneth  Lieberman CPA, PA  ("Lieberman"),  based on that such action was in the
best interests of the Company.  Effective as of that date,  the Company  engaged
Ehrhardt  Keefe Steiner & Hottman PC ("EKS&H") as its new  independent  auditor.
The decision to change accountants was approved by the board of directors of the
Company.

     For the years  ended  December  31,  2000 and 2001 and up until the date of
dismissal,  the  Company and  Lieberman  had no  disagreements  on any matter of
accounting  principles or practices,  financial statement disclosure or auditing
scope or procedure,  which disagreement,  if not resolved to the satisfaction of
Lieberman,  would have caused it to make  reference to the subject matter of the
disagreement in connection with any report or opinion it might have issued.

     Lieberman's opinion in its report on the Company's financial statements for
the year ended December 31, 2000 expressed substantial doubt with respect to the
Company's  ability to continue  as a going  concern.  Lieberman's  report on the
Company's  financial  statements  for the year ended  December  31, 2000 did not
contain any other adverse  opinion,  disclaimer of opinion,  or  modification or
qualification  of  opinion.  Lieberman  did not issue a report on the  financial
statements for the year ended December 31, 2001.




    ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     We have assembled a team of seasoned  senior  management,  and is currently
recruiting other industry veterans to fill key leadership  roles.  Additionally,
the Company is  augmenting  its Board of  Directors  and Board of Advisors  with
skilled  executives  that can aid the growth of the Company  through  high-level
access to potential  customers and strategic  alliance  partners.  The following
table sets forth  certain  information  as of December 31, 2001  concerning  our
executive officers.


NAME. . . . . . .  AGE  POSITION
-----------------  ---  ------------------------------------
Mark T. Wood. . .   43  Chairman of the Board and Chief Executive Officer
Klaus Scholz. . .   53  Chief Operating Officer and Director
Edward J. Janusz.   60  Director
Thomas G. Seifert   31  CFO



MARK T. WOOD, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. Prior to iDial,
Mr. Wood held several  executive  positions at international  telecommunications
companies, which included Vice President and General Manager of Loxcomm America,
Inc., Chief Operating  Officer of WorldQuest  Networks  (NASDAQ:WQNI),  and Vice
President of International Sales at Intellical, Inc. (AMEX:ICL).

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

EDWARD J.  JANUSZ,  DIRECTOR.  Mr.  Janusz is a  seasoned  sales and  operations
executive serving the Company as a Director. Mr. Janusz is Vice President of Cap
Gemini, a leading worldwide IT consulting firm serving Fortune 500 companies.


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

Code of Ethics

The Company has adopted its Code of Ethics and  Business  Conduct for  Officers,
Directors  and  Employees  that applies to all of the  officers,  directors  and
employees of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's  executive officers and
directors  and  persons  who own  more  than  10% of a  registered  class of the
Company's  equity  securities  to file  reports of their  ownership  thereof and
changes in that ownership with the  Securities and Exchange  Commission  ("SEC")
and the National  Association of Securities  Dealers,  Inc. Executive  officers,
directors and greater than 10%  stockholders  are required by SEC regulations to
furnish the Company with copies of all such reports they file.

Based  solely  upon a  review  of  Forms  3, 4 and 5,  and  amendments  thereto,
furnished to the Company  during  fiscal year 2002,  the Company is not aware of
any  director,  officer  or  beneficial  owner of more than ten  percent  of the
Company's Common Stock that, during fiscal year 2002, failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.


ITEM 10.  EXECUTIVE COMPENSATION.


                                             Annual Compensation                                  Awards             Payouts
-----------------------------------------------------------------------------------  ----------------------------- ------------
       (a)              (b)           (c)            (d)                (e)                (f)              (g)         (h)          (i)

                                                                                                        Securities
                                                                      Other             Restricted      Underlying     LTIP         Other
Name and Principal                                                    Annual              Stock          Options/     Payouts      Compen-
    Position            Year       Salary($)       Bonus($)       Compensation($)       Award(s)($)       SARs(#)       ($)        sation
-------------------  ----------  --------------  ------------  -------------------   -----------------  ----------- ------------ -------------


Mark T. Wood           2002          96,000                                                  --
Chief Executive        2001            --                                                2,500,000
Officer                2000            --                                                1,176,000 sh


Thomas Seifert         2002          96,000                                                 --
Chief Financial        2001            --                                                1,750,000 sh
Officer

Klaus Scholz           2002          84,000                                                 --
Vice President         2001                                                              1,000,000 sh
of retail sales

Edward J. Janusz       2002          69,000                                              5,000,000 sh
President and          2001            --                                                   --
Chief Operating
officer



      ITEM 11. SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS AND 5% OWNERS.

     Common  Stock:  To the best of Company s knowledge and belief the following
disclosure presents, as of the date of this report, December 31, 2002, the total
beneficial security ownership of all Directors and Nominees, naming them, and by
all Officers  and  Directors as a group,  without  naming them,  of the Company,
known to or discoverable by the Company, and the total security ownership of all
persons,  entities and groups,  known to or discoverable  by Company,  to be the
beneficial  owner or owners of more than five  percent  of any  voting  class of
Company s stock.  More than one  person,  entity or group  could be  beneficiary
interested  in the same  securities,  so that the total of all  percentages  may
accordingly exceed one hundred percent. The Company has only one class of stock,
namely Common Voting Equity Shares.



NAME AND ADDRESS OF BENEFICIAL OWNER. .  AMOUNT      PERCENTAGE OF
                                         OWNERSHIP
-------------------------------------------------------------------
Mark T. Wood, Chairman of the Board . .  20,600,000           19.4%
2204 Timberloch Place Ste. 225
The Woodlands, TX  77380
-------------------------------------------------------------------
Klaus Scholz, Director and COO. . . . .   4,040,000            3.8%
2204 Timberloch Place Ste. 225
The Woodlands, TX  77380
-------------------------------------------------------------------
Thomas G. Seifert, CFO. . . . . . . . .   3,213,204            3.0%
10800 E. Bethany Ste. 380
Denver, CO  80014
-------------------------------------------------------------------
Edward J. Janusz, Director. . . . . . .   5,100,000            4.8%
2204 Timberloch Place Ste. 225
The Woodlands, TX  77380
-------------------------------------------------------------------

All Directors and Officers Total. . . .  32,953,204           31.0%
-------------------------------------------------------------------

Total Shares Issued and Outstanding . .  106,442,055            100%

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

Beneficial  Ownership  is  determined  in  accordance  with  the  rules  of  the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within 60 days are deemed outstanding for computing the percentage of the person
holding such option or warrant but are not deemed  outstanding for computing the
percentage of any other person.

            ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

Mark Wood,  the Company's  Chairman of the Board,  loaned the Company a total of
$1,447,060 in various loans from December 31, 1999 through December 2002.


   ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.


 (A)

Exhibit
-------
 No.        Description
----        -----------

2.1         Plan of Reorganization, dated November 30, 1999 (1)
2.2         Agreement and Plan of Reorganization, dated October 12, 2002 (2)
3.1         Certificate of Incorporation of iDial (3)
3.2         Bylaws of iDial (4)
4.1         Convertible Note issued to Laurus Master Fund dated July 6, 2001(5)
4.2         Warrant issued to Laurus Master Fund dated July 6, 2001(5)
4.3         Security Agreement dated July 6, 2001 (5)
4.4         Common Stock Purchase Warrant with AJW Offshore, Ltd. dated February 6, 2003.(7)
4.5         Common Stock Purchase Warrant with AJW Partners, LLC. dated February 6, 2003. (7)
4.6         Common Stock Purchase Warrant with AJW Qualified Partners, LLC. dated February 6, 2003. (7)
4.7         Convertible Debenture with AJW Offshore, Ltd. dated February 6, 2003. (7)
4.8         Convertible Debenture with AJW Partners, LLC. dated February 6, 2003. (7)
4.9         Convertible Debenture with AJW Qualified Partners, LLC. dated February 6, 2003. (7)
4.10        Securities Purchase Agreement for the $750,000 financing entered on February 6, 2003. (7)
4.11        Security Agreement dated February 6, 2003. (7)
4.12        Intellectual Property Security Agreement dated February 6, 2003. (7)
4.13        Registration Rights Agreement dated February 6, 2003. (7)
4.14        Guaranty and Pledge Agreement by Mark T. Wood dated February 6, 2003. (7)
4.15        Note Purchase Agreement entered between iDial Networks, Inc. and Mark Wood
             dated March 31, 2000. (7)
4.16        Convertible Promissory Note with Mark Wood dated March 31, 2000. (7)
4.17        Amendment No. 1 to the Note Purchase Agreement dated February 4, 2003. (7)
10.1        Subscription Agreement between iDial and Laurus Master Fund dated July 6, 2001(5)
16.1        Letter on Change in Certifying Accountant(6)
22.1        List of Subsidiaries
99.1        Certification of the Chief Executive Officer of iDial Networks, Inc.
            Pursuant to 18 U.S.C. Section
            1350, As Adopted Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.
99.2        Certification of the Chief Financial Officer of iDial Networks, Inc.
            Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to  Section
            906 of the Sarbanes-Oxley Act of 2002.
99.3        Code of Ethics and Business Conduct of Officers, Directors and
            Employees of iDial Networks, Inc.

(1)  Incorporated  by reference to the Company's  Form 8-K filed on December 20,
     1999
(2)  Incorporated by reference to the Company's Form 8-K on October 12, 2000
(3)  Incorporated by reference to the Company's Form 10-SB on April 13, 2000
(4)  Incorporated by reference to the Company's Form 8-K filed on August 2, 2001
(5)  Incorporated by reference to the Company's Form SB-2 filed on July 17, 2001
(6)  Incorporated by reference to the Company Form 8-K filed on April 5, 2002.
(7)  Incorporated  by  reference  to the Company  Form SB-2 filed on February 2,
     2003.

     (B) FORM 8-K REPORTS.

On November 4, 2002, the Company filed a Form 8-K Current Report disclosing that
a default judgment was entered against Whoofnet.com, Inc. and Mr. Carl Battie in
favor of the Company in connection  with the  complaint  filed by the Company in
the District Court for Dallas County, Texas.

                       Item 14. Controls and Procedures.

As of December 31, 2002, an evaluation was performed  under the  supervision and
with  the  participation  of  the  Company's  management,  including  the  Chief
Executive Officer and the Chief Financial  Officer,  of the effectiveness of the
design and operation of the Company's disclosure controls and procedures.  Based
on that  evaluation,  the Company's  management,  including the Chief  Executive
Officer and the Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2002.  There have been
no significant  changes in the Company's  internal  controls or in other factors
that could  significantly  affect internal  controls  subsequent to December 31,
2002.


                 SUPPLEMENTARY INFORMATION TO BE FURNISHED WITH
              REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY
                REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
                       PURSUANT TO SECTION 12 OF THE ACT.

     No annual report or proxy material has been sent to security holders.




                                   SIGNATURES

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

                  IDIAL NETWORKS, INC. (f/k/a Desert Springs Acquisitions, Inc.)


                  /s/ Mark T. Wood
                  ----------------
                  Mark T. Wood, Chairman of the Board and Chief
                  ---------------------------------------------
                  Executive Officer
                  -----------------


Dated: March 31, 2003

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.



Dated:  March 31, 2003

/s/ Mark T. Wood        Chairman of the Board and Chief Executive Officer
----------------
Mark T. Wood

/s/Klaus Scholz         Chief Operating Officer and Director
---------------
Klaus Scholz

/s/Edward Janusz        Director
----------------
Edward Janusz

/s/Thomas G. Seifert    Chief Financial Officer
--------------------
Thomas G. Seifert





                                  CERTIFICATION

     I, Mark T. Wood, certify that:

1.   I have reviewed this annual report on Form 10-KSB of iDial Networks, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

March 31,  2003

/s/  Mark T. Wood
Marl T. Wood
Chief Executive  Officer






                                  CERTIFICATION

     I, Thomas G. Seifert, certify that:

1.   I have reviewed this annual report on Form 10-KSB of iDial Networks, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

March 31,  2003

/s/  Thomas G. Seifert
Thomas G. Seifert
Chief Financial  Officer







                              IDIAL NETWORKS, INC.

                        Consolidated Financial Statements
                                       and
                          Independent Auditors' Report
                                December 31, 2002









                              IDIAL NETWORKS, INC.




                                Table of Contents


Independent Auditors' Report

Consolidated Financial Statements

Consolidated Balance Sheet

Consolidated Statements of Operations

Consolidated Statement of Changes in Stockholders' Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements










                          INDEPENDENT AUDITORS' REPORT




Board of Directors and Stockholders
iDial Networks, Inc.
Denver, CO


We have audited the accompanying  consolidated  balance sheet of iDial Networks,
Inc.  as of  December  31,  2002,  and the related  consolidated  statements  of
operations,  changes in stockholders' deficit and cash flows for the years ended
December  31,  2002 and 2001 These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of iDial Networks, Inc.
as of December  31,  2002,  and the results of their  operations  and their cash
flows  for the  years  ended  December  31,  2002  and 2001 in  conformity  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in Note 2 to the
consolidated  financial  statements,  the Company has experienced  circumstances
which raise  substantial doubt about its ability to continue as a going concern.
Management's  plans  regarding  those  matters also are described in Note 2. The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.



                                          /s/Ehrhardt Keefe Steiner & Hottman PC
                                             Ehrhardt Keefe Steiner & Hottman PC

February 28, 2003
Denver, Colorado




                              IDIAL NETWORKS, INC.

                           Consolidated Balance Sheet
                                December 31, 2002


                                     Assets

Current assets
  Cash ....................................................   $     21,767
  Accounts receivable .....................................        145,200
  Notes receivable - current portion ......................         50,000
                                                              ------------
      Total current assets ................................        216,967
                                                              ------------

Non-current assets
  Property and equipment, net .............................        794,523
  Intangibles, net ........................................         86,000
  Other long-term assets ..................................         59,878
                                                              ------------
      Total non-current assets ............................        940,401
                                                              ------------

Total assets ..............................................   $  1,157,368
                                                              ============

                      Liabilities and Stockholders' Deficit

Current liabilities
  Accounts payable - trade ................................   $  1,099,347
  Accrued liabilities .....................................        654,552
  Due to related parties ..................................        149,568
  Deferred revenue ........................................        191,753
  Current portion of long-term debt .......................          8,259
  Current portion of capital lease obligation .............         32,149
                                                              ------------
      Total current liabilities ...........................      2,135,628
                                                              ------------

Non-current liabilities
  Long-term debt, less current portion ....................          4,999
  Note payable - stockholder ..............................      1,419,777
                                                              ------------
      Total non-current liabilities .......................      1,424,776
                                                              ------------
      Total liabilities ...................................      3,560,404
                                                              ------------

Commitments and contingencies

Stockholders' deficit
  Preferred stock, no par value, 30,000,000 shares
   authorized, no shares issued and outstanding ...........           --
  Common stock, $005 par value, 500,000,000 shares
   authorized at December 31, 2001 87,144,454
   shares issued and outstanding ..........................        532,211
  Additional paid-in capital ..............................     18,060,063
  Accumulated deficit .....................................    (20,995,310)
                                                              ------------
      Total stockholders' deficit .........................     (2,403,036)
                                                              ------------

Total liabilities and stockholders' deficit ...............   $  1,157,368
                                                              ============



                 See notes to consolidated financial statements.






                              IDIAL NETWORKS, INC.

                      Consolidated Statements of Operations


                                                               For the Years Ended
                                                                   December 31,
                                                          ----------------------------
                                                              2002             2001
                                                          ------------    ------------

Sales .................................................   $ 11,575,278    $  3,861,315

Cost of goods sold
  Cost of sales .......................................      9,872,417       2,724,783
  Depreciation ........................................        211,708         262,014
                                                          ------------    ------------
      Total cost of goods sold ........................     10,084,125       2,986,797
                                                          ------------    ------------

Gross profit ..........................................      1,491,153         874,518
                                                          ------------    ------------

Selling, general and administrative expenses
  General and administrative expenses .................      2,892,182       1,620,229
  Depreciation and amortization .......................        134,566         441,683
                                                          ------------    ------------
      Total selling, general, and administrative
      expenses ........................................      3,026,748       2,061,912
                                                          ------------    ------------

Loss from operations ..................................     (1,535,595)     (1,187,394)
                                                          ------------    ------------

Other income (expense)
  Gain from sale of assets ............................          1,816            --
  Interest expense ....................................       (543,022)       (706,955)
  Loss on extinguishment of debt ......................       (400,258)           --
  Gain on write off of liabilities ....................        787,992            --
  Gain from settlement of vendor contract .............      1,169,589            --
                                                          ------------    ------------
      Total other income (expense) ....................      1,016,117        (706,955)
                                                          ------------    ------------

Loss from continuing operations .......................       (519,478)     (1,894,349)

Discontinued operations ...............................     (1,176,081)     (7,435,095)
                                                          ------------    ------------

Net loss ..............................................   $ (1,695,559)   $ (9,329,444)
                                                          ============    ============

Basic and diluted weighted average common shares
 outstanding ..........................................     94,893,522      87,536,658
                                                          ============    ============

Basic and diluted loss from continuing operations per
 common share .........................................   $      (0.01)   $      (0.02)
                                                          ============    ============

Basic and diluted loss from discontinued operations per
 common share .........................................   $      (0.01)   $      (0.09)
                                                          ============    ============

Basic and diluted loss per common share ...............   $      (0.02)   $      (0.11)
                                                          ============    ============


                 See notes to consolidated financial statements.








                              IDIAL NETWORKS, INC.

           Consolidated Statement of Changes in Stockholders' Deficit
                 For the Years Ended December 31, 2002 and 2001



                                                  Common Stock             Additional                    Accumulated         Total
                                          ----------------------------       Paid-in       Accumulated   Comprehensive    Stockholders'
                                            Shares           Amount          Capital          Deficit      Income/Loss      Deficit
                                          ------------    ------------    ------------     -----------    ------------    ------------

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

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

Debt issuance costs on convertible debt           --              --          (139,750)           --              --          (139,750)

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

Stock issued for services .............        974,100           4,870          24,350            --              --            29,220

Realized loss on marketable security ..           --              --              --              --            42,000          42,000

Net loss from operations ..............           --              --              --        (9,329,444)           --        (9,329,444)
                                          ------------    ------------    ------------     -----------    ------------    ------------

Balance - December 31, 2001 ...........     88,118,554         440,592      17,397,941     (19,299,751)           --        (1,461,218)

Stock issued for services .............     19,377,000          96,885         449,424            --              --           546,309

Stock issued on convertible notes
payable ...............................     17,896,000          89,481         133,951            --              --           223,432

Cancelled shares ......................    (18,949,499)        (94,747)         78,747            --              --           (16,000)

Net loss ..............................           --              --              --        (1,695,559)           --        (1,695,559)
                                          ------------    ------------    ------------     -----------    ------------    ------------

Balance - December 31, 2002 ...........    106,442,055    $    532,211    $ 18,060,063    $(20,995,310)           --      $ (2,403,036)
                                                          ============    ============    ============    ============    ============


                 See notes to consolidated financial statements.




                              IDIAL NETWORKS, INC.

                      Consolidated Statements of Cash Flows

                                                           For the Years Ended
                                                                December 31,
                                                       --------------------------
                                                              2002          2001
                                                       -----------    -----------
Cash flows from operating activities
  Net loss .........................................   $(1,695,559)   $(9,329,444)
                                                       -----------    -----------
  Adjustments to reconcile net loss to net cash
   provided by operating activities
   Stock issued for services .......................       546,309         29,220
   Depreciation ....................................       303,274        575,108
   Amortization of discount on convertible debt ....       374,904        530,811
   Amortization of intangible assets ...............        43,000      1,007,133
   (Gain) loss on disposal of assets of discontinued
    operations .....................................      (220,363)     6,628,152
   Gain on disposal of fixed assets ................        (1,816)          --
   Gain from settlement of vendor contract .........    (1,169,589)          --
   Impairment of goodwill ..........................     1,448,472           --
   Loss on extinguishment of debt ..................       400,258           --
   Gain on write off of liabilities ................      (787,992)          --
   Changes in assets and liabilities
     Accounts receivable - net .....................       115,057       (208,783)
     Accounts receivable - other ...................          (564)        95,000
     Prepaid expenses ..............................        (8,043)         1,404
     Accounts payable and accrued liabilities ......     1,813,690        711,937
     Deposits ......................................       (70,950)        70,950
     Deferred revenue ..............................       140,268         20,229
                                                       -----------    -----------
                                                         2,925,915      9,461,161
                                                       -----------    -----------
      Net cash provided by operating activities ....     1,230,356        131,717
                                                       -----------    -----------

Cash flows from investing activities
  Purchase of property and equipment ...............      (656,140)      (354,942)
  Proceeds from sale of fixed assets ...............        52,000           --
  Net liabilities of discontinued operations .......          --          153,320
                                                       -----------    -----------
      Net cash used in investing activities ........      (604,140)      (201,622)
                                                       -----------    -----------

Cash flows from financing activities
  Net advances (payments) on line-of-credit ........       (14,704)        14,704
  Proceeds from issuance of long-term debt .........          --          610,250
  Payment on long-term debt ........................      (987,997)          --
  Stockholder loans ................................       (40,579)       (96,704)
  Proceeds from related party notes payable ........       100,568           --
  Payments on related party notes payable ..........        (1,000)          --
  Payments on long-term capital leases .............       (26,540)      (143,952)
  Repurchase and cancellation of stock .............       (16,000)          --
                                                       -----------    -----------
      Net cash (used in) provided by financing
      activities ...................................      (986,252)       384,298
                                                       -----------    -----------

Net (decrease) increase in cash ....................      (360,036)       314,393

Cash - beginning of year ...........................       381,803         67,410
                                                       -----------    -----------

Cash - end of year .................................   $    21,767    $   381,803
                                                       ===========    ===========
Supplemental disclosure of cash flow information

Cash paid for:                      Interest
                                  ----------

    2002                          $    452,323
    2001                          $     26,473

Supplemental disclosure of non-cash activity:

     During  2002,  the  Company  assumed a note  receivable  of $50,000  from a
     related party, and recorded the related payable.

     During  2002,  the Company  recorded  $223,432  for stock issued to satisfy
     convertible debt of $172,675 and the related accrued interest of $50,757.

     During 2002, the Company recorded $546,309 for stock issued for services.

     During 2002,  the Company  recorded  $83,747 for the  retirement  of common
     stock.

     During  2002,   the  Company   adjusted   certain  net  assets  related  to
     discontinued  operations by $67,043 due to a default  judgement against the
     former  owners of  Whoofnet.com  and have  included this in the (gain) loss
     from discontinued operations.

     During 2001, the Company recorded  additional paid in capital and discounts
     on notes  payable  totaling  $905,899 in  connection  with the  issuance of
     convertible debt.

     In 2001,  the Company wrote off  unrealizable  assets and recognized a loss
     related to discontinued operations of Whoofnet (Note 3).



                 See notes to consolidated financial statements.



                              IDIAL NETWORKS, INC.

                   Notes to Consolidated Financial Statements



Note 1 - Description of Business and Summary of Significant Accounting Policies

The consolidated  financial  statements  include the accounts of iDial Networks,
Inc.,   ("iDial")  and  it's  wholly  owned  subsidiary,   Dibz  Inc.  ("Dibz"),
(collectively the "Company").

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

On August 7, 2000,  iDial acquired 100% of the stock of Whoofnet in exchange for
the issuance of  approximately  19.8 million shares of iDial common stock with a
fair market value of  $8,100,000.  The  acquisition  was accounted for using the
purchase  method and  accordingly  the purchase  price has been allocated to the
assets acquired  aggregating  $2,479,365 and the liabilities assumed aggregating
$104,353 based on their  estimated fair values at the date of  acquisition.  The
excess  of  purchase  price  over the  estimated  fair  value of the net  assets
acquired, totaling approximately $5.7 million, has been recorded as goodwill and
was being  amortized  using the  straight-line  method over 5 years. In November
2001, the operations of Whoofnet were discontinued (Note 3).

2Sendit  provides a marketing  service by advertising  the products and services
through a variety of media with a primary  focus on the use of fax mail,  direct
mail and email.  In addition  the Company  provides  ancillary  services,  which
include  the sales of mailing  lists,  and  consultation  services.  The primary
customer has been the  investment  market but the Company has recently  expanded
its integration into the general  business market.  In the third quarter of 2002
the Company decided to discontinue the operations of 2sendit.com (Note 3).

In April of 2002 the Company  incorporated a new wholly owned subsidiary,  Dibz,
Inc. Dibz produces and markets the "Dibz card" which is a prepaid "stored value"
card that can be used to purchase  online  digital  content and to make discount
phone calls.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of iDial
Networks,  Inc. and its subsidiary.  All intercompany  accounts and transactions
have been eliminated in consolidation.

Concentrations of Credit Risk

The Company  grants  credit in the normal course of business to customers in the
United States.  The Company  periodically  performs credit analysis and monitors
the financial condition of its customers to reduce credit risk.

During the year ended  December  31, 2002 four  customers  accounted  for 88% of
total revenues.  At December 31, 2002 these same customers  accounted for 79% of
total  accounts  receivable.  Also during the year ended  December 31, 2002 four
suppliers accounted for 20% of total purchases and 9% of accounts payable.

Property and Equipment

Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line  method over the estimated useful lives for owned assets,  ranging
from 3 to 5 years or the lease term of the related asset.

Use of Estimates

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

Revenue Recognition

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

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

Income Taxes

The  Company  recognizes  deferred  tax  liabilities  and  assets  based  on the
differences  between the tax basis of assets and  liabilities and their reported
amounts in the  financial  statements  that will result in taxable or deductible
amounts in future years.

Intangible Assets

Intangible  assets  consist of  trademarks.  These amounts are amortized  over 5
years using the straight-line method.

Advertising Costs

The Company expenses advertising costs as incurred.  Advertising expense for the
years ended December 31, 2002 and 2001 was $65,633 and $52,374, respectively.

Recently Issued Accounting Pronouncements

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities."  SFAS No.  146  addresses  accounting  and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force Issue No. 94-3,  "Liability  Recognition for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (Including
Certain  Costs  Incurred  in a  Restructuring)".  SFAS No. 146  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the  liability is incurred.  SFAS No.
146 is  effective  for exit or  disposal  activities  that are  initiated  after
December  31,  2002,  with early  application  encouraged.  The Company does not
expect the adoption of this statement to have a material effect on the Company's
financial statements.

In  November  2002,  the FASB  published  Interpretation  No.  45,  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of  Others".  The  Interpretation  expands  on the
accounting  guidance of Statements No. 5, 57, and 107 and incorporates,  without
change, the provisions of FASB Interpretation No. 34, which is being superseded.
The Interpretation  elaborates on the existing disclosure  requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies  that at the time a  company  issues a  guarantee,  the  company  must
recognize  an initial  liability  for the fair value,  or market  value,  of the
obligations it assumes under that  guarantee and must disclose that  information
in its interim and annual  financial  statements.  The initial  recognition  and
initial measurement provisions apply on a prospective basis to guarantees issued
or modified  after  December  31, 2002,  regardless  of the  guarantor's  fiscal
year-end.  The disclosure  requirements in the  Interpretation are effective for
financial  statements  of interim or annual  periods  ending after  December 15,
2002.  The  Company  does not expect the  adoption of this  statement  to have a
material effect on the Company's financial statements.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation-  Transitions and Disclosure".  This statement amends SFAS No. 123,
"Accounting  for Stock-Based  Compensation"  to provide  alternative  methods of
transition  for an entity that  voluntarily  changes to the fair value method of
accounting  for  stock-based  compensation.  In  addition,  SFAS 148  amends the
disclosure  provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's  accounting  policy decisions with respect to stock-based
employee  compensation  on reported  net  income.  The  effective  date for this
Statement  is for fiscal years ended after  December 15, 2002.  The Company does
not expect  the  adoption  of this  statement  to have a material  effect on the
Company's financial statements.

Reclassifications

Certain  amounts in the 2001  financial  statements  have been  reclassified  to
conform to the 2002 presentation.

Long-Lived Assets

The Company  reviews its  long-lived  assets for impairment  whenever  events or
changes in circumstances  indicate that the carrying amount of the asset may not
be recovered,  in accordance  with SFAS 144. The Company looks  primarily to the
undiscounted  future cash flows in its  assessment of whether or not  long-lived
assets have been impaired.

Net Loss Per Share

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

For the years ended  December 31, 2002 and 2001 total  warrants and  convertible
debt of  41,616,666  were not  included in the  computation  of diluted loss per
share because  their effect was  antidilutive,  however,  if the Company were to
achieve profitable  operations in the future, they could potentially dilute such
earnings.

Convertible Notes Payable

The Company accounts for convertible notes payable with in-the-money  conversion
features in accordance with EITF 98-5,  accordingly,  the intrinsic value of the
conversion feature is initially recorded as an addition to paid-in-capital and a
discount on the related convertible notes with the discount being amortized over
the remaining  contractual life of the respective note. Any unamortized discount
remaining  upon  conversion  prior to the  stated  maturity  date of the note is
immediately recognized as interest expense.  During the years ended December 31,
2002 and 2001,  $374,904  and  $530,811  was  included in interest  expense from
amortization of these discounts.


Note 2 - Going Concern

The  accompanying  financial  statements  have been  prepared on a going concern
basis  which   contemplates   the  realization  of  assets  and  liquidation  of
liabilities  in the ordinary  course of  business.  The  accompanying  financial
statements have been prepared on a going concern basis,  which  contemplates the
realization of assets and  liquidation of liabilities in the ordinary  course of
business.

The Company has  suffered  recurring  losses from  operations  and has a working
capital  deficiency  of  approximately  $1.9 million at December  31, 2002.  The
Company's  financial  statements  have been prepared on the assumption  that the
Company  will  continue as a going  concern.  Management  has  instituted a cost
reduction  program that includes a reduction of labor and fringe  benefit costs.
In addition,  the Company has consolidated several of its operations,  increased
marketing  efforts  on its  product  lines,  adjusted  sales  prices of  certain
products  to bring  them in line  with  costs,  and  negotiated  more  favorable
contracts to provide services at more efficient costs. If the actions  described
above are not  successful in achieving  profitability  or  additional  financing
cannot be obtained,  the Company would be materially and adversely  affected and
there is  substantial  doubt about the Company's  ability to continue as a going
concern.  The financial  statements do not include any adjustments  necessary if
the Company becomes unable to continue operations for any reason.


Note 3 - Discontinued Operations

During  the third  quarter  of 2002,  management  revised  its  projections  for
2Sendit. Due to the loss of a significant customer that the Company has not been
able  to  replace,  and the  resulting  negative  effect  on  2Sendit  cashflow,
managment has decided to discontinue  the  operations of 2Sendit.  The remaining
equipment is being utilized in the operations of Idial.

The  accompanying  financial  statements  reflect the results of  operations  of
2Sendit as a discontinued business segment for the years ended December 31, 2002
and 2001, and the operations of Whoofnet.com as a discontinued  business segment
for the year ended  December 31, 2001.  The  discontinued  results of operations
include those direct revenues and expenses of 2Sendit and Whoofnet.com.

The  results of  operations  of the  Company's  discontinued  operations  are as
follows:

                                                              For the Years Ended
                                                                 December 31,
                                                          --------------------------
                                                              2002          2001
                                                          -----------    -----------

Revenue ...............................................   $   161,461    $ 1,967,374
Direct costs of services ..............................       (97,422)    (1,622,591)
                                                          -----------    -----------

Gross margin ..........................................        64,039        344,783
                                                          -----------    -----------

Selling, general and administrative ...................       (12,011)      (283,933)
Depreciation ..........................................          --         (289,919)
Impairment of goodwill ................................    (1,448,472)          --
                                                          -----------    -----------

Net loss before amortization of goodwill ..............    (1,396,444)      (229,069)

Amortization of goodwill ..............................          --         (577,874)
                                                          -----------    -----------

Net loss on discontinued operations ...................    (1,396,444)      (806,943)

Gain (loss) on disposal of Whoofnet.com assets ........       220,363     (6,628,152)
                                                          -----------    -----------

Loss on discontinued operations .......................   $(1,176,081)    (7,435,095)
                                                          ===========    ===========

Basic and diluted loss from discontinued operations per
 common share .........................................   $     (0.01)   $     (0.09)
                                                          ===========    ===========


During the fourth  quarter of 2001,  the Company wrote off  unrealizable  assets
related to the discontinued  operations of  Whoofnet.com,  Inc. in the amount of
$6,628,152.

The assets written-off consist of the following:


Current assets .......................................   $      93,200
Equipment and software ...............................       1,864,921
Goodwill .............................................       4,670,031
                                                         -------------
Loss on disposal of the operations of Whoofnet.com ...   $   6,628,152
                                                         =============

The assets of 2Sendit are being utilized in the operations of the Company.

On August 7, 2000,  in accordance  with an Agreement and Plan of  Reorganization
(the "Agreement"),  the Company agreed to acquire Whoofnet.Com,  Inc., a Florida
Corporation  ("Whoofnet"),  for issuance of 10,000,000 shares of common stock of
the  Company.  Thereafter,  the Company  instituted  legal  proceedings  against
Whoofnet  and  Mr.  Carl  Battie   (Whoofnet  and  Mr.  Battie  are  hereinafter
collectively  referred to as the  "Defendants") in the District Court for Dallas
County,  Texas (the "Court") alleging that the Defendants violated certain terms
of the Agreement.  The Company was seeking damages resulting from the violations
of the  Agreement as well as the  rescission of the  Agreement.  On September 9,
2002, a Default Judgment was entered against the Defendants as a result of their
failure  to appear and the Court held that,  among  other  items,  all shares of
common  stock of the  Company  issued  to  shareholders  of  Whoofnet  should be
cancelled  and  returned to the Company.  The  Company,  pursuant to the Default
Judgment,  cancelled  17,949,499 shares of common stock,  which is the number of
shares issued in connection  with the  Agreement on a  post-forward  split basis
that was implemented in November 2000.

Impairment of Goodwill

In July 2001, the FASB issued SFAS Nos. 141 and 142 "Business  Combinations" and
"Goodwill  and other  Intangible  Assets."  Statement  141 requires all business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase  method.  Under the  guidance of Statement  142,  goodwill is no longer
subject to amortization over its estimated useful life. Rather, goodwill will be
subject to at least an annual assessment for impairment by applying a fair value
base test.  Statement 142 is effective for financial  statement  dates beginning
after December 15, 2001.

During the second quarter  management  revised its  projections  for 2Sendit and
during the 3rd quarter management discontinued the operations of 2Sendit. Due to
the loss of a significant customer that the Company has not been able to replace
and the resulting negative effect on future cash flow, the fair value of 2Sendit
valued on a discounted  cash flow basis did not support the  carrying  value and
management has impaired the carrying  value of goodwill of $1,448,472,  which is
reflected as an accounting  change.  The  goodwill,  which has been impaired was
reclassified  to the Company's  marketing  services  segment in connection  with
implementing Statement 142. In adopting Statement 142 as of January 1, 2002, the
Company also no longer amortizes goodwill.

As required by  Statement  142,  the  accounting  change has been applied in the
first quarter of 2002.  Had the Company  adopted  Statement 142 as of January 1,
2001, the historical amounts previously reported at twelve months ended December
31, 2001 would have been adjusted to the following:


Net loss as reported ................................    $ (9,329,444)
Addback:  goodwill amortization .....................          966,133
                                                         -------------
Adjusted net (loss) .................................    $ (8,363,311)
                                                         =============

Basic and diluted loss per share as reported ........    $      (0.02)
Goodwill amortization ...............................           (0.01)
                                                         -------------
Adjusted loss per share .............................    $      (0.03)
                                                         =============


Note 4 - Property and Equipment

Property and equipment at December 31, 2002 consist of the following:

Computer equipment and software .....................    $   1,146,452
Telephony equipment .................................          611,389
Other equipment .....................................          180,617
Furniture and fixtures ..............................           19,582
                                                         -------------
                                                             1,958,040
Less property, plant and equipment - accumulated
 depreciation .......................................      (1,163,517)
                                                         -------------
                                                         $     794,523
                                                         =============


Note 5 - Income Taxes

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely that some  portion or all of the  deferred  tax assets
will not be  realized.  The  ultimate  realization  of  deferred  tax  assets is
dependent  upon the  generating of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities,  projected future taxable income
and projections for future taxable income over the periods in which the deferred
tax assets are deductible.  The net operating loss  carryforward  may be limited
due to a change in ownership  of the Company  after a portion of the losses were
incurred.  At this  time,  management  has  concluded  that it is not likely the
Company will realize the benefits of these  deductible  differences as there can
be no assurance  that the Company will generate the necessary  taxable income in
any future periods.

The tax effects of temporary  difference that give rise to significant  portions
of deferred tax assets and liabilities at December 31, 2002 are as follows:

Net operating loss carryforward ......................   $   5,096,000
Depreciation and amortization ........................       (239,000)
                                                         -------------
Net deferred tax asset ...............................       4,857,000
Valuation allowance ..................................     (4,857,000)
                                                         -------------
                                                         $          -
                                                         =============


Note 6 - Long-Term Debt

Long-term debt at December 31, 2002 consists of:


Note payable in monthly  installments  of $795 including
 interest at 12.9%  expiring  July 2004.  Collateralized
 by equipment.........................................   $      13,258
                                                         -------------

  Less current portion  ..............................         (8,259)
                                                         -------------
                                                         $       4,999
                                                         =============

Maturities of long-term obligations are as follows:

Year Ending December 31,
------------------------
        2003 .........................................   $      8,259
        2004 .........................................          4,999
                                                         ------------
                                                         $     13,258
                                                         ============


Note 7 - Capital Leases

The Company had  previously  acquired  assets under the  provisions of long-term
leases. For financial reporting purposes, minimum lease payments relating to the
assets have been capitalized.  The leases expire in August 2003. Amortization of
the leased property is included in depreciation expense.

The  assets  under  capital  lease  have cost and  accumulated  amortization  at
December 31, 2002 as follows:

Cost .................................................   $     124,284
Less accumulated amortization ........................       (103,567)
                                                         -------------
                                                         $      20,717
                                                         =============

Maturities of capital lease obligations are as follows:

Year Ending December 31,
------------------------
        2003 .........................................   $     34,985
                                                         ------------
        Total minimum lease payments .................         34,985
        Amount representing interest .................        (2,836)
                                                         ------------
        Present value of net minimum lease payments ..         32,149
        Less current portion .........................       (32,149)
                                                         ------------

        Long-term capital lease obligation ...........   $         -
                                                         ===========


Note 8 - Commitments and Contingencies

Operating Leases

The Company  leases  facilities,  equipment  and vehicles  under  non-cancelable
operating leases expiring through September 2003.

Rent expense for these leases was:

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

        2002 .........................................   $      62,712
        2001 .........................................   $      91,989

Future minimum lease payments under these leases are approximately as follows:

Year Ending December 31,
------------------------
        2003 .........................................   $      40,200
                                                         -------------
                                                         $      40,200
                                                         =============


Note 9 - Stockholders' Equity

Warrants

On July 6, 2001, in  conjunction  with the issuance  convertible  notes payable,
executed  on that date,  the Company  issued  warrants  for the  purchase of the
Company's  common  stock.  Warrants  issued  under  the plan vest on the date of
execution  of the  agreement.  A total of  166,666  shares of  common  stock are
authorized for issuance under the plan.

The fair value of the warrants were estimated to be approximately $12,000 on the
date of grant utilizing the Black-Scholes model with the following  assumptions:
expected life of 5 years, 374.77% volatility, risk-free rate of 5.5% and a 0.00%
dividend yield.

The following table presents the activity for warrants outstanding:

                                                                          Weighted
                                                                           Average
                                                            Number of     Exercise
                                                            Warrants        Price
                                                         ---------------  -----------

Outstanding - December 31, 2000                                     -    $       -
      Issued                                                   166,666         0.06
      Forfeited/canceled                                            -            -
      Exercised                                                     -            -
                                                         ---------------  -----------

Outstanding - December 31, 2001                                166,666         0.06
      Forfeited/canceled                                            -            -
      Exercised                                                     -            -
                                                         ---------------  -----------

Outstanding - December 31, 2002                                166,666 $        0.06
                                                         ===============  ===========

All of the  outstanding  warrants are  exercisable  and have a weighted  average
remaining contractual life of 3.52 years.

Cancellation of Shares of Common Stock

In the third quarter the Company cancelled 1,000,000 shares of common stock that
were purchased from a former employee for a cash payment of $16,000.


Note 10 - Shareholder Advances

The Company received loans from  stockholders to fund operations.  The loans are
interest  bearing  at 7% per  annum  and are  convertible  at the  option of the
stockholders  into restricted  common stock at the current market price less 20%
at the time of conversion.  As of December 31, 2002 the loans from  stockholders
totaled  $1,419,777  The debt has been  classified  as long-term at December 31,
2002 since the  stockholders  have entered into an agreement  that  requires the
Company  to convert  the  obligation  into  equity  securities  or to repay such
obligation no earlier than February 6, 2004.


Note 11 - Due to Related Parties

In December of 2002 the Company  received  short term loans from two officers of
the Company.  The loans bear interest at 7% per annum,  and are subject to a 10%
fee to the  officers  for use of the  proceeds.  The  loans  are  classified  as
short-term as they are due upon demand of the officers.  As of December 31, 2002
the amount due to related  parties  including  fee  totaled  $149,568.  Interest
expense and related fees were $9,568 for the year ended December 31, 2002.


Note 12 - Segment Information

In 2002 the Company has two principal and  reportable  operating  segments which
are (1) providing Internet-based voice telecommunication to customers around the
world via retail prepaid  calling cards and (2) providing  Internet-based  voice
telecommunication to phone service carriers via the resale of minutes.

In 2001 the  Company  had three  principal  operating  segments  which  were (1)
providing  Internet-based voice telecommunication to customers around the world,
(2)  providing a marketing  service for various  businesses  and (3) marketing a
next  generation  Internet  company  designed for direct  selling to the general
public through an internet portal. The Company has determined that there are two
reportable  segments (1) providing  Internet-based  voice  telecommunication  to
customers  around the world and (2)  providing a  marketing  service for various
businesses.  The other segment was not reported  because it does not meet any of
the quantitative thresholds under SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information."

These  operating  segments  were  based on the  nature  of the  product  and the
services offered.  Operating segments are defined as components of an enterprise
about which  separate  financial  information  is  available  that is  evaluated
regularly  by the chief  operating  decision-maker  in deciding  how to allocate
resources and in assessing  performance.  The Company's chief executive  officer
and chief financial  officer have been identified as the chief  decision-makers.
The Company's chief operating decision makers direct the allocation of resources
to operating segments based on the profitability and cash flow of the respective
segments.

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

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

                                       Internet
                                     Based Voice
                                         Tele-          Resale
Year Ended December 31, 2002        communications     services         Total
----------------------------        -------------   ------------    ------------

Net sales from external customers   $  4,316,143    $  7,259,135    $ 11,575,278
Gross profit ....................   $    511,497    $    979,656    $  1,491,153
Net operating loss ..............   $   (415,582)   $   (103,896)   $   (519,478)
Interest expense ................   $    271,511    $    271,511    $    543,022
Depreciation and amortization ...   $    138,510    $    207,764    $    346,274
Total assets ....................   $    462,947    $    694,421    $  1,157,368
Capital expenditures ............   $    262,456    $    393,684    $    656,140



                                       Internet
                                     Based Voice
                                         Tele-          Resale
Year Ended December 31, 2002        communications     services         Total
----------------------------        -------------   ------------    ------------

Net sales from external customers   $ 3,230,077    $   631,238    $ 3,861,315
Gross profit ....................   $   748,271    $   126,247    $   874,518
Net operating loss ..............   $(1,591,253)   $  (303,096)   $(1,894,349)
Interest expense ................   $   593,842    $   113,113    $   706,955
Depreciation and amortization ...   $   562,958    $   140,739    $   703,697
Total assets ....................   $ 2,432,169    $   330,475    $ 2,762,644
Capital expenditures ............   $   239,510    $   115,432    $   354,942


Note 13 - Gain on Settlement of Contract

On August 9, 2002 the entered into a settlement  agreement in connection with an
operating  contract  with a provider of  telephone  services  for the  Company's
Voice-over-Internet-Protocol  Network. The Company signed a settlement agreement
and release of all claims related to the contract,  and, as a result, recorded a
$1,169,589 gain on settlement of the contract due to payables incurred under the
contract that were forgiven by the provider at settlement.


Note 14 - Extinguishment of Debt

On August 30, 2002 the Company signed an agreement to extinguish its convertible
notes  payable for a cash  payment of  $969,191  and the  issuance of  3,403,000
shares of common  stock.  The  transaction  resulted  in a loss in the amount of
$400,258,  which reflects the $969,191 payment made less the remaining principal
balance  outstanding  after  conversion  of a  portion  of  principal  under the
original  conversion  terms  for the  3,403,000  shares  issued.  The  remaining
unamortized  discount  was taken to  interest  expense as  required by EITF 98-5
"Acounting for  Convertible  Securities with  Beneficial  Conversion  Features."
Under the terms of the  extinguishment  agreement the 166,666 warrants issued in
conjunction with the convertible debt remain outstanding and expire in 2006.

Shares  issued  during the year ended  December 31, 2002 for the  conversion  of
principal and interest totaling $223,432 were 17,896,000.  No shares were issued
for the  conversion  of principal  and interest for the year ended  December 31,
2001.


Note 15 - Fourth Quarter Adjustment

During the fourth quarter of 2002,  management wrote-off liabilities of $787,992
from a phone services vendor. The Company wrote-off these liabilities during the
fourth quarter of 2002, after previous  correspondence and follow-up resulted in
the realization that the balance was not an outstanding obligation.


Note 16 - Subsequent Events

On January 20,  2003 the Company  cancelled  500,000  shares of common  stock in
conjunction with the termination agreement of a former employee.

On February 6, 2003 the Company  executed a  convertible  note  agreement  for a
principal  amount of $750,000.  Net proceeds of $616,590  were received in three
traunches in February.  The note is convertible into  approximately  104,500,000
shares of the  Company's  common  stock at the date of the note.  The note bears
interest at 12% and matures  February 6, 2004. In conjunction with this note the
Company  issued  warrants to the  purchaser of the note to acquire an additional
2,250,000 shares of the Company's common stock. The warrants have a 5 year term.
The note  contains a beneficial  conversions  feature  which is accounted for in
accordance  with EITF 98-5 and will result in future charges to the statement of
operations in 2003 of approximately $624,000 .

During  February 2003 the Company  issued  16,911,288  shares of common stock in
connection  with the  conversion  of  approximately  $88,000 of principal of the
convertible debt and approximately $12,000 of interest .

The Company is also in the process of  negotiating  the  acquisition  of certain
assets of a telecommunications  company.  Under proposed terms the Company would
issue  30,900,000  shares  of stock and will  assume  approximately  $31,000  in
liabilities.`