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
iDial Networks, Inc.
(Exact name of Company as specified in its charter)
formerly
Desert Springs Acquisitions, Inc.
Nevada 84-1043258
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
16990 Dallas Parkway Suite 106, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (972) 818-1058
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Yes[X] No[] (Indicate by check mark whether the Company (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
Company 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 the Company's knowledge be
contained herein, in definitive proxy or information statements incorporated
herein by reference or any amendment hereto.)
As of December 31, 1999, the aggregate number of shares held by non-affiliates
was approximately 15,465,133 shares. Due to the limited market for the Company's
securities, no estimate is being supplied herewith of the market value for such
securities.
As of December 31, 1999, the number of shares outstanding of the Company's
Common Stock was 18,542,500.
Exhibit Index is found on page 17
PART I
Item 1. Description of Business.
(a) Historical Information. Desert Springs Acquisition Corp. ("We", "Our", "Us"
and sometimes the "Company") is a Colorado corporation (formerly Bartel
Financial Group, Inc) (BFG Colorado) organized October 3, 1986, as WTS III
Capital Corporation ("WTS"). WTS conducted a public offering of its securities
pursuant to a Registration Statement filed with the Denver Regional Office of
the Securities and Exchange Commission ("SEC") which was effective on August 11,
1987, under the Securities Act of 1933. The offering closed after receipt of the
maximum proceeds of $300,000. On October 7, 1987, WTS acquired 100% of Bartel
Financial Group, Inc. ("BFG Utah"), a Utah Corporation in transaction commonly
characterized as a "reverse acquisition".
On July 11, 1995, pursuant to authority granted by shareholders at the Special
Shareholders Meeting of October 28, 1994, the Board of Directors resolved as
follows: The Officers were empowered and directed to effectuate a 200 for 1
reverse split of the Company's Common Stock; provided that no shareholder shall
be reduced to less than 10 shares as a result thereof. Following the 200 to 1
reverse split, and as a result thereof, the existing 138,100,000 shares issued
and outstanding were reduced to 690,500 shares. The Officers were further
empowered and directed to change the name of the Corporation to Desert Springs
Acquisition Corp.
On September 18, September 28, and October 7, 1995, respectively, we entered
into certain Financial Service Agreements. Attention is directed to the Exhibits
furnished with Quarterly Report on Form 10-Q dated September 30, 1995, December
31, 1995 and March 31, 1996. These agreements were the subjects, respectively,
of three successive filings resulting in the Registration of 1,252,000 shares of
common stock on Form S-8, pursuant to the Securities Act of 1933. No change of
control of the Company resulted from the registration or disposition of the
Securities registered on Form S-8.
(b) The Reorganization. On December 23, 1999, we completed a reverse merger with
iDial Networks Inc., formerly Woodcomm International Inc., an Internet based
Telephony Services company. The Company subsequently changed its name to iDial
Networks, Inc. and changed its symbol to IDNW.
(c) Summary of Significant Events following Reorganization. As a result of the
foregoing transactions, as of the date of this Annual Report, the Company had a
single class of securities, namely common equity voting stock, 50,000,000 shares
(of par value $0.001) authorized; of which 18,542,500 shares were issued and
outstanding.
(d) The Business of Company and its Subsidiaries. We are an established
Application Service Provider (ASP) of Internet Protocol (IP) Telephony
communications. Through a reverse merger in December 1999, we became publicly
traded with the symbol (OTCBB:IDNW). Our web address is www.iDialnetworks.com
We compete in a business sector known as Voice Over IP (VoIP), which is
experiencing explosive growth and is projected to reach $60 billion in revenues
by 2005, according to Ovum Research. The Internet phenomenon continues, with
International Data Corporation projecting nearly 400 million global users by the
end of 2002. E-Marketer estimates that 9.4 billion e-mail messages are delivered
daily, and TeleGeography projects the international long distance market to grow
to $79 billion by the end of 2001, comprised of 143 billion minutes of LD calls.
All these factors have enabled the more efficient VoIP technology to begin to
change the face of global communications.
The Company has integrated the economics of VoIP technology with the convenience
of conventional telephony to enable web initiated telephone services. With this
iDial technology, we are able to offer consumers and businesses telephony
services at costs approaching the wholesale rates of carriers. Unlike some
competitors who offer PC to phone services, iDial's web based services are
provisioned via the Internet but all calls are made phone to phone. The majority
of PC owners does not have microphones and telephony software and thus prefer
the more familiar telephone for verbal communications. When the market dictates,
iDial will offer PC to Phone and PC to PC telephony services.
The Company delivers high-quality traditional and VoIP 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 Voice Quality. We offer high voice quality by integrating
traditional telephony 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. The Company offers real-time customer support in
multiple languages, and the integrated billing and call management
system provides service representatives with immediate access to
customer accounts.
(1) Product Description
The Company currently offers traditional prepaid phone cards and VoIP services
based on iDial technology under the following brand names for which various
trade and service marks are registered.
NetPhoneCard - Web initiated worldwide phone calls with US dial tone
and low tariffs.
SendaCall - Prepaid calls sent within a virtual greeting card by
e-mail to recipients anywhere in the world, allowing recipient to
place free call to sender.
Phone-Me-Now - 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.
CellPhoneCard - Based upon ANI recognition of a subscriber's cellular
phone, subscribers benefit from low international tariffs when
nationwide calling is included in the subscriber's cellular rate plan.
HomePhoneCard - Based upon ANI recognition of a subscriber's home
phone, low international tariffs available with a local access number.
CheapPhoneCard - Internet purchased phone cards for USA usage.
The company has additional VoIP products and services in development, targeting
specific business to business markets, as well as consumers. They include:
Conference Calling with up to 8 participants
Low cost International callback service for Internet users outside the
USA.
Web based International Call Center for use by iDial Call Center
Agents who will have complete virtual call center capabilities from
their web connection allowing web based call setup, billing and
reporting.
Free PC to PC calls with H.323 compliant technologies like Microsoft
NetMeeting, and marginal fees to phones worldwide.
Service to Residential and Business customers throughout the US on a
direct, post paid and billed to your credit card service.
(2) Growth Strategy
While a large number of VoIP companies have been formed in recent years, most
focus on the build out and development of international VoIP networks in the
effort to capture an ever shrinking high margin revenue base. Little attention
has been given to domestic VoIP with bundled service offerings. The Company
believes that in this very competitive landscape, offering many voice and data
transmission options, leasing time (or purchasing minutes) on VoIP networks will
quickly become a commodity business, as the various competitors whittle margins
to gain growth and market share. It is imperative to not only offer a quality,
nationwide network but to also be an aggressive marketing organization seeking
to provide value added products and services.
The Company intends to leverage its position in the Internet telephony market to
make communications services readily available worldwide. Its strategy includes
the following key elements:
1) Drive Usage through Resellers and Strategic Partners. The
Company will promote its services through direct sales and
marketing and through relationships with resellers and
leading Internet hardware, software and content companies. A
primary strategy is to offer flat rate global long distance
service to cable subscribers in a partnership with leading
cable operators.
2) Pursue Multiple Sources of Revenue. In addition to minutes-
based revenue, the Company intends to pursue new Web-based
revenue opportunities from banner and audio advertising.
3) Enhance Brand Recognition. The Company intends to strengthen
and enhance its brand recognition by cooperatively marketing
its Internet telephony services with leading companies in
other market segments.
4) Provide Unique VoIP Products and Services for Business to
Business. The Company's current suite of VoIP products will
greatly enhance the e-commerce companies.
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 buyer to
initiate the call. With iDial's "Phone-me-now" technology, a simple click of a
button will connect the buyer with the seller's representative at very low
rates. To further lower operating costs, the Company is exploring joint ventures
with customer service centers in English speaking countries where wages are
lower, and thus customer service becomes more affordable to e-commerce.
(3) Technical Support
The Company's network operations center is located at its corporate headquarters
in Dallas, with gateway equipment also located in Los Angeles to serve the Asian
market. Customer service is provided in several languages. As the Company
increases its services and minutes sold, it plans to install additional
equipment in appropriate sites. The first stage of network expansion projects
gateways in New York and Miami, in addition to the Los Angeles facility. The
Company will lease existing capacity in other locations until such time as
sufficient business is generated to warrant Company owned switching equipment.
The Company has deployed VoIP technology with leading manufacturers such as
Cisco Systems and Clarent, and contracts for carriage with major Internet
backbone suppliers such as Quest and Pacific Gateway. The Company engineering
staff consists of five software developers located at the Company's 90% owned
Technology Center in Sri Lanka, as well as two Dallas based technicians.
(4) Proprietary Technology
The Company uses a combination of its own proprietary software applications and
commercially available licensed technology to conduct Internet and telephone
routing operations.
The Company has developed proprietary software which permits a customer to
purchase a virtual calling card on the Web site using a credit card and to have
the virtual calling card account activated while on the Web site. Also
proprietary are various credit and fraud management applications which aid in
checking credit and limiting fraudulent transactions. Additionally, the Company
has developed proprietary software that allows for the real-time provisioning 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.
(e) Financing Plans. For information, please see Item 6 of Part II MANAGEMENT'S
DISCUSSION AND ANALYSIS
(f) Government Regulation. Congress has recently adopted legislation that
regulates certain aspects of the Internet, including online content, user
privacy, taxation, access charges, liability for third-party activities and
jurisdiction. In addition, a number of initiatives pending in Congress and state
legislatures would prohibit or restrict advertising or sale of certain products
and services on the Internet, which may have the effect of raising the cost of
doing business on the Internet generally. The European Union has also enacted
several directives relating to the Internet, one of which addresses online
commerce. In addition, federal, state, local and foreign governmental
organizations are considering other legislative and regulatory proposals that
would regulate 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.
The Federal Trade Commission has proposed regulations regarding the collection
and use of personal identifying information obtained from individuals when
accessing Web sites, with particular emphasis on access by minors. These
regulations may include requirements that companies establish certain procedures
to disclose and notify users of privacy and security policies, obtain consent
from users for certain collection and use of information and to provide users
with the ability to access, correct and delete personal information stored by
the Company. These regulations may also include enforcement and redress
provisions. There can be no assurance that we will adopt policies that conform
to any regulations adopted by the FTC. Moreover, even in the absence of those
regulations, the FTC has begun investigations into the privacy practices of
companies that collect information on the Internet. One investigation resulted
in a consent decree pursuant to which an Internet company agreed to establish
programs to implement the principles noted above. We may become subject to a
similar investigation, or the FTC's regulatory and enforcement efforts may
adversely affect the ability to collect demographic and personal information
from users, which could have an adverse effect on our ability to provide highly
targeted opportunities for advertisers and electronic commerce marketers. Any of
these developments would materially adversely affect our business, results of
operations and financial condition.
The European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. Under the directive, citizens of the
European Union are guaranteed rights to access their data, rights to know where
the data originated, rights to have inaccurate data rectified, rights to
recourse in the event of unlawful processing and rights to withhold permission
to use their data for direct marketing. The directive could, among other things,
affect United States companies that collect information over the Internet from
individuals in European Union member countries, and may impose restrictions that
are more stringent than current Internet privacy standards in the United States.
In particular, companies with offices located in European Union countries will
not be allowed to send personal information to countries that do not maintain
adequate standards of privacy. The directive does not, however, define what
standards of privacy are adequate. As a result, the directive may adversely
affect the activities of entities such as us that engage in data collection from
users in European Union member countries.
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
California, Colorado and Texas only, and 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 Web site, other than
for virtual calling cards 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 taxes on
Internet-based transactions was passed by the United States Congress last year.
The tax moratorium will be in effect only for three years. 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. If
the moratorium expires at the end of its three-year term, there can be no
assurance that the moratorium will be renewed at the end of such period. Failure
to renew the moratorium could allow various states to impose taxes on
Internet-based commerce. The imposition of such taxes could have a material
adverse effect on our business, financial condition and operating results.
(g) Competition. The long distance telephony market and, in particular, the
Internet telephony market, is highly competitive. There are several large and
numerous small competitors, and we expect to face continuing competition based
on price and service offerings from existing competitors and new market entrants
in the future. The principal competitive factors in the market include price,
quality of service, breadth of geographic presence, customer service,
reliability, network capacity and the availability of enhanced communications
services.
Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we
have. As a result, certain of these competitors may be able to adopt more
aggressive pricing policies, which could hinder our ability to market our
Internet telephony services. One of our key competitive advantages is the
ability to route calls through Internet service providers, which allows us to
bypass the international settlement process and realize substantial savings
compared to traditional telephone service. Any change in the regulation of an
Internet service provider could force us to increase prices and offer rates that
are comparable to traditional telephone call providers.
We believe that the primary competitive factors determining success in the
Internet and IP communications market are: quality of service, the ability to
meet and anticipate customer needs through multiple service offerings,
responsive customer care services, and price.
Future competition could come from a variety of companies both in the Internet
and telecommunications industries. These industries include major companies who
have greater resources and larger subscriber bases than we have, and have been
in operation for many years. We also compete in the growing market of discount
telecommunications services including calling cards, prepaid cards, call-back
services, dial-around or 10-10 calling and collect calling services. In
addition, some Internet service providers have begun to aggressively enhance
their real time interactive communications, focusing initially on instant
messaging, although we expect them to begin to provide PC-to-phone services.
Internet and IP Telephony Providers. Many companies provide, or are planning to
provide, certain portions of the complete communications solution we offer,
including Net2Phone, Delta Three, Gric, iBasis, Jens Corporation, JFAX.COM,
GlocalNet and Poptel.
Traditional Telecommunications Carriers. Several traditional telecommunications
companies, including industry leaders such as AT&T, Sprint, Deutsche Telekom,
MCI WorldCom and Qwest Communications International have recently announced
their intention to offer enhanced Internet and IP communications services in
both the United States and internationally. All of these competitors are
significantly larger than we are and have substantially greater financial,
technical and marketing resources, larger networks, a broader portfolio of
services, stronger name recognition and customer loyalty, well-established
relationships with many of our target customers, and an existing user base to
which they can cross-sell their services.
With respect to prepaid calling cards, we compete with many of the largest
telecommunications providers, including AT&T, MCI WorldCom, Cable & Wireless and
Sprint. These companies are substantially larger and have greater financial,
technical, engineering, personnel and marketing resources, longer operating
histories, greater name recognition and larger customer bases than we do. We
also compete with smaller, emerging carriers in the prepaid calling card market,
including Destia Communications, Inc., RSL Communications, IDT Corp., Pacific
Gateway Exchange, Inc., FaciliCom International, LLC, WorldQuest Networks, Inc.
and PRIMUS Telecommunications Group, Incorporated. 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.
In addition, we compete in the market for Internet telephony 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, Nuera 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.
(h) Planned Acquisitions. There are no planned acquisitions.
(i) Employees. As of January 31, 2000, we employed 15 full-time and 10 part-time
employees. None of our employees are covered by collective bargaining
agreements.
(j) Year 2000. We have not experienced any "Year 2000" technical or computer
deficiencies to date, however, there may be future Y2K compliance problems for
our vendors or suppliers that may indirectly effect the productivity of our
Company.
Item 2. Facilities.
We maintain our executive offices at 16990 Dallas Parkway Suite 106, Dallas,
Texas 75248. The facilities are used for software development. The office size
is 2,666 square feet.
Item 3. Legal Proceedings.
There are no legal or other proceedings pending against the Company, as of the
preparation of this Report, and no facts are known or suspected which would give
rise to any anticipation of any such proceedings in the foreseeable future.
Item 4. Submission of Matters to a Vote of Security Holders.
There have been no matters submitted to a vote of shareholders during the annual
period covered by this report.
PART II
Item 5. Market for Common Equity and Stockholder Matters.
(a) Market Information. The Company has one class of securities, Common Voting
Equity Shares ("Common Stock"). As of the date of this Annual Report, the
securities of the Company may be traded over the counter, 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 18,542,500 shares of Common Stock as of
December 31, 1999, all shares, subject to an exception for the 3,077,367 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 tradeable in
brokerage transaction. Affiliates are permitted by Rule 144 to sell
affiliate-owned securities (Restricted Securities held for more than one 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 tradeable in brokerage transactions.
(b) Holders. Management calculates that the approximate number of holders of the
Company's Common Stock, as of December 31, 1999 was 723.
(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. No other
dividends have been paid or declared by the Company and none are anticipated.
(d) Sales of Unregistered Common Stock 1999. None
(e) Market Information. Our Common Stock is quoted Over-The-Counter on the
Bulletin Board ("OTCBB"). The Company's trading symbol is IDNW.
Period ................................... High bid Low bid
1st 1999 ................................. 1.00 0.05
2nd 1999 ................................. 1.05 0.10
3rd 1999 ................................. 1.37 0.20
4th 1999 ................................. 1.87 0.20
The foregoing price information is based upon inter-dealer prices without retail
mark-up, mark-down or commissions and may not reflect actual transactions.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
The following information is provided as of the Date of this Report:
<S> <C> <C> <C> <C> <C>
December 31 1999 1998 1997 1996 1995
- - ------------------------------------------------------------------------------------------------------------------
Total Assets 617,537 0 0 0 0
Revenues 1,575,826 0 0 0 0
Operating Expenses 657,229 6,000 22,234 25,034 1,314
Net Earnings or (Loss) (560,760) (6,000) (22,234) (25,034) (1,314)
Per Share Earnings or (Loss) (0.04) (0.00) (0.01) (0.02) (0.00)
Average Common Shares Outstanding 14,211,267 2,074,500 1,942,500 1,942,500 690,500
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(a) Plan of Operation for the next twelve months.
In December 1999, Desert Springs Acquisition Corporation (DSAC) acquired all of
the issued and outstanding shares of Woodcomm International, Inc. in exchange
for 15,316,000 shares of common stock of DSAC. For financial reporting purposes
the business combination was accounted for as a reverse acquisition with WCI as
the acquirer. The historical financial statements prior to the merger are those
of WCI.
The Company provides Internet-based voice telecommunication to customers around
the world.
(b) Liquidity and Capital Resources
The Company used cash in operations of $33,400 compared to cash used in
operations of $8,040 for 1998. This is primarily due to net losses offset by
increases in accounts payable and accounts receivable.
The Company has primarily funded investing activities through the issuance of
long-term debt and advances from Member. The Company is currently exploring
other financing alternatives.
Year ended 1999 compared to 1998
The Company's recorded loss for the year ended 1999 was $560,760 compared to
$201,447 for the year ended 1998. This $359,313 increase in the loss was
comprised of an increase in sales and gross margin significantly offset by an
increase in general and administrative expenses of $461,927 and an increase in
interest expense of $72,685.
The $1,050,893 increase in sales was due to an increase in products being
offered as well as an increase in the overall customer base. Throughout 1998 and
most of 1999, the majority of the Company's sales were to one customer. The
terms of this relationship allowed for minimal gross margins on sales. Late in
1999, the Company expanded its customer base as well as its product mix. Along
with the typical Internet-based telecommunication service offered through third
parties, the Company began selling phone cards and offering web-based service.
This created more opportunity for sales as well as an increase in gross margin.
The increase in general and administrative expense is primarily attributable to
an increase of approximately $200,000 in consulting and professional fees
incurred in connection with the reorganization. Approximately $150,000 of an
increase in depreciation expense due to the increase in fixed assets and an
increase of approximately $150,000 in salaries.
iDIAL NETWORKS, INC.
Financial Statements
and
Independent Auditors' Report
December 31, 1999 and 1998
<PAGE>
iDIAL NETWORKS, INC.
Table of Contents
Page
Independent Auditors' Report.................................... F - 1
Financial Statements
Balance Sheets............................................ F - 2
Statement of Accumulated Deficit.......................... F - 3
Statements of Operations and Accumulated Deficit.......... F - 4
Statements of Cash Flows.................................. F - 5
Notes to Financial Statements................................... F - 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
iDial Networks, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of iDial Networks, Inc as of
December 31, 1999 and 1998, and the related statements of operations,
accumulated deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iDial Networks, Inc. as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's history of operating losses raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
March 6, 2000
Denver, Colorado
<PAGE>
iDIAL NETWORKS, INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Assets
Current assets
Cash ................................................ $ 11,481 $ 118,493
Accounts receivable - trade ......................... 26,614 87,149
Receivable (Note 7) ................................. 100,000 --
--------- ---------
Total current assets ............................. 138,095 205,642
Property and equipment, net (Note 2) ................... 255,587 353,914
Other assets
Intangibles ......................................... 215,000 --
Deposits ............................................ 8,855 11,009
Loan origination costs, net of accumulated
amortization of $1,235 ............................ -- 16,765
--------- ---------
Total assets ........................................... $ 617,537 $ 587,330
========= =========
Liabilities and Stockholders' Deficit
Current liabilities
Current portion of long-term debt (Note 3) .......... $ 96,416 $ 10,252
Advances from stockholder's (Note 5) ................ 119,100 186,844
Accounts payable .................................... 347,445 175,221
Accrued consulting fees (Note 4) .................... 55,000 --
Accrued wages ....................................... 25,000 40,000
Accrued interest .................................... -- 17,969
--------- ---------
Total current liabilities ........................ 642,961 430,286
Long-term debt, net of current portion (Note 3) ........ 148,385 450,793
--------- ---------
Total liabilities ................................ 791,346 881,079
Commitments and contingencies (Notes 3 and 4)
Equity (Note 7)
Common stock, $.01 par value, 100,000,000
shares authorized, 18,542,500 shares issued ........... 185,425 --
and outstanding
Additional paid in capital ............................. 495,575 --
Members' capital ....................................... -- 300
Accumulated deficit .................................... (854,809) (294,049)
--------- ---------
Total stockholders' equity deficit ............... (173,809) (293,749)
--------- ---------
Total liabilities and stockholders' deficit ............ $ 617,537 $ 587,330
========= =========
</TABLE>
See notes to financial statements.
F - 2
<PAGE>
iDIAL NETWORKS, INC.
Statements of Operations
For the Years Ended
December 31,
------------------------------
1999 1998
------------ ------------
Sales ...................................... $ 1,575,826 $ 524,933
Cost of sales .............................. 1,388,703 513,109
------------ ------------
Gross profit ............................... 187,123 11,824
Selling, general and administrative expenses 657,229 195,302
------------ ------------
Operating loss ............................. (470,106) (183,478)
Interest expense ........................... (90,654) (17,969)
------------ ------------
Net loss ................................... $ (560,760) $ (201,447)
============ ============
Net loss per share - basic ................. $ (.04) $ (.02)
============ ============
Net loss per share - diluted ............... $ (.04) $ (.02)
============ ============
Weighted average shares outstanding ........ 14,211,267 14,211,267
============ ============
See notes to financial statements.
F - 3
<PAGE>
iDIAL NETWORKS, INC.
Statement of Accumulated Deficit
For the Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
Members' Common Stock Additional Total
Capital ------------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Capital Deficit (Deficit)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1997 .......... $ 300 -- $ -- $ -- $ (92,602) $ (92,302)
Net loss ........................... -- -- -- -- (201,447) (201,447)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 ......... 300 -- -- -- (294,049) (293,749)
Reorganization (Note 1) ............ (300) 1,000 1 299 -- --
Issuance of common stock in
exchange for accrued wages (Note 1) -- 11,385,000 11,300 153,700 -- 165,000
Issuance of common stock for
consulting services (Note 1) ...... -- 3,930,000 40,150 22,850 -- 63,000
Exchange of common stock ........... -- 2,541,500 127,124 (127,124) -- --
Stock issued for retirement of debt
(NOte 7) .......................... -- 85,000 850 55,250 -- 56,100
Stock issued for fixed assets (Note -- 190,000 1,900 123,100 -- 125,000
7)
Stock issued for intangible asset .. -- 250,000 2,500 162,500 -- 165,000
(Note 7)
Stock issued for consulting ........ -- 10,000 100 6,500 -- 6,600
services (Note 7)
Stock issued for cash (Note 7) ..... -- 150,000 1,500 98,500 -- 100,000
Net loss ........................... -- -- -- -- (560,760) (560,760)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 ......... $ -- 18,542,500 $ 185,425 $ 495,575 $ (854,809) $ (173,809)
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
iDIAL NETWORKS, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------
1999 1998
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net loss .................................... $(560,760) $(201,447)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by used in operating activities
Write off of accrued interest ............... 60,000 --
Stock issued for consulting services ........ 69,600 --
Write off of loan acquisition costs ......... 16,765 --
Depreciation and amortization ............... 113,333 47,366
Changes in assets and liabilities
Accounts receivable ....................... (109,562) (87,149)
Accounts payable .......................... 317,224 175,221
Accrued expenses .......................... 60,000 57,969
--------- ---------
527,360 193,407
--------- ---------
Net cash used in operating activities ... (33,400) (8,040)
--------- ---------
Cash flows from investing activities
Purchase of property and equipment .......... (26,651) (21,535)
Deposits .................................... 2,154 (11,009)
--------- ---------
Net cash used in investing activities ... (24,497) (32,544)
--------- ---------
Cash flows from financing activities
Proceeds from issuance of long-term debt .... 35,000 83,614
Payments on long-term debt .................. (16,371) (1,079)
Net (repayments to) advances from member .... (67,744) 94,542
Loan origination cost ....................... -- (18,000)
--------- ---------
Net cash (used in) provided by financing (49,115) 159,077
--------- ---------
activities
(Decrease) increase in cash ................... (107,012) 118,493
Cash, beginning of year ....................... 118,493 --
--------- ---------
Cash, end of year ............................. $ 11,481 $ 118,493
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest was $30,654 and $0 for the years ended December 31,
1999 and 1998, respectively.
Continued on next page.
See notes to financial statements.
F - 5
</TABLE>
<PAGE>
iDIAL NETWORKS, INC.
Statements of Cash Flows
Continued from previous page.
Supplemental disclosure of noncash investing activity:
During the years ended December 31, 1999 and 1998, $169,601 and $378,570 of
office equipment was financed by capital lease obligations.
Prior to the reverse acquisition, 11,385,000 shares of common stock were
issued to the sole stockholder in exchange for forgiveness of $165,000 of
accrued wages. In addition, 3,930,000 shares of common stock were issued
for $63,000 in consulting services.
During the year ended December 31, 1999, the Company transferred common
stock effecting assets and liabilities as follows:
Description Fair Value
- - ----------------------------------------------- ------------
Acquisition of intangible assets $ 215,000
Acquisition of fixed assets 125,000
Settlement of notes payable 404,474
Impairment of equipment (306,246)
Forgiveness of accounts receivable in
connection with stock transactions (170,097)
Settlement of accrued interest 77,969
Receivable for common stock issuance 100,000
See notes to financial statements.
F - 6
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies
Organization and Business
In April 1999, Woodcomm, LLC was reorganized changing from an LLC to a Nevada
Corporation, Woodcomm International, Inc. (WCI).
In December 1999, Desert Springs Acquisition Corporation (Desert Springs)
acquired all of the issued and outstanding common shares of WCI in exchange for
15,316,000 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). The predecessor Company, Woodcomm,
LLC was established in May 1997 in the state of Nevada. The Company began
commercial operations in June 1998 as a facilities-based wholesale provider of
international long-distance telephone services into South East Asia from the
United States.
The Company is providing Internet-based voice telecommunication to customers
around the world. It 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.
Continued Operations and Realization of Assets
The accompanying consolidated 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 losses
from operations since inception, resulting in an accumulated deficit of
approximately $854,809 at December 31, 1999.
The accompanying financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
F - 7
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
The Company's near and long-term operating strategies in relation to the going
concern encompasses pursing several initiatives intended to increase liquidity
through increased revenue. The first is to expand its current prepaid phone card
business by partnering with international termination partners in high margin
countries and aggressively market its products through web site and agent
networks. High traffic will result in significantly lower carrier costs and thus
increase margins. The second is to offer private label long distance voice IP
service and other applications to cable operators and their customers. Third is
to offer iDial's unique send-a-call application to e-greeting card companies
which would allow the sender and recipient to be connected by telephone with a
click of a button. The fourth is to offer iDial's Phone-me-now application to
e-commerce whereby telephone contact would be made with the click of a button.
Concentration of Credit Risk
The Company's financial instruments that are exposed to concentration of credit
risk consist primarily of cash and accounts receivable. Additionally, the
Company maintains cash balances in bank deposit accounts which, at times, may
exceed federally insured limits. During the year ended December 31, 1999,
predominantly all of the Company's sales were generated form two companies and
receivables from these companies consisted of $20,611 or 77% of total trade
accounts receivable. During the year ended December 31, 1998, predominantly all
of the Company's sales were generated from one company and receivables consisted
of $82,614 or 95% of total trade accounts receivable.
Loan Origination Fees
The December 31, 1998 loan origination fees were direct costs incurred for the
origination of loans that were deferred and amortized to interest expense using
the interest method over the contractual terms of the loans. During 1999, the
loan origination fees were expensed in connection with the settlement of the
related debt through the transfer of common stock.
Advertising Costs
The Company expenses advertising costs as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Property and Equipment
Property and equipment are stated at cost; equipment under capital lease is
stated at the lower of fair market value or net present value of minimum lease
payments at inception of the leases. Depreciation is computed using the
straight-line method over the estimated useful lives or lease terms of the
related assets of three to five years.
Intangible Asset
Intangible asset consists of trademarks and rights of a particular phone card
and is stated at cost. Amortization is computed using the straight line over the
estimated useful life other asset of five years.
F - 8
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Revenue Recognition
Revenue is recognized upon the completion of long distance telephone service
based on the duration of the telephone call.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value as of
December 31, 1999, as a result of the relatively short maturity of these
instruments.
The fair value of the notes payable approximate the carrying value as both
the stated rate and discount rate on the notes approximate the estimated current
market rate.
Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recovered. The Company looks primarily to the undiscounted future cash flows
in its assessment of whether or not long-lived assets have been impaired. At
December 31, 1999, the Company determined no impairment was appropriate.
Income Taxes
During 1998, the Company was organized as an LLC. No tax was paid by the LLC as
each member is allocated their respective share of the Company's income or loss
for the year in accordance with federal and state tax laws. Accordingly, no tax
provision is included in the financial statements for the year ended December
31, 1998.
Effective April 1999, the Company was reorganized, changing from an LLC to a C
Corporation. As a result, the Company recognizes deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statements and tax basis of assets and liabilities using the enacted
tax rates in effect for the year in which the differences are expected to
reverse. The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that, based on available evidence, are not expected
to be realized.
F - 9
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Basic and Diluted 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") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions
of SFAS 128 and SAB 98, basic and diluted net loss per share is computed by
dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding for the period.
Recently Issued Accounting Pronouncements
During April 1998, Statement of Position 98-5, "Reporting in the Costs of
Start-Up Activities" was issued. SOP 98-5 was required to be adopted by the
first quarter of 1999. The Company had no effect on operations upon adoption of
SOP 98-5.
Note 2 - Property and Equipment
Property and equipment consists of the following:
December 31,
-----------------------
1999 1998
----------- ---------
Telephony equipment ....................... $ 137,158 $ 288,974
Computers, equipment and software.......... 277,893 111,071
----------- ---------
415,051 400,045
Less accumulated depreciation .......... (159,464) (46,131)
----------- ---------
$ 255,587 $ 353,914
=========== =========
Note 3 - Long-Term Debt
Long-term debt consists of the following:
December 31,
-----------------------
1999 1998
----------- ---------
Note payable, interest at 12.9%, due in monthly
installments of approximately $795, commencing
July 1999 through maturity of June 2004. $ 31,776 $ -
F - 10
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 3 - Long-Term Debt (continued)
December 31,
-----------------------
1999 1998
----------- ---------
Capital leases with monthly installments
totaling $3,295 including interest at
23% and expiring December 2001 through
August 2003. Collateralized by equipment
with a net book value of approximately
$178,000 and $55,000 at December 31, 1999
and 1998, respectively. 213,025 56,571
Various note payables issued for acquisition of
equipment, paid during 1999 with the issuance
of common stock - 404,474
----------- ----------
$244,801 $461,045
=========== ==========
Maturities of long-term debt as of December 31, 1999 are as follows:
Long-Term Capital
Year Ending December 31, Debt Leases Total
------------------------- --------- --------- ---------
2000 $ 5,035 $ 135,869 $ 140,904
2001 6,458 94,369 100,827
2002 7,342 14,932 22,274
2003 8,348 8,237 16,585
2004 4,593 -- 4,593
--------- --------- ---------
31,776 253,407 285,183
Less amount
representing
interest -- (40,382) (40,382)
--------- --------- ---------
31,776 213,025 244,801
Less current
maturities (5,035) (91,381) (96,416)
--------- --------- ---------
$ 26,741 $ 121,644 $ 148,385
========= ========= =========
The net book value of assets under capital lease was approximately $178,000 and
$55,000 as of December 31, 1999 and 1998, respectively.
Note 4 - Commitments
The Company leases office space and furniture and equipment under operating
leases which expire February 2000 through July 2002.
F - 11
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 4 - Commitments (continued)
Future minimum obligations under the non-cancelable operating leases at December
31, 1999 are as follows:
Year Ending December 31,
2000 $110,320
2001 74,176
2002 3,155
--------
$187,651
========
Rent expense under the operating leases was $41,954 and $30,275 for the years
ended December 31, 1999 and 1998, respectively.
Note 5 - Shareholder Advance
In 1998, the Company received advances from a shareholder to fund operations.
The advances are non interest bearing and payable on demand. As of December 31,
1999 and 1998, the advances from stockholder totaled $119,100 and $186,844,
respectively.
Note 6 - Income Taxes
At December 31, 1999, the Company has net operating loss carryforwards of
approximately $536,000 which expires in 2014.
The Company has recorded a long-term deferred tax asset for the net operating
loss of approximately $208,504 at December 31, 1999, and has provided a 100%
valuation allowance on the deferred tax asset due to uncertainty as to the
ultimate utilization of the net operating loss carryforwards.
Note 7 - Stock Transactions
Prior to the reverse acquisition, the stockholder of WCI was issued 11,385,000
shares of common stock in exchange for $165,000 of accrued wages. Additionally,
various consultants were issued common stock in exchange for services. The fair
market value of the common stock on the date of these issuances was determined
based on the consideration received as that amount was more readily determinable
and reliably measurable than the fair market value of the common stock
transferred.
F - 12
<PAGE>
iDIAL NETWORKS, INC.
Notes to Financial Statements
Note 7 - Stock Transactions (continued)
In December 1999, subsequent to the reverse acquisition, the Company issued
common shares in exchange for debt, to acquire various assets and in payment of
consulting services. In December 1999, the fair market value of the common stock
on the date of these issuances was determined to be $.66 based on the issuance
of 150,000 common shares of stock for $100,000 in December 1999.
The various stock transactions which occurred in December 1999 are as follows:
The Company issued 85,000 shares of common stock to an equipment vendor and
customer in exchange for satisfaction of a note payable and related accrued
interest totaling $482,443. This amount was netted with the accounts receivable
balance due the Company which totaled $120,097. The related equipment's
acquisition cost was reduced by approximately $306,000 as a result of this
transaction.
The Company issued 250,000 shares of common stock in exchange for an intangible
asset. In connection with this transaction, the Company also settled an accounts
receivable balance of $50,000. The fair value of the intangible asset was
determined to be $215,000 and is reflected in the accompanying financial
statements.
A consultant was granted 200,000 shares of common stock in exchange for
equipment with a fair value of $125,000 and consulting services. The
accompanying financial statements reflect $6,600 of consulting expense and the
fair value of the equipment as a result of this transaction.
In December 1999, the Company agreed to transfer 150,000 shares of common stock
in exchange for $100,000. This amount was received in full in January 2000.
F - 13
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Reference is made to Auditors Report of December 31, 1999 filed herewith. Those
financial statements, attached thereto are incorporated herein by this reference
as though fully set forth herein.
Please see the Exhibit Index found on page 17 of this Report.
Item 9. Change of Company's Auditor.
This Reorganized Corporation shall have new auditors, Ehrhardt, Keefe, Steiner &
Hottman, 7979 E Tufts Ave, Suite 400, Denver Colorado 80237-24843.There has been
no disagreement with any auditor about any item.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
PART III
Item 10. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The Company has 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, 1999
concerning our executive officers.
NAME AGE POSITION
Mark T. Wood 40 Chairman of the Board
George V. Stein 58 CEO, President and Director (as of January 2000)
Klaus Scholz 50 Chief Operating Officer and Director
Edward J. Janusz 52 Director
Mark T. Wood, Chairman of the Board
Mark Wood has served as managing officer since the inception (May 1997) of
Woodcomm International, predecessor to iDial Networks Inc. From 1996 to May
1997, Mr. Wood was Vice President and General Manager of Loxcomm America Inc.,
an international telecommunications company. From 1995 to 1996 he served as
chief Operating Officer of WorldQuest Networks L.L.C., a Dallas, Texas-based
international Internet Telecommunications company. From 1992 to 1995 B Vice
President, International Sales of Intellicall, Inc. (AMEX:ICL) an international
telecommunications company.
George V. Stein, became CEO, President and Director in January of 2000.
Mr. Stein is a 30-year veteran of the cable and telecommunications industry,
recognized as one of the top 100 most influential executives in 1998 by CableFax
Magazine. He was co-founder of Encore Media Corporation, a Liberty Media company
(NYSE:LMG) that serves in excess of 50 million subscribers with a host of
programming services including ENCORE and STARZ. Most recently, Mr. Stein was
the founder and Chief Executive Officer of Hallmark Entertainment Networks,
Inc., a Hallmark Cards company. Renamed Crown Media Holdings, Inc., (NYSE:CRWN),
the company has filed an S-1 registration and will become a billion dollar cap
entity upon completion of it's underwriting, led by DLJ. A Wharton MBA with
brand management experience at Procter and Gamble, Mr. Stein brings a unique
combination of marketing and financial skills to the VoIP industry.
Klaus Scholz, Director and Chief Operating Officer
Mr. Scholz introduced the worldwide first Internet based Payphone when he was
the Managing Director of The PayPhone Co. (PPC) on behalf of the Thai
conglomerate, Loxley PLC. A native of Germany, he served ten years at Hewlett
Packard (Country Manager South East Europe) before moving to Asia in 1987. In
Thailand, he became the Managing Director of the publicly listed Semiconductor
Ventures International LTD. He joined that company as the Country Manager of the
German Engineering and Certification Body TUV that cooperated with the Chinese
government to improve quality and safety standards in the Taiwanese industry.
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.
Item 11. Executive Compensation.
None.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Common Stock
To the best of Company's knowledge and belief the following disclosure presents,
as of the date of this report, December 31, 1999, 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 beneficially 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.
Please see table on following page
<PAGE>
<TABLE>
<CAPTION>
Security Ownership of Officers and Directors and 5% Owners
Name and Address of Beneficial Owner Amount and Nature Percent of Class
of Ownership
<S> <C> <C>
Mark T. Wood, Chairman of the Board
5919 Buffridge Trail
Dallas, TX 75252 3,385,000 18.26
George V. Stein, CEO, President, Director(1) 0 0.00
Klaus Scholz, Director and COO
19019 Preston Road, Suite 616
Dallas, TX 75252 1,500,000 8.09
Edward J. Janusz, Director
7 Lacewing Place
The Woodlands, TX 50,00 0.27
---------------------------------------------------------------------------------------------
All Officers and Directors as a Group 4,935,000 26.61
==============================================================================================
Mauricio Vega III
14910 Ridge Hill
San Antonio, TX 78233 1,000,000 5.39
Fostures Ventures(2)
5919 Buffridge Trail
Dallas, TX 75252 8,000,000 43.14
REXCO
900-609 Granville Street
P.O. Box 10341 Pacific Centre
Vancouver, BC V7Y 1H4 Canada 1,530,133 8.25
- - ----------------------------------------------------------------------------------------------
Total Shares Issued and Outstanding 18,542,500 100.00
==============================================================================================
(1) AMOUNT OF OWNERSHIP IS 2,500,000 SHARES OF MARK WOOD'S 3,385,000 ISSUED IN 2000.
(2) FOSTERS VENTURES IS A FAMILY TRUST BENEFICIALLY OWNED BY MARK T. WOOD.
</TABLE>
Item 13. Certain Relationships and Related Transactions.
None.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Financial Statements. Reference is made to Auditors Report of
December 31, 1999 filed with herewith. Those financial statements,
attached as Exhibit "F" thereto are incorporated herein by this
reference as though fully set forth herein.
(b) Form 8-K Reports. A Form 8-K was filed on December 15, 1999. The
Form 8-K reported the change of control of this Company, in
accordance with the plan of reorganization and acquisition, dated
November 30, 1999, by which this Company acquired Woodcomm
International, Inc., a private Corporation, for issuance of
16,000,000 new investment shares of common stock. In addition to
the change of control, certain other proposals incidental to the
acquisition and change of control are were approved: (a) filing of
"Shelf Registration Statement" for issuance of up to 2,000,000
shares of common stock at an offering price of not less than $3.00
per share; (b) a change of the corporate name, and change of Situs
of the Corporation from Colorado to Nevada, as a part of this
Reorganization, to become and be iDial Networks Inc., a Nevada
Corporation, or a substantially similar name as may be available
in Nevada; (c) election of the following three Directors, to serve
until the next Annual Meeting of Shareholders or until their
successors are elected and qualified: Mark T. Wood, Klaus Scholz,
and Edward Janusz.
(c) Exhibits. Please see Exhibit Index, following.
Exhibit Index
Financial Statements and Documents
Furnished as a part of this Annual Report
Exhibit 1. Articles of Amendment - Desert Springs Acquisition Corp.
Exhibit 2. Articles of Amendment - iDial Networks, Inc.
Exhibit 3. Articles/Certificate of Share Exchange and Merger
Exhibit F. Audited Financial Statements - December 31, 1999.
<PAGE>
Supplementary Information to be Furnished With
Reports Filed Pursuant to Section 15(d) of the Act by
Companies which Have Not Registered Securities
Pursuant to Section 12 of the Act.
No annual report or proxy material has been sent to security holders.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the individual capacities and on the date indicated.
December 31, 1999.
iDial Networks, Inc.
a Nevada corporation
by
/S/ /S/
Mark Wood George V. Stein
Chairman of the Board President/ Director
<PAGE>
Exhibit 1
Articles of Amendment
Desert Springs Acquisition Corp.
<PAGE>
ARTICLES OF INCORPORATION
OF
Desert Springs Acquisition Corp.
Article I. The name of the Corporation is Desert Springs Acquisition Corp.
Article II. Its principal office is in the State of Nevada is 774 Mays Blvd.
#10, Incline Village NV 89452. The initial resident agent for services of
process at that address is N&R Ltd. Group, Inc.
Article III. The purposes for which the corporation is organized are to engage
in any activity or business not in conflict with the laws of the State of Nevada
or of the United States of America. The period of existence of the corporation
shall be perpetual.
Article IV. The corporation shall have authority to issue an aggregate of
100,000,000 shares of common voting equity stock of par value one mil ($0.001)
per share, and no other class or classes of stock, for a total capitalization of
$100,000. The corporation's capital stock may be sold from time to time for such
consideration as may be fixed by the Board of Directors, provided that no
consideration so fixed shall be less than par value.
Article V. No shareholder shall be entitled to any preemptive or preferential
rights to subscribe to any unissued stock or any other securities which the
corporation may now or hereafter be authorized to issue, nor shall any
shareholder possess cumulative voting rights at any shareholders meeting, for
the purpose of electing Directors, or otherwise.
Article VI. The name and address of the Incorporator of the corporation is
William Stocker, Attorney at Law, 34700 Pacific Coast Highway, Suite 303,
Capistrano Beach CA 92624, phone (949) 248-9561, fax (949) 248-1688. The affairs
of the corporation shall be governed by a Board of Directors of not less than
one (1) nor more than (7) persons. The Incorporator shall act as Sole Initial
Director.
Article VII. The Capital Stock, after the amount of the subscription price or
par value, shall not be subject to assessment to pay the debts of the
corporation, and no stock issued, as paid up, shall ever be assessable or
assessed.
<PAGE>
Article VIII. The initial By-laws of the corporation shall be adopted by its
Board of Directors. The power to alter, amend or repeal the By-laws, or adopt
new By-laws, shall be vested in the Board of Directors, except as otherwise may
be specifically provided in the By-laws.
I the undersigned, being the Incorporator hereinbefore named for the purpose of
forming a corporation pursuant the General Corporation Law of the State of
Nevada, do make and file these Articles of Incorporation, hereby declaring and
certifying that the facts herein stated are true, and accordingly have set my
hand hereunto this Day,
December 16, 1999.
/S/
William Stocker
attorney at law
Incorporator
<PAGE>
Exhibit 2
Articles of Amendment
iDial Networks Inc.
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
OF
Desert Springs Acquisition Corp.
(before payment of capital and issuance of stock)
We the Undersigned, Officers of Desert Springs Acquisition Corp. ("the
Corporation"), incorporated on December 17, 1999, hereby certify:
The Initial Incorporator of the Corporation at a meeting duly convened and held
on December 20, 1999 adopted a resolution to amend the Articles of Incorporation
as Originally filed and/or amended.
The former Article One read:
Article One. The name of the Corporation is Desert Springs Acquisition Corp.
Article One is superseded and replaced as follows:
Article One. The name of the Corporation is iDial Networks, Inc.
The number of shares of the Corporation outstanding is zero, and the
Incorporator is entitled to amend the Articles of Incorporation.
/S/
William Stocker
Incorporator
<PAGE>
Exhibit 3
ARTICLES/CERTIFICATE of SHARE EXCHANGE and MERGER
iDial Networks Inc.
<PAGE>
ARTICLES/CERTIFICATE of SHARE EXCHANGE and MERGER
BY WHICH
Desert Springs Acquisitions Corp.
(a Colorado corporation)
FIRST ACQUIRED AND EXCHANGE WITH
Woodcomm International Inc.
(a Nevada corporation)
AND THEN MOVED ITS PLACE OF INCORPORATION TO NEVADA
BY MERGER OF THE COLORADO CORPORATION WITH AND INTO
iDial Networks, Inc.
(a Nevada corporation)
(Colorado: CRS 7-11-107)
(Nevada: NRS 92A.200-230)
First, the Plans: of Reorganization and Acquisition; and of Merger:
(1) There are two transactions and two plans which together, and in order
constitute the acquisition, share exchange and relocation of the resulting
acquiring entity to Nevada, to join the Nevada subsidiary:
(2.1) That certain Plan of Reorganization and Acquisition, dated November 30,
1999, is attached hereto and incorporated herein by this reference as though
fully set forth herein. The Colorado parent acquires a Nevada Subsidiary.
(2.2) That certain Plan of Reorganization and Merger for Change of Situs, dated
January 7, 2000, is attached hereto and incorporated herein by this reference as
though fully set forth herein. The former Colorado parent then moves to Nevada.
Second, information re Shareholder Action:
(2.1) A Special meeting of shareholders of the Colorado Corporation was duly
called upon notice to all shareholders of record on the record date. The meeting
was held on December 21, 1999. On recommendation of the Board of Directors of
the Colorado Corporation, approval was given by shareholder for the
afore-mentioned acquisition and subsequent move to Nevada, 99% of all
shareholders entitled to vote, present and voting in favor.
(2.2) Unanimous consent by the owners of the private Woodcomm International Inc.
was given to both the acquisition and subsequent move to Nevada of the resulting
Colorado Parent.
(2.3) As to the new Nevada Corporation, iDial Networks, Inc., formerly and
originally Desert Springs Acquisitions Corp. (of Nevada), no shareholder action
was necessary, and none was possible, for the reason that no shares had been
issued. This Nevada corporation was been created solely for the purpose of this
change of situs to Nevada.
Third, Corporate Authority:
(3.1) The Plan of Reorganization and Acquisition and the performance of its
terms by the each and all of the parties and entities mentioned therein were
duly authorized by all action required by the laws under which each was
incorporated or organized and by its constituent documents, to which
representation each of the undersigned duly certifies and attests.
(3.2) The Plan of Reorganization and Merger for Change of Situs and the
performance of its terms by each and all of the parties and entities mentioned
therein were duly authorized by all action required by the laws under which each
was incorporated or organized and by its constituent documents, to which
representation each of the undersigned duly certifies and attests.
Fourth, Significant Provisions:
(4.1) The Colorado Corporation first acquired the private Nevada Corporation
Woodcomm International Inc. as a wholly-owned subsidiary.
(4.2) The Colorado Corporation then moved to Nevada by merger with and into
iDial Networks, Inc., a new Nevada Corporation (with no shares issued) created
for the purpose of this merger.
Fifth, Effective Date:
(5) The exchange and the conversion of shares shall become effective at the
earliest date provided or allowed by law, and not later than certification by
each applicable State Official that this document has been accepted for filing
and filed.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
Sixth Signing:
(6) These Articles of Exchange are signed by the duly authorized Officers of the
each applicable entity as follows:
Desert Springs Acquisitions Corp. Woodcomm International, Inc.
(a Colorado corporation) (a Nevada corporation)
and
iDial Networks, Inc.
(a Nevada corporation)
by by
/S/ /S/
James L. Bartel Mark T. Wood
President President
/S/ /S/
Mitchell Milgaten Mark T. Wood
Secretary Secretary
<PAGE>
Plan of Reorganization and Acquisition
BY WHICH
Desert Springs Acquisitions Corp.
(a Colorado corporation)
SHALL ACQUIRE
Woodcomm International Inc.
(a Nevada corporation)
This Plan of Reorganization and Acquisition is made and dated this day of
November 30,1999 by and between the above referenced corporations, and shall
become effective on Athe Effective Date@ as defined herein.
I. The Interested Parties
A. The Parties to this Plan
1. Desert Springs Acquisitions Corp. ("DSAQ"),
2. Woodcomm International Inc. ("WII"),
II. Recitals
A. The Capital of the Parties:
1. The Capital of DSAQ consists of 500,000,000 shares of common
voting stock of $.0001 par value authorized, of which 2,542,500
shares are issued and outstanding.
2. The Capital of WII consists of shares of common voting stock of
$.0001 par value authorized, of which equitable ownership by its
principals, nor shares having been formally issued, is expressed
as 16,000,000 shares which 16,000,000 shares are treated as if
issued and outstanding, for purposes of this share exchange.
B. The Background for the Acquisition: DSAQ desires to acquire WII and the
shareholders of WII wish to be acquired by a public company.
C. The Boards of Directors of both Corporations respectively have
determined that it is advisable and in the best interests of each of them
and both of them to proceed with the acquisition by the Colorado
Corporation, in accordance with IRS '368(a)(1)(B) and (C).
D. A Majority of Shareholders of DSAQ, having approved the acquisition,
this agreement was approved and adopted by the Board of Directors of DSAQ
in a manner consistent with the laws of its Jurisdiction and its
constituent documents, subject to ratification by all shareholders at
meeting called for that purpose, expected to be held on December 21, 1999.
E. 100% of Shareholders of WII, have approved the acquisition, this
agreement was approved and adopted by the Board of Directors of WII in a
manner consistent with the laws of its Jurisdiction and its constituent
documents.
F. No Reverse Split for 18 Months: the parties have agreed and do agree, as
a material element of this Reorganization that DSAQ shall effect no reverse
split of its common stock within 18 months of the effective date hereof.
III. Plan of Acquisition
A. Reorganization and Acquisition: Desert Springs Acquisitions Corp. and
the Woodcomm International Inc. are hereby reorganized, as of the effective
date hereof, such that Desert Springs Acquisitions Corp. shall acquire all
assets, businesses and capital stock of the Woodcomm International Inc.,
and Woodcomm International Inc. shall become a wholly-owned subsidiary of
Desert Springs Acquisitions Corp.
B. Effective Date: This Plan of Reorganization and Acquisition shall become
effective immediately upon approval and adoption by the parties hereto, in
the manner provided by the law of the places of incorporation and
constituent corporate documents, and the time of such effectiveness shall
be called the effective date hereof.
C. Surviving Corporation: Both corporations shall survive the
Reorganization herein contemplated and shall continue to be governed by the
laws of its respective State of Incorporation.
Rights of Dissenting Shareholders: Desert Springs Acquisitions Corp. is the
entity responsible for the rights of dissenting shareholders.
a. Service of Process: Desert Springs Acquisitions Corp. may be served
with process in Nevada in any proceeding for the enforcement of the
rights of a dissenting shareholder, if any, pursuant to any extent
required by the laws thereof. The President of the corporation hereby
irrevocably appoints the Secretary of the State of Colorado as agent
to accept service of process for the Nevada corporation with respect
to any such proceeding to the extent required by the laws thereof.
b. Agent for Mailing Process: corporation hereby further complies with
the laws of Delaware by designating a person to whom process served
upon the Secretary of that State may be forwarded and mailed: William
Stocker, Attorney at Law, 34700 Pacific Coast Highway, Suite 303,
Capistrano Beach CA 92624, phone (949) 248-9561, fax (949) 248-1688.
D. Surviving Articles of Incorporation: The Articles of Incorporation
of each Corporation shall remain in full force and effect, unchanged.
E. Surviving By-Laws: The By-Laws of each Corporation shall remain in
full force and effect, unchanged.
F. Conversion of Outstanding Stock: Forthwith upon the effective date
hereof, Desert Springs Acquisitions Corp. shall issue 16,000,000 new
investment shares of its common stock to or for the shareholders of
Woodcomm International Inc.; and each and every share of Woodcomm
International Inc. shall be converted into one such new share of
Desert Springs Acquisitions Corp.
G. Further Assurance, Good Faith and Fair Dealing: The Directors of
each Company shall and will execute and deliver any and all necessary
documents, acknowledgments and assurances and to do all things proper
to confirm or acknowledge any and all rights, titles and interests
created or confirmed herein; and both companies covenant hereby to
deal fairly and good faith with each other and each others
shareholders.
H. General Mutual Representations and Warranties. The purpose and
general import of the Mutual Representations and Warranties, are that
each party has made appropriate full disclosure to the others, that no
material information has been withheld, and that the information
exchanged is accurate, true and correct.
1. Organization and Qualification. Each Corporation warrants and
represents that it is duly organized and in good standing, and is duly
qualified to conduct any business it may be conducting, as required by
law or local ordinance.
2. Corporate Authority. Each Corporation warrants and represents that it
has Corporate Authority, under the laws of its jurisdiction and its
constituent documents, to do each and every element of performance to
which it has agreed, and which is reasonably necessary, appropriate
and lawful, to carry out this Agreement in good faith.
3. Ownership of Assets and Property. Each Corporation warrants and
represents that it has lawful title and ownership of its property as
reported to the other, and as disclosed in its financial statements.
4. Absence of Certain Changes or Events. Each Corporation warrants and
represents that there are no material changes of circumstances or
events which have not been fully disclosed to the other party, and
which, if different than previously disclosed in writing, have been
disclosed in writing as current as is reasonably practicable.
5. Absence of Undisclosed Liabilities. Each Corporation warrants and
represents specifically that it has, and has no reason to anticipate
having, any material liabilities which have not been disclosed to the
other, in the financial statements or otherwise in writing.
6. Legal Proceedings. Each Corporation warrants and represents that there
are no legal proceedings, administrative or regulatory proceedings,
pending or suspected, which have not been fully disclosed in writing
to the other.
7. No Breach of Other Agreements. Each Corporation warrants and
represents that this Agreement, and the faithful performance of this
agreement, will not cause any breach of any other existing agreement,
or any covenant, consent decree, or undertaking by either, not
disclosed to the other.
8. Capital Stock. Each Company warrants and represents that the issued
and outstanding shares and all shares of capital stock of such
corporation, is as detailed herein, that all such shares are in fact
issued and outstanding, duly and validly issued, were issued as and
are fully paid and non-assessable shares, and that, other than as
represented in writing, there are no other securities, options,
warrants or rights outstanding, to acquire further shares of such
Corporation.
9. Brokers' or Finder's Fees. Each Corporation warrants and represents
that it is aware of no claims for brokers' fees, or finders' fees, or
other commissions or fees, by any person not disclosed to the other,
which would become, if valid, an obligation of either company.
I. Miscellaneous Provisions
1. At the closing date, there shall be no undisclosed changes from that
reflected in the financial and other statements exchanged by the
parties.
2. Except as required by law, no party shall provide any information
concerning the Subject Property or any aspect of the transactions
contemplated by this Agreement to anyone other than their respective
officers, employees and representatives without the prior written
consent of the other parties hereto. The aforesaid obligations shall
terminate on the earlier to occur of (a) the Closing, or (b) the date
by which any party is required under its articles or bylaws or as
required by law, to provide specific disclosure of such transactions
to its shareholders, governmental agencies or other third parties. In
the event that the transaction does not close, each party will return
all confidential information furnished in confidence to the other.
3. This Agreement may be executed simultaneously in two or more
counterpart originals. The parties can and may rely upon facsimile
signatures as binding under this Agreement, however, the parties agree
to forward original signatures to the other parties as soon as
practicable after the facsimile signatures have been delivered.
4. The Parties to this agreement have no wish to engage in costly or
lengthy litigation with each other. Accordingly, any and all disputes
which the parties cannot resolve by agreement or mediation, shall be
submitted to binding arbitration under the rules and auspices of the
American Arbitration Association, as a further incentive to avoid
disputes, each party shall bear its own costs, with respect thereto,
and with respect to any proceedings in any court brought to enforce or
overturn any arbitration award. This provision is expressly intended
to discourage litigation and to encourage orderly, timely and
economical resolution of any disputes which may occur.
5. If any provision of this agreement or the application thereof to any
person or situation shall be held invalid or unenforceable, the
remainder of the Agreement and the application of such provision to
other persons or situations shall not be effected thereby but shall
continue valid and enforceable to the fullest extent permitted by law.
6. No waiver by any party of any occurrence or provision hereof shall be
deemed a waiver of any other occurrence or provision.
7. The parties acknowledge that both they and their counsel have reviewed
and revised this agreement and that the normal rule of construction
shall not be applied to cause the resolution of any ambiguities
against any party presumptively. The Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada.
8. The parties acknowledge that they have agreed to and contemplate later
corporate action by which the Resulting Colorado Corporation shall
merge with and into a new Nevada Corporation, for the purpose of
changing the corporate name and place of incorporation.
This Plan of Reorganization and Merger is executed on behalf of each Company by
its duly authorized representatives, and attested to, pursuant to the laws of
its respective place of incorporation and in accordance with its constituent
documents.
Desert Springs Acquisitions Corp. Woodcomm International, Inc.
(a Colorado corporation) (a Nevada corporation)
by by
/S/ /S/
James L. Bartel Mark T. Wood
President President
/S/ /S/
Mitchell Milgaten Mark T. Wood
Secretary Secretary
<PAGE>
PLAN OF MERGER FOR CHANGE OF SITUS
BY WHICH
Desert Springs Acquisitions Corp.
(a Colorado corporation)
WILL MERGE WITH AND INTO
iDial Networks, Inc.
(a Nevada corporation)
FOR THE PURPOSE OF CHANGING THE PLACE OF INCORPORATION
This Plan of Reorganization is made and dated this day of January 7, 2000, by
and between the above referenced corporations, sometimes referred to herein as
"the Public Company" and "the Private Company", respectively.
I. Recitals
A. The Parties to this Agreement
1. Desert Springs Acquisitions Corp. ("the Public Company") is a
Colorado Corporation. It has recently acquired Woodcomm
International Inc., a private Nevada Corporation, as a
wholly-owned subsidiary.
2. iDial Networks, Inc. ("the Private Company") is a Nevada
Corporation, having been created originally as Desert Springs
Acquisitions Corp. (of Nevada) for the purpose of changing the
place of incorporation of the Colorado corporation to Nevada.
B. The Capital of the Parties:
1. The Capital of the Public Company consists of 500,000,000 shares
of common voting stock of $.0001 par value authorized, of which
18,542,500 shares are issued and outstanding. There were
2,542,500 shares issued and outstanding, immediately before the
acquisition of Woodcomm International Inc. (a Nevada
Corporation) as a wholly-owned subsidiary of the Public Company,
16,000,000 shares having been issued for that acquisition.
2. The Capital of the Private Company consists of 100,000,000
shares of common voting stock of $0.001 par value authorized, of
which no shares have been or are issued or outstanding.
C. The Decision to Reorganize to Change Situs: The Parties have resolved,
following the acquisition of Woodcomm International Inc. (a Nevada
Corporation), to merge and relocate the place of incorporation of the
Public Parent Company, by means of the following reorganization, by
which the Public Company will merge with and into the Private Company
and move to Nevada. As an intended result of this change of situs, the
Parent Public Corporation shall be located and incorporated in the
same State as its principal wholly-owned Subsidiary.
II. Plan of Reorganization
A. Change of Situs: The Public Company (Colorado) and the Private Company
(Nevada) are hereby reorganized for the sole and singular purpose of
changing the place of incorporation of the Public Desert Springs
Acquisitions Corp.; such that immediately following the Reorganization
the Colorado Public Company will move to Nevada.
1. The Public Company: Desert Springs Acquisitions Corp. of Colorado
will merge with and into and thereafter be iDial Networks, Inc.
of Nevada. The Public Company will retain its corporate
personality and status, and will continue its corporate existence
uninterrupted, in and through, and only in and through the new
Nevada Corporation.
2. Conversion of Outstanding Shares: Forthwith upon the effective
date hereof, each and every one share of stock of the Public
Colorado Company shall be converted to one share of the Nevada
Company. Any such holders of shares may surrender them to the
transfer agent for common stock of the Public Colorado Company,
which transfer agent shall remain and continue as transfer agent
for the Nevada Company.
3. Effective Date: This Plan of Reorganization shall become
effective immediately upon approval and adoption by Corporate
parties hereto, in the manner provided by the law of its place of
incorporation and its constituent corporate documents, the time
of such effectiveness being called the effective date hereof.
4. Surviving Corporations: The Nevada Company shall survive the
Reorganization after Reorganization, with the operational history
of the Colorado Company before the Reorganization, and with the
management, duties and relationships to its shareholders
unchanged by the Reorganization and with all of its property and
with its shareholder list unchanged. The Colorado Company shall
not survive the merger.
5. Further Assurance, Good Faith and Fair Dealing: the Directors of
each Company shall and will execute and deliver any and all
necessary documents, acknowledgments and assurances and do all
things proper to confirm or acknowledge any and all rights,
titles and interests created or confirmed herein; and both
companies covenant hereby to deal fairly and in good faith with
each other and each others shareholders.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
III. Signing
This Reorganization Agreement is executed on behalf of each Company by its duly
authorized representatives, and attested to, pursuant to the laws of its
respective place of incorporation and in accordance with its constituent
documents.
Desert Springs Acquisitions Corp. iDial Networks, Inc.
(a Colorado corporation) (a Nevada corporation)
by by
/S/ /S/
James L. Bartel Mark T. Wood
President President
/S/ /S/
Mitchell Milgaten Mark T. Wood
Secretary Secretary
<PAGE>
Exhibit F
Audited Financial Statements
December 31, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 11,481
<SECURITIES> 0
<RECEIVABLES> 126,614
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 138,095
<PP&E> 415,051
<DEPRECIATION> 159,464
<TOTAL-ASSETS> 617,537
<CURRENT-LIABILITIES> 642,961
<BONDS> 0
0
0
<COMMON> 185,425
<OTHER-SE> 495,575
<TOTAL-LIABILITY-AND-EQUITY> 617,537
<SALES> 1,575,826
<TOTAL-REVENUES> 1,575,826
<CGS> 1,388,703
<TOTAL-COSTS> 657,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,654
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (560,760)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
