--------------------------------------------------------------------------------
Mark T. Woood
CHAIRMAN
iDial Networks, Inc.
16990 Dallas Parkway, Suite 106
Dallas Texas 75248
(Name and Address of Person Authorized to Receive Notices
and Communications on Behalf of the Person Filing Statement)
--------------------------------------------------------------------------------
WITH A COPY TO:
KARL E. RODRIGUEZ, ESQ
24843 Del Prado, #318
Dana Point, CA 92629
(949) 248-9561
fax (949) 248-1688
--------------------------------------------------------------------------------
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 2000
Commission File Number: 0-24962
IDIAL NETWORKS, INC.
formerly
Desert Springs Acquisitions, Inc.
Nevada 75-2863583
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
16990 Dallas Parkway Suite 106, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
Registrant'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 Registrant (1) has filed
all report required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.)
As of September 30, 2000, the number of shares outstanding of the Registrant's
Common Stock was 31,818,658.
1
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IDIAL NETWORKS, INC.
and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
------------ --------------
(Unaudited)
Current assets
Cash $ 102,478 $ 11,481
Accounts receivable - trade 42,828 26,614
Other receivables 7,228 100,000
Prepaid expenses 56,389 -
------------ --------------
Total current assets 208,923 138,095
Property, net 100,765 255,587
Other assets
Capitalized Software Costs, net 2,197,979 -
Other Intangibles 215,000 215,000
Goodwill 5,470,822 -
Available for Sale - Securities 127,200 -
Deposits 14,724 8,855
------------ --------------
Total other assets 8,025,725 223,855
Total assets $ 8,335,413 $ 617,537
============ ==============
Current liabilities
Current portion of long-term debt $ 760,551 $ 96,416
Accounts payable 864,574 347,445
Deferred Revenue 220,285 -
Accrued liabilities 77,712 80,000
------------ --------------
Total current liabilities 1,923,122 523,861
Long-term liabilities
Advances from stockholder's & related parties . 205,600 119,100
Notes payable 150,063 148,385
------------ --------------
Total long-term liabilities 355,663 267,485
Total liabilities 2,278,785 791,346
Stockholders' deficit
Common stock, $.01 par value, 100,000,000 317,287 185,425
shares authorized, 31,728,730 shares issued and
outstanding
Additional paid in capital 10,784,911 495,575
Unrealized gain on marketable securities 54,000 -
Accumulated deficit (5,099,570) (854,809)
------------ --------------
Total stockholders' deficit 6,056,628 (173,809)
------------ --------------
Total liabilities and stockholders' deficit $ 8,335,413 $ 617,537
============ ==============
See notes to financial statements.
2
<PAGE>
IDIAL NETWORKS, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------
(uanudited) (uanudited) (uanudited) (uanudited)
Sales $ 135,438 $ 508,854 $ 949,670 $ 1,327,329
Cost of sales (77,524) (361,435) (931,890) (1,096,356)
--------------------------------------------------------------------------------
Gross profit 57,914 147,419 17,780 230,973
Selling, general and administrative
expenses. (3,478,696) (222,548) (4,214,296) (439,290)
--------------------------------------------------------------------------------
Net operating income (3,420,782) (75,129) (4,196,516) (208,317)
Other expense:
Interest expense (9,314) 0 (48,245) (15,847)
--------------------------------------------------------------------------------
Net loss$ (3,430,096) $ (75,129) $ (4,244,761) $ (224,164)
--------------------------------------------------------------------------------
Other comprehensive income:
Unrealized gain on securities 54,000 0 54,000 0
--------------------------------------------------------------------------------
Comprehensive loss $ (3,376,096) $ (75,129) $ (4,190,761) $ (224,164)
--------------------------------------------------------------------------------
Weighted average shares
Outstanding 18,542,000 14,211,267 21,767,882 14,211,267
--------------------------------------------------------------------------------
Net loss per share, basic and
diluted $ (.19) $ (.01) $ (.20) $ (.02)
--------------------------------------------------------------------------------
Comprehensive loss per
share$ (.18) $ (.01) $ (.19) $ (.02)
--------------------------------------------------------------------------------
See notes to financial statements.
3
<PAGE>
IDIAL NETWORKS, INC.
STATEMENT OF ACCUMULATED DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
Members' Common Stock Additional
Capital Paid-in
Amount Shares Amount Capital
--------------------------------------------------------------------------------
Balance, December 31, 1998. $ 300 - $ - $ -
Reorganization (300) 1,000 1 299
Issuance of common stock in exchange for
accrued wages. - 11,385,000 11,300 153,700
Issuance of common stock for consulting
Services - 3,930,000 40,150 22,850
Exchange of common stock - 2,541,500 127,124 (127,124)
Stock issued for retirement of debt - 85,000 850 55,250
Stock issued for fixed assets - 190,000 1,900 123,100
Stock issued for intangible asset - 250,000 2,500 162,500
Stock issued for consulting services - 10,000 100 6,500
Stock issued for cash - 150,000 1,500 98,500
Net loss - - - -
--------------------------------------------------------------------------------
Balance, December 31,
1999 - 18,542,500 185,425 495,575
Stock issued in connection with
acquisition 10,000,000 100,000 8,000,000
Stock issued for consulting services - 3,186,230 31,862 2,289,336
Unrealized gain on marketable
Securities - - - -
Net loss (unaudited) - - - -
--------------------------------------------------------------------------------
Balance, September 30, 2000
(unaudited) $ - 31,728,730 $317,287 $ 10,784,911
================================================================================
See notes to financial statements.
4
<PAGE>
IDIAL NETWORKS, INC.
STATEMENT OF ACCUMULATED DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
(continued)
Unrealized
Gain on
Marketable Accumulated Total
Stockholders'
Securities Deficit (Deficit)
--------------------------------------------------------------------------------
Balance, December 31, 1998. $ - $ (294,049) $ (293,749)
Reorganization - - -
Issuance of common stock in exchange for
accrued wages. - - 165,000
Issuance of common stock for consulting
Services - - 63,000
Exchange of common stock - - -
Stock issued for retirement of debt - - 56,100
Stock issued for fixed assets - - 125,000
Stock issued for intangible asset - - 165,000
Stock issued for consulting services - - 6,600
Stock issued for cash - - 100,000
Net loss - (560,760) (560,760)
--------------------------------------------------------------------------------
Balance, December 31, 1999 - (854,809) (173,809)
Stock issued in connection with
acquisition - - 8,100,000
Stock issued for consulting services - - 2,321,198
Unrealized gain on marketable
Securities 54,000 54,000 54,000
Net loss (unaudited) - (4,244,761) (4,244,761)
--------------------------------------------------------------------------------
Balance, September 30, 2000
(unaudited) $ 54,000 $(5,099,570) 6,056,628
================================================================================
See notes to financial statements.
5
<PAGE>
IDIAL NETWORKS, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2000 1999
(Unaudited) (Unaudited)
--------------------------------------------------------------------------------
Cash flows from operating activities
Net loss$ (4,244,761) (224,164)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 619,156 151,685
Stock based compensation 2,321,198
Changes in assets and liabilities
Accounts receivable (16,214) (107,929)
Other receivables 92,772 -
Prepaid expenses (40,500) -
Accounts payable 412,776 217,757
Accrued expenses (2,288) 106,846
Deferred Revenue 220,285 -
--------------------------------------------------------------------------------
Net cash used in operating activities (637,576) 144,195
--------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of property and equipment (17,871) (208,309)
Deposits (5,869) 2,155
--------------------------------------------------------------------------------
Net cash used in investing activities (23,740) (206,154)
--------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from issuance of
long-term debt and stockholder advances 752,313 1,851
--------------------------------------------------------------------------------
Net cash provided by financing activities 752,313 1,851
--------------------------------------------------------------------------------
Net increase (decrease) in cash 90,997 (60,108)
Cash, beginning of period 11,481 118,493
--------------------------------------------------------------------------------
Cash, end of period. $ 102,478 $ 58,385
================================================================================
Supplemental disclosure of noncash investing and financing activities:
In the nine months ended September 30, 2000, The Company acquired 100% of the
stock of Whoofnet.com, Inc. and reported on a Form 8-K. The purchase prices
combined were allocated as follows:
Assets acquired
Cash $ 4,885
Available for sale - securities 127,200
Property and equipment 2,331,391
Prepaid expense and other 15,889
-----------
Total assets acquired $2,479,365
Liabilities assumed
Accounts payable and accrued expenses $ 104,353
Net assets acquired 2,375,012
Fair value of common stock issued 8,100,000
See notes to financial statements.
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.
In August 2000, the company acquired 100% of the stock of Whoofnet.com, Inc.
("Whoofnet.com") in exchange for the issuance of 10 million new investment
shares of common stock of the Company.
Whoofnet.com is a next generation Internet Company designed for direct selling.
The company was formed under the laws of Florida on March 6, 2000. The major
product is an Internet portal for use by the general public. The Company has
recently completed its field-testing and Management plans to begin sales within
the next several months. All costs associated with the startup phase of the
organization have been expensed in the current period as per Statement of
Position 98-5.
Whoofnet.com also formed 6 subsidiary Delaware Corporations between the months
of March and May 2000, and 2 foreign subsidiary corporations for the operations
of various aspects of its business.
1) Whoofbiz, Inc. organized in March 2000 is planned to provide small business
services, which includes a 24-hour customer service center, product fulfillment,
merchant account fulfillment, and low cost high quality telecommunications
services.
2) Whoofhealth, Inc. sells its own homeopathic herbal branded products to the
general public. The product is marketed through various media including TV,
Direct Sales and the Internet. The Company was organized April 28, 2000.
3) Whoofmail, Inc. was organized to provide free multilingual email services to
be offered to the general public, in order to build the customer base. The
Company was organized April 28, 2000.
7
<PAGE>
4) Whoofmall, Inc. will provide a shopping mall on the Internet, whereby other
vendors can advertise and sell their products to the general public. The
Company will receive its revenue through various services offered to the vendors
who are participating in the mall. The Company was organized May 2000.
5) Whoofmusic.com, Inc. was created to sell its own label specializing in music
from the 60's, 70's, 80's and 90's and related products. Marketing will be done
through TV Press media and the Internet. The Company was organized May 2000.
6) Whooftelco, Inc. will be a low cost high quality telecommunications provider
to the European and Asian wireless community and to the low cost domestic and
international calls customer in the United States. The Company was organized
March 2000.
7) Whoofnet.Com AC is a Swedish corporation formed on June 16, 2000. The purpose
is to act as the European call center for Whoofnet.Com.
8) Whoofstore.Co AB formed on June 16, 2000 is also a Swedish corporation as a
duty free sales center Management estimates that the licensure granting the
Company a tax-free status has a market value between $5 to 10 million US
dollars.
As of the date of these financial statements none of the subsidiaries were
active or funded.
In September 2000 iDial issued a letter of intent to acquire 100% of the stock
of 2sendit.com. The transaction was completed in November 2000.
2sendit.Com provides a marketing service by advertising the products and
services through a variety of media with a primary focus on the use of fax mail,
direct mail and email. In addition the company provides ancillary services,
which include the sales of mailing lists, and consultation services.
The primary customer has been the investment market but the company has recently
expanded its integration into the general business market.
Basis of Presentation
-----------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes included in the Company's annual
report on Form 10-KSB.
8
<PAGE>
IDIAL NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
Principals of Consolidation
---------------------------
The Companies consolidation policy conforms to FASB Statements 94, dealing with
consolidations of all majority-owned subsidiaries. FASB Statements 94 requires
the Consolidated Financial Statements include the accounts of the Company and
its wholly-owned subsidiary corporations, after elimination of all material
inter-company accounts, transactions, and profits. Investments in
unconsolidated subsidiaries representing ownership of at least 20% but less than
50% are accounted for under the equity method. Non-marketable investments in
which the Company has less than 29% ownership and in which it does not have the
ability to exercise significant influence over the investee are initially
recorded at cost and periodically reviewed for impairment.
Proforma results of operations
------------------------------
The unaudited proforma results of operations had The Company acquired
Whoofnet.com, Inc as of March 6, 2000 (inception) are as follows for the nine
months ended September 30, 2000:
Revenues 949,670
Net Loss (5,157,143)
Net Loss per share . (.24)
(basic and diluted)
FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS
This Form 10-Q contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Specifically, all statements other than statements
of historical facts included in this report regarding the Company's financial
position, business strategy and plans and objectives of management of the
Company for future operations are forward-looking statements. These
forward-looking statements are based on the beliefs of the Company's management,
as well as assumptions made by and information currently available to the
Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect," "intend," and words or phrases of similar
import, as they relate to the Company or Company management, are intended to
identify forward-looking statements. Such statements (the "cautionary
statements") reflect the current view of the Company with respect to future
events and are subject to risks, uncertainties and assumptions related to
various factors including, without limitation, competitive factors, general
economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision, seasonality,
product introductions and acceptance, technological change, changes in industry
practices and one-time events. Although the Company believes that expectations
are reasonable, it can give no assurance that such expectations will prove to be
correct. Based upon changing conditions, should any one or more of these risks
or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the applicable
cautionary statements.
9
<PAGE>
IDial Networks, Inc. ("We", "Our", "Us" and sometimes the "Company") 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
Dial 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 currently made phone to phone.
The majority of PC owners do 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.
iDial 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 medial 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.
Product Description. iDial has integrated the economics of VoIP and WAP
technology with the convenience of conventional telephony to enable web
initiated telephone services. With this iDial technology, the company is able
to offer consumers and businesses telephony services at costs approaching the
wholesale rates of carriers.
10
<PAGE>
iDial's wholly owned subsidiary Whoofnet.com will develop and implement
marketing plans to incorporate sales of the entire iDial product line.
Whoofnet.com will also design and develop the iDial web site allowing iDial
Networks to revert back to research and development of new and existing product
lines. The company will continue to expand its profitable agent program,
whereby other web sites and independent sales agent are paid a commission to
sell iDial products. Additionally, several Business to Business products
developed by iDial will be aggressively marketed by Whoofnet.com.
iDial, through its marketing arm of Whoofnet.com, will enter the European market
with our VoIP and WAP applications. In a joint venture with a Swedish
government agency, we are in the process of building a customer service center
in Bracke Kommun in Sweden.
Wireless Application Protocol (WAP) is the de facto worldwide standard for
providing Internet communications and advanced telephony services on digital
mobile phones, pagers, personal digital assistants (PDAs), and other wireless
terminals. The exploding wireless market is embracing WAP technology, with a
predicted 600 million WAP phones is use by the end of 2003. Europe is leading
the way in WAP, and Forrester Research predicts that 219 million Europeans will
be accessing the Internet on a daily basis by 2003.
iDial has developed a plan to be "first to market" with WAP connectivity to our
iDial services. We believe that a tremendous opportunity exists to:
Immediately provide low cost international long distance services to WAP enabled
phones through our WAP enabled technology. Incorporate WAP access into the iDial
portal, giving WAP users the same carrier choices available to traditional
wireless users, and incorporate a "free" concept for WAP enabled long distance
as a choice through our portal and network.
iDial has developed and applied for patents for applications to enable Personal
Digital Appliances (PDA) such as the Palm Pilot VII to instantly connect with
the iDial site and avail themselves of the company's long distance services. A
similar application for the new Microsoft Pocket PC has also been completed.
iDial will continue to develop WAP enabled products and services to insure that
its core products will always be easily accessible by wireless devices.
Additionally 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.
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.
Product Development. The company has additional VoIP products and services in
development, targeting specific business to business markets, as well as
consumers. It is anticipated these products will be completed and in service
within the next 12 months. They include:
Conference Calling with up to 8 participants
SendaCall - Prepaid calls sent within a virtual greeting card bye-mail to
recipients anywhere in the world, allowing recipient to place free call to
sender.
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.
11
<PAGE>
HomePhoneCard - Based upon ANI recognition of a subscriber's home
phone, low international tariffs available with a local access number.
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.
Wireless Services - The company will continue to expand wireless development to
include areas such as Wireless Access Protocol (WAP) and Bluetooth technologies.
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.
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.
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
12
<PAGE>
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 has
immediate access to multiple accounts and services serving the wireless and
residential/soho markets.
Equipment Requirements. 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 will locate gateways in New York and Miami, in
addition to the existing Dallas, Los Angeles and Laos facilities. 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 Qwest and Pacific Gateway. The company will continue
to expand its network based on technologies provided by Cisco and Microsoft. 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.
Employees. As of September 30, 2000, we employed 15 full-time and 10
part-
time employees. None of our employees are covered by collective
bargaining agreements.
13
<PAGE>
PART I - FINANCIAL INFORMATION
(2) Results of Operations Three and Nine Months Ended September 30, 2000
------------------------------------------------------------------------
Results of operations for the three months ended September 30, 2000 and 1999
Sales decreased $373,416 for the three months ended September 30, 2000 compared
to the three months ended September 30, 1999. This is primarily attributable to
the increase in deferred revenue related to unused telephone cards. This
increase corresponds to an increase in Long distance minutes sold during the
fiscal 2000 period. The remainder of the decrease is attributable to the
increasingly competitive market for phone cards resulting in a decrease in the
average sales price per minute.
General and administrative expenses increased $3,256,148 for the three months
ended September 30, 2000 compared to the same period in 1999. This is due to the
Company issuing common stock valued at $2,289,336 in exchange for consulting
services. Additionally, the Company incurred approximately $250,000 of
amortization expense in connection with the goodwill associated with the
acquisition of Whoofnet.com, Inc (Whoofnet). The remaining increase is
primarily attributable to increases in salaries and wages as well as the
operations of Whoofnet from the date of acquisition through September 30, 2000.
Results of operations for the nine months ended September 30, 2000 and 1999
Sales decreased $377,659 for the nine months ended September 30, 2000 compared
to the nine months ended September 30, 1999. Again, this is attributable to the
increase in deferred revenue of approximately $220,000 The remainder of the
decrease is attributable to increasingly competitive market for phone cards.
While number of minutes has increased, the average sale price per minute has
decreased.
Gross profit decreased from approximately 18.6% to 2%. Again, this is
attributable to a the competitive market which is causing the company to reduce
the sales price while costs have been constant to slightly greater than in the
1999 period.
General and administrative expenses increased $3,775,006 for the nine months
ended September 30, 2000 compared to the same period in 1999. This is due to
the Company issuing common stock valued at $2,289,336 in exchange for consulting
services. Additionally, the Company incurred approximately $250,000 of
amortization expense in connection with the goodwill associated with the
acquisition of Whoofnet.com, Inc (Whoofnet). The remaining increase is
primarily attributable to increases in salaries and wages as well as the
operations of Whoofnet from the date of acquisition through September 30, 2000.
Liquidity and Capital Resources
----------------------------------
During the nine months ended September 30, 2000, the Company's net cash used in
operating activities was $637,576. This shortfall was primarily funded by short-
term borrowings of a approximately $ 752,313.
iDial currently is in the process of raising the necessary capital for
continuing operations and growth through the following activities:
1. Bank Loan - we expect to close on a facility that provides the necessary
capital for continuing operations this month. Negotiations are currently taking
place to secure the loan with stock from major shareholders of the company.
2. Acquisition - The company will pursue acquisition opportunities to
rapidly expand its revenue and profits. This will also strengthen the company
cash flow and operating position.
14
<PAGE>
3. Stock Sale - The company is in the process of seeking investors to
purchase company stock and provide equity funding for the growth of the company.
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
A. RESIGNATION OF DIRECTOR. During the period George Stein, the Chairman of the
Board of the Company, resigned for personal reasons. There were no
disagreements with the Company. He has been replaced on the board by Gerald
Lesher. Mr. Lesher, age 62, has been a practicing attorney since 1975, licenced
to practice law in Pennsylvania and Florida.
B. ACQUISITION SUBSEQUENT TO FILING PERIOD. On October 12, 2000 the Company
acquired all of the stock of 2SendIt.com Inc, a Colorado Corporation, in
exchange for the issuance of 4,199,998 new investment shares of the Company.
2sendit.Com provides a marketing service by advertising the products and
services through a variety of media with a primary focus on the use of fax mail,
direct mail and email. In addition the company provides ancillary services,
which include the sales of mailing lists, and consultation services.
The primary customer has been the investment market but the company has recently
expanded its integration into the general business market.
Item 6. Exhibits and reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-QSB Report for the Quarter ended September 30, 2000, has been signed
below by the following person on behalf of the Registrant and in the capacity
and on the date indicated.
November 14, 2000
IDIAL NETWORKS, INC.
formerly
Desert Springs Acquisitions, Inc.
By
/s/Mark Wood /s/Carl Battie
Mark Wood Carl Battie
Chairman of the Board Vice Chairman of the Board
16
<PAGE>
