Exhibit 99.3
ERF WIRELESS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are based on the historical financial statements of ERF Wireless, Inc. and Centramedia, Inc., as described in the accompanying notes to the unaudited pro forma combined financial statements. We acquired Centramedia on December 31, 2008.
The accompanying unaudited pro forma combined balance sheet is presented as if the acquisition of Centramedia occurred on December 31, 2008. The unaudited pro forma combined statements of operations for the year ended December 31, 2008, are presented as if the acquisition of Centramedia had occurred on January 1, 2008. All material adjustments to reflect the acquisition and the repayment of the borrowings under the amended credit facility are set forth in the column “Pro Forma Adjustments.”
The pro forma data is for informational purposes only and may not necessarily reflect future results of operations or financial position or what the results of operations or financial position would have been had ERF Wireless, Inc. and Centramedia been operating as combined entities for the periods presented. The unaudited pro forma combined financial statements should be read in conjunction historical financial statements, including the notes thereto, of ERF Wireless, Inc. included in our Form 10-K for the year ended December 31, 2008 filed on March 19, 2009, and the historical financial statements included elsewhere in the Form 8-K.
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ERF WIRELESS, INC
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 2008
($ in thousands)
(UNAUDITED)
ERF Wireless | Centramedia | Pro Forma | Pro Forma | ||||||||||||||||
ASSETS | (Registrant) | (Target) | Adjustments | Notes | Combined | ||||||||||||||
Current Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 348 | $ | - | $ | - | $ | 348 | |||||||||||
Accounts receivable, net | 248 | - | - | 248 | |||||||||||||||
Accounts receivable other | 52 | - | - | 52 | |||||||||||||||
Note receivable and current portion of long-term note receivable | - | 186 | (186 | ) | A | - | |||||||||||||
Securities available for sale | - | 1,473 | (1,473 | ) | B | - | |||||||||||||
Inventories | 193 | - | - | 193 | |||||||||||||||
Cost and profit in excess of billings | 427 | - | - | 427 | |||||||||||||||
Prepaid expenses and other | 494 | - | - | 494 | |||||||||||||||
Total current assets | 1,762 | 1,659 | (1,659 | ) | 1,762 | ||||||||||||||
Property and equipment | |||||||||||||||||||
Property and equipment | 7,751 | - | - | 7,751 | |||||||||||||||
Less accumulated depreciation | (1,649 | ) | - | - | (1,649 | ) | |||||||||||||
Total property and equipment | 6,102 | - | - | 6,102 | |||||||||||||||
Other assets | |||||||||||||||||||
Note receivable, net of current portion | - | 414 | (414 | ) | A | - | |||||||||||||
Goodwill | 436 | - | - | 436 | |||||||||||||||
Intangible assets, net | 1,059 | - | - | 1,059 | |||||||||||||||
Other assets | 264 | - | - | 264 | |||||||||||||||
Total assets | $ | 9,623 | $ | 2,073 | $ | (2,073 | ) | $ | 9,623 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
Current liabilities | |||||||||||||||||||
Notes payable and current portion of long-term debt | $ | 702 | $ | - | $ | - | $ | 702 | |||||||||||
Capital lease current portion of long-term capital lease payable | 861 | - | - | 861 | |||||||||||||||
Accounts payable | $ | 981 | - | - | 981 | ||||||||||||||
Accrued expenses | 1,269 | 8 | (8 | ) | C | 1,269 | |||||||||||||
Derivative liabilities | 78 | - | - | 78 | |||||||||||||||
Deferred liability and revenue | 237 | - | - | 237 | |||||||||||||||
Advances payable related party | - | 3,534 | (3,534 | ) | D | - | |||||||||||||
Total current liabilities | 4,128 | 3,542 | (3,542 | ) | 4,128 | ||||||||||||||
Long-term liabilities | |||||||||||||||||||
Long-term debt, net of current portion | 2,844 | - | - | 2,844 | |||||||||||||||
Capital lease, net of current portion | 1,581 | - | - | 1,581 | |||||||||||||||
Deferred liability and revenue | 316 | - | - | 316 | |||||||||||||||
Total long-term liabilities | 4,741 | - | - | 4,741 | |||||||||||||||
Commitments | |||||||||||||||||||
Shareholders’ deficit | |||||||||||||||||||
Preferred stock | 4 | - | - | 4 | |||||||||||||||
Common stock | 102 | 100 | (100 | ) | E | 102 | |||||||||||||
Additional paid in capital | 27,504 | - | - | 27,504 | |||||||||||||||
Accumulated deficit | (26,856 | ) | (1,792 | ) | 1,792 | E | (26,856 | ) | |||||||||||
Accumulated comprehensive income | - | 223 | (223 | ) | B | - | |||||||||||||
Total shareholders’ deficit | 754 | (1,469 | ) | 1,469 | 754 | ||||||||||||||
Total liabilities and shareholders' deficit | $ | 9,623 | $ | 2,073 | $ | (2,073 | ) | $ | 9,623 | ||||||||||
See Notes to Unaudited Pro Forma Combined Financial Statements |
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ERF WIRELESS, INC
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008
($ in thousands, except for per share data)
(UNAUDITED)
ERF Wireless | Centramedia | Pro Forma | Pro Forma | ||||||||||||||||
(Registrant) | (Target) | Adjustments | Notes | Adjustments | |||||||||||||||
Sales: | |||||||||||||||||||
Products | $ | 772 | $ | - | $ | - | $ | 772 | |||||||||||
Services | 4,363 | 1,271 | - | 5,634 | |||||||||||||||
Other | 20 | - | - | 20 | |||||||||||||||
Total sales | 5,155 | 1,271 | - | 6,426 | |||||||||||||||
Costs of goods sold: | |||||||||||||||||||
Products and integration services | 1,511 | 671 | - | 2,182 | |||||||||||||||
Rent, repairs and maintenance | 391 | - | - | 391 | |||||||||||||||
Salary and related cost | 78 | - | - | 78 | |||||||||||||||
Depreciation | 900 | 310 | - | 1,210 | |||||||||||||||
Other cost | 241 | - | - | 241 | |||||||||||||||
Total costs of goods sold: | 3,121 | 981 | - | 4,102 | |||||||||||||||
Gross profit | 2,034 | 290 | - | 2,324 | |||||||||||||||
Operating expenses: | |||||||||||||||||||
Selling, general and administrative | 8,777 | 1,054 | - | 9,831 | |||||||||||||||
Depreciation and amortization | 876 | 17 | - | 893 | |||||||||||||||
Total operating expense | 9,653 | 1,071 | - | 10,724 | |||||||||||||||
Net income (loss) from operations | (7,619 | ) | (781 | ) | - | (8,400 | ) | ||||||||||||
Other income/(expense): | |||||||||||||||||||
Interest expense, net | (887 | ) | - | - | (887 | ) | |||||||||||||
Gain (loss) on sale of assets and other income | 38 | (1,047 | ) | 1,047 | F | 38 | |||||||||||||
Derivative income | 306 | - | - | 306 | |||||||||||||||
Total other income (expense) | (543 | ) | (1,047 | ) | 1,047 | (543 | ) | ||||||||||||
Net (loss) | $ | (8,162 | ) | $ | (1,828 | ) | $ | 1,047 | $ | (8,943 | ) | ||||||||
Other comprehensive loss: | |||||||||||||||||||
Unrealized holding gain | - | 223 | (223 | ) | B | - | |||||||||||||
Total other comprehensive loss | (8,162 | ) | (1,605 | ) | 824 | (8,943 | ) | ||||||||||||
Net (loss) applicable to common shareholders | $ | (8,162 | ) | $ | (1,605 | ) | $ | 824 | $ | (8,943 | ) | ||||||||
Net income (loss) per common share: | |||||||||||||||||||
Basic | $ | (0.10 | ) | $ | - | $ | - | $ | (0.11 | ) | |||||||||
Diluted | $ | (0.10 | ) | $ | - | $ | - | $ | (0.11 | ) | |||||||||
See Notes to Unaudited Pro Forma Combined Financial Statements |
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ERF WIRELESS, INC
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - PURCHASE PRICE
On December 31, 2008, the Company completed the purchase of substantially all the assets from Centramedia, Inc. The assets purchased include substantially all of the assets associated with the Internet operations of Centramedia including the current customer base, inventory, equipment, contract rights, vehicles, Internet address space, general intangibles, certain real property and wireless broadband equipment infrastructure. The acquisition will increase the Company's footprint geographically area covering certain cities and counties in the Texas Panhandle, this will lead to additional synergy with expansion of the WiNet and US-BankNet System and expand our Oil and Gas coverage. At the time of the transaction, there were no material relationships between the seller and the Company or any of its affiliates, or any director or officer of the Company, or any associate of any such officer or director. The Company paid $2,000,000 in cash, notes and securities and assumed $61,000 in current liabilities.
The purchase price allocation is as follows (in thousands):
Cash | $ | 1 | ||
Accounts receivable | 40 | |||
Property and equipment FMV | 2,020 | |||
Deferred revenue | (61 | ) | ||
Total adjusted purchase price | $ | 2,000 |
NOTE 2 - PRO FORMA ADJUSTMENTS TO THE COMBINE CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA COMBINED BALANCE SHEET AT DECEMBER 31, 2008:
A. | Note Receivable - to adjust Centramedia note receivable not assumed by ERF Wireless Inc. | |
B. | Securities available for sale – to adjust Centramedia investment not assumed by ERF Wireless Inc. | |
C. | Short-term liabilities and other accrued liabilities - to eliminate all Centramedia short-term liabilities not assumed by ERF Wireless Inc. | |
D. | Advances payable related party – to eliminate related party payables not assumed by ERF Wireless Inc. | |
E. | Stockholders’ equity to eliminate all Centramedia stockholders’ equity. |
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 2008:
F. | Gain (loss) on sales of assets – to eliminate the loss on sale of assets to ERF Wireless Inc. | |
G. | Unrealized holding gain - to eliminate the unrealized gain on investment to ERF Wireless Inc. |
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