INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
PAGE(S)
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
1
Condensed Consolidated Balance Sheet - December 31, 2004
2
Condensed Consolidated Statement of Operations for the Year ended December 31, 2004
3
Notes to Condensed Consolidated Financial Statements
4
NETFRAN DEVELOPMENT CORP.
INTRODUCTION TO UNAUDITIED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
On February 2, 2005, Ariel Way, Inc., (“The Company”) signed an Acquisition Agreement with Netfran Development Corp., whereby under the terms of the agreement, Netfran will acquire all of the issued and outstanding shares of common stock of Ariel Way, Inc., in exchange for approximately 33,289,434 shares of common stock of Netfran.
The acquisition will be accounted for as a recapitalization of the Company. Accordingly, Ariel Way, Inc., will be treated as the continuing entity for accounting purposes and the historical financial statements presented will be those of Ariel Way, Inc.
The accompanying unaudited pro forma condensed consolidated balance sheet as of December 31, 2004 has been presented as if the acquisition had occurred on December 31, 2004. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2004 have been presented as if the acquisition had occurred January 1, 2004.
The unaudited pro forma condensed consolidated statements do not necessarily represent the actual results that would have been achieved had the companies been combined at the beginning of the year, nor may they be indicative of future operations. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the companies’ respective historical financial statements and notes included thereto.
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$
55,983
$
1,231,828
$
(55,983
)
$
1,231,828
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NETFRAN DEVELOPMENT CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
Netfran
Ariel Way
Pro
Development Corp.
Inc.
Note
Adjustments
Forma
REVENUES
Initial franchise fees
$
160,050
$
—
A
(160,050
)
$
—
Marketing and business development materials
14,552
—
A
(14,552
)
—
Royalty and advertising fees
100,468
—
A
(100,468
)
—
Interest income and other income
260
41,000
A
(260
)
41,000
Total revenues
275,330
41,000
(275,330
)
41,000
OPERATING EXPENSES
Bank Service Charges
—
1,455
1,455
Advertising
21,345
—
A
(21,345
)
—
Automobile
—
1,299
1,299
Bad debt expense
2,500
—
A
(2,500
)
—
Conventions and seminars
22,125
—
A
(22,125
)
—
Depreciation
1,584
849
A
(1,584
)
849
Dues and subscriptions
—
969
969
Foreign currency loss
—
5,591
5,591
General and administrative
117,984
—
A
(117,984
)
—
Interest
—
—
—
—
Insurance
—
7,104
7,104
License, permits and taxes
28,421
—
A
(28,421
)
—
Loan closing costs
—
50,000
50,000
Marketing
28,052
—
A
(28,052
)
—
Miscellaneous
—
1,446
1,446
Overhead costs
33,600
—
A
(33,600
)
—
Payroll taxes and expenses
—
6,153
6,153
Postage
—
561
561
Printing
—
478
478
Professional development
—
5,310
5,310
Professional fees
143,008
407,986
A
(143,008
)
407,986
Office equipment
—
5,872
5,872
Office supplies
—
2,281
2,281
Rent
2,150
2,150
Salaries and wages
356,844
62,500
A
(356,844
)
62,500
Telephone
—
5,892
5,892
Travel and Entertainment
22,590
32,393
A
(22,590
)
32,393
Total operating expenses
778,053
600,289
(778,053
)
600,289
NET LOSS BEFORE OTHER EXPENSE
$
(502,723
)
$
(559,289
)
$
502,723
$
(559,289
)
OTHER EXPENSE
Interest expense
(5,893
)
(687
)
A
5,893
(687
)
Other expense
—
(181
)
—
(181
)
Total other expenses
(5,893
)
(868
)
5,893
(868
)
NET LOSS PER COMMON SHARES
$
(508,616
)
$
(560,157
)
$
508,616
$
(560,157
)
NET LOSS PER BASIC AND DILUTED SHARES
$
(0.138
)
$
(0.054
)
$
(0.054
)
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING
3,698,826
10,393,272
10,393,272
-3-
NETFRAN DEVELOPMENT CORP.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma adjustments are included in the accompanying unaudited pro forma condensed consolidated balance sheet as of December 31, 2004 and the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2004, to reflect the proposed combination of Ariel Way, Inc., and Netfran Development Corp.
A.
Upon consummation of the merger, Netfran Development Corp. had 37,986,934 shares of its common stock outstanding. Accordingly, although Netfran was the legal acquirer and Ariel Way was the legal acquiree, the business combination has been accounted for as a reverse merger acquisition, whereby, for accounting purposes, Ariel Way was the accounting acquirer and Netfran was the accounting acquiree.The Pro Forma gives rise to the recapitalization of the Company.
The assets and liabilities, which make up the franchise business of Netfran Development Corp, were never exchanged in this reverse merger with Ariel Way, as these assets and liabilities were under the company of Netvertise after the acquisition. Ariel Way, Inc., will continue to concentrate solely on the development of its secure global communications business.
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