UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Effective December 2005, Jackson Rivers Company acquired Diverse Networks, Inc.
by issuing either (i) $0.21 in the form of a one-year promissory note, or (ii)
one share of Jackson Rivers Series B Preferred Stock for each share of common
stock of Diverse Networks. For accounting purposes the acquisition has been
accounted for using the purchase method of accounting and, accordingly, the
assets acquired and liabilities assumed have been recorded at their estimated
fair values based upon estimates as of November 30, 2005.
The following unaudited proforma consolidated statements of operations for the
nine months ended September 30, 2005 and for the year ended December 31, 2004,
assumes the acquisition of Diverse Networks, Inc. had occurred on January 1,
2005 and January 1, 2004, respectively, and include the historical audited
consolidated statements of operations for the Registrant for the year ended
December 31, 2004 and the historical unaudited consolidated financial statements
of operations for the Registrant for the nine months ended September 30, 2005,
adjusted for the pro forma effects of the acquisition.
The unaudited pro forma financial statements are presented for informational
purposes only and do not purport to be indicative of the financial condition
that would have resulted if the acquisition had been consummated at either
period-end. The pro forma financial statements should be read in conjunction
with the notes thereto and each Company's financial statements and related notes
thereto contained herein and in Jackson Rivers Inc's 10-QSB filed with the SEC
on November 21, 2005.
The following unaudited pro forma consolidated balance sheet and statements of
operations should be read in connection with the "Notes To Pro Forma Condensed
Consolidated Financial Statements" presented below and the historical financial
statements included elsewhere or incorporated by reference.
The Jackson Rivers Company
Unaudited Pro Forma Consolidated Balance Sheet
September 30, 2005
Assets
Jackson Rivers Diverse Pro Forma
Company Networks, Inc. Adjustments Pro Forma
----------- ----------- ----------- -----------
Current assets
Cash and cash eqivalents $ 2,517 $ 131,923 $ -- $ 134,440
Accounts receivable, net 2,916 290,952 -- 293,868
Inventory 33,060 -- -- 33,060
Federal income taxes receivable -- 333 -- 333
Prepaid expenses 9,542 20,160 -- 29,702
----------- ----------- ----------- -----------
Total current assets 48,035 443,368 -- 491,403
Property and equipment, net 8,114 251,437 -- 259,551
Software, net -- 42,104 503,032 (1) 545,136
Customer relations -- -- 225,000 (1) 225,000
Goodwill -- -- 666,185 (2) 666,185
Deposits -- 14,375 -- 14,375
----------- ----------- ----------- -----------
Total assets $ 56,149 $ 751,284 $ 1,394,217 $ 2,201,650
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 282,744 $ 175,909 $ -- $ 458,653
Notes payable - short term 65,000 -- -- 65,000
Convertible notes payable - related party 85,000 -- -- 85,000
Related party advance 4,300 -- -- 4,300
Stockholder loan -- 233,182 862,000 (4) 1,095,182
Deferred tax liability -- 123,075 -- 123,075
Capital lease - current portion -- 8,088 -- 8,088
----------- ----------- ----------- -----------
Total current liabilities 437,044 540,254 862,000 1,839,298
Long-term liabilities
Capital lease - net of current portion -- 9,875 -- 9,875
Stockholders' equity
Preferred stock 10 -- 10 (3) 20
Common stock 121 300,060 (30,000)(5) 270,181
Additional paid-in-capital 6,683,047 -- 463,302 (3) 7,146,349
Accumulated deficit (7,064,073) (98,905) 98,905 (5) (7,064,073)
----------- ----------- ----------- -----------
Total stockholders' equity (380,895) 201,155 532,217 352,477
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 56,149 $ 751,284 $ 1,394,217 $ 2,201,650
=========== =========== =========== ===========
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The Jackson Rivers Company
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2005
Jackson Rivers Diverse Pro Forma
Company Networks, Inc. Adjustments Pro Forma
----------- ----------- ----------- -----------
Revenues $ 74,359 $ 1,731,387 $ -- $ 1,805,746
Cost of goods sold 20,547 1,055,706 -- 1,076,253
----------- ----------- ----------- -----------
Gross profit 53,812 675,681 -- 729,493
General and administrative expenses 1,717,287 611,992 -- 2,329,279
Depreciation and amortization 1,538 110,400 242,678 (6) 354,616
----------- ----------- ----------- -----------
Total operating expenses 1,718,825 722,392 242,678 2,683,895
Net loss from operations (1,665,013) (46,711) (242,678) (1,954,402)
Other income (expense)
Debt forgiveness 225,700 -- -- 225,700
Interest, net 11 (25,925) (51,720)(7) (77,634)
Other income -- 29,762 -- 29,762
----------- ----------- ----------- -----------
Total other income (expense) 225,711 3,837 (51,720) 177,828
----------- ----------- ----------- -----------
Net loss before income taxes (1,439,302) (42,874) (294,398) (1,776,574)
Income tax expense
Current -- -- -- --
Deferred -- 64,133 -- 64,133
----------- ----------- ----------- -----------
-- 64,133 -- 64,133
----------- ----------- ----------- -----------
Net loss $(1,439,302) $ (107,007) $ (294,398) $(1,840,707)
=========== =========== =========== ===========
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The Jackson Rivers Company
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2004
Jackson Rivers Diverse Pro Forma
Company Networks, Inc. Adjustments Pro Forma
----------- ----------- ----------- -----------
Revenues $ 40,700 $ 6,589,736 $ -- $ 6,630,436
Cost of goods sold -- 4,632,597 -- 4,632,597
----------- ----------- ----------- -----------
Gross profit 40,700 1,957,139 -- 1,997,839
General and administrative expenses 4,846,192 2,329,207 -- 7,175,399
Depreciation and amortization 2,016 189,311 323,570 (6) 514,897
----------- ----------- ----------- -----------
Total operating expenses 4,848,208 2,518,518 323,570 7,690,296
Net loss from operations (4,807,508) (561,379) (323,570) (5,692,457)
Other income (expense)
Interest, net 14 (25,660) (68,960)(7) (94,606)
----------- ----------- ----------- -----------
Total other income (expense) 14 (25,660) (68,960) (94,606)
----------- ----------- ----------- -----------
Net loss before income taxes (4,807,494) (587,039) (392,530) (5,787,063)
Income tax expense
Current -- (55,251) -- (55,251)
Deferred -- (4,655) -- (4,655)
----------- ----------- ----------- -----------
-- (59,906) -- (59,906)
----------- ----------- ----------- -----------
Net loss $(4,807,494) $ (527,133) $ (392,530) $(5,727,157)
=========== =========== =========== ===========
Preferred stock dividend (255,000) -- -- (255,000)
Net loss attributable to common shareholders $(5,062,494) $ (527,133) $ (392,530) $(5,982,157)
=========== =========== =========== ===========
The pro forma adjustments are as follows:
(1) To reflect the fair value of the assets acquired.
(2) To reflect the increase in goddwill related to the acquisition of Diverse.
(3) To reflect the purchase price paid for the acquisition of Diverse.
(4) To reflect notes issued in acquisition of Diverse
(5) To eliminate historical stockholders' equity in Diverse.
(6) To reflect additional depreciation and amortization related to the
increase in the fair value of the assets acquired.
(7) To reflect interest on notes issued in acquisition of Diverse.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 2005, included the unaudited historical results
of operations for the Jackson Rivers Company ("Jackson Rivers") and
Diverse Networks, Inc. ("Diverse") for the nine months ended September 30,
2005, adjusted for the pro forma effects of the acquisition assuming the
acquisition occurred on January 1, 2005.
The unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 2004, included the audited historical results of
operations of Jackson Rivers and Diverse, adjusted for the pro forma
effects of the acquisition assuming the acquisition occurred on January 1,
2004.
The unaudited Pro Forma Balance Sheet at September 30, 2005, included the
unaudited position of Jackson Rivers and Diverse as of September 30, 2005,
assuming the acquisition occurred on September 30, 2005, adjusted for the
pro forma effects of the acquisition.
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