EX-99.3 3 erfw_8ka1-ex9903.htm PRO FORMA FINANCIAL INFORMATION erfw_8ka1-ex9903.htm
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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