**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-KSB**





**ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the year ended September 30, 2007**





**Commission
      File Number** **0-50051**





**ARIEL
      WAY, INC.**





(Name
      of
      Small Business Issuer in Its Charter)




**FLORIDA**
            
            **65-0983277**(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**8000
                Towers Crescent Drive, Suite 1220, Vienna, VA**
            
            **22182**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)




**(703)
                918-2420**(Issuer’s
                Telephone Number, Including Area
                Code)




Securities
      registered under Section 12(b) of the Exchange Act:





None.





Securities
      registered under Section 12(g) of the Exchange Act:





Common
      Stock, $0.001 par value per share





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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. Yes x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB.





Ariel
      Way’s revenue for its most recent fiscal year ending September 30, 2007 was
      $922,221.





As
      of  January 11, 2008, the
      aggregate market value of the shares of common stock held by non-affiliates (based
      on
      the closing price of $0.004 for the common stock as quoted on that date)
      was approximately $875,341.





As
      of January 11, 2008, the Company had 595,000,000 shares of its common
      stock, $0.001 par value per share, outstanding.











**TABLE
      OF CONTENTS**


**ITEM
                  NUMBER**
                **AND
                  CAPTION**
              
              
              
              **PAGE****PART
                  I**Item
                  1.
              
              Description
                  of Business
              
              1Item
                  2.
              
              Description
                  of Property
              
              3Item
                  3.
              
              Legal
                  Proceedings
              
              3Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              3**PART
                  II**Item
                  5.
              
              Market
                  for Common Equity, Related Stockholder Matters and Small Business
                  Issuer
                  Purchases of Equity Securities
              
              3Item
                  6.
              
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              7Item
                  7.
              
              Financial
                  Statements
              
              21Item
                  8.
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              22Item
                  8A.
              
              Controls
                  and Procedures
              
              22Item
                  8B.
              
              Other
                  Information
              
              22**PART
                  III**Item
                  9.
              
              Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance With Section 16(a) of the Exchange Act****
              
              23Item
                  10.
              
              Executive
                  Compensation
              
              25Item
                  11.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              
              28Item
                  12.
              
              Certain
                  Relationships and Related Transactions**,**and
                  Director Independence****
              
              29Item
                  13.
              
              Exhibits
              
              31Item
                  14.
              
              Principal
                  Accountant Fees and Services
              
              36










**PART
      I**





**SPECIAL
      NOTE REGARDING FORWARD LOOKING STATEMENTS**





This
      Annual Report on Form 10-KSB contains forward-looking statements that involve
      risks and uncertainties. The statements contained in this document that are
      not
      purely historical are forward-looking statements within the meaning of Section
      27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
      Act
      of 1934, or the Exchange Act, including without limitation statements regarding
      our expectations, beliefs, intentions or strategies regarding our business.
      This
      Annual Report on Form 10-KSB includes forward-looking statements about our
      business including, but not limited to, the level of our expenditures and
      savings for various expense items and our liquidity in future periods. We may
      identify these statements by the use of words such as “anticipate,” 
“believe,”  “continue,”  “could,”  “estimate,” 
“expect,”  “intend,”  “may,”  “might,”  “plan,” 
“potential,”  “predict,”  “project,”  “should,” 
“will,”  “would” and other similar expressions. All forward-looking
      statements included in this document are based on information available to
      us on
      the date hereof, and we assume no obligation to update any such forward-looking
      statements, except as may otherwise be required by law. Our actual results
      could
      differ materially from those anticipated in these forward-looking statements.





**Item
      1. Description of Business.**





**Overview
      of the Company**





Ariel
      Way, Inc. is a technology and services company for highly secure global
      communications, multimedia and digital signage solutions and technologies.
      We
      are focused on developing innovative and secure technologies, acquiring and
      growing profitable advanced technology companies and global communications
      service providers and creating strategic alliances with companies in
      complementary product lines and service industries. We were initially named
      Netfran Development Corp., and we provided franchise Internet web site design
      and consulting services until, on February 2, 2005, when we acquired Ariel
      Way,
      Inc. (“Old Ariel Way”) in a share exchange transaction. Old Ariel Way was
      engaged in the development of highly secure global communications technologies.
      After the acquisition of Old Ariel Way, we ceased to conduct the franchise
      business we had previously conducted in order to concentrate solely on the
      development of the highly secure global communications technology business.





Up
      to
      June 30, 2007, we marketed and sold our multimedia corporate Business TV (“BTV”)
      communications solutions services to clients who are leading finance-oriented
      services companies primarily in United Kingdom. We also provided BTV services
      to
      leading technology and manufacturing companies throughout the United States
      but
      in 2006 we closed this operation.





Since
      July, 2007, we have been focused on developing and deploying solutions for
      digital signage and interactive media delivered over a combination of satellite,
      terrestrial and wireless local networks. We have also been actively engaged
      in
      seeking a possible acquisition of a new operation that is strategic to our
      digital signage and multimedia communications solutions services.





We
      were
      incorporated under the laws of Florida in January, 2000. Our principal executive
      offices are located at 8000 Towers Crescent Drive, Suite 1220, Vienna, VA 22182
      and our telephone number at that address is (703) 918-2420. We maintain a
      corporate web site at www.arielway.com ** .
      We make
      available free of charge through our web site our annual report on Form 10-KSB,
      quarterly reports on Form 10-QSB, current reports on Form 8-K, and all
      amendments to those reports, as soon as reasonably practicable after we
      electronically file or furnish such material with or to the SEC. The contents
      of
      our web site are not a part of this report.





You
      may
      read and copy any materials we file with the SEC at the SEC's Public Reference
      Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
      information on the operation of the Public Reference Room by calling the SEC
      at
      1-800-SEC-0330. SEC maintains an Internet site that contains reports, proxy
      and
      information statements, and other information regarding issuers that file
      electronically, including
      Ariel Way, Inc., with the
      SEC ( *http://www.sec.gov* ).





**Recent
      Developments**





On
      December 4, 2007, we reported in a current report on Form 8-K that our Chairman,
      CEO and President, Arne Dunhem issued a Letter to its Shareholders.





On
      December 10, 2007 we reported that we had formed a new Advisory Board with
      the
      appointment of Anand Kumar as chairman.





On
      December 11, 2007, we reported that we have signed a
      letter of intent to acquire Syrei Holdings UK, Limited, a UK and Sweden based
      telecom-consulting firm comprised of senior specialists and experts in the
      evolving global telecommunications market ( www.syrei.com ).





On
      December 18, 2007, we announced that we had signed a Memorandum of Understanding
      with Noventri, Inc., a Maryland based "one-stop-shop" company for digital
      signage turnkey solutions, which include consultation, technology, software,
      content creation and management ( www.noventri.com ).





On
      December 19, 2007 we announced that we had signed a Memorandum of Understanding
      with Mason Media Group, LLC, (MMG) a Washington, D.C. based holding company,
      ( www.masonmediagroup.com ),
      that
      develop, produce, and provide technical services to the broadcast, cable, and
      film industry with a primary focus on Sports and Entertainment. MMG is also
      a
      provider of focused advertising, marketing, entertainment, and audiovisual
      content capitalizing on the New Media Revolution.





On
      December 31, 2007, we reported in a current report on Form 8-K that the Company
      issued pursuant to a Board of Director’s resolution on November 21, 2007, an
      aggregate 349,886,779 shares
      of restricted common stock to several parties in exchange for canceling an
      aggregate of $593,839.34 in debt
      and liabilities.




1




On
      January 2, 2008 we announced our plans to acquire 10 percent of FaceTime
      Strategy ( www.facetimestrategy.com ),
      a
      full-service new media agency. We signed a letter of intent, stipulating the
      company’s interest in investing in the newly formed company that specializes in
      advertising, marketing and public relations campaigns *via* the
      Internet, broadcast, print and other mediums.





**Financial
      Condition**





The
      table
      below provides a summary of some of our key financial metrics. This information
      should be read in conjunction with, and is qualified by reference to, our
      consolidated financial statements and notes thereto in Item 7 of this report
      and
“Management’s Discussion and Analysis or Plan of Operations” in Item 6 of this
      report.





**Year ended**
              **September 30,**
            
            **Year ended**
              **September 30,**
            
            **Year ended**
              **September 30,****2007**
            
            **2006**
            
            **2005****Operating
                Results:****Operating
                Revenue**
            
            $
            922,221
            
            $
            2,459,012
            
            $
            1,052,616**Cost
                of Services**
            
            $
            721,086
            
            $
            2,423,722
            
            $
            328,497**Gross
                Profit (Loss)**
            
            $
            201,135
            
            $
            35,290
            
            $
            724,119**Operating
                Expenses**
            
            $
            841,415
            
            $
            3,024,692
            
            $
            3,056,635**Other
                Income (Expense)**
            
            $
            1,240,797
            
            $
            (80,010
            )
            $
            -**Net
                Income (Loss)**
            
            $
            599,491
            
            $
            (3,069,411
            )
            $
            (2,594,342
            )





**September 30,**
            
            **September 30,**
            
            **September 30,****2007**
            
            **2006**
            
            **2005****Balance
                Sheet Data:****Current
                Assets**
            
            $
            4,372
            
            $
            97,305
            
            $
            496,064**Current
                Liabilities**
            
            $
            2,558,713
            
            $
            3,288,087
            
            $
            2,890,380**Accumulated
                Deficit**
            
            $
            (5,167,535
            )
            $
            (5,767,026
            )
            $
            (2,697,615
            )**Shareholder’s
                Equity (Deficit)**
            
            $
            (2,550,328
            )
            $
            (3,149,820
            )
            $
            (1,941,181
            )





Our
      decrease in revenues compared with the period ended September 30, 2006 was
      due
      primarily to winding-down our business TV services in both the US and the UK.
      During the period ended September 30, 2007, we were focused on reducing our
      debt
      and liabilities. As a result of a settlement with Loral Skynet on June 14,
      2007
      for prior debt, the liquidation of the UK operation of dbsXmedia, Ltd. and
      the
      cancellation of certain debt and liabilities, we recorded a significant other
      income which resulted in a net income for the year.





We
      have
      continued to operate with limited cash flow available from operations and have
      been seeking funding for our going forward. If we are unable to secure
      sufficient funding or generate sufficient profitable revenues, the financial
      condition will continue to deteriorate and we may be forced to liquidate or
      cease operations.





**The
      Company**





Ariel
      Way, Inc. is a technology and services company for highly secure global
      communications and digital signage solutions and technologies. We are focused
      on
      developing innovative and secure technologies, acquiring and growing profitable
      advanced technology companies and global communications service providers and
      creating strategic alliances with companies in complementary product lines
      and
      service industries.





During
      fiscal year 2007, our communications solutions were provided by our subsidiary
      Ariel Way Media, Inc., a Delaware corporation and its subsidiary Ariel Way
      Media, Ltd., a U.K. corporation, that provided solutions for Business Television
      (BTV) delivered over satellite networks. As of July 2007, we discontinued our
      BTV services to focus entirely on the development and operation of a network
      for
      advanced digital signage solutions and services. Our planned digital signage
      network includes technologies using LCD and plasma flat screen displays as
      a new
      platform for companies to promote and advertise products and services to
      targeted audiences as they shop, work and play in malls, banks and other
      strategic locations. This network that is based on transmission over satellite,
      wireless and the Internet, is also intended to be used for corporate
      communications and training activities based on our previous experience in
      the
      operation of corporate Business Television.





2




Since
      July 2007, we have also been seeking companies, that are strategic to our
      digital signage business plan, for potential acquisition. Should we be
      successful with some of the potential strategic acquisitions, we intend to
      integrate the operation of the acquired companies with our digital signage
      operation.




**Governmental
      Approvals**





Our
      services require using third party providers that already have access to any
      required governmental permits and approvals. Thus we believe that there is
      no
      need for any specific government approval for our services.




**Employees**





As
      of
      January 11, 2008, we had no employees but 5 consultants. We have no collective
      bargaining agreements with our employees. We anticipate that we will need
      additional people to fill administrative, sales and technical positions if
      we
      are successful in raising capital to implement our strategic business plan.





**Item
      2. Description of Property**





Our
      principal headquarters executive offices were until September 30, 2007 located
      in approximately 900 square feet of office space at 8000 Towers Crescent Drive,
      Suite 1220, Vienna, VA 22182. The term of the lease has been on a month-to-month
      basis as a sub-lease. The Company is seeking an alternative location in the
      same
      building, since the lease for the sub-lessor has expired.





**Item
      3. Legal Proceedings**





None
      known to the Management.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





Not
      applicable.





**PART
      II**





**Item
      5. Market for Common Equity, Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities.**





Our
      common stock is quoted on the Over-the-Counter Bulletin Board under the symbol
      “AWYI”.





The
      following table sets forth the average high and low bid prices for the common
      stock for each calendar quarter since October 1, 2003, as reported by the
      National Quotation Bureau, and represents interdealer quotations, without retail
      markup, markdown or commission and may not be reflective of actual transactions.





**Bid
                Price Per Share****High**
            
            **Low****2003**October
                2003 - December 2003
            
            $
            1.25
            
            $
            1.05**2004**January
                2004 - March 2004
            
            $
            1.25
            
            $
            0.90April
                2004 - June 2004
            
            $
            0.90
            
            $
            0.06July
                2004 - September 2004
            
            $
            1.04
            
            $
            0.11October
                2004 - December 2004
            
            $
            0.75
            
            $
            0.10**2005**January
                2005 - March 2005
            
            $
            0.37
            
            $
            0.25April
                2005 - June 2005
            
            $
            0.35
            
            $
            0.05July
                2005 - September 2005
            
            $
            0.05
            
            $
            0.02October
                2005 - December 2005
            
            $
            0.05
            
            $
            0.04**2006**January
                2006 - March 2006
            
            $
            0.08
            
            $
            0.01April
                2006 - June 2006
            
            $
            0.03
            
            $
            0.01July
                2006 - September 2006
            
            $
            0.01
            
            $
            0.01October
                2006 - December 2006
            
            $
            0.02
            
            $
            0.01**2007**January
                2007 - March 2007
            
            $
            0.02
            
            $
            0.01April
                2007 - June 2007
            
            $
            0.01
            
            $
            0.01July
                2007 - September 2007
            
            $
            0.01
            
            $
            0.01




3




**Stockholders**





As
      of
      January 11, 2008, we believe there were approximately 375 holders of record
      of
      our common stock. We believe that a substantially greater number of holders
      of
      our common stock are “street name” or beneficial holders, whose shares are held
      of record by banks, brokers and other financial institutions.





**Dividends**





We
      have
      never declared or paid cash dividends on our common stock. We currently intend
      to retain all available funds and any future earnings to fund the development
      and growth of our business and do not anticipate declaring or paying any cash
      dividends on our common stock in the foreseeable future.





**Equity
      Compensation Plan Information**





On
      February 11, 2003, the Board of Directors approved the Netfran Development
      Corp.
      2003 Stock Incentive Plan under which employees, officers, non-employee
      directors and consultants are eligible to receive grants of stock options,
      thereby creating a means to raise the level of stock ownership by such
      individuals in order to attract, retain, and reward such individuals. We have
      reserved a total of 600,000 shares of common stock under the 2003 Stock
      Incentive Plan out of which a total of 325,000 shares of common stock were
      issued under the plan during 2003 resulting a balance of 275,000 shares of
      common stock remaining to be issued. The Board of Directors administers the
      2003
      Stock Incentive Plan. Subject to the provisions of the 2003 Stock Incentive
      Plan, the Board of Directors has full and final authority to select the
      individuals to whom options will be granted, to grant the options and to
      determine the terms and conditions and the number of shares issued pursuant
      thereto. However, no option shall be exercisable more than ten years after
      the
      date of grant. Options shall be exercisable at such time and subject to such
      terms and conditions as shall be determined by the Committee at grant.





We
      did
      not grant any shares of common stock or options during the year ended September
      30, 2007 under the 2003 Stock Incentive Plan.





The
      following table sets forth certain information, as of September 30, 2007,
      concerning securities authorized for issuance under the 2003 Stock Incentive
      Plan:





**Number of securities to be**
              **issued upon exercise of**
              **outstanding options,**
              **warrants and rights**
            
            **Weighted-average exercise**
              **price of outstanding options,**
              **warrants and rights**
            
            **Number of securities**
              **remaining available for**
              **future issuance under equity**
              **compensation plans**
              **(excluding securities**
              **reflected in column (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                compensation plans approved by security holders (1)
            
            
            0
            
            
            N/A
            
            
            275,000Equity
                compensation plans not approved by security holders (2)
            
            
            15,922,320
            
            $
            0.028
            
            
            N/ATotal
            
            
            15,922,320
            
            $
            0.028
            
            
            N/A





(1)
            Plan
                authorized 600,000 shares available for issuance under our 2003 Stock
                Incentive Plan, or Plan, all of which may be issued as stock options,
                restricted stock or stock bonuses.(2)
            Includes
                options to purchase 310,097 shares and warrants to purchase 15,612,223
                shares outstanding as of September 30, 2007 that were issued by Ariel
                Way
                under non-plan options and warrants.




4




**Ariel
      Way Non-Plan Option and Warrant Grants**





We
      currently have no option grant outstanding which was granted under our 2003
      Stock Incentive Plan. The remaining options and warrants outstanding were
      granted to individuals outside of any equity compensation plan adopted by us
      (“Non-Plan Grants”). No options or warrants were granted or vested during the
      fiscal year ended September 30, 2007. As of September 30, 2007, of these
      Non-Plan Grants, options to purchase 310,097 shares, that have all vested,
      were
      held by one of our members of our board of directors, warrants to purchase
      4,750,000 shares, out of which 2,831,105 that have vested, were held by members
      of our board of directors and warrants to purchase 3,150,000 shares, out of
      which 1,720,000 that have vested, were held by executive officers of Ariel
      Way.
      Warrants to purchase 10,862,223 shares, out of which 9,432,223 that have vested,
      were held by other individuals or entities. Such Non-Plan Grants were made
      pursuant to the terms of option or warrant agreements, as applicable, with
      each
      such grant authorized by the board of directors of Ariel Way. The Non-Plan
      Grants have not been approved by our stockholders.





Pursuant
      to SFAS 123 (revised December 2004), we recorded during the fiscal year ended
      September 30, 2006, $114,377 of compensation expense related to the options
      and
      warrants vested since January 1, 2006.





**Recent
      Sales of Unregistered Securities**





The
      following provides information concerning all sales of our securities within
      the
      last three years that were not registered under the Securities Act of 1933:





On
      February 2, 2005, under the terms of the Share Exchange Agreement, by and among
      us, Old Ariel Way and the holders of Old Ariel Way common stock, dated as of
      January 20, 2005, each share of Old Ariel Way common stock outstanding
      immediately prior to February 2, 2005 was converted into 1.6762 shares of our
      common stock. Our then outstanding common stock was not affected by the
      acquisition. As a result of the acquisition, we issued 33,289,434 shares of
      common stock to the former stockholders of Old Ariel Way.





On
      February 2, 2005, after we acquired Old Ariel Way, we issued 499,341 shares
      of
      our common stock to Joel Bernstein, Esq., for providing legal services in
      connection with the acquisition transaction and we issued 499,342 shares of
      common stock to Mr. Michael Jordan for advisory services in connection with
      the
      acquisition transaction.





On
      October 12, 2005, the Company issued 100,000 shares of the Company’s common
      stock to MarketLink Technologies, L.L.C. pursuant to a settlement agreement
      between the Company and MarketLink Technologies, L.L.C. related to Enfotec,
      Inc.
      liabilities dated September 9, 2005. The market value per share at the time
      the
      shares were issued was $0.03 per share. An expense of $3,000 was recorded in
      relation to this issuance of shares.





On
      December 31, 2005, we granted Loral Skynet, a warrant to purchase 3,000,000
      shares of our common stock that is exercisable at $0.05 per share in connection
      with a financial settlement related to certain dbsXmedia, Inc. debt to Loral
      Skynet. Cost of services in the amount of $115,823 was recorded in relation
      to
      the issuance of this warrant, based upon the valuation utilizing the
      Black-Sholes model, at the date of issuance of the warrant.





5




On
      February 28, 2006, the Company pursuant to an Investment Agreement by and
      between Ariel Way, Inc. and Yorkville Advisors, LLC (“Yorkville Advisors”, f/k/a
      Cornell Capital Partners, LLC) and Montgomery Equity (collectively referred
      to
      as the “Buyers”), Ariel Way sold and issued to the Buyers one hundred sixty
      (160) Series A Preferred Shares for a consideration consisting solely of the
      surrender of certain Prior Securities. The value at the time the shares were
      issued was $1,685,602 for the 160 shares of Series A Preferred
      Convertible Shares using the Black-Sholes valuation model. The redemption price
      was $10,031 per share accumulating to $1,604,960, which was the total of the
      convertible debentures and notes plus accrued interest.





During
      the period December 27, 2006 through September 30, 2007, the Company received
      a
      total of 37 conversion notices from Yorkville Advisors requesting the conversion
      of an aggregate 10.75 Series A Convertible Preferred Shares, corresponding
      to an
      aggregate conversion amount of $107,832, representing the conversion under
      the
      terms of the Certificate of Designation dated February 28, 2006, into an
      aggregate of 95,911,882 shares of its common stock at an average conversion
      price of $0.00112 per share.





The
      following table sets forth a summary of all conversion requests by Yorkville
      Advisors for the period December 27, 2006 through September 30, 2007:




**Conversion**
              **request
                date**
            
            **No.
                of**
              **Shares**
            
            **Conversion**
              **Share
                Price**
            
            **Converted**
              **Amount**
            
            **Amount
                of**
              **Series
                A**
              **Converted**12/27/2006
            
            
            1,649,842
            
            $
            0.00152
            
            $
            2,507.76
            
            
            0.251/23/2007
            
            
            975,782
            
            $
            0.00257
            
            $
            2,507.76
            
            
            0.251/29/2007
            
            
            1,759,832
            
            $
            0.00285
            
            $
            5,015.52
            
            
            0.502/7/2007
            
            
            1,053,681
            
            $
            0.00238
            
            $
            2,507.76
            
            
            0.252/12/2007
            
            
            1,053,681
            
            $
            0.00238
            
            $
            2,507.76
            
            
            0.252/20/2007
            
            
            1,145,096
            
            $
            0.00219
            
            $
            2,507.76
            
            
            0.252/23/2007
            
            
            1,319,874
            
            $
            0.00190
            
            $
            2,507.76
            
            
            0.253/8/2007
            
            
            1,319,874
            
            $
            0.00190
            
            $
            2,507.76
            
            
            0.253/14/2007
            
            
            1,475,153
            
            $
            0.00170
            
            $
            2,507.76
            
            
            0.253/26/2007
            
            
            1,475,153
            
            $
            0.00170
            
            $
            2,507.76
            
            
            0.253/30/2007
            
            
            1,791,257
            
            $
            0.00140
            
            $
            2,507.76
            
            
            0.254/4/2007
            
            
            1,929,046
            
            $
            0.00130
            
            $
            2,507.76
            
            
            0.254/9/2007
            
            
            1,929,046
            
            $
            0.00130
            
            $
            2,507.76
            
            
            0.254/12/2007
            
            
            1,929,046
            
            $
            0.00130
            
            $
            2,507.76
            
            
            0.254/27/2007
            
            
            1,929,046
            
            $
            0.00130
            
            $
            2,507.76
            
            
            0.255/4/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.255/9/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.255/14/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.255/17/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.255/25/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.256/6/2007
            
            
            2,639,747
            
            $
            0.00095
            
            $
            2,507.76
            
            
            0.256/11/2007
            
            
            3,299,684
            
            $
            0.00076
            
            $
            2,507.76
            
            
            0.257/10/2007
            
            
            2,916,000
            
            $
            0.00086
            
            $
            2,507.76
            
            
            0.257/17/2007
            
            
            2,916,000
            
            $
            0.00086
            
            $
            2,507.76
            
            
            0.257/19/2007
            
            
            2,639,747
            
            $
            0.00095
            
            $
            2,507.76
            
            
            0.257/23/2007
            
            
            2,639,747
            
            $
            0.00095
            
            $
            2,507.76
            
            
            0.257/24/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.258/9/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.258/14/2007
            
            
            4,559,200
            
            $
            0.00110
            
            $
            5,015.12
            
            
            0.508/21/2007
            
            
            2,507,760
            
            $
            0.00100
            
            $
            2,507.76
            
            
            0.258/22/2007
            
            
            5,015,520
            
            $
            0.00100
            
            $
            5,015.12
            
            
            0.508/23/2007
            
            
            5,015,520
            
            $
            0.00100
            
            $
            5,015.12
            
            
            0.508/24/2007
            
            
            5,015,520
            
            $
            0.00100
            
            $
            5,015.12
            
            
            0.508/27/2007
            
            
            5,015,520
            
            $
            0.00100
            
            $
            5,015.12
            
            
            0.509/5/2007
            
            
            3,299,684
            
            $
            0.00076
            
            $
            2,507.76
            
            
            0.259/14/2007
            
            
            3,742,925
            
            $
            0.00067
            
            $
            2,507.76
            
            
            0.259/20/2007
            
            
            4,399,579
            
            $
            0.00057
            
            $
            2,507.76
            
            
            0.25




6




On
      September 30, 2004, Old Ariel Way entered into a 2004 Standby Equity
      Distribution Agreement with Yorkville Advisors. This agreement was terminated
      on
      July 20, 2005 and we entered into a new 2005 Standby Equity Distribution
      Agreement with Yorkville Advisors on July 21, 2005. In connection with the
      2004
      Standby Equity Distribution Agreement, Yorkville Advisors received a commitment
      fee in the form of 1,980,000 shares of Old Ariel Way common stock that were
      converted into an aggregate of 3,318,876 shares of our common stock as a result
      of our acquisition of Old Ariel Way on February 2, 2005. The issuance of the
      shares was valued at $1,128,600, the fair value of our stock at that time.
      The
      2005 Standby Equity Distribution Agreement was terminated on February 28, 2006
      pursuant to an Investment Agreement by and between the Company and Yorkville
      Advisors and Montgomery Equity for the purchase of one hundred sixty (160)
      Series A Preferred Shares.





On
      April
      21, 2005, Old Ariel Way sold and issued to Yorkville Advisors, 2,000,000 shares
      of the Series A Redeemable Preferred Stock of Old Ariel Way, for a purchase
      price of $1.00 per share and an aggregate purchase price of $2,000,000 with
      the
      rights, preference and privileges set forth in the Certificate of Designation
      filed by Old Ariel Way on April 19, 2005 with the Delaware Secretary of State
      on
      the terms and conditions set forth in a Stock Purchase Agreement by and between
      Ariel Way, Inc. and Yorkville Advisors Partners, LP, dated April 19, 2005.
      These
      shares were redeemed by Old Ariel Way on August 10, 2005 for a redemption price
      of $2,074,301 including dividend and the preferred stock was returned to Old
      Ariel Way’s treasury.





Except as otherwise noted, the securities described in this Item were issued
      pursuant to the exemption from registration provided by Section 4(2) of the
      Securities Act of 1933 and/or Regulation D promulgated under the Securities
      Act.
      Each such issuance was made pursuant to individual contracts that are discrete
      from one another and are made only with persons who were sophisticated in such
      transactions and who had knowledge of and access to sufficient information
      about
      our Company to make an informed investment decision. Among this information
      was
      the fact that the securities were restricted securities.





**Item
      6. Management’s Discussion and Analysis or Plan of Operation**





The
      following is a discussion and analysis of the results of operations and
      financial position as of and for the two years ended September 30, 2007 and
      the
      factors that could affect our future financial condition and results of
      operations. Historical results may not be indicative of future performance.





This
      discussion and analysis should be read in conjunction with our consolidated
      financial statements and the notes thereto included elsewhere in this 10-KSB.
      Our consolidated financial statements are prepared in accordance with United
      States Generally Accepted Accounting Principles. All references to dollar
      amounts in this section are in United States dollars.





**Revenue
      and Expenses**





**Overall
      Operating Results:**





Revenue
      was $922,221 and $2,459,012 for the fiscal years ended September 30, 2007 and
      2006 respectively. The reduced revenue resulted from the ceasing of the
      operation of dbsXmedia in both the US and the UK in August 2006, and our reduced
      Business TV operation in the UK through Ariel Way Media. This operation was
      terminated in June 2007. Gross profit for the fiscal year ended September 30,
      2007 was $201,135, compared to a gross profit of $35,290 for the fiscal year
      ended September 30, 2006. The imroved margin for 2007 was due to substantial
      cost reductions as a result of negotiated lower satellite service charges
      incurred related to the satellite provider.





Total
      operating expenses were $841,415 and $3,024,692 for the fiscal years ended
      September 30, 2007 and 2006. The significantly reduced operating expenses from
      2006 to 2007 were due to an overall reduction of the operational organization.
      Salaries decreased from $473,957 to $40,428 in 2006 to 2007 respectively,
      professional fees decreased from $840,411 to $610,096 in 2006 to 2007
      respectively, and rent decreased from $414,468 to $51,325 in 2006 to 2007
      respectively. Bad debt expense decreased from $268,026 to -0- in 2006 to 2007
      respectively, and loss on conditional guarantee no longer applied due to
      settlement with Loral Skynet resulting in a reduction from $303,328 to -0-
      in
      2006 to 2007 respectively. Further, during year 2007, there were no expenses
      for
      the issuance of options or warrants, since none were issued during the year.





7




As
      of
      September 30, 2007 cash and cash equivalents was -0- compared to $46,050 as
      of
      September 30, 2006. Cash balances decreased as the company worked to satisfy
      substantial outstanding debts. As of September 30, 2007, accounts payable and
      accrued expenses were $2,109,976, compared to September 30, 2006 balances of
      $2,889,260. This reduction was due to substantial effort in reducing liabilities
      and debt during the fiscal year ended September 30, 2007 as a result of a
      settlement with Loral Skynet, the liquidation of dbsXmedia, Ltd (UK), the
      ceasing of operation of dbsXmedia (US), and the cancellation of other debt
      and
      liabilities. We intend to continue to significantly reduce our liabilities
      and
      debt.





**Operations
      and Net Income**





The
      net
      income for the fiscal year ended September 30, 2007 was $599,491 compared to
      a
      net loss of ($3,069,411) for the fiscal year ended September 30, 2006. The
      change to net income compared with previous year’s losses were the result of
      other income of $1,240,797 recorded as a result of significant debt and
      liability reductions to include a settlement of significant debt and liability
      to Loral Skynet, the liquidation of dbsXmedia, Ltd (UK), the ceasing of
      operation of dbsXmedia (US), and the cancellation of other accrued debt and
      liabilities. We intend to continue to significantly reduce our liabilities
      and
      debt.





As
      of
      September 30, 2007 the accumulated deficit was reduced to ($5,167,535) compared
      with ($5,767,026) September 30, 2006. This accumulated deficit may, on a limited
      basis, be offset against future taxable income. There are limitations on the
      amount of net operating loss carryforwards that can be used due to the change
      in
      the control of the ownership as a result of our stock exchange transaction
      on
      February 2, 2005 of the now wholly-owned Old Ariel Way subsidiary.





**Application
      of Critical Accounting Policies**





We
      prepare our consolidated financial statement in accordance with accounting
      principles generally accepted in the United States of America ("U.S. GAAP").
      Our
      significant accounting policies are discussed in Note 2 to the consolidated
      financial statements.





We
      consider the accounting policies related to revenue and related cost
      recognition, valuation of goodwill and other intangible assets and accounting
      for income taxes to be critical to the understanding of our results of
      operations. Critical accounting policies include the areas where we have made
      what we consider to be particularly subjective or complex judgments in making
      estimates and where these estimates can significantly impact our financial
      results under different assumptions and conditions. The preparation of financial
      statements in accordance with U.S. GAAP requires management to make certain
      estimates, judgments and assumptions that affect the reported amounts of assets
      and liabilities and disclosures of contingent assets and liabilities at the
      date
      of the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Management bases its estimates on historical
      experience, where available, and on various other assumptions and information
      that are believed to be reasonable under the circumstances, the results of
      which
      form the basis for making judgments about the carrying values of assets and
      liabilities. Actual results may differ from estimates under different
      assumptions or conditions.





Management
      believes the following reflect its more significant accounting policies and
      estimates used in the preparation of its consolidated financial statements.
      Our
      senior management has discussed the development of each of the following
      accounting policies and estimates and the following disclosures with the audit
      committee of our board of directors.





**Goodwill**





We
      had no
      recorded goodwill and we reported no goodwill impairment during the fiscal
      year
      ended September 30, 2007.





Goodwill
      must be reviewed for impairment annually or more frequently if events or changes
      in circumstances indicate that the asset might be impaired. There can be no
      assurance that upon review at a later date material impairment charges will
      not
      be required.





8




The
      intangible asset impairment test consists of comparing the fair value of the
      intangible asset to the carrying amount of the intangible asset. If the carrying
      amount exceeds the fair value, an impairment loss is recognized for the
      difference. The goodwill impairment test is a two-step process. The first step
      compares the fair value of the goodwill unit to its carrying value. If the
      carrying amount exceeds the fair value, the second step of the test is performed
      to measure the amount of impairment loss, if any. The second step compares
      the
      implied fair value of the goodwill with the carrying amount of that goodwill.
      The more complete methodology to calculate the implied fair value of goodwill,
      is that an enterprise allocates the fair value of a reporting unit to all of
      the
      assets and liabilities of that reporting unit (including any unrecognized
      intangible assets) as if the reporting unit had been acquired in a business
      combination and the fair value was the price paid to acquire the reporting
      unit.
      The excess of the fair value of the reporting unit over the amounts assigned
      to
      the assets and liabilities of the reporting unit is the implied fair value
      of
      goodwill. If the carrying amount exceeds the implied fair value, an impairment
      loss is recognized for that difference.




The
      fair
      value of an intangible asset, such as a software technology license, and
      reporting unit goodwill is the amount at which that asset or reporting unit
      could be bought or sold in a current transaction between willing parties.
      Therefore, quoted market prices in active markets are the best evidence of
      fair
      value and should be used when available. If quoted market prices are not
      available, the estimate of fair value is based on the best information
      available, including prices for similar assets and the use of other valuation
      techniques. Other valuation techniques include present value analysis, multiples
      of earnings or revenue or a similar performance measure. The use of these
      techniques involves assumptions by management about factors that are highly
      uncertain including future cash flows, the appropriate discount rate and other
      inputs. Different assumptions for these inputs or valuation methodologies could
      create materially different results.





**Property,
      Plant and Equipment**





Annually,
      property, plant and equipment lives are reviewed to ensure that the estimated
      useful lives are appropriate. The estimated useful lives of property, plant
      and
      equipment is a critical accounting estimate because changing the lives of assets
      can result in larger or smaller charges for depreciation expense. Factors used
      in determining useful lives include technology changes, regulatory requirements,
      obsolescence and type of use. We did not change the useful lives of any
      property, plant and equipment in the year ended September 30, 2007.





We
      review
      long-lived assets for impairment whenever events or circumstances indicate
      that
      the carrying amount may not be fully recoverable. During the year ended
      September 30, 2007 the Company wrote off approximately $24,249 in fixed assets
      due to the impairment of the value and the ceasing of operation of dbsXmedia.





**Liquidity
      and Capital Resources**





As
      of
      September 30, 2007, the Company had cash and cash equivalents of -0-. The
      Company was unable to satisfy current debts, and is in default in its loan
      obligations. The focus of the Company during the fiscal year ending September
      30, 2007 has been to significantly reduce accrued and outstanding liabilities
      and debt.





Net
      cash
      used in operating activities was $112,671 for the fiscal year ended September
      30, 2007 compared with $167,223 for the fiscal year ended September 30, 2006.





As
      of September 30, 2007 the Stockholders’ Deficit was ($2,550,328) compared with
      September 30, 2006, of ($3,149,820). At September 30, 2007, we had a negative
      working capital (current assets minus current liabilities) of ($2,554,341)
      compared with negative working capital of approximately ($3,190,782) at
      September 30, 2006. The improvement is the result of the focus of the Company
      during the fiscal year ending September 30, 2007 to significantly reduce accrued
      and outstanding liabilities and debt.





There
      is
      a significant working capital deficit. Additional funding is required in order
      to sustain our current operations. There is limited cash flow from current
      operations. We are attempting to secure debt and equity funding from external
      sources, including existing shareholders. We may not be able to obtain
      additional sources of financing. Funding is required to first satisfy existing
      debts and current operational expenses.





If
      our
      revenue from operations and funds raised are not sufficient to implement our
      business plan, we will be required to raise money from other sources. Other
      sources of funds may not be available or may be available only on terms that
      are
      unfavorable to us. If we are unable to raise sufficient funds, the
      implementation of our Plan of Operation will be delayed and we may cease
      operations.





9




**Going
      concern**





The
      Company and its Subsidiaries’ consolidated financial statements have been
      prepared on the basis that it will continue as a going concern, which
      contemplates the realization of asset values and the satisfaction of liabilities
      in the normal course of business. Certain conditions indicate that the Company
      may be unable to continue as a going concern as follows:





-
                The inability of the company to fund current operations and satisfy
                its
                current debts when due.





-
                    The current default of its loans from shareholders.





-
                  The inability to fund acquisition opportunities that could provide
                  operational cash flow for the operation going
                  forward.





The
      Company's ability to continue as a going concern is dependent upon increasing
      its revenues and gross profit margins to cover cost of services and other
      operating expenses, generating positive cash flows from operations, obtaining
      debt or equity capital to fund any negative operating cash flows and returning
      the Company to profitable operations. In this connection, the Company has
      adopted the following operating and management plans in order to provide
      positive cash flow from operations and fiscal year 2008:





·
            Raise
                additional capital or secure funding from credit sources.





·
            Expand
                and develop its Business TV business with existing customer base
                and
                additional contracts for new services.





·
            Continue
                to develop and expand its digital signage business through targeted
                marketing initiatives in both the US and Europe.





·
            Continue
                overall cost and expense control and adoption of efficient service
                and
                equipment roll-out approaches resulting in improved gross profits
                and
                reduced operating expenses.





·
            Expand
                operation and revenue base through an aggressive acquisition program
                of
                profitable companies with operation and services with synergy to
                its
                current operation.





·
            Develop
                strategic partnerships with major companies in the area of secure
                wireless
                communications, installation, and equipment maintenance supporting
                the
                Company’s strategy. This strategic initiative is believed to provide
                increased revenues and result in reduced operating expenses.





·
            Develop
                strategic partnerships with major companies providing content and
                advertising services for the Company’s digital signage operation roll-out.





Although
      the results of these actions cannot be predicted with any degree of certainty,
      management believes that if the Company can continue to increase its revenues
      and gross profit margins, reduce expenses, and can obtain additional debt or
      equity financing to fund any negative cash flow from operations in 2008, the
      Company has the ability ultimately to return to profitability.





**Off-Balance
      Sheet Arrangements**





At
      September 30, 2007, there were none issued and outstanding.





**Plan
      of Operation**





Ariel
      Way, Inc. is a technology and services company for highly secure global
      communications and digital signage solutions and technologies. We are focused
      on
      developing innovative and secure technologies, acquiring and growing profitable
      advanced technology companies and global communications service providers and
      creating strategic alliances with companies in complementary product lines
      and
      service industries.





During
      fiscal year 2007, our communications solutions were provided by our subsidiary
      Ariel Way Media, Inc., a Delaware corporation and its subsidiary Ariel Way
      Media, Ltd., a U.K. corporation, that provided solutions for Business Television
      (BTV) delivered over satellite networks. As of July 2007, we discontinued our
      BTV services to focus entirely on the development and operation of a network
      for
      advanced digital signage solutions and services. Our planned digital signage
      network includes technologies using LCD and plasma flat screen displays as
      a new
      platform for companies to promote and advertise products and services to
      targeted audiences as they shop, work and play in malls, banks and other
      strategic locations. This network that is based on transmission over satellite,
      wireless and the Internet, is also intended to be used for corporate
      communications and training activities based on our previous experience in
      the
      operation of Business Television.





10




We
      have
      embarked on building on the experience gained from the previous BTV operation
      and expanding into the dynamic digital signage business through our subsidiary
      company Ariel Way Media. However, if revenue and cash provided by operations
      do
      not outpace our expenses, if economic conditions weaken or if competitive
      pressures increase, our ability to meet our debt obligations and our financial
      condition could be materially and adversely affected, thereby potentially
      adversely affecting our credit ratings, our ability to access the capital
      markets and our compliance with debt covenants.





We
      are
      pursuing both acquisitions and strategic alliances to leverage our strategy
      of
      creating a technology and services company for digital signage and highly secure
      global communications solutions and technologies. Our objectives are to create
      high margin revenues and shareholder value, expand our reach in the global
      market for digital signage and highly secure global communications solutions
      and
      technologies and position us to play a more visible role in providing next
      generation highly secure communications digital signage solutions, products,
      services and technologies.





In
      order
      to implement our overall business plan including both the full development
      of a
      digital signage business, we intend to attempt to raise at least $10,000,000
      over the next 12 months in order to fund:





·
            Expenses
                associated with acquisitions of companies;





·
            Investment
                in laboratory facilities including test and simulation equipment;





·
            Acquisition
                or licensing of certain intellectual property related to the development
                of a nationwide digital signage network and highly secure communications
                technology and software development technology;





·
            Compensation
                for employees and consultants;





·
            Legal
                and accounting fees and other general administrative overhead;





·
            General
                working capital purposes





In
      addition, we may need additional funds if we use a greater percentage of cash
      rather than stock in connection with future acquisitions.





**New
      Accounting Pronouncements**





In
      December 2004, the FASB issued SFAS No. 123 (Revised 2004),
“Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R requires that
      the compensation cost relating to share-based payment transactions be recognized
      in financial statements. That cost will be measured based on the fair value
      of
      the equity or liability instruments issued. The scope of SFAS No. 123R
      includes a wide range of share-based compensation arrangements including share
      options, restricted share plans, performance-based awards, share appreciation
      rights and employee share purchase plans. SFAS No. 123R replaces SFAS
      No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB
      Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS
      No. 123, as originally issued in 1995, established as preferable a
      fair-value-based method of accounting for share-based payment transactions
      with
      employees. However, that Statement permitted entities the option of continuing
      to apply the guidance in APB No. 25, as long as the footnotes to the
      financial statements disclosed what net income would have been had the
      preferable fair-value-based method been used. The impact of this SFAS is fully
      discussed in Note 2 to the Financial Statements as of September 30, 2007 and
      2006.





In
      May
      2005, the FASB issued SFAS No. 154, *Accounting
      Changes and Error Corrections* ,
      which
      replaces APB Opinion No. 20, *Accounting
      Changes* ,
      and
      FASB Statement No.3, *Reporting
      Accounting Changes in Interim Financial Statements* .
      This
      Statement replaces APB Opinion No. 20, *Accounting
      Changes,* and
      FASB
      Statement No. 3, *Reporting
      Accounting Changes in Interim Financial Statements,* and
      changes the requirements for the accounting for and reporting of a change in
      accounting principle. This Statement applies to all voluntary changes in
      accounting principle. It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions. When a pronouncement includes specific
      transition provisions, those provisions should be followed.





11




**Inflation**





Our
      monetary assets, consisting primarily of cash and receivables, and our
      non-monetary assets, consisted primarily of intangible assets and goodwill,
      are
      not affected significantly by inflation. We believe that replacement costs
      of
      equipment, furniture and leasehold improvements will not materially affect
      our
      operations. However, the rate of inflation affects our expenses, such as those
      for employee compensation and costs of network services, which may not be
      readily recoverable in the price of services offered by us.





**RISK
      FACTORS**





**We
      are subject to various risks that may materially harm our business, financial
      condition and results of operations. You should carefully consider the risks
      and
      uncertainties described below and the other information in this filing before
      deciding to purchase our common stock. If any of these risks or uncertainties
      actually occur, our business, financial condition or operating results could
      be
      materially harmed. In that case, the trading price of our common stock could
      decline and you could loose all or part of your investment.**





**Risks
      Related To Our Business**





**We
      are a technology company with a revised and new and unproven enterprise
      technology model and a short operating history, which makes it difficult to
      evaluate our current business and future prospects and may increase the risk
      of
      your investment.**





We
      have
      only a limited operating history with our revised and new business model upon
      which to base an evaluation of our current business and future prospects. Our
      limited operating history with the new business model makes an evaluation of
      our
      business and prospects very difficult. You must consider our business and
      prospects in light of the risks and difficulties we may encounter as a
      developing company with a revised and new business model in the rapidly evolving
      market for technology and services supporting the business of highly secure
      global communications. These risks and difficulties include, but are not limited
      to, the following:





·
            our
                revised and new and unproven business and technology model;





·
            a
                limited number of service offerings and risks associated with developing
                new product and service offerings;





·
            the
                difficulties we may face in managing rapid growth in personnel and
                operations;





·
            a
                failure of our physical infrastructure or internal systems caused
                by a
                denial of service, third-party attack, employee error or malfeasance,
                or
                other causes;





·
            a
                general failure of satellite services and the Internet that impairs
                our
                ability to deliver our service;





·
            a
                loss or breach of confidentiality of customer data;





·
            the
                negative impact on our brand, reputation or trustworthiness caused
                by any
                significant unavailability of our service;





·
            the
                systematic failure of a core component of our service from which
                it would
                be difficult for us to recover;





·
            the
                timing and success of new service introductions and new technologies
                by
                our competitors;





·
            our
                ability to acquire and merge subsidiaries in a highly competitive
                market;
                and





·
            drastic
                changes in the regulatory environment that could have an adverse
                impact in
                the Telecommunications industry.





We
      may
      not be able to successfully address any of these risks or others. Failure to
      adequately do so could force us to curtail or cease our business operations.





12




**We
      have previous years lost money and we may again experience losses in the near
      term, which means that we may not be able to continue to operate as a going
      concern unless we obtain additional funding**





We
      have
      previous years lost money. In the fiscal year ended September 30, 2007 we had
      a
      net income of $599,491 and for the fiscal year ended September 30, 2006 we
      had a
      net loss of ($3,069,411). Future losses may occur. Accordingly, we are
      experiencing liquidity and cash flow problems and we may not be able to raise
      additional capital as needed and on acceptable terms. No assurances can be
      given
      that we will be successful in reaching or maintaining profitable operations;
      or
      that we will be able to raise or borrow adequate funds to execute our business
      plan and consummate any future acquisitions.





**There
      is substantial doubt about our ability to continue as a going concern.**





As
      of
      September 30, 2007, the Company’s independent public accounting firm issued a
“going concern opinion” wherein they stated that the accompanying financial
      statements were prepared assuming the Company will continue as a going concern.
      As discussed in Note 11 to the financial statements as of September 30, 2007,
      the Company did not generate sufficient cash flows from revenues during the
      year
      ended September 30, 2007, to fund its operations. Also at September 30, 2007,
      the Company had negative net working capital of ($2,554,341). These matters
      raise substantial doubt about the Company’s ability to continue as a going
      concern. Management’s plan in regard to these matters is discussed in Note 10 to
      the accompanying financial statements as of September 30, 2007. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty. Unless the Company is successful in generating additional
      sources of revenue, or obtaining additional capital, or restructuring its
      business, the Company is at risk of ceasing operations or filing bankruptcy.





**We
      have a material weakness in internal controls due to a limited segregation
      of
      duties, and if we fail to maintain an effective system of internal controls,
      we
      may not be able to accurately report our financial results or prevent fraud.
      As
      a result, current and potential stockholders could lose confidence in our
      financial reporting which could harm the trading price of our stock.**





Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      prevent fraud. Inferior internal controls could cause investors to lose
      confidence in our reported financial information, which could have a negative
      effect on the trading price of our stock. During the year ended September 30,
      2007, we reduced our staffing in order to conserve cash, as our level of
      business activity declined. As a result, there is very limited segregation
      of
      duties, this is a material weakness in internal controls. However, we have
      implemented procedures to both limit access to bank accounts and to segregate
      the approval of invoices from disbursements of cash. However, with only five
      employees and consultants at the Company, segregation of duties is not
      practicable.





**We
      have historically generated revenue which has not been adequate to support
      our
      full operation and this may continue in the future, which means that we may
      not
      be able to continue operations unless we can increase our generated revenue.
      Further, we ceased the operations of two locations and future revenue could
      be
      limited.**





We
      have
      generated revenue from operations; however, if we do not begin generating more
      revenue we may have to cease operations. As of September 30, 2007, we had an
      accumulated deficit of ($5,167,535). In order to become profitable, we will
      need
      to generate revenues to offset our cost of operations and general and
      administrative expenses. We may not achieve or sustain our revenue or profit
      objectives and our losses may increase in the future and ultimately, we may
      have
      to cease operations.





Our
      operating results are not possible to predict because we have limited
      operations. As a result, we cannot determine if we will be successful in our
      proposed plan of operation. Accordingly, we cannot determine what the future
      holds for our proposed plan of business. As such an investment in our business
      is extremely risky and could result in the entire loss of your investment.





**We
      will need to raise additional capital to continue our operations and consummate
      any future acquisitions or we may be unable to fund our operations, promote
      our
      products or develop our technology**





We
      have
      relied on external financing to fund our operations and acquisitions to date.
      Such financing has historically come from a combination of borrowings from,
      and
      sale of common stock to, third parties and funds provided by certain officers
      and directors. Over the next two years we need to raise additional capital
      to
      fund additional acquisitions and/or to fund operations. We anticipate that
      these
      additional funds will be in the range of $10 million to $20 million,
      depending on the pace and size of our acquisitions. We cannot assure you that
      financing, whether from external sources or related parties, will be available
      if needed or on favorable terms. The sale of our common stock to raise capital
      may cause dilution to our existing shareholders. If additional financing is
      not
      available when required or is not available on acceptable terms, we may be
      unable to fund our operations and expansion, successfully promote our brand
      name, products or services, develop or enhance our technology, take advantage
      of
      business opportunities or respond to competitive market pressures, any of which
      could make it more difficult for us to continue operations. Any reduction in
      our
      operations may result in a lower stock price.





13




A
      portion
      of our future revenue is dependent upon the success of long-term projects,
      which
      require significant up-front expense to us. We are dependent on external
      financing to fund our operations and the up-front costs. There can be no
      assurance that revenues will be realized until the projects are completed or
      certain significant milestones are met. Our failure, or any failure by a
      third-party with which we may contract, to perform services or deliver products
      on a timely basis could force us to curtail or cease our business operations.





**We
      have a working capital deficit; we need to raise additional capital to finance
      operations**





We
      have
      relied on significant external financing to fund our operations. As of September
      30, 2007, we had -0- cash on hand and our total current assets were $4,372
      as of
      September 30, 2007. We have a negative net working capital of ($2,554,341).





We
      will
      need to raise additional capital to fund our working capital deficit, our
      anticipated operating expenses and our strategic business plan. Among other
      things, external financing will be required to cover our operating costs. Unless
      we obtain profitable operations, it is unlikely that we will be able to secure
      additional financing from external sources. If we are unable to secure
      additional financing, we may be forced to curtail or cease our business
      operations. We estimate that we will require $10,000,000 to fund our anticipated
      operating expenses for the next twelve months. The sale of our common stock
      to
      raise capital may cause dilution to our existing shareholders. Our inability
      to
      obtain adequate financing will result in the need to curtail business
      operations. Any of these events would be materially harmful to our business,
      may
      result in a lower stock price and you could lose your entire investment. Our
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





**Our
      common stock is deemed to be “penny stock,” which may make it more difficult for
      investors to resell their shares due to suitability requirements**





Our
      common stock is deemed to be “penny stock” as that term is defined in
      Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny
      stocks are stocks:





·
            With
                a price of less than $5.00 per share;





·
            That
                are not traded on a “recognized” national exchange;





·
            Whose
                prices are not quoted on the NASDAQ automated quotation system (NASDAQ
                listed stock must still have a price of not less than $5.00 per share);
                or





·
            Of
                issuers with net tangible assets less than $2.0 million (if the
                issuer has been in continuous operation for at least three years)
                or
                $5.0 million (if in continuous operation for less than three years),
                or with average revenues of less than $6.0 million for the last three
                years.





Broker/dealers
      dealing in penny stocks are required to provide potential investors with a
      document disclosing the risks of penny stocks. Moreover, broker/dealers are
      required to determine whether an investment in a penny stock is a suitable
      investment for a prospective investor. These requirements may reduce the
      potential market for our common stock by reducing the number of potential
      investors. This may make it more difficult for investors in our common stock
      to
      sell shares to third parties or to otherwise dispose of them. This could cause
      our stock price to decline and you could lose your entire investment.





Our
      securities are covered by the penny stock rules, which impose additional sales
      practice requirements on broker-dealers who sell to persons other than
      established customers and “accredited investors”. The term “accredited investor”
refers generally to institutions with assets in excess of $5,000,000 or
      individuals with a net worth in excess of $1,000,000 or annual income exceeding
      $200,000 or $300,000 jointly with their spouse. The penny stock rules require
      a
      broker-dealer, prior to a transaction in a penny stock not otherwise exempt
      from
      the rules, to deliver a standardized risk disclosure document in a form prepared
      by the SEC which provides information about penny stocks and the nature and
      level of risks in the penny stock market. The broker-dealer also must provide
      the customer with current bid and offer quotations for the penny stock, the
      compensation of the broker-dealer and its salesperson in the transaction and
      monthly account statements showing the market value of each penny stock held
      in
      the customer’s account. The bid and offer quotations, and the broker-dealer and
      salesperson compensation information, must be given to the customer orally
      or in
      writing prior to effecting the transaction and must be given to the customer
      in
      writing before or with the customer’s confirmation. In addition, the penny stock
      rules require that prior to a transaction in a penny stock not otherwise exempt
      from these rules, the broker-dealer must make a special written determination
      that the penny stock is a suitable investment for the purchaser and receive
      the
      purchaser’s written agreement to the transaction. These disclosure requirements
      may have the effect of reducing the level of trading activity in the secondary
      market for the stock that is subject to these penny stock rules. Consequently,
      these penny stock rules may affect the ability of broker-dealers to trade our
      securities. We believe that the penny stock rules discourage investor interest
      in and limit the marketability of, our common stock.





14




The
      National Association of Securities Dealers, or NASD, has adopted sales practice
      requirements which may also limit a stockholder’s ability to buy and sell our
      stock.





In
      addition to the “penny stock” rules described above, the NASD has adopted rules
      that require that in recommending an investment to a customer, a broker-dealer
      must have reasonable grounds for believing that the investment is suitable
      for
      that customer. Prior to recommending speculative low priced securities to their
      non-institutional customers, broker-dealers must make reasonable efforts to
      obtain information about the customer’s financial status, tax status, investment
      objectives and other information. Under interpretations of these rules, the
      NASD
      believes that there is a high probability that speculative low priced securities
      will not be suitable for at least some customers. The NASD requirements make
      it
      more difficult for broker-dealers to recommend that their customers buy our
      common stock, which may limit investors’ ability to buy and sell our stock and
      have an adverse effect on the market for our shares.





**Our
      common stock has a small public float and future sales of our common stock,
      may
      negatively affect the market price of our common stock.**





As
      of
      January 11, 2008, there were 595,000,000 shares of our common stock outstanding,
      at a closing market price of $0.004 for a total market valuation of
      approximately $2,380,000. As a group, our officers, directors and all other
      persons who beneficially own more than 10% of our total outstanding shares,
      beneficially own 285,750,938 shares of our common stock, including vested
      options and vested warrants. Our common stock has a public float of
      approximately 220.0 million shares, which shares in the hands of public
      investors, and which, as the term "public float" is defined by NASDAQ, excludes
      shares that are held directly or indirectly by any of our officers or directors
      or any other person who is the beneficial owner of more than 10% of our total
      shares outstanding. These shares are held by approximately 375 stockholders
      of
      record, not including holders of our common stock in “street name” or beneficial
      holders, whose shares are held of record by banks, brokers and other financial
      institutions. We cannot predict the effect, if any, that future sales of shares
      of our common stock into the market will have on the market price of our common
      stock. However, sales of substantial amounts of common stock, including future
      shares issued upon the exercise of warrants, or stock options (of which
      15,922,320 are presently outstanding; see Item 5 of this report) and/or
      conversion of preferred stock into common stock, or the perception that such
      transactions could occur, may materially and adversely affect prevailing market
      prices for our common stock.





**We
      have and will continue to incur increased costs as a result of being a public
      company.**





As
      a
      public company, we have and will continue to incur significant legal, accounting
      and other expenses that we did not incur as a private company. We will incur
      costs associated with our public company reporting requirements. We also
      anticipate that we will incur costs associated with recently adopted corporate
      governance requirements, including requirements under the Sarbanes-Oxley Act
      of
      2002, as well as new rules implemented by the Securities and Exchange Commission
      and the NYSE and NASDAQ. We expect these rules and regulations to increase
      our
      legal and financial compliance costs and to make some activities more
      time-consuming and costly. We also expect that these new rules and regulations
      may make it more difficult and more expensive for us to obtain director and
      officer liability insurance and we may be required to accept reduced policy
      limits and coverage or incur substantially higher costs to obtain the same
      or
      similar coverage. As a result, it may be more difficult for us to attract and
      retain qualified individuals to serve on our Board of Directors or as executive
      officers. We are currently evaluating and monitoring developments with respect
      to these new rules, and we cannot predict or estimate the amount of additional
      costs we may incur or the timing of such costs. However, we believe that that
      it
      is important to provide a mechanism to grant stock options and other stock
      awards to employees, non-employee directors and consultants as an incentive,
      and
      to tie their interests closer to those of our stockholders.





**We
      have a new executive team and may not be successful in integrating the
      management teams of companies acquired which could adversely affect the
      leadership of Ariel Way, divert management time and adversely affect the
      business and results of operations**





As
      a
      result of completion of our acquisition of Old Ariel Way on February 2, 2005,
      Mr. Arne Dunhem became our new Chairman, President and Chief Executive
      Officer. Failure to successfully integrate the management teams of other
      acquired companies could divert management time and resources, which would
      adversely affect our operations. Our future success also depends on our ability
      to identify, attract, hire, retain and motivate other well-qualified managerial,
      technical, sales and marketing personnel.




15




**Our
      business revenue generation model is unproven and could fail**





Our
      revenue model is revised and new and evolving, and we cannot be certain that
      it
      will be successful. Our ability to generate revenue depends, among other things,
      on our ability to provide quality highly secure global communications and
      digital signage solutions and technologies to our customers and to develop
      and
      ultimately sell various security appliances products and digital signage
      services. We have limited experience with our highly secure global
      communications and digital signage solutions and technologies business and
      our
      success is largely dependent upon our ability to successfully integrate and
      manage any acquisitions we may consummate. If we are unable to sell our services
      and provide them efficiently, we could be forced to curtail or cease our
      business operations.





**The
      winding-up of activities by and operations of dbsXmedia and its business and
      transfer our Company to a new business model based on the Business TV experience
      may not be successful and could fail**





During
      year 2006 we had experienced significant growth in revenues and related
      expenses. Our increase in revenues was due primarily to our acquisition of
      dbsXmedia and its Business TV operation. However, due to dbsXmedia not achieving
      anticipated profitability and cash flow, failing its financial business plan,
      and mounting debt to Loral Skynet for satellite services, its management team
      departing dbsXmedia, we were obligated to wind-up the activities by and services
      provided by dbsXmedia. Subsequently, we have embarked on building on the
      experience gained from the Business TV operation and expanding into the dynamic
      digital signage business through our subsidiary company Ariel Way Media. In
      addition, we are taking a number of measures designed to improve our financial
      condition such as looking into potential acquisitions, cost reductions,
      expansion of the Business TV multimedia experience and the integration of
      various new acquisitions. However, if revenue and cash provided by operations
      do
      not exceed expenses, if economic conditions weaken or if competitive pressures
      increase, our ability to meet our debt obligations and our financial condition
      could be materially and adversely affected, and the company could be forced
      to
      cease operations.





**If
      we are not able to compete effectively in the highly competitive highly secure
      global communications and digital signage solutions and technologies industries
      we may be forced to curtail or cease operations**





Our
      ability to compete effectively with our competitors depends on the following
      factors, among others:





·
            the
                performance of our products, services and technology in a manner
                that
                meets customer expectations;





·
            the
                success of our efforts to develop effective channels of distribution
                for
                our products and services;





·
            our
                ability to price our products and services that are of a quality
                and at a
                price point that is competitive with similar or comparable products
                and
                services offered by our competitors;





·
            general
                conditions in the highly secure global communications and digital
                signage
                solutions and technologies industries;





·
            the
                success of our efforts to develop, improve and satisfactorily address
                any
                issues relating to our technology;





·
            our
                ability to effectively compete with companies that have substantially
                greater market presence and financial, technical, marketing and other
                resources than we have; and





·
            our
                ability to adapt to the consolidation of providers of highly secure
                global
                communications and digital signage solutions and technologies with
                or into
                larger entities, or entry of new entities into the highly secure
                global
                communications and digital signage solutions and technologies market,
                would likely result in greater competition for us.





If
      we are
      unable to successfully compete in our industry, we may be forced to curtail
      or
      cease our business operations.





16




**Consolidations
      in the industry in which we compete could adversely affect our businesses to
      include a reduction or elimination of our proportionate share of those markets**





The
      highly secure global communications and digital signage solutions and
      technologies industry has experienced consolidation of participants, and this
      trend may continue. If highly secure global communications and digital signage
      solutions and technologies providers consolidate with companies that utilize
      technologies that are similar to or compete with our secure technology, our
      proportionate share of the emerging market for highly secure global
      communications and digital signage solutions and technologies may be reduced
      or
      eliminated. This reduction or elimination of our market share could reduce
      our
      ability to obtain profitable operations and could cause us to curtail or cease
      our business operations.





We
      believe that our ability to compete successfully in the highly secure global
      communications and digital signage solutions and technologies market depends
      on
      a number of factors, including market presence; the adequacy of its member
      and
      technical support services; the capacity, reliability and security of its
      network infrastructure; the ease of access to and navigation of the capabilities
      provided by our solutions and technologies; our pricing policies, our
      competitors and suppliers; the timing of introductions of new services by us
      and
      our competitors; our ability to support existing and emerging industry
      standards; and industry and general economic trends. If any of these factors
      negatively impact us, we may be forced to curtail or cease our business
      operations.





**Management
      and directors of Ariel Way have a significant percentage of the fully diluted
      number of common shares and such concentration of ownership may have the effect
      of delaying or preventing a change of control of Ariel Way.**





Our
      management and directors beneficially own a significant percentage of our
      outstanding common stock, on a fully diluted basis. As a result, these
      management and director equity holders will have significant influence in
      matters requiring stockholder approval, including the election and removal
      of
      directors, the approval of significant corporate transactions, such as any
      merger, consolidation or sale of all or substantially all of our assets, and
      the
      control of our management and affairs. Accordingly, such concentration of
      ownership may have the effect of delaying, deferring or preventing a change
      in
      control of us, impeding a merger, consolidation, takeover or other business
      combination involving us or discouraging a potential acquirer from attempting
      to
      obtain control of us.





**We
      may not be able to effectively protect our intellectual property rights, the
      foundation of our business, which could harm our business by making it easier
      for our competitors to duplicate our services**





We
      regard
      certain aspects of our products, processes, services and technology as
      proprietary. We intend to take steps to protect them with patents, copyrights,
      trademarks, restrictions on disclosure and other methods. Despite these
      precautions, we cannot be certain that third parties will not infringe or
      misappropriate our proprietary rights or that third parties will not
      independently develop similar products, services and technology. Any
      infringement, misappropriation or independent development could cause us to
      cease operations.





We
      own
      several Internet domain names, including www.arielway.com. The regulation of
      domain names in the United States and in foreign countries may change.
      Regulatory bodies could establish additional top-level domains or modify the
      requirements for holding domain names, any or all of which may dilute the
      strength of our name. We may not acquire or maintain our domain name or
      additional common names in all of the countries in which our marketplace may
      be
      accessed, or for any or all of the top-level domains that may be introduced.
      The
      relationship between regulations governing domain names and laws protecting
      proprietary rights is unclear. Therefore, we may not be able to prevent third
      parties from acquiring domain names that infringe or otherwise decrease the
      value of our trademarks and other proprietary rights.





We
      may
      have to resort to litigation to enforce our intellectual property rights,
      protect our trade secrets, determine the validity and scope of the proprietary
      rights of others, or defend ourselves from claims of infringement, invalidity
      or
      unenforceability. Litigation may be expensive and divert resources even if
      we
      win. This could adversely affect our business, financial condition and operating
      results such that it could cause us to reduce or cease operations.





**Other
      parties may assert that our technology infringes on their intellectual property
      rights, which could divert management time and resources and possibly force
      us
      to redesign our technology**





Technology-based
      industries, such as ours, are characterized by an increasing number of patents
      and frequent litigation based on allegations of patent infringement. From time
      to time, third parties may assert patent, copyright and other intellectual
      property rights to technologies that are important to us. While there currently
      are no outstanding infringement claims pending by or against us, we cannot
      assure you that third parties will not assert infringement claims against us
      in
      the future, that assertions by such parties will not result in costly
      litigation, or that they will not prevail in any such litigation. In addition,
      we cannot assure you that we will be able to license any valid and infringed
      patents from third parties on commercially reasonable terms or, alternatively,
      be able to redesign products on a cost-effective basis to avoid infringement.
      Any infringement claim or other litigation against or by us could have a
      material adverse effect on us and could cause us to reduce or cease operations.





17




**If
      we are unable to successfully develop the technology necessary for our
      solutions, products and processes, we will not be able to bring our products
      to
      market and may be forced to reduce or cease operations**





Our
      ability to commercialize our solutions and products is dependent on the
      advancement of our existing technology. In order to obtain and maintain market
      share we will continually be required to make advances in technology. We cannot
      assure you that our research and development efforts will result in the
      development of such technology on a timely basis or at all. Any failures in
      such
      research and development efforts could result in significant delays in product
      development and cause us to reduce or cease operations. We cannot assure you
      that we will not encounter unanticipated technological obstacles, which either
      delay or prevent us from completing the development of our products and
      processes.





**If
      we cannot deliver the features and functionality our customers demand, we will
      be unable to attract customers**





Our
      future success depends upon our ability to determine the needs of our customers
      and to design and implement technology products and highly secure global
      communications solutions and technologies that meet their needs in a cost
      efficient manner. If we are unable to successfully determine customer
      requirements or if our current or future services do not adequately satisfy
      customer demands, we will be forced to curtail or cease our business operations.





**Our
      limited operating history with the revised and new business model may impede
      acceptance of our technologies and service by medium-sized and large customers**





Our
      ability to increase revenue and achieve profitability depends, in large part,
      on
      widespread acceptance of our technologies and services by various sized and
      type
      of businesses. Our efforts to sell to these customers may not be successful.
      In
      particular, because we are a relatively new company with a revised and new
      business model and a limited operating history, these target customers may
      have
      concerns regarding our viability and may prefer to purchase critical hardware
      and/or software applications or other services from one of our larger, more
      established competitors. Even if we are able to sell our service to these types
      of customers, they may insist on additional assurances from us that we will
      be
      able to provide adequate levels of service, which could harm our business and
      forced to curtail or cease our business operations.





**Our
      future financial performance will depend on the introduction and widespread
      acceptance of new features to, and enhanced editions of, our technologies and
      services**





Our
      future financial performance will depend on our ability to develop and introduce
      new features to, and new editions of, our technologies and services. The success
      of new features and editions depends on several factors, including the timely
      completion, introduction and market acceptance of the feature or edition.
      Failure in this regard may significantly impair our revenue growth. In addition,
      the market for our technologies and solutions may be limited if prospective
      customers, particularly medium and large customers, require customized features
      or functions that are incompatible with our application delivery model. If
      we
      are unable to develop new features or enhanced editions of our technologies
      and
      solutions that achieve widespread levels of market acceptance or if prospective
      customers require customized features or functions, we will be forced to curtail
      or cease our business operations.





**We
      may be dependent on third parties to complete certain projects with the risk
      of
      failure of the project if the third party does not adequately perform**





A
      potential difficulty in completing a project could have a material adverse
      effect on our reputation, business and results of operations. In certain
      instances, we may be dependent on the efforts of third parties to adequately
      complete our portion of a project and, even if our products and processes
      perform as required, a project may still fail due to other components of the
      project supplied by third parties. Any such project failure could force us
      to
      curtail a crease our business operations.





**If
      we fail to develop our brand cost-effectively, our business may suffer**





We
      believe that developing and maintaining awareness of our brand in a
      cost-effective manner is critical to achieving widespread acceptance of our
      existing and future solutions and technologies and is an important element
      in
      attracting new customers. Furthermore, we believe that the importance of brand
      recognition will increase as competition in our markets develops. Successful
      promotion of our brand will depend largely on the effectiveness of our marketing
      efforts and on our ability to provide reliable and useful technologies and
      services at competitive prices. Brand promotion activities may not yield
      increased revenue, and even if they do, any increased revenue may not offset
      the
      expenses we incurred in building our brand. If we fail to successfully promote
      and maintain our brand, or incur substantial expenses in an unsuccessful attempt
      to promote and maintain our brand, we may fail to attract enough new customers
      or retain our existing customers to the extent necessary to realize a sufficient
      return on our brand-building efforts, and we could be forced to curtail or
      cease
      our business operations.





18





**Any
      failure to adequately expand our direct sales force will impede our growth**





We
      expect
      to be substantially dependent on a direct sales force to obtain new customers,
      particularly medium and large enterprise customers, and to manage our customer
      base. We believe that there is significant competition for direct sales
      personnel with the advanced sales skills and technical knowledge we need. Our
      ability to achieve significant growth in revenue in the future will depend,
      in
      large part, on our success in recruiting, training and retaining sufficient
      direct sales personnel. New hires require significant training and may, in
      some
      cases, take more than a year before they achieve full productivity. Our recent
      hires and planned hires may not become as productive as we would like, and
      we
      may be unable to hire sufficient numbers of qualified individuals in the future
      in the markets where we do business. If we are unable to hire and develop
      sufficient numbers of productive sales personnel, sales of our services will
      suffer and we could be forced to curtail or cease our business operations.





**Sales
      to customers outside the United States expose us to risks inherent in
      international sales**





Our
      anticipated future sales outside the United States may represent, in addition
      to
      our anticipated sales in the Americas, a significant portion of our future
      total
      revenue. We intend to expand our domestic and international sales efforts.
      As a
      result, we will be subject to risks and challenges that we would otherwise
      not
      face if we conducted our business only in the United States. These risks and
      challenges include:





·
            localization
                of our technologies and services, including translation into foreign
                languages and associated expenses;





·
            laws
                and business practices favoring local competitors;





·
            more
                established competitors with greater resources;





·
            compliance
                with multiple, conflicting and changing governmental laws and regulations,
                including tax, privacy and data protection laws and regulations;





·
            different
                employee/employer relationships and the existence of workers’ councils and
                labor unions;





·
            different
                pricing environments;





·
            difficulties
                in staffing and managing foreign operations;





·
            longer
                accounts receivable payment cycles and other collection difficulties;
                and





·
            regional
                economic and political conditions.





These
      factors could force us to curtail or cease our business operations.





**We
      may not be able to keep up with rapid technological changes, which could render
      our solutions, technologies and processes obsolete**





The
      highly secure global communications and digital signage solutions and
      technologies industry is characterized by rapid technological change, changes
      in
      customer requirements and preferences, frequent introduction of products and
      services embodying new technologies and the emergence of new industry standards
      and practices that could render our existing technology and systems obsolete.
      Our future success will depend on our ability to enhance and improve the
      responsiveness, functionality, accessibility and features of our products.
      We
      expect that our marketplace will require extensive technological upgrades and
      enhancements to accommodate many of the new products and services that we
      anticipate will be added to our marketplace. If we are unable to expand and
      upgrade our technology and systems, and successfully integrate new technologies
      or systems in the future, to accommodate such increases in a timely manner,
      we
      may be forced to curtail or cease our business operations.




19





**We
      may not effectively manage the growth necessary to execute our business plan,
      which could adversely affect the quality of our operations and our costs**





In
      order
      to achieve the critical mass of business activity that we believe is necessary
      to successfully execute our business plan; we must significantly increase the
      business operation through acquisitions in addition to increasing the number
      of
      strategic partners and customers that use our solutions, technologies and
      services. This growth will place significant strain on our personnel, systems
      and resources. We also expect that we will continue to hire employees, including
      technical, management-level employees, and sales staff for the foreseeable
      future. This growth will require us to improve management, technical,
      information and accounting systems, controls and procedures. We may not be
      able
      to maintain the quality of our operations, control our costs, continue complying
      with all applicable regulations and expand our internal management, technical
      information and accounting systems in order to support our desired growth.
      If we
      do not manage our growth effectively, we could be forced to curtail or cease
      our
      business operations.





**We
      may not successfully execute or integrate acquisitions**





Our
      business model is dependent upon growth through acquisition of other technology
      and communications solutions providers. We expect to attempt to complete
      acquisitions that we anticipate will enable us to build our highly secure global
      communications solutions and technologies business. Acquisitions involve
      numerous risks, including the following:





·
            Difficulties
                in integrating the operations, technologies, products and personnel
                of the
                acquired companies;





·
            Diversion
                of management’s attention from normal daily operations of the business;





·
            Difficulties
                in entering markets in which we have no or limited direct prior experience
                and where competitors in such markets have stronger market positions;





·
            Initial
                dependence on unfamiliar partners;





·
            Insufficient
                revenues to offset increased expenses associated with acquisitions;
                and





·
            The
                potential loss of key employees of the acquired companies.





Acquisitions
      may also cause us to:





·
            Issue
                common stock that would dilute our current shareholders’ percentage
                ownership;





·
            Assume
                liabilities;





·
            Record
                goodwill and non-amortizable intangible assets that will be subject
                to
                impairment testing on a regular basis and potential periodic impairment
                charges;





·
            Incur
                amortization expenses related to certain intangible assets;





·
            Incur
                large and immediate write-offs, and restructuring and other related
                expenses; or





·
            Become
                subject to litigation.





Mergers
      and acquisitions of high-technology companies are inherently risky, and no
      assurance can be given that our previous or future acquisitions will be
      successful and will not materially adversely affect our business, operating
      results or financial condition. Failure to manage and successfully integrate
      acquisitions we make could force us to curtail or cease our business operations.





**If
      we were to lose the services of members of our management team, we may not
      be
      able to execute our business strategy**




Our
      future success depends in a large part upon the continued service of key members
      of our senior management team. In particular, our CEO Arne Dunhem is critical
      to
      the overall management of Ariel Way as well as the development and
      implementation of our business strategy. Although we do not have a formal
      employment agreement with Mr. Dunhem and other key personnel, we intend to
      design each of their employment agreements to provide incentives to our
      executives to fulfill the terms of their agreements with us, each executive
      or
      employee may terminate their employment with us at any time. We do not maintain
      any key-person life insurance policies. The loss of any of our management or
      key
      personnel could seriously harm our business.





**Our
      business depends upon the growth and maintenance of the global satellite,
      telecommunications and internet infrastructure**





Our
      success will depend on the continued growth and maintenance of the global
      satellite, telecommunications and Internet infrastructure. This includes
      maintenance of a reliable network backbone with the necessary speed, data
      capacity and security for providing reliable Internet services. Satellite,
      telecommunications and Internet infrastructures may be unable to support the
      demands placed on it if the number of users continues to increase, or if
      existing or future users access the Internet more often or increase their
      bandwidth requirements. In addition, viruses, worms and similar programs may
      harm the performance of the Internet. The Internet has experienced a variety
      of
      outages and other delays as a result of damage to portions of its
      infrastructure, and it could face outages and delays in the future. These
      outages and delays could reduce the level of telecommunications and Internet
      usage as well as our ability to provide our solutions. Any failure of the
      Internet infrastructure could force us to curtail or cease our business
      operations.




20
  **Item
        7. Financial Statements**




**ARIEL
      WAY, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      FINANCIAL STATEMENTS**


**FOR
      YEARS ENDED SEPTEMBER 30, 2007 AND**


**SEPTEMBER
      30, 2006**





**INDEX
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**





PAGE(S)Report
                of Independent Registered Public Accounting Firm
            
            F-1Consolidated
                Financial StatementsConsolidated
                Balance Sheet as of September 30, 2007
            
            F-2Consolidated
                Statements of Operations for the Years Ended
              September
                30, 2007 and September 30, 2006
            
            F-3Consolidated
                Statements of Stockholders’ Equity (Deficit) for the Years
                Ended
              September
                30, 2007 and September 30, 2006
            
            F-4Consolidated
                Statements of Cash Flows for the Years Ended
              September
                30, 2007 and September 30, 2006
            
            F-5Notes
                to Consolidated Financial Statements
            
            F-6-21




21





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of
      Directors and Stockholders


Ariel
      Way, Inc.


8000
      Towers Crescent Drive, Ste. 1220


Vienna,
      VA 22182





We
      have
      audited the accompanying consolidated balance sheet of Ariel Way, Inc., (the
      “Company”) as of September 30, 2007, and the related consolidated statements of
      operations, changes in stockholders’ equity (deficit), and cash flows for each
      of the years in the two-year period ended September 30, 2007. These consolidated
      financial statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audits provide
      a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Ariel Way, Inc., as of
      September 30, 2007, and the results of its operations and its cash flows for
      each of the years in the two-year period ended September 30, 2007 in conformity
      with accounting principles generally accepted in the United States of America.




The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As discussed in Note 10 to the
      consolidated financial statements, the Company did not generate sufficient
      cash
      flows from revenues during the year ended September 30, 2007, to fund its
      operations. Also at September 30, 2007, the Company had negative net working
      capital of $2,554,341. Unless the Company is successful in generating new
      sources of revenue, or obtaining debt or equity financing, or restructuring
      its
      business, the Company is likely to deplete its working capital during 2008.
      These matters raise substantial doubt about the Company’s ability to continue as
      a going concern. Management’s plan in regard to these matters is also described
      in Note 10. The consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.




/s/
      BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.


Bagell,
      Josephs, Levine & Company, L.L.C.


Marlton,
      NJ 08053





January
      14, 2008





F-1





**ARIEL
                WAY, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET****SEPTEMBER
                30, 2007**





**ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              -Accounts
                  receivable - net
              
              
              -Prepaid
                expenses and other current assets
              
              
              4,371**Total
                  current assets**
              
              
              4,371**PROPERTY
                  AND EQUIPMENT - NET**
              
              
              4,014**TOTAL
                  ASSETS**
              
              $
              8,385**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****(DEFICIT)****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              2,109,976Other
                  liabilities
              
              
              304,577Promissory
                  notes
              
              
              144,159**Total
                  current liabilities**
              
              
              2,558,712**Total
                  liabilities**
              
              
              2,558,712**STOCKHOLDERS'
                  EQUITY (DEFICIT)**Preferred
                  stock, $.001 par value; 5,000,000 shares authorized;149.25shares issued and outstandingSeries A Convertible Preferred stock,
                  $0.001 par value160 shares authorized, 149.25 issued and outstanding
              
              
              -Common
                  stock, $.001 par value; 595,000,000 shares authorized;134,298,825
                  shares issued and outstanding
              
              
              134,299Additional
                  paid-in capital
              
              
              2,482,908Accumulated
                  deficit
              
              
              (5,167,535
              )**Total
                  stockholders' equity (deficit)**
              
              
              (2,550,328
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
              
              $
              8,385





The
      accompanying notes are an integral part of these consolidated financial
      statements.





F-2





**ARIEL
      WAY, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED SEPTEMBER 30, 2007 AND SEPTEMBER 30, 2006**





**September 30,**
            
            **September 30,****2007**
            
            **2006****REVENUES**
            
            $
            922,221
            
            $
            2,459,012**COST
                OF SERVICES**
            
            
            721,086
            
            
            2,423,722**GROSS
                PROFIT (LOSS)**
            
            
            201,135
            
            
            35,290**OPERATING
                EXPENSES**Professional
                fees
            
            
            610,096
            
            
            957,689Selling
                and marketing
            
            
            15
            
            
            24,915General
                and administrative
            
            
            218,604
            
            
            1,949,584Depreciation,
                and amortization
            
            
            12,699
            
            
            92,504**Total
                Operating Expenses**
            
            
            841,415
            
            
            3,024,692**INCOME
                (LOSS) BEFORE OTHER EXPENSE**
            
            
            (640,280
            )
            
            (2,989,402
            )**OTHER
                INCOME (EXPENSE)**Interest
                expense, net
            
            
            (5,331
            )
            
            (80,010
            )Other
                Expense
            
            
            4,304
            
            
            -Other
                income
            
            
            1,240,797
            
            
            -**Total
                Other Income (Expense)**
            
            
            1,239,770
            
            
            (80,010
            )**INCOME
                (LOSS) BEFORE PROVISION FOR INCOME TAXES**
            
            
            599,491
            
            
            (3,069,411
            )Provision
                for income taxes
            
            
            -
            
            
            -**NET
                INCOME (LOSS) PER APPLICABLE TO COMMON SHARES**
            
            $
            599,491
            
            $
            (3,069,411
            )**NET
                INCOME (LOSS) PER BASIC AND DILUTED SHARES**
            
            $
            0.01
            
            $
            (0.08
            )**WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING**
            
            
            64,427,321
            
            
            38,383,682





The
      accompanying notes are an integral part of these consolidated financial
      statements.





F-3





**ARIEL
                WAY, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)****FOR
                THE YEARS ENDED SEPTEMBER 30, 2007 AND SEPTEMBER 30, 2006**





**Additional****Preferred
                  Stock**
              
              **Common
                  Stock**
              
              **Paid-In**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **(Deficit)**Balance,
                  October 1, 2005
              
              
              -
              
              
              -
              
              
              38,286,943
              
              $
              38,286
              
              $
              718,148
              
              $
              (2,697,615
              )
              $
              (1,941,181
              )Common
                  stock issued to MarketLink
              
              
              -
              
              
              -
              
              
              100,000
              
              
              100
              
              
              2,900
              
              
              -
              
              
              3,000Preferred
                  stock conversion
              
              
              160
              
              
              -
              
              
              -
              
              
              -
              
              
              1,604,967
              
              
              -
              
              
              1,604,967Issuance
                  of Warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              252,804
              
              
              -
              
              
              252,804Net
                  (loss) for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,069,411
              )
              
              (3,069,411
              )Balance,
                  September 30, 2006
              
              
              160
              
              
              -
              
              
              38,386,943
              
              $
              38,386
              
              $
              2,578,820
              
              $
              (5,767,026
              )
              $
              (3,149,821
              )Cancellation
                  and Conversion of preferred stock to common stock to Yorkville
                  Adivisors
              
              
              -10.75
              
              
              -
              
              
              95,911,882
              
              
              95,912
              
              
              (95,912
              )
              
              -
              
              
              -Net
                  income for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              599,491
              
              
              599,491Balance,
                  September 30, 2007
              
              
              149.25
              
              
              -
              
              
              134,298,825
              
              $
              134,298
              
              $
              2,482,908
              
              $
              (5,167,535
              )
              $
              (2,550,330
              )





The accompanying notes are an integral part of these consolidated financial
      statements.







F-4




**ARIEL
                WAY, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FOR
                THE YEARS ENDED SEPTEMBER 30, 2007 AND
                2006**





**September 30,**
              
              **September 30,****2007**
              
              **2006****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  income (loss)
              
              $
              599,491
              
              $
              (3,069,411
              )**Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities:**Depreciation,
                  and amortization
              
              
              12,699
              
              
              92,504Write
                  off of fixed assets
              
              
              24,249
              
              
              143,431Issuance
                  of warrants for compensation
              
              
              -
              
              
              252,805Minority
                  interest
              
              
              -
              
              
              88,264**Changes
                  in assets and liabilities:**(Increase)
                  in accounts receivable
              
              
              30,907
              
              
              284,248Decrease
                  (Increase) in prepaid expenses
              
              
              15,976
              
              
              112,921(Increase)
                    decrease in other liabilities
              
              
              (19,591
              )
              
              324,168Settlement
                  of Loral Skynet debt and other liabilities
              
              
              (776,382
              )
              
              1,603,847**Total
                  adjustments**
              
              
              (712,141
              )
              
              2,902,188**Net
                  cash provided by (used in) operating activities**
              
              
              (112,650
              )
              
              (167,223
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisition
                  of property and equipment
              
              
              -
              
              
              (2,247
              )**Net
                  cash (used in) investing activities**
              
              
              -
              
              
              (2,247
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**(Advances)
                  to related party
              
              
              -
              
              
              15,221Proceeds
                  from long-term debt, net
              
              
              66,599
              
              
              77,659**Net
                  cash provided by financing activities**
              
              
              66,599
              
              
              92,880**INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              (46,050
              )
              
              (76,590
              )**CASH
                  AND CASH EQUIVALENTS - BEGINNING OF YEAR**
              
              
              46,050
              
              
              122,640**CASH
                  AND CASH EQUIVALENTS - END OF YEAR**
              
              $
              -
              
              $
              46,050


**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH INFORMATION:**Cancellation
                  and Conversion of preferred stock to common stock to Yorkville
                  Adivisors
              
              
              -
              
              
              -Conversion
                  of notes payable and convertible debentures for preferred stock
              
              $
              -
              
              $
              1,500,000Preferred
                  stock issued for note interest
              
              $
              -
              
              $
              104,967


The
      accompanying notes are an integral part of these consolidated financial
      statements.





F-5





**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      1-** **ORGANIZATION
      AND BASIS OF PRESENTATION**





Ariel
      Way, Inc., a Florida corporation (“Ariel Way” or the “Company”), is a technology
      and services company for highly secure global communications, multimedia and
      digital signage solutions and technologies. The Company is focused on developing
      innovative and secure technologies, acquiring and growing profitable advanced
      technology companies and global communications service providers and creating
      strategic alliances with companies in complementary product lines and service
      industries.





F-6




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      2-** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries. All significant inter-company accounts and transactions have
      been
      eliminated in consolidation.





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid debt instruments and other short-term
      investments with an initial maturity of three months or less to be cash or
      cash
      equivalents.





The
      Company does not maintain cash and cash equivalents with a financial institution
      that exceeds the limit of insurability under the Federal Deposit Insurance
      Corporation.





**Revenue
      Recognition**





The
      Company records its transactions under the accrual method of accounting where
      income is recognized when the services are rendered.





**Fixed
      Assets**





Furniture
      and equipment are stated at cost. Depreciation is computed using the
      straight-line method over the estimated useful lives of the assets. The costs
      associated with normal maintenance, repair, and refurbishment of equipment
      are
      charged to expense as incurred. The capitalized cost of equipment under capital
      leases is amortized over the lesser of the lease term or the asset’s estimated
      useful life, and is included in depreciation and amortization expense in the
      consolidated statements of operations.





When
      assets are retired or otherwise disposed of, the costs and related accumulated
      depreciation are removed from the accounts, and any resulting gain or loss
      is
      recognized as income for the period. The cost of maintenance and repairs is
      charged to income as incurred; significant renewals and betterments are
      capitalized. Deductions are made for retirements resulting from renewals or
      betterments.





F-7




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**Long-Lived
      Assets**





The
      Company reviews its long-lived assets for impairment whenever events or changes
      in circumstances indicate that the carrying amount of an asset may not be
      recoverable.





**Impairment
      of Long-Lived Assets**





The
      Company periodically evaluates whether current facts or circumstances indicate
      that the carrying value of its depreciable assets to be held and used may not
      be
      recoverable. If such circumstances are determined to exist, an estimate of
      undiscounted future cash flows produced by the long-lived asset, or the
      appropriate grouping of assets, is compared to the carrying value to determine
      whether an impairment exists. If an asset is determined to be impaired, the
      loss
      is measured based on the difference between the asset’s fair value and its
      carrying value. An estimate of the asset’s fair value is based on quoted market
      prices in active markets, if available. If quoted market prices are not
      available, the estimate of fair value is based on various valuation techniques,
      including a discounted value of estimated future cash flows. The Company reports
      an asset to be disposed of at the lower of its carrying value or its estimated
      net realizable value.





F-8




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





The
      company has determined that the value of the remaining fixed assets in the
      UK
      and of dbsXmedia in the US are worthless and have been written off in the amount
      of $24,249 as of September 30, 2007.





**Property
      and Equipment**





Property
      and equipment are stated at cost and depreciated using straight-line and
      accelerated methods over the following estimated useful lives of the assets:





Computer
                equipment
            3
                -
                5 yearsAutomobile
            3
                -
                5 yearsEquipment
            5
                -
                7 years





Differences
      between the straight-line method of depreciation and the tax-accelerated method
      of depreciation are immaterial.





**Goodwill
      and Other Intangible Assets**





In
      June
      2001, the FASB issued Statement No. 142, “ *Goodwill
      and Other Intangible Asset* ”.
      This
      statement addresses financial accounting and reporting for acquired goodwill
      and
      other intangible assets and supersedes APB Opinion No. 17, Intangible Assets.
      It
      addresses how intangible assets that are acquired individually or with a group
      of other assets (but not those acquired in a business combination) should be
      accounted for in financial statements upon their acquisition. This Statement
      also addresses how goodwill and other intangible assets should be accounted
      for
      after they have been initially recognized in the financial statements.




F-9





**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      2-** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**Income
      Taxes**





The
      Company has adopted the provisions of Statement of Financial Accounting
      Standards (“SFAS”) No. 109, Accounting for Income Taxes. The Statement requires
      an asset and liability approach for financial accounting and reporting of income
      taxes, and the recognition of deferred tax assets and liabilities for the
      temporary differences between the financial reporting bases and tax bases of
      the
      Company’s assets and liabilities at enacted tax rates expected to be in effect
      when such amounts are realized or settled.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with the accounting principles
      generally accepted in the Untied States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenue and expenses
      during the reporting period. Actual results could differ from those estimates.





F-10





**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      2-** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**Recent
      Accounting Pronouncements**





In
      May
      2005, the FASB issued SFAS No. 154, *Accounting
      Changes and Error Corrections* ,
      which
      replaces APB Opinion No. 20, *Accounting
      Changes* ,
      and
      FASB Statement No.3, *Reporting
      Accounting Changes in Interim Financial Statements* .
      This
      Statement replaces APB Opinion No. 20, *Accounting
      Changes,* and
      FASB
      Statement No. 3, *Reporting
      Accounting Changes in Interim Financial Statements,* and
      changes the requirements for the accounting for and reporting of a change in
      accounting principle. This Statement applies to all voluntary changes in
      accounting principle. It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions. When a pronouncement includes specific
      transition provisions, those provisions should be followed. The Company does
      not
      anticipate that the implementation of this standard will have a material impact
      on its financial position, results of operations or cash flows.





**Fair
      Value of Financial Instruments**





The
      carrying amounts reported in the consolidated balance sheets for cash and cash
      equivalents, and accounts payable approximate fair value because of the
      immediate or short-term maturity of these financial instruments.





**Marketing
      and Advertising Costs**





The
      Company expenses the costs associated with marketing and advertising as
      incurred. Marketing, advertising and promotional expenses were approximately
      $15
      and $24,915 for the years ended September 30, 2007 and 2006, respectively.





**Accounts
      Receivable**





The
      Company conducts business and extends credit based on an evaluation of the
      customers’ financial condition, generally without requiring collateral. Exposure
      to losses on receivables is expected to vary by customer due to the financial
      condition of each customer. The Company monitors exposure to credit losses
      and
      maintains allowances for anticipated losses considered necessary under the
      circumstances.





Accounts
      receivable are generally due within 30 days and collateral is not required.
      The Company has made no allowance for doubtful accounts as of September 30,
      2007.





**Policy
      for Charging Bad Debt**





The
      allowance for doubtful accounts is our estimate of the credit losses related
      to
      impaired receivables at the date of the financial statements. This allowance
      is
      based on factors including the credit quality of our customers and general
      economic measures. Additions to the allowance for doubtful accounts are made
      by
      recording charges to the bad debt expense account on our statement of income.
      Accounts receivable balances are charged to the allowance for doubtful accounts
      when an account is deemed to be uncollectible, taking into consideration the
      financial condition of the borrower, and other factors. Recoveries on accounts
      receivable balances previously charged off as uncollectible are credited to
      the
      allowance for doubtful accounts.





F-11





**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      2-** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**Deferred
      Financing Fees**





On
      September 30, 2004, Old Ariel Way entered into a 2004 Standby Equity
      Distribution Agreement with Yorkville Advisors. This agreement was terminated
      on
      July 20, 2005 and the Company entered into a new 2005 Standby Equity
      Distribution Agreement with Yorkville Advisors on July 21, 2005. In connection
      with the 2004 Standby Equity Distribution Agreement, Yorkville Advisors received
      a commitment fee in the form of 1,980,000 shares of Old Ariel Way common stock
      that were converted into an aggregate of 3,318,876 shares of our common stock
      as
      a result of our acquisition of Old Ariel Way on February 2, 2005. These shares
      were issued as payment for financing fees to Yorkville Advisors for issuing
      the
      2004 Standby Equity Distribution Agreement and was valued at $1,128,600. The
      2005 Standby Equity Distribution Agreement runs for a period of 24 months.
      The
      2005 Standby Equity Distribution Agreement was terminated on February 28, 2006
      pursuant to an Investment Agreement by and between the Company and Yorkville
      Advisors and Montgomery Equity for the purchase of one hundred sixty (160)
      Series A Preferred Shares. The prior agreement was terminated and the financing
      fee was written off against Additional Paid-In Capital. All deferred financing
      fees were expensed in the year ended September 30, 2006.





**Stock-Based
      Compensation**





Prior
      to
      the January 1, 2006 adoption of the Financial Accounting Standards Board
      ("FASB") Statement No. 123(R), "Share-Based Payment" ("SFAS 123R"), the Company
      accounted for stock-based compensation using the intrinsic value method
      prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting
      for Stock Issued to Employees," and related interpretations. As permitted by
      SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
      stock-based compensation was included as a pro forma disclosure.





Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      SFAS 123R, using the modified-prospective transition method. Under this
      transition method, stock-based compensation expense is recognized in the
      consolidated financial statements for granted, modified, or settled stock
      options. Compensation expense recognized included the estimated expense for
      stock options granted on and subsequent to January 1, 2006, based on the grant
      date fair value estimated in accordance with the provisions of SFAS 123R, and
      the estimated expense for the portion vesting in the period for options granted
      prior to, but not vested as of January 1, 2006, based on the grant date fair
      value estimated in accordance with the original provisions of SFAS 123. Results
      for prior periods have not been restated, as provided for under the
      modified-prospective method.





The
      Company measures compensation expense for its non-employee stock-based
      compensation under the FASB Emerging Issues Task Force Issue No. 96-18,
“Accounting for Equity Instruments ** that
      are
      Issued to Other Than Employees for Acquiring, or in Conjunction with Selling
      Goods or Services”. The fair value of the option issued is used to measure the
      transaction, as this is more reliable than the fair value of the services
      received. The fair value is measured at the value of the Company’s common stock
      on the date that the commitment for performance by the counterparty has been
      reached or the counterparty’s performance is complete. The fair value of the
      equity instrument is charged directly to compensation expense and additional
      paid-in capital.





As
      of
      September 30, 2007 there were no stock options and warrants that were isssued
      or
      that vested and no compensation costs were recorded related to issuance of
      or
      vested stock options and warrants. The following table illustrates the effect
      on
      net income (loss) and earnings (loss) per share for the years ended September
      30, 2007 and 2006 if the Company had applied the fair value recognition
      provisions of SFAS 123 (revised 2004) to stock-based employee compensation:





**Year
                  ended September 30,****2007**
              
              **2006**Net
                  income (loss), as reported
              
              $
              599,491
              
              $
              (3,069,411
              )Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method for all awards
              
              
              -
              
              
              -Pro
                  forma net income (loss)
              
              $
              599,491
              
              $
              (3,069,411
              )Earnings
                  (loss) per share:As
                  reported:Basic
              
              $
              0.01
              
              $
              (0.08
              )





The
      fair
      value of each option or warrant grant on the date of grant is estimated using
      the Black-Scholes option-pricing model reflecting the following weighted average
      assumptions: Volatility, 90%; Expected Life of Warrants, 5 years; Risk Free
      Interest Rate, 3.9% to 4.27% ; and Dividend Yield, 0%. The weighted-average
      fair
      value of options granted during the year ended  September 30, 2006 was
      $0.15.





F-12




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      2-** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**Earnings
      (Loss) Per Share of Common Stock**





Historical
      net income (loss) per common share is computed using the weighted average number
      of common shares outstanding. Diluted earnings per share (EPS) include
      additional dilution from common stock equivalents, such as stock issuable
      pursuant to the exercise of stock options and warrants. Common stock equivalents
      were not included in the computation of diluted earnings per share when the
      Company reported a loss because to do so would be antidilutive for periods
      presented.





The
      following is a reconciliation of the computation for basic and diluted EPS:





**Year
                ended September 30,****2007**
            
            **2006**Net
                income (loss)
            
            $
            599,491
            
            $
            (3,069,411
            )Weighted-average
                common sharesOutstanding
                (Basic)
            
            
            64,427,321
            
            
            38,383,682Weighted-average
                common stockEquivalentsStock
                options
            
            
            -
            
            
            -Warrants
            
            
            -
            
            
            -Weighted-average
                common sharesOutstanding
                (Diluted)
            
            
            64,427,321
            
            
            38,383,682





Options
      and warrants outstanding to purchase stock were not included in the computation
      of diluted EPS for September 30, 2007 and 2006 because inclusion would have
      been
      antidilutive.





**Currency
      Risk and Foreign Currency Translation**





The
      Company transacts business in currencies other than the U.S. Dollar, primarily
      the British Sterling Pound and the Euro Dollar. All currency transactions are
      undertaken in the spot foreign exchange market and the Company does not use
      currency forward contracts, currency options, currency borrowings interest
      rate
      swaps or any other derivative hedging strategy at this point in time. Foreign
      currency translation losses were immaterial during fiscal years ended September
      30, 2007 and 2006.





**NOTE
      3-****EQUIPMENT**





Property
                and equipment at September 30, 2007 is as follows:**2007**Equipment
            
            $
            65,823Computers
            
            
            8,116Less:
                accumulated depreciation
            
            
            (69,925
            )Net
                equipment
            
            $
            4,014





Depreciation
      expense for the years ended September 30, 2007 and 2006 was $12,699 and $22,504,
      respectively. Amortization of financing fees for the years ended September
      30,
      2007 and 2006 was -0- and $70,000 respectively.





F-13




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      4-**  **DEBENTURE
      PAYABLE**





The
      Company on September 30, 2004, issued a secured debenture to Yorkville Advisors,
      whereas the Company would receive $500,000, with a promise to pay to Yorkville
      Advisors the principal sum of $500,000 together with interest on the unpaid
      principal of this debenture at the rate of 5% per year from the date of the
      debenture until paid. The secured debenture was due on September 29, 2006 and
      was secured by the Company’s stock. The $500,000 secured debenture was on
      February 28, 2006 converted pursuant to an Investment Agreement by and between
      the Company and Yorkville Advisors and Montgomery Equity to part of one hundred
      sixty (160) Series A Preferred Shares.





**NOTE
      5-**  **PROMISSORY
      NOTES**





The
      Company on February 2, 2005, borrowed $400,000 from Yorkville Advisors whereas
      the Company received the $400,000, with a promise to pay to Yorkville Advisors
      principal sum of $400,000 together with interest on the unpaid principal at
      the
      rate of 12% per annum and was due and payable on May 31, 2005 with an extension
      to February 28, 2006 and was secured by the Company’s stock. The $400,000 loan
      was on February 28, 2006 converted pursuant to an Investment Agreement by and
      between the Company and Yorkville Advisors and Montgomery Equity to part of
      one
      hundred sixty (160) Series A Preferred Shares.





The
      Company on July 28, 2005, borrowed $600,000 from Montgomery Equity whereas
      the
      Company received the $600,000, with a promise to pay to Montgomery Equity the
      principal sum of $600,000 together with interest on the unpaid principal at
      the
      rate of 12% per annum and was due and payable on February 28, 2006 and was
      secured by the Company’s stock. The $600,000 loan was on February 28, 2006
      converted pursuant to an Investment Agreement by and between the Company and
      Yorkville Advisors and Montgomery Equity to part of one hundred sixty (160)
      Series A Preferred Shares.





In
      May
      2005 the Company executed a promissory note in favor of a shareholder and
      employee in the amount of $70,000 with interest at 12% due on May 17, 2006.
      The
      loan was not paid when due and is in default. The Company has received a waiver
      from the shareholder regarding the default interest rate of the loan. The
      balance of the note as of September 30, 2007 is $54,312 consisting of principal
      and unpaid interest.





In
      September, 2005 the Company executed a promissory note in favor of the Company’s
      Chief Executive Officer in the amount of $42,450 with 5% interest due and
      payable monthly in arrears, commencing on September 26, 2006 and shall continue
      on the first day of each calendar month thereafter that any amounts under this
      Debenture are due and payable. Principal shall be due and payable in 6 equal
      installments of $7,041.74 each. The installments of principal shall be due
      and
      payable commencing on October 1, 2006 and subsequent installments shall be
      due
      and payable on the first day of each calendar month thereafter until the
      outstanding principal balance is paid in full. The loan was not paid when due
      and is in default. The balance of the note as of September 30, 2007 is $10,346
      consisting of principal and unpaid interest.





The
      Company on June 13, 2007, borrowed $57,000 from Yorkville Advisors whereas
      the
      Company promised to pay to Yorkville Advisors the principal sum of $57,000
      together with interest on the unpaid principal at the rate of 11% per annum
      and
      was due and payable on June 13, 2008 to
      pay in
      full the settlement payment to Loral Skynet pursuant to the Settlement Agreement
      and General Release dated June 1, 2007.





The
      Company on August 9, 2007, borrowed $15,000 from Yorkville Advisors whereas
      the
      Company promised to pay to Yorkville Advisors the principal sum of $15,000
      together with interest on the unpaid principal at the rate of 11% per annum
      and
      was due and payable on August 9, 2008 .




F-14




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      6-** **COMMITMENTS
      AND CONTINGENCIES**





**Commitments**





On
      September 30, 2004, Old Ariel Way entered into a $50 million 2004 Standby Equity
      Distribution Agreement with Yorkville Advisors. This agreement was terminated
      on
      July 20, 2005 and the Company entered into a new 2005 Standby Equity
      Distribution Agreement with Yorkville Advisors on July 21, 2005. The 2005
      Standby Equity Distribution Agreement provides, generally, that Cornell will
      purchase up to $50 million of common stock over a two-year period, with the
      time
      and amount of such purchases, if any, at the Company’s discretion. Cornell will
      purchase the shares at a 4% discount to the prevailing market price of the
      common stock. There are certain conditions applicable to the Company’s ability
      to draw down on the 2005 Standby Equity Distribution Agreement including the
      filing and effectiveness of a registration statement covering the resale of
      all
      shares of common stock that may be issued to Cornell under the  2005
      Standby Equity Distribution Agreement and the Company’s adherence with certain
      covenants. The registration statement has not yet become effective. In the
      year
      ended September 30, 2006, the Company has not drawn down any funds under the
      2005 Standby Equity Distribution Agreement from Yorkville Advisors. The 2005
      Standby Equity Distribution Agreement was terminated on February 28, 2006
      pursuant to an Investment Agreement by and between the Company and Yorkville
      Advisors and Montgomery Equity for the purchase of one hundred sixty (160)
      Series A Preferred Shares.





**Operating
      Lease**





The
      Company has maintained an office in McLean, Virginia, under a month to month
      lease obligation basis as a sub-lease. The Company is seeking an alternative
      location in the same building, since the lease for the sub-lessor has
      expired.





Total
      rent expense during the years ended September 30, 2007 and 2006 was
      approximately $51,325 and $414,468, respectively.





**Contingencies**





At
      September 30, 2007, the were no guarantees and indemnifications issued and
      outstanding.





F-15




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      7-** **STOCKHOLDERS’
      EQUITY (DEFICIT)**





**Preferred
      Stock**





The
      Company has 5,000,000 shares of preferred stock authorized, at $0.001 par value
      per share, of which 149.25 shares of Ariel Way Series A Convertible Preferred
      Stock (“Series A Preferred Shares”) were outstanding as of September 30, 2007.





The
      Company filed on March 6, 2006 with the Florida Secretary of State a Certificate
      of Designation providing the terms and conditions of the authorization of 165
      shares of Ariel Way Series A Convertible Preferred Stock (“Series A Preferred
      Shares”).





The
      Holders of Series A Preferred Shares shall be entitled to receive dividends
      or
      distributions on a pro rata basis according to their holdings of shares of
      Series A Preferred Shares when and if declared by the Board of Directors of
      the
      Company in the amount of five (5.0%) percent per year. Dividends shall be paid
      in cash. Dividends shall be cumulative. No cash dividends or distributions
      shall
      be declared or paid or set apart for payment on the Common Stock in any calendar
      year unless cash dividends or distributions on the Series A Preferred Stock
      for
      such calendar year are likewise declared and paid or set apart for payment.
      No
      declared and unpaid dividends shall bear or accrue interest.





Upon
      any
      liquidation, dissolution, or winding up of the Company, whether voluntary or
      involuntary (collectively, a “Liquidation”), before any distribution or payment
      shall be made to any of the holders of Common Stock or any series of Preferred
      Shares, the holders of Series A Preferred Shares shall be entitled to receive
      out of the assets of the Company, whether such assets are capital, surplus
      or
      earnings, an amount equal to $10,031 per share of Series A Preferred Shares
      (the
“Liquidation Amount”) plus all declared and unpaid dividends thereon, for each
      share of Series A Preferred Shares held by them.





If,
      upon
      any Liquidation, the assets of the Company shall be insufficient to pay the
      Liquidation Amount, together with declared and unpaid dividends thereon, in
      full
      to all holders of Series A Preferred Shares, then the entire net assets of
      the
      Corporation shall be distributed among the holders of the Series A Preferred
      Shares, ratably in proportion to the full amounts to which they would otherwise
      be respectively entitled and such distributions may be made in cash or in
      property taken at its fair value (as determined in good faith by the Company’s
      Board of Directors), or both, at the election of the Company’s Board of
      Directors.





The
      Series A Preferred Shares shall have registration rights pursuant to a certain
      Investor’s Registration Rights Agreement dated the February 28, 2006.





In
      lieu
      of payment on the Maturity Date as outlined herein the Holders of Series A
      Preferred Shares shall have sole right and in their discretion to elect
      conversion pursuant to the conversion rights, at any time and from time to
      time
      at their sole discretion, as follow (the "Conversion Rights"):





(a)
        Each share of Series A Preferred Shares shall be convertible, at the
      option of the holder thereof, at any time after the date of issuance of such
      share, at the office of the Company’s transfer agent, pursuant to the
      Irrevocable Transfer Agent Instructions dated the date hereof, for the Series
      A
      Preferred Stock into such number of fully paid and non-assessable shares of
      Common Stock equal to the quotient of the Liquidation Amount divided by the
      Conversion Price. The Conversion Price shall be equal to, the lesser of at
      the
      option of the Buyers either: i) Ten Cents ($0.10) or ii) ninety five percent
      (95%) of the lowest volume weighted average price of the Common Stock for the
      twenty (20) trading days immediately preceding the date of conversion, as quoted
      Bloomberg LP.





(b)
        At the Option of the Holders, if there are outstanding Series A Preferred
      Shares on February 28, 2008, each share of Series A Preferred Stock shall
      convert into shares of Common Stock at the Conversion Price then in effect
      on
      February 28, 2008.





(c)
        Each share of Series A Preferred Shares automatically shall convert into
      shares of Common Stock at the Conversion Price then in effect immediately upon
      the consummation of the occurrence of a stock acquisition, merger, consolidation
      or reorganization of the Company into or with another entity through one or
      a
      series of related transactions, or the sale, transfer or lease (but not
      including a transfer by pledge or mortgage to a bona fide lender) of all or
      substantially all of the assets of the Company.





F-16




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





The
      Conversion Price of the Series A Preferred Shares as described above shall
      be
      adjusted from time to time pursuant to the terms and conditions of the Ariel
      Way
      Series A Convertible Preferred Stock. No holder of the shares of Series A
      Preferred Shares shall be entitled to convert the Series A Preferred Shares
      to
      the extent, but only to the extent, that such conversion would, upon giving
      effect to such conversion, cause the aggregate number of shares of Common Stock
      beneficially owned by such holder to exceed 4.99% of the outstanding shares
      of
      Common Stock following such conversion (which provision may be waived by such
      Holder by written notice from such holder to the Company, which notice shall
      be
      effective sixty one (61) days after the date of such notice).





On
      February 28, 2006, the Company pursuant to an Investment Agreement by and
      between Ariel Way, Inc. and Yorkville Advisors and Montgomery Equity
      (collectively referred to as the “Buyers”), Ariel Way sold and issued to the
      Buyers one hundred sixty (160) Series A Preferred Shares for a consideration
      consisting solely of the surrender of certain Prior Securities.





During
      the period December 27, 2006 through September 30, 2007, the Company received
      a
      total of 37 conversion notices from Yorkville Advisors requesting the conversion
      of an aggregate 10.75 Series A Convertible Preferred Shares, corresponding
      to an
      aggregate conversion amount of $107,832, representing the conversion under
      the
      terms of the Certificate of Designation dated February 28, 2006, into an
      aggregate of 95,911,882 shares of its common stock at an average conversion
      price of $0.00112 per share.





The
      following table sets forth a summary of all conversion requests by Yorkville
      Advisors for the period December 27, 2006 through September 30, 2007:




**Conversionrequest
                  date**
              
              **No.
                  ofShares**
              
              **ConversionShare
                  Price**
              
              **ConvertedAmount**
              
              **Amount
                  ofSeries AConverted**12/27/2006
              
              
              1,649,842
              
              $
              0.00152
              
              $
              2,507.76
              
              
              0.251/23/2007
              
              
              975,782
              
              $
              0.00257
              
              $
              2,507.76
              
              
              0.251/29/2007
              
              
              1,759,832
              
              $
              0.00285
              
              $
              5,015.52
              
              
              0.502/7/2007
              
              
              1,053,681
              
              $
              0.00238
              
              $
              2,507.76
              
              
              0.252/12/2007
              
              
              1,053,681
              
              $
              0.00238
              
              $
              2,507.76
              
              
              0.252/20/2007
              
              
              1,145,096
              
              $
              0.00219
              
              $
              2,507.76
              
              
              0.252/23/2007
              
              
              1,319,874
              
              $
              0.00190
              
              $
              2,507.76
              
              
              0.253/8/2007
              
              
              1,319,874
              
              $
              0.00190
              
              $
              2,507.76
              
              
              0.253/14/2007
              
              
              1,475,153
              
              $
              0.00170
              
              $
              2,507.76
              
              
              0.253/26/2007
              
              
              1,475,153
              
              $
              0.00170
              
              $
              2,507.76
              
              
              0.253/30/2007
              
              
              1,791,257
              
              $
              0.00140
              
              $
              2,507.76
              
              
              0.254/4/2007
              
              
              1,929,046
              
              $
              0.00130
              
              $
              2,507.76
              
              
              0.254/9/2007
              
              
              1,929,046
              
              $
              0.00130
              
              $
              2,507.76
              
              
              0.254/12/2007
              
              
              1,929,046
              
              $
              0.00130
              
              $
              2,507.76
              
              
              0.254/27/2007
              
              
              1,929,046
              
              $
              0.00130
              
              $
              2,507.76
              
              
              0.255/4/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.255/9/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.255/14/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.255/17/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.255/25/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.256/6/2007
              
              
              2,639,747
              
              $
              0.00095
              
              $
              2,507.76
              
              
              0.256/11/2007
              
              
              3,299,684
              
              $
              0.00076
              
              $
              2,507.76
              
              
              0.257/10/2007
              
              
              2,916,000
              
              $
              0.00086
              
              $
              2,507.76
              
              
              0.257/17/2007
              
              
              2,916,000
              
              $
              0.00086
              
              $
              2,507.76
              
              
              0.257/19/2007
              
              
              2,639,747
              
              $
              0.00095
              
              $
              2,507.76
              
              
              0.257/23/2007
              
              
              2,639,747
              
              $
              0.00095
              
              $
              2,507.76
              
              
              0.257/24/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.258/9/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.258/14/2007
              
              
              4,559,200
              
              $
              0.00110
              
              $
              5,015.12
              
              
              0.508/21/2007
              
              
              2,507,760
              
              $
              0.00100
              
              $
              2,507.76
              
              
              0.258/22/2007
              
              
              5,015,520
              
              $
              0.00100
              
              $
              5,015.12
              
              
              0.508/23/2007
              
              
              5,015,520
              
              $
              0.00100
              
              $
              5,015.12
              
              
              0.508/24/2007
              
              
              5,015,520
              
              $
              0.00100
              
              $
              5,015.12
              
              
              0.508/27/2007
              
              
              5,015,520
              
              $
              0.00100
              
              $
              5,015.12
              
              
              0.509/5/2007
              
              
              3,299,684
              
              $
              0.00076
              
              $
              2,507.76
              
              
              0.259/14/2007
              
              
              3,742,925
              
              $
              0.00067
              
              $
              2,507.76
              
              
              0.259/20/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.25




**Common
      Stock**





As
      of
      September 30, 2007, the Company had 595,000,000 shares of common stock
      authorized at $0.001 par value per share, and 134,298,825 issued and
      outstanding.





The
      following describes the common stock transactions for the fiscal year ended
      September 30, 2007:





During
      the period December 27, 2006 through September 30, 2007, the Company received
      a
      total of 37 conversion notices from Yorkville Advisors requesting the conversion
      of an aggregate 10.75 Series A Convertible Preferred Shares, corresponding
      to an
      aggregate conversion amount of $107,832, representing the conversion under
      the
      terms of the Certificate of Designation dated February 28, 2006, into an
      aggregate of 95,911,882 shares of its common stock at an average conversion
      price of $0.00112 per share. The Company believes the issuance of the stock
      to
      be exempt from registration under Section 4(2) of the Securities Act of 1933.





F-17





**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      8-** **LITIGATION/
      LEGAL PROCEEDINGS**





None
      known to the Management.





**NOTE
      9-** **PROVISION
      FOR INCOME TAXES** ****





Income
      taxes are provided for the tax effects of transactions reported in the financial
      statements and consist of taxes currently due. Deferred taxes related to
      differences between the basis of assets and liabilities for financial and income
      tax reporting will either be taxable or deductible when the assets or
      liabilities are recovered or settled. The difference between the basis of assets
      and liabilities for financial and income tax reporting are not material
      therefore, the provision for income taxes from operations consist of income
      taxes currently payable.





There
      were no provisions for income taxes for the period ended September 30, 2007.
      Due
      to substantial financial constraints, the Company has not completed the filing
      of its corporate income tax returns for the years ended September 30, 2007,
      2006, 2005 and 2004. The Company intends to complete the filing of these returns
      upon receipt of funding. Management believes there is no tax liability due
      to
      the losses incurred for the period of non-filing.





At
      September 30, 2007, deferred tax assets approximated the following:





Deferred
                tax assets
            
            $
            2,067,014Valuation
                for deferred asset
            
            
            (2,067,014
            )Net
                deferred tax assets
            
            $
            -





At
      September 30, 2007, the Company had accumulated deficits of ($5,167,535),
      available to offset future taxable income through 2026. The Company established
      valuation allowances equal to the full amount of the deferred tax assets due
      to
      the uncertainty of the utilization of the operating losses in the future period.





**NOTE
      10-** **GOING
      CONCERN** ****





The
      Company and its Subsidiaries’ consolidated financial statements have been
      prepared on the basis that it will continue as a going concern, which
      contemplates the realization of asset values and the satisfaction of liabilities
      in the normal course of business. Certain conditions indicate that the Company
      may be unable to continue as a going concern:





-
      The
      Company reported net income of $599,491 and a net loss of ($3,069,411) for
      the
      years ended September 30, 2007 and 2006, respectively.





-
      Net
      cash used by the Company's operating activities was $115,553 and $167,223 for
      the years ended September 30, 2007 and 2006, respectively.





-
      At
      September 30, 2007, stockholder's deficit was ($2,550,328) compared with a
      stockholder's deficit of ($3,149,820) at September 30, 2006 and included an
      accumulated deficit at September 30, 2007 of ($5,167,535) compared with an
      accumulated deficit of ($5,767,026) at September 30, 2006.





-
      At
      September 30, 2007 there was working capital deficit of ($2,554,341) compared
      with a working capital deficit of ($3,190,782) at September 30, 2006. This
      is an
      improvement for year 2007 compared with year 2006, however, the Company is
      still
      unable to satisfy its current debt obligations and is in default on its notes
      payable. The intends to actively attempt to improve the deficit.





F-18




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





-
      The
      Company had a gross profit of $201,135 and $35,290 for the years ended September
      30, 2007 and 2006, respectively.





Unless
      the Company can acquire new profitable operation that can provide adequate
      cash
      flow, it will require additional funding to cover expected negative cash flows
      until end fiscal year 2008.





The
      Company's ability to continue as a going concern is dependent upon acquiring
      new
      profitable operations with revenues and gross profit margins to cover cost
      of services and other operating expenses, generating positive cash flows
      from operations, obtaining debt or equity capital to fund expected negative
      operating cash flows and returning the Company to profitable operations. In
      this
      connection, the Company has adopted the following operating and management
      plans
      to in order to provide positive cash flow from operations:





-
      Raise
      additional capital.





-
      Expand
      operation and revenue base through an aggressive acquisition program of
      profitable companies with operation and services with synergy to its current
      operation.




-
      Continue to develop and expand its digital signage business through targeted
      marketing initiatives in both the US and Europe.





-
      Continue overall cost and expense control and adoption of efficient service
      and
      equipment roll-out approaches resulting in adequate gross profits and reduced
      operating expenses.





F-19





**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





-
      Develop
      strategic partnerships with major companies in the area of secure wireless
      communications supporting the Company’s strategy. This strategic initiative is
      believed to provide supporting revenues and result in reduced operating
      expenses.





-
      Develop
      strategic partnerships with major companies providing content and advertising
      services for the Company’s digital signage operation roll-out.





-
      Negotiate with creditors including Yorkville Advisors in order to convert
      current debt to equity to significantly improve the Company’s working capital
      deficit.





Although
      the results of these actions cannot be predicted with certainty, management
      believes that if the Company can acquire new profitable operations with adequate
      revenues and to continue to increase its revenues and gross profit margins,
      reduce expenses, and can obtain additional debt or equity financing to fund
      any
      negative cash flow from operations in 2008, the Company has the ability
      ultimately to return to profitability.





F-20




**ARIEL
      WAY, INC., AND SUBSIDIARIES**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007 AND 2006**





**NOTE
      11-****SUBSEQUENT
      EVENTS**





During
      the period October 1, 2007 through January 11, 2008, the Company received a
      total of 18 conversion notices from Yorkville Advisors requesting the conversion
      of an aggregate 6.25 Series A Convertible Preferred Shares, corresponding to
      an
      aggregate conversion amount of $62,694, representing the conversion under the
      terms of the Certificate of Designation dated February 28, 2006, into an
      aggregate of 110,814,396 shares of its common stock at an average conversion
      price of $0.00057 per share.





The
      following table sets forth a summary of all conversion requests by Yorkville
      Advisors for the period October 1, 2007 through January 11, 2008:




**Conversionrequest
                  date**
              
              **No.
                  ofShares**
              
              **ConversionShare
                  Price**
              
              **ConvertedAmount**
              
              **Amount
                  ofSeries AConverted**10/23/2007
              
              
              5,224,500
              
              $
              0.00048
              
              $
              2,507.76
              
              
              0.2510/24/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2510/25/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2510/26/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2510/29/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2510/31/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2511/2/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2511/6/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2511/9/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2511/13/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2511/16/2007
              
              
              4,399,579
              
              $
              0.00057
              
              $
              2,507.76
              
              
              0.2511/16/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.5011/16/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.5011/16/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.5011/16/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.5011/19/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.5011/19/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.5011/20/2007
              
              
              8,799,158
              
              $
              0.00057
              
              $
              5,015.52
              
              
              0.50




On
      December 27, 2007, the Company issued pursuant to a Board of Director’s
      resolution on November 21, 2007, an aggregate 349,886,779 shares
      of restricted common stock to several parties in exchange for canceling an
      aggregate of $593,839.34 in debt
      and liabilities. The aggregate per share conversion price was $0.0016 which
      was
      100% higher than the prevailing closing price at $0.0008 as of November 20,
      2007, the day prior to the Board of Director’s resolution on November 21, 2007.
      The debt and liabilities canceled and converted to shares of restricted common
      stock included outstanding short term loans in default and outstanding since
      2005 and compensation for services outstanding for the period 2004 through
      2007.





The
      table
      below sets forth a summary of the debt and liability canceled and converted
      to
      shares of restricted common stock pursuant to the Board of Director’s resolution
      on November 21, 2007:




**Name**
              
              **Debt and LiabilityCanceled and Converted**
              
              **Amount**
              
              **Conversion perShare Price**
              
              **Shares Issued**Arne
                  and Eva Dunhem
              
              
              Repayment
                  of short term loans in default
                Compensation
                  for services 2004 - 2007
              
              $
              470,839.34
              
              $
              0.0016
              
              
              273,011,779Magdy
                  Battikha
              
              
              Compensation
                  for services 2006 - 2007
              
              $
              68,000.00
              
              $
              0.0016
              
              
              42,500,000Leif
                  T. Carlsson
              
              
              Compensation
                  for services 2006 - 2007
              
              $
              20,000.00
              
              $
              0.0016
              
              
              12,500,000Chivas
                  Capital, Inc.
              
              
              Compensation
                  for services 2007
              
              $
              15,000.00
              
              $
              0.0016
              
              
              9,375,000Rainer
                  Gonzalez
              
              
              Compensation
                  for services 2007
              
              $
              20,000.00
              
              $
              0.0016
              
              
              12,500,000Total
              
              
              
              
              $
              593,839.34
              
              $
              0.0016
              
              
              349,886,779




Except
      as
      otherwise noted, the securities described in this Item were issued pursuant to
      the exemption from registration provided by Section 4(2) of the Securities
      Act
      of 1933 and/or Regulation D promulgated under the Securities Act. Each such
      issuance was made pursuant to individual contracts that are discrete from one
      another and are made only with persons who were sophisticated in such
      transactions and who had knowledge of and access to sufficient information
      about
      our Company to make an informed investment decision. Among this information
      was
      the fact that the securities were restricted securities.




F-21





**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





Not
      applicable.





**Item
      8A. Controls and Procedures**





Evaluation
      of Disclosure Controls and Procedures:





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to our management, including our Chief Executive Officer and Chief Accounting
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure. In designing and evaluating the disclosure controls and procedures,
      they are designed to provide reasonable assurance of achieving the objectives.





As
      of
      September 30, 2007 we completed an evaluation, under the supervision and with
      the participation of our management, including our Chief Executive Officer
      and
      Chief Accounting Officer, of the effectiveness of the design and operation
      of
      our disclosure controls and procedures. Based on the foregoing, our Chief
      Executive Officer and Chief Financial Officer concluded that the Company’s
      disclosure controls and procedures had not been effective at the reasonable
      assurance level.




This material weakness consisted
      primarily of inadequate staffing and supervision that could lead to the untimely
      identification and resolution of accounting and disclosure matters and failure
      to perform timely and effective reviews. However, the size of the Company
      prevents us from being able to employ sufficient resources to enable us to
      have
      adequate segregation of duties within its internal control system. Management
      is
      required to apply its judgment in evaluating the cost-benefit relationship
      of
      possible controls and procedures. Management intends to allocate additional
      resources in addition to reassigning tasks and duties within the Company such
      that the identified deficiencies will be mitigated with priority.





**Item
      8B. Other Information**





Not
      applicable.





22




**PART
      III**





**Item
      9. Directors, Executive Officers****,
      Promoters, Control Persons and Corporate Governance; Compliance With Section
      16(a) of the Exchange Act**





**MANAGEMENT**





Our
      directors and executive officers and their ages as of January 11, 2008 are
      as
      follows:





**Name**
            
            **Age**
            
            **Position**Arne
                Dunhem
            
            57
            
            President,
                Chief Executive Officer and Chairman of the BoardLeif
                T. Carlsson
            
            65
            
            Director





The
      following is a description of the background of our directors and executive
      officers.





**Background
      Information**





***Arne
      Dunhem.*** Mr.
      Arne
      Dunhem, has served as our Chairman, President and Chief Executive Officer since
      February 2, 2005 and was the Chairman, President and Chief Executive Officer
      of
      Old Ariel Way from the founding of Old Ariel Way on February 10, 2004. Mr.
      Dunhem has over thirty four years of executive management and engineering
      experience with large complex multinational corporations, large international
      organizations as well as early stage technology companies. He has over the
      years
      been instrumental in arranging more than $300 million in investor and vendor
      financing commitments and is knowledgeable in international business, finance,
      management, information systems, network operations and engineering for both
      publicly traded and privately held corporations. Between February 2004 and
      February 2, 2005, Mr. Dunhem was the Chairman, President and CEO of Old Ariel
      Way, a company focused on the build-up of a publicly traded highly secure global
      communications solutions and technology company headquartered in the
      metropolitan Washington, D.C. area, USA. Between December 2003 and February
      2004, Mr. Dunhem was a consultant providing executive management and merger
      and
      acquisition support services. Between January 2002 and November 2003, Mr. Dunhem
      was the Chairman, President and CEO of MobilePro Corp., a publicly traded
      technology company in Rockville, MD. He was instrumental in merging the private
      Neoreach, Inc., a development stage company developing third generation wireless
      modem and semiconductor systems, with the publicly traded MobilePro Corp.
      Between July 2001 and January 2002 Mr. Dunhem was working as a strategic
      business consultant and was in January 2002 hired by Neoreach, Inc. as its
      President & CEO. Mr. Dunhem was between November 1998 and June 2001 the
      Chairman & CEO of erbia, Inc., a U.S. domestic long-distance communications
      company which he led from its start-up phase through the sale of the operation
      to a U.S. publicly traded company. Prior to 2000, he was working between January
      1998 and October 1998 as a strategic business consultant for various private
      companies. Between July 1993 and September 1997 he was the Chairman of Tele8
      Kontakt AB, a Swedish nationwide start-up cell-phone operator and also between
      January 1993 and December 1997 the Chairman of Nordiska Tele8 AB of Sweden,
      an
      international long distance and local telephone services company. He took the
      company from its start-up phase through full operation and eventually the sale
      of both companies. Between May 1991 and January 1993 Mr. Dunhem was the
      President for CruiseComm, a company developing high-speed satellite
      communications for voice and data for large passenger cruise ships sailing
      in
      the Baltic Sea, the Mediterranean and in the Caribbean. Between September 1989
      and April 1991 Mr. Dunhem was the Executive Vice President, Engineering &
Operations of Comvik Skyport AB, a Swedish telecommunications company providing
      satellite and data communications services, now the European Tele2
      telecommunications operator. During the period September 1978 through July
      1989
      Mr. Dunhem was with INTELSAT, Washington, D.C., an international satellite
      communications organization in a capacity growing from staff engineer to program
      manager where he had responsibilities for building-up some of the largest
      command, control and monitoring networks. He previously was with the Saab-Scania
      Aerospace Corporation and the Swedish Telecom. Mr. Dunhem earned his M.S. in
      1974 in space telecommunications from Chalmers University of Technology, Sweden.
      Mr. Dunhem has been the Chairman of the Swedish Lutheran Church of Washington,
      D.C., is active with several community organizations, is the founder of a
      Swedish-American Community Center in Washington, D.C. and has over many years
      been active with the Boy Scouts of America. Mr. Dunhem is a U.S. citizen and
      has
      lived in the Washington, D. C. area since 1978.





23





***Leif
      T. Carlsson***.
      Mr. Carlsson, who since February 2, 2005 has served as an independent
      Director of our Board and has served on Old Ariel Way’s Board since October 11,
      2004, is a senior European executive who since 2003 has been working with Arrow
      Capital, a European Venture Capital firm based in Stockholm, Sweden. Mr.
      Carlsson has over the years been a President & CEO of a number of European
      corporations including during 2001 through 2002 with Scanfood AB, currently
      part
      of Swedish Meats AB. Prior to 2000, Mr. Carlsson worked during 1992 through
      2000
      with Scandic Hotels Europe AB, currently part of the global Hilton Hotel-Group;
      during 1990 through 1992 with FFV Aerotech AB and FFV Aerotech Ltd, currently
      part of the Saab Group and FL Schmidt; during 1988 through 1990 with the
      Kinnevik AB Group establishing Comvik Skyport/TELE2; and during 1974 through
      1988 with the Nobel Industries AB, now AkzoNobel for several of their
      corporations. Comvik Skyport/TELE2 became in 1990 the second only private
      telecommunications company in Europe while telecommunications services in Europe
      were still dominated by government monopolies. Mr. Carlsson has been the
      executive****for
      a
      number of companies in several different countries including the U.S., the
      U.K.,
      Sweden and in Asia and has also been on several different Board of Directors
      including IAHI, International Association of Holiday Inns, Inc., and Tele8,
      an
      American telecommunications operator active in Europe. Mr. Carlsson has through
      his corporate career been active on a global basis and has experience in the
      European corporate world. With his base out of Europe and with his European
      experience, Mr. Carlsson will assist us if we proceed with the corporate
      strategy to establish European and other overseas operations. Mr. Carlsson
      earned his M.S. degree in 1969 in Civil Engineering from Chalmers University
      of
      Technology, Sweden and has completed several graduate studies in corporate
      finance, national economy and legal studies from the University of Uppsala,
      Sweden. Mr. Carlsson is a Swedish citizen and lives in Stockholm, Sweden.





**Committees
      of the Board**





The
      Board
      has four (4) standing committees: the Audit & Finance Committee, the
      Compensation Committee, the Governance Committee, and the Financing and M&A
      Committee. The functions of each of these committees and their members are
      specified below. The Board has determined that each director who serves on
      these
      committees, except for the Financing and M&A Committee, is “independent” as
      defined in Nasdaq Rule 4200(a)(15). All Committees of the Board have current
      vacancies and it is the intent of the Board to recruit at earliest opportunity
      additional directors of the Board.





The
      members of the committees are identified in the following table.





**Director**
            
            **Audit
                and Finance**
              **Committee**
            
            **Compensation**
              **Committee**
            
            **Governance**
              **Committee**
            
            **Financing
                and M&A Committee**Leif
                T. Carlsson
            
            Chair
            
            Chair
            
            Chair
            
            YesArne
                Dunhem
            
            No
            
            No
            
            No
            
            Chair





The
      Audit
      and Finance Committee is currently comprised of Mr. Carlsson and has vacancies.
      The Board has determined that one or more other members of the Audit and Finance
      Committee need to meet the definition of “audit committee financial expert” as
      defined by SEC regulations. The Audit and Finance Committee assists the Board
      in
      its oversight of our financial accounting, reporting and controls by meeting
      with members of management and our independent auditors. The committee has
      the
      responsibility to review our annual audited financial statements, and meets
      with
      management and the independent auditors at the end of each quarter to review
      the
      quarterly financial results. In addition, the committee considers and approves
      the employment of, and approves the fee arrangements with, independent auditors
      for audit and other functions. The Audit and Finance Committee reviews our
      accounting policies and internal controls. The Audit and Finance Committee
      has a
      written charter which was adopted on February 2, 2005.





The
      Compensation Committee is currently comprised of Mr. Carlsson and has vacancies.
      The Compensation Committee recommends cash-based and stock compensation for
      executive officers of Ariel Way, administers the Company’s stock options and
      makes recommendations to the Board regarding such matters. The Compensation
      Committee has a written charter which was adopted on February 2, 2005.





The
      Governance Committee is currently comprised of Mr. Carlsson and has vacancies.
      The Governance Committee is entrusted with responsibility for consideration
      and
      review of corporate governance matters in addition to its responsibilities
      for
      nominating candidates for membership to the Board. The Nominating and Governance
      Committee has a written charter which was adopted on February 2, 2005.





The
      Financing and M&A Committee is currently comprised of Messrs. Carlsson and
      Dunhem and has vacancies. The Financing and M&A Committee is entrusted with
      responsibility to assist the Board in carrying out its oversight
      responsibilities relating to certain financial matters affecting the Company.
      The Committee will have the authority to take all actions on behalf of the
      Board
      as the Committee or its Chairperson may from time to time determine to be
      consistent with its purpose and the Charter for the Committee. The Financing
      and
      M&A Committee has a written charter which was adopted on February 2, 2005.





**Code
      of Ethics, Code of Business Conduct**





The
      Company adopted on February
      2, 2005 a
      revised
      Code of Ethics and Code of Business Conduct that apply to our principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or persons performing similar functions. The current Code of Ethics
      and Code of Business Conduct are filed as Exhibits 14.2 through 14.4. These
      codes are also available on the Company’s web-site www.arielway.com .





The
      Company’s prior Code of Ethics with Business Ethics and Conduct Policy was
      disclosed as part of the Company’s Form 10-KSB filing December 31,
      2003.




24


**Section
      16(a) Beneficial Ownership Reporting Compliance**




Based
      solely upon a review of the copies of Forms 3 and 4 and 5 thereto furnished
      to
      the Company as of September 30, 2007, or written representations that no annual
      Form 5 reports were required, the Company believes that all filing requirements
      under Section 16(a) of the Securities Act of 1934, as amended (the "Exchange
      Act") applicable to its directors, officers and any persons holding ten percent
      (10%) or more of the Company's Common Stock were made with respect to the
      Company's fiscal year ended September 30, 2007, except Arne Dunhem who failed
      to
      file a Form 3 concerning his shares of our common stock that he acquired in
      one
      transaction on February 2, 2005 as a result of our acquisition of Ariel
      Way, Inc. (“Old Ariel Way”) in a share exchange transaction and Leif T. Carlsson who
      failed to file a Form 3 concerning his options of our common stock that he
      acquired in one transaction on February 2, 2005 as a result of the
      same share
      exchange transaction.





**Item
      10. Executive Compensation**





**Executive
      Compensation**





***Summary
      Compensation Table*** .
      The
      following table sets forth the annual and long-term compensation for services
      in
      all capacities for the fiscal years ended September 30, 2007 and 2006, paid
      to
      our most highly compensated executive officers. No officer earned over $100,000
      in such fiscal year. Mr. Arne Dunhem became the Chief Executive Officer,
      President and Chairman on February 2, 2005. We had no written employment
      agreement with Mr. Dunhem during the fiscal year ended September 30, 2007.
      Ms.
      Voula Kanellias was our Chief Financial Officer from February 2, 2005 through
      April, 2006.





**Summary
      Compensation Table Year 2007 and 2006**


**Name
                  and principal**
                **position****(1)**
              
              **Year**
              
              **Salary
                  ($)**
              
              **Bonus
                  ($)**
              
              **Stock
                  awards ($)**
              
              **Option
                  awards****(2)**
                **($)**
              
              **Nonequity
                  incentive plan compensation($)**
              
              **Nonqualified
                  deferred compensation earnings**
                **($)**
              
              **All
                  other compensation ($)**
              
              **Total
                  ($)**Arne
                  Dunhem
              
              
              2007
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Chairman,
                  CEO, President
              
              
              2006
              
              
              0
              
              
              0
              
              
              0
              
              
              31,463
              
              
              0
              
              
              0
              
              
              55,000
              
              
              86,463Voula
                  Kanellias
              
              
              2007
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0(From
                  February 2, 2005 through April, 2006) Chief Financial Officer
              
              
              2006
              
              
              0
              
              
              0
              
              
              0
              
              
              17,994
              
              
              0
              
              
              0
              
              
              30,000
              
              
              47,994




(1)
            Mr.
                Dunhem and Ms. Kanellias each joined Ariel Way during the Fiscal
                Year
                ended September 30, 2005. No formal employment agreements have yet
                been
                provided besides a right to be granted warrants as described below.
                As of
                April 2006 Ms. Kanellias is no longer with the Company.(2)
            The
                amounts listed represent the fair market value of the warrant of
                shares of
                common stock on the date of grant.





25




**Outstanding
      Equity Awards at Fiscal Year-End 2007**


**Option
                  awards**
              
              **Stock
                  awards****Name**
              
              **Number of
                  securities underlying unexercised options**
                **(#)**
                **exercisable**
              
              **Number of
                  securities underlying unexercised options**
                **(#)unexercisable**
              
              **Equity**
                **incentive**
                **plan**
                **awards:
                  Number of securities underlying unexercised unearned
                  options**
                **(#)**
              
              **Option**
                **exercise**
                **price**
                **($)**
              
              **Option
                  expiration**
                **date**
              
              **Number**
                **of
                  shares**
                **or units**
                **of stock**
                **that have**
                **not vested**
                **(#)**
              
              **Market**
                **value of**
                **shares of**
                **units of**
                **stock**
                **that have**
                **not**
                **vested**
                **($)**
              
              **Equity**
                **incentive**
                **plan**
                **awards:**
                **Number of
                  unearned shares,**
                **units or**
                **other rights
                  that have**
                **not vested**
                **(#)**
              
              **Equity**
                **incentive**
                **plan**
                **awards:**
                **Market or
                  payout**
                **value of
                  unearned shares, units**
                **or others**
                **rights that**
                **have not**
                **vested**
                **($)**Arne
                  Dunhem
              
              
              720,000
              
              
              430,000
              
              
              0
              
              
              0.01
              
              
              3/20/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0Arne
                  Dunhem
              
              
              1,000,000
              
              
              1,000,000
              
              
              0
              
              
              0.025
              
              
              9/25/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0Voula
                  Kanellias
              
              
              720,000
              
              
              430,000
              
              
              0
              
              
              0.01
              
              
              3/20/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0




(1)
            Mr.
                Dunhem and Ms. Kanellias each received during 2004 Old Ariel Way
                Warrant
                Agreements to receive a right to warrants of Old Ariel Way common
                stock.
                As a result of the Netfran Stock Exchange Agreement consummated February
                2, 2005, warrants to acquire Old Ariel Way common stock were exchanged
                to
                warrants of our common stock. Mr. Dunhem and Ms. Kanellias each after
                an
                amendment dated March 21, 2005 to their respective year 2004 Old
                Ariel Way
                Warrant Agreements and after the warrant exchange received warrants
                to
                purchase 1,150,000 shares of our common stock at an exercise price
                of
                $0.010 per share (the “Warrant Shares”) to vest as follows:
                (i) 60,000 Warrant Shares shall vest monthly each month after
                February 2, 2005 during the term of an agreement or immediately if
                their
                involvement with our Company is terminated without cause or for good
                reason or due to a change in control, sale of a majority of our common
                stock or substantially all of the assets of the Company or merger
                of the
                Company into or with another company (unless such company is less
                than
                fifty percent (50%) of the size (measured by market value) of the
                Company)
                or reverse merger with another company; and (ii) 430,000 Warrant
                Shares
                will vest immediately upon the Company achieving a $20 million market
                cap
                for ten (10) consecutive trading days and a price per share of not
                less than $0.50. As of April 2006 Ms. Kanellias is no longer with
                the
                Company.




**Compensation
      of Directors**





No
      compensation to any director was paid or granted during the fiscal year ended
      September 30, 2007. We have an arrangement pursuant to which our independent
      Directors are compensated for services provided as Directors. In addition to
      an
      individual grant of warrants to purchase shares of our common stock in
      connection with the Director’s agreement to serve on our Board of Directors, we
      also compensate the independent Directors for each Board meeting attended with
      $500 in cash. The Board will review compensation arrangements for subsequent
      years.





On
      August
      22, 2005, in connection with his agreement to serve on our Board of Directors,
      we granted Mr. Leif T. Carlsson a warrant to purchase 1,600,000 shares of our
      common stock, at an exercise price of $0.025 per share. This Warrant shall
      vest
      as follows: (i)  533,333 Warrant Shares shall vest immediately on August
      22, 2005; and (ii) 44,444 Warrant Shares shall vest monthly each of the
      first Twenty Four (24) months during Mr. Carlsson’s engagement as a Director on
      the Company’s Board of Directors or immediately if Mr. Carlsson’s engagement as
      a Director is terminated without cause or for good reason or due to a change
      in
      control, sale of a majority of the common stock or substantially all of the
      assets of the Company or merger of the Company into or with another company
      (unless such company is less than fifty percent (50%) of the size (measured
      by
      market value) of the Company) or reverse merger with another company. When
      Mr.
      Carlsson in September, 2004, joined the Board of Directors of Old Ariel Way,
      he
      was granted 180,000 options to purchase shares of Old Ariel Way common stock,
      which vested on October 11, 2004 and had an exercise price of $0.125 per share.
      These options were on February 2, 2005 converted to an aggregate of 310,097
      options to purchase shares of our common stock at an exercise price of $0.073.





26




On
      September 26, 2005, in connection with his agreement to serve on our Board
      of
      Directors, we granted Mr. Victor Halpert a warrant to purchase 1,000,000 shares
      of our common stock, at an exercise price of $0.03 per share. This Warrant
      shall
      vest as follows: (i)  333,333 Warrant Shares shall vest on October 26, 2005
      ; and (ii) 27,778 Warrant Shares shall vest monthly each of the first
      Twenty Four (24) months during Mr. Halpert’s engagement as a Director on the
      Company’s Board of Directors. In connection with his resignation from his
      appointment to the Board in April 2006, the total number of shares issuable
      upon
      the exercise of his warrants was reduced to 472,223. The warrants are
      exercisable at $0.03 per share.




**Director
      Compensation Year 2007**




**Name**
            
            **Fees earned or paid
                in cash**
              **($)**
            
            **Stock**
              **awards**
              **($)**
            
            **Option**
              **awards**
              **($)**
            
            **Non-equity**
              **incentive plan**
              **compensation**
              **($)**
            
            **Nonqualified
                deferred**
              **compensation
                earnings**
              **($)**
            
            **All other**
              **compensation**
              **($)**
            
            **Total**
              **($)**Leif
                T. Carlsson
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0





**2003
      Stock Incentive Plan**





On
      February 11, 2003, the Board of Directors approved the Netfran Development
      Corp.
      2003 Stock Incentive Plan under which employees, officers, non-employee
      directors and consultants are eligible to receive grants of stock options,
      thereby creating a means to raise the level of stock ownership by such
      individuals in order to attract, retain, and reward such individuals. We have
      authorized a total of 600,000 shares of common stock under the 2003 Stock
      Incentive Plan with a total of 275,000 shares of common stock remaining under
      the plan for future issuance. The Board of Directors administers the 2003 Stock
      Incentive Plan. Subject to the provisions of the 2003 Stock Incentive Plan,
      the
      Board of Directors has full and final authority to select the individuals to
      whom options will be granted, to grant the options and to determine the terms
      and conditions and the number of shares issued pursuant thereto. However, no
      option shall be exercisable more than ten years after the date of grant. Options
      shall be exercisable at such time and subject to such terms and conditions
      as
      shall be determined by the Committee at grant.





We
      did
      not grant any options under the 2003 Stock Incentive Plan during the year ended
      September 30, 2007.





**Indemnification**





As
      permitted by the provisions of the General Corporation Law of the State of
      Florida, we have the power to indemnify any person who was or is a party or
      is
      threatened to be made a party to any threatened, pending or completed action,
      suit or proceeding, whether civil, criminal, administrative or investigative,
      by
      reason of the fact that the person is or was a director, officer, employee
      or
      agent of us, if such officer or director acted in good faith and in a manner
      reasonably believed to be in or not opposed to our best interests. Any such
      person may be indemnified against expenses, including attorneys’ fees,
      judgments, fines and settlements to the extent they have been on the merits
      or
      otherwise in defense of any action, suit or proceeding. Further, we maintain
      liability insurance on behalf of our officers, directors, employees and agents.
      Insofar as indemnification for liabilities arising under the Securities Act
      of
      1933 may be permitted to directors, officers and controlling persons pursuant
      to
      the foregoing provisions, or otherwise, we have been advised that in the opinion
      of the Securities and Exchange Commission such indemnification is against public
      policy as expressed in the Securities Act of 1933 and is, therefore,
      unenforceable.





**Employment
      Agreements**





Our
      corporate company Ariel Way currently does not have employment agreements with
      any of our executive officers .





27




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





**Beneficial
      Owners**





As
      of
      January 11, 2008, other than the directors and executive officers, as identified
      in the table below, to our knowledge no person owned beneficially more than
      five
      percent (5%) of our common stock.





**Directors
      and Executive Officers**





The
      following table shows the amount of our capital stock beneficially owned by
      our
      directors, the executive officers named in the Summary Compensation Table above,
      beneficial owners of 5% or more of our common stock and by all directors and
      executive officers as a group as of  January 11, 2008. Unless otherwise
      indicated, beneficial ownership is direct and the person indicated has sole
      voting and investment power. As of January 11, 2008 we had 595,000,000
      shares of common stock outstanding.





**Shares
                to be****Beneficially**
            
            **Percent****Name
                and Address of Beneficial Owner**
            
            **Title
                of Class**
            
            **Owned****(1)**
            
            **of
                Class****(1)**Elliot
                Krasnow(2)
              c/o
                Netvertise, Inc.
              2801
                N.E. 208th Terrace, 2nd Floor
              Miami,
                FL 33180
            
            
            Common
            
            
            1,270,340
            
            
            0.2
            %Arne
                Dunhem(3)
              8000
                Towers Crescent Drive
              Suite
                1220
              Vienna,
                VA 22182
            
            
            Common
              (Shares
              and
                warrants)
            
            
            185,447,543
            
            
            31.1
            %Eva
                Dunhem(4)****
              8000
                Towers Crescent Drive
              Suite
                1220
              Vienna,
                VA 22182
            
            
            Common
            
            
            102,023,395
            
            
            17.2
            %Leif
                T. Carlsson(5)****
              8000
                Towers Crescent Drive
              Suite 1220
              Vienna,
                VA 22182
            
            
            Common
              (Shares,
                Options
              and
                Warrants)
            
            
            13,921,202
            
            
            2.3
            %Magdy
                Battikha(6)
              8000
                Towers Crescent Drive
              Suite 1220
              Vienna,
                VA 22182
            
            
            Common
              (Shares
                and
              Warrants)
            
            
            46,063,826
            
            
            7.7
            %Officers
                and Directors as a Group
              (2
                Persons)
            
            
            Common
              (Shares,
                Options
              and
                Warrants)
            
            
            199,368,745
            
            
            33.5
            %




(1)
            Applicable
                percentage of ownership is based on 595,000,000 shares of common
                stock
                outstanding as of  January 11, 2008, together with applicable
                options, warrants and convertible securities for each shareholder.
                Beneficial ownership is determined in accordance with the rules of
                the
                Securities and Exchange Commission and generally includes voting
                or
                investment power with respect to securities. Options or warrants
                of shares
                of common stock subject to securities exercisable or convertible
                into
                shares of common stock that are currently exercisable or exercisable
                within 60 days from January 11, 2008 are deemed to be beneficially
                owned by the person holding such options or warrants for the purpose
                of
                computing the percentage of ownership of such person, but are not
                treated
                as outstanding for the purpose of computing the percentage ownership
                of
                any other person.




28




(2)
            Elliot
                Krasnow was our Chief Executive Officer until February 2, 2005. From
                and
                after this date he is no longer with us.(3)
            Represents
                170,988,384 restricted shares of common stock issued to Arne Dunhem,
                our
                Chairman and CEO, on December 27, 2007 as a result of conversion
                on
                November 21, 2007 of debt and liabilities by the Company to Arne
                Dunhem
                into restricted shares of common stock and 6,369,580 shares of common
                stock previously held directly by Arne Dunhem. In addition, it also
                includes 1,720,000 warrants that are vested and immediately exercisable,
                issued to Arne Dunhem through January 11, 2008. It also includes
                6,369,579
                shares held by the Dunhem Family Limited Partnership, of which Arne
                Dunhem, is a General Partner and who makes all investment decisions
                of The
                Dunhem Family Limited Partnership. This information does not include
                any
                shares, if any, that may be issued to Arne Dunhem as compensation
                for his
                providing a personal guarantee of the financing necessary to effect
                the
                stock exchange transaction on February 2, 2005 since the nature and
                amount
                of such compensation has not been determined, if any at all. We expect
                any
                such compensation, if any, will be a non-cash consideration.





(4)
            Represents
                102,023,395 restricted shares of common stock issued to Eva Dunhem
                on
                December 27, 2007 as a result of conversion on November 21, 2007
                of debt
                and liabilities by the Company to Eva Dunhem into restricted shares
                of
                common stock. Eva Dunhem is the spouse of Arne Dunhem, our Chairman
                and
                CEO.(5)
            Represents
                12,500,000 restricted shares of common stock issued to Leif T. Carlsson
                on
                December 27, 2007 as a result of conversion on November 21, 2007
                of
                liabilities by the Company to Leif T. Carlsson into restricted shares
                of
                common stock. In addition, the shares beneficially owned include
                310,097
                options that have vested and are immediately exercisable and a total
                of
                1,111,105 warrants that are exercisable within 60 days from January
                11,
                2008. Leif T. Carlsson is an independent Director of our
                Board.(6)
            Represents
                42,500,000 restricted shares of common stock issued to Magdy Battikha
                on
                December 27, 2007 as a result of conversion on November 21, 2007
                of
                liabilities by the Company to Magdy Battikha into restricted shares
                of
                common stock and 1,843,826 shares of common stock previously held
                directly
                by Magdy Battikha. In addition, it also includes 1,720,000 warrants
                that
                are vested and immediately exercisable, issued to Magdy Battikha
                through
                January 11, 2008. Magdy Battikha is Sr. Vice President, Engineering
                Development of our Company.




**Change
      of Control Arrangements**





The
      Company's 2003 Stock Incentive Plan provides that in the event of a change
      in
      control as defined in the plan, all outstanding options under the plan will
      immediately become exercisable 100% for each participant and the restrictions
      on
      any restricted stock issued under the Plan will cease.








**Item
      12. Certain Relationships and Related Transactions,****and
      Director Independence****.**





In
      connection with our acquisition of Old Ariel Way, on February 2, 2005, Old
      Ariel
      Way and Elliot Krasnow, who was our Chief Executive Officer until the February
      2, 2005, entered into a Stock Purchase and Sale Agreement pursuant to which
      Mr.
      Krasnow sold 300,000 shares of our common stock to Old Ariel Way for $300,000.
      Old Ariel Way intends to retire the shares it acquired from Mr. Krasnow. In
      order to finance the $300,000 payment to Mr. Krasnow and to fund the expenses
      related to the acquisition, Old Ariel Way borrowed $400,000 from Yorkville
      Advisors, one of the stockholders of Old Ariel Way (and now a stockholder of
      ours). The loan bears interest at the rate of 12% per annum and was due and
      payable on May 31, 2005 but was extended to February 28, 2006. Yorkville
      Advisors is not a controlling stockholder of us, and we believe the terms of
      the
      loan were at least as favorable to us as could be obtained from an unrelated
      third party. In order to induce Yorkville Advisors to make the loan to Old
      Ariel
      Way, Arne Dunhem, the Chairman and Chief Executive Officer, provided a personal
      guarantee of payment to Yorkville Advisors. We expect to compensate Mr. Dunhem
      for undertaking the personal guarantee and pledge on our behalf, but the terms
      of any such compensation have not yet been agreed to. Our Compensation Committee
      of the Board of Directors will determine the amount and nature of compensation
      to Mr. Dunhem, but we do not expect that any compensation to him will be paid
      in
      cash. The $400,000 loan was on February 28, 2006 converted pursuant to an
      Investment Agreement by and between the Company and Yorkville Advisors and
      Montgomery Equity to part of one hundred sixty (160) Series A Preferred Shares.





29




On
      July
      28, 2005, we borrowed $600,000 from Montgomery Equity. We received $240,000
      of
      this amount on July 28, 2005 and we received the remaining $360,000 on August
      10, 2005. The loan bears interest at the rate of 12% per annum and was due
      and
      payable on February 28, 2006. On July 28, 2005 we issued to Montgomery Equity
      a
      warrant to purchase 1,000,000 shares of our common stock that is
      exercisable for a period of three (3) years at an exercise price per share
      of
      $0.025. The warrant shares shall have “piggy-back” and demand registration
      rights. Montgomery Equity is not a controlling stockholder of Ariel Way, and
      we
      believe the terms of the loan are at least as favorable to us as could be
      obtained from an unrelated third party. The $600,000 loan was on February 28,
      2006 converted pursuant to an Investment Agreement by and between the Company
      and Yorkville Advisors and Montgomery Equity to part of one hundred sixty (160)
      Series A Preferred Shares.





Arne
      Dunhem, our Chairman and Chief Executive Officer, advanced during the period
      January 1, 2005 through August 3, 2005 an aggregate of $42,250 to cover the
      payment of certain expenses for us. On September 26, 2005, we issued to Mr.
      Dunhem a convertible debenture in the principal sum of $42,250 with interest
      at
      the annual rate of 5% on the unpaid principal of the debenture which was due
      on
      September 25, 2006. Interest on the outstanding principal balance shall be
      due
      and payable monthly, in arrears, commencing on September 25, 2006 and shall
      continue on the first day of each calendar month thereafter that any amounts
      under the debenture are due and payable. Principal shall be due and payable
      in 6
      equal installments of $7,041.74 each. The installments of principal shall be
      due
      and payable commencing on October 1, 2006 and subsequent installments shall
      be
      due and payable on the first day of each calendar month thereafter until the
      outstanding principal balance is paid in full. We were not able to pay the
      principal and interest on the debenture as requested and we have been in default
      since October 1, 2006.The
      balance of the note as of September 30, 2007 is $10,864 consisting of principal
      and unpaid interest.





On
      May
      17, 2005 Mrs. Eva Dunhem, the spouse of Arne Dunhem, our Chairman and Chief
      Executive Officer, advanced as a short-term loan an aggregate of $70,000 to
      us.
      On September 26, 2005, we issued to Mrs. Dunhem a promissory note in the
      principal sum of $70,000 together with interest at the annual rate of 12% on
      the
      unpaid principal of the note on or before the 12th month anniversary of the
      funding date which will be May 17, 2006. The loan was not paid when due and
      is
      in technical default. The Company has received a waiver from Mrs. Dunhem
      regarding the interest rate of the loan in default. The balance of the note
      as
      of September 30, 2007 is $62,209 consisting of principal and unpaid interest.
      In
      addition, we also issued to Mrs. Dunhem a warrant to purchase 200,000 shares
      of
      our common stock for a period of 3 years at an exercise price of $0.03 which
      was
      the price as of the issuance of the warrant. The warrant shares shall have
      “piggy-back” and demand registration rights. In addition, Mrs. Dunhem on June
      30, 2007 also advanced to the Company $8,755 to cover outstanding salaries
      for
      employees in the UK.





We
      granted warrants to purchase our common stock to certain of our directors prior
      to their appointment in 2005 to our Board of Directors in connection with their
      service as members of our advisory board. We subsequently provided additional
      grants to our directors in connection with their service as members of our
      Board
      of Directors. The terms of those grants are described in this Annual Report
      in
      our discussion of the compensation provided to our directors.





On
      December 27, 2007, we issued pursuant to a Board of Director’s resolution on
      November 21, 2007, an aggregate 328,011,779 shares
      of restricted common stock to several related parties to include Arne Dunhem,
      Eva Dunhem, Magdy Battikha, and Leif T. Carlsson, in exchange for canceling
      an
      aggregate of $558,839.34 in debt
      and liabilities. The aggregate per share conversion price was $0.0016 which
      was
      100% higher than the prevailing closing price at $0.0008 as of November 20,
      2007, the day prior to the Board of Director’s resolution on November 21, 2007.
      The debt and liabilities canceled and converted to shares of restricted common
      stock included outstanding short term loans in default and outstanding since
      2005 and compensation for services outstanding for the period 2004 through
      2007.
      Arne Dunhem is our Chairman and CEO, Eva Dunhem is Arne Dunhem’s spouse, Magdy
      Battikha is our Sr. Vice President, Business Development, and Leif T. Carlsson
      is an independent director of our Board.





The
      table
      below sets forth a summary of the debt and liability canceled and converted
      to
      shares of restricted common stock pursuant to the Board of Director’s resolution
      on November 21, 2007:





**Name**
            
            **Debt
                and Liability**
              **Canceled
                and Converted**
            
            **Amount**
            
            **Conversion per
                Share Price**
            
            **Shares Issued**Arne
                and Eva Dunhem
            
            
            Repayment
                of short term loans in default
              Compensation
                for services 2004 - 2007
            
            $
            470,839.34
            
            $
            0.0016
            
            
            273,011,779Magdy
                Battikha
            
            
            Compensation
                for services 2006 - 2007
            
            $
            68,000.00
            
            $
            0.0016
            
            
            42,500,000Leif
                T. Carlsson
            
            
            Compensation
                for services 2006 - 2007
            
            $
            20,000.00
            
            $
            0.0016
            
            
            12,500,000Total
            
            
            
            
            $
            558,839.34
            
            $
            0.0016
            
            
            328,011,779




We
      believe that each of the above referenced transactions was made on terms no
      less
      favorable to us than could have been obtained from an unaffiliated third party.
      Furthermore, any future transactions or loans between us and our officers,
      directors, principal stockholders or affiliates, and any forgiveness of such
      loans, will be on terms no less favorable to us than could be obtained from
      an
      unaffiliated third party, and will be approved by a majority of our directors.





**Director
      Independence**





We
      currently have only one independent director, Mr. Leif T. Carlsson. The only
      transaction with Mr. Carlsson since October 1, 2005 relates to certain
      consulting services by him from April 2005 through October, 2007 related to
      our
      operation in the U.K. for which he was compensated $20,000 which was converted
      into shares of common stock as part of the conversion of liabilities on November
      21, 2007 as described above. Except for the function as a director on the Board,
      Mr. Carlssson has no relationship with the Company or any of the management
      team
      members of the Company.




30




**Item
      13. Exhibits.**





**Exhibit****No.**
            
            **Description**
            
            **Location**2.1
            
            Share
                Exchange Agreement, by and among Netfran Development Corp., Ariel
                Way,
                Inc., and the shareholders of Ariel Way common stock, dated as of
                December
                29, 2004.****
            
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
                filed on February 8, 2005 (File No. 0-50051)2.2
            
            Amendment
                to Share Exchange Agreement, by and among Netfran Development Corp.,
                Ariel
                Way, Inc., and the shareholders of Ariel Way common stock, dated
                as of
                January 20, 2005.****
            
            Incorporated
                by reference to Exhibit 2.2 to the Registrant’s Current Report on
                Form 8-K filed on February 8, 2005 (File No. 0-50051)****2.3
            
            Stock
                Purchase Agreement among Ariel Way, Inc. and dbsXmedia, Inc., dated
                February 15, 2005.****
            
            Incorporated
                by reference to Exhibit 99.3 to the Registrant’s Current Report on
                Form 8-K filed on February 28, 2005 (File No. 0-50051)2.4
            
            Asset
                Purchase Agreement by and among dbsXmedia Inc., Loral Skynet Network
                Services, Inc., CyberStar L.P., CyberStar, LLC and Netfran Development
                Corp. dated February 18, 2005.
            
            Incorporated
                by reference to Exhibit 99.1 to the Registrant’s Current Report on
                Form 8-K filed on April 28, 2005 (File No. 0-50051)


2.5
            
            Amendment
                No. One to Asset Purchase Agreement by and among dbsXmedia Inc.,
                Loral
                Skynet Network Services, Inc., CyberStar L.P., CyberStar, LLC and
                Netfran
                Development Corp., dated April 13, 2005
            
            Incorporated
                by reference to Exhibit 99.2 to the Registrant’s Current Report on
                Form 8-K filed on April 28, 2005 (File No. 0-50051)2.6
            
            Security
                Agreement between dbsXmedia Inc., Loral Skynet Network Services,
                Inc.,
                CyberStar L.P., and CyberStar, LLC dated February 18, 2005
            
            Incorporated
                by reference to Exhibit 99.3 to the Registrant’s Current Report on
                Form 8-K filed on April 28, 2005 (File No. 0-50051)2.7
            
            Teleport
                Service Agreement by and between dbsXmedia, Inc., and Loral Skynet
                Network
                Services, Inc. , dated February 18, 2005
            
            Incorporated
                by reference to Exhibit 99.4 to the Registrant’s Current Report on
                Form 8-K filed on April 28, 2005 (File No. 0-50051)




31


**Exhibit****No.**
              
              **Description**
              
              **Location**


2.8
            
            Guaranty
                Agreement by Netfran Development Corp. in favor of Loral Skynet Network
                Services, Inc., CyberStar, L.P., CyberStar, LLC, and Loral Skynet,
                a
                division of Loral SpaceCom Corporation, dated February 18, 2005
            
            Incorporated
                by reference to Exhibit 99.5 to the Registrant’s Current Report on
                Form 8-K filed on April 28, 2005 (File No. 0-50051)2.9
            
            Stockholders
                Agreement by and among dbsXmedia, Inc., Netfran Development Corp.,
                and
                Zygot, LLC, dated February 21, 2005****
            
            Incorporated
                by reference to Exhibit 99.4 to the Registrant’s Current Report on
                Form 8-K filed on February 28, 2005 (File No. 0-50051)2.10
            
            Stock
                Purchase Agreement between Ariel Way, Inc. and Market Central, Inc.,
                dated
                September 24, 2004
            
            Incorporated
                by reference to Exhibit 2.10 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)2.11
            
            Agreement
                and Plan of Merger between Ariel Way, Inc. and Enfotec, Inc., dated
                September 30, 2004
            
            Incorporated
                by reference to Exhibit 2.5 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)3.1
            
            Articles
                of Incorporation, dated January 24**,**2000,
                of Registrant
            
            Incorporated
                by reference to Exhibit 3.1 to the Company's registration statement
                on
                Form SB-2 (file no. 333-102894) filed on July 26, 2001 (File No.
                0-50051)3.2
            
            By-laws
                of Registrant, dated January 24**,**2000.
            
            Incorporated
                by reference to Exhibit 3.2 to the Company's registration statement
                on
                Form SB-2 (file no. 333-102894) filed on July 26, 2001.****(File
                No. 0-50051)3.3
            
            Articles
                of Amendments to Articles of Incorporation, dated April 28, 2005,
                of the
                Registrant
            
            Incorporated
                by reference to Exhibit A to the Company's Schedule 14C Information
                Statement filed on April 28, 2005.




32





**Exhibit****No.**
            
            **Description**
            
            **Location**3.4
            
            Certificate
                of Conversion of Ariel Way, LLC, dated September 23, 2004.
            
            Incorporated
                by reference to Exhibit 3.4 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)3.5
            
            Certificate
                of Incorporation of Ariel Way, Inc. (DE), dated September 23, 2004.
            
            Incorporated
                by reference to Exhibit 3.5 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)3.6
            
            Certificate
                of Designations of Series A Redeemable Preferred Stock, dated April
                19,
                2005
            
            Incorporated
                by reference to Exhibit 3.6 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)3.7
            
            By-Laws
                of Ariel Way, Inc. (DE), dated September 23, 2004
            
            Incorporated
                by reference to Exhibit 3.7 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)




33




**Exhibit****No.**
              
              **Description**
              
              **Location**


10.1
            
            Standby
                Equity Distribution Agreement, dated July 21, 2005 between Ariel
                Way, Inc.
                and Cornell Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.1 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.2
            
            Registration
                Rights Agreement, dated July 21, 2005, between Ariel Way, Inc. and
                Cornell
                Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.2 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.3
            
            Placement
                Agent Agreement, dated July 21, 2005, between Ariel Way, Inc., Newbridge
                Securities Corporation and Cornell Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.3 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.4
            
            Escrow
                Agreement, dated July 21, 2005, between Ariel Way, Inc., Cornell
                Capital
                Partners, LP and David Gonzalez, Esq.
            
            Incorporated
                by reference to Exhibit 10.4 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.5
            
            Termination
                Agreement, dated July 20, 2005, between Ariel Way, Inc. and Cornell
                Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.5 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)


10.6
            
            Securities
                Purchase Agreement dated September 30, 2004, between Ariel Way, Inc.
                and
                Cornell Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.6 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.7
            
            Investor
                Registration Rights Agreement dated September 30, 2004, between Ariel
                Way,
                Inc. and Cornell Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.7 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.8
            
            Security
                Agreement dated September 30, 2004, between Ariel Way, Inc. and Cornell
                Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.8 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.9
            
            Irrevocable
                Transfer Agent Instructions dated September 30, 2004, between Ariel
                Way,
                Inc. and Interwest Transfer Co., Inc.
            
            Incorporated
                by reference to Exhibit 10.9 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.10
            
            Secured
                Convertible Debenture issued by Ariel Way, Inc. on July 21, 2005
                to
                Cornell Capital Partners, LP
            
            Incorporated
                by reference to Exhibit 10.10 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.11
            
            Promissory
                Note by Ariel Way, Inc. and Cornell Capital Partners, LP, dated February
                1, 2005
            
            Incorporated
                by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)




34




**Exhibit****No.**
              
              **Description**
              
              **Location**


10.12
            
            Guaranty
                given by Arne Dunhem in Favor of Cornell Capital Partners, LP, dated
                February 1, 2005
            
            Incorporated
                by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.13
            
            Pledge
                and Escrow Agreement by and among Cornell Capital Partners, LP, dated
                February 1, 2005, Ariel Way, Inc., Arne Dunhem and David Gonzalez,
                Esq.,
                dated February 1, 2005
            
            Incorporated
                by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.14
            
            Independent
                Contractor Consulting Agreement between Securities Counseling and
                Management, Inc. and Ariel Way, Inc. dated August 16, 2004
            
            Incorporated
                by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.15
            
            Warrant
                Agreement between Ariel Way, Inc. and Arne Dunhem dated August 1,
                2004 and
                Amendment No. 1 to Warrant Agreement between Arne Dunhem and Netfran
                Development Corp., dated March 21, 2005.
            
            Incorporated
                by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)


10.16
            
            Warrant
                Agreement between Ariel Way, Inc. and Anand Kumar dated August 10,
                2004
                and Amendment No. 1 to Warrant Agreement between Anand Kumar and
                Netfran
                Development Corp., dated March 21, 2005.
            
            Incorporated
                by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.17
            
            Warrant
                Agreement between Ariel Way, Inc. and Voula Kanellias dated August
                10,
                2004 and Amendment No. 1 to Warrant Agreement between Voula Kanellias
                and
                Netfran Development Corp., dated March 21, 2005.
            
            Incorporated
                by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.18
            
            Warrant
                Agreement between Ariel Way, Inc. and Magdy Battikha dated November
                1,
                2004 and Amendment No. 1 to Warrant Agreement between Magdy Battikha
                and
                Netfran Development Corp., dated March 21, 2005.
            
            Incorporated
                by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.19
            
            Warrant
                Agreement between Ariel Way, Inc. and Aziz Bennani dated November
                1, 2004
                and Amendment No. 1 to Warrant Agreement between Aziz Bennani and
                Netfran
                Development Corp., dated March 21, 2005.
            
            Incorporated
                by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form
                10-KSB filed on April 15, 2005 (File No. 0-50051)10.20
            
            Independent
                Contractor Services Fee Agreement between Michael Jordan and Netfran
                Development Corp., dated December 28, 2004
            
            Incorporated
                by reference to Exhibit 99.5 to the Registrant’s Current Report on
                Form 8-K filed on February 28, 2004 (File No. 0-50051)10.21
            
            Legal
                Services Fee Agreement between Joel Bernstein, Esq. and Netfran
                Development Corp., dated December 28, 2004
            
            Incorporated
                by reference to Exhibit 99.6 to the Registrant’s Current Report on
                Form 8-K filed on February 28, 2004 (File No. 0-50051)10.22
            
            Warrant
                Agreement between Ariel Way, Inc. and Oberon Securities, LLC dated
                May 28,
                2005.
            
            Incorporated
                by reference to Exhibit 10.22 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.23
            
            Promissory
                Note issued by Ariel Way, Inc. on July 28, 2005 to Cornell Capital
                Partners, LP
            
            Incorporated
                by reference to Exhibit 10.23 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)




35




**Exhibit****No.**
              
              **Description**
              
              **Location**


10.24
            
            Warrant
                issued by Ariel Way, Inc. on July 28, 2005 to Cornell Capital Partners,
                LP
            
            Incorporated
                by reference to Exhibit 10.24 to the Company's registration statement
                on
                Form SB-2 (file no. 333-127363) filed on August 9, 2005.****(File
                No. 0-50051)10.25
            
            Promissory
                Note issued by Ariel Way, Inc. on September 26, 2005 to Mrs. Eva
                Dunhem
            
            Incorporated
                by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form
                10-KSB filed on January 17, 2006 (File No. 0-50051)10.26
            
            Warrant
                issued by Ariel Way, Inc. on September 26, 2005 to Mrs. Eva Dunhem
            
            Incorporated
                by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form
                10-KSB filed on January 17, 2006 (File No. 0-50051)10.27
            
            Convertible
                Debenture issued by Ariel Way, Inc. on September 26, 2005 to Mr.
                Arne
                Dunhem
            
            Incorporated
                by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form
                10-KSB filed on January 17, 2006 (File No. 0-50051)14.1
            
            Business
                Ethics and Conduct Policy
            
            Incorporated
                by reference to Exhibit 14 to the Registrant’s Annual Report on Form
                10-KSB filed on April 31, 2004 (File No. 0-50051)14.2
            
            Code
                of Business Conduct
            
            Provided
                herewith14.3
            
            Code
                of Ethics for Financial Operation and Financial Officers
            
            Provided
                herewith14.4
            
            Internal
                Control
            
            Provided
                herewith


21.1
            
            List
                of Subsidiaries
            
            Provided
                herewith31.1
            
            Certification
                by Arne Dunhem, Chief Executive Officer, pursuant to Rule 13a-14(a)
            
            Provided
                herewith31.2
            
            Certification
                by Arne Dunhem, Acting Chief Financial Officer, pursuant to Rule
                13a-14(a)
            
            Provided
                herewith32.1
            
            Certification
                by Arne Dunhem, Chief Executive Officer, and Arne Dunhem, Acting
                Chief
                Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002*
            
            Provided
                herewith





*
      These
      certifications are not deemed filed by the SEC and are not to be incorporated
      by
      reference in any filing of the Registrant under the Securities Act of 1933
      or
      the Securities Exchange Act of 1934, irrespective of any general incorporation
      language in any filings.





**Item
      14. Principal Accountant Fees and Services.**





During
      the fiscal years ended September 30, 2007 and September 30, 2006, the aggregate
      fees billed by Bagell, Josephs, Levine & Company, L.L.C. for principal
      accountant fees and services were $40,000 per year.





36





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act
      of 1934, the Registrant has duly caused this Report to be signed on its behalf
      by the undersigned, thereunto duly authorized.




**Ariel
                Way, Inc.**By
            /s/
                Arne DunhemName:
                Arne Dunhem
              Title:
                President and Chief Executive Officer,Date:
                January 14, 2008





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.





**SIGNATURE**
            
            **TITLE**
            
            **DATE**/s/
                Arne Dunhem
            
            President,
                Chief Executive Officer,
            
            January
                14, 2008Arne
                Dunhem
            
            Principal
                Executive Officer and Director/s/
                Arne Dunhem
            
            Acting
                Chief Financial Officer, Acting Principal Financial
            
            January
                14, 2008Arne
                Dunhem
            
            and
                Acting Principal Accounting Officer/s/
                Leif T. Carlsson
            
            Director
            
            January
                14, 2008Leif
                T. Carlsson




37