**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-KSB/A**


AMENDMENT
          NO. 2





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


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the year ended September 30, 2005**





**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)
      918-2430**


(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, 2005 was
      $1,052,616.





As
        of  September 19, 2006, the aggregate market value of the shares of common
        stock held by non-affiliates (based on the closing price of $0.01 ** for
        the
        common stock as quoted on that date) was approximately $
        139,763 .





As
        of  September 19, 2006, the Company had 38,386,943 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
            
            9Item
                3.
            
            Legal
                Proceedings
            
            10Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            11**PART
                II**Item
                5.
            
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            
            12Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            15Item
                7.
            
            Financial
                Statements
            
            33Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            34Item
                8A.
            
            Controls
                and Procedures
            
            34Item
                8B.
            
            Other
                Information
            
            34**PART
                III**Item
                9.
            
            Directors
                and Executive Officers of the Registrant
            
            35Item
                10.
            
            Executive
                Compensation
            
            37Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            40Item
                12.
            
            Certain
                Relationships and Related Transactions
            
            42Item
                13.
            
            Exhibits
            
            43Item
                14.
            
            Principal
                Accountant Fees and Services
            
            48











**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**





We
      are a
      technology and services company for highly secure global communications
      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. Our
      communications solutions are provided by our majority-owned subsidiary
      dbsXmedia, Inc., a Delaware corporation (“dbsXmedia”), and our technology
      development effort for highly secure telecommunications services is conducted
      through our wholly-owned subsidiary Enfotec, Inc., a Delaware corporation
      (“Enfotec”). 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.





As
      of
      September 30, 2005, we marketed and sold our integrated multimedia services
      to
      clients who are leading retail and finance-oriented services companies and
      leading technology and manufacturing companies throughout the United States
      and
      Europe. We are focused on growing our current customer bases, developing and
      deploying solutions for Business Television (BTV), digital signage and
      interactive media delivered over a combination of satellite, terrestrial and
      wireless local networks.





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) 918-2430. 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. The SEC also maintains a web site
      at *www.sec.gov* that
      contains reports, proxy statements and other information regarding various
      companies including Ariel Way, Inc.





1


**Recent
      Developments**





On
      October 13, 2005, we announced the appointment of Victor Halpert to our board
      of
      directors. Mr. Halpert is the Managing Member of Halpert Capital, LLC and has
      a
      number of year’s experience in finance, investments, and equity research from
      firms to include Salomon Smith Barney, Robertson Stephens and Israel Equity
      Research & Management in Chicago.  Mr. Halpert is on the board of
      directors of Top Image Systems (NASDAQ-TISA), Unity Wireless (NASDAQ-UTYW)
      and
      Israel Technology Acquisition (NASDAQ-ISLT).   Mr. Halpert has a bachelor’s
      of science degree in Accounting from State University of New York, College
      at
      New Paltz, NY, a Master of Science in Accounting from the University of Illinois
      at Chicago, Graduate Business School and an MBA from the University of Chicago
      Graduate Business School.





On
      October 20, 2005, we announced the appointment of William Stapleton to our
      advisory board. Mr. Stapleton is the president and managing director of the
      Stapleton Group, Inc., a management consulting firm with emphasis on the
      start-up and restructuring of high-performance telecommunications companies.
      He
      has performed executive management duties for 11 mid-sized companies since
      1995
      and assisted Goldman Sachs, Citicorp, MCI WorldCom, Siemens and others with
      capital restructuring, asset recovery services and interim management
      assignments. He was a director at AT&T, responsible for leading and
      executing marketing and sales efforts to assist various AT&T business
      segments to achieve growth and profitability. Stapleton has served on the board
      of directors of SCii Telecom, SA, Lasergate Systems, Inc., and GVN Technologies.
      He holds a degree in business from Syracuse University and completed academic
      fellowships at MIT, Cambridge Institute of Technology, the University of
      Pennsylvania, Wharton School of Business Management and the Menniger Institute
      for Personal Behavior Studies.





On
      October 26, 2005 we announced that our subsidiary dbsXmedia had opened a new
      European headquarters in Plymouth, UK. The move finalizes dbsXmedia's
      integration of the business and systems acquired from Loral Space and
      Communications to support dbsXmedia’s European business television division.





On
      January 12, 2006 we announced that our subsidiary, dbsXmedia has signed a new
      multi-year contract with Avnet, Inc. to provide business television network
      infrastructure and technology to allow migration to IP services over time.





**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,****2005**
            
            **2004****Operating
                Results:****Operating Revenue**
            
            $
            1,052,616
            
            $
            41,000**Cost of Goods Sold**
            
            $
            328,497
            
            $
            0**Gross Profit**
            
            $
            724,119
            
            $
            41,000**Operating Expenses**
            
            $
            2,851,635
            
            $
            144,273**Net Income (Loss)**
            
            $
            (2,389,342
            )
            $
            (103,273
            )








**Year
                Ended September 30,****2005****Balance
                Sheet Data:****Current Assets**
            
            $
            496,064**Current Liabilities**
            
            $
            2,890,380**Accumulated Deficit**
            
            $
            (2,492,615
            )**Shareholder’s Equity (Deficit)**
            
            $
            (1,841,181
            )





2


Over
      the
      past year we have experienced significant growth in revenues and related
      expenses. Our increase in revenues is due primarily to our acquisition of
      dbsXmedia. We are taking a number of measures designed to improve our financial
      condition such as looking into other potential acquisitions, cost reductions,
      expansion of the dbsXmedia multimedia services and the integration of various
      new acquisitions. 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.





**The
      Company**





We
      are a
      technology and services company for highly secure global communications
      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. Our
      communications solutions are provided by our majority-owned subsidiary
      dbsXmedia, Inc., a Delaware corporation (“dbsXmedia”), and our technology
      development effort for highly secure telecommunications services is conducted
      through our wholly-owned subsidiary Enfotec, Inc., a Delaware corporation
      (“Enfotec”). 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.





dbsXmedia
      provides communication infrastructure and integrated multimedia services to
      corporations throughout the United States and Europe. dbsXmedia's executive
      management has over 25 years of experience in the video and transmission
      industry. dbsXmedia operates from offices in Frederick, Maryland and Plymouth,
      United Kingdom, providing solutions for Business Television (BTV), digital
      signage and interactive media delivered over a combination of satellite,
      terrestrial and wireless local networks. Digital signage includes technologies
      using LCD TV and plasma screens to deliver video based messaging directly to
      consumer audiences. Digital signage is an effective direct advertising method
      providing focused marketing for targeted audiences. Integrated multimedia
      services include music radio, video, and IP (Internet Protocol)-based file
      transfer for training/catalogs/point of sale integrated with other information
      to the clients.





dbsXmedia
      provides services to clients who are leading retail and finance-oriented
      services companies and leading technology and manufacturing companies. We
      estimate that consolidation in the BTV industry in 2006 will provide dbsXmedia
      with good opportunities for growth and partnering as result of diminished
      competition in the marketplace. dbsXmedia intends to launch its next generation
      of services in the first quarter of 2006. The new services are designed to
      give
      existing and new customers the ability to change from current broadcast
      technology called MPEG-2 to upgraded multimedia service technologies based
      on
      the IP technology. We believe that our ability to deliver these services over
      satellite, terrestrial DSL broadband and the emerging wireless standard called
      WiMAX will enable dbsXmedia to compete successfully in the retail digital
      signage market and the BTV industry. **** Interactive
      media provides retail satellite services, that are currently "dumb", meaning
      they do not allow the user/viewer to make real-time choices, to select content
      other than the "standard issue version". We believe this will permit
      personalized experience and better training because the addition of
      interactivity will allow users to control the content and therefore adapt it
      to
      their need or environment. dbsXmedia aims to achieve this over all our delivery
      mechanisms - satellite, terrestrial and local wireless.





Enfotec
      is a development stage company that designs, manufactures and markets high-speed
      security appliance solutions with a fully-integrated Linux operating system,
      which is an open-based operating system that integrates high-performance Virtual
      Private Network, “VPN”, firewall, intrusion detection, anti-virus and management
      in a single network appliance. Enfotec’s “EN” Security Appliance and “CSA”
Custom Security Appliance products feature hardware-based technology that
      delivers true wire-line data speed performance and high level of security.
      The
      Enfotec EN series of products is scalable while being easy to configure and
      manage. The EN series of products also enable third party software applications
      to be integrated, thus providing a flexible approach to data and
      telecommunications security. We believe that Enfotec’s products differentiate
      from other security appliances that require proprietary, expensive customized
      semiconductor chips, operating systems and computer data systems. Enfotec
      designs firmware and software technologies, for which we have filed patent
      disclosure documents with the US Patent Office, utilizes standard off-the-shelf
      components combined with the Linux operating system. We believe this provides
      customers with high performance in a non-proprietary, cost effective,
      hardware-based security appliance.





3


The
      Enfotec EN Series is intended to have product models that range from the EN5
      to
      the EN500, where the product numbers delineate performance benchmarks as the
      VPN
      traffic throughput data speed in megabits per second. These models support
      data
      speeds up to a gigabit per second of firewall performance while simultaneously
      supporting 500 megabits per second of true 3DES-CBC VPN encryption, a
      description which is the industry standard encryption method used for data
      traffic over the Internet. These performance benchmarks are achieved with
      standard personal computer “PC” based hardware by utilizing Enfotec’s
      technologies, for which we have filed disclosure documents with the US Patent
      Office for protection of these technologies for highly secure telecommunication:
      Chain Packet Processing, “CPP” and Packet Signature Recognition, “PSR”.
      Enfotec’s CPPtechnology
      enables utilization of up to 97% of the capacity of the standard PC Internal
      data bus “PCI”, as in an ordinary desktop PC, versus the 40% of the capacity of
      the standard PCI that is generally seen in the industry. Enfotec’s PSR
      technology is a firmware algorithm that can check packet signature patterns
      at
      data speeds up to a gigabit per second. These differentiating technologies
      utilize other Enfotec firmware based intellectual property that can actually
      be
      upgraded in the same product model chassis. We believe that proprietary security
      appliances from other product providers do not provide this type of protection.





**Competition**





We
      believe that we can be competitive based on several factor including price,
      engineering support to the customers and in maintenance support of the purchased
      or installed equipment.





For
      dbsXmedia, we believe our primary competitors include: GlobeCast, an operational
      division within France Telecom that has been proactive and successful with
      satellite services for BTV over the past two years, Convergent which we believe
      is the largest competitor in terms of revenue and specializes in interactive
      training to high tech industries and federal and local governments, and
      EchoStar, which is pursuing BTV largely due to the available satellite
      transmission capacity on its own satellites. Other significant competitors
      of
      which we are aware include Broadcast International and Inmedia, and British
      Telecom.





We
      believe that dbsXmedia can be competitive based on factors including price,
      service offering, installation service, maintenance support and engineering
      support.





For
      Enfotec, we believe our primary competitors to be various data security
      companies. As telecommunication networks become increasingly sophisticated
      and
      mission critical, we believe, the advent of true high-speed security
      alternatives becomes crucial for cost effective capacity scalable implementation
      strategies. The existing VPN/firewall companies that we believe dominate the
      technology and products are Cisco at the high-end capacity, Nortel and Nokia,
      both using the Checkpoint Firewall and Juniper Networks/Netscreen security
      solutions at the mid-range capacity, and Sonicwall, Enterasys, Alcatel and
      Watchguard at the low end capacity. For intrusion detection and prevention,
      companies such as Tipping Point, Network Associates and ISS offer specialized
      products for these solutions. Each company indicated has used various
      proprietary hardware and software technologies to penetrate these VPN markets.
      The primary product solution for this penetration is VPN and/or firewall. We
      believe that one compelling weakness for all these companies is the lack of
      performance achieved by any of these technologies.





**Sales
      And Marketing**





Our
      intent for dbsXmedia is to consolidate the existing client base that was
      acquired from Loral and to develop certain targeted requests for proposals
      during the initial period of operation after the acquisition from Loral. We
      intend to focus our marketing to these select opportunities and the media for
      profile building. Subsequently to this period, we intend to emphasize marketing
      of our retail products, again using targeted marketing. We envisage this stage
      requiring trade shows, demonstration periods and a quality blend of salesmanship
      with effective documentation.





Our
      sales
      and marketing strategy for our Enfotec technology is intended to be a mix of
      trade show event participation, a strong channel presence, and a high-visibility
      public relations campaign. Geographically, we believe that North America is
      the
      most important market with an estimated 50% of the world revenues, according
      to
      the research firm Infonetics, but the expanding European and Pacific Rim markets
      are also included in our initial strategy. Our Enfotec product line is intended
      to cut across different markets and customer types.





4


**Intellectual
      Property**





We
      have
      filed disclosure documents with the US Patent Office on two technologies, Chain
      Packet Processing and Pattern Signature Recognition. These technologies are
      at
      the core of our Enfotec products. These are the enabling technologies that,
      we
      believe, allow us to perform at speeds better than proprietary platforms offered
      by our competitors while having an open system architecture at our core.





Enfotec
      filed Disclosure Documents with the US Patent Office for protection of:





-
            Chained
                Packet Processing, “CPP”, with Patent Office Disclosure Document No.
                528391; and





-
            Packet
                Signature Recognition, “PSR” technologies, with Patent Office Disclosure
                Document No. 528389





We
      intend
      to actively pursue through research and development additional advanced
      intellectual properties in the area of global highly secure telecommunications
      and associated technologies and we intend to apply for protection of all
      intellectual properties with the US Patent Office.





**Governmental
      Approvals**





Our
      subsidiary dbsXmedia provides services using third party facilities such as
      Loral Skynet, who in turn has all necessary permits. Thus we believe that there
      is no need for any specific government approval for any of dbsXmedia’s services.





We
      do not
      believe that there is a need for any specific government approval for any of
      Enfotec’s products and for their highly secure technologies since these do not
      include any radio transmitters and do not radiate any radio frequency signals.





Enfotec
      has applied for and been approved for exportation licensing regarding its entire
      product line.





**Employees**





As
        of
        September 19, 2006, we employed 2 full-time or part-time employees and 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 continue to be successful in raising capital to
        implement our strategic business plan.




**Corporate
      History**





Ariel
      Way, Inc. is a technology company and currently trades on the Bulletin Board
      under the stock symbol “AWYI”. The following is a history of Ariel Way.





5




We
      were
      initially named Netfran Development Corp., and we were incorporated in the
      State
      of Florida in January 2000 to market the Netspace Franchise System provided
      by
      Netvertise, Inc., a Florida company, as a franchisor of Internet web site
      design, hosting, updating, maintenance, administration, e-mail publishing and
      consulting services, marketing and advertising services and related services
      under the registered servicemark "NETSPACE". Our strategy was to support
      franchisees to assist small and medium size businesses to implement an effective
      Internet World Wide Web strategy. We had a total of 56 franchises in the United
      States and United Kingdom as of March 10, 2003. Our management also managed
      Netvertise, Inc. Between 2000 and end year 2004, substantially all of our
      revenues were derived from franchise operations, which included franchise fees,
      revenue sharing with franchisees, royalties based on gross retail revenues
      to
      the franchisees' customers, and advertising fees based on revenues generated
      by
      its franchisees. We anticipated that the revenues from ongoing royalties would
      rise as the franchisees established and built their businesses. We believed
      that
      sales of franchises would continue to generate the bulk of our revenues for
      several years, in view of the large part of the country where we had not sold
      franchises. Thereafter, when sales of franchises slow or decline, we would
      become more dependent on ongoing royalties from our franchisees. We supported
      the franchisees by advertising and training, but, ultimately, the level of
      revenues achieved from ongoing royalties from our franchisees were not adequate
      to sustain long-term operations.





In
      2001,
      we filed with the SEC a registration statement relating to the distribution
      of
      3,340,088 shares of our common stock to holders of record of Netvertise, Inc.
      common stock as of the close of business on July 18, 2001 (the "record date").
      The registration statement was declared effective on October 31, 2002. The
      shares were distributed on the basis of one of our shares for every share of
      Netvertise, Inc. held on the record date. The shares of Netvertise being
      distributed represented 99% of our total outstanding shares and Netvertise
      owned
      none of our shares of common stock after the distribution. Our common stock
      began trading on the Over-The-Counter market on February 10, 2003, and was
      quoted on the NASD Electronic Bulletin Board and initiated trading under the
      symbol “NFDV”.





On
      February 2, 2005 we acquired Old Ariel Way, Inc., a Delaware corporation, in
      exchange for the issuance by us of 33,289,434 shares of our common stock to
      the
      former stockholders of Old Ariel Way. The acquisition was made pursuant to
      the
      Share Exchange Agreement dated January 20, 2005, between Netfran, Old Ariel
      Way
      and the shareholders of Old Ariel Way common stock. Under the terms of the
      Share
      Exchange Agreement, each share of Old Ariel Way common stock outstanding
      immediately prior to the Effective Date was converted into 1.6762 shares of
      our
      common stock. Netfran’s outstanding common stock was not affected by the
      transaction. In addition to the common stock issued to the stockholders of
      Old
      Ariel Way, under the Share Exchange Agreement each outstanding option or warrant
      to purchase Old Ariel Way common stock was converted into an option to purchase
      the number of shares of our common stock equal to the number of Old Ariel Way
      common stock underlying the option or warrant immediately prior to the Effective
      Date multiplied by 1.6762 and the exercise price of each option or warrant
      issued by us equaled the exercise price of the corresponding Old Ariel Way
      option or warrant in effect immediately prior to the Effective Date divided
      by
      1.6762.





In
      connection with the share exchange transaction on February 2, 2005, Old Ariel
      Way and Elliot Krasnow, who was our Chief Executive Officer until the Effective
      Time, 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 Cornell Capital
      Partners, L.P. (“Cornell Capital”), 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. We are now in default unless
      we
      can renegotiate the terms of the loan for an extension with Cornell Capital.
      Cornell Capital is not a controlling stockholder of us, and we believe the
      terms
      of the loan are at least as favorable to us as could be obtained from an
      unrelated third party. In order to induce Cornell Capital to make the loan
      to
      Old Ariel Way, Arne Dunhem, the Chairman and Chief Executive Officer of Old
      Ariel Way before the Effective Time and our Chief Executive Officer after the
      Effective Time, provided a personal guarantee of payment to Cornell Capital.
      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.





On
      February 2, 2005, following the Effective Date of the share exchange transaction
      and our acquisition of Old Ariel Way, we ceased to conduct the Internet
      franchise business we had conducted prior to the Effective Date in order to
      concentrate solely development of its highly secure global communications
      business.





On
      February 2, 2005, in connection with the acquisition and pursuant to the Share
      Exchange Agreement dated January 20, 2005, all of our executive officers
      resigned and the executive officers of Old Ariel Way immediately prior to the
      Effective Date became our new executive officers.





On
      February 25, 2005 we filed with the Securities and Exchange Commission a
      Preliminary Information Statement and thereafter we filed a Definitive
      Information Statement on April 28, 2005 to inform the holders of record of
      shares of our common stock as of the close of business on February 23, 2005
      (the
“Record Date”), that our Board of Directors had recommended, and that the
      holders of a majority of our common stock as of such record date have approved,
      by written consent in lieu of a special meeting of stockholders dated February
      23, 2005, the following corporate actions:





6







1.
            Amending
                our Articles of Incorporation to change our name from “Netfran Development
                Corp.” to “Ariel Way, Inc.”; and2.
            Amending
                our Articles of Incorporation to increase the total number of authorized
                shares of our capital stock from 50,000,000 shares, consisting solely
                of
                our common stock, to a total of 250,000,000 shares of our capital
                stock,
                consisting of 245,000,000 shares of our common stock and 5,000,000
                shares
                of our preferred stock, with all of the preferred stock to be “blank
                check” preferred stock. Our capital stock is described more fully below
                at
                “Description of Capital Stock”.





On
      February 19, 2005 we completed the acquisition of dbsXmedia, Inc., a Delaware
      corporation with offices in Maryland and United Kingdom. dbsXmedia, Inc.
      provides satellite-based services for Business Television (BTV), digital
      signage, training and multimedia. We purchased from dbsXmedia 1,500 shares
      of
      its common stock, par value $0.001 per share. After this transaction dbsXmedia
      had 2,500 shares of common stock issued and outstanding out of which we own
      60%
      and Zygot, LLC, which is owned by the management of dbsXmedia, became the
      minority 40% shareholder. dbsXmedia continues to operate under its existing
      name. As part of the purchase consideration (and related to the dbsXmedia
      acquisition described in the next paragraph), we delivered a commitment to
      the
      benefit of dbsXmedia in the form of a Conditional Guaranty, in favor of Loral
      Skynet Network Services, Inc., CyberStar, L.P., CyberStar, LLC, and Loral
      Skynet, a division of Loral SpaceCom Corporation, having a total value of
      $3,000,000. We agreed that dbsXmedia will provide employment contracts and
      full
      benefits for two members of the dbsXmedia management team for three years.
      dbsXmedia operates as a subsidiary of our’s but with autonomous offices and
      management control.





On
      April
      21, 2005, concurrently with our acquisition of dbsXmedia, dbsXmedia completed
      a
      transaction pursuant to an asset Purchase Agreement with Loral Skynet Network
      Services, Inc., CyberStar L.P., and CyberStar, LLC, pursuant to which dbsXmedia
      purchased Loral Skynet’s Business Television product line and assumed the
      management and further development of Loral Skynet’s traditional business
      television services (BTV). Under the terms of the transaction, dbsXmedia
      acquired Loral Skynet’s BTV client base in exchange for $400,000 in cash,
      300,000 shares of our common stock, and dbsXmedia’s assumption of ongoing
      contracts for infrastructure support from Loral Skynet. The ownership transition
      will leave unchanged the services for current customers, under an agreement
      that
      maintains the existing teleport and satellite infrastructure provided by Loral
      Skynet. dbsXmedia agreed that some of the employees of Loral Skynet's BTV group
      will transfer to dbsXmedia's new offices in Frederick, Maryland and Plymouth,
      United Kingdom. This team will take over the daily operations of customers’
corporate communications networks, ensuring seamless, high quality service
      .
      dbsXmedia made and will make cash purchase price payment to Loral Skynet in
      three installments as follows: (i) $250,000 at the closing of the transaction,
      (ii) $75,000 on the first anniversary of the closing of the transaction; and
      (iii) $75,000 on the second anniversary of the Closing of the transaction.
      T he
      $250,000 cash at closing was allocated from prepaid revenue transfered to
      dbsXmedia from Loral Skynet as part of the business acquired. As part of the
      transaction, we delivered a commitment to the benefit of dbsXmedia in the form
      of a Conditional Guaranty in favor of Loral Skynet Network Services, Inc.,
      CyberStar, L.P., CyberStar, LLC, and Loral Skynet, a division of Loral SpaceCom
      Corporation, having a total value of $3,000,000.





On
      May
      26, 2005 we changed our name from Netfran Development Corp. to Ariel Way, Inc.
      and we changed our trading symbol from “NFDV” to the new symbol “AWYI”.





**History
      of Old Ariel Way**





Old
      Ariel
      Way was formed in the State of Delaware as a Limited Liability Corporation
      on
      February 10, 2004 and focused on providing executive management and merger
      and
      acquisition services within the area of highly secure global communications
      services for government customers and global telecommunications operators and
      corporate enterprises. On September 23, 2004, Old Ariel Way converted from
      a
      limited liability company to a Delaware C-corporation and changed its name
      to
“Ariel Way, Inc.”





On
      September 27, 2004, Old Ariel Way closed a transaction with the publicly traded
      Delaware corporation Market Central, Inc. “OTCBB:MKTE”, and issued to Market
      Central 2,000,000 shares of Old Ariel Way common stock pursuant to the terms
      of
      a Stock Purchase Agreement dated September 24, 2004. The purchase consideration
      had an aggregate value of $250,000, consisting of the rights to certain software
      technology with a value of $200,000 and development/support services
      consideration rendered by Market Central’s senior executives with a value of
      $50,000.





7




On
      September 30, 2004, Old Ariel Way entered into an Agreement and Plan of Merger
      with Enfotec, Inc., a private Delaware company, pursuant to which a newly
      formed, wholly-owned subsidiary of Old Ariel Way merged into Enfotec. The merger
      was consummated on September 30, 2004. As a result of the merger, Enfotec became
      a wholly-owned subsidiary of Old Ariel Way. On September 30, 2004, Old Ariel
      Way
      issued 1,000,000 shares of its common stock to the holders of Enfotec’s common
      stock, with an additional 1,000,000 shares of Old Ariel Way’s common stock held
      in reserve for issuance to the Enfotec stockholders if Enfotec met certain
      revenue milestones as of July 15, 2005. On September 30, 2004 Old Ariel Way
      also
      issued to certain creditors of Enfotec, Inc. 200,000 shares of Old Ariel Way’s
      common stock pursuant to the terms of a settlement of certain liabilities of
      Enfotec.





On
      April
      19, 2005 Old Ariel Way designated 2,000,000 shares of Old Ariel Way preferred
      stock as “Series A Redeemable Preferred Stock”. Each issued and outstanding
      share of Old Ariel Way Series A Redeemable Preferred Stock accrues a dividend
      from the original issue date equal to twelve percent (12%) of the original
      purchase price (which was $1.00 per share, as adjusted upon any stock split,
      reverse stock split, combination or recapitalization affecting the shares of
      Series A Redeemable Preferred Stock) per annum, which shall be payable when,
      as
      and if declared by the Old Ariel Way Board of Directors. Old Ariel Way shall
      not
      pay or declare any dividends on the Common Stock of Old Ariel Way unless the
      full accrued and unpaid dividends on the Series A Redeemable Preferred Stock
      described in this paragraph have been paid.





On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital Partners, LP, all
      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. The equity
      provided by the sale of the Series A Preferred Stock enabled us to satisfy
      a
      closing condition of a transaction to acquire the Loral Skynet Business TV
      client base. 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. We believe the issuance of the stock to be
      exempt from registration under Section 4(2) of the Securities Act.





8








**Item
      2. Description of Property**





Our
      principal headquarters executive offices are located in approximately 900 square
      feet of office space at 8000 Towers Crescent Drive, Suite 1220, Vienna, VA
      22182. The term of the lease is on a month-to-month basis at a rent of $2,100
      per month including utilities. Our subsidiary dbsXmedia occupies approximately
      2,800 square feet of office space at 411 Aviation Way, Frederick, Maryland.
      The
      term of the lease is five years at a rent of $5,350 per month including
      utilities that expires in April 2010 dbsXmedia also occupies approximately
      2,950
      square feet of office space at Plymouth, United Kingdom. The term of the lease
      is fifteen years at a rent of UK Pounds 4,490 per month including taxes that
      expires in 2015. Our subsidiary Enfotec, Inc. occupies a small office in Irvine,
      California on a month-by-month basis, currently at a nominal deferred charge.





9





**Item
      3. Legal Proceedings**





In
      June,
      2006, dbsXmedia, Inc. was notified that as a result of its vacating of the
      premises in its Frederick, MD office and the ceasing of operations at that
      site,
      the landlord had filed suit to collect the rent for three months under the
      default provisions of the lease. The lease term expires in April 2010, with
      a
      remaining balance of approximately $264,000, which may be accelerated due to
      the
      default of the lease agreement. The ultimate conclusion of this assessment
      is
      not determinable at this time and the entire balance has been accrued in the
      financial statements for the period ending June 30, 2006. The lease is
      personally guaranteed by the former President of dbsXmedia, Inc.




10


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





Not
      applicable.








11


**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
            
            $
            0.02





**Stockholders**





As
        of
        September 19, 2006, we believe there were approximately 308 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. 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 during the year ended September 30, 2005. Options that
      had
      been granted by us prior to February 2, 2005 and had not been exercized as
      of
      that date were cancelled pursuant to the Share Exchange Agreement dated January
      20, 2005, between Netfran, Old Ariel Way and the shareholders of Old Ariel
      Way
      common stock.





12





The
      following table sets forth certain information, as of September 30, 2005,
      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)
            9,860,097
            $0.020
            N/ATotal
            9,860,097
            $0.020
            N/A





(1)
            Includes
                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 9,550,000
                shares outstanding as of September 30, 2005 that were issued by Ariel
                Way
                under non-plan options and warrants.








13





**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”). As of September 30, 2005, of these Non-Plan Grants,
      warrants to purchase 2,750,000 shares were held by members of our board of
      directors and warrants to purchase 3,450,000 ****** shares
      were held by executive officers of Ariel Way. Warrants to purchase 4,500,000
      shares were held by other individuals. 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.





**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
      January 2003, we issued 33,738 shares of our common stock as payment for legal
      services rendered to us during 2002. The value per share at the time legal
      services were rendered was $0.24 per share. These shares were deemed issuable
      as
      of December 31, 2002. We believe the issuance of the stock to be exempt from
      registration under Section 4(2) of the Securities Act.





On
      February 11, 2003, pursuant to our 2003 Stock Incentive Plan, we granted to
      three executives and directors shares of restricted common stock. Each
      participant signed a restricted stock award agreement in connection with such
      grant. The awarded shares contain a restrictive legend restricting transfer
      without registration under the Securities Act of 1933 or an exemption there
      from. Each such participant is an accredited investor under Regulation D. The
      grantees were: Elliot Krasnow 200,000 shares; Robert S. Steinberg 100,000
      shares; and Dellray Lefevere 25,000 shares. The value per share at the time
      the
      services were rendered was $0.25 per share. We believe the issuance of the
      stock
      to be exempt from registration under Section 4(2) of the Securities Act.





On
      July
      22, 2003, we signed a letter agreement with Stategica Management LLC of Miami,
      Florida to provide advisory services designed to generate at least $10 million
      of value over a three-year period ending in 2006. The value was to be in the
      form of funding, acquisition transactions or other business transactions
      identified by Strategica. In connection with the agreement, we issued 668,018
      shares of common stock to Strategica. Since there could be no assurance of
      any
      level of value we may receive from such engagement, we retained the option
      to
      repurchase such shares to the extent that $10 million of value, as defined
      in
      the agreement, was not provided by Strategica during the term of the engagement.
      The value per share at the time the services were rendered was assumed to be
      $0.25 per share. We believe the issuance of the stock to be exempt from
      registration under Section 4(2) of the Securities Act.





On
      August
      19, 2004, we terminated our advisory agreement with Strategica Management LLC,
      as reported on Form 8-K filed with the Commission on August 26, 2004. The
      668,018 shares of common stock issued to Strategica Management LLC were returned
      to the transfer agent for cancellation.





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. In addition to the
      common stock issued to the former stockholders of Old Ariel Way, under the
      Share
      Exchange Agreement each outstanding option or warrant to purchase Old Ariel
      Way
      common stock was converted into an option to purchase the number of shares
      of
      our common shares equal to the number of Old Ariel Way common shares underlying
      the option or warrant immediately prior to February 2, 2005 multiplied by 1.6762
      and the exercise price of each option or warrant we issued equals the exercise
      price of the corresponding Old Ariel Way option or warrant in effect immediately
      prior to February 2, 2005 divided by 1.6762. We believe the issuance of the
      stock to be exempt from registration under Section 4(2) of the Securities Act.





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.





14





On
      April
      28, 2005, pursuant to an asset Purchase Agreement with Loral Skynet Network
      Services, Inc., CyberStar L.P. and CyberStar, LLC, dbsXmedia purchased Loral
      Skynet’s Business Television product line and assumed the management and further
      development of Loral Skynet’s traditional business television services (BTV).
      Under the terms of the transaction, dbsXmedia acquired Loral Skynet’s BTV client
      base in exchange for cash and shares of common stock and the assumption of
      ongoing contracts for infrastructure support from Loral Skynet. As part of
      the
      transaction, we issued to Loral Skynet a total of 300,000 shares of common
      stock. The value per share at the time the transaction was $0.35 per share.
      We
      believe the issuance of the stock to be exempt from registration under Section
      4(2) of the Securities Act.





On
      September 23, 2004, Old Ariel Way issued an aggregate of 14,680,000 shares
      of its common stock in connection with a conversion to a corporation from a
      predecessor limited liability company, Ariel Way, LLC, as follows: 7,600,000
      shares to The Dunhem Family Partnership, 2,800,000 shares to Anand Kumar,
      1,100,000 shares to Magdy Battikha, 900,000 shares to Aziz Bennani, 900,000
      shares to Voula Kanellias, 480,000 shares to Chivas Capital, Inc., 400,000
      shares to J. David Morris, 300,000 shares to Michael H. Jordan, and 200,000
      shares to Steven Toro. All of the shareholders had acquired their limited
      liability company interests from Ariel Way, LLC at various dates from the
      forming of Ariel Way, LLC on February 10, 2004. We believe the issuance of
      the
      stock to be exempt from registration under Section 4(2) of the Securities
      Act.





On
      September 27, 2004, Old Ariel Way issued to Market Central, Inc., 2,000,000
      shares of Old Ariel Way’s common stock pursuant to the terms of a Stock Purchase
      Agreement for a purchase consideration in an aggregate value of $250,000,
      consisting of the rights to certain software technology with a value of $200,000
      and development/support services consideration rendered by Market Central’s
      senior executives with a value of $50,000. We believe the issuance of the stock
      to be exempt from registration under Section 4(2) of the Securities Act.





On
      September 30, 2004, Old Ariel Way entered into a 2004 Standby Equity
      Distribution Agreement with Cornell Capital. This agreement was terminated
      on
      July 20, 2005 and we entered into a new 2005 Standby Equity Distribution
      Agreement with Cornell Capital on July 21, 2005. In connection with the 2004
      Standby Equity Distribution Agreement, Cornell Capital 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.
      We
      believe the issuance of the stock to be exempt from registration under
      Section 4(2) of the Securities Act.





On
      September 30, 2004, Old Ariel Way issued to the stockholders of Enfotec
      1,000,000 shares of Old Ariel Way’s common stock pursuant to the terms of a
      share exchange under which Old Ariel Way acquired Enfotec. In addition, on
      September 30, 2004, Old Ariel Way also issued to certain stockholders and
      creditors of Enfotec. 200,000 shares of Old Ariel Way common stock, valued
      at a
      fair value of $114,000, based on a price of $0.57 per share, pursuant to the
      terms of a settlement of certain liabilities of Enfotec. We believe the issuance
      of the stock to be exempt from registration under Section 4(2) of the
      Securities Act.





On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital, 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 Cornell Capital 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. We believe the issuance of the stock to be exempt from
      registration under Section 4(2) of the Securities Act.





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. Each such issuance was made pursuant to individual contracts,
      which
      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 us 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 our results of operations and
      financial position for the two years ended September 30, 2005 and the factors
      that could affect our future financial condition and results of operations.
      Historical results may not be indicative of future performance.





15





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.





**General**





On
      February 2, 2005, we completed the acquisition of Old Ariel Way, Inc. under
      the
      terms of the Share Exchange Agreement dated January 20, 2005, between Netfran
      Development Corp. and Ariel Way, Inc. As a result of the stock exchange
      transaction, the former shareholders of Old Ariel Way now own a substantial
      majority of our common stock. As a result of the share exchange transaction
      consummated on February 2, 2005, our financial statements are based on Old
      Ariel
      Way’s operation which became ours and the business we formerly conducted under
      the name Netfran Development Corp. ceased. Our fiscal year also changed as
      a
      result of the share exchange transaction from December 31 to September 30.
      Our
      business includes after April 21, 2005 also the satellite Business TV line
      of
      business that was acquired by our subsidiary dbsXmedia.





**Revenue
      and Expenses**





**Overall
      Operating Results:**





Our
      revenues from operations were $1,052,616 in fiscal year 2005 ending September
      30, 2005. Old Ariel Way was formed on February 10, 2004 with limited revenues
      and thus our revenues from operations were $41,000 in fiscal year 2004 ending
      September 30, 2004 . As stated above, as a result of the share exchange
      transaction consummated on February 2, 2005, the financial statements for the
      fiscal year ended September 30, 2005 are based on Old Ariel Way’s operation
      which became Ariel Way’s and the business we formerly conducted under the name
      Netfran Development Corp. ceased. **** Our
      fiscal year also changed as a result of the share exchange transaction from
      December 31 to September 30.





Our
      total
      fiscal year 2005 ending on September 30, cost and expenses were $3,180,132
      compared to $144,273 for fiscal year 2004, i.e. from inception on February
      10,
      2004 through September 30, 2004.





As
      of
      September 30, 2005 we had $122,640 in cash and cash equivalents compared to
      $29,546 as of September 30, 2004 since there was only limited operation during
      fiscal year 2004 . As of September 30, 2005, our accounts payable and accrued
      expenses were $1,390,380 *.*





**Operating
      and Net Losses**





We
      had a
      net loss of $2,389,342 for the fiscal year ended September 30, 2005 and we
      had a
      net loss of $103,273 for the fiscal year ended September 30, 2004, which was
      from inception on February 10, 2004 through September 30, 2004.





As
      of September 30, 2005 we had accumulated $2,492,615 in operating losses that
      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. No tax benefit has been reported in the financial statements.







**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, judgements 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.




16


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.




**Licenses
      and Goodwill**




We
      reported an impairment during the year ended September 30, 2005 by an aggregate
      of $509,468. The impairment was represented by a reduction of $309,468 of the
      goodwill which had been recorded as a result of our acquisition of Enfotec,
      Inc.
      on September 30, 2004 and a reduction of $200,000 recorded on September 27,
      2004
      as a result of our acquisition of certain software technologies and licenses
      as
      part of an agreement with Market Central, Inc. on September 27, 2004.




See
      Note 2 — Goodwill and Other Intangible Assets




Licenses
      and goodwill must be reviewed for impairment annually, or more frequently if
      events or changes in circumstances indicate that the asset might be impaired.
      We
      perform the annual impairment review on licenses and goodwill during the last
      fiscal quarter. There can be no assurance that upon review at a later date
      material impairment charges will not be required.




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.




We
      tested
      goodwill for impairment of our acquisition of Enfotec, Inc. and the software
      technology license from Market Central, Inc. pursuant to SFAS No. 142,
      "Goodwill and Other Intangible Assets." The normal approach would be to apply
      a
      discounted cash flow approach to value the operation of Enfotec, Inc. and sales
      of the Market Central, Inc. software technologies, using value drivers and
      risks
      specific to its technologies. The cash flow estimates should incorporate
      assumptions that market participants would use in their estimates of fair value.
      Key assumptions made in this process should be the selection of a discount
      rate,
      estimated future cash flow levels, projected capital expenditures and selection
      of terminal value multiples.




As
      a
      result of only limited developments of the Enfotec technologies and that no
      revenues had been generated during the fiscal year 2005, we recorded an
      impairment of the goodwill at a total of $309,469. Likewise, during the fiscal
      year 2005, we had not developed the software technologies available to us under
      the agreement with Market Central, Inc. and no revenue had been generated and
      we
      recorded an impairment of $200,000.




Our
      test
      for impairment of the Enfotec technologies and the Market Central software
      technologies involves uncertainties in applying the valuation techniques and
      the
      variability, however, we believe we have applied conservative impairrment
      approaches. We have no previous underlying assumptions that we have applied
      in
      the past.




The
      outcome of our impairment of the Enfotec, Inc. goodwill and Market Central,
      Inc.
      software technology license has a material effect on our total assets and
      resulted in a decrease in the net stockholders’ deficit during the period to
      $422,727.




17




**Property,
      Plant and Equipment**




Annually,
      we review our property, plant and equipment lives 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, 2005.




We
      review
      long-lived assets for impairment whenever events or circumstances indicate
      that
      the carrying amount may not be fully recoverable.




**Liquidity
      and Capital Resources**





Net
      cash
      used by operating activities was $1,081,254 for the fiscal year ended September
      30, 2005 compared with $454 for the fiscal year ended September 30, 2004, i.e.
      from inception on February 10, 2004 through September 30, 2004 since there
      was
      only limited operation during fiscal year 2004.





As
      of
      September 30, 2005 we had a total Stockholders’ Deficit of $1,841,181 compared
      with September 30, 2004, when we had a total Stockholders’ Equity of $422,727.
      At September 30, 2005, we had a net loss in working capital (current assets
      minus current liabilities) of approximately $2,394,316 compared with at
      September 30, 2004 when we had a net loss in working capital (current assets
      minus current liabilities) of approximately $95,416.





18





On
      September 30, 2004, Old Ariel Way, which we acquired on February 2, 2005,
      entered into a 2004 Standby Equity Distribution Agreement with Cornell Capital
      .
      This agreement was terminated on July 20, 2005 and we entered into a new 2005
      Standby Equity Distribution Agreement with Cornell Capital on July 21, 2005.
      The
      2005 Standby Equity Distribution Agreement provides, generally, that Cornell
      will purchase up to $50 mil lion of common stock over a two-year period, with
      the timing and amount of such purchases, if any, at our discretion. Any sh
      ares
      of common stock sold under the 2005 Standby Equity Distribution Agreement will
      be priced at a 4% discount of the lowest volume weighted average price of the
      common stock as reported by Bloomberg LP during the five consecutive trading
      days after we give notice to Cornell that we wish to sell stock to them. We
      are
      not permitted to draw down more than $4 million in any 30-day calendar period.
      In addition, in order for us to draw down on the 2005 Standby Equity
      Distribution Agreement, we must file and obtain the effectiveness of the
      registration statement of which this prospectus is a part, registering the
      resale of the shares of common stock that may be issued to Cornell under the
      2005 Standby Equity Distribution Agreement. At the time of each draw down,
      we
      are obligated to pay Cornell a fee equal to 3% percent of the amount of each
      draw down. In connection with the 2004 Standby Equity Distribution Agreement,
      on
      September 30, 2004, Cornell Capital 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. We believe the issuance
      of
      the stock to be exempt from registration under Section 4(2) of the
      Securities Act.





Even
      if
      we are able to draw down on the 2005 Standby Equity Distribution Agreement
      , we
      may need and we may not be able to obtain additional sources of financing.
      We
      may need ad ditional financing, from time to time, for the following:





-
            Acquisitions
                of one or more companies





-
            Investment
                in infrastructure equipment and facilities for our multimedia services





-
            Investment
                in laboratory facilities including test and simulation equipment





-
            General
                working capital purposes





On
      September 30, 2004, Old Ariel Way entered into a Securit ies Purchase Agreement
      and issued a convertible debenture to Cornell Capital in the original principal
      amount of $500,000. The convertible debenture was amended on July 21, 2005.
      The
      convertible debenture accrues interest at a rate of 5% per year and is due
      and
      payable on September 29, 2006. At our option, we have the right to redeem a
      portion or all outstanding convertible debenture. The redemption price shall
      be
      one hundred twenty percent (120%) of the amount redeemed plus accrued
      interest. The convertible debenture is convertible at the holder’s option any
      time up to maturity at the fixed conversion price (the “Conversion Price”) in
      effect on any Conversion Date to be equal to Thirty Cents ($0.30), which may
      be
      adjusted pursuant to the other terms of the convertible debenture. Except after
      an event of default, as set forth in the convertible debenture, the holder
      is
      not entitled to convert such debenture for a number of shares of our common
      stock in excess of that number of shares which, upon giving effect to such
      conversion, would cause the aggregate number of shares of common stock
      beneficially held by such holder and its affiliates to exceed 4.99% of our
      outstanding shares of common stock.





On
      February 2, 2005 Old Ariel Way borrowed $400,000 from Cornell Capital. The
      loan
      bears interest at the rate of 12% per annum and was due and payable on May
      31,
      2005 and we are now in default unless we can renegotiate the terms of the loan
      for an extension with Cornell Capital. Cornell Capital is not a controlling
      stockholder of Old 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. In order
      to induce Cornell Capital to make the loan to Old Ariel Way, Arne Dunhem, the
      Chairman and Chief Executive Officer of Old Ariel Way before the Effective
      Time
      and our Chief Executive Officer after the Effective Time, provided a personal
      guarantee of payment to Cornell Capital. 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.





On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital, 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 Cornell Capital, dated April 19, 2005.





On
      July
      28, 2005, we borrowed $600,000 from Montgomery Equity Partners, Ltd.
      (“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 is due and payable on January 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.





19




On
      August
      10, 2005, we elected through our subsidiary Old Ariel Way to redeem and purchase
      from Cornell Capital 2,000,000 shares of Old Ariel Way Series A Redeemable
      Preferred Stock for a total of $2,074,301. In connection with the redemption,
      we
      acknowledged to Cornell Capital that the purchase price represented an agreed
      upon price of $1.00 per share of Preferred Stock along with $74,301 of dividends
      accrued on the Preferred Stock to August 10, 2005. We also acknowledged that
      the
      sum of $30,000 had been paid to Cornell Capital from the closing on July 28,
      2005 of the $600,000 that we borrowed from Montgomery Equity. We also
      represented that we shall owe to Cornell Capital the balance of the Purchase
      Price, or the sum of $30,271.





If
      our
      revenue from operations and funds raised from the 2005 Standby Equity
      Distribution Agreement 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 might need to cease operations.





**Off-Balance
      Sheet Arrangements**





On
      April
      21, 2005, a s
      part of
      a transaction pursuant
      to an asset Purchase Agreement with Loral Skynet ,
      we delivered
      a commitment to the benefit of dbsXmedia in the form of a conditional guaranty
      with a term of two years for satellite services in favor of Loral Skynet, having
      a total value of $3,000,000 that will reduce to $1,500,000 on April 21, 2006
      and
      fully expire on April 21, 2007. Should our subsidiary dbsXmedia fail to make
      monthly payments at $150,000 for certain satellite services during the period
      of
      two years, we may be declared to be in default by Loral Skynet, and Loral Skynet
      would have a right to call upon the conditional guaranty.





**Plan
      Of Operation**





We
      were
      formed in 2000 under the name Netfran Development Corp. to market the Netspace
      Franchise System provided by Netvertise, Inc., a Florida company, as a
      franchisor of Internet web site design, hosting, updating, maintenance,
      administration, e-mail publishing and consulting services, marketing and
      advertising services and related services under the registered servicemark
      "NETSPACE". Our initial strategy was to support franchisees to assist small
      and
      medium size businesses to implement an effective Internet World Wide Web
      strategy. We had a total of 56 franchises in the United States and United
      Kingdom as of March 10, 2003. Our management also managed Netvertise, Inc.
      Between year 2000 and end year 2004, substantially all of our revenues were
      derived from franchise operations, which included a franchise fee, in an
      identified territory, revenue sharing with franchisees, and on-going royalties
      based on gross retail revenues to the franchisees' customers, and advertising
      fees of revenues generated by its franchisees. We anticipated that the revenues
      from ongoing royalties would rise as the franchisees established and built
      their
      businesses. We believed that sales of franchises would continue to generate
      the
      bulk of our revenues for several years in view of the large part of the country
      where we had not sold franchises. However, when sales of franchises slow or
      decline we would become more dependent on ongoing royalties from our
      franchisees. We supported the franchisees by advertising and training but the
      level of revenues achieved from ongoing royalties from our franchisees were
      not
      adequate to sustain long-term operation.





Upon
      completion of our acquisition of Old Ariel Way on February 2, 2005, the business
      strategy, direction and focus of Old Ariel Way became our dominant operating
      focus. In February 2005, we also decided to further pursue a strategy of
      acquiring profitable companies providing solutions, services and technologies
      in
      the area of highly secure global communication. From February 2, 2005, we
      focused through our wholly owned subsidiary Enfotec, Inc. in the design,
      manufacture and marketing of high-speed security appliance solutions with a
      fully integrated Linux operating system, which is an open based operating
      system, that integrate high-performance Virtual Private Network, “VPN”,
      firewall, intrusion detection, anti-virus and management in a single network
      appliance. Enfotec’s “EN” Security Appliance and “CSA” Custom Security Appliance
      products feature certain hardware-based technology that delivers we believe,
      true wire-line data speed performance and with high level of security.





After
      the
      change of our business strategy on February 2, 2005, we subsequently also
      completed the acquisition of the start-up company dbsXmedia, Inc. and
      established satellite business TV services as a new line of business through
      this subsidiary. Through dbsXmedia, we provide communication infrastructure
      and
      integrated multimedia services to corporations throughout the United States
      and
      Europe. dbsXmedia's executive management has over 25 years of experience in
      the
      video and transmission industry. dbsXmedia operates from offices in Frederick,
      Maryland and Plymouth, United Kingdom, providing solutions for Business
      Television (BTV), digital signage and interactive media delivered over a
      combination of satellite, terrestrial and wireless networks. Digital signage
      includes technologies using LCD TV and plasma screens to deliver video based
      messaging directly to consumer audiences. We believe digital signage is an
      effective direct advertising method providing individually targeted marketing.
      Integrated multimedia services include music radio, video, and IP (Internet
      Protocol)-based file transfer for training/catalogs/point of sale integrated
      with other information to the clients.





20


At
      the
      time of its acquisition by Old Ariel Way, the Enfotec subsidiary had filed
      disclosure documents with the US Patent Office on two technologies, Chain Packet
      Processing and Pattern Signature Recognition. These technologies are at the
      core
      of our Enfotec products. These are the enabling technologies that, we believe,
      allow us to perform at speeds better than proprietary platforms offered by
      our
      competitors while having an open system architecture at our core.





We
      are
      pursuing both acquisitions and strategic alliances to leverage our strategy
      of
      creating a technology and services company for 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
      highly secure global communications solutions and technologies and position
      us
      to play a more visible role in providing next generation highly secure
      communications solutions, products, services and technologies.





In
      order
      to implement our overall business plan including both the full development
      of
      the business of our Enfotec and dbsXmedia operations and planned acquisition
      opportunities, we intend to attempt to raise at least $5,000,000 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 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**





On
      October 3, 2001, the FASB issued Statement of Financial Accounting Standards
      No.
      144, “ *Accounting
      for the Impairment or Disposal of Long-Lived Assets”* (“SFAS
      144”), which is applicable to financial statements issued for fiscal years
      beginning after December 15, 2001. The FASB’s new rules on asset impairment
      supersede SFAS 121, *“Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
      of,”* and
      portions of Accounting Principles Board Opinion 30, “Reporting the Results of
      Operations.” This Standard provides a single accounting model for long-lived
      assets to be disposed of and significantly changes the criteria that would
      have
      to be met to classify an asset as held-for-sale. Classification as held-for-sale
      is an important distinction since such assets are not depreciated and are stated
      at the lower of fair value and carrying amount. This Standard also requires
      expected future operating losses from discontinued operations to be displayed
      in
      the period (s) in which the losses are incurred, rather than as of the
      measurement date as presently required.





In
      April
      2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44
      and
      64, Amendment of FASB Statement No. 13, and Technical Corrections. This
      statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment
      of
      Debt, and an amendment of that statement, SFAS No. 44, Accounting for Intangible
      Assets of Motor Carriers, and SFAS No. 64, Extinguishments of Debt Made to
      Satisfy Sinking-Fund Requirements. This statement amends SFAS No. 13, Accounting
      for Leases, to eliminate inconsistencies between the required accounting for
      sales-leaseback transactions and the required accounting for certain lease
      modifications that have economic effects that are similar to sales-leaseback
      transactions.





Also,
      this statement amends other existing authoritative pronouncements to make
      various technical corrections, clarify meanings, or describe their applicability
      under changed conditions. Provisions of SFAS No. 145 related to the rescissions
      of SFAS No. 4 were effective for the Company on November 1, 2002 and provisions
      affecting SFAS No. 13 were effective for transactions occurring after May 15,
      2002. The adoption of SFAS No. 145 did not have a significant impact on the
      Company’s results of operations or financial position.





21


In
      June
      2003, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
      or
      Disposal Activities. This statement covers restructuring type activities
      beginning with plans initiated after December 31, 2002. Activities covered
      by
      this standard that are entered into after that date will be recorded in
      accordance with provisions of SFAS No. 146. The adoption of SFAS No. 146 did
      not
      have a significant impact on the Company’s results of operations or financial
      position.





In
      December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based
      Compensation-Transition and Disclosure, an amendment of FASB Statement No.
      123”
(“SFAS 148”). SFAS 148 amends FASB Statement No. 123, “Accounting for
      Stock-Based Compensation,” to provide alternative methods of transition for an
      entity that voluntarily changes to the fair value based method of accounting
      for
      stock-based employee compensation. It also amends the disclosure provisions
      of
      that Statement to require prominent disclosure about the effects on reported
      net
      income of an entity’s accounting policy decisions with respect to stock-based
      employee compensation. Finally, this Statement amends Accounting Principles
      Board (“APB”) Opinion No. 28, “Interim Financial Reporting”, to require
      disclosure about those effects in interim financial information. SFAS 148 is
      effective for financial statements for fiscal years ending after December 15,
      2002. The Company will continue to account for stock-based employee compensation
      using the intrinsic value method of APB Opinion No. 25, “Accounting for Stock
      Issued to Employees,” but has adopted the enhanced disclosure requirements of
      SFAS 148.





In
      April
      2003, the FASB issued SFAS Statement No. 149, “Amendment of Statement 133 on
      Derivative Instruments and Hedging Activities”, which amends and clarifies
      financial accounting and reporting for derivative instruments, including certain
      derivative instruments embedded in other contracts (collectively referred to
      as
      derivatives) and for hedging activities under FASB Statement No. 133, Accounting
      for Derivative Instruments and Hedging Activities. This Statement is effective
      for contracts entered into or modified after June 30, 2003, except for certain
      hedging relationships designated after June 30, 2003. Most provisions of this
      Statement should be applied prospectively. The adoption of this statement did
      not have a significant impact on the Company’s results of operations or
      financial position.





In
      May
      2003, the FASB issued SFAS Statement No. 150, “Accounting for Certain Financial
      Instruments with Characteristics of both Liabilities and Equity”. This Statement
      establishes standards for how an issuer classifies and measures certain
      financial instruments with characteristics of both liabilities and equity.
      It
      requires that an issuer classify a financial instrument that is within its
      scope
      as a liability (or an asset in some circumstances). This statement is effective
      for financial instruments entered into or modified after May 31, 2003, and
      otherwise is effective at the beginning of the first interim period beginning
      after June 15, 2003, except for mandatory redeemable financial instruments
      of
      nonpublic entities, if applicable. It is to be implemented by reporting the
      cumulative effect of a change in an accounting principle for financial
      instruments created before the issuance date of the Statement and still existing
      at the beginning of the interim period of adoption. The adoption of this
      statement did have a significant impact on the Company’s results of operations
      or financial position. (See Note 10)





In
      November 2002, the FASB issued Interpretation No. 45 (“FIN 45”), Guarantor’s
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others. FIN 45 requires a company, at the time
      it
      issues a guarantee, to recognize an initial liability for the fair value of
      obligations assumed under the guarantees and elaborates on existing disclosure
      requirements related to guarantees and warranties. The recognition requirements
      are effective for guarantees issued or modified after December 31, 2002 for
      initial recognition and initial measurement provisions. The adoption of FIN
      45
      did not have a significant impact on the Company’s results of operations or
      financial position.





In
      January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”),
      Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
      FIN 46 requires certain variable interest entities to be consolidated by the
      primary beneficiary of the entity if the equity investors in the entity do
      not
      have the characteristics of a controlling financial interest or do not have
      sufficient equity at risk for the entity to finance its activities without
      additional subordinated financial support from other parties. FIN 46 is
      effective for all new variable interest entities created or acquired after
      January 31, 2003. For variable interest entities created or acquired prior
      to
      February 1, 2003, the provisions of FIN 46 must be applied for the first interim
      or annual period beginning after June 15, 2003. The adoption of FIN 46 did
      not
      have a significant impact on the Company’ results of operations or financial
      position.





22


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 adoption of SFAS No. 123R
      will not have any affect on the Company’s financial position or results of
      operations.





In
      December 2004, the FASB issued SFAS No. 151, “Inventory Costs.” SFAS
      No. 151 requires abnormal amounts of inventory costs related to idle
      facility, freight handling and wasted material expenses to be recognized as
      current period charges. Additionally, SFAS No. 151 requires that allocation
      of fixed production overheads to the costs of conversion be based on the normal
      capacity of the production facilities. The standard is effective for fiscal
      years beginning after June 15, 2005. The Company does not have
      manufacturing operations or goods held for resale and does not expect the
      adoption of SFAS No. 151 to have any impact on the Company’s financial
      position or results of operations.





In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of
      Non-monetary Assets - An Amendment of APB Opinion No. 29.” SFAS
      No. 153 amends APB Opinion No. 29, “Accounting for Non-monetary
      Transactions.” The amendments made by SFAS No. 153 are based on the
      principle that exchanges of non-monetary assets should be measured based on
      the
      fair value of the assets exchanged. Further, the amendments eliminate the narrow
      exception for non-monetary exchanges of similar productive assets and replace
      it
      with a broader exception for exchanges of non-monetary assets that do not have
      “commercial substance.” Previously, APB No. 29 required that the accounting
      for an exchange of a productive asset for a similar productive asset or an
      equivalent interest in the same or similar productive asset should be based
      on
      the recorded amount of the asset relinquished. The provisions in SFAS
      No. 153 are effective for non-monetary asset exchanges occurring in fiscal
      periods beginning after June 15, 2005. The Company does not expect the
      adoption of SFAS No. 153 to have a material impact on the Company’s
      financial position or results of operations.





**Inflation**





Our
      monetary assets, consisting primarily of cash and receivables, and our
      non-monetary assets, consisting 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.





23





**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.





**We
      have historically lost money and we expect losses will continue in the near
      term, which means that we may not be able to continue operations unless we
      obtain additional funding**





We
      have
      historically lost money. In the fiscal year ended September 30, 2005 we had
      a
      net loss of $ 2,389,342 and as of September 30, 2004 we had a net loss of
      $103,273 . Future losses are likely to occur. Accordingly, we may experience
      liquidity and cash flow problems if we are not 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.





**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**





We
      have
      generated revenue from operations; however, if we do not begin generating more
      revenue we may have to cease operations. At September 30, 2005, we had an
      accumulated deficit of $ 2,492,615 . In order to become profitable, we will
      need
      to generate revenues to offset our cost of research and development 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.


24


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 anticipate that, in addition to the
      $50 million available to us under the 2005 Standby Equity Distribution
      Agreement from Cornell Capital, we may 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 $50 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.





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
      may not be able to access sufficient funds when needed under the 2005 Standby
      Equity Distribution Agreement and the price of our common stock will affect
      our
      ability to draw down on the 2005 Standby Equity Distribution Agreement**





We
      are
      currently dependent upon external financing to fund our operations. Our
      financing needs are expected to be provided, in large part, by our 2005 Standby
      Equity Distribution Agreement. The amount of each advance under the 2005 Standby
      Equity Distribution Agreement is subject to a maximum amount equal to $1,000,000
      in an advance period defined as any 5-day period. Because of this maximum
      advance restriction, we may not be able to access sufficient funds when needed.
      If the market price of our shares of common stock declines, we would be required
      to issue more shares of common stock in order to draw down the same dollar
      amount of an advance than if our stock price were higher. Our Articles of
      Incorporation currently authorize Ariel Way to issue a total of 250,000,000
      shares of our capital stock, consisting of 245,000,000 shares of our common
      stock and 5,000,000 shares of our preferred stock.





In
      addition, pursuant to the terms of the 2005 Standby Equity Distribution
      Agreement, Cornell Capital may not own more than 9.9% of our outstanding shares
      of common stock. In the event Cornell Capital is unable to sell the shares
      of
      our common stock that are issued after we receive an advance in order to keep
      them below 9.9% beneficial ownership, we might not be able to draw down
      additional funds when needed under the 2005 Standby Equity Distribution
      Agreement. Therefore, if we are unable to draw down on our 2005 Standby Equity
      Distribution Agreement and cannot secure external financing from other sources,
      we may be forced 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, 2005, we had $122,640 cash on hand and our total current assets were
      $494,064 as of September 30, 2005. We will need to raise additional capital
      to
      fund our anticipated operating expenses and future expansion. Among other
      things, external financing may 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 or we cannot draw down on the 2005 Standby Equity
      Distribution Agreement, we may be forced to curtail or cease our business
      operations. We estimate that we will require $5,000,000 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.





25


**We
      are in default on a $400,000 loan from Cornell Capital unless the terms can
      be
      renegotiated and the term be extended by Cornell Capital**





On
      February 2, 2005 Old Ariel Way borrowed $400,000 from Cornell Capital, and
      we
      assumed this loan when we acquired Old Ariel Way. The loan bears interest at
      the
      rate of 12% per annum and was due and payable on May 31, 2005. We are now in
      default unless we can renegotiate the terms of the loan for an extension with
      Cornell Capital. Cornell Capital 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. In order to induce Cornell Capital
      to
      make the loan to Old Ariel Way, Arne Dunhem, the Chairman and Chief Executive
      Officer of Old Ariel Way before the Effective Time and our Chief Executive
      Officer after the Effective Time, provided a personal guarantee of payment
      to
      Cornell Capital. 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. The Compensation Committee of our 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.





**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.





26


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.





**We
      have a new executive team and may not be successful in integrating the
      management teams of Enfotec and dbsXmedia 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; Ms. Voula Kanellias became our Chief Financial Officer; and Mr.
      Anand Kumar became our Executive Vice President. Mr. Dunhem served as the
      Chairman, President and Chief Executive Officer of Old Ariel Way since February
      2, 2004, Ms. Kanellias, served as the Chief Financial Officer of Old Ariel
      Way
      since September 2, 2004 and Mr. Kumar served as Executive Vice President of
      Old
      Ariel Way since August 10, 2004. Prior to Ms. Kanellias joining Old Ariel
      Way, Mr. Dunhem and Ms. Kanellias had no experience working together. On
      February 21, 2005, with the acquisition of dbsXmedia, Mr. David Howgill became
      the day-to-day head of operations for our Business Television (BTV) business.
      Failure to successfully integrate the management teams of the 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.





**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 solutions
      and technologies to our customers and to develop and ultimately sell various
      security appliances products. We have limited experience with our highly secure
      global communications 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 will be forced to curtail or cease our business
      operations.





**If
      we are not able to compete effectively in the highly competitive highly secure
      global communications 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 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





27





-
            our
                ability to adapt to the consolidation of providers of highly secure
                global
                communications solutions and technologies with or into larger entities,
                or
                entry of new entities into the highly secure global communications
                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.





**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 solutions and technologies industry has
      experienced consolidation of participants, and this trend may continue. If
      highly secure global communications 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 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 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.





Enfotec
      has filed with the US Patent Office for protection of technologies related
      to
      highly secure telecommunication: Chain Packet Processing, CPP and Packet
      Signature Recognition, PSR, but patents may not be issued, and if issued, may
      not protect the intellectual property from competition which could seek to
      design around or invalidate these patents. Our failure to adequately protect
      our
      proprietary rights in our products, services and technology could harm the
      business by making it easier for competitors to duplicate our services.





We
      own
      several Internet domain names, including www.arielway.com, www.dbsxmedia.com
      and
      www.enfotec.net. 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.





28


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.





**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.





29





**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.





**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 sales outside the United States 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.





30


**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 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.





**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.





31


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.





**We
      may not be successful in integrating the management teams of our acquired
      companies, which could adversely affect the leadership of our company, divert
      management time and adversely affect the business and results of operations**





Mr. Arne
      Dunhem became our President and Chief Executive Officer in February 2005 and
      became the President and Chief Executive Officer of Old Ariel Way in February
      2004. In February 2005, Ms. Voula Kanellias became our Chief Financial
      Officer and became the Chief Financial Officer of Old Ariel Way in September
      2004. Prior to Ms. Kanellias joining Old Ariel Way, Mr. Dunhem and Ms.
      Kanellias had no experience working together. Since Mr. Dunhem joined Old Ariel
      Way and subsequently our Company we have completed two acquisitions and
      integrated various different management teams into our operations. Prior to
      closing those acquisitions, Mr. Dunhem and Ms. Kanellias had not previously
      worked with management at each of our subsidiaries and divisions. Failure to
      successfully integrate the management teams of our 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. There can be no assurance that these professionals will
      be
      available in the market or that we will be able to meet their compensation
      requirements.





**If
      we were to lose the services of Mr. Arne Dunhem, or other 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 have not 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.





32


**Item
      7. Financial Statements**








**ARIEL
      WAY, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      FINANCIAL STATEMENTS**


**FOR
      YEAR ENDED SEPTEMBER 30, 2005 AND**


**PERIOD
      FEBRUARY 10, 2004 (INCEPTION)**


**THROUGH
      SEPTEMBER 30, 2004**





33





**ARIEL
      WAY, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      FINANCIAL STATEMENTS**


**FOR
      THE YEAR ENDED SEPTEMBER 30, 2005 AND PERIOD FEBRUARY 10, 2004**


**(INCEPTION)
      THROUGH SEPTEMBER 30, 2004**





**INDEX
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**





PAGE(S)Report
                of Independent Registered Public Accounting Firm
            
            F-1-2Consolidated
                Financial StatementsBalance
                Sheet as of September 30, 2005
            
            F-3Statement
                of Operations for the Year Ended
              September
                30, 2005 and Period February 10, 2004
              (Inception)
                through September 30, 2004
            
            F-4Statement
                of Stockholders’ Equity for the Year
              Ended
                September 30, 2005 and Period February 10, 2004
              (Inception)
                through September 30, 2004
            
            F-5Statement
                of Cash Flows for the Year Ended
              September
                30, 2005 and Period February 10, 2004
              (Inception)
                through September 30, 2004
            
            F-6-7Notes
                to Consolidated Financial Statements
            
            F-8-20
















**BAGELL,
      JOSEPHS & COMPANY, L.L.C.**


Certified
      Public Accountants





High
      Ridge Commons


Suites
      400-403


200
      Haddonfield Berlin Road


Gibbsboro,
      New Jersey 08026


(856)
      346-2828 Fax (856) 346-2882





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of
      Directors


Ariel
      Way, Inc.


Vienna,
      Virginia 22182





We
      have
      audited the accompanying consolidated balance sheet of Ariel Way, Inc. and
      Subsidiaries as of September 30, 2005 and the related consolidated statement
      of
      operations, changes in consolidated stockholders’ (deficit), and consolidated
      cash flows for the year ended September 30, 2005 and the period February 10,
      2004 (Inception) through September 30, 2004. 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
      have
      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. An audit
      includes examining, on a test   basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall consolidated 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 consolidated financial position of Ariel Way,
      Inc.
      and Subsidiaries, as of September 30, 2005 and the period February 10, 2004
      (Inception) through September 30, 2004 and the results of its consolidated
      operations and its consolidated cash flows for the year then ended 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 11 - GOING
      CONCERN, the Company: had substantial losses and negative cash flow from
      operations in 2005 and 2004, which significantly reduced stockholders' equity
      and resulted in substantial retained deficits and working capital deficits
      at
      September 30, 2005; and will require additional funding to cover substantial
      expected negative cash flows in 2006. These conditions raise substantial doubt
      about the Company's ability to continue as a going concern. Management's plans
      in regard to these matters are also described in “NOTE 11 - GOING CONCERN." The
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





MEMBER
                OF:
            AMERICAN
                INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)CENTER
                FOR PUBLIC COMPANY AUDIT FIRMS (CPCAF)NEW
                JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTSPENNSYLVANIA
                INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTSFLORIDA
                STATE BOARD OF ACCOUNTANCY







F-1


As
          discussed in Note 12, the Company has restated its previously issued
          consolidated financial statements for the period February 10, 2004 (Inception)
          through September 30, 2004. The Company has restated its consolidated financial
          statements to decrease the amount of goodwill recorded for the purchase
          of
          Enfotec, Inc., in the period ended September 30, 2004. The transaction
          reflected
          the issuance of the Company’s common stock shares in exchange for the assets and
          liabilities of Enfotec, Inc. The consolidated financial statements have
          been
          restated as fair value of the stock price of the 1,200,000 shares issued
          were
          reduced from $0.596 per share to $0.125 per share. These transactions did
          not
          result in a change in net loss applicable to common shares for the period
          ended
          September 30, 2004, but resulted in a decrease in the net stockholders’ deficit
          during period to $422,727.




BAGELL,
      JOSEPHS & COMPANY, L.L.C.


Bagell,
      Josephs& Company, LLC.


Gibbsboro,
      New Jersey


January
      13, 2006





F-2








**ARIEL
                WAY, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET****SEPTEMBER
                30, 2005****ASSETS**





**CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            122,640Accounts
                receivable - net
            
            
            315,155Prepaid
                expenses and other current assets
            
            
            58,269**Total
                current assets**
            
            
            496,064**PROPERTY
                AND EQUIPMENT - NET**
            
            
            204,650**OTHER
                ASSETS**Goodwill
            
            
            100,000Due
                from related parties
            
            
            15,221Financing
                fees - net
            
            
            70,000Advances
            
            
            75,000**Total
                other assets**
            
            
            260,221**TOTAL
                ASSETS**
            
            $
            960,935**LIABILITIES
                AND STOCKHOLDERS' DEFICIT****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            1,390,380Promissory
                notes
            
            
            1,000,000Debenture
                payable
            
            
            500,000**Total
                current liabilities**
            
            
            2,890,380**Total
                liabilities**
            
            
            2,890,380**COMMITMENTS
                AND CONTINGENCIES****MINORITY
                INTEREST**
            
            
            (88,264
            )**STOCKHOLDERS'
                DEFICIT**Preferred
                stock, $1 par value; 5,000,000 shares authorized;-0-
                shares issued and outstanding
            
            
            -Common
                stock, $.001 par value; 245,000,000 shares authorized;38,286,943
                shares issued and outstanding
            
            
            38,286Additional
                paid-in capital
            
            
            613,148Deficit
            
            
            (2,492,615
            )**Total
                stockholders' deficit**
            
            
            (1,841,181
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT**
            
            $
            960,935





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




F-3





**ARIEL
      WAY, INC. AND SUBSIDIARIES**


**STATEMENTS
      OF CONSOLIDATED OPERATIONS**


**FOR
      YEAR ENDED SEPTEMBER 30, 2005 AND PERIOD**


**FEBRUARY
      10, 2004 (INCEPTION) THROUGH SEPTEMBER 30, 2004**





**September
                30,**
            
            **September
                30,****2005**
            
            **2004****REVENUES**
            
            $
            1,052,616
            
            $
            41,000**COST
                OF GOODS SOLD**
            
            
            328,497
            
            
            -**GROSS
                PROFIT**
            
            
            724,119
            
            
            41,000**OPERATING
                EXPENSES**Professional
                fees
            
            
            453,722
            
            
            131,986Salaries
            
            
            353,656
            
            
            -Software
                maintenance
            
            
            37,503
            
            
            -Bank
                service charges and other
            
            
            2,505
            
            
            155Travel
                and entertainment
            
            
            101,721
            
            
            1,182Marketing
            
            
            85,748
            
            
            5,130Insurance
            
            
            34,474
            
            
            -Satellite
                expenses
            
            
            795,000
            
            
            -Payroll
                taxes and expenses
            
            
            59,005
            
            
            -Telephone
            
            
            27,515
            
            
            1,216Depreciation,
                Amortization and Impairment
            
            
            617,223
            
            
            -Office
                supplies
            
            
            12,561
            
            
            3,576Rent
            
            
            85,425
            
            
            -Miscellaneous
            
            
            54,586
            
            
            -Automobile
            
            
            1,041
            
            
            258Dues
                and subscriptions
            
            
            4,566
            
            
            770Postage
                and delivery
            
            
            9,177
            
            
            -Printing
            
            
            16,207
            
            
            -Other
            
            
            100,000
            
            
            -**Total
                Operating Expenses**
            
            
            2,851,635
            
            
            144,273**NET
                (LOSS) BEFORE OTHER INCOME (EXPENSE)**
            
            
            (2,127,516
            )
            
            (103,273
            )**OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            16,841
            
            
            -Interest
                expense
            
            
            (60,247
            )
            
            -Other
                expense
            
            
            (5,684
            )
            
            -Minority
                interest
            
            
            88,264
            
            
            -Organization
                costs
            
            
            (301,000
            )
            
            -**Total
                Other Income (Expense)**
            
            
            (261,826
            )
            
            -**NET
                (LOSS) BEFORE PROVISION FOR INCOME TAXES**
            
            
            (2,389,342
            )
            
            (103,273
            )Provision
                for income taxes
            
            
            -
            
            
            -**NET
                (LOSS) APPLICABLE TO COMMON SHARES**
            
            $
            (2,389,342
            )
            $
            (103,273
            )**NET
                (LOSS) PER BASIC SHARES**
            
            $
            (0.07
            )
            $
            (0.02
            )**WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING**
            
            
            35,215,785
            
            
            6,639,224





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





F-4




**ARIEL
                WAY, INC. AND SUBSIDIARIES****STATEMENT
                OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) RESTATED****FOR
                THE YEAR ENDED SEPTEMBER 30, 2005 AND PERIOD FEBRUARY 10, 2004 (INCEPTION)
                THROUGH SEPTEMBER 30, 2004**





**Additional**
            
            
            
            **Deferred****Preferred
                Stock**
            
            **Common
                Stock**
            
            **Paid-In**
            
            
            
            **Financing****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **(Deficit)**
            
            **Fees**
            
            **Total**Balance,
                February 10, 2004
            
            $
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Common
                shares issued to founders (services)
            
            
            -
            
            
            -
            
            
            14,200,000
            
            
            14,200
            
            
            51,800
            
            
            -
            
            
            -
            
            
            66,000Common
                shares issued to Chivas Capital, Inc. for cash
            
            
            -
            
            
            -
            
            
            240,000
            
            
            240
            
            
            29,760
            
            
            -
            
            
            -
            
            
            30,000Common
                shares issued to Chivas Capital, Inc. for services
            
            
            -
            
            
            -
            
            
            240,000
            
            
            240
            
            
            29,760
            
            
            -
            
            
            -
            
            
            30,000Common
                shares issued to Market Central, Inc. for asoftware
                license agreement and prepayment forsoftware
                technology support services
            
            
            -
            
            
            -
            
            
            2,000,000
            
            
            2,000
            
            
            248,000
            
            
            -
            
            
            -
            
            
            250,000Common
                shares issued to Cornell Capital forequity
                line of credit commitment
            
            
            -
            
            
            -
            
            
            1,980,000
            
            
            1,980
            
            
            1,126,620
            
            
            -
            
            
            (1,128,600
            )
            
            -Common
                shares issued for merger with Enfotec, Inc.
            
            
            -
            
            
            -
            
            
            1,000,000
            
            
            1,000
            
            
            124,000
            
            
            -
            
            
            -
            
            
            125,000Common
                shares issued for creditors of Enfotec, Inc.
            
            
            -
            
            
            -
            
            
            200,000
            
            
            200
            
            
            24,800
            
            
            -
            
            
            -
            
            
            25,000Net
                loss for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (103,273
            )
            
            -
            
            
            (103,273
            )Balance,
                September 30, 2004
            
            
            -
            
            
            -
            
            
            19,860,000
            
            $
            19,860
            
            $
            1,634,740
            
            $
            (103,273
            )
            $
            (1,128,600
            )
            $
            422,727Common
                stock issued in reverse merger
            
            
            
            
            
            
            
            
            17,428,260
            
            
            17,428
            
            
            (17,428
            )
            
            -
            
            
            -
            
            
            -Common
                stock issued for services
            
            
            
            
            
            
            
            
            499,342
            
            
            499
            
            
            99,369
            
            
            -
            
            
            -
            
            
            99,868Common
                stock issued for services
            
            
            
            
            
            
            
            
            499,341
            
            
            499
            
            
            99,368
            
            
            -
            
            
            -
            
            
            99,867Termination
                Cornell deal
            
            
            
            
            
            
            
            
            -
            
            
            -
            
            
            (1,128,600
            )
            
            -
            
            
            1,128,600
            
            
            -Preferred
                stock issued
            
            
            2,000,000
            
            
            2,000,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,000,000Redemption
                of preferred stock
            
            
            (2,000,000
            )
            
            (2,000,000
            )
            
            -
            
            
            -
            
            
            (74,301
            )
            
            -
            
            
            -
            
            
            (2,074,301
            )Net
                (loss) for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,389,342
            )
            
            -
            
            
            (2,389,342
            )Balance,
                September 30, 2005
            
            
            -
            
            
            -
            
            
            38,286,943
            
            $
            38,286
            
            $
            613,148
            
            $
            (2,492,615
            )
            $
            -
            
            $
            (1,841,181
            )





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




F-5





**ARIEL
                WAY, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOW****FOR
                THE YEAR ENDED SEPTEMBER 30, 2005 AND THE****PERIOD
                FEBRUARY 10, 2004 (INCEPTION) THROUGH SEPTEMBER 30, 2004**





**RESTATED****2005**
            
            **2004****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                (loss)
            
            $
            (2,389,342
            )
            $
            (103,273
            )**Adjustments
                to reconcile net (loss) to net cash****provided
                by (used in) operating activities:**Issuance
                of stock for services
            
            
            199,736
            
            
            96,000Depreciation,
                Amortization and Impairment
            
            
            617,223
            
            
            -Minority
                Interest
            
            
            (88,264
            )
            
            -**Changes
                in assets and liabilities:**(Increase)
                in accounts receivable
            
            
            (315,155
            )
            
            -(Increase)
                in prepaid expenses
            
            
            (19,870
            )
            
            -Increase
                in accounts payable and accrued expenses
            
            
            914,418
            
            
            6,819**Total
                adjustments**
            
            
            1,308,088
            
            
            102,819**Net
                cash (used in) operating activities**
            
            
            (1,081,254
            )
            
            (454
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Acquisition
                of intangible asset
            
            
            (100,000
            )
            
            -Acquisition
                of property and equipment
            
            
            (208,373
            )
            
            -Acquisition
                of financing fees
            
            
            (107,500
            )
            
            -**Net
                cash (used in) investing activities**
            
            
            (415,873
            )
            
            -**CASH
                FLOWS FROM FINANCING ACTIVITIES**(Advances)
            
            
            90,221
            
            
            -Proceeds
                from promissory notes
            
            
            1,000,000
            
            
            -Proceeds
                from convertible debenture
            
            
            500,000
            
            
            30,000**Net
                cash provided by financing activities**
            
            
            1,590,221
            
            
            30,000**INCREASE
                IN CASH AND CASH EQUIVALENTS**
            
            
            93,094
            
            
            29,546**CASH
                AND CASH EQUIVALENTS - BEGINNING OF YEAR**
            
            
            29,546
            
            
            -**CASH
                AND CASH EQUIVALENTS - END OF YEAR**
            
            $
            122,640
            
            $
            29,546





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




F-6





**ARIEL
                WAY, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOW (CONTINUED)****FOR
                THE YEAR ENDED SEPTEMBER 30, 2005 AND THE****PERIOD
                FEBRUARY 10, 2004 (INCEPTION) THROUGH SEPTEMBER 30, 2004**





**RESTATED****2005**
            
            **2004****SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid during the period for:Interest
                paid
            
            $
            -
            
            $
            -Income
                taxes paid
            
            $
            -
            
            $
            -**SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INFORMATION:**Net
                cash effect of stock acquisition of Enfotec, Inc.:Equipment,
                net
            
            
            -
            
            
            93Goodwill
            
            
            -
            
            
            8,675Accounts
                payable
            
            
            -
            
            
            309,468$
            -
            
            $
            318,236Common
                stock issued for the acquisition of Enfotec, Inc.
            
            $
            -
            
            $
            150,000Net
                effect of acquisition of dbsXmedia Inc.:Equipment,
                net
            
            
            -
            
            
            -Contracts
            
            
            210,000
            
            
            -Goodwill
            
            
            100,000
            
            
            -Accounts
                payable
            
            
            (301,000
            )
            
            -Common
                stock issued for the acquisition of dbsXmedia, Inc.
            
            $
            9,000
            
            $
            -Common
                stock issued for services
            
            $
            199,736
            
            $
            96,000Common
                stock issued for equity line of credit commitment
            
            $
            -
            
            $
            1,128,600





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





F-7


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





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





Ariel
      Way, Inc., a Florida corporation (“Ariel Way” or the “Company”) was initially
      named Netfran Development Corp., and was incorporated in the State of Florida
      in
      January 2000 as a franchisor of Internet web site design, hosting, updating,
      maintenance, administration, e-mail publishing and consulting services,
      marketing and advertising services and related services under the registered
      service mark "NETSPACE".





In
      2001,
      the Company filed with the SEC a registration statement relating to the
      distribution of 3,340,088 shares of the Company’s common stock to holders of
      record of Netvertise, Inc., a Florida corporation, common stock as of the close
      of business on July 18, 2001 (the "record date"). The registration statement
      was
      declared effective on October 31, 2002. The shares were distributed on the
      basis
      of one of the Company’s shares for every share of Netvertise, Inc. held on the
      record date. The shares of Netvertise being distributed represented 99% of
      the
      Company’s total outstanding shares and Netvertise owned none of the Company’s
      shares of common stock after the distribution. The Company’s common stock began
      trading on the Over-The-Counter market on February 10, 2003, and was quoted
      on
      the NASD Electronic Bulletin Board and initiated trading under the symbol
“NFDV”.





On
      February 2, 2005 the Company acquired Ariel Way, Inc., a Delaware corporation,
      (“Old Ariel Way”) in exchange for the issuance by the Company of 33,289,434
      shares of the Company’s common stock to the former stockholders of Old Ariel
      Way. The acquisition was made pursuant to a Share Exchange Agreement dated
      January 20, 2005, between Netfran, Old Ariel Way and the shareholders of Old
      Ariel Way common stock. Under the terms of the Share Exchange Agreement, each
      share of Old Ariel Way common stock outstanding immediately prior to the
      Effective Date was converted into 1.6762 shares of the Company’s common stock.
      The Company’s outstanding common stock was not affected by the transaction
      besides the issuance of stock to the former stockholders of Old Ariel Way.
      In
      addition to the common stock issued to the stockholders of Old Ariel Way, under
      the Share Exchange Agreement each outstanding option or warrant to purchase
      Old
      Ariel Way common stock was converted into an option to purchase the number
      of
      shares of the Company’s common stock equal to the number of Old Ariel Way common
      stock underlying the option or warrant immediately prior to the Effective Date
      multiplied by 1.6762 and the exercise price of each option or warrant issued
      by
      us equaled the exercise price of the corresponding Old Ariel Way option or
      warrant in effect immediately prior to the Effective Date divided by 1.6762.





As
      a
      result of the share exchange transaction consummated on February 2, 2005, the
      Company’s financial statements are based on Old Ariel Way’s operation, which
      became the Company’s and the business the Company formerly conducted under the
      name Netfran Development Corp. ceased. The Company’s fiscal year also changed as
      a result of the share exchange transaction from December 31 to September 30.
      Old
      Ariel Way was formed on February 10, 2004, (“the inception”), and financial
      statements are available from this date.





In
      connection with the share exchange transaction on February 2, 2005, Old Ariel
      Way and Elliot Krasnow, who was the Company’s Chief Executive Officer until the
      Effective Time, entered into a Stock Purchase and Sale Agreement pursuant to
      which Mr. Krasnow sold 300,000 shares of the Company’s common stock to Old Ariel
      Way for $300,000. Old Ariel Way retired 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 Cornell Capital
      Partners, L.P., one of the stockholders of Old Ariel Way (and now one of the
      Company’s stockholder). The loan bears interest at the rate of 12% per annum and
      was due and payable on May 31, 2005. The Company is now in default unless the
      Company can renegotiate the terms of the loan for an extension with Cornell
      Capital. Cornell Capital is not a controlling stockholder of the Company, and
      the Company believes the terms of the loan are at least as favorable to the
      Company as could be obtained from an unrelated third party. In order to induce
      Cornell Capital to make the loan to Old Ariel Way, Arne Dunhem, the Chairman
      and
      Chief Executive Officer of Old Ariel Way







F-8


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**NOTE
      1-** **ORGANIZATION
      AND BASIS OF PRESENTATION (CONTINUED)**





before
      the Effective Time and the Company’s Chief Executive Officer after the Effective
      Time, provided a personal guarantee of payment to Cornell Capital. The Company
      expects to compensate Mr. Dunhem for undertaking the personal guarantee and
      pledge on the Company’s behalf, but the terms of any such compensation have not
      yet been agreed to. The Company’s Compensation Committee of the Board of
      Directors will determine the amount and nature of compensation to Mr. Dunhem,
      but the Company does not expect that any compensation to him will be paid in
      cash.





On
      February 2, 2005, following the Effective Date of the share exchange transaction
      and the Company’s acquisition of Old Ariel Way, the Company ceased to conduct
      the Internet franchise business conducted prior to the Effective Date in order
      to concentrate solely on the development of its highly secure global
      communications business.





On
      February 2, 2005, in connection with the acquisition and pursuant to the Share
      Exchange Agreement dated January 20, 2005, all of the Company’s executive
      officers resigned and the executive officers of Old Ariel Way immediately prior
      to the Effective Date became the Company’s new executive officers.





On
      February 19, 2005 the Company completed the acquisition of dbsXmedia, Inc.,
      a
      Delaware corporation (“dbsXmedia”) with offices in Washington, D.C. and United
      Kingdom. dbsXmedia provides satellite-based services for Business Television
      (BTV), digital signage, training and multimedia. The Company purchased from
      dbsXmedia 1,500 shares of its common stock, par value $0.001 per share. After
      this transaction dbsXmedia had 2,500 shares of common stock outstanding out
      of
      which the Company owns 60% and Zygot, LLC, which is owned by the management
      of
      dbsXmedia, became the minority 40% shareholder. dbsXmedia continues to operate
      under its existing name.







Purchase
      consideration for dbsXmedia, Inc. was deminimus due to the startup nature of
      the
      venture. Thus no purchase cost was ascribed to the stock at the time of
      acquisition. The Company provided the corporate guarantee for the venture as
      described in the following transaction:





Purchase
      price was $400,000 in the form or a note payable to Loral Skynet:








Assets
                were contracts
            
            $
            210,000Fixed
                assets
            
            $
            90,000Goodwill
            
            $
            100,000




Value
          was
          ascribed based upon the fair market value of the assets secured at the
          time of
          acquisition, using managements’ judgement and market value analysis.  A
          formal appraisal was not performed to value the assets acquired. The excess
          of
          the purchase price of $400,000 over the ascribed values to the assets,
          including
          contracts and equipment/fixed was charged to goodwill.  The value of the
          contracts was assigned based upon the non-compete provisions of the Loral
          Skynet
          agreement, and the future revenue stream of the customer
          contracts.





On
      April
      21, 2005 dbsXmedia completed a transaction pursuant to an asset Purchase
      Agreement with Loral Skynet Network Services, Inc., CyberStar L.P., and
      CyberStar, LLC, pursuant to which dbsXmedia purchased Loral Skynet’s Business
      Television product line and assumed the management and further development
      of
      Loral Skynet’s traditional business television services (BTV). Under the terms
      of the transaction, dbsXmedia acquired Loral Skynet’s BTV client base in
      exchange for $400,000 in cash, 300,000 shares of the Company’s common stock, and
      dbsXmedia’s assumption of ongoing contracts for infrastructure support from
      Loral Skynet. The ownership transition will leave unchanged the services for
      current customers, under an agreement that maintains the existing teleport
      and
      satellite infrastructure provided by Loral Skynet. dbsXmedia made and will
      make
      cash purchase price payment to Loral Skynet in three installments as follows:
      (i) $250,000 at the closing of the transaction, (ii) $75,000 on the first
      anniversary of the closing of the transaction; and (iii) $75,000 on the second
      anniversary of the Closing of the transaction. T he $250,000 cash at closing
      was
      allocated from prepaid revenue transferred to dbsXmedia from Loral Skynet as
      part of the business acquired. As part of the transaction, the Company delivered
      a commitment to the benefit of dbsXMedia in the form of a Conditional Guaranty
      in favor of Loral Skynet Network Services, Inc., CyberStar, L.P., CyberStar,
      LLC, and Loral Skynet, a division of Loral SpaceCom Corporation, having a total
      value of $3,000,000.




As
          discussed in the notes to the financial statements, the Company provided
          up to a
          $3,000,000 conditional corporate guarantee for the monthly service payment
          due
          to Loral Skynet (based upon $150,000 per month for a period of 24
          months). The guarantee was reduced to $1,500,000 effective in April 2006
          and would reduce to zero in April 2007. There were no contributions which
          were required as part of the Asset Purchase Agreement with Loral Skynet.
 
 The
          Company assumed no employment agreements from Loral Skynet in connection
          with
          the Asset Purchase Agreement.
 
 There
          was
          no value assigned to the other items noted in the Loral Skynet Asset Purchase
          Agreement, i.e. employment contracts, contributions, indemnification provisions,
          agreements to provide support and transition services.
 
 The
          service cost for the Loral Skynet contract of $150,000 per month was expensed
          in
          each period as incurred. These services included earth station support
          services, and satellite transmission services.
 
 The
          parties Loral Skynet, Ariel Way and dbsXmedia had no prior relationships
          before
          this transaction and there was no common ownership.  The two officers of
          dbsXmedia were employees of Loral Skynet prior to this transation. These
          officers became 40% owners of dbsXmedia through their 100% ownership of
          their
          company Zagot, LLC.


On
      April
      28, 2005, the Company increased the total number of authorized shares of the
      Company’s capital stock from 50,000,000 shares, consisting solely of the
      Company’s common stock, to a total of 250,000,000 shares of the Company’s
      capital stock, consisting of 245,000,000 shares of the Company’s common stock
      and 5,000,000 shares of the Company’s preferred stock, with all of the preferred
      stock to be “blank check” preferred stock





On
      May
      26, 2005 the Company changed the Company’s name from Netfran Development Corp.
      to Ariel Way, Inc. and the Company changed the Company’s trading symbol from
“NFDV” to the new symbol “AWYI”.







F-9


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**NOTE
      1-** **ORGANIZATION
      AND BASIS OF PRESENTATION (CONTINUED)**





**History
      of Old Ariel Way**





Old
      Ariel
      Way was formed in the State of Delaware as a Limited Liability Corporation
      on
      February 10, 2004 and focused on providing executive management and merger
      and
      acquisition services within the area of highly secure global communications
      services for government customers and global telecommunications operators and
      corporate enterprises. On September 23, 2004, Old Ariel Way converted from
      a
      limited liability company to a Delaware corporation and changed its name to
      “Ariel Way, Inc.”





On
      September 27, 2004, Old Ariel Way closed a transaction with the publicly traded
      Delaware corporation Market Central, Inc. “OTCBB:MKTE”, and issued to Market
      Central 2,000,000 shares of Old Ariel Way common stock pursuant to the terms
      of
      a Stock Purchase Agreement dated September 24, 2004. The purchase consideration
      had an aggregate value of $250,000, consisting of the rights to certain software
      technology with a value of $200,000 and development/support services
      consideration rendered by Market Central’s senior executives with a value of
      $50,000.





On
      September 30, 2004, Old Ariel Way entered into an Agreement and Plan of Merger
      with Enfotec, Inc., a private Delaware company, pursuant to which a newly
      formed, wholly-owned subsidiary of Old Ariel Way merged into Enfotec. The merger
      was consummated on September 30, 2004. As a result of the merger, Enfotec became
      a wholly-owned subsidiary of Old Ariel Way. On September 30, 2004, Old Ariel
      Way
      issued 1,000,000 shares of its common stock to the holders of Enfotec’s common
      stock, with an additional 1,000,000 shares of Old Ariel Way’s common stock held
      in reserve for issuance to the Enfotec stockholders if Enfotec met certain
      revenue milestones as of July 15, 2005. On September 30, 2004 Old Ariel Way
      also
      issued to certain creditors of Enfotec, Inc. 200,000 shares of Old Ariel Way’s
      common stock pursuant to the terms of a settlement of certain liabilities of
      Enfotec.





On
      April
      19, 2005 Old Ariel Way designated 2,000,000 shares of Old Ariel Way preferred
      stock as “Series A Redeemable Preferred Stock”. Each issued and outstanding
      share of Old Ariel Way Series A Redeemable Preferred Stock accrues a dividend
      from the original issue date equal to twelve percent (12%) of the original
      purchase price (which was $1.00 per share, as adjusted upon any stock split,
      reverse stock split, combination or recapitalization affecting the shares of
      Series A Redeemable Preferred Stock) per annum, which shall be payable when,
      as
      and if declared by the Old Ariel Way Board of Directors. Old Ariel Way shall
      not
      pay or declare any dividends on the Common Stock of Old Ariel Way unless the
      full accrued and unpaid dividends on the Series A Redeemable Preferred Stock
      described in this paragraph have been paid.





On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital Partners, LP, all
      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. The equity
      provided by the sale of the Series A Preferred Stock enabled us to satisfy
      a
      closing condition of a transaction to acquire the Loral Skynet Business TV
      client base. The preferred stock was redeemed on August 10, 2005, and the
      Company returned the $2,000,000 to Cornell Capital Partners, LP.




F-10


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**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 maintains cash and cash equivalents with a financial institution that
      exceeds the limit of insurability under the Federal Deposit Insurance
      Corporation. However, due to management’s belief in the financial strength of
      Bank of America, management does not believe the risk of keeping deposits in
      excess of federal deposit limits at Bank of America to be a material risk.





**Restricted
      Cash**





The
      Company was during the reporting period required to maintain restricted cash
      for
      the performance of obligations under certain service agreements. On April 21,
      2005, Old Ariel Way sold and issued to Cornell Capital Partners, LP, (“Cornell
      Capital”), 2,000,000 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.
      The cash proceeds provided by the sale of the Series A Preferred Stock that
      became restricted cash, enabled us to satisfy a closing condition of a
      transaction to acquire the Loral Skynet Business TV client base. The
      Company redeemed the 2,000,000 Series A Redeemable Preferred Stock on
      August 10, 2005.





**Revenue
      Recognition**





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





The
      Company, in addition to its Business Television services, from time to time
      receives miscellaneous revenues. During the years ended September 30, 2005
      and
      2004, the Company generated $55,300 and $0 in miscellaneous revenues,
      respectively.





**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-11
 
 **ARIEL
          WAY, INC., AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2005 AND 2004**


**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.





**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 Assets* ”.
      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. The
      Company impaired $509,468 for the year ended September 30, 2005.







F-12


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**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.





**Reclassification**





Certain
      amounts in the September 30, 2004 financial statements were reclassified to
      conform to the September 30, 2005 presentation. The reclassifications in the
      September 30, 2004 financial statements resulted in no changes to the
      accumulated deficits.




**Recent
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board revised SFAS
      No. 123. The revision, referred to as SFAS 123R, was entitled “Share-Based
      Payment”. This revised pronouncement replaces SFAS 123 and supersedes APB
      No. 25, and its scope encompasses 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
      123R
      requires that the compensation cost relating to share-based payment transactions
      be recorded in financial statements. For each transaction, compensation cost
      is
      to be measured based on the fair value of the equity or liability instrument
      issued. The pro forma disclosures previously permitted under SFAS No. 123
      no longer will be an alternative to financial statement recognition of
      compensation expense. In accordance with a recently-issued Securities and
      Exchange Commission rule, small business registrants will be allowed to
      implement SFAS No. 123R as of the beginning of the first annual period that
      begins after December 15, 2005. We currently expect that we will adopt SFAS
      No. 123R no later than for the fiscal quarter ending December 31, 2006
      since our fiscal year ends September 30, 2006. However, we recognize that SFAS
      No. 123R states that early adoption of this Statement for interim or annual
      periods for which financial statements or interim reports have not been issued
      is encouraged and we will attempt to adopt prior to the fiscal quarter ending
      December 31, 2006.




Under
      SFAS No. 123R, we must determine the appropriate fair value model to be
      used for valuing share-based payments, the amortization method for compensation
      cost and the transition method to be used at date of adoption. The permitted
      transition methods include either retrospective or prospective adoption. Under
      the retrospective method, prior periods may be restated either as of the
      beginning of the year of adoption or for all periods presented. The prospective
      method requires that compensation expense be recorded for all unvested stock
      options at the beginning of the first quarter of adoption of SFAS No. 123R,
      while the retrospective methods would record compensation expense for all
      unvested stock options beginning with the first period presented. We are
      evaluating the requirements of SFAS No. 123R and expect that its adoption
      will have a material adverse impact on our consolidated financial position
      and
      consolidated results of operations including an increase in compensation expense
      for equity instruments issued to employees. We have not yet determined the
      method of adoption or the effect of adopting SFAS No. 123R, and we have not
      determined whether the adoption will result in amounts that are similar to
      the
      current pro forma disclosures that have been provided in accordance with SFAS
      No. 123.




F-13





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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





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





**Recent
      Accounting Pronouncements (Continued)**





On
      December 16, 2004, FASB issued Statement of Financial Accounting Standards
      No.
      153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29,
      Accounting for Non-monetary Transactions (" SFAS 153"). This statement amends
      APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      non-monetary assets that do not have commercial substance. Under SFAS 153,
      if a
      non-monetary exchange of similar productive assets meets a commercial-substance
      criterion and fair value is determinable, the transaction must be accounted
      for
      at fair value resulting in recognition of any gain or loss. SFAS 153 is
      effective for non-monetary transactions in fiscal periods that begin after
      June
      15, 2005. 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.





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
      $85,748 and $0 for the years ended September 30, 2005 and 2004, 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. ******







F-14


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





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





**Accounts
      Receivable (Continued)**





Accounts
      receivable are generally due within 30 days and collateral is not required.
      Unbilled accounts receivable represents amounts due from customers for which
      billing statements have not been generated and sent to the customers. The
      Company has not made any allowances for the doubtful accounts as there are
      no
      material aged receivables as of September 30, 2005. Management of the Company
      feels the receivables are fully collectible.





**Deferred
      Financing Fees**





On
      September 30, 2004, Old Ariel Way entered into a 2004 Standby Equity
      Distribution Agreement with Cornell Capital. This agreement was terminated
      on
      July 20, 2005 and the Company entered into a new 2005 Standby Equity
      Distribution Agreement with Cornell Capital on July 21, 2005. In connection
      with
      the 2004 Standby Equity Distribution Agreement, Cornell Capital 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 Cornell Capital 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
      prior agreement was terminated and the financing fee was written off against
      Additional Paid-In Capital.





**Stock-Based
      Compensation**





Employee
      stock awards under the Company's compensation plans are accounted for in
      accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees”
(“APB 25”), and related interpretations. The Company provides the disclosure
      required by Statement of Financial Accounting Standard No. 123(R ), “ *Share
      Based Payment* ”
(“SFAS
      123 (R )”), and related interpretations. Stock-based awards to non-employees are
      accounted for under the provisions of SFAS 123 (R ) and have adopted the
      enhanced disclosure provisions of Statement of Financial Accounting Standard
      No.
      148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an
      Amendment of SFAS No. 123” (“SFAS No.148”).





The
      Company measures compensation expense for its employee stock-based compensation
      using the intrinsic-value method. Under the intrinsic-value method of accounting
      for stock-based compensation, when the exercise price of options granted to
      employees is less than the estimated fair value of the underlying stock on
      the
      date of grant, deferred compensation is recognized and is amortized to
      compensation expense over the applicable vesting period. In each of the periods
      presented, the vesting period was the period in which the options were granted.





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.





F-15


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**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:





**2005**
            
            **2004**Net
                loss
            
            $
            (2,389,342
            )
            $
            (103,273
            )Weighted-average
                common sharesOutstanding
                (Basic)
            
            
            35,215,785
            
            
            6,639,224Weighted-average
                common stockEquivalentsStock
                options
            
            
            -
            
            
            -Warrants
            
            
            -
            
            
            -Weighted-average
                common sharesOutstanding
                (Diluted)
            
            
            35,215,785
            
            
            6,639,224





Options
      and warrants outstanding to purchase stock were not included in the computation
      of diluted EPS for September 30, 2005 and 2004 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 year 2005.





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





Property
                and equipment at September 30, 2005 and 2004 is as follows:**2005**
            
            **2004**Equipment
            
            $
            187,407
            
            $
            8,675Computers
            
            
            12,460
            
            
            -Furniture
            
            
            17,181
            
            
            -Less:
                accumulated depreciation
            
            
            (12,398
            )
            
            -Net
                equipment
            
            $
            204,650
            
            $
            8,675





Depreciation
      expense for the years ended September 30, 2005 and 2004 was $12,398 and $0,
      respectively.






F-16


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





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





Ariel
      Way, Inc. on September 30, 2004, issued a secured debenture to Cornell Capital
      Partners, L.P., whereas Ariel Way, Inc. would receive $500,000, with a promise
      to pay to Cornell Capital Partners 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 is due on
      September 29, 2006 and is secured by the Company’s stock.





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





Ariel
      Way, Inc on February 2, 2005, borrowed an additional $400,000 from Cornell
      Capital Partners, L.P. whereas Ariel Way received the $400,000, with a promise
      to pay to Cornell Capital Partners the principal sum of $400,000 together with
      interest on the unpaid principal at the rate of 12% per annum and is due and
      payable on May 31, 2005 and is secured by the Company’s stock. The Company is
      currently in default with this loan.





Ariel
      Way, Inc on July 28, 2005, borrowed an additional $600,000 from Cornell Capital
      Partners, L.P. whereas Ariel Way received the $600,000, with a promise to pay
      to
      Cornell Capital Partners the principal sum of $600,000 together with interest
      on
      the unpaid principal at the rate of 12% per annum and is due and payable on
      May
      31, 2006 and is secured by the Company’s stock.





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





On
      September 30, 2004, Old Ariel Way entered into a $50 million 2004 Standby Equity
      Distribution Agreement with Cornell Capital. This agreement was terminated
      on
      July 20, 2005 and the Company entered into a new 2005 Standby Equity
      Distribution Agreement with Cornell Capital 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, 2005, the Company has not drawn down any funds under the 2005 Standby Equity
      Distribution Agreement from Cornell Capital.





On
      April
      21, 2005, a s part of a transaction pursuant to an asset Purchase Agreement
      with
      Loral Skynet , we delivered a commitment to the benefit of dbsXmedia in the
      form
      of a Conditional Guaranty for satellite services in favor of Loral Skynet,
      having a total value of $3,000,000 that will reduce to $1,500,000 on April
      21,
      2006 and fully expire on April 21, 2007.







F-17


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





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





**Preferred
      Stock**





The
      Company has 5,000,000 shares of preferred stock authorized, at $1.00 par value
      per share, of which none of the shares of preferred stock is outstanding as
      of
      September 30, 2005 and 2004.





On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital Partners, LP, two
      million (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 Cornell Capital 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 the Company’s treasury. We believe the issuance
      of the stock to be exempt from registration under Section 4(2) of the
      Securities Act.





**Common
      Stock**





As
      of
      September 30, 2005, the Company had 245,000,000 shares of common stock
      authorized at $0.001 par value per share, and 38,286,943 issued and outstanding.





The
      following describes the common stock transactions for the year ended September
      30, 2005.





On
      September 30, 2004, Old Ariel Way entered into a 2004 Standby Equity
      Distribution Agreement with Cornell Capital Partners, LLP. This agreement was
      terminated on July 20, 2005 and we entered into a new 2005 Standby Equity
      Distribution Agreement with Cornell Capital on July 21, 2005. In connection
      with
      the 2004 Standby Equity Distribution Agreement, Cornell Capital 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.





On
      September 30, 2004, Old Ariel Way issued to the stockholders of Enfotec
      1,000,000 shares of Old Ariel Way’s common stock pursuant to the terms of a
      share exchange under which Old Ariel Way acquired Enfotec. In addition, on
      September 30, 2004, Old Ariel Way also issued to certain stockholders and
      creditors of Enfotec. 200,000 shares of Old Ariel Way common stock, valued
      at a
      fair value of $25,000, based on a price of $0.125 per share, pursuant to the
      terms of a settlement of certain liabilities of Enfotec.





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. In addition to the
      common stock issued to the former stockholders of Old Ariel Way, under the
      Share
      Exchange Agreement each outstanding option or warrant to purchase Old Ariel
      Way
      common stock was converted into an option to purchase the number of shares
      of
      our common shares equal to the number of Old Ariel Way common shares underlying
      the option or warrant immediately prior to February 2, 2005 multiplied by 1.6762
      and the exercise price of each option or warrant we issued equals the exercise
      price of the corresponding Old Ariel Way option or warrant in effect immediately
      prior to February 2, 2005 divided by 1.6762.







F-18


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





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





**Common
      Stock (Continued)**





On
      February 2, 2005, in connection with the Acquisition, Old Ariel Way, Inc. and
      Netfran Development Corp., entered into a Stock Purchase and Sale Agreement
      pursuant to which Netfran Development Corp. sold 300,000 shares of its common
      stock to Old Ariel Way, Inc., for $300,000. Old Ariel Way will retire the shares
      it acquired from Netfran Development Corp. As of June 30, 2005 these 300,000
      shares are still issued and outstanding.





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
      April
      28, 2005, pursuant to an asset Purchase Agreement with Loral Skynet Network
      Services, Inc., CyberStar L.P. and CyberStar, LLC, dbsXmedia purchased Loral
      Skynet’s Business Television product line and assumed the management and further
      development of Loral Skynet’s traditional business television services (BTV).
      Under the terms of the transaction, dbsXmedia acquired Loral Skynet’s BTV client
      base in exchange for cash and shares of common stock and the assumption of
      ongoing contracts for infrastructure support from Loral Skynet. As part of
      the
      transaction, we issued to Loral Skynet a total of 300,000 shares of common
      stock. The value per share at the time the transaction was $0.35 per share.





On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital Partners, LP, two
      million (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 Cornell Capital Partners,
      LP, dated April 19, 2005.





**NOTE
      8-** **PATENTS**





As
      of
      September 30, 2005, the Company had filed disclosure documents with the US
      Patent Office on two technologies, Chain Packet Processing and Pattern Signature
      Recognition. These technologies are at the core of our Enfotec products. These
      are the enabling technologies that, we believe, allow us to perform at speeds
      better than proprietary platforms offered by our competitors while having an
      open system architecture at our core.





Enfotec
      filed Disclosure Documents with the US Patent Office for protection of:





-
            Chained
                Packet Processing, “CPP”, with Patent Office Disclosure Document No.
                528391; and





-
            Packet
                Signature Recognition, “PSR” technologies, with Patent Office Disclosure
                Document No. 528389





We
      intend
      to actively pursue through research and development additional advanced
      intellectual properties in the area of global highly secure telecommunications
      and associated technologies and we intend to apply for protection of all
      intellectual properties with the US Patent Office. As of September 30, 2005,
      the
      Company has not been granted approval of any patents.







F-19


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**NOTE
      9-** **LITIGATION/
      LEGAL PROCEEDINGS**





As
      of
      September 30, 2005, the Company was not party to any material legal proceedings.





**NOTE
      10-** **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, 2005.





At
      September 30, 2005, deferred tax assets approximated the following:





Deferred
                tax assets
            
            $
            997,046Valuation
                for deferred asset
            
            
            (997,046
            )Net
                deferred tax assets
            
            $
            -





At
      September 30, 2005, the Company had accumulated deficits approximating
      $2,492,615, available to offset future taxable income through 2025. 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
      11-** **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 losses of $2,389,342 and $103,273 for the year and period
      ended September 30, 2005 and 2004.





-
      Net
      cash used by the Company's operating activities was $1,081,254 and $454 for
      the
      years ended September 30, 2005 and 2004.





-
      At
      September 30, 2005, stockholder's equity was $(1,841,181) and included an
      accumulated deficit of ($2,492,615).





-
      At
      September 30, 2005 there was working capital deficit of $2,394,316.





-
      The
      Company had gross profit margins of $724,119 and $41,000 for the years ended
      September 30, 2005 and 2004.





The
      Company expects positive cash flow from operations end fiscal year 2006,
      however, the Company will require additional funding to cover expected negative
      cash flows until end fiscal year 2006.





The
      Company's ability to continue as a going concern is dependent upon increasing
      its revenues and gross profit margins to cover cost of revenues 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 end fiscal year 2006:





-
      Expand
      and develop its Business TV business with existing customer base and additional
      contract 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.




F-20
 
 **ARIEL
          WAY, INC., AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2005 AND 2004**




-
      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 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.





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





-
      Raise
      additional capital.





Although
      the results of these actions cannot be predicted with 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 the negative cash flow from operations in 2006, the Company
      has the ability ultimately to return to profitability.





**NOTE
      12-**  **RESTATEMENT
      OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS**




The
          Company has restated its previously issued financial statements for the
          period
          February 10, 2004 (inception) through September 30, 2004. The Company has
          restated its financial statements to decrease the amount of goodwill recorded
          for the purchase of Enfotec, Inc., in the period ended September 30, 2004.
          The
          transaction reflected the issuance of the Company’s common stock shares in
          exchange for the assets and liabilities of Enfotec, Inc. The financial
          statements have been restated as fair value of the stock price of the 1,200,000
          shares issued was reduced from $0.596 per share to $0.125 per share. These
          transactions did not result in a change in net loss applicable to common
          shares
          for the period ended September 30, 2004, but resulted in a decrease in
          the net
          stockholders’ deficit during period to $422,727.




F-21


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


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2005 AND 2004**





**NOTE
      13-****SUBSEQUENT
      EVENTS**





On
      October 13, 2005, the Company announced the appointment of Victor Halpert to
      the
      Company’s board of directors. Mr. Halpert is the Managing Member of Halpert
      Capital, LLC and has a number of years experience in finance, investments,
      and
      equity research from firms to include Salomon Smith Barney, Robertson Stephens
      and Israel Equity Research & Management in Chicago.  Mr. Halpert is on
      the board of directors of Top Image Systems (NASDAQ-TISA), Unity Wireless
      (NASDAQ-UTYW) and Israel Technology Acquisition (NASDAQ-ISLT). Mr. Halpert
      has a
      bachelor’s of science degree in Accounting from State University of New York,
      College at New Paltz, NY, a Master of Science in Accounting from the University
      of Illinois at Chicago, Graduate Business School and an MBA from the University
      of Chicago Graduate Business School.





On
      October 20, 2005, the Company announced the appointment of William Stapleton
      to
      the Company’s advisory board. Mr. Stapleton is the president and managing
      director of the Stapleton Group, Inc., a management consulting firm with
      emphasis on the start-up and restructuring of high-performance
      telecommunications companies. He has performed executive management duties
      for
      11 mid-sized companies since 1995 and assisted Goldman Sachs, Citicorp, MCI
      WorldCom, Siemens and others with capital restructuring, asset recovery services
      and interim management assignments. He was a director at AT&T, responsible
      for leading and executing marketing and sales efforts to assist various AT&T
      business segments to achieve growth and profitability. Stapleton has served
      on
      the board of directors of SCii Telecom, SA, Lasergate Systems, Inc., and GVN
      Technologies. He holds a degree in business from Syracuse University and
      completed academic fellowships at MIT, Cambridge Institute of Technology, the
      University of Pennsylvania, Wharton School of Business Management and the
      Menniger Institute for Personal Behavior Studies.





On
      October 26, 2005 the Company announced that the Company’s subsidiary dbsXmedia,
      Inc. had opened a new European headquarters in Plymouth, UK. The move finalizes
      dbsXmedia's integration of the business and systems acquired from Loral Space
      and Communications to support dbsXmedia’s European business television division.





On
      January 12, 2006 the Company announced that its subsidiary, dbsXmedia, Inc.,
      has
      signed a new multi-year contract with Avnet, Inc. to provide business television
      network infrastructure and technology to allow migration to IP services over
      time.







F-22





**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 financial
      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, 2005 we completed an evaluation, under the supervision and with
      the participation of our management, including our chief executive officer
      and
      chief financial 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 were effective at the reasonable assurance level.





Changes
      in Internal Controls:




Subsequent
          to the evaluation as of September 30, 2005, and after subsequent additional
          evaluation during the months of November, 2006 and December, 2006, the
          Company’s
          Chief Executive Officer and Chief Financial Officer concluded that, the
          Company’s disclosure controls and procedures were not effective to ensure that
          information required to be included in the Company’s periodic SEC filings is
          recorded, processed, summarized, and reported within the time periods specified
          in the SEC rules and forms.
 
 The
          Company’s board of directors were advised by Bagell, Josephs & Company,
          L.L.C., the Company’s independent registered public accounting firm, that during
          their performance of audit procedures for 2005 conducted during December,
          2005
          and January, 2006, Bagell, Josephs & Company, L.L.C. identified a material
          weakness as defined in Public Company Accounting Oversight Board Standard
          No. 2
          in the Company’s internal control over financial reporting, primarely related to
          the dbsXmedia operation in both the US and the UK.
 
 This
          deficiency 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, primarely
          related
          to the dbsXmedia operation in both the US and the UK. 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 our 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.








34


**PART
      III**





**Item
      9. Directors and Executive Officers of the Registrant**





**MANAGEMENT**





Our
          directors and executive officers and their ages as of September 19, 2006
          are as
          follows:





**Name**
            **Age**
            **Position**Arne
                Dunhem
            56
            President,
                Chief Executive Officer and Chairman of the BoardLeif
                T. Carlsson
            64
            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 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 is 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.







35


***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 option 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.





36





**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, 2005, 2004 and 2003,
      paid to our most highly compensated executive officers. No officer earned over
      $100,000 in such fiscal year. We had no written employment contract with Mr.
      Elliot Krasnow who was the Chief Executive Officer from the inception of the
      Company until February 2, 2005. 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,
      2005.





**Summary
      Compensation Table**


**Annual
                Compensation**
            
            **Long
                Term Compensation****Awards**
            
            **Payouts****Securities****Underlying****Other**
            
            **Restricted**
            
            **Options****Annual**
            
            **Stock**
            
            **LTIP**
            
            **All
                Other****Year**
            
            **Salary**
            
            **Bonus**
            
            **Compensation**
            
            **Award(s)**
            
            **Payouts
                ($)**
            
            **Compensation**Elliot
                Krasnow
            
            
            2005
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            $
            0(Until
                February 2, 2005) Chief Executive Officer
            
            
            2004
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            $
            02002
            
            $
            75,000
            
            
            -
            
            
            
            
            
            50,000
            
            
            40,000
            
            $
            0Arne
                Dunhem
            
            
            2005
            
            $
            0
            
            
            -
            
            $
            11,000
            
            
            -
            
            
            -
            
            $
            0(After
                February 2, 2005) Chief Executive Officer,
            
            
            2004
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0President
                and Chairman
            
            
            2003
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0Anand
                Kumar
            
            
            2005
            
            $
            0
            
            
            -
            
            $
            11,000
            
            
            -
            
            
            -
            
            $
            0(After
                February 2, 2005) Executive Vice President
            
            
            2004
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0(Director
                until June 6, 2005)
            
            
            2003
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0Voula
                Kanellias
            
            
            2005
            
            $
            0
            
            
            -
            
            $
            11,000
            
            
            -
            
            
            -
            
            $
            0(After
                February 2, 2005) Chief Financial Officer
            
            
            2004
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            02003
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0David
                Howgill
            
            
            2005
            
            $
            120,000
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0(After
                February 19, 2005) Chief Executive Officer, dbsXmedia, Inc.
            
            
            2004
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            02003
            
            $
            0
            
            
            -
            
            $
            0
            
            
            -
            
            
            -
            
            $
            0


________________


(1)
              Mr.
                  Dunhem, Mr. Kumar, 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 September 19, 2006 Mr. Kumar, and Ms. Kanellias are
                  no longer
                  with the Company.(2)
              The
                  amounts listed represent the fair market value of the stock on
                  the date of
                  grant.(3)
              As
                  a result of the Netfran Stock Exchange Agreement dated February
                  2, 2005,
                  all issued and outstanding warrants to purchase shares of Old Ariel
                  Way
                  Stock were exchanged for warrants to purchase shares of our common
                  stock,
                  at a ratio of 1.6762 shares of our common stock for each share
                  of Ariel
                  Way Stock, and the exercise price of each such warrant was adjusted
                  to
                  equal the existing exercise price divided by 1.6762.(4)
              Mr.
                    Dunhem, Mr. Kumar, 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,
                    Mr.
                    Kumar, 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 September 19, 2006 Mr.
                    Kumar, and
                    Ms. Kanellias are no longer with the Company.








37


Option/SAR
      Grants in Last Fiscal Year


(Individual
      Grants)





**Name**
            **Number
                of Securities Underlying Options/SARs Granted**
            **Percent
                of Total Options/SARs Granted to Employees In Fiscal Year**
            **Exercise
                of Base Price ($/Sh)**
            **Expiration
                Date**Arne
                Dunhem (1)
            1,150,000
              ******
            N/A
            $0.01
              ******
            3/20/15
              ******Anand
                Kumar (1)
            1,150,000
              ******
            N/A
            $0.01
              ******
            3/20/15
              ******Voula
                Kanellias (1)
            1,150,000
              ******
            N/A
            $0.01
              ******
            3/20/15
              ******





(1)
      The
      vesting provisions of each of the above listed options or warrants are provided
      above.








38


**Aggregated
      Option Exercises In Last Fiscal Year And Fiscal**


**Year-End
      Option Values**





The
      following table sets forth certain information concerning the number and value
      of securities underlying exercisable and unexercisable stock options and
      warrants as of the fiscal year ended September 30, 2005 by our executive
      officers listed in the Summary Compensation Table above.





**Name**
            
            **Number
                of**
              **Shares**
              **Acquired
                on**
              **Exercise**
            
            **Value**
              **Realized**
            
            **Number
                of Securities**
              **Underlying
                Unexercised**
              **Options
                at**
              **September
                30, 2005****(1)**
              **Exercisable/Unexercisable**
            
            **Value
                of Unexercised**
              **In-the-Money
                Options at**
              **September
                30, 2005****(1)**
              **Exercisable/Unexercisable**Arne
                Dunhem
            
            
            0
            
            $
            0
            
            
            480,000
                /670,000
            
            $
            12,000
                / $16,750Anand
                Kumar
            
            
            0
            
            $
            0
            
            
            480,000
                /670,000
            
            $
            12,000
                / $16,750Voula
                Kanellias
            
            
            0
            
            $
            0
            
            
            480,000
                /670,000
            
            $
            12,000
                / $16,750


_________________________





(1)
            The
                value of unexercised in-the-money options at fiscal year end is calculated
                using the last sale price of $0.025 per share as of September 30,
                2005,
                the last trading day of fiscal year 2005 as reported on the OTC Bulletin
                Board, less the applicable exercise price.





**Compensation
      Of Directors**





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 exercice price of $0.073.





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 or immediately if Mr. Halpert’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 .





39


**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, 2005.





**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 does not currently have employment agreements with
      any of our executive officers .





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





**Beneficial
      Owners**




As
          of
          September 19, 2006, other than the directors and executive officers, Market
          Central, Inc. and Cornell Capital Partners, LP, 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  September 19, 2006. Unless otherwise
        indicated, beneficial ownership is direct and the person indicated has sole
        voting and investment power. As of  September 19, 2006 we had 38,386,943
        shares of common stock outstanding.







40





**Shares
                  to be****Beneficially**
              
              **Percent****Name
                  and Address**
              
              **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
              
              3.3%Arne
                  Dunhem**(3)**
                8000
                  Towers Crescent Drive
                Suite
                  1220
                Vienna,
                  VA 22182
              
              Common (Shares
                and
                  warrants)
              
              14,359,159
              
              35.9%Anand
                  Kumar**(4)**
                8000
                  Towers Crescent Drive
                Suite
                  1220
                Vienna,
                  VA 22182
              
              Common (Shares
                and
                  Warrants)
              
              5,533,374
              
              13.3%Voula
                  Kanellias
                8000
                  Towers Crescent Drive
                Suite
                  1220
                Vienna,
                  VA 22182
              
              Common (Shares
                and
                  Warrants)
              
              2,348,585
              
              7.5%Leif
                  T. Carlsson**(5)**
                8000
                  Towers Crescent Drive
                Suite 1220
                Vienna,
                  VA 22182
              
              Common (Options
                and
                  Warrants)
              
              1,332,314
              
              3.4%Magdy
                  Battikha
                8000
                  Towers Crescent Drive
                Suite 1220
                Vienna,
                  VA 22182
              
              Common
                (Shares
                  and Warrants)
              
              3,463,826
              
              8.7%Aziz
                  Bennani
                8000
                  Towers Crescent Drive
                Suite 1220
                Vienna,
                  VA 22182
              
              Common
                (Shares
                  and Warrants)
              
              2,228,585
              
              5.7%Victor
                  Halpert**(6)**
                8000
                  Towers Crescent Drive
                Suite 1220
                Vienna,
                  VA 22182
              
              Common
                (Warrants)
              
              472,223
              
              1.2%Market
                  Central, Inc.**(7)**
                1650A
                  Gum Branch Road
                Jacksonville,
                  NC 28540
              
              Common
                (Shares)
              
              3,352,400
              
              8.8%Loral
                  Skynet Network Services, Inc.**(8)**
                500
                  Hills Drive
                P.O.
                  Box 701*8*
                Bedminster,
                  NJ 07921
              
              Common
                (Shares
                  and Warrants)
              
              3,300,000
              
              8.0%Cornell
                  Capital Partners, LP**(9)**
                101
                  Hudson Street
                Suite
                  3700
                Jersey
                  City, NJ 07302
              
              Common (Shares
                and
                  Warrants)
              
              2,552,017
              
              6.6%Officers
                  and Directors as a Group
                (2
                  Persons)
              
              
              
              15,691,473
              
              39.3%


______________


(1)
              Applicable
                  percentage of ownership is based on 38,386,943 shares of common
                  stock
                  outstanding as of  September 19, 2006, 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. 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 September 19, 2006 are deemed to be beneficially owned by
                  the person
                  holding such options 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.(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
                    6,369,580 shares held directly by Arne Dunhem, our Chairman and
                    CEO and
                    1,620,000 warrants that are vested and immediately exercisable,
                    issued to
                    Mr. Dunhem through September 19, 2006, and 6,369,579 shares held
                    by the
                    Dunhem Family Partnership,
                    of which Mr. Dunhem, our Chairman and CEO is a General Partner
                    and who
                    with his wife Eva Dunhem jointly and equally make all investment
                    decisions
                    of The Dunhem Family Partnership. This information does not include
                    any
                    shares that may be issued to Mr. 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. We expect any such
                    compensation
                    will be non-cash consideration.(4)
              Anand
                  Kumar was until November 2005 our Executive Vice
                  President.(5)
              Leif
                  T. Carlsson is an independent Director of our Board. The shares
                  beneficially owned are 310,097 options that have vested and are
                  immediately exercisable and a total of 1,022,217 warrants that
                  are
                  exercisable within 60 days from September 20, 2006.(6)
              Victor
                  Halpert was until April 24, 2006, an independent Director of our
                  Board.
                  The shares beneficially owned are a total of 472,223 warrants that
                  are
                  exercisable within 60 days from September 20, 2006.(7)
              Doyal
                  Bryant, the President and CEO of Market Central, Inc. makes all
                  investment
                  decisions on behalf of Market Central, Inc.(8)
              Pat
                  Brant, the President of Loral Skynet Network Services, Inc. makes
                  all
                  investment decisions on behalf of Loral Skynet Network Services,
                  Inc.(9)
              All
                  investment decisions of Cornell Capital Partners, LP are made by
                  its
                  general partner, Yorkville Advisors, LLC. Mark Angelo, the managing
                  member
                  of Yorkville Advisors, makes the investment decisions on behalf
                  of
                  Yorkville Advisors.





41


**Item
      12. Certain Relationships and Related Transactions.**





During
      the period from year 2000 though February 1, 2005, we derived our revenue
      primarily from the sale of the Netspace franchises and from royalties paid
      by
      the franchise holders. The Netspace franchise system was developed by
      Netvertise, Inc. Netvertise was, during the period from year 2000 though
      February 1, 2005, owned by substantially the same shareholders as the Company.
      Netvertise expected to profit from the sale of products and services to the
      franchise owners who used the Netspace system and consumers who used Netspace
      products and services. We did not compensate Netvertise for the right to sell
      the Netspace franchise, and prior to October 20, 2001 there was no written
      agreement between the two companies. Effective October 20, 2001, we and
      Netvertise entered into a written agreement whereas Netvertise provided products
      and services to our franchisees. The services consisted of website development,
      website hosting, maintenance support and upgrading, graphic design, copy
      writing, training, e-publishing and on-line file back up, sharing and storage.
      The agreement also stipulated that Netvertise provided its personnel, office
      space, facilities, and support services as requested by us. The cost of these
      services was to be reimbursed to Netvertise on a monthly basis. This agreement
      was terminated on February 2, 2005.





During
      the period from year 2000 though February 1, 2005, we reimbursed Netvertise
      for
      the costs it incurred in providing services and facilities to us pursuant to
      the
      agreement. For personnel which were shared between us and Netvertise, a
      reasonable allocation was made by management of us and Netvertise, to include
      Messrs. Krasnow and Steinberg, president and chief financial officer,
      respectively of both firms, based upon the relative time spent by such shared
      employees working on Netvertise matters or our matters. We paid Netvertise
      $2,800 per month for use of office facilities, including rent, utilities, office
      furnishings and supplies and the expense of a shared receptionist and office
      manager which we believed was a fair allocation of such expenses.
      Messrs. Krasnow and Steinberg also allocated other shared expenses incurred
      by Netvertise on our behalf, such as insurance by estimating the cost of such
      items used by us. We paid directly and not through Netvertise its direct
      non-shared expenses such as advertising, travel, training and non-shared
      personnel.





Under
      the
      terms of the Share Exchange Agreement dated January 20, 2005 for our acquisition
      of Old Ariel Way, on February 2, 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 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. In addition to the
      common stock issued to the former stockholders of Old Ariel Way, under the
      Share
      Exchange Agreement, each outstanding option or warrant to purchase Old Ariel
      Way
      common stock was converted into an option to purchase the number of shares
      of
      our common shares equal to the number of Old Ariel Way common shares underlying
      the option or warrant immediately prior to February 2, 2005 multiplied by 1.6762
      and the exercise price of each option or warrant we issued will equal the
      exercise price of the corresponding Old Ariel Way option or warrant in effect
      immediately prior to February 2, 2005 divided by 1.6762.





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 Cornell
      Capital, one of the stockholders of Old Ariel Way (and now a stockholder of
      us).
      The loan bears interest at the rate of 12% per annum and was due and payable
      on
      May 31, 2005 and we are now in default unless we can renegotiate the terms
      of
      the loan for an extension with Cornell Capital. Cornell Capital is not a
      controlling stockholder of us, and we believe the terms of the loan are at
      least
      as favorable to us as could be obtained from an unrelated third party. In order
      to induce Cornell Capital to make the loan to Old Ariel Way, Arne Dunhem, the
      Chairman and Chief Executive Officer of Old Ariel Way prior to February 2,
      2005
      and our Chief Executive Officer after February 2, 2005, provided a personal
      guarantee of payment to Cornell Capital. 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.




On
      April
      21, 2005, Old Ariel Way sold and issued to Cornell Capital, 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 on the terms
      and conditions set forth in a Stock Purchase Agreement by and between Ariel
      Way,
      Inc. and Cornell Capital 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.





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 is due and
      payable on January 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.





42


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 is 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. The debenture shall be
      convertible into shares of our Common Stock at the option of Mr. Dunhem, in
      whole or in part at any time and from time to time, after the Original Issue
      Date. The conversion price in effect on any conversion date shall be equal
      to
      $0.30, which may be adjusted pursuant to the other terms of the debenture.





On
      May
      17, 2005 Eva Dunhem, the wife 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. 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.





We
      granted warrants to purchase our common stock to certain of our directors prior
      to their appointment 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.





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.





**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)








43


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








44


**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)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)








45


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








46


**Exhibit****No.**
            
            **Description**
            
            **Location**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)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
            
            Provided
                herewith10.26
            
            Warrant
                issued by Ariel Way, Inc. on September 26, 2005 to Mrs. Eva Dunhem
            
            Provided
                herewith10.27
            
            Convertible
                Debenture issued by Ariel Way, Inc. on September 26, 2005 to Mr.
                Arne
                Dunhem
            
            Provided
                herewith








47


**Exhibit****No.**
              
              **Description**
              
              **Location**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 year ended September 30, 2005, the aggregate fees billed by Bagell,
      Josephs & Company, L.L.C. for principal accountant fees and services was
      $40,000.








48


**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 DunhemTitle:
              President and Chief Executive Officer,Date:
              September 20, 2006





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,
              
              September
                  20, 2006Arne
                  Dunhem
              
              Principal
                  Executive Officer and Director/s/
                  Arne Dunhem
              
              Acting
                  Chief Financial Officer, Acting Principal Financial
              
              September
                  20, 2006Arne
                  Dunhem
              
              and
                  Acting Principal Accounting Officer/s/
                  Leif T. Carlsson
              
              Director
              
              September
                  20, 2006Leif
                  T. Carlsson





49