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helio2007

helio2007

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Published by Rafat Ali

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Published by: Rafat Ali on Feb 29, 2008
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Exhibit 99.1HELIO, INC. and HELIO LLCINDEX TO COMBINED FINANCIAL STATEMENTS
Page
 
Report of Independent Auditors 2Combined Balance Sheets as of December 31, 2006 and 2007 3Combined Statements of Operations for the period inception (January 27, 2005) to December 31,2005, and the years ended December 31, 2006 and 2007 4Combined Statements of Stockholders' and Partners' Equity for the period inception (January 27,2005) to December 31, 2005, and the years ended December 31, 2006 and 2007 5Combined Statements of Cash Flows for the period inception (January 27, 2005) to December 31,2005, and the years ended December 31, 2006 and 2007 7Notes to Combined Financial Statements 9
REPORT OF INDEPENDENT AUDITORS
The Board of Directors andStockholders of HELIO, Inc. and HELIO LLCWe have audited the accompanying combined balance sheets of HELIO, Inc. and affiliate (collectivelythe "Company") as of December 31, 2007 and 2006, and the related combined statements of operations,stockholders' and partners' equity, and cash flows for the years ended December 31, 2007 and 2006, and forthe period January 27, 2005 (inception) through December 31, 2005. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on these financialstatements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the UnitedStates. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. We were not engaged to perform anaudit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sinternal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, and evaluating theoverall financial statement presentation. We believe that our audits provide a reasonable basis for ouropinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, thecombined financial position of HELIO, Inc. and affiliate at December 31, 2007 and 2006 and the combinedresults of its operations and its cash flows for the years ended December 31, 2007 and 2006, and for theperiod January 27, 2005 (inception) through December 31, 2005 in conformity with U.S. generally acceptedaccounting principles.The accompanying financial statements have been prepared assuming that the Company will continueas a going concern. As more fully described in Note 1, the Company has incurred substantial recurringoperating losses since inception and management anticipates that it will continue to incur substantial lossesfrom its operating and investing activities, and the Company may not have sufficient working capital and oroutside financings available to meet its planned operating activities over the next twelve months. Theseconditions raise substantial doubt about the Company's ability to continue as a going concern.Management's plans in regard to these matters also are described in Note 1. The 2007 combined financialstatements do not include any adjustments to reflect the possible future effects on the recoverability andclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.As discussed in Note 2 to the combined financial statements, effective January 1, 2006, the Companychanged its accounting for stock-based compensation in connection with the adoption of Statement of Financial Accounting Standards No. 123 (R), "Share-Based Payment." /s/ Ernst & Young LLPLos Angeles, CaliforniaFebruary 26, 2008
HELIO, INC. and HELIO LLCCOMBINED BALANCE SHEETS(in thousands, except share/unit data)
December 31,2006
 
December 31,2007
 
ASSETS
 Current assets:Cash and cash equivalents $ 111,066 $ 45,148Marketable securities 27,917 Accounts receivable, net of allowance of $5,543 and $10,866 asof December 31, 2006 and 2007, respectively 10,191 29,216Prepaid expenses 13,556 5,263Inventory 11,725 23,729Restricted cash 7,850 6,850Other current assets 1,709 868
 
 Total current assets 184,014 111,074Restricted cashlong term 5,647 5,734Property and equipment 50,456 40,556Other intangible assets 21,031 8,970Goodwill 3,449 3,449Other long term assets 373 290Total assets $ 264,970 $ 170,073
LIABILITIES AND STOCKHOLDERS' AND PARTNERS'EQUITY
 Current liabilities:Accounts payable $ 13,330 $ 30,439Accrued expenses 44,892 54,377Due to Partners 17,864 4,299Member deposits and credit fees 2,730 10,849Deferred revenue 2,803 7,575Total current liabilities 81,619 107,539Convertible notes payable and interest payable due to Partners 62,642Other non-current liabilities 2,123 1,390Total liabilities 83,742 171,571Commitments and contingenciesStockholders' and partners' equity:Convertible preferred membership units (124,401,683 authorized;100,000,000 and 124,401,683 issued and outstanding andconvertible into Class A Common Stock at a 1:1 conversion rateat December 31, 2006 and 2007, respectively) 401,000 540,478Serial preferred stock ($0.01 par value; 20,000,000 authorized;-0- shares issued and outstanding at December 31, 2006 and2007) Class B common stock ($0.01 par value; 2 shares authorized,issued and outstanding at December 31, 2006 and 2007) Class A common stock ($0.01 par value; 230,000,002 sharesauthorized; 5,337,900, and 5,561,272 shares issued andoutstanding at December 31, 2006 and 2007, respectively) 54 56Additional paid-in capital 13,952 18,308Accumulated deficit (233,778) (560,340) Total stockholders' and partners' equity 181,228 (1,498) Total liabilities and stockholders' and partners' equity $ 264,970 $ 170,073

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