Earthlink 2006 Annual Report Download - page 57

transactions and warrant transactions to reduce the potential dilution upon conversion of the convertible senior notes. The remaining proceeds
will be used for general corporate purposes, including expenditures related to our growth initiatives.
During the year ended December 31, 2006, we entered into a financing lease agreement with General Electric Capital Corporation to lease
certain equipment necessary to build out our municipal wireless infrastructure in selected markets. Under the agreement, we can lease up to
$75.0 million of assets. As of December 31, 2006, no equipment was leased pursuant to the financing agreement.
Our available cash and marketable securities, together with our results of operations, are expected to be sufficient to meet our operating
expenses, capital requirements and investment and other obligations for the next 12 months. However, as a result of our growth initiatives and
other investment activities, we may seek additional financing in the future. Except for our financing lease agreement discussed above, we have
no commitments for any additional financing and have no lines of credit or similar sources of financing. We cannot be sure that we can obtain
additional financing on favorable terms, if at all, through the issuance of equity securities or the incurrence of additional debt. Additional equity
financing may dilute our stockholders, and debt financing, if available, may restrict our ability to declare and pay dividends and raise future
capital. If we are unable to obtain additional needed financing, we may be required to reduce our planned capital expenditures, suspend or
reduce our investment activities and/or reduce any of our planned growth initiatives, which could materially and adversely affect our prospects
for long-term growth.
Related Party Transactions
HELIO
EarthLink and HELIO have entered into a services agreement pursuant to which we provide HELIO facilities, accounting, tax, billing,
procurement, risk management, payroll, human resource, employee benefit administration and other support services in exchange for
management fees. However, as HELIO develops its business, the extent to which HELIO relies on us to provide these services has decreased.
We believe that providing these services to HELIO enabled HELIO to more quickly and cost effectively launch its business than if it were to
purchase these services from third parties. The management fees were determined based on our costs to provide the services, and management
believes such fees are reasonable. The total amount of fees that HELIO pays to us depends on the extent to which HELIO utilizes our services.
Fees for services provided to HELIO are reflected as reductions to the associated expenses incurred by us to provide such services. During the
years ended December 31, 2005 and 2006, fees received for services provided to HELIO were $3.0 million and $2.3 million, respectively.
We market HELIO’s products and services, and during the years ended December 31, 2005 and 2006, we generated revenues of $0.3
million and $0.9 million, respectively, associated with marketing HELIO’s services.
We purchase wireless Internet access devices and services from HELIO. During the years ended December 31, 2005 and 2006, fees paid
for products and services received from HELIO were $0.9 million and $0.9 million, respectively.
As of December 31, 2005 and 2006, we had accounts receivable from HELIO of approximately $0.3 million and $0.8 million.
Sprint
Through its ownership interest in us, Sprint was considered a related party during the year ended December 31, 2004. Due to sales of
shares of our common stock during the year ended December 31, 2005, Sprint is no longer considered a related party. We have a marketing
relationship with Embarq, a
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