Earthlink 2008 Annual Report Download - page 280

HELIO, INC. and HELIO LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
7. Goodwill, Contributed and Purchased Intangibles (continued)
Estimated future amortization related to the Company’s identified finite-lived intangible assets at December 31, 2007 is as follows (in
thousands):
8.
Accrued Expenses
Accrued expenses of $44.9 million and $54.4 million at December 31, 2006 and 2007, respectively, were largely comprised of accrued
operating and fixed asset purchases, inventory obligations, member sales and use taxes, advertising and marketing expenses, payroll and other
payroll-related liabilities and agent commissions.
9.
Convertible Promissory Notes
In July 2007, the Company entered into a Note Purchase and Security Agreement (the “Note Agreement”) with its Partners, whereby
the Partners committed to issue the Company up to $200.0 million in the form of secured exchangeable promissory notes for the purpose of
funding the Company’s working capital requirements and product development expenses. In conjunction with the Note Agreement and during
the period July to November 2007, the Company issued 10% secured exchangeable promissory notes in the aggregate principal amounts of
$130.0 million in favor of EarthLink and SKT (collectively, the “Convertible Promissory Notes”). The Convertible Promissory Notes bear a
simple interest rate of 10% per annum, and mature in July 2010 (the “Maturity Date”). Under the provisions of the Note Agreement and the
Convertible Promissory Notes agreement, any holder of Convertible Promissory Notes may exchange any such note (or any portion thereof) at
any time, through and up to the Maturity Date, into Preferred Membership Units (at a per unit exchange rate as defined by the agreements). In
connection with any such exchange, such holder shall also have the right to receive a payment, at the time of exchange, of any accrued and
unpaid interest with respect to the outstanding principal amount of the Convertible Note Payable (or portion thereof) so exchanged, which
payment shall be made, at the election of the Company in cash, membership units, or a combination thereof.
During the year ended December 31, 2007, SKT exchanged Convertible Promissory Notes in the aggregate principal amount of $70.0
million and $0.5 million of accrued interest into 23,492,592 Preferred Membership Units at an exchange value of $3.00 per unit.
As of December 31, 2007, aggregate Convertible Promissory Notes payable were $62.6 million, of which $30.0 million principal and
$1.3 million accrued interest is due to EarthLink and $30.0 million principal and $1.3 million accrued interest is due to SKT. During the period
ended December 31, 2007, the Company recorded $3.1 million of interest expense associated with the Convertible Promissory Notes.
10. Capitalization
Formation of HELIO, Inc.
HELIO, Inc. was formed in January 2005 and was later capitalized in March 2005 through the issuance of one (1) share of Class B
Common Stock to each of the Partners. As of December 31, 2007, the Company has the authority to issue 250,000,004 shares of capital stock,
consisting of (i) 230,000,002 shares of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”) and 2 (two) shares of
Class B Common Stock, par value $0.01 per share (“Class B Common Stock”, and together with Class A Common Stock, “Common Stock”)
and (ii) 20,000,000 shares of Preferred Stock, par value $0.01 per share (“Preferred Stock”), issuable in one or more series as defined in the
Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”).
20
2008
6,016
2009
2,784
Total
$
8,800