**Exhibit 99.1**

As described in the Explanatory Note preceding Item 1of this Annual Report, the unaudited quarterly Condensed Consolidated FinancialStatements for the first two quarters in the fiscal year ended December 31,2006 and all quarters in the fiscal year ended December 31, 2005 have beenrestated to defer a portion of the revenue previously recorded for system sales in China which wasrecognized earlier than it should have been and recognize additional non-cashstock-based compensation expense arising from using corrected measurement datesfor certain stock options grants.

The unaudited Condensed Consolidated FinancialStatements for 2005 also reflect restatements to report sales to certain thirdparty resellers and associated cost of net sales, as related party sales andrelated party cost of net sales, because in 2006 we determined that sales tothese entities are, in substance, sales to SOFTBANK CORP., which is one of oursignificant shareholders. These corrections had no effect on reported total netsales, total cost of sales, total gross profit, or total net income (loss). Theaccounts receivable resulting from these sales are now reported as accountsreceivable, related parties. This correction had no effect on reported totalaccounts receivable, total current assets, or total assets.

Lastly, the Company has corrected the unauditedCondensed Consolidated Balance Sheets at March 31, 2006 and June 30,2006 and the Condensed Consolidated Statements of Cash Flows for the threemonth period ended March 31, 2006 and the six month period ended June 30,2006 to report $6.2 million of time deposits as short-term investments. Formerlythese time deposits with original maturities of more than three months hadincorrectly been reported as cash equivalents. These corrections had no effecton reported total current assets or total assets in the restated CondensedConsolidated Balance Sheets at March 31, 2006 or June 30, 2006. Thecorrections to the Condensed Consolidated Statements of Cash Flow for the threemonth period ended March 31 and the six month period ended June 30,2006 resulted in changes in the above amounts to be reported as investingactivities rather than changes in cash balances.

Following are the restated Condensed ConsolidatedBalance Sheets and Statements of Operations at and for the three month andyear-to-date periods ended June 30, 2006, March 31, 2006, September 30,2005, June 30, 3005 and March 31, 2005. Also included are therestated Condensed Consolidated Statements of Cash Flows for the three monthsended March 31, 2006 and the six months ended June 30, 2006, whichgive effect to the corrections for the aforementioned 2006 error in theclassification of certain time deposits, and the restated CondensedConsolidated Statement of Operations for the three month period ended December 31,2005. This follows guidance issued by the SEC concerning presenting informationabout the effects of restating previously issued financial statements for theeffects of correcting errors in prior stock option accounting. Pursuant to thisguidance we do not intend to amend any of our previously filed Annual Reportson Form 10-K or Quarterly Reports on Form 10-Q for theperiods affected by the restatements and such reports should not be reliedupon.

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except per share amounts)**

| ** **                                                | ** ** | **Three months ended June 30, 2006** | ** ** | **Six months ended June 30, 2006** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                | ** ** | **As previously**                                        | ** ** | ** **                                                  | ** ** | ** ** | ** ** | **As previously** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                | ** ** | **reported**                                                  | ** ** | **Adjustments**                                             | ** ** | **As restated** | ** ** | **reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| Net sales                                                 |       |                                                          |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                           |       |                                                          | $          | 515,733                                                     |       |   |   | $ | (1,835 | ) |   |   | $ | 513,898 |   |   |   | $ | 1,076,094 |   |   |   | $ | (5,160 | ) |   | $ | 1,070,934 |   |
| Related party                                             |       |                                                          | 33,413     |                                                        |       |   | 4,215 |   |   |   | 37,628 |   |   |   | 69,623 |   |   |   | 12,949 |   |   | 82,572 |   |
|                                                      |       |                                                          | 549,146    |                                                        |       |   | 2,380 |   |   |   | 551,526 |   |   |   | 1,145,717 |   |   |   | 7,789 |   |   | 1,153,506 |   |
| Cost of net sales                                         |       |                                                          |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                           |       |                                                          | 414,364    |                                                        |       |   | (251 | ) |   |   | 414,113 |   |   |   | 873,744 |   |   |   | 1,953 |   |   | 875,697 |   |
| Related party                                             |       |                                                          | 25,496     |                                                        |       |   | 2,967 |   |   |   | 28,463 |   |   |   | 40,233 |   |   |   | 4,835 |   |   | 45,068 |   |
| Gross profit                                              |       |                                                          | 109,286    |                                                        |       |   | (336 | ) |   |   | 108,950 |   |   |   | 231,740 |   |   |   | 1,001 |   |   | 232,741 |   |
| Operating expenses:                                       |       |                                                          |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                       |       |                                                          | 82,423     |                                                        |       |   | 686 |   |   |   | 83,109 |   |   |   | 165,593 |   |   |   | 1,240 |   |   | 166,833 |   |
| Research and development                                  |       |                                                          | 46,743     |                                                        |       |   | (140 | ) |   |   | 46,603 |   |   |   | 93,052 |   |   |   | (47 | ) |   | 93,005 |   |
| Amortization of intangible assets                         |       |                                                          | 4,821      |                                                        |       |   | — |   |   |   | 4,821 |   |   |   | 9,746 |   |   |   | — |   |   | 9,746 |   |
| Total operating  expenses                                 |       |                                                          | 133,987    |                                                        |       |   | 546 |   |   |   | 134,533 |   |   |   | 268,391 |   |   |   | 1,193 |   |   | 269,584 |   |
| Operating loss                                            |       |                                                          | (24,701    | )                                                           |       |   | (882 | ) |   |   | (25,583 | ) |   |   | (36,651 | ) |   |   | (192 | ) |   | (36,843 | ) |
| Interest income                                           |       |                                                          | 3,947      |                                                        |       |   | — |   |   |   | 3,947 |   |   |   | 7,479 |   |   |   | — |   |   | 7,479 |   |
| Interest expense                                          |       |                                                          | (3,166     | )                                                           |       |   | — |   |   |   | (3,166 | ) |   |   | (6,667 | ) |   |   | — |   |   | (6,667 | ) |
| Other income, net                                         |       |                                                          | 6,887      |                                                        |       |   | — |   |   |   | 6,887 |   |   |   | 10,454 |   |   |   | — |   |   | 10,454 |   |
| Loss before income taxes and minority interest            |       |                                                          | (17,033    | )                                                           |       |   | (882 | ) |   |   | (17,915 | ) |   |   | (25,385 | ) |   |   | (192 | ) |   | (25,577 | ) |
| Income tax  expense                                       |       |                                                          | (4,669     | )                                                           |       |   | — |   |   |   | (4,669 | ) |   |   | (7,508 | ) |   |   | — |   |   | (7,508 | ) |
| Minority interest  in losses of consolidated subsidiaries |       |                                                          | 259        |                                                        |       |   | — |   |   |   | 259 |   |   |   | 815 |   |   |   | — |   |   | 815 |   |
| Net loss                                                  |       |                                                          | $          | (21,443                                                     | )          |   |   | $ | (882 | ) |   |   | $ | (22,325 | ) |   |   | $ | (32,078 | ) |   |   | $ | (192 | ) |   | $ | (32,270 | ) |
| Loss per share—Basic                                 |       |                                                          | $          | (0.18                                                       | )          |   |   | $ | (0.01 | ) |   |   | $ | (0.19 | ) |   |   | $ | (0.27 | ) |   |   | $ | — |   |   | $ | (0.27 | ) |
| Loss per share—Diluted                               |       |                                                          | $          | (0.18                                                       | )          |   |   | $ | (0.01 | ) |   |   | $ | (0.19 | ) |   |   | $ | (0.27 | ) |   |   | $ | — |   |   | $ | (0.27 | ) |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Unaudited)(In thousands, except per share amounts)**

| ** **                                                | ** ** | **Three months ended March 31, 2006** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                | ** ** | **As previously  reported**                               | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| Net sales                                                 |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                           |       |                                                           | $          | 560,361 |   |   |   | $ | (3,324 | ) |   |   | $ | 557,037 |   |   |
| Related party                                             |       |                                                           | 36,210     |   |   |   | 8,734 |   |   |   | 44,944 |   |   |
|                                                      |       |                                                           | 596,571    |   |   |   | 5,410 |   |   |   | 601,981 |   |   |
| Cost of net sales                                         |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                           |       |                                                           | 459,381    |   |   |   | 2,204 |   |   |   | 461,585 |   |   |
| Related party                                             |       |                                                           | 14,736     |   |   |   | 1,869 |   |   |   | 16,605 |   |   |
| Gross profit                                              |       |                                                           | 122,454    |   |   |   | 1,337 |   |   |   | 123,791 |   |   |
| Operating expenses:                                       |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                       |       |                                                           | 83,172     |   |   |   | 552 |   |   |   | 83,724 |   |   |
| Research and development                                  |       |                                                           | 46,309     |   |   |   | 93 |   |   |   | 46,402 |   |   |
| Amortization of intangible assets                         |       |                                                           | 4,925      |   |   |   | — |   |   |   | 4,925 |   |   |
| Total operating  expenses                                 |       |                                                           | 134,406    |   |   |   | 645 |   |   |   | 135,051 |   |   |
| Operating loss                                            |       |                                                           | (11,952    | ) |   |   | 692 |   |   |   | (11,260 | ) |   |
|                                                      |       |                                                           |       |   |   |   | — |   |   |   | — |   |   |
| Interest income                                           |       |                                                           | 3,532      |   |   |   | — |   |   |   | 3,532 |   |   |
| Interest expense                                          |       |                                                           | (3,500     | ) |   |   | — |   |   |   | (3,500 | ) |   |
| Other income, net                                         |       |                                                           | 3,568      |   |   |   | — |   |   |   | 3,568 |   |   |
| Loss before income taxes and minority interest            |       |                                                           | (8,352     | ) |   |   | 692 |   |   |   | (7,660 | ) |   |
| Income tax  expense                                       |       |                                                           | (2,839     | ) |   |   | — |   |   |   | (2,839 | ) |   |
| Minority interest  in losses of consolidated subsidiaries |       |                                                           | 556        |   |   |   | — |   |   |   | 556 |   |   |
| Net loss                                                  |       |                                                           | $          | (10,635 | ) |   |   | $ | 692 |   |   |   | $ | (9,943 | ) |   |
| Loss per share—Basic                                 |       |                                                           | $          | (0.09 | ) |   |   | $ | 0.01 |   |   |   | $ | (0.08 | ) |   |
| Loss per share—Diluted                               |       |                                                           | $          | (0.09 | ) |   |   | $ | 0.01 |   |   |   | $ | (0.08 | ) |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Unaudited)(In thousands, except per share amounts)**

| ** **                                                                                    | ** ** | **Three months ended December 31, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                                    | ** ** | **As previously**                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                    | ** ** | **reported**                                                      | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| Net sales                                                                                     |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                                                               |       |                                                              | $          | 613,434 |   |   |   | $ | (13,031 | ) |   |   | $ | 600,403 |   |   |
| Related party                                                                                 |       |                                                              | 62,220     |   |   |   | 18,469 |   |   |   | 80,689 |   |   |
|                                                                                          |       |                                                              | 675,654    |   |   |   | 5,438 |   |   |   | 681,092 |   |   |
| Cost of net sales                                                                             |       |                                                              |       |   |   |   | — |   |   |   | — |   |   |
| Unrelated party                                                                               |       |                                                              | 570,534    |   |   |   | (29,188 | ) |   |   | 541,346 |   |   |
| Related party                                                                                 |       |                                                              | 44,019     |   |   |   | 33,072 |   |   |   | 77,091 |   |   |
| Gross profit                                                                                  |       |                                                              | 61,101     |   |   |   | 1,554 |   |   |   | 62,655 |   |   |
| Operating expenses:                                                                           |       |                                                              |       |   |   |   | — |   |   |   | — |   |   |
| Selling, general and administrative                                                           |       |                                                              | 73,907     |   |   |   | 166 |   |   |   | 74,073 |   |   |
| Research and development                                                                      |       |                                                              | 54,455     |   |   |   | 60 |   |   |   | 54,515 |   |   |
| Amortization of intangible assets                                                             |       |                                                              | 5,462      |   |   |   | — |   |   |   | 5,462 |   |   |
| Restructuring                                                                                 |       |                                                              | 11,164     |   |   |   | — |   |   |   | 11,164 |   |   |
| Total operating  expenses                                                                     |       |                                                              | 144,988    |   |   |   | 226 |   |   |   | 145,214 |   |   |
|                                                                                          |       |                                                              |       |   |   |   | — |   |   |   | — |   |   |
| Operating loss                                                                                |       |                                                              | (83,887    | ) |   |   | 1,328 |   |   |   | (82,559 | ) |   |
|                                                                                          |       |                                                              |       |   |   |   | — |   |   |   | — |   |   |
| Interest income                                                                               |       |                                                              | 2,617      |   |   |   | — |   |   |   | 2,617 |   |   |
| Interest expense                                                                              |       |                                                              | (3,900     | ) |   |   | — |   |   |   | (3,900 | ) |   |
| Other income, net                                                                             |       |                                                              | 45,388     |   |   |   | — |   |   |   | 45,388 |   |   |
|                                                                                          |       |                                                              |       |   |   |   | — |   |   |   | — |   |   |
| Loss before  income taxes, minority interest and equity in loss of affiliated  companies |       |                                                              | (39,782    | ) |   |   | 1,328 |   |   |   | (38,454 | ) |   |
| Income tax  (expense) benefit                                                                 |       |                                                              | (2,501     | ) |   |   | — |   |   |   | (2,501 | ) |   |
| Minority interest  in losses of consolidated subsidiaries                                     |       |                                                              | 598        |   |   |   | — |   |   |   | 598 |   |   |
| Equity in loss of  affiliated companies                                                       |       |                                                              | (3,645     | ) |   |   | — |   |   |   | (3,645 | ) |   |
| Net loss                                                                                      |       |                                                              | $          | (45,330 | ) |   |   | $ | 1,328 |   |   |   | $ | (44,002 | ) |   |
| Loss per share—Basic                                                                     |       |                                                              | $          | (0.38 | ) |   |   | $ | 0.01 |   |   |   | $ | (0.37 | ) |   |
| Loss per share—Diluted                                                                   |       |                                                              | $          | (0.38 | ) |   |   | $ | 0.01 |   |   |   | $ | (0.37 | ) |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Unaudited)(In thousands, except per share amounts)**

| ** **                                                                                        | ** ** | **Three months ended September 30, 2005** | ** ** | **Nine months ended September 30, 2005** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                                        | ** ** | **As previously  reported**                                   | ** ** | **Adjustments**                                                   | ** ** | **As restated** | ** ** | **As previously  reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| Net sales                                                                                         |       |                                                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                                                                   |       |                                                               | $          | 625,902                                                           |       |   |   | $ | (41,830 | ) |   |   | $ | 584,072 |   |   |   | $ | 1,921,264 |   |   |   | $ | (126,369 | ) |   | $ | 1,794,895 |   |
| Related party                                                                                     |       |                                                               | 6,144      |                                                              |       |   | 7,219 |   |   |   | 13,363 |   |   |   | 332,425 |   |   |   | 62,698 |   |   | 395,123 |   |
|                                                                                              |       |                                                               | 632,046    |                                                              |       |   | (34,611 | ) |   |   | 597,435 |   |   |   | 2,253,689 |   |   |   | (63,671 | ) |   | 2,190,018 |   |
| Cost of net sales                                                                                 |       |                                                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                                                                   |       |                                                               | 575,907    |                                                              |       |   | (27,221 | ) |   |   | 548,686 |   |   |   | 1,704,751 |   |   |   | (58,958 | ) |   | 1,645,793 |   |
| Related party                                                                                     |       |                                                               | 3,185      |                                                              |       |   | 7,677 |   |   |   | 10,862 |   |   |   | 146,422 |   |   |   | 24,622 |   |   | 171,044 |   |
| Gross profit                                                                                      |       |                                                               | 52,954     |                                                              |       |   | (15,067 | ) |   |   | 37,887 |   |   |   | 402,516 |   |   |   | (29,335 | ) |   | 373,181 |   |
| Operating  expenses:                                                                              |       |                                                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                                                               |       |                                                               | 86,362     |                                                              |       |   | 52 |   |   |   | 86,414 |   |   |   | 298,384 |   |   |   | (994 | ) |   | 297,390 |   |
| Research and development                                                                          |       |                                                               | 60,797     |                                                              |       |   | 20 |   |   |   | 60,817 |   |   |   | 192,678 |   |   |   | (381 | ) |   | 192,297 |   |
| Amortization of intangible assets                                                                 |       |                                                               | 6,643      |                                                              |       |   | — |   |   |   | 6,643 |   |   |   | 20,391 |   |   |   | — |   |   | 20,391 |   |
| Impairment oflong-lived  assets                                                                   |       |                                                               | 218,094    |                                                              |       |   | — |   |   |   | 218,094 |   |   |   | 218,094 |   |   |   | — |   |   | 218,094 |   |
| Restructuring                                                                                     |       |                                                               | 3,378      |                                                              |       |   | — |   |   |   | 3,378 |   |   |   | 18,505 |   |   |   | — |   |   | 18,505 |   |
| In-process research and development                                                          |       |                                                               | —     |                                                              |       |   | — |   |   |   | — |   |   |   | 660 |   |   |   | — |   |   | 660 |   |
| Total operating  expenses                                                                         |       |                                                               | 375,274    |                                                              |       |   | 72 |   |   |   | 375,346 |   |   |   | 748,712 |   |   |   | (1,375 | ) |   | 747,337 |   |
| Operating loss                                                                                    |       |                                                               | (322,320   | )                                                                 |       |   | (15,139 | ) |   |   | (337,459 | ) |   |   | (346,196 | ) |   |   | (27,960 | ) |   | (374,156 | ) |
| Interest income                                                                                   |       |                                                               | 1,673      |                                                              |       |   | — |   |   |   | 1,673 |   |   |   | 4,474 |   |   |   | — |   |   | 4,474 |   |
| Interest expense                                                                                  |       |                                                               | (3,876     | )                                                                 |       |   | — |   |   |   | (3,876 | ) |   |   | (12,864 | ) |   |   | — |   |   | (12,864 | ) |
| Gain on extinguishment of subordinated notes                                                 |       |                                                               | 20,297     |                                                              |       |   | — |   |   |   | 20,297 |   |   |   | 31,392 |   |   |   | — |   |   | 31,392 |   |
| Other income, net                                                                                 |       |                                                               | 7,352      |                                                              |       |   | — |   |   |   | 7,352 |   |   |   | (1,723 | ) |   |   | — |   |   | (1,723 | ) |
| Loss before income taxes, minority interest and  equity in loss of affiliated companies |       |                                                               | (296,874   | )                                                                 |       |   | (15,139 | ) |   |   | (312,013 | ) |   |   | (324,917 | ) |   |   | (27,960 | ) |   | (352,877 | ) |
| Income tax  (expense) benefit                                                                     |       |                                                               | (107,469   | )                                                                 |       |   | (17,753 | ) |   |   | (125,222 | ) |   |   | (115,388 | ) |   |   | (18,653 | ) |   | (134,041 | ) |
| Minority interest in losses of consolidated  subsidiaries                                         |       |                                                               | 3          |                                                              |       |   | — |   |   |   | 3 |   |   |   | 94 |   |   |   | — |   |   | 94 |   |
| Equity in loss of affiliated companies                                                            |       |                                                               | (786       | )                                                                 |       |   | — |   |   |   | (786 | ) |   |   | (1,818 | ) |   |   | — |   |   | (1,818 | ) |
| Net loss                                                                                          |       |                                                               | $          | (405,126                                                          | )          |   |   | $ | (32,892 | ) |   |   | $ | (438,018 | ) |   |   | $ | (442,029 | ) |   |   | $ | (46,613 | ) |   | $ | (488,642 | ) |
| Loss per share—Basic                                                                         |       |                                                               | $          | (3.43                                                             | )          |   |   | $ | (0.27 | ) |   |   | $ | (3.70 | ) |   |   | $ | (3.81 | ) |   |   | $ | (0.41 | ) |   | $ | (4.22 | ) |
| Loss per share—Diluted                                                                       |       |                                                               | $          | (3.43                                                             | )          |   |   | $ | (0.27 | ) |   |   | $ | (3.70 | ) |   |   | $ | (3.81 | ) |   |   | $ | (0.41 | ) |   | $ | (4.22 | ) |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Unaudited)(In thousands, except per share amounts)**

| ** **                                                                              | ** ** | **Three months ended June 30, 2005** | ** ** | **Six months ended June 30, 2005** | ** ** |
|-----------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                              | ** ** | **As previously**                                        | ** ** | ** **                                                  | ** ** | ** ** | ** ** | **As previously** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                              | ** ** | **reported**                                                  | ** ** | **Adjustments**                                             | ** ** | **As restated** | ** ** | **reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| Net sales                                                                               |       |                                                          |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                                                         |       |                                                          | $          | 691,431                                                     |       |   |   | $ | (42,041 | ) |   |   | $ | 649,390 |   |   |   | $ | 1,295,362 |   |   |   | $ | (84,539 | ) |   | $ | 1,210,823 |   |
| Related party                                                                           |       |                                                          | 28,328     |                                                        |       |   | 22,795 |   |   |   | 51,123 |   |   |   | 326,281 |   |   |   | 55,479 |   |   | 381,760 |   |
|                                                                                    |       |                                                          | 719,759    |                                                        |       |   | (19,246 | ) |   |   | 700,513 |   |   |   | 1,621,643 |   |   |   | (29,060 | ) |   | 1,592,583 |   |
| Cost of net sales                                                                       |       |                                                          |       |                                                        |       |   | — |   |   |   | — |   |   |   |   |   |   |   | — |   |   | — |   |
| Unrelated party                                                                         |       |                                                          | 591,892    |                                                        |       |   | (18,758 | ) |   |   | 573,134 |   |   |   | 1,128,844 |   |   |   | (31,738 | ) |   | 1,097,106 |   |
| Related party                                                                           |       |                                                          | 15,729     |                                                        |       |   | 8,796 |   |   |   | 24,525 |   |   |   | 143,237 |   |   |   | 16,945 |   |   | 160,182 |   |
| Gross profit                                                                            |       |                                                          | 112,138    |                                                        |       |   | (9,284 | ) |   |   | 102,854 |   |   |   | 349,562 |   |   |   | (14,267 | ) |   | 335,295 |   |
| Operating  expenses:                                                                    |       |                                                          |       |                                                        |       |   | — |   |   |   | — |   |   |   |   |   |   |   | — |   |   | — |   |
| Selling, general and administrative                                                     |       |                                                          | 103,009    |                                                        |       |   | 78 |   |   |   | 103,087 |   |   |   | 212,020 |   |   |   | (1,047 | ) |   | 210,973 |   |
| Research and development                                                                |       |                                                          | 65,621     |                                                        |       |   | 29 |   |   |   | 65,650 |   |   |   | 131,881 |   |   |   | (399 | ) |   | 131,482 |   |
| Amortization of intangible assets                                                       |       |                                                          | 6,776      |                                                        |       |   | — |   |   |   | 6,776 |   |   |   | 13,748 |   |   |   | — |   |   | 13,748 |   |
| Restructuring                                                                           |       |                                                          | 15,127     |                                                        |       |   | — |   |   |   | 15,127 |   |   |   | 15,127 |   |   |   | — |   |   | 15,127 |   |
| In-process research and development                                                     |       |                                                          | 660        |                                                        |       |   | — |   |   |   | 660 |   |   |   | 660 |   |   |   | — |   |   | 660 |   |
| Total operating expenses                                                                |       |                                                          | 191,193    |                                                        |       |   | 107 |   |   |   | 191,300 |   |   |   | 373,436 |   |   |   | (1,446 | ) |   | 371,990 |   |
|                                                                                    |       |                                                          |       |                                                        |       |   | — |   |   |   | — |   |   |   |   |   |   |   | — |   |   | — |   |
| Operating loss                                                                          |       |                                                          | (79,055    | )                                                           |       |   | (9,391 | ) |   |   | (88,446 | ) |   |   | (23,874 | ) |   |   | (12,821 | ) |   | (36,695 | ) |
|                                                                                    |       |                                                          |       |                                                        |       |   | — |   |   |   | — |   |   |   |   |   |   |   | — |   |   | — |   |
| Interest income                                                                         |       |                                                          | 1,452      |                                                        |       |   | — |   |   |   | 1,452 |   |   |   | 2,801 |   |   |   | — |   |   | 2,801 |   |
| Interest expense                                                                        |       |                                                          | (4,711     | )                                                           |       |   | — |   |   |   | (4,711 | ) |   |   | (8,989 | ) |   |   | — |   |   | (8,989 | ) |
| Gain on extinguishment of subordinated notes                                            |       |                                                          | 11,095     |                                                        |       |   | — |   |   |   | 11,095 |   |   |   | 11,095 |   |   |   | — |   |   | 11,095 |   |
| Other income (expense), net                                                             |       |                                                          | (2,228     | )                                                           |       |   | — |   |   |   | (2,228 | ) |   |   | (9,075 | ) |   |   | — |   |   | (9,075 | ) |
|                                                                                    |       |                                                          |       |                                                        |       |   | — |   |   |   | — |   |   |   |   |   |   |   | — |   |   | — |   |
| Loss before income taxes, minority interest and  equity in loss of affiliated companies |       |                                                          | (73,447    | )                                                           |       |   | (9,391 | ) |   |   | (82,838 | ) |   |   | (28,042 | ) |   |   | (12,821 | ) |   | (40,863 | ) |
| Income tax (expense) benefit                                                            |       |                                                          | (240       | )                                                           |       |   | (3,050 | ) |   |   | (3,290 | ) |   |   | (7,920 | ) |   |   | (900 | ) |   | (8,820 | ) |
| Minority interest in losses of consolidated  subsidiaries                               |       |                                                          | 313        |                                                        |       |   | — |   |   |   | 313 |   |   |   | 91 |   |   |   | — |   |   | 91 |   |
| Equity in loss of affiliated companies                                                  |       |                                                          | (574       | )                                                           |       |   | — |   |   |   | (574 | ) |   |   | (1,033 | ) |   |   | — |   |   | (1,033 | ) |
| Net loss                                                                                |       |                                                          | $          | (73,948                                                     | )          |   |   | $ | (12,441 | ) |   |   | $ | (86,389 | ) |   |   | $ | (36,904 | ) |   |   | $ | (13,721 | ) |   | $ | (50,625 | ) |
| Loss per share—Basic                                                               |       |                                                          | $          | (0.64                                                       | )          |   |   | $ | (0.11 | ) |   |   | $ | (0.75 | ) |   |   | $ | (0.32 | ) |   |   | $ | (0.12 | ) |   | $ | (0.44 | ) |
| Loss per share—Diluted                                                             |       |                                                          | $          | (0.64                                                       | )          |   |   | $ | (0.11 | ) |   |   | $ | (0.75 | ) |   |   | $ | (0.32 | ) |   |   | $ | (0.12 | ) |   | $ | (0.44 | ) |
|                                                                                         |            |                                                               |            |                                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Unaudited)(In thousands, except per share amounts)**

| ** **                                                                                | ** ** | **Three months ended March 31, 2005**        | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                                                | ** ** | **As previously  reported**                                      | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| ** **                                                                                | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Net sales                                                                                 |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                                                           |       |                                                                  | $          | 603,931 |   |   |   | $ | (42,499 | ) |   |   | $ | 561,432 |   |   |
| Related party                                                                             |       |                                                                  | 297,953    |   |   |   | 32,684 |   |   |   | 330,637 |   |   |
|                                                                                      |       |                                                                  | 901,884    |   |   |   | (9,815 | ) |   |   | 892,069 |   |   |
| Cost of net sales                                                                         |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Unrelated party                                                                           |       |                                                                  | 536,952    |   |   |   | (12,980 | ) |   |   | 523,972 |   |   |
| Related party                                                                             |       |                                                                  | 127,508    |   |   |   | 8,149 |   |   |   | 135,657 |   |   |
| Gross profit                                                                              |       |                                                                  | 237,424    |   |   |   | (4,984 | ) |   |   | 232,440 |   |   |
| Operating expenses:                                                                       |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                                                       |       |                                                                  | 109,011    |   |   |   | (1,125 | ) |   |   | 107,886 |   |   |
| Research and development                                                                  |       |                                                                  | 66,260     |   |   |   | (429 | ) |   |   | 65,831 |   |   |
| Amortization of intangible assets                                                         |       |                                                                  | 6,972      |   |   |   | — |   |   |   | 6,972 |   |   |
| Total operating  expenses                                                                 |       |                                                                  | 182,243    |   |   |   | (1,554 | ) |   |   | 180,689 |   |   |
| Operating income                                                                          |       |                                                                  | 55,181     |   |   |   | (3,430 | ) |   |   | 51,751 |   |   |
| Interest income                                                                           |       |                                                                  | 1,349      |   |   |   | — |   |   |   | 1,349 |   |   |
| Interest expense                                                                          |       |                                                                  | (4,278     | ) |   |   | — |   |   |   | (4,278 | ) |   |
| Other income, net                                                                         |       |                                                                  | (6,847     | ) |   |   | — |   |   |   | (6,847 | ) |   |
| Income before income taxes, minority interest and  equity in loss of affiliated companies |       |                                                                  | 45,405     |   |   |   | (3,430 | ) |   |   | 41,975 |   |   |
| Income tax  (expense) benefit                                                             |       |                                                                  | (7,680     | ) |   |   | 2,150 |   |   |   | (5,530 | ) |   |
| Minority interest  in losses of consolidated subsidiaries                                 |       |                                                                  | (222       | ) |   |   | — |   |   |   | (222 | ) |   |
| Equity in loss of  affiliated companies                                                   |       |                                                                  | (459       | ) |   |   | — |   |   |   | (459 | ) |   |
| Net income                                                                                |       |                                                                  | $          | 37,044 |   |   |   | $ | (1,280 | ) |   |   | $ | 35,764 |   |   |
| Earnings per share—Basic                                                             |       |                                                                  | $          | 0.32 |   |   |   | $ | (0.01 | ) |   |   | $ | 0.31 |   |   |
| Earnings per share—Diluted                                                           |       |                                                                  | $          | 0.29 |   |   |   | $ | (0.02 | ) |   |   | $ | 0.27 |   |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands)**

| ** **                                                          | ** ** | **June 30, 2006**      | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **As previously  reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| **ASSETS**                                                          | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current assets:                                                     |       |                             |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                          |       |                             | $          | 647,274 |   |   |   | $ | (6,254 | ) |   | $ | 641,020 |   |
| Short-term investments                                              |       |                             | 10,339     |   |   |   | 6,254 |   |   | 16,593 |   |
| Accounts receivable, net  of allowances for doubtful accounts       |       |                             | 383,507    |   |   |   | (1,779 | ) |   | 381,728 |   |
| Accounts receivable,  related parties                               |       |                             | 41,110     |   |   |   | 1,779 |   |   | 42,889 |   |
| Notes receivable                                                    |       |                             | 11,593     |   |   |   | — |   |   | 11,593 |   |
| Inventories                                                         |       |                             | 455,015    |   |   |   | — |   |   | 455,015 |   |
| Deferred costs                                                      |       |                             | 256,812    |   |   |   | — |   |   | 256,812 |   |
| Prepaids and other  current assets                                  |       |                             | 94,177     |   |   |   | — |   |   | 94,177 |   |
| Restricted cash and  short-term investments                         |       |                             | 71,119     |   |   |   | — |   |   | 71,119 |   |
| Total current assets                                                |       |                             | 1,970,946  |   |   |   | — |   |   | 1,970,946 |   |
| Property, plant and  equipment, net                                 |       |                             | 216,325    |   |   |   | — |   |   | 216,325 |   |
| Long-term investments                                               |       |                             | 29,824     |   |   |   | — |   |   | 29,824 |   |
| Goodwill                                                            |       |                             | 3,063      |   |   |   | — |   |   | 3,063 |   |
| Intangible assets, net                                              |       |                             | 65,568     |   |   |   | — |   |   | 65,568 |   |
| Long-term deferred costs                                            |       |                             | —     |   |   |   | 180,248 |   |   | 180,248 |   |
| Other long-term assets                                              |       |                             | 31,092     |   |   |   | — |   |   | 31,092 |   |
| Total assets                                                        |       |                             | $          | 2,316,818 |   |   |   | $ | 180,248 |   |   | $ | 2,497,066 |   |
| **LIABILITIES,  MINORITY INTEREST AND STOCKHOLDERS’ EQUITY**   |       |                             |       |   |   |   |   |   |   |   |   |
| Current liabilities:                                                |       |                             |       |   |   |   |   |   |   |   |   |
| Accounts payable                                                    |       |                             | $          | 363,097 |   |   |   | $ | — |   |   | $ | 363,097 |   |
| Short-term debt                                                     |       |                             | 122,587    |   |   |   | — |   |   | 122,587 |   |
| Income taxes payable                                                |       |                             | 37,101     |   |   |   | 621 |   |   | 37,722 |   |
| Customer advances                                                   |       |                             | 291,964    |   |   |   | — |   |   | 291,964 |   |
| Deferred revenue                                                    |       |                             | 66,776     |   |   |   | 33,739 |   |   | 100,515 |   |
| Other current  liabilities                                          |       |                             | 218,194    |   |   |   | 1,516 |   |   | 219,710 |   |
| Total current  liabilities                                          |       |                             | 1,099,719  |   |   |   | 35,876 |   |   | 1,135,595 |   |
| Long-term deferred  revenue                                         |       |                             | 16,270     |   |   |   | 246,194 |   |   | 262,464 |   |
| Long-term debt                                                      |       |                             | 274,900    |   |   |   | — |   |   | 274,900 |   |
| Other long-term  liabilities                                        |       |                             | 11,200     |   |   |   | — |   |   | 11,200 |   |
| Total liabilities                                                   |       |                             | 1,402,089  |   |   |   | 282,070 |   |   | 1,684,159 |   |
| Minority interest in  consolidated subsidiaries                     |       |                             | 7,593      |   |   |   | — |   |   | 7,593 |   |
| Stockholders’ equity:                                          |       |                             |       |   |   |   |   |   |   |   |   |
| Common stock                                                        |       |                             | 152        |   |   |   | — |   |   | 152 |   |
| Additional paid-in  capital                                         |       |                             | 1,171,175  |   |   |   | 25,102 |   |   | 1,196,277 |   |
| Deferred stock  compensation                                        |       |                             | —     |   |   |   | — |   |   | — |   |
| Retained earnings  (accumulated deficit)                            |       |                             | (285,252   | ) |   |   | (123,914 | ) |   | (409,166 | ) |
| Accumulated other  comprehensive income                             |       |                             | 21,061     |   |   |   | (3,010 | ) |   | 18,051 |   |
| Total stockholders’  equity                                    |       |                             | 907,136    |   |   |   | (101,822 | ) |   | 805,314 |   |
| Total liabilities, minority interest and  stockholders’ equity |       |                             | $          | 2,316,818 |   |   |   | $ | 180,248 |   |   | $ | 2,497,066 |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)(Unaudited)(In thousands)**

| ** **                                                          | ** ** | **March 31, 2006**     | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **As previously  reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| **ASSETS**                                                          | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current assets:                                                     |       |                             |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                          |       |                             | $          | 673,625 |   |   |   | $ | (6,237 | ) |   | $ | 667,388 |   |
| Short-term investments                                              |       |                             | 10,852     |   |   |   | 6,237 |   |   | 17,089 |   |
| Accounts receivable, net  of allowances for doubtful accounts       |       |                             | 405,938    |   |   |   | (6,936 | ) |   | 399,002 |   |
| Accounts receivable,  related parties                               |       |                             | 89,050     |   |   |   | 6,936 |   |   | 95,986 |   |
| Notes receivable                                                    |       |                             | 7,659      |   |   |   | — |   |   | 7,659 |   |
| Inventories                                                         |       |                             | 424,028    |   |   |   | — |   |   | 424,028 |   |
| Deferred costs                                                      |       |                             | 246,678    |   |   |   | — |   |   | 246,678 |   |
| Prepaids and other  current assets                                  |       |                             | 103,275    |   |   |   | — |   |   | 103,275 |   |
| Restricted cash and  short-term investments                         |       |                             | 69,078     |   |   |   | — |   |   | 69,078 |   |
| Total current assets                                                |       |                             | 2,030,183  |   |   |   | — |   |   | 2,030,183 |   |
| Property, plant and  equipment, net                                 |       |                             | 221,003    |   |   |   | — |   |   | 221,003 |   |
| Long-term investments                                               |       |                             | 25,643     |   |   |   | — |   |   | 25,643 |   |
| Goodwill                                                            |       |                             | 3,063      |   |   |   | — |   |   | 3,063 |   |
| Intangible assets, net                                              |       |                             | 70,389     |   |   |   | — |   |   | 70,389 |   |
| Long-term deferred costs                                            |       |                             | —     |   |   |   | 182,480 |   |   | 182,480 |   |
| Other long-term assets                                              |       |                             | 25,235     |   |   |   | — |   |   | 25,235 |   |
| Total assets                                                        |       |                             | $          | 2,375,516 |   |   |   | $ | 182,480 |   |   | $ | 2,557,996 |   |
| **LIABILITIES,  MINORITY INTEREST AND STOCKHOLDERS’ EQUITY**   |       |                             |       |   |   |   |   |   |   |   |   |
| Current liabilities:                                                |       |                             |       |   |   |   |   |   |   |   |   |
| Accounts payable                                                    |       |                             | $          | 339,865 |   |   |   | $ | — |   |   | $ | 339,865 |   |
| Short-term debt                                                     |       |                             | 172,141    |   |   |   | — |   |   | 172,141 |   |
| Income taxes payable                                                |       |                             | 31,708     |   |   |   | 622 |   |   | 32,330 |   |
| Customer advances                                                   |       |                             | 265,359    |   |   |   | — |   |   | 265,359 |   |
| Deferred revenue                                                    |       |                             | 86,681     |   |   |   | 33,427 |   |   | 120,108 |   |
| Other current  liabilities                                          |       |                             | 243,888    |   |   |   | 1,514 |   |   | 245,402 |   |
| Total current  liabilities                                          |       |                             | 1,139,642  |   |   |   | 35,563 |   |   | 1,175,205 |   |
| Long-term deferred  revenue                                         |       |                             | 17,798     |   |   |   | 248,104 |   |   | 265,902 |   |
| Long-term debt                                                      |       |                             | 274,900    |   |   |   | — |   |   | 274,900 |   |
| Other long-term  liabilities                                        |       |                             | 13,145     |   |   |   | — |   |   | 13,145 |   |
| Total liabilities                                                   |       |                             | 1,445,485  |   |   |   | 283,667 |   |   | 1,729,152 |   |
|                                                                |       |                             |       |   |   |   | — |   |   | — |   |
| Minority interest in  consolidated subsidiaries                     |       |                             | 7,852      |   |   |   | — |   |   | 7,852 |   |
| Stockholders’ equity:                                          |       |                             |       |   |   |   |   |   |   |   |   |
| Common stock                                                        |       |                             | 152        |   |   |   | — |   |   | 152 |   |
| Additional paid-in  capital                                         |       |                             | 1,166,519  |   |   |   | 24,591 |   |   | 1,191,110 |   |
| Deferred stock  compensation                                        |       |                             | —     |   |   |   | — |   |   | — |   |
| Accumulated deficit                                                 |       |                             | (263,809   | ) |   |   | (123,032 | ) |   | (386,841 | ) |
| Accumulated other  comprehensive income                             |       |                             | 19,317     |   |   |   | (2,746 | ) |   | 16,571 |   |
| Total stockholders’  equity                                    |       |                             | 922,179    |   |   |   | (101,187 | ) |   | 820,992 |   |
| Total liabilities, minority interest and  stockholders’ equity |       |                             | $          | 2,375,516 |   |   |   | $ | 182,480 |   |   | $ | 2,557,996 |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)(Unaudited)(In thousands)**

| ** **                                                          | ** ** | **September 30, 2005** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **As previously  reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| **ASSETS**                                                          | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current assets:                                                     |       |                             |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                          |       |                             | $          | 496,126 |   |   |   | $ | — |   |   | $ | 496,126 |   |
| Short-term investments                                              |       |                             | 15,091     |   |   |   | — |   |   | 15,091 |   |
| Accounts receivable, net  of allowances for doubtful accounts       |       |                             | 544,925    |   |   |   | (10,749 | ) |   | 534,176 |   |
| Accounts receivable,  related parties                               |       |                             | 26,920     |   |   |   | 10,749 |   |   | 37,669 |   |
| Notes receivable                                                    |       |                             | 22,934     |   |   |   | — |   |   | 22,934 |   |
| Inventories                                                         |       |                             | 474,485    |   |   |   | — |   |   | 474,485 |   |
| Deferred costs                                                      |       |                             | 238,294    |   |   |   | — |   |   | 238,294 |   |
| Prepaids and other  current assets                                  |       |                             | 83,147     |   |   |   | — |   |   | 83,147 |   |
| Restricted cash and  short-term investments                         |       |                             | 36,922     |   |   |   | — |   |   | 36,922 |   |
| Total current assets                                                |       |                             | 1,938,844  |   |   |   | — |   |   | 1,938,844 |   |
| Property, plant and  equipment, net                                 |       |                             | 251,009    |   |   |   | — |   |   | 251,009 |   |
| Long-term investments                                               |       |                             | 37,427     |   |   |   | — |   |   | 37,427 |   |
| Goodwill                                                            |       |                             | 3,063      |   |   |   | — |   |   | 3,063 |   |
| Intangible assets, net                                              |       |                             | 80,775     |   |   |   | — |   |   | 80,775 |   |
| Long-term deferred costs                                            |       |                             | —     |   |   |   | 188,633 |   |   | 188,633 |   |
| Other long-term assets                                              |       |                             | 31,932     |   |   |   | — |   |   | 31,932 |   |
| Total assets                                                        |       |                             | $          | 2,343,050 |   |   |   | $ | 188,633 |   |   | $ | 2,531,683 |   |
| **LIABILITIES,  MINORITY INTEREST AND STOCKHOLDERS’ EQUITY**   | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current liabilities:                                                |       |                             |       |   |   |   |   |   |   |   |   |
| Accounts payable                                                    |       |                             | $          | 291,466 |   |   |   | $ | — |   |   | $ | 291,466 |   |
| Short-term debt                                                     |       |                             | 226,400    |   |   |   | — |   |   | 226,400 |   |
| Income taxes payable                                                |       |                             | 25,244     |   |   |   | 621 |   |   | 25,865 |   |
| Customer advances                                                   |       |                             | 202,233    |   |   |   | — |   |   | 202,233 |   |
| Deferred revenue                                                    |       |                             | 96,981     |   |   |   | 32,378 |   |   | 129,359 |   |
| Other current  liabilities                                          |       |                             | 250,260    |   |   |   | 1,495 |   |   | 251,755 |   |
| Total current  liabilities                                          |       |                             | 1,092,584  |   |   |   | 34,494 |   |   | 1,127,078 |   |
| Long-term deferred  revenue                                         |       |                             | —     |   |   |   | 257,339 |   |   | 257,339 |   |
| Long-term debt                                                      |       |                             | 274,900    |   |   |   | — |   |   | 274,900 |   |
| Total liabilities                                                   |       |                             | 1,367,484  |   |   |   | 291,833 |   |   | 1,659,317 |   |
| Minority interest in  consolidated subsidiaries                     |       |                             | 5,287      |   |   |   | — |   |   | 5,287 |   |
| Stockholders’ equity:                                          |       |                             |       |   |   |   |   |   |   |   |   |
| Common stock                                                        |       |                             | 151        |   |   |   | — |   |   | 151 |   |
| Additional paid-in  capital                                         |       |                             | 1,165,227  |   |   |   | 23,819 |   |   | 1,189,046 |   |
| Deferred stock  compensation                                        |       |                             | (4,052     | ) |   |   | (115 | ) |   | (4,167 | ) |
| Retained earnings (accumulated  deficit)                            |       |                             | (207,844   | ) |   |   | (125,055 | ) |   | (332,899 | ) |
| Accumulated other  comprehensive income                             |       |                             | 16,797     |   |   |   | (1,849 | ) |   | 14,948 |   |
| Total stockholders’  equity                                    |       |                             | 970,279    |   |   |   | (103,200 | ) |   | 867,079 |   |
| Total liabilities, minority interest and  stockholders’ equity |       |                             | $          | 2,343,050 |   |   |   | $ | 188,633 |   |   | $ | 2,531,683 |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)(Unaudited)(In thousands)**

| ** **                                                             | ** ** | **June 30, 2005**      | ** ** |
|------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                             | ** ** | **As previously  reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| **ASSETS**                                                             | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current assets:                                                        |       |                             |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                             |       |                             | $          | 350,324 |   |   |   | $ | — |   |   | $ | 350,324 |   |
| Short-term investments                                                 |       |                             | 31,402     |   |   |   | — |   |   | 31,402 |   |
| Accounts receivable, net  of allowances for doubtful accounts          |       |                             | 755,251    |   |   |   | (74,717 | ) |   | 680,534 |   |
| Accounts receivable,  related parties                                  |       |                             | 89,569     |   |   |   | 74,717 |   |   | 164,286 |   |
| Notes receivable                                                       |       |                             | 30,815     |   |   |   | — |   |   | 30,815 |   |
| Inventories                                                            |       |                             | 535,780    |   |   |   | — |   |   | 535,780 |   |
| Deferred costs                                                         |       |                             | 249,589    |   |   |   | — |   |   | 249,589 |   |
| Prepaids and other  current assets                                     |       |                             | 99,691     |   |   |   | 1,197 |   |   | 100,888 |   |
| Restricted cash and  short-term investments                            |       |                             | 32,607     |   |   |   | — |   |   | 32,607 |   |
| Current deferred taxes                                                 |       |                             | 43,344     |   |   |   | 4,759 |   |   | 48,103 |   |
| Total current assets                                                   |       |                             | 2,218,372  |   |   |   | 5,956 |   |   | 2,224,328 |   |
| Property, plant and  equipment, net                                    |       |                             | 273,027    |   |   |   | — |   |   | 273,027 |   |
| Long-term investments                                                  |       |                             | 37,099     |   |   |   | — |   |   | 37,099 |   |
| Goodwill                                                               |       |                             | 196,037    |   |   |   | — |   |   | 196,037 |   |
| Intangible assets, net                                                 |       |                             | 89,100     |   |   |   | — |   |   | 89,100 |   |
| Long-term deferred costs                                               |       |                             | —     |   |   |   | 165,239 |   |   | 165,239 |   |
| Other long-term assets                                                 |       |                             | 76,801     |   |   |   | 12,698 |   |   | 89,499 |   |
| Total assets                                                           |       |                             | $          | 2,890,436 |   |   |   | $ | 183,893 |   |   | $ | 3,074,329 |   |
| **LIABILITIES,  MINORITY INTEREST AND STOCKHOLDERS’ EQUITY** | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current liabilities:                                                   |       |                             |       |   |   |   |   |   |   |   |   |
| Accounts payable                                                       |       |                             | $          | 431,361 |   |   |   | $ | — |   |   | $ | 431,361 |   |
| Short-term debt                                                        |       |                             | 265,236    |   |   |   | — |   |   | 265,236 |   |
| Income taxes payable                                                   |       |                             | 3,488      |   |   |   | 1,522 |   |   | 5,010 |   |
| Customer advances                                                      |       |                             | 144,590    |   |   |   | — |   |   | 144,590 |   |
| Deferred revenue                                                       |       |                             | 86,870     |   |   |   | 30,121 |   |   | 116,991 |   |
| Other current  liabilities                                             |       |                             | 253,334    |   |   |   | 1,458 |   |   | 254,792 |   |
| Total current  liabilities                                             |       |                             | 1,184,879  |   |   |   | 33,101 |   |   | 1,217,980 |   |
| Long-term deferred  revenue                                            |       |                             | —     |   |   |   | 219,318 |   |   | 219,318 |   |
| Long-term debt                                                         |       |                             | 364,800    |   |   |   | — |   |   | 364,800 |   |
| Total liabilities                                                      |       |                             | 1,549,679  |   |   |   | 252,419 |   |   | 1,802,098 |   |
| Minority interest in  consolidated subsidiaries                        |       |                             | 5,290      |   |   |   | — |   |   | 5,290 |   |
| Stockholders’ equity:                                             |       |                             |       |   |   |   |   |   |   |   |   |
| Common stock                                                           |       |                             | 146        |   |   |   | — |   |   | 146 |   |
| Additional paid-in  capital                                            |       |                             | 1,138,374  |   |   |   | 23,859 |   |   | 1,162,233 |   |
| Deferred stock compensation                                            |       |                             | (4,584     | ) |   |   | (223 | ) |   | (4,807 | ) |
| Retained earnings  (accumulated deficit)                               |       |                             | 197,281    |   |   |   | (92,163 | ) |   | 105,118 |   |
| Accumulated other  comprehensive income                                |       |                             | 4,250      |   |   |   | 1 |   |   | 4,251 |   |
| Total stockholders’  equity                                       |       |                             | 1,335,467  |   |   |   | (68,526 | ) |   | 1,266,941 |   |
| Total liabilities, minority interest and  stockholders’ equity    |       |                             | $          | 2,890,436 |   |   |   | $ | 183,893 |   |   | $ | 3,074,329 |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)(Unaudited)(In thousands)**

| ** **                                                          | ** ** | **March 31, 2005**     | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **As previously  reported** | ** ** | **Adjustments** | ** ** | **As restated** | ** ** |
| **ASSETS**                                                          | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current assets:                                                     |       |                             |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                                          |       |                             | $          | 372,714 |   |   |   | $ | — |   |   | $ | 372,714 |   |
| Short-term investments                                              |       |                             | 16,224     |   |   |   | — |   |   | 16,224 |   |
| Accounts receivable, net  of allowances for doubtful accounts       |       |                             | 737,696    |   |   |   | (49,152 | ) |   | 688,544 |   |
| Accounts receivable,  related parties                               |       |                             | 168,997    |   |   |   | 49,151 |   |   | 218,148 |   |
| Notes receivable                                                    |       |                             | 22,926     |   |   |   | — |   |   | 22,926 |   |
| Inventories                                                         |       |                             | 601,717    |   |   |   | — |   |   | 601,717 |   |
| Deferred costs                                                      |       |                             | 211,973    |   |   |   | — |   |   | 211,973 |   |
| Prepaids and other  current assets                                  |       |                             | 109,787    |   |   |   | 1,195 |   |   | 110,982 |   |
| Restricted cash and  short-term investments                         |       |                             | 29,551     |   |   |   | — |   |   | 29,551 |   |
| Current deferred taxes                                              |       |                             | 141,713    |   |   |   | 4,759 |   |   | 146,472 |   |
| Total current assets                                                |       |                             | 2,413,298  |   |   |   | 5,953 |   |   | 2,419,251 |   |
| Property, plant and  equipment, net                                 |       |                             | 278,487    |   |   |   | — |   |   | 278,487 |   |
| Long-term investments                                               |       |                             | 35,131     |   |   |   | — |   |   | 35,131 |   |
| Goodwill                                                            |       |                             | 195,816    |   |   |   | — |   |   | 195,816 |   |
| Intangible assets, net                                              |       |                             | 94,438     |   |   |   | — |   |   | 94,438 |   |
| Long-term deferred costs                                            |       |                             | —     |   |   |   | 155,269 |   |   | 155,269 |   |
| Other long-term assets                                              |       |                             | 83,889     |   |   |   | 12,699 |   |   | 96,588 |   |
| Total assets                                                        |       |                             | $          | 3,101,059 |   |   |   | $ | 173,921 |   |   | $ | 3,274,980 |   |
| **LIABILITIES,  MINORITY INTEREST AND   STOCKHOLDERS’ EQUITY** | ** ** |                             | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Current liabilities:                                                |       |                             |       |   |   |   |   |   |   |   |   |
| Accounts payable                                                    |       |                             | $          | 440,706 |   |   |   | $ | — |   |   | $ | 440,706 |   |
| Short-term debt                                                     |       |                             | 275,485    |   |   |   | 3 |   |   | 275,488 |   |
| Income taxes payable                                                |       |                             | 111,640    |   |   |   | (1,529 | ) |   | 110,111 |   |
| Customer advances                                                   |       |                             | 137,442    |   |   |   | — |   |   | 137,442 |   |
| Deferred revenue                                                    |       |                             | 95,004     |   |   |   | 27,247 |   |   | 122,251 |   |
| Other current  liabilities                                          |       |                             | 238,668    |   |   |   | 1,438 |   |   | 240,106 |   |
| Total current  liabilities                                          |       |                             | 1,298,945  |   |   |   | 27,159 |   |   | 1,326,104 |   |
| Long-term deferred  revenue                                         |       |                             | —     |   |   |   | 202,955 |   |   | 202,955 |   |
| Long-term debt                                                      |       |                             | 402,500    |   |   |   | — |   |   | 402,500 |   |
| Total liabilities                                                   |       |                             | 1,701,445  |   |   |   | 230,114 |   |   | 1,931,559 |   |
| Minority interest in  consolidated subsidiaries                     |       |                             | 5,604      |   |   |   | — |   |   | 5,604 |   |
| Stockholders’ equity:                                          |       |                             |       |   |   |   |   |   |   |   |   |
| Common stock                                                        |       |                             | 144        |   |   |   | — |   |   | 144 |   |
| Additional paid-in  capital                                         |       |                             | 1,123,826  |   |   |   | 23,901 |   |   | 1,147,727 |   |
| Deferred stock  compensation                                        |       |                             | (5,527     | ) |   |   | (372 | ) |   | (5,899 | ) |
| Retained earnings  (accumulated deficit)                            |       |                             | 271,229    |   |   |   | (79,722 | ) |   | 191,507 |   |
| Accumulated other  comprehensive income                             |       |                             | 4,338      |   |   |   | — |   |   | 4,338 |   |
| Total stockholders’  equity                                    |       |                             | 1,394,010  |   |   |   | (56,193 | ) |   | 1,337,817 |   |
| Total liabilities, minority interest and  stockholders’ equity |       |                             | $          | 3,101,059 |   |   |   | $ | 173,921 |   |   | $ | 3,274,980 |   |

 

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(In thousands)**

| ** **                                                                                  | ** ** | **Six months ended June 30, 2006** | ** ** |
|---------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                  | ** ** | **As previously**                                      | ** ** | **Total** | ** ** | ** ** | ** ** |
| ** **                                                                                  | ** ** | **reported**                                                | ** ** | **adjustments** | ** ** | **As restated** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                    |       |                                                        | (32,078    | ) |   |   | (190 | ) |   |   | (32,268 | ) |   |
| Adjustments to reconcile net loss to net cash  provided by  (used in) operating activities: |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                                              |       |                                                        | 34,653     |   |   |   | — |   |   |   | 34,653 |   |   |
| Loss on sale and  disposal of assets                                                        |       |                                                        | 2,169      |   |   |   | — |   |   |   | 2,169 |   |   |
| Stock-based compensation  expense                                                           |       |                                                        | 8,769      |   |   |   | 1,166 |   |   |   | 9,935 |   |   |
| Provision for doubtful  accounts                                                            |       |                                                        | 3,133      |   |   |   | — |   |   |   | 3,133 |   |   |
| Provision for deferred  costs                                                               |       |                                                        | 5,978      |   |   |   | — |   |   |   | 5,978 |   |   |
| Other                                                                                       |       |                                                        | (2,930     | ) |   |   | — |   |   |   | (2,930 | ) |   |
| Changes in operating assets and liabilities:                                                |       |                                                        |       |   |   |   | — |   |   |   |   |   |   |
| Accounts receivable                                                                         |       |                                                        | 97,596     |   |   |   | — |   |   |   | 97,596 |   |   |
| Inventories                                                                                 |       |                                                        | (36,916    | ) |   |   | — |   |   |   | (36,916 | ) |   |
| Deferred costs                                                                              |       |                                                        | (13,677    | ) |   |   | — |   |   |   | (13,677 | ) |   |
| Other assets                                                                                |       |                                                        | (7,784     | ) |   |   | 6,822 |   |   |   | (962 | ) |   |
| Accounts payable                                                                            |       |                                                        | 39,693     |   |   |   | — |   |   |   | 39,693 |   |   |
| Income taxes payable                                                                        |       |                                                        | 3,438      |   |   |   | — |   |   |   | 3,438 |   |   |
| Customer advances                                                                           |       |                                                        | 69,280     |   |   |   | — |   |   |   | 69,280 |   |   |
| Deferred revenue                                                                            |       |                                                        | (2,699     | ) |   |   | (7,813 | ) |   |   | (10,512 | ) |   |
| Other current  liabilities                                                                  |       |                                                        | (89,469    | ) |   |   | 15 |   |   |   | (89,454 | ) |   |
| Net cash provided by  operating activities                                                  |       |                                                        | 79,156     |   |   |   | — |   |   |   | 79,156 |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Additions to property,  plant and equipment                                                 |       |                                                        | (12,288    | ) |   |   | — |   |   |   | (12,288 | ) |   |
| Investment in  affiliates, net of cash acquired                                             |       |                                                        | (302       | ) |   |   | — |   |   |   | (302 | ) |   |
| Proceeds from sale of  business                                                             |       |                                                        | 19,965     |   |   |   | — |   |   |   | 19,965 |   |   |
| Change in restricted  cash and long-term investments                                        |       |                                                        | (19,994    | ) |   |   | — |   |   |   | (19,994 | ) |   |
| Purchase of short-term  investments                                                         |       |                                                        | (21,810    | ) |   |   | (6,222 | ) |   |   | (28,032 | ) |   |
| Proceeds from sale of  short-term investments                                               |       |                                                        | 25,588     |   |   |   | — |   |   |   | 25,588 |   |   |
| Other                                                                                       |       |                                                        | 1,672      |   |   |   | — |   |   |   | 1,672 |   |   |
| Net cash used in  investing activities                                                      |       |                                                        | (7,169     | ) |   |   | (6,222 | ) |   |   | (13,391 | ) |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                      |       |                                                        |       |   |   |   | — |   |   |   |   |   |   |
| Proceeds from borrowing                                                                     |       |                                                        | 62,545     |   |   |   | — |   |   |   | 62,545 |   |   |
| Payments on borrowings                                                                      |       |                                                        | (140,053   | ) |   |   | — |   |   |   | (140,053 | ) |   |
| Other                                                                                       |       |                                                        | 1,967      |   |   |   | — |   |   |   | 1,967 |   |   |
| Net cash used in  financing activities                                                      |       |                                                        | (75,541    | ) |   |   | — |   |   |   | (75,541 | ) |   |
| Effect of exchange rate  changes on cash and cash equivalents                               |       |                                                        | 5,257      |   |   |   | (32 | ) |   |   | 5,225 |   |   |
| Net increase (decrease)  in cash and cash equivalents                                       |       |                                                        | 1,703      |   |   |   | (6,254 | ) |   |   | (4,551 | ) |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                           |       |                                                        | 645,571    |   |   |   | — |   |   |   | 645,571 |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                  |       |                                                        | 647,274    |   |   |   | (6,254 | ) |   |   | 641,020 |   |   |

 

  

----

**UTSTARCOM, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Unaudited)(In thousands)**

| ** **                                                                                      | ** ** | **Three months ended March 31, 2006** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                      | ** ** | **As previously**                                         | ** ** | **Total** | ** ** | ** ** | ** ** |
| ** **                                                                                      | ** ** | **reported**                                                   | ** ** | **adjustments** | ** ** | **As restated** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                          |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                        |       |                                                           | $          | (10,635 | ) |   |   | $ | 692 |   |   |   | $ | (9,943 | ) |   |
| Adjustments to reconcile  net loss to net cash provided by (used in) operating activities: |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                   |       |                                                           | 17,476     |   |   |   | — |   |   |   | 17,476 |   |   |
| Loss on sale and disposal of assets                                                             |       |                                                           | 4,708      |   |   |   | — |   |   |   | 4,708 |   |   |
| Stock-based compensation expense                                                                |       |                                                           | 1,769      |   |   |   | 656 |   |   |   | 2,425 |   |   |
| Provision for doubtful accounts                                                                 |       |                                                           | 892        |   |   |   | — |   |   |   | 892 |   |   |
| Provision for deferred costs                                                                    |       |                                                           | 795        |   |   |   | — |   |   |   | 795 |   |   |
| Other                                                                                           |       |                                                           | (578       | ) |   |   | — |   |   |   | (578 | ) |   |
| Changes in  operating assets and liabilities:                                                   |       |                                                           |       |   |   |   | — |   |   |   |   |   |   |
| Accounts receivable                                                                             |       |                                                           | 28,787     |   |   |   | — |   |   |   | 28,787 |   |   |
| Inventories                                                                                     |       |                                                           | (4,337     | ) |   |   | — |   |   |   | (4,337 | ) |   |
| Deferred costs                                                                                  |       |                                                           | (810       | ) |   |   | — |   |   |   | (810 | ) |   |
| Other assets                                                                                    |       |                                                           | (6,771     | ) |   |   | 4,055 |   |   |   | (2,716 | ) |   |
| Accounts payable                                                                                |       |                                                           | 18,077     |   |   |   | — |   |   |   | 18,077 |   |   |
| Income taxes payable                                                                            |       |                                                           | (2,020     | ) |   |   | — |   |   |   | (2,020 | ) |   |
| Customer advances                                                                               |       |                                                           | 43,097     |   |   |   | — |   |   |   | 43,097 |   |   |
| Deferred revenue                                                                                |       |                                                           | 14,207     |   |   |   | (5,418 | ) |   |   | 8,789 |   |   |
| Other current liabilities                                                                       |       |                                                           | (50,985    | ) |   |   | 15 |   |   |   | (50,970 | ) |   |
| Net cash provided by operating activities                                                       |       |                                                           | 53,672     |   |   |   | — |   |   |   | 53,672 |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                          |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Additions to property, plant and equipment                                                      |       |                                                           | (3,162     | ) |   |   | — |   |   |   | (3,162 | ) |   |
| Sale of business                                                                                |       |                                                           | 19,965     |   |   |   | — |   |   |   | 19,965 |   |   |
| Change in restricted cash and long-term investments                                             |       |                                                           | (17,037    | ) |   |   | — |   |   |   | (17,037 | ) |   |
| Purchase of short-term investments                                                              |       |                                                           | (10,819    | ) |   |   | (6,222 | ) |   |   | (17,041 | ) |   |
| Proceeds from sale of short-term investments                                                    |       |                                                           | 13,309     |   |   |   | — |   |   |   | 13,309 |   |   |
| Other                                                                                           |       |                                                           | 499        |   |   |   | — |   |   |   | 499 |   |   |
| Net cash provided by (used in) investing activities                                             |       |                                                           | 2,755      |   |   |   | (6,222 | ) |   |   | (3,467 | ) |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                          |       |                                                           |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from borrowings                                                                        |       |                                                           | 62,370     |   |   |   | — |   |   |   | 62,370 |   |   |
| Payments on borrowings                                                                          |       |                                                           | (89,948    | ) |   |   | — |   |   |   | (89,948 | ) |   |
| Other                                                                                           |       |                                                           | (3,184     | ) |   |   | — |   |   |   | (3,184 | ) |   |
| Net cash used in financing activities                                                           |       |                                                           | (30,762    | ) |   |   | — |   |   |   | (30,762 | ) |   |
| Effect of  exchange rate changes on cash and cash equivalents                                   |       |                                                           | 2,389      |   |   |   | (15 | ) |   |   | 2,374 |   |   |
| Net increase (decrease) in cash and cash equivalents                                            |       |                                                           | 28,054     |   |   |   | (6,237 | ) |   |   | 21,817 |   |   |
| Cash and cash  equivalents at beginning of period                                               |       |                                                           | 645,571    |   |   |   | — |   |   |   | 645,571 |   |   |
| Cash and cash  equivalents at end of period                                                     |       |                                                           | 673,625    |   |   |   | (6,237 | ) |   |   | 667,388 |   |   |
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