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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

10/24/07  Blockbuster Inc                   8-K/A{9}    8/08/07    4:48                                     RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                         HTML     18K 
 2: EX-23.1     Consent of Pricewaterhousecoopers Llp               HTML      4K 
 3: EX-99.1     Movielink Historical Fiancial Statements            HTML    159K 
 4: EX-99.2     Blockbuster Aunaudited Proformas                    HTML    132K 

EXHIBIT 99.1

Movielink, LLC

Financial Statements

Six-Month Periods Ended June 30, 2007 and 2006

and Years Ended December 31, 2006 and 2005

Report of Independent Auditors

To the Members of Movielink, LLC

In our opinion, the accompanying balance sheets and the related statements of operations, of Members’ equity and of cash flows present fairly, in all material respects, the financial position of Movielink, LLC at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred recurring losses from operations and negative cash flows from operating activities, and has an accumulated deficit at December 31, 2006. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ PricewaterhouseCoopers LLP

January 31, 2007

Los Angeles, California

Movielink, LLC

Balance Sheets

June 30, 2007

and December 31, 2006 and 2005

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

2

Movielink, LLC

Statements of Operations

Six-Month Periods Ended June 30, 2007 and 2006

and Years Ended December 31, 2006 and 2005

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

3

Movielink, LLC

Statements of Members’ Equity

Six-Month Period Ended June 30, 2007

and Years Ended December 31, 2006 and 2005

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

4

Movielink, LLC

Statements of Cash Flows

Six-Month Periods Ended June 30, 2007 and 2006

and Years Ended December 31, 2006 and 2005

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

5

Movielink, LLC

Notes to Financial Statements

(information with respect to June 30, 2007 and 2006 is unaudited)

Movielink, LLC (“Movielink” or the “Company”) was formed as a Delaware limited liability company on February 15, 2001 (“Inception”), by its then sole member Sony Pictures Digital Entertainment (“Sony”). The Company’s principal business objective is to engage in the digital distribution of motion pictures over an open access Internet protocol system or through other broadband services.

On August 13, 2001, Sony contributed technology and other operating assets, net of liabilities, of $22,810,490 to Movielink. The amount contributed was comprised of $23,213,107 for software, $240,980 for servers and other hardware, $20,560 for prepaid software maintenance contracts, less $664,157 of liabilities. Simultaneously, Sony transferred its membership interest in the Company to a single-purpose subsidiary and sold 80% of its membership interest in Movielink, in equal shares, to single-purpose subsidiaries of Metro-Goldwyn-Mayer Studios, Inc. (“MGM”), Paramount Pictures Corporation (“Paramount”), Universal Studios (“Universal”), and Warner Bros. (“WB”), which, collectively with the Sony subsidiary are herein referred to as the Company’s “Members”. On February 20, 2002, the Company changed its name from Moviefly, LLC to Movielink, LLC. On November 11, 2002, the Company initiated its principal business operations, a motion picture rental service to broadband Internet consumers located in the United States. On April 4, 2006, the Company launched its Electronic Sell-Through (“EST”) service with major studio content, offering broadband Internet consumers located in the United States the right to download motion pictures for permanent retention. On August 8, 2007, Blockbuster Inc. acquired all of the Members’ interests in the Company for $6,600,000, subject to adjustment for the Company’s net working capital at closing.

Capital Resources and Risk Factors

On August 13, 2001, in connection with the formation discussed above, the Members executed an Amended and Restated Operating Agreement (the “Operating Agreement”), under which the Members have committed to contribute capital of up to $150,000,000, in aggregate, to the Company. The amounts that each Member has committed to contribute to the capital of the Company are subject to certain periodic and aggregate minimum and maximum limits. Additional contributions above those limits would require Member approval. To date, there have been no contributions above those limits. The Company may make capital calls each calendar quarter or at other times during the fiscal year as necessary, provided that the calls are limited to amounts included in the Company’s annual budget approved by the management committee and within the cumulative periodic contribution limits, or have received the requisite Member approval.

During the years ended December 31, 2006 and 2005, the Company made capital calls totaling $23,800,000 and $25,800,000, respectively. No capital calls were made during the six months ended June 30, 2007. As of June 30, 2007, cumulative capital contributed by the Members was $148,027,030.

Under the terms of the Operating Agreement, the Members may dissolve and liquidate the Company under any of the following circumstances: (1) the Members unanimously approve dissolution, or (2) the Members do not approve an annual budget for two consecutive fiscal years.

6

Movielink, LLC

Notes to Financial Statements

(information with respect to June 30, 2007 and 2006 is unaudited)

Capital Resources and Risk Factors (Continued)

The Company has funded its operating losses primarily from Members’ contributions received to date. During the periods from Inception through June 30, 2007 and December 31, 2006, the Company has had negative operating and investing cash flows of $123,104,692 and $112,097,459, respectively. As of June 30, 2007 and December 31, 2006, the Company had an accumulated deficit of $144,981,515 and $134,800,110, respectively. The Company is subject to certain business risks including dependence on key individuals, competition from substitute products, market acceptance of its products, and dependence on growth to achieve its business plans.

As of both June 30, 2007 and December 31, 2006, management was working to secure additional capital, from third party sources or its Members, to fund operations through the next twelve months or to sell the Company. The risk that the Company might fail to secure such capital, or complete the sale of the Company raised substantial doubt about the Company’s ability to continue as a going concern as of December 31, 2006. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could have resulted from the outcome of this uncertainty. All of the Members’ interests were sold to Blockbuster Inc. as of August 8, 2007 (see Note 1).

The Company believes it is in compliance with all applicable laws and regulations. However, as a business owned by five major competing motion picture studios, the Company is subject to scrutiny under antitrust laws. The U.S. Department of Justice (“DOJ”), which has jurisdiction to enforce the antitrust laws, conducted an investigation of Movielink following its inception until June 2004, when the DOJ announced the investigation was being closed because it had not found that the formation of Movielink had harmed competition or consumers of movies.

Period of Presentation

These financial statements reflect the financial position of the Company as of June 30, 2007, December 31, 2006 and 2005, and the results of its operations and cash flows for the six-month periods ended June 30, 2007 and 2006, and for the years ended December 31, 2006 and 2005.

The interim financial data for June 30, 2007 and 2006 is unaudited; however, in the opinion of the Company’s management, the interim data includes all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of the results for the interim periods. Results for the interim periods are not necessarily indicative of results that may be expected for the entire year.

7

Movielink, LLC

Notes to Financial Statements

(information with respect to June 30, 2007 and 2006 is unaudited)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the financial statements.

Revenues

The Company recognizes revenues in accordance with Staff Accounting Bulletin 104, “Revenue Recognition in Financial Statements” (“SAB 104”), and EITF 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”). The Company recognizes revenue when there is persuasive evidence of an arrangement, the fee is fixed or determinable, the product or services have been delivered and collectibility of the resulting receivable is reasonably assured. Revenues from sales of individual movies or television shows by download are recognized, net of discounts and chargebacks, at the time the program is delivered, digitally, to the end user and all obligations thereto have been fulfilled.

The Company recognizes revenue gross or net in accordance with EITF 99-19. In most arrangements, the Company contracts directly with end user customers, is the primary obligor and carries all collection risk. Revenue in these arrangements is recorded on a gross basis. In some cases, the Company utilizes third party distributors to sell movie downloads directly to end user customers, and the Company carries no collection risk and is not the primary obligor. In these instances, the Company reports the revenue net of the amount paid to the distributor.

The Company also enters into marketing and promotional services agreements. The Company recognizes revenue from these marketing and promotional services on a straight-line basis over the period during which the Company performs services under these agreements.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist of money market funds backed by U.S. government securities.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, other assets, accounts payable and accrued liabilities are carried at cost, which approximates fair value.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains its cash and cash equivalents with high credit quality financial institutions; at times, such balances with any one financial institution may exceed FDIC insured limits.

8

Movielink, LLC

Notes to Financial Statements

(information with respect to June 30, 2007 and 2006 is unaudited)

Property and Equipment

Purchases of property and equipment and leasehold improvements are recorded at cost. Maintenance and repair costs are expensed as incurred. Depreciation on assets placed in use is computed using the straight-line method over the estimated useful lives of the assets, which are as follows: servers and other hardware, and office equipment – three years; leasehold improvements – shorter of useful life or remaining lease term.

Capitalized Software Costs

The Company capitalizes the costs of computer software developed or obtained for internal use. Capitalized computer software costs consist of purchased software licenses, implementation costs, internal staffing costs and consulting costs for certain projects that qualify for capitalization. The estimated useful life of capitalized software is three years beginning at the time the software is ready for its intended use. During the years ended December 31, 2006 and