Heelys, Inc. (HLYS*(D):NASDAQ)

Heelys, Inc. reported unaudited consolidated earnings results for the third quarter and nine months ended September 30, 2009. For the quarter, the company reported income from operations of $1,122,000, income before income taxes of $1,179,000, net income of $755,000 or $0.03 basic and diluted per share on net sales of $23,825,000 against loss from operations of $696,000, loss before income taxes of $457,000, net loss of $1,102,000 or $0.04 basic and diluted per share on net sales of $10,751,000 for the same period a year ago. For the nine months, the company reported loss from operations of $3,316,000, loss before income taxes of $861,000, net loss of $686,000 or $0.03 basic and diluted per share on net sales of $55,143,000 against loss from operations of $6,591,000, loss before income taxes of $5,867,000, net loss of $4,002,000 or $0.15 basic and diluted per share on net sales of $32,402,000 for the same period a year ago.

Thomas C. Hansen, the current President and Chief Executive Officer of Heelys Inc. has been elected, effective as of September 24, 2009, to the board of directors of the company.

Effective as of August 21, 2009, Heelys Inc., its former Chief Executive Officer, its former Chief Financial Officer, its directors who signed the company’s registration statement filed with the Securities and Exchange Commission in connection with the company’s December 7, 2006 initial public offering, Capital Southwest Corporation, Capital Southwest Venture Corporation and the underwriters for the IPO, entered into a Compromise and Settlement Agreement with individual shareholder Carl Dick, settling all disputes and claims between the parties arising from a lawsuit originally filed on May 16, 2008 by Mr. Dick (the 'Lawsuit') in the County Court of Law No. 1, Dallas County, Texas. The Settlement Agreement requires the Company to pay Mr. Dick an aggregate sum of $5,250,000 ($2,500,000 was paid on August 25, 2009 and the remaining $2,750,000 must be paid on or before December 1, 2009). The company’s insurance policies have funded $2,500,000 of this amount and will fund an additional $252,727. Pursuant to the Settlement Agreement, Mr. Dick agreed to dismiss the Lawsuit with prejudice and to release all claims relating to the subject matter of the Lawsuit. On August 28, 2009, Mr. Dick’s counsel filed with the Court a Notice of Non-Suit with Prejudice to dismiss the Lawsuit.