SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30,
1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from to
COMMISSION FILE NUMBER: 0-27442
OMNIPOINT CORPORATION
(Exact Name of Registrant as specified in its charter)
DELAWARE 04-2969720
(State or other jurisdiction of (IRS employer
incorporation or organization) identification No.
2000 NORTH 14TH STREET, SUITE 550
ARLINGTON, VA 22201
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 522-7778
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Each Class: Name of Each Exchange
COMMON STOCK, PAR VALUE on which Registered:
$0.01 PER SHARE NASDAQ NATIONAL MARKET
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 50,659,962 shares of common
stock were outstanding as of October 31, 1996.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Note 1)
OMNIPOINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<S> <C> <C>
September 30,
1996 December 31,
(unaudited) 1995
---------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 161,669 $ 57,784
Short term investments 57,023 -
Escrow deposit 27,123 -
Prepaids and other assets (Note 3) 1,146 5,040
Inventory (Note 2) 7,964 1,310
---------------- ----------------
Total current assets 254,925 64,134
Fixed assets, net (Note 4) 93,666 18,957
FCC licensing costs, net of accumulated amortization of $15,632 and
$9,116 as of September 30, 1996 and December 31, 1995, respectively 743,241 338,402
Network infrastructure deposit 2,052 -
FCC deposit 60,000 40,000
Escrow deposit 26,357 -
Long term investments 5,063 -
Deferred financing costs and other intangible assets, net of accumulated
amortization of $1,236 and $987 as of September 30, 1996 and December
31, 1995, respectively 20,522 13,497
---------------- ----------------
Total assets $ 1,205,826 $ 474,990
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 2,575 3,331
Accrued expenses (Note 5) 7,238 4,593
Payable for Network Infrastructure equipment 24,518 -
Accrued interest payable 500 388
Capital lease obligations - current portion 95 182
Credit agreement - 36,500
Convertible Subordinated Notes - 16,250
Deferred revenue - 4,300
---------------- -----------------
Total current liabilities 34,926 65,544
Capital lease obligations - long term portion 12 106
Loan payable under financing agreement - 31,758
Senior notes 18,136 16,485
11 5/8% Senior notes due 2006 (Note 7 and 16) 250,000 -
FCC license obligations (Note 8 and 9) 707,960 347,518
<PAGE>
Commitments and contingencies (Note 10 and 14)
Redeemable convertible preferred stock, $.01 par value, 5,750,000 shares
authorized at December 31, 1995:
Series A; 666,667 shares issued and outstanding at December 31, 1995
(at liquidation preference) - 1,500
Series B; cumulative preferred stock; 1,651,714 shares issued and
outstanding at December 31, 1995 (liquidation preference of $17,244
at December 31, 1995), net of issuance costs - 15,919
Series C; cumulative preferred stock; 1,866,338 shares issued and
outstanding at December 31, 1995 (liquidation preference of $29,106
at December 31, 1995), net of issuance costs - 26,708
Stockholders' equity (deficit):
Common stock, par value, $.01 per share;
75,000,000 shares authorized; 24,658,618 shares issued and outstanding at
December 31, 1995 and 50,631,748 shares issued and outstanding at September
30, 1996 505 247
Additional paid-in capital 321,078 29,860
Accumulated deficit (124,762) (59,498)
Unearned compensation (831) (23)
Notes receivable (1,198) (1,134)
---------------- ----------------
Total stockholders' equity (deficit) 194,792 (30,548)
================ ================
Total liabilities and stockholders' equity $ 1,205,826 $ 474,990
================ ================
</TABLE>
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
OMNIPOINT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- ----------------------------------
1996 1995 1996 1995
---------------- --------------- ---------------- ----------------
Revenues
$ - $ - $ - $ -
Operations expenses:
Research and development 8,251 3,643 21,669 8,820
Sales, general, and administrative 11,418 3,649 21,457 8,098
Depreciation and amortization 2,779 2,907 9,374 8,288
---------------- --------------- ---------------- ----------------
Total operating expenses 22,448 10,199 52,500 25,206
Loss from operations (22,448) (10,199) (52,500) (25,206)
Other income (expense):
Interest and other income 3,119 400 5,830 579
Interest expense related to the New York MTA
License obligation reversed in December 1995 (Note 8) - (8,270) - (23,983)
Interest expense (8,522) - (18,594) (622)
---------------- --------------- ---------------- ----------------
Net loss $ (27,851) $ (18,069) $ (65,264) $ (49,232)
================ =============== ================ ================
Loss per share $ (0.55) $ (0.58) $ (1.44) $ (1.28)
================ =============== ================ ================
Weighted average common shares outstanding 50,278 31,397 45,458 38,597
================ =============== ================ ================
</TABLE>
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
OMNIPOINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<S> <C> <C>
Nine Months Ended
September 30,
-----------------------------
1996 1995
------------- -------------
Cash flows used in operating activities:
Net loss $ (65,264) $ (49,232)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation 9,374 8,288
Compensation expense from stock grants 174 70
Increase in employee notes receivable and related accrued interest (64) (108)
Accrued interest 112 -
Interest expense associated with warrants - 300
Issuance of common stock in exchange for services - 59
Interest expense associated with amortization of discount and issuance costs 1,921 -
Interest income associated with restricted cash (265) -
Delivery of pilot system equipment funded by financing agreement 540 -
Changes in assets and liabilities:
(Increase) decrease in operating assets:
Prepaid expenses and other assets (79) (41)
Inventory (6,655) (342)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 3,728 (359)
Accrued interest payable on credit facility - 139
Accrued interest on New York MTA License obligation, reversed in
December 1995 - 23,826
------------- -------------
Net cash used in operating activities (56,478) (17,400)
------------- -------------
Cash flows used in investing activities:
Purchase of equipment (64,611) (1,334)
Deposits for network infrastructure equipment (2,052) -
Down payments for FCC licenses (50,913) -
Refund of FCC deposit 40,000 -
Deposits for FCC auctions (60,000) -
Purchase of investment securities (62,085) -
------------- -------------
Net cash used in investing activities (199,661) (1,334)
------------- -------------
Cash flows from financing activities:
Proceeds from line of credit loan agreement - 10,000
Proceeds from issuance of preferred stock, net of issuance costs - 16,708
Proceeds from issuance of common stock associated with warrants & options 693 89
Proceeds from financing agreement 55,549 -
Payment on financing agreements (75,178) -
Payments of obligations under capital leases (180) (241)
Proceeds from credit agreement 60,000 -
Payments on credit agreement (96,500) -
Proceeds from initial public offering, net of expenses 118,437 -
Proceeds from secondary public offering, net of expenses 110,684 -
Proceeds from offering of senior notes 188,056 -
Dividends accrued and paid (1,537) -
Proceeds from credit facility, net of issuance costs - 1,233
------------- -------------
Net cash provided by financing activities 360,024 27,789
------------- -------------
Net increase in cash and cash equivalents 103,885 9,055
<PAGE>
Cash and cash equivalents at beginning of period 57,784 5,543
------------- -------------
Cash and cash equivalents at end of period $ 161,669 $ 14,598
============= =============
</TABLE>
Supplemental cash flow information (Note 15)
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
OMNIPOINT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
(In thousands, except share data)
For The Nine Months Ended September 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Total
Common Stock Additional Accumulated Unearned Notes Stockholders'
Shares Amount Paid-in Deficit Compensation Receivable Equity
Capital (Deficit)
Balance, December 31, 1995 $24,658,618 $ 247 $ 29,860 $ (59,498) $ (23) $ (1,134) $(30,548)
Dividends accrued on
Series B and Series C
Preferred Stock - - (273) - - - (273)
Shares issued at initial
public offering,
net of expenses 8,050,000 80 118,357 - - - 118,437
Shares issued at secondary
public offering,
net of expenses 4,500,000 45 110,639 - - - 110,684
Conversion of
subordinated debt 1,562,500 16 16,234 - - - 16,250
Conversion of
preferred stock 10,605,591 106 44,597 - - - 44,703
Exercise of stock options 732,853 7 684 691
Exercise of stock Warrants 346,999 4 (2) 2
Options issued in form of
advanced compensation - - 982 - (982) - -
Amortization of
unearned compensation - - - - 174 - 174
Interest on employee
notes receivable - - - - - (80) (80)
Forgiveness of employee
notes receivable - - - - - 16 16
Net loss - - - (65,264) - - (65,264)
------------ ---------- ------------- ----------- ------------ ----------- ----------
Balance, September 30, 1996 $ 50,456,561 $ 505 $ 321,078 $ (124,762) $ (831) $ (1,198) $194,792
============ ========== ============= =========== ============ =========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE>
1. GENERAL:
The consolidated financial statements have been prepared by Omnipoint
Corporation ("Omnipoint" or the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") and, in
the opinion of management, include all adjustments necessary for a fair
presentation of the financial information for each period shown. Certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC
rules and regulations. Management believes that the disclosures made are
adequate to make the information presented not misleading. The results for
interim periods are not necessarily indicative of the results for the full
year. These consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included
in the Company's 1995 Annual Report on Form 10-K.
On January 31, 1996, the Company completed an initial public offering in
which 8,050,000 shares of common stock were issued, which provided the
Company with proceeds of approximately $118.4 million net of expenses. On
July 3, 1996, the Company completed a secondary offering in which 4,500,000
shares of common stock were issued, which provided the Company with
proceeds of approximately $110.7 million net of expenses. On August 27,
1996, the Company completed the sale of $250.0 million senior unsecured
term notes, which provided the Company with proceeds of approximately
$188.1million net of expenses and cash deposited in escrow to pay two years
interest.
Cash equivalents consist primarily of highly liquid investments with
original maturities of three months or less at date of acquisition.
Short term investments consist primarily of money market notes and
preferred stock, commercial paper and corporate fixed income bonds with
original maturities of less than twelve months.
Pursuant to Statement of Financial Accounting Standards No. (SFAS) No. 115,
debt securities that the Company has both the positive intent and ability
to hold to maturity are carried at amortized cost. Debt securities that the
Company does not have the positive intent and ability to hold to maturity
and all marketable equity securities are classified as either
available-for-sale or trading and are carried at fair value. Unrealized
holding gains and losses on securities classified as available-for-sale are
carried as a separate component of stockholders' equity. Unrealized
holdings gains and losses on securities classified as trading are reported
as earnings. The fair value of investments is determined based on quoted
market prices. The Company determines the appropriate classification of
marketable securities at the time of purchase and evaluates such
designation at each balance sheet date. The costs of debt securities is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization, interest income, realized gains and losses and
declines in value judged to be other than temporary are included in
interest and other income. The cost of securities is based on specific
identification.
At September 30, 1996, $25.4 million of trading securities and $31.6
million of held to maturity securities were included in short-term
investments. The trading securities consists of money market preferred
stock. The held to maturity securities consist of commercial paper and
fixed income corporate bonds.
Certain prior year amounts have been reclassified to conform with the nine
month presentation.
<PAGE>
2. INVENTORY:
There are two major inventory components, raw materials and GSM handsets.
Raw materials are used in development of the Company's technology. GSM
handsets are recorded at the lower of cost or market and available for sale
to subscribers in the New York MTA. Inventory consists of the following at
September 30, 1996 (unaudited) and December 31, 1995:
September 30, December 31,
1996 1995
------------------ -----------------
(In thousands)
GSM Handsets $ 6,994 $ -
Raw Materials 970 1,310
------------------ -----------------
$ 7,964 $ 1,310
================== =================
3. PREPAID EXPENSES AND OTHER ASSETS:
Prepaid expenses and other assets consist of the following at September 30,
1996 (unaudited) and December 31, 1995:
September 30, December 31,
1996 1995
------------------ -----------------
(In thousands)
Advance payment for pilot
system equipment financed
through financing agreement $ - $ 4,840
Prepaid rent 144 -
Insurance 189 -
Deposits 476 83
Other 337 117
------------------ -----------------
$ 1,146 $ 5,040
================== =================
4. FIXED ASSETS:
Fixed assets including equipment under capital leases consist of the
following at September 30, 1996 (unaudited) and December 31, 1995:
September 30, December 31,
1996 1995
------------------ -----------------
(In thousands)
Building $ 1,843 $ 1,190
Office equipment 2,253 649
Lab equipment 10,095 3,693
Network infrastructure equipment 57,422 12,634
Cell sites 17,500 -
Furniture and fixtures 674 265
Purchased software 3,496 1,453
Building and leasehold improvements 4,490 1,325
Vehicles 454 214
------------------ -----------------
98,227 21,423
Less: accumulated depreciation (4,561) (2,466)
------------------ -----------------
$ 93,666 $ 18,957
================== =================
Network infrastructure equipment includes approximately $1.3 million of
capitalized interest at September 30, 1996.
<PAGE>
5. ACCRUED EXPENSES:
Accrued expenses consist of the following at September 30, 1996 (unaudited)
and December 31, 1995:
September 30, December 31,
1996 1995
------------------ -----------------
(In thousands)
Salaries and benefits $ 2,333 $ 724
Bonuses - 350
Relocation 510 539
Professional fees 3,674 464
Accrued bond issuance costs 292 -
Dividends - 1,839
Initial public offering/
secondary offering costs - 593
Other 429 84
------------------ -----------------
$ 7,238 $ 4,593
================== =================
6. FOLLOW-ON EQUITY OFFERING:
On July 3, 1996, the Company completed a follow-on public offering of
4,500,000 shares of common stock. Net proceeds to the Company totaled
approximately $110.7 million after underwriters' commissions and associated
offering costs. The net proceeds are expected to be used principally for
the second required principal payment and subsequent interest payments for
the Entrepreneurs' Band C Block licenses, for working capital and capital
expenditures related to the Entrepreneurs' Band networks and for the New
York MTA operations.
7. SENIOR NOTES OFFERING:
On August 27, 1996, the Company completed the private placement of $250.0
million Senior Unsecured Ten Year term notes. The Company received
approximately $188.1 million, net of offering costs and placed $53.3
million in escrow to pay the first two years' interest. Prior to August 15,
1999, the Company may redeem, with the net proceeds of one or more public
equity offerings or sales of certain capital stocks, up to one-third of the
notes originally outstanding at the redemption price of 111.625% of the
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of redemption, provided that at least
two-thirds of the notes remain outstanding. The notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after
August 15, 2001, at redemption prices set forth in the Company's November
15, 1996 Exchange Offer prospectus. Additionally, the Company filed an
exchange offer for these notes on Form S-4 that was declared effective on
November 5, 1996. The public notes offered in exchange for the private
placement notes are identical in all material respects (Note 16).
8. NEW YORK MTA LICENSE OBLIGATION:
Prior to December 31, 1995, the FCC had not implemented the exact terms for
principal and interest payments on the New York MTA License. The initial
terms generally allowed for installment payments over the first five years
of the License with interest-only for at least the first two years. Since
payments did not begin until after the New York MTA License and Pioneer's
Preference orders were no longer subject to judicial review, the FCC had
not yet determined the interest rate to be charged or the timing and nature
of the installment payments and related issues. Therefore, the Company
estimated and accrued interest at the prime rate (8.75% at September 30,
1995) from the date of the New York MTA License obligation was awarded, and
had recorded accrued interest as of September 30, 1995 of approximately
$25.4 million. On March 8, 1996, the FCC adopted an Order which specifies
the license payment terms, such as the interest rate and timetable for
payment of the principal obligations for recipients of the Pioneer's
Preference license. The FCC adopted an interest rate of 7.75%. Payments
commenced 30 days from the Order date or April 8, 1996, and thereafter are
due on April 30, July 31, October 31 and January 31 over the next five
years. The five year payment period runs and interest accrues from the
adoption date of March 8, 1996.
Based on the Order, the Company revised its estimate and accrual of
interest. Pursuant to Accounting Principles Board Opinion No. 20
"Accounting Changes," this change in accounting estimate was recorded in
the Company's
financial statements during December 1995, resulting in a decrease in 1995
interest expense of approximately $33.5 million. Had this adjustment been
retroactively recorded in the nine months ended September 30, 1995, the net
loss and loss per common share would have been $(25.2) million and $(0.65),
respectively.
9. ENTREPRENEURS' BAND C BLOCK LICENSES:
The Company successfully bid for 18 Entrepreneurs' Band BTA licenses for an
aggregate price of $509.1 million. The Company made its down payment of
10%, or $51.0 million in two equal installments, on May 14, 1996 and
September 24, 1996. The licenses were awarded to the Company on September
17, 1996. The remaining 90%, of the license payments, or $458.2 million, is
due in quarterly installments beginning in the year 2003 and continuing
until 2006. The license payments bear interest at 7% per annum until paid.
The license payments and amount for the Entrepreneurs' Band BTA are
accounted for in accordance with the recently agreed upon industry
practices. Based on the Company's estimate of borrowing costs for debt
similar to that issued by the US government, the Company used an 11%
discount rate. Accordingly, the licenses were recorded at a net present
value of $411.0 million. Interest incurred for such licenses will be
capitalized during the buildout phase and amortization of such license
costs will begin with the commencement of service to customers.
10. ERICSSON AGREEMENTS:
On April 16, 1996, Ericsson, Inc. ("Ericsson") and the Company entered into
definitive agreements governing (i) the licensing and supply arrangement
related to the Omnipoint System, (ii) the purchase by OCI or other
Omnipoint affiliates of PCS 1900 handsets, (iii) the sale by Ericsson of
IS-661 and GSM infrastructure equipment, and (iv) cooperation of marketing
standards and technical activities. Under the terms of the licensing and
supply agreement, Ericsson will pay license fees and royalties, including
an initial $4.5 million license fee after the Company places purchase
orders for $85.0 million of equipment and services. In addition, under the
agreement for the purchase of Ericsson infrastructure equipment, the
Company and its affiliates will purchase $250.0 million of a mix of IS-661
and PCS 1900 infrastructure equipment. Under the handset agreement, the
Company will purchase GSM handsets. These commitments are to be fulfilled
within five years of the date upon which the definitive agreement was
executed. In April 1996, the Company entered into a non-binding memorandum
of understanding with Orbitel Mobile Communications Ltd. ("Orbitel"), a
wholly-owned subsidiary of Ericsson, which contemplates agreements pursuant
to which Orbitel will develop, manufacture and supply to the Company both
IS-661 and dual mode IS-661/PCS 1900 handsets under a mutually agreeable
timetable after OCI agrees to a minimum purchase commitment to be
determined when the parties have ascertained the resources necessary for
the development and manufacture of such handsets. The Company signed a
credit facility with Ericsson to provide financing to the Company for up to
$132.0 million for the purposes of financing the purchase of equipment and
services from Ericsson for the New York MTA market. A portion of the
Ericsson Credit Facility, which may be used for interest payments accruing
under such facility, matures on June 30, 1998. The principal amount on
other portions of the facility are payable in installments beginning in
2000, with the final payment due on December 31, 2004. Amounts borrowed and
repaid are not available for re-borrowing unless allowed by mutual consent.
Interest on the Ericsson Credit Facility is payable quarterly at varying
interest rates at a base or LIBOR rate at the Company's election.
Under the terms of the Ericsson Credit Facility, the Company's subsidiary,
Omnipoint Communications, Inc.("OCI")is subject to certain financial and
operational covenants including restrictions on OCI's ability to pay
dividends, restrictions on indebtedness and certain financial maintenance
requirements. Additionally, the Ericsson Credit Facility provides that,
among other events, the failure of OCI to pay when due amounts owing the
FCC shall constitute an event of default.
The Ericsson Credit Facility is secured by substantially all of the assets
of OCI, including a pledge of all capital stock of OCI owned by a
wholly-owned subsidiary of the Company (which constitutes a 95.58%
ownership interest). All collateral is held by a collateral agent and is
shared on a pari passu basis with Northern Telecom.
The Company paid all outstanding balances to Ericsson on September 30,
1996, or approximately $2.1 million.
<PAGE>
11. DELIVERY OF IS-661 PILOT SYSTEM:
The Company's Equipment division is developing a proprietary technology
that is suitable for a variety of digital wireless applications, including
mobile network systems and wireless local loop. The Company's technology
can be integrated with wireless Global System for Mobile Communications
networks and local telephone switching platforms. This technology,
officially designated as IS-661 by the Joint Technical Committee on
Wireless Access, is a proprietary Common Air Interface system using spread
spectrum.
During the first nine months of 1996, the Company's Equipment division
manufactured and delivered the IS-661 pilot system to the Service division.
The Company recognized deferred revenue and deferred assets as research and
development expenses associated with the delivery and installation of the
pilot system.
12. LINE OF CREDIT
In August 1996, the Company, through its subsidiary, Omnipoint PCS
Entrepreneurs Two ("OPCSE Two"), entered into a secured revolving credit
facility. The agreement provided for up to $100.0 million in revolving
credit for a maximum of nine months from its initial funding date.
Subsequent to the initial drawing, the committed amount of the credit
facility may not exceed the initial drawing. The initial funding took place
on August 12, 1996, in the amount of $60.0 million and was repaid on August
13, 1996. The facility is secured by all assets of OPCSE Two and a pledge
of all capital stock of OPCSE Two owned by a wholly-owned subsidiary of the
Company. The Company has also guaranteed the payment and performance of the
OPCSE Two's obligation.
13. D, E AND F BLOCK AUCTION:
In August 1996, the Company made a $60.0 million deposit with the FCC to
participate in the D, E and F Block auction. The deposit qualifies the
Company to participate in the D, E and F Block auction and will be used to
satisfy any commitments arising from the Company's successful bidding in
the D, E and F Block auction. Winning bidders for the D and E Block
licenses must submit sufficient funds to bring the to total amount of money
on deposit with the FCC to 20% of their net winning bids within five
business days of the auction closing notice and pay the remaining 80%
within five business days of the license grant. F Block winning bidders
will receive 15% or 25% bidding credit if their annual gross revenues
averaged over the preceding three calendar years is less than $40.0 million
or $15.0 million, respectively. Within five business days after release of
the D, E and F Block auction closing notices, F Block winning bidders must
submit sufficient funds to bring the total amount of money on deposit with
the FCC to 10% of their net winning bids. Within five business days of the
license grant, F Block winners must bring the total amount on deposit with
the FCC up to 20% of their net winning bids, and may execute a 10-year
promissory note for the balance.
14. COMMITMENTS AND CONTINGENCIES:
During 1994, the Company entered into an agreement to purchase $100.0
million of equipment and services over the next five years with Northern
Telecom. Under the terms of the Supply Agreement, if the conditions of the
purchase obligation of Omnipoint Communications Inc., a subsidiary of the
Company ("OCI"), are satisfied and OCI fails to purchase $100.0 million of
equipment and services, it may have to pay a penalty of 10% of the
satisfied portion of the $100.0 million, which may be waived under certain
conditions. On July 21, 1995, the Company entered into an amendment to this
supply agreement to increase the purchase commitment from $100.0 million to
$250.0 million. The Company has purchased approximately $61.0 million under
this purchase commitment as of September 30, 1996.
On December 12, 1995, the Company and Hansol Paper Co., Ltd. ("Hansol") and
its Telecom affiliates entered into a strategic alliance for the promotion
of the Omnipoint System in the Republic of Korea and other parts of Asia,
and the grant of a license to Hansol to manufacture Omnipoint System
handsets. The agreement provides that Omnipoint will enter into a purchase
order, subject to certain preconditions, including competitive pricing, to
acquire from Hansol handsets for sale to subscribers in areas covered by
licenses, if any, purchased by the Company in the Entrepreneurs' Band
auction.
On April 16, 1996, the Company, through its subsidiary, OCI, signed a five
year agreement with Ericsson to purchase $85.0 million of infrastructure
equipment , software and engineering, installation and testing services. Of
this amount, $75.0 million shall relate to PCS 1900/GSM based equipment and
services and $10.0 million or less shall relate to IS-661 based equipment
and
<PAGE>
services. In addition, had the Company acquired C-Block licenses covering
27.0 million people, beyond those in the New York MTA, the Company would
have been obligated to purchase $165.0 million in additional equipment and
services, of which $105.0 million would relate to PCS 1900/GSM equipment
and services. As the Company acquired less than the 27.0 million people
beyond the New York MTA, the Company remains obligated to make additional
purchases, but the $165.0 million and the $105.0 million will be reduced
proportionately to the actual coverage level obtained or such purchase
level commitments shall be reduced in such other manner as the parties
agree is equitable. The Company placed purchase orders for approximately
$46.9 million under this purchase commitment as of September 30, 1996. The
NT and Ericsson Credit Facilities are secured by a pledge of all capital
stock of OCI owned by a wholly-owned subsidiary of the Company (which
constitutes a 95.58% ownership interest) and substantially all of OCI's
assets. The Company paid all outstanding balances to NT and Ericsson on
September 30, 1996, or approximately $73.2 and $2.1 million, respectively.
On July 1, 1996, the Company, through its subsidiary, OCI, signed a five
year agreement with a provider of billing and customer-care services for
which the Company will be provided with software products and services to
support its billing and customer-service requirements. The Company
guaranteed an annual voice services processing commitment of 22,800,000
voice services as defined in the agreement over the next five years or
$14.1 million.
On June 28, 1996, the Company, through its subsidiary,OCI, signed a three
year agreement to receive fault, configuration and performance management
services for its GSM network through a nonexclusive license of certain
software. The Company will pay a fee of $0.0866 per POP for each area that
is managed, directly or indirectly, by this software. The Company made an
initial commitment of 40 million POPs or $3.5 million. The Company made
payments of $1.0 million related to this commitment prior to September 30,
1996 and the remaining $2.5 million is due prior to June 30, 1997.
<PAGE>
<TABLE>
<CAPTION>
15. SUPPLEMENTAL CASH FLOW INFORMATION (UNAUDITED):
<S> <C> <C>
Nine Months Ended September 30,
1996 1995
------------------ -----------------
(In thousands)
Noncash investing and financing activities:
Capital lease obligations incurred - 88
Government financing for FCC licenses 360,442 -
Common stock issued upon conversion of subordinated notes 16,250 -
Issuance of options as a form of advanced compensation 982 -
Common stock issued in exchange for employee notes receivable - 75
Conversion of preferred stock in connection with the offering 44,703 -
Issuance of Series B preferred stock in payment of Series B
dividend 576 1,517
Pilot system equipment funded by financing agreement 1,321 -
Issuance of Series C preferred stock in exchange for amounts
due under the line of credit - 10,000
Dividends accrued on Series B and Series C preferred stock - 1,030
Proceeds from credit facility used to pay origination fee - 7,500
Common stock issued in exchange for services - 58
</TABLE>
16. SUBSEQUENT EVENTS (UNAUDITED):
SENIOR NOTES EXCHANGE OFFER FILED ON REGISTRATION FORM S-4
The Company offered to exchange (the "Exchange Offer") its 11 5/8% Senior
Notes due 2006, which have been registered on Form S-4 under the Securities
Act of 1933, as amended (the "New Notes"), for any and all of its
outstanding 11 5/8% Senior Notes due 2006 (the "Old Notes") .
The Prospectus containing the terms and conditions of the Exchange Offer is
dated November 5, 1996.
The Company will accept for exchange any and all old notes that are validly
tendered and not withdrawn prior to the Exchange Offer expiration at 5:00
p.m. December 10, 1996. Tenders of Old Notes may be withdrawn at any time
prior to the expiration of the Exchange Offer.
The New Notes will be obligations of the Company evidencing the same
indebtedness as the Old Notes and is governed by the same indenture as the
Old Notes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in forward-looking statements. Factors that might cause such a
difference include, but are not limited to, the "Risk Factors" set forth in the
Company's Registration Statement on Form S-1 (File No. 333-03739).
OVERVIEW
Omnipoint reported a third quarter 1996 loss of $27.9 million or $0.55 per
share, an increase of 54.1%, or approximately $9.8 million, compared to the same
quarter in 1995. For the nine months ended September 30, 1996, the Company
reported a loss of $65.3 million, or $1.44 per share, an increase of 32.7%, or
approximately $16.1 million, compared to the same period in 1995. The 1995 third
quarter loss was $18.1 million, or $0.58 per share, and a nine month 1995 loss
of $49.2 million, or $1.28 per share. On March 8, 1996, the FCC adopted an order
setting the interest rate for the New York MTA License at 7.75% per annum
accruing from March 8, 1996. As a result, the Company reversed accrued interest
of $33.5 million related to the License in December 1995. Had this adjustment
been retroactively recorded in the nine months ended September 30, 1995, the net
loss and loss per share would have been $25.2 million and $0.65, respectively.
For the three month period ending September 30, 1995, the loss would have been
$9.8 million, or $0.31 per share.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 Compared to Three Months Ended
September 30, 1995
Research and development expenses increased by 130.6%, or approximately
$4.7 million, to $8.3 million for the three months ended September 30, 1996
compared to $3.6 million for the three months ended September 30, 1995. The
increase was primarily due to an increase of $1.3 million for project management
and other costs associated with the buildout of the IS-661 pilot system and New
York MTA PCS 1900 infrastructure, an increase of $355,000 for equipment leases
and rentals, and an increase of $2.4 million in payroll and related taxes,
employee benefits and employee recruiting costs associated with the Company's
continued growth and its development of the IS-661 technology. The Company
expects that research and development expenses will continue to increase
significantly during the remainder of 1996 as compared to 1995.
Sales, general and administrative expenses increased by 216.7%, or
approximately $7.8 million, to $11.4 million for the three months ended
September 30, 1996 compared to $3.6 million for the three months ended September
30, 1995. Of this increase, $1.9 million was due to payroll and payroll related
expenses associated with increases in headcount resulting from the expansion of
the Company's operations. The remaining increase consists primarily of increases
of $1.7 million in advertising and promotion, $280,000 in consulting service
fees, $1.2 million in rent, utility and other building expenses, and $358,000 in
equipment rentals and leases. The Company expects that such expenses will
continue to increase significantly during the remainder of 1996 as the Company
continues to expand its operations.
Depreciation and amortization decreased by 4.4%, or approximately $128,000,
to $2.8 million for the three months ended September 30, 1996 compared to $2.9
million for the three months ended September 30, 1995. Depreciation on operating
network assets being deployed within the New York MTA will commence once the
network is launched.
Interest and other income increased approximately $2.7 million, to $3.1
million for the three months ended September 30, 1996 compared to $400,000 for
the three months ended September 30, 1995. The increase was due to the increase
in interest earned on interest bearing cash and cash equivalents and short term
and long term investments. The increase in cash and cash equivalents resulted
from the issuance of $25.0 million in senior notes in November 1995 and $25.0
million in convertible notes in November and December 1995, the proceeds of
$118.4 million received from the Company's initial public offering in January
1996, $110.7 million from a follow-on public offering in July 1996, and $188.1
million for sale of 11 5/8% senior notes in August 1996 (the "Senior Notes").
Interest expense increased by 3.0%, or approximately $252,000, to $8.5
million for the three months ended September 30, 1996 compared to $8.3 million
of the three months ended September 30,1995. The interest expense for the three
months ended September 30, 1995 included $8.3 million of accrued interest
expense related to the New York MTA License. On March 8, 1996, the FCC adopted
an order setting the interest rate for the License at 7.75% per annum
accruing from March 8, 1996. As a result, the Company reversed $33.5 million of
accrued interest related to the New York MTA License during December 1995. Had
this adjustment been retroactively recorded in the three months ended September
30, 1995, the net loss and loss per share would have been $9.8 million and
$0.31, respectively.
Net loss increased by 54.1%, or approximately $9.8 million to $27.9 million
for the three months ended September 30, 1996 compared to $18.1 million for the
three months ended September 30, 1995. This increase was primarily due to a
general increase in operating expenses, partially offset by a decrease of $2.5
million in net interest expense.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Research and development expenses increased by 146.6%, or approximately
$12.9 million, to $21.7 million for the nine months ended September 30, 1996
compared to $8.8 million for the nine months ended September 30, 1995. The
increase was primarily due to an increase of $1.5 million in the purchase of
research and development components and non-recurring engineering, an increase
of $1.0 million for the development and delivery of a pilot IS-661 mobility
system, an increase of $1.3 million for project management and other costs
associated with the buildout of the IS-661 pilot system and New York MTA PCS
1900 infrastructure, an increase of $1.2 million for equipment leases and
rentals and an increase of $5.7 million in payroll and related taxes, employee
benefits and employee recruiting costs associated with the Company's continued
growth and its development of the IS-661 technology. The Company expects that
research and development expenses will continue to increase significantly during
the remainder of 1996 as compared to 1995.
Sales, general and administrative expenses increased by 165.4%, or
approximately $13.4 million, to $21.5 million for the nine months ended
September 30, 1996 compared to $8.1 million for the nine months ended September
30, 1995. Of this increase, $4.1 million was due to payroll related expenses
associated with increases in headcount resulting from the expansion of the
Company's operations. The remaining increase consists primarily of increases of
$1.2 million in consulting service fees, $2.1 million in rent, utilities and
other building expenses, $342,000 million in legal fees, $1.8 million in
advertising and promotions, $887,000 in equipment rentals and leases and
$224,000 in travel expense. The Company expects that such expenses will continue
to increase significantly during 1996, as the Company continues to expand its
operations.
Depreciation and amortization increased by 13.3%, or approximately $1.1
million, to $9.4 million for the nine months ended September 30, 1996 compared
to $8.3 million for the nine months ended September 30, 1995. The increase in
the 1996 period was due to a general increase in depreciation related to the
Company's research and development equipment.
Interest and other income increased approximately $5.3 million, to $5.8
million for the nine months ended September 30, 1996 compared to $579,000 for
the nine months ended September 30, 1995. The increase was due to the increase
in interest earned on interest bearing cash and cash equivalents. The increase
in cash and cash equivalents resulted from the issuance of $25.0 million in
senior notes in November 1995 and $25.0 million in convertible notes in November
and December 1995 and the proceeds of $118.4 million received from the Company's
initial public offering in January 1996, $110.7 million from a follow-on
offering in July 1996 and $188.1 million from a sale of Senior Notes in August
1996.
Interest expense decreased by 24.4%, or approximately $6.0 million, to $18.6
million for the nine months ended September 30, 1996 compared to $24.6 million
of the nine months ended September 30, 1995. The interest expense for the nine
months ended September 30, 1995 included $24.0 million of accrued estimated
interest expense related to the New York MTA License. On March 8, 1996, the FCC
adopted an order setting the interest rate for the License at 7.75% per annum
accruing from March 8, 1996. As a result, the Company reversed $33.5 million of
accrued interest related to the New York MTA License during December 1995. Had
this adjustment been retroactively recorded in the nine months ended September
30, 1995, the net loss and loss per share would have been $25.2 million and
$0.65, respectively.
Net loss increased approximately $16.1 million to $65.3 million for the
nine months ended September 30, 1996 compared to $49.2 million for the nine
months ended September 30, 1995. This increase was primarily due to a general
increase in operating expenses, partially offset by a decrease of $11.3 million
in net interest expense.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1996, the Company has financed its
operations and met its capital requirements primarily through its initial public
offering and follow-on public offering, vendor financing and the Senior Notes.
These financing activities provided net cash of $360.0 million for the nine
months ended September 30, 1996 compared to $27.8 million for the nine months
ended September 30, 1995. Operating activities used net cash of $56.5 million
for the nine months ended September 30, 1996 compared to $17.4 million for the
nine months ended September 30, 1995. The increase resulted from the Company's
additional activity relating to supporting product development and commencement
of the New York MTA network buildout. Investing activities, network assets,
licenses, and lab equipment used net cash of $199.7 million for the nine months
ended September 30, 1996 compared to using $1.3 million for the nine months
ended September 30, 1995. The increase consists of $64.6 million for purchases
of New York MTA infrastructure related items and lab equipment used in
engineering and manufacturing, and $50.9 million for the down payment on the
Entrepreneur's Band FCC, $20.0 million in additional FCC deposits and $62.1
million for short and long term investments.
As of September 30, 1996, the Company had working capital of approximately
$220.0 million. In January 1996, working capital increased by $135.4 million,
from a deficit of $1.4 million at December 31, 1995, to $134.0 million upon
receiving $118.4 million of proceeds, net of expenses, from the issuance of
8,050,000 shares of Common Stock in the Company's initial public offering and
the reduction of current liabilities of $36.5 million and $16.3 million related
to the repayment of debt outstanding pursuant to a certain credit agreement and
the conversion of $25.0 million of convertible subordinated notes upon the
initial public offering, respectively. The increase in working capital was
partially offset by the cash used to repay short-term debt. In July 1996, the
Company received approximately $110.7 million of proceeds, net of expenses, from
the issuance of 4,500,000 shares of Common Stock. The Company sold $250.0
million in Senior Notes in August 1996, yielding the Company $188.1 million
after deducting expenses and $53.3 million in escrowed funds. Items reducing
working capital include an additional $20.0 million in FCC deposits, $50.9
million for a 10 percent down payment on the FCC Entrepreneur C Block licenses,
and a $75.2 million repayment of vendor financing debt.
On March 8, 1996 the FCC adopted an order regarding the New York MTA
License, the terms and conditions of which are as follows: (i) a five-year
payment period with interest accruing at 7.75% from the adoption date of the
order with the first payment due on the 30th day following such date and
subsequent payments due quarterly on April 30, July 31, October 31 and January
31, (ii) interest only payments for the first two years and (iii) principal and
interest payments for the remaining three years. The Company made the first
interest payment of $2.2 million on April 5, 1996. The Company made a second
payment of $4.5 million, representing interest from April 8 through June 30,
1996, on April 30, 1996.
The Company has an agreement to purchase $250.0 million of equipment and
services over the next five years from Northern Telecom. The Company has
purchased approximately $61.0 million of equipment and services under such
agreement. The Company has a $382.5 million credit facility with Northern
Telecom, the "NT Credit Facility," to finance future purchases and installations
of telecommunications equipment, engineering services, certain related
construction costs, third-party equipment and other expenses. The Company also
has an OEM agreement to sell certain equipment, hardware and software to
Northern Telecom at its normal selling prices, which will result in licensing
fees and revenues.
The NT Credit Facility is secured by a pledge of all capital stock of
Omnipoint Communications, Inc. ("OCI") owned by a wholly-owned subsidiary of the
Company (which constitutes a 95.58% ownership interest) and substantially all of
OCI's assets. Under the terms of the NT Credit Facility, OCI is subject to
certain financial and operational covenants including restrictions on OCI's
ability to pay dividends, restrictions on indebtedness and certain financial
maintenance requirements. Additionally, the NT Credit Facility provides that,
among other events, the failure of OCI to pay when due amounts owing the FCC
shall constitute an event of default. Interest on the NT Credit Facility is
payable quarterly.
A portion of the NT Credit Facility, which may be used for working capital
purposes including interest payments on the principal of such facility, matures
on June 30, 1997. Borrowings for working capital purposes which are repaid may
be subsequently borrowed for the other purposes allowed under the NT Credit
Facility. As of September 30, 1996, the Company repaid the entire outstanding
balance of approximately $58.9 million of the NT Credit Facility.
<PAGE>
The principal amount of the non-working capital portions of the NT Credit
Facility is payable in installments beginning in 2000, with the final payment
due on December 31, 2004. As of September 30, 1996, OCI repaid all outstanding
balances (principal and accrued interest) of approximately $14.9 million
outstanding under the non-working capital portions of the facility.
Subsequent to September 30, 1996, the Company has not initiated any
additional draws on the NT or Ericsson Credit Facilities.
On November 29, 1995, the Company sold convertible notes in the aggregate
amount of $15.0 million, together with warrants to purchase 375,000 shares of
Common Stock at an exercise price of $.004 per share. On December 18, 1995, the
Company sold convertible notes in the aggregate amount of $10.0 million together
with warrants to purchase 250,000 shares of Common Stock at an exercise price of
$.004 per share. The convertible notes were converted upon the closing of the
Company's initial public offering on January 31, 1996, into 1,562,500 shares of
Common Stock.
On January 31, 1996, the Company completed an initial public offering of
8,050,000 shares of Common Stock resulting in proceeds, net of related expenses
of approximately $118.4 million. In connection with the offering, all Preferred
Stock was converted into 10,605,591 shares of Common Stock. The Company used a
portion of the proceeds to pay down the outstanding balance of the credit
agreement of $36.5 million in connection with its participation in the
Entrepreneurs' Band auction.
On July 3, 1996, the Company completed a follow-on public offering of
4,500,00 shares of common stock. Net proceeds to the Company totaled $110.7
million after underwriters' commissions and associated offering costs. The net
proceeds are expected to be used principally for the second required principal
payment and subsequent interest payments for the Entrepreneurs' Band C Block
licenses, and for working capital and capital expenditures related both to the
Entrepreneurs' Band networks and the New York MTA operations
In August 1996, the Company made a $60.0 million deposit with the FCC to
participate in the D, E and F Block auction. The deposit qualifies the Company
to participate in the D, E and F Block auction and will be used to satisfy any
commitments arising from the Company's successful bidding in the D, E and F
Block auction. Winning bidders for the D and E Block licenses must submit
sufficient funds to bring the to total amount of money on deposit with the FCC
to 20% of their net winning bids within five business days of the auction
closing notice and pay the remaining 80% within five business days of the
license grant. F Block winning bidders will receive 15% or 25% bidding credit if
their annual gross revenues averaged over the preceding three calendar years is
less than $40.0 million or $15.0 million, respectively. Within five business
days after release of the D, E and F Block auction closing notices, F Block
winning bidders must submit sufficient funds to bring the total amount of money
on deposit with the FCC to 10% of their net winning bids. Within five business
days of the license grant, F Block winners must bring the total amount on
deposit with the FCC up to 20% of their net winning bids, and may execute a
10-year promissory note for the balance.
In August 1996, the Company, through its subsidiary, Omnipoint PCS
Entrepreneurs Two, Inc. ("OPCSE Two"), entered into a credit facility with a
bank. The agreement provides for up to $100.0 million in revolving credit for
general working capital purposes with a draw down termination date and final
repayment date of May 8, 1997. The initial funding took place on August 12,
1996, at which time the Company drew down $60.0 million (which was repaid on
August 13, 1996). Subsequent to the initial drawing, the committed amount of the
credit facility may not exceed the initial drawing and is subject to mandatory
reduction under the terms of the credit agreement. Under the terms of the
agreement, the Company paid a portion of the upfront fee and will pay additional
fees based in part on amounts outstanding from time to time. Interest periods
range from one to fourteen days, with interest rates set by the bank based on
wholesale money market rates available to the bank. The facility is secured by
all assets of OPCSE Two and a pledge of all capital stock of OPCSE Two owned by
a wholly-owned subsidiary of the Company. The Company has also guaranteed the
payment and performance of OPCSE Two's obligations.
The Company entered into a credit facility with Ericsson, dated as of
August 7, 1996, to provide financing to the Company for up to $132.0 million for
the purpose of financing the purchase of equipment and services from Ericsson
for the New York MTA market. A portion of the Ericsson Credit Facility, which
may be used for interest payments accruing under such facility, and a portion
which may be used to purchase handsets, mature on June 30, 1998. The principal
amount on other portions of the facility is payable in installments beginning in
2000, with the final payment due on December 31, 2004. Amounts borrowed and
repaid are not available for reborrowing except for the $2.1 million repaid
the Company during the third quarter of 1996. Interest on the Ericsson Credit
Facility is payable quarterly.
Under the terms of the Ericsson Credit Facility, OCI is subject to certain
financial and operational covenants including restrictions on OCI's ability to
pay dividends, restrictions on indebtedness and certain financial maintenance
requirements. Additionally, the Ericsson Credit Facility provides that, among
other events, the failure of OCI to pay when due amounts owing the FCC shall
constitute an event of default. The Ericsson Credit Facility is secured by
substantially all of the assets of OCI, including a pledge of all capital stock
of OCI owned by a wholly-owned subsidiary of the Company (which constitutes a
95.58% ownership interest). All collateral is held by a collateral agent and is
shared on a pari pasu basis with Northern Telecom pursuant to an inter-creditor
arrangement.
The Company paid all outstanding balances to Ericsson on September 30,
1996, or approximately $2.1 million.
The Company successfully bid for 18 Entrepreneurs' Band BTA licenses for an
aggregate price of $509.1 million. The Company made its down payment of 10%, or
$51.0 million in two equal installments, on May 14, 1996 and September 24, 1996.
The licenses were awarded to the Company on September 17, 1996. The remaining
90% of the license payments, or $458.1 million, will be due in quarterly
installments beginning in the year 2003 and continuing until 2006 and will bear
interest until paid at 7%. The Entrepreneurs' Band BTA licenses are accounted
for in accordance with the recently SEC mandated industry practices.
Accordingly, the licenses were recorded at a net present value of $411.0
million. Interest incurred for such licenses will be capitalized during the
buildout phase and amortization of such license costs will begin with the
commencement of service to customers. Based on the Company's estimate of
borrowing costs for debt similar to that issued by the US government, the
Company used an 11% discount rate.
The Company's future capital requirements will depend upon many factors,
including the successful development of new products, the extent and timing of
acceptance of the Company's equipment in the market, requirements to maintain or
arrange for manufacturing facilities, the progress of the Company's research and
development efforts, expansion of the Company's marketing and sales efforts, the
Company's results of operations and the status of competitive products. The
Company believes that cash and cash equivalents on hand, anticipated revenues,
vendor financing and additional strategic partnerships will be adequate to fund
its operations for the next 12 months. There can be no assurance, however, that
the Company will not require additional financing prior to such date to fund its
operations. The Company believes that it will require substantial amounts of
additional capital over the next several years and anticipates that this capital
will be derived from a mix of public offerings and private placements of debt or
equity securities or both.
<PAGE>
<TABLE>
<CAPTION>
Part II -- Other Information
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
3.1@ Amended and Restated Certificate of Incorporation of the Registrant.
3.6* Amended and Restated Bylaws of the Registrant.
4.2 See Exhibit 3.1.
10.1* Registrant's Amended and Restated 1990 Stock Option Plan.
10.2* Form of Incentive Stock Option Agreement under Registrant's 1990 Stock Option Plan.
10.3* Form of Stock Option Agreement under Registrant's 1990 Stock Option Plan for non-qualified options.
10.4* Form of Stock Option Agreement outside scope of Registrant's 1990 Stock Option Plan for non-qualified
options.
10.5* Warrant Certificate, dated August 2, 1991, by and between the Registrant and Allen & Company Incorporated.
10.6* Warrant Certificate, dated August 2, 1991, by and between the Registrant and Allen & Company Incorporated.
10.7* Letter agreement, dated June 29, 1995, by and between the Registrant and Allen & Company Incorporated
(relating to Exhibit 10.6).
10.8* Common Stock Purchase Warrant issued March 10, 1995, granted to Madison Dearborn Capital Partners, L.P.
10.9* Common Stock Purchase Warrant issued March 10, 1995, granted to Madison Dearborn Capital Partners, L.P.
10.10* Proprietary Information, Development and Non-Compete Agreement, dated December 6, 1990, by and between
the Registrant and Douglas G. Smith.
10.11* Employment Agreement, effective October 1, 1995, by and between the Registrant, Omnipoint
Communications Inc. and George F. Schmitt.
10.12* Promissory Note, dated October 1, 1995, by George F. Schmitt.
10.13* Stock Restriction Agreement, dated October 1, 1995, by and between the Registrant and George F.
Schmitt.
10.14* Employment Agreement, dated April 17, 1995, by and between the Registrant and Bradley E. Sparks.
10.15* Promissory Note, dated April 17, 1995, by Bradley E. Sparks.
10.16* Stock Restriction Agreement, dated April 17, 1995, by and between the Registrant and Bradley E. Sparks.
10.17* Employment Agreement, dated December 5, 1994, by and between the Registrant and Randall Meals.
10.18* Promissory Note, dated December 5, 1994, by Randall Meals.
10.19* Promissory Note, dated September 19, 1995, by Randall Meals.
10.20* Stock Restriction Agreement, dated December 5, 1995, by and between the Registrant and Randall Meals.
10.21* Employment Agreement, dated June 21, 1994, by and between Omnipoint Communications Inc. and Harry
Plonskier.
10.22* Stock Restriction Agreement, dated July 5, 1994, by and between the Registrant and Harry Plonskier.
10.23* Employment Agreement,dated June 16, 1991, by and between the Registrant and Evelyn Goldfine.
10.24* Employment Agreement, dated April 15, 1994, by and between the Registrant and Robert Dixon.
10.25 [Intentionally left blank]
10.26* Form of Employment Agreement by and between the Registrant and its employees.
10.27* Form of Non-Disclosure Agreement.
10.28* Form of Stock Restriction Agreement by and between the Registrant and certain stockholders.
10.29* Series A Convertible Preferred Stock Purchase Agreement, dated August 2, 1991, by and between the
Registrant and Allen & Company Incorporated.
10.30* Series B Convertible Preferred Stock Purchase Agreement, dated August 9, 1993, by and among the Registrant and
Madison Dearborn Capital Partners, L.P.
10.31* Amendment No. 1 to Series B Convertible Preferred Stock Purchase Agreement, dated June 29, 1995, by
and between the Registrant and Madison Dearborn Capital Partners, L.P.
<PAGE>
10.32* Series C Convertible Preferred Stock Purchase Agreement, dated June 29, 1995, by and among the Registrant and the
other parties named therein.
10.33* Stock Purchase Agreement, dated January 29, 1994, by and between the Registrant and Ameritech Development
Corporation.
10.34* Stock Purchase Agreement, dated June 29, 1994, by and between the Registrant and Associated PCN Company.
10.35* Common Stock Purchase Agreement, dated June 1, 1994, by and between the Registrant and the parties named
therein.
10.36* Amended and Restated Registration Rights Agreement, dated June 29, 1995, by and among the Registrant and the
parties named therein.
10.37* First Amended and Restated Voting Agreement, dated June 29, 1995, by and among the Registrant and the
other parties named therein.
10.38* OEM Supply Agreement for Omnipoint PCS (Personal Communication Systems) Products, dated September 22, 1994, by
and between the Registrant and Northern Telecom Inc.
10.39* Letter agreement dated December 9, 1994, by and between the Registrant and Northern Telecom Inc.
(relating to Exhibit 10.38).
10.40* Manufacturing License and Escrow Agreement for Personal Communication Service Products, dated February
28, 1995, by and between the Registrant and Northern Telecom Inc.
10.41* Collaborative Development Agreement, dated March 1, 1995, by and between the Registrant and Northern Telecom Inc.
10.42* Reciprocal OEM Agreement Memorandum of Understanding, dated March 30, 1995, by and between the Registrant and
Northern Telecom Inc.
10.43* Supply Agreement, dated September 22, 1994, by and between Omnipoint Communications Inc. and Northern
Telecom Inc.
10.44* Amendment No. 1 to Supply Agreement, dated July 21, 1995, by and between Omnipoint Communications Inc.
and Northern Telecom Inc.
10.45* Loan Agreement, dated as of July 21, 1995, by and between Omnipoint Communications Inc. and Northern
Telecom Inc.
10.46 [Intentionally left blank]
10.46.1* Letter Agreement, dated November 14, 1995, by and among the Registrant, Omnipoint Communications Inc.
and JRC International Inc. (relating to Exhibit 10.46).
10.46.2* Letter Agreement, dated December 21, 1995, by and among the Registrant, Omnipoint Communications Inc.
and JRC International Inc. (relating to Exhibit 10.46).
10.47* Engineering Services Agreement, dated as of August 31, 1995, by and between the Registrant and JRC
International Inc.
10.48* Memorandum of Understanding, dated April 21, 1995, by and between the Registrant and Pacific Bell Mobile Services.
10.49* Office Sublease Agreement by and between the Registrant and United Technologies Microelectronics Center, Inc.,
commencing August 1, 1994 or upon earlier occupation by the Registrant.
10.50* Amendment to Office Sublease Agreement, signed August 17, 1994, by and between the Registrant and United
Technologies
Microelectronics Center, Inc.
10.51* Office Building Lease for Courthouse Plaza Office Building, dated January 18, 1994, by and between the
Registrant and Eastrich No. 130 Corporation.
10.52* First Lease Amendment, dated January 20, 1995, by and between the Registrant and Eastrich No. 130
Corporation.
10.53* Pioneer's Preference License granted by the FCC to Omnipoint Communications Inc. on December 14, 1994.
10.54* Note and Warrant Purchase Agreement dated November 22, 1995, between the Registrant and the purchasers
named therein.
10.55* Senior Note Due 2000 issued by the Registrant on November 22, 1995 to the holder identified therein.
10.56* Senior Note Due 2000 issued by the Registrant on November 22,
1995 to the holder identified therein.
10.57* Common Stock Warrant issued by the Registrant on November 22, 1995 to the holder identified therein.
<PAGE>
10.58* Common Stock Warrant issued by the Registrant on November 22, 1995 to the holder identified therein.
10.59* Credit Agreement, dated as of November 21, 1995, by and among OPCS Corp., Omnipoint PCS Entrepreneurs, Inc. and
Bank of America National Trust and Savings Association.
10.60* Memorandum of Understanding, dated November 22, 1995, by and between the Registrant and Ericsson Inc.
10.60.1* Letter Agreement, dated January 24, 1996, by and between the Registrant and between Ericsson Inc.
10.61* Convertible Subordinated Note and Warrant Purchase Agreement, dated December 12, 1995, by and between the
Registrant and Hansol Paper Co., Ltd.
10.62* Convertible Subordinated Note and Warrant Purchase Agreement, dated as of November 29, 1995, by and among the
Registrant and the entities identified therein.
10.63* Letter of Intent, dated October 26, 1995, by and between the Registrant and BellSouth Personal Communications,
Inc.
10.64* Waiver of Registration Rights and Confirmation of 180-Day Lockup, dated as of October 31, 1995, by and between the
Registrant and Ameritech Development Corporation.
10.65* Registration Rights Agreement dated as of April 26, 1994, by and among the Registrant and the parties
thereto.
10.66* Contract for Sale of Real Estate, dated August 30, 1995, by and between F&R Bari Realty, Ltd., Inc.
and Omnipoint Communications Inc.
10.67* Lease Agreement, dated October 15, 1995, by and between the Registrant and Baetis Properties, Inc.
10.68+ Acquisition Agreement for Ericsson CMS 40 Personal Communications Systems (PCS) Infrastructure
Products, dated as of April 16, 1996, by and between Ericsson Inc. and Omnipoint Communications Inc.
10.69+ Acquisition Supply and License Agreement for Omnipoint Personal Communications Systems (PCS)
Infrastructure Products, dated as of April 16, 1996, by and between Ericsson Inc. and Omnipoint
Communications Inc.
10.70+ Agreement for Purchase and Sale of Ericsson Inc. Masko Terminal Units, dated as of April 16, 1996, by
and between Ericsson Inc. and Omnipoint Communications Inc.
10.71+ Memorandum of Understanding, dated April 2, 1996, by and between Orbitel Mobile Communications Inc.
and the Registrant.
10.72++ Letter of Intent, dated November 20, 1995, by and between the Registrant and Western Wireless Corporation.
10.73++ Letter of Intent, dated February 26, 1996, by and between Omnipoint Communications Inc. and American
Portable Telecom, Inc.
10.74++ Letter of Intent, dated March 22, 1996, by and between Omnipoint Communications, Inc. and American
Personal Communications.
10.75++ Letter of Intent, dated May 13, 1996, by and between the Registrant and InterCel, Inc.
10.76++ License agreement dated March 22, 1996 by and between the Registrant and Bender & Company, Inc.
10.77++ Second License Agreement, dated April 17, 1996, by and between the Registrant and Bender &
Company, Inc.
10.78++ Lease Agreement, dated March 1, 1996, by and between Omniset Corporation and Roots Stone Limited
Partnership.
10.79@@ Escrow Agreement by and among the Registrant, the Chase Manhattan Bank and Marine Midland Bank, dated August 27,
1996
11.1 Statement of computation of loss per share.
22.1* Subsidiaries of the Registrant.
27 Financial Data Schedule
- ----------
@ Incorporated herein by reference to Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
@@ Incorporated herein by reference from the Company's Current Report on Form 8-K, filed September 10, 1996.
* Incorporated herein by reference to the Company's Registration Statement on Form S-1, No. 33-98360.
+ Incorporated herein by reference to the Company's Current Report on Form 8-K, filed May 3, 1996, as amended.
++ Incorporated herein by reference to the Company's Registration Statement Form S-1, No. 333-03739.
- ----------
(b) Reports on Form 8-K
Report on Form 8-K filed September 10, 1996, Item 5, disclosing the
consummation of the private placement of $250 million of the Company's 11 5/8%
Senior Notes due 2006.
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNIPOINT CORPORATION
Date: November 14, 1996 /s/ Bradley E. Sparks
-------------------------
Bradley E. Sparks
Chief Financial Officer
<TABLE>
<CAPTION>
EXHIBIT 11.1
OMNIPOINT CORPORATION
STATEMENT OF COMPUTATION OF LOSS PER SHARE
<S> <C> <C> <C> <C>
Three Months Ended September 30, Nine Months Ended September 30,
(unaudited) (unaudited)
--------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- --------------- --------------- ---------------
Calculation of primary loss per share:
Net loss $ (27,851) $ (18,069) $ (65,264) $ (49,232)
================ =============== =============== ===============
Common shares outstanding 50,278 24,527 45,458 31,727
Issuance of cheap stock (1) 6,870 6,870
---------------- --------------- --------------- ---------------
Total shares - primary 50,278 31,397 45,458 38,597
================ =============== =============== ===============
Primary loss per share:
Net loss per share $ (0.55) $ (0.58) $ (1.44) $ (1.28)
================ =============== =============== ===============
</TABLE>
Note: The computation of fully diluted earnings per share is identical
to that of primary earnings per share for the periods presented
above and therefore is not included separately herein.
(1) Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common equivalent shares issued during the
twelve month period prior to the initial filing date of the
Company's Initial Public Offering Registration Statement at
exercise prices below the initial public offering price of $16.00
have been included in the calculation of cheap stock shares using
the treasury stock method, until the initial public offering
became effective on January 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT OF OMNIPOINT CORPORATION AS OF AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 161669
<SECURITIES> 57023
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7964
<CURRENT-ASSETS> 254925
<PP&E> 98227
<DEPRECIATION> (4561)
<TOTAL-ASSETS> 1205826
<CURRENT-LIABILITIES> 34926
<BONDS> 268136
0
0
<COMMON> 505
<OTHER-SE> 194287
<TOTAL-LIABILITY-AND-EQUITY> 1205826
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 52500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18594
<INCOME-PRETAX> (65,264)
<INCOME-TAX> 0
<INCOME-CONTINUING> (65,264)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (65,264)
<EPS-PRIMARY> (1.44)
<EPS-DILUTED> (1.44)
</TABLE>
