SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________________________
FORM 10/A
Amendment No. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES
Under Section 12(b) or 12(g) of
THE SECURITIES EXCHANGE ACT OF 1934
________________________________
PCS 2000, L.P.
(Exact Name of Registrant as Specified in its charter)
Delaware 66-0514434
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
620 Broadway
Sonoma, California 95476
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (707) 938-2428
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class is to be registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
ITEM 1. BUSINESS
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GENERAL
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PCS 2000, L.P., a Delaware limited partnership (the "Partnership"), was
formed on January 24, 1995 to own and operate broadband personal
communications services ("PCS") licenses to be acquired in auctions conducted
by the Federal Communications Commission (the "FCC"). The Partnership
competed for PCS licenses in frequency Block C, set aside for "designated
entities" ("Entrepreneurs") that meet certain financial and equity structure
requirements and that qualify for certain benefits under rules, regulations
and policies of the FCC and related statutory provisions ("FCC Rules"). On
January 22, 1997, the Partnership was awarded 15 PCS licenses covering
markets in the United States and Puerto Rico (the "Licenses") by the FCC.
The Partnership's business strategy is to acquire the Licenses and operate
such Licenses with a view to providing capital appreciation in the value of
the Partnership's units of limited partnership interest (the "Units").
Unicom Corporation, the former general partner ("Unicom") of the Partnership
and SuperTel Communications Corp., the current general partner of the
partnership, formed on June 7, 1996 ("SuperTel" or the "General Partner"),
have taken steps to qualify the Partnership for the maximum benefits allowed
by the FCC for an Entrepreneur under 47 C.F.R. SectionSection 24.711(d)
(installment payments) and 24.712(c) (bidding credits) of the final rules of
the FCC for PCS systems. Unicom is not related to the parent of Commonwealth
Edison. See "Background of Personal Communications Services Business and FCC
Auctions -- Entrepreneur Classes and Economic Preferences" and "The
Partnership -- Transfer of General Partner's Interest."
The Partnership filed an application (the "Application") with the FCC
for the authority to acquire licenses to provide PCS systems in all Basic
Trading Areas in the United States. The Partnership was high bidder for the
Licenses at the Block C auction for the award of PCS licenses authorized
under Part 24 of the FCC's rules. The Partnership expects to develop, own
and operate the Licenses it has been awarded. See "The Partnership -- The
Partnership's Business to Date" below. On January 22, 1997, the FCC issued
its Memorandum Opinion and Order, FCC, 97-15 (the "Order") granting the
Partnership the Licenses. See "The Partnership -- Transfer of the General
Partnership Interest." The FCC's grant of the Licenses may, however, be
reversed on the basis of an interested party's motion for reconsideration or
on appeal to the United States Court of Appeals for the District of Columbia
Circuit. On February 21, 1997, the SDE Trust, a stockholder of Unicom, filed
with the FCC a motion for reconsideration with respect to the Order (the
"Petition for Reconsideration"). See "The Partnership -- Petitions to Deny."
The Partnership currently anticipates that it will take 18 months or
more to complete the initial build-out of its PCS systems and to begin
offering wireless services in the markets covered by its Licenses.
Development of the infrastructure necessary to offer PCS systems is subject
to delays, including those associated with design, acquisition, obtaining of
financing, installation and construction of wireless telephone systems. See
"Development of the Licenses" below.
The Agreement of Limited Partnership of PCS 2000, L.P. (the "Partnership
Agreement") provides that the Partnership will terminate on December
31, 2005. The Partnership will dissolve on such date (unless terminated
earlier or unless the Partnership Agreement is amended to change such
date). The General Partner anticipates that it will have developed its
Licenses by such date, and depending upon business considerations, will
have restructured itself or transferred or sold its Licenses.
BACKGROUND OF PERSONAL COMMUNICATIONS SERVICES BUSINESS AND FCC AUCTIONS
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In 1993, Congress adopted the Omnibus Budget Reconciliation Act of 1993
(the "Reconciliation Act") which, among other things, mandated Auctions for
the award of certain FCC licenses, including PCS licenses. Pursuant to
authority granted to the FCC by the Reconciliation Act, the FCC awarded PCS
licenses through a process of competitive bidding auctions in which there
were multiple applications for the same license (the "Auctions").
The PCS technology is expected to be a completely digital technology
designed from the ground up to be a wireless "telecommunicator" system.
Since PCS will be digital, it is capable of numerous advanced service
features, including caller-ID, voice-prompting, voice-recognition, scrambled
(secure) calling, message and image delivery, intelligent call transfer and
follow-me calling, single number service (the same number can be assigned to
multiple PCS telephones in different locations) and auto-trace of crank
callers. In addition, if such features are incorporated into a given PCS
network, PCS subscribers will have E-mail access and personal computer
compatibility.
PCS is a radio-based transmission technology which, like cellular
technology, uses the same frequencies repeatedly in a multiple-transmitter
cell design. PCS systems use frequencies in the 1900 MHz band, not the 800
MHz band (which is used by cellular technology). PCS transmissions are not
as prone to out-of-cell interference, which can occur with the existing
cellular telephone frequencies. The first PCS system began operations in the
Washington, D.C. metropolitan area in the fourth quarter of 1995 and new PCS
systems continue to commence operations in different markets.
FREQUENCY BLOCKS
The FCC has divided PCS into six frequency blocks, designated Blocks A
through F, such that there are six overlapping licenses in each market in
each geographic area of the country. Blocks A, B and C are 30 MHz blocks,
and Blocks D, E and F are 10 MHz blocks. Thirty MHz blocks allow for the PCS
operator to provide the full range of services described above to a larger
number of subscribers. Conversely, 10 MHz blocks allow the PCS operator to
provide either a smaller range of services, such as paging or E-mail to a
larger number of subscribers, or a larger range of services to a smaller
number of subscribers. Subject to certain restrictions applicable to
Blocks C and F, PCS operators can combine blocks to provide subscribers with
a broader range of services.
FCC Rules now allow companies to hold up to 45 MHz of cellular, PCS and
other commercial mobile service spectrum in any combination per market. As a
result, an existing cellular provider may acquire up to two additional 10
MHz PCS licenses in a market in which it provides cellular services, and a
person holding any Block A or Block B 30 MHz license in a particular
market may also hold one 10 MHz license for the same area. This rule is
subject to reconsideration and review or appeal. A single licensee may
hold 51 Block A or B licenses nationally. Other than the 45 MHz ceiling
per market described above, there are no limitations on the number of
Block D and E licenses that a single operator may hold. With respect
to Blocks C and F, no license holder may hold more than 10% of the
licenses, or 98 licenses, available nationwide.
FCC Rules permitted any U.S. entity, regardless of size, to participate
in the Auctions at which Blocks A, B, D and E licenses were sold. Blocks C
and F, however, were set aside for Entrepreneurs, which are entities meeting
certain financial and equity structure requirements and that qualify for
certain benefits under rules, regulations and policies of the FCC and related
statutory provisions. The General Partner qualified the Partnership as an
Entrepreneur, and the Partnership was awarded the Licenses in the Block C
auction. Although the Partnership was eligible to bid in the Block F
auction, the General Partner determined not to do so because it believes
that the Partnership must devote its efforts to fully develop its Block C
Licenses. In addition, the General Partner has considered the amount of
capital the Partnership will need to develop its Block C Licenses and the
availability of additional capital.
MAJOR TRADING AREA; BASIC TRADING AREA
PCS licenses are awarded either on the basis of Major Trading Areas
(each, a "MTA") or Basic Trading Areas (each, a "BTA"). Each MTA is
comprised of one or more BTAs. The FCC has divided the entire United States
into 51 MTAs and 493 BTAs. The MTAs contain anywhere from one to 23 BTAs.
Block A and B licenses were awarded on the basis of MTAs. Block C, D, E
and F Auctions awarded licenses covering the entire country on the basis of
BTAs, including Puerto Rico, American Samoa, Guam, Northern Mariana Islands
and the U.S. Virgin Islands.
FCC AUCTIONS
The FCC began the Auctions in December 1994. The first Auction was for
frequency Blocks A and B (30 MHz) licenses, and lasted from December 1994 to
March 1995. This Auction was open to all bidders, and the major
telecommunications companies were the principal participants in this Auction,
which awarded 99 MTA licenses in Blocks A and B. The price paid per person
of population ("POP") for a 30 MHz license ranged from $1 to $32. The
average price was approximately $15.25 per POP. Total Auction proceeds were
approximately $7.7 billion.
The Auction for Block C (30 MHz) licenses, in which the Partnership
participated, began on December 18, 1995 and ended on May 6, 1996. This
Auction, in which the Block C spectrum was offered in each of the 493 BTAs,
was restricted to companies which qualified as Entrepreneurs, as described
below. The prices bid per POP ranged approximately from $1.91 to $101.93.
The average price bid was $52.39 per POP. Total Auction bids were
approximately $13.25 billion. These prices will be discounted, however,
because of bidding credits and installment financing options available
to Entrepreneurs, as described below.
The remaining Auctions in which frequency Blocks D, E and F licenses
(all 10 MHz licenses) were offered on a BTA basis were completed in January
1997. In these Auctions, Blocks D and E were open to all bidders and Block F
licenses were restricted to Entrepreneurs. Total auction proceeds for these
Auctions were approximately $2.52 billion. The FCC has not yet published
detailed per POP information on the results of these Auctions, but the
average price per POP is estimated by the General Partner to have been
approximately $3.33.
ENTREPRENEUR CLASSES AND ECONOMIC PREFERENCES
Block C and F licenses were reserved for Entrepreneurs meeting certain
limiting criteria set forth in FCC Rules. Entrepreneurs were granted a set
of economic preferences in the Auctions.
Under FCC Rules, an Entrepreneur is defined as an entity that, together
with its affiliates and persons or entities that hold attributable interests
in such entity and their affiliates, has less than (i) $500 million of assets
and (ii) $125 million of annual gross revenue over the prior two years. In
addition, FCC Rules define three classes of Entrepreneurs, with each class
eligible for different economic preferences in the Blocks C and F Auctions.
A "Large Business Entrepreneur" is defined as an entity that has aggregate
gross revenues for each of the last two years between $75 million and
$125 million. A "Business Entrepreneur" is an entity that has aggregate
gross revenues for each of the last two years between $75 million and
$40 million. A "Small Business" is an entity that has less than $40 million
of aggregate annual gross revenue averaged over the last three years.
(Originally the FCC had defined four classes, but, as a result of
constitutional challenges to the benefits granted to Minority- or Women-Owned
Businesses,the FCCdecided togrant thebenefitsoriginally intendedfor Minority-
or Women-Owned Businesses to all entities that fit the criteria for being a
Small Business.)
Each class of Entrepreneurs was entitled to differing economic
preferences, which are summarized in the table below. All Entrepreneurs
qualified for the FCC's installment payment plan under which the federal
government will finance 90% of the winning Auction bid in the Block C
spectrum. The terms of the installment plan vary according to the
Entrepreneurial class. A Large Business Entrepreneur can finance the balance
of its Auction bid in the Block C Auction at an interest rate equal to the
10-year treasury note rate at the date of grant of the license plus 3.5%,
with principal and interest amortized over the 10-year license term. A
Business Entrepreneur is entitled to similar terms in the Block C Auction,
except that interest-only payments are permitted in the first year and that
the interest rate is the 10-year treasury note rate plus 2.5%.
Small Businesses are entitled to interest-only payments for the first
six years and can amortize interest and principal over the remaining four
years of the license term. The interest rate applicable to Small Businesses
is the 10-year treasury note rate at the date of grant of the license. In
addition, Small Businesses are entitled to a bidding credit of 25%. The
bidding credits operate as follows: if a qualifying Small Business
submits a winning bid, the price it bids for the license is reduced by
the bidding credit, and the reduced price is then eligible for the
installment payment benefits applicable to such Small Business.
Summary of Economic Preferences for Entrepreneurs in Block C Auction
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Installment Interest Rate/ Bidding
Plan Amortization Credit
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Large Business Yes 10-year treasury note rate
Entrepreneur plus 3.5% n/a
Principal and interest amortized
over the 10-year license term
Business Yes 10-year treasury note rate
Entrepreneur plus 2.5% n/a
Interest-only payments permitted
in the first year and principal
and interest amortized over
remaining nine years of the
license term
Small Businesses Yes 10-year treasury note rate 25% bidding
credit
Interest-only payments permitted
for the first six years and
principal and interest amortized
over the remaining four years of
the license term
GENERAL PARTNER STRUCTURE
As noted above, as originally promulgated, in order to be classified as
both a Small Business and a Minority-or Women Owned Business (entitled to the
maximum benefits under the original rules), FCC Rules required minorities and
women to exercise control over the Partnership through an entity that
qualified as a Small Business. Unicom, and its successor, the General
Partner, were created to serve as the entity through which these requirements
could be met. The Partnership met these requirements by placing management
control of the Partnership in the General Partner, restricting ownership of a
majority of its shares of Common Stock (the "Common Stock") to minorities and
women, and providing the General Partner with 25% of the equity of the
Partnership. Accordingly, the General Partner manages the Partnership and
limited partners only have certain limited rights amounting to less than
de facto and de jure control.
PARTICIPATION IN THE AUCTION
The Partnership filed with the FCC its Short Form Application ("Form
175"), in which the Partnership certified that it: (i) met all of the FCC's
requirements for PCS license holders, including specific legal, technical,
financial and other qualification requirements for the licenses for which it
applied, that it was in compliance with certain foreign ownership
requirements, and that it was eligible for the special benefits and
credits given to a Small Business and consents to FCC audits to verify such
eligibility; (ii) was the real party in interest and that no undisclosed
agreements or understandings provide that someone other than the Partnership
will have an interest in the licenses for which it applied; and (iii) did
not and would not enter into any agreements or understandings regarding
the amount to be bid, bidding strategies or the license on which to
bid, except with parties identified in the Form 175.
The Partnership was required to make a one-time up-front bidding deposit
to the FCC equal to $0.015 per POP per MHz for Block C licenses, for the
largest combination of MHz-POPs encompassed by licenses on which the
Partnership intended to bid. The Partnership made a deposit of $50 million,
which entitled it to bid for 111 million POPs. This deposit was the fifth
largest deposit received by the FCC for the Block C Auction. The
Partnership's bidding in any single round was limited by the amount of this
payment.
FCC Rules strictly prohibit collusion among bidders, and strictly limit
communications among applicants after the filing of Form 175 to the extent
such communications concern bids, bidding strategies and markets on which
bids will be placed while the auction is in progress.
POST AUCTION PROCEDURES
Of the $50 million that the Partnership deposited with the FCC,
approximately $34.5 million was credited toward the license down payments for
the Licenses the Partnership was awarded. The remainder of the deposit,
approximately $11,039,602 after deduction of two bid withdrawal penalties,
was returned to the Partnership on January 27, 1997. On January 27, 1997,
the Partnership paid a forfeiture of $1,000,000 with respect to actions of
Anthony T. Easton following an erroneous bid in the Norfolk, Virginia market.
See "The Partnership -- Bidding Error" and "-- Omaha Withdrawal."
Successful bidders had 10 business days after the conclusion of the
Block C Auction to file a long form application ("Form 600") for the markets
purchased at the Auction. The Partnership timely filed its Form 600, and on
July 2, 1996 filed an amendment to the Form 600. Following the filing of the
original Form 600, the FCC issued a public notice which commenced a period
during which any interested party may file a petition to deny the
Partnership's Form 600. This period commenced on May 2, 1996 and ended on
July 1, 1996. Two parties filed petitions to deny the award of any of the
Licenses to the Partnership. See "The Partnership -- Petitions to Deny."
Additionally, on July 11, 1996, the FCC issued a public notice commencing a
second 30-day period (which ended on August 12, 1996) during which any
interested party may file a petition to deny with respect to matters covered
in the Partnership's July 2, 1996 amendment to its Form 600. A third
petition to deny was filed during this second period. In the Order, the
three petitions to deny were rejected by the FCC on January 22, 1997, and the
FCC awarded the Partnership its Licenses. Any interested party, however,
still has the right to file a motion asking the FCC to reconsider its
decision, or appeal the FCC's decision to the United States Court of Appeals
for the District of Columbia Circuit. On February 21, 1997, the SDE Trust
filed the Petition for Reconsideration. See "The Partnership -- Transfer
of the General Partnership Interest" and "The Partnership -- Petitions to
Deny." There is no statute or regulation prescribing the time period during
which the FCC must act on the Petition for Reconsideration. Once the FCC
acts on this petition, interested parties have a 30-day period to appeal the
FCC's decision to the United States Court of Appeals for the District of
Columbia.
Entrepreneurs made an initial payment within 5 days of the end of the
Auction to increase their up-front bidding deposit to 5% of the purchase
price, net of bidding credits. They were required to pay an additional 5% of
the net purchase price after the grant of license, with the remaining 90%
payable in installments. If an Entrepreneur's initial up-front bidding
deposit was in excess of 10% of the purchase price, the FCC returned the
excess. As the Partnership was the high bidder for the 15 Licenses at an
aggregate net bid price of $344,293,125, the Partnership, which had deposited
$50 million at the commencement of the auction, received back approximately
$12.3 million in excess payments from the FCC, after payment of approximately
$4.5 million of bid withdrawal penalties assessed by the FCC. In addition,
the Partnership paid to the FCC a forfeiture of $1 million with respect to
actions subsequent to the Bidding Error. See "The Partnership -- Bidding
Error" and "-- Omaha Withdrawal."
BUILD-OUT REQUIREMENTS
All PCS license holders are required to meet certain requirements
imposed by the FCC relating to the provision of service in each license area.
Block C license holders must provide coverage to one-third of the POPs in
each license service area within five years of license grant and two-thirds
of the POPs in each license service area within ten years of license grant.
Failure to comply with the build-out requirements could subject the
Partnership to license forfeiture or other penalties, and may have a material
adverse effect on the financial condition of the Partnership.
DEVELOPMENT OF THE LICENSES
The Partnership currently anticipates requiring, for each of the
Licenses it has acquired, 18 months or more to complete the initial build-out
and to begin offering wireless service in the Markets. Development of the
infrastructure necessary to offer PCS systems is subject to delays and risks,
including those inherent in the general uncertainty associated with further
regulatory review and appeal of the license grants, financing design,
acquisition, installation and construction of wireless telephone systems.
The successful implementation of the Licenses also depends on the
Partnership's ability to lease or acquire sites for the location of its base
station equipment, which includes the negotiation of lease or acquisition
terms for numerous sites per Market (varying with the size of the Market) and
may require in many instances that the Partnership obtain zoning variances or
other governmental or local regulatory approvals that are beyond the
Partnership's control. Delays in the site acquisition process as well as
construction delays and other factors could adversely affect the timing for
build-out and commercial operation of the Partnership's Licenses.
THE PARTNERSHIP
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THE GENERAL PARTNER
Unicom was incorporated in Puerto Rico in March 1993 and the General
Partner was incorporated in Puerto Rico in June 1996. Unicom was structured
to ensure that the Partnership would receive the maximum benefits eligible to
Entrepreneurs. The General Partner, as the successor of Unicom, was also
structured to receive the benefits offered to Small Businesses and Minority-
or Women-Owned Businesses. (As noted above, the FCC subsequently determined
to grant to all Small Businesses the benefits that Minority- or Women-Owned
Businesses were to receive.) Currently, Fred H. Martinez is the Chairman of
the General Partner's Board of Directors which includes Richard Reiss, Javier
Lamoso, Gary H. Arizala, Margaret W. Minnich, Lawrence Odell, James T. Perry,
Nezam Tooloee and Daniel J. Parks. Richard Reiss is the President and Chief
Executive Officer of the General Partner, Javier Lamoso is the Executive Vice
President, John Duffy is the Senior Vice President for External Affairs, Eric
Spackey is the Vice President, Daniel J. Parks is the General Counsel and
Lawrence Odell is the Secretary.
From January 26, 1995 through August 18, 1995, the Partnership raised
$65,112,500 in its private placement (the "Private Placement") of 2604.5 of
its Units. Consistent with the terms of the Private Placement, the proceeds
were used as follows: (i) 80% of the proceeds were used to bid for and make
down payments on the PCS licenses the Partnership acquired, and to develop,
own and operate these licenses and (ii) 20% of the proceeds were allocated
for payment to Romulus Telecommunications, Inc., a Puerto Rico corporation
("Romulus"), for its services in preparing and filing of the Application and
assisting the Partnership in bidding under the Services Agreement. See
"Item 7 -- Payments to Romulus." One-half of such fee ($6,511,250) was non-
refundable and was paid to Romulus prior to the commencement of the Auctions.
The remaining one-half of such fee ($6,511,250) is held in a separate account
controlled by Quentin L. Breen and Anthony T. Easton, and was intended to be
paid to Romulus only if the Partnership was successful in acquiring at least
one PCS license. The Partnership has filed suit in Puerto Rico, however,
attaching the amount held in this account until resolution of the bidding
error described below. Under the Services Agreement, had the Partnership
been unsuccessful in obtaining a PCS license, the $6,511,250 held in the
account would have been returned to the Partnership. If the Partnership
License grants are reversed on reconsideration or appeal, the Partnership
shall return to the holders of Units (the "Investors") their pro-rata
investment (less the fee paid to Romulus and any other fees and expenses the
Partnership may incur), without interest.
THE PARTNERSHIP'S BUSINESS TO DATE
The Partnership's operations to date have focused on raising capital in
the Private Placement, preparing for the Auctions, bidding in the Block C
Auction and obtaining the Licenses. In addition, the Partnership has been
conducting preliminary discussions with telecommunications equipment
vendors and strategic service providers. See "The Partnership's Plan of
Operation" below.
The Partnership deposited $50 million with the FCC on November 18, 1995
qualifying it to bid on 111 million POPs. On January 22, 1997, the FCC
awarded the Partnership the Licenses; however, the license grants are subject
to reconsideration by the FCC and appeal to the United States Court of
Appeals for the District of Columbia Circuit.
The table below identifies each market to which the Licenses pertain,
the population, the Partnership's winning bid and the net price payable by
the Partnership per person of population ("Price/POP").
<TABLE>
<CAPTION>
Market Name Population* Bid** Price/POP**
----------- ----------- ------------------- -------------
<S> <C> <C> <C>
San Juan, PR 2,170,250 $ 84,687,825 $39.02
Mayaguez-Aguadilla, PR 1,325,600 $ 29,400,075 $21.75
Salt Lake City-Ogden, UT 1,308,040 $ 82,293,825 $62.91
Logan, UT 79,420 $ 276,825 $ 3.49
Provo-Orem, UT 269,410 $ 6,678,075 $24.79
Reno, NV 439,280 $ 27,802,575 $63.29
Fresno, CA 755,580 $ 47,026,575 $62.24
Bakersfield, CA 543,480 $ 26,941,575 $49.57
Modesto, CA 418,980 $ 12,320,325 $29.41
Visalia-Porterville, CA 413,390 $ 9,371,325 $22.67
Redding, CA 253,260 $ 4,500,825 $17.77
Merced, CA 192,710 $ 3,532,575 $18.33
Eureka, CA 142,580 $ 1,181,325 $ 8.29
Boise-Nampa, ID 416,500 $ 7,742,325 $18.59
Lewiston-Moscow, ID 110,030 $ 537,075 $ 4.88
Totals: 8,864,510 $ 344,293,125 $38.84
</TABLE>
* Based on the 1990 census figures used by the FCC.
** Gives effect to the 25% bidding credit to which the Partnership is
eligible under FCC rules.
The net cost of the Partnership's Licenses was $344,293,125. The
Partnership made a down payment of 10% of the net cost, or approximately
$34,429,312, and owes the federal government approximately $309,863,813,
which amount is payable over 10 years, as follows. Interest only payments
are required to be made for the first six years, at an interest rate of 6.5%
per year. Interest (at 6.5% per year) and principal payments are required to
be made during the seventh through the tenth year, when the loan must be paid
off completely. The Partnership anticipates that interest payments on the
cost of the Licenses will be approximately $20.2 million a year for the first
six years, and the entire $309,863,813 must be amortized during the remaining
four years.
Although the Partnership was awarded these Licenses, no assurance can be
made that the Partnership ultimately will retain these Licenses. FCC Rules
provide other parties the opportunity to file petitions to deny the licenses
and three parties filed such petitions with respect to matters covered in the
Partnership's original and amended Form 600 applications. See "The
Partnership -- Petitions to Deny" below. The persons filing these petitions
to deny had the right until February 21, 1997, to ask the FCC to reconsider
its award of the Licenses to the Partnership or file claim in the United
States Court of Appeals for the District of Columbia Circuit. On
February 21, 1997, the SDE Trust filed the Petition for Reconsideration
asking that the FCC reconsider its approval of the transfer of the
Partnership's general partnership interest. The Partnership will vigorously
defend its interests in these matters. See "The Partnership -- Petitions to
Deny."
BIDDING ERROR
On January 23, 1996, Anthony T. Easton entered an erroneous bid on
behalf of the Partnership for the PCS license for the Norfolk, Virginia
market. Mr. Easton, in his capacity as bidding agent and Director of
Engineering of Romulus, mistakenly entered a bid of $180,060,000 when he had
meant to bid $18,006,000 (the "Bidding Error"). At the time, Mr. Easton was
also the acting chief executive officer of Unicom and a member of its Board
of Directors. Unicom engaged special counsel to investigate and report (the
"Report") to Unicom the circumstances surrounding the Bidding Error. Unicom
also engaged Price Waterhouse LLP to evaluate Romulus' bidding procedures and
recommend steps to ensure that no other errors would occur.
The Report concluded that a preponderance of the evidence indicated that
Mr. Easton prepared and directed submission of the erroneous bid, and that
Mr. Easton was most likely the person who erroneously typed an extra zero on
the erroneous bid, causing the bid to be changed from $18,006,000 to
$180,060,000. In addition, the Report concluded that a preponderance of the
evidence indicated that upon learning of the erroneous bid, Mr. Easton took
affirmative steps to conceal his possible responsibility for the mistake.
The Report stated that there was no evidence that any other person knowingly
took affirmative steps to conceal responsibility for the mistake.
Upon receiving the Report, the board of directors of Unicom asked for
and received Mr. Easton's resignation from his positions as acting chief
executive officer of Unicom and a member of its board of directors effective
February 19, 1996. Mr. Breen, who is President of Romulus and who was not
directly involved in the Bidding Error, resigned from his position as a
member of Unicom's board of directors on April 26, 1996. In addition,
Unicom's board of directors determined to assume greater control over the
Partnership's bidding, and to restrict Romulus' role. Accordingly, Unicom's
management oversaw the preparation and submission of all bids after
February 19, 1996.
The Partnership withdrew the erroneous bid on January 24, 1996 and
requested the FCC to waive or reduce the amount of any withdrawal penalty.
Under FCC Rules, a bidder who withdraws a high bid during the course of an
auction is subject to a penalty equal to the difference between the amount of
the withdrawn bid and the amount of the bid awarded the license. Since the
high bid for the license for the Norfolk, Virginia market was $87,569,000,
the Partnership could have been subject to a withdrawal penalty as high as
$92,491,000. On December 19, 1996, however, the FCC determined to assess the
Partnership a bid withdrawal penalty of $3,273,374. The Partnership has
requested further reduction in the amount of this penalty.
In addition, in a Notice of Apparent Liability for Forfeiture, dated
January 22, 1997 (the "Notice"), the FCC proposed forfeiture of $1,000,000 on
the Partnership because of the actions of Mr. Easton. In the Notice, the FCC
concluded that in connection with the Bidding Error, although the error was
inadvertent, Mr. Easton misrepresented facts to the FCC, lacked candor before
the FCC and otherwise attempted to mislead it. The FCC proposed that the
Partnership pay this forfeiture because Mr. Easton was an officer and
director of the Partnership's former general partner at the time the
misrepresentations were made. The FCC concluded, however, that because the
Partnership moved quickly to take adequate remedial steps to eliminate any
ownership or management participation by anyone possibly responsible for the
misrepresentations, the Partnership was not to be disqualified from receiving
its Licenses. See "Transfer of General Partnership Interest" below.
Accordingly, the FCC granted the Partnership the 15 Licenses in the Order.
The Partnership is seeking to recover this penalty in a legal action
against Mr. Easton and Romulus. Although the Partnership has determined to
seek a full reimbursement, through litigation if necessary, of any penalty
and all costs related to it from Romulus, the General Partner does not have
specific information on the financial condition of Romulus. The General
Partner believes, however, that Romulus could pay at least $6.5 million held
in the account which the Partnership has attached.
Romulus does not currently and will not in the future have any
involvement in the affairs of the General Partner or the Partnership.
TRANSFER OF THE GENERAL PARTNERSHIP INTEREST
Based upon the Report and after discussions and consultations with FCC
staff, Unicom's board of directors concluded that it was in the best interest
of the Partnership and the Investors that the beneficial interests of
Mr. Easton, or any members of his family, in Unicom be divested.
Mr. Easton's wife, Susan D. Easton, is the beneficiary of the SDE Trust which
owned shares in Unicom. Since Unicom and the SDE Trust were unable to come
to an agreement on transferring such shares back to Unicom or to a third
party, Unicom determined to sell its general partnership interest in the
Partnership, to SuperTel. On June 18, 1996, pursuant to an Asset Purchase
Agreement, dated as of June 18, 1996, Unicom sold its general partnership
interest in the Partnership to SuperTel for $100,000 by means of a
nonrecourse 7% promissory note due in seven years.
Other than the SDE Trust and the Breen Family Trust, all stockholders of
Unicom received the same amount of shares of SuperTel that each held in
Unicom. The SDE Trust and the Breen Family Trust still hold shares in Unicom
and have not received any consideration for such shares. The proportion of
SuperTel shares that were not issued to the SDE Trust were issued to Richard
Reiss, Chief Executive Officer of SuperTel, and are subject to an agreement
that allows the Partnership to reacquire them at nominal consideration for
use as incentive compensation for current and future management necessary to
build and operate the Licenses or to attract additional investors. Mr. Breen
is beneficiary of the Breen Family Trust, which was issued a warrant instead
of any SuperTel shares. The warrant provides the Breen Family Trust the
right to purchase, for nominal consideration, the same proportion of SuperTel
shares as it owned in Unicom only if the FCC awards the Partnership its
Licenses and if the FCC consents to the acquisition of the SuperTel shares by
the Breen Family Trust. In addition, Mr. Breen beneficially owned three
Partnership Units, and the Partnership repurchased these Units at the
original price paid by Mr. Breen.
Except for Messrs. Easton and Breen, the officers and directors of
SuperTel are the same as those of Unicom, other than Lawrence Odell, who was
elected to the Board of Directors of SuperTel, and Patricia J. Jordan who was
not reelected to Unicom's board of directors in the June 1996 stockholders
meeting and who was not elected to the Board of Directors of SuperTel.
Susan D. Easton filed suit against the Partnership on May 28, 1996,
challenging the transfer of the general partnership interest, which suit was
later withdrawn without prejudice. Mr. Easton filed an amended complaint
(the original complaint had never been served) on June 18, 1996 seeking
declaratory judgment that he is not responsible and should have no liability
for the Bidding Error, which suit was dismissed by the court without leave to
amend on December 24, 1996; on January 31, 1997, Mr. Easton filed a motion
for reconsideration which was denied on March 7, 1997. On January 27, 1997,
the Trustee of the SDE Trust filed a suit seeking damages for the elimination
of its interest in the Partnership. In addition, the SDE Trust filed with
the FCC the Petition for Reconsideration. See "Item 8." The General Partner
has vigorously defended the interests of the Partnership in these cases and
will continue to do so.
PETITIONS TO DENY
On July 1, 1996, two parties filed petitions to deny the award of any
Licenses to the Partnership. Susan D. Easton, the beneficiary of the SDE
Trust, filed a petition maintaining that the Partnership should not receive
any Licenses because the SDE Trust's interest in the Partnership was
extinguished as described above. (Subsequently, the SDE Trust also filed the
petition described below). In addition, an Investor, WillowRun, L.P., filed
a petition stating that the Partnership should not receive any Licenses on
grounds that the General Partner does not hold a 25% equity interest in the
Partnership, and that the General Partner was not truthful with the FCC or in
its disclosures to the Investors. In the alternative, WillowRun, L.P.
requested that the FCC release records that it collected in connection with
its investigation of the Bidding Error, fully inform the Investors of
developments and extend the comment period for opposition to the award of any
Licenses to the Partnership following release of such information. The Part-
nership filed an opposition statement to these two petitions on July 16,
1996.
In addition, on August 12, 1996, the SDE Trust filed a new petition to
deny the award of any Licenses to the Partnership. This petition, like the
one filed by Susan D. Easton, also maintained that the Licenses should not be
granted because of the elimination of the interest of the SDE Trust and its
beneficiary, Susan D. Easton, in the Partnership. On August 27, 1996, the
Partnership filed its opposition statement to this petition. Following the
filing of the Partnership's opposition statements, the parties who filed the
petitions to deny had an opportunity to file replies, and did so.
In its Order issued on January 22, 1997, the FCC rejected these
petitions to deny and awarded the Partnership the Licenses. On February 21,
1997, the SDE Trust filed the Petition for Reconsideration requesting the FCC
to reconsider the Notice and the Order. See "-- Bidding Error." The
Petition for Reconsideration argues that the grounds upon which the FCC based
the Notice and the Order should be corrected and clarified because, as
written, the Notice and the Order could be misinterpreted to impute
wrongdoing to the SDE Trust thereby jeopardizing a lawsuit filed by the SDE
Trust against the Partnership, Unicom, the General Partner and certain of
these entities' officers, directors, trustees and attorneys in California
state court. See "Item 8." The Partnership filed a response to the Petition
for Reconsideration on March 6, 1997 and is vigorously defending its
interests in this matter. Although no assurances can be made, the General
Partner expects that the Partnership will ultimately retain its Licenses.
There is no statute or regulation prescribing the time period during which
the FCC must act on the Petition for Reconsideration. Once the FCC acts on
this petition, interested parties may appeal the FCC's decision to the United
States Court of Appeals for the District of Columbia Circuit within 30 days
of the FCC's decision.
OMAHA WITHDRAWAL
The Partnership was subject to a withdrawal penalty for its strategic
withdrawal of a bid for the PCS license covering Omaha, Nebraska. On
December 19, 1996, the FCC issued the Partnership a penalty of $1,257,711
for the withdrawal. This withdrawal was the result of the Partnership's
targeting and bidding, at one point during the Block C auction, for
certain midwestern markets. During the course of the auction, however,
the Partnership was outbid in all of its bids in the midwest except for
Omaha, Nebraska. Accordingly, the Partnership withdrew its bid for the
Omaha market and became subject to the withdrawal penalty. The bidding
team decided it was more desirable to risk paying a bid withdrawal
penalty rather than have to spend the $30 million to develop what would
have been a stand alone market. The presence of a stand alone market
without any relationship to the two clusters the Partnership acquired
would have made financing it difficult and would have taken too
much of management's focus. The withdrawal penalty adds 12.6 cents per
POP to the cost of the Partnership's 8.8 million POP portfolio.
THE PARTNERSHIP'S PLAN OF OPERATION
The Partnership's operations to date have focused on raising capital,
preparing for and bidding in the Auctions, working to retain the Licenses it
has been awarded, raising financing and conducting preliminary discussions
with telecommunications equipment vendors and strategic service providers.
The Partnership has no revenues (other than interest income) and is likely to
incur operating losses after commencing commercial operations, until such
time, when its subscriber base generates revenue in excess of the
Partnership's expenses. Development of a significant subscriber base is
likely to take time, during which the Partnership must finance its operations
by other means than its revenues. Consequently, should the Partnership
ultimately retain the Licenses, the Partnership will need additional debt or
equity financing to hire and retain qualified key employees, pay interest on
the License debt, develop and construct the infrastructure necessary to
operate complex wireless telephone systems, introduce and market a new range
of service offerings on a commercial basis and otherwise operate its licensed
PCS systems. The Partnership owes the federal government approximately
$309,863,813 in connection with the acquisition of the Licenses, which is
payable over 10 years. Interest only payments (at a rate of 6.5% a year) are
required for the first six years, and interest (at a rate of 6.5% a year) and
principal payments are required during the seventh through the tenth year,
when the loan must be paid off completely. The Partnership anticipates
that interest payments on this amount will be approximately $20.2 million
a year for the first six years. In addition, the Partnership believes that
the total equipment costs, including design and engineering, will approximate
some $20 per POP acquired. The Partnership may also need as much as $13 per
POP to cover negative cash flow from initial operations and other start-up
costs before it becomes profitable. Accordingly, as the Partnership
was awarded Licenses in 15 markets with approximately 8.8 million POPs
(based on 1990 population statistics used by the FCC), and, therefore,
based on the cost estimations, the Partnership will need approximately
$290 million in additional financing over the next three years.
The Partnership plans to be a leading provider of PCS systems in its
licensed markets. It plans to construct its markets as quickly as possible
to both fulfill the FCC build-out requirements as well as to have enough
capacity to handle the anticipated growth of its customer base. It plans to
employ focused marketing strategies targeted at specific audiences to build
market share. The Partnership believes it has acquired markets with strong
potential for high growth consisting of persons with high levels of income
and education who are eager to adopt new technologies. It plans to gain a
competitive advantage by providing quality service at a competitive price.
The Partnership is currently in various stages of discussions with a
variety of equipment vendors to determine the best selection of equipment
with the most attractive financing terms. The Partnership is seeking vendors
that meet the Partnership's goals of prompt construction, system reliability,
pricing and vendor financing. Presently, the Partnership has entered into an
agreement with respect to the Puerto Rico market with Ericsson, a PCS
equipment manufacturer. The agreement is binding only if the Partnership
obtains the Puerto Rico license and if the Partnership obtains financing that
is mutually acceptable to finance the acquisition and installation of the PCS
equipment.
The Partnership plans to begin prompt construction of its PCS systems.
The Partnership is conducting a series of meetings with major Wall Street
investment firms to discuss its long term capital requirements. Although no
assurances can be made that the Partnership will be successful, it is
anticipated that the Partnership will complete a round of third-party
financing in the future. This financing will be used as working capital. The
Partnership also expects to try to raise up to approximately $2 million from
its Investors to increase its equity base thereby becoming more attractive to
new investors.
If the Partnership is unable to develop the Licenses, it can transfer
them to a third person only with FCC approval. In addition, within the first
five years, it can only transfer the Licenses to another Entrepreneur.
Further, such a transfer could subject the Partnership to reduced favorable
government financing and to loss of bidding credits unless, within the first
five years of receipt of the Licenses, the Partnership transfers them to
qualified Entrepreneurs, or unless the Licenses are transferred after five
years. Accordingly, the Partnership does not expect to transfer any of its
licenses until such time as it is not subject to such a loss.
The General Partner has no plans or arrangements to purchase the
Partnership's assets.
ITEM 2. FINANCIAL INFORMATION
- ------- ---------------------
SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER
- -----------------------------------------------------------------------------
31, 1996
- --------
The following table summarizes selected financial data of the
Partnership from the period from inception (January 24, 1995) to December 31,
1995, and from January 1, 1996 to December 31, 1996. The table should be
read in conjunction with the more detailed financial statements contained in
Item 15 below.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
January 24, 1995
(Date of Inception to
December 31, 1995 December 31, 1996
(audited) (audited)
--------------------- -----------------
<S> <C> <C>
Total Revenues:
Interest Earnings . . . . . . . . . . . . . . . . . $ 1,469,099 $ 66,767
Total Expenses:
Consulting and legal services rendered by related
parties(1) . . . . . . . . . . . . . . . . . . . . . 6,756,250 744,862
Management Fee to General Partner . . . . . . . . . 513,288 424,334
Other Legal Fees . . . . . . . . . . . . . . . . . . 368,704 1,283,356
Miscellaneous Consulting Services . . . . . . . . . 325,604 557,353
Travel . . . . . . . . . . . . . . . . . . . . . . . 118,850 282,890
Insurance . . . . . . . . . . . . . . . . . . . . . 32,000 133,784
Other Administrative Expenses 68,769 183,890
Omaha Withdrawal Fee . . . . . . . . . . . . . . . . 1,257,771
Norfolk Bid Withdrawal . . . . . . . . . . . . . . . 3,273,374
Forfeiture Imposed by FCC for misrepresentations
misrepresentations misrepresentations 1,000,000
--------------------- -----------------
Subtotal: . . . . . . . . . . . . . . . . . . . . . . . . $ 8,183,465 $9,141,614
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . $(6,714,366) ($9,074,847)
Net Income (Loss) Attributable to General Partner . . . . $(1,678,592) ($2,268,712)
Net Income (Loss) Attributable to Unitholders
($1,933.49) in 1995 and ($2,609.71) in 1996 per Unit
respectively) . . . . . . . . . . . . . . . . . . . ($5,035,774) ($6,806,135)
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
December 31, 1995 December 31, 1996
(audited) (audited)
--------------------- -----------------
<S> <C> <C>
Operating Capital . . . . . . . . . . . . . . . . . . . . $ 2,727,541 $ 2,492,851
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . 96,000 100,538
Deposits . . . . . . . . . . . . . . . . . . . . . . . . 50,000,000 45,468,855
Restricted Cash(2) . . . . . . . . . . . . . . . . . . . 6,511,250 6,511,250
Equipment Net . . . . . . . . . . . . . . . . . . . . . . 0 14,535
Liabilities . . . . . . . . . . . . . . . . . . . . . . .
836,657 2,287,242
Unitholders' Equity (2,604.5 Units in 1995 and 2,719.6
Units in 1996; and 1 general partnership interest) . . . 58,498,134 52,300,787
Book Value Per Unit . . . . . . . . . . . . . . . . . . . 22,452 19,224
</TABLE>
_________________________________
(1) Includes payments of $6,511,250 to Romulus for its services in
preparation of the Application and bidding at Auctions, see "Item 7 --
Payments to Romulus," and other consulting fees.
(2) The Partnership has filed suit attaching this amount. This amount will
be released only if the Partnership is successful in retaining any of
the Licenses and after resolution of the penalties the FCC has assessed
in connection with the Bidding Error. If the Partnership fails to
retain any of the Licenses, these funds will be released into the
Partnership's account and the Investors will be reimbursed up to 90% of
their original investment, less expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- -----------------------------------------------------------------------------
OPERATIONS
- ----------
INTRODUCTION
The Partnership was formed in January 1995, and is managed by the
General Partner. The Partnership was organized to acquire, own and operate
PCS licenses in frequency Blocks C and F, and to take advantage of the
benefits that the FCC has set aside for Entrepreneurs.
RESULTS OF OPERATIONS
Expenses
Expenses for the year ended December 31, 1996 totaled $9,141,614. This
amount included an accrual for $424,334 of expenses to be reimbursed to the
General Partner, including its management fee. Pursuant to the Partnership
Agreement, originally the management fee was 1% of the Partnership's gross
assets plus reasonable costs and expenses in managing the Partnership. The
General Partner then amended the Partnership Agreement to reduce the
management fee to all reasonable costs and expenses in managing the
Partnership, plus 10% of such amount. Subsequent to the issuance of the
Partnership's 1995 financial statements, the General Partner determined that
the management fee was not contingent upon the Partnership making a down
payment to the FCC to purchase a License, but should have been accrued in the
1995 financial statements. This management fee, approximately $513,000, was
accrued with respect to fiscal year ending December 31, 1995, and the 1995
financial statements were restated to reflect this accrual. As a result, in
1995 the Partnership's loss increased by $513,000.
General and administrative expenses for the period ended December 31,
1995 were $8,183,465, which included amounts paid to Romulus under Services
Agreement and the expenses and the management fee of the General Partner.
Expenses for the year ended on December 31, 1996 are higher than the expenses
for the same period of 1995 because the 1996 expenses includes the Omaha
withdrawal fee of $1,257,771, the Norfolk bid withdrawal fee of
$3,273,374, the $1,000,000 forfeiture imposed by the FCC, and related
legal fees and certain consulting expenses amounting to $1,373,547
which were incurred in connection with the result of the Bidding Error.
The Partnership is seeking to recover the costs, penalties and fines
associated with the Bidding Error from Romulus and Mr. Easton, and
has attached $6,511,250 of restricted cash held in the account controlled
by Romulus. Although no assurances can be made, the General Partner
believes it will prevail in collecting these amounts.
Liquidity and Capital Resources
As of December 31, 1996, the Partnership had assets totaling
$54,588,029, consisting of $2,492,851 in cash and cash equivalents,
$45,468,855 ($50 million less bid withdrawal penalty) on deposit with the
FCC, $6,511,250 in restricted cash, $100,538 in prepaid expenses, $14,535 in
equipment and current liabilities of $2,287,242. As of December 31, 1995,
the Partnership had assets totaling $59,334,791, consisting of $2,727,541 in
cash and cash equivalents, $50 million on deposit with the FCC, other assets
of $96,000, $6,511,250 in restricted cash and current liabilities of
$836,657. The Partnership assets decreased during 1996 because of expenses
associated with securing the Licenses and a forfeiture and bid withdrawal
penalty associated with the Bidding Error. During 1995, the Partnership
assets increased as the result of the Private Placement begun in 1995, which
ended during the fourth quarter of 1995.
As of December 31, 1996 the Partnership raised $2,952,500 of additional
capital from a capital call that began on September 30, 1996 and ended on
January 22, 1997. The total amount raised in this capital call was
$3,992,500. Three Units were repurchased during the second quarter 1996 from
Mr. Breen following the Bidding Error.
The Partnership expects to try to raise up to an additional $2 million
from its Investors in another capital call. In addition, the Partnership is
continuing to seek additional capital for purposes of developing the
Licenses. The Partnership's efforts to raise additional capital to develop
Licenses is dependent upon whether the Partnership retains any of the
Licenses. Failure to retain its Licenses or the failure to prevail in the
litigation to which the Partnership is subject will have a material adverse
impact on the Partnership's business and operations. Although no assurance
can be made, the Partnership expects to raise the additional amounts it needs
to develop the Licenses it retains. The Partnership currently estimates it
will need to raise approximately $290 million over the next three years to
develop all of the Licenses. In addition, the Partnership owes the federal
government approximately $309,863,813 in connection with the acquisition of
the Licenses. Although no assurances can be made, the Partnership expects to
prevail in the litigation in which it is a party. See "Item 8."
ITEM 3. PROPERTIES
- ------- ----------
The Partnership did not own any property as of the end of fiscal year
ended December 31, 1996. The Partnership sublets its principal offices in
California from its General Counsel at no charge.
The Partnership is embarking on an aggressive build-out phase which
includes leasing sites where its telephone switching equipment, relay
stations and other equipment will be located. In addition, the Partnership
anticipates leasing offices in cities where it has Licenses at such time as
when necessary to develop the Licenses. The Partnership also intends to
establish a strategically located principal office from where it can best
manage the Licenses.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
Exclusive management and control of the Partnership's business is vested
in the General Partner. The Partnership has no employees and is managed and
controlled by the Board of Directors and executive officers of the General
Partner. The General Partner owns 100% of the Partnership's general
partnership interest. The shares of General Partner are held by certain
Puerto Rican individuals and Puerto Rico trusts.
The following table sets forth, as of March 25, 1997, information with
respect to beneficial ownership of the Partnership's Units by: (i) all
persons known to the General Partner to be the beneficial owner of 5.0% or
more thereof; (ii) each Director of the General Partner; (iii) each of the
executive officers of the General Partner; and (iv) all executive officers
and Directors as a group of the General Partner. All persons listed have sole
voting and investment power with respect to their Units unless otherwise
indicated.
NAME OF BENEFICIAL OWNER UNITS BENEFICIALLY OWNED PERCENTAGE OWNERSHIP
Fred H. Martinez(1) 1.2 *
Richard Reiss(2) 1.2 *
Javier O. Lamoso(3) 0 *
Gary H. Arizala(4) 2.4 *
Margaret W. Minnich(5) 0 *
Daniel J. Parks(6) 4 *
James T. Perry(7) 2.4 *
Nezam Tooloee(8) 0 *
John Duffy(9) 1.2 *
Lawrence Odell(10) 1.2 *
Eric Spackey(11) 0 *
All executive officers
and directors of the General Partner
as a group (11 persons) 12.4 *
_____________________
* Less than 1.0%.
(1) Mr. Martinez is Chairman of the Board of Directors of the General
Partner. Mr. Martinez and Mr. Odell are Trustees of Martinez Odell &
Calabria Pension Fund, which owns the Unit reflected in the table.
(2) Mr. Reiss is President, Chief Executive Officer and Treasurer of the
General Partner and a member of the Board of Directors.
(3) Mr. Lamoso is Executive Vice President of the General Partner and a
member of the Board of Directors.
(4) Mr. Arizala is a Director.
(5) Ms. Minnich is a Director. The Table does not include 12 Units held by
The Wealden Company, of which Ms. Minnich is a director and vice
president, and 4.8 Units held by J.B. Wharton, Jr. Residual Trust, of
which Ms. Minnich is a co-trustee and a contingent beneficiary.
(6) Mr. Parks is a Director and General Counsel of the General Partner. The
Units reflected in the table consist of 4 Units held by a pension plan,
of which Mr. Parks and another individual are beneficiaries, and of
which Mr. Parks is a trustee.
(7) Mr. Perry is a Director.
(8) Mr. Tooloee is a Director.
(9) Mr. Duffy is Senior Vice President of External Affairs of the General
Partner.
(10) Mr. Odell is a Director and Secretary of the General Partner. Mr.
Martinez and Mr. Odell are trustees of Martinez Odell & Calabria
Pension Fund, which owns the Unit reflected in the table.
(11) Mr. Spackey is Vice President of the General Partner.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
- ------- --------------------------------
The Partnership has no employees, directors or executive officers. The
Partnership is managed by the General Partner, whose directors and executives
officers are listed below.
Fred H. Martinez, Director and Chairman of the Board, age 51, has been
chairman of the board of trustees of the University of Puerto Rico from 1993
to the present. During 1977 to 1979, Mr. Martinez was director of the Puerto
Rico Income Tax Bureau, member of the Governor's Economic Advisory Council,
chairman, Committee on Section 936, Government of Puerto Rico, assistant
secretary of the treasury, Internal Revenue, PR Treasury Department
(1978-1979), president, Tax Committee, PR Chamber of Commerce
(1978-1979). In 1993 he was chairman of the board of the Solid Wastes
Management Authority, Government of PR. Mr. Martinez has extensive
experience in contract negotiations, corporate and tax law, and in
directing major institutions. He holds a B.S. in Economics from Villanova
University (1967), an LL.B. (law) from the University of Puerto Rico (1971),
and an LL.M (taxation) from Georgetown University (1972).
Richard Reiss, Director, President, Chief Executive Officer and Treasurer,
age 50, has been president of his own business consulting firm since 1979,
specializing in financial and management matters. Mr. Reiss has long
experience in developing, structuring and managing corporate equity and debt
placements, and in the overseeing and management of substantial businesses.
Formerly Mr. Reiss was chief financial officer and chief operating officer of
Bacardi Corporation. He has been a member of the Board of Directors of Banco
Santander, Puerto Rico for 16 years. Since February 1996, Mr. Reiss has been
a member of the Board of Directors of Pepsi Cola Puerto Rico Bottling Co.,
Inc. Mr. Reiss is a member of the Board of Directors of NovaComm
Corporation, a manufacturer of access control units for financial
institutions, and was its President from 1995 to 1996. Mr. Reiss is a
certified public accountant and graduated magna cum laude from the University
of Puerto Rico with B.B.A. in business administration.
Javier O. Lamoso, Director and Executive Vice President, age 32, has had
extensive experience in the telecommunications industry and has been
responsible for developing, negotiating and overseeing numerous strategic
operational, economic and political aspects of the cellular telephone
industry, including cell-site acquisition, environmental impacts, leasing
contractual arrangements and inter-company relations with other operating
telecommunications organizations, including interexchange carriers and local
telephone companies. Until recently, Mr. Lamoso acted as counsel to the
Puerto Rico Cable Operators Association in various matters which include the
negotiation of rates and levies and the drafting of new legislation. From
1986 to 1987 Mr. Lamoso held a non-legal position in the corporate finance
department of Simpson, Thacher & Bartlett, and was involved with 1987
successful external debt restructuring of Chile. He holds a B.A. in
Political Science/ Economics from Fordham University (1986), and a J.D. in
law from the University of Puerto Rico (1990).
Gary H. Arizala, Director, age 58, is an entrepreneur and successful
businessman. Mr. Arizala has extensive experience in the cellular telephone
industry serving as chairman of United Cellular Associates from 1988 to the
present and of Aikane Cellular from 1991 to the present. In these capacities
he directed the executive committee activities to oversee the development of
the ME-3 RSA cellular telephone system which was successfully acquired by
Telephone & Data Systems in early 1994. In 1972 Mr. Arizala founded
Alphabetland Preschool and Kindergarten, which he owns and operates.
Alphabetland provides high-quality child care and preschool education ser-
vices to 400 to 500 families annually through five child care centers located
on Oahu, Hawaii, and employs approximately 90 people. From 1963 to 1971,
Mr. Arizala was an assistant civil engineer with the State of
California responsible for utilities relocation for the State Water
Project. His duties included negotiating plans and agreements with
Southern California Edison, Southern California Gas, the United State
Forest Service among other major private and public organizations. He is on
the Guardian Advisory Council of the National Federation of Independent
Businesses, and an active member of the Chamber of Commerce, and Small
Business Hawaii organizations. Mr. Arizala holds a B.S. in Civil
Engineering from the University of Hawaii (1963).
Margaret W. Minnich, Director, age 42, has held management and supervisory
positions in finance and accounting over a 10-year period in the non-profit,
manufacturing and public accounting field. She has been a member of the
board of several privately-held companies and a private foundation for over
seven years. From 1992 to the present, she has served as director of
finance/controller of The California Wellness Foundation, and is responsible
for all financial reporting, accounting, budgeting and tax functions
including investment performance and asset allocation review of a $450
million investment portfolio, and managing cash flow for an annual budget
exceeding $40 million. From 1984 through 1990, Ms. Minnich held several key
positions with MICOM Communications Corporation, including manager of
financial planning where she directed all accounting and financial functions.
From 1981 to 1984, Ms. Minnich was a senior accountant with Ernst & Young,
Los Angeles, specializing in electronics, aerospace and heavy industry
fields. Ms. Minnich is a member of the California Society of Certified
Public Accountants, the Southern California Association for Philanthropy, and
serves on the boards of the Wharton Foundation and The Wealden Company. She
holds a B.A. in Philosophy from the University of Southern California (1978)
and an MBA in accounting from USC (1981).
Lawrence Odell, Director and Secretary, age 47, is the co-managing partner of
Puerto Rico's third largest law firm with substantial expertise in the fields
of corporate finance, administrative law, securities and banking. He is a
member of the Trial Lawyers Association of America, served as a member of the
Inter-American Law Review from 1973 to 1974, and has written for that publi-
cation in the past. He holds a B.A. (1971) and a J.D. (1974) from the Inter-
American University of Puerto Rico, and an LL.M. in labor law from New York
University (1975). Mr. Odell has served in the capacity of secretary for
several major corporations, including Buenos Aires Embotelladora, S.A.
(BAESA).
Daniel J. Parks, Director and General Counsel, age 52, is a lawyer with a
private practice located in Sonoma, California. Mr. Parks graduated from the
University of Hawaii with a B.S. in Geology in 1969 and received his Juris
Doctor degree from Hastings College of Law in 1972. For the past 10 years,
Mr. Parks has specialized in the tax, corporate and transactional aspects of
the representation of entities holding and operating FCC licenses. Mr. Parks
is also the proprietor of Parks Vineyards which owns premium vineyards in
Sonoma and Napa counties.
James T. Perry, Director, age 64, is a successful entrepreneur
and businessman with substantial experience in the real estate and retail
foods industries. From 1987 to the present, he has been general
partner of Telenode Rincon, the original owner and developer of the RSA
cellular tele- phone system for PR-1, which was successfully
acquired by Cellular Communications, Inc., as well as managing other
cellular telephone and telecommunications holdings. From 1959 to 1975,
Mr. Perry was the president and/or owner of several successful
licensed real estate firms including United Realty Group, Milwaukee,
the largest black-owned real estate firm in Wisconsin, and Perry and
Sherard Realty, Milwaukee, which specialized in rehabilitating and
selling between 75 to 100 properties per year utilizing a staff
of approximately 30 people. From 1975 to 1992, Mr. Perry owned and
operated a McDonald's franchise in Saint Louis, Missouri, and was
responsible for all operations of this successful business. Mr. Perry
served in the U.S. Army in Korea, and has taken extensive courses in the
fields of general business and real estate. From 1988 to 1992 he was vice
president of the Ronald McDonald Children's Charities, and from 1980 to
1984 he served as a member of the McDonald's Advertising Committee.
His memberships include the board of directors of the Skinker DeBaliviere
Business Association, Hamilton Community Schools, Saint Louis, and the
admissions committee of the Milwaukee Board of Realtors. He is a past
president of the Urban Brokers Association, and a director of the Multiple
Listing Service.
Nezam Tooloee, Nominee for Director and Consultant, age 38, was nominated as
a director of the General Partner on February 19, 1997; his nomination is
subject to shareholder approval. Mr. Tooloee is a consultant to the Chief
Executive Officer and will act as chief executive officer of the western
region of the United States in which the Partnership has Licenses.
Mr. Tooloee most recently was vice president and corporate development
officer of U.S. AirWaves Inc., a bidder in the PCS auctions until its
withdrawal. Previously, he was a senior vice president of International
Wireless Communications, in which position he was responsible for its PCS
business. Through his work in international markets, Mr. Tooloee is
experienced in wireless operations, license and frequency acquisition,
strategy formulation, supply contracts negotiation, vendor financing and
economic analysis. Formerly, he was a principal at Strategic Decisions
Group, specializing in management and strategic consulting for major high-
technology corporations. Mr. Tooloee has nearly 10 years of experience in
creating and managing strategic alliances, partnerships and joint ventures.
John Duffy, Senior Vice President of External Affairs, age 47, has been
associated with the Partnership's general partner since September, 1994.
Mr. Duffy is responsible for the Partnership's capital raising activities.
He was the principal in his own consulting firm from 1990 until joining the
General Partner. He worked with a variety of start-up companies developing
business plans, market strategies and raising investment capital and was at
various times a client service representative of Romulus. Prior to that
time, he was employed with Drexel Burnham Lambert, an international
securities firm from 1981 to 1989, where he held the position of vice
president. Prior to Drexel, Mr. Duffy was an associate vice president with
Dean Witter Reynolds from 1979 to 1981.
Eric Spackey, Vice President, age 34, was appointed vice president of the
General Partner in January 1996. Mr. Spackey is responsible for the
development and the day to day operations of the Puerto Rico market. Prior
to joining the General Partner, Mr. Spackey served as an independent
consultant providing strategic planning and business development to
telecommunication, finance, and health care organizations throughout Northern
California. During this same period, he served on the board of
directors of Health Business Development. Previously, he was affiliated
with General Cellular Corporation from 1990 to 1993, where he was
most recently manager of financial planning. Mr. Spackey graduated from
the University of California at Berkeley in 1986.
ITEM 6. EXECUTIVE COMPENSATION
- ------- ----------------------
The Partnership has no employees. It is managed by the General
Partner's Board of Directors and employees. The Partnership reimburses the
General Partner for all reasonable expenses incurred by it in connection with
managing the Partnership, including salaries and expenses of the General
Partner's employees who manage the Partnership.
The following Summary Compensation Table sets forth certain information
concerning the cash and non-cash compensation earned by or awarded to the
chief executive officer of the Partnership's General Partner and the other
most highly compensated executive officers who earned more than $100,000 in
1996. It also includes information regarding Anthony T. Easton, who acted as
Unicom's chief executive officer until his resignation on February 19, 1996.
Mr. Easton did not receive a salary from the Partnership or Unicom in 1995.
Richard Reiss was appointed Unicom's chief executive officer effective
February 19, 1996, and is the Chief Executive Officer of the General Partner.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------------- ---------------
Securities ALL OTHER
Name & Principal Fiscal Other Annual Underlying COMPEN-
Position Year Salary($) Bonus($) Compensation($) Options/SAR's SATION($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard Reiss, 1996 $289,000 $0 $25,000(1) 0 $0
President, Chief 1995 $0 $0 $0 0 $0
Executive Officer,
and Treasurer
Anthony T. Easton 1995 $0 $0 $0 0 $0
Former Acting Chief 0
Executive Officer
Javier Lamoso 1996 $125,000 $41,250 $25,000(1) 0 $0
Executive Vice 1995 $0 $0 $0 0 $0
President
John Duffy 1996 $125,000 $111,250 $0 0 $0
Senior Vice 1995 $0 $0 $0 0 $0
President
External Affairs
Eric Spackey 1996 $125,000 $31,250 $0 0 $0
Vice President 1995 $0 $0 $0 0 $0
</TABLE>
________________
(1) Consists of director's fee in the amount of $25,000.
In 1996, the General Partner engaged a compensation consulting company
to assist it in determining the appropriate levels for executive
compensation. Other than with respect to the Chief Executive Officer, the
General Partner's Board of Directors determined to pay each of the executive
officers the salary recommended by the compensation consulting company. The
Board of Directors determined that the Chief Executive Officer should receive
a higher salary than that recommended by the compensation consultants.
In 1996, each of the executive officers agreed to defer 60% of their
salary listed in the Summary Compensation Table. The deferred amounts were
to be paid only if the Partnership was granted its Licenses. Subsequent to
the FCC's grant of the Licenses, the Board of Directors of the General
Partner determined to award each of the executive officers the deferred
amounts, along with the bonuses listed in the Summary Compensation Table.
The General Counsel of the General Partner presently receives an annual
salary of $75,000, is eligible for an annual bonus of $20,000 and receives
director's fees of $25,000. For 1996, the General Counsel earned $76,250.
On March 19, 1997, the General Partner determined that future executive
compensation should be established by a committee of non-employee directors.
Accordingly, the Board of Directors established a Compensation Committee that
consists of Mr. Martinez, Ms. Minnich and Mr. Perry.
Directors receive an annual fee of $25,000 each, other than the Chairman
of the Board, Mr. Martinez, who received an annual fee of $50,000 for 1996
(and will receive a fee of $100,000 for 1997), Mr. Odell, who receives an
annual fee of $35,000 and Mr.Tooloee, who will not receive a fee. Directors
are reimbursed for their reasonable expenses in attending board meetings.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The entire Board of Directors, including the following officers of the
General Partner participated in deliberations regarding executive
compensation during fiscal year 1996: Richard Reiss, Daniel Parks and Javier
Lamoso.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
GENERAL PARTNERSHIP INTEREST
Unicom contributed $100,000, which entitled it to receive 100% of the
Partnership's general partner interest. The general partnership interest was
transferred to SuperTel in exchange for $100,000. The general partner
interest entitles the General Partner to 25% of the equity of the Part-
nership. See "Item 9."
MANAGEMENT FEE
The General Partner has amended the Agreement of Limited Partnership of
PCS 2000, L.P. (the "Partnership Agreement") to provide that the General
Partner will be entitled to reimbursement for all reasonable operating
expenses, plus 10% of such amount. The management fee is paid on a monthly
basis. The Partnership Agreement had originally provided for an annual
management fee equal to 1% of the amount of the Partnership's gross assets
including the value of the licenses purchased at the Block C Auction, plus
reimbursement for all reasonable expenses and costs incurred in managing and
operating the Partnership. The General Partner, by a resolution approved by
its shareholders, amended the Partnership Agreement and reduced the
management fee because it believed the original fee would adversely affect
the ability of the Partnership to receive additional funding for developing
the Licenses. The management fee for 1995 was accrued in accordance with the
amended Partnership Agreement.
PAYMENTS TO ROMULUS
Unicom and Romulus entered into a Services Agreement, dated as of
January 24, 1995, whereby in exchange for a fee of up to 20% of the amount
which the Partnership raised in the Private Placement of its Units, Romulus
agreed to prepare and file the Application with the FCC for licenses to
provide PCS systems in certain markets and bid at the Auction for such
licenses on the Partnership's behalf. As the Partnership raised
$65,112,500 in the Private Placement, Romulus may be entitled to as much
as $13,022,500. The Application prepared by Romulus included all
information required by the FCC for authority to bid, including any
engineering and engineering forms required under the FCC reports and
orders, rules, regulations, and other guidelines issued by the FCC.
Quentin L. Breen, formerly a Director of Unicom, is the President of
Romulus. Mr. Breen and Anthony T. Easton, formerly a Director and
acting chief executive officer of Unicom, are beneficial owners of
Romulus. Mr. Easton and Mr. Breen, as principals of Romulus, were
appointed as two of the Partnership's representatives in bidding for
Markets in the Auctions. See "Bidding Error" above.
Under the Services Agreement, Romulus was entitled to a fee of $5,000
per Unit sold in the Private Placement. One-half of this fee was non-
refundable and was paid to Romulus prior to the commencement of the Block C
Auction. In accordance with the Services Agreement, Romulus was paid
$6,511,250 during 1995. The remaining $6,511,250 is held in a separate
account controlled by Messrs. Easton and Breen. The Partnership has filed a
suit attaching this account. The Partnership is seeking to recover from the
account the penalty for the Norfolk, Virginia bid withdrawal and the
forfeiture which totalled approximately $4.27 million, and related costs
associated with the Bidding Error.
OTHER RELATIONSHIPS AND TRANSACTIONS
Mr. Martinez and Mr. Odell are partners of Martinez, Odell & Calabria, a
law firm which provides legal services to the General Partner and the
Partnership.
Mr. Tooloee is paid $10,000 per month for 40% of his time for services
as an outside consultant to the Partnership. If Mr. Tooloee spends
more than 40% of his time consulting on Partnership business, he will be
compensated accordingly.
Mr. Breen beneficially owned three Partnership Units, and following the
Bidding Error, the Partnership repurchased these Units at the original price
paid by Mr. Breen.
ITEM 8. LEGAL PROCEEDINGS
- ------- -----------------
The Partnership is a party to three legal proceedings, two demands for
arbitration and a FCC license proceeding in which three petitions to deny the
award of any of the Licenses to the Partnership were filed, all of which have
arisen in connection with the Bidding Error. In addition, two additional
lawsuits were filed, one of which was voluntarily withdrawn and the other was
dismissed with prejudice.
On June 6, 1996, the Partnership filed suit in San Juan, Superior Court
for the Commonwealth of Puerto Rico and attached the Romulus account which
holds approximately $6.5 million which would be payable to Romulus under its
agreement with the Partnership. See "Item 1 -- Bidding Error." The
Partnership took steps to attach the funds to ensure that Romulus funds were
available to repay the Partnership the amount of the Norfolk, Virginia
withdrawal penalty, forfeiture and related expenses totaling approximately
$5.5 million that the Partnership paid in connection with the Bidding Error.
On July 26, 1996, Romulus and Mr. Easton each filed a demand for
arbitration with the American Arbitration Association at its Miami, Florida
office seeking to arbitrate all matters relating to the Bidding Error,
including the attachment of the Romulus account. The General Partner is
presently determining its response to these demands for arbitration.
In addition, certain officers, directors, employees and consultants of
the General Partner, as well as persons unrelated to the General Partner and
the Partnership, have been sued by certain limited partners in the Circuit
Court for the State of Oregon, Multnomah County. This lawsuit was commenced
on November 27, 1996, and alleges certain securities law violations, common
law fraud and activities violating Oregon's racketeering laws in connection
with the Partnership's initial sale of Units. Although the Partnership is
not a named party, the Partnership has agreed to indemnify all persons
related to it in this suit. The Partnership believes the suit is totally
without merit and is vigorously defending this lawsuit.
On January 27, 1997, in the Superior Court of the State of California
for the County of San Mateo, the trustee of the SDE Trust filed a complaint
for damages of $300 million and equitable relief against Unicom, the General
Partner, the Partnership and certain officers and directors, trustees of
trusts holding Unicom shares and attorneys for breach of fiduciary duty
arising out of an alleged conspiracy among the defendants to attempt to
unlawfully purchase the Unicom shares held by the SDE Trust for the personal
gain of Unicom shareholders. The Partnership denies engaging in any unlawful
activity in purchasing the Unicom shares held by the SDE Trust and is
currently evaluating its response to this complaint.
In addition, the Partnership was subject to three petitions to deny
the award of any of the Licenses to the Partnership. Although the FCC denied
these petitions on January 22, 1997, on February 21, 1997 the SDE Trust filed
a petition asking that the FCC reconsider its statements regarding the
transfer of the Partnership's general partnership interest. See "Item 1 --
Petitions to Deny."
The General Partner believes that an adverse result in any of these
lawsuits or the failure to retain some or all of the Licenses will have a
materially adverse effect on the financial condition and operations of the
Partnership. Although no assurances can be made, the General Partner expects
that the Partnership will ultimately prevail in all of these matters.
In addition, Anthony T. Easton filed a suit in the Superior Court for
the State of California, County of San Mateo, on June 18, 1996, seeking
declaratory judgment that he is not responsible or liable for the Bidding
Error. As noted above, the General Partner maintains that Romulus
must reimburse the Partnership for the penalty, forfeiture and
related costs incurred by the Partnership in connection with the
Bidding Error. This case was dismissed without leave to amend on
December 24, 1996 and Mr. Easton has filed a motion for
reconsideration on January 31, 1997. On March 7, 1997, the motion
for reconsideration was denied.
Susan D. Easton, beneficiary of the SDE Trust and wife of Anthony
T. Easton, filed suit in Superior Court for the State of California, County
of San Mateo, on May 28, 1996, seeking declaratory judgment with respect to
the transfer of the general partnership interest to the General Partner. Ms.
Easton withdrew this suit without prejudice on December 12, 1996.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
- ------- -------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
There is no trading market for the Units, and it is unlikely that a
trading market will exist at any time in the future. Any transfer of the
Units is severely restricted by certain conditions outlined in the
Partnership Agreement, and requires the consent of the General Partner which
can be withheld in the General Partner's sole reasonable discretion. See
"Item 11 -- Restrictions on Transfer."
As of March 25, 1997, only the General Partner holds a general
partnership interest and 1,641 Investors hold an aggregate of 2,761.2 Units
of limited partnership interest.
There have been no cash distributions to the Investors to date. The
following summary of certain allocation provisions of the Partnership
Agreement is entirely qualified by reference to the Partnership Agreement,
which is filed as an Exhibit to this Form 10. As a general rule, the General
Partner shall cause the Partnership to make distributions, if any, of cash
flow received from operations of the Partnership which the General Partner,
in its sole discretion, determines to distribute to Investors ("Cash Flow").
All distributions will be made 75% to the Investors and 25% to the General
Partner. Distributions to the Investors shall be made in proportion to the
number of Units held by each Investor on the last day of the calendar quarter
to which such distribution relates.
The availability of Cash Flow for distribution to the Investors is
dependent upon the Partnership earning more than its expenses. No assurance
can be given that income in any year will be sufficient to generate Cash Flow
for distribution to the Investors or that there will not be cash deficits.
Further, because operating expenses are subject to increases, and increases
in revenue from Partnership operations may be subject to market limitations,
income from the Partnership in any year may not be sufficient to generate
Cash Flow.
Net losses from operations of the Partnership will be allocated as
follows: first, to the Investors to offset any profits previously allocated
to the Investors, and second, 75% to the Investors in accordance with the
number of Units held by each Investor and 25% to the General Partner. The
gain from a financing, refinancing, sale or other disposition of the
Partnership's assets (or from similar capital transactions)
(collectively, "Capital Transactions") will be allocated 75% to the
Investors and 25% to the General Partner. The loss from a Capital
Transaction will be allocated in the same way that net losses from the
Partnership's operations are allocated. Further adjustments to capital
accounts may be required and are authorized by the Partnership Agreement to
comply with the provisions of any future Internal Revenue Service
regulations.
The Partnership may realize net proceeds (that is, proceeds available
after the payment of certain fees and expenses including payments to the
General Partner or its affiliates) from a Capital Transaction. No assurance
can be given, however, as to the availability of a Capital Transaction or the
amount of net cash proceeds therefrom. Any amounts received by the
Partnership which constitute amounts derived from a Capital Transaction, will
be treated as being received from operations of the Partnership and will be
distributed to Investors only if the General Partner determines to do so.
The General Partner is entitled to reimbursement of all reasonable
operating expenses, plus 10% of such amount. See "Item 7 -- Management Fee."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
- -------- --------------------------------
From January 26, 1995 to August 18, 1995, the Partnership conducted the
Private Placement of the Units in accordance with Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). A total
of 2,604.5 Units were sold to 1,641 Investors for an aggregate price of
$65,112,500 in the Private Placement. In addition, between September 30,
1996 and January 27, 1997, the Partnership conducted a capital call, in which
it sold to its existing Investors one-fifth Units at a price of $5,000 per
one-fifth Unit. The Partnership sold 798.5 one-fifth Units to its existing
Investors for an aggregate price of $3,992,500. Five one-fifth units are the
equivalent of one Unit.
These offerings were made in reliance upon, among others, the exemption
from registration pursuant to Section 4(2) thereof and Regulation D of the
Rules and Regulations of the Securities and Exchange Commission for an offer
and sale of securities which do not involve a public offering. The sales
qualified for an exempt offering under Rule 506 of Regulation D because all
of the Investors, other than one, are Accredited Investors as defined by
Regulation D.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
- -------- -------------------------------------------------------
The Partnership was formed as a limited partnership under the Delaware
Revised Uniform Limited Partnership Act (the "Revised Act"). The rights and
obligations of the partners are governed by the Partnership Agreement. The
following summary of certain provisions of the Partnership Agreement is
entirely qualified by reference to the Partnership Agreement, which is
filed as an Exhibit to this Form 10.
DESCRIPTION OF THE UNITS
The Partnership Agreement authorized the issuance and sale of Units for
$25,000 a Unit, payable in cash or property including contractual rights or
other assets that may be acceptable to the General Partner in its sole
discretion. A total of 2,604.5 Units were issued in the Private Placement
and 798.5 one-fifth Units were issued in the Partnership's capital call which
commenced on September 30, 1996 and ended on January 22, 1997.
THE RESPONSIBILITIES OF THE GENERAL PARTNER
The General Partner has full, exclusive and complete responsibility and
discretion in the management and control of the Partnership, and the
Investors have no authority to transact business for, or participate in the
management activities and decisions of, the Partnership. The General Partner
is expressly authorized to, on behalf of the Partnership, borrow money and
issue evidences of indebtedness in connection therewith, refinance, increase
the amount of or otherwise amend the terms of any indebtedness and to secure
such indebtedness by a security agreement, pledge or other lien on
Partnership assets. Certain other major decisions affecting the Partnership,
however, including the sale of all or substantially all of the assets of the
Partnership, a material change in the business or purpose of the Partnership
and the voluntary withdrawal of a General Partner, are decided only with the
consent of the General Partner and Investors holding at least a majority of
the then outstanding Units held by Investors. The authority of the General
Partner is subject to certain other express restrictions set forth in the
Partnership Agreement.
The General Partner is not required to devote full time to Partnership
business and is specifically permitted to engage in any other business,
including, but not limited to, acting as a general partner on other
partnerships formed for purposes similar to the purpose of the Partnership.
The General Partner may not, however, indirectly or directly compete with the
business of the Partnership without first offering to share these investment
opportunities with the Investors or the Partnership.
The General Partner has the exclusive right to admit any person as an
additional general partner of the Partnership upon, in most cases, the
approval of Investors holding at least a majority of the then outstanding
Units held by Investors. In addition, the General Partner may, without the
consent of the Investors, substitute in its stead as General Partner, any
entity which has by merger or otherwise, acquired substantially all of the
assets of the General Partner and continued its business, provided that such
substitution does not violate FCC Rules applicable to PCS or cause the
Partnership to lose its status as an Entrepreneur.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER
The General Partner is accountable to the Partnership as a fiduciary,
and consequently must exercise good faith and integrity in handling the
affairs of the Partnership. Under the Revised Act, a limited partner may
bring a derivative action to the same extent as a stockholder under Delaware
corporation law to enforce a right of the limited partnership to recover a
judgment. There is no express statutory authority for a limited partners'
class action in Delaware, and the Supreme Court of Delaware has not held that
a limited partner may institute legal action on behalf of himself or herself
and all other similarly situated limited partners to recover damages for a
breach by a general partner of its fiduciary duties. Similarly, the
Partnership Agreement contains no provisions for a class action by limited
partners. Accordingly, legal remedies may not be available or affordable if
the General Partner breaches its fiduciary obligations to the Partnership.
If the General Partner is sued, the General Partner will determine,
based on all the facts and circumstances in the case, whether it believed
that its actions constituted a breach of its fiduciary responsibility. If
the suit were to proceed under circumstances where the General Partner
believed that it did not breach its fiduciary duty, the General Partner may
use any defenses which it or any other defendant in a similar position would
have, including those described below and any other available legal or
equitable defenses (such as estoppel, expiration of the statute of
limitations or applicability of the statute of frauds).
WITHDRAWAL, RETIREMENT, REMOVAL OR SUBSTITUTION OF THE GENERAL PARTNER
The General Partner may voluntarily retire only with the approval of
Investors holding at least a majority of the then outstanding Units held by
all Investors and provided that such withdrawal does not violate FCC Rules
applicable to PCS or cause the Partnership to lose its status as an
Entrepreneur. The General Partner will retire automatically upon filing its
certificate of dissolution or its equivalent. Upon retirement or removal,
the General Partner will become a limited partner and as such will not have
any right to participate in the management of the affairs of the Partnership
but will continue to own its Partnership interest and the retained rights
which it owned as a general partner. Investors holding at least 75% of the
then outstanding Units held by all Investors have the right to remove any
general partner, subject to certain FCC Rules. See "Voting Rights of
Investors" below. The terminated General Partner's interest in the
Partnership will be converted to an Investor's interest, and the terminated
General Partner will be entitled to vote with the other Investors on any
matters requiring the Investors' consent, or the terminated General Partner
may elect to cause the Partnership to pay for the terminated General
Partner's interest. The value of the terminated General Partner's interest
will be the fair market value of such interest as determined by agreement
between the terminated General Partner and the Partnership (which agreement
will require the approval of a majority in interest of the Investors), or if
they cannot agree, by an independent, qualified appraiser mutually selected
by the terminated General Partner and either the remaining General Partner or
Investors holding a majority of the outstanding Units held by Investors, or
if such appraiser cannot be selected, by binding arbitration in San Juan,
Puerto Rico. The General Partner may substitute in its place without the
Investors' consent any entity that has acquired substantially all of its
assets and continued its business if such substitution does not violate the
FCC Rules.
TERMINATION OF THE PARTNERSHIP
The Partnership will continue in full force and effect until December
31, 2005, except that the Partnership shall be dissolved prior to such date
upon the happening of any of the following events:
(a) the sale or other disposition of all or substantially all of the
assets of the Partnership;
(b) the entry of a decree of judicial dissolution of the Partnership;
(c) the election of a general partner to dissolve the Partnership;
(d) the election to dissolve the Partnership made in writing by
Investors holding at least 75% of the then outstanding Units; or
(e) if a general partner ceases to be a general partner, unless (i)
there remains a general partner of the Partnership and the remaining general
partners elect to continue the Partnership within 60 days or (ii) there is no
remaining general partner and the Investors elect within 90 days to continue
the Partnership in accordance with Section 10(a) of the Partnership
Agreement.
Upon dissolution of the Partnership, the Partnership's assets will be
liquidated and the proceeds of liquidation will be applied and distributed as
described under Item 9 above.
LIABILITY OF INVESTORS TO THIRD PARTIES
The General Partner will be liable for all debts, liabilities and
obligations of the Partnership, except for non-recourse indebtedness (if any)
to the extent not paid by the Partnership. The Partnership Agreement,
however, limits the liability of the General Partner and certain other
persons to the Partnership and to Investors, and provides for indemnification
of such persons in the case of liability to third parties, under certain
circumstances and subject to certain exceptions and limitations. See
"Fiduciary Responsibility of the General Partner" and "Item 12" below.
Under the Revised Act, a limited partner is not liable for the debts,
liabilities and obligations of the Partnership in excess of his or her
Capital Contribution and his or her share of undistributed net income as long
as he or she does not take part in the management or control of the
Partnership's business. Under Delaware law, however, an Investor may be
liable for Partnership debts up to the amount of any distribution made to
such Investor if the Investor knew at the time of such distribution that,
after giving effect to the distribution, all liabilities of the Partnership,
other than liabilities to Investors on account of their interests in the
Partnership and liabilities for which the recourse of creditors is limited to
specified property of the Partnership, exceed the fair value of the
Partnership's assets, except that for purposes of calculating the assets
of the Partnership, assets subject to liabilities for which the recourse of
creditors is limited to specified property of the Partnership will be
included only to the extent that the fair market value of the assets exceeds
the liability. If the Investor receives a distribution in violation of
this limitation or the Partnership Agreement, he or she is liable to
the Partnership for return of the distribution for a period of three
years from the date of the distribution. An Investor may also be
liable for the return of distributions under applicable laws for such
three-year period.
AMENDMENTS AND POWER OF ATTORNEY
The General Partner may utilize the power of attorney granted to it by
each Investor to execute certain types of amendments to the Partnership
Agreement. In particular, the Partnership Agreement provides that the power
of attorney permits the General Partner to execute and deliver all
instruments and file all documents required to carry out the provisions of
the Partnership Agreement, including, without limitation, the following:
(a) any certificates and any amendments that may be required to qualify
or continue the Partnership and conduct its business;
(b) any amendments to the Partnership Agreement in accordance with the
terms thereof;
(c) any certificate or other instrument necessary to reflect the
dissolution and termination of the Partnership;
(d) any amendment that (i) does not have a material adverse effect upon
the Investors; (ii) adds to the representations or obligations of the General
Partner or surrenders any right or power granted to the General Partner
herein; (iii) corrects any error or resolves any ambiguity in or
inconsistency between any of the provisions hereof; (iv) deletes or adds any
provision required to be so deleted or added by any state securities
commission or other governmental authority; or (v) is deemed to be necessary
or desirable, in the reasonable determination of the General Partner, (A) to
satisfy any requirements, conditions or guidelines contained in any
regulation, ruling, order directive or opinion of any federal or state agency
or judicial authority or contained in any federal or state statute (including
any amendment in accordance with Section 5.2 and Section 7.1(a) of the
Partnership Agreement) or (B) to preserve the status of the Partnership as a
partnership for federal income tax purposes or to ensure that Investors will
be treated as limited partners for federal income tax purposes.
In addition, the General Partner may amend the Partnership Agreement
upon the advice of counsel that such amendment is necessary for the
Partnership to comply with FCC Rules and regulations as currently existing or
as modified by the FCC in the future. In the event any such amendment is
made by the General Partner and such amendment has a material adverse effect
on the Investors, then each Investor has 10 days after notification of the
change to notify the General Partner that as to such Investor the amendment
is not accepted and that such Investor chooses to withdraw from the
Partnership and receive a refund of the cash portion of such Investor's
capital contribution.
Other than as provided above, the Partnership Agreement may not
otherwise be modified or amended except with the consent of the General
Partner and Investors holding a majority of the then outstanding Units.
Investors have no appraisal, or dissenters, rights in the event that
they are opposed to a duly adopted amendment of the Partnership Agreement
except with respect to amendments required to qualify the Partnership under
FCC Rules pertaining to PCS.
VOTING RIGHTS OF INVESTORS
The Partnership Agreement provides that Investors holding at least 75%
of the then outstanding Units held by Investors have the right to remove any
general partner. The FCC rules restrict the Partnership's ability to remove
or replace the General Partner for five years after grant of the Licenses.
FCC Rules may require the Partnership Agreement to be amended to remove or
restrict such right of removal. The General Partner shall not amend this
provision unless its legal counsel advises that such amendment is required by
the FCC. If the Partnership Agreement is required to be amended, Investors
may lose any ability they have to remove the General Partner.
The approval of Investors holding at least a majority of the then
outstanding Units held by Investors will be required for the admission of an
additional or successor general partner if there is one or more remaining
general partner; however, the admission of an additional general partner also
requires the approval of the then general partner. The unanimous approval of
the Investors is required for the admission of a general partner and an
election to continue the business of the Partnership where there is no
remaining general partner, unless (i) the remaining general partner was
removed, in which case the approval of Investors holding at least 75% of the
then outstanding Units held by Investors is required for such admission and
election or (ii) the last remaining general partner voluntarily withdrew as a
general partner, in which case the approval of Investors holding at least a
majority of the then outstanding Units held by Investors is required for such
admission and election. The approval of the general partner and Investors
holding at least a majority of the then outstanding Units held by Investors
is required to cause a material change to be made in the business or purpose
of the Partnership, permit the voluntary withdrawal of the general partner,
or permit the merger or other reorganization of the Partnership, to the
extent approval of Investors is required under the Revised Act.
REPORTS TO INVESTORS
The General Partner sends, within 90 days after the end of each calendar
year, to each Investor such tax information as necessary for the preparation
by such Investor up the Investor's federal tax return, and such other reports
as may be required by the Revised Act.
ACCOUNTING BOOKS AND RECORDS
The Partnership method of accounting will be selected by the General
Partner, and will be in accordance with generally accepted accounting
principles and its fiscal year is the calendar year. An annual audit of the
financial statements of the Partnership will be conducted by the independent
certified public accountant firm of Price Waterhouse. The books and records
of the Partnership will be maintained at its principal place of business and
will be available at reasonable hours during the business day for inspection
by any Investor or his duly authorized representative.
TAX ELECTIONS
Upon the transfer of the interest of an Investor in the Partnership, the
Partnership, in the General Partner's sole discretion, may elect, pursuant to
Section 754 of the Code, to adjust the basis of the Partnership's interest in
its property. All other elections required or permitted to be made by the
Partnership under the Code will be made by the General Partner in such manner
as will be most advantageous to the Investors.
CAPITAL CALLS AND ADDITIONAL INVESTORS
If the General Partner determines that additional capital is required by
the Partnership, the General Partner must make a call for additional Capital
Contributions (a "Capital Call") and notify each Investor of the total amount
of the Capital Call and of the total number of additional Units that the
Partnership will offer to issue and sell (and the price per Unit) in order to
raise the amount of the Capital Call. Each Investor has the right to make an
additional Capital Contribution to the Partnership in proportion to the
number of Units such Investor holds. If any Investors declines to
participate in the Capital Call, or fails to pay the additional Capital
Contribution when due, the General Partner may, in its absolute discretion,
(i) offer to the other Investors the opportunity to make additional Capital
Contributions in an aggregate amount equal to all or a portion of the total
Capital Call remaining unpaid, (ii) purchase the Units itself, and/or (iii)
offer to third parties the opportunity to purchase the Units. Failure to
participate in the Capital Call will result in a reduction of the Investor's
proportionate interest in the Partnership. The General Partner is not
required to participate in any Capital Calls and its equity interest in the
Partnership will not be reduced.
MEETINGS
The General Partner may at any time call a meeting of the Investors and
is required to call such a meeting or vote following receipt of a written
request therefor signed by 20% or more of the outstanding Units. The
Partnership does not intend to hold annual meetings of Investors.
RESTRICTIONS ON TRANSFER
Investors bear the economic risk of the investment for an indefinite
period of time because the Units were not registered under the Securities Act
and therefore may not be sold unless they are subsequently registered under
the Securities Act or an exemption from registration is available. Each
Investor who acquired a Unit represented that such purchase was for the
investor's own account for investment purposes and not with a view toward
resale or distribution, and agreed not to sell a Unit without registration
under applicable federal and state securities laws, unless there is an
available exemption thereunder. In addition, the General Partner may require
that, before an Investor's interest is transferred, the transferror deliver
to the General Partner a legal opinion satisfactory to it and counsel to the
Partnership to the effect that the transfer will not violate federal or state
securities laws.
In addition, the Partnership Agreement provides that Investors may not
sell, transfer, assign, pledge or otherwise dispose of all or any part of a
Unit without the General Partner's written consent (which consent will not be
unreasonably withheld). In determining whether to grant consent to an
assignment, the General Partner may, in its discretion, require that the
following conditions, be complied with: (i) the assignee consents in writing
to be bound by the terms and conditions of the Partnership Agreement; (ii)
the assignee delivers an opinion of counsel satisfactory to the General
Partner, to the effect that (A) the Partnership would not lose its status as
an Entrepreneur under FCC Rules applicable to PCS or would otherwise violate,
or suffer material adverse consequences under, FCC Rules applicable to PCS;
(B) the Partnership would not become subject to the Department of Labor's
plan asset regulations as a result of the assignment; (C) the assignment
would be in compliance with all the requirements of the Revised Act; and (D)
the assignment would be in compliance with federal securities laws and state
securities laws; and (iii) the assignee pay any reasonable charges of the
General Partner or the Partnership in connection with the substitution.
A legend has been placed on the Partnership Agreement and certificates
representing the Units referring to the restrictions on transferability and
sale of the Units. In addition, a notation has been made on the records of
the Partnership that the sale and transferability of the Units are
restricted.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- -------- -----------------------------------------
The Partnership Agreement provides that, in general, the Partnership,
its receiver or trustee shall indemnify and hold harmless the General Partner
and its affiliates for any liability or loss (including attorneys' fees)
suffered by such persons by reason of any (i) act performed by such persons
on behalf of or in furtherance of the Partnership's business or (ii) inaction
by such persons, if the conduct of such persons does not constitute fraud or
willful misconduct and such persons reasonably believed, at time of the
action or inaction, that such conduct was in connection with the
Partnership's business and in best interests of the Partnership.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Partnership or the General Partner pursuant to the provisions described
above, the Partnership has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -----------------------------------
Index to Financial Statements
-----------------------------
PCS 2000, L.P.
--------------
Report of Independent Accountants
Statement of Assets, Liabilities and Partners' Capital for fiscal
years ended December 31, 1995 and December 31, 1996
Statement of Revenues and Expenses for fiscal years ended
December 31, 1995 and December 31, 1996
Statement of Cash Flow for fiscal years ended December 31, 1995 and
December 31, 1996
Statement of Changes in Partners' Capital Accounts for fiscal years
ended December 31, 1996
Notes to Financial Statements
SuperTel Communications Corp.
-----------------------------
Report of Independent Accountants
Balance Sheet, December 31, 1996
Statement of Revenues and Expenses from inception to December 31,
1996
Statement of Cash Flows from inception to December 31, 1996
Notes to Financial Statements
PCS 2000, L.P.
--------------
(a development stage enterprise)
REPORT AND FINANCIAL STATEMENTS
-------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners of PCS 2000, L.P.
In our opinion, the accompanying statement of assets, liabilities and
partners' capital, and the related statements of revenues and expenses, of
cash flows and of changes in partners'capital accounts, after the
restatement described in Note 7, present fairly, in all material respects,
the financial position of PCS 2000, L.P. (the Partnership), a development
stage enterprise, at December 31, 1996 and 1995 and the results of its
operations and its cash flows for the year ended December 31, 1996 and for
the periods from inception (January 24, 1995) through December 31, 1995 and
December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership'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 generally accepted auditing standards
which require that we plan and perform the audit 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 the opinion expressed
above.
PRICE WATERHOUSE
San Juan, Puerto Rico
February 7, 1997
PCS 2000, L.P.
--------------
(a development stage enterprise)
--------------------------------
STATEMENT OF ASSETS, LIABILITIES AND
------------------------------------
PARTNERS' CAPITAL
-----------------
December 31,
------------
1996 1995
---- ----
ASSETS
------
Current assets:
Cash and cash equivalents $ 2,492,851 $ 2,727,541
Prepaid expenses 100,538 96,000
Other current assets - deposits 45,468,855
----------- -----------
Total current assets 48,062,244 2,823,541
Restricted cash - escrow account 6,511,250 6,511,250
Deposits 50,000,000
Other assets 14,535
----------- -----------
$54,588,029 $59,334,791
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities:
Bank overdraft $ 46,173
Payable to FCC $1,000,000
Accounts payable and accrued liabilities 204,927 130,634
Accounts payable for legal fees 440,847
Accounts payable to related parties 641,468 659,850
----------- -----------
Total current liabilities 2,287,242 836,657
Contingency (Note 10)
Partners' capital:
Limited partners' capital (2,719.6 units issued
and outstanding in 1996 and 2,604.5 in 1995) 67,990,000 65,112,500
General partner's capital 100,000 100,000
Undistributed losses accumulated during
development stage (15,789,213) (6,714,366)
----------- -----------
Total partners' capital 52,300,787 58,498,134
----------- -----------
Total liabilities and partners' capital $54,588,029 $59,334,791
=========== ===========
The accompanying notes are an integral part of this statement.
PCS 2000, L.P.
--------------
(a development stage enterprise)
STATEMENT OF REVENUES AND EXPENSES
----------------------------------
January 24, 1995 January 24, 1995
Year ended (inception) to (inception) to
December 31, 1996 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
Revenues:
Interest income $ 66,767 $1,469,099 $1,535,866
----------------- ----------------- -----------------
Expenses:
Consulting and
legal services
rendered by
related parties 744,862 6,756,250 7,501,112
Management fee
to General Partner 424,334 513,288 937,622
Other legal fees 1,283,356 368,704 1,652,060
Miscellaneous
consulting services 557,353 325,604 882,957
Travel 282,890 118,850 401,740
Insurance 133,784 32,000 165,784
Other administrative
expenses 183,890 68,769 252,659
Bid withdrawal penalty
(Omaha, Nebraska) 1,257,771 1,257,771
Bid withdrawal penalty
(Norfolk, Virginia) 3,273,374 3,273,374
Forfeiture imposed
by FCC 1,000,000 1,000,000
----------------- ----------------- -----------------
9,141,614 8,183,465 17,325,079
----------------- ----------------- -----------------
Net loss $9,074,847 $6,714,366 $15,789,213
================= ================= =================
Net loss attributable
to general partner $ 2,268,712 $ 1,678,592
================= =================
Net loss attributable
to limited partners
($2,609.71 and
$1,933.49 per limited
partnership unit in
1996 and 1995,
respectively) $ 6,806,135 $ 5,035,774
================= =================
The accompanying notes are an integral part of this statement.
PCS 2000, L.P.
--------------
(a development stage enterprise)
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
January 24, 1995 January 24, 1995
Year ended (inception) to (inception) to
December 31, 1996 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities -
Net loss ($9,074,847) ($ 6,714,366) ($15,789,213)
Adjustments to reconcile net loss for the
period to net cash used by operating
activities:
Increase in prepaid expenses (4,538) (96,000) (100,538)
(Decrease) increase in bank overdraft (46,173) 46,173
Increase in payable to FCC 1,000,000 1,000,000
Increase in accounts payable and accrued
liabilities 74,293 130,634 204,927
Increase in accounts payable for legal fees 440,847 440,847
(Decrease) increase in accounts payable to
related parties (18,382) 659,850 641,468
----------------- ----------------- -----------------
Total adjustments 1,446,047 740,657 2,186,704
----------------- ----------------- -----------------
Net cash used by operating activities (7,628,800) (5,973,709) (13,602,509)
----------------- ----------------- -----------------
Cash provided (used) by flows investing
activities:
FCC auction deposit (50,000,000) (50,000,000)
Bid withdrawal payment 4,531,145 4,531,145
Other assets (14,535) (14,535)
----------------- ----------------- -----------------
Net cash provided (used) by
investing activities 4,516,610 (50,000,000) (45,483,390)
----------------- ----------------- -----------------
Cash flows from financing activities:
Capital investment by partners 2,952,500 65,212,500 68,165,000
Capital repurchased from partner (75,000) (75,000)
Restricted cash (6,511,250) (6,511,250)
----------------- ----------------- -----------------
Net cash provided from financing
activities 2,877,500 58,701,250 61,578,750
----------------- ----------------- -----------------
Net (decrease) increase in cash (234,690) 2,727,541 2,492,851
Cash and cash equivalent at beginning
of period 2,727,541
----------------- ----------------- -----------------
Cash and cash equivalents at end
of period $2,492,851 $ 2,727,541 $ 2,492,851
================= ================= =================
</TABLE>
The accompanying notes are an integral part of this statement.
PCS 2000, L.P.
--------------
(a development stage enterprise)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
--------------------------------------------------
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Capital invested 2,604.5 $65,112,500 $ 100,000 $65,212,500
Share of undistributed losses (5,035,774) (1,678,592) (6,714,366)
------------- ------------- ------------ ------------
Balance (deficit) at
December 31, 1995 2,604.5 60,076,726 (1,578,592) 58,498,134
Repurchase of limited partners
units (3.0) (75,000) (75,000)
Capital invested in 1996 118.1 2,952,500 2,952,500
Share of undistributed losses (6,806,135) (2,268,712) (9,074,847)
------------- ------------- ------------ ------------
Balance (deficit) at
December 31, 1996 2,719.6 $56,148,091 ($3,847,304) $52,300,787
============= ============= ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
PCS 2000, L.P.
--------------
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - REPORTING ENTITY AND SUMMARY OF
- ----------------------------------------
SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------
PCS 2000, L.P. (the Partnership), a development stage enterprise, is a
limited partnership organized on January 24, 1995 under the laws of the
State of Delaware. The Partnership was formed to file applications with the
Federal Communications Commission ("FCC") under personal communications
service ("PCS") frequency Block C, originally restricted to minorities,
small businesses and designated entities, to become a provider of broadband
PCS, a new telecommunications technology. The Partnership will terminate on
December 31, 2005, or earlier upon the occurrence of certain specified
events as detailed in the Partnership Agreement. The Partnership has not
yet generated revenues from commercial operations.
In 1996, the Partnership's former general partner, Unicom Corporation, sold
its interest in the Partnership to SuperTel Communications Corp.
(SuperTel), a Puerto Rico corporation (the "General Partner"). The General
Partner's total share of the income and losses of the Partnership is 25% as
per the Partnership's Agreement. Approximately 1,600 limited partners also
invested in the Partnership through a private placement.
Use of estimates in preparation of financial statements
- -------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those estimates.
Basis of accounting and fiscal year
- -----------------------------------
The Partnership's records are maintained on the accrual basis of accounting
for financial reporting and tax purposes. The fiscal year of the
Partnership ends on December 31.
Cash equivalents
- ----------------
The Partnership considers all highly liquid investment instruments purchased
with an original maturity of three months or less to be cash equivalents.
PCS Licenses
- ------------
Upon the acquisition of the licenses, the Partnership will record them at cost,
to be amortized over the estimated life of the licenses (forty years) once the
PCS network is ready for its intended use. The Partnership will capitalize the
interest related to debt pertaining to the PCS licenses during the construction
period.
NOTE 2 - FINANCING REQUIREMENTS:
- --------------------------------
The Partnership has no revenues (other than interest income) and is likely to
incur operating losses after commencing commercial operations until such time
as its subscriber base generates revenue in excess of the Partnership's
expenses. Development of a significant subscriber base is likely to take time,
during which the Partnership must finance its operations by other means than
its revenues. Consequently, following the grant of the licenses, the
Partnership will need additional debt or equity financing to develop and
construct the infrastructure necessary to operate wireless telephone systems,
introduce and market a new range of service offerings on a commercial basis and
otherwise operate its licensed PCS systems.
The Partnership is currently in various stages of discussions with a variety of
equipment vendors to determine the selection of equipment with the best
financing terms.
The Partnership plans to begin construction of its system as soon as it
receives the licenses from the FCC and is currently evaluating several
options to satisfy its financing needs.
NOTE 3 - BID WITHDRAWAL PAYMENT AND PENALTY:
- -------------------------------------------
In 1996, the Partnership, through its bidding agent, inadvertently submitted
to the FCC an erroneous bid for one of the PCS licenses being auctioned
(Norfolk, Virginia). Although the Partnership withdrew the bid immediately,
the FCC could have imposed a substantial penalty for withdrawal of the then
highest submitted bid, which penalty is based on the difference between the
bid withdrawn and the eventual highest bid. The General Partner met with FCC
officials and filed a petition for a waiver of the penalty or, in the
alternative, a substantial reduction in the penalty amount, as the FCC's
rules were intended to deter frivolous and manipulative bids, and not errors.
On December 20, 1996, the FCC issued an order (the "Order") resolving the
Partnership's request for waiver of the related bid withdrawal payment for
the license applicable to Round 11 of the Broad Band PCS C Block auction
(Norfolk, Virginia) for which the FCC ordered the Partnership to pay a penalty
of approximately $3,273,000. This Order also assessed a bid withdrawal
payment of approximately $1,258,000 for license B332 (Omaha, Nebraska) for the
Broad Band PCS C block auction. In accordance with the Order, these amounts
were deducted from the Partnership's deposit with the FCC. In addition to the
December 20, 1996 Order, the FCC issued a Notice of Apparent Liability and
Forfeiture dated January 22, 1997, finding the Partnership liable for
$1,000,000 for misrepresentations made to the Commission by its bidding agent.
This amount has been recorded as of December 31, 1996 and is reflected as a
liability in the accompanying balance sheet.
The Partnership and its General Partner have filed several actions in court to
recover the FCC assessments made in connection with the bidding error as well
as other related expenses incurred (See Note 10). One of the actions filed
resulted in the attachment of a $6.5 million escrow account deposited in the
name of the bidding agent, Romulus Telecommunications, Inc. ("Romulus"), with
a local bank, which would have been payable upon obtaining the PCS licenses.
It is management's intention to pursue vigorously the recovery of the FCC
assessments from Romulus. Management believes it will prevail in collecting
from the restricted cash all the assessments made by the FCC in connection
with the bidding error and other related expenses.
NOTE 4 - RESTRICTED CASH:
- ------------------------
As of December 31, 1996, restricted cash amounting to $6,511,250 is held in
trust by Romulus and is restricted for payment of all services related to the
auction process. The amount is payable only if the Partnership obtains at
least one PCS license. However, the Partnership has obtained a Court Order
attaching this amount as a result of a lawsuit more fully explained in Note 10.
NOTE 5 - AUCTION DEPOSITS:
- -------------------------
This account represents the deposits placed with the FCC to participate in the
auctions for the licenses mentioned above. This deposit will be partly used
for the downpayment of the licenses to be acquired.
NOTE 6 - PARTNERS' CAPITAL:
- --------------------------
At December 31, 1995, the limited partners' capital was composed of 2,6041/2
units distributed among approximately 1,600 limited partners. In 1996, the
Partnership repurchased 3 units from a limited partner and sold to its limited
partners 590.5 one-fifth units. As a result the limited partners'capital at
December 31, 1996 consists of 2,601.5 units and 590.5 one-fifth units.
The Partnership Agreement provides that the Partnership may sell additional
limited partnership interests after the initial offering to raise additional
equity.
Cash flow received from normal operations of the Partnership which the general
partner, in its sole discretion, determines to distribute to the investors of
the Partnership, will be distributed 75% to the limited partners and 25% to the
general partner. The operating losses of the Partnership for federal income
tax purposes will be allocated first to the partners as necessary to offset any
profits previously allocated to them until each partner has cumulative losses
equal to cumulative profits previously allocated to each partner, and second,
75% to the limited partners in accordance with the number of units held by each
limited partner and 25% to the general partner; provided, however, that any
losses that would have the effect of causing or increasing a partner's capital
account deficit will be allocated first, pro rata to the other partners in
accordance with their respective share of partnership distributions, and second,
when such allocations can be made without increasing a partner's capital account
deficit, to the general partner.
NOTE 7 - RELATED PARTY TRANSACTIONS:
- -----------------------------------
In 1996, the Partnership incurred legal and consulting expenses paid to limited
partners and members of the Board of Directors amounting to approximately
$745,000 (1995 - $245,000).
Additionally, the application, preparation and auction bidding services were
performed by a related party for which a fee of $6,511,250 was paid during
1995. An additional $6,511,250 remains as a contingent fee payable upon
acquisition of at least one PCS license.
The Partnership Agreement, as amended, provides for payment of a management fee
to its General Partner, equal to the reasonable costs of operating the business
of the Partnership, plus 10% of such aggregate amount, which fee shall be
payable monthly, on the first day of each month during the year. Expenses
reimbursed include, but are not limited to, compensation costs and expenses
related to the officers, directors, and employees in the performance of their
duties. In connection with this agreement, the General Partner billed $424,000
in 1996 for these services.
Subsequent to the issuance of the Partnership's 1995 financial statements,
management became aware that the management fee was not contingent upon
obtaining a PCS license as originally interpreted. As a result, the
Partnership has recognized a management fee of approximately $513,000 in 1995
in the accompanying financial statements which increased the previously
reported net loss by the same amount. Of this amount $128,250 and $384,750
were attributed to the General Partner and the limited partners, respectively.
NOTE 8 - LICENSES:
- -----------------
On January 22, 1997, the Partnership was granted the Broad Band PCS C block
licenses. This resulted in recognizing the cost of the licenses of
$344,293,125 and the related liability of $309,863,813. The down payment, or
10% of the bid amount, was deducted by the FCC from the deposit held.
The unaudited pro forma condensed balance sheet of the Partnership as of
December 31, 1996 after giving effect to certain pro forma adjustments
resulting from obtaining the licenses is as follows:
Assets:
------
Cash $ 13,532,394
Prepaid expenses 100,538
Restricted cash 6,511,250
Property and equipment 14,536
PCS licenses 344,293,125
------------
$364,451,843
============
Liabilities and partners'capital:
--------------------------------
Accounts payable and accrued liabilities $ 2,287,241
Loan payable 309,863,813
Capital 52,300,789
------------
$364,451,843
============
As a result of obtaining the licenses, the Partnership is liable for services
provided by Romulus as discussed in Note 4. However, management is vigorously
challenging in court the payment of such fees (See Notes 3 and 10).
NOTE 9 - INCOME TAX:
- -------------------
The Partnership, as a limited partnership, is not subject to income tax and the
tax effect of its activities accrues to the partners.
Taxable income to the General and Limited Partners differs from that reported
in the statement of revenues and expenses mainly due to different treatment of
operational expenses incurred in 1996 and 1995 for tax and book purposes.
Since the partnership has not been assigned any PCS licenses yet, all operating
expenses were deferred for tax purposes creating a temporary difference for the
partners.
These expenses will be amortized over a period not exceeding 10 years. The
taxable income for the partners is determined as follows:
1996 1995
------------ --------------
Net loss per books ($9,074,846) ($6,714,366)
Add - Operating expenses
deferred until a PCS
license is assigned
to the Partnership 9,141,613 8,183,465
------------ --------------
Taxable income $ 66,767 $1,469,099
============ ==============
There are no other significant differences between taxable income for the
partners and the net loss reported in the statement of revenues and expenses.
NOTE 10 - CONTINGENCY:
- ---------------------
In 1996, the Partnership's bidding agent, Romulus, submitted an erroneous bid
for one of the PCS licenses being auctioned (Norfolk, Virginia). The
Partnership withdrew the bid immediately and the General Partner filed a
petition for a waiver of the penalty or, in the alternative, a substantial
reduction in the penalty amount.
On December 20, 1996, the FCC resolved the Partnership's request and assessed
a bid withdrawal payment of $3,273,000 for the Norfolk, Virginia market. Also,
on January 22, 1997 the FCC issued a Notice of Apparent Liability and Forfeiture
and found the Partnership liable for $1,000,000 for misrepresentations made by
its bidding agent.
As a result of the penalty and assessment imposed by the FCC, the Partnership
and its General Partner filed, on June 6, 1996, an action for damages against
Romulus (bidding agent) and one of its directors, wherein they seek
reimbursement for the defendants' gross negligence and subsequent fraudulent
acts in covering up an error in bidding in the January 23, 1996 FCC auction for
certain telecommunication markets. In connection with this case, the
Partnership has attached the $6.5 million deposited in the name of Romulus
with a local bank and posted a $25,000 bond pursuant to such order. Romulus
and its director have both filed separate requests for arbitration. The
Partnership has filed for dismissal of these proceedings. Management is
pursuing this matter vigorously and is confident that its position will
prevail.
On June 28, 1996 Romulus's director filed a declaratory relief action against
the Partnership's general partner in regard to the respective rights and
duties revolving around the erroneous bid submitted on behalf of the
Partnership to the FCC in connection with PCS licenses.
In November 1996, certain limited partners of the Partnership filed a suit in
the Circuit Court of the State of Oregon against the Company and certain of its
officers, directors, employees and consultants. The suit alleges that
defendants employed misstatements and omissions of fact in connection with the
sale of limited partnership units of the Partnership and seeks the return of
the investment of $25,000 per unit for approximately 22 units, plus interest
and attorney fees. The case is in the early stage, however, the Company is
defending this matter vigorously.
SUPERTEL COMMUNICATIONS CORP.
-----------------------------
REPORT AND FINANCIAL STATEMENTS
-------------------------------
DECEMBER 31, 1996
-----------------
PRICE WATERHOUSE
February 7, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------
To the Board of Directors of
SuperTel Communications Corp.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of SuperTel Communications Corp.
at December 31, 1996 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we
plan and perform the audit 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 audit provides a reasonable basis
for the opinion expressed above.
SUPERTEL COMMUNICATIONS CORP.
-----------------------------
BALANCE SHEET
-------------
DECEMBER 31, 1996
-----------------
ASSETS
------
Assets:
Cash $ 8,237
Accounts receivable from affiliated company 101,954
----------
Total assets $110,191
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Liabilities:
Accounts payable to officers and directors $ 63,304
Accounts payable to affiliated company 30,997
Income tax payable 3,277
Note payable to affiliate 100,000
----------
Total liabilities 197,578
==========
Stockholders' deficiency:
Common stock, no par value,
1,000 shares authorized;
1,000 shares issued and outstanding 1,000
Accumulated deficit (88,387)
----------
Total stockholder's deficiency (87,387)
----------
Total liabilities and stockholders' deficiency $110,191
==========
The accompanying notes are an integral part of this statement.
SUPERTEL COMMUNICATIONS CORP.
-----------------------------
STATEMENT OF REVENUES AND EXPENSES AND DEFICIT
----------------------------------------------
FOR THE PERIOD FROM INCEPTION ON JUNE 7, 1996
---------------------------------------------
TO DECEMBER 31 1996
-------------------
Revenues:
Management fees $205,036
----------
Expenses:
Directors' fees 112,000
Salaries 29,167
Travel expenses 27,658
Interest expense 3,749
Other general and administrative expenses 17,572
----------
Total expenses 190,146
----------
Income before loss on investment and income taxes 14,890
Loss on investment in partnership (100,000)
----------
(85,110)
Provision for income taxes (3,277)
----------
Net loss and deficit at December 31, 1996 ($ 88,387)
==========
The accompanying notes are an integral part of this statement.
SUPERTEL COMMUNICATIONS CORP.
-----------------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE PERIOD FROM INCEPTION JUNE 7, 1996
------------------------------------------
TO DECEMBER 31, 1996
--------------------
Cash flows from operating activities:
Net loss ($ 88,387)
Adjustments to reconcile net income to
net cash provided by operating activities:
Loss on investment in subsidiary 100,000
Increase in accounts receivable-trade (101,954)
Increase in accounts payable and accruals 97,578
----------
Total adjustment 95,624
----------
Net cash from operating activities 7,237
Cash flows provided by financing activities -
Proceeds from issuance of common stock 1,000
----------
Net increase in cash and cash equivalents and cash and cash
equivalents at end of the period $ 8,237
==========
The accompanying notes are an integral part of this statement.
SUPERTEL COMMUNICATIONS CORP.
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - REPORTING ENTITY AND SUMMARY OF
- ----------------------------------------
SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------
Reporting entity
- ----------------
SuperTel Communication Corp. (the "Company" ) was organized on June 7, 1996
under the laws of Puerto Rico. It was created to serve as General Partner of
PCS 2000 L.P. (the "Partnership"), a development stage enterprise.
On June 18, 1996, the Company acquired the general partnership interest of
Unicom Corporation ("Unicom") for $100,000 by means of a nonrecourse
promissory note. The stockholders, officers and directors of the Company
are essentially the same as those of Unicom. All stockholders of Unicom
received the same number of shares of the Company that they previously held
in Unicom except for shares held by two trusts for the benefit of the
respective families of two former directors of Unicom. The transfer is the
subject of a lawsuit brought by a trust that is a substantial shareholder of
Unicom, and whose sole beneficiary is the wife of a former director. The
Company is vigorously defending its position in this case; it believes it has
meritorious defenses to such suit and that the outcome of such suit will not
adversely affect future operations of the Company.
During 1996, most of the Company's transactions were related to the
administration of the Partnership, a limited partnership organized on
February 14, 1995 under the laws of the State of Delaware, for which the
Company has served as the general partner since June 18, 1996. The
Partnership is engaged in the acquisition of licenses from the Federal
Communications Commission ("FCC") to serve as provider of Personal
Communications Services ("PCS"). The Company is entitled to 25% of all
distributions made by the Partnership.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles. The following summarizes the most significant
accounting policies followed in the preparation of the accompanying financial
statements:
Use of estimates in preparation of financial statements
- -------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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 those estimates.
Cash equivalents
- ----------------
The Company considers highly liquid investments with maturity of three months
or less, at the time of purchase, to be cash equivalents. No cash equivalents
were held by the Company at December 31, 1996.
Investment in partnership
- -------------------------
The investment in partnership represents an investment in PCS 2000, L. P.
amounting to $100,000. The Company accounts for the investment in the
Partnership using the equity method. As of December 31, 1996, the Company's
investment in the undistributed losses of the Partnership amounted to
approximately $3,847,000, therefore, the carrying value of its investment
was written down to zero.
NOTE 2 - RELATED PARTY TRANSACTIONS:
- -----------------------------------
The partnership agreement with PCS 2000, L. P., as amended, provides for
payment of a management fee to its general partner, equal to the
reasonable costs of operating the business of the Partnership, plus 10% of
such aggregate amount, which fee shall be payable monthly, on the first day of
each month during the year. Expenses reimbursed include, but are not limited
to, compensation costs, and expenses related to officers, directors, and
employees in the performance of their duties. During 1996, fees billed
amounted to approximately $205,000.
All other related party transactions are advances from / to affiliated companies
made in the ordinary course of business.
NOTE 3 - NOTE PAYABLE:
- ---------------------
Note payable consists of a nonrecourse promissory note due to an affiliate
amounting to $100,000, bearing interest at 7%, and due on June 18, 2003.
NOTE 4 - INCOME TAX:
- -------------------
Under the provisions of the Puerto Rico Tax law, the loss on the investment
in partnership is not deductible until it is finally determined that the
investment is worthless.
NOTE 5 - CAPITAL:
- ----------------
The Company is authorized to issue 2,000 shares, which shall be divided into
1,000 shares of restricted voting common stock without par value and 1,000
shares of restricted non-voting preferred stock without par value. The
preferred shares are divided into classes, from A to J with 100 shares each
class and upon their issuance the Company has the option to redeem them at
their issuance price plus accrued dividends. At December 31, 1996 none of
the preferred shares had been issued.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION:
- -------------------------------------------
During the year, the Company issued a nonrecourse promissory note amounting to
$100,000 (See Note 3) to acquire the investment in partnership.
NOTE 7 - BID WITHDRAWAL PAYMENT AND PENALTY:
- -------------------------------------------
In 1996, the Partnership, through its bidding agent, inadvertently submitted
an erroneous bid for one of the licenses being auctioned. Although the
Partnership withdrew the bid immediately, the FCC could have imposed a very
substantial penalty for withdrawal of the then highest submitted bid, which
penalty is based on the difference between the bid withdrawn and the eventual
highest bid. The Company filed a petition for a waiver of the penalty or, in
the alternative, a substantial reduction in the penalty amount, as the FCC's
rules were intended to deter frivolous and manipulative bids, and not errors.
On December 20, 1996, the FCC issued an order (the "Order") resolving the
Partnership's request for waiver of the related bid withdrawal payment for the
license applicable to Round 11 of the Broad Band PCS C Block auction for which
the FCC ordered the Partnership to pay a penalty of approximately $3,300,000.
This Order also assessed a bid withdrawal payment of approximately $1,258,000
for license B332 (Omaha, Nebraska) for the Broad Band PCS C block auction. In
accordance with the Order, these amounts were deducted from the Partnership's
deposit with the FCC. In addition to the December 20, 1996 order, the FCC
issued a Notice of Apparent Liability for Forfeiture dated January 22, 1997,
finding the Partnership liable for $1,000,000 for misrepresentations made to
the FCC by its bidding agent. It is the Partnership's intention to recover
this and other expenses related to the bidding error from its former bidding
agent.
As a result of the assessment made and penalty imposed by the FCC, the
Partnership and its General Partner filed, on June 6, 1996, an action for
damages against Romulus Telecommunications, Inc. (bidding agent) and one of
its directors, wherein they seek reimbursement for the defendants' gross
negligence and subsequent fraudulent acts in covering up an error in bidding
in the January 23, 1996 FCC auction for certain telecommunication markets.
In connection with this case, the Partnership has attached the $6.5 million
deposited in the name of Romulus Telecommunications, Inc. ("Romulus") with a
local bank and posted $25,000 bond pursuant to such order. Romulus and its
director have both filed separate requests for arbitration. The Partnership
has filed for dismissal of these proceedings. Management is pursuing this
matter vigorously and is confident that its position will prevail.
NOTE 8 - CONTINGENCY:
- --------------------
In mid 1996, Romulus's director and his wife filed declaratory relief actions
against the Company in regard to the respective rights and duties revolving
around the erroneous bid submitted on behalf of the Partnership to the FCC in
connection with PCS licenses (See Note 7).
In November 1996, certain limited partners of the Partnership filed a suit in
the Circuit Court of the State of Oregon against the Company and certain of
its officers, directors, employees and consultants. The suit alleges that
defendants employed misstatements and omissions of fact in connection with the
sale of limited partnership units of the Partnership and seeks the return of
the investment of $25,000 per unit for approximately 22 units, plus interest
and attorney fees. The case is in the early stage, however, the Company is
defending this matter vigorously.
NOTE 9 - SUBSEQUENT EVENTS:
- --------------------------
On January 22, 1997 the Partnership was granted the 15 Broad Band PCS C block
licenses for which it has been the high bidder in the PCS auctions which
remained pending at December 31, 1996.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------- -----------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
- -------- ---------------------------------
(a) Index to Financial Statements
-----------------------------
PCS 2000, L.P.
--------------
Report of Independent Accountants
Statement of Assets, Liabilities and Partners' Capital for fiscal
years ended December 31, 1995 and December 31, 1996
Statement of Revenues and Expenses for fiscal years ended
December 31, 1995 and December 31, 1996
Statement of Cash Flow for fiscal years ended December 31, 1995 and
December 31, 1996
Statement of Changes in Partners' Capital Accounts for fiscal years
ended December 31, 1996
Notes to Financial Statements
SuperTel Communications Corp.
-----------------------------
Report of Independent Accountants
Balance Sheet, December 31, 1996
Statement of Revenues and Expenses from inception to December 31,
1996
Statement of Cash Flows from inception to December 31, 1996
Notes to Financial Statements
(b) Exhibits
--------
Exhibit
Number
-------
3.1 Agreement of Limited Partnership of PCS 2000, L.P.
(Exhibit 3.1 of the Partnership's Registration Statement
on Form 10 (File No. 0-28362), effective June 28, 1996,
is hereby incorporated by reference)
10.1 Form of Services Agreement between PCS 2000, L.P. and
Romulus Telecommunications, Inc. (Exhibit 10.1 of the
Partnership's Registration Statement on Form 10 (File
No. 0-28362), effective June 28, 1996, is hereby
incorporated by reference)
10.2 Asset Purchase Agreement, dated as of June 18, 1996, by
and between SuperTel Communications Corp. and Unicom
Corporation (Exhibit 10.2 of the Partnership's
Registration Statement on Form 10 (File No. 0-28362),
effective June 28, 1996, is hereby incorporated by
reference)
27 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
PCS 2000, L.P.
By: SuperTel Communications Corp.
By: /s/ Richard Reiss
---------------------------------
Name: Richard Reiss
Title: Chief Executive Officer
Capacity in
Signature Which Signed Date
--------- ------------ ----
/s/ Fred H. Martinez Director and Chairman March 26, 1997
--------------------------- -----------------
Fred H. Martinez of the Board
/s/ Richard Reiss Director, Chief Executive March 10, 1997
--------------------------- -----------------
Richard Reiss Officer and Treasurer
/s/ Javier O. Lamoso Director and Executive March 24, 1997
--------------------------- -----------------
Javier O. Lamoso Vice President
/s/ Gary H. Arizala Director March 10, 1997
--------------------------- -----------------
Gary H. Arizala
/s/ Margaret W. Minnich Director March 20, 1997
--------------------------- -----------------
Margaret W. Minnich
/s/ Lawrence Odell Director March 31, 1997
--------------------------- -----------------
Lawrence Odell
/s/ Daniel J. Parks Director March 31, 1997
--------------------------- -----------------
Daniel J. Parks
/s/ James T. Perry Director March 26, 1997
--------------------------- -----------------
James T. Perry
EXHIBIT INDEX
-------------
Exhibit Description
- ------- -----------
3.1 Agreement of Limited Partnership of PCS 2000, L.P. (Exhibit 3.1 of
the Partnership's Registration Statement on Form 10 (File No. 0-
28362), effective June 28, 1996, is hereby incorporated by
reference)
10.1 Form of Services Agreement between PCS 2000, L.P. and Romulus
Telecommunications, Inc. (Exhibit 10.1 of the Partnership's
Registration Statement on Form 10 (File No. 0-28362), effective
June 28, 1996, is hereby incorporated by reference)
10.2 Asset Purchase Agreement, dated as of June 18, 1996, by and
between SuperTel Communications Corp. and Unicom Corporation
(Exhibit 10.2 of the Partnership's Registration Statement on
Form 10 (File No. 0-28362), effective June 28, 1996, is hereby
incorporated by reference)
27 Financial Data Schedule
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,493
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 52,080
<PP&E> 15
<DEPRECIATION> 0
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<BONDS> 0
0
0
<COMMON> 68,090
<OTHER-SE> (15,789)
<TOTAL-LIABILITY-AND-EQUITY> 54,588
<SALES> 0
<TOTAL-REVENUES> 67
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,142
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<INCOME-PRETAX> (9,075)
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<NET-INCOME> (9,075)
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</TABLE>
