<PAGE>
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ________ to ________
Commission file number 0-28362
ClearComm, L.P. (formerly PCS 2000, L.P.)
(Exact name of registrant as specified in its charter)
Delaware 66-0514434
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
620 Broadway 95476
Sonoma, California ---------
--------------------------------------- (Zip Code)
(Address of principal executive offices
Registrant's telephone number, including area code: (707) 938-2428
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,790.4 Units of Limited
Partnership Interest
<PAGE>
ClearComm, L.P. (formerly PCS 2000, L.P.)
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Assets, Liabilities and Partners' Capital as of June 30, 1997 (unaudited) and December 31,
1996 (audited)........................................................................................ 3
Statement of Revenues and Expenses for the three months ended June 30, 1997 and 1996 (unaudited) and six
months ended June 30, 1997 and 1996 (unaudited)....................................................... 4
Statement of Cash Flows for the six months ended June 30, 1997 and 1996 (unaudited...................... 5
Statement of Changes in Partners' Capital Accounts from inception on January 24, 1995 through June 30,
1997 (unaudited)...................................................................................... 7
Notes to the Interim Financial Statements............................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 15
Item 5. Other Information............................................................................... 15
Item 6. Exhibits and Reports on Form 8-K................................................................ 15
Signatures.............................................................................................. 16
Exhibit Index........................................................................................... 17
</TABLE>
2
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ClearComm, L.P.
(a development stage enterprise)
STATEMENT OF ASSETS, LIABILITIES
AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Unaudited
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 11,458,874 $ 2,492,851
Prepaid expenses........................... 37,037 100,538
Other current assets-deposits.............. 25,000 45,468,855
------------ ------------
Total current assets.................... 11,520,911 48,062,244
Licenses, including capitalized interest
of $8,839,728............................... 353,132,853
Restricted cash............................... 6,511,250
Equipment, net................................ 42,166 14,535
------------ ------------
Total assets............................ $364,695,930 $54,588,029
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Payable to the - FCC....................... -- $ 1,000,000
Accounts payable and accrued liabilities... $ 663,229 204,927
Accounts payable - General Partner......... 58,395 101,954
Accounts payable for legal fees............ 443,493 440,847
Accounts payable to related parties........ 539,514 539,514
------------ ------------
Total current liabilities............... 1,704,631 2,287,242
------------ ------------
Long term liabilities
Notes payable - FCC 309,863,813
Accrued interest - FCC notes............... 8,839,728
------------
Total long term liabilities.............. 318,703,541
------------
Limited partners' capital (2,601.5 units
and 944.5 one fifth units in 1997; and
2601.5 and 592 one fifth units in 1996;
authorized and issued).................. 69,906,000 67,990,000
General partner's capital................. 100,000 100,000
Undistributed losses...................... (25,718,242) (15,789,213)
------------ ------------
Total partners capital.................. 44,287,758 52,300,787
------------ ------------
Total liabilities and partners'
capital........................... $364,695,930 $54,588,029
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are integral part of this statement
3
<PAGE>
ClearComm, L.P.
(Unaudited)
STATEMENT OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
Commutative
Three Months Ended Six Months Ended from inception
June 30, June 30, thru June 30,
-------------------------- -------------------------- -------------
<C> <C> <C> <C> <C>
1997 1996 1997 1996 1997
------------ ---------- ----------- ----------- -------------
Revenues:
Interest income..................................... $ 135,926 $ 17,130 $ 245,633 $ 44,297 $ 1,781,499
Expenses:
Consulting and legal services rendered by
Related parties.................................. 386,437 1,158,792 7,599,460 405,849 15,100,572
General and administrative services billed by
the General Partner.............................. 89,327 110,467 191,441 219,298 1,129,063
Other legal fees................................... 461,139 407,320 864,343 660,023 2,516,403
Miscellaneous consulting services.................. 480,212 176,137 1,065,707 280,539 1,948,662
Insurance.......................................... 31,720 32,000 63,441 64,000 229,225
Travel............................................. 159,869 92,166 227,077 145,696 628,817
Other administrative expenses...................... 113,313 25,794 163,195 38,537 415,854
Bid withdrawals and forfeiture imposed
by the FCC....................................... 5,531,145
----------- ---------- ----------- ---------- ----------
Total expenses..................................... 1,1722,017 1,002,676 10,174,664 1,813,932 27,499,741
----------- ---------- ----------- ---------- ----------
Net loss........................................... ($1,586,091) ($985,546) ($9,929,031) ($1,769,635) ($25,718,242)
------------ ---------- ------------ ----------- -----------
------------ ---------- ------------ ----------- -----------
Net loss attributable to general partner............ (396,523) (246,387) (2,482,258) (442,409)
Net loss attributable to limited partner............ (1,189,569) (739,160) (7,446,773) (1,327,226)
----------- ----------- ------------ -----------
Net loss per limited partner unit.................. ($426.31) ($283.80) $2,668.71) ($509.59)
----------- ---------- ----------- ----------
</TABLE>
The accompanying notes are integral part of this statement.
5
<PAGE>
ClearComm, L.P.
(a development stage enterprise)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cummulative
Six Months Ended from
June 30, inception
---------------------------- thru June 30,
1997 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.................................................. ($ 9,929,031) (1,769,635) ($25,718,242)
------------ ----------- -----------
Adjustments to reconcile the net loss for the
period to net cash used by operating activities:
Depreciation.............................................. 5,022 591 8,663
(Increase) Decrease in prepaid expenses................... 63,501 54,000 (37,037)
Decrease in Bank overdraft................................ (46,173)
Increase in security deposit.............................. (25,000)
Decease in payable to the FCC............................. (1,000,000)
Increase in accounts payable and legal fees............... 460,949 177,639 1,106,722
(Decrease) Increase in accounts payable:
General Partner........................................ (43,559) 24,923 58,395
Related parties........................................ (40,304) 539,514
------------ ----------- -----------
Total adjustments......................................... (539,087) 170,676 1,676,257
------------ ----------- -----------
Net cash used by operating activities.................. (10,468,118) (1,598,959) (24,041,985)
------------ ----------- -----------
Cash flows used in investing activities:
FCC Auction deposit and down payment...................... 11,039,542 (38,960,458)
Bid withdrawal payment.................................... 4,531,145
Equipment................................................. (32,651) (13,211) (50,828)
------------ ----------- ------------
Net cash provided (used) by investing activities....... 11,006,891 (13,211) (34,480,141)
------------ ----------- ------------
Cash flows from financing activities:
Capital investment by partners............................ 1,916,000 (75,000) 70,006,000
Restricted cash........................................... 6,511,250
------------ ----------- ------------
Net cash provided (used) from financing activities..... 8,427,250 (75,000) 70,006,000
------------ ----------- ------------
Net increase (decease) in cash............................ $ 8,966,023 ($1,687,170) $ 11,483,874
------------ ----------- ------------
------------ ----------- ------------
Summary:
Net increase (decrease) in cash........................... $ 8,966,023 (1,687,170)
Cash and cash equivalents at:
the beginning of the period............................. 2,492,851 2,727,541
the end of the period................................... $ 11,458,874 $ 1,040,371 $11,483,874
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
The accompanying notes are integral part of this statement
6
<PAGE>
ClearComm, L.P.
(a development stage enterprise)
SIX MONTHS PERIOD ENDED JUNE 30, 1997
Supplemental schedule of non cash investing and financing activities:
The Partnership was granted by the FCC on January 1997 PCS licenses for which
the bid had been previously submitted. In conjunction with this acquisition,
the following loan was granted by the FCC:
Acquisition of PCS licenses $344,293,125
Auction deposit (34,429,312)
-------------
$309,863,813
-------------
-------------
7
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ClearComm, L.P.
---------------
(a development stage enterprise)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
--------------------------------------------------
(Unaudited)
-----------
FOR THE PERIOD FROM INCEPTION ON JANUARY 24, 1995 THROUGH JUNE 30, 1997
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited Limited Partners
Partner Partners Total Units
------- -------- ----- ----------------
<S> <C> <C> <C> <C>
Capital invested thru December 31, 1995 $100,000 $65,112,500 $65,212,500 2,604.5 units
1995 share of undistributed losses (1,678,592) (5,035,774) (6,714,366
---------- ---------- ----------
Capital account balance (deficit) at
December 31, 1995 (1,578,592) 60,076,726 58,498,134 2,604.5 units
---------- ---------- ----------
Repurchase of Limited Partners units (75,000) (75,000) -3 units
Capital contributed during 1996 2,952,500 2,952,500 590.5 one fifth unit
1996 share of undistributed losses (2,268,711) (6,806,134) (9,074,845)
---------- ---------- ----------
Capital account balance (deficit) at 2,601.5 units and
December 31, 1996 (3,847,303) 56,148,092 52,300,789 590.5 one fifth units
---------- ---------- ----------
Capital contributed during first quarter
1997 1,040,000 1,040,000 208 one fifth units
First quarter 1997 share of undistributed
losses (2,085,735) (6,257,205) (8,342,940)
---------- ---------- ----------
Capital account balance (deficit) at 2,601.5 units and
March 31, 1997 (5,933,038) 50,930,887 44,997,849 798.5 one fifth units
---------- ---------- ----------
Capital contributed during second quarter
1997 876,000 876,000 146 one fifth unit
Second quarter 1997 share of undistributed
losses (396,523) (1,189,568) (1,586,091)
Capital account balance (deficit) at 2,601.5 units and
June 30, 1997 ($6,329,561) $50,617,319 $44,287,758 944.5 one fifth units
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are integral part of this statement.
8
<PAGE>
ClearComm, L.P.
(a development stage enterprise)
NOTES TO INTERIM FINANCIAL STATEMENTS
NOTE 1--REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ClearComm, L.P. (the "Partnership") (formerly, PCS 2000, L.P.), 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., 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 Partnership Agreement. Approximately 1,600 limited
partners also invested in the Partnership through a private placement.
Interim Financial Data; Use of estimates in preparation of financial statements
The interim financial data is unaudited; however, in the opinion of the
management, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results
of the interim periods.
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
PCS licenses are recorded at cost, and will be amortized over the estimated
life of the licenses (forty years) once the PCS network is placed in service.
9
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The interest related to debt pertaining to the PCS licenses during the
construction period is capitalized.
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, 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 expects to raise an additional $2 million from its investors
in an offering that commenced on March 26, 1997. In addition, the Partnership
is in various stages of discussions with a variety of equipment vendors to
determine the selection of equipment with the best financing terms. An
equipment vendor is in the process of due diligence for the purpose of
establishing final terms and conditions for two of the markets under
development. A term sheet has been presented to the Partnership for the
remaining thirteen markets and is under evaluation at this time.
The Partnership is seeking construction permits to build its system and is
currently evaluating several options to satisfy its financing needs. It is
also in the process of conducting site selection work in all markets under
development.
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.
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 9). 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
10
<PAGE>
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 was held in
trust by Romulus and was 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 9.
NOTE 5--PARTNERS' CAPITAL:
At December 31, 1995, the limited partners' capital was composed of 2,604.5
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 consisted of 2,601.5 units and 590.5 one-fifth
units.
During the quarter ending on March 31, 1997, the Partnership raised
$1,040,000 from a capital call that ended on January 22, 1997. As a result,
the limited partners' capital at March 31, 1997 consisted of 2,601.5 units
and 798.5 one-fifth units.
During the quarter ended in June 30, 1997, the Partnership raised $876,000
from an offering that commenced on March 26, 1997. As of June 30, 1997, the
limited partners' capital consisted of 2,601.5 units and 944.5 one-fifth
units. The present offering ends on October 31, 1997 unless extended by the
General Partner.
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 6--RELATED PARTY TRANSACTIONS:
During the second quarter 1997, the Partnership incurred legal and consulting
expenses paid to limited partners and members of the Board of Directors
amounting to approximately $386,437 (1996 - $158,792).
Additionally, the application, preparation and auction bidding services were
performed by a related party for which a
11
<PAGE>
fee of $6,511,250 was paid during 1995. An additional $6,511,250 was expensed
in the first quarter of 1997 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 $89,327 in the second quarter of 1997 for these services.
NOTE 7--LICENSES AND LONG TERM NOTES PAYABLE:
On January 22, 1997, the Partnership was granted its 15 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 liability is represented by 10-year notes due to the FCC bearing interest
at 6.5%. According to the notes, interest shall be paid quarterly for the
first six(6) years and principal and interest over the next four (4) years.
In March 1997, the FCC issued an order suspending interest payments on Block
C licenses indefinitely; however, interest on the notes is accrued.
NOTE 8--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 Partner and the 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 operated 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:
12
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<TABLE>
<CAPTION>
THRU SIX MONTHS YEAR ENDED
PERIOD ENDED ---------------------------
JUNE 30. 1997 1996 1995
--------------- ------------ ------------
<S> <C> <C> <C>
Net loss per books...................................... ($9,929,031) ($9,074,846) ($6,714,366)
Add--Operating expenses deferred until
a PCS license is assigned to the Partnership.......... 10,174,664 9,141,613 8,183,465
--------------- ------------ ------------
Taxable income.......................................... $ 245,633 $ 66,767 $1,469,099
--------------- ------------ ------------
--------------- ------------ ------------
</TABLE>
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 9--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 one of its directors have both filed separate requests for arbitration.
The Partnership has filed for dismissal of the arbitration proceedings.
Management is pursuing this matter vigorously and is confident that its
position will prevail.
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
Partnership is defending this matter vigorously.
13
<PAGE>
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 an Unicom Corporation
shareholder filed a complaint for damages of $300 million and equitable
relief against Unicom Corporation, 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 personal gain of Unicom shareholders. The Partnership
denies engaging in any unlawful activity in connection with the Unicom shares
held by the SDE Trust. On April 7, 1997, the Partnership filed a motion to
move this case to Puerto Rico. On July 21, 1997, the judge granted the
Partnership's motion.
The Partnership was subject to three petitions to deny the award of any
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
the FCC to reconsider its statements in its order granting the licenses. The
Partnership filed its response on March 6, 1997, and the SDE Trust filed a
reply on March 18, 1997.
Failure to retain its licenses or failure to prevail in the litigation to
which the Partnership is subject will have a material adverse effect on the
Partnership's business and operations.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
ClearComm, L.P. (the "Partnership") was formed in January 1995 under the
name PCS 2000, L.P. On April 17, 1997 the Partnership was renamed ClearComm,
L.P. The Partnership is managed by SuperTel Communications Corp. (the "General
Partner"). The Partnership was organized to acquire, own and operate personal
communication services ("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
QUARTER ENDED JUNE 30, 1997 COMPARED WITH QUARTER ENDED
JUNE 30, 1996
REVENUES
The Partnership's sole source of revenue for the quarter ended June 30, 1997
continued to be interest income. Interest income for this quarter was $135,926.
In the second quarter of 1996, the Partnership had interest earnings of $17,130.
The increase in interest earnings was primarily due to the Federal
Communications Commission (the "FCC") refunding to the Partnership approximately
$11,039,602, which the Partnership had placed on deposit with the FCC in
connection with the acquisition of its PCS licenses and the interest earned by
the additional capital invested by the limited partners during the quarter.
EXPENSES
Expenses for the quarter ended June 30, 1997 totaled $1,722,017, expenses
for the same period in 1996 amounted to $1,002,576. The Partnership's expenses
in the first quarter of 1997 were greater than the first quarter of 1996 because
of the costs associated in developing the Partnership's licenses.
YEAR-TO-DATE RESULTS ANALYSIS
REVENUES
The Partnership's sole source of revenue for the six months ended June 30,
1997 continued to be interest income. Interest income for this period was
$245,633. In the same period of 1996, the Partnership had interest earnings of
$44,297. The increase in interest earnings was primarily due to the FCC
refunding to the Partnership approximately $11,039,602, as described above,
and the interest earned by the additional capital invested by the limited
partners during the quarter.
EXPENSES
Expenses for the six months ended June 30, 1997 totaled $10,174,664,
expenses for the same period in 1996 amounted to $1,813,932. The
Partnership's expenses in the first six months of 1997 were greater than the
first six months of 1996 because of the costs associated in developing the
Partnership's licenses and the $6,511,250 advanced to Romulus
Telecommunications, Inc. under the Services Agreement for the first quarter
of 1997.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Partnership had assets totaling $364,695,930,
consisting of $11,458,874 in cash and cash equivalents, $37,037 in prepaid
expenses, $25,000 on deposit, $344,293,125 of PCS licenses, $8,839,728 of
capitalized interest on the license debt during the construction period of the
PCS system and $42,166 of equipment. Current liabilities totaled $1,704,632 and
long term debt of $318,703,541 bearing interest at the rate of 6.5% relating to
the acquisition of the PCS licenses. This debt is represented by 10-year notes
due to the FCC, including accrued interest. According to the notes, interest
shall be paid quarterly for the first six (6) years, and interest and principal
shall be paid quarterly over the last four (4) years. In March 1997, the FCC
issued an order suspending interest payments on all C Block licenses
indefinitely; however, interest on the notes will continue to accrue at an
annual rate of 6.5%. The Partnership's assets and liabilities increased
significantly during the first quarter of 1997 because of the Partnership's
receipt of the PCS licenses which were awarded in January 1997.
During the quarter ending June 30, 1997 the Partnership raised $876,000 of
additional capital from an offering to its limited partners that began of March
26, 1997. The Partnership issued 146 additional one-fifth units to its Limited
Partners, the Partnership wants to raise an additional $2 million from its
limited partners in this offering that is schedule to end on October 31, 1997.
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 its PCS licenses is dependent upon whether the
Partnership retains any of the licenses. On February 21, 1997, a party filed
with the FCC a petition for reconsideration of the order which granted the
Partnership its licenses. Failure to retain its licenses or failure to
prevail in the litigation to which the Partnership is subject will have a
material adverse effect on the Partnership's business and operations.A
lthough no assurance can be made, the Partnership expects to retain its PCS
licenses and raise the additional amounts it needs to develop its licenses.
The Partnership currently estimates it will need to raise approximately $290
million over the next three years to develop its PCS licenses.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership is subject to certain legal proceedings and an FCC
proceeding which were described in the Partnership's Form 10-K for the year
ended December 31, 1996 (the "1996 Form 10-K").
As previously reported in the Partnership's 1996 Form 10-K, 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 personal gain of Unicom shareholders.
The Partnership denies engaging in any unlawful activity in connection with the
Unicom shares held by the SDE Trust. On April 7, 1997, the Partnership filed a
motion to move this case to Puerto Rico.
16
<PAGE>
ITEM 5. OTHER INFORMATION
On April 17, 1997, the Partnership changed its name from PCS 2000, L.P. to
ClearComm, L.P.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
27.0 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ClearComm, L.P.
By: SuperTel Communications Corp.
By: /s/ Javier O. Lamoso
--------------------
Name: Javier O. Lamoso
Title: Executive Vice President
August 14, 1997
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,459
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,521
<PP&E> 51
<DEPRECIATION> 9
<TOTAL-ASSETS> 364,969
<CURRENT-LIABILITIES> 1,705
<BONDS> 318,704
0
0
<COMMON> 70,006
<OTHER-SE> (25,718)
<TOTAL-LIABILITY-AND-EQUITY> 364,696
<SALES> 0
<TOTAL-REVENUES> 136
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,722
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,586)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,586)
<EPS-PRIMARY> 426
<EPS-DILUTED> 568
</TABLE>
