<PAGE> 1
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 March 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
Sonoma, California 95476
(Address of principal executive offices) (Zip Code)
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: 2,761.2 Units of Limited
Partnership Interest
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<TABLE>
<CAPTION>
ClearComm, L.P. (formerly PCS 2000, L.P.)
INDEX
Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Assets, Liabilities and Partners' Capital as of
March 31, 1997 (unaudited) and December 31,
1996 (audited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Revenues and Expenses for the three
months ended March 31, 1997 (unaudited) and March 31, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Cash Flows for the three months ended March 31, 1997
(unaudited) and year ended
December 31, 1996 (audited) . . . . . . . . . . . . . . . . . . . . . 5
Statement of Changes in Partners' Capital Accounts from
inception on January 24, 1995 through March 31,
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLEARCOMM, L.P. (formally, PCS 2000, L.P.)
---------------
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF ASSETS, LIABILITIES
AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
UNAUDITED AUDITED
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996
---- ----
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $12,043,317 $2,492,851
Prepaid expenses 68,758 100,538
Other current assets - deposits 25,000 45,468,855
--------------- -----------------
Total current assets 12,137,075 48,062,244
Licenses 344,293,125 -
Capitalized interest 3,804,441
Restricted cash - 6,511,250
Equipment, net 13,627 14,535
--------------- -----------------
Total assets $360,248,268 $54,588,029
=============== =================
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<S> <C> <C>
Current liabilities:
Payable to the FCC - $1,000,000
Accounts payable and accrued liabilities $302,674 204,927
Accounts payable General Partner 64,068 101,954
Accounts payable for legal fees 675,912 440,847
Accounts payable to related parties 539,514 539,514
--------------- -----------------
Total current liabilities 1,582,168 2,287,242
--------------- -----------------
Long term liabilities
Notes payable FCC 309,863,813
Accrued interest FCC notes 3,804,441
---------------
Total long term liabilities 313,668,254
---------------
Limited partners' capital (2,601.5 units and 798.5 one fifth
units in 1997; and 2601.5 and 592 one fifth units in 1996;
authorized and issued) 69,030,000 67,990,000
General partner's capital 100,000 100,000
Undistributed losses (24,132,153) (15,789,213)
--------------- -----------------
Total partners' capital 44,997,847 52,300,787
--------------- -----------------
Total liabilities and partners' capital $360,248,268 $54,588,029
=============== =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE> 4
CLEARCOMM, L.P.
(UNAUDITED)
STATEMENT OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,
---------
1997 1996
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<S> <C> <C>
Revenues:
Interest income $109,707 $27,167
-------------- ------------
Expenses:
Consulting and legal services rendered by
Related parties 7,213,023 247,057
General and administrative services billed by
the General Partner 102,114 108,831
Other legal fees 403,204 252,703
Miscellaneous consulting services 585,495 104,402
Insurance 31,721 32,000
Travel 67,208 53,520
Other administrative expenses 49,882 12,743
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Total expenses 8,452,647 811,256
-------------- ------------
Net loss ($8,342,940) ($784,089)
============== ============
Net loss attributable to general partner (2,085,735) (196,022)
-------------- ------------
Net loss attributable to limited partners (6,257,205) (588,067)
-------------- ------------
Net loss per limited partner unit ($2,266.12) ($225.79)
-------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
<PAGE> 5
CLEARCOMM, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED AUDITED
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
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1997 1996
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<S> <C> <C>
Cash flows from operating activities
Net loss ($8,342,940) ($9,074,847)
---------------- --------------
Adjustments to reconcile the net loss for the
period to net cash used by operating activities:
Depreciation 908 3,642
(Increase) decrease in prepaid expenses and other assets 31,780 (4,538)
(Decrease) Increase in Bank overdraft (46,173)
Increase in security deposit (25,000)
(Decrease) in payable to the FCC (1,000,000)
Increase in accounts payable 97,747 1,515,140
Decrease in accounts payable General Partner (37,886) (302,052)
Increase in accounts payable to related parties 235,065 283,670
---------------- --------------
Total adjustments (697,386) 1,449,689
---------------- --------------
Net cash used by operating activities (9,040,326) (7,625,158)
---------------- --------------
Cash flows used in investing activities:
Auction deposit returned by FCC 11,039,542 4,531,145
Equipment (18,177)
---------------- --------------
Net cash provided by investing activities 11,039,542 4,512,968
---------------- --------------
Cash flows from financing activities:
Capital investment by partners 1,040,000 2,952,500
Capital repurchased from partners (75,000)
Restricted cash 6,511,250 -
---------------- --------------
Net cash from financing activities 7,551,250 2,877,500
---------------- --------------
Net increase (decrease) in cash $9,550,466 ($234,690)
================ ==============
Summary:
Net increase (decrease) in cash 9,550,466 (234,690)
Cash and cash equivalents at the beginning of the period 2,492,851 2,727,541
---------------- --------------
Cash and cash equivalents at the end of the period $12,043,317 $2,492,851
================ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE> 6
CLEARCOMM, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31, 1997
---------------------------------------
<S> <C>
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 previouly
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
===============
</TABLE>
<PAGE> 7
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 MARCH 31, 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
------------ ------------ --------------
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 units
1996 Share of undistributed losses (2,268,712) (6,806,135) (9,074,847)
------------ ------------ --------------
Capital account balance (deficit) at
December 31, 1996 (3,847,304) 56,148,091 52,300,787 2,601.5 units and 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
March 31, 1997 ($5,933,039) $50,930,886 $44,997,847 2,601.5 units and 590.5 one fifth units
============ ============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
<PAGE> 8
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 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.
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<PAGE> 9
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.
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, 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.
The Partnership is now soliciting construction permits to build its system 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
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<PAGE> 10
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 was recorded as of December
31, 1996 and is reflected as a liability in the accompanying balance sheet as of
that date.
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 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 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 was partly used for the
down payment of the PCS licenses the Partnership acquired.
NOTE 6 - 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.
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<PAGE> 11
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.
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:
During the first quarter 1997, the Partnership incurred legal and consulting
expenses paid to limited partners and members of the Board of Directors
amounting to approximately $701,773 (1996 - $247,057).
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 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 $102,114
in the first quarter of 1997 for these services.
NOTE 8 - 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.
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<PAGE> 12
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 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 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:
<TABLE>
<CAPTION>
Thru
1st Quarter
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net loss per books ($8,342,940) ($9,074,846) ($6,714,366)
Add - Operating
---
expenses deferred
until a PCS license
is assigned to the
Partnership 8,452,647 9,141,613 8,183,465
----------- ---------- ----------
Taxable income $ 109,707 $ 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 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.
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<PAGE> 13
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.
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 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.
The Parthership 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
Patnership 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 Parthership is subject will have a material adverse effect on the
Parthership's business and operations.
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<PAGE> 14
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.
QUARTER ENDED MARCH 31, 1997 COMPARED WITH QUARTER ENDED
MARCH 31, 1996
Results of Operations
Revenues
The Partnership's sole source of revenue for the quarter ended March
31, 1997 continued to be interest income. Interest income for this quarter was
$109,707. In the first quarter of 1996, the Partnership had interest earnings of
$27,167. 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.
Expenses
Expenses for the quarter ended March 31, 1997 totaled $8,452,647. This
amount included $6,511,250 advanced to Romulus Telecommunications, Inc.
("Romulus") under the Services Agreement, pursuant to which Romulus had assisted
the Partnership in obtaining its licenses. This amount had been classified in
earlier financial statements as restricted cash because its payment to Romulus
was contingent upon the Partnership receiving any PCS licenses. Although this
amount is no longer considered restricted cash because the Partnership was
awarded its PCS licenses in January 1997, the Partnership has filed a suit
attaching this amount in connection its efforts to recover the costs, penalties
and fines which were incurred as a result of the bidding error in the Norfolk,
Virginia market. In addition, 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.
Expenses for the quarter ended March 31, 1996 were $811,256. This
amount differs from the expenses previously reported for that quarter (which
were then stated to be $702,425) because the expenses for that quarter now
includes an accrual of $108,831 of expenses to be reimbursed to the General
Partner, including its
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<PAGE> 15
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,
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. As a result the management fee for the first quarter 1996 and
earlier periods were then accrued and included in the respective reporting
periods.
Liquidity and Capital Resources
As of March 31, 1997, the Partnership had assets totaling
$360,248,268, consisting of $12,043,317 in cash and cash equivalents, $68,758 in
prepaid expenses, $25,000 on deposit, $344,293,125 of PCS licenses, $3,804,441
of capitalized interest on the license debt during the construction period of
the PCS system and $13,627 of equipment. Current liabilities totaled $1,582,168
and long term debt of $313,668,254 with an annual interest 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 March 31, 1997 the Partnership raised
$1,040,000 of additional capital from a capital call to its limited partners
that began of September 30, 1996 and ended on January 22, 1997. The total
amount raised in this capital call was $3,992,500.
The Partnership wants to raise an additional $2 million from its
limited partners in a capital call that commenced on March 26, 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. Although 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.
-15-
<PAGE> 16
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.
On March 6, 1997, the Partnership filed a response with the FCC to the
Petition for Reconsideration filed by the SDE Trust in which the SDE Trust asked
that the FCC reconsider its statements in the order granting the Partnership its
PCS licenses and the SDE Trust filed a reply on March 18, 1997.
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
(b) During the period covered by this report, the
Partnership filed the following Current Report of
Form 8-K:
(i) Form 8-K, dated February 20, 1997, and
filed with the Commission on February 21,
1997, reporting information under Item 5.
-16-
<PAGE> 17
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
May 14, 1997
-17-
<PAGE> 18
EXHIBIT INDEX
No. Exhibit Page No.
27 Financial Data Schedule . . . . . . . . . . . . .
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,043
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,137
<PP&E> 18
<DEPRECIATION> (4)
<TOTAL-ASSETS> 360,248
<CURRENT-LIABILITIES> 1,582
<BONDS> 313,668
0
0
<COMMON> 69,130
<OTHER-SE> (24,132)
<TOTAL-LIABILITY-AND-EQUITY> 360,248
<SALES> 0
<TOTAL-REVENUES> 110
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,343)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,343)
<EPS-PRIMARY> (2,266)
<EPS-DILUTED> (3,020)
</TABLE>
