<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, 2000
/ / 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.
------------------------------------------------------
(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.)
221 Ponce de Leon Avenue Suite 1407 00917-1814
---------------------------------------- ----------
San Juan, Puerto Rico (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (787) 756-0840
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
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ClearComm, L.P.
INDEX
<TABLE>
<CAPTION>
Page No.
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PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Assets, Liabilities and Partners'
Capital as of June 30, 2000 (unaudited) and December 31, 1999 ...................................................... 3
Consolidated Statements of Revenues and Expenses for the
three-month and six-month period ended June 30, 2000 and 1999
(unaudited) ........................................................................................................ 4
Consolidated Statements of Cash Flows for the six month period
Ended June 30, 2000 and 1999 ....................................................................................... 5
Consolidated Statements of Changes in Partners' Capital Accounts
for the six-month period ended June 30, 2000 (unaudited) ........................................................... 6
Notes to Interim Consolidated Financial Statements............................................................. 7
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................................................................... 9
Item 3
Quantitative Disclosure About Market Risk.......................... ................................................ 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................................. ................................. 13
Item 6. Exhibits and Reports on Form 8-K................................... ................................................ 13
Signatures.................................................................. ................................................ 14
Exhibit Index............................................................... ................................................ 15
</TABLE>
<PAGE>
PART I Financial Information
Item 1. Financial Statements
ClearComm, L.P.
CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES
AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,349,641 $ 6,546,305
Accounts receivable, net of allowance
for doubtful accounts of $4,100,000 and $625,000 16,433,048 3,244,067
Subscription receivable from limited partners - 981,000
Inventories 15,895,121 9,201,823
Prepaid expenses 729,712 425,684
------------- -------------
Total current assets 41,407,522 20,398,879
Licenses, including capitalized interest of
$12,174,000, net 66,155,859 67,543,320
Property and equipment, net 90,127,475 89,200,611
------------- -------------
Total assets $ 197,690,856 $ 177,142,810
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $ 108,172,144 $ 102,735,841
Line of credit 26,000,000 -
Accounts payable to related parties 7,017,390 2,815,302
Accrued interest 750,132 2,381,545
Deferred Income 1,463,380 443,000
------------- -------------
Total current liabilities 143,403,046 108,375,688
------------- -------------
Long term liabilities:
Notes payable 60,880,492 57,984,462
------------- -------------
Partners' Capital:
Limited partners' capital 2,903.1 units, issued and outstanding 73,039,616 73,039,616
General partner's capital 100,000 100,000
Undistributed losses
Accumulated during development stage (48,704,525) (48,704,525)
Operations (31,027,773) (13,652,431)
------------- -------------
Total partners' capital (6,592,682) 10,782,660
------------- -------------
Total liabilities and partners' capital $ 197,690,856 $ 177,142,810
============= =============
</TABLE>
The accompanying notes are integral part of these consolidated statements.
3
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ClearComm, L.P.
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues:
Service revenues $ 17,871,490 $ $ 28,692,761 $
Handset and accessories
sales 4,141,777 6,252,633
Interest income 50,652 274,157 258,299 401,736
-------------- ------------ ------------- -------------
Total revenues 22,063,919 274,157 35,203,693 401,736
-------------- ------------ ------------- -------------
Operating cost and expenses:
Cost of handset and
accessories 4,401,490 6,281,122
Interconnection expense 1,133,406 2,372,277
Sales and dealers
commissions 1,631,687 2,877,828
Salaries and benefits 2,473,550 362,219 5,055,690 389,335
Advertising expense 2,093,579 3,920,631
Legal and professional
services 1,120,155 205,183 3,169,394 400,768
Depreciation and
amortization 5,220,958 10,773,708 18,495
Interest expense 2,064,167 3,826,283
Rent expense 435,191 1,081,115
Other expenses 7,630,033 1,279,243 11,084,492 1,540,633
Management fee to general
partner 367,451 16,515 641,754 88,015
Consulting and legal services
rendered by related
parties, including management fee to TLD 890,968 345,537 1,494,741 529,966
-------------- ------------ ------------- -------------
Total expenses 29,462,635 2,208,697 52,579,035 2,967,212
-------------- ------------ ------------- -------------
Net loss $ (7,398,716) $ (1,934,540) $ (17,375,342) $ (2,565,476)
============== ============ ============= =============
Net loss attributable to general
partner $ (1,849,679) $ (483,635) $ (4,343,836) $ (641,369)
============== ============ ============= =============
Net loss attributable to limited
partners $ (5,549,037) $ (1,450,905) $ (13,031,506) $ (1,924,107)
============== ============ ============= =============
</TABLE>
The accompanying notes are integral part of these consolidated financial
statements.
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ClearComm, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Month Period Ended
June 30, June 30,
------------ ------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $(17,375,342) $ (2,565,476)
------------ ------------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 10,773,708 18,495
Bad debt expense 3,474,970 -
Changes in operating assets and liabilities:
Increase in accounts receivable and subscription
receivable from limited partners (15,682,951) 1,513,240
Increase in prepaid expenses (304,028) (93,938)
Increase in inventories (6,693,298) -
Increase (decrease) in accounts payable and accrued liabilities,
accounts payable to related parties and accrued interest 5,603,008 (532,858)
Increase in deferred income 1,020,380 -
------------ ------------
Total adjustments (1,808,211) 904,939
------------ ------------
Net cash used in operating activities (19,183,553) (1,660,537)
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (5,013,111) (73,387)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of note payable to TLD - 19,960,000
Proceeds from the line of credit 26,000,000 -
------------ ------------
Net cash provided by financing activities 26,000,000 19,960,000
------------ ------------
Net increase in cash and cash equivalents 1,803,336 18,226,076
Cash and cash equivalents at:
Beginning of period 6,546,305 4,246,412
------------ ------------
End of period $ 8,349,641 $ 22,472,488
============ ============
Supplemental cash flow disclosure:
Capitalization of interest not paid $ - $ 297,300
============ ============
</TABLE>
The accompanying notes are integral part of these consolidated financial
statements.
5
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ClearComm, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
(Unaudited)
-----------
FOR THE SIX MONTH PERIOD ENDED June 30, 2000
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited Partners General
Units Amount Partner Total
------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Capital account balance (deficit) at
December 31, 1999 2,903.1 $26,271,899 ($15,489,239) $10,782,660
Six-month period ended June 30, 2000
Share of undistributed losses ( 13,031,506) ( 4,343,836) ( 17,375,342)
------- ----------- ------------ -----------
Capital account balance (deficit) at
June 30, 2000 2,903.1 $13,240,393 ($19,833,075) ($6,592,682)
======= =========== ============ ===========
</TABLE>
The accompanying notes are integral part of these consolidated financial
statements.
6
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CLEARCOMM, L.P.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND INTRODUCTION
The unaudited interim consolidated financial statements presented
herein have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the instructions to Form
10-Q and Regulation S-X pertaining to interim financial statements. Accordingly,
they do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The unaudited interim
consolidated financial statements reflect all adjustments, consisting of normal
recurring adjustments and accruals which, in the opinion of management, are
considered necessary for a fair presentation of the Partnership's financial
position at June 30, 2000 and 1999 and results of operations and cash flows for
six month period ended June 30, 2000 and 1999. The unaudited interim
consolidated financial statements should be read in conjunction with the summary
of significant accounting policies and notes to consolidated financial
statements included in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1999. Results of operations for interim periods are not
necessarily indicative of the results that may be expected for the full year.
The Partnership was formed in January 1995 and is managed by its
General Partner, SuperTel Communications Corp. The Partnership was organized to
acquire, own, consult and operate personal communication services PCS licenses
in the Block C band and to take advantage of the benefits that the FCC has set
aside for Entrepreneurs. The Partnership owns the Puerto Rico Licenses, which
consist of two 15 MHz PCS licenses covering Puerto Rico, and the California
Licenses, which consist of five 15 MHz PCS licenses covering the California
cities of Eureka, Redding, Modesto, Merced and Visalia.
The Partnership commenced commercial operations of its PCS network in
Puerto Rico on September 26, 1999, when it began offering wireless services in
Puerto Rico to the public. Prior to that date, its income had consisted of
interest earnings only. Since the Partnership has only recently commenced
commercial operations, the comparisons presented below may not be indicative of
future operations.
The Partnership established its Puerto Rico network by forming a wholly
owned subsidiary, NewComm Wireless Services, Inc. (NewComm) on January 29, 1999.
On February 4, 1999, the Partnership and NewComm entered into an agreement with
Telefonica Larga Distancia de Puerto Rico, Inc. (TLD), whereby the Partnership
contributed its two Puerto Rico Licenses to NewComm and TLD provided NewComm a
$19,960,000 loan to develop the Puerto Rico Licenses. TLD's loan is pursuant to
a secured convertible promissory note (the "Note") which is convertible into
49.9% of NewComm's common stock. The Note bears interest at the floating rate of
the 90 days London Interbank Offer Rate (LIBOR) plus 1 - 1/2%. The Note however,
cannot be converted until the FCC authorizes TLD to hold more than a 25% equity
interest in NewComm. TLD also received an option (the "Option") to buy an
additional 0.02%, which would bring its ownership to 50.1%, subject to a
third-party valuation and FCC approval.
The Option cannot be exercised prior to January 22, 2002, unless the ownership
restrictions on the Puerto Rico licenses are eliminated by the FCC. NewComm,
however, has the option to buyout TLD in the last year before the restrictions
on the Puerto Rico licenses lapse.
With respect to its California Licenses, which cover approximately 1.7
million POPS in California, the Partnership anticipates establishing the
California Network. Although no assurances can be made, the Partnership
anticipates that it will negotiate acceptable agreements regarding these
licenses so that it will be able to offer wireless services in the regions
covered by these licenses.
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2. NET LOSS PER LIMITED PARTNERSHIP UNIT
Net loss per limited partnership unit is computed by dividing net loss
for the period by the weighted-average number of limited partnership units
outstanding during the period.
3. LINE OF CREDIT PAYABLE TO TLD
During February 2000, NewComm obtained additional financing from TLD in
the form of a line of credit of $30 million. As of June 30, 2000, $26,000,000
were outstanding under this credit facility. The line of credit will be due upon
commencement of a $60 million bridge loan, which is scheduled to commence in
September 2000.
4. NEW ACCOUNTING PRONOUNCEMENTS
In December, 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements"
("SAB No. 101"). SAB No. 101 sets forth certain of the SEC staff's views on
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB No. 101 is effective for the first fiscal quarter of
the fiscal year beginning after December 15, 1999. The adoption of SAB No. 101
did not have a material effect on the Partnership's results of operations or
financial position.
The Financial Accounting Standards Board issued Statement of SFAS No.
133,"Accounting for Derivative Instruments and Hedging Activities" in June,
1998. The Company will adopt SFAS No. 133 effective June 1, 2001. The Company
has not yet determined the impact of the adoption of SFAS No. 133 on future
results of operations or financial condition, but does not expect it to have a
material effect.
5. SEGMENT INFORMATION
The Partnership adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" during 1999. The Partnership determines its
segments based on geographic location. As the Partnership currently offers its
services to customers mainly located in Puerto Rico, there is only one segment
for purposes of SFAS No. 131. Please note that the California Licenses are not
operational.
6. FINANCING REQUIREMENTS
The Partnership commenced operations in September 1999 and is likely to
incur operating losses 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 means other than its revenues.
As part of the agreement with TLD, NewComm entered into contracts with
Lucent Technologies, Inc. ("Lucent") which requires them and other parties to
build a network that uses Code Division Multiple Access ("CDMA") protocol. It is
expected that the total cost will approximate $125 million.
Management has evaluated several alternatives for obtaining permanent
financing for paying the cost of the network and is considering accepting one of
the alternatives offered by two banks that provide for a bridge financing of
approximately $60 million and a permanent financing of approximately $150
million. (Refer to Item 2. MD & A section for additional explanation on
management plans).
Management believes that the Partnership will comply with all the
requirements for obtaining the permanent financing and believes that cash and
cash equivalents on hand, anticipated growth in revenues, vendor financing and
the permanent financing will be adequate to fund its operations through the end
of 2000.
Each of the Partnership's C-Block licenses is subject to an FCC
requirement that the Partnership construct network facilities that offer
coverage to at least one-third of the population in the market covered by such
8
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license within five years following the grant of the applicable license and to
at least two-third of the population within ten years following the grant.
Although the Partnership's buildup plan calls for to exceed these minimum
requirements,failure to comply with these requirements could result in the
revocation of the related licenses or the imposition of fines on the Partnership
by the FCC. Therefore, delays in constructing its PCS network for licenses
granted for markets outside Puerto Rico could have a material adverse effect on
the Partnership's financial conditions and results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The information contained in this Part I, Item 2 updates, and should be read in
conjunction with, information set forth in Part II, Items 7 and 8, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999, in
addition to the interim consolidated financial statements and accompanying notes
presented in Part 1, Item 1 of this Form 10-Q.
The Partnership was formed in January 1995 and is managed by its General
Partner, SuperTel Communications Corp. The Partnership was organized to acquire,
own, consult and operate personal communication services PCS licenses in the
Block C band and to take advantage of the benefits that the FCC has set aside
for Entrepreneurs. The Partnership owns the Puerto Rico Licenses, which consist
of two 15 MHz PCS licenses covering Puerto Rico, and the California Licenses,
which consist of five 15 MHz PCS licenses covering the California cities of
Eureka, Redding, Modesto, Merced and Visalia.
The Partnership commenced commercial operations of its PCS network in
Puerto Rico on September 26, 1999 when it began offering wireless services in
Puerto Rico to the public. Prior to that date, its income had consisted of
interest earnings only. Since the Partnership has only recently commenced
commercial operations, the comparisons presented below may not be indicative of
future operations.
The Partnership established its Puerto Rico network by forming a wholly
owned subsidiary, NewComm on January 29, 1999. On February 4, 1999 the
Partnership and NewComm entered into an agreement with TLD, whereby the
Partnership contributed its two Puerto Rico Licenses to NewComm and TLD provided
NewComm a $19,960,000 loan to develop the Puerto Rico Licenses. TLD's loan is
pursuant to a secured convertible promissory note (the "Note") which is a
convertible into 49.9% of NewComm's equity. The Note however, cannot be
converted until the FCC authorizes TLD to hold more than a 25% equity interest
in NewComm. TLD also received an option (the "Option") to buy an additional
0.02%, which would bring its ownership to 50.1%, subject to a third party
valuation and FCC approval. The Option cannot be exercised prior to January 22,
2002, unless the ownership restrictions on the Puerto Rico licenses are
eliminated by the FCC. NewComm, however, has the option to buyout TLD in the
last year before the restrictions on the Puerto Rico licenses lapse.
With respect to its California Licenses, which cover approximately 1.7
million POPS in California, the Partnership anticipates establishing the
California Network. Although no assurances can be made, the Partnership
anticipates that it will negotiate acceptable agreements regarding these
licenses so that it will be able to offer wireless services in the regions
covered by these licenses.
Forward-looking Statements
This Form 10-Q and future filings by the Partnership on Form 10-Q and
Form 8-K and future oral and written statements by the Partnership may include
certain forward-looking statements, including (without limitation) statements
with respect to anticipated future operating and financial performance, growth
opportunities and growth rates, acquisition and divestitive opportunities, and
other similar forecasts and statements of expectation. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
9
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"should," and variations of these words and similar expressions, are intended to
identify these forward-looking statements. Forward-looking statements by the
Partnership is based on estimates, projections, beliefs and assumptions of
management and are not guarantees of future performance. The Partnership
disclaims any obligation to update or revise any forward-looking statement based
on the occurrence of future events, the receipt of new information, or
otherwise.
Actual future performance, outcomes and results may differ materially
from those expressed in forward-looking statements made by the Partnership as a
result of a number of important factors. Examples of these factors include,
without limitation, failure to develop the Partnership's PCS licenses in
California due to an inability to obtain satisfactory financing or partners;
rapid technological developments and changes in the telecommunications industry;
ongoing deregulation (and the resulting likelihood of significantly increased
price and product/service competition) in the telecommunications industry as a
result of the Telecommunications Act of 1996 and other similar federal and state
legislation and the federal and state rules and regulations enacted pursuant to
that legislation; regulatory limitations on the Partnership's ability to compete
in the telecommunications services industry; and continuing consolidation in the
telecommunications services industry. In addition to these factors, actual
future performance, outcomes and results may differ materially because of other,
more general, factors including, without limitation, general industry and market
conditions and growth rates, domestic and international economic conditions,
governmental and public policy changes and the continued availability of
financing in the amounts, at the terms and on the conditions necessary to
support the Partnership's future business.
Results of Operations
Overview. The Partnership's results for the three months ended June 30, 2000
reflect a growth trend in the subscriber base. The Partnership reported a net
loss of $7,398,716 during the three months ended June 30, 2000, as compared to a
net loss of $8,113,277 during the three months ended March 31, 2000. The
reduction in net loss is related to the increase in subscriber base as well as
the revenue per user (rpu). The rpu was $40 in December 1999 and has increased
month over month to $73.62 at the end of March 2000 and $78.92 at the end of
June 2000.
Three Month Period Ended June 30, 2000 Compared With Three Month Period Ended
June 30, 1999
Revenues
The Partnership's revenues for the quarter ended June 30, 2000, which
amounted to $22,063,919 included $17,871,490 in airtime and $4,141,777 in
handset and accessories sales generated from NewComm's wireless operations,
which started in Puerto Rico in September 1999. In the second quarter of
2000,the Partnership had interest earnings of $50,652 compared to $274,157 in
the same period for the year 1999. The decrease in interest income during the
second quarter of year 2000 is attributable to the use of previously invested
cash to fund NewComm wireless operations.
Expenses
Expenses for the quarter ended June 30, 2000 totaled $29,462,635
compared to $2,208,697 for the same period in 1999. The increase in expenses
during 2000 is attributable to the costs associated with NewComm's operations,
which started in September 1999. The Partnership's expenses in the second
quarter of 2000 included $4,401,490 in costs of handset and accessories,
$2,473,550 for salaries and benefits, $2,064,167 for interest expense due on
notes payable and line of credit, $5,220,958 in depreciation and amortization,
$13,291,347 in advertising, sales and dealers commissions, interconnection,
management fee to general partner, rent and other expenses, $1,120,155 for legal
and professional services and $890,968 for consulting and legal services charged
by related parties such as TLD.
10
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Expenses for the quarter ended June 30, 1999 were mainly comprised of salaries
and benefits of $362,219, legal and professional fees of $205,183 and other
expenses of $1,279,243.
Six Month Period Ended June 30, 2000 Compared with Six Month Period Ended
June 30, 1999
Revenues
The Partnership's revenues for the six months ended June 30, 2000,
which amounted to $35,203,692 included $28,692,761 in airtime and $6,252,633 in
handset and accessories sales generated from NewComm's wireless operations. The
Partnership's sole source of revenue for the six months ended June 30, 1999 was
interest income because the Partnership had not commenced operations. Interest
income for this period was $401,736 compared to $258,299 for the same period of
2000. The decrease in interest income during year 2000 is attributable to the
use of previously invested cash to fund NewComm wireless operations.
Expenses
Expenses for the six months ended June 30, 2000 totaled $52,579,035
compared to $2,967,212 for the same period in 1999. The increase in expenses
during 2000 is attributable to the costs associated with NewComm's operations,
which started in September 1999. The Partnership's expenses in the first six
months of 2000 included $6,281,122 in costs of handset and accessories,
$5,055,690 for salaries and benefits, $3,826,283 for interest expense due on
notes payable and line of credit, $10,773,708 in depreciation and amortization,
$21,978,097 in advertising, sales and dealers commissions, interconnection,
management fee to general partner, rent and other expenses, $3,169,394 for legal
and professional services and $1,494,741 for consulting and legal services
charged by related parties such as TLD. Expenses for the six months ended June
30, 1999 were mainly comprised of salaries and benefits of $389,335, legal and
professional fees of $400,768 and other expenses of $1,540,633.
Liquidity and Capital Resources
As of June 30, 2000, the Partnership had cash and cash equivalents
amounting to $8,349,641, which are mostly related to the loan proceeds NewComm
received from TLD net of cash used in operating activities of $19,183,553 and
investing activities of $5,013,111 for the six months period ended June 30,
2000.
During the six months ended June 30, 2000, $19,183,553 million of cash
was used by operations. While the Company had a net loss of $17,375,342 for the
six months ended June 30, 2000, $10,773,708 million of the loss represented
non-cash depreciation and amortization expenses.
Accounts receivable increase of $15,682,951 is directly related to the
rapid increase in NewComm's customer base. Inventories as of June 30, 2000
resulted in an overall increase of $6,693,298. The overall increase is mainly
related to the build out of the PCS network, which requires NewComm to keep an
adequate quantity of inventory to supply the demand of its increasing customer
base.
In connection with the build out of the Partnership's Puerto Rico
Network, NewComm has incurred a liability with Lucent Technologies, Inc. (the
entity that is building out the network) for the PCS network under construction.
As of June 30, 2000, the Partnership owed $77,468,779 under this contract. The
total amount of this contract is approximately $125 million.
In addition, the Partnership owes the FCC $51,339,555 (undiscounted)
plus accrued interest at 6.5% of $750,132 in connection with the acquisition of
its PCS licenses. As of June 30, 2000, the notes payable to the FCC amount to
$39,067,327, net of the applicable discount.
The Partnership has a secured promissory note payable to TLD which
bears interest at the floating rate of 90 days LIBOR plus 1.5% and is due in
March 2004. In addition, in
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February 2000 the joint venture agreement with TLD was amended to provide
NewComm a revolving line of credit of approximately $30 million for working
capital from TLD.
The Partnership expects that the total cost to implement NewComm's
business plan to be approximately $200 million. This consists of approximately
$125 million in costs associated with building out the Puerto Rico Network, and
approximately $75 million to fund NewComm's operations until it becomes
profitable. NewComm has obtained short term financing up to $30 million at a
rate of 1.5% over 90 day LIBOR. In addition, the Partnership will be obtaining
long term financing of $150 million provided that the Partnership and TLD
contribute additional capital or convertible debt to NewComm. The Partnership
believes that the additional capital contribution or convertible debt, along
with the proposed long term financing, would fully fund NewComm's operations.
The Partnership anticipates that earnings and cash distributions
derived from its Puerto Rico Network once it is fully operational, and, if
necessary, additional capital calls from its Investors or accessing the public
capital markets, should provide it with the liquidity to meet its obligations.
The Partnership also expects that once it is able to develop its California
Licenses, it will have additional sources of revenues and profits.
ITEM 3. QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Partnership's exposure to market risk through derivative financial
instruments and other financial instruments is not material because the
Partnership does not use derivative financial instruments and does not have
foreign currency exchange risks. The Partnership invests cash balances in excess
of operating requirements in a short-term money market account. As of June 30,
2000, the Partnership had cash equivalents and short-term investments of
approximately $8,349,641 consisting of cash and highly liquid, short-term
investments in a money market account.
The Partnership's cash and cash equivalents will increase or decrease
by an immaterial amount if market interest rates increase or decrease, and
therefore, its exposure to interest rate changes has been immaterial. The
Partnership's loans payable to the FCC have a fixed interest rate of 6.5% and
therefore are not exposed to interest rate risks. The TLD Note relating to
indebtedness of NewComm bears interest at the floating rate of the 90 days LIBOR
plus 1.5% (6.95% at June 30, 2000) and is due in March 2004. The Line of Credit
payable to TLD also bears interest at the rate of 1.5% over the 90 days LIBOR
rate, due upon commencement of a $60 million bridge loan scheduled to be
executed in September 2000. The amount owed to Lucent in connection with its
build out of the Puerto Rico Network consists of a deferred price and therefore
are not subject to interest rate risk.
12
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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, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
27.0 Financial Data Schedule
(b) The Partnership filed a Form 8-K on May 1, 2000 with respect to Item 4:
Changes in Registrant's Certifying Accountant.
ITEMS 2, 3, 4 and 5 are not applicable have been omitted.
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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.
Date: August 14, 2000 By: /s/ Javier O. Lamoso
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Name: Javier O. Lamoso
Title: President
