**Securities and Exchange Commission**

**Washington, D.C. 20549**

 

 

**FORM 10-Q**

 

** **
| **(Mark One)** |   |                                                      |
|----------------|--------|-----------------------------------------------------------|
| ý         |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15 (d) OF** |
|           |   | **THE SECURITIES EXCHANGE ACT OF 1934**                   |

 

**For the quarterly period ended September 30, 2002**

 
| o      |   | **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.**

(Exact name ofregistrant as specified in its charter)

 

 
| **Delaware**                                                      | **66-0514434**      |
|-------------------------------------------------------------------|---------------------|
| (State or other  jurisdiction of                                  | (I.R.S. Employer    |
| incorporation or  organization)                                   | Identification No.) |
|                                                              |                |
| **268  Muñoz Rivera Ave. Suite 2206  Hato Rey, Puerto Rico** | **00918-1929**      |
| (Address of principal  executive offices)                         | (Zip Code)          |

 

Registrant’s telephonenumber, including area code: **(787) 620-0140**

 

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months and (2) has been subject to such filingrequirements for the past 90 days.

Yes   ý  No   o

 

 

 

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ClearComm, L.P.

INDEX

 
| PART I   FINANCIAL INFORMATION |                                                                                                                                              |
|------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                                              |
| Item 1.                                  | Financial Statements                                                                                                                              |   |
|                                     |                                                                                                                                              |   |
|                                     | Consolidated  Statements of Assets, Liabilities and Partners’ Deficit as of September 30,  2002 (unaudited) and December 31, 2001 (audited)  |   |
|                                     |                                                                                                                                              |   |
|                                     | Consolidated  Statements of Revenues and Expenses for the three-month and nine-month  periods ended September 30, 2002 and 2001 (unaudited). |   |
|                                     |                                                                                                                                              |   |
|                                     | Consolidated  Statements of Changes in Partners’ Deficit for the nine-month period ended  September 30, 2002 (unaudited)                |   |
|                                     |                                                                                                                                              |   |
|                                     | Consolidated  Statements of Cash Flows for the nine-month periods ended September 30,  2002 and 2001 (unaudited)                             |   |
|                                     |                                                                                                                                              |   |
|                                     | Notes  to Interim Consolidated Financial Statements (unaudited)                                                                                   |   |
|                                     |                                                                                                                                              |   |
| Item  2                                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                       |   |
|                                     |                                                                                                                                              |   |
| Item  3                                  | Quantitative  Disclosure About Market Risk.                                                                                                       |   |
|                                     |                                                                                                                                              |   |
| PART II                                  | OTHER INFORMATION                                                                                                                                 |   |
|                                     |                                                                                                                                              |   |
| Item 1.                                  | Legal Proceedings                                                                                                                                 |   |
|                                     |                                                                                                                                              |   |
| Item 6.                                  | Exhibits and  Reports on Form 8-K                                                                                                                 |   |
|                                     |                                                                                                                                              |   |
| Signatures.                              |                                                                                                                                              |
|                                     |                                                                                                                                              |
| Exhibit Index.                           |                                                                                                                                              |

 

 

2

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PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

ClearComm, L.P.

CONSOLIDATED STATEMENTSOF ASSETS, LIABILITIESAND PARTNERS’ DEFICIT

 
|                                                                    |   | **September  30,** |        | **December  31,** |   |
|-------------------------------------------------------------------------|--------|--------------------|-------------|-------------------|--------|
|                                                                    |   | **2002**           |        | **2001**          |   |
|                                                                    |   | **(Unaudited)**    |        | **(Audited)**     |   |
| ASSETS                                                                  |   |               |        |              |   |
| CURRENT ASSETS:                                                         |   |               |        |              |   |
| Cash and cash  equivalents                                              |   | $                  | 15,732,595  |              | $      | 10,241,902 |   |
| Accounts  receivable, net of allowance for doubtful accounts            |   | 19,225,585         |        | 19,099,986        |   |
| Accounts  receivable due from officer                                   |   | 106,500            |        | 102,000           |   |
| Insurance claim  receivable                                             |   | 0                  |        | 1,496,324         |   |
| Investment in  eMilios                                                  |   | 205,962            |        | —            |   |
| Inventories                                                             |   | 10,974,536         |        | 10,305,254        |   |
| Prepaid expenses                                                        |   | 839,629            |        | 652,279           |   |
| Total current  assets                                                   |   | 47,084,807         |        | 41,897,745        |   |
|                                                                    |   |               |        |              |   |
| DEFERRED  FINANCING COSTS, net                                          |   | —             |        | 906,731           |   |
| PCS LICENSES,  net                                                      |   | 55,541,863         |        | 57,517,974        |   |
| PROPERTY AND  EQUIPMENT, net                                            |   | 100,504,507        |        | 102,095,953       |   |
|                                                                    |   | $                  | 203,131,177 |              | $      | 202,418,403 |   |
| LIABILITIES AND  PARTNER’S DEFICIT                                 |   |               |        |              |   |
| CURRENT  LIABILITIES:                                                   |   |               |        |              |   |
| Accounts payable  and accrued liabilities                               |   | $                  | 27,939,654  |              | $      | 27,868,716 |   |
| Note payable to  Lucent Technologies                                    |   | 60,531,697         |        | 60,531,697        |   |
| Bridge Loan  Facility                                                   |   | 60,000,000         |        | 60,000,000        |   |
| Accounts payable  to related parties                                    |   | 10,815,708         |        | 8,705,353         |   |
| Note Payable to  Alcatel                                                |   | 7,436,029          |        | 12,790,140        |   |
| Accrued interest                                                        |   | 3,531,546          |        | 3,517,319         |   |
| Deferred income                                                         |   | 1,053,620          |        | 1,550,665         |   |
| Total current  liabilities                                              |   | 171,308,253        |        | 174,963,890       |   |
| LONG-TERM NOTES  PAYABLE                                                |   | 92,035,349         |        | 81,723,962        |   |
| MINORITY  INTEREST                                                      |   | 12,198,869         |        | 13,362,939        |   |
|                                                                    |   |               |        |              |   |
| PARTNER’S  DEFICIT                                                 |   |               |        |              |   |
| Limited  partners’ capital (2,907.7 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                                                              |   | (96,846,385        | )           | (92,067,478       | )      |
| Total partners’  deficit                                           |   | (72,411,295        | )           | (67,632,388       | )      |
|                                                                    |   | $                  | 203,131,177 |              | $      | 202,418,403 |   |

 

The accompanying notes are integral part of these consolidatedstatements.

 

3

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ClearComm, L.P.

CONSOLIDATED STATEMENTSOF REVENUES AND EXPENSES (UNAUDITED)

 
|                                                    |   | **Three-Month  Periods Ended September 30** |       | **Nine-Month  Periods Ended September  30** |   |
|---------------------------------------------------------|--------|---------------------------------------------|------------|--------------------------------------------------|--------|
|                                                    |   | **2002**                                    |       | **2001**                                         |   | **2002** |   | **2001** |   |
| **Revenues:**                                           |   |                                        |       |                                             |   |   |   |   |   |
| Service revenues                                        |   | $                                           | 20,340,849 |                                             | $      | 27,920,018 |   | $ | 72,411,264 |   | $ | 80,295,479 |   |
| Handset and  accessories sales                          |   | 5,868,471                                   |       | 2,924,974                                        |   | 9,581,532 |   | 12,081,137 |   |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
|                                                    |   | 26,209,320                                  |       | 30,844,992                                       |   | 81,992,796 |   | 92,376,616 |   |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Operating Cost and Expenses:**                        |   |                                        |       |                                             |   |   |   |   |   |
| Cost of handset and accessories                         |   | 1,346,332                                   |       | 6,906,803                                        |   | 13,778,576 |   | 24,712,623 |   |
| Interconnection expense                                 |   | 754,137                                     |       | 1,079,937                                        |   | 3,734,885 |   | 3,493,079 |   |
| Sales and dealers commissions                           |   | 1,364,697                                   |       | 2,258,949                                        |   | 3,624,206 |   | 6,503,361 |   |
| Salaries and benefits                                   |   | 4,486,661                                   |       | 4,032,313                                        |   | 11,822,554 |   | 11,623,493 |   |
| Advertising expense                                     |   | 1,398,567                                   |       | 2,047,188                                        |   | 6,289,900 |   | 6,071,154 |   |
| Legal and professional services                         |   | 2,917,803                                   |       | 3,160,410                                        |   | 7,615,695 |   | 7,965,526 |   |
| Depreciation and amortization                           |   | 4,203,439                                   |       | 3,821,063                                        |   | 12,223,068 |   | 13,715,283 |   |
| Provision for doubtful accounts                         |   | 2,143,788                                   |       | 1,969,556                                        |   | 7,598,802 |   | 7,873,389 |   |
| Rent expense                                            |   | 7,269,060                                   |       | 3,212,212                                        |   | 11,440,856 |   | 9,169,892 |   |
| Taxes other than income                                 |   | 1,024,724                                   |       | (481,365                                         | )      | 2,949,949 |   | 2,952,565 |   |
| Other expenses                                          |   | 1,468,339                                   |       | 1,942,305                                        |   | 3,951,991 |   | 5,572,785 |   |
| Management fee to General Partner                       |   | 34,000                                      |       | 32,000                                           |   | 96,000 |   | 96,000 |   |
| Services rendered by related parties                    |   | 1,309,270                                   |       | 1,533,073                                        |   | 4,330,612 |   | 4,013,584 |   |
| Gain on sale of Visalia-Porterville license             |   | —                                      |       | —                                           |   | — |   | (4,814,337 | ) |
| Gain on sale of NewComm’s Stock to Fleet           |   |                                        |       |                                             |   | (12,569,784 | )  |   |   |
|                                                    |   | 29,720,818                                  |       | 31,514,444                                       |   | 76,887,311 |   | 98,948,397 |   |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Income (Loss) from Operations**                       |   | (3,511,498                                  | )          | (669,452                                         | )      | 5,105,485 |   | (6,571,781 | ) |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Other Income (Expense)**                              |   |                                        |       |                                             |   |   |   |   |   |
| Interest income                                         |   | 12,737                                      |       | 154,327                                          |   | 318,199 |   | 489,553 |   |
| Interest expense                                        |   | (3,062,518                                  | )          | (3,627,182                                       | )      | (11,796,876 | ) | (11,719,876 | ) |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
|                                                    |   | (3,049,781                                  | )          | (3,472,855                                       | )      | (11,478,677 | ) | (11,230,323 | ) |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Net Income (Loss) before Minority  Interest**         |   | (6,561,279                                  | )          | (4,142,306                                       | )      | (6,373,192 | ) | (17,802,104 | ) |
| **Minority Interest**                                   |   | 561,202                                     |       | 187,873                                          |   | 1,594,285 |   | 894,565 |   |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Net Income (Loss)**                                   |   | $                                           | (6,000,077 | )                                                | $      | (3,954,433 | ) | $ | (4,778,907 | ) | $ | (16,907,539 | ) |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Net Income (Loss) Attributable to  General Partner**  |   | $                                           | (1,500,019 | )                                                | $      | (988,608 | ) | $ | (1,194,727 | ) | $ | (4,226,885 | ) |
|                                                    |   |                                        |       |                                             |   |   |   |   |   |
| **Net Income (Loss) Attributable to  Limited Partners** |   | $                                           | (4,500,058 | )                                                | $      | (2,965,825 | ) | $ | (3,584,180 | ) | $ | (12,680,654 | ) |

 

The accompanying notes are integral part of these consolidatedfinancial statements.

4

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ClearComm, L.P.

CONSOLIDATED STATEMENTSOF CHANGES IN PARTNERS’ DEFICIT (Unaudited)

FOR THE NINE-MONTH PERIODENDED SEPTEMBER 30, 2002

 
|                                        |   | **Limited  Partners** |   | **General** |        |        |        |
|---------------------------------------------|--------|-----------------------|--------|-------------|-------------|-------------|-------------|
|                                        |   | **Units**             |   | **Amount**  |        | **Partner** |        | **Total** |   |
| Balance  (deficit) at December 31, 2001     |   | 2,907.7               |   | $           | (50,724,291 | )           | (16,908,097 | ) | (67,632,388 | ) |
| Nine-month  period ended September 30, 2002 |   |                  |   |        |        |        |        |   |   |
| Net loss                                    |   |                  |   | (3,584,180  | )           | (1,194,727  | )           | (4,778,907 | ) |
| Balance  (deficit) at June 30, 2002         |   | 2,907.7               |   | $           | (54,308,471 | )           | (18,102,824 | ) | (72,411,295 | ) |

 

The accompanying notes are integral part of these consolidatedfinancial statements.

 

5

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ClearComm, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|                                                                                                 |   | **Nine-Month  Periods Ended** |       |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                                                 |   | **September  30,**            |       | **September  30,** |   |
|                                                                                                 |   | **2002**                      |       | **2001** |   |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**                                                            |   |                          |       |   |   |
| Net (Income)                                                                                         |   | $                             | (4,778,907 | ) | $ | (16,907,539 | ) |
|                                                                                                 |   |                          |       |   |   |
| Adjustments to  reconcile net (income) for the period to net cash used in  operating activities |   |                          |       |   |   |
| Depreciation and  amortization                                                                       |   | 12,223,068                    |       | 13,715,283 |   |
| Provision for  doubtful accounts                                                                     |   | 7,598,802                     |       | 7,873,389 |   |
| Minority  interest                                                                                   |   | (1,594,285                    | )          | (894,565 | ) |
| Gain from sale  of Visalia-Porterville license                                                       |   | —                        |       | (4,814,337 | ) |
| Increase in  accounts receivable                                                                     |   | (7,724,401                    | )          | (5,710,904 | ) |
| Increase in  accounts receivable due from officer                                                    |   | (4,500                        | )          | (101,000 | ) |
| Increase  (decrease) in insurance claim receivable                                                   |   | 1,496,320                     |       | (234,673 | ) |
| Increase in  inventories                                                                             |   | (669,282                      | )          | (2,171,388 | ) |
| Increase in  prepaid expenses and deferred financing cost                                            |   | 719,381                       |       | 787,285 |   |
| (Decrease)  increase in accounts payable and accrued liabilities                                     |   | 70,942                        |       | 1,133,906 |   |
| Increase in  accounts payable to related parties                                                     |   | 2,110,356                     |       | 3,287,410 |   |
| Increase  (decrease) in accrued interest                                                             |   | (3,670,797                    | )          | 1,700,143 |   |
| (Decrease)  increase in deferred income                                                              |   | (497,045                      | )          | (368,209 | ) |
| Total  adjustments                                                                                   |   | 10,058,558                    |       | 16,277,304 |   |
| Net cash  provided by operating activities                                                           |   | 5,279,651                     |       | (630,235 | ) |
|                                                                                                 |   |                          |       |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                               |   |                          |       |   |   |
| Acquisition of  property and equipment                                                               |   | (8,655,511                    | )          | (7,544,445 | ) |
| Gain on Sale of  Stock to Fleet                                                                      |   | (12,569,784                   | )          | — |   |
| Investment in  eMilios                                                                               |   | (205,962                      | )          | — |   |
| Net cash (used  in) operating activities                                                             |   | (21,431,257                   | )          | (4,841,232 | ) |
|                                                                                                 |   |                          |       |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                               |   |                          |       |   |   |
| Proceeds from  sale of Visalia-Porterville license                                                   |   | —                        |       | 9,500,000 |   |
| Proceeds from  the sale Stock to NewComm                                                             |   | 13,000,000                    |       | — |   |
| Capital  contribution from minority interest                                                         |   | —                        |       | 5,000,000 |   |
| Proceeds from  issuance of notes payable to TLD                                                      |   | 13,996,410                    |       | 4,990,000 |   |
| Payment of Note  Payable to Lucent                                                                   |   | —                        |       | (8,298,808 | ) |
| Payment of Note  Payable to Alcatel                                                                  |   | (5,354,111                    | )          |   |   |
| Net cash  provided by financing activities                                                           |   | 21,642,299                    |       | 11,191,192 |   |
|                                                                                                 |   |                          |       |   |   |
| NET INCREASE IN  CASH AND CASH EQUIVALENTS                                                           |   | 5,490,693                     |       | 3,016,512 |   |
|                                                                                                 |   |                          |       |   |   |
| CASH AND CASH  EQUIVALENTS, beginning of period                                                      |   | 10,241,902                    |       | 9,338,798 |   |
|                                                                                                 |   |                          |       |   |   |
| CASH AND CASH  EQUIVALENTS, end of period                                                            |   | $                             | 15,732,595 |   | $ | 12,355,310 |   |
|                                                                                                 |   |                          |       |   |   |
| SUPPLEMENTAL  CASH FLOWS INFORMATION:                                                                |   |                          |       |   |   |
| Network  construction costs financed through note payable to Lucent and accounts  payable            |   | $                             | —     |   | $ | 14,233,744 |   |
| Accounts  receivable written-off against the allowance for doubtful accounts                         |   | $                             | 9,227,981  |   | $ | 9,143,191 |   |
| Interest paid                                                                                        |   | $                             | 11,796,876 |   | $ | 9,876,260 |   |

 

The accompanying notes are integral part of these consolidatedfinancial statements.

 

6

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CLEARCOMM, L.P.

NOTES TO INTERIMCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

1.                                       BASIS OF PRESENTATION AND INTRODUCTION

 

                The unauditedinterim consolidated financial statements presented herein have been preparedin accordance with accounting principles generally accepted in the UnitedStates for interim financial statements and with the instructions to Form 10-Qand Regulation S-X pertaining to interim financial statements.  Accordingly, they do not include allinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements.  The unaudited interim consolidated financialstatements reflect all adjustments, consisting of normal recurring adjustmentsand accruals which, in the opinion of management, are considered necessary fora fair presentation of the Partnership’s financial position at September 30,2002 and results of operations and cash flows for the three-month periods endedSeptember 30, 2002 and 2001.  Theunaudited interim consolidated financial statements should be read inconjunction with the summary of significant accounting policies and notes toconsolidated financial statements included in the Partnership’s Annual Reporton Form 10-K for the year ended December 31, 2001.  Results of operations for interim periods are not necessarilyindicative of the results that may be expected for the full year.

 

                ClearComm, L.P.(the “Partnership”) is a limited partnership organized on January 24, 1995under the laws of the State of Delaware. The Partnership was formed to file applications with the FederalCommunications Commission (“FCC”) under personal communications service (“PCS”)frequency Block C, originally restricted to minorities, small businesses anddesignated entities, to become a provider of broadband PCS.  The Partnership will terminate on December31, 2005, or earlier upon the occurrence of certain specified events asdetailed in the Partnership Agreement.

 

                SuperTel CommunicationsCorp. (“SuperTel”), a Puerto Rico corporation, is the General Partner.  Its total share of the income and losses ofthe Partnership is 25% in accordance with the Partnership Agreement.  Approximately 1,600 limited partners alsoinvested in the Partnership through a private placement.

 

                On January 22,1997, the Partnership was granted the PCS Block C licenses for Puerto Rico andcertain cities in California.

 

NewComm Wireless Services, Inc.

 

                On February 4,1999, the Partnership entered into a joint venture agreement (the “JointVenture Agreement”) with Telefónica Larga Distancia De Puerto Rico, Inc.(“TLD”) to jointly develop and operate certain PCS licenses in PuertoRico.  Among the most important provisionsof the Joint Venture Agreement are the following:

 

•                    The Partnership transferred all of its Puerto Rico PCSlicenses including its related debt with the FCC to NewComm Wireless Services,Inc. (“NewComm”), a newly organized Puerto Rico corporation, in exchange forall of NewComm’s issued and outstanding common stock.

 

•                    TLD loaned approximately $20 million to NewComm bymeans of a secured convertible promissory note payable (the “PromissoryNote”).  The Promissory Note is securedby a security agreement pursuant to which a security interest is imposed uponNewComm’s assets, a Partnership guarantee and a pledge agreement, as defined.

 

•                    Once certain regulatory and other requirements aremet, the Promissory Note will be converted to NewComm’s common stockrepresenting approximately 49.9% of NewComm’s equity at the time of theexchange.  Originally, TLD had theoption to buy an additional .2%, which would have brought its ownership to50.1%, subject to a third party valuation of NewComm’s stock and approval bythe FCC.  On June 26, 2001, the JointVenture Agreement was amended eliminating the TLD Option to buy the additional..2%.  However, by means of a StockPurchase Agreement dated as of March 12, 2002, and subject to certainconditions, the Partnership has agreed to sell an amount of shares equal to0.2% of NewComm to TLD.

 

•                    The new Sale Agreement provides that at any time after14 months from the signing of the Stock Purchase Agreement with TLD, that is,any time after May 2003, ClearComm (or TLD), as the case may be, may trigger ashareholder obligation to sell NewComm. Within 30 days of a notice of sale, TLD (or ClearComm as the case maybe) would have the right to purchase ClearComm’s (or TLD’s) interest.  The purchase price to be paid at that timewould be based on a valuation performed by the investment banking firm thatprepared the one under the Stock Purchase Agreement.  If TLD does not exercise its right to buy out ClearComm’sinterest, the shareholders will be bound to proceed with the sales

 

7

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        process to attempt a sale of NewComm.  All shareholders are bound to cooperate andundertake all that is

        necessary in that effort.  Further, the shareholders are bound toaccept the highest price proposed by an

        interested buyer, which price must bepayable in cash or freely tradable securities, or a combination

        thereof, and which must be for a pricenot less than the valuation prepared by the investment  banker.

 

•                    Some additional points are that at the closing of thesale of NewComm the Management Agreement and the Technology Transfer Agreementheld by TLD will terminate.  Also, nopremium for controlling interest or discount for holding a minority interest inNewComm will apply.  The Sale Agreementshall continue in full force and effect even if the Stock Purchase Agreementwith TLD, for whatever reason, does not close.

 

 

 

                In September 1999,NewComm commenced providing PCS services in Puerto Rico.

 

                In each ofNovember 2000, December 2000, and March 2001, NewComm received $5,000,000, fromSyndicated Communications Venture Partners IV, L.P. (Syncom), a third party, inexchange for approximately 4.92% ownership in NewComm. Syncom has contributed$25 million to NewComm in exchange for an approximately 8.2% ownership interestin NewComm.  The last $10 million trenchwas contributed in November 2002.

 

                On March 2, 2002,the Partnership sold approximately 4.08% of NewComm to a group of investors ledby Fleet Development Ventures for $13 million. The Partnership and TLD contributed approximately $9 million each to NewCommin the form of equity and convertible debt, respectively. The Partnership andTLD have committed an additional $10M each to close the Project FinanceFacility.  The Partnership believes ithas obtained sufficient funds, together with TLD, to provide NewComm with thecapital necessary for the Project Finance Facility and to fully fund NewComm’soperations.

 

 

Internet Surfing Stores of P.R., Inc. - (eMilios)

 

                On April 16, 2002,ClearComm, L.P. entered into a Shareholders’ Agreement to form a joint venturewith eMilios International, L.L.C., a Florida limited liability company, topromote and establish in Puerto Rico the eMilios concept.  The joint venture was formed under a PuertoRico corporation named Internet Surfing Stores of Puerto Rico, Inc.(“ISS”).  The Partnership owns 49% andeMilios International owns 51% of ISS.

 

                The eMiliosconcept involves internet communication galleries that are geared towardseducating people in the use of computers and the internet, and acts as acommunication and recreational center as well. The broadband connectivity that is offered at eMilios allows the storesto efficiently offer internet communications and also access to a great varietyof interactive content, such as cyber games, as well as software and tools forfree lancers and small business entities.  The service is provided and collected with a proprietary smart card andsoftware application.  The commitment ofthe Partnership to ISS is $1 million and eMilios International has committed$500,000 in cash plus trade-name, systems, software, and technology know-howequivalent to $500,000.  The Partnershipis responsible for the management and day-to-day operations of ISS.   ISS opened its first store with 48 stationson October 23, 2002.  A second store ofsimilar size is scheduled to open during the month of December.  The investment has the benefit of an exitmechanism.  At any time after 2003,ClearComm can force the acquisitions of its shares in ISS or the sale of thewhole company.

 

2.             FINANCINGREQUIREMENTS

 

                The accompanyingconsolidated financial statements have been prepared on a going concern basis,which contemplates the realization of assets and the satisfaction ofliabilities in the normal course of business. The Partnership commenced operations in September 1999 and has  incurred operating losses amounting to $4.8million for the nine-month period ended September 30, 2002 and incurredoperating losses of $16.9 million for the nine month period ended September 30,2001.  It also has working capitaldefining and partners’ capital deficits of $124.3 million and $72.4 million,respectively, as of September 30, 2002. The Partnership is likely to continue incurring losses until such timeas its subscriber base generates revenue in excess of the Partnership’sexpenses.  Development of a significantsubscriber base is likely to take time, during which the Partnership mustfinance its operations by means other than its revenues.

 

                As part of theagreement with TLD, NewComm entered into a contract with Lucent Technologies,Inc. (“Lucent”) that required Lucent to build a network that uses the CodeDivision Multiple Access (“CDMA”) protocol. The total cost of the network was approximately $125 million.  During 2000, NewComm’s management and Lucentagreed on formally extending the

 

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payment of up to $61.0 million of the total amount due under thecontract under a formal financing agreement. The financing agreement extended payments for an eight-month period(through June 2001) at an annual interest rate of 1.5% over 90-day LIBOR.  NewComm’s management and Lucent restructuredthis financing agreement, by means of a Promissory Note issued on September 26,2001 for the principal sum of $60.5 million plus 8% interest.   The parties are currently  negotiating to make this part of a permanentdebt facility.

 

During November 2000, NewComm entered into a $60million bridge loan agreement (the “Bridge Loan Facility”) with ABN-AMRO andBBVA (the “Banks”) with interest at 1.5% over 90-day LIBOR, which expired onMarch 15, 2001, and was extended until March 13, 2002, with an interest rateat .75% over 90-day LIBOR.  TheBridge Loan is now guaranteed by Telefónica Internacional, S.A. (TISA), anaffiliate of TLD.   On September 26,2002, the maturity date of the Bridge Loan Facility was extended to November29, 2002, and the Banks have agreed to extend it again until December 31,2002.  ClearComm and TLD continue towork towards securing a permanent financing facility, which will require thePartnership, through Syncom and TLD, to each contribute a total ofapproximately $25 million in equity and convertible debt.  As part of this commitment, during thesecond half of 2000, the first half of 2001, and second quarter of 2002, thePartnership, Syncom and TLD have contributed a total of $24 million in the formof equity and convertible debt, respectively.

 

                Each of thePartnership’s C-Block licenses is subject to a FCC requirement that thePartnership constructs network facilities that offer coverage to at leastone-third of the population in the market covered by such license within fiveyears following the grant of the applicable license and to at least two-thirdsof the population within ten years following the grant.   The Partnership is in compliance with theFCC coverage requirements in Puerto Rico and the California Licenses.

 

                Managementbelieves that the Partnership will comply with all the requirements forobtaining the financing and believes that cash and cash equivalents on hand,anticipated growth in revenues, vendor financing and the permanent financingwill be adequate to fund its operations, at a minimum, through the end of2002.  However, in the absence ofimproved operating results and cash flows, and without the closing of itscontemplated permanent financing, the Partnership may face liquidity problemsto fund its operations and meet its obligations.  As a result of these matters, substantial doubt exists about thePartnership’s ability to continue as a going concern.  The accompanying consolidated financialstatements do not include any adjustments that might result from the outcome ofthis uncertainty.

 

3.             OTHER ACCOUNTINGPRONOUNCEMENTS

 

                In June 1998, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards No. 133, “Accounting for Derivative Instruments andHedging Activities” (“SFAS 133”). SFAS 133 established accounting and reportingstandards requiring that every derivative instrument (including certainderivative instruments embedded in other contracts) be recorded in the balancesheet as either an asset or liability measured at its fair value. SFAS 133requires that changes in the derivative’s fair value be recognized currently inearnings unless specific hedge accounting criteria are met. In June 2000, theFASB issued Statement of Financial Accounting Standards No. 138 (“SFAS 138”)which amends SFAS 133 for certain derivative instruments and certain hedgingactivities. SFAS 133, as amended, is effective for fiscal years beginning afterJune 15, 2000. The Partnership adopted SFAS 133 beginning January 1, 2001, butdid not have any derivatives.

 

                In June 2001, theFinancial Accounting Standards Board issued SFAS No. 141, “BusinessCombinations” (effective July 1, 2001) and SFAS No. 142, “Goodwill and OtherIntangible Assets” (effective for the Company on January 1, 2002). SFAS No. 141prohibits pooling-of-interests accounting for acquisitions. SFAS No. 142specifies that goodwill and some intangible assets will no longer be amortizedbut instead will be subject to periodic impairment testing. The Company is inthe process of evaluating the financial statement impact of adoption of SFASNo. 142.

 

4.             LEGAL PROCEEDINGS

 

                The Partnership issubject to certain legal proceedings and an FCC proceeding, which weredescribed in the Partnership’s Form 10-K for the year ended December 31, 2001.

 

Sprint/Centennial

 

On September 21, 2001, NewComm Wireless Services, Inc.d/b/a MoviStar (“MoviStar”) filed a *Complaint*and *Motion and Memorandum of Law RequestingTemporary Restraining Order and Preliminary Injunction* in theFederal District Court for the District of Puerto Rico, which alleged seriousand unlawful interruptions, interferences and irreparable damages to MoviStar’s

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operations arising out of Sprint’s refusal tobroadcast an SID for the Puerto Rico market that will not interfere with theservices presently being offered by MoviStar to its subscribers.  During October 15th to 18th,2001, the District Court held an evidentiary hearing related to the injunctiverelief sought.  In its *Opinion andOrder* of**October 29, 2001, the District Courtordered Sprint to “immediately cease and desist from using SID 5142 and/or anyother SID which similarly interferes with plaintiff’s operations in PuertoRico.”

 

On October 30, 2001, Centennial filed a *Motion ofIntervention of Right* in which it requested leave from the DistrictCourt to join the Sprint litigation. Despite MoviStar’s opposition, the District Court granted Centennial’smotion on November 5, 2001.  Both Sprintand Centennial are currently appealing, in the First Circuit Court of Appeals,the injunctive relief granted by the DistrictCourt of Puerto Rico.  On April 6, 2002, the First Circuit Court ofAppeals issued an order reversing the injunction release.  On or about April 20, 2002, MoviStar filed aPetition for a Re-Hearing and the petition was denied.  However, MoviStar is continuing to pursueits damage claims and has now entered into a formal discovery of evidenceperiod.

 

 

 

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-looking Statements

 

                This Form 10-Q andfuture filings by the Partnership on Form 10-Q and Form 8-K and future oral andwritten statements by the Partnership may include certain forward-lookingstatements, including (without limitation) statements with respect toanticipated future operating and financial performance, growth opportunitiesand growth rates, acquisition and divestitive opportunities, and other similarforecasts and statements of expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,”“seeks,” “estimates,” and “should,” and variations of these words and similarexpressions, are intended to identify these forward-looking statements.  Forward-looking statements by thePartnership are based on estimates, projections, beliefs and assumptions ofmanagement and are not guarantees of future performance.  The Partnership disclaims any obligation toupdate or revise any forward-looking statement based on the occurrence offuture events, the receipt of new information, or otherwise.

 

                Actualfuture performance, outcomes and results may differ materially from thoseexpressed in forward-looking statements made by the Partnership as a result ofa number of important factors.  Examplesof these factors include, without limitation, failure to develop thePartnership’s PCS licenses in California due to an inability to obtainsatisfactory financing or partners capital; rapid technological developmentsand changes in the telecommunications industry; ongoing deregulation (and theresulting likelihood of significantly increased price and product/servicecompetition) in the telecommunications industry as a result of theTelecommunications Act of 1996 and other similar federal and state legislationand the federal and state rules and regulations enacted pursuant to thatlegislation; regulatory limitations on the Partnership’s ability to compete inthe telecommunications services industry; and continuing consolidation in thetelecommunications services industry.  Inaddition to these factors, actual future performance, outcomes and results maydiffer materially because of other, more general factors including, withoutlimitation, general industry and market conditions and growth rates, domesticand international economic conditions, governmental and public policy changesand the continued availability of financing in the amounts, at the terms and onthe conditions necessary to support the Partnership’s future business.

 

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Introduction

 

                Theinformation contained in this Part I, Item 2 updates, and should be read inconjunction with, information set forth in Part II, Items 7 and 8, in theCompany’s Annual Report on Form 10-K for the year ended December 31, 2000, inaddition to the interim consolidated financial statements and accompanyingnotes presented in Part 1, Item 1 of this Form 10-Q.

 

                The Partnershipwas formed in January 1995 and is managed by its General Partner, SuperTelCommunications Corp.  The Partnershipwas organized to acquire, own, consult and operate personal communicationservices PCS licenses in the Block C band and to take advantage of the benefitsthat the FCC has set aside for entrepreneurs. The Partnership owns the Puerto Rico Licenses, which consist of two 15MHz PCS licenses covering Puerto Rico, and the California Licenses, whichconsist of four 15 MHz PCS licenses covering the California cities of Eureka,Redding, Modesto, and Merced. The license covering Visalia-Porterville,California, was sold and transferred to Leap Wireless on June 8, 2001 for$9,500,000.

 

                The Partnershipcommenced commercial operations of its PCS network in Puerto Rico on September24, 1999 when it began offering wireless services in Puerto Rico to thepublic.  Prior to that date, its incomehad consisted of interest earnings only. Since the Partnership commenced commercial operations in 1999 and during2000 was still in the start-up process, the comparisons presented below may notbe indicative of future operations.

 

                The Partnershipestablished its Puerto Rico network by forming a wholly owned subsidiary,NewComm, on January 29, 1999.  OnFebruary 4, 1999, the Partnership and NewComm entered into an agreement withTLD, whereby the Partnership contributed its two Puerto Rico Licenses toNewComm and TLD provided NewComm a $19,960,000 loan to develop the Puerto RicoLicenses.  TLD’s loan is pursuant to asecured convertible promissory note (the “Note”) which is convertible into49.9% of NewComm’s equity.  The Notehowever, cannot be converted until the FCC authorizes TLD to hold more than a25% equity interest in NewComm.  Bymeans of a Stock Purchase Agreement executed on March 12, 2002, the Partnershiphas agreed to sell shares equal to 0.2% in NewComm to TLD conditioned to obtainingpermanent financing and a clear exit path for the Partnership.  The transaction is subject to FCC approvalalso.

 

                Since January 2002the Partnership has been offering wireless DSL service in certain areas withinthe California Licenses in compliance with the FCC build out requirements.

 

Results of Operations

 

                Three-monthperiod ended September 30, 2002 compared with three-month period endedSeptember 30, 2001.

 

Revenues

 

                The Partnership’srevenues for the three-month period ended September 30, 2002 totaled$26,209,320 as compared to $30,844,992 for the same period in 2001. Revenuesfor the three-month period ended September 30, 2002 included $20,340,849 inservice revenues and $5,868,471 in handset and accessories sales generated fromNewComm’s wireless operations, as compared to $27,920,018 and $2,924,974respectively, for the same period in 2001. The decrease in total revenues is mainly due to lesser handset andaccessories sales which were affected by handset units pricing adjustments.  Handset and accessories sales for the threemonth period ended September 30, 2002 includes customer contract base withtotal sales of $3.2 million, where as such account was included in servicerevenues in the same period in 2001. This reclassification entry accounts for the apparent increase in handsetand accessories sales as compared to the same period in 2001.

 

Expenses

 

                Expenses for thethree-month period ended September 30, 2002 totaled $29,720,818 as compared to$31,514,444 for the same period in 2001. During the third  quarter of  2002, the Partnership’s expenses included$1,346,332 ($6,906,803 as of September 30, 2001) in costs of handset andaccessories, $4,486,661 ($4,032,313 as of September 30, 2001) for salaries andbenefits, $2,917,803 ($3,160,410 as of September 30, 2001) for legal and professionalservices, $4,203,439 ($3,821,063 as of September 30, 2001) in depreciation and amortization, $ 2,143,788($1,969,556 as of  September 30, 2001)in provision for doubtful accounts, $13,313,524 ($10,091,227 as of  September 30, 2001) in interconnection,sales and dealers commissions, advertising, rent, taxes other than income,other expenses and management fee to General Partner, and $1,309,270($1,533,073 as of  September 30, 2001)for services rendered by related parties. However, the Arthur Andersen firm closed  in the month of June of 2002 and the firm’s local office closedat approximately the same time.  Effortsby Deloitte & Touche  to contactformer account managers and responsible partner have been unsuccessful.  Therefore, Deloitte & Touche has beenunable to complete their review of the Partnership’s financial statementspresented herein.  Furthermore, withoutnotes and documents of the former auditors, new expenses groupings have beencreated for this report.  Thus, a lineby line comparison of the expenses for the three-month period that endedSeptember 30, 2002 with the same period of expenses of 2001 may seem unclear.

 

                The overalldecrease in expenses of $1.8 million dollars is mainly due to a reduction inthe cost of handsets and accessories combined with an increase in rent expenseand taxes other than income.   The $29.7million total expenses for the three months period September  30, 2002 included rent expense of $7.3million which resulted in an increase as compared to the same period in 2001due to additional stores opened in a chain of local supermarkets and anincrease in site rent for new antennas located throughout the Island.

 

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                The decrease ininterest expense ($3,062,518 and $3,627,182 for the quarter ended September 30,2002 and 2001, respectively) is attributable to the reduction of debtoutstanding related to the Note Payable to Alcatel.

 

                Nine-month periodended September 30, 2002 compared with nine-month period ended September 30,2001

 

Revenues

 

                The Partnership’s revenues for the nine-month periodended September 30, 2002 totaled $81,992,796 as compared to $$92,376,616 forthe same period in 2001.  Revenues for the nine-month period endedSeptember 30, 2002 included $72,411,264 in service revenues and $9,581,532 inhandset and accessories sales generated from NewComm’s wireless operations, ascompared to $80,295,479 and $12,081,137 respectively, for the same period in2001.  The decrease in revenues ismainly due the reduction in handset and accessories sales and a pricingadjustment to the handsets.

 

Expenses

 

Expenses for the nine-month period ended September 30,2002 totaled $76,887,311 as compared to $98,948,397 for the same period in2001.  During the nine-month period ended September 30, 2002, the Partnership’sexpenses included $13,778,576 ($24,712,623 as of September 30, 2001) in costsof handset and accessories, $11,822,554 ($11,623,493 as of September 30, 2001)for salaries and benefits, $7,615,695 ($7,965,526 as of September 30, 2001) forlegal and professional services, $12,223,068 ($13,715,283 as of September 30,2001) in depreciation and amortization, $7,598,802 ($7,873,389 as of  September 30, 2001) in provision fordoubtful accounts, $32,087,787 ($33,858,836 as of September 30, 2001) ininterconnection, sales and dealers commissions, advertising, rent, taxes otherthan income, other expenses and management fee to General Partner, $4,330,612($4,013,584 as of  30, 2001) forservices rendered by related parties and a one time gain of $12,569,788 on thesale of stock to Fleet for the six month period ended in June 2002 and a onetime gain of $4,814,337 from the sale of the Visalia-Porterville, California,license.  However, the Arthur Andersenfirm closed in the month of June of 2002 and the firm’s local office closed atapproximately the same time. Efforts by Deloitte & Touche to contact formeraccount managers and responsible partner have been unsuccessful. Therefore,Deloitte & Touche has been unable to complete their review of the Partnership’sfinancial statements presented herein. Furthermore, without notes and documents of the former auditors, newexpenses groupings have been created for this report. And, a line by linecomparison of the expenses for the nine-month period that ended September 30,2002 with the same period of expenses of 2001 may seem unclear.

Net loss of $4,778,907for the nine-month period ended September 30, 2002 includes a $12.6 milliongain on the sale of the Partnership’s stock on NewComm to Fleet. Without suchgain the Partnership incurred in operating losses of $ 17.4 million as comparedto a net loss of $21.7 for the same period in 2001; the decrease in operatinglosses of $4.3 million is directly related to the reduction in the ongoingcosts of meeting the competition of existing cellular and PCS operators inorder to develop and maintain a subscriber base.  To meet competition, asubsidy is granted in the sale of handsets and accessories, on which a negativemargin is generated.  Such subsidy hasbeen significantly reduced with the increase of amounts charged to customersfor handsets combined with a reduction of the cost of acquisition of suchhandsets during the nine-month period ended September 30, 2002.   ThePartnership’s net loss for the first half of 2001 was offset by the, one time,$4,814,337 gain on sale of Visalia-Porterville, California, license**.**

 

 

Liquidity and Capital Resources

 

                Asof September 30, 2002, the Partnership had cash and cash equivalents amountingto $15,732,595, which are mostly related to proceeds from the sale of theVisalia-Porterville, California, license in the second quarter, 2001, and theFleet Transaction.

 

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                As part of theagreement with TLD, NewComm entered into a contract with Lucent Technologies,Inc. (“Lucent”) that required Lucent to build a network that uses the CodeDivision Multiple Access (“CDMA”) protocol. The total cost of the original network was approximately $125million.  During 2000, NewComm’smanagement and Lucent agreed on formally extending the payment of up to $61.0million of the total amount of network construction payable, at the time, undera formal financing agreement.  Thefinancing agreement was restructured as a Promissory Note on September 26,2001, with a principal sum of $60.5 million plus 8% interest, and NewComm is atpresent negotiating a restructuring of this debt to a permanent facility.

 

                Inaddition, the Partnership owes the United States federal governmentapproximately $51,339,555 (undiscounted) plus accrued interest at 6.5% inconnection with the acquisition of its PCS licenses.  As of September 30, 2002, the notes payable to FCC are presentednet of a discount.

 

                ThePartnership has a secured promissory note payable to TLD, which bears interestat the floating rate of 90-day LIBOR plus 1.5% and is due in March, 2004.

 

                The Partnershipestimates that the total cost to implement NewComm’s business plan will beapproximately $200 million.  Thisconsists of approximately $125 million in costs associated with building-outthe Puerto Rico Network, and approximately $75 million to fund NewComm’soperations until these become profitable. NewComm obtained a short term financing (“Bridge Loan”) of $60 millionwhich has been extended until November 29, 2002, with an interest rate of .75%over 90-day LIBOR.  The Bridge Loan isnow guaranteed by Telefónica Internacional, S.A. (TISA), an affiliate ofTLD.  ClearComm and TLD continue to worktowards securing a permanent financing facility.  The Partnership anticipates that banks, together with Lucent,will be willing to provide long term financing of approximately $150 million,provided that the Partnership and TLD contribute additional capital orconvertible debt to NewComm.  ThePartnership, through Syncom and TLD, contributed a total of $30 million ofadditional capital or convertible debt during the second half of 2000 and firsthalf of 2001.  In the second quarter thePartnership and TLD each contributed an additional $9 million convertible debtand capital, respectively.  Syncominvested $15 million in NewComm in exchange for 4.92% of NewComm. ClearCommsold approximately 4.08% of its interest in NewComm in exchange of $13 Millionduring the first quarter of 2002.  ThePartnership believes that the capital or convertible debt contributed by Syncomand TLD, along with the extended interim financing, will fully fund NewComm’soperations through the end of 2002.

 

                On March 2, 2002,the Partnership sold 4.08% of NewComm to a group of investors led by FleetDevelopment Ventures for $13 million. During the second quarter of 2002, the Partnership and TLD contributedapproximately $9 million each to NewComm in the form of equity and convertibledebt, respectively.  The Partnershipbelieves it has obtained sufficient funds, together with TLD, to provideNewComm with the capital necessary for the Project Finance Facility and tofully fund NewComm’s operations.

 

                As a result of therestructuring of its FCC debt in June 1998, the Partnership has no outstandingdebt on its California Licenses, which consist of 15MHz of bandwidth coveringan approximate population of 1.1 million people in Eureka, Redding, Merced, andModesto, all within the state of California. Holders of major C Block licenses covering areas surrounding the areascovered by the California Licenses are currently under bankruptcy courtproceedings, which adversely affect the Partnership’s ability to enter intojoint venture agreements to develop these licenses.  However, a re-auction of D, E, F and disaggregated C Blocklicenses was concluded on April 16, 1999. Another re-auction was concluded in January 2001.  However, this re-auction was set aside bythe Washington D.C. Court of Appeals on June 22, 2001.  The FCC has filed for an appeal of thisruling before the United States Supreme Court, and the Court has accepted toreview the case.  Accordingly, therecontinues to be uncertainty regarding the ownership of the licenses surroundingthe California Licenses.   ThePartnership is actively pursuing alliances and possible funding mechanisms todevelop its California Licenses.

 

                The Partnershipanticipates that earnings and cash distributions derived from its Puerto RicoNetwork, interim and permanent financing and, if necessary, additional capitalcalls from its Investors or accessing the public capital markets, shouldprovide it with the liquidity to meet its obligations.  The Partnership also expects that once it isable to develop its California Licenses, it will have additional sources ofrevenues and profits.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUTMARKET RISK

 

                The Partnership’sexposure to market risk through derivative financial instruments and otherfinancial instruments is not material because the Partnership does not usederivative financial instruments and does not have foreign currency exchangerisks.  The Partnership invests cashbalances in excess of operating requirements in short-term money marketfunds.  As of September 30, 2002, the

 

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Partnership had cash equivalents and short-term investments ofapproximately $15,732,595 consisting of cash and highly liquid, short-terminvestments in money market funds.

 

                The Partnership’scash and cash equivalents will increase or decrease by an immaterial amount ifmarket interest rates increase or decrease, and therefore, its exposure to interestrate changes has been immaterial.  ThePartnership’s loans payable to the FCC have a fixed interest rate of 6.5% andtherefore are not exposed to interest rate risks.  The TLD Note relating to indebtedness of NewComm bears interestat the floating rate of the 90-day LIBOR plus 1.5% and is due in March2004.  The Partnership, TLD, and Lucentare currently under negotiations to restructure the approximately $61 milliondebt owed to Lucent.

 

Controls and Procedures

 

                The Partnership’s Chief Executive Officer, Javier O.Lamoso, and the Partnership’s Chief Financial Officer, Edileen Salicrup, haveevaluated the Partnership’s disclosure controls and procedures within 90 daysof the filing of this report.

 

                Mr. Lamoso and Ms. Salicrup have concluded that thePartnership’s disclosure controls and procedures provide reasonable assurancethat the Partnership can meet its disclosure obligations.  The Partnership’s disclosure controls andprocedures are based upon a roll-up of financial and non-financial reportingthat is consolidated by TLE pursuant to the Partnership’s Management Agreementwith TLD.  The reporting process isdesigned to ensure that information required to be disclosed by the Partnershipin the reports that it files or submits with the Commission is recorded,processed, summarized and reported within the time periods specified in theCommission’s rules and forms.

 

                There have been no significant changes in thePartnership’s internal controls or in other factors that could significantlyaffect these controls subsequent to the date of their evaluation.

 

 

PART II: OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 

 

Information regardinglegal proceedings is disclosed in Part I, Item 1, Notes to Interim ConsolidatedFinancial Statements (unaudited), Section 4, and is hereby incorporated intoPart II, Item 1 by this reference.

 

 

 

 

ITEM 6.  EXHIBITSAND REPORTS ON FORM 8-K

 

(a)                                  List of Exhibits

 

Exhibit 99: Certifications by the Chief Executive Office and Chief Financial Officerpursuant to Section 1350 of Chapter b3 of Title 18 of the United States Code.

 

 

 

ITEMS 2, 3, 4 and 5 are not applicable and have been omitted.

 

 

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SIGNATURES

 

                Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|                           |   | ClearComm, L.P.                 |
|--------------------------------|--------|---------------------------------|
|                           |   |                            |
|                           |   |                            |
|                           | By:    | SuperTel Communications Corp.   |
|                           |   |                            |
|                           |   |                            |
| Date:   December 23, 2002 |   | By:  /s/  Javier O. Lamoso |
|                           |   | Name: Javier O. Lamoso          |
|                           |   | Title: President                |

 

 

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CERTIFICATION OF CHIEFEXECUTIVE OFFICER

 

I, Javier O. Lamoso, Chief Executive Officer of ClearComm, L.P.,certify that:

 

# 1.                                       I have reviewed this quarterly report onForm 10-Q of ClearComm, L.P.;

# 2.                                       Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

# 3.                                       Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

# 4.                                       The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

## a.                                       designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

## b.                                      evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

## c.                                       presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

# 5.                                       The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

## a.                                       all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

## b.                                      any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

# 6.                                       The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date: December 23, 2002
|   |                                       |                    |
|--------|--------------------------------------------|-------------------------|
|   |         | /s/ Javier O. Lamoso    |
|   |                                       | Javier O. Lamoso        |
|   |                                       | Chief Executive Officer |

 

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CERTIFICATION OF CHIEFFINANCIAL OFFICER

 

I, Edileen Salicrup, Chief Financial Officer of ClearComm, L.P.,certify that:

 

# 1.                                       I have reviewed this quarterly report onForm 10-Q of ClearComm, L.P.;

# 2.                                       Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

# 3.                                       Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

# 4.                                       The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

## a.                                       designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

## b.                                      evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

## c.                                       presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

# 5.                                       The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

## a.                                       all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

## b.                                      any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

# 6.                                       The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date: December 23, 2002
|   |   |                    |
|--------|--------|-------------------------|
|   |   | /s/Edileen Salicrup     |
|   |   | Edileen Salicrup        |
|   |   | Chief Financial Officer |

 

 

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