----

----

**Securities and ExchangeCommission****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 June 30, 2001**          |
|                                                       |
| ** **                                                 | **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 of  registrant 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****** | **00918-1913******  |
| (Address of principal  executive offices)                            | (Zip  Code)         |

Registrant'stelephone number, including area code: **(787)620-0140**

Indicate by check mark whether theregistrant (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   ý             No   o

----

----

ClearComm,L.P.

INDEX

| PART I   FINANCIAL INFORMATION |                                                                                                                                    |
|------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                                    |
| Item 1.  Financial Statements       |                                                                                                                                    |
|                                     |                                                                                                                                    |   |
|                                     | Consolidated  Statements of Assets, Liabilities and Partners' Deficit as of June 30, 2001  (unaudited) and December 31, 2000 (audited)  |   |
|                                     |                                                                                                                                    |   |
|                                     | Consolidated  Statements of Revenues and Expenses for the three-month and six-month periods  ended June 30, 2001 and 2000 (unaudited) . |   |
|                                     |                                                                                                                                    |   |
|                                     | Consolidated  Statements of Changes in Partners' Deficit for the six-month period ended  June 30, 2001 (unaudited)                      |   |
|                                     |                                                                                                                                    |   |
|                                     | Consolidated  Statements of Cash Flows for the six-month periods ended June 30, 2001 and  2000 (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.                          |                                                                                                                                    |
|                                          |                                                                                                                                         |  |  |

 

PARTI   FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS

ClearComm,L.P.

CONSOLIDATEDSTATEMENTS OF ASSETS, LIABILITIESAND PARTNERS' DEFICIT

 
|                               | June  30,                                                                                   |        | December  31, |        |
|------------------------------------|---------------------------------------------------------------------------------------------|-------------|---------------|-------------|
|                               | 2001                                                                                        |        | 2000          |        |
|                               |                                                                                             |        |               |        |
|                               | (Unaudited)                                                                                 |        | (Audited)     |        |
| ASSETS                             |                                                                                        |        |          |        |
| CURRENT ASSETS:                    |                                                                                        |        |          |        |
|                               | Cash and cash equivalents                                                                   | $           | 16,685,142    |        | $ | 9,338,798 |   |
|                               | Accounts receivable, net of allowance  for doubtful accounts of $20,527,639 and $18,341,025 | 20,076,705  |     | 20,049,769  |    |
|                               | Insurance claim receivable                                                                  | 2,202,779   |          | 1,256,285   |   |
|                               | Inventories                                                                                 | 15,840,547  |          | 12,977,164  |   |
|                               | Prepaid expenses                                                                            | 1,026,174   |          | 751,603     |   |
|                               |                                                                                        |             |          |             |   |
|                               | Total current assets                                                                        | 55,831,347  |          | 44,373,619  |   |
|                               |                                                                                        |        |          |        |
| DEFERRED FINANCING COSTS, net      | 1,210,964                                                                                   |        | 1,730,047     |        |
| PCS LICENSES, net                  | 58,835,381                                                                                  |        | 64,838,452    |        |
| PROPERTY AND EQUIPMENT, net        | 102,257,094                                                                                 |        | 97,002,140    |        |
|                               |                                                                                             |        |               |        |
|                               | $                                                                                           | 218,134,786 |          | $           | 207,944,258 |   |
|                               |                                                                                             |        |               |        |
| LIABILITIES AND PARTNER'S  DEFICIT |                                                                                        |        |          |        |
| CURRENT LIABILITIES:               |                                                                                        |        |          |        |
|                               | Accounts payable and accrued  liabilities                                                   | $           | 52,660,068    |        | $ | 40,314,401 |   |
|                               | Note payable to Lucent  Technologies                                                        | 56,817,808  |          | 61,000,000  |   |
|                               | Bridge Loan Facility                                                                        | 60,000,000  |          | 60,000,000  |   |
|                               | Accounts payable to related  parties                                                        | 4,688,016   |          | 2,041,767   |   |
|                               | Accrued interest                                                                            | 2,526,644   |          | 1,566,872   |   |
|                               | Deferred income                                                                             | 1,941,941   |          | 1,820,183   |   |
|                               |                                                                                        |             |          |             |   |
|                               | Total current liabilities                                                                   | 178,634,477 |          | 166,743,223 |   |
|                               |                                                                                        |             |          |             |   |
|                               |                                                                                        |        |          |        |
| LONG-TERM NOTES PAYABLE            | 79,415,305                                                                                  |        | 72,456,233    |        |
|                               |                                                                                             |        |               |        |
| MINORITY INTEREST                  | 14,010,837                                                                                  |        | 9,717,529     |        |
|                               |                                                                                             |        |               |        |
| PARTNER'S DEFICIT                  |                                                                                        |        |          |        |
|                               | 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                                                                                  | (78,360,924 | )             | (65,407,818 | ) |
|                               |                                                                                        |             |          |             |   |
|                               | Total partners' deficit                                                                     | (53,925,833 | )             | (40,972,727 | ) |
|                               |                                                                                        |             |          |             |   |
|                               |                                                                                        |        |          |        |
|                               | $                                                                                           | 218,134,786 |          | $           | 207,944,258 |   |
|                               |                                                                                             |        |               |        |
|                                    |                                                                                             |             |               |             |  |  |  |  |  |

 

The accompanying notes are integral partof these consolidated statements.

 

ClearComm,L.P.

CONSOLIDATEDSTATEMENTS OF REVENUES AND EXPENSES(UNAUDITED)

 

|                                           | **Three-Month Periods Ended June 30**        |       | **Six-Month Periods Ended June 30** |       |
|------------------------------------------------|----------------------------------------------|------------|-------------------------------------|------------|
|                                           | ****                                         |       | ****                                |       |
|                                           | **2001**                                     |       | **2000**                            |       | **2001** |   | **2000** |   |
|                                           | ****                                         |       | ****                                |       | **** |   | **** |   |
| **Revenues:**                                  |                                         |       |                                |       |   |   |   |   |
|                                           | Service revenues                             | $          | 27,345,079                          |       | $ | 17,871,490 |   | $ | 52,375,461 |   | $ | 28,692,761 |   |
|                                           | Handset and accessories sales                | 6,174,279  |                                | 4,141,777  |   | 9,156,163 |   | 6,252,633 |   |
|                                           |                                         |            |                                |            |   |  |   |  |   |
|                                           | 33,519,358                                   |       | 22,013,267                          |       | 61,531,624 |   | 34,945,394 |   |
|                                           |                                              |       |                                     |       |  |   |  |   |
| **Operating  Cost and Expenses:**              |                                         |       |                                |       |   |   |   |   |
|                                           | Cost of handset and  accessories             | 9,700,493  |                                | 4,401,490  |   | 17,760,845 |   | 6,281,122 |   |
|                                           | Interconnection expense                      | 400,316    |                                | 1,133,406  |   | 2,458,116 |   | 2,372,277 |   |
|                                           | Sales and dealers commissions                | 589,815    |                                | 1,631,687  |   | 2,349,408 |   | 2,877,828 |   |
|                                           | Salaries and benefits                        | 3,123,051  |                                | 2,473,550  |   | 6,319,987 |   | 5,055,690 |   |
|                                           | Advertising expense                          | 4,852,781  |                                | 2,093,579  |   | 7,170,080 |   | 3,920,631 |   |
|                                           | Legal and professional  services             | 3,309,562  |                                | 1,120,155  |   | 6,250,680 |   | 3,169,394 |   |
|                                           | Depreciation and amortization                | 4,315,997  |                                | 5,220,958  |   | 9,998,177 |   | 10,773,708 |   |
|                                           | Provision for doubtful  accounts             | 1,935,110  |                                | 445,774    |   | 5,903,832 |   | 3,474,970 |   |
|                                           | Rent expense                                 | 1,841,529  |                                | 435,191    |   | 3,895,754 |   | 1,081,115 |   |
|                                           | Taxes other than income                      | 1,836,279  |                                | -          |   | 3,457,126 |   | - |   |
|                                           | Other expenses                               | 2,157,845  |                                | 7,184,259  |   | 4,651,391 |   | 7,609,522 |   |
|                                           | Management fee to General  Partner           | 32,000     |                                | 367,451    |   | 64,000 |   | 641,754 |   |
|                                           | Services rendered by related  parties        | 398,268    |                                | 890,968    |   | 675,570 |   | 1,494,741 |   |
|                                           | Gain on sale of  Visalia-Porterville license | (4,814,337 | )                                   | -          |   | (4,814,337 | ) | - |   |
|                                           |                                         |            |                                |            |   |  |   |  |   |
|                                           | 29,678,709                                   |       | 27,398,468                          |       | 66,140,629 |   | 48,752,752 |   |
|                                           |                                              |       |                                     |       |  |   |  |   |
|                                           |                                         |       |                                |       |   |   |   |   |
| **Income  (Loss) from Operations**             | 3,840,649                                    |       | (5,385,201                          | )          | (4,609,005 | ) | (13,807,358 | ) |
|                                           |                                              |       |                                     |       |  |   |  |   |
| **Other Income  (Expense)**                    |                                         |       |                                |       |   |   |   |   |
|                                           | Interest income                              | 122,329    |                                | 50,652     |   | 307,015 |   | 258,299 |   |
|                                           | Interest expense                             | (4,653,842 | )                                   | (2,064,167 | ) | (9,357,808 | ) | (3,826,283 | ) |
|                                           |                                         |            |                                |            |   |  |   |  |   |
|                                           |                                         |       |                                |       |   |   |   |   |
|                                           | (4,531,513                                   | )          | (2,013,515                          | )          | (9,050,793 | ) | (3,567,984 | ) |
|                                           |                                              |       |                                     |       |  |   |  |   |
|                                           |                                         |       |                                |       |   |   |   |   |
| **Net Loss  before Minority Interest**         | (690,864                                     | )          | (7,398,716                          | )          | (13,659,798 | ) | (17,375,342 | ) |
| **Minority  Interest**                         | 254,316                                      |       | -                                   |       | 706,692 |   | - |   |
|                                           |                                              |       |                                     |       |  |   |  |   |
| **Net Loss**                                   | $                                            | (436,548   | )                                   | $          | (7,398,716 | ) | $ | (12,953,106 | ) | $ | (17,375,342 | ) |
|                                           |                                              |       |                                     |       |  |   |  |   |
| **Net Loss  Attributable to General Partner**  | $                                            | (109,137   | )                                   | $          | (1,849,679 | ) | $ | (3,238,277 | ) | $ | (4,343,836 | ) |
|                                           |                                              |       |                                     |       |  |   |  |   |
| **Net Loss  Attributable to Limited Partners** | $                                            | (327,411   | )                                   | $          | (5,549,037 | ) | $ | (9,714,830 | ) | $ | (13,031,506 | ) |
|                                           |                                              |       |                                     |       |  |   |  |   |

 

The accompanying notes are integral partof these consolidated financial statements.

 

ClearComm,L.P.

CONSOLIDATEDSTATEMENTS OF CHANGES IN PARTNERS' DEFICIT(Unaudited)

FORTHE SIX-MONTH PERIOD ENDED JUNE 30, 2001

 

|                                    | Limited  Partners |   | General |        |    |       |
|-----------------------------------------|-------------------|--------|---------|-------------|---------|------------|
|                                    | Units             |   | Amount  |        | Partner |       | Total |   |
|                                    |                   |   |         |        |         |       |  |   |
| Balance (deficit) at  December 31, 2000 | 2,903.1           |   | $       | (12,544,641 | )       | $          | (28,428,086 | ) | $ | (40,972,727 | ) |
|                                    |              |   |    |        |    |       |   |   |   |   |   |
| Six-month period ended  June 30, 2001   |              |   |    |        |    |       |   |   |
|                                    | Net loss          | -      |    | (9,714,830  | )       | (3,238,277 | ) | (12,953,106 | ) |
|                                    |              |        |    |             |    |            |   |  |   |
| Balance (deficit) at  June 30, 2001     | 2,903.1           |   | $       | (22,259,271 | )       | $          | (31,666,363 | ) | $ | (53,925,833 | ) |
|                                    |                   |   |         |        |         |       |  |   |

 

The accompanying notes are integral partof these consolidated financial statements.

 

ClearComm,L.P.

CONSOLIDATED STATEMENTSOF CASH FLOWS(UNAUDITED)

|                                                                                                         |                                                                         | **Six-Month Periods Ended** |         |
|--------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|-----------------------------|--------------|
|                                                                                                         |                                                                         | **June 30,**                |         | **June 30,** |   |
|                                                                                                         |                                                                         | **2001**                    |         | **2000** |   |
|                                                                                                         |                                                                         | ****                        |         | **** |   |
| CASH FLOWS FROM OPERATING  ACTIVITIES                                                                        |                                                                         |                        |         |   |   |
| Net loss                                                                                                     |                                                                         | $                           | (12,953,106  | ) | $ | (17,375,342 | ) |
|                                                                                                         |                                                                         |                             |         |  |   |
| Adjustments to reconcile net  loss for the period to net cash provided by (used in operating activities |                                                                         |                        |    |   |    |
|                                                                                                         | Depreciation and amortization                                                |                        | 9,998,177    |   | 10,773,708 |   |
|                                                                                                         | Provision for doubtful accounts                                              |                        | 5,903,832    |   | 3,474,970 |   |
|                                                                                                         | Minority interest                                                            |                        | (706,692     | ) | - |   |
|                                                                                                         | Increase in accounts  receivable                                             |                        | (5,930,768   | ) | (15,682,951 | ) |
|                                                                                                         | Increase in insurance claim  receivable                                      |                        | (946,494     | ) | - |   |
|                                                                                                         | Increase in inventories                                                      |                        | (2,863,383   | ) | (6,693,298 | ) |
|                                                                                                         | Increase in prepaid expenses                                                 |                        | (274,571     | ) | (304,028 | ) |
|                                                                                                         | Increase in accounts payable  and accrued liabilities                        |                        | 4,215,794    |   | 5,603,008 |   |
|                                                                                                         | Increase in accounts payable  to related parties                             |                        | 2,646,249    |   | - |   |
|                                                                                                         | Increase in accrued interest                                                 |                        | 1,785,588    |   | - |   |
|                                                                                                         | Increase in deferred income                                                  |                        | 121,758      |   | 1,020,380 |   |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |
|                                                                                                         | Total adjustments                                                            |                        | 13,949,490   |   | (1,808,211 | ) |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |
|                                                                                                         | Net cash provided by (used in  operating activities                          |                        | 996,384      |   | (19,183,553 | ) |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                        |                                                                         |                        |         |   |   |
|                                                                                                         | Acquisition of property and  equipment                                       |                        | (4,841,232   | ) | (5,013,111 | ) |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                                                       |                                                                         |                        |         |   |   |
|                                                                                                         | Proceeds from sale of  Visalia-Porterville license                           |                        | 9,500,000    |   | - |   |
|                                                                                                         | Capital contribution from  minority interest                                 |                        | 5,000,000    |   | - |   |
|                                                                                                         | Proceeds from issuance of  notes payable to TLD                              |                        | 4,990,000    |   | - |   |
|                                                                                                         | Payment of Note Payable to  Lucent                                           |                        | (8,298,808   | ) | - |   |
|                                                                                                         | Proceeds from line of credit                                                 |                        | -            |   | 26,000,000 |   |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         | Net cash provided by  financing activities                                   |                        | 11,191,192   |   | 26,000,000 |   |
|                                                                                                         |                                                                         |                        |         |   |   |
| NET INCREASE IN CASH AND CASH  EQUIVALENTS                                                                   |                                                                         | 7,346,344                   |         | 1,803,336 |   |
|                                                                                                         |                                                                         |                        |         |   |   |
| CASH AND CASH EQUIVALENTS,  beginning of period                                                              |                                                                         | 9,338,798                   |         | 6,546,305 |   |
|                                                                                                         |                                                                         |                             |         |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |
| CASH AND CASH EQUIVALENTS,  end of period                                                                    |                                                                         | $                           | 16,685,142   |   | $ | 8,349,641 |   |
|                                                                                                         |                                                                         |                             |         |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |
| SUPPLEMENTAL CASH FLOWS  INFORMATION:                                                                        |                                                                         |                        |         |   |   |
|                                                                                                         |                                                                         |                        |         |   |   |
|                                                                                                         | Network construction costs  accrued                                          |                        | $            | 10,132,389 |   | $ | - |   |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |   |
|                                                                                                         | Accounts receivable  written-off against the allowance for doubtful accounts |                        | $            | 3,718,949 |   | $ | - |   |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                         |                                                                         |                        |         |   |   |   |
|                                                                                                         | Interest paid                                                                |                        | $            | 6,307,071 |   | $ | - |   |
|                                                                                                         |                                                                         |                        |              |   |  |   |
|                                                                                                              |                                                                              |                             |              |  |  |  |  |  |  |  |  |

The accompanying notes are integral partof these consolidated financial statements.

 

CLEARCOMM,L.P.

NOTESTO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.          BASISOF PRESENTATION AND INTRODUCTION

             Theunaudited interim consolidated financial statements presented herein have beenprepared in accordance with accounting principles generally accepted in theUnited States for interim financial statements and with the instructions toForm 10-Q and 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 June 30, 2001and results of operations and cash flows for the six-month periods ended June30, 2001 and 2000.  The unauditedinterim consolidated financial statements should be read in conjunction withthe summary of significant accounting policies and notes to consolidatedfinancial statements included in the Partnership's Annual Report on Form 10-Kfor the year ended December 31, 2000. Results of operations for interim periods are not necessarily indicativeof 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 communicationsservice ("PCS") frequency Block C, originally restricted tominorities, small businesses and designated entities, to become a provider ofbroadband PCS.  The Partnership willterminate on December 31, 2005, or earlier upon the occurrence of certainspecified events as detailed in the Partnership Agreement.

             SuperTelCommunications Corp. (“SuperTel”), a Puerto Rico corporation, is the GeneralPartner.  Its total share of the incomeand losses of the Partnership is 25% in accordance with the PartnershipAgreement.  Approximately 1,600 limitedpartners also invested in the Partnership through a private placement.

             OnJanuary 22, 1997, the Partnership was granted the PCS Block C licenses forPuerto Rico and certain cities in California.

             OnFebruary 4, 1999, the Partnership entered into a joint venture agreement (the“Joint Venture Agreement”) with Telefónica Larga Distancia De Puerto Rico, Inc.(“TLD”) to jointly develop and operate certain PCS licenses in Puerto Rico.  Among the most important provisions of theJoint Venture Agreement are the following: •The  Partnership transferred all of its Puerto Rico PCS licenses including its  related debt with the FCC to NewComm Wireless Services, Inc. (“NewComm”), a  newly organized Puerto Rico corporation, in exchange for all of NewComm’s  issued and outstanding common stock.    •TLD  loaned approximately $20 million to NewComm by means of a secured convertible  promissory note payable (the “Promissory Note”).  The Promissory Note is secured by a security agreement pursuant  to which a security interest is imposed upon NewComm’s assets, a Partnership  guarantee and a pledge agreement, as defined.    •Once  certain regulatory and other requirements are met, the Promissory Note will  be converted to NewComm’s common stock representing approximately 49.9% of  NewComm’s equity at the time of the exchange.  Originally, TLD had the option to buy an additional .2%, which  would have brought its ownership to 50.1%, subject to a third party valuation  of NewComm’s stock and approval by the FCC.   On June 26, 2001, the Joint Venture Agreement was amended eliminating  the TLD Option to buy the additional .2%.    •NewComm  and TLD entered into certain management and technology transfer agreements.
             InSeptember 1999, NewComm commenced providing PCS services in Puerto Rico.

             OnAugust 28, 2000, the Partnership entered into a Purchase and Sale Agreementwith Leap Wireless International ("Leap Wireless"), pursuant to whichthe Partnership sold the Visalia-Porterville, California license to LeapWireless in exchange for shares of Leap Wireless stock valued at$9,500,000.  The closing of the saleoccurred on June 8, 2001.  ThePartnership received a $9,500,000 cash payment and recorded a gain of$4,814,337 related to the sale.

             DuringNovember and December 2000, and March 2001, NewComm received $5,000,000, eachrespective month, for an aggregate equity investment of $15,000,000 fromSyndicated Communications Venture Partners IV, L.P. (Syncom), a third party, inexchange for a 4.92% ownership in NewComm. Syncom is committed to contribute up to $25 million to NewComm inexchange for a 8.2% ownership.

2.          FINANCINGREQUIREMENTS

             Theaccompanying consolidated financial statements have been prepared on a goingconcern basis, which contemplates the realization of assets and thesatisfaction of liabilities in the normal course of business.  The Partnership commenced operations inSeptember 1999 and has incurred operating losses of amounting to $13 millionfor the six-month period ended June 30, 2001 and $41.4 million for the yearended December 31, 2000.  It also hasworking capital and partners’ capital deficits of $122.8 and $53.9 million,respectively, as of June 30, 2001.  ThePartnership is likely to continue incurring losses until such time as itssubscriber base generates revenue in excess of the Partnership’s expenses.  Development of a significant subscriber baseis likely to take time, during which the Partnership must finance itsoperations by means other than its revenues.

             Aspart of the agreement with TLD, NewComm entered into a contract with LucentTechnologies, Inc. (“Lucent”) that requires Lucent to build a network that usesCode Division Multiple Access (“CDMA”) protocol.  It is expected that the total cost will approximate $125million.  During 2000, NewComm’smanagement and Lucent agreed on formally extending the payment of up to $61.0million of the total amount due under the contract under a formal financingagreement.  The financing agreementextends payments for an eight-month period (through June 2001) at an annualinterest rate of 1.5% over 90-day LIBOR. NewComm’s management and Lucent are currently working on restructuringthe financing agreement, which expired on June 2001.  During the second quarter of 2001, NewComm paid $8.3 million ofthe outstanding note payable and accrued additional network construction costsamounting to $4.1 million.  As of June30, 2001, $56.8 million is outstanding under this financing agreement.
             DuringNovember 2000, NewComm entered into a $60 million bridge loan agreement (the“Bridge Loan Facility”) with ABN-AMRO and BBVA (the “Banks”) with interest at1.5% over 90-day LIBOR, which expired on March 15, 2001, and was extended untilMay 29, 2001, with interest at 2.50% over 90-day LIBOR, when a permanent loanfinancing for $150 million was expected to close.  The Bridge Loan Facility has been extended until October 17,2001, with interest rate at .625% over 90-day LIBOR, and is now guaranteed byTelefónica Internacional, S.A. (TISA), an affiliate of TLD.  ClearComm and TLD continue to work towardssecuring a permanent financing facility. The permanent financing agreement will require that the Partnership, bymeans of Syncom, and TLD, contribute approximately $25 million each in equityand convertible debt, respectively.  Aspart of this commitment, during the second half of 2000 and first half of 2001,Syncom and TLD have contributed $15 million each in the form of equity andconvertible debt, respectively.

             Eachof the Partnership’s C-Block licenses is subject to a FCC requirement that thePartnership construct 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.  Although the Partnership’s build out plancalls for it to exceed these minimum requirements, failure to comply with theserequirements could result in the revocation of the related licenses or theimposition of fines on the Partnership by the FCC.  Therefore, delays in constructing its PCS network for licensesgranted for markets outside Puerto Rico could have a material adverse effect onthe Partnership’s financial condition and results of operations.  The Partnership is working on plans toprovide coverage in the areas covered by the California Licenses to be incompliance with the FCC build-out requirements.

             Managementbelieves that the Partnership will comply with all the requirements forobtaining the permanent financing and believes that cash and cash equivalentson hand, anticipated growth in revenues, vendor financing and the permanentfinancing will be adequate to fund its operations, at a minimum, through theend of 2001.  However, in the absence ofimproved operating results and cash flows, and the closing of its contemplatedpermanent financing, the Partnership may face liquidity problems to fund itsoperations and meet its obligations.  Asa result of these matters, substantial doubt exists about the Partnership’sabilityto continue as a going concern. The accompanying consolidated financial statements do not include anyadjustments that might result from the outcome of this uncertainty.

3.          OTHERACCOUNTING PRONOUNCEMENTS

             InJune 1998, the Financial Accounting Standards Board ("FASB") issuedStatement of Financial Accounting Standards (“SFAS”) No. 133, "Accountingfor Derivative Instruments and Hedging Activities" ("SFAS 133").SFAS 133 established accounting and reporting standards requiring that everyderivative instrument (including certain derivative instruments embedded inother contracts) be recorded in the balance sheet as either an asset orliability measured at its fair value. SFAS 133 requires that changes in thederivative's fair value be recognized currently in earnings unless specifichedge accounting criteria are met. In June 2000, the FASB issued Statement ofFinancial Accounting Standards No. 138 ("SFAS 138") which amends SFAS133 for certain derivative instruments and certain hedging activities. SFAS133, as amended, is effective for fiscal years beginning after June 15, 2000.The Partnership adopted SFAS 133 beginning January 1, 2001, but did not haveany derivatives.

             InJune 2001, the Financial Accounting Standards Board issued SFAS No. 141,"Business Combinations" (effective July 1, 2001) and SFAS No. 142,"Goodwill and Other Intangible Assets" (effective for the Company onJanuary 1, 2002). SFAS No. 141 prohibits pooling-of-interests accounting foracquisitions. SFAS No. 142 specifies that goodwill and some intangible assetswill no longer be amortized but instead will be subject to periodic impairmenttesting. The Company is in the process of evaluating the financial statementimpact of adoption of SFAS No. 142.

4.          LEGALPROCEEDINGS

             ThePartnership is subject to certain legal proceedings and an FCC proceeding,which were described in the Partnership's Form 10-K for the year ended December31, 2000.

ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

Forward-looking Statements

             ThisForm 10-Q and future filings by the Partnership on Form 10-Q and Form 8-K andfuture oral and written statements by the Partnership may include certainforward-looking statements, including (without limitation) statements withrespect to anticipated future operating and financial performance, growthopportunities and growth rates, acquisition and divestitive opportunities, andother similar forecasts and statements of expectation.  Words such as "expects,""anticipates," "intends," "plans,""believes," "seeks," "estimates," and "should,"and variations of these words and similar expressions, are intended to identifythese forward-looking statements. Forward-looking statements by the Partnership are based on estimates,projections, beliefs and assumptions of management and are not guarantees offuture performance.  The Partnershipdisclaims any obligation to update or revise any forward-looking statementbased on the occurrence of future events, the receipt of new information, orotherwise.

Actual future performance, outcomes andresults may differ materially from those expressed in forward-lookingstatements made by the Partnership as a result of a number of importantfactors.  Examples of these factorsinclude, without limitation, failure to develop the Partnership's PCS licensesin California due to an inability to obtain satisfactory financing or partners;rapid technological developments and changes in the telecommunicationsindustry; ongoing deregulation (and the resulting likelihood of significantlyincreased price and product/service competition) in the telecommunicationsindustry as a result of the Telecommunications Act of 1996 and other similarfederal and state legislation and the federal and state rules and regulationsenacted pursuant to that legislation; regulatory limitations on thePartnership's ability to compete in the telecommunications services industry;and continuing consolidation in the telecommunications services industry.  In addition to these factors, actual futureperformance, outcomes and results may differ materially because of other, moregeneral, factors including, without limitation, general industry and marketconditions and growth rates, domestic and international economic conditions,governmental and public policy changes and the continued availability offinancing in the amounts, at the terms and on the conditions necessary tosupport the Partnership's future business.

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.

             ThePartnership was formed in January 1995 and is managed by its General Partner,SuperTel Communications Corp.  ThePartnership was organized to acquire, own, consult and operate personalcommunication services PCS licenses in the Block C band and to take advantageof the benefits that the FCC has set aside for Entrepreneurs.  The Partnership owns the Puerto RicoLicenses, which consist of two 15 MHz PCS licenses covering Puerto Rico, andthe California Licenses, which consist of four 15 MHz PCS licenses covering theCalifornia cities of Eureka, Redding, Modesto, and Merced. The license coveringVisalia-Porterville, California, was sold and transferred to Leap Wireless onJune 8, 2001 for $9,500,000.
             ThePartnership commenced commercial operations of its PCS network in Puerto Ricoon September 24, 1999 when it began offering wireless services in Puerto Ricoto the public.  Prior to that date, itsincome had consisted of interest earnings only.  Since the Partnership commenced commercial operations in 1999 andduring 2000 was still in the start-up process, the comparisons presented belowmay not be indicative of future operations.

             ThePartnership established its Puerto Rico network by forming a wholly ownedsubsidiary, NewComm on January 29, 1999. On February 4, 1999, the Partnership and NewComm entered into anagreement with TLD, whereby the Partnership contributed its two Puerto RicoLicenses to NewComm and TLD provided NewComm a $19,960,000 loan to develop thePuerto Rico Licenses.  TLD’s loan ispursuant to a secured convertible promissory note (the “Note”) which isconvertible into 49.9% of NewComm’s equity. The Note however, cannot be converted until the FCC authorizes TLD tohold more than a 25% equity interest in NewComm.  At that time, TLD also received an option (the “Option”) to buyan additional 0.2%, which would bring its ownership to 50.1%, subject to athird-party valuation and FCC approval. This option was eliminated from the Joint Venture Agreement on June 26,2001 by means of an amendment thereto and filed before the FCC on June 27,2001.  NewComm, however,  maintained its option to buyout TLD in thelast year before the restrictions on the Puerto Rico licenses lapse.

             Withrespect to its California Licenses, the Partnership anticipates developingthese licenses by means of strategic alliances and/or partnerships with otheroperators.  Although no assurances canbe made, the Partnership anticipates that it will negotiate acceptableagreements regarding these licenses so that it will be able to offer wirelessservices in the regions covered by these licenses.

Results of Operations

             Three-monthperiod ended June 30, 2001 compared with three-month period ended June 30, 2000

Revenues

             ThePartnership’s revenues for the three-month period ended June 30, 2001 totaled$33,519,358 as compared to $22,013,267 for the same period in 2000. Revenuesfor the three-month period ended June 30 2001 included $27,345,079 in servicerevenues and $6,174,279 in handset and accessories sales generated fromNewComm’s wireless operations, as compared to $17,871,490, and $4,141,777respectively, for the same period in 2000. The increase in revenues is mainly due to growth in the subscriber baseas NewComm had been operating for only nine months as of June 30, 2000.

Expenses

             Expensesfor the three-month period ended June 30, 2001 totaled $29,678,709 as comparedto $27,398,468 for the same period in 2000. During the second quarter of 2001, the Partnership's expenses included$9,700,493 ($4,401,490 as of June 30, 2000) in costs of handset andaccessories, $3,123,051 ($2,473,550 as of June 30, 2000) for salaries andbenefits, $3,309,562 ($1,120,155 as of June 30, 2000) for legal andprofessional services, $4,315,997 ($5,220,958 as of June 30, 2000) indepreciation and amortization, $1,935,110 ($445,774 as of June 30, 2000) inprovision for doubtful accounts, $11,710,565 ($12,845,573 as of June 30, 2000)in interconnection, sales and dealers commissions, advertising, rent, taxesother than income, other expenses and management fee to General Partner,$398,268 ($890,968 as of June 30, 2000) for services rendered by relatedparties and a, one time, gain of $4,814,337 from the sale of theVisalia-Porterville, California, license.
             Theincrease in interest expense ($4,653,842 and $2,064,167 for the quarter endedJune 30, 2001 and 2000, respectively) is related to higher level of debtoutstanding related to the FCC Note, TLD Promissory Note, Note Payable toLucent and the Bridge Loan Facility. The decrease in sales and dealerscommissions ($589,815 and $1,631,687 for the quarter ended June 30, 2001 and2000, respectively) is due to a decrease in commissions paid under the newterms of the dealers commissions contract. NewComm continues to negotiate with the dealers to pay commissions thatare competitive within the market.  Thedecrease in interconnection expense ($400,316 and $1,133,406 for the quarterended June 30, 2001 and 2000, respectively) is due to a non-recurringadjustment to reconcile the interconnection payable balance.

             Netloss of $436,548 for the three-month period ended June 30, 2001, as compared to$7,398,716 for the same period in 2000, reflects the Partership’s increase inservice revenues of $9,473,589, from a larger subscriber base, contrasted bythe ongoing costs of meeting the competition of existing cellular and PCSoperators in order to develop a subscriber base.  To meet competition, a significant subsidy is granted in the saleof handsets and accessories, on which a negative margin of $3,526,214 and$259,214 was generated during the three-month periods ended June 30, 2001 and2000, respectively.  In addition, theprovision for doubtful accounts and interest expense increased to $1,935,110and $4,653,842, respectively, for the quarter ended June 30, 2001, as comparedto $445,774 and $2,064,167 respectively, for the quarter ended June 30,2000.  The Partnership’s net loss forthe second quarter of 2001 was offset by the, one time, $4,814,337 gain on thesale of the Visalia-Porterville, California, license.

             Six-monthperiod ended June 30, 2001 compared with six-month period ended June 30, 2000

Revenues

             ThePartnership’s revenues for the six-month period ended June 30, 2001 totaled$61,531,624 as compared to $34,945,394 for the same period in 2000.  Revenues for the six-month period ended June30, 2001 included $52,375,461 in service revenue and $9,156,163 in handset andaccessories sales generated from NewComm’s wireless operations, as compared to$28,692,761, and $6,252,633 respectively, for the same period in 2000.  The increase in revenues is mainly due togrowth in the subscriber base as NewComm had been operating for only ninemonths as of June 30, 2000.

Expenses

             Expensesfor the six-month period ended June 30, 2001 totaled $66,140,629 as compared to$48,752,752 for the same period in 2000. During the six-month period ended June 30, 2001, the Partnership'sexpenses included $17,760,845 ($6,281,122 as of June 30, 2000) in costs ofhandset and accessories, $6,319,987 ($5,055,690 as of June 30, 2000) forsalaries and benefits, $6,250,680 ($3,169,394 as of June 30, 2000) for legaland professional services, $9,998,177 ($10,773,708 as of June 30, 2000) indepreciation and amortization, $5,903,832 ($3,474,970 as of June 30, 2000) inprovision for doubtful accounts, $24,045,875 ($18,503,127 as of June 30, 2000)in interconnection, sales and dealers commissions, advertising, rent, taxesother than income, other expenses and management fee to General Partner,$675,570 ($1,494,741 as of June 30, 2000) for services rendered by relatedparties and a, one time, gain of $4,814,337 from the sale of theVisalia-Porterville, California, license.

             Theincrease in interest expense ($9,357,808 and $8,092,694 for the six-monthperiods ended June 30, 2001 and 2000, respectively) is related to the higherlevel of debt outstanding related to the FCC Note, TLD Promissory Note, NotePayable to Lucent and the Bridge Loan Facility.
             Netloss of $12,953,106 for the six-month period ended June 30, 2001, as comparedto $17,455,068 for the same period in 2000, reflects the ongoing costs ofmeeting the competition of existing cellular and PCS operators in order todevelop a subscriber base.  To meetcompetition, a significant subsidy is granted in the sale of handsets andaccessories, on which a negative margin of $8,604,682 and $28,489 was generatedduring the six-month periods ended June 30, 2001 and 2000, respectively.  In addition, the provision for doubtfulaccounts and interest expense increased to $5,903,832 and $9,357,808,respectively, for the six month period ended June 30, 2001, as compared to$3,474,970 and $3,826,283 respectively, for the same period in 2000.  The Partnership’s net loss for the firsthalf of 2001 was offset by the, one time, $4,814,337 gain on sale ofVisalia-Porterville, California, license.

Liquidity and Capital Resources

             Asof June 30, 2001, the Partnership had cash and cash equivalents amounting to$16,685,142, which are mostly related to proceeds from the contributionrepresented by convertible debt from TLD and the sale of theVisalia-Porterville, California, license.

             Aspart of the agreement with TLD, NewComm entered into a contract with LucentTechnologies, Inc. (“Lucent”) that requires Lucent to build a network that usesCode Division Multiple Access (“CDMA”) protocol.  It is expected that the total cost will approximate $125 million.  During 2000, NewComm’s management and Lucentagreed on formally extending the payment of up to $61.0 million of the totalamount of network construction payable, at the time, under a formal financingagreement.  The financing agreementextends payments for an eight-month period (through June 2001), at an annualrate of 1.5% over 90-day LIBOR. NewComm’s management and Lucent are currently working on restructuringthe financing agreement, which expired on June 2001.  During the second quarter of 2001, NewComm paid $8.3 million ofthe outstanding note payable and accrued additional network construction costsamounting to $4.1 million.  As of June30, 2001, $56,817,808 is outstanding under this financing agreement.

             Inaddition, the Partnership owes the United States federal governmentapproximately $51,339,555 (undiscounted) plus accrued interest at 6.5% of$836,418 in connection with the acquisition of its PCS licenses.  As of June 30, 2001, the notes payable toFCC are presented net of a discount of approximately $10,615,343.

             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.  In addition, in January 2000 the jointventure agreement with TLD was amended to provide NewComm a revolving line ofcredit of approximately $30 million for working capital from TLD.  This loan was paid-off in December 2000 bymeans of a $60 million bridge loan to NewComm from ABN-AMRO and BBVA.
             ThePartnership expects that the total cost to implement NewComm’s business plan tobe approximately $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 millionat a rate of 1.5% over 90-day LIBOR, which came due in March 2001, which wasextended until May 29, 2001 at a rate of 2.5% over 90-day LIBOR.  The Bridge Loan was subsequently extendeduntil October 17, 2001, with interest rate at .625% over 90-day LIBOR, and isnow guaranteed by Telefónica Internacional, S.A. (TISA), an affiliate ofTLD.  ClearComm and TLD continue to worktowards securing a permanent finance facility. In addition, the Partnership believes such banks will be willing toprovide long term financing of $150 million provided that the Partnership andTLD contribute additional capital or convertible debt to NewComm.  The Partnership, by means of Syncom and TLD,contributed $30 million of additional capital or convertible debt during thesecond semester of 2000 and first semester of 2001.  Syncom and TLD have contributed $15 million each in the form ofequity and convertible debt, respectively. Syncom invested $15 million in NewComm in exchange for 4.92% ofNewComm.  The Partnership believes thatthe additional capital contribution or convertible debt by Syncom and TLD,along with the proposed long term financing would fully fund NewComm’soperations through the end of 2001.

             Asa result of the restructuring of its FCC debt in June 1998, the Partnership hasno outstanding debt on its California Licenses, which consist of 15MHz ofbandwidth covering an approximate population of 1.5 million people in Eureka,Redding, Merced, and Modesto, all within the state of California.  Holders of major C Block licenses coveringareas surrounding the areas covered by the California Licenses are currentlyunder bankruptcy court proceedings, which adversely affects the Partnership’s abilityto enter into joint venture agreements to develop these licenses.  However, a re-auction of D, E, F anddisaggregated C Block licenses concluded on April 16, 1999.  Another re-auction was concluded in January2001.  However, this re-auction was setaside by the Washington D.C. Court of Appeals on June 22, 2001.  It is believed that the FCC may appeal theruling to the United States Supreme Court. Accordingly, there continues to be uncertainty regarding the ownershipof the licenses surrounding the California Licenses.   The Partnership is actively pursuing alliances and possiblefunding mechanisms to develop its California Licenses.

             ThePartnership anticipates that earnings and cash distributions derived from itsPuerto Rico Network once it is fully operational, interim and permanent financingand, if necessary, additional capital calls from its Investors or accessing thepublic capital markets, should provide it with the liquidity to meet itsobligations.  The Partnership alsoexpects that once it is able to develop its California Licenses, it will haveadditional sources of revenues and profits.

ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

             ThePartnership's exposure to market risk through derivative financial instrumentsand other financial instruments is not material because the Partnership doesnot use derivative financial instruments and does not have foreign currencyexchange risks.  The Partnership investscash balances in excess of operating requirements in short-term money marketfunds.  As of June 30, 2001, thePartnership had cash equivalents and short-term investments of approximately$16,685,142 consisting of cash and highly liquid, short-term investments inmoney market funds.
             ThePartnership’s cash and cash equivalents will increase or decrease by an immaterialamount if market interest rates increase or decrease, and therefore, itsexposure to interest rate changes has been immaterial.  The Partnership’s loans payable to the FCChave a fixed interest rate of 6.5% and therefore are not exposed to interest raterisks.  The TLD Note relating toindebtedness of NewComm bears interest at the floating rate of the 90-day LIBORplus 1.5% and is due in March 2004.  Theamounts owed to Lucent in connection with its build out of the Puerto RicoNetwork were due on June 2001 and bear interest at 1.5% over 90-day LIBOR.  NewComm’s management and Lucent arecurrently working on restructuring the financing agreement, which expired onJune 2001.  The Partnership’s short-termfinancing bears interest at .625% over 90-day LIBOR.  The Partnership anticipates that the interest rate applicable tothe permanent financing will be similar or lower than the ones related to theTLD Note and the short-term financing.

PART II: OTHERINFORMATION

ITEM1.            LEGAL PROCEEDINGS

             ThePartnership is subject to certain legal proceedings and a FCC proceeding, allof which were previously reported in the Partnership's Form 10-K for the yearended December 31, 2000.

ITEM 6.            EXHIBITS AND REPORTS ON FORM 8-K

             (a)         List of Exhibits - None

             (b)        The Partnership did not file a Form 8-Kin the quarter ended June 30, 2001.

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

 

SIGNATURES

 

             Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly 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, 2001By:  /s/ Javier O. Lamoso Name:  Javier O. Lamoso Title:  President