##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2007
 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 001-33349
 CLEARWIRE CORPORATION
  Delaware
    
    56-2408571(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)4400 Carillon PointKirkland, Washington
    
    98033(Address of principal executive office)
    
    (zip code)
 (425) 216-7600
 o þ
  o o þ
 o þ




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##### 



CLEARWIRE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2007
Table of Contents
 PagePart I. Financial InformationItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of March 31, 2007
and December 31, 2006
    
    
    2Condensed Consolidated Statements of Operations for the three
months ended March 31, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2007 and 2006
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the three months ended March 31, 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    24Part II. Other InformationItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 4. Submission of Matters to a Vote of Security Holders
    
    
    39Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    40Signatures
    
    
    41EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
   March 31,
    
    
    December 31,2007
    
    
    2006AssetsCurrent Assets:Cash and cash equivalents
    
    $
    892,440
    
    
    $
    438,030Short-term investments
    
    
    613,120
    
    
    
    663,644Restricted cash
    
    
    11,610
    
    
    
    10,727Restricted investments
    
    
    51,376
    
    
    
    69,401Accounts
receivable, net of allowance of $1,129 and $753
    
    
    3,006
    
    
    
    2,774Notes receivable, related party
    
    
    4,118
    
    
    
    4,409Inventory
    
    
    1,350
    
    
    
    1,398Prepaids and other assets
    
    
    24,063
    
    
    
    19,219Total current assets
    
    
    1,601,083
    
    
    
    1,209,602Property, plant and equipment, net
    
    
    361,157
    
    
    
    302,798Restricted cash
    
    
    160
    
    
    
    117Restricted investments
    
    
    
    
    
    
    16,269Prepaid spectrum license fees
    
    
    298,357
    
    
    
    241,151Spectrum licenses and other intangible assets, net
    
    
    239,036
    
    
    
    222,980Goodwill
    
    
    31,238
    
    
    
    30,908Investments in equity investees
    
    
    13,305
    
    
    
    14,983Other assets
    
    
    27,989
    
    
    
    29,565Total Assets
    
    $
    2,572,325
    
    
    $
    2,068,373Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable and accrued expenses (includes related party
balances of $6,054 and $6,799)
    
    $
    89,027
    
    
    $
    108,216Deferred rent
    
    
    8,481
    
    
    
    6,986Deferred revenue
    
    
    6,877
    
    
    
    5,599Due to affiliate
    
    
    140
    
    
    
    532Current portion of long-term debt
    
    
    1,250
    
    
    
    1,250Total current liabilities
    
    
    105,775
    
    
    
    122,583Long-term debt, net of discount of $104,558 and $110,007
    
    
    649,263
    
    
    
    644,438Other long-term liabilities
    
    
    48,255
    
    
    
    42,385Total liabilities
    
    
    803,293
    
    
    
    809,406Minority Interest
    
    
    15,102
    
    
    
    1,358Commitments and Contingencies (Note 7)
    
    
    
    
    
    
    Stockholders Equity:Preferred stock, par value $0.0001, 5,000,000 shares
authorized; no shares issued or outstanding
    
    
    
    
    
    
    Common stock, par value $0.0001, and additional paid-in
capital, 350,000,000 shares authorized; Class A,
134,482,178 and 109,325,236 shares issued and
outstanding
    
    
    2,063,248
    
    
    
    1,474,759Class B, 28,596,685 shares issued and outstanding
    
    
    234,376
    
    
    
    234,376Common stock and warrants payable
    
    
    36
    
    
    
    166Deferred compensation
    
    
    (802
    )
    
    
    (116
    )Accumulated other comprehensive income
    
    
    8,273
    
    
    
    6,990Accumulated deficit
    
    
    (551,201
    )
    
    
    (458,566
    )Total stockholders equity
    
    
    1,753,930
    
    
    
    1,257,609Total Liabilities and Stockholders Equity
    
    $
    2,572,325
    
    
    $
    2,068,373
  2




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months Ended March 31,2007
    
    
    2006Revenues:Service
    
    $
    29,275
    
    
    $
    9,541Equipment and other (includes related party sales of $0 and
$7,618)
    
    
    
    
    
    
    13,207Total revenues
    
    
    29,275
    
    
    
    22,748Operating Expenses:Cost of goods and services (exclusive of items shown
separately below):Cost of service (includes related party costs of $728 and $0)
    
    
    16,735
    
    
    
    8,722Cost of equipment (includes related party costs of $0
and $2,390)
    
    
    
    
    
    
    5,140Selling, general and administrative expense
    
    
    68,657
    
    
    
    40,604Research and development
    
    
    445
    
    
    
    2,655Depreciation and amortization
    
    
    16,185
    
    
    
    7,433Spectrum lease expense
    
    
    13,442
    
    
    
    3,344Total operating expenses
    
    
    115,464
    
    
    
    67,898Operating loss
    
    
    (86,189
    )
    
    
    (45,150
    )Other (Expense) Income:Interest income
    
    
    16,590
    
    
    
    3,062Interest expense
    
    
    (24,218
    )
    
    
    (11,089
    )Foreign currency transaction gains (losses), net
    
    
    33
    
    
    
    (6
    )Other income (expense), net
    
    
    2,478
    
    
    
    (49
    )Total other expense, net
    
    
    (5,117
    )
    
    
    (8,082
    )Loss before income taxes, minority interest and losses from equity
investees
    
    
    (91,306
    )
    
    
    (53,232
    )Income tax provision
    
    
    (603
    )
    
    
    (464
    )Loss before minority interest and losses from equity investees
    
    
    (91,909
    )
    
    
    (53,696
    )Losses from equity investees, net
    
    
    (1,618
    )
    
    
    (1,973
    )Minority interest in net loss of consolidated subsidiaries
    
    
    892
    
    
    
    390Net loss
    
    $
    (92,635
    )
    
    $
    (55,279
    )Net loss per common share, basic and diluted
    
    $
    (0.64
    )
    
    $
    (0.73
    )Weighted average common shares outstanding, basic and diluted
    
    
    143,739
    
    
    
    75,746
  3




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
   For the three months ended March 31,2007
    
    
    2006Cash Flows From Operating Activities:Net loss
    
    $
    (92,635
    )
    
    $
    (55,279
    )Adjustments to reconcile net loss to net cash used in operating activities:Allowance for doubtful accounts
    
    
    661
    
    
    
    3Depreciation and amortization
    
    
    16,185
    
    
    
    7,433Amortization of prepaid license fees
    
    
    2,774
    
    
    
    938Amortization of deferred financing costs and accretion of debt discount
    
    
    7,052
    
    
    
    1,096Deferred income taxes
    
    
    677
    
    
    
    464Share-based compensation
    
    
    7,869
    
    
    
    1,683Minority interest
    
    
    (892
    )
    
    
    (390
    )Losses from equity investees, net
    
    
    1,618
    
    
    
    1,973(Gain) loss on other asset disposals
    
    
    (5
    )
    
    
    18Gain on sale of equity investment
    
    
    (2,213
    )
    
    
    Changes in assets and liabilities, net of effects from acquisitions:Prepaid spectrum license fees
    
    
    (44,327
    )
    
    
    (3,524
    )Inventory
    
    
    48
    
    
    
    102Accounts receivable
    
    
    (879
    )
    
    
    (1,602
    )Prepaids and other assets
    
    
    (4,988
    )
    
    
    (1,774
    )Accounts payable
    
    
    2,855
    
    
    
    (3,897
    )Accrued expenses and other liabilities
    
    
    (13,736
    )
    
    
    2,089Due to affiliate
    
    
    (392
    )
    
    
    (162
    )Net cash used in operating activities
    
    
    (120,328
    )
    
    
    (50,829
    )Cash Flows From Investing Activities:Purchase of property, plant and equipment
    
    
    (74,370
    )
    
    
    (29,452
    )Payments for acquisitions of spectrum licenses and other
    
    
    (10,400
    )
    
    
    (4,065
    )Purchases of short-term investments
    
    
    (461,928
    )
    
    
    (10,309
    )Sales or maturities of short-term investments
    
    
    512,415
    
    
    
    86,571Issuance of notes receivable, related party
    
    
    
    
    
    
    (1,664
    )Restricted cash
    
    
    (926
    )
    
    
    30Restricted investments
    
    
    34,294
    
    
    
    (55,827
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (27,722
    )Proceeds from sale of equity investment
    
    
    2,250
    
    
    
    Net cash provided by (used in) investing activities
    
    
    1,335
    
    
    
    (42,438
    )Cash Flows From Financing Activities:Proceeds from issuance of common stock for IPO, net
    
    
    557,572
    
    
    
    Proceeds from issuance of common stock for option and warrant exercises
    
    
    1,546
    
    
    
    Proceeds from issuance of senior debt and warrants
    
    
    
    
    
    
    360,350Deferred financing fees
    
    
    
    
    
    
    (16,100
    )Principal payments on long-term debt
    
    
    (625
    )
    
    
    Contributions from minority interests
    
    
    15,000
    
    
    
    Net cash provided by financing activities
    
    
    573,493
    
    
    
    344,250Effect of foreign currency exchange rates on cash and cash equivalents
    
    
    (90
    )
    
    
    535Net increase in cash and cash equivalents
    
    
    454,410
    
    
    
    251,518Cash and Cash Equivalents:Beginning of period
    
    
    438,030
    
    
    
    29,188End of period
    
    $
    892,440
    
    
    $
    280,706Supplemental Cash Flow Disclosures:Common stock and warrants issued for spectrum licenses
    
    $
    21,379
    
    
    $
    24,463Common stock and warrants issued for business acquisitions
    
    $
    15
    
    
    $
    1,476Cash paid for taxes
    
    $
    32
    
    
    $
    Cash paid for interest
    
    $
    39,170
    
    
    $
    15,115Cashless
option exercises
    
    $
    346
    
    
    $
    Fixed asset
purchases in accounts payable
    
    $
    1,518
    
    
    $
    10,385Non-cash dividends to related party
    
    $
    1,063
    
    
    $
    772
  4




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED
STATEMENT OF STOCKHOLDERS EQUITY
   Class A
    
    
    Class B
    
    
    Common
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock, Warrants and
    
    
    Common Stock and
    
    
    stock
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Total
    
    
    ComprehensiveAdditional Paid In Capital
    
    
    Additional Paid In Capital
    
    
    and warrants
    
    
    Deferred
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Stockholders
    
    
    IncomeShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    payable
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Equity
    
    
    (Loss)Balances at January 1, 2007
    
    
    109,325
    
    
    $
    1,474,759
    
    
    
    28,597
    
    
    $
    234,376
    
    
    $
    166
    
    
    $
    (116
    )
    
    $
    6,990
    
    
    $
    (458,566
    )
    
    $
    1,257,609
    
    
    $
    (276,731
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,635
    )
    
    
    (92,635
    )
    
    
    (92,635
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,320
    
    
    
    
    
    
    
    1,320
    
    
    
    1,320Unrealized loss on short-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    (37
    )
    
    
    (37
    )Common stock issued from IPO, net
    
    
    24,000
    
    
    
    557,572
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    557,572Common stock issued for spectrum
    
    
    233
    
    
    
    4,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,200Options and warrants exercised
    
    
    864
    
    
    
    1,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,546Cashless option exercises and other
stock transactions
    
    
    27
    
    
    
    (462
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (462
    )Restricted stock issued
    
    
    33
    
    
    
    833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (833
    )
    
    
    
    
    
    
    
    
    
    
    Warrants issued
    
    
    
    
    
    
    17,194
    
    
    
    
    
    
    
    
    
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,064Share-based compensation
    
    
    
    
    
    
    7,606
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    7,753Balances at March 31, 2007
    
    
    134,482
    
    
    $
    2,063,248
    
    
    
    28,597
    
    
    $
    234,376
    
    
    $
    36
    
    
    $
    (802
    )
    
    $
    8,273
    
    
    $
    (551,201
    )
    
    $
    1,753,930
    
    
    $
    (91,352
    )
  5




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 1. Description of Business and Basis of Presentation
 The Business
   Basis of Presentation
  Principles of Consolidation
  Use of Estimates
   Recent Accounting Pronouncements
 SFAS No. 159  The Fair Value Option for Financial Assets and Financial Liabilities
 6




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
  FIN No. 48  Accounting for Uncertainty in Income Taxes
 FSP No. EITF 00-19-2 Accounting for Registration Payment Arrangements Accounting for Contingencies.
 SFAS No. 157 Fair Value Measurements
 2. Summary of Significant Accounting Policies
  3. Strategic Transactions
 Determining Whether a Nonmonetary Transaction Involves Receipt of
Productive Assets or of a Business
 7




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
 4. Property, Plant and Equipment
  March 31,
    
    
    December 31,2007
    
    
    2006Network and base station equipment
    
    $
    178,323
    
    
    $
    161,875Customer premise equipment
    
    
    58,010
    
    
    
    47,700Furniture, fixtures and equipment
    
    
    23,090
    
    
    
    20,546Leasehold improvements
    
    
    12,695
    
    
    
    8,340Construction in progress
    
    
    152,410
    
    
    
    112,669424,528
    
    
    
    351,130Less: accumulated depreciation and
amortization
    
    
    (63,371
    )
    
    
    (48,332
    )$
    361,157
    
    
    $
    302,798
  5. Spectrum Licenses, Goodwill, and Other Intangible Assets
     6. Accounts Payable and Accrued Expenses
  March 31,
    
    
    December 31,2007
    
    
    2006Accounts payable
    
    $
    44,588
    
    
    $
    41,710Accrued interest
    
    
    9,119
    
    
    
    27,272Salaries and benefits
    
    
    9,375
    
    
    
    12,095Other
    
    
    25,945
    
    
    
    27,139$
    89,027
    
    
    $
    108,216
 8




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
 7. Commitments and Contingencies
   8. Income Taxes
      9.
Stockholders Equity
   10. Share-Based Payments
  9




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
  Stock Options
   Three months ended March 31,2007
    
    
    2006Cost of service
    
    $
    15
    
    
    $
    284Selling, general and administrative
    
    
    7,854
    
    
    
    1,399$
    7,869
    
    
    $
    1,683
  Three months ended March 31,2007
    
    2006Expected volatility
    
    
    64.68
    %
    
    
    78.62
    %Expected dividend yield
    
    
    
    
    
    
    Expected life (in years)
    
    
    6.25
    
    
    
    6.25Risk-free interest rate
    
    
    4.46% - 4.78
    %
    
    
    4.45
    %Weighted average fair value per
option at grant date
    
    $
    15.96
    
    
    $
    10.76
    Restricted Stock
  10




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
 SAR Plan
   Warrants
   Three months ended March 31,2007
    
    
    2006Expected volatility
    
    64.68% to 88.54%
    
    
    78.62
    %Expected dividend yield
    
    
    
    
    
    
    Expected life (in years)
    
    
    5-10
    
    
    
    5-6Risk-free interest rate
    
    3.05% to 4.81%
    
    4.35% to 4.59%Weighted average fair value per
warrant at issuance date
    
    $
    12.07
    
    
    $
    9.96
 11. Net Loss Per Share
 Earnings
Per Share,
  Three months ended March 31,2007
    
    2006Stock options
    
    
    13,942,894
    
    
    
    9,128,478Nonvested restricted stock
    
    
    74,999
    
    
    
    250,000Warrants
    
    
    18,904,640
    
    
    
    18,635,27932,922,533
    
    
    
    28,013,757
 12. Comprehensive Loss
  11




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
   13. Geographic Information
 Disclosures about Segments of an Enterprise and Related
Information
  Revenue (a)
    
    
    Long-lived Assets (b)Three months ended March 31,
    
    
    March 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006United States
    
    $
    23,104
    
    
    $
    20,578
    
    
    $
    787,766
    
    
    $
    661,444Europe
    
    
    6,171
    
    
    
    2,170
    
    
    
    109,131
    
    
    
    103,782$
    29,275
    
    
    $
    22,748
    
    
    $
    896,897
    
    
    $
    765,226
 
 (a)
    
    Revenues are attributed to geographic areas based on the location of the
customer.(b)
    
    Consists of property, plant and equipment and prepaid spectrum and spectrum licenses
attributable to the geographic area based on location. 14. Related Party Transactions
  Relationships among Certain Stockholders, Directors, and Officers of Clearwire
   12




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
  Advisory Services Agreement
   Nextel Undertaking 
 Intel Collaboration Agreement
  Motorola Agreements
 13




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##### Table of Contents



CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Continued)
 HITN and its Affiliates
    Agreements with Bell Canada
   14




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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis summarizes the significant factors affecting our
consolidated results of operations, financial condition and liquidity position for the three months
ended March 31, 2007 and 2006 and should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this filing. The following
discussion and analysis contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to these differences include those discussed
below and elsewhere in this quarterly report on Form 10-Q, particularly in the section entitled
Risk Factors.
 Forward-Looking Statements
    Overview and Recent Developments
     15




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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
          16




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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
  Critical Accounting Policies
    Revenue Recognition
 Revenue
Recognition
 Accounting for Revenue
Arrangements with Multiple Deliverables
  Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)
 Software Revenue Recognition
 17




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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
   Share-Based Compensation
  Accounting for Share-Based Compensation
 Accounting for Spectrum Licenses and Leases
 Goodwill and Other Intangible Assets,
  Deferred Tax Asset Valuation Allowance
 Accounting for Income Taxes
 18




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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
 Results of Operations
  Three Months Ended March 31,2007
    
    
    2006Revenues:Service
    
    $
    29,275
    
    
    $
    9,541Equipment and other (includes related party sales of $0 and $7,618)
    
    
    
    
    
    
    13,207Total revenues
    
    
    29,275
    
    
    
    22,748Operating Expenses:Cost of goods and services (exclusive of items shown
separately below):Cost of service (includes related party costs of $728 and $0)
    
    
    16,735
    
    
    
    8,722Cost of equipment (includes related party costs of $0
and $2,390)
    
    
    
    
    
    
    5,140Selling, general and administrative expense
    
    
    68,657
    
    
    
    40,604Research and development
    
    
    445
    
    
    
    2,655Depreciation and amortization
    
    
    16,185
    
    
    
    7,433Spectrum lease expense
    
    
    13,442
    
    
    
    3,344Total operating expenses
    
    
    115,464
    
    
    
    67,898Operating loss
    
    
    (86,189
    )
    
    
    (45,150
    )Other (Expense) Income:Interest income
    
    
    16,590
    
    
    
    3,062Interest expense
    
    
    (24,218
    )
    
    
    (11,089
    )Foreign
currency transaction gains (losses), net
    
    
    33
    
    
    
    (6
    )Other income (expense), net
    
    
    2,478
    
    
    
    (49
    )Total other expense, net
    
    
    (5,117
    )
    
    
    (8,082
    )Loss before income taxes, minority interest and losses from equity
investees
    
    
    (91,306
    )
    
    
    (53,232
    )Income tax provision
    
    
    (603
    )
    
    
    (464
    )Loss before minority interest and losses from equity investees
    
    
    (91,909
    )
    
    
    (53,696
    )Losses from equity investees, net
    
    
    (1,618
    )
    
    
    (1,973
    )Minority interest in net loss of consolidated subsidiaries
    
    
    892
    
    
    
    390Net loss
    
    $
    (92,635
    )
    
    $
    (55,279
    )
 Revenue .
   19




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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
  Cost of goods and services .
  Selling, general and administrative expense .
   Research and development.
 Depreciation and amortization .
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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
  Spectrum lease expense.
 Interest income.
 Interest expense .
 Other income (expense), net.
 Losses from equity investees, net.
 Cash Flow Analysis
  Three Months Ended March 31,2007
    
    
    2006Cash used in operating activities
    
    $
    (120,328
    )
    
    $
    (50,829
    )Cash provided by (used in) investing activities
    
    
    1,335
    
    
    
    (42,438
    )Cash provided by financing activities
    
    
    573,493
    
    
    
    344,250Effect of foreign exchange rates on cash and cash
equivalents
    
    
    (90
    )
    
    
    535Net increase in cash and cash equivalents, including the
effects of foreign exchange rate changes
    
    
    454,410
    
    
    
    251,518Cash and cash equivalents at beginning of period
    
    
    438,030
    
    
    
    29,188Cash and cash equivalents at end of period
    
    $
    892,440
    
    
    $
    280,706
 Operating Activities
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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
  Investing Activities
  Financing Activities
  Liquidity and Capital Resource Requirements
  Recent Accounting Pronouncements
 SFAS
No. 159  The Fair Value Option for Financial Assets and Financial Liabilities
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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
 FIN No. 48  Accounting for Uncertainty in Income Taxes
 FSP No. EITF 00-19-2 Accounting for Registration Payment Arrangements Accounting for Contingencies.
 SFAS No. 157 Fair Value Measurements
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
    Foreign Currency Exchange Rates
  23




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CLEARWIRE CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
    
    
    improved the documentation and implementation of accounting policies and
procedures intended to ensure that all transactions are recorded consistently and with the
appropriate level of supporting documentation;
    
    increased accounting management oversight of the process surrounding the
accounting consolidation and reporting process and finalization of the financial
information as reported in the Form 10-Q;
    
    established a cross departmental team to implement improved policies and
procedures for the procurement and payment processes that is intended to also address the
proper recording of accounts payable and accrued expenses;
    
    continued efforts to improve our controls in the information technology area;
    
    trained our employees with respect to our company values and specifically
trained the accounting department concerning the importance of controls in a public company
environment;
    
    formally commenced our documentation and testing of our internal
controls over financial reporting as required by the Sarbanes-Oxley Act of 2002; and
    
    subsequent to the end of the first quarter, we hired a Chief Accounting Officer
with thorough knowledge and experience with technical accounting and U.S. GAAP reporting
requirements to oversee our accounting and internal controls over financial reporting.
  24




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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Risks Relating to Our Company
 We are an early stage company, we have a history of operating losses and we expect to continue to
realize significant net losses for the foreseeable future.
  
    
    our results of operations may fluctuate significantly, which may adversely
affect the value of an investment in our Class A common stock;
    
    we may be unable to develop and deploy our network, expand our services,
meet the objectives we have established for our business strategy or grow our business
profitably, if at all;
    
    it may be difficult to predict accurately our key operating and performance
metrics because of our limited operating history; and
    
    our network and related technologies may fail or the quality and number of
services we are able to provide may decline if our network operates at maximum capacity
for an extended period of time.
  If we do not obtain additional financing, our business prospects, financial condition and
results of operations will be adversely affected.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
   We have committed to deploy a wireless broadband network using mobile WiMAX technologies under
certain circumstances, even if there are alternative technologies available in the future that
would be technologically superior or more cost effective.
   If third parties fail to develop and deliver the equipment that we need for both our existing
and future networks, we may be unable to execute our business strategy or operate our business.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
  Many of our competitors are better established and have significantly greater resources than
we have, which may make it difficult to attract and retain subscribers.
   
    
    cable operators offering high-speed Internet connectivity services and
voice communications;
    
    incumbent and competitive local exchange carriers providing DSL services
over their existing wide, metropolitan and local area networks;
    
    3G cellular, PCS and other wireless providers offering wireless broadband
services and capabilities, including developments in existing cellular and PCS
technology that may increase network speeds or have other advantages over our services;
    
    Internet service providers offering dial-up Internet connectivity;
    
    municipalities and other entities operating WiFi networks, some of which are free or subsidized;
    
    providers of VoIP and other telephony services;
    
    wireless Internet service providers using licensed or unlicensed spectrum;
    
    satellite and fixed wireless service providers offering or developing
broadband Internet connectivity and VoIP telephony;
    
    electric utilities and other providers offering or planning to offer
broadband Internet connectivity over power lines; and
    
    resellers providing wireless Internet or other wireless services using
infrastructure developed and operated by others.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
  Our substantial indebtedness and restrictive debt covenants could limit our financing options
and liquidity position and may limit our ability to grow our business.
   
    
    we may not be able to obtain additional financing to fund working capital, operating
losses, capital expenditures or acquisitions on terms acceptable to us or at all;
    
    we may be unable to refinance our indebtedness on terms acceptable to us, or at all;
    
    our substantial indebtedness may make us more vulnerable to economic downturns and limit
our ability to withstand competitive pressures; and
    
    cash flows from operations and investing activities have been negative since inception
and will continue to be so for some time, and our remaining cash, if any, may be
insufficient to operate our business.
  
    
    pay dividends to our stockholders;
    
    incur, or cause certain of our subsidiaries to incur, additional indebtedness;
    
    permit liens on or conduct sales of any assets pledged as collateral;
    
    sell all or substantially all of our assets or consolidate or merge with or into other companies;
    
    repay existing indebtedness; and
    
    engage in transactions with affiliates.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 We and our independent public accountants have both identified material weaknesses and other
significant deficiencies in our internal control over financial reporting during 2005 and 2006. If
we fail to establish and maintain an effective system of internal control, we may not be able to
report our financial results accurately or to prevent fraud. Any inability to report and file our
financial results in an accurate and timely manner could harm our business and adversely impact the
trading price of our Class A common stock.
      Acquisitions, investments and other strategic transactions could result in operating
difficulties, dilution and distractions from our core business.
  
    
    difficulties in integrating acquired technologies and operations
into our business while maintaining uniform standards, controls,
policies and procedures;
    
    obligations imposed on us by counterparties in such transactions
that limit our ability to obtain additional financing, our ability
to compete in geographic areas or specific lines of business, or
other aspects of our operational flexibility;
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
    
    increasing cost and complexity of assuring the implementation and
maintenance of adequate internal control and disclosure controls
and procedures, and of obtaining the reports and attestations
required under the Securities Exchange Act of 1934;
    
    difficulties in consolidating and preparing our financial
statements due to poor accounting records, weak financial controls
and, in some cases, procedures at acquired entities not based on
U.S. GAAP particularly those entities in which we lack control;
and
    
    inability to predict or anticipate market developments and capital
commitments relating to the acquired company, business or
technology.
  
    
    difficulties, as a result of distance, language, legal or culture differences, in developing,
staffing and managing foreign operations;
 
    
    lack of control over our equity investees and other business relationships;
 
    
    currency exchange rate fluctuations;
 
    
    longer payment cycles;
 
    
    credit risk and higher levels of payment fraud;
 
    
    foreign exchange controls that might limit our control over, or prevent us from repatriating, cash
generated outside the United States;
 
    
    potentially adverse tax consequences;
 
    
    expropriation or nationalization of assets;
 
    
    differences in regulatory requirements that may make it difficult to offer all of our services;
 
    
    unexpected changes in regulatory requirements;
 
    
    difficulties in foreign corporate law that have and may create additional administrative burdens and
legal risks;
 
    
    increased management time and resources to manage overseas operations;
 
    
    trade barriers and import and export restrictions; and
 
    
    political or social unrest and economic instability.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 We may experience difficulties in constructing, upgrading and maintaining our network, which
could adversely affect customer satisfaction, increase subscriber churn and reduce our revenues.
    If we do not obtain and maintain rights to use licensed spectrum in one or more markets, we
may be unable to operate in these markets, which could adversely affect our ability to execute our
business strategy.
   
    
    inability to satisfy build-out or service deployment requirements
upon which our spectrum licenses or leases are, or may be,
conditioned;
 
    
    adverse changes to regulations governing our spectrum rights;
 
    
    inability to use the spectrum we have acquired or leased due to
interference from licensed or unlicensed operators in our band or
in adjacent bands;
 
    
    refusal by the FCC or one or more foreign licensing authorities to
recognize our acquisition or lease of spectrum licenses from
others or our investments in other license holders;
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
    
    inability to offer new services or to expand existing services to
take advantage of new capabilities of our network resulting from
advancements in technology due to regulations governing our
spectrum rights;
 
    
    inability to control leased spectrum due to contractual disputes
with, or the bankruptcy or other reorganization of, the license
holders;
 
    
    failure of the FCC or other regulators to renew our spectrum
licenses as they expire and our failure to obtain extensions or
renewals of spectrum leases before they expire;
 
    
    potentially significant increases in spectrum prices, because of
increased competition for the limited supply of licensed spectrum
both in the United States and internationally; and
 
    
    invalidation of our authorization to use all or a significant
portion of our spectrum, resulting in, among other things,
impairment charges related to assets recorded for such spectrum.
  Interruption or failure of our information technology and communications systems could impair
our ability to provide our services, which could damage our reputation and harm our operating
results.
   A number of our significant business arrangements are between us and parties that have an
investment in or a fiduciary duty to our company, and the terms of those arrangements may not be
beneficial to us.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 The industries in which we operate are continually evolving, which makes it difficult to
evaluate our future prospects and increases the risk of your investment. Our products and services
may become obsolete, and we may not be able to develop competitive products or services on a timely
basis or at all.
  
    
    existing service providers may use more traditional and
commercially proven means to deliver similar or alternative
services;
 
    
    new service providers may use more efficient, less expensive
technologies, including products not yet invented or developed;
 
    
    consumers may not subscribe to our services;
 
    
    we may not be able to realize economies of scale;
 
    
    we may be unable to respond successfully to advances in competing
technologies in a timely and cost-effective manner;
 
    
    we may lack the financial and operational resources necessary to
enable migration toward mobile WiMAX technology and the
development and deployment of network components and software that
do not currently exist and that may require substantial upgrades
to or replacements of existing infrastructure; and
 
    
    existing, proposed or undeveloped technologies may render our
existing or planned services less profitable or obsolete.
  We rely on highly skilled executives and other personnel. If we cannot retain and motivate key
personnel, we may be unable to implement our business strategy.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 Certain aspects of our VoIP telephony services differ from traditional telephone service,
which may limit the attractiveness of our services.
  
    
    our subscribers may experience lower call quality than they experience with traditional
wireline telephone companies, including static, echoes and transmission delays;
 
    
    our subscribers may experience higher dropped-call rates than they experience with traditional
wireline telephone companies;
 
    
    a power loss or Internet access interruption may cause our service to be interrupted; and
 
    
    at this time we do not offer local number portability to our subscribers.
   Our activities outside the United States operate in a competitive environment different than
the environment within the United States. Any difficulties in managing these businesses could
occupy a disproportionate amount of our managements attention and disrupt our operations.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
  We may be unable to protect our intellectual property, which could reduce the value of our
services and our brand.
   We could be subject to claims that we have infringed on the proprietary rights of others,
which claims would likely be costly to defend, could require us to pay damages and could limit our
ability to use necessary technologies in the future.
  If our data security measures are breached, subscribers may perceive our network and services
as not secure.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 Our business depends on a strong brand, and if we do not maintain and enhance our brand, our
ability to attract and retain subscribers may be impaired and our business and operating results
harmed.
  We are subject to extensive regulation that could limit or restrict our activities and
adversely affect our ability to achieve our business objectives. If we fail to comply with these
regulations, we may be subject to penalties, including fines and suspensions, which may adversely
affect our financial condition and results of operations.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
   We are a controlled company within the meaning of the Nasdaq Marketplace Rules and, as a
result, rely on, exemptions from certain corporate governance requirements.
   Mr. McCaw and Intel Capital are our largest stockholders, and as a result they can exert
control over us and may have actual or potential interests that may diverge from yours.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
  Since our initial public offering in March 2007, the market price of our common stock has been
and may continue to be volatile.
  
    
    quarterly variations in our results of operations or those of our competitors;
 
    
    announcements by us or our competitors of acquisitions, new products, significant
contracts, commercial relationships or capital commitments;
 
    
    disruption to our operations or those of other companies critical to our network operations;
 
    
    the emergence of new competitors or new technologies;
 
    
    our ability to develop and market new and enhanced products on a timely basis;
 
    
    seasonal or other variations in our subscriber base;
 
    
    commencement of, or our involvement in, litigation;
 
    
    availability of additional spectrum;
 
    
    dilutive issuances of our stock or the stock of our subsidiaries, or the incurrence of
additional debt including upon the exercise of outstanding warrants and options;;
 
    
    changes in our board or management;
 
    
    adoption of new or different accounting standards;
 
    
    changes in governmental regulations or the status of our regulatory approvals;
 
    
    changes in earnings estimates or recommendations by securities analysts;
 
    
    announcements regarding mobile WiMAX and other technical standards; and
 
    
    general economic conditions and slow or negative growth of related markets.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
       
 Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    The following individuals were elected to directors of the Company: Peter L.S. Currie,
Richard Emerson, Nicolas Kauser, Craig O. McCaw, David Perlmutter, Michael J. Sabia, R. Gerard
Salemme, Stuart M. Sloan, Arvind Sodhani, Michelangelo A. Volpi, and Benjamin G. Wolff.
 2.
    
    The Fourth Amended and Restated Certificate of Incorporation
of the Company was adopted and
approved.
 3.
    
    The Clearwire Corporation 2007 Stock Compensation Plan was approved.
 
 Item 5. Other Information
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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 Item 6. Exhibits
 EXHIBIT INDEX
 3.1
    
    Fourth Amended and Restated Certificate of Incorporation of Clearwire Corporation.*3.2
    
    Amended and Restated Bylaws.*4.1
    
    Form of stock certificate for Class A common stock.*4.2
    
    Amended and Restated Stockholders Agreement dated March 16, 2004 among Clearwire Corporation and the parties thereto.*4.3
    
    Registration Rights Agreement dated November 13, 2003 among Flux U.S. Corporation, Clearwire Holdings, Inc. and Hispanic Information and Telecommunications Network, Inc.*4.4
    
    Registration Rights Agreement dated March 16, 2004 among Clearwire Corporation and the parties thereto.*4.5
    
    Registration Rights Agreement dated August 5, 2005 among Clearwire Corporation and certain buyers of the Senior Secured Notes.*4.6
    
    Investor Rights Agreement dated August 29, 2006 among Clearwire Corporation, Intel Pacific, Inc. and Motorola, Inc.*4.7
    
    Securities Purchase Agreement dated August 5, 2005 among Clearwire Corporation and the buyers of the Senior Secured Notes, as amended February 16, 2006.*4.8
    
    Indenture dated August 5, 2005 among Clearwire
Corporation, Clearwire LLC, Fixed Wireless Holdings, LLC, NextNet Wireless, Inc. and The Bank of New York, as Trustee, as supplemented February 16, 2006.*4.9
    
    Form of Senior Secured Note, due 2010.*4.10
    
    Form of Warrant.*10.1
    
    Clearwire Corporation 2007 Stock Compensation Plan*10.2
    
    Stock and Asset Purchase Agreement by and among BellSouth
Corporation, Clearwire Spectrum Holdings II LLC, Clearwire
Corporation and AT&T Inc., dated as of February 15, 2007*31.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 302
of the Sarbanes Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 302 of the Sarbanes Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002, 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002, 18 U.S.C. Section 1350.
 
 *
    
    Incorporated by Reference to Clearwires Registration Statement on Form S-1 (Registration No. 333-139468), as amended. 40




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CLEARWIRE CORPORATION AND SUBSIDIARIES
 
 SIGNATURES
  CLEARWIRE CORPORATIONDate: May 15, 2007
    /s/ JOHN A. BUTLERJohn A. ButlerChief Financial Officer 41