Clearwire 2007 Annual Report Download

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2007 Annual Report

Table of contents

  • Page 1
    2007 Annual Report

  • Page 2
    Clearwire Mission To provide the simplest way for people to enjoy all that the Internet has to offer anytime and anywhere.

  • Page 3
    ...any device or screen, and you have a network that stands to change the game forever. Just as mobile phones now connect to people rather than places, Clearwire is giving our customers the ability to access the Internet, at true broadband speeds, when they are on the go. This combination of high speed...

  • Page 4
    ... our future is incredibly exciting, the performance of our existing market operations has also been impressive. In 2007, we almost doubled our customer base to nearly 400,000 subscribers, and we more than doubled our service revenues year-over-year, making us the largest provider of true broadband...

  • Page 5
    ... in our existing markets, and later in the year we should see mobile WiMAXbased residential gateway modems, PC Cards, ExpressCards, USB driven devices, and embedded chipsets in PCs available in our new WiMAX markets. Smart Growth While we are making compelling penetration and market share gains, we...

  • Page 6
    ...and Edison, or the writings of Shakespeare and Jefferson, the power to share information widely is considered by many as the most significant, life changing development of the last 1,000 years. Clearwire will allow people to connect, communicate and collaborate as never before. We believe that this...

  • Page 7
    ...30, 2007, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $1,465,893,274 based on the closing sale price as reported on the NASDAQ National Market System. As of March 3, 2008, there were 135,600,714 shares of Class A common stock...

  • Page 8
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  • Page 9
    ... Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accounting Fees and Services ...PART IV Exhibits and Financial...

  • Page 10
    ... broadband networks cover entire communities and deliver a high-speed Internet connection that not only creates a new communications path into the home or office, but also provides a broadband connection anytime and anywhere within our coverage area. We intend to evolve our networks and the services...

  • Page 11
    ... will expand from the current cable/ DSL replacement business to more traditional wireless uses. Our pre-WiMAX network, utilized in the markets in which we offered our services as of December 31, 2007, relies on network infrastructure equipment that is based on non-line-of-sight, or NLOS, Orthogonal...

  • Page 12
    ... markets, we offer subscribers a choice of service plans designed to accommodate users that require greater access speeds or more email addresses and web hosting accounts. As of December 31, 2007, our primary service plans for our current wireless broadband services in the United States include...

  • Page 13
    ...offer a comparable wireless broadband service in their markets in Denmark and Mexico. In our international markets, we currently offer subscribers a choice of service plans designed to accommodate users that require faster access speeds or a greater number of email addresses and web hosting accounts...

  • Page 14
    ... able to offer services over our mobile WiMAX network in our new markets that we place in commercial operation in the second half of 2008 and beyond similar to the fixed and portable wireless high-speed Internet access and VoIP telephony services we currently offer our existing subscribers, but with...

  • Page 15
    ...will be available only over our planned mobile WiMAX network. Markets Served and Deployment United States Markets We use the term "market" to refer to one or more municipalities in a geographically distinct location in which we provide our services. Our markets range from major metropolitan areas to...

  • Page 16
    ... of modems, so that a new subscriber can activate his or her account and receive equipment while at the mobile kiosk. As of December 31, 2007, we employed approximately 520 salespeople in the United States. We generally compensate these employees on a salary plus commission basis. Our direct sales...

  • Page 17
    ... account access and, for VoIP subscribers, web-based resources that allow them to control their telephony features and settings; and • A network of service technicians available to provide on-site customer assistance and technical support. In October 2006, we opened a call center in Las Vegas...

  • Page 18
    ...given market. Pre-WiMAX Network Components The Expedience customer premise equipment ("CPE") that operates on our pre-WiMAX network is a NLOS wireless modem that connects to any IP-based device, such as a computer, using a standard Ethernet connection. It is simple to install and requires no service...

  • Page 19
    ...40 cell sites encompassing an area of approximately 145 square miles. This is one of the largest WiMAX field tests in the United States. Based on the initial success of these trials, we expect that all future domestic markets will be deployed with WiMAX technology. Spectrum Our network operates over...

  • Page 20
    ... wireless broadband services as opposed to simply warehousing spectrum rights. We also may pay commissions or issue shares, stock options or warrants to brokers who locate and secure spectrum for us. We have recently observed a significant increase in the cost of acquiring spectrum in the United...

  • Page 21
    ... of that area. As in the United States, we engineer our international networks to optimize the number of users that the network can support while providing sufficient capacity and bandwidth. Thus far we have chosen not to launch our services in a market using our current technology unless we...

  • Page 22
    ... mobile WiMAX network. Competition The market for broadband services is highly competitive and includes companies that offer a variety of services using a number of different technological platforms, such as cable modems, DSL, third-generation, or 3G, cellular, satellite, wireless Internet service...

  • Page 23
    ... broadband network management On November 7, 2006, the FCC issued an order classifying BPL Internet access service as an "information service." Like cable modem and DSL service, the broadband transmission component of BPL Internet access service is not required to be offered as a telecommunications...

  • Page 24
    ...terms, and conditions of their Internet access service offerings. The FCC, however, is currently considering whether to impose various consumer protection obligations, similar to Title II obligations, on broadband Internet access providers, including DSL, cable modem and wireless broadband providers...

  • Page 25
    ...facilities-based broadband Internet access providers and interconnected VoIP providers are subject to CALEA, which requires service providers covered by that statute to build certain law enforcement surveillance assistance capabilities into their communications networks and to maintain CALEA-related...

  • Page 26
    ... technical and service rules to facilitate wireless broadband operations in the 2495 to 2690 MHz band. The FCC adopted new rules that (i) expand the permitted uses of EBS and BRS spectrum so as to facilitate the provision of high-speed data and voice services accessible to mobile and fixed users on...

  • Page 27
    ...and future state and federal laws imposing taxes or other regulations on Internet access and electronic commerce may arise, any of which could increase the cost of our services and could materially and adversely affect our business. Intellectual Property We review our technological developments with...

  • Page 28
    ... additional capital during this period if acceptable terms are available. We also expect to require substantial additional capital in the long-term to fund our business, including further operating losses, network expansion plans and spectrum acquisitions, and our success and viability will depend...

  • Page 29
    ...of the proceeds to repay and retire existing loans and secured notes. The remainder of the proceeds will be used for expansion plans, spectrum acquisition, and general working capital purposes. Our senior term loan facility provides for quarterly principal payments, with the remaining balance due on...

  • Page 30
    ... our business, acquire needed assets, or take other actions we might otherwise consider appropriate or desirable. 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...

  • Page 31
    ... and retain subscribers. Our competitors include: • 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...

  • Page 32
    ... include ensuring the availability of subscriber equipment that is compatible with our network and managing sales, advertising, customer support, and billing and collection functions of our business while providing reliable network service that meets our subscribers' expectations. Our failure in...

  • Page 33
    ... ability to execute our business strategy. To offer our services using licensed spectrum both in the United States and internationally, we depend on our ability to acquire and maintain sufficient rights to use spectrum through ownership or long-term leases in each of the markets in which we operate...

  • Page 34
    ... market developments and capital commitments relating to the acquired company, business or technology. In the past, some of our business acquisitions have given rise to significant deficiencies in financial reporting controls in certain areas such as cash, inventory, fixed assets, prepaid site...

  • Page 35
    ...rapid technological change, competitive pricing, frequent new service introductions, evolving industry standards and changing regulatory requirements. Additionally, our planned deployment of mobile WiMAX depends on the development of network equipment and subscriber devices based on the mobile WiMAX...

  • Page 36
    ...planned services less profitable or obsolete. As our services and those offered by our competitors develop, businesses and consumers, including our current subscribers, may not accept our services as an attractive alternative to other means of receiving wireless broadband services. We rely on highly...

  • Page 37
    ...and adversely affect our business elsewhere. In a number of international markets, we face substantial competition from local service providers that offer or may offer their own wireless broadband or VoIP telephony services and from other companies that provide Internet connectivity services. We may...

  • Page 38
    ... parties may overcome our network security and obtain access to data on our network, including on a device connected to our network. In addition, because we operate and control our network and our subscribers' Internet connectivity, unauthorized access or sabotage of our network could result...

  • Page 39
    ... companies that offer competing services, such as cable and DSL providers and incumbent telecommunications carriers, also affects our business indirectly. In order to provide "interconnected" VoIP service we need to obtain, on behalf of our customers, North American Numbering Plan telephone numbers...

  • Page 40
    ... or board resolution addressing the nomination process. Unless we choose to no longer rely on these exemptions in the future, you will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq Global Select Market corporate governance requirements...

  • Page 41
    ... of new competitors or new technologies; • market perceptions relating to the deployment of mobile WiMAX Networks by other operators, including Sprint Nextel; • our ability to develop and market new and enhanced products on a timely basis; • seasonal or other variations in our subscriber base...

  • Page 42
    ... projected needs of our business for the next twelve months. The following table lists our significant properties and the inside square footage of those properties: City, State Approximate Size (Square Feet) Kirkland, WA (headquarters and administrative) ...Milton, FL (call center) ...Las Vegas, NV...

  • Page 43
    ... Purchases of Equity Securities Market Prices of Common Stock Our common stock is traded on the Nasdaq Global Market under the symbol "CLWR." The following table sets forth the high and low sales prices of our common stock as reported on the Nasdaq Global Market: Fiscal Year 2007 High Low Quarter...

  • Page 44
    ... 2005, 2004 and 2003 and the consolidated statement of operations for the year ended December 31, 2004 and 2003 are derived from our audited financial statements and related notes which are not included in this report. The information set forth below should be read in conjunction with our historical...

  • Page 45
    ... network build-out related to our expansion into new markets. 2007 As of December 31, 2006 2005 2004 (In thousands) 2003 Operating Data: Network covered population: United States(1) ...International(2) ...Network covered households:(3) United States ...International ...Subscribers:(4) United States...

  • Page 46
    ... the home or office. We provide a portable broadband connection that delivers high speed Internet access and enables premium services, such as VoIP telephony, anytime and anywhere within our coverage area Our pre-WiMAX network relies on network infrastructure equipment that is based on non-line-of...

  • Page 47
    ... networks based on the IEEE mobile Worldwide Interoperability of Microwave Access 802.16e-2005, or mobile WiMAX, standard in all new markets. As with our current pre-WiMAX network infrastructure equipment, we expect mobile WiMAX technology to support fixed, portable and mobile service offerings...

  • Page 48
    ... financial markets of late, we cannot offer assurances that the necessary capital to achieve our current plan will be available on attractive terms or at all, and we plan to manage our use of capital by adjusting the rate at which we build our network, acquire spectrum and deploy our services...

  • Page 49
    ... of 2007 the Company was organized into two reportable business segments: the United States and the International business. See Note 16, Business Segments, for further discussion. Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based...

  • Page 50
    ... handling costs billed to customers are recorded to service revenue. Prior to our sale of NextNet in August 2006, we primarily earned equipment revenue from sales to third party network providers of base stations, CPE, related infrastructure, system services and software maintenance contracts. With...

  • Page 51
    ... such as a switch to mobile WiMAX wireless broadband network; • a significant change in our management's views of growth rates for our business; and • a significant change in the anticipated future economic and regulatory conditions and expected technological availability. We frequently evaluate...

  • Page 52
    ... made to employees and directors based on estimated fair values. We recognize compensation costs, net of a forfeiture rate, for those shares expected to vest on a graded vesting schedule over the requisite service period of the award, which is generally the option vesting term of four years. We...

  • Page 53
    ...markets launched, subscriber growth, revenue growth, spectrum licenses acquired or leased, employee growth and the execution of strategic transactions; • the exercise price of warrants for the purchase of our common stock issued to both related parties and third parties; • the terms of cash sale...

  • Page 54
    ... various factors including market price (when available), investment ratings, the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair value has been less than our cost basis, and our intent and ability to hold the investment until maturity...

  • Page 55
    ... timing of cash flows, market liquidity, and review of underlying collateral and principal, interest and dividend payments. The use of different judgments and assumptions could result in different presentations of pricing and security prices could change significantly based on market conditions. 47

  • Page 56
    ... presented (in thousands except per share data). 2007 Year Ended December 31, 2006 2005 REVENUES: Service ...Equipment and other (includes related party sales of $0, $15,546, and $9,728) ...Total revenues ...OPERATING EXPENSES: Cost of goods and services (exclusive of a portion of depreciation...

  • Page 57
    ... internet access and related back haul costs, as the number of on-air sites increased to approximately 2,360 at December 31, 2007 compared to approximately 1,310 at December 31, 2006. In both 2007 and 2006, in anticipation of build-out and future market launches, we also had tower lease expenses...

  • Page 58
    ... sales, marketing, network deployment, executive, finance, information technology, human resource and legal. It also includes costs associated with advertising, trade shows, public relations, promotions and other market development programs and third-party professional service fees. Selling, general...

  • Page 59
    ... of small to medium sized insurance companies and financial institutions and asset backed capital commitment securities supported by high grade, short term commercial paper and a put option from a monoline insurance company. These auction rate securities were rated AAA/Aaa or AA/Aa by Standard...

  • Page 60
    ... market conditions do not allow the Company to estimate when the auctions for its auction rate securities will resume. As a result, during 2007 the Company reclassified its auction rate securities from short-term investments to long-term investments. Other income (expense), net. In the year ended...

  • Page 61
    ...a full year of sales in 2005 to Flux Fixed Wireless, a related party, which had higher overall margins, as compared to eight months in 2006, due to the sale of NextNet. As a result of our sale of NextNet, we do not currently expect to incur any future material cost of equipment. Selling, general and...

  • Page 62
    ...our market deployment schedule based on available funds. As a result, the amount and timing of our long-term capital needs will depend on the extent of our network deployment and, to a lesser degree, on the schedule on which mobile WiMAX technologies become commercially available. As our business is...

  • Page 63
    ... nine new markets in 2006, and, as a result, invested $259.4 million in deploying our wireless broadband network and acquiring additional spectrum licenses in 2006, as compared to $157.0 million in 2005, an increase of $102.4 million. Purchases of short-term and restricted investments, net of sales...

  • Page 64
    ...further details. (3) Excludes obligations of approximately $57.8 million under pending spectrum acquisition agreements at December 31, 2007. (4) Excludes $89.8 million of capital and service credit commitments related to certain spectrum lease agreements. We do not have any obligations that meet the...

  • Page 65
    ... annual periods beginning on or after December 15, 2008. We are currently evaluating whether the adoption of SFAS No. 160 will have a material impact on our financial statements. SFAS No. 159 - In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial...

  • Page 66
    ... of small to medium sized insurance companies and financial institutions and asset backed capital commitment securities supported by high grade, short term commercial paper and a put option from a monoline insurance company. These auction rate securities were rated AAA/Aaa or AA/Aa by Standard...

  • Page 67
    ITEM 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at December 31, 2007 and 2006 ...Consolidated Statements of Operations for the years ended December 31, 2007, 2006 ...

  • Page 68
    ... generally accepted in the United States of America. As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for stock-based compensation upon adoption of Statement of Financial Accounting Standards Board Statement No. 123(R), Share-Based Payment...

  • Page 69
    ... 31, 2007 2006 (In thousands, except share and per share data) ASSETS CURRENT ASSETS: Cash and cash equivalents ...Short-term investments ...Restricted cash ...Restricted investments ...Accounts receivable, net of allowance of $787 and $753 ...Notes receivable short-term, related party ...Inventory...

  • Page 70
    CLEARWIRE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2007 2006 2005 (In thousands, except per share data) REVENUES: Service ...Equipment and other (includes related party sales of $0, $15,546 and $9,728) ...Total revenues ...OPERATING EXPENSES: Cost ...

  • Page 71
    ... ...Common stock issued from IPO, net ...Common stock issued for spectrum ...Warrants issued ...Options and warrants exercised . Cashless option exercises and other stock transactions ...Deferred stock-based compensation ...Restricted stock compensation . Share-based compensation ...Balances...

  • Page 72
    ... stock and warrants issued for spectrum licenses ...Common stock and warrants issued for business acquisitions ...Cash paid for taxes ...Cash paid for interest ...Notes receivable exchanged for spectrum licenses ...Fixed asset purchases in accounts payable ...Non-cash dividends to related party...

  • Page 73
    ... of wireless broadband services. Clearwire delivers high-speed wireless broadband services to individuals, small businesses, public safety organizations, and others in a growing number of markets through its advanced network. As of December 31, 2007, the Company offered its services in 46 markets...

  • Page 74
    ... various factors including market price (when available), investment ratings, the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair value has been less than the cost basis, and the Company's intent and ability to hold the investment until...

  • Page 75
    ... hold or issue any financial instruments for trading purposes. See Note 10, LongTerm Debt, for the fair value of long-term debt. Accounts Receivable - Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. The Company specifically provides allowances...

  • Page 76
    ... the fair value and carrying value of the assets. Impairment analyses, when performed, are based on the Company's business and technology strategy, management's views of growth rates for its business, anticipated future economic and regulatory conditions and expected technological availability. For...

  • Page 77
    ... financial statements. Revenue Recognition - The Company primarily earns service revenue by providing access to its high-speed wireless network. Also included in service revenue are equipment rentals and optional services, including personal and business email and static Internet Protocol. Service...

  • Page 78
    ...to third parties. NextNet generally warranted new technology equipment sold to the purchaser to be free from defects in material and workmanship for two years for system infrastructure and one year for CPE. A warranty provision was made for estimated product repair at the time of the sale based upon...

  • Page 79
    ... patterns (expected life of the options), future forfeitures, and related tax effects. Prior to the adoption of SFAS No. 123(R), the Company accounted for share-based compensation expense in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB...

  • Page 80
    CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Recent Accounting Pronouncements SFAS No. 141(R) - In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS No. 141(R)"). In SFAS No. 141(R), the FASB retained the ...

  • Page 81
    ... LLC specialize in providing billing, online support services and customer relationship management software solutions to the communications and services industry. For the year ended December 31, 2006, the Company purchased various companies through both asset and share purchase agreements. The total...

  • Page 82
    ..."). These agreements cover a number of topics, including, but not limited to, certain technology development projects and future Clearwire purchase commitments and a maximum Motorola pricing schedule for network equipment from NextNet. The aggregate price paid by Clearwire in any calendar year will...

  • Page 83
    ... new lines of business, recapitalize, merge, consolidate or enter into certain acquisitions, sell our assets, and enter into transactions with its affiliates. Other Agreements BellSouth - On May 29, 2007, the Company closed an agreement with BellSouth Corporation to acquire for an aggregate price...

  • Page 84
    ... providers of these services and applications in markets beyond the United States, to the extent permitted under its existing agreements. In addition to these services, the Master Supply Agreement grants Bell and BCE Nexxia certain rights with respect to future service offerings by Clearwire...

  • Page 85
    ... is a telecommunications services provider holding spectrum licenses covering most of the major markets in Denmark. Danske offers wireless broadband Internet services to consumers and businesses in multiple markets in Denmark over a network deploying NextNet equipment. Clearwire acquired an equity...

  • Page 86
    ... current operations are classified as short-term available-for-sale investments, and are stated at fair value. Auction rate securities without readily determinable market values are classified as long-term available-for-sale investments and are stated at fair value. Unrealized gains and losses are...

  • Page 87
    CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) At December 31, 2007, the Company held available for sale short-term and long-term investments with a total fair value of $155.6 million and a cost of $162.9 million. During the year ended December 31, ...

  • Page 88
    ... of small to medium sized insurance companies and financial institutions and asset backed capital commitment securities supported by high grade, short term commercial paper and a put option from a monoline insurance company. These auction rate securities were rated AAA/Aaa or AA/Aa by Standard...

  • Page 89
    ... ...$16,623 23,637 (9,352) 30,908 4,758 $35,666 Based on the identified intangible assets recorded as of December 31, 2007, future amortization of intangible assets, not including spectrum leases pending FCC approval, is expected to be as follows (in thousands): 2008 ...2009 ...2010 ...2011 ...2012...

  • Page 90
    ...of a lease agreement is accounted for as prepaid spectrum license fees and is expensed over the term of the lease agreement, including renewal terms, as applicable. Future commitments under these leases are disclosed in Note 11. During the year ended December 31, 2007, consideration paid relating to...

  • Page 91
    CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses as of December 31, 2007 and 2006 consisted of the following (in thousands): December 31, 2007 2006 Accounts payable ...$ 42...

  • Page 92
    CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) to certain intangible assets, including certain spectrum assets, which are not amortized for book purposes. The net change in the valuation allowance for the years ended December 31, 2007, 2006 and 2005 ...

  • Page 93
    ...on July 3, 2012. In general, borrowings under the senior term loan facility bear interest based, at the Company's option, at either the Eurodollar rate or an alternate base rate, in each case plus a margin. The rate of interest for borrowings under the new senior term loan facility is the Eurodollar...

  • Page 94
    ... following the issuance of the Notes. This option was exercised in February 2006 when the Company completed the sale of $360.4 million senior secured notes to new and existing holders. In connection with the sale of the additional notes, the Company also issued 9,609,334 Warrants to the purchasers...

  • Page 95
    ...of its network equipment situated on leased sites, including land, towers and rooftop locations. Certain of the leases provide for minimum lease payments, additional charges and escalation clauses. Leased spectrum agreements have initial terms of up to 30 years. Other operating leases generally have...

  • Page 96
    ... various spectrum lease agreements the Company has commitments to provide Clearwire services to the lessors in launched markets, and reimbursement of capital equipment and third-party service expenditures of the lessors over the term of the lease. During the year ended December 31, 2007, the Company...

  • Page 97
    ... market and network expansion, spectrum acquisitions and general corporate purposes. Under Clearwire's Certificate of Incorporation, as amended, it has the authority to issue 355,000,000 shares of capital stock as follows: • 300,000,000 shares of Class A common stock, par value $0.0001 per share...

  • Page 98
    ...SAB No. 107, Share-Based Payment, due to lack of option exercise history. The risk-free interest rate is based on the zero-coupon U.S Treasury bond, with a term equal to the expected life of the options. Compensation cost recognized for these plans for the year ended December 31, 2007, 2006 and 2005...

  • Page 99
    ... FINANCIAL STATEMENTS - (Continued) The Company also granted stock options to employees of entities under common control who performed services to the Company to purchase shares of the Company's Class A common stock. In accordance with EITF Issue No. 00-23, Issues Related to the Accounting for Stock...

  • Page 100
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Information regarding stock options outstanding and exercisable as of December 31, 2007 is as follows: Options Outstanding Weighted Average Contractual Weighted Life Average Number of Exercise Remaining Options (Years) Price Options...

  • Page 101
    ...the fair value of the Company's restricted stock units is based on the grant-date fair market value of the common stock, which equals the grant date market price. A summary of the restricted stock unit activity for the year ended December 31, 2007 is presented below: Number of Shares WeightedAverage...

  • Page 102
    ... to options at the fourth quarter remeasured fair value. Warrants During the year ended December 31, 2007, the Company issued 1,407,139 warrants at a weighted average exercise price of $37.99 to purchase the Company's Class A common stock in connection with the acquisition of spectrum or assets. At...

  • Page 103
    CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of warrants granted is estimated on the date of grant using the Black-Scholes option pricing model using the following average assumptions for the years ended December 31, 2007 and 2006: ...

  • Page 104
    ... was organized into two reportable business segments: the United States and the International business. The Company reports business segment information as follows (in thousands): 2007 Year Ended December 31, 2006 2005 United States Revenues ...Cost of goods and services (exclusive of items shown...

  • Page 105
    ...or in the future. Mr. McCaw and his affiliates will likely continue to make additional investments in telecommunications businesses. ERH also held 0% as of December 31, 2007 and 3.1% of the Company's long-term debt as of December 31, 2006, as a result of the retirement of all senior secured notes on...

  • Page 106
    ... Services Agreement in 2003, Clearwire also issued to ERH warrants to purchase 375,000 shares of the Company's Class A common stock at an exercise price of $3.00 per share, which may be exercised any time within 10 years of the issuance of the warrants. As of December 31, 2007, the remaining life...

  • Page 107
    ... FINANCIAL STATEMENTS - (Continued) formerly a member of Clearwire's Board of Directors and is an owner of ISA and ISC, which are also affiliates of HITN. The agreements provided for payment to be provided to ISA and ISC in the form of warrants to purchase additional shares of Class A common stock...

  • Page 108
    CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 18. Quarterly Financial Information (unaudited) Summarized quarterly financial information for the years ended December 31, 2007 and 2006 is as follows (in thousands, except per share data): First ...

  • Page 109
    ... by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and...

  • Page 110
    ...for share-based payments, and ineffective controls relating to processes to ensure consistent communication of modifications in stock option grants to accounting personnel responsible for accounting for such modifications, accounting for leases and deferred rent, and information security. Management...

  • Page 111
    .... In addition, based on the work we performed during 2007 on our internal control over financial reporting, we have not identified any new material weaknesses as of December 31, 2007. This annual report does not include an attestation report of the company's registered public accounting firm due to...

  • Page 112
    ...will be included in the Proxy Statement under the heading "Information About Our Directors and Executive Officers - Related Party Transactions," and is incorporated herein by reference. ITEM 14. Principal Accounting Fees and Services The information required by Item 14 will be included in the Proxy...

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    ...the undersigned, thereunto duly authorized, as of March 13, 2008. CLEARWIRE CORPORATION /s/ BENJAMIN G. WOLFF Benjamin G. Wolff Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the...

  • Page 114
    ... herein by reference to Exhibit 4.6 of Amendment Number 5 to Clearwire Corporation's Registration Statement on Form S-1 filed March 7, 2007). 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...

  • Page 115
    ... Exhibit 10.12 of Amendment Number 1 to Clearwire Corporation's Registration Statement on Form S-1 filed January 8, 2007). Master Spectrum Acquisition Agreement dated November 13, 2003 between Flux U.S. Corporation and Hispanic Information and Telecommunications Network, Inc (Incorporated herein by...

  • Page 116
    ... 10.23 of Amendment No. 5 to Clearwire Corporation's Registration Statement on Form S-1 filed March 7, 2007). EBS Capacity Use and Royalty Agreement dated September 15, 2005 between Hispanic Information and Telecommunications Network, Inc. and Clearwire Spectrum Holdings LLC. (Incorporated herein by...

  • Page 117
    ... LLC and Hispanic Information and Telecommunications Network, Inc. (Incorporated herein by reference to Exhibit 10.60 of Amendment No. 5 to Clearwire Corporation's Registration Statement on Form S-1 filed March 7, 2007). Educational Broadband Service Long Term De Facto Transfer Lease Agreement dated...

  • Page 118
    ... Bank N.A., as a Tranche C Term Lender, and Morgan Stanley Senior Funding, Inc. and Wachovia Capital Markets, LLC, as lead arrangers (Incorporated by reference to Exhibit 10.1 to Clearwire Corporation's Form 8-K filed on November 2, 2007). Form of Stock Option Agreement (Incorporated by reference to...

  • Page 119
    ... I, Benjamin G. Wolff, certify that: 1. I have reviewed this annual report on Form 10-K of Clearwire Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

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    ... I, John A. Butler, certify that: 1. I have reviewed this annual report on Form 10-K of Clearwire Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

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    ... of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ BENJAMIN G. WOLFF Benjamin G. Wolff Chief Executive Officer Clearwire Corporation March 13, 2008

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    ... or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ JOHN A BUTLER John A. Butler Chief Financial Officer Clearwire Corporation March 13, 2008

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    ... Clearwire Information Corporate Address 4400 Carillon Point Kirkland, Washington 98033 Phone: 425-216-7600 Investor Relations Phone: 425-216-4735 E-mail: [email protected] Website: http://investors.clearwire.com Company Website www.clearwire.com Stock Listing Nasdaq National Market...

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    1.888.CLEARWIRE (1.888.253.2794) I www.clearwire.com