SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2003.
[ ] 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 000-26153
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HIGH SPEED ACCESS CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 61-1324009
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9900 CORPORATE CAMPUS DRIVE, SUITE 3000
LOUISVILLE, KENTUCKY 40223
(Address of principal executive offices, including zip code)
502/657-6340
(Registrant's telephone number, including area code)
FORMER NAME, FORMER ADDRESS, AND FORMER YEAR,
IF CHANGED SINCE LAST REPORT: NOT APPLICABLE
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Number of shares of Common Stock outstanding as of August 1, 2003...40,294,783
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions, involve risks
and uncertainties, and actual events or results may differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" as well as those discussed in other filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2002.
OVERVIEW
High Speed Access Corp. (hereinafter referred to as the Company, we, us
or our) formerly provided high speed Internet access and related services to
residential and commercial customers primarily via cable modems and
international ISP infrastructure services.
On August 13, 2002, our Board concluded that the liquidation of the
Company was the best alternative available for maximizing stockholder value and
adopted a Plan of Liquidation and Dissolution (the "Plan"). The Plan was
approved by the holders of a majority of the Company's shares on November 27,
2002. The key features of the Plan are (1) filing a Certificate of Dissolution
with the Secretary of State of Delaware and thereafter remaining in existence as
a non-operating entity for three years; (2) winding up our affairs, including
the settlement of any then-outstanding issues with Charter relating to the Asset
Sale, selling any remaining non-cash assets of the Company, and taking such
action as may be necessary to preserve the value of our assets and distributing
our assets in accordance with the Plan; (3) paying our creditors; (4)
terminating any of our remaining commercial agreements, relationships or
outstanding obligations; (5) resolving our outstanding litigation; (6)
establishing a Contingency Reserve for payment of the Company's expenses and
liabilities; and (7) preparing to make distributions to our stockholders.
In connection with the adoption of the Plan and the anticipated
liquidation, the Company adopted the liquidation basis of accounting effective
November 27, 2002, and has valued its assets at their estimated net realizable
cash values and has stated its liabilities, including costs to liquidate, at
their estimated settlement amounts, all of which approximate their estimated
fair values. Uncertainties as to the value to be realized from the disposal of
the Company's assets (other than cash), and the ultimate amount paid to settle
its liabilities make it impracticable to predict the aggregate net value that
may ultimately be distributable to stockholders. Claims, liabilities and future
expenses of liquidation (including salaries, payroll and local taxes,
professional fees, and miscellaneous office expenses), although currently
declining in the aggregate, will continue to be incurred with execution of the
Plan. Although we do not believe that a precise estimate of the Company's net
assets can currently be made, we believe that available cash and cash equivalent
investments and amounts received from the sale of office furniture will be
adequate to provide for the Company's obligations, liabilities, operating costs
and claims (including contingent liabilities), and to make future cash
distributions to stockholders.
Under Delaware law, the Company will remain in existence as a
non-operating entity until December 4, 2005 and is required to maintain a
certain level of liquid assets and reserves to cover any remaining liabilities
and pay operating costs during the wind-up period. During the wind-up period,
the Company will attempt to convert its remaining assets to cash and settle its
liabilities as expeditiously as possible.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Liquidation Basis of Accounting. As of November 27, 2002, all
activities of the Company are presented under the liquidation basis of
accounting. Inherent in the liquidation basis of accounting are significant
management estimates and judgments. Under the liquidation basis of accounting,
assets have been valued at their estimated net realizable values and liabilities
are stated at their anticipated settlement amounts, all of which approximate
their estimated fair values. The estimated net realizable values of assets and
settlement amounts of liabilities, including costs of liquidation, represent our
best estimate of the recoverable value of the assets and settlement amounts of
liabilities. There can be no assurance, however, that we will be successful in
selling the assets at their estimated net realizable value or in settling the
liabilities at their estimated amounts. The liquidation basis of accounting
requires that we accrue an estimate for all liabilities related to expenses to
be incurred during the wind-up period. While we believe our estimates are
reasonable under the circumstances, if the length of our wind-up period were to
change or other conditions were to arise, actual results may differ from these
estimates and these differences may be material.
The Company made an Initial Cash Distribution of $1.40 per share or
$56.4 million to its stockholders on May 30, 2003. The Board of Directors also
authorized a Subsequent Cash Distribution of $0.17 per share or $6.9 million on
August 29, 2003, payable to shareholders of record as of August 22, 2003. The
"per share" amounts are based on 40,294,783 shares of common stock outstanding
as of August 1, 2003.
Other than this Subsequent Cash Distribution, the Company does not
expect to make any other liquidating distributions prior to the transfer of its
remaining assets and liabilities to a liquidating trust on or before December
31, 2003. At such time, the Company will most likely deregister under the
Securities Act of 1934, and will no longer be subject to its rules, including
those relating to reporting and proxy solicitations. In addition, the Company
expects to cancel its outstanding shares in exchange for illiquid beneficial
interests in the liquidating trust. At such time, we expect to close our stock
transfer books, after which you will no longer be able to transfer shares. After
the stock transfer books have been closed, certificates representing shares of
common stock will not be assignable or transferable on our books except by will,
intestate succession or operation of law. After the final record date for the
recording of stock transfers, we will not issue any new stock certificates,
other than replacement certificates.
Due to the duration of the wind-up period to December 4, 2005, and
provision in Delaware law that the Company maintain reserves sufficient to allow
for the payment of all its liabilities and obligations, including all
contingent, conditional and unmatured claims, the Company established a
Contingency Reserve upon the adoption of liquidation basis accounting on
November 27, 2002. The amount of reserve initially established was $2.0 million
and was unchanged as of March 31, 2003. At June 30, 2003, the Company lowered
the established Contingency Reserve to $1,150,000 as a result of the receipt of
the remainder of the Charter Holdback. At June 30, 2003, the Company has no
known material claims against this reserve and will periodically assess whether
maintenance of a lower or higher Contingency Reserve is required. In the event
there are no claims against this reserve, then the amount of any future
liquidating distributions and the Final Liquidation Payment on or before
December 4, 2005 would include the full amount of the Contingency Reserve.
The amount and timing of any future liquidating distributions by the
trustee after January 1, 2004 will depend upon a variety of factors including,
but not limited to, the actual proceeds from the realization of the Company's
assets, the ultimate settlement amounts of the Company's liabilities and
obligations and actual costs incurred in connection with carrying out the Plan,
including salaries, administrative and operating costs during the wind-up
period. A summary of significant estimates and judgments utilized in
preparation of the June 30, 2003 condensed consolidated financial statements on
a liquidation basis follows:
Interest Receivable. At June 30, 2003, interest receivable of $65,000
represents the Company's estimate of future interest earnings on cash, cash
equivalents and short-term investments over the wind-up period through December
4, 2005 and accounts for less than 1.0% of the Company's total assets.
Furniture and Fixtures. At June 30, 2003, furniture and fixtures of
$62,000 represents the Company's estimate of cash proceeds to be received on the
sale of office furniture.
Accounts Payable and Accrued Liabilities. At June 30, 2003, accounts
payable and accrued expenses were $0.4 million. Included in this amount are
accrued circuit termination charges of $0.2 million and $0.2 million for the
expected payout on 2,862,174 stock options outstanding under the Company's stock
option plans that were cancelled on March 3, 2003.
Estimated Costs to be Incurred During The Wind-up Period. At June 30,
2003, the Company estimates that there are $0.6 million of costs to be incurred
through December 4, 2005, including compensation for liquidation personnel ($0.2
million) and professional fees and other miscellaneous costs ($0.4 million).
Contingency Reserve. In view of the duration of the wind-up period to
December 4, 2005, and provision in Delaware law that the Company maintain
reserves sufficient to allow for the payment of all its liabilities and
obligations, including all contingent, conditional and unmatured claims, the
Company established a Contingency Reserve upon the adoption of liquidation basis
accounting on November 27, 2002. The amount of reserve initially established was
$2.0 million and was unchanged as of March 31, 2003. At June 30, 2003, the
Company lowered the established Contingency Reserve to $1,150,000 as a result of
the receipt of the remainder of the Charter Holdback. At June 30, 2003, the
Company has no known material claims against this reserve and will periodically
assess whether maintenance of a lower or higher Contingency Reserve is required.
In the event there are no claims against this reserve, then the amount of any
future liquidating distributions and the Final Liquidation Payment that may be
paid to stockholders would include the full amount of the Contingency Reserve.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
The condensed consolidated financial statements for the three and six
months ended June 30, 2002 were prepared on the going concern basis of
accounting, which contemplates realization of assets and satisfaction of
liabilities in the normal course of business. The Company adopted the
liquidation basis of accounting as of November 27, 2002.
The decrease in net assets in liquidation during the six months ended
June 30, 2003 is the result of the $56.4 million Initial Cash Distribution plus
the following adjustments made during the six months ended June 30, 2003 (in
thousands):
<Table>
ADJUST ASSETS AND LIABILITIES TO FAIR VALUE:
Increase in estimated future interest income $ 28
Accounts payable and accrued expenses 633
------
Total adjustments to fair value 661
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ACCRUE ADDITIONAL ESTIMATED COSTS DURING WIND-UP:
Costs to be incurred during the wind-up period (56)
------
Total estimated costs during the wind-up period (56)
------
Total liquidation adjustments $ 605
======
</Table>
The decrease in accounts payable and accrued expenses is the result of
the settlement of liabilities at less than the recorded amounts. The increase in
estimated costs during the wind-up period is primarily the result of additional
legal fees relating to the remaining $1.0 holdback from Charter.
The Company made an Initial Cash Distribution of $1.40 per share or
$56.4 million to its stockholders on May 30, 2003. The Board of Directors also
authorized a Subsequent Cash Distribution of $0.17 per share or $6.9 million on
August 29, 2003, payable to shareholders of record as of August 22, 2003. The
"per share" amounts are based on 40,294,783 shares of common stock outstanding
as of August 1, 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary objectives are to liquidate its assets in the
shortest time period possible while realizing the maximum values for such
assets. The actual nature, amount, and timing of all future distributions will
be determined by the Board in its sole discretion, and will depend in part upon
the Company's ability to convert certain remaining assets into cash and settle
certain obligations. Although the liquidation is currently expected to be
concluded on December 4, 2005, the period of time to liquidate the assets and
distribute the proceeds is subject to uncertainties and contingencies, many of
which are beyond the Company's control (see Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk Factors"). The
Company made an Initial Cash Distribution of $1.40 per share or $56.4 million to
its stockholders on May 30, 2003. The Company has also announced that its Board
of Directors authorized a Subsequent Cash Distribution of $0.17 per share or
$6.9 million on August 29, 2003, payable to shareholders of record as of August
22, 2003. Other than this Subsequent Cash Distribution, the Company does not
expect to make other liquidating distributions prior to the Final Liquidation
Payment on or around December 4, 2005. The "per share" amounts are based on
40,294,783 shares of common stock outstanding as of August 1, 2003. These
amounts do not include any benefit that might be realized if some or all of the
Contingency Reserve is not required to pay claims.
The Company currently intends to transfer its remaining assets and
liabilities to a liquidating trust on or before December 31, 2003. At such time,
the Company will most likely deregister under the Securities Act of 1934, and
will no longer be subject to its rules, including those relating to reporting
and proxy solicitations. In addition, the Company expects to cancel its
outstanding shares in exchange for illiquid beneficial interests in the
liquidating trust. At such time, we expect to close our stock transfer books,
after which you will no longer be able to transfer shares. After the stock
transfer books have been closed, certificates representing shares of common
stock will not be assignable or transferable on our books except by will,
intestate succession or operation of law. After the final record date for the
recording of stock transfers, we will not issue any new stock certificates,
other than replacement certificates.
Due to the duration of the wind-up period to December 4, 2005, and
provision in Delaware law that the Company maintain reserves sufficient to allow
for the payment of all its liabilities and obligations, including all
contingent, conditional and unmatured claims, the Company established a
Contingency Reserve upon the adoption of liquidation basis accounting on
November 27, 2002. The amount of reserve initially established was $2.0 million
and was unchanged as of March 31, 2003. At June 30, 2003, the Company lowered
the established Contingency Reserve to $1,150,000 as a result of the receipt of
the remainder of the Charter Holdback. At June 30, 2003, the Company has no
known material claims against this reserve and will periodically assess whether
maintenance of a lower or higher Contingency Reserve is required. In the event
there are no claims against this reserve, then the amount of any future
liquidating distributions and the Final Liquidation Payment that may ultimately
be paid to stockholders would include the full amount the Contingency Reserve.
At June 30, 2003, the Company estimates that there is $0.6 million of
operating costs to be incurred during the remaining wind-up period through
December 4, 2005. The estimated liabilities of the Company at June 30, 2003
total $1.0 million. In addition, the Company has a Contingency Reserve of
$1,150,000 (see Note 1 of "Notes to Condensed Consolidated Financial
Statements"), equivalent to approximately $0.0285 per share.
At June 30, 2003, net assets in liquidation were $8.0 million. We had
cash and cash equivalents and short-term investments of $8.1 million and $0.9
million, respectively, compared to cash and cash equivalents and short-term
investments of $63.6 million and $1.2 million, respectively, at December 31,
2002. The net decrease in cash, cash equivalents and short-term investments of
$56.0 million is the result of the following: (in thousands):
<Table>
Receipt of Charter holdback $ 2,103
Interest received 344
Sale of furniture and fixtures 51
Initial cash distribution (56,413)
Compensation and related expenses and severance (1,178)
Property, income and franchise taxes (166)
Legal settlement (167)
Professional fees (218)
Circuit termination charges (89)
Other accrued expenses (219)
-----------
Net decrease in cash, cash equivalents and short-term investments $ (55,952)
===========
</Table>
We invest excess cash in money market accounts with the intent to make
such funds readily available for future distributions to stockholders.
The amount and timing of liquidating distributions will depend upon a
variety of factors including, but not limited to, the actual proceeds from the
realization of the Company's assets, the ultimate settlement amounts of the
Company's liabilities and obligations and actual costs incurred in connection
with carrying out the Plan, including salaries, administrative and operating
costs during the wind-up period.
INVESTMENT PORTFOLIO. Cash equivalents are highly liquid investments
with insignificant interest rate risk and original maturities of 90 days or less
and are stated at amounts that approximate fair value based on quoted market
prices. Cash equivalents consist of investments in interest-bearing money market
accounts with financial institutions. Short-term investments at June 30, 2003
are comprised solely of certificates of deposit.
LEGAL PROCEEDINGS.
The Delaware Class Action Lawsuits. The Company, our then directors,
certain former directors as well as Charter and Paul Allen, were named as
defendants in four putative class action lawsuits filed in the Court of Chancery
of the State of Delaware (Denault v. O'Brien, et. al., Civil Action No.
19045-NC, Tesche v. O'Brien, et al., Civil Action No. 19046-NC, Johnson v.
O'Brien, et. al., Civil Action No. 19053-NC, and Krim v. Allen, et al., Civil
Action 19478-NC). All four lawsuits, which alleged breach of fiduciary duties by
the individual defendants and Charter, were consolidated and settled with the
approval of the Delaware Chancery Court on April 16, 2003. No objections or
appeals to the settlement were filed. The Company paid its $166,500 portion of
the $390,000 settlement amount required to reimburse plaintiffs' counsel for
their fees and expenses incurred in the litigation.
The IPO Litigation. Also, on November 5, 2001, the Company, our
President and Chief Financial Officer (Mr. George Willett) and one of our former
Presidents (Mr. Ron Pitcock), together with Lehman Brothers, Inc., J.P. Morgan
Securities, Inc., CIBC World Markets Corp., and Banc of America Securities,
Inc., were named as defendants in a purported class action lawsuit filed in the
United States District Court for the Southern District of New York (Ruthy Parnes
v. High Speed Access Corp., et. al., Index No. 01-CV-9743(SAS)). The lawsuit
alleges that our Registration Statement, dated June 3, 1999, and Prospectus,
dated June 4, 1999, for the issuance and initial public offering of 13,000,000
shares of our common stock to investors contained material misrepresentations
and/or omissions. The purported class action alleges violations of Sections 11
and 15 of the Securities Act of 1933 (the "1933 Act") and Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-
promulgated thereunder. The essence of the complaints is that defendants issued
and sold our common stock pursuant to the Registration Statement for the IPO
without disclosing to investors that certain underwriters in the offering had
solicited and received excessive and undisclosed commissions from certain
investors. The complaints also allege that our Registration Statement for the
IPO failed to disclose that the underwriters allocated Company shares in the IPO
to customers in exchange for the customers' promises to purchase additional
shares in the aftermarket at pre-determined prices above the IPO price, thereby
maintaining, distorting and/or inflating the market price for the shares in the
aftermarket. The plaintiff asks to represent the interest of all holders of our
common stock and seeks unspecified monetary damages.
On July 15, 2002, the Company moved to dismiss all claims against it
and Messrs. Willett and Pitcock. The allegations against Messrs. Willett and
Pitcock were dismissed without prejudice on October 11, 2002 pursuant to a
Reservation of Rights and Tolling Agreement dated as of July 20, 2002. On
February 19, 2003, the Court denied the Company's motion to dismiss the alleged
violations of Section 11 and 15 of the 1933 Act. However, the Court granted the
Company's motion to dismiss the alleged violations of Sections 10(b) and 20(a)
of the 1934 Act and Rule 10b- promulgated thereunder.
On February 28, 2003, Charter notified the Company of its assertion of
a potential claim for indemnity in respect of Charter being named as a
"successor in interest" to the Company in the IPO Litigation and deferred
release of half of the $2.0 million indemnity holdback. Charter was dismissed as
a defendant in the IPO Litigation on May 28, 2003 and paid the remaining $1.0
million indemnity holdback to us on June 5, 2003.
On June 26, 2003, the Plaintiffs' Executive Committee announced that a
proposed settlement between the approximately 300 issuer defendants and their
directors and officers and the plaintiffs has been structured in the IPO
Litigation which would guarantee at least $1.0 billion to investors who are
class members from the insurers of the issuers. The cases will continue against
the 55 investment bank underwriter defendants. The Company had assented to
participate in the settlement, which is subject to final documentation and
review and consent of the Court. If final settlement occurs, the Company will be
removed from the litigation without payment of any funds.
With respect to the allegations against the Company, we believe this
lawsuit is without merit and intend to continue to vigorously defend against the
claims made therein. We express no opinion as to the allegations lodged against
Lehman Brothers, Inc., J.P. Morgan Securities, Inc., CIBC World Markets Corp.,
and Banc of America Securities Inc.
We do not believe that the IPO litigation will have a material adverse
effect on our net assets in liquidation.
RISK FACTORS
You should carefully consider the following factors and other
information in this Form 10-Q and other filings we make with the Securities and
Exchange Commission before trading in our common stock. The Company's plan is to
wind-up the Company's affairs and distribute its net assets to the stockholders.
The timing and completion of these objectives are subject to a number of risks
and uncertainties, including those set forth below:
WE MAKE FORWARD-LOOKING STATEMENTS IN THIS FORM 10-Q THAT ARE SUBJECT TO RISKS
THAT MAY CHANGE THE LIKELIHOOD OF THOSE STATEMENTS BEING REALIZED.
This Form 10-Q, as well as other documents incorporated by reference
herein and to which we refer in this Form 10-Q, describes many of the positive
factors and assumed benefits of the Plan. You should also be aware of factors
that could have a negative impact on the Plan and our ability to make
distributions of net assets. When we use such words as "believes", "expects",
"anticipates", or similar expressions, we are making forward-looking statements.
In addition, we have made in this Form 10-Q certain forward looking statements,
including statements concerning the timing and amount of distributions of cash
to stockholders and other statements concerning the value of our net assets and
the resultant liquidation value per share of common. All such forward-looking
statements are necessarily only estimates of future results, and there can be no
assurance that actual results will not materially differ from expectations.
These statements are subject to many risks, including those set forth in each of
the following paragraphs.
YOU WILL NOT KNOW THE EXACT AMOUNT OR TIMING OF ANY FUTURE LIQUIDATING
DISTRIBUTIONS.
The methods used by the Board and management to estimate the value of
our net assets do not result in an exact determination of value nor are they
intended to indicate definitively the amount of cash you will receive during the
winding up and liquidation of the Company. The Company has established reserves
for known and unknown liabilities (see "Contingency Reserve" discussion below)
and the adequacy of those reserves will be reviewed prior to making any future
cash distributions to stockholders. We cannot assure you that the amount you
will receive in liquidation will equal or exceed the price or prices at which
the common stock has recently traded or may trade in the future. Any
distributions to you may be reduced by additional liabilities we may incur, and
the ultimate settlement amounts of our liabilities.
Additionally, even though we are not aware of any other pending or
threatened claims, a creditor of the Company or other party with a claim against
us might file a new lawsuit or obtain an injunction against our making any
further distributions to you under the Plan. In that event, either our Board,
the liquidating trustee or a court may decide that the amounts to be distributed
are needed to provide for the payment of such liabilities and expenses,
including unknown or contingent liabilities that may arise or be put in dispute
at a later date.
WE MIGHT MISCALCULATE OR FAIL TO ADEQUATELY RESERVE AN AMOUNT SUFFICIENT TO
COVER OUR CONTINGENT LIABILITIES.
On December 4, 2002 we filed a Certificate of Dissolution with the
State of Delaware dissolving the Company. According to Delaware General
Corporation Law, we will continue to exist for three years after the dissolution
becomes effective (December 4, 2005) or for a longer period if the Delaware
Court of Chancery requires us to, for the purpose of prosecuting and defending
suits against us and enabling us to dispose of our property, discharge our
liabilities and distribute to our stockholders any remaining assets.
Under Delaware law, the Board established a reserve for known and
unknown liabilities expected to be incurred through completion of our
liquidation (the "Contingency Reserve"), and the adequacy of that reserve has
been and will continue to be reviewed prior to making cash distributions to you.
As of June 30, 2003, we set aside a $1,150,000 Contingency Reserve. However, we
cannot assure you that such Contingency Reserve will be adequate to cover all of
our expenses and liabilities expected to be incurred through completion of our
liquidation.
If the Contingency Reserve is insufficient for payment of our expenses
and liabilities, you could be held liable for payment to our creditors of your
proportional share of amounts owed to creditors in excess of the Contingency
Reserve. In that regard, your liability would be limited to the amounts
previously received by you from us or a liquidating trust established by the
Company. Accordingly, you could be required to return some or all distributions
previously made to you. In such an event, you could receive nothing from us
under the Plan. Moreover, you could incur a net tax cost if you paid taxes on
the amounts received from us and then have to repay such amounts back to our
creditors. Unless you are able to get a corresponding reduction in taxes in
connection with your repayment, you may end up having paid taxes on monies that
you have had to return.
YOU MAY NOT BE ABLE TO BUY OR SELL SHARES OF OUR COMMON STOCK IF WE CLOSE OUR
STOCK TRANSFER BOOKS.
We expect to close our stock transfer books on or before December 31,
2003, and in any event on the close of business on the date on which the
remaining assets of the Company are transferred to a liquidating trust, after
which you will no longer be able to transfer shares.
After the stock transfer books have been closed, certificates
representing shares of common stock will not be assignable or transferable on
our books except by will, intestate succession or operation of law. After the
final record date for the recording of stock transfers, we will not issue any
new stock certificates, other than replacement certificates.
OUR STOCK PRICE COULD BE HIGHLY VOLATILE AND OUR STOCK IS LIKELY TO BE THINLY
TRADED.
Our stock price has been trading at a discount to our net cash value
per share. Even though we do not expect to make any additional cash
distributions prior to the transfer of our remaining assets and liabilities to a
liquidating trust on or before December 31, 2003, the announcement of additional
cash distributions could cause our stock to fluctuate suddenly and widely
depending on the amount and timing of such distributions and the amount of funds
still retained by the Company, and these fluctuations may be unrelated to our
performance or actions with respect to the Plan. General market price declines
or market volatility in the future could adversely affect the price of the our
common stock, and thus, the current market price may not be indicative of future
market prices.
In addition, at such time as the Company transfers its remaining assets
and liabilities to a liquidating trust, the Company will most likely deregister
and cancel its outstanding shares in exchange for illiquid beneficial interests
in the liquidating trust. This deregistration and cancellation, or even the
announcement of such a deregistration and cancellation could also adversely
affect the price of our common stock. Moreover, if the number of the Company's
shareholders of record drops below 300, the Company may deregister under the
Securities Act of 1934 prior to December 31, 2003, and will no longer be subject
to its rules, including those relating to reporting and proxy solicitations.
Following our $0.17 per share distribution on August 29, 2003 and
continuing until the closure of our stock transfer books on or about December
31, 2003, it is possible that our stock will be thinly traded
on the over the counter electronic bulletin board and the Pink Sheets, which
could affect a stockholder's ability to obtain price quotations and/or acquire
or dispose of the Company's shares.
THE TAX CONSEQUENCES OF OUR LIQUIDATION MAY NOT BE FAVORABLE TO YOU
The following discussion is a general summary of what the Company
believes are the material Federal income tax consequences of the Plan to its
stockholders, but does not purport to be a complete analysis of all the
potential tax effects:
As a consequence of our liquidation, our stockholders will
recognize gain or loss equal to the difference between (i) the sum of
the amount of cash distributed to them and the fair market value (at
the time of distribution) of any property distributed to them (net of
their proportionate share of liabilities), and (ii) their tax basis for
their shares of the common stock. A stockholder's tax basis in his or
her shares will depend upon various factors, including the amount paid
by the stockholder for his or her shares and the amount and nature of
any distributions received with respect to those shares. A
stockholder's gain or loss will be computed on a "per share" basis. We
have made more than one liquidating distribution, and the amount of
each such liquidating distribution will be allocated proportionately to
each share of stock owned by a stockholder. Any gain will be recognized
by reason of a liquidating distribution only to the extent that the
aggregate value of such distributions received by a stockholder with
respect to a share exceeds his, her or its tax basis for that share.
Any loss will be recognized only if the aggregate value of the
liquidating distributions with respect to a share is less than the
stockholder's tax basis for that share.
Any gain or loss recognized by a stockholder will be capital
gain or loss provided the shares are held as capital assets. Gain
resulting from distributions of cash or assets from a corporation
pursuant to a plan of liquidation is, therefore, generally capital gain
rather than ordinary income. If it were to be determined that
distributions made pursuant to the Plan were not liquidating
distributions, the result could be treatment of distributions as
dividends, taxable at ordinary income rates. Upon any distribution of
property, the stockholder's tax basis in such property immediately
after the distribution will be the fair market value of such property
at the time of distribution. The gain or loss realized upon the
stockholder's future sale of that property will be measured by the
difference between the stockholder's tax basis in the property at the
time of the sale and the proceeds of the sale. After the close of each
year, we will provide stockholders and the IRS with a statement of the
amount of cash distributed to the stockholders and, if applicable, our
best estimate as to the value of any property distributed to them
during that year. There is no assurance that the IRS will not challenge
such property valuation. As a result of such a challenge, the amount of
gain or loss recognized by stockholders might be changed. Distributions
to stockholders could result in tax liability to any given stockholder
exceeding the amount of cash received, requiring the stockholder to
meet the tax obligations from other sources or by selling all or a
portion of the assets received.
We intend to structure the transfer of our remaining assets
and liabilities to the liquidating trust so that stockholders will be
treated for tax purposes as having received their proportionate share
of the property at the time it is transferred to the liquidating trust.
In such event, the amount of the distribution deemed to have been
received by a stockholder will be reduced by his or her proportionate
share of known liabilities assumed by the liquidating trust or to which
the property transferred is subject. Assuming such treatment is
achieved, assets transferred to the liquidating trust will cause the
stockholders to be treated in the same manner for Federal income tax
purposes as if the stockholders had received a distribution directly
from us and they may be subject to tax on their proportionate value of
such transferred assets even though they will not have received any
actual distributions from the Company or the liquidating trust with
which to pay the tax.
The liquidating trust itself should not be subject to tax.
After formation of the liquidating trust, the stockholders will take
into account for Federal income tax purposes their allocable portion of
any income, gain or loss recognized by the liquidating trust. AS A
RESULT OF THE ONGOING OPERATIONS OF THE LIQUIDATING TRUST, STOCKHOLDERS
SHOULD BE AWARE THAT THEY MAY BE SUBJECT TO TAX, WHETHER OR NOT THEY
HAVE RECEIVED ANY ACTUAL DISTRIBUTIONS FROM THE LIQUIDATING TRUST WITH
WHICH TO PAY THE TAX.
Stockholders may also be subject to state or local taxes and
should consult their tax advisor with respect to the state and local
tax consequences of the Plan. The foregoing summary of certain Federal
income tax consequences is included for general information only and
does not constitute legal advice to any stockholder. The tax
consequences of the Plan may vary depending upon your particular
circumstances. We recommend that you consult your own tax advisor
regarding the specific tax consequences of the Plan to you.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 as
amended, the Company has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
High Speed Access Corp.
Date: November 24, 2003 By /s/ George E. Willett
-------------------------------------
George E. Willett
President and Chief Financial Officer
EXHIBIT INDEX
31.1 Certification of President and CFO Pursuant to Securities Exchange Act
Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant To 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002