HIGH SPEED ACCESS CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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(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, 2002.

[ ] 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 Identification Number)
incorporation or organization)

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:

Our previous principal executive offices were located at 10300 Ormsby Park
Place, Suite 405, Louisville, KY 40223

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, 2002...40,280,446

INDEX

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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

HIGH SPEED ACCESS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

The accompanying notes are an integral part of these
condensed consolidated financial statements.

3

HIGH SPEED ACCESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

The accompanying notes are an integral part of these
condensed consolidated financial statements.

4

HIGH SPEED ACCESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(IN THOUSANDS)
(UNAUDITED)

The accompanying notes are an integral part of these
condensed consolidated financial statements.

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ITEM 1 - NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements of High Speed
Access Corp. and its subsidiaries (herein referred to as the Company, we, us, or
our) included herein reflect all adjustments, consisting only of normal
recurring adjustments, which in the opinion of management are necessary to
present fairly the Company's financial position, results of operations and cash
flows for the periods presented. Certain information and footnote disclosures
normally included in audited financial information prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the Securities and Exchange Commission's rules and regulations.

The results of operations for the period ended June 30, 2002 are not
necessarily indicative of the results to be expected for any subsequent quarter
or for the entire fiscal year ending December 31, 2002. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.

The Company does not own or operate any revenue-generating businesses.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
These estimates are based on knowledge of current events and anticipated future
events. Actual results could differ from those estimates.

RECLASSIFICATION

The condensed consolidated statement of operations for the three and six
months ended June 30, 2001, and the condensed consolidated statement of cash
flows for the six months ended June 30, 2001, have been reclassified for the
effects of the discontinued operations of the Company's high speed Internet
access and related services and international Internet Service Provider ("ISP")
infrastructure services business segments.

NOTE 2 - DISCONTINUED OPERATIONS

HIGH SPEED INTERNET ACCESS AND RELATED SERVICES

On February 28, 2002, the Company consummated the sale of substantially all
of its assets (the "Asset Sale") to CC Systems, LLC immediately after obtaining
the required approval of the Company's stockholders. The Asset Sale was effected
pursuant to an asset purchase agreement (the "Asset Purchase Agreement"), dated
September 28, 2001, between the Company and Charter Communications Holding
Company, LLC. Subsequent to September 28, 2001, Charter Communications Holding
Company, LLC assigned to CC Systems, LLC the rights to purchase assets and
certain other rights under the Asset Purchase Agreement and certain other
related agreements. Except as otherwise specifically noted or unless the context
otherwise requires, any reference herein to "Charter" should be deemed a
reference individually and/or collectively to any of the following Charter
entities: Charter Communications Holding Company, LLC, Charter Communications,
Inc., CC Systems, LLC, and Charter Communications Ventures, LLC.

The assets acquired by Charter pursuant to the Asset Purchase Agreement were
used by the Company primarily in the provision of high speed Internet access to
residential and commercial customers of Charter via cable modems. Subsequent to
the Asset Sale, we do not own or operate any revenue-generating businesses.

Pursuant to the terms of the Asset Purchase Agreement, Charter acquired
certain assets from us in consideration for (i) the payment to us of a cash
amount equal to $81.1 million, subject to certain adjustments, (ii) the
assumption of certain of our operating liabilities, and (iii) the tender to us
of all our outstanding shares of Series D Preferred Stock and warrants held by
Charter to purchase shares of common stock. On February 28, 2002, Charter held
back an aggregate of $3.4 million of the purchase price to secure certain
purchase price adjustments and indemnity claims against the Company under the
Asset Purchase Agreement. Of this amount, $1.4

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million was paid to us on April 30, 2002. The remaining $2.0 million, less any
amounts used to secure or satisfy actual indemnification claims, is payable to
us on or about February 28, 2003.

The Company received from Charter on February 28, 2002, a net cash amount
equal to $69.5 million. The payment consisted of the following (in millions):

Cash purchase price per the Asset Purchase Agreement....... $ 81.1
--------
Adjustments:
Current assets acquired by Charter, as adjusted per
the Asset Purchase Agreement......................... 4.5
Capital leases, debt and other liabilities assumed
or paid by Charter................................... (12.7)
Indemnity holdbacks..................................... (3.4)
--------
Total adjustments................................. (11.6)
--------
Net cash proceeds from sale to Charter.................. $ 69.5
========

Under the Asset Purchase Agreement:

o We sold substantially all of our revenue-generating fixed assets with a net
book value of $22.8 million at February 28, 2002.

o We sold all accounts receivable related to Charter systems with a net book
value of $4.1 million at February 28, 2002 for which we received a purchase
price adjustment.

o The Company paid to Charter $5.1 million for outstanding launch fees.

o Charter paid to the Company $2.2 million for expenses incurred by the
Company on Charter's behalf prior to September 28, 2001.

o Charter assumed certain of the Company's operating and capital lease
obligations with future minimum lease payments of $13.5 million.

o The Company paid $2.2 million to retire all outstanding long-term debt and
$8.1 million to pay-off substantially all of the Company's capital lease
obligations. In connection with these payments, the Company recorded a loss
on the early extinguishment of debt and capital lease obligations of $2.0
million during the first quarter of 2002.

o Warrants to purchase 2,650,659 shares of our Company's common stock earned
by Charter under various distribution agreements were cancelled.

o All of the Company's 75,000 outstanding shares of Series D Preferred Stock
were cancelled.

o Charter assumed certain commitments relating to circuits with a national
telecommunications company with future minimum payments of $7.4 million
through 2003.

o On February 28, 2002, the Company paid an additional $3.4 million of
expenses related to the Asset Sale. The total expenses paid were $6.4
million.

The Company recorded a gain on the Asset Sale to Charter of $40.3 million
during the first quarter of 2002. The components of the gain are as follows (in
millions):

Net cash proceeds from sale to Charter....... $ 69.5
Fair value of preferred stock................ 3.7
Liabilities assumed by Charter............... 14.4
Book value of assets acquired by Charter..... (44.3)
Indemnity holdbacks.......................... 3.4
Transaction expenses......................... (6.4)
--------
Gain on Asset Sale........................... $ 40.3
========

Also on February 28, 2002, the Company purchased 20,222,139 shares of our
common stock from Vulcan Ventures Incorporated

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("Vulcan") for an aggregate purchase price of $4.4 million, or $0.22 per share.
The consummation of the Asset Sale was a condition precedent to the purchase of
common stock from Vulcan. The board of directors approved the cancellation of
these shares in March, 2002 and they were officially retired in June, 2002.
Following the consummation of the Asset Sale and the purchase of common stock
from Vulcan, none of Vulcan, Charter or any of their respective affiliates hold
any equity interest in the Company. Accordingly, the Company is no longer
affiliated with Vulcan, Charter, or any of their respective affiliates.

The Asset Sale completed the discontinuance of the Company's high speed
Internet access and related services business. During 2001, the Company exited
all of its cable system agreements except for those with Charter, sold the
assets of Digital Chainsaw, and discontinued its efforts to enter the digital
subscriber line ("DSL") market. In connection with these actions, the Company
recorded an asset impairment charge of $28.8 million for the write-down of fixed
assets and goodwill during the third quarter of 2001.

The Company adopted Statement of Financial Accounting Standards (SFAS) No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144)
on January 1, 2002. SFAS 144 supersedes Emerging Issues Task Force Issue No.
95-18 "Accounting and Reporting for a Discontinued Business Segment When the
Measurement Date Occurs after the Balance Sheet Date but before the Issuance of
Financial Statements" and requires a discontinued operation to be accounted for
under SFAS 144 if a measurement date for the discontinued operations is not
reached under Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business" prior
to the entity's period-end. The measurement date for the discontinuance of the
Company's high speed Internet access and related services business that included
the Asset Sale occurred on February 28, 2002, the date on which the Company's
stockholders approved the Asset Sale. Consequently, the results of operations of
the high speed Internet access and related services business have been presented
as discontinued operations and prior periods have been restated.

INTERNATIONAL ISP INFRASTRUCTURE SERVICES

On December 31, 2001, the Company terminated its agreement with Kabel
Nordrhein-Westfalen GmbH & Co. KG ("KNRW") in Germany for the provision of
international ISP infrastructure services. In connection with the discontinuance
of the international business segment, we incurred a one-time charge of $0.6
million in the fourth quarter 2001 for the accrual of estimated losses during
the phase-out period, including personnel, travel, and facility costs. The
results of this operation have been classified as discontinued and prior periods
have been restated.

NOTE 3 - STOCKHOLDERS' EQUITY

Activity in stockholders' equity for the six months ended June 30, 2002 was as
follows (in thousands except share amounts):

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss), comprised of net income (loss) and net
unrealized holding gains and losses on investments, totaled $(3.9) million and
$(33.8) million for the three months ended June 30, 2002 and 2001, respectively,
and $28.7 million and $(67.5) million for the six months ended June 30, 2002 and
2001, respectively.

NOTE 4 - INCOME (LOSS) PER SHARE

The Company computes net income (loss) per share under the provisions of
SFAS No. 128, "Earnings per Share," ("SFAS 128"). Under the provisions of SFAS
128, basic net income (loss) per share is computed by dividing the net income
(loss) for the period by

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the weighted average number of shares of common stock outstanding during the
period.

Diluted earnings per share is determined in the same manner as basic
earnings per share, except that the number of shares is increased assuming
exercise of dilutive stock options using the treasury stock method and assuming
vesting of restricted stock awards. The calculation of diluted net income (loss)
per share excludes potential common shares if the effect is anti-dilutive.

Basic and diluted net income (loss) per share for the three months ended
June 30, 2002 and 2001, were $(0.10) and $(0.58) based on weighted average
shares outstanding of 40,205,446 and 58,767,843, respectively. For the six
months ended June 30, 2002 and 2001, basic and diluted net income (loss) per
share were $0.63 and $(1.15) based on weighted average shares outstanding of
45,833,363 and 58,726,179, respectively. Diluted net income (loss) per share
equals basic net income (loss) per share because the assumed exercise of the
Company's stock options and the vesting of restricted stock is dilutive to loss
from continuing operations per share. Stock options and warrants to purchase
4,429,071 shares and 10,850,012 shares of our common stock at June 30, 2002 and
2001, respectively, were excluded from the calculation of diluted net income
(loss) per share as they were anti-dilutive.

NOTE 5 - OTHER CURRENT LIABILITIES

The components of other current liabilities at June 30, 2002 and December
31, 2001 were as follows (in thousands):

During the three months ended June 30, 2002, the Company paid to the former
stockholders of Digital Chainsaw, a company we acquired in August, 2000, and
subsequently sold the assets of in 2001, $1.5 million to settle their potential
claims against us. Of this amount, $1.25 million was expensed during the three
months ended December 31, 2001, and $0.25 million was expensed during the three
months ended March 31, 2002. This payment covered the claims of substantially
all of the former Digital Chainsaw stockholders. Additionally, the Company
expensed and paid an additional $0.2 million in litigation settlement costs
during the three months ended June 30, 2002.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

The Company, our directors, certain of our former directors as well as
Charter and Paul Allen have been 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. 19045NC, 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. O'Brien, et al., Civil Action 19478-NC). All four lawsuits, the first
three of which have been consolidated, allege, among other things, that the
initially proposed cash purchase price by Charter of $73.0 million was grossly
inadequate and that "[t]he purpose of the proposed acquisition is to enable
Charter and Allen to acquire [the Company's] valuable assets for their own
benefit at the expense of [the Company's] public stockholders." The fourth
lawsuit, Krim v. O'Brien, also alleges that the $81.1 million purchase price
under the Asset Purchase Agreement was "grossly inadequate."

The suits allege that the defendants breached their fiduciary duties to the
Company in connection with the making and consideration of Charter's proposal.
The plaintiffs ask to represent the interests of all common stockholders of the
Company and seek (except in the case of Krim v. O'Brien) injunctive relief
preventing the Company from consummating the Asset Sale. All four lawsuits seek
to rescind the transaction and seek unspecified monetary damages.

We believe these lawsuits are entirely without merit. Nevertheless, lawyers
for the defendants in these lawsuits have had discussions with attorneys
representing the plaintiffs in the first three lawsuits. These discussions
covered, among other topics, financial and other changes to the terms of the
Asset Purchase Agreement that addressed the matters raised by the plaintiffs. As
a result of these discussions, a tentative agreement has been reached to settle
the first three lawsuits. The settlement is embodied in a Memorandum of
Understanding (the "MOU") executed by counsel to all parties to the first three
lawsuits, dated as of January 10, 2002. Among other things, the MOU provides
that the settlement is premised upon defendants' acknowledgment that the
prosecution

9

of the first three litigations was a "substantial causal factor" underlying
defendants' decision to condition the Asset Sale on the public stockholder
majority vote and was "one of the causal factors" underlying Charter's decision
to increase the consideration to be paid to the Company in connection with the
Asset Sale. The MOU further provides that defendants shall, upon Court approval,
pay up to $390,000, which amount will be allocated among the defendants, to
reimburse plaintiffs' counsel for the fees and expenses incurred in pursuit of
these litigations. The settlement is subject to confirmatory discovery, final
documentation and approval of the Delaware Chancery Court. We believe that the
claims asserted in the fourth lawsuit, Krim v. O'Brien, will be covered by the
settlement.

Also, on November 5, 2001, the Company, our Chief Financial Officer and our
former President, 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,
alleging that our four underwriters engaged in a pattern of conduct to
surreptitiously extract inflated commissions greater than those disclosed in the
offering materials, among other acts of misconduct. The plaintiff asks to
represent the interest of all holders of our common stock and seeks unspecified
monetary damages. With respect to allegations against the Company, our Chief
Financial Officer and our former President, we believe this lawsuit is without
merit and intend 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 results of the above-noted legal proceedings will
have a material adverse effect on our financial condition or cash flows.
However, the Company's defense of and/or attempts to settle favorably these
proceedings and claims may affect the timing and amount of any distribution of
proceeds from the Asset Sale.

NOTE 7 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued FASB Statement
No. 146 (FAS 146), Accounting for Exit or Disposal Activities. FAS 146 addresses
the recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including costs related to terminating a contract
that is not a capital lease and termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. FAS 146 supersedes Emerging Issues Task Force
Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring) and requires liabilities associated with exit and disposal
activities to be expensed as incurred. FAS 146 will be effective for exit or
disposal activities of the Company that are initiated after December 31, 2002.

NOTE 8 - SUBSEQUENT EVENT

On August 13, 2002, our board of directors unanimously adopted a resolution
recommending a plan of liquidation be submitted to our stockholders so that we
may liquidate all of our remaining assets, pay our known liabilities, distribute
our remaining cash on hand (subject to the set aside of adequate reserves to
cover known, unknown and contingent liabilities, including any litigation that
we reasonably expect to be incurred) and dissolve. Under Delaware Law, a plan of
liquidation and dissolution must be approved by the holders of a majority of the
Company's outstanding common stock.

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, 2001.

OVERVIEW

On February 28, 2002, High Speed Access Corp. (hereinafter referred to as
the Company, we, us or our) consummated the sale of substantially all of its
assets (the "Asset Sale") to CC Systems, LLC immediately after obtaining the
required approval of our stockholders. The Asset Sale was effected pursuant to
an asset purchase agreement (the "Asset Purchase Agreement"), dated

10

September 28, 2001, between the Company and Charter Communications Holding
Company, LLC. Subsequent to September 28, 2001, Charter Communications Holding
Company, LLC assigned to CC Systems, LLC the rights to purchase assets and
certain other rights under the Asset Purchase Agreement and certain other
related agreements. Except as otherwise specifically noted or unless the context
otherwise requires, any reference herein to "Charter" should be deemed a
reference individually and/or collectively to any of the following Charter
entities: Charter Communications Holding Company, LLC, Charter Communications,
Inc., CC Systems, LLC, and Charter Communications Ventures, LLC.

The assets acquired by Charter pursuant to the Asset Purchase Agreement were
used by us primarily in the provision of high speed Internet access to
residential and commercial customers of Charter via cable modems. Subsequent to
the Asset Sale, we do not own or operate any revenue-generating businesses.

Pursuant to the terms of the Asset Purchase Agreement, Charter acquired
certain assets from us in consideration for (i) the payment to us of a cash
amount equal to $81.1 million, subject to certain adjustments, (ii) the
assumption of certain of our operating liabilities, and (iii) the tender to us
of all our outstanding shares of Series D Preferred Stock and warrants held by
Charter to purchase shares of common stock. At the closing, Charter agreed to
certain reductions in our indemnification obligations under the Asset Purchase
Agreement. On February 28, 2002, Charter held back an aggregate of $3.4 million
of the purchase price to secure certain purchase price adjustments and indemnity
claims against the Company under the Asset Purchase Agreement. Of this amount,
$1.4 million was paid to us on April 30, 2002. The remaining $2.0 million, less
any amounts used to secure or satisfy actual indemnification claims, is payable
on or about February 28, 2003. After taking account of the various purchase
price adjustments, obligations paid by Charter on our behalf and the $3.4
million purchase price and indemnification holdbacks, the Company received from
Charter on February 28, 2002, a net cash amount equal to $69.5 million.

Also on February 28, 2002, we purchased 20,222,139 shares of our common
stock from Vulcan Ventures Incorporated ("Vulcan") for an aggregate purchase
price of $4.4 million, or $0.22 per share. The consummation of the Asset Sale
was a condition precedent to the purchase of our common stock from Vulcan. The
board of directors approved the cancellation of these shares in March, 2002 and
they were officially retired in June, 2002. Following the consummation of the
Asset Sale and the purchase of our common stock from Vulcan, none of Vulcan,
Charter or any of their respective affiliates hold any equity interest in the
Company. Accordingly, we are no longer affiliated with Vulcan, Charter or any of
their respective affiliates.

As a result of the Asset Sale and other actions, we do not presently own or
manage any revenue-generating businesses. After reviewing various strategic
alternatives for the Company, our board of directors concluded that the
liquidation of the Company was the best available alternative for maximizing
stockholder value and, accordingly, was advisable and in the best interest of
the Company and it's stockholders. On August 13, 2002, our board of directors
unanimously adopted a resolution recommending that a plan of liquidation and
dissolution be submitted to our stockholders. Under Delaware law, a plan of
liquidation and dissolution must be approved by the holders of a majority of the
Company's outstanding common stock. If approved by the stockholders, the plan
will authorize us to proceed with the liquidation of all of our remaining
assets, payment of our known liabilities, and the distribution of our remaining
cash on hand (subject to the set aside of adequate reserves to cover known,
unknown and contingent liabilities, including any litigation that we reasonably
expect to be incurred), and the dissolution of the Company. The Company is not
soliciting the vote of any of its stockholders with respect to the plan of
liquidation and dissolution pursuant to this Quarterly Report on Form 10-Q. The
Company intends to provide stockholders as soon as reasonably practicable a
definitive proxy statement relating to a meeting of stockholders, at which,
among other things, the plan of liquidation and dissolution will be considered.

Assuming a plan of liquidation and dissolution is approved by the Company's
stockholders, we expect to make a cash distribution or distributions to our
stockholders in accordance with such plan. However, the number, amount, timing,
and record date(s) of such distribution(s) have not and may not be determined
for some time under the plan.

Our expenses following the discontinuance of our high speed Internet access
and related services and international ISP infrastructure services businesses
consist of the following:

o General and administrative expenses, which consist primarily of salaries
for our remaining employees, fees for professional services and
insurance.

o Non-cash compensation expense from restricted stock, which consists of
the value of restricted stock issued to employees amortized over the
vesting period.

The Nasdaq Listing Qualifications Panel denied the Company's appeal of the
delisting of its common stock from the Nasdaq

11

National Market. Effective as of the open of business on July 10, 2002, the
Company's common stock no longer traded on the Nasdaq National Market. The
Company did not appeal the Panel's decision and the Company's securities now
trade on the OTC-Bulletin Board and Pink Sheets.

Our operating results have varied on a quarterly basis during our short
operating history and may fluctuate significantly in the future due to a variety
of factors, many of which are outside our control. As a result of such factors,
our annual or quarterly results of operations may be below the expectations of
public market analysts or investors, in which case the market price of the
common stock could be materially and adversely affected. In addition, the
results of any quarter do not indicate the results to be expected for a full
fiscal year.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 COMPARED
WITH THE THREE AND SIX MONTHS ENDED JUNE 30, 2001

EXPENSES

GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
three months ended June 30, 2002 and 2001 were $2.8 million and $1.4 million,
respectively, an increase of $1.4 million. General and administrative expenses
for the six months ended June 30, 2002 and 2001 were $4.0 million and $3.0
million, respectively, an increase of $1.0 million The increase in general and
administrative expenses for the three months ended June 30, 2002, resulted
primarily from $2.0 million in severance and severance-related costs associated
with the termination of certain employees, including our former President and
Chief Executive Officer and our former Chief Operating Officer, $0.2 in legal
settlement expenses, offset by a decrease in personnel costs to administer the
accounting and finance functions, as well as other wind-down personnel, and
lower outside services including legal fees.

NON-CASH COMPENSATION EXPENSE FROM RESTRICTED STOCK. Non-cash compensation
expense from restricted stock for the three months ended June 30, 2002 and 2001
were $1.3 million and $0.2 million, respectively, an increase of $1.1 million.
Non-cash compensation expense from restricted stock for the six months ended
June 30, 2002 and 2001 were $1.7 million and $0.2 million, respectively, an
increase of $1.5 million. This expense represents the fair market value of the
restricted stock at the time of grant amortized over the vesting period. The
increase in the expense during the second quarter of 2002 is attributable to the
vesting of the restricted stock upon the termination of our former President and
Chief Executive Officer and our former Chief Operating Officer.

NET INVESTMENT INCOME. Net investment income represents interest earned on
cash, cash equivalents and short-term investments, offset by interest expense
associated with debt and capital lease obligations. Net investment income was
$0.3 million for each of the three months ended June 30, 2002 and 2001. Net
investment income for the six months ended June 30, 2002 and 2001 was $0.3
million and $1.1 million, respectively, a decrease of $0.8 million. The decrease
in investment income for the six months ended June 30, 2002 is the result of
lower average investment balances and lower interest rates during 2002.
Offsetting the reduction in investment income was a reduction in interest
expense resulting primarily from the payoff of long-term debt and capital lease
obligations in the first quarter of 2002.

INCOME TAXES. At December 31, 2001, we had net deferred tax assets of $131.4
million primarily related to federal and state net operating loss carryforwards.
The net deferred tax asset has been fully offset by a valuation allowance based
upon the Company's history of operating losses. At December 31, 2001, we
accumulated net operating loss carryforwards for federal and state tax purposes
of approximately $287.1 million, which will expire beginning in 2018.
Utilization of these net operating losses will be subject to a substantial
annual limitation based upon the changes in the Company's ownership that
occurred on February 28, 2002, as provided in Section 382 of the Internal
Revenue Code of 1986 and similar state provisions. We currently expect to
generate taxable income in 2002 as a result of the Asset Sale. This income will
be offset by our net operating loss carryforwards.

LOSS FROM DISCONTINUED OPERATIONS, NET. The net losses from discontinued
operations for the three months ended June 30, 2002 and 2001 were $0.1 million
and $32.7 million, respectively, a decrease of $32.6 million. The net losses
from discontinued operations for the six months ended June 30, 2002 and 2001
were $4.2 million and $65.2 million, respectively, a decrease of $61.0 million.
The decreases are partially the result of two months of operations in 2002
versus six months in 2001. Also, to preserve cash, we implemented a series of
significant cost reduction measures throughout the second half of 2001 that had
a significant impact on the operating results in the first quarter of 2002.
Among these actions, we:

o exited all of our cable system agreements except for those with Charter;

o sold the operations of Digital Chainsaw;

12

o discontinued our efforts to enter the DSL market;

o exited all unnecessary leased space, and;

o reduced our workforce to include only those employees that Charter
agreed to hire in connection with the Asset Sale.

Additionally, in connection with the Asset Purchase Agreement, we entered in a
management agreement with Charter, pursuant to which Charter became solely
responsible for the purchase and installation of cable modems and related
equipment, while sharing responsibility for product marketing. The management
agreement terminated upon the consummation of the Asset Sale.

During the second quarter of 2002, we recorded adjustments that increased
our previously reported loss from discontinued operations by $0.1 million. These
adjustments related to an increase in estimated healthcare costs for severed
employees and an increase in estimated property tax expense, partially offset by
a favorable settlement on lease terminations costs.

GAIN ON SALE OF OPERATIONS TO CHARTER. The Company recorded a non-recurring
gain on the Asset Sale to Charter of $40.3 million during the first quarter of
2002. The components of the gain are as follows (in millions):

Net cash proceeds from sale to Charter ......... $ 69.5
Fair value of preferred stock .................. 3.7
Liabilities assumed by Charter ................. 14.4
Book value of assets acquired by Charter ....... (44.3)
Indemnity holdbacks ............................ 3.4
Transaction expenses ........................... (6.4)
------------
Gain on Asset Sale ............................. $ 40.3
============

LOSS ON EARLY EXTINGUISHMENT OF DEBT AND CAPITAL LEASE OBLIGATIONS. The
Company recorded a non-recurring loss on the early extinguishment of debt and
capital lease obligations of $2.0 million during the first quarter of 2002. The
Company paid a total of $10.3 million to terminate debt and certain capital
leases with future minimum payments of $10.5 million. The $2.0 million loss
represents the amount of cash paid over the recorded net book value of $8.3
million.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2002, we had cash and cash equivalents of $62.6 million and
short-term investments of $4.2 million, compared with $11.7 million of cash and
cash equivalents and $6.1 million of short-term investments at December 31,
2001.

Cash used in operating activities of continuing operations for the six
months ended June 30, 2002 was $3.4 million, consisting of a net loss from
continuing operations of $5.3 million, offset by non-cash compensation expense
from restricted stock of $1.7 million and changes in operating assets and
liabilities of $0.2 million.

Cash used in operating activities of discontinued operations for the six
months ended June 30, 2002 was $8.2 million, which consisted of the following
(in millions):

Loss from discontinued operations $ (4.2)
Depreciation and amortization 2.5
Collection of accounts receivable 2.1
Payment of liabilities related to discontinued operations (9.8)
Decreases in other assets 1.2
------------
Net cash used in operating activities of discontinued operations $ (8.2)
============

Cash provided by investing activities of continuing operations for the six
months ended June 30, 2002 was $1.9 million, the result of sales and maturities
of short-term investments of $69.2 million, offset by purchases of short-term
investments of $67.3 million.

Cash provided by investing activities of discontinued operations for the six
months ended June 30, 2002 was $76.1 million, primarily the result of cash
proceeds from the Charter transaction of $76.6 million, calculated as follows:

13

Net cash proceeds from sale to Charter .......... $ 69.5
Capital leases assumed by Charter ............... 2.1
Capital leases paid by Charter included in
financing activities of discontinued
operations ................................. 7.0
Indemnity holdback received...................... 1.4
Transaction expenses ............................ (3.4)
---------
Net cash proceeds included in investing
activities of discontinued operations ...... $ 76.6
=========

Cash used in financing activities of continuing operations for the six
months ended June 30, 2002 was $4.4 million, primarily the result of the
repurchase of 20,222,139 shares of our common stock from Vulcan on February 28,
2002.

Cash used in financing activities of discontinued operations for the six
months ended June 30, 2002 was $11.0 million, calculated as follows:

Capital leases paid by Charter 7.0
Other early extinguishment capital leases payments 1.1
Scheduled capital leases payments 0.5
Early extinguishment debt payments 2.2
Scheduled debt payments 0.2
------------
Net cash used in financing activities of discontinued operations $ 11.0
============

EFFECTS OF THE ASSET SALE. As discussed above, the Company received from
Charter on February 28, 2002, a net cash amount equal to $69.5 million. The
payment consisted of the following (in millions):

Cash purchase price per the Asset Purchase Agreement ............ $ 81.1
---------
Adjustments:
Current assets acquired by Charter, as adjusted per
the Asset Purchase Agreement ............................ 4.5
Capital leases, debt and other liabilities assumed or
paid by Charter ......................................... (12.7)
Indemnity holdbacks ....................................... (3.4)
---------
Total adjustments ................................. (11.6)
---------
Net cash proceeds from sale to Charter .................... $ 69.5
=========

The Company recorded a gain on the Asset Sale to Charter of $40.3 million
during the first quarter of 2002. The components of the gain are as follows (in
millions):

Net cash proceeds from sale to Charter ...... $ 69.5
Fair value of preferred stock ............... 3.7
Liabilities assumed by Charter .............. 14.4
Book value of assets acquired by Charter .... (44.3)
Indemnity holdbacks ......................... 3.4
Transaction expenses ........................ (6.4)
---------
Gain on Asset Sale .......................... $ 40.3
=========

Also on February 28, 2002, the Company purchased 20,222,139 shares of its
common stock from Vulcan for an aggregate purchase price of $4.4 million, or
$0.22 per share. These shares were retired during the second quarter of 2002.

PROJECTED LOSSES AFTER THE ASSET SALE. For the quarter ending September 30,
2002, we currently expect to incur a net loss of between $0.3 million and $0.4
million. This estimate is based in part on the following assumptions:

o We believe we will earn interest on cash and short term investments for
the quarter totaling approximately $0.3 million.

o We expect to continue to employ a total of four employees to provide
general and administrative support for the wind down of our remaining
obligations.

o We expect to record a charge of approximately $0.2 million related to
severance obligations for our former General Counsel during the third
quarter of 2002.

14

Our estimates do not include any additional potential charges for the
following items:

o Severance charges for an existing employment contract with our President
and CFO, which provides for potential severance payments and associated
expenses of approximately $0.2 million.

o Potential charges for known and unknown contingent liabilities for which
we anticipate the likelihood of payment is remote.

We expect that before any cash distribution to stockholders and any
liquidation administrative cost, our normal net loss after September 30, 2002,
exclusive of any unforeseen or unusual items, will not exceed $50,000 per month.

These estimates do not include any costs incurred in connection with the
potential liquidation and dissolution of the Company. These losses will be
incurred in connection with the continued employment of, and overhead costs
associated with, our remaining employees, fees for professional services and
insurance. We expect to partially fund these losses from the proceeds of, and
interest income earned on the proceeds of, the Asset Sale, but such interest
income alone generated by the proceeds of the Asset Sale will not be adequate to
fully offset these continuing general and administrative costs.

NET CASH VALUE. We currently estimate that, as of September 30, 2002, our
net cash value will be approximately $56.4 million to $60.3 million, or
approximately $1.40 to $1.50 per share of common stock. These estimates of net
cash value do not include $2.0 million to satisfy potential indemnity claims
that Charter held back under the Asset Purchase Agreement, most of which we
currently believe will ultimately be released to us in accordance with the Asset
Purchase Agreement. "Net cash value" represents the amount of our cash and cash
equivalents and short-term investments reduced by the amount of our total
liabilities. "Per share net cash value" represents our net cash value divided by
the number of shares of our common stock outstanding as of August 1, 2002 of
40,280,446. Our actual net cash value, and per share net cash value, may vary
depending on various factors, including but not limited to, final payout amounts
on known, unknown and contingent liabilities and the level of cash used in our
operations. We cannot assure you that our per share net cash value estimate of
approximately $1.40 to $1.50 will be reflected in the trading price of our
common stock. Also, the number, amount, timing and record date(s) of the cash
distribution(s) that we intend to make to our stockholders have not been
determined.

Our estimates of our net cash value and per share net cash value as of
September 30, 2002 are based on the following assumptions:

(1) Consists of cash and cash equivalents and short-term investments of
$66,804, less total liabilities of $4,759, as of June 30, 2002.

(2) Consists of estimated aggregate severance benefits to which our
President and CFO is entitled under his existing employment agreement if
his employment is terminated.

(3) Consists of estimated amounts potentially payable arising from known and
unknown contingent liabilities for which we anticipate the likelihood of
payment is remote.

The prospective financial information included in this Form 10-Q has been
prepared by, and is the responsibility of, the Company's

15

management. PricewaterhouseCoopers LLP has neither examined nor compiled the
accompanying prospective financial information and, accordingly,
PricewaterhouseCoopers LLP does not express an opinion or any other form of
assurance with respect thereto. This prospective financial information was not
prepared with a view toward compliance with the published guidelines of the
Securities and Exchange Commission or the guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of
prospective financial information.

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 principally of investments in interest-bearing money
market accounts with financial institutions and highly liquid investment-grade
debt securities of the U.S. Government.

Short-term investments are classified as available-for-sale and, as a
result, are stated at fair value. Short-term investments at June 30, 2002 are
comprised solely of U.S. Government agency securities. We record changes in the
fair market value of securities held for short-term investment as an equal
adjustment to the carrying value of the security and stockholders' equity.

LOAN FACILITIES. On February 28, 2002, in conjunction with the Asset Sale to
Charter, we paid off all remaining amounts due on our loan facilities.

LEASE OBLIGATIONS. During 2002, we paid $1.5 million to terminate certain
operating leases with future minimum lease payments of $2.7 million. In
addition, $10.2 million of future operating lease payments were assigned to
Charter as a result of the Asset Purchase Agreement that closed on February 28,
2002.

Also during 2002, we paid $8.6 million to terminate certain capital leases
with future minimum lease payments of $8.5 million. Also, $3.3 million of future
capital lease payments were assigned to Charter as a result of the Asset
Purchase Agreement that closed on February 28, 2002.

LEGAL PROCEEDINGS. The Company, our directors, certain former directors as
well as Charter and Paul Allen have been 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. 19045NC, 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. O'Brien, et al., Civil Action 19478-NC). All four
lawsuits, the first three of which have been consolidated, allege, among other
things, that the initially proposed cash purchase price by Charter of $73.0
million was grossly inadequate and that "[t]he purpose of the proposed
acquisition is to enable Charter and Allen to acquire [the Company's] valuable
assets for their own benefit at the expense of [the Company's] public
shareholders." The fourth lawsuit, Krim v. O'Brien, also alleges that the $81.1
million purchase price under the Asset Purchase Agreement was "grossly
inadequate."

The suits allege that the defendants breached their fiduciary duties to the
Company in connection with the making and consideration of Charter's proposal.
The plaintiffs ask to represent the interests of all common stockholders of the
Company and seek (except in the case of Krim v. O'Brien) injunctive relief
preventing the Company from consummating the Asset Sale. All four lawsuits seek
to rescind the transaction and seek unspecified monetary damages.

We believe these lawsuits are entirely without merit. Nevertheless, lawyers
for the defendants in these lawsuits have had discussions with attorneys
representing the plaintiffs in the first three lawsuits. These discussions
covered, among other topics, financial and other changes to the terms of the
Asset Purchase Agreement that addressed the matters raised by the plaintiffs. As
a result of these discussions, a tentative agreement has been reached to settle
the first three lawsuits. The settlement is embodied in a Memorandum of
Understanding (the "MOU") executed by counsel to all parties to the first three
lawsuits, dated as of January 10, 2002. Among other things, the MOU provides
that the settlement is premised upon defendants' acknowledgment that the
prosecution of the first three litigations was a "substantial causal factor"
underlying defendants' decision to condition the Asset Sale on the public
stockholder majority vote and was "one of the causal factors" underlying
Charter's decision to increase the consideration to be paid to the Company in
connection with the Asset Sale. The MOU further provides that defendants shall,
upon Court approval, pay up to $390,000, which amount will be allocated among
the defendants, to reimburse plaintiffs' counsel for the fees and expenses
incurred in pursuit of these litigations. The settlement is subject to
confirmatory discovery, final documentation and approval of the Delaware
Chancery Court. We believe that the claims asserted in the fourth lawsuit, Krim
v. O'Brien, will be covered by the settlement.

Also, on November 5, 2001, the Company, our Chief Financial Officer and our
former President, 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

16

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, alleging that our four underwriters engaged in a pattern of conduct
to surreptitiously extract inflated commissions greater than those disclosed in
the offering materials, among other acts of misconduct. The plaintiff asks to
represent the interest of all holders of our common stock and seeks unspecified
monetary damages. With respect to allegations against the Company, our Chief
Financial Officer and our former President, we believe this lawsuit is without
merit and intend 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.

During the three months ended June 30, 2002, the Company paid to the former
stockholders of Digital Chainsaw, a company we acquired in August, 2000, and
subsequently sold the assets of in 2001, $1.5 million to settle their potential
claims against us. This payment covered the claims of substantially all of the
former Digital Chainsaw stockholders. Additionally, the Company expensed and
paid an additional $0.2 million in litigation settlement costs during the three
months ended June 30, 2002.

We do not believe that the results of the above-noted legal proceedings will
have a material adverse effect on our financial condition or cash flows.
However, the Company's defense of and/or attempts to settle favorably these
proceedings and claims may affect the timing and amount of any distribution of
proceeds from the Asset Sale.

ADOPTION OF ACCOUNTING PRONOUNCEMENT

The Company adopted Statement of Financial Accounting Standards (SFAS) No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144)
on January 1, 2002. SFAS 144 supersedes Emerging Issues Task Force Issue No.
95-18 "Accounting and Reporting for a Discontinued Business Segment When the
Measurement Date Occurs after the Balance Sheet Date but before the Issuance of
Financial Statements" and requires a discontinued operation to be accounting for
under SFAS 144 if a measurement date for the discontinued operations is not
reached under Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business" prior
to the entity's year-end. The measurement date for the discontinuance of the
Company's high speed Internet access and related services business that included
the Asset Sale occurred on February 28, 2002, the date on which the Company's
stockholders approved the Asset Sale. Consequently, the results of operations of
the high speed Internet access and related services business have been presented
as discontinued operations effective in the quarter ended June 30, 2002 and
prior periods have been restated.

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. If any of the following risks
actually occur, our business and financial results could be materially and
adversely affected. In that case, the trading price of our common stock could
decline and you could lose all or part of your investment.

RISKS RELATED TO OUR WIND DOWN ACTIVITIES AND OUR POTENTIAL LIQUIDATION AND
DISSOLUTION

WE EXPECT TO CONTINUE TO SPEND THE PROCEEDS OF THE ASSET SALE WHILE WE SEEK
SHAREHOLDER APPROVAL FOR A PLAN OF LIQUIDATION AND DISSOLUTION

We expect to incur a net loss of approximately $0.3 million to $0.4 million
for the quarter ending September 30, 2002. We expect that before any cash
distribution to stockholders and any liquidation administrative cost, after July
1, 2002, our normal net loss, exclusive of any unforeseen or unusual items,
including severance charges, will not exceed $50,000 per month. These losses
will be incurred in connection with the continued employment of, and overhead
costs associated with, our remaining employees, fees for professional services
and insurance. We expect to partially fund these losses from the proceeds of,
and interest income earned on the proceeds of, the Asset Sale, but such interest
income alone generated by the proceeds of the Asset Sale will not be adequate to
fully offset these continuing overhead costs. To the extent we are unable to or
are delayed in obtaining stockholder approval of a plan of liquidation and
dissolution, we will likely continue to incur these losses and our net cash
value, and any amounts available for distribution to stockholders, will
decrease.

ALTHOUGH WE INTEND TO MAKE A DISTRIBUTION TO STOCKHOLDERS, WE HAVE NOT
DETERMINED WHEN OR HOW MUCH WE WILL DISTRIBUTE

After reviewing various strategic alternatives for the Company, our board
of directors concluded that the liquidation of the

17

Company was the best available alternative for maximizing stockholder value and,
accordingly, was advisable and in the best interest of the Company and it's
stockholders. On August 13, 2002, our board of directors unanimously adopted a
resolution recommending that a plan of liquidation and dissolution be submitted
to our stockholders. Under Delaware law, a plan of liquidation and dissolution
must be approved by the holders of a majority of the Company's outstanding
common stock. If approved by the stockholders, the plan will authorize us to
proceed with the liquidation of all of our remaining assets, payment of our
known liabilities, and the distribution of our remaining cash on hand (subject
to the set aside of adequate reserves to cover known, unknown and contingent
liabilities, including any litigation that we reasonably expect to be incurred),
and the dissolution of the Company. The Company is not soliciting the vote of
any of its stockholders with respect to the plan of liquidation and dissolution
pursuant to this Quarterly Report on Form 10-Q. The Company intends to provide
stockholders as soon as reasonably practicable a proxy statement relating to
a meeting of stockholders, at which, among other things, the plan of liquidation
and dissolution will be considered.

Assuming a plan of liquidation and dissolution is approved by the Company's
stockholders, we expect to make a cash distribution or distributions to our
stockholders in accordance with such plan. However, the number, amount,
timing, and record date(s) of such distribution(s) have not and may not be
determined for some time under the plan but will be decided by our board in its
sole discretion and will depend upon various factors, including:

o the amounts deemed necessary by our board to pay or provide for all of
our liabilities and obligations, including our potential liabilities and
obligations arising from existing and threatened litigation and the
indemnification provisions of the asset purchase agreement and the
severance provisions contained in the employment agreements of certain
of our executive officers;

o the amounts deemed necessary by our board to fulfill our existing
contractual obligations;

o the amounts deemed necessary by our board to satisfy any known or
unknown contingent liabilities, including existing and threatened
litigation;

o the timing and proceeds of the sale of our remaining assets; and

o approval of a plan of liquidation and dissolution by our stockholders.

The amount of our expected cash distribution(s) will be based upon estimates
of the costs associated with each of these factors, as well as the funds
necessary to complete the liquidation. If the board determines that material
contingent liabilities exist, including any asserted or threatened litigation,
any distribution, may be reduced or delayed. Furthermore, each of these factors
will be dependent upon a number of contingencies and conditions, many of which
are beyond our control, including market conditions and actions by third
parties. As a result, any decisions with respect to a distribution, will involve
judgments and assumptions that, although they may be considered reasonable at
the time by the board and management, may not be realized.

IF WE OBTAIN STOCKHOLDER APPROVAL TO LIQUIDATE AND DISSOLVE, THERE MAY BE
SUBSTANTIAL COSTS AND DELAYS

Assuming we obtain stockholder approval to liquidate and dissolve, we
anticipate that expenses for professional fees and other expenses of a
liquidation and dissolution will be significant. Moreover, no decision has been
made with respect to whether the company will elect to dissolve with or without
the supervision of the Delaware Chancery Court, and there are risks and
substantial differences in the administrative and professional costs associated
with these options. Furthermore, under Delaware law, it typically takes at least
three (3) years to dissolve a corporation, and during that time it is highly
unlikely that there will be a public market for our stock.

WE WERE DELISTED FROM THE NASDAQ NATIONAL MARKET, WHICH MAY ADVERSELY AFFECT THE
TRADING PRICE OF OUR COMMON STOCK

As of July 9, 2002, our common stock trades on the Over the Counter Bulletin
Board and Pink Sheets. These are generally considered less efficient markets,
and our stock price, as well as the liquidity of our common stock, may be
adversely affected as a result.

OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE

At the present time, our stock price is trading at a substantial discount to
our net cash value per share. If we were to announce a substantial distribution
of proceeds from the Asset Sale, our stock could fluctuate suddenly and widely
depending on the amount and

18

timing of such distribution and the amount of funds retained by the Company for
the payment of claims. In the past, companies that have experienced volatility
in the market price of their stock have been the objects of securities class
action litigation. If we were the object of securities class action litigation,
it could result in substantial costs to our stockholders and a diversion of our
management's attention and resources.

Additionally, the market price of our common stock may fluctuate
significantly in the future, and these fluctuations may be unrelated to our
performance or actions taken by the board with respect to a recommended plan of
liquidation. 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.

WE MAY INADVERTENTLY BECOME AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED, AND AS A RESULT, BECOME SUBJECT TO ADDITIONAL
REGULATION

If we at any time own investment securities (not including U.S. government
securities) that have a value exceeding 40% of our unconsolidated assets (or,
under applicable rules, own investment securities (not including U.S. government
securities) having a value exceeding 45% of our unconsolidated assets and no
more than 45% of our net income is derived from these investment securities) and
do not qualify for an exemption under the Investment Company Act, we may be
required to register as an investment company with the SEC, which would subject
us to extensive additional regulation.

To the extent we may be subject to the registration requirements of the
Investment Company Act, we may be permitted to rely on a temporary exemption
from these registration requirements for a period of up to one year, provided
that we had a bona fide intent to be engaged primarily, as soon as reasonably
possible and in any event at the end of one year, in a business other than that
of investing, reinvesting, owning, holding or trading in investment securities.
We would not be permitted to rely on this exemption more than once in any
three-year period.

If we rely on this exemption from the registration requirements of the
Investment Company Act and continue to own investment securities having a value
exceeding 40% of our unconsolidated assets (or, under applicable rules, own
investment securities (not including U.S. government securities) having a value
exceeding 45% of our unconsolidated assets and no more than 45% of our net
income is derived from these investment securities) at the end of the one-year
exemption period, we may be forced to invest any remaining proceeds from the
Asset Sale in U.S. government securities that have a lesser rate of return than
corporate or other non-U.S. government securities.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is limited to interest rate sensitivity, which
is affected by changes in the general level of U.S. interest rates. Our cash
equivalents are invested with high-quality issuers and limit the amount of
credit exposure to any one issuer. Due to the short-term nature of our cash
equivalents, we believe that we are not subject to any material market risk
exposure. We do not have any foreign currency hedging instruments.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

The Company, our directors, certain former directors as well as Charter and
Paul Allen have been 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. 19045NC, 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.
O'Brien, et al., Civil Action 19478-NC). All four lawsuits, the first three of
which have been consolidated, allege, among other things, that the initially
proposed cash purchase price by Charter of $73.0 million was grossly inadequate
and that "[t]he purpose of the proposed acquisition is to enable Charter and
Allen to acquire [the Company's] valuable assets for their own benefit at the
expense of [the Company's] public stockholders." The fourth lawsuit, Krim v.
O'Brien, also alleges that the $81.1 million purchase price under the Asset
Purchase Agreement was "grossly inadequate."

The suits allege that the defendants breached their fiduciary duties to the
Company in connection with the making and consideration of Charter's proposal.
The plaintiffs ask to represent the interests of all common stockholders of the
Company and seek (except in the case of Krim v. O'Brien) injunctive relief
preventing the Company from consummating the Asset Sale. All four lawsuits seek
to rescind the transaction and seek unspecified monetary damages.

19

We believe these lawsuits are entirely without merit. Nevertheless, lawyers
for the defendants in these lawsuits have had discussions with attorneys
representing the plaintiffs in the first three lawsuits. These discussions
covered, among other topics, financial and other changes to the terms of the
Asset Purchase Agreement that addressed the matters raised by the plaintiffs. As
a result of these discussions, a tentative agreement has been reached to settle
the first three lawsuits. The settlement is embodied in a Memorandum of
Understanding (the "MOU") executed by counsel to all parties to the first three
lawsuits, dated as of January 10, 2002. Among other things, the MOU provides
that the settlement is premised upon defendants' acknowledgment that the
prosecution of the first three litigations was a "substantial causal factor"
underlying defendants' decision to condition the Asset Sale on the public
stockholder majority vote and was "one of the causal factors" underlying
Charter's decision to increase the consideration to be paid to the Company in
connection with the Asset Sale. The MOU further provides that defendants shall,
upon Court approval, pay up to $390,000, which amount will be allocated among
the defendants, to reimburse plaintiffs' counsel for the fees and expenses
incurred in pursuit of these litigations. The settlement is subject to
confirmatory discovery, final documentation and approval of the Delaware
Chancery Court. We believe that the claims asserted in the fourth lawsuit, Krim
v. O'Brien, will be covered by the settlement.

Also, on November 5, 2001, the Company, our Chief Financial Officer and our
former President, 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,
alleging that our four underwriters engaged in a pattern of conduct to
surreptitiously extract inflated commissions greater than those disclosed in the
offering materials, among other acts of misconduct. The plaintiff asks to
represent the interest of all holders of our common stock and seeks unspecified
monetary damages. With respect to allegations against the Company, our Chief
Financial Officer and our former President, we believe this lawsuit is without
merit and intend 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 results of the above-noted legal proceedings will
have a material adverse effect on our financial condition or cash flows.
However, the Company's defense of and/or attempts to settle favorably these
proceedings and claims may affect the timing and amount of any distribution of
proceeds from the Asset Sale.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) In December 2000, we issued and sold 38,000 shares and 37,000 shares of
Series D senior convertible preferred stock to Vulcan and Charter Communications
Ventures, LLC, an affiliate of Charter, respectively. In this private placement,
we received aggregate consideration of $38.0 million and $37.0 million from
Vulcan and Charter, respectively. The preferred stock was convertible into
common stock of the Company at a conversion price of $5.01875 per share, subject
to adjustment for future stock issuances at less than the conversion price and
other customary adjustments.

The initial proceeds to the Company were $75.0 million. Through December 31,
2001 the proceeds have been applied as follows:

Direct or indirect payment to others for:

Offering expenses $ 1,000,000
Working capital $ 74,000,000

None of these expenses were direct or indirect payments to investors or
officers or 10% stockholders of the Company. This issuance of Series D
convertible preferred stock was made in reliance on the exemption from
registration provided by section 4(2) of the Securities Act and Rule 506
promulgated thereunder.

(b) In accordance with the Asset Purchase Agreement, Vulcan and Charter
tendered to the Company all 75,000 shares outstanding of Series D convertible
preferred stock on February 28, 2002.

(c) On February 28, 2002, the Company purchased 20,222,139 shares of Its
common stock from Vulcan for an aggregate purchase price of $4.4 million, or
$0.22 per share. The consummation of the Asset Sale was a condition precedent to
the purchase of common stock from Vulcan. The board of directors approved the
cancellation of these shares in March, 2002, and they were officially retired in
June, 2002.

20

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

99.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 Of The Sarbanes-Oxley Act Of 2002

(b) Reports on Form 8-K

None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

High Speed Access Corp.

Date: August 14, 2002 By /s/ George E. Willett
--------------- ----------------------------------
George E. Willett
President and Chief Financial Officer

22

INDEX TO EXHIBITS