SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 1998
or
[_] 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 333-50049
DTI Holdings, Inc.
(Exact name of registrant as specified in its charter)
Missouri 43-1828147
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
8112 Maryland Ave, 4th Floor
St. Louis, Missouri 63105
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314) 880-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 [_]
As of February 11, 1999, 30,000,000 shares of the Registrant's common stock,
$.01 par value, were issued and outstanding.
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DTI HOLDINGS, INC.
FORM 10-Q
December 31, 1998
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1998 (Unaudited) 1
Condensed Consolidated Statements of Operations for
the Three and Six Months Ended December 31, 1997
and 1998 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended December 31, 1997 and 1998
(Unaudited) 3
Notes to Condensed Consolidated Financial Statements
(Unaudited) 4 - 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 10
Item 3: Quantitative and Qualitative Disclosures About Market
Risk 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures
Exhibit Index
<PAGE>
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
DTI HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<S> <C> <C>
June 30, December 31,
1998 1998
------------ ------------
Assets
Current assets:
Cash and cash equivalents..................................... $251,057,274 $225,500,478
Trade accounts receivable, net................................ 501,612 189,185
Other receivables............................................. -- 211,828
Prepaid and other current assets.............................. 69,635 451,929
------------ ------------
Total current assets..................................... 251,628,521 226,353,420
Property and equipment, net..................................... 77,771,527 123,489,489
Deferred financing costs, net of amortization of $509,869
and $1,327,422........................................... 10,028,558 9,736,120
Deferred tax asset.............................................. 3,234,331 3,234,331
Other assets.................................................... 202,223 64,633
------------ ------------
Total.................................................... $342,865,160 $362,877,993
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable.............................................. $ 4,722,418 $ 13,193,567
Vendor financing.............................................. -- 1,282,485
Taxes payable (other than income taxes)....................... 1,830,668 1,596,368
Other current liabilities..................................... 83,605 506,611
------------ ------------
Total current liabilities................................ 6,636,691 16,579,031
Deferred revenues............................................... 16,814,488 19,343,923
Senior discount notes, net of unamortized discount of
$9,465,882 and $8,716,240 277,455,859 295,555,199
Vendor financing................................................ -- 1,282,484
Other long-term liabilities..................................... -- 228,869
------------ ------------
Total liabilities........................................ 300,907,038 332,989,506
------------ ------------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value, 20,000 shares
authorized, no shares issued and outstanding.............. -- --
Convertible series A preferred stock, $.01 par value,
(aggregate liquidation preference of $45,000,000)
30,000 shares authorized, issued and outstanding.......... 300 300
Common stock, $.01 par value, 100,000,000 shares
authorized, 30,000,000 shares issued and
outstanding............................................... 300,000 300,000
Additional paid-in capital.................................... 44,013,063 44,213,063
Common stock warrants 10,421,336 10,421,336
Unearned compensation......................................... -- (90,910)
Accumulated deficit........................................... (12,776,577) ( 24,955,302)
------------ ------------
Total stockholders' equity........................... 41,958,122 29,888,487
------------ ------------
Total........................................................... $342,865,160 $362,877,993
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
DTI HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Six Months Ended
December 31 December 31,
1997 1998 1997 1998
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Telecommunications services:
Carrier's carrier services......................... $ 426,523 $ 1,626,946 $ 744,185 $ 3,251,478
End-user services.................................. 139,926 103,486 274,346 218,603
---------- ----------- ----------- ------------
Total revenues.................................. 566,449 1,730,432 1,018,531 3,470,081
---------- ----------- ----------- ------------
OPERATING EXPENSES:
Telecommunications services........................ 225,566 1,002,707 409,372 1,995,351
Selling, general and administrative................ 944,056 1,463,268 1,598,136 2,999,806
Depreciation and amortization...................... 468,950 809,000 830,700 1,501,000
---------- ----------- ----------- ------------
Total operating expenses........................ 1,638,572 3,274,975 2,838,208 6,496,157
---------- ----------- ----------- ------------
LOSS FROM OPERATIONS................................. (1,072,123) (1,544,543) (1,819,677) (3,026,076)
OTHER INCOME (EXPENSES):
Interest income.................................... 67,869 2,960,830 120,146 6,304,340
Interest expense................................... -- (7,705,422) -- (15,456,989)
---------- ----------- ----------- ------------
Loss before income tax benefit.................. (1,004,254) (6,289,135) (1,699,531) (12,178,725)
INCOME TAX BENEFIT................................... 402,000 -- 680,000 --
---------- ----------- ----------- ------------
NET LOSS............................................. $ (602,254) $(6,289,135) $(1,019,531) $(12,178,725)
========== =========== =========== ============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
DTI HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
<S> <C> <C>
1997 1998
------------ -------------
Cash flows provided by operating activities:
Net loss...................................................... $(1,019,531) $(12,178,725)
Adjustments to reconcile net loss to cash provided
by operating activities: 830,700 1,501,000
Depreciation and amortization............................
Accretion of senior discount notes....................... -- 14,592,346
Amortization of deferred financing costs................. -- 817,615
Deferred income taxes.................................... (680,000)
Amortization of unearned compensation.................... -- 109,090
Other noncash items...................................... -- 45,534
Changes in assets and liabilities:
Trade accounts receivable............................. (1,330,458) (111,229)
Other assets.......................................... (232,502) (32,876)
Accounts payable...................................... 958,853 8,471,149
Other liabilities..................................... (20,949) 606,341
Taxes payable (other than income taxes)............... 808,654 (234,300)
Deferred revenues..................................... 4,631,269 2,529,435
----------- ------------
Net cash flows provided by operating activities................. 3,946,036 16,115,380
----------- ------------
Cash flows from investing activities:
Increase in network and equipment............................. (21,926,768) (41,146,999)
----------- ------------
Net cash used in investing activities........................... (21,926,768) (41,146,999)
----------- ------------
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible
Preferred stock............................................ 17,250,000 --
Deferred financing costs...................................... -- (525,177)
----------- ------------
Cash flows provided by (used in) financing activities........... 17,250,000 (525,177)
----------- ------------
Net decrease in cash and cash equivalents....................... (730,732) (25,556,796)
Cash and cash equivalents, beginning of period 4,366,906 251,057,274
----------- ------------
Cash and cash equivalents, end of period........................ $ 3,636,174 $225,500,478
=========== ============
Noncash investing and financing activities:
Interest capitalized to fixed assets.......................... $ -- $ 3,506,994
=========== ============
Fixed assets acquired through vendor financing................ $ -- $ 2,564,969
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
DTI Holdings, inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10-01
of Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements.
In the opinion of the management of DTI Holdings, Inc. and subsidiary (the
"Company" or "DTI") the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary to present fairly the Company's financial information for
the interim periods presented and have been prepared in accordance with
generally accepted accounting principles. The interim results of operations are
not necessarily indicative of results that may be expected for any other interim
period or for the full year.
The financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended June 30,
1998 included in the Company's Form 10-K filed with the Securities and Exchange
Commission. Accordingly, note disclosures which would substantially duplicate
the disclosures in the audited financial statements have been omitted.
2. COMMITMENTS AND CONTINGENCIES
On June 20, 1995, the Company and its President were named as defendants in a
suit in which the plaintiff alleges that (i) the plaintiff entered into an oral
contract with the defendants pursuant to which the plaintiff was to receive a
percentage of the Company's common stock, (ii) the plaintiff provided services
to the Company for which the plaintiff was not and should be compensated, and
(iii) the defendants misrepresented certain facts to the plaintiff in order to
induce him to loan money and provide services to the defendants. Based on these
allegations, the plaintiff is suing for breach of contract and fraud and is
seeking actual monetary damages, punitive damages and a percentage of the common
stock of the Company. Management believes the plaintiff's claims are without
merit and intends to vigorously defend the claims. It is not possible to
determine what impact, if any, the outcome of this litigation might have on the
financial condition, results of operations or cash flows of the Company at this
time. The President has agreed personally to indemnify the Company against any
and all losses and damages resulting from any judgments and awards rendered
against the Company in this litigation. However, no guarantee can be made as to
the ability to satisfy all such amounts. The President has also agreed to
indemnify the holder of the convertible preferred stock from such losses and
damages, and has pledged his stock ownership in the Company to secure such
obligation.
The Company has received notice from a customer that it intends to set off
against amounts payable to the Company $15,000 per month, which as of December
31, 1998 totaled approximately $180,000 (in addition to $400,000 previously set
off against other payments) as damages and penalties under the Company's
contract with that customer due to the failure by the Company to meet certain
construction deadlines, and such customer reserved its rights to seek other
remedies under the contract. The Company believes that if such $180,000 setoff
4
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were to be made, it would not be material to the Company's business, financial
position or results of operations. The Company is behind schedule with respect
to such contract as a result of such customer's not obtaining on behalf of the
Company certain rights-of-way required for completion of certain network
facilities, and the Company's limitations on its financial and human resources,
particularly prior to the Senior Discount Notes Offering. The Company has
obtained alternative rights-of-way and hired additional construction supervisory
personnel to accelerate the completion of such construction. Upon completion and
turn-up of services, such customer is contractually required to pay the Company
a lump sum of approximately $3.8 million for the Company's telecommunications
services over its network.
From time to time the Company is named as a defendant in routine lawsuits
incidental to its business. The Company believes that none of such current
proceedings, individually or in the aggregate, will have a material adverse
effect on the Company's financial position, results of operations or cash flows.
During fiscal 1999, the Company has made and will continue to make material
commitments related to the expansion of its network.
2. VENDOR FINANCING AGREEMENT
On December 15, 1998, the Company entered into a vendor financing agreement with
its fiber optic cable vendor allowing for deferred payment terms for one and
two-year periods on qualifying cable purchases up to $15 million. Interest under
the agreement will accrue at a rate of LIBOR plus 2%. As of December 31, 1998,
total borrowings under this agreement were $2,564,969.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Three and Six Months Ended December 31, 1997 Compared to the Three and Six
Months Ended December 31, 1998
Revenue
Total revenue for the second quarter grew $1.2 million, or 205%, from $566,000
in fiscal 1998 to $1.7 million in fiscal 1999, totally attributable to increased
revenue from carrier's carrier services. Revenue from carrier's carrier services
was up 281% principally from increased sales of point-to-point transport
business on the Company's completed routes. Total revenue for the first six
months of the year increased 241% over the first six months of fiscal 1998 due
to increased carrier's carrier services. Subsequent to December 31, 1998, DTI
has completed or will soon complete its performance of several one-year service
agreements with one of its carrier customers. The expiration dates of these
service agreements range from February 1, 1999 to March 4, 1999. The anticipated
decline of monthly recurring revenues related to these expiring service
agreements is approximately $170,000 and is partially offset by leased circuit
costs of approximately $50,000 that the Company is incurring to provide some of
the services.
Operating Expenses
Telecommunications services expenses were up $777,000 from the second quarter of
fiscal 1999 over 1998. For the first six months of fiscal 1999 compared to 1998
telecommunication services increased $1.6 million. These increases reflect the
growth of personnel costs related to the building of the management
infrastructure, as well as increased costs related to leased capacity to support
existing customers in areas not yet reached by the Company's network.
Selling, general and administrative expenses for the three months ended December
31, 1998 increased $519,000 over the same period in fiscal 1998 and were up $1.4
million for the respective six-month periods. The increase is mainly due to
additional administrative and sales personnel and the expenses of supporting
these personnel.
Depreciation and amortization grew 73% from last year's second quarter and 81%
for the six month period due to increasing amounts of the Company's fiber optic
network being placed into service in fiscal 1999. Depreciation and amortization
will continue to grow as the Company continues to invest in capital assets to
increase network capacity and as additional network routes are placed into
service.
Other Income (Expense)
Net other income (expense) for the second quarter and the fiscal year to date
increased from net income of $68,000 and $120,000, respectively, in fiscal 1998
to a net expense of $4.7 million and $9.2 million, respectively, in fiscal 1999.
This change is due to the issuance of the Company's Senior Discount Notes in
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February 1998, which resulted in increased noncash interest expense, offset in
part by interest income earned on the portion of the proceeds from the Senior
Discount Notes invested in short-term investment-grade securities.
Income Taxes
An income tax benefit of $402,000 and $680,000 was recorded for the three and
six-month periods, respectively, ended December 31, 1997 compared to no benefit
or provision in the comparable periods in fiscal 1999. Management believes it is
more likely than not that the deferred income tax assets, net of the valuation
allowance, will be realized based on current income tax laws and expectations of
future taxable income stemming from the reversal of existing deferred tax
liabilities or ordinary operations. A valuation allowance is being provided to
reserve for significant deferred tax assets generated from net operating loss
carryforwards and the nondeductible interest expense related to the Company's
Senior Discount Notes, issued in February 1998, that may not be realizable due
to uncertainties surrounding income tax law changes and future operating income
levels.
Liquidity and Capital Resources
As of December 31, 1998, the Company had $225.5 million of cash and cash
equivalents. The decrease of $25.6 million for the six months ended December 31,
1998 was primarily due to expenditures on the Company's property and equipment
as the Company continues to expand its fiber optic network.
The net cash provided by operating activities was $16.1 million for the six
month period ended December 31, 1998 compared to $3.9 million in the comparable
period in fiscal 1998, primarily as a result of cash derived from interest
income and an increase in accounts payable associated with the continued
development of the Company's network.
Cash used in investing activities for the six month period ended December 31,
1998 was $41.1 million compared to $21.9 million for the comparable period of
fiscal 1998. The growth in investing activities reflects the purchase of network
and equipment to be used in the Company's operations.
Cash provided by (used in) financing activities was $(525,000) in the first six
months of fiscal 1999, compared to $17.2 million from the issuance of redeemable
convertible preferred stock in the first six months of fiscal 1998. The Company
did not enter into any new cash financing transactions in the first two quarters
of fiscal 1999. However, the Company has entered into a vendor financing
agreement with its major fiber optic cable vendor allowing for deferred payment
terms for one and two-year periods on qualifying cable purchases up to $15
million.
To achieve its business plan, DTI will need significant financing to fund its
capital expenditure, working capital and debt service requirements and its
anticipated future operating losses. The Company's estimated capital
requirements primarily include the estimated cost of (i) constructing
approximately half of the planned DTI network routes, (ii) purchasing, for cash,
fiber optic facilities pursuant to long-term IRUs for planned routes that the
Company will neither construct nor acquire through swaps with other
telecommunication carriers, and (iii) additional network expansion activities,
including the construction of additional local loops in secondary and tertiary
cities as network traffic volume increases. The Company estimates that total
7
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capital expenditures necessary to complete the DTI network will be in excess of
$800 million, of which the Company had expended $127 million, as of December 31,
1998. During the balance of calendar 1999, the Company anticipates its capital
expenditure priorities will be focused principally on expanding from its
existing Missouri/Arkansas base by building additional regional rings that
adjoin existing rings and those that initiate new rings in areas in which strong
carrier interest has been expressed. The Company anticipates that its existing
financial resources will be adequate to fund the abovementioned priorities and
its existing capital commitments, principally payments required under existing
IRU and short-term lease agreements, totaling $119 million which are payable in
varying installments over the period through December 31, 1999. In addition, the
Company has a commitment at December 31, 1998 for eight telecommunications
switches totaling $15 million which is cancelable upon the payment of a
cancellation fee of $42,000 for each of the remaining unpurchased switches. The
Company also may require additional capital in the future to fund operating
deficits and net losses and for potential strategic alliances, joint ventures
and acquisitions. These activities could require significant additional capital
not included in the foregoing estimated capital requirements.
As of December 31, 1998, DTI had $225.5 million of cash and cash equivalents.
Such amount is expected to provide sufficient liquidity to meet the Company's
operating and capital requirements through approximately December 31, 1999.
Subsequent to such date, DTI's operating and capital requirements are expected
to be funded, in large part, out of additional debt or equity financing, advance
payments under IRUs, wholesale network capacity agreements and regional ring
service agreements, and available cash flow from operations, if any. The Company
is exploring the possibility of an additional high yield debt offering, a
commercial credit facility and equity sales, but has no specific plans at this
time. The Company is in various stages of discussions with potential customers
for IRUs, wholesale network capacity agreements and regional ring service
agreements. There can be no assurance, however, that the Company will continue
to obtain advance payments from customers prior to commencing construction of,
or obtaining IRUs for, planned routes, that it will be able to obtain financing
under any credit facility or that other sources of capital will be available on
a timely basis or on terms that are acceptable to the Company and within the
restrictions under the Company's existing financing arrangements, or at all. If
the Company fails to obtain the capital required to complete the DTI network,
the Company could modify, defer or abandon plans to build or acquire certain
portions of the DTI network. The failure of the Company, however, to raise the
substantial capital required to complete the DTI network could have a material
adverse effect on the Company. The actual amount and timing of DTI's capital
requirements may differ materially from the Company's estimates depending on the
actual costs of network construction and equipment, the actual costs of
purchasing fiber optic facilities pursuant to long-term IRUs, the execution of
more or fewer swaps with other carriers than currently planned, demand for the
Company's services, and the Company's ability to implement its current business
strategy as a result of regulatory, technological and competitive developments
(including market developments and new opportunities) in the telecommunications
industry.
Subject to the Indenture provisions that limit restrictions on the ability of
any of the Company's Restricted Subsidiaries to pay dividends and make other
payments to the Company, future debt instruments of Digital Teleport, Inc., the
Company's wholly owned subsidiary ("Digital Teleport"), may impose significant
restrictions that may affect, among other things, the ability of Digital
Teleport to pay dividends or make loans, advances or other distributions to the
Company. The ability of Digital Teleport to pay dividends and make other
distributions also will be subject to, among other things, applicable state laws
and regulations. Although the Senior Discount Notes do not require cash interest
payments until September 1, 2003, at such time the Senior Discount Notes will
require annual cash interest payments of $63.25 million. In addition, the Senior
Discount Notes mature on March 1, 2008. The Company currently expects that the
8
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earnings and cash flow, if any, of Digital Teleport will be retained and used by
such subsidiary in its operations, including servicing its own debt obligations.
The Company does not anticipate that it will receive any material distributions
from Digital Teleport prior to September 1, 2003. Even if the Company determined
to pay a dividend on or make a distribution in respect of the capital stock of
Digital Teleport, there can be no assurance that Digital Teleport will generate
sufficient cash flow to pay such a dividend or distribute such funds to the
Company or that applicable state law and contractual restrictions, including
negative covenants contained in any future debt instruments of Digital Teleport,
will permit such dividends or distributions. The failure of Digital Teleport to
pay, or to generate sufficient earnings or cash flow to distribute any cash
dividends or make any loans, advances or other payments of funds to the Company
would have a material adverse effect on the Company's ability to meet its
obligations on the Senior Discount Notes. Further, there can be no assurance
that the Company will have available, or will be able to acquire from
alternative sources of financing, funds sufficient to repurchase the Senior
Discount Notes in the event of a Change of Control.
The Company has received notice from a customer that it intends to set off
against amounts payable to the Company $15,000 per month, which as of December
31, 1998 totaled approximately $180,000 (in addition to $400,000 previously set
off against other payments) as damages and penalties under the Company's
contract with that customer due to the failure by the Company to meet certain
construction deadlines, and such customer reserved its rights to seek other
remedies under the contract. The Company believes that if such $180,000 setoff
were to be made, it would not be material to the Company's business, financial
position or results of operations. The Company is behind schedule with respect
to such contract as a result of such customer's not obtaining on behalf of the
Company certain rights-of-way required for completion of certain network
facilities, and the Company's limitations on its financial and human resources,
particularly prior to the Senior Discount Notes Offering. The Company has
obtained alternative rights-of-way and hired additional construction supervisory
personnel to accelerate the completion of such construction. Upon completion and
turn-up of services, such customer is contractually required to pay the Company
a lump sum of approximately $3.8 million for the Company's telecommunications
services over its network
Year 2000
While the Company believes that its existing systems and software applications
are Year 2000 compliant, there can be no assurance until the year 2000 that all
of the Company's systems and software applications then in place will function
adequately. The failure of the Company's systems or software applications to
accommodate the year 2000 could have a material adverse effect on its business,
financial condition and results of operations. Further, if the systems or
software applications of telecommunications equipment suppliers, ILECs, IXCs or
others on whose services or products the Company depends or with whom the
Company's systems must interface are not Year 2000 compliant, it could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company intends to continue to monitor the
performance of its accounting, information and processing systems and software
applications and those of its third-party constituents to identify and resolve
any Year 2000 issues. To the extent necessary, the Company may need to replace,
upgrade or reprogram certain systems to ensure that all interfacing applications
will be Year 2000 compliant when operating jointly. Based on current
information, the Company does not expect that the costs of such replacements,
upgrades and reprogramming will be material to its business, financial condition
or results of operations. Most major domestic carriers have announced that they
expect to achieve Year 2000 compliance for their networks and support systems by
mid-1999; however, other domestic and international carriers and other
third-party constituents may not be Year 2000 compliant, and failures on their
9
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networks and systems could adversely affect the operation of the Company's
networks and support systems and have a material adverse effect on the Company's
business, financial condition and results of operations. The Company has not
developed a contingency plan with respect to the failure of its systems or the
systems of its suppliers or other carriers to achieve year 2000 compliance.
Forward Looking Statements
Certain statements throughout Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this quarterly report are
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties
and other factors that may cause actual events or results to differ materially
from those expressed or implied by the forward looking statements. The most
important factors that could prevent the Company from achieving its stated goals
include, but are not limited to, (a) failure to obtain substantial amounts of
additional financing at reasonable costs and on acceptable terms, (b) failure to
effectively and efficiently manage the expansion and construction of the
Company's network, (c) failure to enter into additional indefeasible rights to
use ("IRUs") and/or wholesale network capacity agreements, (d) failure to obtain
and maintain sufficient rights-of-way, (e) intense competition and pricing
decreases, (f) potential for rapid and significant changes in telecommunications
technology and their effect on the Company's business, and (g) adverse changes
in the regulatory environment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
10
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
3.1 Restated Articles of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-50049)(the "S-4")).
3.2 Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.2 to the S-4).
27 Financial Data Schedule
(b) Reports on Form 8-K
(1) Form 8-K dated September 1, 1998 was filed on October 14, 1998,
pursuant to Item 7 (Financial Statements and Exhibits)
(2) Form 8-K dated October 7, 1998 was filed on October 13, 1998, pursuant
to Item 6 (Resignation of Registrant's Directors) and Item 7.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DTI HOLDINGS, INC.
Date: February 11, 1999 /S/Gary W. Douglass
----------------- ---------------------------------------
Gary W. Douglass, Senior Vice President
Finance and Administration and
Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE>
Exhibits Index:
3.1 Restated Articles of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-50049) (the "S-4")).
3.2 Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.2 to the S-4).
27 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and the condensed consolidated statement of
operations of DTI Holdings, Inc. filed as part of the quarterly report on Form
10-Q and is qualified in its entirety by reference to such quarterly report on
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-mos
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0
300
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