<PAGE>
EXHIBIT 99.1
SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS
You should consider carefully the following factors in evaluating us and our
business. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us, which we
currently deem immaterial or that are similar to those faced by other companies
in our industry or business in general, may also impair our business operations.
If any of the following risks actually occurs, our business, financial condition
or results of future operations could be materially and adversely affected.
WE HAVE EXPERIENCED, AND CONTINUE TO EXPERIENCE, NET LOSSES.
Since our inception, we have experienced, and are continuing to
experience, operating losses and negative cash flow from operations. Our
statements of operations for the six month period ended June 30, 1999, and the
six month period ended June 30, 2000, reflect net losses of $6,511,537, and
$10,660,598, respectively. Due to the effect of the negative accretion
adjustment of $30,473,580 for the redemption value of the preferred stock (which
redemption cannot occur until July 23, 2006), the net income available to common
stockholders for the six month period ended June 30, 2000 was $19,812,982, or
approximately $1.34 basic income per share. This negative accretion was
attributable to the downward adjustment to the preferred stock to its full
redemption value resulting from a decline in the market value of the underlying
common stock as of June 30, 2000. We expect to incur operating losses in the
near future and until such time as operations generate sufficient revenues to
cover our costs.
WE MAY REQUIRE ADDITIONAL WORKING CAPITAL OR FINANCING TO MEET OUR OPERATING
DEMANDS IN 2000.
The rapid development of our business will continue to require
substantial capital expenditures for additional installations of network
equipment at new affiliate locations. Our future financial results will depend
primarily on our ability to increase our number of affiliate locations, maintain
our existing installations and increase advertising revenues. We cannot assure
that we will achieve profitability or positive cash flows from future operating
activities. If we fail to increase the number of installation sites or
experience operating difficulties, or if advertising revenues do not increase
substantially, it is likely that we will be required to raise additional capital
or obtain additional financing to fund our operations.
WE MAY NOT MEET OUR COVENANTS UNDER OUR BANK DEBT ARRANGEMENTS.
At June 30, 2000, CTN did not meet the minimum EBITDA covenants of its
$12.0 line of credit facility. If we fail to meet a covenant under our bank
loans, the financial institution has the right to declare the loan due upon
demand. The financial institution has granted CTN a waiver for the current
default. CTN negotiated new covenants for this credit facility. Our majority
shareholder has committed to provide funding through the end of fiscal 2000 in
the event we experience cash flow deficits from operations or cash flow deficits
in connection with debt service requirements.
WE DEPEND UPON OUR ADVERTISING REVENUES.
We derive a significant portion of our revenues from advertisers
displaying their commercials on the Network. Although we have agreements with
certain national advertisers and have held discussions or had prior agreements
with other national advertisers, we cannot assure that these advertisers will
continue to purchase advertising from us, or that new advertisers will purchase
advertising from us. Because certain advertisers may discontinue or reduce
advertising on the Network from time to time, we anticipate that we could
experience fluctuations in operating results and revenues. The failure to
attract
<PAGE>
and enter into new and/or additional agreements with national advertisers and to
derive significant revenues from these advertisers would have a material adverse
effect on our business and financial results.
WE DEPEND UPON THE COMMISSIONS AND FEES EARNED THROUGH MPM.
MPM earns its revenues by charging commissions on the advertisements it
places for clients. Historically, the commission customary in the industry was
15% of the gross charge for advertising space or time; more recently lower
commissions are being negotiated with clients and commissions charged on media
billings are not uniform. Revenues are dependent upon the marketing requirements
of clients. Clients may reduce advertising and marketing budgets at any time.
WE MUST SECURE NEW INSTALLATIONS AND MAINTAIN EXISTING INSTALLATIONS.
The Network's growth is dependent upon our ability to increase the
number of installation sites at colleges and universities. If we increase our
installation sites, we will have increased viewership and should be able to
increase our advertising revenue. In addition, we believe that if we are able to
increase our installation sites, it will become more difficult for a competitor
to enter the market. We have increased our number of installations, including
contracts for future installations, from 1,182 as of June 30, 1999 to 1,790 as
of June 30, 2000. Although we have been successful in increasing our
installation sites, we cannot assure that this growth will continue and that
colleges and universities will not require the removal of our system from
current locations. Our contracts with colleges and universities for installation
sites typically have a three-year term. The failure to increase or maintain
installation sites would have a material adverse effect on our business and
financial results.
WE DEPEND UPON OUR ACCESS TO PROGRAMMING.
We believe that our ability to maintain access to music videos and
other programming on a regular, long-term basis, on terms favorable to us, is
important to our future success and profitability. The Network's programming
consists primarily of music, news, information and entertainment. The Network's
music programming is provided free of charge by major music companies, including
Warner/Elektra/Atlantic, EMI, Polygram, MCA and BMG. We also receive customized
news and sports feeds produced for the Network by CNN through an agreement with
Turner Private Networks. Termination of substantially all or a large number of
our programming agreements would have a material adverse effect on our business
and financial results.
WE DEPEND UPON SATELLITE TECHNOLOGY.
The ability of the Network to transmit our programming, and thereby
derive advertising revenue, is dependent upon proper performance of the
satellite transmission equipment upon which the Network's programming delivery
is based. Our contract with Public Broadcasting Service, Inc. provides for our
sublease of transponder capacity on a satellite owned and operated by GE
American Communications, Inc. We are entitled to limited protected service under
the sublease in the event the satellite fails, which would enable the Network's
programming to be redirected to a different satellite under certain
circumstances and subject to certain limitations. However, in the event that the
Network's programming is required to be redirected to a different satellite, our
satellite dishes installed in each of our affiliate locations would be required
to be redirected in order for the programming signals to be received from the
satellite. This redirection procedure could take up to 21 days for completion
and would involve significant cost to us. We have obtained insurance for certain
of the costs associated with such a satellite failure, including the costs of
redirecting the satellite dishes, securing a new satellite transponder, and the
lost advertising revenues resulting from the interruption in programming.
<PAGE>
WE DEPEND ON OUR AGREEMENTS WITH THIRD PARTIES.
The ability of the Network to transmit our programming and to maintain
and install our equipment is dependent upon performance by certain third parties
under contracts with us. We are substantially dependent upon performance by
unaffiliated companies for our day-to-day programming operations and system
installation and maintenance.
ANY FAILURE TO MAINTAIN OR IMPROVE MARKET ACCEPTANCE FOR THE NETWORK WOULD
ADVERSELY AFFECT OUR BUSINESS.
Our prospects will be significantly affected by the success of our
affiliate marketing efforts, the acceptance of our programming by potential
viewers and our ability to attract advertisers. Achieving market acceptance for
the Network will require significant effort and expenditures by us to enhance
awareness and demand by viewers and advertisers. Our current strategy and future
marketing plans may be subject to change as a result of a number of factors,
including progress or delays in our affiliate marketing efforts, the nature of
possible affiliation and other broadcast arrangements that may become available
to us in the future, and factors affecting the direct broadcast industry. We
cannot assure that our strategy will result in initial or continued market
acceptance for the Network.
WE DEPEND UPON OUR KEY EXECUTIVES.
We are substantially dependent on the efforts of: Jason Elkin, our
Chairman and Chief Executive Officer; Martin Grant, our President and Chief
Operating Officer, and Geoffrey Kanter, President of MPM. The loss of any of
these executives could have a material adverse effect on our business and
financial results. All of these executives have entered into multi-year
employment agreements with us.
MPM DEPENDS ON ITS SALES STAFF TO MAINTAIN ITS BUSINESS.
MPM's business is, and will continue to be, dependent upon the sales
skills of its account personnel and their relationships with clients. There is
substantial competition among media placement and advertising companies for
talented personnel and MPM is vulnerable to adverse consequences from the loss
of key individuals. Employees of MPM are generally not under employment
contracts and are free to move to competitors.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES.
CTN competes for advertisers with many other forms of advertising
media, including television, Internet, radio, print, direct mail and billboard.
There are no meaningful intellectual property barriers to prevent competitors
from entering into this market, and we cannot assure that a competitor with
greater resources than us will not enter into the market. We believe that
competition could increase as other organizations perceive the potential for
commercial application of our product or service.
MPM's business is highly competitive and advertising accounts may shift
agencies on little or no notice. Clients may also reduce advertising and
marketing budgets at any time. Many of MPM's current and potential competitors
have longer operating histories, more established business relationships, larger
customer bases, greater name recognition and substantially greater financial,
technical, marketing, personnel, management, service, support and other
resources than MPM does. This could allow MPM's current and potential
competitors to respond more quickly than MPM can to new or emerging technologies
and changes in customer requirements, to devote greater resources to the
marketing and sale of their products and services and to adopt more aggressive
pricing policies. We expect that competition
<PAGE>
will increase as other established and emerging companies enter the media
placement market. Increased competition may result in price reductions, lower
gross margins and loss of our market share. This could materially and adversely
affect our business, financial condition and results of operations.
WE MUST CONTINUE TO ADVANCE OUR TECHNOLOGY.
We expect technological developments and enhancements to continue at a
rapid pace in the direct broadcast satellite network industry and related
industries, and we cannot assure that technological developments will not
require us to switch to a different transmission technology or cause our
technology and products to be dated. Our future success could be largely
dependent upon our ability to adapt to technological change and remain
competitive.
OUR PRINCIPAL STOCKHOLDER CONTINUES TO CONTROL OUR AFFAIRS.
U-C Holdings, L.L.C. beneficially owns approximately 86.2% of our
outstanding voting stock, including common stock and voting preferred stock. As
a result of its ownership, Holdings has, and will continue to have, sufficient
voting power to determine our direction and policies, the election of our
directors, the outcome of any other matter submitted to a vote of stockholders
and to prevent or cause a change in our control.
WE MAY BE SUBJECT TO CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS.
Certain conflicts of interest may arise as a result of the beneficial
ownership interests in Holdings that are held by a majority of our directors,
including our Chairman and Chief Executive Officer. Several members of our Board
of Directors may be deemed to be indirect beneficial owners of the securities
beneficially owned by Holdings. Conflicts of interest may arise as a result of
these affiliated relationships. Although no specific measures to resolve such
conflicts of interest have been formulated, our management has a fiduciary
obligation to deal fairly and in good faith with us and will exercise reasonable
judgment in resolving any specific conflict of interest that may occur.
THE HOLDERS OF OUR COMMON STOCK COULD BE MATERIALLY DILUTED UNDER CERTAIN
CIRCUMSTANCES.
The conversion of the shares of convertible preferred stock into common
stock or the payment of a dividend of shares of common stock to the holders of
convertible preferred stock will result in dilution of voting rights of the
currently outstanding public holders of the common stock.
OUR REVENUES ARE SUBJECT TO SEASONALITY.
Our revenues are affected by the pattern of seasonality common to most
school-related businesses. Historically, we have generated a significant portion
of our revenues during the period of September through May and substantially
less revenues during the summer months when most colleges and universities do
not hold regular classes.
OUR STOCK PRICE AND ABILITY TO RAISE CAPITAL OR OBTAIN FINANCING COULD BE HURT
BY OUR OUTSTANDING WARRANTS AND OPTIONS.
As of June 30, 2000, there are outstanding options to purchase
2,420,658 shares of our common stock granted to employees, officers and
directors pursuant to our stock option plans and otherwise. In addition, there
are warrants outstanding that permit their holders to purchase 1,893,982 shares
of our common stock. Holdings has entered into certain Equity Protection
Agreements, dated April 25, 1997, which allow Holdings to purchase additional
shares of our common stock upon the exercise of options or
<PAGE>
warrants that were outstanding on April 25, 1997 at the price of $2.75 per share
and $3.50 per share (as adjusted). Certain other holders of options and warrants
also have demand and piggy-back registration rights. While such rights, warrants
and options are outstanding, they may (i) adversely affect the market price of
our common stock and (ii) impair our ability to, and the terms on which we can,
raise additional equity capital or obtain debt financing.
SALES OF OUR SHARES COULD CAUSE OUR STOCK PRICE TO FALL.
Sales of a substantial number of shares of common stock in the public
market could adversely affect the market price of our common stock prevailing
from time to time. All shares of our common stock, including shares held by
Holdings, are freely tradable or may be sold pursuant to Rule 144 under the
Securities Act. The sale of the shares of our common stock held by Holdings and
other affiliates of CTN are subject to certain volume limitations set forth in
Rule 144 under the Securities Act. As of June 30, 2000, options to purchase
2,420,658 shares and warrants to purchase 1,893,982 shares of our common stock
were outstanding, of which options to purchase 1,158,204 shares and warrants to
purchase 1,893,982 shares were exercisable.
THERE ARE SEVERAL RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY; IF WE CANNOT
INTEGRATE ACQUIRED COMPANIES WITH OUR BUSINESS, OUR PROFITABILITY MAY BE
ADVERSELY AFFECTED.
We may seek to expand or complement our operations through the possible
acquisition of other companies or through the licensing of programs that we
believe are compatible with our business. While we explore acquisition
opportunities from time to time, as of the date of this report, we have no
definitive plans, agreements, commitments, arrangements or understandings with
respect to any significant acquisition. We have not established any minimum
criteria for any other acquisition, and our management and Board of Directors
will have complete discretion in determining the terms of any such acquisition.
Under Delaware law, various forms of business combinations can be effected
without stockholder approval and, accordingly, stockholders will, in all
likelihood, neither receive nor otherwise have the opportunity to evaluate any
financial or other information which may be made available to us in connection
with any acquisition and must rely entirely upon the ability of management in
selecting, structuring and consummating acquisitions that are consistent with
our business objectives.
We have completed a number of acquisitions in the past two fiscal years
and may complete additional acquisitions of complementary businesses in the
future. Our operating results may be adversely affected by our ability to
effectively and efficiently integrate these recently acquired companies as well
as our ability to integrate companies that we acquire in the future.
