PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward looking statements. Cytation.com Incorporated ("Cytation" or the
"Company") intends to qualify both its written and oral forward looking
statements for protection under the Reform Act and any other similar safe
harbor provisions.
"Forward looking statements" are defined by the Reform Act. Generally, forward
looking statements include expressed expectations of future events and the
assumptions on which the expressed expectations are based. All forward
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward looking statements of Cytation. The
Company undertakes no obligation to update or revise this Safe Harbor
Compliance Statement for Forward Looking Statements (the "Safe Harbor
Statement") to reflect future developments. In addition, Cytation undertakes
no obligation to update or revise forward looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
Cytation provides the following risk factor disclosure in connection with its
continuing effort to qualify its written and oral forward looking statements
for the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to management that could
cause actual results to differ materially from those in forward looking
statements include the disclosures contained in the Item 5, Other Information,
Business Plan, to which this statement is appended as an exhibit and also
include the following:
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company has incurred indebtedness and, as a result, debt service
obligations. The Company's ability to make payments on its debt
obligations will depend on its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control. If the Company is
unable to service its indebtedness, it will be required to adopt alternative
strategies, which may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its indebtedness
or seeking additional equity capital. There can be no assurance that any of
these strategies could be effected on satisfactory terms.
The degree to which the Company is leveraged could have important
consequences, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures,
acquisitions or other general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations may be
dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations; (iii)
the Company's existing indebtedness contains, and future financings are
expected to contain, financial and other restrictive covenants, including
without limitation those restricting the incurrence of additional
indebtedness, the creation of liens, the payment of dividends, sales of
assets, capital expenditures, and prepayment of indebtedness and those
requiring maintenance of minimum net worth, minimum EBITDA and minimum
interest coverage and limiting leverage; (iv) certain of the Company's
borrowings are and will continue to be at variable rates of interest which
expose the Company to the risk of increases in interest rates; and (v) the
Company may be more leveraged than certain of its competitors, which may place
the Company at a relative competitive disadvantage and make the Company more
vulnerable to changes in its industry and changing economic conditions. As a
result of the Company's level of indebtedness, its financial capacity to
respond to market conditions, extraordinary capital needs and other factors
may be limited.
LIQUIDITY
The Company expects to consummate the sale of equity in connection with a
planned secondary offering prior to September 30, 1999 and to use a portion
of the net proceeds from the sale to pay off indebtedness. There can be no
assurance that the sale will close by such date or at all.
LITIGATION AND GOVERNMENT INVESTIGATIONS
Numerous federal and state civil and criminal laws govern computer
technology and Internet service activities. In general, these laws provide
for various fines, penalties, multiple damages, assessments and sanctions
for violations.
EVOLVING INDUSTRY STANDARDS; RAPID TECHNOLOGICAL CHANGES
Cytation's success in its business will depend in part upon its continued
ability to enhance its existing products and services, to introduce new
products and services quickly and cost effectively to meet evolving customer
needs, to achieve market acceptance for new product and service offerings and
to respond to emerging industry standards and other technological changes.
There can be no assurance that Cytation will be able to respond effectively to
technological changes or new industry standards. Moreover, there can be no
assurance that competitors of Cytation will not develop competitive products,
or that any such competitive products will not have an adverse effect upon
Cytation's operating results.
Moreover, management intends to continue to implement "best practices" and
other established process improvements in its operations going forward. There
can be no assurance that the Company will be successful in refining, enhancing
and developing its operating strategies and systems going forward, that the
costs associated with refining, enhancing and developing such strategies and
systems will not increase significantly in future periods or that the Company's
existing software and technology will not become obsolete as a result of
ongoing technological developments in the marketplace.
YEAR 2000
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the year 2000 or thereafter without error or interruption
(commonly known as the "Year 2000" problem). The Company has conducted a
review of its business systems, including its computer systems, and is
querying its customers, vendors and resellers as to their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
approaches and is reached. Through its review, the Company has identified a
number of older legacy systems that will be abandoned in favor of a limited
number of more efficient processing systems, rather than make all the systems
Year 2000 compatible. Customers, vendors and resellers have been identified
and requests for information distributed regarding the Year 2000 readiness of
such parties.
Responses are expected through the first quarter of 1999. The Company will
develop contingency plans during the first quarter of 1999 through the second
quarter of 1999 in response to assessments of the Year 2000 readiness of
customers, vendors and resellers. The estimated cost of the Company's Year
2000 efforts is $10,000 to $15,000 over 1998 and 1999, the majority of which
represents redirection of internal resources. However, there can be no
assurance that the Company will identify all such Year 2000 problems in its
computer systems or those of its customers, vendors or resellers in advance
of their occurrence or that the Company will be able to successfully remedy
any problems that are discovered. The expenses of the Company's efforts to
identify and address such problems, or the expenses or liabilities to which
the Company may become subject as a result of such problems, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The revenue stream and financial stability of existing customers may be
adversely impacted by Year 2000 problems, which could cause fluctuations in the
Company's revenue. In addition, failure of the Company to identify and remedy
Year 2000 problems could put the Company at a competitive disadvantage
relative to companies that have corrected such problems.
VOLATILITY OF STOCK PRICE
Cytation believes factors such as the Company's liquidity and financial
resources, Internet reform measures and quarter to quarter and year to year
variations in financial results could cause the market price of Cytation Common
Stock to fluctuate substantially. Any adverse announcement with respect to
such matters or any shortfall in revenue or earnings from levels expected by
Management could have an immediate and material adverse effect on the trading
price of Cytation Common Stock in any given period. As a result, the market
for Cytation Common Stock may experience material adverse price and volume
fluctuations and an investment in the Company's Common Stock is not suitable
for any investor who is unwilling to assume the risk associated with any such
price and volume fluctuations.