NIC Inc. Post-Effective Amendment No. 1 to Form S-8
As
filed with the Securities and Exchange Commission on November 20,
2006
Registration
No. 333-136016
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM
S-8
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
________________
NIC
INC.
(Exact
name of registrant as specified in its charter)
|
Colorado
|
|
52-2077581
|
|
(State
or other jurisdiction
of
incorporation or organization)
|
|
(I.R.S.
Employer
Identification
Number)
|
10540
South Ridgeview Road
Olathe,
Kansas 66061
(877)
234-3468
(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)
2006
Amended and Restated Stock Option and Incentive Plan
(Full
title of the plan(s))
___________
William
F. Bradley, Jr., Esq.
NIC
Inc.
10540
South Ridgeview Road
Olathe,
Kansas 66061
(877)
234-3468
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copies
of all communications, including all communications sent to the agent for
service should be sent to:
|
D.
Elizabeth Wills, Esq.
Rothgerber
Johnson & Lyons LLP
1200
Seventeenth Street, Suite 3000
Denver,
Colorado 80202
(303)
623-9000
|
Approximate
date of proposed sale to the public:
From
time to time after the effective date of this Registration
Statement
EXPLANATORY
NOTE
This
Registration Statement contains the form of reoffer prospectus to be used by
certain officers, directors and employees of the Registrant with respect to
the
control securities acquired pursuant to the Registrant's employee benefit
plan.
The
form of Reoffer Prospectus contained herein is also being filed as part of
a
Post-Effective Amendment to the Registration Statement on Form S-8, Registration
Number 333-83171.
Reoffer
Prospectus
NIC
INC.
1,081,219
Shares of Common Stock
This
reoffer prospectus relates to a maximum of 1,081,219 shares of our common stock
being offered for the account of certain of our directors, executive officers
and employees (each a "selling shareholder" and collectively the "selling
shareholders"). The shares being offered consist of 900,000 shares that may
be
acquired upon the exercise of stock options granted pursuant to our 1998 Stock
Option Plan and our 2004 Amended and Restated Stock Option Plan and 181,219
shares that have been granted pursuant to our 2006 Amended and Restated Stock
Option and Incentive Plan. The selling shareholders or their pledges,
donees, transferees or other successors-in-interest will offer the shares for
sale at prevailing prices on the Nasdaq Global Select Market from time to time
through public or private transactions at prevailing market prices, directly
or
through brokers or otherwise, and at prices related to prevailing market prices
or at privately negotiated prices.
We
will not receive any proceeds from sales made under this reoffer prospectus
by
the selling shareholders. We have not entered into any underwriting
arrangements in connection with the sale of the shares. The selling shareholders
will bear all sales commissions and similar expenses. Any other expenses
incurred by us in connection with this registration statement and offering
and
not borne by the selling shareholders will be borne by us.
The
selling shareholders and any brokers executing selling orders on his behalf
may
be deemed to be "underwriters" within the meaning of the Securities Act of
1933,
in which event commissions received by such brokers may be deemed to be
underwriting commissions under the Securities Act of 1933.
Our
common shares are quoted on Nasdaq Global Select Market under the trading symbol
"EGOV." On November 17, 2006, the last reported sales price of our common
stock was $4.68 per share on the Nasdaq Global Select Market.
________________
The
common shares offered pursuant to this registration statement involve a high
degree of risk. See "Risk Factors" on page 5 of this reoffer prospectus.
________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
___________________
The
date of this prospectus is November 20, 2006
REOFFER
PROSPECTUS
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
3
THE
OFFERING
3
OUR
COMPANY
3
DISCLOSURE
REGARDING FORWARD-LOOKING
STATEMENTS
4
RISK
FACTORS
5
INFORMATION
ABOUT THE
OFFERING
20
USE
OF
PROCEEDS
20
SELLING
SHAREHOLDERS
20
PLAN
OF
DISTRIBUTION
23
LEGAL
MATTERS
24
DOCUMENTS
INCORPORATED BY REFERENCE
25
AVAILABLE
INFORMATION
25
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES
ACT LIABILITIES
26
PART
II 1
INFORMATION
NOT REQUIRED IN
PROSPECTUS
1
SIGNATURES
2
PROSPECTUS
SUMMARY
THE
OFFERING
|
|
61,559,746
|
|
Securities
being registered:
|
900,000
shares of common stock which may be acquired by the selling shareholders
upon exercise of options granted pursuant to our 1998 Stock Option
Plan
and our 2004 Amended and Restated Stock Option Plan and 181,219 shares
of
common stock which have been granted to the selling shareholders
pursuant
to our 2006 Amended and Restated Stock Option and Incentive Plan.
|
|
Use
of Proceeds:
|
We
will not receive any proceeds from the sale of shares sold by the
selling
shareholders.
|
|
Nasdaq
Symbol:
|
EGOV
|
OUR
COMPANY
The
Securities and Exchange Commission (the "SEC") allows us to "incorporate by
reference" certain information that we file with it, which means that we can
disclose important information to you by referring you to those documents.
The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will update
automatically, supplement and/or supersede this information. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus shall be deemed to be modified or superseded for purposes
of
this prospectus to the extent that a statement contained in this prospectus
or
in any other document which also is or is deemed to be incorporated by reference
in this prospectus modifies or supersedes such statement. Any such statement
so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus. You should read the following summary
together with the more detailed information regarding our company, our common
stock and our financial statements and notes to those statements appearing
elsewhere in this prospectus or incorporated herein by reference. References
in
this prospectus to "our company," "we," "our," and "us" refer to NIC
Inc.
NIC
(formerly National Information Consortium, Inc.) was formed on December 18,
1997, for the sole purpose of effecting an exchange of common stock, in a
transaction referred to as the Exchange Offer, to combine under common ownership
five separate affiliated entities under which we conducted our business
operations. The five companies were NICUSA (formerly National Information
Consortium USA), Kansas Information Consortium, Indiana Interactive, Nebraska
Interactive and Arkansas Information Consortium. The Exchange Offer was
consummated on March 31, 1998, and was accounted for as a business
combination.
NIC
is a provider of eGovernment services that helps governments use the Internet
to
reduce costs and provide a higher level of service to businesses and citizens.
We accomplish this currently through two divisions: our portal outsourcing
businesses and our software & services businesses. In our primary portal
outsourcing business, we enter into contracts with governments to design, build
and operate Web-based portals on their behalf. These portals consist of Web
sites and applications we have built that allow businesses and citizens to
access government information online and complete transactions, including
applying for a permit, retrieving driver's license records or filing a
government-mandated form or report. Our self-funding business model allows
us to
reduce our government partners' financial and technology risks and generate
revenues by sharing in the fees we collect from eGovernment transactions. Our
government partners benefit through gaining a centralized, customer-focused
presence on the Internet, while businesses and citizens receive a faster, more
convenient and more cost-effective means to interact with
governments.
Currently,
we have contracts to provide portal outsourcing services to nineteen states.
We
typically enter into three- to five-year contracts with our government partners
and manage operations for each contractual relationship through separate local
subsidiaries that operate as decentralized businesses with a high degree of
autonomy. We intend to increase our revenues by signing long-term portal
contracts with new government partners and by delivering new services to a
growing number of government entities within our existing contractual
relationships.
Our
software & services businesses primarily include our UCC and corporate
filings software development and ethics & elections businesses. Our UCC and
corporate filings software development business, NIC Conquest, is a provider
of
software applications and services for electronic filings and document
management solutions for governments. Currently, our UCC and corporate filings
software development business is primarily engaged in servicing our contract
with the California Secretary of State. This business is not actively marketing
its applications and services in respect of new engagements. This business
focuses on Secretaries of State, whose offices are state governments' principal
agencies for UCC and corporate filings. Our ethics & elections business, NIC
Technologies, designs and develops online campaign expenditure and ethics
compliance systems for federal and state government agencies. Currently, our
ethics and elections business is primarily engaged in servicing its contracts
with the Federal Election Commission and the State of Michigan.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
reoffer prospectus, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Exchange Act. Any statements about our expectations,
beliefs, plans, objectives, assumptions or future events or performance are
not
historical facts and may be forward-looking. These statements are often, but
not
always, made through the use of words or phrases such as "anticipate,"
"estimate," "plans," "projects," "continuing," "ongoing," "expects," "management
believes," "we believe," "we intend" and similar words or phrases. Accordingly,
these statements involve estimates, assumptions and uncertainties that could
cause actual results to differ materially from those expressed in them. Any
forward-looking statements are qualified in their entirety by reference to
the
factors discussed throughout this prospectus.
Because
the forward-looking statements referred to above, as well as the risk factors
beginning on page 5 of this prospectus, could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance
on
any forward-looking statements. Further, any forward-looking statement speaks
only as of the
date
on which it is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date
on
which the statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us
to
predict which factors will arise. In addition, we cannot assess the impact
of
each factor on our business or the extent to which any factor, or combination
of
factors, may cause actual results to differ materially from those contained
in
any forward-looking statements.
RISK
FACTORS
Except
for the historical information contained in this prospectus or incorporated
by
reference, this prospectus (and the information incorporated by reference in
this reoffer prospectus) contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
discussed here or incorporated by reference. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the following section, as well as those discussed elsewhere in this reoffer
prospectus and in any other documents incorporated by
reference.
Investment
in our shares involves a high degree of risk. You should consider the following
discussion of risks as well as other information in this reoffer prospectus
and
the incorporated documents before purchasing any shares. Each of these risk
factors could adversely affect our business, operating results, prospects and
financial condition, as well as adversely affect the value of an investment
in
our common stock.
This
reoffer prospectus contains forward-looking statements within the meaning of
the
Private Securities Litigation Reform Act of 1995. Statements in this prospectus
that are not historical facts are hereby identified as "forward-looking
statements" for the purpose of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and
similar expressions are intended to identify forward-looking statements. All
forward-looking statements are necessarily only estimates of future results
and
there can be no assurance that actual results will not differ materially from
expectations, and, therefore, investors are cautioned not to place undue
reliance on such statements. Set forth below is a discussion of certain factors,
which could cause our actual results to differ materially from the results
projected or suggested in such forward-looking statements. Investors should
understand that it is not possible to predict or identify all such factors
and
that this list should not be considered a complete statement of all potential
risks and uncertainties. We undertake no obligation to update any
forward-looking statements as a result of future events or
developments.
Our
UCC and corporate filings software development business has incurred losses
under its fixed-fee contracts in the past, and our results of operations could
be harmed if the costs that this business incurs to meet contractual commitments
exceed our current estimates.
Our
UCC and corporate filings software development business, NIC Conquest, develops
and delivers applications, typically for a fixed development fee, that improve
the back-office administration of government records and better enable
electronic filing and distribution of business entity and UCC records for
secretaries of state. This business recognizes revenues on the
percentage-of-completion method of accounting utilizing costs incurred to date
as compared to the estimated total costs for each contract. This method is
used
because management considers expended costs to be the best available measure
of
progress on our fixed-price contracts and results in our recognizing contract
revenues over the contract term in proportion to our incurrence of contract
costs. The earnings or losses recognized on individual contracts are based
on
estimates of contract revenues and costs. Contract losses are
recognized
in
full when determined, and contract profit estimates are adjusted based on
ongoing reviews of contract profitability. Actual results could differ from
estimated amounts and could result in a reduction or elimination of previously
recognized earnings. In certain circumstances, such adjustments could be
significant.
In
the fourth quarter of 1998, we determined that the balance of revenues remaining
to be recognized under our existing contractual obligations was not expected
to
cover anticipated costs of developing and implementing the related applications.
Estimated costs in excess of fixed contract prices of $1.3 million for
completing these applications were expensed under the percentage-of-completion
method of accounting in the fourth quarter of 1998. We accrued additional
anticipated losses of $1.1 million in 1999, $1.4 million in 2000, and $6.0
million in 2001 based on revised estimates relating to our then-existing
contracts. In 2002, we accrued approximately $3.5 million in anticipated losses
due to cost overruns on contracts in Arkansas, Minnesota and Oklahoma. We have
fulfilled all obligations under our contracts with the states of Minnesota
and
Oklahoma, and the Arkansas system is currently in the maintenance phase. As
recently as the first quarter of 2005, we recorded a $5.0 million charge due
to
anticipated cost overruns on our contract with the California Secretary of
State, as further discussed in Note 2 in the Notes to Consolidated Financial
Statements included in our Form 10-K for the fiscal year ended December 31,
2005, filed with the SEC on March 16, 2006. In June 2006, the California
Secretary of State officially accepted the UCC system, which also commenced
the
maintenance and operations phase of the contract. However, it is possible that
our costs will similarly exceed revenues in the future, as a result of
unforeseen difficulties in the creation of an application called for in the
contract, unforeseen challenges in ensuring compatibility with existing systems,
rising development, subcontractor and personnel costs, delays in completing
the
contract, or other reasons. If this occurs, our results of operations, financial
condition and cash flows could be seriously harmed.
We
depend on other contractors and subcontractors in connection with our
performance under our UCC and corporate filings software development engagement
with the California Secretary of State. If these parties fail to satisfy their
obligations to us or the California Secretary of State, or if we are unable
to
maintain these relationships, our operating results and business prospects
could
be adversely affected.
A
significant portion of the work we are obligated to deliver to the California
Secretary of State is performed by subcontractors. There is a risk that the
California Secretary of State or we may have disputes with our subcontractors
arising from, among other things, the quality and timeliness of work performed
by the subcontractors and customer concerns about the subcontractors. Disputes
with subcontractors or the California Secretary of State could lead to legal
disputes and litigation. Adverse judgments or settlements in legal disputes
may
result in significant monetary damages or injunctive relief against us. In
addition, if any of our subcontractors fails to deliver on a timely basis the
agreed-upon supplies and/or perform the agreed-upon services, our ability to
fulfill our obligations as a prime contractor may be jeopardized. Subcontractor
performance deficiencies could result in the termination of our contract for
default. A termination for default could expose us to liability and have an
adverse effect on our business prospects, financial condition, and on our
ability to compete for future contracts and orders.
We
have incurred significant net losses in the past, and may do so again in the
future.
We
expanded rapidly following our initial public offering in July 1999 and incurred
substantial net losses through mid-2002 primarily as a result of our acquired
software & services businesses. We incurred net losses of approximately
$10.7 million for the year ended December 31, 1999, $40.3 million for the year
ended December 31, 2000, $77.4 million for the year ended December 31, 2001
and
$7.6 million for the year ended December 31, 2002. However, as part of a broad
strategic refocusing of the
Company
on our profitable core outsourced portal business during 2002, we exited our
eProcurement business, NIC Commerce, decided to wind down our transportation
business, IDT, and restructured the other software & services businesses in
an effort to accelerate our path to profitability. As a result, the Company
became profitable in the second half of 2002 and has been profitable since
that
time with the exception of the first quarter of 2005, as a result of the $5.0
million charge we recorded on our UCC and corporate filings software development
engagement with the California Secretary of State, our only remaining legacy
contract from this business. Further, even though we were profitable in 2005
(with the exception of the first quarter noted above), we may not be able to
sustain or increase profitability on a quarterly or annual basis thereafter.
We
will need to generate significantly higher revenues while containing costs
and
operating expenses if we are to achieve growing profitability. We cannot be
certain that our revenues will continue to grow or that we will ever achieve
sufficient revenues to remain profitable on a long-term, sustained
basis.
We
may be unable to generate sufficient taxable income from future operations
to
fully utilize our significant tax net operating loss
carryforwards.
We
have a recent history of unprofitable operations primarily due to operating
losses incurred in the software & services companies we have acquired since
September 1999, as further discussed above. These losses have generated
significant federal tax net operating losses, or NOLs. We had available at
December 31, 2005, total NOL carryforwards for federal tax purposes of
approximately $55.2 million that will expire in the years 2020 ($17.8 million),
2021 ($27.1 million) and 2022 ($10.3 million), respectively. For the year ended
December 31, 2005 total net deferred tax assets, including NOL carryforwards,
comprised approximately 25% of our total assets. We became profitable in the
second half of 2002 and have been profitable since that time with the exception
of the first quarter of 2005, as further discussed above. Further, even though
we expect to be profitable and generate taxable income in 2006 and beyond,
we
may not be able to sustain the necessary levels of taxable income to fully
utilize our significant NOL carryforwards prior to expiration. There is
considerable management judgment necessary to determine future taxable income,
and accordingly, actual results could vary significantly from such estimates.
Accordingly, the recorded amount of the deferred tax assets considered
realizable could be reduced in the near term if estimates of future taxable
income during the carryforward periods are reduced. If this occurs, our results
of operations, financial condition and cash flows could be seriously
harmed.
If
our competitors are more successful in attracting and retaining customers and
users, then our revenues and profits could decline.
The
principal substitute for our services is a government-designed and managed
service that integrates other vendors' technologies, products and services.
Companies that have expertise in marketing and providing technical electronic
services to government entities compete with us by further developing their
services and increasing their focus on this piece of their business and market
shares. Many of our potential competitors are national or international in
scope
and have greater resources than we do. These resources could enable our
potential competitors to initiate severe price cuts or take other measures
in an
effort to gain market share. Additionally, in some geographic areas, we may
face
competition from smaller consulting firms with established reputations and
political relationships with potential government partners. If we do not compete
effectively or if we experience any pricing pressures, reduced margins or loss
of market share resulting from increased competition, our business and financial
condition may be adversely affected.
Because
we have portal outsourcing contracts with a limited number of governments,
the
termination of certain of these contracts may harm our
business.
Currently,
the majority of our revenues are derived from the operation of our outsourced
portal businesses. We have master portal contracts with 22 state and local
governments. These contracts
typically
have initial terms of three to five years with optional renewal periods of
one
to five years. However, any renewal is optional and a government may terminate
its contract prior to the expiration date upon specific cause events that are
not cured within a specified period or, in some cases, upon passing legislation.
Additionally, some of the contracts under which we provide portal management
and
software development services can be terminated without cause on a specified
period of notice. The loss of one or more of our larger state portal partners,
such as Indiana, Virginia, Tennessee, Utah or Colorado, if not replaced, could
dramatically reduce our revenues. If these revenue shortfalls occur, our
business and financial condition would be harmed. We cannot be certain if,
when
or to what extent governments might fail to renew or terminate any or all of
their contracts with us.
We
may face damage to our professional reputation if our partners are not satisfied
with our services.
We
depend to a large extent on our relationships with our government partners,
our
reputation for high quality professional services and commitment to preserving
public trust to attract and retain customers. As a result, if one of our
government partners is not satisfied with our services, it may be more damaging
in our business than in other businesses.
Because
we have certain portal outsourcing contracts that contain performance bond
requirements and/or indemnification provisions against claims arising from
our
performance, we may suffer monetary or reputational damages if we fail to meet
our contractual obligations.
We
are bound by performance bond commitments on certain portal outsourcing
contracts. Performance deficiencies by us or our subcontractors could result
in
a default of a performance bond, which could expose us to liability and have
an
adverse affect on our business prospects, financial condition, and on our
ability to compete for future portal outsourcing contracts. Further, under
certain of our portal outsourcing contracts, we are required to fully indemnify
our government clients against claims arising from our performance or the
performance of our subcontractors. If we fail to meet our contractual
obligations or our performance or our subcontractors' performance gives rise
to
claims, we could be subject to legal liability, monetary damages and loss of
customer relationships.
We
may be unable to obtain future contracts through the request for proposal
process.
A
high percentage of our current revenues is derived from contracts with
governments and government agencies that operate under special rules that apply
to government purchasing. Where this process applies, there are special rules
that typically require open bidding by possible service providers like us
against a list of requirements established by governments under existing or
specially-created procedures. To respond successfully to these requests for
proposals, commonly known as RFPs, we must estimate accurately our cost
structure for servicing a proposed contract, the time required to establish
operations for the proposed client and the likely terms of any other proposals
submitted. We also must assemble and submit a large volume of information within
the strict time schedule mandated by an RFP. Whether or not we are able to
respond successfully to RFPs in the future will significantly impact our
business. We cannot guarantee that we will win any bids in the future through
the RFP process, or that any winning bids will ultimately result in contracts.
Therefore, our business, results of operations and financial condition would
be
harmed if we fail to obtain profitable future contracts through the RFP
process.
We
may be unable to sustain the usage levels of current services that provide
a
significant percentage of our revenues.
We
obtain a high proportion of our revenues from a limited number of services.
Transaction-based fees charged for access to motor vehicle records through
our
insurance industry records exchange
network
accounted for over 62% of our portal revenues for the year ended December 31,
2005 and are expected to continue to account for a significant portion of our
revenues in the near future. Regulatory changes or the development of
alternative information sources could materially reduce our revenues from this
service. A reduction in revenues from currently popular services would harm
our
business, results of operations and financial condition.
If
our potential customers are not willing to switch to or adopt our online
government portals and other electronic services, our growth and revenues will
be limited.
The
failure to generate a large customer base would harm our growth and revenues.
This failure could occur for several reasons. Our future revenues and profits
depend upon the widespread acceptance and use of the Internet as an effective
medium for accessing public information, particularly as a medium for government
filings. We cannot assure that customer acceptance and use of the Internet
will
continue to grow. Additionally, we face intense competition in all sectors
of
our business. As a result, our efforts to create a larger customer base may
be
more difficult than expected even if we are perceived to offer services superior
to those of our competitors. Further, because the government-to-citizen and
government-to-business portal access and electronic filing market is relatively
new, potential customers in this market may be confused or uncertain about
the
relative merits of each eGovernment application and of which application to
adopt, if any. Confusion and uncertainty in the marketplace may inhibit
customers from adopting our applications, which could harm our business, results
of operations and financial condition.
The
fees we collect for many of our services are subject to regulation that could
limit growth of our revenues and profitability.
Under
the terms of our outsourced portal government contracts, we remit a portion
of
the fees we collect to state agencies. Generally, our contracts provide that
the
amount of any fees we retain is set by governments to provide us with a
reasonable return or profit. We have limited control over the level of fees
we
are permitted to retain. Our business, results of operations and financial
condition may be harmed if the level of fees we are permitted to retain in
the
future is too low or if our costs rise without a commensurate increase in
fees.
Our
portal revenues could be harmed as a result of government budget
deficits.
Although
the majority of our portal revenues are derived from fees we charge to users
for
transactions conducted through our portals, approximately 3% of our portal
revenues in 2005 were derived from software development or portal management
services paid directly to us by governments on a time-and-materials or fixed
fee
basis. In the event of budget deficits, our government clients may be required
to curtail discretionary spending on such projects and our portal revenues
could
be harmed.
Because
a major portion of our current revenues is generated from a small number of
users, the loss of any of these users may harm our business and financial
condition.
A
significant portion of our revenues is derived from data resellers' use of
our
portals to access motor vehicle records for sale to the automobile insurance
industry. For the year ended December 31, 2005, one of these data resellers,
ChoicePoint, accounted for approximately 46% of our portal revenues. It is
possible that these users will develop alternative data sources or new business
processes that would materially diminish their use of our portals. The loss
of
all or a substantial portion of business from any of these entities would harm
our business, results of operations and financial condition.
We
may lose the right to the content distributed through our outsourced portals,
which is provided to us entirely by government
entities.
We
do not own or create the content distributed through our outsourced portals.
We
depend on the governments with which we contract to supply information and
data
feeds to us on a timely basis to allow businesses and citizens to complete
transactions and obtain government information. We cannot assure that these
data
sources will continue to be available in the future. Government entities could
terminate their contracts to provide data. Changes in regulations could mean
that governments no longer collect some types of data or that the data is
protected by more stringent privacy rules preventing uses now made of it.
Moreover, our data sources are not always subject to exclusive agreements,
so
that data included in our services also may be included in those of our
potential competitors. In addition, we are dependent upon the accuracy and
reliability of government computer systems and data collection for the content
of our portals. The loss or the unavailability of our data sources in the
future, or the loss of our exclusive right to distribute some of the data
sources, could harm our business, results of operations and financial
condition.
The
growth in our revenues may be limited by the number of governments that choose
to provide eGovernment services and to adopt our business model and by the
finite number of governments with which we may contract for our eGovernment
services.
Our
revenues are generated principally from contracts with state governments to
provide eGovernment services on behalf of those governments to complete
transactions and distribute public information electronically. The growth in
our
revenues largely depends on government entities adopting our public/private
model. We cannot assure that government entities will choose to provide
eGovernment services at all, or that they will not provide such services
themselves without private assistance or adopting our model. In addition, as
there is a finite number of states remaining with which we can contract for
our
services, future increases in our revenues may depend in part on our ability
to
expand our business model to include multi-state cooperative organizations,
local governments and federal agencies and to broaden our service offerings
to
diversify our revenue streams across our lines of business. We cannot assure
that we will succeed in expanding into new markets, broadening our service
offerings, or that our services will be adaptable to those new
markets.
Our
business with various government entities often requires specific government
legislation to be passed for us to initiate and maintain our government
contracts.
Because
a central part of our business includes the execution of contracts with
governments under which we remit a portion of user fees charged to businesses
and citizens to state agencies, it is often necessary for governments to draft
and adopt specific legislation before the government can circulate an RFP to
which we can respond. Furthermore, the maintenance of our government contracts
requires the continued acceptance of enabling legislation and any implementing
regulations. In the past, various entities that use the portals we operate
to
obtain government information have challenged the authority of governments
to
electronically provide these services exclusively through portals like those
we
operate. A successful challenge in the future could result in a proliferation
of
alternative ways to obtain these services, which would harm our business,
results of operations and financial condition. The repeal or modification of
any
enabling legislation would also harm our business, results of operations and
financial condition.
Because
a large portion of our business relies on a contractual bidding process whose
parameters are established by governments, the length of our sales cycles is
uncertain and can lead to shortfalls in revenues.
Our
dependence on a bidding process to initiate many new projects, the parameters
of
which are established by governments, results in uncertainty in our sales cycles
because the duration and the procedures for each bidding process vary
significantly according to each government entity's policies and procedures.
The
time between the date of initial contact with a government for a bid and the
award of the bid may range from as little as 180 days to up to several years.
The bidding process is subject to factors over which we have little or no
control, including:
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·
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political
acceptance of the concept of government agencies contracting with
third
parties to distribute public information, which has been offered
traditionally only by the government agencies and often without
charge;
|
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·
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the
internal review process by the government agencies for bid
acceptance;
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·
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the
need to reach a political accommodation among various interest
groups;
|
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·
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changes
to the bidding procedure by the government
agencies;
|
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·
|
changes
to state legislation authorizing government's contracting with third
parties to distribute public
information;
|
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·
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changes
in government administrations;
|
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·
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the
budgetary restrictions of government
entities;
|
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·
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the
competition generated by the bidding
process;
|
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·
|
the
possibility of cancellation or delay by the government entities;
and
|
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·
|
government's
manner of drafting bid documents, which may partially, or not at
all,
utilize our method of providing eGovernment
services.
|
We
are dependent on the bidding process for a significant part of our business.
Therefore, any material delay in the bidding process, changes to the bidding
practices and policies, the failure to receive the bid or the failure to execute
a contract may disrupt our financial results for a particular period and harm
our financial condition.
The
seasonality of use for some of our eGovernment services may harm our fourth
quarter results of each calendar year.
The
use of some of our eGovernment services is seasonal, particularly the accessing
of drivers' records, resulting in lower revenues from this service in the fourth
quarter of each calendar year, due to the smaller number of business days in
this quarter and a lower volume of transactions during the holiday period.
As a
result, seasonality could cause our quarterly results to fluctuate, which could
harm our business, results of operations and financial condition.
We
may need more working capital to fund operations and expand our
business.
We
believe that our current financial resources will be sufficient to meet our
present working capital and capital expenditure requirements for at least the
next twelve months. However, we may need to raise additional capital before
this
period ends to further:
·
fund
operations, including the costs to fund our legacy contract with the California
Secretary of State and subcontractors on that project;
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·
|
collateralize
letters of credit, which we are required to post as collateral for
performance on certain of our outsourced government portal contracts
and
as collateral for certain performance
bonds;
|
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·
|
support
our expansion into other states and government agencies beyond what
is
contemplated in 2006 if unforeseen opportunities
arise;
|
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·
|
expand
our product and service offerings beyond what is contemplated in
2006 if
unforeseen opportunities arise;
|
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·
|
respond
to unforeseen competitive pressures;
and
|
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·
|
acquire
technologies beyond what is
contemplated.
|
Our
future liquidity and capital requirements will depend upon numerous factors,
including the success of our existing and new service offerings and potentially
competing technological and market developments. However, any projections of
future cash flows are subject to substantial uncertainty. If current cash,
lines
of credit and cash generated from operations are insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity securities, issue
debt securities or increase our working capital line of credit. The sale of
additional equity securities could result in dilution to the Company's
shareholders. From time to time, we expect to evaluate the acquisition of or
investment in businesses and technologies that complement our various
eGovernment businesses. Acquisitions or investments might impact the Company's
liquidity requirements or cause the Company to sell additional equity securities
or issue debt securities. There can be no assurance that financing will be
available in amounts or on terms acceptable to the Company, if at all. If
adequate funds were not available on acceptable terms, our ability to develop
or
enhance our applications and services, take advantage of future opportunities
or
respond to competitive pressures would be significantly limited. This limitation
could h arm our business, results of operations and financial
condition.
Our
acquisitions and strategic alliances entail numerous risks and
uncertainties.
As
part of our business strategy, we have made and may continue to make
acquisitions or enter into strategic alliances that we believe will complement
our existing businesses, increase traffic to our government clients' sites,
enhance our services, broaden our software and applications offerings or
technological capabilities or increase our profitability. These acquisitions
and
future acquisitions or joint ventures could present numerous risks and
uncertainties, including:
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·
|
difficulties
in the assimilation of operations, personnel, technologies and information
systems of the acquired companies;
|
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·
|
the
inability to successfully market, distribute, deploy and manage new
products and services that we have limited or no experience in
managing;
|
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·
|
the
diversion of management's attention from our core
business;
|
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·
|
the
risk that an acquired business will not perform as
expected;
|
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·
|
risks
associated with entering markets in which we have limited or no
experience;
|
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·
|
potential
loss of key employees, particularly those of our acquired
businesses;
|
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·
|
adverse
effects on existing business relationships with existing suppliers
and
customers;
|
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·
|
potentially
dilutive issuances of equity securities, which may be freely tradable
in
the public market;
|
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·
|
erosion
of our brand equity in the eGovernment or financial
markets;
|
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·
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impairment,
restructuring and other charges;
and
|
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·
|
the
incurrence of debt or other expenses related to goodwill and other
intangible assets.
|
We
cannot be sure that any acquisitions we may announce will ultimately close.
Moreover, even after we close such transactions, we cannot assure that we will
be able to successfully integrate the new businesses or any other businesses,
products or technologies we may acquire in the future. For example, in the
third
and fourth quarters of 2001, we recorded impairment losses totaling $37.0
million and $12.5 million, respectively, relating to our NIC Commerce, NIC
Technologies and NIC Conquest businesses, all of which were acquired since
the
third quarter of 1999. Also, in the third quarter of 2000 and the fourth quarter
of 2001, we recorded restructuring charges totaling $0.7 million and $0.4
million, respectively, relating to our NIC Commerce and NIC Technologies
businesses. Additionally, in the second quarter of 2002, we recorded a $1.3
million impairment loss relating to our IDT business, which was acquired in
October 2000, and an impairment loss totaling $3.0 million relating to our
AOL
business.
Our
quarterly results of operations may be volatile and difficult to predict. If
our
quarterly results of operations fail to meet the expectations of public market
analysts or investors, the market price of our common stock may decrease
significantly.
Our
future revenues and results of operations may vary significantly from quarter
to
quarter due to a number of factors, many of which are outside of our control,
and any of which may harm our business. These factors include:
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·
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the
incurrence of significant charges related to our UCC and corporate
filings
software development business, which has incurred significant losses
under
its fixed-fee contracts in the past, particularly under our contract
with
the California Secretary of State;
|
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·
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the
commencement, completion or termination of contracts during any particular
quarter;
|
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·
|
the
introduction of new eGovernment services by us or our
competitors;
|
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·
|
technical
difficulties or system downtime affecting the Internet generally
or the
operation of our eGovernment
services;
|
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·
|
the
amount and timing of operating costs and capital expenditures relating
to
the expansion of our business operations and
infrastructure;
|
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·
|
the
result of negative cash flows due to capital investments;
and
|
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·
|
the
incurrence of significant charges related to
acquisitions.
|
Due
to the factors noted above, our revenues in a particular quarter may be lower
than we anticipate and if we are unable to reduce spending in that quarter,
our
results of operations for that quarter may be harmed. One should not rely on
quarter-to-quarter comparisons of our results of operations as an indication
of
future performance. It is possible that in some future periods our results
of
operations may be below the expectations of public market analysts and
investors. If this occurs, the price of our common stock may
decline.
Our
intellectual property rights are valuable and any inability to protect them
could harm our company.
We
regard our copyrights, patents, trademarks, trade dress, trade secrets, and
similar intellectual property as important to our success. We rely on a
combination of nondisclosure and other contractual arrangements with
governments, our employees and third parties, and privacy and trade secret
laws
to protect and limit the distribution of the proprietary applications,
documentation and processes we have developed in connection with the eGovernment
services we offer. Despite our precautions, third parties may succeed in
misappropriating our intellectual property or independently developing similar
intellectual property. If we fail to adequately protect our intellectual
property rights and proprietary information or if we become involved in
litigation relating to our intellectual property rights and proprietary
technology, our business could be harmed. Any actions we take may not be
adequate to protect our proprietary rights, and other companies may develop
technologies that are similar or superior to our proprietary
technology.
We
may be subject to intellectual property infringement claims, which are costly
to
defend and could limit our ability to use certain technologies in the
future.
We
may become subject to claims alleging infringement of third-party intellectual
property rights. Any claims could subject us to costly litigation, and may
require us to pay damages and develop non-infringing intellectual property
or
acquire licenses to the intellectual property that is the subject of the alleged
infringement. Licenses for such intellectual property may not be available
on
acceptable terms or at all. Litigation regarding intellectual property rights
is
common in the Internet and software industries. We expect third-party
infringement claims involving Internet technologies and software products and
services to increase. If an infringement claim is filed against us, we may
be
prevented from using certain technologies and may incur significant costs
resolving the claim. We cannot assure that our applications and services do
not
infringe on the intellectual property rights of third parties. In addition,
we
have agreed, and expect that we may agree in the future, to indemnify certain
of
our customers against claims that our services infringe upon the intellectual
property rights of others. We could incur substantial costs in defending
ourselves and our customers against infringement claims. In the event of a
claim
of infringement, we and our customers may be required to obtain one or more
licenses from third parties. We cannot assure that we or our customers could
obtain necessary licenses from third parties at a reasonable cost or at
all.
We
generally grant our customers fully paid licenses to use the software and
applications we develop for use in their portals. If customers elect to
terminate our contracts and manage portal operations internally, our revenues
and profits could decline.
After
termination of our contracts, it is possible that governments and their
successors and affiliates may use their right of use license rights to the
software programs and other applications we have developed for them in the
operation of their portals to operate the portals themselves. This could
adversely affect our revenues and profits. Additionally, they may inadvertently
allow our intellectual property or other information to fall into the hands
of
third parties, including our competitors.
We
depend on technology licensed to us by third parties, and the loss of this
technology could delay implementation of our services or force us to pay higher
license fees.
We
license numerous third-party technologies and applications that we incorporate
into our existing service offerings, on which, in the aggregate, we are
substantially dependent. There can be no assurance that the licenses for such
third-party technologies will not be terminated or that we will be able to
license third-party technology and applications for future services. While
we do
not believe that one
individual
technology or application we license is material to our business, changes in
or
the loss of third party licenses could lead to a material increase in the costs
of licensing or to our products becoming inoperable or their performance being
materially reduced, with the result that we may need to incur additional
development or procurement costs in an attempt to ensure continued performance
of our services, and either the cost of such undertakings or the failure to
successfully complete such undertakings could have a material adverse effect
on
our business, results of operations and financial condition.
If
we fail to coordinate or expand our operational procedures and controls, we
may
not effectively manage our growth.
Our
growth rate may increase rapidly in response to the acceptance of our services
under new or existing government contracts. If we cannot manage our growth
effectively, we may not be able to coordinate the activities of our technical,
accounting and marketing staffs, and our business could be harmed. We intend
to
plan for the acceptance of new bids by a number of governmental entities so
that
we may be ready to begin operations as soon as possible after acceptance of
a
bid. Additionally, we plan to continue our expansion of eGovernment services
into new government markets. As part of this plan of growth, we must implement
new operational procedures and controls to expand, train and manage our
employees and to coordinate the operations of our various subsidiaries. If
we
cannot manage the growth of our government portals, staff, software installation
and maintenance teams, offices and operations, our business may be
harmed.
We
may be unable to hire, integrate or retain qualified
personnel.
The
growth in our business has resulted in an increase in the responsibilities
for
both existing and new management personnel. Some of our personnel are presently
serving in more than one executive capacity. The loss of any of our executives
could harm our business. In addition, we expect that we will need to hire
additional personnel in all areas throughout 2006, including general managers
for new operations in jurisdictions in which we obtain contracts. We may not
be
able to retain our current key employees or attract, integrate or retain other
qualified employees in the future. If we do not succeed in attracting new
personnel or integrating, retaining and motivating our current personnel, our
business could be harmed. In addition, new employees generally require
substantial training in the presentation, policies and positioning of our
government portals and other services. This training will require substantial
resources and management attention.
To
be successful, we must develop and market comprehensive, efficient,
cost-effective and secure electronic access to public information and new
services.
Our
success depends in part upon our ability to attract a greater number of Internet
users to access public information electronically by delivering a comprehensive
composite of public information and an efficient, cost effective and secure
method of electronic access and transactions. Moreover, in order to increase
revenues in the future, we must continue to develop services that businesses
and
citizens will find valuable, and there is no guarantee that we will be able
to
do so. If we are unable to develop services that allow us to attract, retain
and
expand our current user base, our revenues and future results of operations
may
be harmed. We cannot assure that the services we offer will appeal to a
sufficient number of Internet users to generate continued revenue growth. Our
ability to attract Internet users to our government portals depends on several
factors, including:
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·
|
the
comprehensiveness of public records available through our government
portals;
|
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·
|
the
perceived efficiency and cost-effectiveness of accessing public records
electronically;
|
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·
|
the
effectiveness of security measures;
|
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·
|
the
increased usage and continued reliability of the Internet;
and
|
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·
|
the
user acceptance of our online applications and
services.
|
We
are subject to independent audits by our government customers. Deficiencies
in
our performance under a government contract could result in contract
termination, reputational damage or financial
penalties.
Each
government entity with which we contract for outsourced portal services has
the
authority to require an independent audit of our performance. The scope of
audits could include inspections of income statements, balance sheets, fee
structures, collections practices, service levels and our compliance with
applicable laws, regulations and standards. We cannot assure that a future
audit
will not find any material performance deficiencies that would result in an
adjustment to our revenues and result in financial penalties. Moreover, the
consequent negative publicity could harm our reputation among other governments
with which we would like to contract. All of these factors could harm our
business, results of operations and financial condition.
We
may be unable to integrate new technologies and industry standards
effectively.
Our
future success will depend on our ability to enhance and improve the
responsiveness, functionality and features of our services in accordance with
industry standards and to address the increasingly sophisticated technological
needs of our customers on a cost-effective and timely basis. Our ability to
remain competitive will depend, in part, on our ability to:
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·
|
enhance
and improve the responsiveness, functionality and other features
of the
government portals we offer;
|
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·
|
continue
to develop our technical expertise;
|
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·
|
develop
and introduce new services, applications and technology to meet changing
customer needs and preferences; and
|
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·
|
influence
and respond to emerging industry standards and other technological
changes
in a timely and cost-effective
manner.
|
We
cannot assure that we will be successful in responding to the above
technological and industry challenges in a timely and cost-effective manner.
If
we are unable to integrate new technologies and industry standards effectively,
our business could be harmed.
We
depend on the increasing use of the Internet and on the growth of online
government information systems. If the use of the Internet and eGovernment
information systems does not grow as anticipated, our business will be seriously
harmed.
Our
business depends on the increased acceptance and use of the Internet as a medium
for accessing public information and completing government filings. Rapid growth
in the use of the Internet is a relatively recent phenomenon. As a result,
acceptance and use may not continue to develop at historical rates and a
sufficiently broad base of individual and business customers may not adopt
or
continue to use the Internet as a medium for accessing government portals and
other online services. Demand and market acceptance for recently introduced
services over the Internet are subject to a high level of uncertainty, and
there
exist few proven services.
Our
business would be seriously harmed if:
| |
·
|
use
of the Internet and other online services does not continue to increase
or
increases more slowly than expected;
or
|
| |
·
|
the
technology underlying the Internet and other online services does
not
effectively support any expansion that may
occur.
|
If
the Internet infrastructure fails to develop or be adequately maintained, our
business would be harmed because users may not be able to access our government
portals.
The
Internet has experienced, and is expected to continue to experience, significant
growth in the number of users and amount of traffic. If the Web continues to
experience increased numbers of users, frequency of use or increased bandwidth
requirements, the Internet infrastructure may not be able to support these
increased demands or perform reliably. The Internet has experienced a variety
of
outages and other delays as a result of damage to portions of its
infrastructure, and could face such outages and delays in the future. These
outages and delays could reduce the level of Internet usage and traffic on
our
government portals. Such outages and delays would also hinder our customers'
ability to complete eGovernment transactions. In addition, the Internet could
lose its viability due to delays in the development or adoption of new standards
and protocols to handle increased levels of activity or due to increased
governmental regulation. If the Internet infrastructure is not adequately
developed or maintained, use of our government portals and our
government-to-citizen and government-to-business services may be
reduced.
Our
success depends on the increase in Internet usage generally and in particular
as
a means to access public information electronically. This in part requires
the
development and maintenance of the Internet infrastructure. If this
infrastructure fails to develop or be adequately maintained, our business would
be harmed because users may not be able to access our government portals. Among
other things, this development and maintenance will require a reliable network
backbone with the necessary speed, data capacity, security and timely
development of complementary products for providing reliable Internet access
and
services.
We
may be held liable for content that we obtain from government
agencies.
Because
we aggregate and distribute sometimes private and sensitive public information
over the Internet, we may face potential liability for defamation, libel,
negligence, invasion of privacy, copyright or trademark infringement, and other
claims based on the nature and content of the material that is published on
our
outsourced government portals. Most of the agreements through which we obtain
consent to disseminate this information do not contain indemnity provisions
in
our favor. These types of claims have been brought, sometimes successfully,
against online services and Web sites in the past. We cannot assure that our
general liability or errors and omissions insurance will be adequate to
indemnify us for all liability that may be imposed. Any liability that is not
covered by our insurance or is in excess of our insurance coverage could
severely harm our business operations and financial condition.
Concerns
over transactional security may hinder the growth of our
business.
A
significant barrier to electronic commerce is the secure transmission of
confidential information over public networks. Any breach in our security could
expose us to a risk of loss or litigation and possible liability. We rely on
encryption and authentication technology licensed from third parties to provide
secure transmission of confidential information. As a result of advances in
computer capabilities, new discoveries in the field of cryptography or other
developments, a compromise or breach of the
algorithms
we use to protect customer transaction data may occur. Because we provide
information released from various government entities, we may represent an
attractive target for security breaches.
A
compromise of our security or a perceived compromise of our security could
severely harm our business. A party who is able to circumvent our security
measures could misappropriate proprietary information, including customer credit
card information, or cause interruptions or direct damage to our government
portals. Also, should hackers obtain sensitive data and information, or create
bugs or viruses in an attempt to sabotage the functionality of our applications
and services, we may receive negative publicity, incur liability to our
customers or lose the confidence of the governments with which we contract,
any
of which may cause the termination or modification of our government contracts.
In December 2005, a security breach occurred which allowed an unauthorized
party
to gain access to the State of Rhode Island's official Web site (which we
operate through a contract between our New England Interactive, LLC subsidiary
and the State of Rhode Island) and obtain personal information, including full
credit card numbers for 4,117 credit cards, that was stored in one of the
portal's servers. For additional information on this matter, refer to the
Company's Form 8-K filed with the SEC on January 30, 2006.
We
may be required to expend significant capital and other resources to protect
against the threat of security breaches or to alleviate problems caused by
these
breaches. However, protection may not be available at a reasonable price or
at
all.
Our
systems may fail or limit user traffic.
Most
of our communications hardware and computer hardware operations for delivering
our eGovernment services are located individually in each state or city where
we
provide those services. We cannot assure that during the occurrence of fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events that the modem banks and direct dial-up connections we have
to
serve as back-up systems will not prevent damage to our systems or cause
interruptions to our services. Computer viruses, electronic break-ins or other
similar disruptive problems could cause users to stop visiting our government
portals and could cause our partners to terminate agreements with us. If any
of
these circumstances occurred, our business could be harmed. Our insurance
policies may not adequately compensate us for any losses that may occur due
to
any failures of or interruptions in our systems. Our government portals must
accommodate a high volume of traffic and deliver frequently updated information.
These government portals may experience interruptions due to any failure or
delay by government agencies in the transmission or receipt of this information.
Due to holidays and technical problems with state computer systems, our Web
sites have experienced slower response times or decreased traffic in the past
and may experience the same incidents in the future. In addition, our users
depend on Internet service providers, online service providers and other Web
site operators for access to our government portals and other online
government-to-citizen and government-to-business services. Many of these
providers and operators have experienced significant outages in the past due
to
system failures unrelated to our systems, holidays and heavy user traffic,
and
could experience the same outages, delays and other difficulties in the future.
Any of these system failures could harm our business, results of operations
and
financial condition.
Compliance
with changing regulation of corporate governance and public disclosure may
result in additional expenses.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and
NASDAQ Global Select Market rules, are creating uncertainty for companies such
as ours. These new or changed laws, regulations and standards are subject to
varying interpretations in many cases due to their lack of specificity, and
as
a
result,
their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies, which could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions
to disclosure and governance practices. We are committed to maintaining high
standards of corporate governance and public disclosure. As a result, our
efforts to comply with evolving laws, regulations and standards have resulted
in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities. In particular, our
efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the
related regulations regarding our required assessment of our internal control
over financial reporting and our independent registered public accounting firm's
audit of that assessment has required the commitment of significant financial
and managerial resources. Further, our board members, chief executive officer
and chief financial officer could face an increased risk of personal liability
in connection with the performance of their duties. As a result, we may have
difficulty attracting and retaining qualified board members and executive
officers, which could harm our business. If our efforts to comply with new
or
changed laws, regulations and standards differ from the activities intended
by
regulatory or governing bodies due to ambiguities related to practice, our
reputation may be harmed.
The
National Information Consortium Voting Trust owns a significant amount of our
common stock, which may impede attempts to replace or remove our board or
management.
As
of September 30, 2006, The National Information Consortium Voting Trust owned
approximately 35% of our outstanding common stock. This concentration of
ownership may have the effect of delaying or preventing a change in control
or
changes in management, or limiting the ability of other shareholders to approve
or disapprove transactions that they may deem in their best
interest.
The
shares owned by the National Information Consortium Voting Trust are available
for sale on the open market. The resale of these securities might
adversely affect our stock price.
We
have on file with the SEC an effective registration statement for the resale
of
the shares owned by the National Information Consortium Voting Trust. The
Voting Trust will be permitted to sell its registered shares in the open market
from time to time without advance notice to us or to the market and without
limitations on volume.
Sales
of substantial amounts of shares of our common stock in the public market,
or
the perception that those sales may occur, could cause the market price of
our
common stock to decline or make it more difficult for us to sell equity
securities in the future at a time and a price that we consider
appropriate.
INFORMATION
ABOUT THE OFFERING
This
reoffer prospectus relates to a maximum of 1,081,219 shares of our common stock
which may be offered and resold from time to time by the selling shareholders
identified in this reoffer prospectus. It is anticipated that the selling
shareholders will offer shares for sale at prevailing prices on the Nasdaq
Global Select Market on the date of sale. We will not receive any proceeds
from the sales of common stock by the selling shareholders under this reoffer
prospectus. The selling shareholders will pay for the cost of all sales
commissions and similar expenses. We will however pay for all of the costs
associated with the filing of this registration statement.
USE
OF PROCEEDS
The
shares being offered consist of 900,000 shares that may be acquired upon the
exercise of stock options granted pursuant to our 1998 Stock Option Plan and
our
2004 Amended and Restated Stock Option Plan and 181,219 shares that have been
granted pursuant to our 2006 Amended and Restated Stock Option and Incentive
Plan. This reoffer prospectus relates to the offer and sale from time to
time of these shares by the selling shareholders in the manner and under the
circumstances described under "Plan of Distribution." The following table sets
forth:
| |
·
|
the
name of each selling shareholder,
|
| |
·
|
his
position(s), office or other material relationship with
NIC,
|
| |
·
|
the
number of shares of our common stock owned (or subject to options)
by each
selling shareholder prior to the date of this prospectus and prior
to this
offering,
|
| |
·
|
the
number of shares of our common stock which may be offered for the
account
of each selling shareholder under this reoffer prospectus (all of
which
have been or may be acquired by the selling shareholders pursuant
to the
exercise of options subject to the appropriate vesting of such options),
and
|
| |
·
|
the
number and percent of shares of our common stock to be beneficially
owned
by each selling shareholder if such selling shareholder were to sell
all
of his shares of common stock covered by this
prospectus.
|
The
number of shares in the column "Number of Shares Being Offered" represents
all
of the shares that each selling shareholder may offer under this reoffer
prospectus. We do not know how long the selling shareholders will hold the
shares before selling them or how many shares they will sell and we currently
have no agreements, arrangements or understandings with any of the selling
shareholders regarding the sale of any of the resale shares. The shares offered
by this reoffer prospectus may be offered from time to time by the selling
shareholders listed below.
|
|
|
Shares
Beneficially Owned
Prior
to Offering(1)
|
|
Number
of
Shares
Being
|
|
Shares
Beneficially Owned
After
Offering(2)
|
|
Security
Holders
|
Position
with NIC
|
Number
|
|
Percent
|
|
Offered
|
|
Number
|
|
Percent
|
|
Jeffery
S. Fraser
|
Chief
Executive Officer and Director
|
544,809
|
(3)
|
*
|
|
242,878
|
|
301,931
|
|
*
|
|
Harry
H. Herington
|
President
|
246,228
|
(4)
|
*
|
|
186,836
|
|
59,392
|
|
*
|
|
Eric
J. Bur
|
Chief
Financial Officer
|
110,059
|
(5)
|
*
|
|
74,627
|
|
35,432
|
|
*
|
|
William
F. Bradley, Jr.
|
Chief
Operating Officer and Secretary
|
60,485
|
(6)
|
*
|
|
60,485
|
|
--
|
|
*
|
|
Samuel
R. Somerhalder
|
Chief
Administrative Officer
|
89,751
|
(7)
|
*
|
|
35,485
|
|
54,266
|
|
*
|
|
Stephen
M. Kovzan
|
Vice
President - Financial Operations and Chief Accounting
Officer
|
30,908
|
(8)
|
*
|
|
30,908
|
|
--
|
|
*
|
|
Ross
C. Hartley
|
Director
|
608,419
|
(9)
|
*
|
|
59,000
|
|
549,419
|
|
*
|
|
John
L. Bunce, Jr.
|
Director
|
269,910
|
(10)
|
*
|
|
119,000
|
|
150,910
|
|
*
|
|
Art
N. Burtscher
|
Director
|
93,301
|
(11)
|
*
|
|
69,000
|
|
24,301
|
|
*
|
|
Daniel
J. Evans
|
Director
|
194,514
|
(12)
|
*
|
|
104,000
|
|
90,514
|
|
*
|
|
Pete
Wilson
|
Director
|
156,265
|
(13)
|
*
|
|
99,000
|
|
57,265
|
|
*
|
____________________
*
Indicates
less than one percent.
|
(1)
|
This
table is prepared solely based on information supplied to us by the
listed
security holders, any Schedules 13D or 13G and Forms 3 and 4, and
other
public documents filed with the SEC, and assumes the sale of all
of the
resale shares. The applicable percentages of beneficial ownership
are
based on an aggregate of 61,570,900 shares of our common stock issued
and
outstanding on September 30, 2006, adjusted as may be required by
rules
promulgated by the SEC.
|
|
(2)
|
Assumes
that all shares to be offered, as set forth above, are sold pursuant
to
this offering, and that no other shares of common stock are acquired
or
disposed of by the selling shareholders prior to the termination
of this
offering. Because the selling shareholders may sell all, some or
none of
their shares or may acquire or dispose of other shares of common
stock, no
reliable estimate can be made of the aggregate number of shares that
will
be sold pursuant to this offering or the number or percentage of
shares of
common stock that each selling shareholder will own upon completion
of
this offering.
|
|
(3)
|
Includes
21,400,805 shares of the Company's common stock held of record by
the
National Information Consortium Voting Trust ("Voting Trust"), of
which
Messrs. Hartley and Fraser serve as co-trustees and with respect
to which
they share voting and investment power. Messrs. Hartley and Fraser
disclaim beneficial ownership of the shares held of record by the
Voting
Trust, except to the extent of their pecuniary interest noted herein.
Shares beneficially owned by Mr. Fraser also include 301,931
shares
|
| |
directly
owned outside the Voting Trust, 37,878 shares of unvested restricted
stock
and 205,000 vested and unvested options to purchase shares of common
stock
prior to this offering. Mr. Fraser and his family members have in
the
aggregate a 25.3% pecuniary interest in the Voting Trust, represented
by
1,020,866 shares held directly by the Voting Trust for the benefit
of a
trust, of which Mr. Fraser is the beneficiary, and 4,391,147 shares
held
directly by the Voting Trust for the benefit of entities of which
Mr.
Fraser acts as manager. Mr. Fraser disclaims beneficial ownership
over
1,848,398 of the shares held by one of these
entities.
|
|
(4)
|
Shares
beneficially owned by Mr. Herington include 59,392 shares directly
owned,
36,836 shares of unvested restricted stock, and 150,000 vested and
unvested options to purchase shares of common stock prior to this
offering. Mr. Herington and his family members also have in the aggregate
a 3.7% pecuniary interest in the Voting Trust, represented by 770,003
shares held of record by the Voting Trust for the benefit of Mr.
Herington
and his wife, and a total of 25,224 shares held of record by the
Voting
Trust for the benefit of Mr. Herington's minor
children.
|
|
(5)
|
Shares
beneficially owned by Mr. Bur include 35,432 shares directly owned,
24,627
shares of unvested restricted stock, and 50,000 vested and unvested
options to purchase shares of common stock prior to this offering.
|
|
(6)
|
Mr.
Bradley has a 6.7% pecuniary interest in the Voting Trust, represented
by
1,433,307 shares directly held by the Voting Trust for the benefit
of a
trust, of which Mr. Bradley is the beneficiary. Includes 22,985 shares
of
unvested restricted stock and 37,500 vested and unvested options
to
purchase shares of common stock prior to this
offering.
|
|
(7)
|
Shares
beneficially owned by Mr. Somerhalder include 54,266 shares directly
owned, 22,985 shares of unvested restricted stock, and 12,500 unvested
options to purchase shares of common stock prior to this offering.
Shares
directly owned include 1,500 shares held directly by Mr. Somerhalder's
wife. Mr. Somerhalder and his wife also have in the aggregate a 4.1%
pecuniary interest in the Voting Trust, represented by 881,734 shares
held
directly by the Voting Trust for their
benefit.
|
|
(8)
|
Shares
beneficially owned by Mr. Kovzan include 15,908 shares of unvested
restricted stock and 15,000 vested and unvested options to purchase
shares
of common stock prior to this
offering.
|
|
(9)
|
Includes
21,400,805 shares of the Company's common stock held of record by
the
Voting Trust , of which Messrs. Hartley and Fraser serve as co-trustees
and with respect to which they share voting and investment power.
Messrs.
Hartley and Fraser disclaim beneficial ownership of the shares held
of
record by the Voting Trust, except to the extent of their pecuniary
interest noted below. Shares beneficially owned by Mr. Hartley also
include 549,419 shares directly owned outside the Voting Trust, 4,000
shares of unvested restricted stock, and 55,000 vested and unvested
options to purchase shares of common stock prior to this offering.
Mr.
Hartley and his two children have in the aggregate a 25.5% pecuniary
interest in the Voting Trust, represented by 4,952,766 shares held
of
record by the Voting Trust for the benefit of Mr. Hartley, and 499,305
shares held of record by the Voting Trust for the benefit of Mr.
Hartley's
children.
|
|
(10)
|
Shares
beneficially owned by Mr. Bunce include 150,910 shares directly owned,
4,000 shares of unvested restricted stock, and 115,000 vested and
unvested
options to purchase shares of common stock prior to this
offering.
|
|
(11)
|
Shares
beneficially owned by Mr. Burtscher include 24,301 shares directly
owned,
4,000 shares of unvested restricted stock, and 65,000 vested and
unvested
options to purchase shares of common stock prior to this offering.
Mr.
Burtscher and his wife also have in the aggregate a 0.5% pecuniary
interest in the Voting Trust, represented by 102,641 shares held
of record
by the Voting Trust for their
benefit.
|
|
(12)
|
Shares
beneficially owned by Mr. Evans include 90,514 shares directly owned,
4,000 shares of unvested restricted stock, and 100,000 vested and
unvested
options to purchase shares of common stock prior to this
offering.
|
|
(13)
|
Shares
beneficially owned by Mr. Wilson include 57,265 shares directly owned,
4,000 shares of unvested restricted stock, and 95,000 vested and
unvested
options to purchase shares of common stock prior to this
offering.
|
Under
the Securities Exchange Act of 1934, any person engaged in a distribution of
the
shares offered by this reoffer prospectus may not simultaneously engage in
market making activities with respect to our common shares during the applicable
"cooling off" periods prior to the commencement of such
distribution.
In
addition, and without limiting the foregoing, the selling shareholders will
be
subject to applicable provisions of the Securities Exchange Act of 1934 and
the
rules and regulations thereunder, which provisions may limit the timing of
purchases and sales of the shares by the selling shareholders.
The
selling shareholders may sell the shares being offered from time to time in
one
or more transactions:
| |
·
|
in
transactions on the Nasdaq Global Select
Market;
|
| |
·
|
in
the over-the-counter market;
|
| |
·
|
in
privately negotiated transactions;
|
| |
·
|
through
broker-dealers, who may act as agents or
principals;
|
| |
·
|
through
one or more underwriters on a firm commitment or best efforts
basis;
|
| |
·
|
through
the writing of options on shares, whether the options are listed
on an
options exchange or otherwise; or
|
| |
·
|
a
combination of such methods of
sale.
|
The
selling shareholders may sell the shares at market prices prevailing at the
time
of sale, at prices related to those market prices or at negotiated prices.
The
selling shareholders also may sell the shares pursuant to Rule 144 adopted
under
the Securities Act, as permitted by that rule. The selling shareholders may
effect transactions by selling shares directly to purchasers or to or through
broker-dealers. The broker-dealers may act as agents or principals. The
broker-dealers may receive compensation in the form of discounts, concessions
or
commissions from the selling shareholders or the purchasers of the shares.
The
compensation of any particular broker-dealer may be in excess of customary
commissions. Because the selling shareholders and broker-dealers that
participate with the selling shareholders in the distribution of shares may
be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, the selling shareholders will be subject to the prospectus
delivery requirements of the Securities Act. Any commissions received by them
and any profit on the resale of shares may be deemed to be underwriting
compensation.
The
selling shareholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities. There is no underwriter
or coordinating broker acting in connection with the proposed sale of shares
by
the selling shareholders.
The
shares will be sold through registered or licensed brokers or dealers if
required under applicable state securities laws. In addition, in certain states
the shares may not be sold unless they have
been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the shares may not simultaneously engage in market making
activities with respect to our common stock for a period of two business days
prior to the commencement of such distribution. In addition, each selling
shareholder will be subject to applicable provisions of the Exchange Act and
the
associated rules and regulations under the Exchange Act, including Regulation
M,
which provisions may limit the timing of purchases and sales of shares of our
common stock by the selling shareholders. We will make copies of this prospectus
available to the selling shareholders and have informed them of the need to
deliver copies of this prospectus to purchasers at or prior to the time of
any
sale of the shares.
We
will bear all costs, expenses and fees in connection with the registration
of
the shares. The selling shareholders will bear all commissions and discounts,
if
any, attributable to the sales of the shares. The selling shareholders may
agree
to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act. The selling shareholders may also agree to
indemnify certain persons, including broker-dealers and agents, against certain
liabilities in connection with the offering of the shares, including liabilities
arising under the Securities Act.
Upon
notification to us by a selling shareholder that any material arrangement has
been entered into with broker-dealers for the sale or purchase of shares, we
will file a supplement to this reoffer prospectus, if required,
disclosing:
| |
·
|
the
name of the participating
broker-dealers;
|
| |
·
|
the
number of shares involved;
|
| |
·
|
the
price at which such shares were
sold;
|
| |
·
|
the
commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable;
|
| |
·
|
that
such broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus;
and
|
| |
·
|
other
facts material to the transaction.
|
In
addition, upon being notified by a selling shareholder that a donee or pledgee
intends to sell more than 500 shares, we will file a supplement to this
prospectus.
The
validity of the issuance of the shares of common stock offered hereby will
be
passed upon for us by Rothgerber Johnson & Lyons LLP, Denver,
Colorado.
DOCUMENTS
INCORPORATED BY REFERENCE
| |
·
|
Our
Annual Report on Form 10-K for the fiscal year ended December 31,
2005;
|
| |
·
|
Our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006,
June
30, 2006 and September 30, 2006;
|
| |
·
|
Our
Definitive Proxy Statement for our Annual Meeting of Shareholders
held on
May 2, 2006;
|
| |
·
|
Our
Current Reports on Form 8-K dated April 27, 2006, July 12, 2006,
July 27,
2006, October 24, 2006, October 26, 2006 and November 14, 2006;
and
|
| |
·
|
The
description of our common stock contained in the registration statement
on
Form S-1 filed with the SEC on May 6,
1999.
|
You
may request and obtain a copy of these filings, at no cost, by writing or
telephoning us at the following address or phone number:
William
F. Bradley, Jr., Esq.
NIC
Inc.
10540
South Ridgeview Road
Olathe,
Kansas 66061
(877)
234-3468
AVAILABLE
INFORMATION
We
have filed with the SEC a Registration Statement on Form S-8 under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder, with respect to the common stock being offered by this reoffer
prospectus. This reoffer prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the
Registration Statement and the exhibits and schedules to the Registration
Statement, as permitted by the rules and regulations of the SEC. For further
information with respect to our company and the common stock being offered,
we
refer you to the Registration Statement on Form S-8, including the exhibits
attached, which may be inspected
and
copied at the public reference facilities of the SEC referred to above.
Statements contained in this reoffer prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the full text of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified
in
all respects by such reference.
We
furnish shareholders with annual reports containing audited financial statements
and with proxy material for our annual meetings complying with the proxy
requirements of the Securities Exchange Act of 1934.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
8. Exhibits
The
following exhibits are filed as part of this registration
statement:
Exhibit
Number
Description
of Document
23.1
Consent
of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm
24
Power
of Attorney (included in signature page)*
________________
*Previously
filed
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing a post-effective amendment to Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Olathe, State of Kansas, on November 20, 2006.
NIC INC.
By: /s/
Jeffery S. Fraser
Jeffery S. Fraser
Chairman of the Board and Chief Executive Officer
Pursuant
to the requirements of the Securities Act of 1933, the following persons in
the
capacities and on the dates indicated have signed this registration statement
below.
Signature Title
Date
/s/
Jeffery S. Fraser
Jeffery
S.
Fraser Chairman
of the Board and Chief
Executive
November
20, 2006
Officer (Principal Executive Officer)
/s/
Harry H. Herington
Harry
H.
Herington
President
and
Director
November
20, 2006
/s/
Eric J. Bur
Eric
J.
Bur
Chief
Financial Officer
(Principal Financial
Officer) November
20, 2006
/s/
Stephen M. Kovzan
Stephen
M.
Kovzan
Vice
President, Financial Operations and
Chief Accounting Officer
(Principal Accounting
Officer)
November
20, 2006
*________________
John
L. Bunce,
Jr.
Director
November
20, 2006
*________________
Art
N.
Burtscher Director November
20, 2006
*________________
Daniel
J.
Evans Director
November
20, 2006
*________________
Ross
C.
Hartley
Director
November
20, 2006
*________________
Pete
Wilson
Director November
20, 2006
*By:
/s/
William F. Bradley,
Jr.
November 20, 2006
William
F. Bradley, Jr.
Attorney-In-Fact,
pursuant to
Power
of Attorney
INDEX
TO EXHIBITS
Exhibit
Number
Description
of Document
23.1
Consent
of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm
24 Power
of Attorney (included in signature page)*
________________
*Previously
filed
II-3