1065332--3/16/2006--NIC

related topics

{system, service, information}

{regulation, government, change}

{customer, product, revenue}

{acquisition, growth, future}

{product, market, service}

{property, intellectual, protect}

{stock, price, operating}

{cost, contract, operation}

{control, financial, internal}

{tax, income, asset}

{regulation, change, law}

{personnel, key, retain}

{provision, law, control}

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. 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. We have incurred significant net losses in the past, and may do so again in the future. We may be unable to generate sufficient taxable income from future operations to fully utilize our significant tax net operating loss carryforwards. If our competitors are more successful in attracting and retaining customers and users, then our revenues and profits could decline. Because we have portal outsourcing contracts with a limited number of governments, the termination of certain of these contracts may harm our business. We may face damage to our professional reputation if our partners are not satisfied with our services. Because we have certain portal outsourcing contracts that contain performance bond requirements and/or indemnifiction provisions against claims arising from our performance, we may suffer monetary or reputational damages if we fail to meet our contractual obligations. We may be unable to obtain future contracts through the request for proposal process. We may be unable to sustain the usage levels of current services that provide a significant percentage of our revenues. 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 fees we collect for many of our services are subject to regulation that could limit growth of our revenues and profitability. Our portal revenues could be harmed as a result of government budget deficits. 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. We may lose the right to the content distributed through our outsourced portals, which is provided to us entirely by government entities. 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 business with various government entities often requires specific government legislation to be passed for us to initiate and maintain our government contracts. 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. The seasonality of use for some of our eGovernment services may harm our fourth quarter results of each calendar year. We may need more working capital to fund operations and expand our business. Our acquisitions and strategic alliances entail numerous risks and uncertainties. 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 intellectual property rights are valuable and any inability to protect them could harm our company. 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 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. 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. If we fail to coordinate or expand our operational procedures and controls, we may not effectively manage our growth. We may be unable to hire, integrate or retain qualified personnel. To be successful, we must develop and market comprehensive, efficient, cost-effective and secure electronic access to public information and new 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. We may be unable to integrate new technologies and industry standards effectively. 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. 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. We may be held liable for content that we obtain from government agencies. Concerns over transactional security may hinder the growth of our business. Our systems may fail or limit user traffic. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. 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.

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1065332--3/16/2006--NIC_INC