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EXHIBIT 99.2
NATIONAL INFORMATION CONSORTIUM, INC.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OVERVIEW
On September 15, 1999, National Information Consortium, Inc. ("NIC" or the
"Company") acquired the net assets of the business of eFed, a provider of
Internet-based procurement software and services for the government. eFed
designs, develops and manages online procurement software and services for
federal and state markets. eFed was a division of privately held Reston,
Virginia-based Electric Press, Inc. The acquisition was accounted for as a
purchase and the results of eFed's operations are included in the Company's
consolidated statements of operations from the date of acquisition. The total
purchase price for the business was approximately $29.5 million. Total
consideration included $15 million in cash from the proceeds of NIC's initial
public offering and the issuance of 606,000 shares of unregistered common stock
with a fair value of approximately $14.5 million. The fair value of the common
shares was determined based on the average closing market price of NIC's common
stock three days before and after the September 13, 1999 announcement date of
the acquisition. Additional consideration is also payable through the end of
calendar year 2003 if eFed's financial results exceed certain targeted levels,
which have been set substantially above the historical experience of eFed at the
time of acquisition.
The total purchase price of approximately $29.5 million was allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their fair values on the closing date. The fair value of net
tangible assets acquired, consisting primarily of accounts receivable, property
and equipment, accounts payable and other accrued expenses, totaled $816,000 and
approximated historical carrying amounts. The sole identifiable intangible asset
relates to eFed's Internet procurement software. This asset was valued at
approximately $21.8 million based on the net present value of projected future
net cash flows from licensing the software over its estimated three-year life.
The remainder of the cost was allocated to goodwill. The goodwill is being
amortized on a straight-line basis over three years. The Company determined a
three year life was appropriate after giving consideration to the rapid
technological changes occurring in the Internet industry, the potential for
increasing competition given the demand for electronic purchasing products and
services, and the intense competition which exists for qualified Internet
professionals.
The following unaudited pro forma consolidated statements of operations give
effect to the acquisition by NIC of eFed and are based on the individual
statements of operations of the Company for the nine months ended September 30,
1999 and the year ended December 31, 1998, and of eFed for the period from
January 1, 1999 to September 15, 1999, and the year ended December 31, 1998, as
if the transaction occurred on January 1, 1999 and 1998. These unaudited pro
forma consolidated statements of operations should be read in conjunction with
the historical financial statements and notes thereto of the Company (included
in the Company's Form S-1, which became effective July 15, 1999, and the
Company's most recent Form 10-Q, which was filed on November 15, 1999) and of
eFed (included elsewhere in this Form 8-K).
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods presented
and should not be construed as being representative of the future operating
results.
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NATIONAL INFORMATION CONSORTIUM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1998
(a)
NIC EFED ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
Revenues $ 28,623,656 $ 1,644,796 $ - $ 30,268,452
Cost of revenues 21,210,632 389,730 - 21,600,362
------------ ------------ ------------ ------------
Gross profit 7,413,024 1,255,066 - 8,668,090
------------ ------------ ------------ ------------
Operating expenses:
Service development and operations 3,884,810 - - 3,884,810
Selling, general and administrative 4,241,780 868,317 - 5,110,097
Stock compensation 568,869 - - 568,869
Depreciation and amortization 5,922,396 94,230 9,576,168(b) 15,592,794
------------ ------------ ------------ ------------
Total operating expenses 14,617,855 962,547 9,576,168 25,156,570
------------ ------------ ------------ ------------
Operating income (loss) (7,204,831) 292,519 (9,576,168) (16,488,480)
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (88,161) (5,248) - (93,409)
Other income, net 55,839 - - 55,839
------------ ------------ ------------ ------------
Total other income (expense) (32,322) (5,248) - (37,570)
------------ ------------ ------------ ------------
Income (loss) before income taxes (7,237,153) 287,271 (9,576,168) (16,526,050)
Income tax expense (benefit) 658,813 - (3,399,736) (d) (2,740,923)
------------ ------------ ------------ ------------
Net income (loss) $ (7,895,966) $ 287,271 $ (6,176,432) $(13,785,127)
============ ============ ============ ============
Net loss per share:
Basic and diluted $ (0.21) $ (0.35)
============ ============
Weighted average shares outstanding 37,242,423 1,969,636 (c) 39,212,059
============ ============ ============
See accompanying Notes to Pro Forma Consolidated Financial Information.
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NATIONAL INFORMATION CONSORTIUM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1999
(a)
NIC EFED ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
Revenues $ 40,457,100 $ 2,340,178 $ - $ 42,797,278
Cost of revenues 30,494,613 540,630 - 31,035,243
------------ ------------ ------------ ------------
Gross profit 9,962,487 1,799,548 - 11,762,035
------------ ------------ ------------ ------------
Operating expenses:
Service development and operations 4,009,427 - - 4,009,427
Selling, general and administrative 5,428,977 1,462,365 - 6,891,342
Stock compensation 2,734,710 - - 2,734,710
Depreciation and amortization 6,408,709 131,236 6,783,119 (b) 13,323,064
------------ ------------ ------------ ------------
Total operating expenses 18,581,823 1,593,601 6,783,119 26,958,543
------------ ------------ ------------ ------------
Operating income (loss) (8,619,336) 205,947 (6,783,119) (15,196,508)
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (145,236) (10,688) - (155,924)
Other income, net 1,167,316 - - 1,167,316
------------ ------------ ------------ ------------
Total other income (expense) 1,022,080 (10,688) - 1,011,392
------------ ------------ ------------ ------------
Income before income taxes (7,597,256) 195,259 (6,783,119) (14,185,116)
Income tax expense (benefit) (353,194) - (2,411,157) (d) (2,764,351)
------------ ------------ ------------ ------------
Net income (loss) $ (7,244,062) $ 195,259 $ (4,371,962) $(11,420,765)
============ ============ ============ ============
Net loss per share:
Basic and diluted $ (0.16) $ (0.24)
============ ============
Weighted average shares outstanding 45,277,801 1,552,415 (c) 46,830,216
============ ============ ============
See accompanying Notes to Pro Forma Consolidated Financial Information.
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NATIONAL INFORMATION CONSORTIUM, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following adjustments were applied to the Company's historical consolidated
statements of operations for the periods indicated to arrive at the pro forma
consolidated financial information.
a) For the nine months ended September 30, 1999, this column represents eFed's
results of operations for the period from January 1, 1999 to September 15,
1999. The Company's consolidated results of operations already include
eFed's results of operations for the period from the date of acquisition to
September 30, 1999. For the year ended December 31, 1998, this column
represents eFed's results of operations for the year ended December 31,
1998.
b) This adjustment represents amortization expense resulting from the
application of purchase accounting. For the nine months ended September 30,
1999, the adjustment represents amortization for the period from January 1,
1999 to September 15, 1999, as the Company's consolidated results of
operations reflect amortization for the period from the date of acquisition
to September 30, 1999. For the year ended December 31, 1998, the adjustment
represents a full year of amortization.
c) This adjustment represents the incremental shares needed to reflect the
common shares outstanding for the period based on the following stock
issuances as of the beginning of the period presented:
a. The actual issuance of 606,000 unregistered common shares as part
of the acquisition price.
b. The assumed issuance of 1,363,636 shares of common stock at $11 per
share, resulting in net proceeds of $15 million. The net proceeds
were used to pay the cash portion of the acquisition price. The $11
share price was based on the net proceeds per share received by the
Company's from its initial public offering of 10 million shares of
common stock on July 15, 1999. For the nine months ended September
30, 1999, the pro forma weighted average shares outstanding reflect
the 1,969,636 shares as outstanding for the nine months ended
September 30,1999, and also reflect the difference between the 10
million shares of common stock issued on July 15, 1999 and
1,363,636 shares noted above as outstanding from July 15, 1999 to
September 30, 1999.
d) For year ended December 31, 1998 and for the period from January 1, 1999 to
September 15, 1999, Electric Press, Inc. was an S corporation. Accordingly,
no provision for income taxes was included in eFed's results of operations
for the corresponding periods. For the nine months ended September 30,
1999, this adjustment represents eFed's pro forma tax provision (expense on
its results of operations) and the pro forma tax provision (benefit)
related to the amortization expense resulting from the application of
purchase accounting for the period from January 1, 1999 to September 15,
1999. The Company's consolidated results of operations already include
eFed's tax provision and the tax benefit relating to amortization for the
period from the date of acquisition to September 30, 1999. For the year
ended December 31, 1998, this adjustment represents eFed's pro forma tax
provision (expense on its results of operations) and the pro forma tax
provision (benefit) related to the amortization expense arising from the
application of purchase accounting. The pro forma provisions for income
taxes were calculated based on enacted tax laws and statutory tax rates
applicable to the periods presented.