PROSPECTUS
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111,813 Shares
NAVIDEC, INC.
Common Stock
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This prospectus relates solely to the sale and offer by the selling
stockholders identified in this prospectus of up to 111,813 shares of our common
stock. We will not receive any of the proceeds from the sale of the shares of
common stock by the selling stockholders. The aggregate net proceeds to the
selling stockholders from the sale of the shares of our common stock will equal
the sales price of such shares of common stock, less any commissions.
The selling stockholders have not identified any current plan to distribute
the shares. We anticipate that the selling stockholders will either offer the
shares for sale for their own account at Nasdaq National Market market prices or
retain them for investment. See "Plan of Distribution." We will pay the expenses
incurred in registering the 111,813 shares of common stock, including legal
and accounting fees.
Our common stock is listed on the Nasdaq National Market under the symbol
"NVDC". The last reported sales price of our common stock on the Nasdaq National
Market on February 11, 2000 was $14.375 per share. Our mailing address is
Fiddler's Green Center, 6399 Fiddler's Green Circle, Suite 300, Greenwood
Village, Colorado 80111 and our telephone number is (303) 222-1000.
Investing in our common stock involves certain risks. See "Risk Factors"
beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is February 11, 2000
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RISK FACTORS
This prospectus includes "Forward Looking Statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934 including, in particular, the statements about our plans, strategies,
and prospects. Although we believe our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
can give no assurance such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from the
forward-looking statements we make in this prospectus are set forth below and
elsewhere in this prospectus. All forward-looking statements attributable to
Navidec or persons acting on our behalf are expressly qualified in their
entirety by the following cautionary statements.
Risks Associated With Our Business Generally
It is difficult to evaluate our business and prospects because we have a limited
operating history.
As a company in the early stage of development, we take risks and there are
uncertainties relating to our ability to successfully implement our business
plan. Our business and prospects must be considered in light of the risks,
expenses and difficulties encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets such as
Internet solutions. The risks and uncertainties include, among other things, the
following:
o we may not be able to develop awareness and brand loyalty for our
products and services;
o we may not be able to anticipate and adapt to the changing market for
Internet services and e-commerce;
o we may not be able to expand our sales and marketing efforts;
o we may not be able to continue to upgrade and enhance our technologies
to accommodate expanded service offerings;
o we may not successfully respond to competitive developments; and
o we may not be able to develop and renew strategic relationships.
We may not be successful in accomplishing any or all of these objectives,
which could materially harm our business. In this case, the value of your
investment may decline.
We have incurred operating losses, expect continued losses and may not achieve
profitability. If we continue to lose money, we may have to curtail our
operations.
We have not been profitable and we may continue to lose money for the
foreseeable future. Although there has been growth in annual revenue,
historically we have incurred losses and experienced negative cash flow. We may
continue to incur losses and may never achieve or sustain profitability. An
extended period of losses and negative cash flow may prevent us from operating
and expanding our business and continuing our incubation strategy.
We plan to expand rapidly which will place a strain on our resources and if we
fail to manage our growth effectively, it could harm our business.
Our rapid growth and plans for further growth have placed, and are expected
to continue to place, a significant strain on our administrative, operational
and financial resources. The failure to grow these resources, as well as our
technology base, along with the rest of our business may have a negative impact
on our financial performance.
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Our incubation strategy involves risk.
Part of our strategy is to incubate new business ventures that we develop
in addition to our Internet solutions business. We are currently in the process
of incubating our first business, DriveOff.com, Inc. The DriveOff.com web site
was launched in late September 1999 and is fully operational in select states.
Incubating new businesses will require us to make significant investments. The
formation of DriveOff.com included, and we expect that any incubation of other
e-businesses in the future will include, the provision of intellectual property,
the hiring of employees, the contribution of capital and the devotion of
significant time and resources. After forming any new e-business, we may not
generate enough revenue from the new business to cover the amounts we spend to
create and launch the business. If we do not generate substantial revenues from
any business we incubate, that business may never become profitable, and our
business, financial condition and operating results will be negatively affected.
We have limited experience in incubating new businesses. Our incubation
strategy has the following additional risks:
o we may not be able to identify suitable business ventures to incubate;
o forming new e-businesses may cause a disruption in our Internet
solutions business and distract our management and other personnel;
o the businesses we incubate may be unproven, may involve substantial
risk and may never be profitable; and
o the costs associated with incubating a new e-business may have a
negative impact on our profitability.
We expect to incubate businesses in which we obtain experience through our
Internet solutions business. Therefore, these new businesses may be competitive
with our existing customers, which may result in the loss of customers from our
Internet solutions business.
We may engage in future acquisitions that dilute our stockholders, cause us to
incur debt and assume contingent or unknown liabilities. In addition,
acquisitions pose many additional risks.
We expect to make strategic acquisitions. In that event, we could:
o issue equity securities which would dilute our stockholders;
o incur significant acquisition-related expenses, including amortization
or write-off of goodwill or other intangible assets;
o incur substantial debt; or
o assume unknown or contingent liabilities.
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Acquisitions could also entail numerous additional risks, including:
o difficulties in integrating acquired personnel, operations,
technologies or services;
o unanticipated costs associated with the acquisitions that may harm our
operating results;
o diversion of management's attention from other business concerns; and
o risks of entering markets in which we have no or limited prior
experience.
Any of these risks could have a negative impact on our business, operating
results and financial condition.
We may not be able to successfully operate our business if we are unable to
attract, train and retain additional highly qualified sales and marketing,
managerial and technical personnel, or if we lose key personnel.
Our future success depends on our ability to identify, hire, train and
retain highly qualified sales and marketing, managerial and technical personnel.
Competition for personnel is intense, and we may not be able to attract,
assimilate or retain qualified personnel in the future. The inability to attract
and retain the necessary managerial, technical and sales and marketing personnel
could have a material adverse effect on our business.
Our business and operations are substantially dependent on the performance
of our executive officers and key employees. We maintain "key person" life
insurance on the life of Ralph Armijo, our Chairman, President and Chief
Executive Officer. The loss of the services of Ralph Armijo, Michael Kranitz,
the President of DriveOff.com, Patrick Mawhinney, our Chief Financial Officer or
Kenneth Bero, our Chief Operating Officer could have a material adverse effect
on our business. We have employment contracts with Mr. Armijo, Mr. Mawhinney and
Mr. Bero.
Our success is dependent on our keeping pace with advances in technology.
If we are unable to keep pace with advances in technology, consumers may stop
using our services and our revenue will decrease.
The Internet and e-business markets are characterized by rapid
technological change, changes in consumer preferences and new product and
service offerings that could render our existing web sites and technology
obsolete. Our performance will depend, in part, on our ability to:
o continue to enhance our existing services;
o develop new technology that addresses the increasingly sophisticated
and varied needs of our prospective customers; and
o license leading technologies and respond to technological advances and
emerging industry standards and practices on a timely and
cost-effective basis.
We may not be successful in using new technologies effectively or adapting
our web sites or other technology to customer requirements or to emerging
industry standards. If we are unable to adapt to changing technologies, our
business, results of operations and financial condition could be negatively
impacted.
Internet commerce has yet to attract significant regulation. Government
regulation may result in fines, penalties, taxes or other costs that may reduce
our future earnings.
We currently are not directly regulated by any governmental agency, other
than having to comply with regulations applicable to businesses generally.
However, due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet, covering, among other things, the following issues:
o taxation of consumer transactions;
o advertising;
o user privacy;
o unsolicited marketing;
o pricing;
o quality of products and services;
o intellectual property;
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o information security; and
o anti-competitive practices.
The adoption of any of these laws or regulations may decrease the growth of
Internet commerce. These laws could decrease the demand for our products and
services, increase our cost of doing business, or otherwise have an adverse
effect on our business, operating results or financial condition.
Moreover, the applicability to the Internet of existing laws governing
issues including real and intellectual property ownership, libel and personal
privacy is uncertain. If these existing laws were to be applied to the Internet,
our business may be harmed.
Taxing authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in Internet commerce. New state
tax regulations may subject us to additional state sales, use and income taxes.
The adoption of any of these laws or regulations may decrease the growth of
Internet usage or the acceptance of Internet commerce which could, in turn,
decrease the demand for our products and services, increase costs and otherwise
have a material adverse effect on our business, results of operations and
financial condition. To date, we have not spent significant resources on
lobbying or related government affairs issues but we may need to do so in the
future.
We may unintentionally infringe on the proprietary rights of others which may
result in costly litigation and loss of the right to use such proprietary
rights.
We may be subject to claims alleging that we have infringed upon third
party proprietary rights which may result in significant damages. Even if any of
these claims may ultimately prove to be without merit, the time management
spends addressing those claims and the legal costs associated with those claims
could harm our business.
We license technology and content from third parties and it is possible
that we could become a party to infringement actions based upon the licenses
from those third parties. We generally obtain representations as to the origin
and ownership of all licensed technology and content; however, this may not
adequately protect us. Any of those claims, with or without merit, could subject
us to costly litigation and the diversion of our technical and management
personnel.
Misappropriation of our intellectual property and proprietary rights could
impair our competitive position.
Our ability to compete depends upon our systems and technology. Despite
efforts to protect our proprietary rights through the use of trademarks, trade
secrets and copyright law, confidentiality agreements and technical measures,
unauthorized parties may attempt to copy aspects of our services or obtain and
use information that we regard as proprietary. Policing unauthorized use of our
proprietary rights is difficult. Effective trademark, service mark, copyright
and trade secret protection may not be available in every country in which our
services are made available online.
In addition, litigation may be necessary in the future to enforce or
protect our intellectual property rights or to defend against claims of
infringement or invalidity. As part of our confidentiality procedures, we
generally enter into agreements with our employees and consultants and limit
access to our trade secrets and technology. We cannot be sure that the steps
taken by us will prevent misappropriation of technology or that the agreements
entered into for that purpose will be enforceable. Misappropriation of our
intellectual property or potential litigation could have a negative impact on
our business.
We may be hurt by system interruptions because our primary servers are located
at a single principal location. If communications to that location were
interrupted, our operations could be negatively impacted.
We primarily host our web sites at our corporate headquarters in Greenwood
Village, Colorado. Although we maintain offsite backup servers, all of our
primary servers are located at our corporate headquarters and are vulnerable to
interruption by damage from fire, flood, power loss, telecommunications failure,
break-ins and other events beyond our control. We have, from time to time,
experienced periodic systems interruptions and anticipate that these
interruptions will occur in the future. If we experience significant system
disruptions, our business, results of operations and financial condition would
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be materially adversely affected. We maintain business interruption insurance
for the actual loss of business income sustained due to the suspension of
operations as a result of direct physical loss of or damage to property in our
offices. Our property and business interruption insurance may not be adequate to
compensate us for all losses that may occur due to failure of our systems.
Our computer infrastructure may suffer security breaches. Any such problems
could jeopardize confidential information transmitted over the Internet, cause
interruptions in our operations or cause us to have liability to third parties.
We rely on technology that is designed to facilitate the secure
transmission of confidential information. Our computer infrastructure is
potentially vulnerable to physical or electronic computer break-ins, viruses and
similar disruptive problems. A party who is able to circumvent our security
measures could misappropriate proprietary information, jeopardize the
confidential nature of information transmitted over the Internet or cause
interruptions in our operations. Concerns over the security of Internet
transactions and the privacy of users could also inhibit the growth of the
Internet in general, particularly as a means of conducting commercial
transactions. To the extent that our activities involve the storage and
transmission of proprietary information, including personal financial
information, security breaches could expose us to a risk of financial loss,
litigation and other liabilities. Our insurance does not currently protect us
against these losses. Any security breach would have a material adverse effect
on our business, results of operations and financial condition.
If the Internet does not continue to technologically improve, it may be unable
to support increased levels of activity. Without the increased capacity of the
Internet and our systems, our revenue may not increase and our operations may be
harmed.
Our success will depend, in large part, upon the communications industry
and its infrastructure for providing Internet access and carrying Internet
traffic. The Internet may not prove to be a viable commercial medium because of
inadequate development of the necessary infrastructure or complementary products
as well as delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity.
If the Internet continues to experience significant growth in the number of
users and the level of use, then the Internet infrastructure may not be able to
continue to support the demands placed on it by this potential growth. An
unexpectedly large increase in the volume or pace of traffic on our web sites or
the number of orders placed by customers may require us to expand and further
upgrade our technology, transaction-processing systems and network
infrastructure. We may not be able to accurately project the rate or timing of
increases, if any, in the use of our web sites or expand and upgrade our systems
and infrastructure to accommodate these increases.
We may not be able to acquire or maintain effective web addresses, which may
allow competitors to gain an advantage.
We currently hold various web addresses relating to our brand names. We may
not be able to prevent third parties, including direct competitors, from
acquiring web addresses that are similar to our addresses, which could harm our
business. The acquisition and maintenance of web addresses is generally
regulated by governmental agencies and their designees. However, the regulation
of web addresses in the United States and in foreign countries may change. As a
result, we may not be able to acquire or maintain relevant web addresses where
we conduct business. Furthermore, the relationship between regulations governing
web addresses and laws protecting trademarks is unclear.
We may be required to seek additional financing. If additional financing is not
available to us, we may have to curtail our operations.
Our capital requirements have been and will continue to be significant. We
anticipate that our cash reserves and the projected cash flow from our
operations, will be sufficient to fund our operations for at least the next 12
months. If our capital requirements or cash flow vary materially from our
current projections or if unforeseen circumstances occur, we may require
additional financing sooner than we anticipate.
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We may be required to obtain additional financing to achieve our business
objectives. Failure to raise these funds may:
o restrict our growth and limit expansion of our business;
o limit our development of new products and services;
o limit our ability to take advantage of strategic opportunities,
including incubating new businesses; and
o hinder our ability to compete.
Additional financing may not be available to us when needed or, if
available, may not be obtained on commercially reasonable terms. In addition,
any equity financing may involve substantial dilution to our then-existing
stockholders.
Risks Associated With Our Internet Solutions Business
Our future revenue is unpredictable and our quarterly operating results may
fluctuate.
Our limited operating history and the emerging nature of the Internet
solutions market makes it very difficult for us to accurately forecast our
revenue. A number of factors are likely to cause fluctuations in our operating
results, including but not limited to:
o Internet growth;
o demand for our services;
o our ability to test, introduce and develop new services and enhance
our clients' Internet solutions;
o our ability to expand the breadth of services offered;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our business;
o the announcement or introduction of new or enhanced services by our
competitors;
o our ability to expand our market presence through relationships with
third parties; and
o our ability to acquire new or complementary businesses, products or
technologies.
Period-to-period comparisons of our operating results are not a good
indication of our future performance. It is likely that our operating results in
some quarters will be below market expectations. In this event, the price of our
common stock is likely to decline.
The success of our business is dependent on market acceptance of our services.
Our success will depend substantially upon the adoption of the Internet as
an attractive platform for conducting business. If market acceptance is not
forthcoming, our revenue may not grow and our prospects for earnings may suffer.
In particular, enterprises that have already invested substantial resources in
other means of conducting commerce and exchanging information may be reluctant
to adopt a new strategy that could make their existing products and
infrastructure obsolete. The Internet solutions business is dependent on
companies realizing the benefits of supplementing or replacing traditional
business models with a business transformation to e-business. It is difficult to
predict the future growth rate, if any, and the size of the market for our
services because the market for our services is new and evolving.
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We face significant competition in our markets from a wide variety of
competitors.
Competition in the e-business services industry is intense. We may not be
able to successfully compete against our current or future competitors. An
increasing number of competitors continue to enter the market in which we
operate. There is a risk that our competitors may outperform us in many areas
affecting our Internet solutions business. These areas include:
o technology;
o breadth of services offered;
o creative and artistic ability;
o marketing and distribution resources;
o customer service and support; and
o price for services.
If any of our competitors outperform us in any of these areas, our revenue
may decrease and our business may be negatively impacted. Many of our
competitors have greater brand recognition, longer operating histories, a larger
customer base and greater financial, marketing and other resources than we have.
These factors may place us at a disadvantage when we respond to our customers'
pricing strategies, technological advances and other initiatives.
The market in which we operate is characterized by low financial barriers
to entry and frequent introductions of new services and products. We expect
competition in our business to increase significantly in the future. The intense
level of competition in the Internet solutions business could harm our operating
results and financial condition.
We generally do not have long-term contracts and need to establish relationships
with new customers.
Our customers generally retain us on a project-by-project basis, rather
than under long-term contracts. As a result, a customer may or may not engage us
for further services after one or more segments of the NPact process is
complete. For example, after the consultation phase of NPact is complete and we
have determined what solution would be optimal, the customer may have another
company build and manage the solution. The absence of long-term contracts and
the need for new customers create an uncertain revenue stream, which could
negatively affect our financial performance.
Our fixed price contracts involve financial risk.
Most of our contracts are currently on a fixed-price basis, rather than a
"time and material" basis. We assume greater financial risk on fixed-price
contracts than on "time and material" engagements. We have a limited history in
estimating our costs for our fixed-price engagements. If we fail to estimate
costs accurately or encounter unexpected problems, our business could be
materially harmed.
Risks Associated With DriveOff.com
The DriveOff.com business model is new and unproved.
DriveOff.com, our subsidiary, has a new business model that is unproved and
its success will primarily depend on the willingness of consumers to purchase
and lease cars completely online. Through operation of the CarWizard and
LeaseSource web sites, DriveOff.com currently generates revenue through each
referral that is made to participating dealers. In late September 1999, we
launched DriveOff.com's new web site, which is based on a consumer-friendly
model of automobile purchasing and leasing, in which revenue is almost
exclusively generated from the completion of a sale or lease of a vehicle. We
launched the DriveOff.com web site initially in a limited number of states and
intend to eventually expand to a nationwide presence. The previous model and its
lead-based revenue stream will be largely discontinued as DriveOff.com expands
its presence. Accordingly, the failure to generate sufficient revenues using the
new consumer-centric model will negatively impact its business.
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DriveOff.com has no operating history using its new business model upon which to
base an evaluation of its business and prospects.
DriveOff.com's potential for future profitability must be considered in
light of the risks associated with a company that has not operated using its new
business model. DriveOff.com faces uncertainties, expenses and difficulties
frequently encountered by companies in the early stages of development,
particularly companies in new and rapidly evolving markets like the market for
Internet commerce. Furthermore, while many Internet commerce companies have
grown in terms of revenue, few are profitable.
To succeed, DriveOff.com must establish and maintain a large network of
participating automobile dealers.
DriveOff.com offers and arranges for the delivery of automobiles through
local automobile dealers who have agreed to participate in IADMA LLC, a
marketing association affiliated with DriveOff.com. DriveOff.com will only be
able to offer its service in those geographic areas in which it has signed up a
dealer for each automobile nameplate. To date, DriveOff.com has only signed up
approximately 700 dealers in less than 40 states. Even if DriveOff.com can
initially sign up sufficient dealers, it will have to retain such participating
dealers or add new dealers to reduce the effects of any turnover. DriveOff.com's
revenues will be harmed if sufficient dealers cannot be attracted and retained.
Factors which may affect our ability to attract and retain participating dealers
include competition from other Internet automobile buying services, volume of
sales and revenue derived through DriveOff.com, dealers' acceptance of the
Internet as an attractive means for selling automobiles, and the ease of
participating in the DriveOff.com service.
The success of DriveOff.com is dependent on consumers and automotive dealers
accepting the Internet as a method of purchasing and leasing automobiles.
The Internet represents a medium for automobile purchases, sales and leases
which has only recently begun to develop. As is typical for a new and rapidly
evolving industry, demand and market acceptance for recently introduced services
and products over the Internet are affected by a high level of uncertainty and
there are few proven services.
While DriveOff.com believes that its services offer significant advantages
to consumers and automotive dealers, widespread acceptance of Internet commerce,
in general, or of DriveOff.com's services, in particular, may not occur.
Consumers have established habits for purchasing and leasing automobiles and may
be reluctant to try a new and unproven buying method. The success of
DriveOff.com assumes that consumers and automotive dealers will accept the
Internet as a viable method of purchasing or selling and leasing automobiles.
The online automotive solutions business depends on strategic relationships
which DriveOff.com may not be able to maintain in the future.
DriveOff.com depends on strategic relationships to direct traffic to its
automotive solutions web sites. These include online affinity partners, such as
CBS Worldwide Inc. and X-Surf.com, and Internet portals, including WebCrawler.
DriveOff.com cannot be certain that these parties will maintain their agreements
with DriveOff.com. In addition, DriveOff.com must periodically renegotiate
existing agreements and these negotiations could result in increased costs in
future periods. DriveOff.com has received approximately 10% of its purchase
requests through an Internet relationship with Excite Inc. The agreement with
Excite terminated on September 30, 1999 and DriveOff.com has not found
alternative, comparable marketing partners capable of originating significant
numbers of purchase requests on terms satisfactory to it.
DriveOff.com develops new services by entering into alliances with other
companies engaged in complementary businesses, including vehicle financing and
leasing, and insurance. Some of these relationships may prohibit or limit
DriveOff.com from referring consumers to other potential sources of financing.
Therefore, DriveOff.com may be dependent on those companies with which it has
developed strategic relationships. DriveOff.com cannot assure that any strategic
relationships will continue or that it will be able to develop new strategic
relationships.
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DriveOff.com is subject to regulatory uncertainties and potential government
regulation.
DriveOff.com may be subject, both directly and indirectly, to various laws
and regulations. Government authorities may also decide that federal and/or
state automobile brokerage laws, insurance licensing laws, motor vehicle
dealership laws or related consumer protection or product liability laws apply
to aspects of DriveOff.com's business as well as DriveOff.com's relationship
with IADMA. If any state imposes additional regulatory requirements on
DriveOff.com or prohibits its activities as currently structured, DriveOff.com
may be required to modify or terminate its marketing programs in that state in a
manner which may undermine the program's attractiveness or availability to
consumers or dealers in that state.
DriveOff.com may be required by certain state laws to obtain some licenses
which may be an expensive and time-consuming process that could divert the
efforts of management from day-to-day operations. Alternatively, if DriveOff.com
determines that a given state's licensing or other requirements are overly
burdensome, it may elect to terminate operations in that state. Additionally, if
DriveOff.com determines that its activities cannot be structured in a manner
that does not implicate a given state's brokering prohibitions, it may elect to
terminate operations in that state. In each case, DriveOff.com's business and
financial condition could be adversely affected.
DriveOff.com may decide to market insurance online, which may require it to
be licensed under state insurance laws. The use of the Internet in the marketing
of insurance products, however, is a relatively new practice. It is not clear
whether or to what extent state insurance licensing laws apply to activities
similar to DriveOff.com's business. If DriveOff.com is required to comply with
these licensing laws, compliance could be costly or, potentially, impossible to
achieve.
DriveOff.com may not be able to create necessary levels of brand recognition or
effectively compete with its competitors.
DriveOff.com competes with a variety of Internet and traditional vehicle
purchasing services and automotive brokers, many of which have substantially
more capital, existing brand recognition, resources and access to additional
financing. The market for Internet-based commercial services is new, and
competition among commercial web sites is expected to increase significantly in
the future. To compete successfully as an Internet-based commercial entity,
DriveOff.com must significantly increase awareness of its services and brand
name.
DriveOff.com competes with other entities which maintain similar commercial
web sites including Autobytel.com, AutoNation, AutoWeb.com, CarsDirect, Cendant
AutoVantage and Microsoft CarPoint. Sites for electronic classified ads, as well
as vehicle-related products and services, are also proliferating. DriveOff.com
competes indirectly against vehicle brokerage firms and affinity programs
offered by several companies. In addition, all major vehicle manufacturers have
their own web sites and many have recently launched or announced plans to launch
online buying services, including General Motors Corporation's BuyPower.
DriveOff.com also competes with traditional automobile dealerships.
DriveOff.com also competes with vehicle insurers, lenders and lessors as
well as other dealers that are not part of the IADMA network. These companies
may already maintain or may introduce web sites that will compete with our web
sites.
The importance of brand recognition will increase as more companies engage
in commerce over the Internet. Development and awareness of DriveOff.com's
brands will depend largely on its ability to obtain a leadership position in
Internet automobile commerce.
DriveOff.com's quarterly financial results are subject to significant
fluctuations.
DriveOff.com's quarterly operating results may fluctuate due to many
factors affecting its online automotive solutions business. If revenue does not
increase faster than expenses, DriveOff.com's financial condition will be
materially harmed. Other factors that may adversely affect its quarterly
operating results include:
o the ability of IADMA to retain existing dealers and attract new
dealers;
o the ability to maintain dealer and customer satisfaction;
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o the announcement or introduction of new or enhanced sites, services
and products by DriveOff.com's competitors;
o general economic conditions and economic conditions specific to the
Internet, online commerce or the automobile industry;
o the usage levels of online services and consumer acceptance of the
Internet and commercial online services for the purchase of consumer
products and services like those offered by DriveOff.com;
o the ability to upgrade and develop systems and infrastructure and to
attract new personnel in a timely and effective manner;
o the level of traffic to DriveOff.com's web sites and other sites that
refer traffic to those web sites;
o technical difficulties, system downtime or Internet brownouts;
o the amount and timing of operating costs and capital expenditures
relating to expansion of the business, operations and infrastructure;
and
o governmental regulation.
To date, the quarter-to-quarter growth in revenue from our automotive
solutions business, which has been consolidated into DriveOff.com, has offset
any effects due to seasonality. However, seasonality in the automotive industry,
Internet and commercial online service usage, and advertising expenditures are
likely to cause fluctuations in DriveOff.com's operating results and could harm
the business. DriveOff.com anticipates that purchase requests will typically
increase during the first and third fiscal quarters when new vehicle models are
introduced and will typically decline during the second and fourth quarters.
Internet and commercial online service usage and the growth rate of that usage
typically declines during the summer.
DriveOff.com's success will largely be a function of the overall strength of the
automobile industry.
The overall strength of the automotive industry will significantly impact
the revenue DriveOff.com derives from its automotive related vendors and
consumer traffic to our web sites. The automotive industry is cyclical due in
part to changes in national and global economic forces. Sales of vehicles in the
United States have been at historically high levels during recent years. There
is no assurance that the sales of vehicles will remain at their current levels.
A decrease in the current level of vehicle sales could negatively impact
DriveOff.com's financial condition. In addition, labor problems in the
automobile industry, such as strikes, may have a negative impact on the ability
of IADMA member dealers to deliver automobiles. The failure to timely deliver
automobiles may have a negative impact on DriveOff.com's financial condition.
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Risks Associated With Navidec's Common Stock
Future sales of common stock by our existing stockholders could adversely affect
our stock price.
The market price of our common stock could decline as a result of sales of
a substantial number of shares of our common stock in the market after this
offering, or the perception that such sales could occur. These sales might make
it more difficult for us to sell equity securities in the future at a time and
at a price that we deem appropriate. As of December 31, 1999, we had 10,171,693
outstanding shares of common stock.
As of December 31, 1999, options to purchase a total of 1,490,070 shares of
common stock were outstanding, 288,935 of which are currently exercisable.
Shares issued upon the exercise of stock options will be eligible for resale in
the public market from time-to-time.
As of December 31, 1999, warrants to purchase 205,471 shares of common
stock were outstanding, all of which are currently exercisable.
Our directors and officers, who have beneficial ownership of 1,476,446
shares in the aggregate, have entered into lock-up agreements in which they have
agreed that they will not sell, directly or indirectly, any shares of common
stock without the prior written consent of our underwriters for a period of 180
days from October 20, 1999, the effective date of our registration statement on
Form S-3 (filed on August 12, 1999), which was filed in connection with our
offering of 2,500,000 shares of our common stock.
The price of our common stock is volatile and may be affected by numerous market
conditions beyond our control.
Our stock price has been highly volatile since our initial public offering
in February 1997. We expect this volatility to continue in the future due to a
variety of factors, including:
o quarterly variations in actual or anticipated results of our
operations;
o analysts' earnings estimates;
o announcements of technological innovations or new products or services
by us or our competitors;
o general conditions in the Internet or other high computer technology
industries; and
o general economic conditions.
In addition, the securities markets frequently experience extreme price and
volume fluctuation which affect market prices for securities of companies
generally, and technology companies in particular. These fluctuations are often
unrelated to the operating performance of the affected companies. Broad market
fluctuations may adversely affect the market price of our common stock.
The trading prices of many technology and Internet-related companies'
stocks have reached historical highs within the last 52 weeks and have reflected
relative valuations substantially above historical levels. During the same
period, those companies' stocks have also been highly volatile and have recorded
lows well below those historical highs. We cannot assure you that our stock will
trade at the same levels of other Internet stocks or that Internet stocks in
general will sustain their current market prices.
In the past, following periods of high volatility in a particular company's
securities, securities class action litigation has been brought against the
company. We may become involved in this type of litigation in the future.
Litigation is often expensive and diverts management's attention and resources,
which could have a material adverse effect on our business.
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THE COMPANY
Overview
We are a provider and incubator of innovative Internet solutions and
services. Our combination of creative, technical and consulting expertise allows
us to design, build and manage comprehensive Internet solutions for a diverse
range of customers, which range from Internet start-ups to Fortune 1000
companies. Our focused approach enables our customers to rapidly move their
Internet operations from a basic web presence toward an integrated e-business.
We leverage our expertise to provide our customers with proven solutions and, in
some instances, to help them launch new Internet-based businesses.
We employ our NPact methodology in all of our projects. Through the NPact
process, we help our customers identify how the Internet can be optimally used
to their competitive advantage. NPact also enables us to accurately determine
the necessary costs and timelines for implementing an integrated Internet
solution. Once the ultimate solution has been determined, NPact separates the
assignment into multiple fixed-price 90 to 120-day projects, each providing
incremental functionality. We incorporate our reusable software modules and
packaged Internet applications to ensure that our solutions are rapidly
deployable, highly reliable, scalable and cost effective.
By consulting, building and managing e-business solutions and services, we
are in a position to leverage our expertise to incubate vertical market Internet
businesses. Our subsidiary, DriveOff.com was incubated out of our online
automotive solutions division and our e-commerce business model expertise.
DriveOff.com currently operates USWheels.com, CarWizard.com, LeaseSource.com and
a network of affinity web sites, including CBS.CarWizard.com, which offer
automotive information, interactive decision tools and buying and leasing
options to consumers. In late September 1999, DriveOff.com launched an
innovative consumer-friendly web site that allows consumers to research, finance
and purchase or lease an automobile online without negotiating with a car
salesperson. We believe the DriveOff.com web site will provide an automobile
purchasing solution that consumers and dealers will find to be superior to the
products currently available. DriveOff.com differs from its competitors, such as
Autobytel.com, AutoWeb.com and Microsoft CarPoint, by delivering completed sales
rather than leads to participating dealers. We believe that DriveOff.com's new
business model will be more appealing to consumers and dealers, as well as more
profitable than the existing lead generation models.
Industry Background
Growth of the Internet
The Internet has rapidly become a significant tool for global
communications and commerce, enabling millions of people to transact business
electronically. Improvements in network infrastructure, increasingly faster and
cheaper access to the Internet and the growing installed base of advanced and
more affordable personal computers have fueled the growth of the Internet.
Growth of E-business Solutions
The Internet represents a revolutionary and powerful new opportunity for
business. Many Internet start-up companies are rapidly entering already
established markets. These companies have an advantage over their traditional
competitors as their business models do not conflict with conventional
"brick-and-mortar" models and their rapid deployment is not hindered by the
conversion or integration of existing information technology systems.
As a result of these new entrants, many companies that do not currently
utilize the Internet are being forced to reevaluate their business models and to
adopt or supplement existing Internet-based solutions. Companies such as
Amazon.com, Inc. and eToys Inc. have challenged traditional competitors in their
industries and have transformed their respective marketplaces, forcing an
increasing number of traditional businesses to consider adopting Internet
solutions in order to take advantage of Internet efficiencies and compete
effectively.
As the use of the Internet as a new channel of distribution has grown, the
need to move rapidly from having a basic web presence to adopting a complete
model has grown. This progression can be illustrated through what we refer to as
the e-business transformation curve.
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Challenges Associated with Creating an E-business Solution
Companies seeking to successfully develop an e-business solution face many
challenges. Solutions can be highly complex and require high degrees of
architectural consulting, software development, creative design, system
infrastructure and project management expertise, as well as ongoing maintenance
and support.
Most internal information technology departments of traditional businesses
lack the personnel, technical capabilities and resources necessary to
cost-effectively develop and maintain complete Internet or e-business solutions.
Traditional businesses are facing competition from small, emerging
Internet-based competitors. However, many of these smaller competitors do not
posses the technology, e-business experience or resources necessary to implement
their strategies. The lack of internal resources along with time to market
pressures, has led many large businesses and Internet start-ups to retain
Internet solution providers to assist with this critical need to move their own
business model further up the e-business transformation curve. International
Data Corporation projects that the worldwide market for Internet services will
grow from $7.8 billion in 1998 to $78.0 billion in 2003.
The growth of the Internet as a new channel of distribution has resulted in
several significant issues and opportunities for all types of businesses, as
well as e-business solutions providers. In addition to the technical components,
successful e-business solutions require business models that address brand and
imaging strategies and partnerships, as well as site content. Few Internet
solutions providers or in-house information technology departments are able to
provide the combined multi-disciplined expertise necessary to rapidly develop
and implement complex Internet sites, which require highly technical and
creative, as well as project management skills. We believe the ability to offer
a full range of Internet services and solutions will increasingly become a
competitive factor as e-business operations continue to evolve and gain in
complexity.
Navidec's Solution
Our development methodology, industry partnerships and e-business
experience enable us to design, build and manage highly complex Internet
solutions for both established and emerging companies. Our multi-disciplined
expertise and experience enables our customers to move rapidly through the
e-business transformation process.
One of the key differentiating factors of our service is our ability to
deliver incremental functionality within 90 to 120-day periods on a fixed-price
basis, enabling our customers to rapidly deploy and scale their Internet
operations. Our use of reusable software modules and packaged applications
further accelerate our customers' time-to-market and ensure our solutions are
highly reliable, secure and cost effective.
We provide fixed-price, fixed-time solutions and services using our NPact
methodology. The goal of NPact is to identify a customer's position on the
e-business transformation curve, rapidly architect, develop and deploy
appropriate solutions and services, and manage, as necessary, the application
development and operating environment. Specifically, NPact is comprised of four
stages:
o NSight--during which we consult with our customers in order to
identify their strategies, define project goals, project success
criteria, timing and budgetary issues.
o NVolve--during which our technical staff works with the customer
collaboratively to assess, analyze and understand the existing
business environment and processes. Upon completion of the business
process analysis, we complete an architectural overview, which
includes a detailed timeline, project milestones, design
characteristics and fixed fees.
o NTrust--during which we build and test the infrastructure for the
solution, including hardware, software and any necessary support
services.
o NAble--during which we provide end-user training, marketing and
acceptance testing, and necessary on-going support for successful
project implementation.
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Each NPact team consists of a multi-disciplined group of e-business
architects, software developers, system engineers and creative designers. The
team is led and managed by a project manager who is responsible for delivering
the project solution within the specified timeframe and budget constraints. By
assembling these multi-disciplined teams of professionals, we are able to
deliver solutions to meet the specific needs of our customers through an
understanding of both their business objectives and the technology that is
available to achieve those objectives.
Navidec's Strategy
We believe that the rapidly increasing demand for comprehensive Internet
solutions, combined with the inability of most internal information technology
departments to develop, implement and manage their Internet environments, has
created a significant opportunity for Internet solutions providers.
Specifically, we believe there is demand for Internet solutions providers who
have the expertise and experience to effectively operate in a dynamic market
that is technically complex and has significant time-to-market constraints.
Our goal is to become the leading provider and incubator of innovative
e-business solutions and services. To achieve our objective, we are pursuing the
following strategies:
Expand Geographically. In order to broaden our customer base, we intend to
expand our geographic presence by establishing additional sales and
marketing offices in new regions and making selected, strategic
acquisitions.
Increase Internet Consulting. Although Internet consulting directly
generates only a small percentage of our revenues, we believe that Internet
consulting is an important service offering that is increasingly being
demanded by customers. We believe that we can leverage our Internet
solutions consulting expertise into engagements to build and manage
Internet and e-commerce solutions for customers.
Expand Our Presence as an Application Service Provider. An increasing
number of our clients are realizing the need to outsource both Internet
application development and actual management of the Internet application
environments once the solutions have been deployed. Our expertise as an
Internet solutions provider positions us to leverage these opportunities.
We plan to partner with key Internet service providers to offer additional
hardware, service and support capabilities.
Expand the Depth of Client Relationships. We have solid relationships with
a large customer base. We plan to leverage our strong reputation, industry
expertise and technical skills to expand the scope of our current customer
relationships and, in the process, become our customers' primary Internet
solutions consultant. This will enable us to move our customers more
rapidly through the e-business transformation process, which will produce
higher margin services and generate projects with recurring revenue
streams.
Continue to Develop Technical Capabilities. We have significant Internet
solutions capabilities which we use to deliver comprehensive e-business
solutions and services. We intend to continue to expand our technical
capabilities and strategic partnerships to enable us to deliver
time-critical and mission-critical solutions and to meet the changing needs
of our customers. We will continue to develop software applications that
can be reused in order to deliver solutions rapidly, reliably and
cost-effectively.
Continue to Attract and Retain Experienced Professionals. Our success to
date is due in large part to our ability to attract and retain experienced
professionals. We will continue to recruit professionals from major
consulting firms, creative design firms and information technology services
firms, as well as from other Internet solutions providers. We will continue
to maintain a team-driven and results-oriented culture that is attractive
to energetic, talented professionals and that fosters innovation and
creativity.
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Continue to Incubate New Businesses. We intend to continue to leverage our
technical expertise with acquired knowledge of certain business sectors to
grow and launch new business ventures. We believe successful e-businesses
require capital, industry knowledge, personnel and technology. We intend to
partner with companies with complementary expertise to cooperatively
incubate and launch new businesses. We will carefully select these
opportunities, which may be pursued through equity investments,
acquisitions, or strategic alliances.
Navidec's Services
We provide integrated consulting, development, infrastructure and
application environment management services to support our customers' time
sensitive and mission-critical Internet business objectives.
Our consulting services provide expertise and experience regarding Internet
business model development and implementation, infrastructure support, effective
project definition and scheduling, site branding, image, design and
functionality. In addition, our services address environment outsourcing,
management strategies and cost benefit analysis. Our solutions typically include
many of the following components:
o graphic design;
o integrated marketing;
o integrating legacy systems;
o messaging infrastructure;
o private intranets; and
o web distribution strategies.
Our development services provide expertise and experience in rapid design,
build and deployment of Java-based, open system e-business solutions such as web
sites, intranets and extranets. We also provide marketing and media services
such as digital image capture, post-processing services for scanned images and
graphic arts production. We build reusable software modules and products as well
as integrate packaged Internet solutions. We build and deploy complete projects
and project modules typically in 90 to 120-day time frames to move our customers
up the e-business transformation curve. In addition to building comprehensive
e-business solutions, we design, implement and integrate open system mail
messaging infrastructure support and solutions. Finally, our development
services provide design, integration and deployment of hardware systems to
maximize the operation of our application solutions. The hardware component of
the business enables us to provide a complete solution which ensures quality
service, time effective implementation and accountability.
Our Internet environment management services include providing application
services for a number of our customers. Our environment management services
include the following:
o electronic messaging implementation;
o database management;
o hosting of web sites on our Internet server;
o network implementation;
o product support;
o technical support; and
o web site maintenance and evolution.
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We build and manage cost effective outsourcing solutions for our clients
enabling them to focus their efforts on their core competencies. In addition, we
offer training modules for clients seeking to build enterprise, Java-based,
Internet development environments.
Navidec's Internet Solutions Customers
Since our inception, we have implemented solutions for over 200 customers.
The following customers are examples of the types of engagements that we have
successfully completed and which represent various stages on the e-business
transformation curve.
Prospecting--We developed a site for Pentax Corporation that enabled its
customers to research product features for its cameras, binoculars, lenses and
accessories. We created a web-based update tool that allowed Pentax to
instantaneously update the site with changes to product features and pricing.
The site was recently named one of Lycos' "Top 5%," a selective directory of
top-shelf web sites.
Prospecting--Richmond American Homes, a division of M.D.C. Holdings, Inc.,
one of the nation's largest home builders, started as a customer seeking a basic
Internet presence. Richmond needed to develop a site which would enable them to
target new customer audiences and provide a new information source for potential
home buyers and investors. By working with Richmond, we developed a web site
which used Java applets to create crisp visuals and simple site navigation. The
site was also designed to interact with a Sybase relational database which
enabled Richmond to automate its inventory updates through its internal system.
Richmond is in the process of implementing our system in eight states
nationwide. To date, the site has contributed to over $20 million in new home
sales.
Business Integration--Verio Corporation is the world's largest domain based
web host and one of the largest Internet service providers in the United States.
Through a number of acquisitions, Verio inherited an inefficient internal e-mail
architecture. Navidec, in conjunction with Netscape, converted 42 disparate
e-mail systems into a unified Netscape solution. As part of this process, we
have rebuilt Verio's infrastructure to enhance its ability to store, backup and
more effectively manage its customer's e-mail and large file attachments.
Business Integration--Columbine JDS Systems, Inc. is a national leader in
distributing invoices between broadcast outlets and advertising agencies. We
have worked with Columbine JDS to transform their operations to a complete
e-business model. Our solution, which required extensive integration into legacy
application systems, along with security for online transactions, enabled
Columbine JDS to make its entire billing system completely paperless and secure.
In addition to generating substantial cost savings, Columbine JDS expects that
this new system will enable it to attract new customers.
Business Transformation--DriveOff.com is an example of how we have
incubated an Internet business by applying our technical capabilities with our
industry expertise. In this case, as a result of the automotive industry
expertise that we developed through our USWheels.com, CarWizard.com and
LeaseSource.com web sites, we launched a vertically integrated business that
combines advanced interactive technology with research, financial and
administrative services, and a nationwide automobile dealership network to
provide a consumer-friendly automobile purchasing solution. See
"DriveOff.com--Incubating Our First Vertical Market Business."
Strategic Business Partnerships and Technology
We are one of only 18 Authorized Java Development Centers in the United
States. Combining our Java expertise with our application server, database and
mail messaging expertise, we build reusable software modules and integrate
packaged Internet solutions. We also develop solutions using HTML, XML, Perl and
other proven technologies. We apply these solutions to our own products, to our
corporate customer base and to other e-businesses that have ideas and concepts
requiring technological expertise.
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We have developed and maintain industry partnerships with Internet
companies such as Sun Microsystems, Inc., Netscape Communications Corporation,
BEA Weblogic, Inc., Oracle Corporation, Vignette, Inc., Netegrity, Inc. and
Object Design, Inc. Our focus on a limited set of partners enables us to keep
high visibility with our critical vendors and provides us the opportunity to
commit extensive training resources to maintain and grow product competency and
expertise.
In addition to our e-business development capabilities, we have significant
Internet infrastructure support expertise including light directory application
protocol, digital certificates and messaging. Our certifications and
qualifications include Sun Elite status, Sun Level 2000 Competency, Authorized
Netscape Premier Partner, Authorized Netscape Professional Services
Subcontractor, Authorized BEA Weblogic Service Partner, Authorized Oracle
Alliance Partner and Professional Services Subcontractor, Object Design
Developer and Reseller, as well as Macromedia experts.
Because of our strategic relationships, and the large number of additional
third-party technologies that are available to us, we are not dependent upon any
single technology to provide our services. We are in a position to choose from
multiple suppliers to incorporate the most appropriate technologies and products
for each NPact process. Because third-party providers typically license their
software directly to our customers, we are not at risk of losing individual
licenses that are necessary for our services.
Sales and Marketing
Our sales efforts target clients in market segments seeking to leverage the
Internet's potential and move rapidly up the e-business transformation curve.
Our direct salesforce is primarily responsible for identifying prospects,
engaging potential users of our solutions and services and maintaining and
growing the client relationship. Over the next 12 months, as we increase our
development capacity and expand our consulting and application service provider
services, we expect to significantly grow our regionally focused, 18 person
salesforce to a national presence.
The role of our marketing program is to create and sustain brand
identification, preference and loyalty. Our marketing department has
responsibility for communications, advertising, public relations and our web
site content. As we expand our business model to a national presence, we will
grow our corporate marketing organization to facilitate the expansion of our
branding, preference and loyalty strategy.
Navidec's Incubation Process
In the course of providing Internet solutions to our customers, our ability
to utilize reusable software modules and leverage expertise within vertical
markets continues to grow. In addition to providing accelerated time-to-market,
proven solutions for our customers, we will opportunistically seek to incubate
selected businesses, either through partnerships with our customers,
acquisitions of businesses in particular sectors or the development of our own
businesses. Our incubation process combines our technology and industry
experience with the personnel and capital to create a successful new business
venture.
DriveOff.com--Incubating Our First Vertical Market Business
The Inception. DriveOff.com is the culmination of four years of experience
developing Internet automotive solutions. In 1995, we were hired by the Burt
Group, based in Denver, Colorado, to design a web site for the group's
automotive dealerships. The Burt site began generating 50 to 75 sales per month
at a time when, we believe, the average dealer web site was yielding five to ten
sales per month. In light of its success with the Burt site, we created a
vertical product named USWheels.com. The "Wheels" solution offered dealers leads
from regional Wheels web sites that harvested and posted new and used dealer
inventory every 24 hours. At the end of 1998, we merged with LeaseSource Online,
Inc. and CarWizard, Inc. and acquired valuable auto buying and leasing content
to supplement our inventory-based automotive solution.
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Market Understanding: The Need for a Complete Solution. Like many of our
business clients, the automotive division was still in the early stages of
Internet development at the end of 1998. Our automobile web sites were initially
harvesting customer leads and selling them to affiliated dealers, as most of our
competitors continue to do. Our market research revealed significant
dissatisfaction among consumers who used the Internet to research a vehicle,
only to be cast back into the traditional sales process by having their name
sold to a participating dealer. From the dealers' perspective, as Internet auto
companies have captured an increasing number of customers, there has been
increasing pressure on dealers to purchase customer names in order to maintain a
competitive market position.
Business Transformation. Leveraging our industry and technological
expertise, we created DriveOff.com to significantly alter and improve the way in
which consumers purchase (or lease) automobiles. The DriveOff.com web site
provides a complete automotive solution that enables consumers to research,
price, finance and purchase or lease a new automobile, completing substantially
all of the transaction from the DriveOff.com web site, with no dealer
interaction until delivery of the vehicle. Through an exclusive association with
IADMA, DriveOff.com provides dealers an opportunity to meaningfully participate
in the Internet automotive arena without having to pay lead or referral fees.
DriveOff.com provides IADMA member dealers with closed sales, not leads.
DriveOff.com believes this revenue model will be more profitable than the
existing lead generation models.
How DriveOff.com Works. Upon entering the DriveOff.com web site, or any of
its affiliated web sites, customers will navigate through six easy steps to
receive their vehicle.
Step 1: Research the Vehicle Using the Auto Library. The Auto Library
provides users with professional-grade automobile research to
make an informed purchase decision. Available information
includes:
o pricing, technical, safety, warranty, incentive and
optioning information, which is customarily used by dealers,
fleet administrators and leasing companies to price and
option vehicles, as well as professional driving reviews;
o standard auto leasing residual values and average money
factors which enable consumers to conduct impartial
comparisons of DriveOff.com lease offers;
o proprietary data and guidance with respect to the auto
leasing process; and
o search functionality, which allows consumers to compare or
search for vehicles and available options.
Step 2: Configure the Vehicle. Using accurate pricing and configuration
tools, DriveOff.com customers can build a vehicle to their
liking, specifying everything from option packages to paint
colors. Unlike many competing sites, DriveOff.com's intelligent
optioning tool prevents users from improperly equipping a vehicle
and ensures that vehicles are completely configured before
allowing the consumer to continue the purchase process. After
configuring a vehicle, users can specify those options that they
must have as opposed to those that they would like to have to
help DriveOff.com satisfy the users' vehicle requests.
Step 3: Price the Vehicle with Real Quote. Real Quote allows users to
configure the vehicle of their choice using a professional-grade
pricing and optioning tool. Users then receive definitive price,
loan and lease payment information. By providing no more than a
zip code, customers are able to obtain binding monthly payment
quotes, subject only to credit approval. Real Quote filters
shoppers who are not ready to buy, saving the time and expense
typically incurred when filtering "price quote shoppers." We
believe this tool will provide significant value while
unobtrusively and effectively drawing buyers into the purchase
process.
Step 4: Request the Vehicle. After receiving a quote, a user is able to
review a full transaction disclosure page, submit a DriveOff Deal
Request and provide a deposit either electronically or via
telephone. Users may select a convenient time for a deal
administrator to contact the user by telephone. If users elect to
apply for either a lease or loan, they complete an online credit
application in order to qualify for the payment quoted online.
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Step 5: Track the Vehicle Using the Personal Auto Center. The Personal
Auto Center provides a user with the ability to monitor the
status of the user's purchase (or lease). The password-protected
Personal Auto Center tracks the key elements of the user's deal,
such as vehicle specification changes, credit approval and
delivery status and serves as the primary means for the user to
initiate communication directly with DriveOff.com's customer
service center.
Step 6: Drive Off with the Vehicle: The "Deal Kit." Once a user's credit
application is accepted and the user approves the vehicle,
DriveOff.com delivers the user a Deal Kit via overnight mail. The
Deal Kit contains all of the legal documents necessary for the
user to take delivery of the specific vehicle approved online.
Having the Deal Kit ahead of time allows users to review the
entire transaction conveniently before taking delivery of the
vehicle. In order to complete the purchase, the user simply
brings the Deal Kit to the participating dealer, executes the
documents and drives off.
From the Consumer's Perspective. As compared to other auto buying services
on the Internet at this time, DriveOff.com distinguishes itself with a package
of consumer-oriented features that make the automobile buying experience easier
and allow the consumer to maintain control over the buying process.
<TABLE>
<CAPTION>
DriveOff.com Autobytel AutoNation AutoWeb AutoVantage CarsDirect CarPoint
------------ --------- ---------- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
All Makes & Models o o o o o o o
Intelligent Vehicle Optioner o o o o
Binding Online Payment Quotes o
Full Online Deal Disclosure o
Live Deal Tracking o
Integrated Financing and Leasing o
Personal Closing Documents o
No Dealer Negotiations o o o
Research & Reviews o o o o o o
Nationwide Coverage (as of
December 31, 1999) o o o o
</TABLE>
From the Dealer's Perspective. Since 1995, dealers have lost many of their
customers to Internet automotive sites such as Microsoft CarPoint, Autobytel.com
and AutoWeb.com. Customers are primarily visiting national automotive web sites
rather than local dealership sites to obtain information and submit requests for
new automobiles. Without a unified national presence, there is little that any
individual dealer or dealer group can do to effectively compete against large
Internet services. As a result, these dealers have been purchasing leads from
these large Internet services. By joining IADMA, dealers secure the services of
a national automotive portal on a long-term, exclusive basis, giving them the
ability to compete on the Internet.
Strategic Relationships. In the second quarter of 1999, DriveOff.com
facilitated the formation of IADMA, 85% of which is owned by its member dealers
and 15% of which is owned by DriveOff.com. DriveOff.com entered into a ten-year
marketing and services agreement with IADMA that requires all vehicle purchases
generated from the DriveOff.com web site to be delivered to IADMA member
dealers. IADMA provides its members a national Internet presence through
DriveOff.com. Rather than paying a service for unfiltered and often unqualified
leads, dealers who participate in IADMA receive incremental sales from
DriveOff.com.
DriveOff.com has established a long-term relationship with Westar Financial
Services Corporation, Inc. through which Westar will provide complete financial
administration as well as lease and loan origination services. Westar will
function as a financial clearinghouse for DriveOff.com, assuming responsibility
for all financial aspects of the transactions originating from DriveOff.com.
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In addition, DriveOff.com and Westar have entered into an agreement with
First Union National Bank under which First Union has agreed to purchase up to
$1.0 billion per year in auto loans originating from DriveOff.com.
DriveOff.com's relationships with Westar and First Union will allow it to
integrate complete financing capabilities into the automobile acquisition,
providing a one-stop source for vehicle selection and financing.
DriveOff.com's Affinity Program. DriveOff.com intends to draw customers and
extend its reach through conventional media, Internet media and a content-rich
affinity program. Although DriveOff.com will devote substantial resources to
establishing brand awareness through conventional and Internet advertising and
public relations efforts, affinity relationships represent the cornerstone of
its marketing strategy. DriveOff.com has the right to license for publication
its entire Auto Library. Accordingly, DriveOff.com can provide privately branded
or co-branded auto buying services on the web sites of Internet portals, large
corporations, such as Wells Fargo & Company, professional associations and
credit unions. Rather than paying for ads or links from these affinity sites,
DriveOff.com's affinity program generates low-cost, but widespread, distribution
through the placement of content on the web sites of its affinity partners.
Depending on the web site, DriveOff.com's Auto Library currently generates 12 to
16 page views per visitor. As a result, DriveOff.com offers its affinity
partners the ability to generate significant advertising revenue by having the
Auto Library content on their sites. At the same time, it allows affinity
partners to offer valuable content and service to their user base.
DriveOff.com's affinity program is particularly attractive to credit
unions. Like any other indirect auto lender, credit unions have little control
over their customers once they visit the dealership's finance and insurance
department. Often, the finance and insurance manager will "flip" customers from
their credit union financing source to another source, typically one that has a
more favorable commission for the manager. DriveOff.com's central financing
model allows it to guarantee affiliated credit unions that every sale or lease
originating from their co-branded site will be financed through them.
DriveOff.com also features a simple affinity partnership, which permits smaller
sites to link to DriveOff.com and receive a fee for each completed deal request
referred by the partner site. DriveOff.com enrolls simple affinity partners
through an automated web-based process.
Financial relationships with affinity partners can generate advertising
revenue, monthly content license fees and leads for DriveOff.com. Most
relationships will also provide for lead fees to affinity partners.
In addition to affinity sites, DriveOff.com will draw leads directly from
its USWheels.com, CarWizard.com, CBS.CarWizard.com and LeaseSource.com sites.
With little advertising, these sites delivered more than 56.4 million page views
and 64,000 purchase requests during the first six months of 1999.
Competition
Internet Solutions. The Internet solutions business is in an increasingly
competitive environment populated by a large number of regional firms and
national operations providing similar services to Navidec. We believe our
competition approaches the business of Internet solutions from a variety of
disciplines ranging from the technical expertise of the consulting divisions of
the "Big Five" accounting firms to the image and creative expertise of major
advertising agencies. Additionally, there are a variety of direct competitors
including interactive agencies, such as Razorfish, Inc. and Agency.com, that use
digital technologies to enhance communications and interactions between
individuals and businesses and "e-builders," such as Scient Corporation, Sapient
Systems, Inc., USWeb Corporation and iXL Enterprises, Inc., that provide
Internet strategy consulting and Internet-based solutions to businesses. Other
potential competitors to our business include browser software vendors, personal
computer and Unix software vendors and Internet service providers. Additional
competition results from numerous client/server companies, database companies,
multimedia companies, document management companies, networking software
companies, network management companies and educational software companies. Many
of our competitors have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources. Competitive factors in the Internet solutions business
include core technology, breadth of services offered, creative and artistic
ability, marketing and distribution resources, customer service and support and
price.
DriveOff.com. The market for vehicles and vehicle-related products and
services is highly competitive, and DriveOff.com expects competition to increase
significantly, particularly on the Internet. Competitors include AutoWeb.com,
Cendant's AutoVantage, Autobytel.com, AutoNation, CarsDirect and Microsoft
CarPoint. In addition, all the major vehicle manufacturers own and operate web
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sites and many have recently launched or announced plans to launch online buying
services, including General Motors' BuyPower. Sites for electronic classified
ads, as well as vehicle-related products and services, are also proliferating.
While DriveOff.com expects to benefit from its relationship with IADMA and its
strategic partners, it could face substantial competition in the future from
large dealer groups which may choose to compete in e-commerce. In addition to
direct competitors, DriveOff.com competes indirectly with vehicle brokerage
firms, discount warehouse clubs and automobile clubs. Also, several auction
Internet sites have recently announced their intention to auction vehicles on
the Internet.
Product Distribution
We serve both as a national manufacturer's representative for the products
of certain international manufacturers and as a reseller of selected computer
products in the Rocky Mountain region. We focus our distribution efforts towards
selling specialized, higher margin products.
Distribution activities usually involve our receipt of orders for equipment
from prospective purchasers and our delivery and/or installation of the
equipment. We purchase the equipment directly from the manufacturer or vendor
and resell it to the purchaser at a price which includes the cost and a profit
margin. With the exception of graphics supplies and certain imported components,
we do not generally maintain an inventory of products we distribute. We
specialize in distributing electronic components, printers and printer supplies.
Because product distribution is not related to our core strategy, we do not
intend to commit significant resources to this line of business.
Regulatory Uncertainties and Government Regulation
There are currently few laws or regulations which apply directly to the
Internet. Due to the increasing popularity of the Internet, however, it is
likely that a number of laws and regulations may be adopted at the local, state,
national or international levels with respect to commerce over the Internet,
potentially covering issues such as the pricing of services and products,
advertising, user privacy, intellectual property, information security or
anti-competitive practices. In addition, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
Internet commerce. New state tax regulations may subject us to additional state
sales, use and income taxes. Because our business is dependent on the Internet,
the adoption of any such laws or regulations may decrease the growth of Internet
usage or the acceptance of Internet commerce which could, in turn, decrease the
demand for our services and increase costs or otherwise have a material adverse
effect on our business, results of operations and financial condition. To date,
we have not spent significant resources on lobbying or related government
affairs issues but we may need to do so in the future.
DriveOff.com's operations may be subject, both directly and indirectly, to
various laws and regulations. Government authorities may also take the position
that federal and/or state automobile brokerage laws, insurance licensing laws,
motor vehicle dealership laws or related consumer protection or product
liability laws apply to aspects of DriveOff.com's business. As DriveOff.com
introduces new services and expands its operations to other countries, it will
need to comply with additional licensing and regulatory requirements. Due to the
increasing popularity and use of the Internet, it is possible that a number of
new laws and regulations may be adopted with respect to this rapidly developing
environment for conducting business. DriveOff.com believes that, in a majority
of states, its relationship with dealers is not subject to the coverage of state
motor vehicle dealer licensing laws; however, it is possible that some states
may require DriveOff.com to ultimately obtain a motor vehicle dealer license.
DriveOff.com also believes that, in a majority of states, its dealer marketing
service does not qualify as an automobile brokerage activity and therefore state
broker licensing requirements and broker prohibitions do not apply to it;
however, it is possible that some states may deem DriveOff.com's dealer
marketing services as an automobile brokerage activity. In the event that any
state imposes additional regulatory requirements on DriveOff.com, DriveOff.com
may be required to modify its marketing programs in that state in a manner which
may undermine the program's attractiveness to consumers or dealers in that
state. Alternatively, if DriveOff.com determines that a given state's licensing
and related requirements are overly burdensome or if it determines that its
activities cannot be structured in a manner that does not implicate a given
state's brokering prohibitions, it may elect to terminate operations in such
state.
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DriveOff.com may need to apply for financial broker licenses which may be
an expensive and time-consuming process that could divert the efforts of
management from day-to-day operations. In the event states require DriveOff.com
to be licensed and DriveOff.com is unable to do so, or is otherwise unable to
comply with regulations required by changes in current operations or the
introduction of new services, its business, results of operations and financial
condition could be harmed. DriveOff.com may market insurance online, which may
require it to be licensed under state insurance laws. The use of the Internet in
the marketing of insurance products, however, is a relatively new practice. It
is not clear whether or to what extent state insurance licensing laws apply to
activities similar to DriveOff.com's. If DriveOff.com was required to comply
with such licensing laws, compliance could be costly or impossible. This could
have a material adverse effect on its business, results of operations or
financial condition.
Employees and Culture
As of December 31, 1999, we had a total of 182 employees, of which 137 were
exclusively or primarily devoted to the Internet solutions business, 43 were
devoted exclusively or primarily to the DriveOff.com business and two were
exclusively devoted to the product distribution business. None of our employees
is represented by a labor union and we believe that our employee relations are
excellent. We recognize that our employees are the key to our continued success.
Our goal is to provide each employee with an environment for professional growth
and development.
Recruiting. We dedicate significant resources to our recruiting efforts. A
majority of our new employees come from referrals by current employees. We
believe that our existing employees are an excellent recruiting resource and we
reward employees that bring new people into the organization. We believe that
the success of our employee referral program is a direct reflection of employee
satisfaction. In addition to seeking qualified referrals, we actively recruit
from many of the country's leading graduate and undergraduate programs and
through professional search firms.
Training and Development. Our training and professional development
programs advance the skills of employees and enable us to deliver high-quality
services to our clients. Our goal is to ensure that each professional in our
organization has the opportunity to develop the skills necessary to grow
professionally and to serve our customers' needs.
Compensation. Our compensation program has been structured to attract and
retain highly skilled professionals by offering competitive base salaries with
performance based incentives. In addition, key employees may receive stock
options upon commencement of employment and may receive additional options based
upon performance.
Facilities
Our operations are principally located at Fiddler's Green Center, 6399
Fiddler's Green Circle, Greenwood Village, Colorado in a 70,000 square foot
facility. Our lease for this facility expires in January, 2005.
Legal Matters
We are currently not involved in any material legal proceedings.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, and therefore, file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You can inspect and copy all of this information at the public reference
facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's Regional Offices, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. In
addition, the Commission maintains a web site at http://www.sec.gov that also
contains this and other information. Our common stock is listed on the Nasdaq
National Market under the symbol "NVDC". Copies of publicly available documents
that have been filed with the Commission can be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washingtonn, D.C. 20006.
This prospectus, which constitutes a part of a registration statement on
Form S-3 filed by Navidec with the Commission under the Securities Act of 1933,
omits certain information contained in the registration statement. Accordingly,
you should refer to the registration statement and its exhibits for further
information with respect to Navidec and the shares of common stock offered
hereby. Furthermore, statements contained in this prospectus or in any document
incorporated in this prospectus by reference regarding any contract or other
document are not necessarily complete, and, in each instance, you should refer
to the copy of the contract or other document filed with the Commission as an
exhibit to the registration statement.
The Commission allows us to incorporate by reference the information we
file with them, 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 Commission will automatically update and supersede the information in
this prospectus. Accordingly, we incorporate by reference and refer you to the
documents listed below and any future filings we make with the Commission and
refer you to under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until
the registration statement of which this prospectus is a part is no longer
effective:
(1) Navidec's annual report on Form 10-KSB for the year ended December 31,
1998;
(2) Navidec's quarterly reports on Form 10-QSB for the quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999;
(3) Navidec's current reports on Form 8-K, filed with the Commission on
each of January 7, 1999, March 8, 1999, March 15, 1999, July 29, 1999,
October 15, 1999 and October 20, 1999; and
(4) the description of Navidec's common stock contained in Navidec's
registration statement on Form 8-A filed with the Commission on
January 28, 1997.
We will provide, without charge, to each person, including any beneficial
owner, to whom this prospectus has been delivered, upon written or oral request,
a copy of any and all of the documents that have been incorporated into this
prospectus by reference, other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into the documents that this
prospectus incorporates. Requests for such copies should be directed to the
Chief Financial Officer, Navidec, Inc., Fiddler's Green Center, 6399 Fiddler's
Green Circle, Suite 300, Greenwood Village, Colorado 80111, telephone (303) 222-
1000. Persons requesting copies of exhibits that were not specifically
incorporated by reference in such documents will be charged the costs of
reproduction.
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USE OF PROCEEDS
The shares of our common stock being offered are for the account of the
selling stockholders. Accordingly, we will not receive any proceeds from the
shares offered hereby.
SELLING STOCKHOLDERS
The selling stockholders are TKO International, a Denver, Colorado based
marketing firm, and Charles F. Kirby, an individual. In connection with a
Consulting Agreement between Navidec and TKO, Navidec granted TKO options to
purchase 100,000 shares of our common stock at $4.00 per share and 100,000
shares of our common stock at $6.03125 per share. With Navidec's consent, TKO
subsequently assigned to Mr. Kirby 28,000 of the $4.00 options and 28,000 of the
$6.03125 options. The selling shareholders exercised their respective options on
November 5, 1999 in a cashless exercise transaction resulting in TKO holding
80,505 shares of our common stock and Mr. Kirby holding 31,308 shares of our
common stock
At the time the options were granted, we agreed to file with the Commission
and, subject to certain exceptions, keep effective a registration statement (of
which this prospectus is a part) covering the resale of the selling
stockholders' shares of our common stock. In connection with such registration,
we will pay our own legal and accounting expenses as well as the Commission's
registration fees, while the selling stockholders will pay their own legal
expenses and any brokerage or similar fees in connection with the resale of
their shares.
The following table sets forth the names of the selling stockholders and
the number of shares that may be offered by the selling stockholders. As used in
the following table, an asterick means less than one percent. The number of
shares which may be actually sold by the selling stockholders will be determined
by the selling stockholders from time to time, and will depend upon a number of
factors, including the price of our common stock. Because the selling
stockholders may offer all, some or none of the shares offered hereby, and
because the offering contemplated by this prospectus is not being underwritten
on a firm commitment basis, we cannot give an estimate as to the number of
shares that will be held by the selling stockholders upon or prior to
termination of this offering. For purposes of this table, we have assumed that,
after completion of this offering, the selling stockholders will have sold all
of their respective shares offered hereby. The table sets forth such information
concerning the beneficial ownership of the shares by the selling stockholders,
as of December 31, 1999. All information as to beneficial ownership has been
furnished by the selling stockholders. The number of shares beneficially owned
is determined under rules promulgated by the SEC, and the information is not
necessarily indicative of beneficial ownership for any other purpose
<TABLE>
<CAPTION>
Shares of Common Stock Number of Shares of Common Stock
Owned Prior to This Offering Shares Offered Owned After This Offering
---------------------------- -------------- -------------------------
Number of Shares Percent (1) Number of Shares Percent (1)
---------------- ------- ---------------- -------
<S> <C> <C> <C> <C> <C>
TKO International 80,505 * 80,505 -0- 0%
Charles F. Kirby 31,308 * 31,308 -0- 0%
</TABLE>
(1) Percent of total shares of our common stock based on 10,171,693 shares
outstanding as of December 31, 1999.
PLAN OF DISTRIBUTION
The purpose of this prospectus is to permit each of the selling
stockholders to offer for sale or to sell shares of common stock at such time
and at such prices as he or it, in his or its sole discretion, chooses. Navidec
will not receive any of the proceeds from these offerings or sales. All
information as to the selling stockholders' plan of distribution has been
furnished by the selling stockholders.
The selling stockholders may sell or distribute some or all of their shares
from time to time through dealers or brokers or other agents or directly to one
or more purchasers in transactions (which may involve crosses and block
transactions) on the Nasdaq National Market or other exchanges on which our
common stock may be listed for trading, in privately negotiated transactions
(including sales pursuant to pledges) or in the over-the-counter market, or in
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brokerage transactions, or in a combination of such transactions. Such
transactions may be effected by the selling stockholders at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. Brokers,
dealers, or their agents participating in such transactions as agent may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders (and, if they act as agent for the purchaser of the shares,
from the purchaser). Such discounts, concessions or commissions as to a
particular broker, dealer or other agent might be in excess of those customary
in the type of transaction involved. To the extent required, we will file,
during any period in which offers or sale are being made, one or more
supplements to this prospectus to set forth any other material information with
respect to the plan of distribution not previously disclosed.
The selling stockholders and any such brokers, dealers or other agents that
participate in such distribution may be deemed to be "underwriters" within the
meaning of the Securities Act, and any discounts, commissions or concessions
received by any such brokers, dealers or other agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
In connection with the offer and sale of the shares of common stock by the
selling stockholders, various state securities laws and regulations require that
any such offer and sale should be made only through the use of a broker-dealer
registered as such in any state where a selling stockholder engages such
broker-dealer and in any state where such broker-dealer intends to offer and
sell shares.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares of common stock offered hereby may not
simultaneously engage in market activities with respect to common stock for the
applicable period under Regulation M prior to the commencement of such
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rule 10B-5 and Regulation M, which
provisions may limit the timing of purchases and sale of any of the shares by
the selling stockholders. All of the foregoing may affect the marketability of
the shares offered hereby.
Navidec will pay substantially all of the expenses incident to this
offering of the shares by the selling stockholders to the public other than the
selling stockholders' legal expenses and commissions, concessions and discounts
of brokers, dealers or other agents. The selling stockholders may indemnify any
broker, dealer, or other agent that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act. Navidec may agree to indemnify the selling stockholders and
any such statutory "underwriters" and controlling persons of such "underwriters"
against certain liabilities, including certain liabilities under the Securities
Act.
We have agreed, subject to certain suspensions of effectiveness and
adjustments to the period of effectiveness, to keep the registration statement
continuously effective until all the shares of common stock offered hereby are
sold or may be sold without registration.
LEGAL MATTERS
The validity of the issuance of the shares offered hereby will be passed
upon for Navidec by Benesch, Friedlander, Coplan & Aronoff LLP of Cleveland,
Ohio. Certain attorneys at Benesch, Friedlander, Coplan & Aronoff LLP own shares
of common stock.
EXPERTS
The consolidated financial statements and schedules incorporated by
reference in this prospectus and included in our Annual Report on Form 10-KSB
for the year ended December 31, 1998, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP and Hein +
Associates LLP, independent public accountants, and are included herein in
reliance upon the authority of said firms as experts in giving said reports.
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No dealer, salesperson or other person
has been authorized to give any
information or to make any
representation not contained in this
prospectus in connection with the
offering covered by this prospectus. If 111,813 SHARES
given or made, such information or
representations must not be relied upon
as having been authorized by Navidec.
This prospectus does not constitute an
offer to sell, or a solicitation of an NAVIDEC, INC.
offer to buy, the common stock in any
jurisdiction where, or to any person to
whom, it is unlawful to make such offer
or solicitation. Neither the delivery of COMMON STOCK
hereunder shall, under any
circumstances, create any implication -----------------------
that there has not been any change in
the facts set forth in this prospectus
or the affairs of Navidec since the date
hereof. PROSPECTUS
----------------------
TABLE OF CONTENTS
February 11, 2000
Page
Risk Factors 2
The Company 13
Where You Can Find More
Information 24
Use of Proceeds 25
Selling Stockholders 25
Plan of Distribution 25
Legal Matters 26
Experts 26
