UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997
Commission File Number 0-21177
NETSMART TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3680154
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
146 Nassau Avenue, Islip, NY 11751
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 968-2000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes_X_ No__
Number of shares of common stock outstanding as of October 21, 1997: 8,235,542
<PAGE>
Netsmart Technologies, Inc.
Index
Part I: - Financial Information:
Item 1. Financial Statement Page
Consolidated Balance Sheets - September 30, 1997
and December 31, 1996 1-3
Consolidated Statements of Operations-
Nine Months Ended September 30, 1997 and 1996 and
Three Months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1997 and 1996 5-6
Consolidated Statement of Stockholders' Equity-
Nine Months Ended September 30, 1997 7-8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
<PAGE>
Netsmart Technologies, Inc.
Consolidated Balance Sheets
September 30, December 31,
1997 1996
------------- ------------
Assets
Current Assets:
Cash $ 4,431 $ 998,317
Accounts receivable- Net 2,052,829 2,284,450
Costs and Estimated Profits in Excess
of Interim Billings 811,059 931,786
Other Current Assets 102,412 82,205
---------- ----------
Total current assets 2,970,731 4,296,758
---------- ----------
Property and Equipment - Net 400,793 382,586
---------- ----------
Other assets:
Software Development Costs 626,756 250,920
Investment in Joint Venture at Equity 129,308 120,546
Customer Lists 2,893,814 3,128,814
Other Assets 60,811 71,105
---------- ----------
Total Other Assets 3,710,689 3,571,385
---------- ----------
Total Assets $7,082,213 $8,250,729
========== ==========
See Notes to Financial Statements.
-1-
<PAGE>
Netsmart Technologies, Inc.
Consolidated Balance Sheets
September 30, December 31,
1997 1996
------------ -----------
Liabilities and Stockholders' Equity:
Current Liabilities:
Notes Payable - Other $ 873,184 $ 590,031
Capitalized Lease Obligations 21,443 41,449
Accounts Payable 1,365,244 983,156
Accrued Expenses 1,057,443 991,075
Interim Billings in Excess of Costs
and Estimated Profits 993,934 1,102,105
Due to Related Parties 73,297 23,542
Deferred Revenue 142,909 88,420
--------- ---------
Total Current Liabilities - Forward 4,527,454 3,819,778
--------- ---------
Capitalized Lease Obligations - Forward 3,320 15,945
---------- ----------
See Notes to Financial Statements.
-2-
<PAGE>
Netsmart Technologies, Inc.
Consolidated Balance Sheets
September 30, December 31,
1997 1996
------------ -----------
Total Current Liabilities - Forwarded $ 4,527,454 $ 3,819,778
----------- -----------
Capitalized Lease Obligations - Forwarded 3,320 15,945
----------- -----------
Commitments and Contingencies -- --
----------- -----------
Stockholders' Equity:
Preferred Stock, $.01 Par Value;
Authorized 3,000,000 Shares;
Authorized, Issued and Outstanding:
Series D 6% Redeemable Preferred Stock
$.01 Par Value 3,000 Shares Authorized,
1,210 Issued and Outstanding
[Liquidation Preference of $1,210,000] 12 12
Additional Paid-in Capital - Preferred
Stock - Series D at
September 30, 1997 and December 31, 1996 1,209,509 1,209,509
Common Stock - $.01 Par Value; Authorized
15,000,000 Shares; Issued and Outstanding
6,975,782 Shares at September 30, 1997 and
6,798,203 at December 31, 1996 69,757 67,982
Additional Paid-in Capital - Common Stock 15,011,366 14,863,328
Accumulated Deficit (13,739,205) (11,725,825)
---------- ----------
Total Stockholders' Equity 2,551,439 4,415,006
---------- ---------
Total Liabilities and Stockholders' Equity $ 7,082,213 $ 8,250,729
========== ==========
See Notes to Financial Statements.
-3-
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Statements of Operations
Nine months ended Three months ended
September 30, September 30,
----------------- ------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Software and Related
Systems and Services:
General $ 2,601,602 $ 4,065,762 $ 973,776 $ 740,283
Maintenance Contract
Services 975,129 890,018 309,188 317,186
---------- ---------- ---------- ----------
Total Software and Related
Systems and Services 3,576,731 4,955,780 1,282,964 1,057,469
Data Center Services 1,567,014 1,543,100 547,728 505,853
---------- ----------- --------- ----------
Total Revenues 5,143,745 6,498,880 1,830,692 1,563,322
---------- ----------- --------- ----------
Cost of Revenues:
Software and Related
Systems and Services:
General 2,688,192 3,938,025 1,017,686 1,169,732
Maintenance Contract
Services 701,251 409,483 220,262 124,208
---------- ----------- --------- ---------
Total Software and Related
Systems and Services 3,389,443 4,347,508 1,237,948 1,293,940
Data Center Services 1,129,510 868,437 390,234 298,620
---------- ----------- --------- ---------
Total Cost of Revenues 4,518,953 5,215,945 1,628,182 1,592,560
---------- ----------- --------- ---------
Gross Profit 624,792 1,282,935 202,510 (29,238)
Selling, General and
Administrative Expenses 2,015,057 1,489,141 697,760 555,156
Related Party Administrative
Expenses 135,000 24,00 45,00 15,000
Compensation expense -
Warrants and Options Granted 2,229,300 (769)
--------- --------- --------- --------
Loss from Operations (1,525,265) (2,459,506) (540,250) (598,625)
Interest Expense 239,515 394,163 88,98 119,061
Financing Costs 1,680,000 1,680,000
Equity in net loss of joint
venture 139,699 109,185 35,36 9,185
---------- ---------- --------- ---------
Net Loss $(1,904,479) $(4,642,854) $ (664,592) $(2,406,871)
============ ============ ============= ============
Weighted average number of
shares of common stock 6,819,802 5,068,654 6,819,802 5,068,654
Loss per share $ (.28) $ (.92) $ (.10) $ (.48)
============ ============ ============= ============
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Statements of Cash Flows
Nine months ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Operating Activities:
Net [Loss] $(1,904,479) $(4,642,854)
------------ ------------
Adjustments to Reconcile Net Income [Loss]
to Net Cash [Used for] Provided by
Operating Activities:
Depreciation and Amortization 439,518 348,190
Administrative Expenses -- 9,000
Additional Compensation Related to the
Issuance of Equity Securities -- 2,229,300
Financing Expenses related to the
Issuance of Common Stock -- 1,680,000
Equity in Net Loss of Joint Venture 139,699 109,185
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable 231,621 (279,636)
Costs and Estimated Profits in
Excess of Interim Billings 120,727 (372,519)
Other Current Assets (20,207) 8,900
Other Assets 10,294 (4,923)
Increase [Decrease] in
Accounts Payable 382,088 (240,223)
Accrued Expenses 66,368 178,887
Interim Billings in Excess of
Costs and Estimated Profits 108,171) 351,608
Due to Related Parties 49,755 (120,390)
Deferred Revenue 54,489 (82,944)
---------- ------------
Total Adjustments 1,366,181 3,814,435
---------- ------------
Net Cash - Operating Activities -
Forward (538,298) 828,419)
---------- ------------
Investing Activities:
Acquisition of Property and Equipment (136,561) (62,401)
Software Development Costs (462,000) (278,800)
Investment in Joint Venture (148,461) (345,000)
----------- -------------
Net Cash - Investing Activities -
Forward (747,022) (686,201)
----------- -------------
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
Netsmart Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
Nine months ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Net Cash - Operating Activities -
Forwarded $ (538,298) $ (828,419)
------------ ------------
Net Cash - Investing Activities -
Forwarded (747,022) (686,201)
------------ ------------
Financing Activities:
(Payment) Proceeds of Notes Payable 283,153 (553,561)
Payment of Bank Note Payable (79,000)
Payment of Capitalized Lease
Obligations (32,631) (23,416)
Cash Overdraft -- (95,536)
Payment of Short-Term Notes to Related Parties -- (750,000)
Redemption of Series B Preferred Stock -- (96,000)
Issuance of Common Stock -- 5,175,000
Cost associated with Issuance of Stock -- (1,347,511)
Proceeds from Warrant Exercise -- 1,600,000
Proceeds from Stock Option Exercise 40,912 --
------------ ------------
Net Cash - Financing Activities 291,434 3,829,976
------------ ------------
Net Increase [Decrease] in Cash (993,886) 2,315,356
Cash - Beginning of Periods 998,317 --
------------ ------------
Cash - End of Periods $ 4,431 $ 2,315,356
============ ===========
Supplemental Disclosure of Cash Flow
Information Cash paid during the periods
for:
Interest $ 253,771 $ 369,384
Taxes $ 12,013 --
Supplemental Disclosure of Non-cash Financing Activities:
During the nine months ended September 30, 1997, the Company had the following:
1) 12,802 shares of common stock were issued to Series D Preferred stockholders
as dividends which were payable on October 1, 1996 and April 1, 1997.
These shares were valued at $108,900.
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
Netsmart Technologies, Inc.
Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1997
Series D Preferred Stock at .01 Par Value Shares Amount
------ ------
Beginning Balance 1,210 $ 12
------ -------
Ending Balance 1,210 $ 12
====== =======
Additional Paid-In Capital Preferred Stock
Beginning Balance $1,209,509
Ending Balance $1,209,509
=========
Common Stock $.01 Par Value Authorized
15,000,000 Shares
Beginning Balance 6,798,203 $ 67,982
Stock Options Exercised 164,777 1,647
Common Stock Issued - Series D
Preferred Stock Dividend 12,802 128
--------- ---------
Ending Balance 6,975,782 $ 69,757
========= ========
See Notes to Financial Statements.
-7-
<PAGE>
Netsmart Technologies, Inc.
Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1997
Additional Paid-In Capital Common Stock Shares Amount
Beginning Balance $ 14,863,328
Stock Options Exercised 39,266
Common Stock Issued - Series D
Preferred Stock Dividend 108,772
-----------
Ending Balance $ 15,011,366
===========
Accumulated Deficit
Beginning Balance $(11,725,826)
Series D Preferred Stock Dividend (108,900)
Net Loss (1,904,479)
-----------
Ending Balance $(13,739,205)
===========
Total Stockholders' Equity $ 2,551,439
===========
See Notes to Financial Statements.
-8-
<PAGE>
Netsmart Technologies, Inc.
Notes to Consolidated Financial Statements
(1) In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Company as
of September 30,1997 and the results of its operations for the nine months and
three months ended September 30,1997 and 1996 and the changes in cash flows for
the nine months ended September 30,1997 and 1996. The results of operations for
the nine months ended September 30,1997 and 1996 are not necessarily indicative
of the results to be expected for the full year.
(2) The accounting policies followed by the Company are set forth in Notes 1 and
2 to the Company's consolidated financial statements as filed in its December
31, 1996 Form 10-K.
During the nine months ended September 30, 1997, the Company invested in
software for a customer activated terminal for a major west coast utility. As a
result of this effort, the Company capitalized software development costs in the
amount of $258,000. Also during the nine months ended September 30, 1997, the
Company developed a series of software products and capitalized software
development costs of $203,500.
On June 30, 1997, the Company paid a dividends relating to the Series D
Preferred Stock which were payable on October 1, 1996 and April 1, 1997. The
dividends were paid through the issuance 12,802 shares of Common Stock and
valued at the fair market value at the respective dates they became payable.
This resulted in an increase of $108,900 in the accumulated deficit with a
corresponding increase in Common Stock and additional paid in capital - Common
stock in the amounts of $128 and $108,772, respectively.
In September 1997, 164,777 stock options were exercised in the 1993 Long Term
Incentive stock option plan and the Company received gross proceeds of $40,913.
As a result, Common Stock and additional paid in capital Common stock increased
by $ 1,647 and $39,266 respectively.
(3) Loss per share - Loss per share is computed by dividing the net loss for the
period by the weighted average number of shares of common stock. Common stock
equivalents are assumed converted to common stock when dilutive. During periods
of operations in which losses were incurred, common stock equivalents were
excluded from the weighted average number of shares of common stock because
their inclusion would be anti-dilutive.
(4) In October 1997, the Company issued 80,000 shares of Common stock for the
purchase of certain assets and customer lists.
In September 1997 the Company amended the terms of its Series A Redeemable
Common Stock Purchase Warrants. Pursuant to the amendment, (i) the exercise
price of the Warrant was reduced from $4.50 to $3.00, and (ii) upon payment of
the $3.00 exercise price, the Company will issue two shares of Common Stock,
resulting in an effective exercise price of $1.50 per share. The amended terms
will remain in effect until December 16, 1997. For the period October 1, 1997
through October 29, 1997, 629,880 warrants were exercised and the Company
received $1,889,640 in gross proceeds. As a result, the Company issued 1,259,760
additional common shares in October.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of operations
Nine Months Ended September 30, 1997 and 1996
The Company's revenue for the nine months ended September 30, 1997 (the
"September 1997 period") was $5,144,000, a decrease of $1,355,000, or 21% from
the revenue for the nine months ended September 30, 1996 (the "September 1996
period") which was $6,499,000. This decrease results from a decrease in revenue
from $1,593,000 in the September 1996 period to $95,000 in the September 1997
period, from a contract with IBN Inc. ("IBN"). IBN represented the Company's
largest customer in the September 1996 period, accounting for approximately
24.5% of revenue. As of September 30, 1997 the contract is substantially
complete. The Company is no longer providing professional services to IBN. The
Company intends to expand its marketing effort for its CarteSmart System,
however, at September 30, 1997, the Company did not have any significant
contracts for the CarteSmart system.
Revenue from the Company's health information systems continued to represent the
Company's principal source of revenue in September 1997 period, accounting for
$4,943,000 or 96% of revenue. The largest component of revenue in the September
1997 period was data center (service bureau) revenue which increased to
$1,567,000 from $1,543,000 in the September 1996 period, reflecting a 2%
increase. The turnkey systems revenue increased to $1,463,000 in the September
1997 period from $1,235,000 in the September 1996 period, reflecting an increase
of 18%. Maintenance revenue increased to $975,000 in the September 1997 period
from $890,000 in the September 1996 period, reflecting an increase of 10%.
License revenue decreased to $214,000 in the September 1997 period from $309,000
in the September 1996 period, a decrease of 31%. License revenue is generated as
part of a sale of a turnkey system pursuant to a contract or purchase order that
includes development of a turnkey system and maintenance. Third party hardware
and software revenue decreased to $724,000 in the September 1997 period from
$919,000 in the September 1996 period, reflecting a decrease of 21%. Sales of
third party hardware and software are made in connection with the sales of
turnkey systems.
Revenue from contracts from government agencies represented 35% of revenue for
September 1997 period . The Company believes that such contracts will continue
to represent an important part of its business.
Gross profit decreased to $625,000 in the September 1997 period from $1,283,000
in the September 1996 period, a 51% decrease. The decrease in the gross profit
was substantially the result of the reduction in revenue from the IBN contract,
on which there was a negative gross profit as well as a decrease in the health
information systems license revenue.
Selling, general and administrative expenses were $2,015,000 in the September
1997 period, an increase of 35% from the $1,489,000 in the September 1996
period. This increase was the result of an increase in personnel and salaries in
the sales and marketing and administrative areas as well as an increase in other
direct sales expenses and insurance.
During the September 1996 period, the Company incurred non cash compensation
charges of $2.2 million arising out of the issuance by the Company of warrants
and options having exercise prices which were less than the market value of the
Common Stock at the date of approval by the board of directors. No such charges
were incurred during the September 1997 period.
-10-
<PAGE>
During the September 1996 period, the Company issued shares of Common Stock to
certain lenders and as a result, incurred a financing cost of $1.7 million which
was charged to operations. No such charges were incurred during the September
1997 period.
In the September 1997 period, the Company's 50% share of the loss in its joint
venture corporation with respect to the development of CCAC software purchased
in 1996 increased from $109,000 in the September 1996 period to $140,000 in the
September 1997 period.
Interest expense was $239,000 in the September 1997 period, a decrease of
$155,000, or 39% from the $394,000 in the September 1996 period . This is a
result of a decrease in the average borrowings during the September 1997 period.
The most significant component of the interest expense on an ongoing basis is
the interest payable to the Company's asset-based lender. The Company pays
interest on such loan at a rate equal to the greater of 18% per annum or prime
plus 8% plus a fee of 1% of the face amount of the invoice. Effective August 1,
1997, the Company renegotiated its agreement with its asset - based lender
whereby the interest rate was reduced to a basic interest rate of prime plus
8.5% plus a fee of 5/8% of the face amount of the invoice.
Related party administrative expense was $135,000 in the September 1997 period,
an increase of $111,000 from the $24,000 in the September 1996 period. This
increase was the result of an agreement with The Trinity Group, an affiliate, to
provide general business, management and financial consulting services for a
monthly fee of $15,000.
The Company did not incur any research and development costs in the September
1997 and 1996 periods.
As a result of the foregoing factors, the Company incurred a net loss of $1.9
million, or $.28 per share, in the September 1997 period, as compared with a net
loss of $4.6 million, or $.92 per share, in the September 1996 period.
Three months ended September 30, 1997 and 1996
The Company's revenue for the three months ended September 30, 1997 (the
"September 1997 quarter") was $1,830,000, an increase of $267,000, or 17% from
the revenue for the three months ended September 30, 1996 (the "September 1996
quarter") which was $1,563,000.
Revenue from the Company's health information systems continued to represent the
Company's principal source of revenue in the September 1997 quarter, accounting
for $1,811,000 or 99% of revenue. The largest component of revenue in the
September 1997 quarter was turnkey systems revenue which increased to $650,000
from $415,000 in the September 1996 quarter, reflecting a 57% increase. This
increase is substantially the result of growth in turnkey backlog and the
ability of the Company to provide the staff necessary to generate the additional
revenue. The data center (service bureau) revenue increased to $548,000 in the
September 1997 quarter from $506,000 in the September 1996 quarter, reflecting
an increase of 8%. Maintenance revenue decreased to $309,000 in the September
1997 quarter from $317,000 in the September 1996 quarter, reflecting a decrease
of 3%. License revenue remained constant at $69,000 for both the September 1997
quarter and September 1996 quarter. License revenue is generated as part of a
sale of a turnkey system pursuant to a contract or purchase order that includes
development of a turnkey system and maintenance. Third party hardware and
software revenue decreased to $235,000 in the September 1997 quarter from
$256,000 in the September 1996 quarter, reflecting a decrease of 8%. Sales of
third party hardware and software are made in connection with the sales of
turnkey systems.
-11-
<PAGE>
Revenue from contracts from government agencies represented 40% of revenue for
the September 1997 quarter. The Company believes that such contracts will
continue to represent an important part of its business.
Gross profit increased to $203,000 in the September 1997 quarter from $(29,000)
in the September 1996 quarter, a 793% increase. The negative gross profit was
substantially due to costs incurred in the September 1996 quarter relating to
the IBN contract. Such costs were no longer being incurred in the September 1997
quarter. The increase in the gross profit was substantially the result of a
reduction in costs associated with the IBN contract as well as the increase in
revenue from the health information systems mentioned above.
Selling, general and administrative expenses were $698,000 in the September 1997
quarter, an increase of 26% from the $555,000 in the September 1996 quarter.
This increase was the result of an increase in personnel and salaries in the
sales and marketing and administrative areas as well as an increase in other
direct sales expenses and insurance.
During the September 1996 quarter, the Company issued shares of Common Stock to
certain lenders and as a result, incurred a financing cost of $1.7 million which
was charged to operations. No such charges were incurred during the September
1997 quarter.
In the September 1997 quarter, the Company's 50% share of the loss in its joint
venture corporation with respect to the development of CCAC software purchased
in 1996 increased from $9,000 in the September 1996 quarter to $35,000 in the
September 1997 quarter.
Interest expense was $89,000 in the September 1997 quarter, a decrease of
$30,000, or 25% from the $119,000 in the September 1996 quarter. This is a
result of a decrease in the average borrowings during the 1997 quarter. The most
significant component of the interest expense on an ongoing basis is the
interest payable to the Company's asset-based lender. The Company pays interest
on such loan at a rateof prime plus 8.5% plus a fee of 5/8% of the face amount
of the invoice.
Related party administrative expense was $45,000 in the September 1997 quarter,
an increase of $30,000 from the $15,000 in the September 1996 quarter. This
increase was the result of an agreement with The Trinity Group an affiliate to
provide general business, management and financial consulting services for a
monthly fee of $15,000.
The Company did not incur any research and development costs in the September
1997 and 1996 quarters.
As a result of the foregoing factors, the Company incurred a net loss of
$665,000, or $.10 per share, in the September 1997 quarter, as compared with a
net loss of $2,407,000 or per $.47 per share, in the September 1996 quarter.
Liquidity and Capital Resources
The Company had a working capital deficit of $1.6 million at September 30, 1997
as compared to a working capital surplus of $477,000 at December 31, 1996. The
decrease in working capital for the nine months ended September 30, 1997 was
substantially due to the net loss incurred for the nine months ended September
30, 1997 as well as the Company's increase in its capitalized software. The
Company also invested an additional $148,000 in its CCAC joint venture during
the nine months ended September 30, 1997. The Company's cash balances were
$4,000 at September 30, 1997 as compared to $998,000 at December 31, 1996.
-12-
<PAGE>
The Company's principal source of funds, other than revenue, has been an
accounts receivable financing agreement with an asset based lender whereby it
may borrow up to 80% of eligible accounts receivable up to a maximum of
$750,000. Effective August 1, 1997, the maximum amount the Company can borrow
has been increased to $1,250,000. As of September 30, 1997, the outstanding
borrowings under this facility were $873,000. At September 30, 1997, the maximum
amount available under this formula was $887,000.
At September 30, 1997, accounts receivable and costs and estimated profits in
excess of interim billings were approximately $2.9 million, representing
approximately 150 days of revenue based on annualizing the revenue for the nine
months ended September 30, 1997, although no assurance can be given that revenue
will continue at the same level as the nine month period. Accounts receivable at
September 30, 1997 decreased by $231,000 from $2,284,000 at December 31, 1996 to
$2,053,000 at September 30, 1997. At September 30, 1997, IBN accounted for 17%
of the total gross accounts receivable balance. No other customer accounted for
more than 10% of the accounts receivable balance. A significant percentage of
such accounts receivable from IBN at September 30, 1997 has been outstanding for
more than one year.
In September 1997 the Company amended the terms if its Series A Redeemable
Common Stock Purchase Warrants. Pursuant to the amendment, (i) the exercise
price of the Warrant was reduced from $4.50 to $3.00, and (ii) upon payment of
the $3.00 exercise price, the Company will issue two shares of Common Stock,
resulting in an effective exercise price of $1.50 per share. The amended terms
will remain in effect until December 16, 1997. For the period October 1, 1997
through October 29, 1997, 629,880 warrants were exercised and the Company has
received $1,889,640 in gross proceeds. The Company believes that these funds
will be sufficient to enable it to operate without additional funds for at least
one year.
-13-
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETSMART TECHNOLOGIES, INC.
Chairman of the Board October 31, 1997
- ------------------------- (Principal Executive Officer)
Lewis S. Schiller
Chief Financial Officer October 31, 1997
- ------------------------- (Principal Financial and
Anthony F. Grisanti Accounting Officer)
NETSMART TECHNOLOGIES, INC.
EXHIBIT 11.1 - CALCULATION OF EARNINGS PER SHARE
Nine Months Ended
September 30, 1997
Primary EPS Fully Diluted EPS
Net Loss $(1,904,479) $(1,904,479)
Dividend Adjustment -- --
----------- -----------
Adjusted Net Loss $(1,904,479) $(1,904,479)
=========== ===========
Loss Per Share:
Loss Per Share - Note 1 $ (.28)
===========
Loss Per Share - Assuming Full
Dilution - Note 2 $ (.21)
===========
Note 1: Computed by dividing net loss by the weighted average number of
common shares (6,819,802) for the nine months ended September 30,1997.
Adjusting it by items (i) to (v) below using the treasury stock method
of calculating earnings per share.
(i) Assumes that 204,340 1995 stock options issued in 1995 and
outstanding at September 30, 1997 were exercised at the beginning
of the period and that the proceeds were used to purchase treasury
stock at the average market price of the Company's common stock for
the period as quoted on the Nasdaq SmallCap Market, retire debt,
redeem preferred stock and to invest the balance if appropriate.
(ii) Assumes that 129,500 1996 stock options issued in 1996 and
outstanding at September 30, 1997 were exercised at the beginning
of the period and that the proceeds were used to purchase treasury
stock at the average market price of the Company's common stock for
the period as quoted on the Nasdaq SmallCap Market, retire, redeem
preferred stock debt, and to invest the balance if appropriate.
(iii)Assumes Series B common stock purchase warrants to purchase an
aggregate of 877,500 common shares were exercised at the beginning
of the period and that the proceeds were used to purchase treasury
stock at the average market price of the Company's common stock for
the period as quoted on the Nasdaq SmallCap Market, retire debt,
redeem preferred stock and to invest the balance if appropriate.
(iv) Assumes common stock purchase warrants to purchase an aggregate of
56,250 shares were exercised at the beginning of the period and
that the proceeds were used to purchase treasury stock at the
average market price of the Company's common stock for the period
as quoted on the Nasdaq SmallCap Market, retire debt, redeem
preferred stock and to invest the balance if appropriate.
(v) Assumes Series A redeemable common stock purchase warrants to
purchase an aggregate of 1,793,750 common shares were exercised at
the beginning of the period and that the proceeds were used to
purchase treasury stock for the period as quoted on the Nasdaq
SmallCap Market, retire debt, redeem preferred stock and to invest
the balance if appropriate.
The proceeds received from the above transactions would then be used to purchase
treasury stock up to 20%, retire debt redeem preferred stock and the remaining
balance invested.
<PAGE>
NETSMART TECHNOLOGIES, INC.
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE [CONTINUED]
Note 2: Computed by dividing net loss by the weighted average number of common
shares (9,247,903) for the nine months ended September 30, 1997 adjusting it by
items (i) to (v) below using the treasury stock method of calculating earnings
per share.
(i) Assumes that 204,340 1995 stock options issued in 1995 and
outstanding at September 30, 1997 were exercised at the beginning
of the period and that the proceeds were used to purchase treasury
stock at the market price of the Company's common stock at
September 30, 1997 as quoted on the Nasdaq SmallCap Market, retire
debt, redeem preferred stock and to invest the balance if
appropriate.
(ii) Assumes that 129,500 1996 stock options issued in 1996 and
outstanding at September 30, 1997 were exercised at the beginning
of the period and that the proceeds were used to purchase treasury
stock at the market price of the Company's common stock at
September 30, 1997 as quoted on the Nasdaq SmallCap Market, retire
debt, redeem preferred stock and to invest the balance if
appropriate.
(iii)Assumes Series B common stock purchase warrants to purchase an
aggregate of 877,500 common shares were exercised at the beginning
of the period and that the proceeds were used to purchase treasury
stock at the market price of the Company's common stock at
September 30, 1997 as quoted on the Nasdaq SmallCap Market, retire
debt, redeem preferred stock and to invest the balance if
appropriate.
(iv) Assumes that stock options to purchase 56,250 shares were exercised
at the beginning of the period and that the proceeds were used to
purchase treasury stock at the market price of the Company's common
stock at September 30, 1997 as quoted on the Nasdaq SmallCap Market
, retire debt, redeem preferred stock and to invest the balance if
appropriate.
(v) Assumes Series A redeemable common stock purchase warrants to
purchase an aggregate of 1,793,750 common shares were exercised at
the beginning of the period and that the proceeds were used to
purchase treasury stock at the Company's common stock price at
September 30, 1997 as quoted on the Nasdaq SmallCap Market, retire
debt, redeem preferred stock and to invest the balance if
appropriate.
The proceeds received from the above transactions would then be used to purchase
treasury stock up to 20%, retire debt, redeem preferred stock and the remaining
balance invested.
NOTE - This calculation is submitted in accordance with the Securities Exchange
Act of 1934 Release No. 9083, although it is contrary to para. 40 of APB 15
because it may produce an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS FILED
AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<CIK> 0001011028
<NAME> Netsmart Technologies, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,431
<SECURITIES> 0
<RECEIVABLES> 2,052,829
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,970,731
<PP&E> 839,530
<DEPRECIATION> 438,737
<TOTAL-ASSETS> 7,082,213
<CURRENT-LIABILITIES> 4,527,454
<BONDS> 0
0
12
<COMMON> 69,757
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,082,213
<SALES> 5,143,745
<TOTAL-REVENUES> 5,143,745
<CGS> 4,518,953
<TOTAL-COSTS> 4,014,235
<OTHER-EXPENSES> 2,289,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239,515
<INCOME-PRETAX> 1,904,479
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<INCOME-CONTINUING> 1,904,479
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<CHANGES> 0
<NET-INCOME> 1,904,479
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.21)
</TABLE>
