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 June 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 August 4, 1997: 6,811,005
=========
<PAGE>
Netsmart Technologies, Inc.
Index
Part I: - Financial Information:
Item 1. Financial Statements: Page
----
Consolidated Balance Sheets - June 30, 1997
and December 31, 1996 1-3
Consolidated Statements of Operations-
Six Months Ended June 30, 1997 and 1996 and
three months ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1997 and 1996 5-6
Consolidated Statement of Stockholders' Equity-
Six Months Ended June 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>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Balance Sheets
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash $ 22,395 $ 998,317
Accounts receivable- Net 2,431,572 2,284,450
Costs and Estimated Profits in Excess
of Interim Billings 778,014 931,786
Other Current Assets 77,146 82,205
------ ------
Total current assets 3,309,127 4,296,758
--------- ---------
Property and Equipment - Net 390,537 382,586
------- -------
Other assets:
Software Development Costs 665,652 250,920
Investment in Joint Venture at Equity 164,669 120,546
Customer Lists 2,972,814 3,128,814
Other Assets 69,723 71,105
------ ------
Total Other Assets 3,872,858 3,571,385
--------- ---------
Total Assets $ 7,572,522 $ 8,250,729
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Balance Sheets
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Notes Payable - Other $ 703,111 $ 590,031
Capitalized Lease Obligations 21,951 41,449
Accounts Payable 1,485,602 983,156
Accrued Expenses 886,252 991,075
Interim Billings in Excess of Costs
and Estimated Profits 1,150,306 1,102,105
Due to Related Parties 71,780 23,542
Deferred Revenue 68,641 88,420
------ ------
Total Current Liabilities 4,387,643 3,819,778
--------- ---------
Capitalized Lease Obligations - Forward 9,761 15,945
----- ------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Balance Sheets
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Total Current Liabilities - Forwarded $ 4,387,643 $ 3,819,778
----------- ------------
Capitalized Lease Obligations - Forwarded 9,761 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 $1,209,509 - Series D at
June 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
6,811,005 Shares at June 30, 1997 and 6,798,203
at December 31, 1996 68,110 67,982
Additional Paid-in Capital - Common Stock 14,972,100 14,863,328
Accumulated Deficit (13,074,613) (11,725,825)
----------- -----------
Total Stockholders' Equity 3,175,118 4,415,006
--------- ---------
Total Liabilities and Stockholders' Equity $ 7,572,522 $ 8,250,729
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Statements of Operations
Six months ended Three months ended
June 30, June 30,
-------------- ---------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Software and Related
Systems and Services:
General $ 1,627,826 $ 3,325,479 $ 864,309 $1,535,419
Maintenance Contract
Services 665,941 572,832 342,168 283,604
------- ------- ------- -------
Total Software and Related
Systems and Services 2,293,767 3,898,311 1,206,477 1,819,023
Data Center Services 1,019,286 1,037,247 534,766 555,879
--------- --------- ------- -------
Total Revenues 3,313,053 4,935,558 1,741,243 2,374,902
--------- --------- --------- ---------
Cost of Revenues:
Software and Related
Systems and Services:
General 1,670,506 2,768,293 829,543 1,299,160
Maintenance Contract
Services 480,989 285,275 247,414 141,110
------- ------- ------- -------
Total Software and Related
Systems and Services 2,151,495 3,053,568 1,076,957 1,440,270
Data Center Services 739,276 569,817 399,199 284,687
------- ------- ------- -------
Total Cost of Revenues 2,890,771 3,623,385 1,476,156 1,724,957
--------- --------- --------- ---------
Gross Profit 422,282 1,312,173 265,087 649,945
Selling, General and
Administrative Expenses 1,317,297 933,985 678,532 478,634
Related Party Administrative
Expenses 90,000 9,000 45,000 4,500
Compensation expense -
Warrants and Options Granted 2,230,069 155,569
Loss from Operations (985,015) (1,860,881) (458,445) (11,242)
Interest Expense 150,533 275,102 82,097 148,543
------- ------- ------ -------
Equity in net loss of joint
venture 104,339 100,000 46,032 100,000
------- ------- ------ -------
Net Loss $(1,239,887) $(2,235,983) $ (586,574) $ (237,301)
=========== =========== ========== ===========
Weighted average number of
shares of common stock 6,800,032 4,821,528 6,800,032 4,821,528
Loss per share $ (.18) $ (.46) $ (.08) $ (.05)
=========== =========== =========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Statements of Cash Flows
Six months ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Operating Activities:
Net [Loss] $(1,239,887) $(2,235,983)
Adjustments to Reconcile Net Income [Loss]
to Net Cash [Used for] Provided by
Operating Activities:
Depreciation and Amortization 278,400 220,096
Administrative Expenses 9,000
Compensation Expense -
Warrants and Options Granted 2,230,069
Equity in Net Loss of Joint Venture 104,339 100,000
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (147,122) (643,521)
Costs and Estimated Profits in
Excess of Interim Billings 153,772 (583,675)
Other Current Assets 5,059 514
Other Assets 1,382 (2,522)
Increase [Decrease] in
Accounts Payable 502,446 1,076,559
Accrued Expenses (104,823) 131,168
Interim Billings in Excess of
Costs and Estimated Profits 48,201 522,907
Due to Related Parties 48,238 (55,265)
Deferred Revenue (19,779) (100,782)
------- --------
Total Adjustments 870,113 2,904,548
------- ---------
Net Cash - Operating Activities -
Forward (369,774) 668,565
-------- -------
Investing Activities:
Acquisition of Property and Equipment (83,083) (35,020)
Software Development Costs (462,000) (278,800)
Investment in Joint Venture at Equity (148,462) (650,000)
-------- --------
Net Cash - Investing Activities -
Forward (693,545) (963,820)
-------- --------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Netsmart Technologies, Inc.
Consolidated Statements of Cash Flows
Six months ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Net Cash - Operating Activities -
Forwarded $ (369,774) $ 668,565
----------- ----------
Net Cash - Investing Activities -
Forwarded (693,545) (963,820)
Financing Activities:
(Payment) Proceeds of Notes Payable - Other 113,080 540,800
Payment of Bank Note Payable (79,000)
Payment of Capitalized Lease
Obligations (25,683) (9,448)
Cash Overdraft 31,583
Deferred Public Offering Costs (188,373)
------- --------
Net Cash - Financing Activities 87,397 295,562
Net Increase [Decrease] in Cash (975,922) 307
Cash - Beginning of Periods 998,317
------- -------
Cash - End of Periods $ 22,395 $ 307
=========== ==========
Supplemental Disclosure of Cash Flow
Information Cash paid during the periods
for:
Interest $ 178,357 $ 193,972
=========== ==========
Supplemental Disclosure of Non-cash Financing Activities:
During the six months ended June 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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Netsmart Technologies, Inc.
Consolidated Statement of Stockholders' Equity
For the Six Months Ended June 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
Common Stock Issued - Series D
Preferred Stock Dividend 12,802 128
------ ---
Ending Balance 6,811,005 $ 68,110
========= =========
See Notes to Financial Statements.
<PAGE>
Netsmart Technologies, Inc.
Consolidated Statement of Stockholders' Equity
For the Six Months Ended June 30, 1997
Additional Paid-In Capital Common Stock Shares Amount
----- -----
Beginning Balance $ 14,863,328
Common Stock Issued - Series D
Preferred Stock Dividend 108,772
-------
Ending Balance $ 14,972,100
============
Accumulated Deficit
Beginning Balance $(11,725,826)
Series D Preferred Stock Dividend (108,900)
Net Loss (1,239,887)
----------
Ending Balance $(13,074,613)
============
Total Stockholders' Equity $ 3,175,118
============
See Notes to Financial Statements.
<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 June 30,1997 and the results of its operations for the six months and three
months ended June 30,1997 and 1996 and the changes in cash flows for the six
months ended June 30,1997 and 1996.
(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 six months ended June 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 six months ended June 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 dividend relating to the Series D Preferred
Stock which were payable on October 1, 1996 and April 1, 1997. The dividend was
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.
(3) The results of operations for the six months ended June 30,1997 and 1996 are
not necessarily indicative of the results to be expected for the full year.
(4) 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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of operations
Six Months Ended June 30, 1997 and 1996
The Company's revenue for the six months ended June 30, 1997 (the "June 1997
period") was $3,313,000, a decrease of $1,623,000, or 33% from the revenue for
the six months ended June 30, 1996 (the "June 1996 period") which was
$4,936,000. Approximately $1,498,000 of this decrease represented a decrease in
revenue from $1,593,000 in the June 1996 period to $95,000 in the June 1997
period, from a contract with IBN Inc. ("IBN"). IBN represented the Company's
largest customer in the June 1996 period , accounting for approximately 32.3% of
revenue. As of June 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 June 30,
1997, the Company did not have any significant contracts for the CarteSmart
system. The remainder of the decrease in revenue for the June 1997 period was
attributable to a modest decline in the Company's health information systems
divisions sales.
Revenue from the Company's health information systems continued to represent the
Company's principal source of revenue in June 1997 period, accounting for
$3,131,000 or 95% of revenue. The largest component of revenue in the June 1997
period was data center (service bureau) revenue which decreased to $1,019,000
from $1,037,000 in the June 1996 period, reflecting a 2% decrease. The turnkey
systems revenue decreased to $812,000 in the June 1997 period from $820,000 in
the June 1996 period, reflecting a decrease of 1%. Maintenance revenue increased
to $666,000 in the June 1997 period from $573,000 in the June 1996 period,
reflecting an increase of 16%. License revenue decreased to $145,000 in the June
1997 period from $240,000 in the June 1996 period, a decrease of 40%. Although
this decrease reflected reduced new business during the June period, the Company
has experienced an increase in new order backlog during the second 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 $489,000 in
the June 1997 period from $663,000 in the June 1996 period, reflecting a
decrease of 26%. Sales of third party hardware and software are made in
connection with the sales of turnkey systems.
Revenue from contracts from government agencies represented 32% of revenue for
June 1997 period . The Company believes that such contracts will continue to
represent an important part of its business.
Gross profit decreased to $422,000 in the June 1997 period from $1,312,000 in
the June 1996 period, a 68% decrease. The decrease in the gross profit was
substantially the result of the reduction in revenue from the IBN contract as
well as a decrease in the health information systems license revenue.
Selling, general and administrative expenses were $1,317,000 in the June 1997
period, an increase of 41% from the $934,000 in the June 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 June 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 June 1997 period.
In the June 1997 period the Company recognized its 50% share of its loss in its
joint venture corporation with respect to the development of CCAC software
purchased in 1996. The Company's share of such loss was $104,000 for the June
1997 period as compared to $100,000 for the June 1996 period.
Interest expense was $151,000 in the June 1997 period, a decrease of $124,000,
or 45% from the $275,000 in the June 1996 period . This is a result of a
decrease in the average borrowings during the 1997. 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 $90,000 in the June 1997 period, an
increase of $81,000 from the $9,000 in the June 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 1997 and
1996 periods.
As a result of the foregoing factors, the Company incurred a net loss of $1.2
million, or $.18 per share, in June 1997 period, as compared with a net loss of
$2.2 million, or $.46 per share, in June 1996 period.
Three Months Ended June 30, 1997 and 1996
The Company's revenue for the three months ended June 30, 1997 (the "June 1997
quarter") was $1,741,000, a decrease of $634,000, or 27% from the revenue for
the three months ended June 30, 1996 (the "June 1996 quarter") which was
$2,375,000. Approximately $641,000 of this decrease represented a decrease in
revenue from $660,000 in the June 1996 quarter to $19,000 in the June 1997
quarter. IBN represented the Company's largest customer in the June 1996
quarter, accounting for approximately 27.8% of revenue.
Revenue from the Company's health information systems continued to represent the
Company's principal source of revenue in June 1997 quarter, accounting for
$1,690,000 or 97% of revenue. The largest component of revenue in the June 1997
quarter was data center (service bureau) revenue which decreased to $535,000
from $556,000 in the June 1996 quarter, reflecting a 4% decrease. The turnkey
systems revenue increased to $462,000 in the June 1997 quarter from $409,000 in
the June 1996 quarter, reflecting an increase of 13%. Maintenance revenue
increased to $342,000 in the June 1997 quarter from $284,000 in the June 1996
quarter, reflecting an increase of 20%. License revenue increased to $75,000 in
the June 1997 quarter from $72,000 in the June 1996 quarter, an increase of 4%.
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 $276,000 in
the June 1997 quarter from $394,000 in the June 1996 quarter, reflecting a
decrease of 30%. Sales of third party hardware and software are made in
connection with the sales of turnkey systems.
Revenue from contracts from government agencies represented 32% of revenue for
June 1997 quarter . The Company believes that such contracts will continue to
represent an important part of its business.
Gross profit decreased to $265,000 in the June 1997 quarter from $649,000 in the
June 1996 quarter, a 59% decrease. The decrease in the gross profit was
substantially the result of a reduction in revenue from the IBN contract.
Selling, general and administrative expenses were $679,000 in the June 1997
quarter, an increase of 42% from the $479,000 in the June 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 June 1996 quarter, the Company incurred non cash compensation charges
of $156,000 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 June 1997 quarter.
In the June 1997 quarter the Company recognized its 50% share of its loss in its
joint venture corporation with respect to the development of CCAC software
purchased in 1996. The company's share of such loss was $46,000 for the June
1997 quarter as compared to $100,000 for the June 1996 quarter.
Interest expense was $82,000 in the June 1997 quarter, a decrease of $66,000, or
45% from the $148,000 in the June 1996 quarter . This is a result of a decrease
in the average borrowings during the 1997. 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.
Related party administrative expense was $45,000 in the June 1997 quarter, an
increase of $41,000 from the $4,000 in the June 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 1997 and
1996 periods.
As a result of the foregoing factors, the Company incurred a net loss of
$587,000, or $.08 per share, in June 1997 quarter, as compared with a net loss
of $237,000 or per $.05 per share, in June 1996 quarter.
Liquidity and Capital Resources
The Company had a working capital deficit of $1.1 million at June 30, 1997 as
compared to a working capital surplus of $477,000 at December 31, 1996. The
decrease in working capital for the six months ended June 30, 1997 was
substantially due to the net loss incurred for the six months ended June 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 six
months ended June 30, 1997. The Company's cash balances were $22,000 at June 30,
1997 as compared to $998,000 at December 31, 1996.
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 June 30, 1997, the outstanding
borrowings under this facility were $703,000. The agreement with the asset based
lender provides for the borrowings of up to 80% of eligible accounts receivable.
At June 30, 1997 the maximum amount available under this formula was $749,000.
At June 30, 1997, accounts receivable and costs and estimated profits in excess
of interim billings were approximately $3.2 million, representing approximately
174 days of revenue based on annualizing the revenue for the six months ended
June 30, 1997, although no assurance can be given that revenue will continue at
the same level as the six month period. Accounts receivable at June 30, 1997
increased by $147,000 from $2,284,000 at December 31, 1996 to $2,431,000 at June
30, 1997. At June 30, 1997, IBN accounted for 15% of the total gross accounts
receivable balance. One other customer accounted for 16% of the total gross
accounts receivable at June 30, 1997. However, cash received from this customer
in July 1997 reduced the account balance to less than 10% of the total accounts
receivable balance. No other customer accounted for more than 10% of the
accounts receivable balance.
The Company is currently seeking to raise additional working capital. No
assurance can be given as to the ability of the Company to obtain additional
working capital and failure to obtain additional working capital could have a
material adverse affect on the Company and its financial condition.
<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 August 12, 1997
- --------------------------- (Principal Executive Officer)
Lewis S. Schiller
Chief Financial Officer August 12, 1997
- --------------------------- (Principal Financial and
Anthony F. Grisanti Accounting Officer)
NETSMART TECHNOLOGIES, INC.
EXHIBIT 11.1 - CALCULATION OF EARNINGS PER SHARE
Six Months Ended
----------------
June 30, 1997
-------------
Primary EPS Fully Diluted EPS
----------- ----------------
Net Loss $(1,239,887) $(1,239,887)
Dividend Adjustment -- --
---------- -----------
Adjusted Net Loss $(1,239,887) $(1,239,887)
========== ==========
Loss Per Share:
Loss Per Share - Note 1 $ (.18)
==========
Loss Per Share - Assuming Full
Dilution - Note 2 $ (.16)
=========
Note 1: Computed by dividing net loss by the weighted average number of
common shares (6,800,032) for the six months ended June 30, 1997.
Adjusting it by items (i) to (iv) below using the treasury stock method
of calculating earnings per share.
(i) Assumes that 369,117 1995 stock options issued in 1995 and
outstanding at June 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 June 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 and
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.
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 (7,727,641) for the six months ended June 30, 1997
adjusting it by items (i) to (iv) below using the treasury stock method
of calculating earnings per share.
(i) Assumes that 369,117 1995 stock options issued in 1995 and
outstanding at June 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 June
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 June 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 June
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 and
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 June
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 June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 22,395
<SECURITIES> 0
<RECEIVABLES> 2,431,572
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,309,127
<PP&E> 786,052
<DEPRECIATION> 395,515
<TOTAL-ASSETS> 7,572,522
<CURRENT-LIABILITIES> 4,387,643
<BONDS> 0
0
12
<COMMON> 68,110
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,572,522
<SALES> 3,313,053
<TOTAL-REVENUES> 3,313,053
<CGS> 2,890,771
<TOTAL-COSTS> 2,890,771
<OTHER-EXPENSES> 1,511,636
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,533
<INCOME-PRETAX> (1,239,877)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,239,887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,239,887)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.16)
</TABLE>
