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, 2001
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: (631) 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 16, 2001: 3,691,209
=========
Netsmart Technologies, Inc. and Subsidiaries
Index
Part I: - Financial Information:
Item 1. Financial Statements: Page
----
Consolidated Balance Sheets - September 30, 2001 (Unaudited)
and December 31, 2000 1-2
Consolidated Statements of Income (Unaudited) -
Nine Months Ended September 30, 2001 and September 30, 2000 and
Three Months Ended September 30, 2001 and 2000 3
Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2001 and September 30, 2000 4-5
Consolidated Statement of Stockholders' Equity (Unaudited) -
Nine Months Ended September 30, 2001 6-7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
Part II
Item 6B - Exhibits and Reports on Form 8-K 13
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
September 30, December 31,
2001 2000
(Unaudited) ------------
-------------
Assets:
Current Assets:
Cash and Cash Equivalents $ 3,271,702 $ 2,418,947
Accounts Receivable - Net 5,375,288 4,688,598
Costs and Estimated Profits in Excess
of Interim Billings 4,595,590 4,068,255
Deferred taxes 494,000 494,000
Other Current Assets 80,702 144,942
----------- -----------
Total Current Assets 13,817,282 11,814,742
----------- -----------
Property and Equipment - Net 415,648 512,281
----------- -----------
Other Assets:
Software Development Costs - Net 704,511 822,645
Customer Lists - Net 2,732,139 2,064,832
Other Assets 153,733 86,213
----------- -----------
Total Other Assets 3,590,383 2,973,690
----------- -----------
Total Assets $17,823,313 $15,300,713
=========== ===========
See Notes to Consolidated Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
September 30, December 31,
2001 2000
(Unaudited) ------------
-------------
Liabilities and Stockholders' Equity:
Current Liabilities:
Current Portion - Capitalized Lease Obligations $ 36,652 $ 35,756
Current Portion - Long Term Debt 500,000 -
Accounts Payable 1,073,474 807,298
Accrued Expenses 614,159 1,154,647
Interim Billings in Excess of Costs and
Estimated Profits 3,318,951 3,350,697
Deferred Revenue 505,158 608,444
---------- -----------
Total Current Liabilities 6,048,394 5,956,842
---------- -----------
Capitalized Lease Obligations -
Less current portion 14,034 40,458
Long Term Debt - Less current portion 1,875,002 -
---------- -----------
Total Non Current Liabilities 1,889,036 40,458
---------- -----------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock - $.01 Par Value, 3,000,000
Shares Authorized; None issued and outstanding
Common Stock - $.01 Par Value; Authorized
15,000,000 Shares; Issued 3,719,247 shares
at September 30, 2001, 3,524,692 shares at
December 31, 2000 37,192 35,246
Additional Paid-in Capital 20,850,479 20,454,391
Accumulated Deficit (10,701,978) (10,886,414)
---------- ----------
10,185,693 9,603,223
Less cost of Common Stock held
in treasury - 28,038 shares at September 30,
2001 and December 31, 2000 299,810 299,810
---------- ----------
Total Stockholders' Equity 9,885,883 9,303,413
---------- ----------
Total Liabilities and Stockholders' Equity $17,823,313 $15,300,713
========== ==========
See Notes to Consolidated Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)
--------------------------------------------------------------------------------
Nine months ended Three months ended
September 30, September 30,
----------------- ------------------
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Software and Related
Systems and Services:
General $ 8,493,803 $11,338,937 $ 2,660,725 $ 3,679,746
Maintenance Contract
Services 3,772,538 2,553,221 1,299,747 906,250
---------- ---------- ---------- ----------
Total Software and Related
Systems and Services 12,266,341 13,892,158 3,960,472 4,585,996
Data Center Services 1,548,640 1,716,129 615,020 511,539
---------- ---------- ---------- ----------
Total Revenues 13,814,981 15,608,287 4,575,492 5,097,535
---------- ---------- ---------- ----------
Cost of Revenues:
Software and Related
Systems and Services:
General 5,899,287 7,090,442 1,837,191 2,376,425
Maintenance Contract
Services 2,608,638 1,640,350 997,463 578,172
---------- ---------- ---------- ----------
Total Software and Related
Systems and Services 8,507,925 8,730,792 2,834,654 2,954,597
Data Center Services 761,339 766,843 254,725 258,897
---------- ---------- ---------- ----------
Total Cost of Revenues 9,269,264 9,497,635 3,089,379 3,213,494
---------- ---------- ---------- ----------
Gross Profit 4,545,717 6,110,652 1,486,113 1,884,041
Selling, General and
Administrative Expenses 3,255,337 3,425,657 1,036,403 1,057,769
Value of Warrants Issuance and Extension - 181,000 - -
Research and Development 985,782 1,052,151 344,471 348,132
---------- ---------- ---------- ----------
Income before Interest Expense and
Provision for Income Taxes 304,598 1,451,844 105,239 478,140
Interest Expense 105,162 111,169 50,973 27,382
---------- ---------- ---------- ----------
Income before provision for income taxes 199,436 1,340,675 54,266 450,758
Provision for income taxes 15,000 - 4,000 -
---------- ---------- ---------- ----------
Net Income $ 184,436 $ 1,340,675 $ 50,266 $ 450,758
========== ========== ========== ==========
Earnings Per Share of Common Stock:
Basic:
Net Income $ .05 $ .40 $ .01 $ .13
========== ========== ========== ==========
Weighted Average Number of Shares of
Common Stock Outstanding 3,596,376 3,329,027 3,691,209 3,489,998
========== ========== ========== ==========
Diluted:
Net Income $ .05 $ .36 $ .01 $ .12
========== ========== ========== ==========
Weighted Average Number of Shares of
Common Stock Outstanding 3,844,476 3,744,704 3,937,426 3,841,746
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
--------------------------------------------------------------------------------
Nine months ended
September 30
2001 2000
---- ----
Operating Activities:
Net Income $ 184,436 $1,340,675
-------- ---------
Adjustments to Reconcile Net Income to Net
Cash (Used In) Provided by Operating Activities:
Depreciation and Amortization 802,999 522,355
Financing Cost Related to Issuance
and Extension of Warrants - 181,000
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (686,690) (159,410)
Costs and Estimated Profits in
Excess of Interim Billings (527,335) 858,945
Other Current Assets 64,240 6,853
Other Assets (67,520) 69,065
Increase [Decrease] in
Accounts Payable 266,176 (695,127)
Accrued Expenses (540,488) (180,933)
Interim Billings in Excess of
Costs and Estimated Profits (31,746) (500,983)
Deferred Revenue (103,286) 186,071
-------- ----------
Total Adjustments (823,650) 287,836
-------- ---------
Net Cash (Used In) Provided by -
Operating Activities (639,214) 1,628,511
-------- ---------
Investing Activities:
Net Cost of AIMS Acquisition (779,700)
Acquisition of Property and Equipment (99,639) (157,705)
Software Development Costs - (493,192)
-------- ---------
Net Cash (Used In) Investing Activities (879,339) (650,897)
-------- ---------
See Notes to Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
--------------------------------------------------------------------------------
Nine months ended
September 30
2001 2000
---- ----
Financing Activities:
Payments of Short-Term Notes $ - $ (882,404)
Proceeds from Term Loan 2,500,000
Payments of Term Loan (124,998) -
Payment of Capitalized Lease Obligations (25,528) (18,716)
Net Proceeds from Warrant Exercise 1,139,630
Net Proceeds from Stock Options Exercised 21,834 134,179
--------- ----------
Net Cash Provided by Financing Activities 2,371,308 372,689
--------- ----------
Net Increase in Cash and Cash Equivalents 852,755 1,350,303
Cash and Cash Equivalents - Beginning of Period 2,418,947 204,989
--------- ----------
Cash and Cash Equivalents - End of Period $3,271,702 $ 1,555,292
========= ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods for:
Interest $ 90,997 $ 111,169
Income Taxes $ 117,810 $ 188,867
Non Cash Investment Activities:
Value of Common Stock Issued in AIMS Acquisition $ 376,200 $ -
See Notes to Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Unaudited)
--------------------------------------------------------------------------------
For the Nine Months Ended September 30, 2001
Common Stock $.01 Par Value Authorized Shares Amount
------ ------
15,000,000 Shares:
Beginning Balance - December 31, 2000 3,524,692 $ 35,246
Common Stock Issued - Exercise of Options 14,555 146
Common Stock Issued - Acquisition 180,000 1,800
--------- -------
Ending Balance - September 30, 2001 3,719,247 $ 37,192
=======
See Notes to Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (Unaudited)
--------------------------------------------------------------------------------
For the Nine Months Ended September 30, 2001
Additional Paid-In Capital Common Stock: Shares Amount
------ ------
Beginning Balance - December 31, 2000 $ 20,454,391
Common Stock Issued - Exercise of Options 21,688
Common Stock Issued - Acquisition 374,400
-----------
Ending Balance - September 30, 2001 $ 20,850,479
===========
Accumulated Deficit
Beginning Balance - December 31, 2000 $(10,886,414)
Net Income 184,436
-----------
Ending Balance - September 30, 2001 $(10,701,978)
===========
Treasury Stock:
Beginning Balance - December 31, 2000 28,038 $ (299,810)
------ -----------
Ending Balance - September 30, 2001 28,038 $ (299,810)
====== ===========
Total Stockholders Equity $ 9,885,883
===========
See Notes to Financial Statements.
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(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, 2001 and the results of its operations for the nine and three
months ended September 30, 2001 and 2000 and the changes in cash flows for the
nine months ended September 30, 2001 and 2000. The results of operations for the
nine and three months ended September 30, 2001 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 Form 10-K
for the year ended December 31, 2000.
(3) Income per share - Income per share is computed by dividing the net income
for the period by the weighted average number of shares of common stock. The
common stock equivalents are assumed converted to common stock when dilutive.
(4) During the period ended September 30, 2001, stock options to purchase 14,555
shares were exercised and the Company received gross proceeds of $21,834. As a
result, common stock and additional paid in capital increased by $146 and
$21,688.
(5) The Company is a defendant in an arbitration proceeding commenced in March
2001 seeking damages of $635,000 for an alleged breach of a staff augmentation
services agreement. The Company believes that it has valid legal defenses to
such action.
(6) On May 10, 2001, the Company acquired the intellectual property, customer
contracts and certain other assets of Advanced Institutional Management Systems
("AIMS"). The principal assets acquired were the AIMS' customer base and the
rights to AIMS' Correctional and Public Health Systems software. The purchase
price consisted of 180,000 shares of the Company's common stock, valued at
$376,200, of which 18,000 shares are held in escrow, and $500,000 cash. In
addition, the Company may issue up to 100,000 additional shares of common stock,
based on revenue derived from new contracts for the AIMS systems. The Company
also assumed certain contract obligations. The Company has allocated $194,986 of
assumed contract obligations to the purchase price. The cost of the acquisition
was $1,155,900, of which $167,000 was allocated to purchased software, which is
included as other assets on the balance sheet, and $988,900 to customer lists.
The Company is amortizing the purchased software over a three-year life and the
customer lists over a seven-year life.
(7) In June 2001, the Company entered into a financing arrangement with a bank.
This improved credit facility and medium term financing replaced the Company's
asset-based borrowing facility. The new financing provides the Company with a
five-year term loan of $2.5 million, and a $1.5 million revolving line of
credit. The term loan bears interest at a fixed rate of 7.95% per annum and is
payable in monthly installments during the term of the loan. The revolving line
of credit is priced at the bank's prime rate. The interest rate on the previous
facility was prime plus 2%.
(8) The Company commenced an action in November 2000, against Insight Recovery
Center Inc. alleging breach of contract in failure to pay $147,406 pursuant to
an agreement with Insight Recovery Center Inc. The Company resolved this action
in an out of court settlement in September 2001. The settlement of this action
had no material effect on the operations of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
A significant portion of our revenue is derived from fixed price software
development contracts and licenses. We recognize this revenue on the estimated
percentage of completion basis. Since the billing schedules under the contracts
differ from the recognition of revenue, at the end of any period, these
contracts generally result in either costs and estimated profits in excess of
billing or billing in excess of cost and estimated profits. The largest
component of our revenue is based upon the time spent by our technical personnel
on a project. As a result, during the third and fourth quarters, when many of
our employees are on vacation and holidays, our revenue could be affected.
Nine months Ended September 30, 2001 and 2000
Our revenue for the nine months ended September 30, 2001 (the "September 2001
period") was $13,815,000, a decrease of $1,793,000, or 11%, from our revenue for
the nine months ended September 30, 2000 (the "September 2000 period"), which
was $15,608,000. The largest component of revenue was turnkey systems labor
revenue, which increased to $5,043,000 in the September 2001 period, from
$4,913,000 in the September 2000 period, reflecting a 3% increase. Although
there was a general decline in the sales of turnkey systems, due to an industry
wide slowdown in information technology purchasing activity, we were able to
generate additional labor revenue for customization and enhancements services
for our existing client base. Revenue from third party hardware and software
decreased to $1,868,000 in the September 2001 period, from $3,542,000 in the
September 2000 period, which represents a decrease of 47%. Sales of third party
hardware and software are made in connection with the sales of turnkey systems
and were affected by the decline in the sales of turnkey systems. These sales
are typically made at lower gross margins than our behavioral health systems and
services revenue. The data center (service bureau) revenue decreased to
$1,549,000 in the September 2001 period, from $1,716,000 in the September 2000
period, reflecting a decrease of 10%. This decrease is substantially the result
of work performed for one particular client during the September 2000 period as
well as a smaller client base during the September 2001 period. License revenue
decreased to $623,000 in September 2001 period, from $1,947,000 in the September
2000 period, reflecting a decrease of 68%. License revenue is generated as part
of a sale of a behavioral health information system pursuant to a contract or
purchase order that includes delivery of the system and maintenance and is
affected by the decline in revenue from turnkey systems. Maintenance revenue
increased to $3,773,000 in September 2001 period, from $2,553,000 in the
September 2000 period, reflecting an increase of 48%. As turnkey systems are
completed, they are transitioned to the maintenance division. Included in the
September 2001 period is $661,000 of maintenance revenue related to contracts
for AIMS software. Revenue from the sales of our small turnkey division
increased to $960,000 in the September 2001 period, from $937,000 in the
September 2000 period, reflecting an increase of 2%.
Revenue from contracts from government agencies represented 39% of revenue in
the September 2001 period and 50% of revenue in the September 2000 period. This
decrease reflects a reduction in new government work .
Gross profit decreased to $4,546,000 in the September 2001 period from
$6,111,000 in the September 2000 period, reflecting a decrease of 26%. Our gross
margin percentage decreased to 33% in the September 2001 period from 39% in the
September 2000 period. This decrease was substantially the result of a decrease
in our license and data center revenue mentioned above. In addition the gross
margin associated with the AIMS maintenance revenue is currently lower than the
gross margin experienced with our other maintenance revenue..
Selling, general and administrative expenses were $3,255,000 in the September
2001 period, reflecting a decrease of 5% from the $3,426,000 in the September
2000 period. This decrease was substantially in the area of administrative costs
and was partially offset by an increase in sales and marketing costs.
In the September 2000 period, we issued warrants for services rendered. We also
extended one series of our warrants for fourteen months. An aggregate of
$181,000 was charged to operations for the warrant issuance and the warrant
extension. As a result of the extension of the warrants in the September 2000
period, we raised additional equity of $1,153,000 from the exercise of the
warrants in the September 2000 period. There were no similar costs in the
September 2001 period.
We incurred product development expenses of $986,000 in the September 2001
period, a decrease of 6% from the $1,052,000 in the September 2000 period.
During the September 2001 period, we continued to invest in improved
functionality and technology in our products, but at a lesser extent than the
September 2000 period.
Interest expense was $105,000 in the September 2001 period, a decrease of
$6,000, or 5%, from the $111,000 in the September 2000 period. This decrease was
the result of lower short-term borrowings during the September 2001 period and
was substantially offset by interest associated with the $2,500,000 term loan
which we received in September 2001.
We have a federal net operating loss tax carryforward of approximately $7
million. However, in the September 2001 period, we provided for taxes in the
amount of $15,000. This provision was based upon certain state taxes.
As a result of the foregoing factors, in the September 2001 period, we had net
income of $184,000, or $.05 per share (basic and diluted). For the September
2000 period, we had net income of $1,341,000, or $.40 per share (basic) and $.36
per share (diluted).
Three months Ended September 30, 2001 and 2000
Our revenue for the three months ended September 30, 2001 (the "September 2001
quarter") was $4,575,000, a decrease of $522,000, or 10%, from our revenue for
the three months ended September 30, 2000 (the "September 2000 quarter"), which
was $5,098,000. The largest component of revenue was turnkey systems labor
revenue, which increased to $1,658,000 in the September 2001 quarter, from
$1,392,000 in the September 2000 quarter, reflecting a 19% increase. This
increase was substantially due to customization and enhancements services for
our existing client base. Revenue from third party hardware and software
decreased to $515,000 in the September 2001 quarter, from $1,296,000 in the
September 2000 quarter, which represents a decrease of 60%. Sales of third party
hardware and software are made in connection with the sales of turnkey systems
and were affected by the decline in revenue from new turnkey systems. These
sales are typically made at lower gross margins than our behavioral health
systems and services revenue. The data center (service bureau) revenue increased
to $615,000 in the September 2001 quarter, from $512,000 in the September 2000
quarter, reflecting an increase of 20%. This increase is substantially the
result of work performed for one particular client during the September 2001
quarter and was partially offset by a smaller client base. License revenue
decreased to $140,000 in September 2001 quarter, from $689,000 in the September
2000 quarter, reflecting a decrease of 80%. License revenue is generated as part
of a sale of a behavioral health information system pursuant to a contract or
purchase order that includes delivery of the system and maintenance and is
affected by the decline in revenue from turnkey systems. Maintenance revenue
increased to $1,300,000 in September 2001 quarter, from $906,000 in the
September 2000 quarter, reflecting an increase of 43%. As turnkey systems are
completed, they are transitioned to the maintenance division. Included in the
September 2001 quarter is $274,000 of maintenance revenue related to contracts
for AIMS software. Revenue from the sales of our small turnkey division
increased to $348,000 in the September 2001 quarter, from $304,000 in the
September 2000 quarter, reflecting an increase of 15%.
Revenue from contracts from government agencies represented 35% of revenue in
the September 2001 quarter and 53% of revenue in the September 2000 quarter.
This decrease reflects a reduction in new government work.
Gross profit decreased to $1,486,000 in the September 2001 quarter from
$1,884,000 in the September 2000 quarter, reflecting a decrease of 21%. Our
gross margin percentage decreased to 32% in the September 2001 period from 37%
in the September 2000 period. This decrease was substantially the result of a
decrease in our license revenue mentioned above. In addition the gross margin
associated with the AIMS maintenance revenue is currently lower than the gross
margin experienced with our other maintenance revenue. Our gross margin decrease
was partially offset by the increase in data center revenue mentioned above.
Selling, general and administrative expenses were $1,036,000 in the September
2001 quarter, reflecting a decrease of 2% from the $1,058,000 in the September
2000 quarter. This decrease was substantially in the area of administrative
costs.
We incurred product development expenses of $344,000 in the September 2001
quarter, a decrease of 1% from the $348,000 in the September 2000 quarter.
Interest expense was $51,000 in the September 2001 quarter, an increase of
$24,000, or 89%, from the $27,000 in the September 2000 quarter. This increase
was the result of interest on the $2.5 million term loan we received in
September 2001.
We have a federal net operating loss tax carryforward of approximately $7
million. However, in the September 2001 quarter, we provided for taxes in the
amount of $4,000. This provision was based upon certain state taxes.
As a result of the foregoing factors, in the September 2001 quarter, we
generated a net income of $50,000, or $.01 per share (basic and diluted). For
the September 2000 quarter, we generated net income of $451,000, or $.13 per
share (basic) and $.12 per share (diluted).
Liquidity and Capital Resources
In June 2001, we entered into a financing arrangement with a Fleet Bank. This
improved credit facility and medium term financing replaced our asset-based
borrowing facility. The new financing provides us with a five-year term loan of
$2.5 million, as well as a $1.5 million revolving line of credit. The term loan
bears interest at a fixed rate of 7.95% per annum and the revolving line of
credit is priced at the prime rate. Under our revolving line of credit, we can
borrow up to 75% of eligible receivables up to a maximum of $1.5 million. The
maximum available to us at September 30, 2001 under the borrowing base formula
was $1.5 million. The interest rate on the previous facility was prime + 2%. The
proceeds of the term loan are designated for acquisitions as well as product
enhancements specific to California requirements. The revolving line of credit
will be utilized for general working capital needs. We did not use the revolving
line of credit during the September 2001 period. We have made principal payments
on the $2.5 million term loan and the amount outstanding at September 30, 2001
is $2,375,000.
We had working capital of $7.8 million at September 30, 2001 as compared to
working capital of $5.9 million at December 31, 2000. The increase in working
capital for the September 2001 period was substantially the result of us
entering into our $2.5 million term loan arrangement as well as from net income
after adding back depreciation and amortization.
On May 10, 2001, we acquired the intellectual property, customer contracts and
certain other assets of Advanced Institutional Management Systems ("AIMS"). The
principal assets acquired were the AIMS' customer base and
the rights to AIMS' Correctional and Public Health Systems software. The
purchase price consisted of 180,000 shares of the Company's common stock, of
which 18,000 shares are held in escrow, and $500,000 cash. We funded the cash
portion with our term loan. In addition, we may issue up to 100,000 additional
shares of common stock, based on revenue derived from new contracts for the AIMS
systems.
At September 30, 2001, accounts receivable and costs and estimated profits in
excess of interim billings were approximately $10 million, representing
approximately 195 days of revenue based on annualizing the revenue for the
September 2001 period, although no assurance can be given that revenue will
continue at the same level.
Based on our outstanding contracts and our continuing business, we believe that
our cash flow from operations, the availability under our financing agreement
and our cash on hand will be sufficient to enable us to continue to operate
without additional funding. It is possible that we may need additional funding
if our business does not develop as we anticipate or if our expenses, including
our software development costs relating to the expansion of our product line and
our marketing costs for seeking to expand the market for our products and
services to include smaller clinics and facilities and sole group practitioners
exceed our expectations.
An important part of our growth strategy is to acquire other businesses that are
related to our current business. Such acquisitions may be made with cash or our
securities or a combination of cash and securities. If we fail to make any
acquisitions our future growth may be limited.
Forward Looking Statements
Statements in this Form 10-Q include forward-looking statements that address,
among other things, our expectations with respect to the development of our
business. In addition to these statements, other information including words
such as "seek," "anticipate," "believe," "plan," "estimate," "expect," "intend"
and other similar expressions are forward looking statements. Actual results
could differ materially from those currently anticipated due to a number of
factors, including those identified in our Annual Report on Form 10-K for 2000
under "Risk Factors," those discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this Form 10-Q and
our Form 10-K for 2000 and elsewhere, and in other documents which we file with
the Securities and Exchange Commission.
Part II
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K.
Form 8-K/A, Amendment No. 1, with an event date of May 10, 2001. The
Report related to Item 2, Acquisition and Disposition of Assets, and the Form
8-K/A was filed on July 23, 2001 to include the financial statements of Advanced
Institutional Management Systems, Inc. ("AIMS") and the pro forma financial
information for the Registrant and AIMS.
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.
/s/ James L. Conway Chief Executive Officer November 5, 2001
----------------------- (Principal Executive Officer)
James L. Conway
/s/ Anthony F. Grisanti Chief Financial Officer November 5, 2001
----------------------- (Principal Financial and
Anthony F. Grisanti Accounting Officer)