Registration
No.
333-
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C.
FORM
S-8
REGISTRATION
STATEMENT
under
THE
SECURITIES ACT OF 1933
NETSMART
TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
13-3680154
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
|
|
3500
Sunrise Highway, great River, New York
|
11739
|
(Address
of principal executive offices)
|
(Zip
Code)
|
NETSMART
TECHNOLOGIES, INC.
2001
LONG-TERM INCENTIVE PLAN, AS AMENDED
(Full
Title of the Plan)
James
Conway, Chief Executive Officer
Netsmart
Technologies, Inc.
3500
Sunrise Highway
Great
River, New York 11739
(Name
and
address of agent for service)
(631)
968-2000
(Telephone
number, including area code, of agent for service)
copy
to:
Nancy
D. Lieberman, Esq.
Kramer,
Coleman, Wactlar & Lieberman, P.C.
100
Jericho Quadrangle
Jericho,
New York 11753
(516)
822-4820
CALCULATION
OF REGISTRATION FEE
Title
of Each
Class
of Securities
To
be Registered
|
Amount
to be
Registered
(2)
|
Proposed
Minimum
Offering
Price Per
Security
(1)
|
Proposed
Maximum
Aggregate
Offering
Price
(1)
|
Amount
of
Registration
Fee
|
Common
Stock,
par
value $.01
per
share
|
400,000
shs. (3)
|
$9.85
|
$3,490,000
|
$421.58
|
|
(1)
|
Calculated
in accordance with Rule 457(g) under the Securities
Act.
|
|
(2)
|
The
Registration Statement also covers an indeterminate number of additional
shares of Common Stock which may become issuable pursuant to anti-dilution
and adjustment provisions of the
plan.
|
|
(3)
|
Represents
additional shares of common stock issuable under the Netsmart
Technologies, Inc. 2001 Long-Term Incentive Plan, as
amended.
|
EXPLANATORY
NOTE
This
Registration Statement on Form S-8 (the “Registration Statement”) registers
issuances of 400,000 shares of common stock, par value $.01 per share, of
Netsmart Technologies, Inc. upon the exercise of options previously granted
under the 2001 Long-Term Incentive Plan.
PART
I
INFORMATION
REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item
1.
Plan Information.
The
documents containing the information specified in Part I will be delivered
in
accordance with Rule 428(b)(1) of the Securities Act of 1933, as amended (the
“Securities Act”). Such documents are not required to be, and are not, filed
with the Securities and Exchange Commission (“Commission”) either as part of
this Registration Statement or as prospectuses or prospectus supplements
pursuant to Rule 424. These documents, and the documents incorporated by
reference in this Registration Statement pursuant to Item 3 of Part II of this
Form S-8, taken together, constitute a prospectus that meets the requirements
of
Section 10(a) of the Securities Act.
Item
2.
Registrant Information and Employee Plan Annual Information.
Upon
written or oral requests, any of the documents incorporated by reference in
Item
3 of Part II of this Registration Statement (which documents are incorporated
by
reference in the Section 10(a) prospectus), other documents required to be
delivered to eligible plan participants pursuant to Rule 428(b) of the
Securities Act or additional information about the terms of the stock options
granted under the 2001 Long-Term Incentive Plan are available without charge
by
contacting:
Anthony
Grisanti
Executive
Vice President
Netsmart
Technologies, Inc.
3500
Sunrise Highway
Great
River, NY 11739
631-968-2000
This
Registration Statement also includes a reoffer prospectus that has been prepared
in accordance with the requirements of Part I of Form S-3 and, pursuant to
General Instruction C of Form S-8, may be used for reofferings and resales
on a
continuous or delayed basis of 187,208 shares of common stock that are issuable
upon the exercise of options granted to the selling securityholders named herein
under the 2001 Long-Term Incentive Plan.
REOFFER
PROSPECTUS
NETSMART
TECHNOLOGIES, INC.
187,208
Shares of Common Stock
This
prospectus relates to the disposition, from time to time, of up to 187,208
shares of our common stock by the holders of these shares named in this reoffer
prospectus, who may be deemed to be our “affiliates.”
The
shares may be offered directly, through agents on behalf of the selling
securityholders and their transferees, or through underwriters or
dealers.
We
will
not receive any of the proceeds from the sale of the shares. We will receive
the
exercise price upon exercise of the options. We have agreed to bear the expenses
in connection with the registration and sale of the shares, except for selling
commissions.
The
selling securityholders and any agents or broker-dealers that participate with
the selling securityholders in the distribution of the shares may be considered
“underwriters” within the meaning of the Securities Act of 1933, as amended,
and, in that event, any commissions received by them and any profit on the
resale of the shares may be considered underwriting commissions or discounts
under the Securities Act.
Our
common stock is currently traded on the NASDAQ SmallCap Market under the symbol
“NTST.” On March 31, 2006, the closing price for our common stock, as reported
by NASDAQ, was $13.86 per share.
The
securities offered in this prospectus involve a high degree of
risk.
You
should carefully read and consider the “Risk Factors,” commencing
on
Page
3, for information that should be considered in
determining
whether
to purchase any of the securities.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date
of this reoffer prospectus is April 6, 2006
TABLE
OF CONTENTS
Risk
Factors
|
|
|
3
|
Forward-looking
Statements
|
|
|
6
|
Use
of Proceeds
|
|
|
6
|
Price
Range of Our Common Stock
|
|
|
7
|
Dividend
Policy
|
|
|
7
|
Selling
Securityholders
|
|
|
7
|
Plan
of Distribution
|
|
|
10
|
Experts
|
|
|
10
|
Legal
Matters
|
|
|
10
|
Pro
Forma Financial Information
|
|
|
11
|
Where
You Can Find More Information
|
|
|
16
|
As
used
in this reoffer prospectus, the terms “we,” “us,” “our,” and “Netsmart” mean
Netsmart Technologies, Inc. and its subsidiaries, unless otherwise
specified.
We
are
incorporated under the laws of the state of Delaware. Our executive offices
are
located at 3500 Sunrise Highway, Great River, New York 11739 and our telephone
number is (631) 968-2000.
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN
THIS REOFFER PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO ONE
HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THESE
SECURITIES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED.
YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS REOFFER PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF SUCH DOCUMENTS.
RISK
FACTORS
The
securities offered in this reoffer prospectus are speculative and involve a
high
degree of risk. Only those persons able to lose their entire investment should
purchase any of the securities. Prior to making an investment decision, you
should carefully read this prospectus and consider, along with other matters
referred to herein, the following risk factors.
Because
we are particularly dependent upon government contracts, any decrease in funding
for entitlement programs could result in decreased
revenue.
We
market
our health information systems principally to behavioral health facilities,
many
of which are operated by state and local government entities and include
entitlement programs. During 2005, 2004 and 2003, we generated 44%, 49% and
57%,
respectively, of our revenue from contracts that are directly or indirectly
with
government agencies. Government agencies generally have the right to cancel
certain contracts at their convenience. Our ability to generate business from
government agencies is affected by funding for entitlement programs, and our
revenue would decline if state agencies reduce this funding.
Changes
in government regulation of the health care industry may adversely affect our
revenue, operating expenses and profitability.
Our
business is based on providing systems for behavioral and public health
organizations in both the public and private sectors. The federal and state
governments have adopted numerous regulations relating to the health care
industry, including regulations relating to the payments to health care
providers for various services, and our systems are designed to provide
information based on these requirements. The adoption of new regulations can
have a significant effect upon the operations of health care providers,
particularly those operated by state agencies. Furthermore, changes in
regulations in the health care field may force us to modify our health
information systems to meet any new record-keeping or other requirements and
may
impose added costs on our business. If that happens, we may not be able to
generate revenues sufficient to cover the costs of developing the modifications.
In addition, any failure of our systems to comply with new or amended
regulations could result in reductions in our revenue and profitability.
If
we are not able to take advantage of technological advances, we may not be
able
to remain competitive and our revenue may decline.
Our
customers require software which enables them to store, retrieve and process
very large quantities of data and to provide them with instantaneous
communications among the various data bases. Our business requires us to take
advantage of recent advances in software, computer and communications
technology. This technology has been developing at rapid rates in recent years,
and our future may be dependent upon our ability to use and develop or obtain
rights to products utilizing such technology. New technology may develop in
a
manner which may make our software obsolete. Our inability to use or develop
new
technology would have a significant adverse effect upon our
business.
We
may have difficulty competing with larger companies that offer similar services,
which may result in decreased revenue.
Our
customers in the human services market include entitlement programs, managed
care organizations and specialty care facilities which have a need for access
to
information over a distributed data network. Each of the software industry,
in
general, and the health information software business in particular, is highly
competitive. Other companies have the staff and resources to develop competitive
systems. We may not be able to compete successfully with such competitors.
The
health information systems business is served by a number of major companies
and
a larger number of smaller companies. We believe that price competition is
a
significant factor in our ability to market our health information systems
and
services, and our inability to offer competitive pricing may impair our ability
to market our systems and services.
If
we are unable to protect our intellectual property, our competitors may gain
access to our technology, which could harm our ability to successfully compete
in our market.
We
have
no patent protection for our proprietary software. We rely on copyright
protection for our software and non-disclosure and secrecy agreements with
employees and third parties to whom we disclose information. This protection
does not prevent our competitors from independently developing products similar
or superior to our products and technologies. To further develop our services
or
products, we may need to acquire licenses for intellectual property. These
licenses may not be available on commercially reasonable terms, if at all.
Our
failure to protect our proprietary technology or to obtain appropriate licenses
could have a material adverse effect on our business, operating results or
financial condition. Since our business is dependent upon our proprietary
products, the unauthorized use or disclosure of this information could harm
our
business.
We
cannot
guarantee that in the future, third parties will not claim that we infringed
their intellectual property. Asserting our rights or defending against third
party claims could involve substantial costs and diversion of resources, which
could materially and adversely affect our financial condition.
Government
programs may suggest or mandate initiatives that could impact our ability to
sell our products.
A
major
initiative being pushed by President Bush and the Department of Health and
Human
Services is the National Electronic Health Record. The federal government is
promoting this platform and technology which is based on supplying “freeware” to
any agency who desires; however, support is not supplied. This initiative
competes with the private for profit Health Information Systems vendor community
and could adversely affect our ability to sell our products and our financial
results.
The
covenants in our loan agreement restrict our financial and operational
flexibility, including our ability to complete additional acquisitions, invest
in new business opportunities, pay down certain indebtedness or declare
dividends.
Our
term
loan agreement contains covenants that restrict, among other things, our ability
to borrow money, make particular types of investments, including investments
in
our subsidiaries, make other restricted payments, swap or sell assets, merge
or
consolidate, or make acquisitions. An event of default under our loan agreement
could allow our lender to declare all amounts outstanding to be immediately
due
and payable. We have pledged substantially all of our consolidated assets to
secure the debt under our loan agreement. If the amounts outstanding under
the
loan agreement were accelerated, the lender could proceed against those
consolidated assets. Any event of default, therefore, could have a material
adverse effect on our business. The loan agreement also requires us to maintain
specified financial ratios. Our ability to meet these financial ratios can
be
affected by events beyond our control, and we cannot assure you that we will
continue to meet those ratios. We also may incur future debt obligations that
might subject us to restrictive covenants that could affect our financial and
operational flexibility or subject us to other events of
default.
We
have
only paid one cash dividend after getting our lender’s consent and we do not
anticipate paying any further cash dividends on our common stock in the
foreseeable future. We presently intend to retain future earnings, if any,
in
order to provide funds for use in the operation and expansion of our business.
Consequently, investors cannot rely on the payment of dividends to increase
the
value of their investment in us. In addition, our loan agreement prohibits
us
from paying cash dividends without the prior consent of the lender.
Our
growth may be limited if we cannot make acquisitions.
A
part of
our business strategy is to acquire other businesses that are related to our
current business. These acquisitions may be made with cash or securities or
a
combination of cash and securities. To the extent that we require cash, we
may
have to borrow the funds or issue equity, which could dilute our earnings or
the
book value per share of our common stock. Our stock price may adversely affect
our ability to make acquisitions for equity or to raise funds for acquisitions
through the issuance of equity securities. If we fail to make any acquisitions,
our future growth may be limited. As of the date hereof, we do not have any
agreement or understanding, either formal or informal, as to any
acquisition.
We
may be unable to effectively integrate CMHC Systems, Inc. or any other
acquisitions, which may disrupt or have a negative impact on our
business.
In
September 2005, we consummated a merger with CMHC Systems, Inc., pursuant to
which CMHC has become our wholly-owned subsidiary. We may have difficulty
integrating CMHC’s personnel and operations with our own and we may have the
same difficulty with any other acquisitions we may make. In addition, the key
personnel of any acquired business may not be willing to work for us, and its
officers may exercise their rights to terminate their employment with us. We
cannot predict the effect expansion may have on our core business. Regardless
of
whether we are successful in making an acquisition, the negotiations could
disrupt our ongoing business, distract our management and employees and increase
our expenses.
Because
we are dependent on our management, the loss of key executive officers could
disrupt our business and our financial performance could
suffer.
Our
business is largely dependent upon our senior executive officers, Messrs. James
L. Conway, our chief executive officer and Anthony F. Grisanti, our chief
financial officer. Although we have employment agreements with these officers,
the employment agreements do not guarantee that those officers will continue
as
our employees, and each of those officers has the right to terminate his
employment on 90 days notice. Our agreements with Messrs. Conway and Grisanti
are scheduled to expire on December 31, 2006. Our business may be adversely
affected if any key management personnel or other key employees left our
employ.
The
employment contracts with our executive officers and provisions of Delaware
law
may deter or prevent a takeover attempt and may reduce the price investors
might
be willing to pay for our common stock.
The
employment contracts between us and each of James Conway and Anthony Grisanti
provide that in the event there is a change in control of our company, the
employee has the option to terminate his employment agreement. Upon such
termination, each of Messrs. Conway and Grisanti has the right to receive a
lump
sum payment equal to his compensation for a 48 month period.
In
addition, Delaware law restricts business combinations with stockholders who
acquire 15% or more of a company’s common stock without the consent of the
company’s board of directors.
These
provisions could deter or prevent a takeover attempt and may also reduce the
price that investors might be willing to pay in the future for shares of our
common stock.
Any
issuance of preferred stock may adversely effect the voting power and equity
interest of our common stock.
Our
certificate of incorporation gives our board of directors the right to create
new series of preferred stock. As a result, the board of directors may, without
stockholder approval, issue preferred stock with voting, dividend, conversion,
liquidation or other rights which could adversely affect the voting power and
equity interest of the holders of our common stock. The preferred stock, which
could be issued with the right to more than one vote per share, could be
utilized as a method of discouraging, delaying or preventing a change of
control. The possible impact on takeover attempts could adversely affect the
price of our common stock. Although we have no present intention to issue any
shares of preferred stock or to create any series of preferred stock, we may
issue such shares in the future. If we issue preferred stock in a manner which
dilutes the voting rights of the holders of our common stock, our listing on
The
Nasdaq SmallCap Market may be impaired.
Shares
may be issued pursuant to options and warrants which may adversely affect the
market price of our common stock.
We
may
issue stock upon the exercise of options to purchase shares of our common stock
pursuant to our long term incentive plans, under which options to purchase
935,047 shares were outstanding at March 31, 2006 and upon the exercise of
147,003 warrants. The exercise of these options and warrants and the sale of
the
underlying shares of common stock may have an adverse effect upon the price
of
our common stock.
FORWARD-LOOKING
STATEMENTS
Statements
in this prospectus contain "forward-looking statements" within the meaning
of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements that express our intentions,
beliefs, expectations, strategies, predictions or any other statements relating
to our future activities or other future events or conditions. These statements
are based on current expectations, estimates and projections about our business
based, in part, on assumptions made by management. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes and
results may, and probably will, differ materially from what is expressed or
forecasted in the forward-looking statements due to numerous factors, including
those described above and those risks discussed from time to time in this
prospectus, including the risks described in this prospectus under "Risk
Factors," and those described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in other documents which we
file
with the Securities and Exchange Commission. In addition, such statements could
be affected by risks and uncertainties related to product demand, market and
customer acceptance, competition, government regulations and requirements,
pricing and development difficulties, as well as general industry and market
conditions and growth rates, and general economic conditions. Any
forward-looking statements speak only as of the date on which they are made,
and
we do not undertake any obligation to update any forward-looking statement
to
reflect unanticipated events or circumstances after the date of this
prospectus.
USE
OF PROCEEDS
The
proceeds from the sale of the shares by the selling securityholders will belong
to the individual selling securityholder. We will not receive any of the
proceeds from the sale of the shares. We will, however, receive the exercise
price of the options upon their exercise. We cannot assure you that any options
will be exercised. We expect to utilize any amounts that we receive upon the
exercise of the options for new product development, sales and marketing
expenditures, potential acquisitions and general corporate purposes. Our
management will have broad discretion to determine the use of any
proceeds.
PRICE
RANGE OF OUR COMMON STOCK
Our
common stock is traded on The Nasdaq SmallCap Market under the symbol NTST.
Set
forth below is the reported high and low sales prices of our common stock for
each quarterly period set forth below:
Quarter
Ended
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
March
31, 2006
|
|
$
|
13.86
|
|
$
|
10.48
|
|
|
|
|
|
|
|
|
|
December
31, 2005
|
|
|
15.00
|
|
|
12.17
|
|
September
30, 2005
|
|
|
12.50
|
|
|
8.94
|
|
June
30, 2005
|
|
|
9.74
|
|
|
8.50
|
|
March
31, 2005
|
|
|
10.27
|
|
|
8.28
|
|
|
|
|
|
|
|
|
|
December
31, 2004
|
|
|
9.25
|
|
|
7.30
|
|
September
30, 2004
|
|
|
10.00
|
|
|
6.07
|
|
June
30, 2004
|
|
|
13.85
|
|
|
7.11
|
|
March
31, 2004
|
|
|
18.70
|
|
|
11.49
|
|
|
|
|
|
|
|
|
|
December
31, 2003
|
|
|
19.85
|
|
|
8.45
|
|
September
30, 2003
|
|
|
10.90
|
|
|
5.15
|
|
June
30, 2003
|
|
|
5.53
|
|
|
4.00
|
|
March
31, 2003
|
|
|
6.00
|
|
|
3.53
|
|
As
of
March 1, 2006, there were approximately 2,900 beneficial owners of our common
stock. The closing price of our common stock was $13.86 per share on March
31,
2006. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
DIVIDEND
POLICY
In
July
2003, with our lender’s consent, we paid a one-time cash dividend of $.10 per
share. We do not anticipate paying additional cash dividends on our common
stock
in the foreseeable future. We intend to retain any future earnings for the
development and expansion of our business and for acquisitions. In addition,
we
are a party to a loan agreement which prohibits us from paying cash dividends
without the prior consent of our lender.
SELLING
SECURITYHOLDERS
The
common stock to which this reoffer prospectus relates is issuable upon the
exercise of options granted under the 2001 Plan and is being registered for
reoffers and resales by the selling securityholders who may acquire these shares
upon the exercise of those options. The selling securityholders may sell all,
some or none of the common stock. Therefore, no estimate can be made of the
aggregate number of shares that are to be offered by this reoffer prospectus
or
that will be owned for the direct or indirect account of each selling
securityholder upon completion of the offering to which this reoffer prospectus
relates. The selling securityholders may offer the common stock for sale from
time to time. See “Plan of Distribution.” The inclusion in the table of the
individuals named below will not be deemed to be an admission that any of these
individuals are our affiliates.
Participants
under the 2001 Plan, who are deemed to be our “affiliates” who acquire common
stock under the 2001 plan may be added to the selling securityholders listed
below from time to time by use of a reoffer prospectus supplement filed pursuant
to Rule 424(b) under the Securities Act.
In
addition, certain unnamed non-affiliates of ours may use the reoffer prospectus
for reoffers and resales of the shares of common stock registered pursuant
to
the Registration Statement of which the reoffer prospectus is a part, provided
that these non-affiliates hold less than one percent of the shares issuable
under the 2001 Plan.
The
following table provides the names, the relationship with us within the past
3
years and beneficial ownership of, and the number of shares of common stock
which may be sold by, each selling securityholder.
Name(1)
|
|
Relationship
with us
within
past 3 years
|
|
Total
Amount
Owned
|
|
Amount
to be
Offered
for
the
Selling
Securityholders’
Account
|
|
Amount
and nature of
beneficial
ownership of
common
stock
after
sale of the securities
|
|
|
|
|
|
|
|
|
Number
(2)
|
|
Percent
(3)
|
James
L. Conway
|
|
Chief
Executive Officer and Director
|
|
248,848
(4)
|
|
100,000
|
|
148,848
|
|
2.2%
|
Anthony
F. Grisanti
|
|
Vice
President
|
|
204,815
(5)
|
|
45,000
|
|
159,815
|
|
2.4%
|
Gerald
Koop
|
|
President
and Director
|
|
204,883
(6)
|
|
25,000
|
|
179,883
|
|
2.7%
|
John
Gallagher
|
|
Director
|
|
30,000
(7)
|
|
5,427
|
|
24,573
|
|
*
|
Francis
Calcagno
|
|
Director
|
|
22,000
(8)
|
|
3,927
|
|
18,073
|
|
*
|
Joseph
Sicinski
|
|
Director
|
|
37,000
(9)
|
|
3,927
|
|
33,073
|
|
*
|
Yacov
Shamash
|
|
Director
|
|
12,000
(10)
|
|
3,927
|
|
8,073
|
|
*
|
|
*
|
Represents
less than 1%.
|
|
(1)
|
The
address of each of the selling shareholders is c/o Netsmart Technologies,
Inc., 3500 Sunrise Highway, Great River, NY 11739. Each selling
shareholder listed herein shall include any donee, pledge, transferee,
or
other successors in interest that receives shares of common stock
or
options from the selling stockholder as a gift, distribution or in
other
non-sale transfers, from time to time.
|
|
(2)
|
Assuming
the sale of all shares registered for the account of the selling
shareholders whether or not exercisable within 60 days of the date
of this
reoffer prospectus. The selling shareholders may sell all, some or
no
portion of the common stock registered hereunder.
|
|
(3)
|
Common
stock deemed to be beneficially owned by virtue of the right of any
person
to acquire these shares whether or not exercisable within 60 days
of the
date of this reoffer prospectus is treated as outstanding only for
purposes of determining the percent owned by such person.
|
|
(4)
|
Includes
142,500 shares of common stock underlying options exercisable within
60
days.
|
|
(5)
|
Includes
100,000 shares of common stock underlying options exercisable within
60
days.
|
|
(6)
|
Includes
65,000 shares of common stock underlying options exercisable within
60
days.
|
|
(7)
|
Includes
20,000 shares of common stock underlying options exercisable within
60
days.
|
|
(8)
|
Consists
of 22,000 shares of common stock underlying options exercisable within
60
days.
|
|
(9)
|
Includes
12,000 shares of common stock underlying options exercisable within
60
days.
|
|
(10)
|
Consists
of 12,000 shares of common stock underlying options exercisable within
60
days.
|
PLAN
OF DISTRIBUTION
Our
shares are traded on the Nasdaq SmallCap Market under the symbol “NTST.” On
behalf of the selling securityholders, we are registering the shares of common
stock issued or issuable to the selling securityholders. The distribution of
the
shares by the selling securityholders is not subject to any underwriting
agreement. The shares of common stock may be sold in one or more transactions
at
fixed prices, at prevailing market prices at the time of sale, at prices related
to the prevailing market prices, at varying prices determined at the time of
sale, or at negotiated prices. These sales may be effected at various times
in
one or more of the following transactions, or in other kinds of transactions:
|
o
|
transactions
on The Nasdaq Stock Market or on any national securities exchange
or U.S.
inter-dealer system of a registered national securities association
on
which the warrants and our preferred stock and common stock may be
listed
or quoted at the time of sale;
|
|
o
|
in
the over-the-counter market;
|
|
o
|
in
private transactions and transactions otherwise than on these exchanges
or
systems or in the over-the-counter market;
|
|
o
|
by
pledge to secure or in payment of debt and other obligations;
or
|
|
o
|
through
a combination of any of the above transactions.
|
The
selling securityholders and their respective successors, including their
transferees, pledgees or donees or their successors, may sell common stock
directly to purchasers or through underwriters, broker-dealers or agents, who
may receive compensation in the form of discounts, concessions or commissions
from the selling securityholders or the purchasers. These discounts, concessions
or commissions as to any particular underwriter, broker-dealer or agent may
be
in excess of those customary in the types of transactions involved.
The
selling securityholders and any broker-dealers, agents or underwriters that
participate with the selling securityholders in the distribution of the issued
and outstanding shares of common stock or the shares of stock issuable upon
exercise of warrants may be deemed to be "underwriters" within the meaning
of
the Securities Act, in which event any commissions received by these
broker-dealers, agents or underwriters and any profits realized by the selling
securityholders on the resales of the securities may be deemed to be
underwriting commissions or discounts under the Securities Act.
In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus.
The
shares are not being offered in any jurisdiction where the offer is not
permitted.
EXPERTS
The
consolidated financial statements of Netsmart Technologies, Inc., and
subsidiaries appearing in our company’s Annual Report on Form 10-K for the year
ended December 31, 2005, have been audited by Marcum & Kliegman LLP, our
independent registered public accounting firm, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
reports given upon the authority of such firm as experts in accounting and
auditing.
The
consolidated financial statements of CMHC Systems, Inc. and subsidiary as of
March 31, 2005 and 2004, and for the years then ended, have been incorporated
by
reference herein in reliance upon the report of KPMG LLP, independent registered
public accounting firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing. The audit report contains
an
explanatory paragraph that states that the company’s consolidated balance sheet
as of March 31, 2004 and the related consolidated statements of operations,
stockholders’ deficit and cash flows for the year then ended have been restated.
The
reviewed financial statements and schedules of CMHC Systems, Inc. and subsidiary
as of June 30, 2005 and 2004, and for the three month periods then ended, have
been incorporated by reference herein in reliance upon the report of SS&G
Financial Services, Inc. (formerly Saltz, Shamis & Goldfarb, Inc.),
independent registered public accounting firm, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and review
services.
LEGAL
MATTERS
The
validity of the securities offered hereby will be passed upon for us by Kramer,
Coleman, Wactlar & Lieberman, P.C., Jericho, New York.
PRO
FORMA FINANCIAL INFORMATION
The
unaudited pro forma condensed consolidated statement of operations reflects
the
results of operations of Netsmart Technologies, Inc. (“Netsmart”) for the twelve
months ended December 31, 2005 and for CMHC Systems, Inc. (“CMHC”) for the nine
months ended September 30, 2005, as if the merger of CMHC with a subsidiary
of
Netsmart occurred at the beginning of the period. The unaudited pro forma
condensed consolidated statement of operations also reflects the results of
operations of Addiction Management Services, Inc. (“AMS”) for the six months
ended June 30, 2005. The AMS acquisition closed on June 20, 2005; the operating
results for the nine-day period between the date of the acquisition and June
30,
2005 were negligible and, as a result Netsmart has elected to use the full
six-month period ended June 30, 2005 for pro forma purposes.
The
unaudited pro forma condensed consolidated statement of operations is presented
for illustrative purposes only and is not necessarily indicative of Netsmart’s
consolidated financial position or results of operations in future periods
or
the results that actually would have been realized if the merger and
acquisitions occurred during the specified periods. We have not presented a
pro
forma balance sheet since the acquisitions occurred prior to December 31, 2005,
and are included in our actual consolidated balance sheet as of December 31,
2005. The pro forma adjustments are based on available financial information
and
certain estimates and assumptions set forth in the accompanying notes. The
unaudited pro forma condensed consolidated statement of operations, including
the notes thereto should be read in conjunction with, historical consolidated
financial statements and the related notes thereto of Netsmart included in
its
Form 10-K for the year ended December 31, 2005 which is on file with the SEC,
and the audited financial statements for the year ended March 31, 2005 and
the
reviewed financial statements for the three months ended June 30, 2005 of CMHC
included in Netsmart’s Report on Form 8-K dated September 28, 2005, as amended
by Form 8-K/A dated December 9, 2005, January 10, 2006 and April 5,
2006.
NETSMART
TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netsmart
|
|
CMHC
|
|
AMS
|
|
Note
|
|
Pro
Forma
Adjustments
|
|
Consolidated
|
|
|
|
Twelve
months ended
|
|
Nine
months ended
|
|
Six
months ended
|
|
|
|
Twelve months
ended
|
|
Twelve months
ended
|
|
Revenues:
|
|
Dec
31, 2005
|
|
Sept
30, 2005
|
|
June
30, 2005
|
|
|
|
Dec.
31, 2005
|
|
Dec. 31,
2005
|
|
Software
and Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems
and Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
$
|
20,326,805
|
|
$
|
4,661,552
|
|
$
|
625,063
|
|
|
|
|
|
|
|
|
25,613,420
|
|
Maintenance
Contract Services
|
|
|
13,317,744
|
|
|
13,487,011
|
|
|
742,529
|
|
|
|
|
|
|
|
|
27,547,284
|
|
Total
Software and Related Systems & Services
|
|
|
33,644,549
|
|
|
18,148,563
|
|
|
1,367,593
|
|
|
|
|
|
-
|
|
|
53,160,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application
Service Provider Services
|
|
|
2,538,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,538,457
|
|
Data
Center Services
|
|
|
1,795,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,795,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
|
37,978,454
|
|
|
18,148,563
|
|
|
1,367,593
|
|
|
|
|
|
-
|
|
|
57,494,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
and Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems
and Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
11,682,754
|
|
|
1,932,108
|
|
|
119,204
|
|
|
(B1a)
|
|
|
1,123,418
|
|
|
14,614,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(B1b)
|
|
|
(242,961
|
)
|
|
|
|
Maintenance
Contract Services
|
|
|
5,421,575
|
|
|
5,104,790
|
|
|
448,178
|
|
|
|
|
|
|
|
|
10,974,543
|
|
Total
Software and Related Systems & Services
|
|
|
17,104,329
|
|
|
7,036,898
|
|
|
567,383
|
|
|
|
|
|
880,457
|
|
|
25,589,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application
Service Provider Services
|
|
|
1,611,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,611,026
|
|
Data
Center Services
|
|
|
887,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
887,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cost of Revenues
|
|
|
19,602,524
|
|
|
7,036,898
|
|
|
567,383
|
|
|
|
|
|
880,457
|
|
|
28,087,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
18,375,930
|
|
|
11,111,665
|
|
|
800,210
|
|
|
|
|
|
(880,457
|
)
|
|
29,407,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
General and Administrative Expenses
|
|
|
11,272,446
|
|
|
6,977,885
|
|
|
184,654
|
|
|
(B1c)
|
|
$
|
286,056
|
|
|
18,721,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research,
Development and Maintenance
|
|
|
4,547,114
|
|
|
3,007,100
|
|
|
|
|
|
|
|
|
|
|
|
7,554,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
15,819,560
|
|
|
9,984,985
|
|
|
184,654
|
|
|
|
|
|
286,056
|
|
|
26,275,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
2,556,370
|
|
|
1,126,680
|
|
|
615,556
|
|
|
|
|
|
(1,166,513
|
)
|
|
3,132,092
|
|
Interest
and Other Income
|
|
|
311,496
|
|
|
12,519
|
|
|
|
|
|
|
|
|
|
|
|
324,015
|
|
Interest
and Other Expense
|
|
|
119,090
|
|
|
72,640
|
|
|
|
|
|
(B3)
|
|
|
122,696
|
|
|
314,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before Income Tax Expense
|
|
|
2,748,776
|
|
|
1,066,559
|
|
|
615,556
|
|
|
|
|
|
(1,289,210
|
)
|
|
3,141,681
|
|
Income
Tax Expense
|
|
|
1,159,000
|
|
|
71,972
|
|
|
|
|
|
(B2)
|
|
|
88,534
|
|
|
1,319,506
|
|
Net
Income
|
|
$
|
1,589,776
|
|
$
|
994,587
|
|
$
|
615,556
|
|
|
|
|
$
|
(1,377,744
|
)
|
$
|
1,822,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share ("EPS")of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Outstanding
|
|
|
5,684,191
|
|
|
|
|
|
|
|
|
(B4)
|
|
|
694,301
|
|
|
6,378,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock and Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalents
Outstanding
|
|
|
5,935,405
|
|
|
|
|
|
|
|
|
(B4)
|
|
|
694,301
|
|
|
6,629,706
|
|
See
Notes
to Pro Forma Condensed Consolidated Financial
Statements.
NETSMART
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES
TO
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS
OF
PRESENTATION
Pursuant
to the merger agreement dated September 20, 2005, Netsmart Technologies, Inc.
(“Netsmart”) acquired 100% of the equity of CMHC Systems, Inc. The purchase
price totaled $19,565,956 as follows: 435,735 shares of Netsmart’s common stock
(valued at $4,915,091), $12,994,758 in cash plus additional cash consideration
currently estimated to be $792,024 as required by the “working capital
adjustment” calculated and payable as defined in the merger agreement (subject
to adjustment, see Note 2), and acquisition costs of $864,083. The cash
consideration was paid utilizing the working capital of Netsmart. The
acquisition has been accounted for under the purchase method of accounting
in
accordance with SFAS No. 141 by which the acquiring company records at its
cost
the acquired assets less liabilities assumed.
Pursuant
to the asset purchase agreement dated June 20, 2005, Netsmart acquired certain
assets and liabilities and rights to the intellectual property and customer
contracts of AMS. The purchase price was $3,590,778, which consisted of $948,833
of liabilities assumed for pre billed services plus $2,641,945 in cash. The
source of the cash consideration was the working capital of Netsmart. The
purchase has been accounted for under the purchase method of accounting in
accordance with SFAS No. 141.
On
October 7, 2005, Netsmart entered into a Loan Agreement consisting of (i) a
$2,500,000 Revolving Credit Loan and (ii) a $2,500,000 Term Loan. On October
7,
2005, Netsmart borrowed the full amount of the $2,500,000 Term Loan. On October
14, 2005, Netsmart issued 490,000 shares of common stock and 147,003 common
stock purchase warrants in a private placement generating net proceeds of
$4,115,128.
CMHC
Merger
Netsmart
purchased 100% of the equity of CMHC. Netsmart did not purchase 570 Metro Place
North Limited Partnership, an entity that is majority-owned by CMHC’s former
majority stockholder and owns the land and the building where CMHC conducts
most
of its operations. The breakdown of the allocation of the assets is subject
to
adjustment. The total acquisition cost is based upon certain estimates and
is
also subject to adjustment.
The
following are the details of the total acquisition cost:
|
Cash
paid
|
|
$
|
12,994,758
|
|
|
Market
value of common stock issued
|
|
|
4,915,091
|
|
|
Estimated
working capital adjustment *
|
|
|
792,024
|
|
|
Other
acquisition costs
|
|
|
864,083
|
|
|
Total
acquisition
|
|
$
|
19,565,956
|
|
The
total cost of acquisition was allocated as follows
**:
|
|
Current
assets
|
|
$
|
7,098,000
|
|
|
|
Property
and equipment
|
|
|
464,000
|
|
|
|
Customer
lists
|
|
|
5,300,000
|
(to
be amortized over 20 years)
|
|
Backlog
|
|
|
502,000
|
(to
be amortized over 1 year)
|
|
Capitalized
software costs
|
|
|
3,300,000
|
(to
be amortized over 4 years)
|
|
Goodwill
|
|
|
18,736,000
|
|
|
|
Deferred
taxes, long-term
|
|
|
1,381,000
|
|
|
|
Other
assets
|
|
|
26,000
|
|
|
|
Total assets
|
|
|
36,807,000
|
|
|
|
Current
liabilities
|
|
|
(14,032,000
|
)
|
|
|
Long-term
obligations
|
|
|
(38,000
|
)
|
|
|
Deferred
tax liability, long-term
|
|
|
(3,171,000
|
)
|
|
|
Total liabilities
|
|
|
(17,241,000
|
)
|
|
|
Total
acquisition allocation
|
|
$
|
19,566,000
|
|
|
*
The
working capital adjustment of an estimated $792,024 is based upon the terms
of
the merger agreement whereby the purchase price will include an amount equal
to
the amount that the final net working capital of CMHC is greater than a negative
$7.5 million. This estimate is based upon the unaudited balance sheet of CMHC
as
of September 30, 2005 and is subject to adjustment.
**
The
primary fair value adjustments made to CMHC’s historical cost balance sheet were
to increase the value of CMHC’s software to fair value, and to record customer
lists, contract backlog and goodwill and the related deferred tax liability
as
well as to adjust the fair value of deferred revenue. For all other assets
and
liabilities, historical cost approximated fair value.
|
·
|
In
order to value CMHC’s software, management considered the historical costs
incurred as well as projected costs to recreate the software. However,
since there is a specific earnings stream that can be associated
exclusively with the existing software, management applied a discounted
cash flow model in its estimation of the fair value of the software.
CMHC’s software consists of management information systems used by
behavioral and public health organizations; the systems include financial,
client administration, clinical assessment and administration. The
estimated useful life of the software is four years. Such estimate
considered the following: (i) the software is an integral part of
each
customer’s operations and is not easily replaced, (ii) however, the
underlying architecture of the software is based on unsupported
programming language and character-based screens (not the graphical
interfaces used today) and will need to be updated, and (iii) the
results
of the discounted cash flow analysis.
|
|
·
|
The
customer list has been valued using a discounted cash flow model.
CMHC
provides computer-based management information systems for approximately
400 behavioral and public healthcare organizations. CMHC’s relationships
with its customers are long-term in nature, indicating that the customer
relationships are an important intangible asset to Netsmart. CMHC
has been
in business since 1978, and based upon their historical attrition
rate,
and the 30 year projections used for the cash flow analysis, the
useful
life of the customer lists is estimated to be 20
years.
|
|
·
|
The
contract backlog represents the fair value of various customer contracts
and purchase orders that have already been billed to the customers,
but
for which services have not yet been performed. The value was determined
using a discounted cash flow model. The contract backlog is being
amortized over 12 months, since the services to be performed with
respect
to the underlying customer contracts are expected to be completed
within
one year.
|
|
·
|
The
deferred tax liability represents a long term deferred tax liability
related to the above fair valuation adjustments for the capitalized
software, customer list and contract backlog intangible assets. These
intangibles are not deductible expenses for tax purposes. The tax
effect
has been calculated utilizing Netsmart's blended statutory tax rate
of
42%.
|
|
·
|
Goodwill
represents the excess of the cost of CMHC over the net of the amounts
assigned to tangible and identifiable intangible assets acquired
and
liabilities assumed. The goodwill is not amortized for book or income
tax
purposes.
|
|
·
|
Deferred
revenue was adjusted for revenue for which there is no performance
obligation and to eliminate future gross profit related to sales
efforts
incurred prior to the acquisition
date.
|
Netsmart
only recently purchased CMHC, and accordingly, is still gathering data related
to the allocation of the purchase price. As such, the purchase price allocation
is subject to change. Changes could include a reallocation of intangible assets
which would likely have the effect of increasing or decreasing future
amortization expense, since the intangible assets have initially been assigned
varied lives ranging from no amortization (for goodwill) to 20 year amortization
(for the customer list). Additionally, the lives assigned to the identifiable
intangible assets represent management’s best estimates of the time period in
which it will continue to receive benefits from these assets. The useful lives
may need to be adjusted in the future based upon changes to the expected useful
lives of such assets. As a result, future amortization expense could be
materially different from the pro forma amortization expense presented
herein.
Strategic
headcount adjustments related to the CMHC merger decreasing cost of sales,
selling and general and administrative expenses have not been reflected in
the
pro forma adjustments to the statement of operations. These adjustments are
the
result of planned strategic employee terminations that occurred on and shortly
after the closing date of the merger.
Consulting
contracts were entered into with several senior executives of CMHC ranging
in
duration from day-to-day to up to six months. These contracts, in effect,
replace the salaries of the executives and, as a result, do not have a
significant impact on operations going forward.
As
a
result of the merger, Netsmart assumed the lease agreement on the premises
located at 570 Metro Place North in Dublin, Ohio. The subject building is owned
by CMHC’s former majority stockholder who is a current employee of Netsmart.
Netsmart has reviewed Fin 46 R and has determined that the consolidation is
not
required. The lease ends on October 31, 2013 and, based upon research of
comparable rental property, Netsmart has determined that the current rent being
paid under the terms of the lease represents a fair market price for leases
currently being negotiated in that market. In addition, the rental payments
that
are required for the next twelve months approximate the rental payments that
have been made over the past year by CMHC and, as a result, no pro forma
adjustment has been made.
Subsequent
to the acquisition of CMHC, Netsmart sold to investors, pursuant to a private
placement agreement, an aggregate 490,000 shares of common stock and warrants
to
purchase 122,504 shares of common stock. Netsmart has received $4,493,104 in
gross proceeds and paid commissions of $275,000 and $102,976 in professional
costs related to the private placement. Netsmart has also issued a warrant
to
purchase 24,500 shares to the placement agent. The private placement agreement
requires Netsmart to file a registration statement within 30 days of the closing
of the private placement, and to use its reasonable best efforts to have such
registration statement declared effective by the SEC within 90 days of the
closing. Generally, the private placement agreement further provides for a
penalty to be paid to the investors should Netsmart fail to meet its
registration obligations. Such penalty is payable to the investors in cash
at
the rate of 2.5% of the gross proceeds per month, up to a maximum penalty of
20%
of the gross proceeds. Netsmart has accounted for the proceeds of the private
placement as equity in accordance with View A of EITF 05-04. Any potential
penalties incurred pursuant to the registration rights agreement will be
recorded in earnings when and if incurred as per SFAS 5.
Addiction
Management Systems, Inc. Asset Purchase
Netsmart
did not purchase any of the assets on the AMS balance sheet other than the
purchase of certain inventory items utilized to resell to then-existing clients,
the value of which has been recorded as $32,048, certain accounts receivable
in
the amount of $127,698 and a lease security deposit in the amount of $3,334.
Netsmart did not assume any of the liabilities reflected on the AMS balance
sheet other than for contract performance related to revenue collected from
clients in advance of performance of work contracted for in the amount of
$948,833.
The
following are the details of the total acquisition cost:
|
Cash
paid
|
|
$
|
2,641,945
|
|
|
Liabilities
assumed
|
|
|
948,833
|
|
|
Other
acquisition costs
|
|
|
19,904
|
|
|
Total
acquisition
|
|
$
|
3,610,682
|
|
The
total
cost of acquisition was allocated as follows:
|
Customer
lists
|
|
$
|
1,396,902
|
(to
be amortized over 8 years)
|
|
Software
purchased
|
|
|
2,050,700
|
(to
be amortized over 8 years)
|
|
Accounts
Receivable purchased
|
|
|
127,698
|
|
|
Inventory
purchased
|
|
|
32,048
|
|
|
Lease
security deposit
|
|
|
3,334
|
|
|
Total
acquisition allocation
|
|
$
|
3,610,682
|
|
Pro
forma
adjustments were made to the unaudited condensed consolidated statements of
operations for the year ended December 31, 2005 to reflect amortization of
$215,474 for customer lists and software purchased related to the AMS
acquisition. This amount represents amortization for the six months ended June
30, 2005
Pro
forma
adjustments were made to the unaudited condensed consolidated statement of
operations for the year ended December 31, 2005 to reflect changes resulting
from the merger that are directly attributable, factually supportable and are
expected to have continuing impact on the combined operations. The following
are
the notes explaining such pro forma adjustments:
|
(B1a) |
The
adjustment increasing cost of sales is due mainly to the amortization
of
the of the acquired software related to the CMHC merger and the
amortization of the acquired software related to the AMS acquisition.
The
amounts specific to each acquisition are as
follows:
|
|
|
|
Year
ended
|
|
|
|
|
December
31, 2005
|
|
|
CMHC
|
|
$
|
995,250
|
|
|
AMS
|
|
|
128,168
|
|
|
Total
|
|
$
|
1,123,418
|
|
|
(B1b)The |
adjustment
decreasing cost of sales is the result of eliminating amortization
of the
acquired software of CMHC that is already reflected in the CMHC historical
statements of operations.
|
|
(B1c) |
The
adjustment increasing selling, general and administrative expenses
is due
mainly to the amortization of the customer list related to the CMHC
merger
and the amortization of customer list related to the AMS acquisition.
The
amounts specific to each acquisition are as
follows:
|
|
|
|
Year
ended
|
|
|
|
|
December
31, 2005
|
|
|
CMHC
|
|
$
|
198,750
|
|
|
AMS
|
|
|
87,306
|
|
|
Total
|
|
$
|
286,056
|
|
|
(B2)
|
The
adjustment to the income tax provision is to reflect the overall
42%
normal tax rate for Netsmart.
|
|
(B3)
|
This
adjustment represents interest expense on the Term Loan entered
into on
October 7, 2005.
|
|
(B4)
|
The
pro forma adjustment to the number of common shares outstanding
is a
direct result of:
|
|
1.
|
The
issuance of 435,735 shares related to the CMHC merger.
|
|
2.
|
The
shares issued pursuant to the private placement contracts resulting
in the
issuance of 490,000 shares of common stock and warrants to purchase
122,504 shares of common stock plus an additional warrant to purchase
24,500 shares of common stock issued to the placement
agent.
|
|
The
common shares issued have been reflected in both the basic and
diluted
earnings per share calculation and the warrants issued to purchase
common
stock have not been reflected in the diluted earning per share
calculation
as the result would be anti
dilutive.
|
WHERE
YOU CAN FIND MORE INFORMATION
Government
Filings.
We are
subject to the information reporting requirements of the Securities Exchange
Act
of 1934, as amended. As such, we file annual, quarterly and special reports,
proxy statements and other documents with the Securities and Exchange
Commission. These reports, proxy statements and other documents may be inspected
and copied at the public reference facilities maintained by the SEC at 100
F
Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for
further information on their public reference facilities. In addition, the
SEC
maintains an Internet site that contains reports, proxy and information
statements and other information regarding companies, including our company,
that file electronically with the SEC at the address “http://www.sec.gov.”
Stock
Market.
Our
common stock is listed on The Nasdaq SmallCap Market. Material filed by us
can
also be inspected and copied at the offices of NASDAQ at 1735 K Street, N.W.,
Washington, D.C. 20006.
Netsmart.
We will
provide you without charge, upon your request, a copy of any or all reports,
proxy statements and other documents filed by us with the SEC, as well as any
or
all of the documents incorporated by reference in this prospectus or the
registration statement (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed to us at our executive
offices:
Netsmart
Technologies, Inc.
3500
Sunrise Highway
Great
River, NY 11739
Attn:
James L. Conway
Telephone
number: (631) 968-2000
www.csmcorp.com
We
are
incorporated under the laws of the state of Delaware.
Information
Incorporated by Reference.
The SEC
allows us to “incorporate by reference” the information we file with the SEC,
which means that:
|
·
|
incorporated
documents are considered part of this
prospectus,
|
|
·
|
we
can disclose important information to you by referring you to those
documents, and
|
|
·
|
information
that we file after the date of this prospectus with the SEC will
automatically update and supersede information contained in this
prospectus and the registration
statement.
|
We
incorporate by reference the documents listed below and any future filings
we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act until this offering has been completed:
|
·
|
Our
annual report on Form 10-K for the fiscal year ended December 31,
2005
filed with the SEC on March 31, 2006;
|
|
·
|
Our
current report on Form 8-K filed with the SEC on September 30,
2005;
|
|
·
|
Our
current report on Form 8-K/A filed with the SEC on December 9, 2005;
|
|
·
|
Our
current report on Form 8-K/A filed with the SEC on January 10, 2006;
|
|
·
|
Our
current report on Form 8-K/A filed with the SEC on April 5, 2006;
and
|
|
·
|
The
description of our common stock contained in our registration statement
on
Form 8-A, declared effective on August 13,
1996.
|
You
should rely only on the information contained or incorporated by reference
in
this prospectus and in any accompanying prospectus supplement. No one has been
authorized to provide you with different information.
You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of such
documents.
|
|
|
No
person has been authorized in connection with the offering made hereby
to
give any information or to make any representation not contained
in this
prospectus and, if given or made, such information or representation
must
not be relied upon as having been authorized by us, any selling
securityholder or any other person. This prospectus does not constitute
an
offer to sell or a solicitation of an offer to buy any of the securities
offered hereby to any person or by anyone in any jurisdiction in
which it
is unlawful to make such offer or solicitation. Neither the delivery
of
this prospectus nor any sale made hereunder shall, except as otherwise
contemplated by the rules and regulations of the Securities and Exchange
Commission, create any implication that the information contained
herein
is correct as of any date subsequent to the date
hereof.
|
|
187,208
Shares
of
COMMON
STOCK
NETSMART
TECHNOLOGIES, INC.
REOFFER
PROSPECTUS
April
6, 2006
|
PART
II
INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
Item
3. Incorporation
of Documents by Reference.
The
Registrant hereby incorporates by reference into this Registration Statement
the
documents listed below:
|
(a)
|
The
Registrant’s Annual Report on Form 10-K for the fiscal year ended December
31, 2005 filed with the SEC on March 31, 2006;
|
|
(b)
|
The
Registrant’s current report on Form 8-K filed with the SEC on September
30, 2005;
|
|
(c)
|
The
Registrant’s report on Form 8-K/A filed with the SEC on December 9, 2005;
|
|
(d)
|
The
Registrant’s report on Form 8-K/A filed with the SEC on January 10, 2006;
|
|
(e)
|
The
Registrant’s report on Form 8-K/A filed with the SEC on April 5, 2006; and
|
|
(f)
|
The
description of the Registrant’s common stock contained in its registration
statement on Form 8-A, declared effective on August 13, 1996, including
any amendment or report filed for the purpose of updating such
description.
|
All
documents subsequently filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all such securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and
to
be a part hereof from the date of filing of such documents.
Item
4. Description
of Securities.
Not
applicable.
Item
5. Interests
of Named Experts and Counsel.
None.
Item
6. Indemnification
of Directors and Officers.
Under
the
provisions of the Certificate of Incorporation and By-Laws of Registrant, each
person who is or was a director or officer of Registrant shall be indemnified
by
Registrant as of right to the full extent permitted or authorized by the General
Corporation Law of Delaware.
Under
such law, to the extent that such person is successful on the merits of defense
of a suit or proceeding brought against him by reason of the fact that he is
a
director or officer of Registrant, he shall be indemnified against expenses
(including attorneys' fees) reasonably incurred in connection with such
action.
If
unsuccessful in defense of a third-party civil suit or a criminal suit is
settled, such a person shall be indemnified under such law against both (1)
expenses (including attorneys’ fees) and (2) judgments, fines and amounts paid
in settlement if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of Registrant, and with respect
to any criminal action, had no reasonable cause to believe his conduct was
unlawful.
If
unsuccessful in defense of a suit brought by or in the right of Registrant,
or
if such suit is settled, such a person shall be indemnified under such law
only
against expenses (including attorneys’ fees) incurred in the defense or
settlement of such suit if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of Registrant except
that if such a person is adjudicated to be liable in such suit for negligence
or
misconduct in the performance of his duty to Registrant, he cannot be made
whole
even for expenses unless the court determines that he is fairly and reasonably
entitled to be indemnified for such expenses.
The
officers and directors of the Registrant are covered by officers’ and directors’
liability insurance.
Item
7. Exemption
from Registration Claimed.
Not
applicable.
Item
8. Exhibits.
|
4.1
|
Restated
Certificate of Incorporation, as amended (Incorporated by reference
to
Exhibit 3.1 to registration statement on Form S-1, File No.
333-2550)
|
|
4.2
|
By-Laws
(Incorporated by reference to Exhibit 3.2 to registration statement
on
Form S-1, File No. 333-2550)
|
|
4.3
|
2001
Long-Term Incentive Plan, as
amended
|
|
5 |
Opinion
and consent of Kramer, Coleman, Wactlar & Lieberman,
P.C.
|
|
23.1
|
Consent
of Kramer, Coleman, Wactlar & Lieberman, P.C. - included in their
opinion filed as Exhibit 5
|
|
23.2
|
Consent
of Marcum & Kliegman LLP
|
|
23.4
|
Consent
of SS&G Financial Services,
Inc.
|
|
24 |
Powers
of Attorney (included on signature
page)
|
Item
9.
Undertakings.
(a) The
undersigned Registrant hereby undertakes:
(1) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that
paragraphs (a)(l)(i) and (a)(l)(ii) do not apply if the information required
to
be included in a post-effective amendment by those paragraphs is contained
in
periodic reports filed by the Registrant pursuant to section 13 or section
15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in
the
Registration Statement.
(2) That,
for
the purposes of determining any liability under the Securities Act of 1933,
each
such post-effective amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the
offering.
(b) The
undersigned Registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of
1934) that is incorporated by reference in the Registration Statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be
the initial bona fide offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against policy
as expressed in the Act and will be governed by final adjudication of such
issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all requirements for filing
on Form S-8 and has duly caused this Registration Statement to be signed on
its
behalf by the undersigned, thereunto duly authorized, in Great River, New York
on the 5th
day of
April, 2006.
|
|
|
|
NETSMART
TECHNOLOGIES, INC. |
|
|
|
Date: |
By: |
/s/ James
L.
Conway |
|
James
L. Conway
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
POWER
OF
ATTORNEY
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed on April 5, 2006 by the following persons in the capacities
indicated. Each person whose signature appears below constitutes and appoints
James L. Conway with full power of substitution, his true and lawful
attorney-in-fact and agent to do any and all acts and things in his name and
on
his behalf in his capacities indicated below which he may deem necessary or
advisable to enable Netsmart Technologies, Inc. to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this registration
statement including specifically, but not limited to, power and authority to
sign for him in his name in the capacities stated below, any and all amendments
(including post-effective amendments) thereto, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and
every act and thing requisite and necessary to be done in such connection,
as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
s/James
L. Conway
|
|
Chief
Executive Officer and Director
|
James
L. Conway
|
|
(Principal
Executive Officer)
|
|
|
|
s/Anthony
F. Grisanti
|
|
Chief
Financial Officer, Treasurer
|
Anthony
F. Grisanti
|
|
and
Secretary (Principal Financial Officer)
|
|
|
|
s/Gerald
Koop
|
|
Director
|
Gerald
O. Koop
|
|
|
|
|
|
s/John
F. Phillips
|
|
Director
|
John
F. Phillips
|
|
|
|
|
|
s/Yacov
Shamash
|
|
Director
|
Yacov
Shamash
|
|
|
|
|
|
s/Joseph
C. Sicinski
|
|
Director
|
Joseph
C. Sicinski
|
|
|
|
|
|
s/Francis
J. Calcagno
|
|
Director
|
Francis
J. Calcagno
|
|
|
|
|
|
s/John
S.T. Gallagher
|
|
Director
|
John
S.T. Gallagher
|
|
|
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
NETSMART
TECHNOLOGIES, INC.
Form
S-8
Registration Statement
E
X H I B
I T I N D E X
Exhibit
|
|
|
Number
|
|
Exhibit
Description
|
|
|
|
4.1
|
|
Restated
Certificate of Incorporation, as amended (Incorporated by reference
to
Exhibit 3.1 to registration statement on Form S-1, File No.
333-2550)
|
|
|
|
4.2
|
|
By-Laws
(Incorporated by reference to Exhibit 3.2 to registration statement
on
Form S-1, File No. 333-2550)
|
|
|
|
4.3
|
|
2001
Long Term Incentive Plan, as amended
|
|
|
|
5
|
|
Opinion
and Consent of Counsel
|
|
|
|
23.1
|
|
Consent
of Counsel (included in Exhibit 5)
|
|
|
|
23.2
|
|
Consent
of Marcum & Kliegman LLP
|
|
|
|
23.3
|
|
Consent
of KPMG LLP
|
|
|
|
23.4
|
|
Consent
of SS&G Financial Services, Inc.
|
|
|
|
24
|
|
Powers
of Attorney (included on signature
page)
|