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 March 31, 2004
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)
3500 Sunrise Highway, Great River, NY 11739
(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__
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes __ No X
---
Number of shares of common stock outstanding as of April 20, 2004: 5,335,700
=========
Netsmart Technologies, Inc. and Subsidiary
Index
Part I: - Financial Information:
Item 1. Financial Statements: Page
----
Condensed Consolidated Balance Sheets - March 31, 2004 (Unaudited)
and December 31, 2003 1-2
Condensed Consolidated Statements of Income - (Unaudited)
Three Months Ended March 31, 2004 and 2003 3
Condensed Consolidated Statements of Cash Flows - (Unaudited)
Three Months Ended March 31, 2004 and 2003 4-5
Condensed Consolidated Statement of Stockholders' Equity - (Unaudited)
Three Months Ended March 31, 2004 6-7
Notes to Condensed Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 20
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
March 31, December 31,
-------- ------------
2004 2003
---- ----
Unaudited
---------
Assets:
Current Assets:
Cash and Cash Equivalents $14,248,929 $15,920,993
Accounts Receivable - Net 8,200,059 8,004,481
Costs and Estimated Profits in Excess
of Interim Billings 1,629,462 1,817,135
Deferred taxes 823,000 918,000
Other Current Assets 522,551 541,458
---------- ----------
Total Current Assets 25,424,001 27,202,067
---------- ----------
Property and Equipment - Net 2,729,421 2,591,758
---------- ----------
Other Assets:
Software Development Costs - Net 1,057,531 1,087,116
Customer Lists - Net 2,552,452 2,701,751
Deferred taxes less current portion 790,000 882,000
Other Assets 146,873 168,697
---------- ----------
Total Other Assets 4,546,856 4,839,564
---------- ----------
Total Assets $32,700,278 $34,633,389
========== ==========
See Notes to Condensed Consolidated Financial Statements.
1
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
March 31, December 31,
-------- -----------
2004 2003
---- ----
Unaudited
---------
Liabilities and Stockholders' Equity:
Current Liabilities:
Current Portion - Long Term Debt $ 666,667 $ 666,667
Current Portion Capital Lease Obligations 60,740 61,416
Accounts Payable 1,080,047 1,329,765
Accrued Expenses 1,419,656 2,295,454
Interim Billings in Excess of Costs and Estimated
Profits 5,971,493 7,263,285
Deferred Revenue 1,108,197 871,628
---------- ----------
Total Current Liabilities 10,306,800 12,488,215
---------- ----------
Long Term Debt - Less current portion 833,355 1,000,020
Capital Lease Obligations - Less current portion 70,344 85,982
Interest Rate Swap at Fair Value 51,896 59,068
---------- ----------
Total Non Current Liabilities 955,595 1,145,070
---------- ----------
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 and outstanding 5,563,624 and 5,335,700 shares at
March 31, 2004 and 5,528,247 and 5,304,489
shares at December 31, 2003 55,636 55,282
Additional Paid in Capital 29,169,068 29,010,212
Accumulated Comprehensive loss - Interest Rate Swap (51,896) (59,068)
Accumulated Deficit (6,021,943) (6,346,873)
---------- ----------
23,150,865 22,659,553
Less: cost of shares of Common Stock held
in treasury - 227,924 shares at March 31, 2004
and 223,758 at December 31, 2003 1,712,982 1,659,449
---------- ----------
Total Stockholders' Equity 21,437,883 21,000,104
---------- ----------
Total Liabilities and Stockholders' Equity $ 32,700,278 $ 34,633,389
========== ==========
See Notes to Condensed Consolidated Financial Statements.
2
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)
-------------------------------------------------------------------------------
Three months ended
March 31,
2004 2003
---- ----
Revenues:
Software and Related
Systems and Services:
General $4,062,955 $ 3,946,961
Maintenance Contract
Services 1,917,226 1,713,554
--------- ---------
Total Software and Related
Systems and Services 5,980,181 5,660,515
Application Service Provider Services 354,814 --
Data Center Services 487,981 458,538
--------- ---------
Total Revenues 6,822,976 6,119,053
--------- ---------
Cost of Revenues:
Software and Related
Systems and Services:
General 1,973,276 2,487,142
Maintenance Contract
Services 985,474 866,126
--------- ---------
Total Software and Related
Systems and Services 2,958,750 3,353,268
Application Service Provider Services 226,510 --
Data Center Services 214,057 266,212
--------- ---------
Total Cost of Revenues 3,399,317 3,619,480
--------- ---------
Gross Profit 3,423,659 2,499,573
--------- ---------
Selling, General and
Administrative Expenses 1,830,886 1,664,083
Research, Development and Maintenance 1,039,899 510,437
--------- ---------
Total 2,870,785 2,174,520
--------- ---------
Operating Income 552,874 325,053
Interest and Other Income 31,640 12,303
Interest and Other Expense (41,584) (33,171)
--------- ---------
Income before Income Tax Expense (Benefit) 542,930 304,185
Income Tax Expense (Benefit) 218,000 33,000
--------- ---------
Net Income $ 324,930 $ 271,185
========= =========
Earnings Per Share ("EPS")of Common Stock:
Basic EPS $ .06 $ .07
========= ==========
Weighted Average Number of Shares of
Common Stock Outstanding 5,317,574 3,956,633
========= ==========
Diluted EPS $ .06 $ .06
========= ==========
Weighted Average Number of Shares of
Common Stock and Common Stock
Equivalents Outstanding 5,571,569 4,356,021
========= ==========
See Notes to Condensed Consolidated Financial Statements.
3
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
-------------------------------------------------------------------------------
Three Months ended
March 31,
------------------
2004 2003
---- ----
Operating Activities:
Net Income $ 324,930 $ 271,185
--------- ---------
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 388,146 247,900
Provision for Doubtful Accounts -- 25,567
Amortization of Warrants Issued for Services
and Costs Related to Warrant Extension -- 14,400
Deferred Income Taxes 187,000 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (195,578) 489,991
Costs and Estimated Profits in
Excess of Interim Billings 187,673 945,150
Other Current Assets 18,907 26,677
Other Assets 10,157 11,256
Increase [Decrease] in
Accounts Payable (249,718) (702,342)
Accrued Expenses (202,553) 7,739
Interim Billings in Excess of
Costs and Estimated Profits (1,291,792) 513,457
Deferred Revenue 236,569 (436,300)
--------- ---------
Total Adjustments (911,189) 1,143,495
--------- ---------
Net Cash (Used In) Provided by
Operating Activities (586,259) 1,414,680
--------- ---------
Investing Activities:
Acquisition of Property and Equipment (964,503) (108,524)
Capitalized Software Development (44,000) --
--------- ---------
Net Cash Used In Investing Activities (1,008,503) (108,524)
--------- ----------
See Notes to Condensed Consolidated Financial Statements.
4
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
-------------------------------------------------------------------------------
Three Months ended
March 31,
------------------
2004 2003
---- ----
Financing Activities:
Payment of Capitalized Lease Obligations $ (16,314) $ (2,357)
Net Proceeds from Stock Options Exercised 105,677 --
Payments of Term Loan (166,665) (124,998)
---------- ---------
Net Cash Used in Financing Activities (77,302) (127,355)
---------- ---------
Net (Decrease) Increase in Cash
and Cash Equivalents (1,672,064) 1,178,801
Cash and Cash Equivalents -
Beginning of Period 15,920,993 7,251,740
---------- ---------
Cash and Cash Equivalents -
End of Period $14,248,929 $8,430,541
========== =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 42,351 $ 34,358
Income Taxes $ 139,598 $ 65,381
Non Cash Investing and Financing Activities:
The fair value of the interest rate swap decreased by $7,172 for the three
months ended March 31, 2004. The fair value of the interest rate swap increased
by $9,096 for the three months ended March 31, 2003.
During the three months ended March 31, 2004, the Company received 4,166 shares
of its common stock as consideration for the exercise of certain stock options.
The value of the shares received was $53,533, which was the market value of the
common stock on the date of exercise.
See Notes to Condensed Consolidated Financial Statements.
5
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - (UNAUDITED)
Additional Accumulated
---------- -----------
Paid-in Comprehensive
------- -------------
Capital Loss Total
------- ---- -----
Common Stock Common Accumulated Interest Rate Comprehensive Treasury Shares Stockholders'
------------ ------ ----------- ------------- ------------- --------------- -------------
Shares Amount Stock Deficit Swap Income Shares Amount Equity
------ ------ ----- ------- ---- ------ ------ ------ ------
Balance - 5,528,247 $55,282 $29,010,212 $(6,346,873) $(59,068) -- 223,758 $(1,659,449) $21,000,104
January 1, 2004
Common Stock
Issued -
Exercise of Options 35,377 354 158,856 -- -- -- -- -- 159,210
Change in Fair
Value of Interest
Rate Swap -- -- -- -- 7,172 $ 7,172 -- -- 7,172
Treasury Shares
from Cashless
Exercise of
Stock Options -- -- -- -- -- -- 4,166 (53,533) (53,533)
Net Income -- -- -- 324,930 -- 324,930 -- -- 324,930
-------
$332,102
--------- ------ ---------- ---------- ------- ======= ------- ---------- ----------
Balance -
March 31, 2004 5,563,624 $55,636 $29,169,068 $(6,021,943) $(51,896) 227,924 $(1,712,982) $21,437,883
========= ====== ========== ========== ======= ======= ========== ==========
See Notes to Consolidated Financial Statements.
6
NETSMART TECHNOLOGIES, INC. AND SUBSIDIARY
-------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
(1) Financial Statements
--------------------
The accompanying condensed consolidated financial statements include the
accounts of Netsmart Technologies, Inc. and its subsidiary ("The Company").
All intercompany balances and transactions have been eliminated in
consolidation.
These unaudited, condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
of America for complete financial statements. In the opinion of management
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of
operations of any interim period are not necessarily indicative of the results
of operations to be expected for the fiscal year. For further information,
refer to the consolidated financial statements and accompanying footnotes
included in the Company's annual report on Form 10-K for the year ended
December 31, 2003.
(2) Earnings Per Share
------------------
The following table sets forth the components used in the computation of basic
and diluted earnings per share:
Three Months Ended March 31,
2004 2003
---- ----
Numerator:
Net income $ 324,930 $ 271,185
========= =========
Denominator:
Weighted average shares 5,317,574 3,956,633
--------- ---------
Effect of dilutive securities:
Employee stock options 253,995 371,448
Stock warrants -- 27,940
--------- ---------
Dilutive potential common shares 253,995 399,388
--------- ---------
Denominator for diluted earnings per
share-adjusted weighted average shares
after assumed conversions 5,571,569 4,356,021
========= =========
(3) Stock Options and Similar Equity Instruments
--------------------------------------------
At March 31, 2003, the Company had three stock-based employee compensation
plans. As permitted under Statement of Financial Accounting Standards ("SFAS")
No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure",
which amended SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", the Company has elected to continue to follow the intrinsic value
method in accounting for its stock-based employee compensation arrangements, as
defined by Accounting Principles Board Opinion ("APB") No. 25, "Accounting for
Stock Issued to Employees", and related interpretations including Financial
Accounting Standards Board Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation", an interpretation of APB No. 25. No
stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the
7
date of grant. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation:
Three Months Ended
March 31,
2004 2003
---- ----
Net Income as Reported $ 324,930 $ 271,185
Deduct: Total stock-based employee compensation
expense determined under fair value-based method
for all awards, net of related tax effect 95,082 136,401
---------- ----------
Pro Forma Net Income $ 229,848 $ 134,784
========== ==========
Basic Net Income Per Share as Reported $ .06 $ .07
========== ==========
Basic Pro Forma Net Income Per Share $ .04 $ .03
========== ==========
Diluted Net Income Per Share as Reported $ .06 $ .06
========== ==========
Diluted Pro Forma Net Income Per Share $ .04 $ .03
========== ==========
The fair value of options at date of grant was estimated using the Black-Scholes
fair value based method with the following weighted average assumptions:
Three Months Ended
March 31,
2004 2003
---- ----
Expected Life (Years) 5 5
Interest Rate 4.00% 4.00%
Annual Rate of Dividends 0% 0%
Volatility 68% 68%
The weighted average fair value of options at date of grant using the fair value
based method during 2004 and 2003 is estimated at $2.83 and $1.42 respectively.
(4) Income Taxes
------------
The provision for income taxes for the period ended March 31, 2004, consists of
a current tax provision of $31,000 and a deferred tax provision of approximately
$187,000. The deferred tax provision was $239,000 based upon utilization of
available net operating loss carry forwards offset by a reduction in the
deferred tax asset valuation allowance of $52,000. The provision for income
taxes for the period ending March 31, 2003, reflects a deferred tax provision of
approximately $137,000, offset by a reduction in the deferred tax asset
valuation allowance of the same amount.
8
(5) Stockholders' Equity
--------------------
During the three months ended March 31, 2004, options to purchase 35,377 shares
were exercised and the Company received gross proceeds of $159,210. Included in
the gross proceeds received from the exercise of options was the delivery of
4,166 shares of the Company's common stock, which were valued at $53,533, which
was based upon the market price of the common stock on the date of exercise in
accordance with the cashless exercise provisions of the Company's stock option
plans.
Included in the above options exercised were 12,250 options owned by certain of
the Company's officers and members of the Board of Directors, which were done on
a cashless basis and represents all cashless exercises during the quarter ended
March 31, 2004..
(6) Operating Segments
The Company currently classifies its operations into three business segments:
(1) Software and Related Systems and Services, (2) Data Center Services and (3)
Application Service Provider ("ASP") services. ASP services is a new segment as
a result of the CareNet acquisition and any previous ASP operations were
immaterial and were previously included in Software and Related Systems and
Services.Software and Related Systems and Services is the design, installation,
implementation and maintenance of computer information systems that provide
comprehensive healthcare information technology solutions including billing,
patient tracking and scheduling for inpatient and outpatient environments, as
well as clinical documentation and medical record generation and management.
Data Center Services involves Company personnel performing data entry and data
processing services for customers. Application Service Provider services
involves the Company offerings of its Avatar suite of products, its CareNet
products and InfoScribeR products on a virtual private network or internet
delivery approach, thereby allowing its customers to rapidly deploy products and
pay on a monthly service basis, thus eliminating capital intensive system
requirements. Application Service Provider services revenue is recognized in the
period in which the services are provided. Intersegment sales and sales outside
the United States are not material. Information concerning the Company's
business segments are as follows:
Software and Application
------------ -----------
Related Systems Data Center Service Provider
--------------- ----------- ----------------
and Services Services Services Consolidated
------------ -------- -------- ------------
Three Months Ended March 31,
----------------------------
2004
----
Revenue $ 5,980,181 $ 487,981 $ 354,814 $ 6,822,976
Income before income taxes 409,368 163,427 (29,865) 542,930
Total identifiable assets at
March 31, 2004 27,194,311 2,271,929 3,234,038 32,700,278
Three Months Ended March 31,
----------------------------
2003
----
Revenue $ 5,660,515 $ 458,538 -- $ 6,119,053
Income before income taxes 229,164 75,021 -- 304,185
Total identifiable assets at
March 31, 2003 20,175,008 1,676,210 -- 21,851,218
9
(7) Reclassifications
-----------------
Certain accounts in the prior year financial statements have been reclassified
for comparative purposes to conform to the presentation in the current year
financial statements. These reclassifications have no effect on previously
reported income.
(8) Subsequent Events
-----------------
Effective April 1, 2004, the Company entered into revised employment agreements
with Messrs. James L. Conway, Gerald O. Koop and Anthony F. Grisanti. The terms
and conditions of the revised contracts are identical in all material respects
to the previous contracts except that (i), the term of each individual's
contract was extended by one year, so that Messrs. Conway and Grisanti's
contracts will expire on December 31, 2006 and Mr. Koop's contract will expire
on December 31, 2005 and (ii) the revised contracts do not contain the provision
pursuant to which, following each individual's respective term of employment, he
would have acted as a consultant to the Company for a period of five years for
an annual compensation of $75,000.
Effective April 1, 2004, the Company has adopted an Executive Retirement plan,
whereby upon retirement, the Company will pay certain officers a retirement
benefit of approximately $85,000 per year for a period of six years. This rate
is subject to 10% increases up to $110,000 per year, depending on the officer's
length of employment beyond April 1, 2004.
Mr. Phillip's employment contract expired on December 31, 2003. Mr. Phillips was
paid on a month to month basis for the three months ended March 31, 2004.
Effective April 1, 2004, Mr. Phillips retired and, pursuant to the terms of the
Company's Executive Retirement plan, will receive $85,000 per year for the next
six years.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Our operations are grouped into three segments:
|X| Software and Related Systems and Services
|X| Data Center (service bureau) Services
|X| Application Service Provider Services (ASP)
Results of Operations
Fixed price software development contracts and licenses accounted for 34% and
49% of consolidated revenue for the three months ended March 31, 2004 and 2003,
respectively. We recognize revenue for fixed price contracts 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. Revenue from fixed
price software development contracts is determined using the percentage of
completion method which 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 is affected. Our time
spent on projects during the second half of the year can generally range from 1%
to 10% less than time spent on projects during the first half of the year.
Three Months Ended March 31, 2004 and 2003
Our total revenue for the three months ended March 31, 2004 (the "March 2004
period") was $6,823,000, an increase of $704,000, or 12%, from our revenue for
the three months ended March 31, 2003 (the "March 2003 period"), which was
$6,119,000.
Revenue from contracts from state and local government agencies represented 47%
of revenue in the March 2004 period and 62% of revenue in the March 2003 period.
This decrease is the result of the substantial completion towards the end of
2003 of two state contracts and one county contract.
Software and Related Systems and Services
-----------------------------------------
Our Software and Related Systems and Services revenue for the March 2004 period
was $5,980,000, an increase of $319,000, or 6%, from our revenue for the March
2003 period, which was $5,661,000. Software and related systems and services
revenue is comprised of turnkey systems labor revenue, revenue from sales of
third party hardware and software, license revenue, maintenance revenue and
revenue from small turnkey systems.
The largest component of revenue was turnkey systems labor revenue, which
increased to $2,266,000 in the March 2004 period, from $2,184,000 in the March
2003 period, reflecting a 4% increase. Turnkey systems labor revenue refers to
labor associated with turnkey installations and includes categories such as
training, installation, project management and development. This increase was
partially the result of an increased staff working on turnkey labor contracts.
Labor rate price changes from the March 2004 period to the March 2003 period
resulted in a 4% increase in the average daily billing rate and accounted for
approximately $36,000, or 44%, of the total turnkey systems labor increase.
Revenue from third party hardware and software decreased to $880,000 in the
March 2004 period, from $979,000 in the March 2003 period, which represents a
decrease of 10%. Sales of third party hardware and software are made in
connection with the sales of turnkey systems. These sales are typically made at
lower gross margins than our human services revenue. During the March 2004
period, we did not sell and perform on as many contracts containing such third
party items as pharmacy software and hardware. License revenue increased to
$630,000 in the March 2004 period, from $594,000 in the March 2003 period,
11
reflecting an increase of 6%. License revenue is generated as part of a sale of
a human services information system pursuant to a contract or purchase order
that includes delivery of the system and maintenance. This increase was the
result of an increase in additional license sales to our existing client base.
Maintenance revenue increased to $1,917,000 in the March 2004 period, from
$1,714,000 in the March 2003 period, reflecting an increase of 12%. As turnkey
systems are completed, they are transitioned to the maintenance division,
thereby increasing our installed base. Revenue from the sales of our small
turnkey division increased to $287,000 in the March 2004 period, from $190,000
in the March 2003 period, reflecting an increase of 51%. This increase is the
result of the introduction of our new Avatar AM product into the market place
during the latter part of 2003. Small turnkey division sales relate to turnkey
contracts that are less than $50,000 and are usually completed within one month.
Gross profit increased to $3,021,000 in the March 2004 period from $2,307,000 in
the March 2003 period, reflecting an increase of 31%. Our gross margin
percentage increased to 51% in the March 2004 period from 41% in the March 2003
period. Our gross margin percentage increased primarily as a result of improved
margins on our turnkey labor revenue, which was the result of improved
efficiency on our fixed price contracts.
Data Center Services (Service Bureau)
--------------------
Data center clients typically generate approximately the same amount of revenue
each year. We bill on a transaction basis or on a fixed fee arrangement.
Historically, each year we increase the transaction or fixed fees by an amount
that approximates the New York urban consumer price index increase. The data
center revenue increased to $488,000 in the March 2004 period, from $459,000 in
the March 2003 period, representing an increase of $29,000, or 6%. This increase
was due to an increase in the client base as well as increases in pricing.
Gross profit increased to $274,000 in the March 2004 period from $192,000 in the
March 2003 period, reflecting an increase of 42%. Our gross margin percentage
increased to 56% in the March 2004 period from 42% in the March 2003 period.
This increase was the result of the increase in revenue as well as a reduction
in costs of approximately $52,000.
Application Service Provider Services ("ASP")
---------------------------------------------
Application Service Provider services involves the offering of our Avatar suite
of products, our CareNet products and our InfoScribeR products on a virtual
private network or internet delivery approach, thereby allowing our customers to
rapidly deploy products and pay on a monthly service basis, thus eliminating
capital intensive system requirements. This is the first quarter that we have
accounted for ASP Services as a segment. This is the result of our acquisition
of CareNet on June 25, 2003.
Revenue for the March 2004 period was $355,000, which consisted of revenue from
our CareNet operations of $183,000, revenue from our InfoScriber operations of
$58,000 and revenue from our Avatar ASP services operations of $114,000.
Gross profit for the March 2004 period was $128,000 and our gross margin
percentage was 36%.
Operating Expenses
------------------
Selling, general and administrative expenses were $1,831,000 in the March 2004
period, reflecting an increase of $167,000, or 10%, from the $1,664,000 in the
March 2003 period. The increases were: advertising and promotion, which
increased by $56,000; trade show costs, which increased by $39,000; depreciation
expense which increased by $96,000; amortization of the CareNet acquisition
12
costs, which was $70,000 in the March 2004 period and not present in the March
2003 periods; and general insurance, which increased by $19,000. The cost
increases were partially offset by reductions in: bad debt expense, which
decreased by $74,000; conference costs, which decreased by $18,000 and the
provision for bonuses which decreased by $21,000.
We incurred product development and maintenance expenses of $1,040,000 in the
March 2004 period, an increase of 104% from the $510,000 in the March 2003
period. The increase in product development and maintenance expense is the
result of continuing investment in product enhancement and extensions. These
extensions include the development of new software modules which addresses
Federal reporting requirements, as well as continued investment in core
products. These amounts have been appropriately accounted for in accordance with
SFAS No. 86, "Accounting for the Cost of Computer Software to be Sold, Leased,
or Otherwise Marketed."
Interest and other expense was $42,000 in the March 2004 period, an increase of
$8,000, or 25%, from the $33,000 in the March 2003 period. This increase is the
result of an increase in borrowing related to the promissory note issued to
Shuttle Data Systems Corp. in connection with our acquisition of CareNet and an
increase in our capitalized lease arrangements. The increase in interest expense
was partially offset by reduced borrowing during the March 2004 period under our
loan with Fleet Bank
Interest income was $31,000 in the March 2004 period, an increase of $19,000, or
157%, from the $12,000 in the March 2003 period. Interest income is generated
from short-term investments made with a substantial portion of the proceeds
received from the term loan, as well as cash generated from operations and the
proceeds the exercise of options and warrants.
We have a net operating loss tax carry forward of approximately $5.9 million.
In the March 2004 period, we recorded a current income tax expense of $31,000,
which related to various state and local taxes, as well as a provision for the
Federal alternative minimum tax. The income tax provision was increased by a
deferred tax provision of $187,000. The deferred tax provision was $239,000
based on utilization of net operating loss carry forwards offset by a reduction
in the referred tax asset valuation allowance of $52,000.
As a result of the foregoing factors, in the March 2004 period, we had net
income of $325,000, or $.06 per share basic and diluted. For the March 2003
period, we had net income of $271,000, or $.07 per share (basic) and $.06 per
share (diluted).
Liquidity and Capital Resources
-------------------------------
We had working capital of approximately $15.1 million at March 31, 2004 as
compared to working capital of approximately $14.7 million at December 31, 2003.
This increase of $400,000 in working capital was the result of the following:
our net income, after adding back depreciation and amortization and adjusting
for the change in the current portion of the deferred tax asset, increased
working capital by $618,000. The increase in working capital also included
$106,000 in net proceeds from the exercise of our stock options. These increases
were partially offset by an investment in capitalized software of $44,000 and by
an additional $291,000 for the acquisition of equipment. The remaining increase
in working capital of $11,000 was due to changes in other current assets and
liabilities.
In June 2001, we entered into a revolving credit and term loan agreement with
Fleet Bank ("Fleet"). This financing provides us with a five-year term loan of
$2.5 million, as well as a two year $1.5 million revolving line of credit. The
$1.5 million line of credit expired in June 2003. We did not utilize this line
of credit during its duration. The current term loan bears interest at LIBOR
plus 2.5%. We have entered into an interest rate swap agreement with Fleet for
the amount outstanding under the term loan whereby we converted our variable
rate on the term loan to a fixed rate of 7.95% in order to reduce the interest
rate risk associated with these borrowings. We have made principal payments on
the $2.5 million term loan and the amount outstanding at March 31, 2004 is $1.1
million.
13
The terms of our term loan agreement require compliance with certain covenants,
including maintaining a minimum net equity of $9 million, minimum cash reserves
of $500,000, maintenance of certain financial ratios, limitations on capital
expenditures and indebtedness and prohibition of the payment of cash dividends.
As of March 31, 2004, we were in compliance with the financial covenants of this
agreement. We are currently exploring our options with Fleet, relating to the
possible increase in the amount of the term loan to be used primarily for
acquisitions, as well as an additional term loan to assist in costs associated
with the relocation of our corporate headquarters.
On February 27, 2003, our Board of Directors authorized the purchase of up to
$100,000 of our common stock at any time the market price is less than $3.50 per
share. Purchases of stock will be made from time to time, depending on market
conditions, in open market or in privately negotiated transactions, at prices
deemed appropriate by management. There is no set time limit on the purchases.
We expect to fund any stock repurchases from our operating cash flow. As of
March 31, 2004, we have not made any stock repurchases.
In June 2003, we acquired substantially all of the assets of the CareNet segment
of Shuttle Data Systems Corporation, d/b/a Adia Information Management Corp. The
total purchase price included, among other consideration, a three year
promissory note in the principal amount of $500,000 payable in 36 equal monthly
installments of principal plus interest at the prime rate plus 1%. We have made
principal payments on the $500,000 loan and the amount outstanding at March 31,
2004 is $375,000.
In the March 2004 period, we incurred capitalized software development costs of
$44,000 relating to our RAD Plus 2004 product.
A part of our growth strategy is to acquire other businesses that are related to
our current business. Such acquisitions may be made with cash, our securities or
a combination of cash and securities. If we fail to make any acquisitions our
future growth will be limited to only internal growth. As of the date of this
Form 10-Q quarterly report, we did not have any formal or informal agreements or
understandings with respect to any material acquisitions, and we cannot give any
assurance that we will be able to complete any material acquisitions.
Based on our outstanding contracts and our continuing business, we believe that
our cash flow from operations and our cash on hand will be sufficient to enable
us to fund our operations for at least the next twelve months. It is possible
that we may need additional funding if we go forward with certain acquisitions
or if our business does not develop as we anticipate or if our expenses,
including our software development costs relating to our 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 expectation.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. These accounting
principles require us to make certain estimates, judgments and assumptions. We
believe that the estimates, judgments and assumptions upon which we rely are
reasonable based upon information available to us at the time that these
estimates, judgments and assumptions are made. These estimates, judgments and
assumptions can affect the reported amounts of assets and liabilities as of the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the periods presented. Among other things, estimates are
used in accounting for allowances for bad debts, deferred income taxes, expected
realizable values of assets (primarily capitalized software development costs
and customer lists) and revenue recognition. To the extent there are material
differences between these estimates, judgments or assumptions and actual
14
results, our financial statements will be affected. The significant accounting
policies that we believe are the most critical to aid in fully understanding and
evaluating our reported financial results include the following:
Revenue Recognition
Capitalized Software Development Costs
Impairment of Customer Lists
Revenue Recognition: Revenue associated with fixed price turnkey sales consists
of the following components: licensing of software, labor associated with the
installation and implementation of the software; and maintenance services
rendered in connection with such licensing activities. Revenue from fixed price
software development contracts and revenue under license agreements, which
require significant modification of the software package to the customer's
specifications, are recognized utilizing the estimated percentage-of-completion
method which uses the units-of-work-performed method to measure progress towards
completion. Revisions in cost estimates and recognition of losses on these
contracts are reflected in the accounting period in which the facts become
known. The complexity of the estimation process and issues related to the
assumptions, risks and uncertainties inherent with the application of the
percentage of completion method of accounting affect the amounts of revenue and
related expenses reported in our Consolidated Financial Statements. A number of
internal and external factors can affect our estimates, including labor rates,
utilization and efficiency variances and specification and testing requirement
changes. Maintenance contract revenue is recognized on a straight-line basis
over the life of the respective contract. We also derive revenue from the sale
of third party hardware and software which is recognized based upon the terms of
each contract. Consulting revenue is recognized when the services are rendered.
Data Center revenue and Application Service Provider revenue are recognized in
the period in which the services are provided. The above sources of revenue are
recognized when, persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed and determinable and collectibility is probable.
Contract terms provide for billing schedules that differ from revenue
recognition and give rise to costs and estimated profits in excess of billings,
and billings in excess of costs and estimated profits.
Deferred revenue represents revenue billed and collected but not yet earned.
The cost of maintenance revenue, which consists solely of staff payroll and
applicable overhead, is expensed as incurred.
Capitalized Software Development Costs - Capitalization of computer software
development costs begins upon the establishment of technological feasibility and
ends upon its availability for general release to customers. Technological
feasibility for our computer software products is generally based upon
achievement of a detail program design free of high risk development issues. The
Company capitalizes only those costs directly attributable to the development of
the software. The establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized computer software development costs
requires considerable judgment by management with respect to certain external
factors, including, but not limited to, technological feasibility, anticipated
future gross revenue, estimated economic life and changes in software and
hardware technology. Prior to reaching technological feasibility these costs are
expensed as incurred and included in research, development and maintenance.
Activities undertaken after the products are available for general release to
customers to correct errors or keep the product updated are expensed as incurred
and included in research, development and maintenance. Amortization of
capitalized computer software development costs commences when the related
products become available for general release to customers. Amortization is
provided on a product by product basis. The annual amortization is the greater
of the amount computed using (a) the ratio that current gross revenue for a
product bear to the total of current and anticipated future gross revenue for
that product or (b) the straight-line method over the remaining estimated
economic life of the product. The estimated life of these products range from 3
to 8 years.
We periodically perform reviews of the recoverability of such capitalized
software costs. At the time a determination is made that capitalized amounts are
not recoverable based on the estimated cash flows to be generated from the
applicable software, any remaining capitalized amounts are written off.
15
Impairment of Customer Lists - Pursuant to SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", we evaluate our long-lived assets
for financial impairment, and continue to evaluate them as events or changes in
circumstances indicate that the carrying amount of such assets may not be fully
recoverable. We evaluate the recoverability of long-lived assets by measuring
the carrying amount of the assets against the estimated undiscounted future cash
flows associated with them. At the time such evaluations indicate that the
future undiscounted cash flows of certain long-lived assets are not sufficient
to recover the carrying amount of such assets, the assets are adjusted to their
fair values.
Contractual Obligations
The following table summarizes, as of March 31, 2004, our obligations and
commitments to make future payments under debt, capital leases and operating
leases:
Contractual Obligations Payments Due by
----------------------- ---------------
Period
------
Total Less than 1 - 3 4 - 5 years Over 5
----- --------- ----- ----------- ------
1 year years years
------ ----- -----
Long Term Debt(1) 1,500,022 666,667 833,355 -- --
Capital Lease Obligations(2) 143,660 68,957 74,703 -- --
Operating Leases(3) 6,424,472 384,839 1,170,731 1,216,087 3,652,815
Total Contractual Cash Obligations 8,068,154 1,120,463 2,078,789 1,216,087 3,652,815
(1) See Note 7 to Netsmart's Consolidated Financial Statements for the years
ended December 31, 2003, 2002 and 2001, which describes the Company's financing
agreement.
(2) See Note 10 to Netsmart's Consolidated Financial Statements for the
years ended December 31, 2003, 2002 and 2001, which describes the Company's
Capital Lease Obligation.
(3) See Note 12 to Netsmart's Consolidated Financial Statements for the years
ended December 31, 2003, 2002 and 2001, which describes the Company's Operating
Lease Obligations.
ISSUES AND UNCERTAINTIES
------------------------
This Quarterly Report on Form 10-Q contains statements that are forward-looking.
These statements are based on current expectations and assumptions that are
subject to risks and uncertainties. Actual results could differ materially
because of issues and uncertainties such as those listed below and elsewhere in
this report, which, among others, should be considered in evaluating our
financial outlook.
Intellectual Property Rights
We defend our intellectual property rights, but unlicensed copying and use of
software and intellectual property rights may result in a loss of revenue to us.
16
General Economic and Geo-Political Risks
Softness in healthcare information technology spending or other changes in
general economic conditions that affect demand for computer software could
adversely effect our revenue. Terrorist activity and armed conflict pose the
additional risk of general economic disruption. These conditions lend additional
uncertainty to the timing and budget for technology investment decisions by our
customers.
Competition
We continue to experience intensive competition across all markets for our
products and services. These competitive pressures may result in decreased sales
volumes, price reductions, and/or increased operating costs, such as for
marketing and sales incentives, resulting in lower revenue, gross margins and
operating income.
Technology
Our success depends upon our ability to develop new products and enhance our
existing products. Rapid technological advances in hardware and software
development, evolving standards in computer hardware, software technology and
communications infrastructure, changing customer needs and frequent new product
introductions and enhancements characterize the enterprise software market in
which we compete. To keep pace with technological developments, satisfy
increasingly sophisticated customer requirements and achieve market acceptance,
we must enhance and improve our existing products. We must also continue to
introduce new products and services. If we are unable to develop new products or
adapt our current products to run on new or popular operating systems, if we are
unable to enhance and improve our products successfully in a timely manner, or
if we fail to position and/or price our products to meet market demand,
customers may not buy new software licenses and our business and operating
results will be adversely affected. If our enhancement to existing products does
not deliver the functionality that our customer base demands, our customers may
not renew product support and our business and operating results will be
adversely affected. In addition, standards for network protocols, as well as
other industry adopted and de facto standards for the internet, are rapidly
evolving. We cannot provide any assurance that the standards on which we choose
to develop new products will allow us to compete effectively for business
opportunities as they arise in emerging areas. Accelerated product introductions
and short product life cycles require high levels of expenditures for research
and development that could adversely affect our operating results. Further, any
new products we develop may not be introduced in a timely manner and may not
achieve the broad market acceptance necessary to generate significant revenues.
Finally, while customers make first-time buying decisions based on the products,
many make future license and support buying decisions based upon the quality of
the support offering. If we do not continue to enhance our support services our
renewal rates for product support may decline, which could affect our operating
results.
Sales and Marketing
Our sales forecasts may not consistently correlate to revenues in a particular
quarter. We use a "pipeline" system, a common industry practice, to forecast
sales and trends in our business. Our sales personnel monitor the status of all
proposals, such as the date when they estimate that a customer will make a
purchase decision and the potential dollar amount of the sale. These estimates
are aggregated periodically to generate a sales pipeline. We compare this
pipeline at various points in time to evaluate trends in our business. This
analysis provides some guidance in business planning and budgeting, but these
pipeline estimates are by their nature speculative. Our pipeline estimates are
not necessarily reliable predictors of revenues in a particular quarter or over
a longer period of time, partially because of changes in conversion rates of the
pipeline into contracts that can be very difficult to estimate. A variation in
the conversion rate of the pipeline into contracts, or in the pipeline itself,
could cause us to plan or budget incorrectly and thereby adversely affect our
business or results of operations. In particular, a slowdown in information
17
technology spending or economic conditions can cause purchasing decisions to be
delayed, reduced in amount or cancelled, which would reduce the overall pipeline
conversion rate in a particular period of time.
Acquisitions
Acquisitions and investments present many risks, and we may not realize the
financial and strategic goals that were contemplated at the time of any
transaction. We have in the past and expect in the future to acquire or make
investments in complementary companies, products, services and technologies. The
risks we may encounter in acquisitions and investments include:
* we may find that the acquired company or assets do not further
our business strategy or that we paid more than what the company
or assets are worth;
* we may have difficulty integrating the operations and personnel
of the acquired businesses;
* we may have difficulty incorporating the acquired technologies
or products with our existing product lines;
* we may have product liability, customer liability or intellectual
property liability associated with the sale of the acquired
company's products;
* our ongoing business may be disrupted by transition or
integration issues;
* our management's attention may be diverted from other business
concerns;
* our management may not be able to improve our financial and
strategic position;
* the acquisition may result in litigation from terminated
employees or third parties; and
* our due diligence process may fail to identify significant issues
with the target's product quality, financial disclosures and
accounting practices, product architecture and legal
contingencies, among other matters.
These factors could have a material adverse effect on our business, results of
operations, financial condition or cash flows, particularly in the case of a
larger acquisition or number of acquisitions.
We previously have generally paid for acquisitions in cash and stock. We may in
the future pay for acquisitions in whole or in part with stock or other
equity-related purchase rights. To the extent that we issue shares of stock or
other rights to purchase stock, including options and other rights, existing
stockholders may be diluted and earnings per share may decrease.
Stock Option Fair Value Method
If we account for employee stock option and employee stock purchase plans using
the fair value method, it could significantly reduce our net income and earnings
per share. There has been ongoing public debate whether employee stock option
and employee stock purchase plans shares should be treated as a compensation
expense and, if so, how to properly value such charges. If we elected or were
required to record an expense for our stock-based compensation plans using the
fair value method, we could have significant accounting charges. For example, in
the first three months of fiscal 2004, had we accounted for stock-based
compensation plans using the fair-value method prescribed in FASB Statement No.
123 as amended by Statement 148, net income would have been reduced by $95,000.
Although we are not currently required to record any compensation expense using
the fair value method in connection with option grants that have an exercise
price at or above fair market value at the grant date and for shares issued
under our employee stock purchase plan, future laws or regulations could require
us to treat all stock-based compensation as an expense using the fair value
method.
Business Disruptions
Business disruptions could affect our future operating results. Our operating
results and financial condition could be materially and adversely affected in
the event of a major earthquake, fire or other catastrophic event. We are a
18
highly automated business and a disruption or failure of our systems could cause
delays in completing sales and providing services.
Dependence on government contracts
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 healthcare facilities,
many of which are operated by state and local government entities and include
entitlement programs. We generate a significant portion of our revenue from
contracts that are directly or indirectly with government agencies. Government
agencies generally have the right to cancel 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks related to changes in interest rates. Our debt is
at fixed rates of interest after completing an interest rate swap agreement,
which effectively converted our variable rate debt into a fixed rate debt of
7.95%. Therefore, if the LIBOR rate plus 2.5% increases above 7.95%, it may have
a positive effect on our net income.
Most of our cash and cash equivalents, which are invested in money market
accounts and commercial paper, are at variable rates of interest. If short-term
market interest rates decrease by 10% from the levels at March 31, 2004, the
effect on our net income would be a decrease of approximately $12,000 per year.
Item 4. Controls and Procedures
Evaluation and Disclosure Controls and Procedures
Based on their evaluation as of a date within 90 days of the filing of this Form
10-Q, our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as required by
Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures were effective to insure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported with the time periods specified by
the SEC's rules and forms.
Changes in Internal Controls
There were no significant changes in our internal controls over financial
reporting that occurred during the quarter ended March 31, 2004 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Limitations on the Effectiveness of Controls
We believe that a control system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the control system are
met, and no evaluation of controls can provide absolute assurance that all
controls issues and instances of fraud, if any, within a company have been
detected.
19
Forward-Looking Statements
Statements in this Form 10-Q quarterly report may be "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 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 our Form 10-K annual report for the year ended December 31, 2003,
including the risks described under "Risk Factors" and 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 events or circumstances after the date of this Form 10-K.
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10 All material contracts.
10.1 Employment Agreement dated as of April 1, 2004, by
and between Netsmart Technologies, Inc. and James L.
Conway.
10.2 Employment Agreement dated as of April 1, 2004, by
and between Netsmart Technologies, Inc. and Gerald O.
Koop.
10.3 Employment Agreement dated as of April 1, 2004, by
and between Netsmart Technologies, Inc. and Anthony F.
Grisanti.
10.4 Consulting Agreement dated as of April 1, 2004, by
and between Netsmart Technologies, Inc. and John F.
Phillips.
10.5 Executive Retirement Plan.
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 8 U.S.C.ss.1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
20
(b) Reports on Form 8-K
Report on Form 8-K dated March 3, 2004 - Item12 - Results of Operations
and Financial Condition containing announcement of press release of the
Company's financial results for the fiscal year and fourth quarter ended
December 31, 2003.
21
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.
Chief Executive Officer May 5, 2004
/s/ James L. Conway (Principal Executive Officer)
------------------------
James L. Conway
/s/ Anthony F. Grisanti Chief Financial Officer May 5, 2004
------------------------ (Principal Financial and
Anthony F. Grisanti Accounting Officer)
22
Index of Exhibits
-----------------
Exhibit No. Description
----------- ------------
10 All material contracts.
10.1 Employment Agreement dated as of April 1, 2004, by
and between Netsmart Technologies, Inc. and
James L. Conway.
10.2 Employment Agreement dated as of April 1, 2004,
by and between Netsmart Technologies, Inc. and
Gerald O. Koop.
10.3 Employent Agreement dated as of April 1, 2004,
by and between Netsmart Technologies, Inc. and
Anthony F. Grisanti.
10.4 Consulting Agreement dated as of April 1, 2004, by
and between Netsmart Technologies, Inc. and
John F. Phillips.
10.5 Executive Retirement Plan.
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 8 U.S.C.ss.1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 8 U.S.C.ss.1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
23