UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                         Commission File Number 0-21177

                           NETSMART TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                  13-3680154
             (State or other jurisdiction of            (I.R.S. Employer
              incorporation or organization)         Identification Number)

                146 Nassau Avenue, Islip, NY                 11751
             (Address of principal executive offices)      (Zip Code)

    Registrant's telephone number, including area code:   (516) 968-2000

    Securities registered pursuant to Section 12(b) of the Act:____

    Securities  registered  pursuant to Section 12(g) of the Act:

  Title of Each Class                 Outstanding shares as of February 7, 2001
  -------------------                 -----------------------------------------
  Common Stock, par value                    3,498,098
    $.01 per share

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 a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S - K is not contained herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

DOCUMENTS INCORPORATED BY REFERENCE

Part III is incorporated  by reference from the  registrant's  definitive  proxy
statement in connection with its 2001 Annual Meeting of Stockholders to be filed
within 120 days of the close of the registrant's fiscal year.

<PAGE>

                                     PART I

Item 1.  Business

Introduction

Netsmart   Technologies,   Inc.  is  a  leader  in  the   design,   development,
implementation  and  licensing  of  management   information   systems  for  the
behavioral and public  healthcare  industry through our  wholly-owned  operating
subsidiary,  Creative  Socio-Medics  Corp.  These  products are supported  under
long-term  maintenance  agreements.  Our ASP  and  client  server-based  systems
provide comprehensive  healthcare information technology solutions which include
billing,   patient   tracking  and   scheduling  for  inpatient  and  outpatient
environments,  as well as clinical  documentation  and medical record generation
and  management.  Our  marketing  is directed  primarily  at such  providers  of
behavioral  and public health  services as state and county  behavioral  health,
public health and substance abuse  agencies,  psychiatric  hospitals,  methadone
maintenance   clinics,  and  other  speciality  care  inpatient  and  outpatient
providers.

We have an established  nationwide customer base,  including state agencies that
have responsibility for providing behavioral or public healthcare services in 14
states.

Business Strategy

We  believe  that we are  one of the  most  established  suppliers  of  practice
management  solutions to the behavioral and public healthcare services industry.
Our software solutions are utilized by more than 500 provider  institutions that
employ approximately 50,000 clinicians. Many of these facilities represent large
provider agencies such as state hospitals and behavioral healthcare networks.

The  behavioral  and public  healthcare  industry  will be required to update or
replace  their  existing  information  processing  solutions  to comply with the
emerging federal data standards requirements. The two most influential standards
for this sector are:

     *   The Federal Health Insurance  Portability and  Accountability  Act -
         which focuses on the privacy and security of healthcare information

     *   Decision Support 2000+ - Center for Mental Health Services data
         standards for state operated/funded facilities

We intend to capitalize on the increased  demand for information  systems driven
by these federal initiatives by:

     *   Offering  end-to-end  solutions  meeting the federal data standards to
         all market segments.

     *   Providing technology features that maximize end user effectiveness.

Our  product  suite  Avatar,  coupled  with our  best-of-breed  partners  offers
comprehensive  enterprise-wide  solutions  for all  provider  types  within this
sector. Our Electronic Medical Record, Avatar-CWS,  selected for the prestigious
Davies  Award,  is  the  first  for  a  behavioral/public   health  application.
Avatar-CWS  is  the  platform  for   accommodating  the  emerging  federal  data
standards. Avatar is available in both client/server and ASP/internet deployment
options.

On the technology front, we will be expanding the Avatar product line to include
three broad-base distribution vehicles:

     *   Web Portal:  Avatar will be offered  through a web portal to provide
         single and small practice groups access on a subscription basis.

     *   Smart  Card:  Our pilot  project  in patient  access  for  treatment
         services  in  methadone  maintenance  will be  expanded to provide a
         secure link between multi-service  agencies, such as court diversion
         and treatment.

                                        1

<PAGE>

     *   Palm Pilot:  Connectivity  of Avatar and Palm Pilots will extend the
         distribution  of  clinical  record  keeping  to the point of service
         between clinician and consumer.

Forward - Looking Statements

The  statements  in this Form 10-K Annual  Report that are not  descriptions  of
historical  facts may be forward-  looking  statements that are subject to risks
and  uncertainties.  In particular,  statements in this Form 10-K Annual Report,
including any material  incorporated  by reference in this Form 10-K, that state
our  intentions,  beliefs,  expectations,  strategies,  predictions or any other
statements  relating  to  our  future  activities  or  other  future  events  or
conditions  are  "forward-looking  statements."  Forward-looking  statements are
subject to risks,  uncertainties and other factors,  including,  but not limited
to, those  identified  under "Risk  Factors,"  those  described in  Management's
Discussion and Analysis of Financial Conditions and Results of Operations and in
any other  filings  with the  Securities  and  Exchange  Commission,  as well as
general economic conditions, any one or more of which could cause actual results
to differ materially from those stated in such statements.

Organization of the Company

We are a Delaware  corporation  formed in September  1992 under the name Medical
Services  Corp.  Our name was changed to Carte  Medical  Corporation  in October
1993,  CSMC  Corporation  in June 1995 and to  Netsmart  Technologies,  Inc.  in
February  1996. Our executive  offices are located at 146 Nassau Avenue,  Islip,
New York  11751,  telephone  (631)  968-2000.  Reference  to us and to  Netsmart
include our  subsidiary,  Creative  Socio-Medics,  unless the context  indicates
otherwise.  Our website is located at  www.csmcorp.com.  Neither the Information
contained in our website nor the information  contained in any Internet  website
is a part of this Form 10-K Annual Report.

Risk Factors

If we are unable to obtain additional capital, we may not be able to develop our
--------------------------------------------------------------------------------
business.
---------

We had working  capital of $5.9  million at December  31,  2000.  We may require
additional  capital in order to expand and develop our  business and perform our
obligations  under our  agreements and purchase  orders.  We have no commitments
from any person to provide us with any such capital.  Our business may suffer if
we do not obtain the capital when it is required.

Because we are particularly  dependent upon government  contracts,  our business
--------------------------------------------------------------------------------
may be impaired by policies relating to entitlement programs.
-------------------------------------------------------------

We market  our health  information  systems  principally  to  behavioral  health
facilities,  many of which are  operated  by  government  entities  and  include
entitlement  programs.  During  2000,  we  generated  51%  of our  revenue  from
contracts  with  government  agencies,  as compared  with 55% in 1999 and 52% in
1998.  Government agencies generally have the right to cancel contracts at their
convenience.  In addition,  we may lose business if government  agencies  reduce
funding for entitlement programs.

Our  business  is based on  providing  systems  relating  to  behavioral  health
--------------------------------------------------------------------------------
organizations,  and changes in government regulation of health care industry may
--------------------------------------------------------------------------------
affect the market for our systems.
----------------------------------

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.  We cannot predict the effect on
our  business of future  regulations  by  governments  and payment  practices by
government  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.  If that happens,  we may not be able to
generate revenues sufficient to cover the costs of developing the modifications.

                                        2
<PAGE>

If we are not able to take advantage of technological advances, our business may
--------------------------------------------------------------------------------
suffer.
-------

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 new technology
would have a significant adverse effect upon our business.

Because of our size, we may have difficulty competing with larger companies that
--------------------------------------------------------------------------------
offer similar services.
-----------------------

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.  The software  industry in general,
and  the  health  information  software  business  in  particular,   are  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.

Because we are dependent on our management,  the loss of key executive  officers
--------------------------------------------------------------------------------
could harm our business.
------------------------

Our business is largely  dependent upon our senior executive  officers,  Messrs.
James L. Conway, chief executive officer, Gerald O. Koop, president,  Anthony F.
Grisanti,  chief  financial  officer,  and John F.  Philips,  vice  president --
marketing.  Although we have  employment  agreements  with these  officers,  the
employment  agreement do not guarantee  that the officers will continue with us,
and each of these officers has the right to terminate his employment  with us on
90  days  notice.  Our  business  may be  adversely  affected  if any of our key
management personnel or other key employees left our employ.

Because we lack patent protection,  we cannot assure you that others will not be
--------------------------------------------------------------------------------
able to use our proprietary information in competition with us.
---------------------------------------------------------------

We have no patent or copyright protection for our proprietary  software,  and we
rely on  non-disclosure  agreements  with our  employees.  Since our business is
dependent upon our proprietary  products,  the unauthorized use or disclosure of
this information could harm our business.

Our growth may be limited if we cannot make acquisitions.
---------------------------------------------------------

An important part of our growth strategy is to acquire other businesses that are
related to our current business.  Such acquisitions may be made with cash or our
securities  or a  combination  of cash and  securities.  To the  extent  that we
require  cash,  we may have to  borrow  the  funds or issue  equity.  We have no
commitments  from any financing  source and we may not be able to raise any cash
necessary to complete an acquisition.  Our stock price may adversely  affect our
ability  to make  acquisitions  for  equity or to raise  funds  for  acquisition
through the issues of equity  securities.  If we fail to make any  acquisitions,
our  future  growth  may be  limited.  As of the date of this Form  10-K  annual
report,  we do not  have  any  agreement  or  understanding,  either  formal  or
informal, as to any acquisition.

If we make any  acquisitions,  they may disrupt or have a negative impact on our
--------------------------------------------------------------------------------
business.
---------

If we make  acquisitions,  we could have  difficulty  integrating  the  acquired
companies' personnel and operations with our own. In addition, the key personnel
of the acquired business may not be willing to work for us, and our officers may
exercise their rights to terminate  their  employment with us. We cannot predict
the affect 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.

                                        3
<PAGE>

We do not anticipate paying dividends on our common stock.
----------------------------------------------------------

We presently intend to retain future earnings, if any, in order to provide funds
for use in the operation and expansion of our business and,  accordingly,  we do
not  anticipate  paying cash  dividends on our Common  Stock in the  foreseeable
future.

The  rights of the  holders of common  stock may be  impaired  by the  potential
--------------------------------------------------------------------------------
issuance of preferred 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 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
additional 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 the common stock,  our listing
on The Nasdaq SmallCap Market may be impaired.

Shares may be issued  pursuant to options  which may affect the market  price of
--------------------------------------------------------------------------------
our common stock.
-----------------

We may issue stock upon the  exercise of options to purchase up to an  aggregate
809,718 shares of common stock pursuant to our long-term incentive plans, all of
which were  outstanding  at February 28, 2001. The exercise of these options and
the sale of the  underlying  shares of common  stock may have an adverse  effect
upon the price of our stock.

Health and Human Services Systems and Services

We develop, market and support computer software which enables behavioral/public
healthcare  organizations  to  provide  a full  range of  services  in a network
computing environment.

Users typically purchase one of several healthcare  information  systems, in the
form  of  a  perpetual  license  to  use  the  system,  as  well  as  purchasing
professional  services,  support, and maintenance.  In addition,  we offer third
party  hardware and software  pursuant to value added resale  arrangements  with
third party vendors.  The  professional  services  include  project  management,
training,  consulting  and  software  development  services,  which are provided
either on a time and material basis or pursuant to a fixed-price  contract.  The
software  development  services  may  require  the  adaptation  of  health  care
information  technology  systems  to  meet  the  specific  requirements  of  the
customer.

Our  typical  license for a health  information  system  ranges from  $10,000 to
$100,000 for a single facility healthcare organization to $250,000 to $1,000,000
for multi-unit care organizations  such as those run by state agencies.  Revenue
from license fees were approximately  $2,603,000, or 12.9% of revenue, for 2000,
$2,228,000,  or 10.5% of revenue, for 1999 and $2,270,000,  or 17.3% of revenue,
for 1998. A customer's  purchase  order may also include third party hardware or
software.   Revenue  from  hardware  and  third  party  software  accounted  for
approximately $4,158,000, or 20.6% of revenue, for 2000, $5,915,000, or 27.8% of
revenue,  for 1999 and $2,610,000,  or 19.8% of revenue,  for 1998. Revenue from
turnkey  systems  labor  accounted  for  approximately  $6,502,000,  or 32.2% of
revenue, for 2000, $7,768,000,  or 36.6% of revenue, for 1999 and $3,664,000, or
27.8% of revenue in 1998.

In addition to our behavioral/public  healthcare information systems and related
services,  we offer  processing  services  to  substance  abuse  facilities  and
maintain a data center facility at which our personnel  perform data entry, data
processing and produce  operations  reports for smaller substance abuse clinics.
Our data center revenue was approximately  $2,263,000,  or 11.2% of revenue, for
2000,  $1,908,000,  or 9% of  revenue,  for  1999  and  $2,164,000,  or 16.4% of
revenue, for 1998.

Maintenance  services have generated  increasing  revenue and have become a more
significant  portion  of our  business  since  most  purchasers  of health  care
information  system  licenses also  purchase  maintenance  service.  Maintenance
revenue increases as existing  customers  purchase  additional  licenses and new
customers purchase

                                        4
<PAGE>

their initial  software  licenses.  By agreement with our customers,  we provide
telephone  help  services and maintain and upgrade their  software.  Maintenance
contracts may require us to make modifications to meet any new federal and state
reporting requirements which become effective during the term of the maintenance
contract.  We do not maintain the hardware and third party  software sold to our
customers,  but we provide a telephone help line service for certain third party
software,  which we  license  to our  customers.  Our  maintenance  revenue  was
approximately $3,521,000, or 17.5% of revenue, for 2000, $2,258,000, or 10.6% of
revenue, for 1999 and $1,432,000, or 10.9% of revenue, for 1998.

We currently offer four product modules that provide a range of core application
requirements for behavioral  healthcare  providers.  These products consist of a
suite of complete information technology  applications developed by us, together
with  software  provided  by others  which  enables us to offer  enterprise-wide
solutions to the behavioral  health industry.  The products will be offered in a
variety of delivery modes.

        *   Avatar  -  Practice  Management:  This  system  is  a  comprehensive
            solution providing patient management functions,  billing, tracking,
            scheduling, and reporting for inpatient treatment facilities.

        *   Avatar  -  Clinician   Workstation:   This  workstation  provides  a
            clinician with documentation and medical record management including
            assessment,  care  planning,  progress  notes  and  on-line  medical
            records. The clinician  workstation is our electronic medical record
            system for behavioral  health,  which  integrates the clinical tools
            necessary for an interdisciplinary approach to the delivery of human
            services.

        *   Avatar  -  M4:  Pursuant  to  a  joint   marketing   agreement  with
            Mallinckrodt  Pharmaceutical Specialties, a division of Mallinckrodt
            Inc.,  we offer a solution for  dispensing,  admissions  and medical
            records, counselor and reception/security specifically for methadone
            clinics.  We can  integrate  M4 with  our  other  behavioral  health
            products.

        *   Avatar - Managed  Care:  The managed  care and  employee  assistance
            program modules include such features as service request management,
            contact   tracking   (patients,   providers,   others),   import  of
            eligibility  information by contract,  provider  search by location,
            specialty,  contract,  hospital privileges,  claims adjudication and
            payment.

Markets and Marketing

The market for behavioral/public health information systems and related services
consists of both private and publicly  operated  providers  offering hospital or
community-based   outpatient   behavioral/public   healthcare  services.   These
healthcare providers require a healthcare information system to administer their
programs. We believe that there are at least 15,000 behavioral/public healthcare
providers in the United States, including public and private hospitals,  private
and  community-based   residential  facilities  and  Federal,  state  and  local
governmental agencies.

Many  long-term   behavioral/public   healthcare   facilities  are  operated  by
government entities and include those operated as part of entitlement  programs.
During the years ended December 31, 2000,  1999 and 1998,  approximately  51.0%,
55.0% and 52.0%,  respectively,  of revenue was generated  from  contracts  with
government  agencies.  Contracts  with  government  agencies  generally  include
provisions  which permit the  contracting  agency to cancel the contract for its
convenience,  although we have not  experienced a termination for convenience in
the last five years.

In addition to these major behavioral/public  healthcare providers,  there are a
larger number of sole  practitioners,  group practices and smaller clinics which
may also require  behavioral/public  healthcare facilities.  We intend to market
our Internet-based systems to these potential customers.

We believe that the demand for information technology solutions is increasing as
a result of:
        1.  new federal initiatives for data standards
        2.  continuous pressure from managed care to reduce healthcare delivery
            costs while expanding the availability of services.


                                        5
<PAGE>

In order to remain competitive,  the behavioral/public  health delivery networks
need detailed clinical and management  information systems that enable providers
within the networks to maintain a broad scope of accurate  medical and financial
information, manage costs and deliver quality care efficiently. In addition, the
need to  upgrade  existing  systems  to  meet  the  increased  demand  for  data
processing  needs of managed care and regulatory  oversight has also resulted in
an increased demand for  behavioral/public  healthcare  information  technology.
These data processing needs include analysis of patient assessments, maintenance
of patient records,  administration  of patient  treatment plans and the overall
coordination of patient case management.

We coordinate our marketing effort with the state agencies and other major users
of our systems.  Our state agency  clients  formed a State Systems  Association,
presently  consisting of state  organizations  or agencies  from 14 states.  The
association's  members work with our  management to assess and determine  future
requirements in both patient managed care coordination and regulatory reporting.

No customer accounted for 10% or more of our revenue in 2000. For the year ended
December 31, 1999, one customer  accounted for approximately $3.8 million or 18%
of our  revenue.  For the year  ended  December  31,  1998,  this same  customer
accounted for $2.1 million or 16% of our revenue.

We had a backlog  of  orders,  including  ongoing  maintenance  and data  center
contracts  for our  behavioral  health  information  systems of $14.4 million at
December 31, 2000 and $14.2 million at December 31, 1999. A  substantial  amount
of the 2000 backlog is expected to be filled during 2001.

Product Development

We  incurred  product  development  costs  relating  to  our  behavioral  health
information  systems of approximately  $1,360,000 in 2000,  $800,000 in 1999 and
$763,000  in 1998,  all of which was  company-sponsored.  In 2000,  we  incurred
capitalized software  development costs of approximately  $219,000 in connection
with the development of our proposed web portal services and application service
provider  solutions  for  healthcare  providers.  During 2000,  we also incurred
capitalized   software   development  costs  of  $334,000  associated  with  our
acquisition of the Connex suite of managed care and employee  assistance program
information  systems.  Included in these costs is $100,000 of valued assigned to
the 15,528  shares of our  common  stock  which we issued to acquire  the Connex
suite.

Competition

The healthcare software industry is highly competitive. Although we believe that
we can provide a health care facility or managed care organization with software
to enable it to perform its services more effectively,  other software companies
provide  comparable  systems  and also have the staff and  resources  to develop
competitive systems.

According to independent  consulting reports,  healthcare information technology
is an $18.0 billion  industry  served by numerous  vendors.  The dominant health
care information technology vendors have achieved annual sales of more than $1.0
billion  by  focusing  on  solutions  for  large  medical/surgical  health  care
providers, such as large hospital systems and health maintenance  organizations,
and, have not focused on the  behavioral/public  healthcare industry. We believe
that most of the presently  available  healthcare  management  software does not
meet the specific needs of the behavioral/public  healthcare industry,  and that
the  functionality of our information  systems are designed to meet the needs of
this market.  However,  the behavioral  health  information  systems business is
serviced by a number of  companies,  some of which are better  capitalized  with
larger  infrastructure  than we, and we may not be able to  continue  to compete
effectively with such companies.

We have an  established  customer  base of more  than  400  clients  nationwide,
including  substantial private and government  providers of healthcare services.
During the past three  years,  we signed  contracts  to provide  our  healthcare
information  systems to twelve  state  agencies  responsible  for  administering
behavioral services, bringing the total of such state agencies to 16.

Government Regulations and Contracts

The federal and state governments have adopted numerous  regulations relating to
the health care industry,

                                        6
<PAGE>

including  regulations  relating to the  payments to health care  providers  for
various services.  The adoption of new regulations can have a significant effect
upon the operations of health care providers and insurance  companies.  Although
our  business  is  aimed at  meeting  certain  of the  problems  resulting  from
government  regulations  and from efforts to reduce the cost of health care,  we
cannot  predict  the effect of future  regulations  by  governments  and payment
practices by government agencies or health insurers, including reductions in the
funding for or scope of  entitlement  programs.  Any change in the  structure of
health  care in the  United  States  can have a  material  effect  on  companies
providing  services  to the health  care  industry,  including  those  providing
software.  Although we believe that the likely  direction  which may result from
the current  study of the health care  industry  would be an increased  trend to
managed care programs,  thereby  increasing  the  importance of automation,  our
business may not benefit from any changes in the industry structure. Even if the
industry  does evolve  toward more  healthcare  being  provided by managed  care
organizations,  it is possible that there will be substantial concentration in a
few very large  organizations,  which may seek to develop  their own software or
obtain software from other sources.  To the extent that the health care industry
evolves  with  greater  government-sponsored  programs  and less  privately  run
organizations,  our  business  may be adversely  affected.  Furthermore,  to the
extent that each state changes its own  regulations in the health care field, it
may be necessary for us to modify our behavioral health  information  systems to
meet  any new  record-keeping  or  other  requirements  imposed  by  changes  in
regulations, and we may not be able to generate revenues sufficient to cover the
costs of developing the modifications.

A  significant  amount  of our  business  has  been  with  government  agencies,
including  specialized  care  facilities  operated by, or under  contract  with,
government  agencies.  The decision on the part of a government  agency to enter
into a contract is dependent  upon a number of factors,  including  economic and
budgetary  problems  affecting  the  local  area,  and  government   procurement
regulations,  which may  include  the need for  approval by more than one agency
before a contract is signed. In addition,  government agencies generally include
provisions in their contracts which permit the contracting  agency to cancel the
contract  at  its  convenience.  We  have  not  experienced  a  termination  for
convenience in the last five years.

Intellectual Property Rights

We have no patent rights for our behavioral health  information system software,
but  we  rely  upon  copyright   protection   for  our  software,   as  well  as
non-disclosure  and secrecy  agreements  with our employees and third parties to
whom we  disclose  information.  We may not be able to protect  our  proprietary
rights  to our  system  and  third  parties  may  claim  rights  in the  system.
Disclosure  of the codes  used in any  proprietary  product,  whether  or not in
violation of a non-disclosure agreement,  could have a materially adverse affect
upon us, even if we are  successful  in  obtaining  injunctive  relief.  We must
continue  to  invest in  product  development,  employee  training,  and  client
support.

Employees

As of December 31, 2000, we had 130 employees,  including four executive, eleven
sales and  marketing,  104  technical  and eleven  clerical  and  administrative
employees.

Executive Officers

        Our executive officers are as follows:

           Name               Age            Position
           ----               ---            --------
Edward D. Bright              64     Chairman of the Board
James L. Conway               53     Chief Executive Officer
Gerald Koop                   62     President
Anthony F. Grisanti           51     Chief Financial Officer, Treasurer and
                                     Secretary
John F. Phillips              63     Vice President - Marketing

Mr. Edward D. Bright has been chairman of the board and a director since April
1998.  In April 1998, Mr. Bright was also elected as chairman, secretary,

                                        7
<PAGE>
<TABLE>

treasurer and a director of Consolidated Technology Group Ltd., a public company
now known as The Sagemark Companies Ltd., which is engaged in various lines of
business, and a director of Trans Global Services, Inc., which provides
technical temporary staffing services.  Mr. Bright is also Chairman of Sagemark.

Mr. James L. Conway has been a director since January 1996 and chief executive
officer since April 1998 and president from January 1996 until February 2001.
From 1993 to April 1998 he was president of S-Tech Corporation, a manufacturer
of aircraft instruments for the U.S. military and specialty vending equipment
for postal, telecommunication and other industries.  Mr. Conway was previously
Vice President and member of the Board of ITT Credit Corporation, a wholly owned
subsidiary of ITT.  Mr. Conway is also a director of Trans Global Services,
Inc., which provides technical temporary staffing services.

Mr.  Gerald O. Koop has been a  director  since  June 1998 and  president  since
February 2001. He has held management  positions with our  subsidiary,  Creative
Socio-Medics,  for more than the past five  years,  most  recently  as its chief
executive officer, a position he has held since 1996.

Mr.  Anthony F. Grisanti has been  treasurer  since June 1994,  secretary  since
February  1995 and chief  financial  officer  since  January  1996. He was chief
financial  officer  of  Creative  Socio-Medics  for more than five  years  prior
thereto.

Mr. John F.  Phillips has been a director and vice  president - marketing  since
June 1996. He has been and vice  president of Creative  Socio-Medics  since June
1994.  He was also our vice  president  --  marketing  from June 1994 to January
1996. He was a senior  executive  officer and director of Creative  Socio-Medics
and its parent company for more than five years prior to June 1994.

Item 2.   Property
<S>                              <C>             <C>            <C>                 <C>

We lease office space at the following locations:

Location                           Purpose         Space          Annual Rental         Expiration
--------                           -------         -----          -------------         ----------
146 Nassau Avenue                  Executive       18,000         $303,000, plus 4%     12/31/03
Islip, New York                    offices         square feet    annual increases

1335 Dublin Road                   Offices         3,500          $51,000               11/30/01
Columbus, Ohio                                     square feet

18B Ledgebrook Run                 (2)             1,800          $21,000(1)            10/31/02
Mansfield Center, Connecticut,                     square feet

7590 Fay Avenue                    Offices         1,800          $44,000, plus 6%      12/31/01
La  Jolla, California                              square feet    annual increases

----------
(1)     This lease provides for an annual increase in rent for operating
        expenses and real estate taxes.

(2)     These offices are no longer being used by us, and the space is being
        subleased at our cost.

We believe  that our space is  adequate  for our  immediate  needs and that,  if
additional  space is required,  it would be readily  available  on  commercially
reasonable rates.

Item 3.   Legal Proceedings

In October 2000,  our  subsidiary,  Creative  Socio-Medics,  commenced an action
against the City of  Richmond,  in the  Supreme  Court of the State of New York,
County of Suffolk,  which action was  subsequently  removed to the United States
District  Court for the Eastern  District  of New York,  for failure to pay more
than $1 million

                                        8
</TABLE>
<PAGE>
<TABLE>

pursuant a contract we have with  Richmond.  Richmond  advised the court that it
intended to move to dismiss the complaint for lack of personal  jurisdiction  in
New York and improper venue.  The parties are currently  engaged in discovery on
jurisdictional  issues.  In November  2000,  Richmond  filed a complaint  in the
Circuit  Court for the City of Richmond,  Richmond,  Virginia,  alleging,  among
other things, that the contract with Creative  Socio-Medics was procured through
fraudulent  misrepresentations concerning the nature of the work to be performed
and the price for the services and that Creative  Socio-Medics failed to perform
its obligations  under the agreement,  seeking damages of $373,000 and a finding
that it owes no additional amounts to Creative Socio-Medics. The parties entered
into a  stipulation  staying  the  Richmond  action  until  a  determination  of
Richmond's  jurisdictional challenges to the New York action. We believe that we
have valid  claims  against  Richmond and we intend to  vigorously  pursue those
claims. We also believe that the allegations  contained in Richmond's  complaint
are without merit and we intend to vigorously defend against those claims.

In November 2000,  Creative  Socio-Medics  commenced an action  against  Insight
Recovery  Center Inc.,  in the Supreme  Court of the State of New York County of
Suffolk,  which action was  subsequently  removed to the United  State  District
Court of the  Eastern  District of New York.  The  complaint  alleges  breach of
contract  in failing to pay  $147,406  pursuant  to an  agreement  with  Insight
Recovery  Center.  Insight  Recovery  Center  has not  filed  an  answer  to the
complaint  and advised  Creative  Socio-Medics  that it  intended  to  challenge
jurisdiction in New York. Also in November 2000, Insight Recovery Center filed a
complaint  against Creative  Socio-Medics in the Circuit Court for the County of
Genessee, Michigan, which action was removed to the United States District Court
for  the  District  of  Michigan  alleging,  among  other  claims,  fraudulently
inducement and breach of contract. Creative Socio-Medics has not filed an answer
to that  complaint  and  advised  Insight  Recovery  Center  that it intended to
challenge jurisdiction in Michigan. However, prior to any motion being made, the
parties have agreed in principle to a settlement,  which  provides,  among other
things,  for a payment by Insight  Recovery Center to Creative  Socio-Medics and
for  Creative  Socio-Medics  to perform  services  and provide  product  over an
extended  period of time at stated rates.  If the settlement in principle is not
implemented  for any reason and the actions go forward,  we believe that we have
valid claims against Insight Recovery Center and we intend to vigorously  pursue
those  claims.  We also  believe  that the  allegations  contained  in Insight's
complaint  are without merit and we intend to  vigorously  defend  against those
claims.

In June 2000, Psychiatric  Solutions,  Inc. commenced an action against Creative
Socio-Medics,  Inc. in the Chancery  Court in the State of  Tennessee,  Davidson
County,   alleging  that  Creative  Socio-Medics  breached  its  agreement  with
Psychiatric   Solutions   and  made  material   representations   regarding  the
capabilities of the Creative Socio-Medics programs. The complaint sought damages
of in excess of $2  million.  Although  we believe  that the action was  without
merit, we settled the action by paying $37,500 to Psychiatric Solutions.

Item 4.  Submission of Matters to a Vote of Security Holders

On December 21, 2000, we held our 2000 annual meeting of stockholders.

The following individuals were elected as directors:

Name                           Number of Votes             Broker Non Votes
Edward D. Bright                   3,096,975                   1,667,349
James L. Conway                    3,096,975                   1,667,349
John F. Phillips                   3,096,975                   1,667,349
Gerald O. Koop                     3,096,975                   1,667,349
Joseph G. Sicinski                 3,096,975                   1,667,349


                                        9
<PAGE>

The following proposals were approved as follows:
<S>                          <C>           <C>               <C>          <C>

                                                                            Broker
                               Votes For    Votes Against      Abstain      Non Votes
Approval of the amendment
to the 1999 Long Term

Incentive Plan                 1,345,702        139,943         5,758       1,667,349

Approval of the 1999
Stock Purchase Plan            1,384,837        100,624         5,942       1,667,349

Approval of the selection of
Richard A. Eisner & Co., LLP
as independent auditors for
2000                           3,089,906          1,432        46,556       1,667,349




                                     Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

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 during the past two years.

        Quarter Ending                             High                 Bid
        --------------                             ----                 ---

        March 31, 1999                              4.91                2.59
        June 30, 1999                               4.63                3.50
        September 30, 1999                          7.69                4.25
        December 31, 1999                           8.13                6.00

        March 31, 2000                             11.75                5.25
        June 30, 2000                              11.38                4.00
        September 30, 2000                          5.69                3.31
        December 31, 2000                           4.13                1.50


As of December 31, 2000, there were approximately 1,950 holders of record of our
common stock. The closing price of our common stock was $2.25 per share on March
20, 2001. These quotations reflect inter- dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

We have not paid any cash dividends to the holders of our common stock since our
organization.

We did not sell any unregistered securities during 2000.

                                       10
</TABLE>
<PAGE>
<TABLE>

Item 6.  Selected Financial Data
<S>                               <C>          <C>          <C>           <C>         <C>

                                                        Year Ended December 31,
                                                        -----------------------
                                      2000         1999          1998         1997        1996
                                      ----         ----          ----         ----        ----
                                                   (in thousands except per share data)
Selected Statements
  of Operations Data:

Revenue                             $20,171      $21,252       $ 13,165      $  7,635    $  6,538

Income (Loss) from Continuing
 Operations before interest
 and other financing costs            2,141(1)     1,895            759          (536)     (3,614)(2)

Income (Loss) from Discontinued
 Operations                              70          180           (217)       (2,615)       (801)

Net Income (Loss)                     2,386(1)     1,825            196        (3,459)     (6,579)(2,3)

Per Share Data - Diluted:
 Continuing Operations                  .61          .47            .12          (.37)      (3.36)
 Discontinued Operations                .02          .05           (.08)        (1.10)       (.47)
 Net Income (loss)                      .63          .52            .04         (1.47)      (3.83)

Weighted average number
 of shares outstanding                3,771        3,516          2,865         2,387       1,716

Selected Balance
 Sheet Data:
 Working Capital (deficiency)         5,858        2,012             10          (537)        477

Total Assets                         15,301       13,972         10,289         7,340       8,251

Total Liabilities                     5,997        8,617          7,005         4,200       3,836

Accumulated Deficit                 (10,886)     (13,272)       (15,097)      (15,293)    (11,726)

Stockholders' Equity                  9,304        5,355          3,284         3,140       4,415

----------
        (1)Includes benefit of net operating loss in the amount of $494,000.

        (2)Includes $3,492 of non-cash compensation charges arising from the
issuance by the Company of warrants and options having  exercise prices which
were less than the market  value  of the  Common  Stock  at the date of approval
by the  board of directors.

        (3)Includes $1,692 of  non-cash  costs  associated with the  issuance of
500,000  shares of common  stock to certain  noteholders  and  25,000  shares of
common stock to the Company's asset based lender.

        All per  share  information  has  been  retroactively  adjusted  for the
one-for-three reverse stock split which became effective September 1998.

                                       11
</TABLE>
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

A  significant  portion  of our  revenue is derived  from fixed  price  software
development  contracts and licenses.  We recognize this revenue on the estimated
percentage of completion basis.  Since the billing schedules under the contracts
differ  from  the  recognition  of  revenue,  at the  end of any  period,  these
contracts  generally  result in either costs and estimated  profits in excess of
billing  or  billing  in  excess  of cost and  estimated  profits.  The  largest
component of our revenue is based upon the time spent by our technical personnel
on a project.  As a result,  during the third and fourth quarters,  when many of
our  employees  are on vacation  and  holidays,  our revenue  could be affected.
Additionally,  during 2000,  we  implemented  an increased  product  enhancement
effort relating  principally to new product  functionality,  technology upgrades
and the addition of clinical  content.  We also  undertook the  development of a
significant  upgrade to our core  product,  which  resulted  in a  migration  to
leading edge  technologies.  We allocated to these  projects  personnel  who had
previously performed services for clients which generated revenue.

Years Ended December 31, 2000 and 1999

Our revenue for 2000 was $20,171,000,  a decrease of $1,081,000, or 5%, from our
1999  revenue,  which was  $21,252,000.  The  largest  component  of revenue was
turnkey  systems labor  revenue,  which  decreased to  $6,502,000 in 2000,  from
$7,768,000  in 1999,  reflecting  a 16%  decrease.  This  decrease  reflects the
allocation of personnel to our product  enhancement  efforts instead of services
under the contracts. Revenue from third party hardware and software decreased to
$4,158,000 in 2000 from $5,915,000 in 1999,  which represents a decrease of 30%.
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 behavioral  health systems and services  revenue.  The data center  (service
bureau)  revenue  increased to $2,263,000  in 2000 from  $1,908,000 in the 1999,
reflecting an increase of 19%. This increase is substantially the result of work
being performed for one particular client.  There are no assurances that revenue
will  continue  at this  rate for this  client.  License  revenue  increased  to
$2,603,000  in 2000 from  $2,228,000  in 1999,  reflecting  an  increase of 17%.
License  revenue  is  generated  as  part  of  a  sale  of a  behavioral  health
information  system  pursuant  to a contract  or  purchase  order that  includes
delivery  of the  system  and  maintenance.  Maintenance  revenue  increased  to
$3,521,000 in 2000 from  $2,258,000  in 1999,  reflecting an increase of 56%. As
turnkey  systems  are  completed,  they  are  transitioned  to  the  maintenance
division.  During 2000 we completed the turnkey systems for approximately 32 new
clients,  for which we are  performing  maintenance  services.  Revenue from the
sales of our  small  turnkey  division  decreased  to  $1,124,000  in 2000  from
$1,174,000 in 1999, reflecting a decrease of 4%.

Revenue from contracts from  government  agencies  represented 51% of revenue in
2000 and 55% of revenue in 1999.  This decrease  reflects both the completion of
contracts with government agencies and recognition of revenue from a substantial
contract with a private institution.

Gross profit increased to $8,215,000 in 2000 from $7,375,000 in 1999, reflecting
an 11%  increase.  Our overall  gross margin was 41% in 2000  compared to 35% in
1999.  The  increase  in gross  margin  was  substantially  attributable  to the
decrease in our third party hardware and software revenue,  which yields margins
significantly less than revenue from our behavioral health systems and services,
and the increase in maintenance  revenue,  which generates a higher gross margin
since  the  core  costs  and  infrastructure  investment  have  previously  been
established.

Selling, general and administrative expenses were $4,534,000 in 2000, a decrease
of 1/2 % from the $4,553,000 in 1999.

In 2000 we issued warrants for services rendered. We also extended one series of
our  warrants  for  fourteen  months.  An  aggregate  of $181,000 was charged to
operations for the warrant  issuance and the warrant  extension.  As a result of
the extension of the warrants in 2000, we raised additional equity of $1,153,000
from the  exercise of the  warrants.  In 1999 we issued  warrants  for  services
rendered.  We also extended one series of warrants for two months.  An aggregate
of $127,000 was charged to operations  for the warrant  issuance and the warrant
extension.

                                       12
<PAGE>

We incurred product  development  expenses of $1,360,000 in 2000, an increase of
70% from the $800,000 in 1999.  Research and development  expenses  increased in
2000 as a result of several major product initiatives. These initiatives include
the  repositioning  of all of our  products  to a client  environment  that will
facilitate   alternative   system  delivery  methods,   including  Internet  and
application service provider channels.  Additionally,  we significantly upgraded
our core product to provide them with more current technologies and to integrate
them with customer specific requirements.

Interest  expense was $161,000 in 2000, a decrease of $89,000,  or 36%, from the
$250,000 in 1999. This decrease was the result of lower borrowings  during 2000,
in addition to a reduced cost of borrowings.  The most significant  component of
the  interest  expense  on an  ongoing  basis  is the  interest  payable  to our
asset-based lender. We paid interest on such loans at a rate equal to prime plus
5 % in 1999. In October 1999, we entered into a new credit  facility  agreement.
The interest  rate of the new facility is 2% above the prime rate.  During 2000,
we paid all our  outstanding  borrowings  from the lender,  and, at December 31,
2000, there were no outstanding obligations to the lender.  This facility
remains  available under the same terms and conditions if we need to borrow in
the future.

We recognized a gain of $70,000 from our  discontinued  operations in 2000. This
gain  resulted  from the  reduction  in our reserve  against a  promissory  note
received from the sale of the discontinued operations. We reduced the reserve as
a result of our sale of our interest in the  purchaser  for a note.  In 1999, we
recognized a gain from our discontinued operations of $180,000.

We have a net  operating  loss tax carry  forward of  approximately  $7 million.
However,  in 2000, we provided for income taxes in the amount of $157,000.  This
provision was based upon federal alternative minimum tax calculations as well as
for  certain  state  taxes  where we do not have any net  operating  loss  carry
forwards.  In  addition,  we  recognized  a partial tax benefit in the amount of
$494,000 principally related to our net operating loss carry forwards.

As a result of the  foregoing  factors,  in 2000 we  generated a net income from
continuing  operations  of  $2,316,000,  or $.69 per share  (basic) and $.61 per
share (diluted),  a gain from  discontinued  operations of $70,000,  or $.02 per
share (basic and  diluted),  and a net income of  $2,386,000,  or $.71 per share
(basic) and $.63 per share  (diluted).  For 1999,  we generated  net income from
continuing  operations  of  $1,645,000,  or $.56 per share  (basic) and $.47 per
share (diluted),  a gain from discontinued  operations of $180,000,  or $.06 per
share (basic) and $.05 per share (diluted),  and a net income of $1,825,000,  or
$.62 per share (basic) and $.52 per share (diluted).

Years Ended December 31, 1999 and 1998

Our revenue for 1999 was  $21,252,000,  an increase of $8,086,000,  or 61%, from
our 1998 revenue,  which was  $13,165,000.  The largest  component of revenue in
1999 was turnkey  systems labor revenue,  which  increased to $7,768,000 in 1999
from  $3,664,000  in  1998,  reflecting  a  112%  increase.   This  increase  is
substantially the result of growth in the behavioral health information  systems
business and our ability to provide the staff  necessary to generate  additional
revenue from our  outstanding  contracts.  Revenue from third party hardware and
software  increased  to  $5,915,000  in 1999  from  $2,610,000  in  1998,  which
represents an increase of 127%.  Sales of third party  hardware and software are
made in connection with the sales of turnkey  systems.  The data center (service
bureau)  revenue  decreased  to  $1,908,000  in 1999  from  $2,164,000  in 1998,
reflecting a decrease of 12%.  This decrease was  substantially  the result of a
special  project  performed for a client during 1998,  which did not continue at
the same rate in 1999.  License  revenue  decreased to  $2,228,000  in 1999 from
$2,270,000 in 1998, reflecting a decrease of 2%. License revenue is generated as
part of a sale of a behavioral health  information system pursuant to a contract
or purchase order that includes  delivery of the system and maintenance.  During
1999,  our  contracts  generally  had a longer term than our  contracts in 1998,
resulting  in the  recognition  of  license  revenue  over a longer  period.  At
December 31, 1999, we had  unrecognized  license revenue of  approximately  $2.1
million, as compared with $1.8 million at December 31, 1998. Maintenance revenue
increased to $2,258,000 in 1999 from $1,432,000 in 1998,  reflecting an increase
of 58%.  Revenue  from the  sales of our small  turnkey  division  increased  to
$1,174,000 in 1999 from $1,025,000 in 1998, reflecting an increase of 15%.

                                       13

<PAGE>

Revenue from contracts from  government  agencies  represented 55% of revenue in
1999 and 52% of revenue  in1998.  This  increase  reflects  an  increase  in our
contracts with state agencies.

Gross profit  increased to  $7,375,000  in 1999 from  $5,084,000  in 1998, a 45%
increase.  Our overall gross margin was 35% in 1999 compared to 39% in 1998. The
reduction in gross margin was substantially  attributable to the increase in our
third party hardware and software  revenue,  which yields margins  significantly
less  than  our  margin  from  our  behavioral   health  systems  and  services.
Additionally,  in order to fill our backlog of orders for our behavioral  health
systems,  we hired  additional  technical  personnel.  Since there is a delay of
approximately  nine months between the time we hire technical  personnel and the
time we are able to generate revenue from their services, the increased staffing
costs had a negative impact upon our margins in 1999.

Selling,  general  and  administrative  expenses  were  $4,553,000  in 1999,  an
increase of 29% from the $3,516,000 in 1998. This increase was substantially the
result of an increase in sales and marketing salaries and related direct selling
costs as well as an increase  in the  provision  for  incentive  bonuses.  These
increases were partially offset by a decrease in sales commissions.

In 1999 we issued warrants for services rendered. We also extended one series of
our warrants  for two months.  An aggregate of $127,000 was charged to financing
costs for the  warrant  issuance  and the warrant  extension.  We did not have a
similar charge item in 1998.

We incurred product development  expenses of $800,000 in 1999, an increase of 5%
from the $763,000 in 1998. These expenses were related to our behavioral  health
information systems products,  including our clinician  workstation,  behavioral
health  information  system for Windows,  managed care and methadone  dispensing
products.

Interest  expense was $250,000 in 1999, a decrease of $96,000,  or 28%, from the
$346,000 in 1998. This decrease was the result of lower borrowings  during 1999,
in addition to a reduced cost of borrowings.  The most significant  component of
the  interest  expense  on an  ongoing  basis  is the  interest  payable  to our
asset-based lender. We paid interest on such loans at a rate equal to prime plus
5 %. In October 1999,  we entered into a credit  facility  agreement  with a new
asset-based  lender. The interest rate of the new facility is 2% above the prime
rate.

Related  party  administrative  expense was $45,000 in 1998.  These charges were
incurred  pursuant to a management  services  agreement  with our then principal
stockholder to provide  general  business,  management and financial  consulting
services for a monthly fee of $15,000.  This  agreement was mutually  terminated
effective April 1, 1998.

We recognized a gain of $180,000 from our discontinued  operations in 1999. This
gain  resulted  from the  reduction  in our reserve  against a  promissory  note
received from the sale of the discontinued operations. We reduced the reserve as
a result of our sale of our interest in the  purchaser  for a note.  In 1998, we
recognized a net loss from our discontinued operations of $217,000.

As a result of the  foregoing  factors,  in 1999 we  generated a net income from
continuing  operations  of  $1,645,000,  or $.56 per share  (basic) and $.47 per
share (diluted),  a gain from discontinued  operations of $180,000,  or $.06 per
share (basic) and $.05 per share (diluted),  and a net income of $1,825,000,  or
$.62 per share (basic) and $.52 per share (diluted).  For 1998, we generated net
income from  continuing  operations  of  $413,000,  or $.12 per share (basic and
diluted),  a loss from  discontinued  operations of $217,000,  or $.08 per share
(basic and diluted),  and net income applicable to common stock of $124,000,  or
$.04 per share (basic and diluted).

Liquidity and Capital Resources

We had  working  capital of $5.9  million at  December  31,  2000 as compared to
working capital of $2 million at December 31, 1999. Our cash position  increased
from  $205,000 at December 31, 1999 to $2.4  million at December  31, 2000.  The
increase in working capital for 2000 was  substantially  due to net income after
adding back  depreciation and amortization as well as from capital received from
the exercise of warrants and options totaling $1.3 million.

                                       14
<PAGE>

Our principal  source of funds,  other than revenue,  is an accounts  receivable
financing  agreement with an asset based lender which permits us to borrow up to
80% of eligible accounts receivable up to a maximum of $3.5 million. At December
31,  2000,  there were no  outstanding  borrowings  under this  facility and the
maximum  amount  available  to borrow under this  formula was $1.3  million.

At December 31, 2000,  accounts  receivable  and costs and estimated  profits in
excess  of  interim  billings  were  approximately  $8.5  million,  representing
approximately  156 days of revenue based on annualizing the revenue for the year
ended  December 31, 2000,  although no assurance  can be given that revenue will
continue at the same level as the year ended December 31, 2000.

Based on our outstanding  contracts and our continuing business, we believe that
our cash flow from operations,  the availability  under our financing  agreement
and our cash on hand will be  sufficient  to enable us to  continue  to  operate
without additional funding,  although it is possible that we may need additional
funding if our business  does not develop as we  anticipate  or if our expenses,
including  our  software  development  costs  relating to 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.

An important part of our growth strategy is to acquire other businesses that are
related to our current business.  Such acquisitions may be made with cash or our
securities  or a  combination  of cash and  securities.  To the  extent  that we
require  cash,  we may have to  borrow  the  funds or issue  equity.  We have no
commitments  from any financing  source and we may not be able to raise any cash
necessary to complete an acquisition.  If we fail to make any  acquisitions  our
future growth may be limited.

Forward Looking Statements

Statements in this Form 10-K include  forward-looking  statements  that address,
among other things,  our  expectations  with respect to the  development  of our
business.  In addition to these statements,  other  information  including words
such as "seek" "anticipate,"  "believe," "plan," "estimate,"  "expect," "intend"
and other similar  expressions  are forward looking  statements.  Actual results
could differ  materially  from those  currently  anticipated  due to a number of
factors,  including  those  identified  in this Annual Report on Form 10-K under
"Risk  Factors" and  elsewhere,  and in other  documents  which we file with the
Securities and Exchange Commission.

                                       15
<PAGE>
<TABLE>

                           Netsmart Technologies, Inc.
                                Quarterly Summary
                                    Unaudited
<S>                                            <C>             <C>          <C>            <C>

In thousands, except per share data amounts
                                                 1st Quarter    2nd Quarter   3rd Quarter    4th Quarter
                                                 -----------    -----------   -----------    -----------
               2000 (a)

Total revenue                                    $  5,601       $  4,909      $  5,099       $  4,562
Gross profit                                        2,085          2,142         1,884          2,104
Net income from continuing operations                 437            453           451            975
Discontinued operations                                -              -             -              70
Net income                                            437            453           451          1,045

Per share amounts:
  Net earnings - Basic:
    Continuing operations                        $   0.14       $   0.13      $   0.13       $   0.28
    Discontinued operations                      $     -        $     -       $     -        $   0.02
                                                 --------       --------     ---------      ---------
                                                 $   0.14       $   0.13      $   0.13       $   0.30
                                                 ========       ========     =========      =========

Net earnings - Diluted:

  Continuing operations                          $   0.12       $   0.12      $   0.12       $   0.25
 Discontinued operations                         $     -        $     -       $     -        $   0.02
                                                 --------       --------      --------       --------
                                                 $   0.12       $   0.12      $   0.12       $   0.27

               1999

Total revenue                                    $  5,235       $  5,572      $  5,240       $  5,205
Gross profit                                        1,788          1,957         1,866          1,764
Net income from continuing operations                 327            413           444            461
Discontinued operations                                -              -             -             180
Net income                                            327            413           444            641

Per share amounts:
  Net earnings - Basic:
    Continuing operations                        $   0.11       $   0.14      $   0.15       $   0.15
    Discontinued operations                      $     -        $     -       $     -        $   0.06
                                                 --------       --------      --------       --------
                                                 $   0.11       $   0.14      $   0.15       $   0.12
                                                 ========       ========      ========       ========

  Net earnings - Diluted:

    Continuing operation                         $   0.11       $   0.12      $   0.13       $   0.13
    Discontinued operations                      $     -        $     -             -            0.05
                                                 --------       --------      --------       --------
                                                 $   0.11       $   0.12      $   0.13       $   0.18
                                                 ========       ========      ========       ========


(a) Includes the benefit of a net operating loss in the amount of $494 in the fourth quarter of 2000.


                                       16
</TABLE>
<PAGE>


Item 8.  Financial Statements and Supplementary Data

The financial statements and supplementary  data begin on page F-1 of this Form
10-K.


Item 9.   Changes and Disagreements with Accountants on Accounting and Financial
Disclosure

None


                                    Part III

Items 10, 11, 12, and 13.

The information called for by Item 10 (Directors and Executive Officers),
Item II (Executive Compensation), Item 12 (Security Ownership of Certain
Beneficial Owners and Management), and Item 13 (Certain Relationships and
Related Transactions) is incorporated herein by reference from our definitive
proxy statement for the Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission not later than 120 days after the close of
the year ended December 31, 2000.


Part IV

Item 14.  Exhibits, Financial Statements Schedules and Reports on Form 8-K.


                                       17
<PAGE>


1.             Financial Statements
               Report of Richard A. Eisner & Company, LLP
               Consolidated Balance Sheets as of December 31, 2000 and 1999
               Consolidated  Statements of Income for the Years Ended
               December 31,  2000,  1999 and 1998
               Consolidated  Statements  of  Stockholders'  Equity for the Years
               Ended December 31, 2000, 1999 and 1998
               Consolidated Statements of Cash Flows for the Years Ended
               December 31, 2000,  1999 and 1998
               Notes to Consolidated Financial Statements

2.             Financial Statement Schedules
               None

3.             Reports on Form 8-K
               None

4.             Exhibits
               3.1(1)    Restated Certificate of Incorporation, as amended
               3.2(1)    By-Laws
               10.1      Employment Agreement dated January 1, 2001, between the
                         Registrant and James L. Conway.
               10.2      Employment Agreement dated January 1, 2001, between the
                         Registrant and John F. Phillips.
               10.3      Employment Agreement dated January 1, 2001, between the
                         Registrant and Gerald O. Koop.
               10.4      Employment Agreement dated January 1, 2001, between the
                         Registrant and Anthony F. Grisanti.
               10.5(1)   1993 Long-Term Incentive Plan.
               10.6(2)   1998 Long-Term Incentive Plan.
               10.7(3)   1999 Long-Term Incentive Plan.
               10.8(3)   1999 Employee Stock Purchase Plan
               10.9(4)   Agreement dated August 26, 1999, between the Registrant
                         and Silicon Valley Bank.
               21.1      Subsidiaries of the Registrant.
               25.1      Powers of attorney (See Signature Page)

----------
(1)       Filed as an exhibit to the Registrant's registration statement on Form
S-1, File No. 333-2550, which was declared effective by the Commission on
August 13, 1996, and incorporated herein by reference.

(2)       Filed as an appendix the  Registrant's  proxy  statement dated
September 30, 1999,  relating  to its 1999 Annual  Meeting of  Stockholders  and
incorporated herein by reference.

(3)       Filed as an appendix the Registrant's  proxy statement dated
November 9, 2000, relating to its 2000 Annual Meeting of Stockholders and
incorporated  herein by reference.

(4)       Filed as an exhibit  to the  Registrant's  Annual  Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein by reference.

                                       18


<PAGE>





                           NETSMART TECHNOLOGIES, INC.
                                AND SUBSIDIARIES

                                      F - 1

<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
INDEX
--------------------------------------------------------------------------------



                                                                   Page to Page

Independent Auditors' Report.......................................F-3

Consolidated Balance Sheets........................................F-4......F-5

Consolidated Statements of Income..................................F-6......F-7

Consolidated Statements of Stockholders' Equity....................F-8

Consolidated Statements of Cash Flows..............................F-9......F-11

Notes to Consolidated Financial Statements ........................F-12.....F-28




                              . . . . . . . . . . .

                                      F - 2

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders of
Netsmart Technologies, Inc.
Islip, New York

          We have  audited  the  accompanying  consolidated  balance  sheets  of
Netsmart  Technologies,  Inc. and  subsidiaries as of December 31, 2000 and 1999
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three year period  ended  December  31, 2000.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

          We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

          In our opinion,  the  financial  statements  referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Netsmart  Technologies,  Inc. and its  subsidiaries  as of December 31, 2000 and
1999, and the consolidated  results of their  operations and their  consolidated
cash flows for each of the years in the three year  period  ended  December  31,
2000, in conformity with generally accepted accounting principles.

Richard A. Eisner & Company, LLP

New York, New York
February 27, 2001

                                      F - 3
<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------

                                                          December 31,
                                                          ------------
                                                     2 0 0 0        1 9 9 9
                                                     -------        -------
Assets:

Current Assets:

        Cash and Cash Equivalents                $  2,418,947       $    204,989
        Accounts Receivable - Net                   4,688,598          5,789,734
        Costs and Estimated Profits in Excess
          of Interim Billings                       4,068,255          4,253,072
        Note Receivable                                    -             150,000
        Deferred taxes                                494,000                 -
        Other Current Assets                          144,942            167,516
                                                  -----------        -----------

        Total Current Assets                       11,814,742         10,565,311
                                                  -----------        -----------

Property and Equipment - Net                          512,281            534,864
                                                  -----------        -----------

Other Assets:
        Software Development Costs - Net              822,645            310,722
        Customer Lists - Net                        2,064,832          2,399,108
        Other Assets                                   86,213            162,472
                                                  -----------        -----------

        Total Other Assets                          2,973,690          2,872,302
                                                  -----------        -----------

        Total Assets                             $ 15,300,713       $ 13,972,477
                                                  ===========        ===========

See Notes to Consolidated Financial Statements.

                                      F - 4

<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<S>                                                             <C>              <C>

                                                                         December 31,
                                                                         ------------
                                                                   2 0 0 0          1 9 9 9
                                                                   -------          -------
Liabilities and Stockholders' Equity:

Current Liabilities:
        Notes Payable                                           $        --       $    882,404
        Capital Lease Obligations                                     35,756            25,385
        Accounts Payable                                             807,298         2,562,087
        Accrued Expenses                                           1,154,647         1,243,548
        Interim Billings in Excess of Costs and Estimated
          Profits                                                  3,350,697         3,750,847
        Deferred Revenue                                             608,444            88,546
                                                                 -----------       -----------

Total Current Liabilities                                          5,956,842         8,552,817
                                                                 -----------       -----------

Capital Lease Obligations - Less current portion
        included above                                                40,458            64,627
                                                                 -----------       -----------

Commitments and Contingencies

Stockholders' Equity:
        Preferred Stock - $.01 Par Value, 3,000,000
          Shares Authorized; None issued and outstanding

        Common  Stock - $.01 Par Value;  Authorized
        15,000,000  Shares;  Issued 3,524,692 shares
        at December 31, 2000, 2,988,738 shares at
        December 31, 1999                                             35,246            29,887

        Additional Paid in Capital                                20,454,391        18,657,579

        Accumulated Deficit                                      (10,886,414)      (13,272,433)
                                                                 -----------       -----------
                                                                   9,603,223         5,415,033

        Less cost of shares of Common Stock held
        in treasury - 28,038  shares at December 31,
        2000 and 5,333 shares at December 31, 1999                   299,810            60,000
                                                                 -----------       -----------

        Total Stockholders' Equity                                 9,303,413         5,355,033
                                                                 -----------       -----------

        Total Liabilities and Stockholders' Equity              $ 15,300,713      $ 13,972,477
                                                                 ===========        ==========


See Notes to Consolidated Financial Statements.

                                      F - 5

</TABLE>
<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<S>                                  <C>              <C>              <C>


                                                    Year ended December 31,

                                            2 0 0 0         1 9 9 9         1 9 9 8
                                            -------         -------         -------
Revenues:

  Software and Related
    Systems and Services:

    General                              $14,387,256     $17,085,603     $  9,569,100
    Maintenance Contract
      Services                             3,520,717       2,257,869        1,431,695
                                          ----------      ----------      -----------
    Total Software and Related
      Systems and Services                17,907,973      19,343,472       11,000,795

  Data Center Services                     2,262,676       1,908,158        2,164,472
                                          ----------      ----------      -----------

  Total Revenues                          20,170,649      21,251,630       13,165,267
                                          ----------      ----------       ----------

Cost of Revenues:
  Software and Related
    Systems and Services:
    General                                8,645,275      11,054,960        5,975,249
    Maintenance Contract
      Services                             2,285,663       1,713,759          975,212
                                          ----------      ----------       ----------

    Total Software and Related
      Systems and Services                10,930,938      12,768,719        6,950,461

  Data Center Services                     1,024,523       1,107,571        1,131,078
                                          ----------      ----------       ----------

  Total Cost of Revenues                  11,955,461      13,876,290        8,081,539
                                          ----------      ----------       ----------

Gross Profit                               8,215,188       7,375,340        5,083,728
                                          ----------      ----------       ----------

Selling, General and
  Administrative Expenses                  4,533,829       4,552,866        3,516,288
Cost of Warrants Issued and
  Their Extensions                           181,000         127,000               -
Related Party Administrative Expense              -               -            45,000
Research and Development                   1,359,781         800,470          763,059
                                          ----------      ----------       ----------

  Total                                    6,074,610       5,480,336        4,324,347
                                          ----------      ----------       ----------

Income from Continuing Operations
  before Interest Expense                  2,140,578       1,895,004          759,381

Interest Expense                             161,386         250,235          346,114
                                          ----------      ----------       ----------

Income from Continuing Operations
  before income tax benefit                1,979,192       1,644,769          413,267

Income Tax Benefit                          (336,827)             -                -
                                          ----------      ----------       ----------

Income from Continuing Operations          2,316,019       1,644,769          413,267
                                          ----------      ----------       ----------

See Notes to Consolidated Financial Statements.

                                      F - 6
</TABLE>
<PAGE>
<TABLE>


NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<S>                                                 <C>                 <C>                <C>
                                                                      Year ended December 31,
                                                                      -----------------------
                                                            2 0 0 0           1 9 9 9          1 9 9 8
                                                            -------           -------          -------

Discontinued Operations:
  Loss from Discontinued Operations                                                  -           (397,018)
  Gain on Sale of Discontinued Operations                     70,000            180,000           180,000
                                                          ----------         ----------        ----------

  Income (Loss) from Discontinued Operations                  70,000            180,000          (217,018)
                                                          ----------         ----------        ----------

  Net Income                                               2,386,019          1,824,769           196,249

  Less Cumulative Preferred Stock Dividends                       -                  -             72,600
                                                          ----------         ----------        ----------

  Net Income Applicable to Common Stock                  $ 2,386,019        $ 1,824,769       $   123,649
                                                          ==========         ==========        ==========


Earnings Per Share of Common Stock:
  Basic:
    Income from Continuing Operations                    $       .69        $       .56       $       .12
    Income (Loss) from Discontinued Operations                   .02                .06              (.08)
                                                          ----------         ----------        ----------

    Net Income                                           $       .71        $       .62       $       .04
                                                          ==========         ==========        ==========

    Weighted Average Number of Shares of
      Common Stock Outstanding                             3,367,005          2,921,254         2,779,655
                                                          ==========         ==========        ==========

  Diluted:
    Income from Continuing Operations                    $       .61        $       .47       $       .12
    Income (Loss) from Discontinued Operations                   .02                .05              (.08)
                                                          ----------         ----------        ----------

    Net Income                                           $       .63        $       .52       $       .04
                                                          ==========         ==========        ==========

    Weighted Average Number of Shares of
      Common Stock Outstanding                             3,770,992          3,516,317         2,864,993
                                                          ==========         ==========        ==========




See Notes to Consolidated Financial Statements.

                                      F - 7

</TABLE>
<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

                                       Additional                         Additional
                                         Paid-in                            Paid-in
                         Series D        Capital                            Capital                                      Total
                     Preferred Stock   Preferred       Common Stock        Common     Accumulated  Treasury  Shares  Stockholders'
                     ---------------   ---------       ------------        ------     -----------  --------  ------  ------------
                      Shares   Amount     Stock     Shares       Amount      Stock       Deficit     Shares    Cost      Equity
                      ------   ------     -----     ------       ------      -----       -------     ------    ----      ------

<S>                 <C>      <C>     <C>           <C>        <C>       <C>         <C>            <C>      <C>        <C>

Balance -
 December 31, 1997    1,210   $  12   $ 1,209,509   2,777,999   $27,780  $17,195,668  $(15,293,451)                      $3,139,518

Common Stock Issued -
 Exercise of Options                                    8,922        89        8,236                                          8,325

Purchase of Treasury
 Shares                                                                                               5,333   $ (60,000)    (60,000)

Net Income                                                                                 196,249                          196,249
                      -----    ----    ----------   ---------    ------   ----------   -----------   ------    --------   ---------


Balance -
 December 31, 1998    1,210      12     1,209,509   2,786,921    27,869   17,203,904   (15,097,202)   5,333     (60,000)  3,284,092

Common Stock Issued -
 Exercise of Options                                   99,317       993      112,554                                        113,547

Common Stock Issued -
 Consultant                                             2,500        25        5,600                                          5,625

Common Stock Issued
 for Redemption of
 Series D Preferred
 Stock               (1,210)    (12)   (1,209,509)    100,000     1,000    1,208,521                                             -

Issuance and
 Extension of Warrants                                                       127,000                                        127,000

Net Income                                                                               1,824,769                        1,824,769
                      -----    ----    ----------   ---------    ------   ----------   -----------   ------    --------   ---------
                         -       -             -    2,988,738    29,887   18,657,579   (13,272,433)   5,333     (60,000)  5,355,033

Balance -
 December 31, 1999

Common Stock Issued -
 Exercise of Options                                  328,321     3,283      378,258                 22,705    (239,810)    141,731

Common Stock Issued -
 Exercise of Warrants                                 192,105     1,921    1,137,709                                      1,139,630

Common Stock Issued -
 Acquisition                                           15,528       155       99,845                                        100,000

Issuance and Extension
 of Warrants                                                                 181,000                                        181,000

Net Income                                                                               2,386,019                        2,386,019
                      -----    ----    ----------   ---------    ------   ----------   -----------   ------    --------   ---------

Balance -
 December 31, 2000       -    $  -    $        -    3,524,692   $35,246  $20,454,391  $(10,886,414)  28,038   $(299,810) $9,303,413
                      =====    ====    ==========   =========    ======   ==========    ==========   ======    ========   =========


See Notes to Consolidated Financial Statements.

                                      F - 8
</TABLE>
<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<S>                                                <C>               <C>               <C>
                                                                     Year ended December 31,
                                                                     ----------------------
                                                         2 0 0 0           1 9 9 9           1 9 9 8
                                                         -------           -------           -------

Operating Activities:
  Income from Continuing Operations                   $ 2,316,019       $ 1,644,769       $    413,267
                                                       ----------        ----------        -----------
  Adjustments to Reconcile Income
    from Continuing Operations to Net Cash
    Provided by (Used in) Operating Activities:
    Depreciation and Amortization                         717,776           600,907            561,562
    Financing Costs Related to Issuance
    and Extension of Warrants                             181,000           127,000
    Financing Expenses related to the issuance
    of Common Stock                                                           5,625
    Cash Used in Discontinued Operations                                                      (397,018)
    Provision for Doubtful Accounts                       330,000            84,000             60,000

  Changes in Assets and Liabilities:
    [Increase] Decrease in:
    Accounts Receivable                                   771,136        (2,273,709)        (1,477,607)
    Costs and Estimated Profits in
    Excess of Interim Billings                            184,817        (1,353,377)        (2,357,371)
    Other Current Assets                                   22,574           (57,921)           (25,825)
    Deferred Taxes                                       (494,000)               -                  -
    Other Assets                                           76,259           (61,408)             5,839

    Increase [Decrease] in:
    Accounts Payable                                   (1,754,789)          395,754          1,034,641
    Accrued Expenses                                      (88,901)           64,655            102,773
    Interim Billings in Excess of
    Costs and Estimated Profits                          (400,150)        1,946,848            852,114
    Deferred Revenue                                      519,898            40,927            (69,461)
                                                       ----------        ----------        -----------

    Total Adjustments                                      65,620          (480,699)        (1,710,353)
                                                       ----------        ----------        -----------

  Net Cash Provided by (Used In)
    Operating Activities                                2,381,639         1,164,070         (1,297,086)
                                                       ----------        ----------        -----------

Investing Activities:
  Acquisition of Property and
    Equipment                                            (236,740)         (406,751)          (222,031)
  Software Development Costs                             (536,100)         (208,972)
  Cash Provided by Discontinued Operations                220,000           180,000             30,000
                                                       ----------        ----------        -----------

  Net Cash Used In Investing Activities                  (552,840)         (435,723)          (192,031)
                                                       ----------        ----------        -----------

See Notes to Consolidated Financial Statements.

                                      F - 9
</TABLE>
<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<S>                                                 <C>                <C>              <C>

                                                                     Year ended December 31,
                                                                     ----------------------
                                                         2 0 0 0           1 9 9 9           1 9 9 8
                                                         -------           -------           -------
Financing Activities:
  Proceeds from Short-Term Notes                                            882,404            704,517
  Payment of Short-Term Notes                            (882,404)       (1,639,694)
  Proceeds from Capitalized Lease Obligation               13,249            40,000
  Proceeds of loans from Related Parties                                                       140,000
  Repayment of loans from related parties                                   (84,000)           (56,000)
  Payment of Capitalized Lease Obligations                (27,047)          (34,304)           (15,658)
  Net Proceeds from Warrant Exercise                    1,139,630
  Net Proceeds from Stock Option Exercise                 141,731           113,547              8,325
  Purchase of Treasury Shares                                                                  (25,000)
  Other                                                                                         76,643
                                                        ---------         ---------          ---------

  Net Cash Provided by (Used in)
    Financing Activities                                  385,159          (722,047)           832,827
                                                        ---------         ---------          ---------

  Net Increase [Decrease] in Cash
    and Cash Equivalents                                2,213,958             6,300           (656,290)

  Cash and Cash Equivalents -
    Beginning of Year                                     204,989           198,689            854,979
                                                        ---------         ---------          ---------

  Cash and Cash Equivalents -
    End of Year                                       $ 2,418,947       $   204,989        $   198,689
                                                        =========         =========          =========

Supplemental Disclosure of Cash Flow Information:
  Cash paid during the years for:
    Interest                                          $   172,556       $   262,884        $   353,713
    Income Taxes                                      $   157,173       $    41,478        $    16,934

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Year ended December 31, 2000:

The Company  issued 15,528 shares of common stock to acquire the Connex suite of
managed care and employee assistance program information systems software. These
shares were valued at $100,000 which was the market value on date of grant.

During  2000,  stock  options to purchase  328,321  shares were  exercised,  and
proceeds of $381,541 includes  $239,810  representing the market value of 22,705
shares of the Company's  common stock which was received for the exercise  price
of certain of these options.

Year ended December 31, 1999:

Pursuant  to a March  25,  1999  agreement  between  the  Company,  Consolidated
Technology Group Ltd. ("Consolidated"), now known as The Sagemark Companies, SIS
Capital  Corp.,  a  wholly-owned  subsidiary  of  Consolidated,  and a group  of
purchasers, consisting principally of the Company's management and directors, on
April 8, 1999, Consolidated  transferred to the Company, the 1,210 shares of the
Company's Series D 6% Redeemable Preferred Stock, including the right to receive
$145,200 of accumulated dividends, and warrants to purchase shares of our common
stock in exchange for which the Company issued 100,000 shares of

                                     F - 10
</TABLE>
<PAGE>

common  stock to SIS  Capital.  The shares of Series D  Preferred  Stock and the
annual  dividends of $72,600  associated  with the Series D Preferred Stock were
cancelled.

Year ended December 31, 1998:

5,333 shares of Common Stock were  repurchased  from Johnson  Computing  Systems
pursuant to the  acquisition  agreement,  at a cost of $60,000 which was paid by
the issuance of a short term note.

See Notes to Consolidated Financial Statements.

                                     F - 11
<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #1
--------------------------------------------------------------------------------

[1] The Company

The Company licenses and installs its proprietary software products, operates an
established service bureau and enters into long term maintenance agreements with
behavioral health  organizations and methadone clinics and other substance abuse
facilities throughout the United States.

[2] Summary of Significant Accounting Policies

Principles  of  Consolidation  -  The  financial   statements  include  Netsmart
Technologies,  Inc.  ["Netsmart"],  and its  wholly-owned  subsidiary,  Creative
Socio-Medics Corp. ["CSM"] as well as PsyMedX, a joint venture in which Netsmart
owns  an  80%  interest  (collectively  referred  to  as  the  "Company").   All
intercompany transactions are eliminated in consolidation.

Estimates - The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all highly liquid  instruments
purchased with a maturity of three months or less to be cash  equivalents.  Cash
equivalents totaled approximately $363,000 and $192,000 at December 31, 2000 and
1999 respectively.

Concentration  of Credit Risk - The Company  extends  credit to customers  which
results in accounts receivable arising from its normal business activities.  The
Company  does not require  collateral  or other  security  to support  financial
instruments subject to credit risk. The Company routinely assesses the financial
strength of its customers and based upon factors  surrounding the credit risk of
the  customers  believes  that its accounts  receivable  credit risk exposure is
limited.

The Company's  behavioral health information systems are marketed to specialized
care facilities,  many of which are operated by government  entities and include
entitlement  programs.  During the years ended December 31, 2000, 1999 and 1998,
approximately  51%, 55% and 52%  respectively,  of the  Company's  revenues were
generated from contracts with government agencies.

During the year ended December 31, 2000, no one customer accounted for more than
10% of revenue.  During the year ended  December 31, 1999 and 1998, one customer
accounted for approximately $3,835,000 and $2,113,000,  respectively, or 18% and
16%,  respectively of revenue.  Accounts receivable of approximately $69,000 and
costs and estimated  profits in excess of billing of $1,805,000 less $170,000 in
interim  billings in excess of costs and  estimated  profits  were due from this
customer at December 31, 1999.

The  Company  places  its cash and cash  equivalents  with high  credit  quality
financial  institutions.  The  amount on  deposit  in any one  institution  that
exceeds federally insured limits is subject to credit risk. At December 31, 2000
and  1999,  cash  and cash  equivalent  balances  of $2.2  million  and  $90,000
respectively,  were held at a  financial  institution  in  excess  of  federally
insured limits.

Revenue Recognition - During 1997, the Accounting  Standards Executive Committee
of the  American  Institute  of Certified  Public  Accountants  issued SOP 97-2,
"Software   Revenue   Recognition."   This  SOP  provides  guidance  on  revenue
recognition on software transactions.  The company adopted SOP 97-2 in 1998. The
adoption did not have a material impact on the financial  position or results of
operations of the Company. The Company recognizes revenue principally from

                                     F - 12

<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
--------------------------------------------------------------------------------

[2] Summary of Significant Accounting Policies - [Continued]

the  licensing of its  software and from  consulting  and  maintenance  services
rendered in connection with such licensing  activities.  Information  processing
revenues  are  recognized  in the  period  in which  the  service  is  provided.
Maintenance  contract  revenue is recognized on a  straight-line  basis over the
life of the respective contract.  The Company also derives 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.
No  revenue is  recognized  prior to  obtaining  a binding  commitment  from the
customer.

Software development revenue from time-and-materials contracts are recognized as
services are performed.  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 on the
estimated  percentage-of-completion  method. Using 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.  Revenue  from  software  package  license
agreements without significant vendor obligations is recognized upon delivery of
the  software.  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.

Property and  Equipment and  Depreciation  - Property and equipment is stated at
cost less  accumulated  depreciation.  Depreciation of property and equipment is
computed by the  straight-line  method at rates adequate to allocate the cost of
applicable  assets over their expected  useful lives.  Amortization of leasehold
improvements  is computed  using the  shorter of the lease term or the  expected
useful life of these assets.

Estimated useful lives are as follows:

Equipment                                                       3-5 Years
Furniture and Fixtures                                            5 Years
Leasehold Improvements                                            5 Years

Capitalized  Software  Development  Costs - Capitalization  of computer software
development  costs begins upon the  establishment of technological  feasibility.
Technological  feasibility  for the  Company's  computer  software  products  is
generally  based upon  achievement  of a detail program design free of high risk
development  issues.  The  establishment  of  technological  feasibility and the
ongoing   assessment  of   recoverability   of  capitalized   computer  software
development costs requires considerable  judgement by management with respect to
certain  external  factors,   including,   but  not  limited  to,  technological
feasibility,  anticipated  future gross  revenues,  estimated  economic life and
changes in software and hardware technology.

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
revenues for a product bear to the total of current and anticipated future gross
revenues for that  product or (b) the  straight-line  method over the  remaining
estimated economic life of the product.

                                     F - 13
<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
--------------------------------------------------------------------------------

[2] Summary of Significant Accounting Policies - [Continued]

The  Company  periodically  performs  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 net realizable  value,  any remaining  capitalized
amounts are written off.

During 2000, the Company  acquired the Connex suite of managed care and employee
assistance  program  information  systems.  The  acquisition  price consisted of
approximately  $47,000  in cash and 15,528  shares of  Netsmart's  common  stock
valued at $100,000. The purchase price was allocated to computer software in the
amount of $147,000. During 2000, the Company made additional enhancements to the
purchased software in the amount of $270,000.  The Company has amortized $83,000
of these total costs  during  2000.  As of December  31,  2000,  the Company has
invested  approximately  $417,000  on this  effort  of  which  $334,000  remains
capitalized.

During 1999, the Company established PsyMedX, a joint venture with Pathware Inc.
The Company  owns 80% of PsyMedX and  Pathware,  Inc.  owns 20%.  The  agreement
focuses on a joint  effort to develop  and  market web portal  services  and ASP
solutions for the behavioral/public healthcare providers, consumers and managers
throughout the United States.  As of December 31, 2000, the Company has invested
approximately   $428,000  in  this  venture   which  is  reflected  as  software
development costs.

Information  related to  capitalized  software  costs  applicable  to continuing
operations is as follows:

        Year ended December 31,               2000          1999         1998
        -----------------------               ----          ----         ----

        Beginning of Year                  $ 310,722     $ 142,450    $ 183,150
        Capitalized                          636,100       208,972           -
        Amortization                        (124,177)      (40,700)     (40,700)
                                            --------      --------     --------

          Net                              $ 822,645     $ 310,722    $ 142,450
          ---                               ========      ========     ========

Customer  Lists -  Customer  lists  represent  a listing of  customers  obtained
through the  acquisition  of CSM to which the  Company can market its  products.
Customer lists are being amortized on the straight-line method over an estimated
useful life of 12 years.

Customer lists at December 31, 2000 and 1999 are as follows:

                                                         December 31,
                                                         ------------
                                                    2 0 0 0          1 9 9 9
                                                    -------          -------

        Customer Lists                            $4,106,223       $4,106,223
        Less: Accumulated Amortization             2,041,391        1,707,115
                                                   ---------        ---------

        Net                                       $2,064,832       $2,399,108
        ---                                        =========        =========

Amortization expense amounted to 334,276, 334,284 and 334,284, respectively, for
the years ended December 31, 2000, 1999 and 1998.

The Company has adopted Statement of Financial  Accounting  Standards (SFAS) No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed Of." SFAS No. 121 established accounting standards for the
impairment  of  long-lived  assets and  certain  identifiable  intangibles,  and
goodwill related to those assets to be held and used, and for long- lived assets
and  certain  identifiable   intangibles  to  be  disposed  of.  Management  has
determined that

                                     F - 14

<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
--------------------------------------------------------------------------------

[2] Summary of Significant Accounting Policies - [Continued]

expected future cash flows  (undiscounted  and without interest  charges) exceed
the  carrying  value of the long lived  assets at December 31, 2000 and believes
that no impairment of these assets has occurred.

Stock  Options  and  Similar  Equity  Instruments  -  The  Company  adopted  the
disclosure  requirements of Statement of Financial Accounting Standards ("SFAS")
No.  123,  "Accounting  for  Stock-Based  Compensation,"  for stock  options and
similar  equity  instruments  (collectively,  "Options")  issued  to  employees.
However,  the Company has elected to apply the  intrinsic  value based method of
accounting for options issued to employees  prescribed by Accounting  Principles
Board ("APB") Opinion No. 25,  "Accounting for Stock Issued to Employees" rather
than the fair value based method of accounting  prescribed by SFAS No. 123. SFAS
No.  123 also  applies  to  transactions  in which an entity  issues  its equity
instruments to acquire goods or services from non-employees.  Those transactions
are accounted for based on the fair value of the  consideration  received or the
fair  value  of the  equity  instruments  issued,  whichever  is  more  reliably
measurable.

Earnings  Per Share - Basic  earnings  per share of common  stock is computed by
dividing  income from  continuing  operations  and net income,  after  dividends
accrued during 1998 for the Series D cumulative preferred stock outstanding,  by
the weighted  average  number of shares of common stock  outstanding  during the
period.  Diluted  earnings  per share  reflects  the amount of earnings  for the
period available to each share of common stock outstanding  during the reporting
period,  giving effect to all  potentially  dilutive shares of common stock from
the potential exercise of stock options and warrants.

The  computation  of diluted  earnings  per share  does not  assume  conversion,
exercise or contingent  issuance of securities  that would have an  antidilutive
effect on earnings per share (i.e.  improving  earnings per share). The dilutive
effect of outstanding  options and warrants and their  equivalents are reflected
in dilutive  earnings per share by the application of the treasury stock method.
Options and warrants  will have a dilutive  effect only when the average  market
price of the common  stock during the period  exceeds the exercise  price of the
options or warrants.  The Company had potentially  dilutive options and warrants
outstanding  of 974,275,  978,022 and  1,830,652 at December 31, 2000,  1999 and
1998, respectively.

All per share information has been retroactively  adjusted for the one-for-three
reverse stock split which became effective September 1998.

                                     F - 15

<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
--------------------------------------------------------------------------------

[2] Summary of Significant Accounting Policies - [Continued]

The following table sets forth the computation of basic and diluted earnings per
share:

                                                          Year ended December 31,
                                                          -----------------------
                                                      2000          1999          1998
                                                      ----          ----          ----
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Numerator:

  Income from continuing operations                $2,316,019    $1,644,769      $  413,267
  Less cumulative preferred stock dividends                                          72,600
                                                    ---------     ---------       ---------

  Income available to common stockholders           2,316,019     1,644,769         340,667

Discontinued operations:
  Loss from discontinued operations                                                (397,018)
  Gain on sale of discontinued operations              70,000       180,000         180,000
                                                    ---------     ---------       ---------
Net income available to common stockholders
  after assumed conversions                        $2,386,019    $1,824,769      $  123,649
                                                    =========     =========       =========

Denominator:
Weighted average shares                             3,367,005     2,921,254       2,779,655
                                                    ---------     ---------       ---------
Effect of dilutive securities:
  Employee stock options                              403,987       584,075          85,338
  Stock warrants                                           -         10,988              -
                                                    ---------     ---------       ---------
  Dilutive potential common shares                    403,987       595,063          85,338
                                                    ---------     ---------       ---------

  Denominator for diluted earnings per
    share-adjusted weighted average shares
    after assumed conversions                       3,770,992     3,516,317       2,864,993
                                                    =========     =========       =========

Research and Development - Research and development costs are charged to expense
as incurred.

Advertising - Advertising  costs are expensed as incurred.  Advertising  expense
amounted to $226,024, $89,488 and $71,908 for the three years ended December 31,
2000, 1999 and 1998, respectively.

[3] Accounts Receivable

Accounts  receivable is shown net of allowance for doubtful accounts of $370,222
and  $305,226 at December  31,  2000 and 1999  respectively.  The changes in the
allowance for doubtful accounts are summarized as follows:

                                                 Year Ended December 31,
                                                 -----------------------
                                               2000          1999         1998
                                               ----          ----         ----

        Beginning Balance                   $ 305,226     $ 372,797    $ 348,029
        Provision for Doubtful Accounts       330,000        84,000       60,000
        Charge-offs                          (265,004)     (151,571)     (35,232)
                                              -------       -------      -------

        Ending Balance                      $ 370,222     $ 305,226    $ 372,797
                                              =======       =======      =======

                                     F - 16
</TABLE>
<PAGE>



NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
--------------------------------------------------------------------------------

[4] Costs and Estimated Profits in Excess of Interim Billings and Interim
Billings in Excess of Costs and Estimated Profits

Costs,  estimated profits, and billings on uncompleted  contracts are summarized
as follows:

                                                           December 31,
                                                           ------------
                                                     2 0 0 0           1 9 9 9
                                                     -------           -------

Costs Incurred on Uncompleted Contracts           $ 15,063,888     $ 12,582,652
Estimated Profits                                    9,368,984        7,446,962
                                                    ----------       ----------

Total                                               24,432,872       20,029,614
Billings to Date                                    23,715,314       19,527,389
                                                    ----------       ----------

    Net                                           $    717,558     $    502,225
    ---                                             ==========       ==========

Included in the accompanying balance sheet under the following captions:

Costs and estimated profits in excess of
 interim billings                                 $  4,068,255     $  4,253,072
Interim billings in excess of costs and
 estimated profits                                  (3,350,697)      (3,750,847)
                                                    ----------       ----------

    Net                                           $    717,558     $    502,225
    ---                                             ==========       ==========

[5] Discontinued Operations

During 1998 the Company  discontinued its CarteSmart division which included its
interest in a joint  venture.  On June 30, 1998, the Company sold this division,
with an option to purchase the  Company's  interest in the joint  venture if the
other party to the venture did not elect to acquire the Company's  interest,  to
Granite  Technologies,  Inc.  ("Granite"),  a  corporation  formed by the former
management  of  the  division.  Granite  issued  to  the  Company  its  $500,000
promissory  note and an equity  interest in Granite  equal to 20% at the time of
transaction.  Granite also agreed to pay certain  royalties to the Company.  The
note was subject to cancellation if the other party to the joint venture elected
to purchase the  Company's  interest.  As the Company has virtually no influence
over the financing and operating policies of Granite, the interest in Granite is
accounted  for using the cost method.  The Company has been  informed that as of
December  31,  2000,  its 20%  interest in Granite has been  diluted to 13% as a
result of additional equity issued by Granite to third parties.

As a result of the  discontinuation  of the CarteSmart  division,  the financial
statements  for the periods being reported have been restated to reflect the net
loss from the CarteSmart  division as a loss from discontinued  operations.  The
revenues from the discontinued operations amounted to $33,000 in 1998.

In October  1998,  the other party to the joint  venture  exercised its right to
purchase the Company's  interest in the joint venture for a $500,000  note.  The
terms of the note  required  twenty four monthly  principal  payments of $15,000
each, commencing November 1, 1998 and a $140,000 balloon payment due November 1,
2000.  The note also bears  interest at 5.66% per annum.  The Company valued the
note at $180,000  based on  managements  estimates of future  collections on the
note. Collections have exceeded management's  expectations of collectibility and
therefore the Company has  recognized  additional  gain on sale of  discontinued
operations.

                                     F - 17
<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
--------------------------------------------------------------------------------

[6] Property and Equipment

Property and equipment consist of the following:

                                                            December 31,
                                                            ------------
                                                        2 0 0 0      1 9 9 9
                                                        -------      -------

Equipment, Furniture and Fixtures                     $1,082,773      $  869,497
Leasehold Improvements                                   282,589         264,153
                                                       ---------       ---------

Totals - At Cost                                       1,365,362       1,133,650
Less:  Accumulated Depreciation                          853,081         598,786
                                                       ---------       ---------

    Net                                               $  512,281      $  534,864
    ---                                                =========       =========

Depreciation expense amounted to $259,323, $225,923, and $176,578,  respectively
for the years ended December 31, 2000, 1999 and 1998.

[7] Related Party Transactions

Related  Party  Administrative  Expense - The Company had an agreement  with its
then principal stockholder,  Consolidated, and its subsidiary The Trinity Group,
Inc.  ("Trinity")  pursuant to which the Company  paid  Trinity a monthly fee of
$15,000 for general business, management and financial consulting services. This
agreement was mutually  terminated,  effective  April 1, 1998.  Pursuant to this
agreement,  in 1998, the Company charged $45,000 to related party administrative
expenses.

[8] Notes Payable

Asset-Based  Lender - In October 1999,  the Company  entered into a new two year
credit facility  agreement with a bank.  Under this  agreement,  the Company can
draw up to 80% of eligible accounts  receivable up to $3.5 million,  on which it
pays  interest at 2% above the prime rate.  All of the accounts  receivable  and
property and  equipment of the Company and its  subsidiaries  collateralize  the
note. The Company had no borrowings under this facility at December 31, 2000 and
$882,404 at December 31, 1999. The amount available under the credit facility at
December 31, 2000 was $1.3 million.

The weighted  average interest rate on short-term  borrowings  outstanding as of
December 31, 1999 amounted to approximately 16%.

[9] Income Taxes

The Company utilizes an asset and liability  approach to determine the extent of
any deferred  income  taxes,  as described in Statement of Financial  Accounting
Standards   No.  109,   "Accounting   for  Income   Taxes."  This  method  gives
consideration to the future tax consequences associated with differences between
financial statement and tax bases of assets and liabilities.

At December  31,  2000,  the Company has net  operating  loss  carryforwards  of
$6,517,000  expiring by 2012.  Pursuant to Section 382 of the  Internal  Revenue
Code regarding substantial changes in Company ownership, utilization of this net
operating loss  carryforward  is limited to  approximately  $1,360,000 per year,
plus any prior years' amounts not utilized.

The Company's  provision for taxes includes  Federal  alternative  minimum taxes
after utilizing its net operating loss as well as certain state and local taxes.

                                     F - 18

<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
--------------------------------------------------------------------------------

[9] Income Taxes - [Continued]

The expiration dates of net operating loss carryforwards are as follows:

December 31,                                        Amount
-----------                                         ------

    2010                                          $    326,000
    2011                                             2,930,000
    2012                                             3,261,000
                                                   -----------
                                                  $  6,517,000
                                                   ===========

Provision for income taxes consists of the following:

                                           Year ended December 31,
                                           ----------------------
                                        2000            1999          1998
                                        ----            ----          ----
Current:
  Federal                           $  43,280       $      -       $     -
  State                               113,893              -             -
                                     --------        --------       -------
                                      157,173              -             -
                                     --------        --------       -------

Deferred:
  Federal                            (442,000)             -             -
  State                               (52,000)             -             -
                                     --------        --------       -------
                                     (494,000)             -             -
                                     --------        --------       -------

    Total                          $ (336,827)      $      -       $     -
                                     ========        ========       =======


The Company  realized  tax benefits of  approximately  $938,000,  $909,000,  and
$121,000, during the years ended December 31, 2000, 1999 and 1998, respectively,
from the utilization of net operating loss carry forward.

The difference between income taxes at the statutory Federal income tax rate and
income taxes reported in the income statement is as follows:

                                                       Year ended December 31,
                                                       -----------------------
                                                    2000       1999        1998
                                                    ----       ----        ----

Income taxes at the federal statutory rate            34%        34%        34%
State and local income taxes net of Federal taxes      5%         6%         6%
Nondeductible expenses                                 5%
Utilization of net operating loss carryforward       (46)%      (53)%      (29)%
Federal Minimum Tax                                    2%         3%
(Decrease) increase in valuation allowance           (25)%       10%       (11)%
Other                                                  8%
                                                    ------     ------     ------

                                                     (17)%        0%         0%
                                                    ======     ======     ======

                                     F - 19

<PAGE>


NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
--------------------------------------------------------------------------------

[9] Income Taxes - [Continued]

Significant components of the Company's deferred tax assets are comprised of the
following:
                                                          December 31,
                                                          ------------
                                                      2000             1999
                                                      ----             ----

Net operating loss carryforward                    $ 2,233,000     $ 3,346,000
Allowance for doubtful accounts                        141,000         116,000
Accrued vacation and bonuses                           363,000         296,000
Alternative minimum tax credit carryforward             83,000          43,000
Benefit of stock based compensation awards           1,400,000       1,400,000
                                                    ----------      ----------

Total deferred tax assets                            4,220,000       5,201,000

Valuation allowance                                 (3,726,000)     (5,201,000)
                                                    ----------      ----------

Net deferred tax assets                            $   494,000    $         -
                                                    ==========      ==========

The Company has provided a valuation  allowance in the amount of  $3,726,000  of
the deferred tax asset of  approximately  $4,220,000.  The  valuation  allowance
decreased by  $1,475,000 at December 31, 2000.  The Company  believes that based
upon its average  income over its past three years,  that it is more likely than
not,  to use at least a portion  of its net  operating  loss  carryforward.  The
valuation  allowance (decreased) increased by ($699,000) and $300,000 at
December 31, 1999 and 1998 respectively.

[10] Stockholders' Equity

The Company is  authorized to issue  3,000,000  shares of preferred  stock,  par
value $.01 per share, and 15,000,000  shares of common stock, par value $.01 per
share.  The Company's  Board of Directors is authorized to issue preferred stock
from time to time without  stockholder  action,  in one or more distinct series.
The Board of Directors is authorized to determine the rights and  preferences of
the  preferred  stock when issued.  The Board of Directors  has  authorized  the
issuance of Series A, Series B and Series D  preferred  Stock.  No shares of any
series of preferred stock were outstanding on December 31, 2000.

At the close of business on September 14, 1998, a one-for-three reverse split of
the common  stock became  effective.  All common stock and per share data in the
financial statements and notes have been adjusted to reflect this reverse split.

Pursuant to a March 25, 1999, agreement between the Company,  Consolidated and a
group of  purchasers,  consisting  principally  of the Company's  management and
directors, on April 8, 1999,  Consolidated  transferred to the Company the 1,210
shares of the Company's Series D 6% Redeemable  Preferred  Stock,  including the
right to receive $145,200 of accumulated  dividends for which the Company issued
100,000 shares of common stock to Consolidated. The shares of Series D Preferred
Stock have been cancelled as well as the annual dividends of $72,600  associated
with the Series D Preferred Stock.

Common  Stock  Issuances - On August 19,  1996,  the Company  completed a public
offering  pursuant  to which it received  net  proceeds  of  approximately  $3.8
million from the sale of units  comprised  of an aggregate of 431,250  shares of
Common Stock and Series A Redeemable  Common Stock Purchase  Warrants ("Series A
Warrants") to purchase an aggregate of 215,625  shares of common stock at $13.50
per share through August 1999.

In August 1996,  holders of Series B Common Stock Purchase  Warrants  ("Series B
Warrants")  to purchase an aggregate of 266,666  shares of Common Stock at $6.00
per share exercised such

                                     F - 20

<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
--------------------------------------------------------------------------------

[10] Stockholders' Equity - [Continued]

warrants.  The Company  received $1.6 million from the sale of such shares.  See
Note 14 for information relating to the issuance of the Series B Warrants.

During a 90 day period in 1997,  the terms of the Series A Warrants were amended
to reduce the  exercise  price.  During such  period,  the Company  received net
proceeds of  approximately  $1.8  million  from the  issuance of an aggregate of
426,071 shares of common stock upon exercise of Series A Warrants.

During 2000,  Series B Warrants to purchase an  aggregate  of 192,105  shares of
Common Stock at $6 per share were exercised.  The Company  received $1.2 million
from the exercise of the warrants.

Treasury Stock - In 1998,  pursuant to the Johnson Computing Systems  agreement,
the Company  purchased  from Johnson  Computing  Systems  5,333 shares of Common
Stock for $60,000. The shares are treated as treasury shares.

During 2000,  stock options to purchase  328,321 shares were exercised,  and the
Company  received  gross  proceeds of $381,541.  Pursuant to the option  grants,
employees  have  the  right  to pay for the  exercise  price  of the  option  by
delivering  shares of common  stock  owned by them.  During  2000,  the  Company
received 22,705 shares, having a value of $239,810, as the exercise price of the
options.

Stock Options - See Note 14 for information relating to the Company's 1993, 1998
and 1999 Long-Term Incentive Plans.

On December 21, 2000, the shareholders of the Company approved the 1999 Employee
Stock Purchase Plan. The plan reserves  150,000 shares of common stock. The Plan
provides  eligible  employees with the  opportunity to purchase shares of common
stock at a discounted price through regular payroll deductions.  No options have
been issued as of December 31, 2000 under this plan.

[11] Capital Lease Obligations

Future minimum payments under capital lease  obligations as of December 31, 2000
are as follows:

Year ending
-----------
December 31,
-----------
      2001                                               $  42,759
      2002                                                  33,263
      2003                                                  10,822
                                                          --------

    Total Minimum Payments                                  86,844
    Less Amount Representing Interest at
       4.9% to 13.8% Per annum                              10,630
                                                          --------

    Balance                                              $  76,214
                                                          ========

Capital lease  obligations are  collateralized by equipment which has a net book
value of  $90,000  and  $97,000 at  December  31,  2000 and 1999,  respectively.
Amortization   of  $25,054,   $19,329  and  $10,200  in  2000,  1999  and  1998,
respectively, has been included in depreciation expense.

                                     F - 21

<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
--------------------------------------------------------------------------------

[12] Fair Value of Financial Instruments

The carrying  amount of cash and cash  equivalents,  accounts  receivable,  note
receivable,  accounts  payable and debt maturing within one year approximate the
fair value of these instruments because of their short maturities.

[13] Commitments and Contingencies

Leases
------

The  Company  leases  space  for its  executive  offices  and  facilities  under
noncancellable operating leases expiring December 31, 2003.

Minimum annual rentals under noncancellable  operating leases (net of a sublease
to Granite of $21,000 per year through  2002) having terms of more than one year
are as follows:

Years ending
------------
December 31,
-----------
   2001                                       $  412,000
   2002                                          329,000
   2003                                          342,000
                                               ---------

    Total                                     $1,083,000
    -----                                      =========

Rent expense amounted to $464,000,  $388,000 and $349,000 respectively,  for the
years ended December 31, 2000, 1999 and 1998.

Employment Agreement

In July 1998, the Company entered into five-year employment  agreements with its
four  executive  officers  pursuant to which such officers  receive an aggregate
annual base salaries of $560,000, with an annual cost of living adjustment.

In January  2001,  the Company  entered into  employment  agreements  with these
officers  for  terms of two or three  years  with the right of the  employee  to
extend the agreement for an additional year. The aggregate base compensation for
these officers for 2001 is $596,000,  subject to annual  increases  equal to the
greater  of 5% or the  increase  in the cost of  living  increases.  Each of the
officers  also has the right,  at any time on 90 days notice,  to terminate  his
full time employment and continue as a part- time consultant at an annual salary
of  $75,000  for five years  following  the  expiration  or  termination  of his
employment.  The  agreements  also  provide  the  officers  with  an  automobile
allowance.  In the event of a change  of  control,  the  executive  may  receive
severance payments of between 42 and 48 months' compensation.

[14] Stock-Based Compensation

Long Term Incentive Plans - The Company has three long-term incentive plans, the
1993 Long- Term Incentive Plan (the "1993 Plan"), as amended, the 1998 Long-Term
Incentive Plan (the "1998 Plan"), as amended,  and the 1999 Long-Term  Incentive
Plan (the  "1999  Plan").  The 1999 plan was  approved  by the  shareholders  in
December  2000 and provides for the issuance of 300,000  shares of common stock.
The  Company  may issue  17,833,  790,000  and  300,000  shares of Common  Stock
pursuant to the 1993 Plan, the 1998 Plan, and the 1999 Plan respectively.

                                     F - 22

<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
--------------------------------------------------------------------------------

[14] Stock-Based Compensation - [Continued]

Officers  and  other  key  employees,  consultants  and  directors  (other  than
non-employee  directors) are eligible to receive  options or other  equity-based
incentives  under  the  Plans.  The 1993  Plan,  the 1998 Plan and the 1999 Plan
(collectively,  the "Plans") are administered by the  Compensation  Committee of
the board of directors.

The 1998 and 1999 Plans provides that each non-employee  director  automatically
receives a nonqualified stock option to purchase 5,000 shares of Common Stock on
April 1 of each year.  However,  if there are not  sufficient  shares  available
under the  applicable  Plan,  the  non-employee  director  will receive a lesser
number of shares. The 1998 Plan also provided for the grant on June 30, 1998, to
each  non-employee  director,  other  than  the  chairman  of  the  board,  of a
non-qualified stock option to purchase 10,000 shares of Common Stock, and to the
chairman of the board, a non- qualified  stock option to purchase  35,000 shares
of Common Stock.

In November  1998,  the  Committee  reduced the  exercise  price of  outstanding
options to purchase an aggregate of 43,167  shares of Common  Stock,  from $4.50
per share to $1.50 per  share,  which was in excess of the  market  price on the
date the Committee approved the reduction in the exercise price, and accordingly
did not result in any compensation charge.

During 2000,  pursuant to an employment  contract with a newly hired  executive,
the Company  issued a  non-qualified  stock option to purchase  75,000 shares of
stock at an exercise price of $6.50 per share.

A summary of the activity under the Company's stock option plans is as follows:

                                         2000                   1999                    1998
                               ---------------------   ---------------------    ----------------------
                                           Weighted               Weighted                    Weighted
                                           Average                Average                     Average
                                           Exercise               Exercise                    Exercise
                               Shares       Price       Shares      Price         Shares        Price
<S>                          <C>         <C>        <C>        <C>          <C>          <C>

Outstanding - Beginning of
  Year                          783,041      $1.176     882,358    $1.172       148,780       $3.244
Granted During the Year         375,000       2.748          -         -        823,167(a)     1.180
Canceled During the Year        (20,002)      1.250          -         -        (80,667)(a)    9.600
Exercised During the Year      (328,321)      1.167     (99,317)    1.143        (8,922)        .723
                                -------       -----     -------     -----       --------       -----

   Outstanding - End of Year    809,718    $1.908     783,041    $1.176       882,358    $1.172
                                =======     =====     =======     =====       =======     =====

   Exercisable - End of Year    434,718    $1.183     783,041    $1.176       242,358    $1.338
                                =======     =====     =======     =====       =======     =====


(a)  Includes  under  "Granted  During  the Year"  43,167  shares  granted  upon
cancellation  of an equal number of shares having an exercise price of $4.50 per
share,  and under  "Cancelled  During the Year" the  cancellation  of options to
purchase 43,167 shares.

                                     F - 23
</TABLE>
<PAGE>


NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13
--------------------------------------------------------------------------------

[14] Stock-Based Compensation - [Continued]

The following table summarizes stock option information as of December 31, 2000:

                                             Options Outstanding
                                             ------------------
                                                  Weighted
                                                  --------
                                             Average Remaining        Options
                                             -----------------        -------
Exercise Prices     Number Outstanding       Contractual Life       Exercisable
---------------     ------------------       -----------------      -----------

$1.50                     17,833                .25 Years            17,833
$1.50                    141,135               2.42 Years           141,135
$1.00                    275,750               2.83 Years           275,750
$6.50                     75,000               4.25 Years                -
$1.81                    300,000               5.00 Years                -
                         -------               ----------          --------

   Totals                809,718               3.64 Years           434,718
                         =======               ==========          ========


Warrants  Issued as Compensation - In February 1996, the Company issued Series B
Common Stock Purchase Warrants to purchase  1,051,250 shares of common stock, of
which warrants to purchase  838,750  shares were  exercisable at $6.00 per share
and  warrants  to  purchase   212,500  are  exercisable  at  $15.00  per  share,
subsequently  adjusted  to  $12,  see  below.  These  warrants  were  issued  in
connection with services rendered,  which, in the case of SIS Capital,  included
the guarantee of certain notes payable.  Certain of the warrants initially had a
November 1998 expiration  date,  which was extended to December 31, 1999,  which
was the expiration  date of all of the warrants.  In December 1999 the remaining
$6 and $12 warrants totaling 287,500 and 448,544, respectively, were extended to
February  29,  2000.  The Company  recognized  a financing  cost of $81,000 with
respect to this extension in 1999. In February 2000, these warrants were further
extended to April 30, 2000 and the company recognized additional financing costs
of $125,000 in 2000.  At the end of April 2000,  192,105 of the $6 warrants were
exercised  and 95,395  expired.  During the course of the year the  448,544  $12
warrants were extended to April 30, 2001.

Of the warrants issued in February 1996,  262,500 warrants  exercisable at $6.00
per share and 12,500  warrants  exercisable  at $15.00 per share were  issued to
replace 275,000 warrants  previously  issued in October 1993. These warrants had
exercise prices ranging from $8.00 per share to $30.00 per share.

During 1999, the Company issued warrants to purchase 45,000 shares in connection
with a financial advisory agreement whereby the Company will pay consulting fees
in addition to the issuance of the warrants.  These warrants were valued at $.58
per  warrant,  which  represented  the  cost  of the  services  based  upon  the
contractual  agreement.  These warrants have an exercise  price of $5.45,  which
represented  a 15%  premium  over the  market  value of the stock at the time of
issuance and will expire in October 2004.

During 1999,  the Company  issued 9,000  warrants for services  rendered.  These
warrants  were  valued  at  $2.20  per  warrant  based  upon  the  Black-Scholes
calculation  which  included an interest rate of 5.51% and a volatility  rate of
 .3. These  warrants have an exercise  price of $4.20 per warrant,  which was the
market  value of the stock at the time of  issuance  and will  expire in October
2004.

                                     F - 24

<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14
--------------------------------------------------------------------------------

[14] Stock-Based Compensation - [Continued]

A summary of warrant activity is as follows:

                                         2000                     1999                     1998
                               ----------------------   ---------------------   ----------------------
                                           Weighted               Weighted                Weighted
                                           --------               --------                --------
                                           Average                Average                 Average
                                           -------                -------                 -------
                                           Exercise               Exercise                Exercise
                                           --------               --------                --------
                               Shares       Price       Shares     Price        Shares     Price
                               ------       -----       ------     -----        ------     -----
<S>                          <C>         <C>        <C>         <C>         <C>         <C>

Outstanding - Beginning
  of Year                       790,044    $ 9.35     1,033,632   $10.49      1,033,632    $10.49
Granted During the Year         514,544    $11.13       790,044     9.36             -         -
Canceled During the Year             -         -       (188,333)   11.84             -         -
Expired During the Year        (543,939)   $10.95      (845,299)   10.20             -         -
Exercised During the Year      (192,105)   $ 6.00            -        -              -         -
                                -------     -----     ---------    -----      ---------     -----

   Outstanding - End of Year    568,544    $10.57       790,044   $ 9.35      1,033,632    $10.49
                                =======     =====     =========    =====      =========     =====


   Exercisable - End of Year    568,544    $10.57       790,044   $ 9.35      1,033,632    $10.49
                                =======     =====     =========    =====      =========     =====

The following table summarizes warrant information as of December 31, 2000:

                                                                   Weighted
                                                                   --------
                                                               Average Remaining
                                                               -----------------
Exercise Prices                      Shares                    Contractual Life
---------------                      ------                   ------------------
$12.00                               448,544                         .33 Years
$ 5.45                               100,000                        3.75 Years
$ 4.20                                20,000                        3.75 Years
                                     -------                        ----------

   Total                             568,544                        1.05 Years
                                     =======                        ==========

The  Company  applies  Accounting  Principles  Board  Opinion  ("APB")  No.  25,
"Accounting  for Stock Issued to Employees,"  and related  interpretations,  for
stock  options  issued to employees in accounting  for its stock options  plans.
There was no compensation cost recognized for stock based employee  compensation
awards for 2000, 1999 and 1998.

                                     F - 25
</TABLE>
<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #15
--------------------------------------------------------------------------------

[14] Stock-Based Compensation - [Continued]

If  the   Company   had   accounted   for  the   issuance  of  all  options  and
compensation-based  warrants pursuant to the fair value based method of SFAS No.
123, the Company would have recorded  additional  compensation  expense totaling
$564,133  and  $609,372  for  the  years  ended  December  31,  2000  and  1998,
respectively and the Company's net income (loss) and net income (loss) per share
would have been as follows:

                                                                        Year  ended
                                                                        -----------
                                                                        December 31,
                                                                        ------------
                                                           2000            1999           1998
                                                           ----            ----           ----
<S>                                                   <C>             <C>            <C>

Net Income as Reported                                  $2,386,019      $1,824,769     $ 196,249
                                                        ==========      ==========     =========

Pro Forma Net Income (loss)                             $2,291,997      $1,421,964     $ (10,320)
                                                        ==========      ==========     =========

Net Income Attributable to Common Stock                 $2,386,019      $1,824,769     $ 123,649
                                                        ==========      ==========     =========

Pro-Forma Net Income (loss) Attributable to
  Common Stock                                          $2,291,997      $1,421,964     $ (82,920)
                                                        ==========      ==========     =========

Net Income Per Share as Reported                        $      .63      $     0.52     $     .06
                                                        ==========      ==========     =========

Pro Forma Net Income (loss) Per Share                   $      .61      $     0.40     $     .00
                                                        ==========      ==========     =========

There were no options or warrants issued to employees in 1999.

There were no options or  compensation  based warrants issued in 1999 which were
accounted  for under APB No. 25. The fair value of options and  warrants at date
of grant was estimated using the Black-Scholes  fair value based method with the
following weighted average assumptions:

                                                     2000                 1998
                                                     ----                 ----
Expected Life (Years)                                   5                   5
Interest Rate                                        5.50%               4.87%
Annual Rate of Dividends                                0%                  0%
Volatility                                             57%                 70%

The  weighted  average fair value of options and warrants at date of grant using
the fair value based method  during 2000 and 1998 is estimated at $1.50 and $.74
respectively.

                                     F - 26
</TABLE>
<PAGE>
<TABLE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #16
--------------------------------------------------------------------------------

[15] Operating Segments

The Company currently classifies its operations into two business segments:  (1)
Software and Related Systems and Services and (2) Data Center 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
involve company personnel performing data entry and data processing services for
customers.  Intersegment  sales and sales  outside  the  United  States  are not
material. Information concerning the Company's business segments is as follows:

                                                              Year ended December 31,
                                                              -----------------------
                                                       2 0 0 0           1 9 9 9         1 9 9 8
                                                       -------           -------         -------
<S>                                              <C>               <C>               <C>
Revenues:
--------
      Software and Related Systems and Services    $17,907,973       $19,343,472       $11,000,795
      Data Center Services                           2,262,676         1,908,158         2,164,472
                                                    ----------        ----------        ----------

      Total Revenues                               $20,170,649       $21,251,630       $13,165,267
      --------------                                ==========        ==========        ==========

Gross Profit:
------------
      Software and Related Systems and Services    $ 6,977,035       $ 6,574,753      $  4,050,334
      Data Center Services                           1,238,153           800,587         1,033,394
                                                    ----------        ----------        ----------

      Total Gross Profit                           $ 8,215,188       $ 7,375,340      $  5,083,728
      ------------------                            ==========        ==========       ===========

Income From Continuing Operations before
----------------------------------------
  Income Taxes:
  ------------
      Software and Related Systems and Services    $ 1,208,445       $ 1,266,614      $     53,291
      Data Center Services                             770,747           378,155           359,976
                                                    ----------        ----------       -----------

      Total Income From Continuing
      ----------------------------
        Operations before Income Taxes             $ 1,979,192       $ 1,644,769      $    413,267
        ------------------------------              ==========        ==========       ===========

Depreciation and Amortization:
-----------------------------
      Software and Related Systems and Services    $   579,900       $   356,191      $    468,840
      Data Center Services                             137,876           244,716            92,722
                                                    ----------        ----------       -----------

      Total Depreciation and Amortization          $   717,776       $   600,907      $    561,562
      -----------------------------------           ==========        ==========       ===========

Capital Expenditures:
--------------------
      Software and Related Systems and Services    $   850,893       $   595,747      $    188,570
      Data Center Services                              21,947            19,976            33,461
                                                    ----------        ----------       -----------

      Total Capital Expenditures                   $   872,840       $   615,723      $    222,031
      --------------------------                    ==========        ==========       ===========

Identifiable Assets:
-------------------
      Software and Related Systems and Services    $12,659,935       $11,757,183      $  7,740,018
      Data Center Services                           2,146,778         2,215,294         2,548,928
                                                    ----------        ----------       -----------

      Total Identifiable Assets                    $14,806,713       $13,972,477      $ 10,288,946
      -------------------------                     ==========        ==========        ==========

                                     F - 27
</TABLE>
<PAGE>

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #17
--------------------------------------------------------------------------------

[16] Legal Proceedings

In October 2000,  our  subsidiary,  Creative  Socio-Medics,  commenced an action
against the City of  Richmond,  in the  Supreme  Court of the State of New York,
County of Suffolk,  which action was  subsequently  removed to the United States
District  Court for the Eastern  District  of New York,  for failure to pay more
than $1 million pursuant a contract we have with Richmond.  Richmond advised the
court that it  intended to move to dismiss  the  complaint  for lack of personal
jurisdiction in New York and improper venue.  The parties are currently  engaged
in  discovery on  jurisdictional  issues.  In November  2000,  Richmond  filed a
complaint  in the Circuit  Court for the City of Richmond,  Richmond,  Virginia,
alleging,  among other things, that the contract with Creative  Socio-Medics was
procured through fraudulent misrepresentations concerning the nature of the work
to be performed  and the price for the services and that  Creative  Socio-Medics
failed to  perform  its  obligations  under the  agreement,  seeking  damages of
$373,000  and  a  finding  that  it  owes  no  additional  amounts  to  Creative
Socio-Medics. The parties entered into a stipulation staying the Richmond action
until a determination  of Richmond's  jurisdictional  challenges to the New York
action.  We believe that we have valid claims against  Richmond and we intend to
vigorously pursue those claims.  We also believe that the allegations  contained
in Richmond's  complaint  are without  merit and we intend to vigorously  defend
against those claims.

In November 2000,  Creative  Socio-Medics  commenced an action  against  Insight
Recovery  Center Inc.,  in the Supreme  Court of the State of New York County of
Suffolk,  which action was  subsequently  removed to the United  State  District
Court of the  Eastern  District of New York.  The  complaint  alleges  breach of
contract  in failing to pay  $147,406  pursuant  to an  agreement  with  Insight
Recovery  Center.  Insight  Recovery  Center  has not  filed  an  answer  to the
complaint  and advised  Creative  Socio-Medics  that it  intended  to  challenge
jurisdiction in New York. Also in November 2000, Insight Recovery Center filed a
complaint  against Creative  Socio-Medics in the Circuit Court for the County of
Genessee, Michigan, which action was removed to the United States District Court
for  the  District  of  Michigan  alleging,  among  other  claims,  fraudulently
inducement and breach of contract. Creative Socio-Medics has not filed an answer
to that  complaint  and  advised  Insight  Recovery  Center  that it intended to
challenge jurisdiction in Michigan. However, prior to any motion being made, the
parties have agreed in principle to a settlement,  which  provides,  among other
things,  for a payment by  Insight to  Creative  Socio-Medics  and for  Creative
Socio-Medics to perform  services and provide product over an extended period of
time at stated rates.  If the settlement in principle is not implemented for any
reason and the actions go forward,  we believe that we have valid claims against
Insight Recovery Center and we intend to vigorously pursue those claims. We also
believe that the allegations  contained in Insight Recovery  Center's  complaint
are without merit and we intend to vigorously defend against those claims.

                                     F - 28

<PAGE>


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) 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.

Date: March 29, 2001                   /s/ James L. Conway
                                       -----------------------------------------
                                       James L. Conway, Chief Executive Officer

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates  indicated.  Each person whose
signature appears below hereby authorizes Edward D. Bright,  James L. Conway and
Anthony F.  Grisanti or any of them acting in the absence of the others,  as his
true and lawful  attorney-in-fact and agent, with full power of substitution and
resubstitution  for  him  and in his  name,  place  and  stead,  in any  and all
capacities to sign any and all amendments (including post-effective  amendments)
to this registration statement,  and to file the same, with all exhibits thereto
and other  documents in connection  therewith,  with the Securities and Exchange
Commission.

Signature                                Title                        Date
---------                                -----                        ----

/s/ James L. Conway              Chief Executive Officer          March 29, 2001
------------------------         and Director (Principal
James L. Conway                  Executive Officer)


/s/ Anthony F. Grisanti          Chief Financial Officer          March 29, 2001
------------------------         (Principal Financial and
Anthony F. Grisanti              Accounting Officer)


/s/ Edward D. Bright             Director                         March 29, 2001
------------------------
Edward D. Bright


/s/ John F. Phillips             Director                         March 29, 2001
------------------------
John F. Phillips


/s/ Gerald Koop                  Director                         March 29, 2001
------------------------
Gerald Koop


                                 Director                         March 29, 2001
------------------------
Joseph Sicinski

<PAGE>

                           Netsmart Technologies, Inc.
                                Index to Exhibits
                                December 31, 1999

a)  Exhibits

3.1(1)    Restated Certificate of Incorporation, as amended
3.2(1)    By-Laws
10.1      Employment Agreement dated January 1, 2001, between the Registrant and
          James L. Conway.
10.2      Employment Agreement dated January 1, 2001, between the Registrant and
          John F. Phillips.
10.3      Employment Agreement dated January 1, 2001, between the Registrant and
          Gerald O. Koop.
10.4      Employment Agreement dated January 1, 2001, between the Registrant and
          Anthony F. Grisanti.
10.5(1)   1993 Long-Term Incentive Plan.
10.6(2)   1998 Long-Term Incentive Plan.
10.7(3)   1999 Long-Term Incentive Plan.
10.8(3)   1999 Employee Stock Purchase Plan
10.9(4)   Agreement dated August 26, 1999, between the Registrant and Silicon
          Valley Bank.
21.1      Subsidiaries of the Registrant.
25.1      Powers of attorney (See Signature Page)


----------
(1)       Filed as an exhibit to the Registrant's registration statement on Form
S-1, File No. 333-2550, which was declared effective by the Commission on
August 13, 1996, and incorporated herein by reference.

(2)       Filed as an appendix the  Registrant's  proxy  statement dated
September 30, 1999,  relating  to its 1999 Annual  Meeting of  Stockholders  and
incorporated herein by reference.

(3)       Filed as an appendix the Registrant's  proxy statement dated
November 9, 2000, relating to its 2000 Annual Meeting of Stockholders and
incorporated  herein by reference.

(4)       Filed as an exhibit  to the  Registrant's  Annual  Report on Form 10-K
for the year ended December 31, 1999 and incorporated herein by reference.