UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998
Commission File Number 0-21177
NETSMART TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3680154
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
146 Nassau Avenue, Islip, NY 11751
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 968-2000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes_X_ No__
Number of shares of common stock outstanding as of October 29, 1998: 2,781,588
=========
Netsmart Technologies, Inc.
Index
Part I: - Financial Information:
Item 1. Financial Statements: Page
----
Consolidated Balance Sheets - September 30, 1998
and December 31, 1997 1-2
Consolidated Statements of Operations-
Nine Months Ended September 30, 1998 and 1997 and
three months ended September 30, 1998 and 1997 3
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1998 and 1997 4-5
Consolidated Statement of Stockholders' Equity-
Nine Months Ended September 30, 1998 6-7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
Item 4. Submission of Matters to a vote of Security
Holders 13
Netsmart Technologies, Inc.
Consolidated Balance Sheets
September 30, December 31,
1998 1997
----------- -----------
Assets
Current Assets:
Cash $ 27,809 $ 854,979
Accounts receivable- Net 2,631,297 2,182,418
Costs and Estimated Profits in Excess
of Interim Billings 2,186,458 542,324
Other Current Assets 110,762 83,770
--------- ---------
Total Current Assets 4,956,326 3,663,491
--------- ---------
Property and Equipment - Net 304,672 308,583
--------- ---------
Other assets:
Software Development Costs 152,625 183,150
Customer Lists 2,816,713 3,067,676
Other Assets 105,988 116,903
--------- ---------
Total Other Assets 3,075,326 3,367,729
--------- ---------
Total Assets $8,336,324 $7,339,803
========= =========
See Notes to Financial Statements.
-3-
Netsmart Technologies, Inc.
Consolidated Balance Sheets
September 30, December 31,
1998 1997
------------ -----------
Liabilities and Stockholders' Equity:
Current Liabilities:
Note due to Asset Based Lender $ 1,063,626 $ 935,177
Capitalized Lease Obligations 11,330 23,331
Accounts Payable 1,230,670 1,131,692
Accrued Expenses 1,233,299 1,041,120
Due to related parties 112,000 --
Interim Billings in Excess of Costs
and Estimated Profits 1,769,098 951,885
Deferred Revenue 62,563 117,080
--------- ---------
Total Current Liabilities 5,482,586 4,200,285
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $.01 Par Value; Authorized
3,000,000 Shares; Authorized, Issued and
Outstanding:
Series D 6% Redeemable Preferred Stock - $.01
Par Value 3,000 Shares Authorized, 1,210
Issued and Outstanding [Liquidation
Preference of $1,210] 12 12
Additional Paid-in Capital - Preferred Stock -
Series D 1,209,509 1,209,509
Common Stock - $.01 Par Value; Authorized
15,000,000 Shares; Issued 2,786,921 Shares in
1998 and 2,777,999 Shares in 1997 27,869 27,780
Additional Paid-in Capital - Common Stock 17,203,904 17,195,668
Accumulated Deficit (15,527,556) (15,293,451)
---------- ----------
2,913,738 3,139,518
Less Cost of 16,000 Common Shares held in Treasury 60,000 --
---------- ----------
Total Stockholders' Equity 2,853,738 3,139,518
---------- ----------
Total Liabilities and Stockholders' Equity $ 8,336,324 $ 7,339,803
========== ==========
See Notes to Financial Statements.
-4-
Netsmart Technologies, Inc.
Consolidated Statements of Operations
Nine months ended Three months ended
September 30, September 30,
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Software and Related
Systems and Services:
General $ 6,204,279 $ 2,400,376 $ 2,700,517 $ 954,226
Maintenance Contract
Services 1,009,690 975,129 348,331 309,188
--------- --------- --------- ----------
Total Software and Related
Systems and Services 7,213,969 3,375,505 3,048,848 1,263,414
Data Center Services 1,667,123 1,567,014 491,333 547,728
--------- --------- --------- ----------
Total Revenues 8,881,092 4,942,519 3,540,181 1,811,142
--------- --------- --------- ----------
Cost of Revenues:
Software and Related
Systems and Services:
General 3,859,990 1,805,382 1,672,215 722,740
Maintenance Contract
Services 732,501 701,251 228,859 220,262
--------- --------- --------- ----------
Total Software and Related
Systems and Services 4,592,491 2,506,633 1,901,074 943,002
Data Center Services 847,913 1,129,510 294,626 390,234
--------- --------- --------- ----------
Total Cost of Revenues 5,440,404 3,636,143 2,195,700 1,333,236
--------- --------- --------- ----------
Gross Profit 3,440,688 1,306,376 1,344,481 477,906
Selling, General and
Administrative Expenses 2,300,688 2,015,057 924,402 697,760
Research and Development 678,061 138,468
Interest Expense 270,139 239,515 121,238 88,982
Related Party Administrative
Expenses 45,000 135,000 -- 45,000
--------- --------- --------- ----------
Income [Loss] from Continuing Operations 146,800 (1,083,196) 160,373 (353,836)
Loss from Discontinued Operations 380,905 821,283 37,666 310,756
--------- --------- --------- ----------
Net Income [Loss] $ (234,105) $(1,904,479) $ 122,707 $ (664,592)
========= ========= ========== ==========
Weighted average number of
shares of common stock 2,779,075 2,273,267 2,804,017 2,273,267
Income (loss) from Continuing Operations $ 0.06 $ (0.48) $ 0.06 $ (0.15)
Loss from Discontinued Operations (0.14) (0.36) (0.02) (0.14)
--------- --------- --------- ----------
Net Income (loss) $ (0.08) $ (0.84) $ 0.04 $ (0.29)
========= ========= ========= ==========
See Notes to Financial Statements.
-5-
Netsmart Technologies, Inc.
Consolidated Statements of Cash Flows
Nine months ended
September 30,
-----------------
1998 1997
---- ----
Operating Activities:
Net Loss From Continuing Operations $ 146,800 $(1,083,196)
--------- ---------
Adjustments to Reconcile Net Income [Loss]
to Net Cash [Used for] Provided by
Operating Activities:
Depreciation and Amortization 411,511 439,518
Equity in Net Loss of Joint Venture 139,699
Cash Used in Discontinued Operations (380,905) (821,283)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (448,879) 231,621
Costs and Estimated Profits in
Excess of Interim Billings (1,644,134) 120,727
Other Current Assets (26,992) (20,207)
Other Assets 10,915 10,294
Increase [Decrease] in
Accounts Payable 98,978 382,088
Accrued Expenses 192,179 66,368
Interim Billings in Excess of
Costs and Estimated Profits 817,213 (108,171)
Due to Related Parties 49,755
Deferred Revenue (54,517) 54,489
--------- ---------
Total Adjustments (1,024,631) 544,898
--------- ---------
Net Cash - Operating Activities -
Forward (877,831) (538,298)
--------- ---------
Investing Activities:
Acquisition of Property and Equipment (126,112) (136,561)
Software Development Costs (462,000)
Investment in Joint Venture at Equity (148,461)
--------- -------
Net Cash - Investing Activities -
Forward (126,112) (747,022)
--------- -------
See Notes to Financial Statements.
-6-
Netsmart Technologies, Inc.
Consolidated Statements of Cash Flows
Nine months ended
September 30,
-----------------
1998 1997
---- ----
Net Cash - Operating Activities -
Forwarded $ (877,831) $ (538,298)
--------- ---------
Net Cash - Investing Activities -
Forwarded (126,112) (747,022)
--------- ---------
Financing Activities:
(Payment) Proceeds from Note due to
Asset Based Lender 128,449 283,153
Payment of Capitalized Lease
Obligations (12,001) (32,631)
Proceeds from Stock Option Exercise 8,325 40,912
Payment for Treasury Stock (60,000) --
Proceeds From Loan from Related Parties 112,000 --
--------- ---------
Net Cash - Financing Activities 176,773 291,434
Net Increase [Decrease] in Cash (827,170) (993,886)
Cash - Beginning of Periods 854,979 998,317
--------- ---------
Cash - End of Periods $ 27,809 $ 4,431
========= =========
Supplemental Disclosure of Cash Flow
Information Cash paid during the periods
for:
Interest $ 276,262 $ 253,771
========= =========
Taxes $ 16,934 $ 12,013
========= =========
See Notes to Financial Statements.
-7-
Netsmart Technologies, Inc.
Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1998
Series D Preferred Stock, .01 Par Value Shares Amount
------ ------
Beginning Balance 1,210 $ 12
------ --------
Ending Balance 1,210 $ 12
====== ========
Additional Paid-In Capital Preferred Stock
Beginning Balance $1,209,509
---------
Ending Balance $1,209,509
=========
Common Stock, $.01 Par Value, Authorized
15,000,000 Shares
Beginning Balance 2,777,999 $ 27,780
Stock Options Exercised 8,922 89
---------- ---------
Ending Balance 2,786,921 $ 27,869
========== =========
See Notes to Financial Statements.
-8-
Netsmart Technologies, Inc.
Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1998
Additional Paid-In Capital Common Stock Shares Amount
------ ------
Beginning Balance $ 17,195,668
Stock Options Exercised 8,236
Ending Balance $ 17,203,904
==========
Cost of Common Shares Held in Treasury
Beginning Balance -- --
Purchase of Treasury Shares (5,333) (60,000)
----- ------
Ending Balance (5,333) (60,000)
===== ======
Accumulated Deficit
Beginning Balance $(15,293,451)
Net Loss (234,105)
-------
Ending Balance $(15,527,556)
==========
Total Stockholders' Equity $ 2,853,738
==========
See Notes to Financial Statements.
-9-
Netsmart Technologies, Inc.
Notes to Consolidated Financial Statements
(1) In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Company as
of September 30, 1998 and the results of its operations for the three and nine
month periods ended September 30, 1998 and 1997 and its cash flows for the nine
months ended September 30, 1998 and 1997. The results of operations for the nine
months ended September 30, 1998 are not necessarily indicative of the results to
be expected for the full year.
(2) The accounting policies followed by the Company are set forth in Notes 1 and
2 to the Company's consolidated financial statements as filed in its December
31, 1997 Form 10-K.
At the close of business on September 14, 1998 a one for three reverse split
became effective. All share and per share data have been adjusted to reflect the
one for three reverse split.
(3) During the quarter ended September 30, 1998, stock options to purchase 8,922
were exercised and the Company received gross proceeds of $8,325. As a result,
Common Stock and additional paid in capital of Common Stock increased by $89 and
$8,236 respectively.
Pursuant to the Johnson Computing Systems agreement, the Company repurchased
from Johnson Computing Systems, 5,333 shares of Common Stock for $60,000. The
shares are treated as treasury shares.
(4) Loss per share - Loss per share is computed by dividing the net income or
loss for the period by the weighted average number of shares of common stock.
The Common stock equivalents are assumed converted to common stock when
dilutive. During periods in which losses were incurred, common stock equivalents
were excluded from the weighted average number of shares of common stock because
their inclusion would be anti-dilutive.
(5) During the quarter ended June 30, 1998, the Company discontinued its
CarteSmart division. On June 30, 1998, the Company sold this division to Granite
Technologies, Inc. ("Granite"), a corporation formed by the former management of
such division. Granite issued to the Company its $500,000 promissory note and an
equity interest in Granite. Granite also agreed to pay certain royalties to the
Company and granted the Company a license with respect to the CarteSmart
software.
As a result of the discontinuation of the SmartCarte division, the financial
statements for the nine and three months ended September 30, 1997, have been
restated to reflect the net loss from such division as a loss from discontinued
operations.
Because Granite has no operating history and, at the time of the agreement, did
not have any significant capitalization, at September 30, 1998, the Company
placed a 100% reserve against Granite's $500,000 note, and the note is not
reflected as an asset on the Company's June 30, 1998 balance sheet.
(6) In October 1998 an action against the Company by Onecard Health Services
Corporation and its affiliates was dismissed. The action had alleged
misappropriation by the Company of Onecard's trade secrets, corporate assets and
corporate opportunities.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of operations
Nine months ended September 30, 1998 and 1997
Effective June 30, 1998 the Company discontinued its Smart Card division and
accounted for the operations of this division as a discontinued operation.
Accordingly, references to the Company's continuing operations relate to its
behavioral health information systems ("BHIS") business which accounts for the
Company's entire operations.
The Company's revenue for the nine months ended September 30, 1998 (the
"September 1998 period") was $8,881,000, an increase of $3,939,000 or 80%, from
the revenue for the nine months ended September 30, 1997 (the "September 1997
period") which was $4,942,000.
The largest component of revenue in the September 1998 period was turnkey
systems labor revenue which increased to $2,349,000 from $1,463,000 in the
September 1997 period, reflecting a 61% increase. This increase is substantially
the result of growth in the BHIS backlog and the ability of the Company to
provide the staff necessary to generate additional revenue. The data center
(service bureau) revenue increased to $1,667,000 in the September 1998 period
from $1,567,000 in the September 1997 period, reflecting an increase of 6%. This
increase was substantially the result of a special project performed for a
client in the first quarter of 1998. License revenue increased to $1,791,000 in
the September 1998 period from $214,000 in the September 1997 period, an
increase of 738%. License revenue is generated as part of a sale of BHIS
pursuant to a contract or purchase order that includes delivery of the system
and maintenance. Revenue from third party hardware and software increased to
$1,378,000 in the September 1998 period from $724,000 in the September 1997
period, an increase of 90%. Sales of third party hardware and software are made
in connection with the sales of turnkey systems. Maintenance revenue increased
to $1,010,000 in the September 1998 period from $975,000 in the September 1997
period, reflecting an increase of 4%. Revenue from the sales of the Company's
small turnkey division (formerly its methadone division) division totaled
$686,000 in the September 1998 period. There was no revenue for the small
turnkey division in the September 1997 period.
Revenue from contracts from government agencies represented 48% of revenue for
the September 1998 period and 40% of revenue for the September 1997 period.
Gross profit increased to $3,441,000 in the September 1998 period from
$1,306,000 in the September 1997 period, a 163% increase. The increase in the
gross profit was substantially the result of the increased license revenue which
provides higher margins.
Selling, general and administrative expenses were $2,301,000 in the September
1998 period, an increase of 14% from the $2,015,000 in the September 1997
period. This increase was substantially the result of an increase in commission
expenses resulting from increased revenue as well as increases in, sales and
marketing salaries, advertising and related sales expenses which were partially
offset by a decrease in employee expenses in the administrative area as well as
other miscellaneous expenses.
The Company incurred research and development expenses of $678,000 in the
September 1998 period. These costs were related to the Company's BHIS products.
There were no such costs in the September 1997 period.
Interest expense was $270,000 in the September 1998 period, an increase of
$31,000 or 13%, from the $240,000 in the September 1997 period. This increase is
the result of higher borrowings during the September 1998 period.
-11-
The most significant component of the interest expense on an ongoing basis is
the interest payable to the Company's asset-based lender. The Company pays
interest on such loans at a rate equal to prime plus 8 1/2% plus a fee of 5/8%
of the face amount of the invoice. Effective October 1, 1998 the Company has
amended the terms of its agreement with its asset based lender and has reduced
the interest rate from prime plus 8 1/2% to prime plus 5% and has eliminated the
5/8% fee previously paid on the face amount of each invoice.
Related party administrative expense was $45,000 in the September 1998 period
and $135,000 in the September 1997 period. These charges are pursuant to an
agreement with the Company's 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.
Loss from the Company's discontinued operations, the smart card division, was
$381,000 in the September 1998 period, a decrease of $440,000 or 54%, from the
$821,000 in the September 1997 period.
As a result of the foregoing factors, the Company incurred a net loss of
$234,000, or $.08 per share, in the September 1998 period, as compared with a
net loss of $1,904,000 or $.84 per share, in the September 1997 period.
Three months ended September 30, 1998 and 1997
The Company's revenue for the three months ended September 30, 1998 (the
"September 1998 quarter") was $3,540,000, an increase of $1,729,000 or 95%, from
the revenue for the three months ended September 30, 1997 (the "September 1997
quarter") which was $1,811,000.
The largest component of revenue in the September 1998 quarter was turnkey
systems labor revenue which increased to $1,015,000 from $650,000 in the
September 1997 quarter, reflecting a 56% increase. This increase is
substantially the result of growth in the BHIS backlog and the ability of the
Company to provide the staff necessary to generate additional revenue. License
revenue increased to $760,000 in the September 1998 quarter from $68,000 in the
September 1997 quarter, an increase of 1,008%. License revenue is generated as
part of a sale of BHIS pursuant to a contract or purchase order that includes
delivery of the system and maintenance. The data center (service bureau) revenue
decreased to $491,000 in the September 1998 quarter from $547,000 in the
September 1997 quarter, reflecting a decrease of 10%. This decrease was
substantially the result of a special project performed for a client in the
September 1997 quarter. Revenue from third party hardware and software increased
to $681,000 in the September 1998 quarter from $235,000 in the September 1997
quarter, an increase of 189%. Sales of third party hardware and software are
made in connection with the sales of turnkey systems. Maintenance revenue
increased to $348,000 in the September 1998 quarter from $309,000 in the
September 1997 quarter, reflecting an increase of 13%. Revenue from the sales of
the Company's small turnkey division (formerly its methadone division) totaled
$244,000 in the September 1998 quarter. There was no revenue for the small
turnkey division in the September 1997 quarter.
Revenue from contracts from government agencies represented 57% of revenue for
the September 1998 quarter and 40% of revenue for the September 1997 quarter.
Gross profit increased to $1,344,000 in the September 1998 quarter from $478,000
in the September 1997 quarter, a 181% increase. The increase in the gross profit
was substantially the result of the increased license revenue which provides
higher margins.
Selling, general and administrative expenses were $924,000 in the September 1998
quarter, an increase of 32% from
-12-
the $698,000 in the September 1997 quarter. This increase was substantially the
result of an increase in commissions expense resulting from increased revenue as
well as increases in sales and marketing salaries, advertising, related sales
expenses and administrative salaries which were partially offset by a decrease
in employee expenses in the administrative area as well as other miscellaneous
expenses.
The Company incurred product development expense of $138,000 in the September
1998 quarter. These costs were related to the Company's BHIS products. There
were no such costs on the September 1997 quarter.
Interest expense was $121,000 in the September 1998 quarter, an increase of
$32,000 or 36%, from the $89,000 in the September 1997 quarter. The most
significant component of the interest expense on an ongoing basis is the
interest payable to the Company's asset-based lender. The Company pays interest
on such loans at a rate equal to prime plus 8 1/2% plus a fee of 5/8% of the
face amount of the invoice. Effective October 1, 1998 the Company has amended
the terms of its agreement with its asset based lender and has reduced the
interest rate from prime plus 8 1/2% to prime plus 5% and has eliminated the
5/8% fee previously paid on the face amount of each invoice.
There was no related party administrative expense in the September 1998 quarter
and $45,000 in the September 1997 quarter. These charges are pursuant to an
agreement with the Company's 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.
Residual losses from the Company's discontinued operations were $38,000 in the
September 1998 quarter, a decrease of $273,000 or 88%, from the $311,000 in the
September 1997 quarter. These losses reflect expenses incurred in winding down
this operation.
As a result of the foregoing factors, the Company generated a net income of
$122,000, or $.04, per share in the September 1998 quarter, as compared with a
net loss of $665,000, or $.29, loss per share in the September 1997 quarter.
Liquidity and Capital Resources
The Company had a working capital deficit of $526,000 at September 30, 1998 as
compared to a working capital deficit of $537,000 at December 31, 1997, and the
Company's cash position decreased from $855,000 at December 31, 1997 to $28,000
at September 30, 1998. The decrease in working capital for the nine months ended
September 30, 1998 was substantially due to the net loss incurred for the nine
months ended September 30, 1998 as well as the purchase of computer equipment
and to a lesser extent, treasury shares.
The Company's principal source of funds, other than revenue, is an accounts
receivable financing agreement with an asset based lender whereby it may borrow
up to 80% of eligible accounts receivable up to a maximum of $1,250,000. This
maximum was increased to $1.5 million effective August 1, 1998. As of September
30, 1998, the outstanding borrowings under this facility was $1,064,000. At
September 30, 1998, the maximum amount available under this formula was
$1,206,000. During the quarter, with the consent of the asset-based lender, the
Company from time to time exceeded the maximum borrowing level provided in its
agreement with the asset-based lender. Effective October 1, 1998, the Company
amended the terms of its agreement with its asset based lender. Pursuant to the
revised agreement, the Company can borrow up to 80% of the amount of its
qualified accounts receivable up to a maximum of $2 million.
At September 30, 1998, accounts receivable and costs and estimated profits in
excess of interim billings were approximately $4.8 million, representing
approximately 146 days of revenue based on annualizing the revenue for
-13-
the nine months ended September 30, 1998, although no assurance can be given
that revenue will continue at the same level as the nine month period. Accounts
receivable at September 30, 1998 increased by $449,000 from $2,182,000 at
December 31, 1997 to $2,631,000 at September 30, 1998. The Company believes
that, with the elimination of expenses relating to the smart card business, the
Company's cash on hand, the increased line with its asset based lender together
with revenue from its BHIS business, will be sufficient to enable it to continue
to operate at least through the end of 1998 without additional funding. If the
Company continues to grow at its existing rate into 1999 and beyond, it may
require significant additional funding. The Company is therefore exploring
various long term funding possibilities with several banks and investment
banking organizations. No assurances can be given as to the ability of the
Company to obtain additional financing and its inability to do so could have a
material adverse affect on the Company's ability to grow.
Forward Looking Statements
Statements in this Form 10-Q include forward-looking statements that are subject
to risks and uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors, including those identified in
this Form 10-Q, the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and in other documents filed by the Company with the
Securities and Exchange Commission.
-14-
Item 4. Submission of Matters to a Vote of Security Holders
On September 10, 1998 the Company held its 1998 Annual Meeting of Stockholders.
The following individuals were elected as directors:
Name Number of Votes Broker Non Votes
Edward D. Bright 7,105,087 2,860,164
James L. Conway 7,000,321 2,860,164
John F. Phillips 7,105,087 2,860,164
Gerald O. Koop 7,105,087 2,860,164
Seymour Richter 7,101,097 2,860,164
Joseph G. Sicinski 7,101,097 2,860,164
The following proposals were approved as follows:
Broker
Proposal Votes For Votes Against Abstain Non Votes
Approval of a one-for-
three reverse split of the
Company's common stock 7,161,586 442,312 32,000 2,860,164
Approval of the Company's
Long Term Incentive Plan 3,896,265 765,421 12,800 2,860,164
Approval of the selection of
Richard H. Eisner & Co. as
auditors for 1998 7,114,717 102,870 393,365 2,860,164
-15-
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETSMART TECHNOLOGIES, INC.
/s/ James L. Conway President, Chief Executive November 5, 1998
- ------------------------ Officer and Director (Principal
James L. Conway Executive Officer)
/s/ Anthony F. Grisanti Chief Financial Officer November 5, 1998
- ------------------------ (Principal Financial and
Anthony F. Grisanti Accounting Officer)
-16-