EXHIBIT 99.3

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (See note A)
JUNE 30, 2005

	Netsmart			CMHC					Pro Forma Adjustments			Combined			Note		Consoldidation Adjustments			Consolidated - Pre Operating Adjustments
Assets:	June 30, 2005			June 30, 2005			Note		June 30, 2005			June 30, 2005
Current Assets:
Cash and Cash Equivalents	$	16,359,627		$	529,984			(A1)	$	(12,994,758	)	$	10,612,957							$	10,612,957
								(A2)		4,218,104
								(A3)		2,500,000
Accounts Receivable Net		9,010,691			1,688,121								10,698,812								10,698,812
Costs and Estimated Profits in Excess																					–
of Interim Billings		831,057											831,057								831,057
Deferred taxes		1,030,000			294,674								1,324,674								1,324,674
Other Current Assets		772,305			1,024,625								1,796,930								1,796,930
Total Current Assets	$	28,003,680		$	3,537,404					($6,276,654	)	$	25,264,430							$	25,264,430

Property and Equipment Net		2,427,944			527,535								2,955,479								2,955,479

Other Assets:
Software Development Costs - Net		3,561,024			1,490,238								5,051,262			(A4a)	$	1,809,762			6,861,024
Customer Lists - Net		3,183,411											3,183,411			(A4b)		5,200,000			8,383,411
Capitalized Backlog													–			(A4c)		490,000			490,000
Goodwill													–			(A6)		19,216,024			19,216,024
Deferred taxes less current portion		1,074,000			940,128								2,014,128								2,014,128
Investment in CMHC								(A1)		19,565,956			19,565,956			(A7)		(19,565,956	)		–
Other Assets		104,246			26,208								130,454								130,454
Total Other Assets		7,922,681			2,456,574					19,565,956			29,945,211					7,149,830			37,095,041
Total Assets	$	38,354,305		$	6,521,513				$	13,289,301		$	58,165,119				$	7,149,830		$	65,314,949

Liabilities and Stockholders' Equity:
Current Liabilities:
Current Portion - Long Term Debt	$	666,699		$	470,118			(A3)	$	500,000		$	1,636,817								1,636,817
Current Portion Capital Lease Obligations		54,394		$	10,035								64,429								64,429
Accounts Payable		1,469,763		$	677,000								2,146,763								2,146,763
Accrued Expenses		1,146,917			1,161,047			(A1)		1,656,106			3,964,070								3,964,070
Interim Billings in Excess of Costs and Estimated																					–
Profits		6,917,950											6,917,950								6,917,950
Deferred Revenue		1,924,311			7,907,131								9,831,442								9,831,442
Registration rights obligation								(A8)		899,000			899,000								899,000
Total Current Liabilities		12,180,034			10,225,331					3,055,106			25,460,471					–			25,460,471

Long Term Debt - Less current portion		–			17,695			(A3)		2,000,000			2,017,695								2,017,695
Capital Lease Obligations - Less current portion		–			12,317								12,317								12,317
Interest Rate Swap at Fair Value		5,008											5,008								5,008
Deferred taxes													–			(A5)	$	3,416,000			3,416,000
Deferred Rent Payable		475,050											475,050								475,050
Total Non Current Liabilities		480,058			30,012					2,000,000			2,510,070					3,416,000			5,926,070

Commitments and Contingencies

Stockholders' Equity:
Preferred Stock		–			–								–								–
Common Stock		55,995			14,220			(A1)		4,357			79,472			(A7)		(14,220	)		65,252
								(A2)		4,900
Additional Paid in Capital		30,137,495			1,008,287			(A1)		4,910,734			39,370,720			(A7)		(1,008,287	)		38,362,433
								(A2)		4,213,204
								(A8)		(899,000	)
Accumulated Comprehensive loss - Interest Rate Swap		(5,008	)										(5,008	)							(5,008	)
Accumulated Deficit		(2,781,287	)		(4,756,337	)							(7,537,624	)		(A7)		4,756,337			(2,781,287	)
		27,407,195			(3,733,830	)				8,234,195			31,907,560					3,733,830			35,641,390
Less: cost of shares of Common Stock held
in treasury - 227,924 shares at June 30, 2005
and December 31, 2004		1,712,982											1,712,982								1,712,982

Total Stockholders' Equity		25,694,213			(3,733,830	)				8,234,195			30,194,578					3,733,830			33,928,408
Total Liabilities and Stockholders' Equity	$	38,354,305		$	6,521,513				$	13,289,301		$	58,165,119				$	7,149,830		$	65,314,949

See Notes to Pro Forma Condensed Consolidated Financial Statements.

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NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2004


	Netsmart		CMHC consolidated			Less 570 Metro Place North Limited Partnership			CMHC			AMS		Continued Learning (estimated historical amounts)							Consolidated
	12/31/2004		3/31/2005			3/31/2005			3/31/2005			12/31/2004		12/31/2004		Note		Pro Forma Adjustments			Year End 2004
Revenues:
Software and Related
Systems and Services:
General	$	16,931,606	$	5,340,220					$	5,340,220		$	598,654								$	22,870,480
Maintenance Contract Services		8,289,525		16,460,035						16,460,035			1,302,372									26,051,932
Total Software and Related Systems & Services		25,221,131		21,800,255						21,800,255			1,901,026		–				–			48,922,412

Application Service Provider Services		1,725,473												$	515,996							2,241,469
Data Center Services		2,058,240																				2,058,240
Total Revenues		29,004,844		21,800,255						21,800,255			1,901,026		515,996				–			53,222,121

Cost of Revenues:
Software and Related
Systems and Services:
General		9,203,071		2,684,231						2,684,231			147,991				(B1a)		1,645,319			12,993,353
																	(B1b)		(687,258	)
Maintenance Contract Services		4,168,975		6,493,320						6,493,320			1,026,503									11,688,798
Total Software and Related Systems & Services		13,372,046		9,177,551						9,177,551			1,174,493		–				958,061			24,682,151

Application Service Provider Services		926,333													411,026							1,337,359
Data Center Services		849,353																				849,353
Total Cost of Revenues		15,147,732		9,177,551						9,177,551			1,174,493		411,026				958,061			26,868,864

Gross Profit		13,857,112		12,622,704						12,622,704			726,533		104,970				(958,061	)		26,353,257

Selling, General and Administrative Expenses		7,293,865		8,995,584			298,260			9,293,844			588,527		91,037		(B1c)	$	448,229			17,715,502
Research, Development and Maintenance		3,498,448		4,663,100						4,663,100												8,161,548
Total		10,792,313		13,658,684			298,260			13,956,944			588,527		91,037				448,229			25,877,050

Operating Income		3,064,799		(1,035,980	)		(298,260	)		(1,334,240	)		138,005		13,933				(1,406,290	)		476,208
Interest and Other Income		126,379		24,878						24,878												151,257
Minority Interest - Partnership				159,218			(159,218	)		–
Interest and Other Expense		129,213		213,949			(135,085	)		78,864							(B3)		160,506			368,583
Income before Income Tax Expense		3,061,965		(1,384,269	)		(3,957	)		(1,388,226	)		138,005		13,933				(1,566,795	)		258,882
Income Tax Expense		309,000		254,910			3,957			(258,867	)						(B2)		48,242			98,375
Net Income	$	2,752,965		($1,129,359	)	$	0			($1,129,359	)	$	138,005	$	13,933				($1,615,037	)	$	160,507

Earnings Per Share ("EPS") of Common Stock:
Basic EPS	$	0.52																			$	0.03

Weighted Average Number of Shares of Common Stock
Outstanding		5,331,700															(B4)		945,735			6,277,435

Diluted EPS	$	0.50																			$	0.02

Weighted Average Number of Shares of Common Stock and
Common Stock Equivalents
Outstanding		5,536,731															(B4)		945,735			6,482,466

See Notes to Pro Forma Condensed Consolidated Financial Statements.

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NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2005

	Netsmart		CMHC		AMS		Continued Learning (estimated historical amounts)		Note		Pro Forma Adjustments			Consolidated
	Six months ended		Six months ended		Six months ended		Four months ended				Six months ended			Six months ended
Revenues:	June 30, 2005		June 30, 2005		June 30, 2005		April 27, 2005				June 30, 2005			June 30, 2005
Software and Related
Systems and Services:
General	$	8,663,661	$	3,489,377	$	625,063									12,778,101
Maintenance Contract Services		4,445,033		8,934,716		742,529									14,122,278
Total Software and Related Systems & Services		13,108,694		12,424,093		1,367,593						–			26,900,379

Application Service Provider Services		1,133,046					$	171,999							1,305,045
Data Center Services		946,258													946,258
Total Revenues		15,187,998		12,424,093		1,367,593		171,999				–			29,151,682

Cost of Revenues:
Software and Related
Systems and Services:
General		4,500,663		1,303,949		119,204				(B1a)		810,329			6,611,175
										(B1b)		(122,970	)
Maintenance Contract Services		2,111,381		3,338,160		448,178									5,897,719
Total Software and Related Systems & Services		6,612,044		4,642,109		567,383		–				687,359			12,508,894

Application Service Provider Services		664,082						137,009							801,091
Data Center Services		449,624													449,624
Total Cost of Revenues		7,725,750		4,642,109		567,383		137,009				687,359			13,759,609

Gross Profit		7,462,248		7,781,984		800,210		34,990				(687,359	)		15,392,073

Selling, General and Administrative Expenses		4,358,585		4,647,105		184,654		30,346		(B1c)	$	221,845			9,442,536

Research, Development and Maintenance		1,969,303		2,068,400											4,037,703
Total		6,327,888		6,715,505		184,654		30,346				221,845			13,480,239

Operating Income		1,134,360		1,066,479		615,556		4,644				(909,204	)		1,911,835
Interest and Other Income		145,694		8,863											154,557
Interest and Other Expense		37,433		40,084						(B3)		83,063			160,580
Income before Income Tax Expense		1,242,621		1,035,258		615,556		4,644				(992,267	)		1,905,812
Income Tax Expense		430,000		271,827						(B2)		22,381			724,208
Net Income	$	812,621	$	763,431	$	615,556	$	4,644			$	(1,014,648	)	$	1,181,604

Earnings Per Share ("EPS")of Common Stock:
Basic EPS	$	0.15												$	0.19

Weighted Average Number of Shares of
Common Stock Outstanding		5,354,968								(B4)		939,068			6,294,036

Diluted EPS	$	0.15												$	0.18

Weighted Average Number of Shares of
Common Stock and Common Stock
Equivalents Outstanding		5,570,611								(B4)		939,068			6,509,679

See Notes to Pro Forma Condensed Consolidated Financial Statements.

-3-

NETSMART TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION

Pursuant to the merger agreement dated September 20, 2005, Netsmart Technologies, Inc. (“Netsmart”) acquired 100% of the equity of CMHC Systems, Inc. (“CMHC”). The purchase price totaled $19,565,956 as follows: 435,735 shares of Netsmart’s common stock (valued at $4,915,091), $12,994,758 in cash plus additional cash consideration currently estimated to be $792,024 as required by the “working capital adjustment” calculated and payable as defined in the merger agreement (subject to adjustment, see Note 2), and acquisition costs of $864,083. The cash consideration was paid utilizing the working capital of Netsmart. The acquisition has been accounted for under the purchase method of accounting in accordance with SFAS No. 141 by which the acquiring company records at its cost the acquired assets less liabilities assumed.

Pursuant to the asset purchase agreement dated April 27, 2005, Creative Socio-Medics Corp. (“CSM”), a wholly-owned subsidiary of Netsmart, acquired certain assets and liabilities and rights to the intellectual property and customer contracts of ContinuedLearning LLC (“CL”). The purchase price consisted of 20,000 shares of Netsmart’s common stock and $191,400 in cash. The market value of the stock issued at the date of the merger agreement was $191,400 and the source of the cash consideration was the working capital of Netsmart. The purchase has been accounted for under the purchase method of accounting in accordance with SFAS No. 141.

Pursuant to the asset purchase agreement dated June 20, 2005, CSM acquired certain assets and liabilities and rights to the intellectual property and customer contracts of Addiction Management Systems, Inc. (“AMS”). The purchase price was $3,590,778, which consisted of $948,833 of liabilities assumed for pre billed services plus $2,641,945 in cash. The source of the cash consideration was the working capital of Netsmart. The purchase has been accounted for under the purchase method of accounting in accordance with SFAS No. 141.

On October 7, 2005, Netsmart entered into a Loan Agreement consisting of (i) a $2,500,000 Revolving Credit Loan and (ii) a $2,500,000 Term Loan. On October 7, 2005, the Netsmart borrowed the full amount of the $2,500,000 Term Loan. On October 14, 2005, Netsmart issued 490,000 shares of common stock and 147,004 common stock purchase warrants in a private placement generating net proceeds of $4,218,000.

2.	PRO FORMA ADJUSTMENTS

CMHC Merger

CMHC reports on a fiscal year end of March 31 and, as a result, the pro forma statement of operations for the year ended December 31, 2004 is inclusive of CMHC operations for the period of January 1, 2005 thru March 31, 2005. CMHC revenue and net income for the three months ended March 31, 2005 were $6,559,865 and $569,045 respectively.

Netsmart purchased 100% of the equity of CMHC. Netsmart did not purchase 570 Metro Place North Limited Partnership, an entity that is majority-owned by CMHC’s former majority stockholder and owns the land and the building where CMHC conducts most of its operations. The breakdown of the allocation of the assets is subject to adjustment. The total acquisition cost is based upon certain estimates and is also subject to adjustment.

The following are the details of the total acquisition cost:


Cash paid	$	12,994,758
Market value of common stock issued		4,915,091
Estimated working capital adjustment *		792,024
Other acquisition costs		864,083
Total acquisition	$	19,565,956

-4-

The total cost of acquisition was allocated as follows **:


Current assets	$	3,537,404
Property and equipment		527,535
Customer lists		5,200,000		(to be amortized over 20 years)
Backlog		490,000		(to be amortized over 1 year)
Software purchased		3,300,000		(to be amortized over 4 years)
Goodwill		19,216,024
Deferred taxes, long-term		940,128
Other assets		26,208
Total assets		33,237,299
Current liabilities		(10,225,331	)
Long-term obligations		(30,012	)
Deferred taxes, long-term		(3,416,000	)
Total liablitites		(13,671,343	)
Total acquisition allocation	$	19,565,956

The working capital adjustment of an estimated $792,024 is based upon the terms of the merger agreement whereby the purchase price will include an amount equal to the amount that the final net working capital of CMHC is greater than a negative $7.5 million. This estimate is based upon the unaudited balance sheet of CMHC as of September 30, 2005 and is subject to adjustment.

The primary fair value adjustments made to CMHC’s historical cost balance sheet were to increase the value of CMHC’s software to fair value, and to record customer lists, contract backlog and goodwill and the related deferred tax liability. For all other assets and liabilities, historical cost approximated fair value.

In order to value CMHC’s software, management considered the historical costs incurred as well as projected costs to recreate the software. However, since there is a specific earnings stream that can be associated exclusively with the existing software, management applied a discounted cash flow model in its estimation of the fair value of the software. CMHC’s software consists of management information systems used by behavioral and public health organizations; the systems include financial, client administration, clinical assessment and administration. The estimated useful life of the software is four years. Such estimate considered the following: (i) the software is an integral part of each customer’s operations and is not easily replaced, (ii) however, the underlying architecture of the software is based on unsupported programming language and character-based screens (not the graphical interfaces used today) and will need to be updated, and (iii) the results of the discounted cash flow analysis.

The customer list has been valued using a discounted cash flow model. CMHC provides computer-based management information systems for approximately 400 behavioral and public healthcare organizations. CMHC’s relationships with its customers are long-term in nature, indicating that the customer relationships are an important intangible asset to the Company. CMHC has been in business since 1978, and based upon their historical attrition rate, and the 30 year projections used for the cash flow analysis, the useful life of the customer lists is estimated to be 20 years.

The contract backlog represents the fair value of various customer contracts and purchase orders that have already been billed to the customers, but for which services have not yet been performed. The value was determined using a discounted cash flow model. The contract backlog is being amortized over 12 months, since the services to be performed with respect to the underlying customer contracts are expected to be completed within one year.

The deferred tax liability represents a long term deferred tax liability related to the above fair valuation adjustments for the capitalized software, customer list and contract backlog intangible assets. These intangibles are not deductible expenses for tax purposes. The tax effect has been calculated utilizing Netsmart's blended statutory tax rate of 38%.

Goodwill represents the excess of the cost of CMHC over the net of the amounts assigned to tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill is not amortized for book or income tax purposes.

The Company only recently purchased CMHC, and accordingly, is still gathering data related to the allocation of the purchase price. As such, the purchase price allocation is subject to change. Changes could include a reallocation of intangible assets which would likely have the effect of increasing or decreasing future amortization expense, since the intangible assets have initially been assigned varied lives ranging from no amortization (for goodwill) to 20 year amortization (for the customer list). Additionally, the lives assigned to the identifiable intangible assets represent management’s best estimates of the time period in which it will continue to receive benefits from these assets. The useful lives may need to be adjusted in the future based upon changes to the expected useful lives of such assets. As a result, future amortization expense could be materially different from the pro forma amortization expense presented herein.

-5-

Strategic headcount adjustments related to the CMHC merger decreasing cost of sales, selling, general and administrative and research, development and maintenance expenses have not been reflected in the pro forma adjustments to the statement of operations. These adjustments are the result of planned strategic employee terminations that occurred on and shortly after the closing date of the merger.

Consulting contracts were entered into with several senior executives of CMHC ranging in duration from day-to-day to up to six months. These contracts, in effect, replace the salaries of the executives and, as a result, do not have a significant impact on operations going forward.

As a result of the merger, Netsmart assumed the lease agreement on the premises located at 570 Metro Place North in Dublin, Ohio. The subject building is owned by CMHC’s former majority stockholder who is a current employee of Netsmart. Netsmart has reviewed Fin 46 R and has determined that the consolidation is not required The lease ends on October 31, 2013 and, based upon research of comparable rental property, Netsmart has determined that the current rent being paid under the terms of the lease represents a fair market price for leases currently being negotiated in that market. In addition, the rental payments that are required for the next twelve months approximate the rental payments that have been made over the past year by CMHC and, as a result, no pro forma adjustment has been made.

Subsequent to the acquisition of CMHC, Netsmart sold to investors , pursuant to a private placement agreement (the “Agreement”), an aggregate 490,000 shares of common stock and warrants to purchase 122,504 shares of common stock. Netsmart has received $4,493,104 in gross proceeds and paid commissions of $275,000 related to the private placement. Netsmart has also issued a warrant to purchase 24,500 shares to the placement agent. The Agreement requires Netsmart to file a registration statement within 30 days of the closing of the private placement, and to use its reasonable best efforts to have such registration statement declared effective by the SEC within 90 days of the closing. Generally, the Agreement further provides for a penalty to be paid to the investors should Netsmart fail to meet its registration obligations. Such penalty is payable to the investors in cash at the rate of 2.5% of the gross proceeds per month, up to a maximum penalty of 20% of the gross proceeds. In accordance with View C of EITF 05-4, Netsmart intends to record 20% of the gross proceeds (approximately $899,000) as a liability until Netsmart has no further obligations pursuant to the registration rights provision that are outside of its control.

ContinuedLearning Asset Purchase

Netsmart did not purchase any of the assets on the CL balance sheet other than the purchase of computer hardware utilized to service then-existing clients, the value of which has been recorded as $17,000. Netsmart did not assume any of the liabilities reflected on the CL balance sheet other than for contract performance related to revenue collected from clients in advance of performance of work contracted for in the amount of $19,206.

The following are the details of the total acquisition cost:


Cash paid	$	250,000
Market value of common stock issued		191,400
Liabilities assumed		19,206
Other acquisition costs		28,632
Total acquisition	$	489,238

The total cost of acquisition was allocated as follows:


Customer lists	$	3,347	(to be amortized over 3 years)
Software purchased		443,891	(to be amortized over 6 years)
Non-compete and Non solicitation 25,000			(to be amortized over 2 years)
Hardware purchased		17,000
Total acquisition allocation	$	489,238

-6-

Pro forma adjustments were made to the unaudited condensed consolidated statements of operations for the year ended December 31, 2004 and the for the four months ended April 2005 to reflect amortization of $87,598 and $29,199, respectively, for customer lists, software purchased and certain non-compete and non-solicitation covenants.

A contingent purchase price adjustment of up to $250,000 may be incurred if, in accordance with the agreement, the CL product line retains a certain level of recurring revenue during the twelve-month period commencing on the closing date of the agreement and ending on the first anniversary date. This contingent adjustment has not been reflected as a pro forma adjustment due to its uncertainty.

Addiction Management Systems, Inc. Asset Purchase

Netsmart did not purchase any of the assets on the AMS balance sheet other than the purchase of certain inventory items utilized to resell to then-existing clients, the value of which has been recorded as $32,048, certain accounts receivable in the amount of $127,698 and a lease security deposit in the amount of $3,334. Netsmart did not assume any of the liabilities reflected on the AMS balance sheet other than for contract performance related to revenue collected from clients in advance of performance of work contracted for in the amount of $948,833.

The following are the details of the total acquisition cost:


Cash paid	$	2,641,945
Liabilities assumed		948,833
Other acquisition costs		19,904
Total acquisition	$	3,610,682

The total cost of acquisition was allocated as follows:

Customer lists	$	1,396,902	(to be amortized over 8 years)	)
Software purchased		2,050,700	(to be amortized over 8 years)	)
Accounts Receivable purchased		127,698
Inventory purchased		32,048
Lease security deposit		3,334
Total acquisition allocation	$	3,610,682

Pro forma adjustments were made to the unaudited condensed consolidated statements of operations for the year ended December 31, 2004 and for the six months ended June 30, 2005 to reflect amortization of $430,950 and $215,475, respectively, for customer lists and software purchased.

The following are the notes explaining pro forma adjustments to the unaudited condensed consolidated balance sheet as of June 30, 2005:

(A)

The acquired assets and liabilities of AMS and CL are already incorporated in the Netsmart consolidated balance sheet as of June 30, 2005. These acquisitions occurred prior to the balance sheet date and are therefore not shown separately for pro forma balance sheet purposes.

(A1)

This adjustment represents the recording of Netsmart's acquisition of CMHC totaling $19,565,956. The investment was paid for with cash consideration of $12,994,758, the market value of 435,735 shares of common stock issued of $4,915,091; the working capital adjustment of an estimated $792,024, and certain other costs of completing the acquisition of $864,083 are included in accrued expenses (reflecting an aggregate of $1,656,106).

(A2)

On October 14, 2005, Netsmart sold in a private placement an aggregate 490,000 shares of common stock and warrants to purchase 122,504 shares of common stock. Netsmart received $4,218,104 (net of commissions of $275,000) related to the private placement. Netsmart also issued to the placement agent a warrant to purchase 24,500 shares of common stock. All of the warrants have an exercise price of $11.00 and have a term of 5 years.

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(A3)

On October 7, 2005, Netsmart entered into a Loan Agreement consisting of (i) a $2,500,000 Revolving Credit Loan and (ii) a $2,500,000 Term Loan. On October 7, 2005, Netsmart borrowed the full amount of the $2,500,000 Term Loan. Netsmart has not borrowed any amounts under the Revolving Credit Loan. The principal amount of the Term Loan is payable in sixty (60) consecutive monthly installments. The unpaid principal amount of the Term Loan bears interest at the LIBOR Rate plus 2.25%, which rate was swapped into a fixed rate equivalent of 7.1% for the term of the Term Loan.

(A4)

These amounts represent the adjustments to the historical cost balance sheet of CMHC to bring the balances to estimated fair value. The software development costs, the customer lists and the contract backlog are currently expected to be amortized over 4, 20 and 1 years, respectively.

(A4a)

Represents the fair value of software purchased ($3,300,000) less existing historical value of CMHC software ($1,490,238).

(A4b)

Represents the fair value of the CMHC customer list.

(A4c)

Represents the fair value of the CMHC customer backlog.

(A5)

This consolidation adjustment represents the recording of a long term deferred tax liability related to the fair valuation adjustments for the capitalized software, customer list and contract backlog intangible assets. These intangibles are not deductible expenses for tax purposes. The tax effect has been calculated utilizing Netsmart's blended statutory tax rate of 38%. This results in a long term deferred tax liability of $3,416,000.

(A6)

This represents the excess of the purchase price of CMHC (including currently estimated adjustments) over the fair value of the assets acquired and liabilities assumed.

(A7)

This consolidation adjustment represents the elimination of Netsmart’s investment in CMHC and the elimination of CMHC’s equity.

(A8)

The Registration Rights Agreement related to the CMHC acquisition requires Netsmart to file a registration statement within 30 days of the closing of the private placement, and to use its reasonable best efforts to have such registration statement declared effective by the SEC within 90 days of the closing. Generally, the Agreement further provides for a penalty to be paid to the investors should Netsmart fail to meet its registration obligations. Such penalty is payable to the investors in cash at the rate of 2.5% of the gross proceeds per month, up to a maximum penalty of 20% of the gross proceeds. In accordance with View C of EITF 05-4, this adjustment represents 20% of the gross proceeds from the transaction which Netsmart intends to record as a current liability until Netsmart has no further obligations pursuant to the registration rights provision that are outside of its control.

Pro forma adjustments were made to the unaudited condensed consolidated statements of operations for the year ended December 31, 2004 and the six months ended June 30, 2005 to reflect changes resulting from merger that are directly attributable, factually supportable and are expected to have continuing impact on the combined operations. The following are the notes explaining such pro forma adjustments:

(B1a)

The adjustment increasing cost of sales is due mainly to the amortization of the of the acquired software related to the CMHC merger and the amortization of the acquired software related to each each of th CL and AMS acquisitions. The amounts specific to each acquisition are as follows:

	Year ended		Six Months ended
	December 31,2004		June 30,2005
CMHC	$	1,315,000	$	657,500
CL		73,982		24,661
AMS		256,337		128,168
Total	$	1,645,319	$	810,329

(B1b)

The adjustment decreasing cost of sales is the result of eliminating amortization of the acquired software that is already reflected in the historical statements of operations.

(B1c)

The adjustment increasing selling, general and administrative expenses is due mainly to the amortization of the customer list related to the CMHC merger and the amortization of customer list related to each of the CL and AMS acquisitions. The amounts specific to each acquisition are as follows:

	Year ended		Six Months ended
	December 31,2004		June 30,2005
CMHC	$	260,000	$	130,000
CL		13,616		4,539
AMS		174,613		87,306
Total	$	448,229	$	221,845

(B2)

The adjustment to the income tax provision is to reflect the overall 38% normal tax rate for Netsmart.

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(B3)

This adjustment represents interest expense on the Term Loan entered into on October 7, 2005.

(B4)

The pro forma adjustment to the number of common shares outstanding is a direct result of:

The issuance of 435,735 shares related to the CMHC merger.

An adjustment to the weighted average shares outstanding related to the 20,000 shares issued in connection with the CL acquisition. The number of weighted average shares is increased by 13,333 for the six months ended June 30, 2005 and by 20,000 shares for the year ended December 31, 2004.

The shares issued pursuant to the private placement contracts resulting in the issuance of 490,000 shares of common stock and warrants to purchase 122,504 shares of common stock plus an additional warrant to purchase 24,500 shares of common stock issued to the placement agent.

The common shares issued have been reflected in both the basic and diluted earnings per share calculation and the warrants issued to purchase common stock have not been reflected in the diluted earning per share calculation as the result would be antidilutive.

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NETSMART TECHNOLOGIES INC 8-K/A