SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to section 13 of 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 23, 1999 Network Six, Inc. (Exact name of registrant as specified in its charter) Commission File No. 0-21038 Rhode Island 05-036-6090 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 475 Kilvert Street, Warwick, Rhode Island 02886 (Address of principal executive offices, including zip code) (401) 732-9000 (Registrant's telephone number, including area code) Item 5. Other Events The February 23, 1999 Press Release of the Registrant attached hereto as EXHIBIT 99 is incorporated herein by reference. Item 7 (c) Exhibits 99 Press Release, dated February 23,1999, of Network Six, Inc. 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. Network Six, Inc. ----------------------- (Registrant) Date: February 24, 1999 By: /s/ Dorothy M. Cipolla Dorothy M. Cipolla Chief Financial Officer Network Six, Inc. Current Report on Form 8-K Dated February 23, 1999 Exhibit Index Exhibit No. Exhibits 99 Press Release dated February 23, 1999 EXHIBIT 99 NETWORK SIX REPORTS 161% INCREASE IN ANNUAL NET INCOME Kenneth C. Kirsch, President and CEO Or Dorothy M. Cipolla, CFO and Treasurer February 23, 1999 Warwick, RI: Network Six, Inc. reported net income of $1,061,006, or $.96 per share, for the calendar year ending December 31, 1998, up 161%, or $654,056, from the previous year's net income of $406,950, or $.25 per share. Revenues for the year were $10,399,980, down 9.3%, or $1,060,457, from the previous year's total of $11,460,437. Kenneth C. Kirsch, President and CEO commented, "We are pleased with our 1998 financial performance. Gross profit, as a percentage of contract revenue earned, improved to 38%, compared to 25% a year ago when we subcontracted a large portion of our Maine child welfare contract to a third-party. Net income, as a percentage of contract revenue earned, improved to 10% from 3.6% a year earlier. Although revenues dropped somewhat from the previous year, we believe that we are well-positioned to capture additional business. In this regard, we intend to pursue new business in the government sector, particularly in health and human services, where we enjoy an excellent national reputation, as well as in higher education information technology consulting, network services and selected private sector opportunities." Dorothy M. Cipolla, CFO and Treasurer added, "We are in a stronger position financially than we were a year ago and continue to operate the Company on cash flows from operations. The fourth quarter of 1998 marks our seventh consecutive quarter of profitability." ********************** Network Six is a full service systems integrator, providing information technology solutions that enable its customers to become more effective and efficient. Network Six's services include strategic planning, management consulting, network design, network and application implementation, training, outsourcing, maintenance and support. Network Six's stock is traded on the NASDAQ SmallCap Market under the symbol NWSS. Its website is http://www.networksix.com. This report contains forward-looking statements reflecting the Company's expectations or beliefs concerning future events that could materially affect Company performance in the future. All forward-looking statements are subject to the risks and uncertainties inherent with predictions and forecasts. Please refer to the company's forthcoming 10K for December 31, 1998 or 10Q's for March 31, June 30, 1998 or September 30, 1998 for more discussion and information. The following is a recap of Network Six's operating results and balance sheet: Network Six, Inc. Balance Sheets December 31, 1998 and 1997 Assets 1998 1997 ----- ---- Current assets: Cash $ 1,442,035 $ 1,291,924 Contract receivables, less allowance for doubtful accounts of $69,175 in 1998 and $50,000 in 1997 1,966,788 2,011,379 Costs and estimated earnings in excess of billings on contracts 1,220,253 1,388,515 Other assets 112,433 244,257 --------- --------- Total current assets 4,741,509 4,936,075 --------- --------- Property and equipment Computers and equipment 590,527 506,484 Furniture and fixtures 163,532 167,558 Leasehold improvements 20,191 20,191 -------- -------- 774,250 694,233 Less: accum. depreciation and amortization 602,033 627,146 -------- -------- Net property and equipment 172,217 67,087 Deferred taxes 37,097 391,475 Contract receivables and costs in excess of billings on Hawaii contract 3,459,382 3,459,382 Other assets 290,577 438,084 --------- --------- $ 8,700,782 $ 9,292,103 ========== ========== Network Six, Inc. Balance Sheets, continued December 31, 1998 and 1997 Liabilities and Stockholders' Equity 1998 1997 -------- -------- Current liabilities: Notes payable to bank $ - $ 1,160,000 Current installment of obligations under capital leases 89,483 82,690 Accounts payable 58,456 188,377 Accrued salaries and benefits 579,320 449,133 Accrued subcontractor expense 24,950 1,352,393 Note payable - short term 291,997 163,871 Other accrued expenses 320,982 342,465 Billings in excess of costs and estimated earnings on contracts 341,572 155,754 Income taxes payable 771,631 13,338 Deferred taxes 50,926 545,869 Preferred stock dividends payable 795,992 460,068 --------- -------- Total current liabilities 3,325,309 4,913,958 --------- --------- Obligations under capital leases, excluding current installments 38,090 104,003 Note payable - long term 952,017 742,239 Hawaii Payable 576,483 576,483 --------- --------- Total Liabilities 4,891,899 6,336,683 --------- --------- Stockholders' equity: Series A convertible Preferred stock, $3.50 par value Authorized 857,142.85 shares; issued and outstanding 714,285.71 shares in 1997 and 1996; liquidation of $3.50 per share plus unpaid and accumulated dividends 2,235,674 2,235,674 Common stock, $.10 par value. Authorized 4,000,000 shares; issued 764,663 shares in 1998 and 734,294 in 1997 76,466 73,429 Additional paid-on capital 1,796,284 1,670,939 Retained earnings (accumulated deficit) (299,541)(1,024,622) --------- ---------- Total stockholders' equity 3,808,883 2,955,420 Total Liabilities & Stockholder's Equity $ 8,700,782 $9,292,103 ========== ========= Network Six, Inc. Statements of Operations Years ended December 31, 1998, 1997 and 1996 1998 1997 1996 ---------- ----------- ----------- Contract revenue earned $ 10,399,979 $ 11,460,437 $ 7,344,380 Cost of revenue earned 6,418,678 8,620,097 7,359,649 ----------- ----------- ------------ Gross profit (loss) 3,981,301 2,840,340 (15,269) Selling, general & administrative Expenses 2,260,418 2,071,294 2,240,073 Restructuring - - (119,436) --------- --------- ------------ Income (loss) from operations 1,720,883 769,046 (2,135,906) Other deductions (income) Interest expense 125,314 266,030 435,925 Interest earned (78,437) (31,934) (38,463) --------- -------- ---------- Income (loss) before Income taxes 1,674,006 534,950 (2,533,368) Income taxes 613,000 128,000 (775,023) --------- --------- ----------- Net income (loss) $ 1,061,006 $ 406,950 $ (1,758,345) =========== ========= =========== Net income (loss) per share: Basic $ 0.96 $ 0.25 $ (2.71) ============ =========== ============ Diluted $ 0.96 $ 0.25 $ (2.71) ============ =========== ============ Shares used in computing net income per share: Basic 758,547 729,927 719,317 ============ =========== ============ Diluted 758,547 729,927 719,317 ============ =========== ============ Preferred dividends declared $ 335,924 $ 225,308 $ 187,500 ============= =========== ============