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):
July 28, 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 July 27, 1999 Press Release of the Registrant attached hereto as
EXHIBIT 99 is incorporated herein by reference.
Item 7 (c) Exhibits
99 Press Release, dated July 27,1999, 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: July 28, 1999 By: /s/ Dorothy M. Cipolla
Dorothy M. Cipolla
Chief Financial Officer
Network Six, Inc.
Current Report on Form 8-K
Dated July 28, 1999
Exhibit Index
Exhibit
No. Exhibits
99 Press Release dated July 27, 1999
EXHIBIT 99
NETWORK SIX REPORTS SECOND QUARTER
FINANCIAL RESULTS
Contact: (401)732-9000
Kenneth C. Kirsch, President and CEO
Or
Dorothy M. Cipolla,
CFO and Treasurer
July 27, 1999
Warwick, RI: Network Six, Inc. (NASDAQ:NWSS) reported contract revenue earned
for the quarter ending June 30, 1999 of $2,550,370, down 22%, or $703,326, from
$3,253,696 the same period a year ago. Net loss for the period was $1,712,238,
or $2.27 per share, down $2,022,036 from the same period a year ago when the
Company reported net income of $309,798, or $.30 per share. These figures
include a one-time pre-tax charge of $3.2 million ($1.9 million after-tax)
related to the Company settling its long-standing litigation with the State of
Hawaii. Net income for the quarter, not considering this one-time charge,
would have been $164,647, or $.11 per share.
Contract revenue earned for the six months ending June 30, 1999 was $5,238,770
down $236,543, or 4.3%, from $5,475,313 the same period a year ago. Net loss
for the period was $1,455,042, or $2.06 per share, down $1,905,305 from the
same period a year ago when the Company reported net income of $450,263, or
$.38 per share, once again reflecting the one-time Hawaii settlement charge.
Kenneth C. Kirsch, President and CEO commented, "During the quarter, we had
three significant achievements: (1) we resolved our litigation with the State
of Hawaii; (2) we signed a one-year $5.25 million contract with our largest
customer, the State of Rhode Island; and (3) we entered into a one-year $2.6
million contract extension with the State of Maine. Although the Hawaii
settlement negatively impacts this quarter's (and this year's) earnings, it
eliminates a material underlying contingency regarding the Company's future.
The firming up of the Rhode Island and Maine business, moreover, provides us
with a solid foundation upon which we expect to build."
Dorothy Cipolla, CFO and Treasurer stated, "From a cash flow perspective, our
settling the Hawaii litigation is actually a positive. We received $300,000
from a third-party defendant and paid Hawaii $250,000, but are not required to
make another payment to Hawaii until June of 2000. We anticipate applying much
of the $1.3 million tax benefit associated with the write-off of Hawaii-related
assets this year and the balance next year. Our cash flow remains strong and
we have not needed to borrow against our line of credit."
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 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 10Q for March 31, 1999 or 10K for December 31, 1998 for
more discussion and information.
The following is a recap of Network Six's operating results and balance sheet:
Network Six, Inc.
Condensed Balance Sheets
June 30, 1999 Dec. 31, 1998
Assets (unaudited)
Current assets: ------------ ------------
Cash $ 1,451,003 $ 1,442,035
Contract receivables, less allowance for
doubtful accounts of $69,175 at June 30,
1999 and December 31, 1998 2,698,456 1,966,788
Costs and estimated earnings in excess of
billings on contract 258,277 1,220,253
Income tax receivable 1,273,851 -
Other current assets 146,087 112,433
------------ ------------
Total current assets 5,827,674 4,741,509
------------ ------------
Property and equipment
Computers and equipment 634,774 590,527
Furniture and fixtures 162,606 163,532
Leasehold improvements 20,191 20,191
------------ ------------
817,571 774,250
Less: accum. depreciation and amortization 577,657 602,033
------------ ------------
Net property and equipment 239,914 172,217
Deferred taxes 37,097 37,097
Contract receivables and costs in excess
of billings on Hawaii contract - 3,459,382
Other assets 343,484 290,577
------------ ------------
$ 6,448,169 $ 8,700,782
=========== ===========
June 30, 1999 Dec. 31, 1998
(unaudited)
Liabilities and Stockholders' Equity ------------ ------------
Current liabilities:
Current installment of obligations
under capital leases $ 34,535 $ 89,483
Current portion of long-term debt:
Vendors 100,000 200,000
Others 339,864 91,997
Accounts payable 197,094 58,456
Accrued salaries and benefits 420,950 579,320
Accrued subcontractor expense 8,158 24,950
Other accrued expenses 198,688 320,982
Billings in excess of costs and
estimated earnings on contracts 356,950 341,572
Income taxes payable - 780,066
Deferred taxes 42,491 42,491
Preferred stock dividends payable 954,057 795,992
------------ ------------
Total current liabilities 2,652,787 3,325,309
------------ ------------
Obligations under capital leases,
excluding current installments - 38,090
Long-term debt, less current portion:
Vendors 642,239 542,239
Others 866,408 409,778
Hawaii Payable - 576,483
------------ ------------
Total Liabilities 4,161,434 4,891,899
------------ ------------
Stockholders' equity:
Series A convertible preferred stock,
$3.50 par value. Authorized 857,142.85
shares; issued and outstanding 714,285.71
shares at June 30, 1999 and December 31,
1998; 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 780,156 shares
at June 30, 1999 and 764,663 at
December 31, 1998 79,278 76,466
Additional paid-in capital 1,886,130 1,796,284
Treasury stock, recorded at cost, 316 shares at
June 30, 1999 and 0 at December 31, 1998 (1,699) -
Retained earnings (accumulated deficit) (1,912,648) (299,541)
------------ ------------
Total stockholders' equity 2,286,735 3,808,883
------------ ------------
Total Liabilities &
Stockholders' Equity $ 6,448,169 $ 8,700,782
=========== ===========
Network Six, Inc.
Condensed Statements of Income
(Unaudited)
Three months Three months Six months Six months
ended 6/30/99 ended 6/30/98 ended 6/30/99 ended 6/30/98
------------- ------------- ------------- -------------
Contract revenue earned 2,550,370 3,253,696 5,238,770 5,475,313
Cost of revenue earned 1,565,228 2,158,529 3,139,753 3,605,184
------------ ------------ ------------ ------------
Gross profit 985,142 1,095,167 2,099,017 1,870,129
Selling, general &
administrative expenses 694,439 562,467 1,356,359 1,120,292
Litigation settlement 3,176,665 - 3,176,665 -
------------ ------------ ------------ ------------
Income from operations(2,885,962) 532,700 (2,434,007) 749,837
Other deductions (income)
Interest expense 29,408 10,530 59,364 39,715
Interest earned (17,770) (2,918) (31,698) (53,041)
------------ ------------ ------------ ------------
Income before
income taxes (2,897,600) 525,088 (2,461,673) 763,163
Income taxes (1,185,362) 215,290 1,006,631 312,900
------------ ------------ ------------ ------------
Net income (1,712,238) 309,798 (1,455,042) 450,263
============= ============= ============= =============
Net income per share:
Basic (2.27) 0.30 (2.06) 0.38
============= ============= ============= =============
Diluted (2.27) 0.30 (2.06) 0.38
============= ============= ============= =============
Shares used in computing net income per share:
Basic 788,573 756,176 781,774 752,839
============= ============= ============= =============
Diluted 788,573 756,176 781,774 752,839
============= ============= ============= =============
Preferred dividends
declared 79,469 84,144 158,065 167,363
============= ============= =============
=============