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): October 29, 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 October 29, 1999 Press Release of the Registrant attached hereto as EXHIBIT 99 is incorporated herein by reference. Item 7 (c) Exhibits 99 Press Release, dated October 29,1999, 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: October 29, 1999 By: /s/ Dorothy M. Cipolla Dorothy M. Cipolla Chief Financial Officer Network Six, Inc. Current Report on Form 8-K Dated October 29, 1999 Exhibit Index Exhibit No. Exhibits 99 Press Release dated October 29, 1999 EXHIBIT 99 NETWORK SIX REPORTS THIRD QUARTER FINANCIAL RESULTS Contact (401) 732-9000 Kenneth C. Kirsch, President and CEO Or Dorothy M. Cipolla, CFO and Treasurer October 29, 1999 Warwick, RI: Network Six, Inc. (NASDAQ:NWSS) reported contract revenue earned for the quarter ending September 30, 1999 of $2,575,192, down 3%, or $87,411, from $2,662,603 the same period a year ago. Net income for the period was $149,727, or $0.09 per share, down $148,409 from the same period a year ago when the Company reported net income of $298,136, or $.28 per share. Contract revenue earned for the nine months ending September 30, 1999 was $7,813,958 down $323,958, or 4%, from $8,137,916 the same period a year ago. Net loss for the period was $1,305,315, or $1.98 per share, down $2,053,714 from the same period a year ago when the Company reported net income of $748,399, or $.66 per share. These figures include a one-time pre-tax charge of approximately $3.2 million ($1.9 million after-tax) related to the Company settling its long-standing litigation with the State of Hawaii. Without the Hawaii settlement charge, net income for the first nine months would have been $568,917 or $.42 per share. Kenneth C. Kirsch, President and CEO commented, "Earlier in the year, we made a conscious decision to beef up our sales and marketing staff and to pursue selective markets. This investment continued during the third quarter and we expect it to continue prospectively as well. With our improved financial health, we are able to focus our efforts on growing the Company for the long-term by making investments in product development and selling and marketing activities that we expect to generate favorable returns for the Company in the years to come. Although third quarter revenues fell below our expectations, primarily due to a slowdown in new systems development activities related to Y2K, we believe that new systems development initiatives and related spending will re-commence shortly after the beginning of the year." Dorothy Cipolla, CFO and Treasurer, added, "The Company continues to grow stronger every day; our cash position has never been higher, our balance sheet is solid and our credit facility remains untapped. We are well positioned for growth." ************************************************************************** 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 June 30, 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 Sept. 30, 1999 Dec. 31, 1998 Assets (unaudited) Current assets: ------------ ------------ [S] [C] [C] Cash $ 2,534,719 $ 1,442,035 Contract receivables, less allowance for doubtful accounts of $50,000 at Sept. 30, 1999 and $69,175 at December 31, 1998 1,558,083 1,966,788 Costs and estimated earnings in excess of billings on contract 816,352 1,220,253 Refundable income taxes relating to the Hawaii settlement 686,000 - Other current assets 127,820 112,433 ------------ ------------ Total current assets 5,722,974 4,741,509 ------------ ------------ Property and equipment Computers and equipment 618,021 590,527 Furniture and fixtures 162,606 163,532 Leasehold improvements 20,191 20,191 ------------ ------------ 800,818 774,250 Less: accum. depreciation and amortization 587,574 602,033 ------------ ------------ Net property and equipment 213,244 172,217 Deferred taxes 417,401 37,097 Contract receivables and costs in excess of billings on Hawaii contract - 3,459,382 Other assets 86,906 290,577 ------------ ------------ $ 6,440,525 $ 8,700,782 =========== =========== Sept. 30, 1999 Dec. 31, 1998 (unaudited) Liabilities and Stockholders' Equity ------------ ------------ Current liabilities: Current installment of obligations under capital leases $ 7,227 $ 89,483 Current portion of long-term debt: Vendors 100,000 200,000 Others 340,918 91,997 Accounts payable 80,645 58,456 Accrued salaries and benefits 573,266 579,320 Accrued subcontractor expense 24,153 24,950 Other accrued expenses 74,726 320,982 Billings in excess of costs and estimated earnings on contracts 328,478 341,572 Income taxes payable - 780,066 Deferred taxes 42,491 42,491 Preferred stock dividends payable 1,035,975 795,992 ------------ ------------ Total current liabilities 2,607,879 3,325,309 ------------ ------------ Obligations under capital leases, excluding current installments - 38,090 Long-term debt, less current portion: Vendors 642,239 542,239 Others 837,234 409,778 Hawaii Payable - 576,483 ------------ ------------ Total Liabilities 4,087,352 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 Sept. 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 792,881 shares at September 30, 1999 and 764,663 at December 31, 1998 79,288 76,466 Additional paid-in capital 1,886,294 1,796,284 Treasury stock, recorded at cost, 316 shares at Sept.30, 1999 and 0 at December 31, 1998 (3,245) - Retained earnings (accumulated deficit) (1,844,838) (299,541) ------------ ------------ Total stockholders' equity 2,353,173 3,808,883 ------------ ------------ Total Liabilities & Stockholders' Equity $ 6,440,525 $ 8,700,782 =========== =========== Network Six, Inc. Condensed Statements of Income (Unaudited) [C] [C] [C] [C] Three months Three months Six months Six months ended 9/30/99 ended 9/30/98 ended 9/30/99 ended 9/30/98 ------------- ------------- ------------- ------------- Contract revenue earned 2,575,192 2,662,603 7,813,958 8,137,916 Cost of revenue earned 1,632,648 1,535,388 4,772,396 5,140,573 ------------ ------------ ------------ ---------- Gross profit 942,544 1,127,215 3,041,562 2,997,344 Selling, general & administrative expenses 655,048 617,290 2,011,408 1,737,581 Litigation settlement - - 3,176,665 - ------------ ------------ ------------ ------------ Income from operations 287,496 509,925 (2,146,511) 1,259,763 Other deductions (income) Interest expense 60,147 14,573 119,512 54,289 Interest earned (26,426) (10,336) (58,124) (63,377) ------------ ------------ ------------ ----------- Income before income taxes 253,775 505,688 (2,207,899) 1,268,851 Income taxes 104,048 207,552 (902,584) 520,452 ------------ ------------ ------------ ----------- Net income 149,727 298,136 (1,305,315) 748,399 ============= ============= ============= =========== Net income per share: Basic 0.09 0.28 (1.98) 0.66 ============= ============= ============= ============ Diluted 0.09 0.28 (1.98) 0.66 ============= ============= ============= =========== Shares used in computing net income per share: Basic 788,573 763,880 785,476 756,519 ============= ============= ============= ============ Diluted 788,573 763,880 785,476 756,519 ============= ============= ============= ============ Preferred dividends declared 81,918 85,068 239,983 252,431 ============= ============= ============= =============