Item 5
NETWORK SIX REPORTS SECOND
QUARTER RESULTS
Kenneth C. Kirsch, President and CEO
Or
James J. Ferry, Vice President of Finance &
Administration, CFO and Treasurer
July 27, 2000
Warwick, RI: Network Six, Inc. (NASDAQ: NWSS) reported contract revenue earned
for the quarter ending June 30, 2000 of $3,004,373 up 18%, or $454,003 from
$2,550,370 the same period a year ago. Net income for the period was $137,074
or $0.06 per share, up $1,849,312 from the same period a year ago when it
reported a net loss of $1,712,238 or $2.27 per share. The previous year's
figures include a one-time pre-tax charge of $3.2 million ($1.9 million
after-tax) related to the Company settling its litigation with the State of
Hawaii. Net income for the previous year, not considering this one-time charge,
would have been $164,647, or $0.11 per share.
Contract revenue earned for the six months ending June 30, 2000 was $5,860,411
up 12%, or $621,641 from $5,238,770 the same period a year ago. Net income for
the period was $337,458 or $0.21 per share, up $1,792,500 from the same period a
year ago when the Company reported a net loss of $1,455,042, or $2.06 per share,
once again reflecting the one-time Hawaii settlement charge.
Kenneth C. Kirsch, President and CEO commented, "The first half of 2000
reflected strong growth in our State Government business, however, our strategy
to enter the private sector arena by providing end to end solutions continues to
take longer than expected. As we enter the second half of 2000, our challenge
will be to augment our public sector business with additional private sector
opportunities."
James J. Ferry, Vice President of Finance & Administration, CFO and Treasurer
added, "Our increased revenue was largely due to the addition of the State of
Rhode Island Department of Children, Youth and Families support contract which
has significantly lower margins than our other contracts. Nonetheless, the
combination of $2.5 million of cash and an untapped $1 million line of credit
provide a strong financial position going forward."
********************************************************************************
Network Six is a full service provider of information technology solutions that
enable its customers to operate more efficiently and effectively. Network Six's
services include e-commerce planning and implementation, technology consulting,
applications development and support and network design and implementation.
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 10Q for June 30, 2000, the 10Q for March 31,
2000 or 10K for December 31, 1999 for more discussion and information.
The following is a recap of Network Six's operating results and balance sheet:
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<TABLE>
<CAPTION>
NETWORK SIX, INC.
CONDENSED BALANCE SHEETS
ASSETS June 30, 2000 Dec. 31, 1999
--------------- ---------------
Current assets: (unaudited)
<S> <C> <C>
Cash $ 2,474,770 $ 2,453,935
Contract receivables, less allowance for
doubtful accounts of $49,000 at June 30,
2000 and December 31, 1999 1,937,142 1,561,255
Costs and estimated earnings in excess of
billings on contract 713,636 759,891
Refundable taxes on income 150,640
Deferred taxes 32,433 287,083
Other current assets 113,851 151,933
--------------- ---------------
Total current assets 5,271,832 5,364,737
Property and equipment
Computers and equipment 621,045 590,124
Furniture and fixtures 162,606 162,606
Leasehold improvements 20,191 20,191
--------------- ---------------
803,842 772,921
Less: accum. depreciation and amortization 613,302 578,015
--------------- ---------------
Net property and equipment 190,540 194,906
Deferred taxes 513,795 513,795
Other assets 49,037 86,750
--------------- ---------------
Total assets $ 6,025,204 $ 6,160,188
=============== ===============
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June 30, 2000 Dec. 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
--------------- ---------------
Current liabilities:
Current installment of obligations
under capital leases - $ 8,132
Current portion of long-term debt:
Vendors $ 100,000 100,000
Others 351,522 349,141
Accounts payable 84,454 202,195
Accrued salaries and benefits 422,249 508,193
Other accrued expenses 134,765 99,781
Billings in excess of costs and
estimated earnings on contracts 80,101 124,458
Preferred stock dividends payable 1,290,873 1,119,468
--------------- ---------------
Total current liabilities 2,463,964 2,511,368
Long-term debt, less current portion:
Vendors 542,239 542,239
Others 474,266 775,636
--------------- ---------------
Total Liabilities 3,480,469 3,829,243
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, 2000 and December 31,
1999; 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 825,534 shares
at June 30, 2000 and 794,306 at
December 31, 1999 82,553 79,430
Additional paid-in capital 1,947,520 1,888,652
Treasury stock recorded at cost, 11,163 shares
at June 30, 2000 and 8,081 shares at
December 31, 1999 (42,434) (28,179)
Retained earnings (accumulated deficit) (1,678,578) (1,844,632)
--------------- ---------------
Total stockholders' equity 2,544,735 2,330,945
--------------- ---------------
Total Liabilities & Stockholders' Equity $ 6,025,204 $ 6,160,188
=============== ===============
</TABLE>
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<TABLE>
<CAPTION>
NETWORK SIX, INC.
Condensed Statements of Income
(Unaudited)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/00 ENDED 6/30/99 ENDED 6/30/00 ENDED 6/30/99
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Contract revenue earned $ 3,004,373 $ 2,550,370 $ 5,860,411 $ 5,238,770
Cost of revenue earned 1,959,713 1,565,228 3,743,242 3,139,753
--------------- --------------- --------------- ---------------
Gross profit 1,044,660 985,142 2,117,169 2,099,017
Selling, general & administrative expenses 804,998 694,439 1,535,820 1,356,359
Litigation settlement - 3,176,665 - 3,176,665
--------------- --------------- --------------- ---------------
Income (loss) from operations 239,662 (2,885,962) 581,349 (2,434,007)
Other deductions (income)
Interest expense 42,217 29,408 79,603 59,364
Interest earned (34,882) (17,770) (70,216) (31,698)
--------------- --------------- --------------- ---------------
Income (loss) before income taxes 232,327 (2,897,600) 571,962 (2,461,673)
Provision (credit) for income taxes 95,253 (1,185,362) 234,504 (1,006,631)
--------------- --------------- --------------- ---------------
Net income (loss) $ 137,074 ($1,712,238) $ 337,458 ($1,455,042)
=============== =============== =============== ===============
Net income (loss) per share:
Basic $ 0.06 ($2.27) $ 0.21 ($2.06)
=============== =============== =============== ===============
Diluted $ 0.06 ($2.27) $ 0.21 ($2.06)
=============== =============== =============== ===============
Shares used in computing net income (loss) per share:
Basic 819,284 788,573 807,621 781,774
=============== =============== =============== ===============
Diluted 819,284 788,573 807,621 781,774
=============== =============== =============== ===============
Preferred dividends declared $ 87,260 $ 79,469 $ 171,404 $ 158,065
=============== =============== =============== ===============
</TABLE>
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