UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
Date of Report: January 13, 2000
NETWORK SYSTEMS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-22991 87-0460247
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification Number)
200 North Elm Street, Greensboro, North Carolina 27401
(Address of principal executive officer) (Zip Code)
(336) 271-8400
(Registrants telephone number, including area code)
Item 5. Other Events
On January 13, 2000, Network Systems International, Inc.
(the "Company") issued a press release reporting its results
for its 1999 fiscal year ended September 30, 1999. The
press release also noted that the results of the 1999 fiscal
year of the Company reflected a change in the application of
accounting standards related to the capitalization of
software development costs. This change was based on advice
from its new outside auditors, KPMG LLP, that it was more
appropriate to expense in-house development costs based upon
the documentation required by FASB No. 86 Computer Software
to be Sold, Leased, or Otherwise Marketed to support the
achievement of technological feasibility for the Company's
software products.
The press release included a chart indicating the effect of
this change in accounting for internally developed software
on the previously released financial results for its fiscal
year ended September 30, 1998 and its quarterly results for
December 31, 1998, March 31, 1999, and June 30, 1999. The
Company's Form 10KSB, filed on January 13, 2000, also
reflects the effect of this change in accounting for the
Company's fiscal years ended September 30, 1999 and
September 30, 1998.
In addition, the Company announced in the press release that
earnings were negatively impacted by several non-recurring
charges for the year ended September 30, 1999. Also, the
Company announced that $120,000 in cost as previously
reported to acquire Vercom Software, Inc. should have been
capitalized rather than expensed.
A copy of the press release discussing the above and certain
related matters is included as Exhibit 99 to this Current
Report on Form 8-K and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Exhibits
The following exhibits are filed herewith in accordance with
the provisions of Item 601 of Regulation S-B:
Exhibit No. 99 Description of Exhibit
Press Release issued by the registrant on January 13, 2000
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 hereunto duly
authorized.
NETWORK SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Michael T. Spohn
Michael T. Spohn,
Chief Financial Officer
Date: January 13, 2000
FOR IMMEDIATE RELEASE
NETWORK SYSTEMS INTERNATIONAL, INC.
REPORTS FISCAL 1999 RESULTS
Greensboro, North Carolina: Thursday, January 13, 2000:
NETWORK SYSTEMS International, Inc. (NASDAQ: NESI-news;
www.nesi.net) reported the results today of its 1999 fiscal
year ended September 30, 1999. Revenues increased to
$14,249,657 during 1999 from $12,804,921 in 1998 or 11
percent. Earnings decreased to $286,000 or 3 cents per
share in 1999 from $2,069,000 or 27 cents per share in 1998.
Earnings in 1999 were negatively impacted by several non-
recurring charges that totaled $880,000. These charges
include a required write-off of in-process research and
development costs in connection with the VERCOM Software,
Inc. acquisition, a settlement with a former customer and
other miscellaneous one-time expenses. These charges were
previously estimated at $1.0 million. The $120,000
reduction from the Company's original estimate relates to
the determination that certain costs to acquire VERCOM
Software should be capitalized rather than expensed.
Earnings for 1999 excluding these non-recurring charges were
$957,000 or 11 cents per share.
The results described above reflect a change in the
application of accounting standards related to the
capitalization of software development costs. The Company's
new auditors, KPMG L.L.P., advised the Company that it was
more appropriate to expense its in-house software
development costs based upon the time at which technological
feasibility is attained. This change results in the write-
off of capitalized software development costs of $1,592,000
and a reduction in deferred income tax liabilities of
$621,000 as of September 30, 1997.
The following table reflects the effect on earnings related
to this change in accounting for the periods indicated.
Earnings as Earnings
Originally as
Reported Restated
Fiscal Year 1998 $ 1,967,000 $ 2,069,000
Quarter Ended 12/31/98 $ 565,000 $ 488,000
Quarter Ended 3/31/99 $ 692,000 $ 632,000
Quarter Ended 6/30/99 $ (248,000) $ (233,000)
Robbie M. Efird, Chairman and CEO stated, "The results for
1999 were adversely affected by an industry-wide slowdown
directly related to businesses focusing on ensuring their
existing systems were Year 2000 compliant. Like many of our
competitors, revenues from software licenses and the related
hardware sales have suffered during this extraordinary time
as potential customers have postponed purchases of many
software products until after January 1, 2000. Revenues
from services continued to escalate and demand remains
strong. We believe Network Systems is well-positioned to
participate in the recovery of software purchases in our
target markets as companies continue to upgrade and replace
their systems and take advantage of new technologies. We
enter 2000 optimistically and look forward to resuming our
historical growth pattern."
NETWORK SYSTEMS International, Inc. is a vertical market
company that specializes in providing industry specific
solutions to the textile, apparel, home furnishings and
printing industries. The Company's integrated applications
provide customers a complete system for managing the
enterprise and supply chain. Founded in 1985, NETWORK
SYTEMS International, Inc. is headquartered in Greensboro,
NC with offices in Dallas, TX and Duncan, SC.
Safe Harbor Act Disclaimer: This release may contain forward
looking statements that involve risk and uncertainties,
including without limitations, continued acceptance of the
Company's products and services, increased levels of
competition, new products and technological changes, the
Company's dependency on financing third party suppliers and
intellectual property rights, material customers, the
Company's business concentration risk within the textile
industry, and other risks. The Company's actual
consolidated financial results during 2000, and beyond,
could differ materially from those expressed in any forward
looking statements made by, or on behalf of, the Company.
