<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                  For the Fiscal Year Ended December 31, 1999

                         Commission File Number 0-21038

                               NETWORK SIX, INC.

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                RHODE ISLAND                                    05-0366090
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                     Identification Number)

             475 KILVERT STREET                                    02886
            WARWICK, RHODE ISLAND                               (Zip Code)
  (Address of principal executive offices)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 732-9000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10
par value

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of February 28, 2000 (computed by reference
to the closing price of such stock on The NASDAQ SmallCap Market) was
$2,786,294.

    As of February 28, 2000, there were 796,084 shares of the registrant's
Common Stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                  DOCUMENT                                  WHERE INCORPORATED
                  --------                                  ------------------
<S>                                            <C>
Portions of the registrant's definitive Proxy
     Statement regarding the 2000 Annual
           Meeting of Stockholders                               Part III
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                               NETWORK SIX, INC.
                                   FORM 10-K

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM                                                                                    PAGE
----                                                                                    ----
<S>                     <C>                                                           <C>
                                            PART I
 1                      Business....................................................      3
 2                      Properties..................................................     10
 3                      Legal Proceedings...........................................     10
 4                      Submission of Matters to a Vote of Security Holders.........     12
                                           PART II
                        Market for Registrant's Common Equity and Related
 5                        Stockholder Matters.......................................     12
 6                      Selected Financial Data.....................................     12
                        Management's Discussion and Analysis of Financial Condition
 7                        and Results of Operation..................................     14
 8                      Financial Statements and Supplementary Data.................     19
                        Changes in and Disagreements With Accountants on Accounting
 9                        and Financial Disclosure..................................     19
                                           PART III
 10                     Directors and Executive Officers of the Registrant..........     19
 11                     Executive Compensation......................................     19
                        Security Ownership of Certain Beneficial Owners and
 12                       Management................................................     20
 13                     Certain Relationships and Related Transactions..............     20
                                           PART IV
                        Exhibits, Financial Statement Schedules and Reports on Form
 14                       8-K.......................................................     20
                        Signatures..................................................     23
</TABLE>

                                       2
<PAGE>
PART I

ITEM 1. BUSINESS.

GENERAL

    Network Six, Inc. (the "Company") is a provider of information technology
solutions that enable its customers to operate more efficiently and effectively.
The Company's services include e-commerce planning and implementation,
technology consulting, applications development and support and network design
and implementation. Incorporated in 1976 under the name National E-F-T, Inc.,
the Company has historically focused on providing its services to state
governments, particularly health and human services agencies. Although the
Company has recently targeted additional markets (such as higher education,
health care and network services), the Company derived a substantial portion of
its revenues in 1999 from contracts with state government health and human
service agencies.

    The Company is expanding its operations into the e-commerce space in order
to better meet the needs of its customers. Unlike many other e-commerce
companies, the Company can offer "end-to-end" support and leverage its
significant mainframe, client/server and network services experience to this
rapidly growing and changing marketplace. The Company's government customers are
logical candidates for this new business to consumer ("B2C") model. Private
sector clients, moreover, are candidates for the business to business ("B2B")
model, which, many analysts believe, will account for the lion's share of
Internet commerce prospectively.

    The Company is incorporated under the laws of Rhode Island, and its
principal executive offices are located at 475 Kilvert Street, Warwick, Rhode
Island 02886, telephone number (401) 732-9000.

THE INFORMATION TECHNOLOGY INDUSTRY

    Rapid improvements in the price and performance of computer and
communications equipment in the last 20 years, coupled with the growth of
sophisticated, powerful software, have resulted in a substantial increase in the
number of organizations that use computer-based information systems and in the
scope and complexity of such systems. The proliferation of both products and
suppliers of products has not only expanded the scope of tasks that can be
performed by information systems, but it has also increased the complexity of
such systems.

    Information systems typically include computer hardware (mainframe,
minicomputers, and workstations), software (both custom and packaged), and
communications equipment (routers, servers, etc.). Effective operation of
information systems depends not only on having proper equipment and software,
but also on having well-trained and skilled personnel.

    The pace and magnitude of technological change have been so great that it
has been difficult for in-house data processing staffs to remain abreast of
developments. As a result, business and government organizations increasingly
retain third-party vendors employing skilled information technology
professionals to define, develop, and install complex custom information systems
and to provide applications software and comprehensive solutions to their
information systems needs. Business and government organizations are also
turning to third-party vendors to provide information technology services in
order to reduce their investments in technology and personnel.

STATE GOVERNMENT HEALTH AND HUMAN SERVICES AGENCIES

    State government health and human services agencies are among the
organizations that most need the services of outside providers of information
technology services to upgrade and maintain their computer based information
systems. They have large and burdensome caseloads and must maintain extensive
records. At the same time, they are required to increase the capacity and
enhance the capabilities of their information systems as the federal government,
which in most cases provides a

                                       3
<PAGE>
substantial portion of the funding of the programs states administer (see chart
below), requires detailed, standardized reporting of program data, elimination
of errors, and more responsive management. Yet the information systems of many
such agencies are obsolete and have limited data interfacing capabilities.
Moreover, the states often require them to do more with less.

    The federal government assists the states by providing financial assistance
for information systems in five major areas: (i) the Child Support Enforcement
(CSE) program; (ii) the previous welfare programs of AFDC and Jobs Opportunities
and Basic Skills (JOBS) program which have been combined into the TANF
(Temporary Assistance to Needy Families) and together with the food stamp
program; (iii) the Medicaid and experimental managed care programs; (iv) the
Child Welfare program; and (v) other programs, including Electronic Benefit
Transfer (EBT), automated program policy systems, and out sourcing and
privatization of human services agency functions. The U.S. Department of Health
and Human Services (HHS) administers these programs at the federal level, with
the exception of the food stamp program that is administered by the Food
Nutrition Service of the U.S. Department of Agriculture (USDA).

    CHILD SUPPORT ENFORCEMENT.  The federal government established the Child
Support Enforcement (CSE) program in 1975 in response to the increased failure
of many parents to provide financial support to their children. The CSE program
is intended to help strengthen families and reduce dependence on government
assistance by requiring parents to support their children rather than the
government. State governments generally must locate absent parents, establish
paternity if necessary, obtain judicial support orders, and collect the support
payments required by those orders.

    The Child Support Enforcement Amendments of 1984 require state CSE systems,
in order to receive federal funding, to meet certain federal functional
requirements covering case initiation, case management, database linkage,
financial management, enforcement, security, privacy, and reporting. The federal
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
("Welfare reform") has had a major impact on CSE systems as well. Welfare reform
mandated: (i) changes to the way collections are distributed; (ii) added a
Federal Case Registry (FCR) which is a central repository for child support
cases and participants from all states; (iii) new interstate case processing;
and (iv) modification to federal reporting requirements.

    TANF.  The automated information system requirements of two distinct
federal-state programs--AFDC and Food Stamps--are usually combined at the state
level under what is now known as TANF (Temporary Assistance to Needy Families),
previously referred to as FAMIS (Family Assistance Management Information
Systems). Welfare reform has established time limits for assistance and has made
the need for education, training, job placement, and other supportive services
especially important.

    The Food Stamp Program is designed to improve the nutrition of low-income
households and is also administered by state welfare agencies under the
supervision of USDA. Benefits are generally provided in the form of food stamp
coupons and are funded by the federal government, which reimburses part of the
cost of establishing an automated system and are part of the cost of operating
an automated food stamp program.

    MEDICAID AND MANAGED CARE.  Medicaid is a federal-state matching entitlement
program providing reimbursement for the cost of medical care to low-income
individuals who are aged, blind, disabled, or members of families with dependent
children, and to certain other pregnant women and children. Within broad federal
guidelines, each state designs and administers its own program. Eligibility
systems and claims processing systems are automated by states to handle this
program, which is typically the largest line item in a state budget. Federal
assistance is also available on a waiver basis for managed care experiments for
Medicaid recipients and similar populations.

                                       4
<PAGE>
    CHILD WELFARE.  In November 1993 Congress created a funding authority for
Statewide Automated Child Welfare Information Systems (SACWIS) that provided
federal funds at a 75% rate for the creation of information systems for fiscal
years 1994, 1995, 1996 and 1997. Funding levels for 1998 and beyond were and are
generally 50%. Also in December 1993, the Administration for Children and
Families of HHS published the final rules for the implementation of the section
of the Social Security Act of 1935 that requires the collection of adoption and
foster care data.

    OTHER HUMAN SERVICES PROGRAMS.  State human services agencies have initiated
a number of additional programs, some of which have involved the use of federal
funds. These programs include: (i) communications kiosks and voice response
systems to inform and educate citizens about human services programs and to
answer specific inquiries; (ii) privatization and out sourcing of various human
services functions such as child support collections; (iii) automated policy
systems to eliminate the volumes of federal and state regulations that must be
referred to by social workers; (iv) Electronic Benefit Transfer (EBT) systems
that involve the transfer of food stamp benefits and payments via electronic
networks that may utilize debit cards or smart cards in conjunction with
automated teller machines or point of sale devices.

    FEDERAL FUNDING.  Federal Financial Participation (FFP) is the term used for
federal funds provided to states to assist in delivering human services or for
establishing automated systems to assist in such delivery. From time to time
Congress will increase FFP percentages for a limited time in an attempt to
motivate states to automate or upgrade certain systems. The following is a table
of FFP percentages for state system automation by selected program as of
December 31, 1999:

<TABLE>
<CAPTION>
                                                                       PROJECTED END DATE
PROGRAM                                              FFP%               OF CURRENT FFP%
-------                                            --------       ----------------------------
<S>                                                <C>            <C>
CSE                                                66-80%         None*
TANF                                               Varies**       None**
Food Stamps                                        50%            None
Medicaid                                           50%            None
Medicaid/Managed Care                              50-90%         Varies by program component
Child Welfare                                      50%-75%        None
Other Health and Human Services Systems            Varies         Varies by program component
</TABLE>

------------------------

*   Declines to 66% except for certain welfare reform initiatives, which would
    be eligible for 80% FFP.

**  States receive block grants and are permitted to use federal funds within
    their discretion.

    The FFP percentages shown above are subject to change at any time by the
U.S. Congress.

CONTRACTS AND SERVICES PROVIDED

    The Company's contracts with state agencies have covered four basic types of
projects: (i) the transfer of an entire automated information system currently
in use by another state, which may involve the development of substantial
modifications to that system and installation of the modified system; (ii) the
development of an entirely new system; (iii) the development and installation of
enhancements to an agency's existing system; and (iv) the provision of support
services with respect to an existing

                                       5
<PAGE>
system. The following table sets forth information as of December 31, 1999
relating to the Company's significant contracts with state agencies since
December 1994:

<TABLE>
<CAPTION>
STATE                     PROGRAM AREA          PROJECT        CONTRACT DATE         STATUS
-----                  ------------------  ------------------  -------------   ------------------
<S>                    <C>                 <C>                 <C>             <C>
Idaho                  CSE                 Support services     May 1995       Completed
Rhode Island           TANF/CSE            Support services     July 1995      Completed
Rhode Island           Dept. of Health     Develop new system   May 1996       Completed
Maine                  Child Welfare       Support services     April 1998     In process
Rhode Island           TANF/CSE            Support services     July 1999      In process
</TABLE>

    CONTRACT PROCESS.  Because most health and human services agency contracts
involve federal funding, they originate with a federally required Advanced
Planning Document (APD) submitted by the state agency to the federal government
for approval. The federal government reviews APDs to ensure that the system
proposed by the agency incorporates minimum functional requirements and will
otherwise meet federal, state, and user needs in a cost effective manner.
Following approval of the APD, the state agency prepares a request for proposals
(RFP) from private industry for software services and for equipment, or
hardware, by which the system will operate. Each RFP, which is also subject to
approval by the federal government, is usually divided into two parts, one
soliciting technical proposals and the other soliciting price proposals. There
may be separate RFP's for hardware and software or the RFP may be a "bundled"
bid that includes both hardware and software.

    RFPs essentially define the procuring agency's functional requirements, and
proposals submitted in response thereto by the Company and its competitors are
extensive, detailed descriptions of the manner in which the system proposed
would satisfy those requirements and the experience and qualifications of those
who would design and implement the system. The Company's cost of preparing such
proposals ranges between $10,000 and $100,000, and the Company has submitted
proposals both as a prime contractor and as a subcontractor to others. Contracts
are usually awarded on the basis of a combination of technical considerations
and price, although price can be the determinative factor between technically
acceptable proposals.

    SERVICES.  The Company's contracts with state agencies are usually fixed
price agreements, except for support services which are generally time and
materials contracts, and typically involve most or all of the following services
provided by the Company:

    - customizing and modifying an existing system to be transferred or
      designing a new system;

    - writing computer programs;

    - installing the system;

    - converting data from computer or manual files;

    - testing the system;

    - training personnel to operate the system;

    - providing computers and related equipment; and

    - managing the system.

    As a result, the services provided in performing a contract are not
technically complex, but require emphasis on carefully defining the needs of the
staffs of the agencies that administer the programs involved and adapting
existing technology to satisfy those needs. Change orders and enhancements under
existing contracts are also usually performed on a fixed-price basis and may
result in substantial additions to the base contract price. Contract performance
generally occurs over a period of 24 to 36 months.

                                       6
<PAGE>
    FEDERAL CERTIFICATION.  When system development and installation are
complete, the contracting state agency is generally required to obtain federal
certification that the system meets federal requirements. There are generally no
fixed time requirements for obtaining certification, and certification of the
systems installed by the Company has generally been received between 6 and
12 months following completion of installation. Many state agencies require the
contractor to provide a performance bond, ranging from 10% to 50% of the
contract price, to be released upon completion of the warranty period or upon
certification. Total systems contracts also often provide for a warranty period
following completion of the contract.

    Following certification of a newly installed system, it is not unusual for
state agencies to contract for support services. Services provided under support
contracts are usually paid for on the basis of an hourly rate plus expenses with
an overall limitation. The Company estimates that automated information systems
currently being installed have a useful technological life of approximately five
years and that the systems require revisions every year to keep up with changing
legislation, regulation, and its needs.

    TERMINATION.  As with government contracts generally, the Company's
contracts with state human services agencies may be terminated upon relatively
short notice, with no obligation upon the agency other than to reimburse the
Company for its costs of performance through the date of termination. Such
contracts also generally impose substantial penalties for default such as
failure to obtain federal certification of the completed system.

HIGHER EDUCATION

    The Company provides information technology services to the higher education
market. In 1999, the Company developed a web-based application in support of a
"Performance Based Transcript" system for a local university. The underlying
technology consists of the Oracle Application Server enabling end user access
through a browser while leveraging the existing technical knowledge base of
client/server developers. The application allows instructors, students and
employers to review a student's qualifications from more than a traditional
transcript as part of the job preparation and interview process. Instructors are
able to record measurement of a student's applied skills, track special
certifications received, apply weight to individual skills within a specific
course, as well as, provide traditional grade information. Employers are able to
use the outcome to better assess the candidate's aptitude for a specific
position.

    In addition to using web-based technology to connect university instructors,
students and potential employers to information applicable to the employment
process, the Company assumed a major role in an Enterprise Resource Planning
(ERP) implementation project for a local college. The project is a two-year
endeavor to modify and integrate base ERP software to accommodate student
services, financial services and financial aid. A web-based component will be
included within the student services module. The Company intends to leverage its
knowledge base within the Higher Education market to other management
consulting, web-based design and development, and ERP implementations.

HEALTH CARE

    The health care sector is undergoing tremendous change and consolidation.
Over the last several years, the Company has worked in the area of pharmacy
benefits, assisting a local customer develop and enhance its information
systems. This work has drawn upon many of the skills the Company's technical
staff developed supporting other client/server and mainframe systems. In
addition, however, the Company has played an important role web-enabling the
applications to allow clients easy access to important data.

                                       7
<PAGE>
    The Company envisions doing additional work in the health care arena.
Pharmacy benefits is particularly attractive since it represents a growth area
as the population ages and requires more prescriptions.

NETWORK SERVICES

    The Company's Network Services Division, formed in 1997, offers consulting
and implementation services in local and wide area networking, electronic
messaging and network security. It focused its 1999 efforts in the public
sector, including state agencies, municipalities, school systems and libraries.

    The Company's network services work with state agencies continued under
agreements with the Rhode Island Department of Human Services (DHS), the Rhode
Island Department of Mental Health, Retardation and Hospitals (MHRH) and the
Rhode Island Office of Libraries and Information Services (OLIS) providing
network management and support services to these agencies through full time
technical resources.

    The Company also provided service to various Rhode Island municipalities and
school systems this past year. These services included technology needs
assessments, network implementations and contractual support agreements. The
Towns of Westerly, Rhode Island and North Kingstown, Rhode Island saw
substantial network systems implemented by the Company this year. Microsoft's
Windows NT, Exchange E-mail and Windows 95 were major components of these
projects. In addition, Cisco networking products were deployed for
telecommunications needs at these sites.

    The Company intends to continue to focus on current technologies as well as
wide area networking, network security and Internet/Intranet/e-Business
integration services. The Division will continue to focus our services on
network consulting, implementation and support, offering resources under various
contractual agreements.

COMPETITION

    The Company operates in a highly competitive market. The Company's
competitors for state human services agency contracts include firms such as
Andersen Consulting, Unisys, Dynamics Research Corporation, American Management
Systems, Complete Business Solutions, Inc., Keane and Deloitte & Touche LLP.
These competitors have substantially greater financial, technical, and marketing
resources than those of the Company. The Company believes, however, that no
single contractor is dominant in its market and that the primary competitive
factors are reputation, capability and resources, experience with similar
systems, quality and reliability of service, flexibility and price.

    With respect to other State agencies, higher education, health care,
non-profits and the private sector, there are numerous companies that provide
information technology services. None, however, dominates the market. The
network services market is relatively young and has many companies competing for
various business opportunities.

BACKLOG

    Substantially all of the Company's revenues are derived from work to be
performed under contracts of expected duration exceeding one year. Such
contracts may be terminated on relatively short notice and may be subject
to/contingent upon state or federal funding. At December 31, 1999, the

                                       8
<PAGE>
Company had the following contracts to provide services which, if fully
performed, would result in the revenues shown:

<TABLE>
<CAPTION>
                                                               AMOUNT RECOGNIZED AS
                                                   CONTRACT     CONTRACT REVENUES          BACKLOG
CONTRACT TITLE                                    AMOUNT(1)    EARNED THRU 12/31/99   AS OF 12/31/99(2)
--------------                                    ----------   --------------------   -----------------
<S>                                               <C>          <C>                    <C>
Massachusetts Highway Department................  $  274,995        $       --           $  274,995
Rhode Island Support............................   5,252,670         2,788,569            2,464,101
Maine Child Welfare (MACWIS)....................   2,550,966         1,136,683            1,414,283
MIM Corporation.................................     164,900            36,465              128,435
Others..........................................     130,608           111,575               19,033
                                                  ----------        ----------           ----------
Totals..........................................  $8,374,139        $4,073,292           $4,300,847
                                                  ==========        ==========           ==========
</TABLE>

------------------------

(1) Contract amounts for certain of the above contracts have been adjusted to
    reflect change orders for enhancements or additional functionality.

(2) The Company expects that substantially all of its backlog at December 31,
    1999 will be realized by the end of 2000. There can be no assurance,
    however, that the Company will ultimately realize all of these revenues from
    such contracts. See Note 9 to Financial Statements regarding concentration
    of revenue.

EMPLOYEES

    The Company believes that its future success will depend in large part upon
its continued ability to hire and retain qualified technical and project
management personnel. There can be no assurance that the Company will be
successful in attracting and retaining sufficient numbers of qualified personnel
to conduct its business in the future.

    As of December 31, 1999, the Company had approximately 103 employees. None
of the Company's employees is represented by a labor union. The Company believes
its relations with its employees are excellent.

                                       9
<PAGE>
ITEM 2. PROPERTIES.

    The Company's principal offices are located in Warwick, Rhode Island,
approximately 12 miles from Providence. The Company leases approximately 9,500
square feet of office space at this location under a lease with an average
annual cost including utilities of approximately $186,000 that expires on
October 31, 2000. The Company also leases 3,600 square feet in Augusta, Maine to
support project activities. This lease expires June 30, 2000. The Company
believes that these offices are adequate for its current and near term needs.

ITEM 3. LEGAL PROCEEDINGS

    In June 1995, the Company began negotiating a significant amendment to its
contract for a child support enforcement ("CSE") system with the State of Hawaii
("the State") when it determined that the total estimated cost to complete the
system would be significantly greater than expected. In March 1996, the Company
received final State and federal government approval for this contract amendment
totaling $4.4 million. As a result of numerous in-depth reviews of this contract
amendment, management determined that remaining contract costs would exceed the
contract value by $440,000, and therefore, accrued this loss in December 1995.

    In June 1996, the Company announced a new subcontract agreement with
Complete Business Solutions, Inc. ("CBSI") to expand CBSI's role in the Hawaii
CSE contract. CBSI, at the request of Hawaii, was contracted to lead a detailed
review of the current system under development. Hawaii, in turn, agreed to pay
CBSI $1.2 million from the Company's remaining contract budget when various
milestones were achieved. The Company had a significant role in the detailed
review and had hoped that its results would facilitate the resolution of open
contractual scope issues.

    On September 13, 1996, the State of Hawaii terminated its contract with the
Company, effective September 23, 1996, claiming that the Company had failed to
fulfill its obligations under the contract. In response, the Company also
terminated the contract with the State effective September 23, 1996. The Hawaii
contract, originally estimated to be a $20.7 million contract, was increased to
$25.2 million by the State in February 1996, and was the Company's largest
contract at the time. Prior to termination, approximately $16.5 million of costs
had been incurred towards completion of the contract, and $11 million had been
billed and substantially paid.

    On November 12, 1996, the State of Hawaii filed a lawsuit in the Circuit
Court of the First Circuit of the State of Hawaii (the "Court") against the
Company and Aetna Casualty and Surety and Federal Insurance Company for damages
due to breach of contract (the "Hawaii litigation"). Aetna Casualty and Surety
and Federal Insurance Company provided the $10.3 million performance bond on the
Company's contract with the State of Hawaii to develop and install the State's
child support enforcement system. The suit alleged that the Company failed to
meet contractual deadlines, provided late, incomplete and/or unsuitable
deliverables, materially breached the contract by never completing the design,
the application programming, and the system test and systems implementation. The
State sought an unspecified amount for general damages, consequential and
special damages, liquidated damages, attorneys' fees, reimbursement for the cost
of the suit and interest costs that the court might deem just and proper.

    The Company denied the State's allegation and, on January 23, 1997, filed a
counter claim against the State alleging that the State had breached the
contract. The Company sought $70 million in damages and alleged that the State
fraudulently induced the Company into designing and building a system having
capabilities and features far beyond the scope of the Company's contract. The
fraudulent inducement was in the form of withholding payments, improper
rejection of work that satisfied the requirements of the contract and verbal and
written abuse of the Company's employees and management.

                                       10
<PAGE>
    In addition, Unisys, a vendor providing equipment under the Company's Hawaii
contract, submitted a $896,000 claim against the $10.3 million performance bond.
In February of 1997, the State released all but $1.1 million of the performance
bond; the remainder is intended to cover amounts payable to Unisys and other
subcontractors. In April of 1997, after a detailed review of their records and
discussions with the Company, Unisys agreed to lower their claim to $859,602 and
Aetna Casualty and Surety paid that claim. Lockheed Martin IMS ("Lockheed"), who
guaranteed the performance bond, reimbursed Aetna for that claim. In
December 1997, the Company reached an agreement with Lockheed to repay the
$859,602 over a five-year period.

    On December 13, 1996, CBSI filed a lawsuit in the Superior Court of the
State of Rhode Island seeking $517,503, which the Company had previously
accrued, plus interest costs and attorney's fees. The Company disputed the
$517,503 owed to CBSI and filed a counterclaim against CBSI on January 13, 1997,
alleging, among other things, that CBSI failed to complete its duties required
under the subcontract with the Company in a timely manner, improperly engaged in
negotiations with the State of Hawaii to complete the project, hired and
attempted to hire employees of the Company in violation of its subcontract
agreement with the Company and obtained and utilized confidential information
and proprietary intellectual property inappropriately. Also, the Company alleged
that CBSI owed the Company $482,750 as of December 31, 1996, for which the
Company did not establish a reserve for uncollectibility.

    On February 3, 1997, the Company filed a third-party complaint ("TPC") as
part of the Hawaii litigation against MAXIMUS Corporation ("MAXIMUS") and CBSI.
MAXIMUS had been the State of Hawaii's contract supervisor and advisor since the
inception of the Hawaii project. The allegations the Company made against CBSI
in this TPC were substantially similar to the allegations made against CBSI in
the Company's counterclaim to CBSI's December 13, 1996, lawsuit brought against
the Company in Rhode Island. The Company alleged that MAXIMUS was liable to the
Company on grounds that: (i) the Company was an intended third party beneficiary
under the contract between MAXIMUS and Hawaii; (ii) MAXIMUS tortuously
interfered in the contract between the Company and Hawaii; (iii) MAXIMUS
negligently breached duties to the Company, and (iv) MAXIMUS aided and abetted
Hawaii in Hawaii's breach of contract. The Company's complaint sought
$70 million in damages.

    Due to the significant uncertainty created by these events, the Company
ceased recognition of revenue on the Hawaii contract in 1996. It recorded an
adjustment of $1.8 million in the fourth quarter of 1996 to reverse revenue of
$1 million, $400 thousand and $400 thousand recorded previously in the first,
second and third quarters, respectively. In addition, the Company expensed
$1.96 million of costs incurred related to the Hawaii contract in 1996.

    On May 11, 1999, the Company reached a settlement agreement with both the
State and CBSI, which was approved by the Court on July 22, 1999. All claims of
the Company, the State and CBSI were dismissed, except the Company's claims
against MAXIMUS. Per the settlement, the Company agreed to pay the State
$1 million over four years as follows: June 1999--$250,000, June 2000--
$250,000, June 2001--$250,000, June 2002--$125,000 and June 2003--$125,000. The
first payment was reduced by a $50,000 credit for the settlement of a lease
obligation on computer equipment. The equipment lessor, who had filed suit
against the Company, accepted $50,000 from the Company in full payment of that
obligation. CBSI agreed to pay the Company $300,000 immediately, which the
Company has received. No party to these settlement agreements admitted any
wrongdoing.

    To facilitate the settlement, Lockheed agreed to modify certain aspects of a
promissory note issued to it by the Company in 1997. Lockheed agreed to extend
the note's maturity several years, to reschedule favorably certain principal
payments and to reduce the interest rate on the remaining principal, which is
$642,000 as of December 31, 1999.

                                       11
<PAGE>
    On October 29, 1999, the Company and MAXIMUS entered into a settlement
agreement whereby the Company released MAXIMUS from all claims and potential
claims in relation to the Hawaii contract and vice versa in exchange for a
payment to the Company of $50,000, which the Company received in November 1999.

    As of December 31, 1999, the Company was not involved in any material
litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    None.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The Company's Common Stock is traded on The NASDAQ SmallCap Market under the
symbol "NWSS." Prior to August 2, 1993, the Common Stock was traded in the
over-the-counter market under the same symbol.

    The following table sets forth the high and low sales prices of the
Company's Common Stock as reported on The NASDAQ National Market prior to
October 29, 1998 thereafter on The NASDAQ SmallCap Market.

<TABLE>
<CAPTION>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
1999
First Quarter...............................................   $6.25      $3.25
Second Quarter..............................................    6.50       3.38
Third Quarter...............................................    6.75       3.50
Fourth Quarter..............................................    5.19       3.13

1998
First Quarter...............................................   $5.38      $2.75
Second Quarter..............................................    6.00       3.38
Third Quarter...............................................    9.75       3.19
Fourth Quarter..............................................    5.25       2.94
</TABLE>

    As of December 31, 1999, there were 294 holders of record of the Common
Stock, representing approximately 378 beneficial owners. The last reported sale
price for the Common Stock, as reported on The NASDAQ SmallCap Market on
February 28, 2000, was $3.50 per share.

DIVIDEND POLICY

    The Company has not paid any dividends on its Common Stock since its
formation. It presently intends to retain its earnings for use in its business
and does not anticipate paying any cash dividends in the foreseeable future. The
Company's Articles of Incorporation prohibit the payment of dividends on the
Common Stock if dividends required to be paid on the Company's Series A
Convertible Preferred Stock are in arrears, which they are.

ITEM 6. SELECTED FINANCIAL DATA.

    The following selected financial data are qualified by reference to, and
should be read in conjunction with, the Company's Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operation" contained elsewhere in or

                                       12
<PAGE>
incorporated by reference in this Form 10-K. The selected financial data for
each of the five years in the period ended December 31, 1999, are derived from
the Company's audited financial statements.

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                -------------------------------------------------------------------
                                   1999          1998          1997          1996          1995
                                -----------   -----------   -----------   -----------   -----------
<S>                             <C>           <C>           <C>           <C>           <C>
INCOME STATEMENT DATA:
Contract revenue earned.......  $10,225,676   $10,399,979   $11,460,437   $ 7,344,380   $20,985,012
Cost of revenue earned........    6,178,286     6,418,678     8,620,097     7,359,649    19,299,944
                                -----------   -----------   -----------   -----------   -----------
Gross profit (loss)...........    4,047,390     3,981,301     2,840,340       (15,269)    1,685,068
Selling, general and
  administrative expense......    2,920,352     2,260,418     2,071,294     2,240,073     4,369,260
Research & development
  expense.....................           --            --            --            --       185,235
Restructuring expense.........           --            --            --      (119,436)      537,221
Litigation settlement.........    3,126,665
Income (loss) from
  operations..................   (1,999,627)    1,720,883       769,046    (2,135,906)   (3,406,648)
Income (loss) before income
  taxes.......................   (2,064,615)    1,674,006       534,950    (2,533,368)   (3,792,521)
Net income (loss).............   (1,221,615)    1,061,006       406,950    (1,758,345)   (2,427,440)
Net income (loss) per share
  Basic.......................        (1.96)         0.96          0.25         (2.71)        (3.68)
  Diluted.....................        (1.96)         0.96          0.25         (2.71)        (3.68)
Shares used in computing net
  income (loss) per share
  Basic.......................      787,638       758,547       729,927       719,317       709,841
  Diluted.....................      787,638       758,547       729,927       719,317       709,841
</TABLE>

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                   ----------------------------------------------------------------
                                      1999         1998         1997         1996          1995
                                   ----------   ----------   ----------   -----------   -----------
<S>                                <C>          <C>          <C>          <C>           <C>
BALANCE SHEET DATA:
Working capital..................  $2,853,369   $1,416,200   $   22,117   $(1,073,671)  $(2,075,339)
Hawaii contract receivables*.....          --    3,459,382    3,459,382     3,571,824     5,711,022
Total assets.....................   6,160,188    8,700,782    9,292,103     8,273,564    14,945,273
Long-term obligations............   1,317,875    1,566,590    1,422,725       235,479       254,393
Total stockholders' equity.......   2,330,945    3,808,883    2,955,420     2,748,777     4,644,494
</TABLE>

    * See Notes 10 and 11 in the notes to the financial statements.

                                       13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATION.

    The following analysis of the financial conditions and results of operations
of the Company should be read in conjunction with the Company's Financial
Statements and Notes thereto included elsewhere in or incorporated by reference
in this Form 10-K.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    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. They are
necessarily speculative statements, and unforeseen factors, such as competitive
pressures, litigation, labor market changes, technology changes and regulatory
and state funding changes could cause results to differ materially from any that
may be expected. Actual results and events may therefore differ significantly
from those discussed in forward-looking statements. Moreover, forward-looking
statements are made in the context of information available as of the date
stated, and the Company undertakes no obligation to update or revise such
statements to reflect new circumstances or unanticipated events as they occur.

GENERAL

    The Company was incorporated in 1976 as National E-F-T, Inc. Initially the
Company provided consulting services with respect to electronic funds transfer
and electronic data interchange systems. In 1983 the Company changed its name to
Network Solutions, Inc. and on February 1, 1994 to Network Six, Inc. By 1983,
the Company had changed its focus to that of a regional provider of systems
development and contract computer programming services. Since 1988, the Company
has focused its efforts on providing its services to state government health and
human services agencies. Commencing in 1998, the Company began targeting its
marketing efforts at other state government agencies, as well as non-profit
organizations and the private commercial sector.

    In January 1999, the Company announced that the State of Rhode Island,
Department of Administration, had increased its contract with the Company for an
additional $2.5 million to enhance the State's InRHODES computer system. This
brought the total value of the Company's support contract with the State of
Rhode Island for InRHODES-related work to $5.3 million.

    In February 1999, the Company announced that Dr. Samara H. Navarro, formerly
Deputy Commissioner, Department of Children and Families, State of Florida,
joined the Company as Vice President of Governmental Services.

    In April 1999, the Company announced that Peter C. Wallace, formerly an
executive with ITT World Directories, joined the Board of Directors. The Company
concurrently announced that Clifton C. Dutton, a Director of the Company since
1997, had resigned.

    In June 1999, the Company announced that the State of Rhode Island,
Department of Administration, had awarded a contract to the Company valued at
approximately $5.25 million to support the State's InRHODES computer system,
used by the Department of Human Services and the Division of Taxation--Child
Support Enforcement. The State of Rhode Island has the option to renew the
contract for up to three additional years.

    In July 1999, the Company announced that the State of Maine extended the
support contract for Maine's MACWIS child welfare system for another year
commencing July 1, 1999. The value of the contract, including enhancements to
the system, is approximately $2.6 million.

    In November 1999, the Company announced a new one-year revolving line of
credit agreement with Fleet National Bank of Providence, RI. The $1 million
credit facility replaced the Company's

                                       14
<PAGE>
existing credit facility with a New Jersey based finance company and includes
revolving loan financing and standby letters of credit.

    In November 1999, the Company announced it had been tentatively selected by
the Director of Administration, State of Rhode Island, to maintain the Rhode
Island Children's Information System for the Department of Children, Youth and
Families (DCYF). The value of the one-year contract, which was subsequently
signed and began in February 1, 2000, is approximately $1.5 million. The State
has the option to extend the contract for up to two additional years at similar
levels of support and price.

    In December 1999, the Company announced the appointment of James J. Ferry as
Vice President of Finance and Administration, Chief Financial Officer and
Treasurer. Mr. Ferry has over 20 years of financial management experience in
both the electronics and automotive industries.

    In March 2000, the Company announced that three non-employee Directors of
the Board resigned. The three, Ralph Cote, Nicolas Supron and Peter Wallace, all
cited personal reasons as well as philosophical differences with the Company's
Chairman, President and CEO, Kenneth C. Kirsch. None of them expressed any
objection to any action of the Company or the Board.

    In March 2000, the Company announced that Donna J. Guido, Vice President of
Information Systems for the Company, and Henry N. Huta, President/CEO of BIW
Tamaqua Cables were elected to the Board of Directors.

    In March 2000, Edward J. Braks, Chief Financial Officer and Chair of the
Management Committee of Paul Arpin Van Lines was elected to the Board of
Directors.

YEAR 2000 DISCLOSURE

    The "Year 2000 Issue" is the result of the use of two digits instead of four
to define the applicable year. The Company has completed its Year 2000 program
by testing and upgrading (when necessary) all software and hardware. At the time
of filing of this 10-K, the Company has not experienced, or anticipates
experiencing, any significant problems internally or externally to its
operations. Although the Company believes it has completed this upgrade program
successfully, there can be no assurance that this program will continue to be
successful in remediating the impact of the "Year 2000 Issue".

RESULTS OF OPERATIONS

    The following table sets forth for the years indicated, information derived
from the Company's Financial Statements expressed as a percentage of the
Company's contract revenue earned:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                         ------------------------------
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Contract revenue earned................................   100.0%     100.0%     100.0%
Cost of revenue earned.................................    60.4%      61.7%      75.2%
Gross profit...........................................    39.6%      38.3%      24.8%
Selling and administrative expenses....................    28.6%      21.7%      18.1%
Income before income taxes.............................   -20.2%      16.1%       4.7%
Net income (loss)......................................   -11.9%      10.2%       3.6%
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

    Contract revenue earned decreased $174,303, or 2%, from $10,399,979 in the
year ended December 31, 1998 to $10,225,676 in the year ended December 31, 1999.
This was primarily due to the completion of the installation of the Maine
Automated Child Welfare Information System ("MACWIS"), lower maintenance and
support services at MIM Corporation, and the completion of a contract with GTECH
Corporation. This decrease was offset by increased revenues from the

                                       15
<PAGE>
installation of a web-based application and related work in support of a
"Performance Based Transcript" system for a local university.

    Cost of revenue earned, consisting of direct employee labor, direct contract
expense and subcontracting expense, decreased $240,392, or 4%, from $6,418,678
in 1998 to $6,178,286 in 1999. This was primarily due to a lower reliance on
subcontractor labor, which is generally at a higher cost than the Company's
internal staff.

    Gross profit increased $66,089 from $3,981,301 in 1998 to $4,047,390 in
1999. Gross profit, as a percentage of revenue, was 38% for 1998 and 40% for
1999. This was primarily because of the Company's improved margins on the Maine
MACWIS support project compared to the initial Maine MACWIS development and
implementation project which included substantial subcontract labor.

    Selling, general and administrative expenses increased $659,934, or 29%,
from $2,260,418 in 1998 to $2,920,352 in 1999 primarily due to an increase in
marketing and business development staff and related activities in an effort to
increase the revenue of the Company. On a percentage of contract revenue earned,
SG&A expenses increased from 22% in 1998 to 29% in 1999.

    Interest expense increased $28,451, or 23%, from $125,314 in 1998 to
$153,765 in 1999 due to the imputed interest on the note payable to the State of
Hawaii. See Item 3--Legal Proceedings.

    Income before income taxes decreased $3,738,621 from $1,674,006 in 1998 to a
loss of 2,064,615 in 1999 primarily due to settlement of the Company's Hawaii
related litigation. See Item 3--Legal Proceedings. The effect of the litigation
settlements consists of (1) the write-off of Hawaii related receivables, work in
process and liabilities of $2,607,708, (2) the present value of the $1,000,000
payment due to Hawaii of $868,957, (3) the receipt of a $300,000 payment from
CBSI and (4) a $50,000 payment from MAXIMUS is $3,126,665. See Item 3--Legal
Proceedings and Notes 10 and 11 in Notes to Financial Statements.

    As a result of the foregoing, loss before income taxes was $2,064,615 in
1999, a decrease of $3,738,621 from income before taxes of $1,674,006 in 1998.

    Net income decreased $2,282,621 in 1999 from $1,061,006 in 1998 to a net
loss of $1,221,615, primarily due to increased selling, general and
administrative expenses and the effect of settling the litigation with the State
of Hawaii and other parties.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

    Contract revenue earned decreased $1,060,457, or 9%, from $11,460,437 in the
year ended December 31, 1997 to $10,399,980 in the year ended December 31, 1998
primarily due to the completion of the Idaho Child Support Enforcement project
in March 1997, and the substantial completion of the Rhode Island Department of
Health system (KidsNet) and the Maine Automated Child Welfare Information System
(MACWIS) projects. This decrease was offset by increased work on the Rhode
Island Department of Human Services contract due to welfare reform, commencement
of the MIM Corporation project, and increased business for the Company's Network
Services Division.

    Cost of revenue earned, consisting of direct employee labor, direct contract
expense and subcontracting expense, decreased $2,201,419, or 26%, from
$8,620,097 in 1997 to $6,418,678 in 1998. This was primarily due to a lower
reliance on subcontractor labor, which is generally at a higher cost than the
Company's internal staff.

    Gross profit increased $1,140,961 from $2,840,340 in 1997 to $3,981,301 in
1998. Gross profit, as a percentage of revenue was 25% for 1997 and 38% for
1998. This was primarily because of the Company's improved margins on the Maine
MACWIS support project over the Maine MACWIS project.

                                       16
<PAGE>
    Selling, general and administrative expenses increased $189,124, or 9%, from
$2,071,294 in 1997 to $2,260,418 in 1998 primarily due to an increase in
marketing and related expenses. On a percentage basis, SG&A expenses increased
from 18% in 1997 to 22% in 1998, as a percentage of contract revenue earned.

    Interest expense decreased $140,716 or 53% from $266,030 in 1997 to $125,314
in 1998 due to a lower level of borrowing.

    As a result of the foregoing, income before income taxes was $1,674,006 in
1998, an increase of $1,139,056 from $534,950 in 1997. Income before income
taxes, as a percentage of contract revenue earned increased from 5% in 1997 to
16% in 1998.

    Net income of $1,061,006 in 1998 represents an increase of $654,056, or
161%, from $406,950 in 1997. As a percentage of contract revenue earned, net
income increased from 4% in 1997 to 10% in 1998. The Company's effective tax
rate was 24% for 1997 and 37% for 1998.

LIQUIDITY AND CAPITAL RESOURCES

    In order to finance bid preparation costs and to obtain sufficient
collateral to support performance bonds required by some customers, the Company
has, in the past, entered into joint ventures with other firms with greater
financial resources when bidding for contracts. The Company expects to continue
and expand this practice prospectively as well as to pursue more time and
material contracts than it has historically pursued. Time and materials
contracts generally do not require performance bonds and almost always involve
less risk to meet customer requirements.

    The Company has historically not received its first contract progress
payments until approximately three to six months after contract award, which
itself was as much as 12 months after proposal preparation commences. The
Company was therefore required to fund substantial costs well before the receipt
of related income, including marketing and proposal costs and the cost of a
performance bond. Prospectively, the Company expects to tighten up this
timetable, thereby reducing the requirement for additional working capital.

    The Company has funded its operations through cash flows from operations,
bank borrowings, borrowings from venture partners, and private placements of
equity securities. Net cash provided by operating activities was $1,584,094,
$1,066,014 and $1,854,052 in the years ended December 31, 1999, 1998, and 1997
respectively. Fluctuations in net cash provided by operating activities are
primarily the result of changes in net income, accounts receivable and income
tax receivable, accounts payable and costs and estimated earnings in excess of
billings on contracts due to differences in contract milestones and payment
dates.

    On September 21, 1998 the Company entered into two five-year term loans,
each for $250,000. One lender was the Small Business Loan Fund Corporation,
("SBLFC"), a subsidiary of the Rhode Island Economic Development Corporation.
The other lender was the Business Development Corporation of Rhode Island
("BDC"). The SBLFC loan carries an annual interest rate of 9.5% and must be
repaid over five years. The BDC loan carries an annual interest rate of 10.25%,
and an annual deferred fee of $5,000, and must be paid back over five years.
Both term loans are secured by substantially all the assets of the Company. The
BDC was also issued five-year warrants to purchase 11,500 unregistered shares of
the Company's Common Stock at a price of $4.50 per share. The warrants expire on
September 20, 2003. The fair value of the warrants was estimated by the Company
to be $36,806 using the Black-Scholes model and is being amortized ratably over
the exercise period. Such amount is included in other noncurrent assets on the
accompanying balance sheet.

    The BDC and SBLFC notes contain restrictive covenants, which require, among
other things, a minimum cash flow to debt service coverage ratio. As of
December 31, 1999, the Company was not in

                                       17
<PAGE>
compliance with such covenant. The Company has obtained a waiver relating to
this default as it pertains to the 1999 financial statements.

    On November 15, 1999, the Company entered into a revolving line of credit
with a commercial bank. This $1 million revolving line of credit is secured by
all of the assets of the Company. The Company can borrow up to 80% of certain
qualified accounts receivable at an interest rate of prime plus 1/4%. On
December 31, 1999, the revolving line of credit had an outstanding balance of
zero.

    The Company believes that cash flow generated by operations will be
sufficient to fund continuing operations through the end of 2000. The Company
believes that inflation has not had a material impact on its results of
operations to date.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

    There are no recently issued financial accounting standards that impact the
Company's financial statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

    LABOR CONSIDERATIONS

    Due to the technical and labor-intensive nature of the Company's business,
continued success of the Company depends largely upon the ability of management
to attract and retain highly-skilled information technology professionals and
project managers possessing the technical skills and experience necessary to
deliver the Company's services. There is a high demand for qualified information
technology professionals worldwide and they are likely to remain a limited
resource for the foreseeable future. The Company has no assurance that qualified
information technology professionals will continue to be available in sufficient
numbers, or at wages, which will enable the Company to retain current or future
employees. A material adverse effect on the Company's business, operating
results, and financial condition would be expected if the Company fails to
attract or retain qualified information technology professionals in sufficient
numbers.

    TECHNOLOGICAL CONSIDERATIONS

    Rapid technological change, evolving industry standards, changing client
preferences and new product introductions characterizes the information
technology industry. The Company's success will depend in part on its ability to
develop technological solutions that keep pace with changes in the industry.
There can be no assurance that products or technologies developed by others will
not render the Company's services noncompetitive or obsolete or that the Company
will be able to keep pace with the expected continued rapid changes in
technology. A failure by the Company to address these developments could have a
material adverse effect on the Company's business, operating results and
financial condition.

    YEAR 2000 CLIENT CONSIDERATIONS

    The Company's contracts, including year 2000 projects, often involve
projects that are critical to the operations of its clients' businesses and
provide benefits that may be difficult to measure. There can be no assurance
that despite the Company's attempts to contractually limit its liability for
damages arising from errors, mistakes, omissions or negligent acts in rendering
its services, these attempts will be successful. The Company's inability to meet
a client's expectations in the delivery of its services could result in a
material adverse effect to the client's operations and, therefore, could
potentially give rise to claims against the Company or damage the Company's
reputation, detrimentally affecting its business, operating results and
financial condition. The Company believes that it has successfully completed all
client year 2000 projects and as of the date of this filing is not aware of any
issues relating year 2000 projects undertaken by the Company on behalf of
clients.

                                       18
<PAGE>
    LONG-TERM CONTRACT CONCERNS

    The typical contract with a client is for a term of one to three years.
Generally, there is no assurance that a client will renew its contract when it
terminates. Under such contracts, clients may reduce the use of the Company's
services without penalty. Failure by the Company to retain its existing clients
could materially adversely effect its results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The information required by Item 8 is contained on pages F-2 to F-23 of this
report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.

    On January 6, 1998, the Company engaged the firm of Sansiveri, Kimball &
McNamee, L.L.P. ("SKM"), as its auditors. Before the engagement, neither the
Company nor anyone on its behalf (i) consulted with the newly engaged accountant
regarding the application of accounting principles to a specific completed or
contemplated transaction or the type of audit opinion that might be rendered on
the Company's financial statements, or (ii) had been provided with advice that
was an important factor considered by the Company in reaching a decision as to
an accounting, auditing or financial reporting issue. The decision to engage SKM
was approved by the Audit Committee of the Board of Directors of the Company.

    On January 6, 1998, the Company terminated, with the concurrence of its
Audit Committee, its relationship with its auditors KPMG LLP ("KPMG"). KPMG
included in its Independent Auditors' reports dated March 28, 1997 and April 1,
1996 a statement that the accompanying financial statements had been prepared
assuming that the Company will continue as a going concern. In addition, during
the audit of the Company's financial statements for the year ended December 31,
1996, KPMG concluded that approximately $1.8 million of revenue recognized on
the Company's contract with the State of Hawaii during the first three quarters
of 1996 should not have been recognized and should have been reversed in the
respective quarters. The Company believes that the revenue was properly and
correctly recognized and that there is no reason that it should have known under
applicable accounting standards that the revenue should not have been recognized
at the time. Moreover, when the Company had reason to know that revenue under
the contract should not be recognized because of changed conditions, such
revenue was reversed in the fourth quarter of 1996 and for the year ended
December 31, 1996.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

    The Company currently intends to include the information required by Item 10
in the Company's 2000 Annual Meeting Proxy Statement ("2000 Proxy Statement")
and such proxy statement is incorporated herein by reference. Such Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after the Company's fiscal year end.

ITEM 11. EXECUTIVE COMPENSATION.

    The Company currently intends to include the information required by Item 11
in the Company's 2000 Proxy Statement and such information is incorporated
herein by reference. Such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the Company's fiscal year end.

                                       19
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The Company currently intends to include information required by Item 12 in
the Company's 2000 Proxy Statement and such information is incorporated herein
by reference. Such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the Company's fiscal year end.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The Company currently intends to include information required by Item 13 in
the Company's 2000 Proxy Statement and such information is incorporated herein
by reference. Such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the Company's fiscal year end.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

    (a) (1) List of Financial Statements.

    The following financial statements and notes thereto of the Company and
Independent Auditors' Report thereon are included on pages F-2 to F-22 of this
report:

       Independent Auditors' Report of Sansiveri, Kimball & McNamee L.L.P.

       Balance Sheets as of December 31, 1999 and 1998

       Statements of Operations for the Years Ended December 31, 1999, 1998, and
       1997

       Statements of Stockholders' Equity for the Years Ended December 31, 1999,
       1998, and 1997

       Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and
       1997

       Notes to Financial Statements

(2) LIST OF FINANCIAL STATEMENT SCHEDULES.

    All schedules have been omitted because they are either not applicable or
not required, or the required information is provided in the financial
statements or notes thereto.

                                       20
<PAGE>
(3) LIST OF EXHIBITS.

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                     EXHIBIT
       -------          ------------------------------------------------------------
<C>                     <S>
          3.1           Articles of Incorporation of the Company, as amended
                        (incorporated by reference from the Company's Form 10, File
                        No. 0-21038)

          3.2           Bylaws of the Company as amended (incorporated by reference
                        from the Company's Form 10, File No. 0-21038)

         10.1           Stock Purchase Agreement dated October 29, 1992 between the
                        Company and Saugatuck Capital Company Limited Partnership
                        III (incorporated by reference from the Company Form 10,
                        exhibit 10.7, File No. 0-21038)

         10.2           Registration Rights Agreement dated October 29, 1992 between
                        the Company and Saugatuck Capital Company Limited
                        Partnership III (incorporated by reference from the
                        Company's Form 10, exhibit 10.8, File No. 0-21038)

         10.3           Incentive Stock Option Plan (incorporated by reference from
                        the Company's Form 10, exhibit 10.9, File No. 0-21038)

         10.4           Deferred Compensation Agreement between the Company and Mr.
                        Robert E. Radican, as amended (incorporated by reference
                        from the Company's Form 10-K, exhibit 10.10, for the fiscal
                        year ended December 31, 1994)

         10.5           1993 Employee Stock Purchase Plan (incorporated by reference
                        from the Company's Form 10-K, exhibit 10.12, for the fiscal
                        year ended December 31, 1994)

         10.6           1993 Incentive Stock Option Plan (incorporated by reference
                        from the Company's Form 10-K, exhibit 10.18, for the fiscal
                        year ended December 31, 1993)

         10.7           Non-employee Director Stock Option Plan (incorporated by
                        reference from the Company's Form 10-K, exhibit 10.12, for
                        the fiscal year ended December 31, 1996)

         10.8           Contract dated April, 1997 between the Company and the State
                        of Maine re: Automated child welfare system (incorporated by
                        reference from the Company's Form 10-K, exhibit 10.18, for
                        the fiscal year ended December 31, 1997)

         10.9           Agreement dated December 29, 1997 between the Company and
                        Lockheed Martin IMS re: note payable (incorporated by
                        reference from the Company's Form 10-K, exhibit 10.19, for
                        the fiscal year ending December 31, 1997)

        10.10           Credit Agreement dated September 23, 1998 between the
                        Company and Small Business Loan Fund Corporation, a
                        subsidiary of the Rhode Island Economic Development
                        Corporation (incorporated by reference from the Company's
                        Form 10-K, exhibit 10.16, for the fiscal year ending
                        December 31, 1998)

        10.11           Credit Agreement dated September 23, 1998 between the
                        Company and Business Development Corporation of Rhode Island
                        (incorporated by reference from the Company's Form 10-K,
                        exhibit 10.17, for the fiscal year ending December 31, 1998)

        10.12           Employment Agreement between the Company and Mr. Kenneth C.
                        Kirsch dated January 1, 1999

        10.13           Contract dated April 28, 1999 between then Company and
                        Complete Business Solutions, Inc. ("CBSI") dismissing all
                        outstanding claims between the Company and CBSI
</TABLE>

                                       21
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                     EXHIBIT
       -------          ------------------------------------------------------------
<C>                     <S>
        10.14           Contract dated May 1, 1999 between the Company and the State
                        of Hawaii dismissing all outstanding claims between the
                        Company and the State of Hawaii

        10.15           Contract dated July 1, 1999 between the Company and the
                        State of Rhode Island Department of Human Services re:
                        support services

        10.16           Loan Agreement dated November 15, 1999 between the Company
                        and Fleet National Bank

         22.1           List of Subsidiaries (incorporated by reference from the
                        Company's Form 10, File No. 0-21038)
</TABLE>

(b) REPORTS ON FORM 8-K.

    A current report on Form 8-K, dated December 2, 1999 was filed by the
Company and included a press release dated December 1, 1999 announcing the
appointment of James J. Ferry as Vice President of Finance and Administration,
Chief Financial Officer and Treasurer.

    A current report on Form 8-K, dated November 30, 1999 was filed by the
Company and included the press release dated November 30, 1999 announcing a
tentative $1.5 million contract award to the Company by the State of Rhode
Island to maintain the Rhode Island Children's Information System (RICHST) for
the Department of Children, Youth and Families.

    A current report on Form 8-K, dated November 23, 1999 was filed by the
Company and included a press release dated November 22, 1999 announcing a new
line of credit agreement with Fleet National Bank of Providence, Rhode Island.
The $1 million credit facility replaced the Company's credit facility with a New
Jersey based finance company.

    A current report on Form 8-K, dated October 29, 1999 was filed by the
Company and included the press release dated October 29, 1999, announcing the
Company's results for the quarter ended September 30, 1999. A Statement of
Operations (without notes) for the quarters ended September 30, 1999 and, 1998
was included with the filing. A balance sheet as of September 30, 1999 and
December 31, 1998 was also included with the filing.

                                       22
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned on the 29th day of March 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       NETWORK SIX, INC.

                                                       BY:  /S/ KENNETH C. KIRSCH
                                                            -----------------------------------------
                                                            Kenneth C. Kirsch
                                                            President and Chief Executive Officer
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                      DATE
                      ---------                                    -----                      ----
<C>                                                    <S>                             <C>
                                                       Chairman of the Board,
                /s/ KENNETH C. KIRSCH                    President, and Chief
     -------------------------------------------         Executive Officer (Principal    March 29, 2000
                  Kenneth C. Kirsch                      Executive Officer)

                                                       Vice President of Finance and
                                                         Administration, Chief
                 /s/ JAMES J. FERRY                      Financial Officer, and
     -------------------------------------------         Treasurer (Principal            March 29, 2000
                   James J. Ferry                        Financial and Accounting
                                                         Officer)

                  /s/ HENRY N. HUTA                    Director
     -------------------------------------------                                         March 29, 2000
                    Henry N. Huta

                 /s/ DONNA J. GUIDO                    Director
     -------------------------------------------                                         March 29, 2000
                   Donna J. Guido

                 /s/ EDWARD J. BRAKS                   Director
     -------------------------------------------                                         March 29, 2000
                   Edward J. Braks
</TABLE>

                                       23
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
                                      AND
                         FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Independent Auditors' Report of Sansiveri, Kimball & McNamee
  L.L.P.....................................................     F-2
Balance Sheets as of December 31, 1999 and 1998.............   F-3-4
Statements of Operations for the Years Ended December 31,
  1999, 1998, and 1997......................................     F-5
Statements of Stockholders' Equity for the Years Ended
  December 31, 1999, 1998, and 1997.........................     F-6
Statements of Cash Flows for the Years Ended December 31,
  1999, 1998, and 1997......................................   F-7-8
Notes to Financial Statements...............................     F-9
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of
Network Six, Inc.:

    We have audited the accompanying balance sheet of Network Six, Inc. as of
December 31, 1999 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1999, 1998
and 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, such financial statements referred to above present fairly,
in all material respects, the financial position of Network Six, Inc. at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years ended December 31, 1999, 1998 and 1997, in conformity with
generally accepted accounting principles.

Sansiveri, Kimball & McNamee, L.L.P.
/s/ Sansiveri, Kimball & McNamee, L.L.P.
Providence, Rhode Island
February 29, 2000

                                      F-2
<PAGE>
                               NETWORK SIX, INC.

                                 BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $2,453,935   $1,442,035
  Contract receivables, less allowance for doubtful accounts
    of $49,000 in 1999 and $69,000 in 1998 (Note 2).........   1,561,255    1,966,788
  Costs and estimated earnings in excess of billings on
    contracts (Note 3)......................................     759,891    1,220,253
  Refundable taxes on income (Note 6).......................     150,640           --
  Deferred taxes (Note 6)...................................     287,083           --
  Other assets..............................................     151,933      112,433
                                                              ----------   ----------
    Total current assets....................................   5,364,737    4,741,509
                                                              ----------   ----------
Property and equipment (Note 5):
  Computers and equipment...................................     590,124      590,527
  Furniture and fixtures....................................     162,606      163,532
  Leasehold improvements....................................      20,191       20,191
                                                              ----------   ----------
                                                                 772,921      774,250
Less accumulated depreciation and amortization..............     578,015      602,033
                                                              ----------   ----------
    Property and equipment, net.............................     194,906      172,217
  Deferred taxes (Note 6)...................................     513,795       37,097
  Contract receivables and costs in excess of billings on
    Hawaii contract (Notes 3, 10 and 11)....................          --    3,459,382
  Other assets..............................................      86,750      290,577
                                                              ----------   ----------
  Total assets..............................................  $6,160,188   $8,700,782
                                                              ==========   ==========
</TABLE>

                                      F-3
<PAGE>
                               NETWORK SIX, INC.

                                 BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current installment of obligations under capital leases
    (Note 5)................................................  $    8,132   $   89,483
  Current portion of long-term debt (Note 4)
    Vendors.................................................     100,000      200,000
    Others..................................................     349,141       91,997
  Accounts payable..........................................     202,195       58,456
  Accrued salaries and benefits.............................     508,193      579,320
  Accrued subcontractor expense.............................      12,843       24,950
  Other accrued expenses....................................      86,938      320,982
  Billings in excess of costs and estimated earnings on
    contracts (Note 3)......................................     124,458      341,572
  Income taxes payable (Note 6).............................          --      780,066
  Deferred taxes (Note 6)...................................          --       42,491
  Preferred stock dividends payable (Note 7)................   1,119,468      795,992
                                                              ----------   ----------
    Total current liabilities...............................   2,511,368    3,325,309
                                                              ----------   ----------
Obligations under capital leases, excluding current
  installments (Note 5).....................................          --       38,090
Long-term debt, less current portion (Note 4)
    Vendors.................................................     542,239      542,239
    Others..................................................     775,636      409,778
  Hawaii Payable (Notes 10 and 11)..........................          --      576,483
                                                              ----------   ----------
    Total Liabilities.......................................   3,829,243    4,891,899
                                                              ----------   ----------
Commitments (Notes 5, 8 and 10)
Other information (Note 9)
Stockholders' equity (Note 7):
  Series A convertible preferred stock, $3.50 par value.
    Authorized 857,142.85 shares; issued and outstanding
    714,285.71 shares in 1999 and 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 and outstanding 794,306 shares in 1999 and
    764,663 in 1998.........................................      79,430       76,466
Additional paid-in capital..................................   1,888,652    1,796,284
Treasury stock, recorded at cost, 8,081 shares at December
  31, 1999..................................................     (28,179)          --
Retained earnings (accumulated deficit).....................  (1,844,632)    (299,541)
                                                              ----------   ----------
    Total stockholders' equity..............................   2,330,945    3,808,883
                                                              ----------   ----------
    Total Liabilities and Stockholders' Equity..............  $6,160,188   $8,700,782
                                                              ==========   ==========
</TABLE>

                See accompanying notes to financial statements.

                                      F-4
<PAGE>
                               NETWORK SIX, INC.

                            STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                           1999          1998          1997
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Contract revenue earned (Note 9)......................  $10,225,676   $10,399,979   $11,460,437
Cost of revenue earned................................    6,178,286     6,418,678     8,620,097
                                                        -----------   -----------   -----------
  Gross profit........................................    4,047,390     3,981,301     2,840,340

Selling, general and administrative expenses..........    2,920,352     2,260,418     2,071,294
Litigation settlement (Note 11).......................    3,126,665            --            --
                                                        -----------   -----------   -----------
Income (loss) from operations.........................   (1,999,627)    1,720,883       769,046

Other deductions (income):
  Interest expense....................................      153,765       125,314       266,030
  Interest earned.....................................      (88,777)      (78,437)      (31,934)
                                                        -----------   -----------   -----------
Income (loss) before income taxes.....................   (2,064,615)    1,674,006       534,950

Income taxes (Note 6).................................     (843,000)      613,000       128,000
                                                        -----------   -----------   -----------

Net income (loss).....................................  $(1,221,615)  $ 1,061,006   $   406,950
                                                        ===========   ===========   ===========

Net income (loss) per share:
Basic.................................................  $     (1.96)  $      0.96   $      0.25
                                                        ===========   ===========   ===========
Diluted...............................................  $     (1.96)  $      0.96   $      0.25
                                                        ===========   ===========   ===========

Shares used in computing net income (loss) per share:
Basic.................................................      787,638       758,547       729,927
                                                        ===========   ===========   ===========
Diluted...............................................      787,638       758,547       729,927
                                                        ===========   ===========   ===========
Preferred dividends declared..........................  $   323,476   $   335,925   $   225,307
                                                        ===========   ===========   ===========
</TABLE>

                See accompanying notes to financial statements.

                                      F-5
<PAGE>
                               NETWORK SIX, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                     SERIES A                               RETAINED
                                                    CONVERTIBLE              ADDITIONAL     EARNINGS                    TOTAL
                                                     PREFERRED     COMMON     PAID-IN     (ACCUMULATED   TREASURY   STOCKHOLDERS'
                                                       STOCK       STOCK      CAPITAL       DEFICIT)      STOCK        EQUITY
                                                    -----------   --------   ----------   ------------   --------   -------------
<S>                                                 <C>           <C>        <C>          <C>            <C>        <C>
Balance at December 31, 1996......................  $2,235,674    $72,119    $1,653,296   $(1,206,265)   $(6,047)    $2,748,777

Net Income........................................                                            406,950                   406,950
Dividends declared on preferred stock 7.5%/share
  (Q1-Q3); 13.5% (Q4).............................                                           (225,307)                 (225,307)
Sale of 4,998 treasury shares.....................                                                         6,047          6,047
Sale of 13,102 shares of common stock.............                  1,310       17,643                                   18,954
                                                    ----------    -------    ----------   -----------    --------    ----------
Balance at December 31, 1997......................   2,235,674     73,429    1,670,939     (1,024,622)        --      2,955,421

Net Income........................................                                          1,061,006                 1,061,006
Dividends declared on preferred stock
  13.5%/share.....................................                                           (335,925)                 (335,925)
Shares issued in connection with exercise of
  options 6,275 shares............................                    628       12,223                                   12,851
Sale of 24,094 shares of common stock.............                  2,409       76,316                                   78,725
Warrants issued with term loan....................                              36,806                                   36,806
                                                    ----------    -------    ----------   -----------    --------    ----------
Balance at December 31, 1998......................   2,235,674     76,466    1,796,284       (299,541)                3,808,883

Net Income (loss).................................                                         (1,221,615)               (1,221,615)
Dividends declared on preferred stock
  13.5%/share.....................................                                           (323,476)                 (323,476)
Shares Issued in connection with exercise of
  options 14,200 shares...........................                  1,420       35,036                                   36,456
Purchase of 8,081 treasury shares.................                                                       (28,179)       (28,179)
Sale of 15,443 shares of common stock.............                  1,544       57,332                                   58,876
                                                    ----------    -------    ----------   -----------    --------    ----------
Balance at December 31, 1999......................  $2,235,674    $79,430    $1,888,652   $(1,844,632)   $(28,179)   $2,330,945
                                                    ==========    =======    ==========   ===========    ========    ==========
</TABLE>

                See accompanying notes to financial statements.

                                      F-6
<PAGE>
                               NETWORK SIX, INC.

                            STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                            1999          1998          1997
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Net income (loss)......................................  ($1,221,615)  $ 1,061,006   $   406,950
Adjustments to reconcile net income (loss) to net cash
  Provided by operating activities:
    Depreciation and amortization......................       74,237        47,415        82,010
    Litigation settlement, excluding cash received.....    3,476,665            --            --
    Provision for doubtful accounts....................       97,760        19,175       (47,856)
    Loss on sale/disposal of fixed assets..............        3,976         6,518         9,023
    Provision (credit) for deferred taxes..............     (806,272)     (149,000)       75,000
    Accrued financing fee..............................           --        20,000            --
    Forgiveness of note payable to vendor..............           --       (50,036)           --
    Changes in operating assets and liabilities:
    Contract receivables...............................      307,773        25,416      (434,765)
    Cost and estimated earnings in excess of billings
      on contracts.....................................      460,362       168,262       476,423
    Income taxes receivable............................     (150,640)           --       516,046
    Other current assets...............................      (39,500)      131,824       (85,281)
    Other noncurrent assets............................      334,870       181,548      (261,785)
    Long term amounts due from Hawaii..................           --            --       112,442
    Accounts payable...................................      143,739      (129,921)   (1,543,955)
    Accrued salaries and benefits......................      (71,127)      130,187       (21,634)
    Accrued subcontractor exp..........................      (12,107)   (1,327,443)    1,330,149
    Other notes payable................................           --            --       698,593
    Hawaii payable.....................................           --            --       576,483
    Other accrued expenses.............................      (16,847)      (21,483)     (165,729)
     Accrued restructuring.............................           --            --        (5,383)
    Billings in excess of costs and estimated earnings
      on contracts.....................................     (217,114)      185,818       123,983
    Income taxes payable...............................     (780,066)      766,728        13,338
                                                         -----------   -----------   -----------
      Net cash provided by operating activities........  $ 1,584,094   $ 1,066,014   $ 1,854,052
                                                         -----------   -----------   -----------
</TABLE>

                                      F-7
<PAGE>
                               NETWORK SIX, INC.

                            STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                            1999          1998          1997
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
Cash flows from investing activities:
  Capital expenditures.................................  ($  101,925)  ($  156,299)  ($   21,552)
  Proceeds from the sale of assets.....................        1,023            --         1,948
                                                         -----------   -----------   -----------
      Net cash used by investing activities............     (100,902)     (156,299)      (19,604)
                                                         -----------   -----------   -----------
Cash flows from financing activities:
  Principal payments on capital lease obligations......      (61,447)      (59,120)      (54,745)
  Net proceeds (payments) from note payable to bank....           --    (1,160,000)     (640,000)
  Proceeds from long-term debt.........................           --       500,000            --
  Payments on long-term debt...........................     (476,998)     (132,060)           --
  Proceeds from issuance of common stock...............       95,332        91,576        18,593
  Proceeds from sales (purchases) of treasury stock....      (28,179)           --         6,047
                                                         -----------   -----------   -----------
    Net cash provided (used) in financing activities...     (471,292)     (759,604)     (670,105)
                                                         -----------   -----------   -----------
  Net increase in cash and cash equivalents............    1,011,900       150,111     1,164,343
  Cash and cash equivalents at beginning of year.......    1,442,035     1,291,924       127,581
                                                         -----------   -----------   -----------
  Cash and cash equivalents at end of year.............  $ 2,453,935   $ 1,442,035   $ 1,291,924
                                                         ===========   ===========   ===========
Supplemental cash flow information:
    Cash (received) paid during the year for:
      Income taxes (net)...............................  $   893,977   ($    4,788)  ($  467,781)
                                                         ===========   ===========   ===========
      Interest (net)...................................  $     7,939   $    89,030   $   222,376
                                                         ===========   ===========   ===========
</TABLE>

                See accompanying notes to financial statements.

                                      F-8
<PAGE>
                               NETWORK SIX, INC.

                         NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (A) DESCRIPTION OF BUSINESS

    Network Six, Inc. (the "Company"), is a provider of software development and
computer-related consulting services to government and industry. Founded in
1976, the Company focuses on providing its services to state government health
and human services agencies. Currently, substantially all of its revenues are
derived from contracts with such agencies. Services are provided under "time and
materials" contracts and "fixed price" contracts. Under these contracts, which
are generally awarded as a result of formal competitive-bidding processes, the
Company provides a range of information technology services, consisting
primarily of systems integration, system design, software development, hardware
planning and procurement, and personnel training. More recently, the Company has
expanded its customer base to include private sector, non-profit and other
organizations.

    (B) REVENUE RECOGNITION

    Revenues from services provided under fixed-price and modified fixed-price
contracts are recognized on the percentage-of-completion method, measured by the
percentage of costs incurred to date to estimated total costs for each contract.
This method is used because management considers costs incurred to be the best
available measure of progress on these contracts. Revenues from time and
materials contracts are recognized on the basis of costs incurred during the
period plus the related fee earned.

    Cost of revenues earned includes all direct material and labor costs and
those indirect costs related to contract performance. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions and estimated
profitability including those arising from contract penalty provisions and final
contract settlements, may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.

    Costs and estimated earnings in excess of billings on uncompleted contracts,
represents revenues recognized in excess of amounts billed. Billings in excess
of costs and estimated earnings on uncompleted contracts, represents billings in
excess of revenues recognized. For fixed price contracts, costs and estimated
earnings are billed upon customer approval of the Company's attaining various
phases of completion set forth in each contract. Retainage is billed upon
customer approval on contract completion. Costs and earnings on time and
material contracts are billed when time is expended and material costs are
incurred. The Company also recognizes revenue from the sale of hardware to
various customers. Revenue and related costs for these sales are recorded when
the customer accepts delivery and installation of the hardware.

    In the state government systems integration industry, it is common practice
to negotiate change orders to existing contracts in progress due to the custom
nature of systems integration projects. In addition, such change orders
generally must be submitted to the federal government for approval because a
portion of state systems integration projects are federally funded. Over the
years, the Company has successfully negotiated and received federal approval of
numerous contract change orders. However, the frequent need for change orders in
the systems integration business and the inherent uncertainties in obtaining
state and federal approval of change orders is a significant risk, which could
have a material impact to the Company.

                                      F-9
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    (C) CASH AND CASH EQUIVALENTS

    Cash and cash equivalents include investments with an original maturity of
approximately three months or less.

    (D) OTHER ASSETS

    Other assets consist of employee receivables, lease receivables, sales tax
refund receivable, prepaid insurance, and security deposits.

    (E) PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or the estimated useful
life of the asset.

    The estimated useful lives of property and equipment and leasehold
improvements are:

<TABLE>
<S>                                                           <C>
Leasehold improvements......................................  30 months
Computers and equipment.....................................  3 years
Furniture and fixtures......................................  5 years
</TABLE>

    When the Company determines that certain property, plant and equipment is
impaired, a loss for impairment is recorded for the excess of the carrying value
over the fair market value of the asset. Fair value is determined by independent
appraisal, if an active market exists for the related asset. Otherwise, fair
value is estimated through forecasts of expected cash flows.

    (F) INCOME TAXES

    The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

    (G) NET INCOME (LOSS) PER COMMON SHARE

    Basic net income (loss) per common share is computed by dividing net income
(loss), after deducting dividends on Series A convertible preferred stock by the
weighted average number of common shares, and in the case of diluted earnings
per share assuming the conversion of the convertible preferred stock and common
stock equivalents outstanding during the period. Common stock equivalents
include stock options and warrants. For 1999, 1998 and 1997, the stock purchase
warrants, options, and convertible preferred stock and related dividends
declared have not been included in the computation of net income or loss per
share, since the effect would be anti-dilutive. Therefore the numerator of the
basic and diluted earnings per share calculations were the same, as was the
denominator.

                                      F-10
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    (H) COSTS OF MODIFYING SOFTWARE

    The costs of modifying the Company's software for year 2000 compliance were
charged to expense as incurred.

    (I) COSTS OF FAILURE TO BE YEAR 2000 COMPLIANT

    Any losses that may result if the Company, its suppliers, subcontractors, or
customers fail to correct Year 2000 deficiencies are recorded as they are
incurred.

    (J) FINANCIAL INSTRUMENTS

    Financial Instruments consist of cash, certificates of deposit, contract
accounts receivable, leases receivable, accounts payable, lease obligations, and
notes payable. The carrying value of these financial instruments approximates
their fair value.

    (K) USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the allowance for doubtful
accounts on contract receivables. Actual results could differ from those
estimates.

(2) CONTRACT RECEIVABLES

    Contract receivables at December 31 consist of:

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
Time and materials and completed fixed price contracts......  $1,012,540   $  816,338
Fixed price contracts in progress...........................     597,890    1,219,625
                                                              ----------   ----------
                                                               1,610,430    2,035,963
  Less allowance for doubtful accounts......................      49,175       69,175
                                                              ----------   ----------
                                                              $1,561,255   $1,966,788
                                                              ==========   ==========
</TABLE>

(3) COSTS AND ESTIMATED EARNINGS ON CONTRACTS

    Costs and estimated earnings on contracts at December 31 consist of:

<TABLE>
<CAPTION>
                                                                 1999          1998
                                                              -----------   -----------
<S>                                                           <C>           <C>
Beginning balance...........................................  $   878,681   $ 1,232,761
Costs incurred..............................................    6,178,286     6,418,678
Estimated Earnings..........................................    4,047,390     3,981,301
                                                              -----------   -----------
                                                               11,104,357    11,632,740
Less billings...............................................   10,468,924    10,754,059
                                                              -----------   -----------
                                                              $   635,433   $   878,681
                                                              ===========   ===========
</TABLE>

                                      F-11
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    Included in the accompanying balance sheets under the following captions:

<TABLE>
<CAPTION>
                                                                1999         1998
                                                              ---------   ----------
<S>                                                           <C>         <C>
Costs and estimated earnings in excess of billings on
  contracts.................................................  $ 759,891   $1,220,253
Billings in excess of costs and estimated earnings on
  contracts.................................................   (124,458)    (341,572)
                                                              ---------   ----------
                                                              $ 635,433   $  878,681
                                                              =========   ==========
</TABLE>

    Costs and estimated earnings on contracts at December 31, 1999 and 1998 are
expected to be billed and collected within one year.

(4) NOTES PAYABLE

    (A) SECURED NOTES

    On September 21, 1998 the Company entered into two five-year term loans,
each for $250,000. One lender was the Small Business Loan Fund Corporation,
("SBLFC"), a subsidiary of the Rhode Island Economic Development Corporation.
The other lender was the Business Development Corporation of Rhode Island
("BDC"). The SBLFC loan carries an annual interest rate of 9.5% and must be
repaid over five years. The BDC loan carries an annual interest rate of 10.25%,
and an annual deferred fee of $5,000, and must be paid back over five years.
Both term loans are secured by substantially all the assets of the Company. The
BDC was also issued five-year warrants to purchase 11,500 shares of the
Company's common stock with a strike price of $4.50 per share. The warrants
expire on September 20, 2003. The fair value of the warrants was estimated by
the Company to be $36,806 using the Black-Scholes model and is being amortized
ratably over the exercise period. Such amount is included in other non-current
assets on the accompanying balance sheet.

    The BDC and SBLFC notes contain restrictive covenants, which require among
other things, a minimum cash flow to debt service coverage ratio. As of
December 31, 1999, the Company was not in compliance with such covenant. The
Company has obtained a waiver relating to this default as it pertains to the
1999 financial statements.

    On November 15, 1999, the Company entered into a revolving line of credit
with a commercial bank. This $1 million revolving line of credit is secured by
all of the assets of the Company. The Company can borrow up to 80% of certain
qualified accounts receivable at an interest rate of prime plus 1/4%. On
December 31, 1999, the revolving line of credit had an outstanding balance of
zero.

    (B) UNSECURED NOTES

    On December 29, 1997, the Company restructured a $842,239 account payable
with Unisys to a four year unsecured note payable. After Unisys filed a claim
against the Company's Hawaii-related performance bond, the bonding company paid
Unisys, and then Lockheed Martin IMS Corporation ("Lockheed") reimbursed the
bonding company. Lockheed had guaranteed the Company's performance bond for the
Hawaii contract. The note is payable to Lockheed carries an initial interest
rate of five percent through 1998, and six percent from 1999 until December 29,
2004, with such interest to be paid monthly. Principal payments are to be made
annually as follows: December 1998--$100,000, December 1999--$100,000,
December 2000--$100,000, December 2001--$100,000, December 2002--$100,000,
December 2003--$150,000, December 2004--$192,239. The note has a discount
provision for early payment.

                                      F-12
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    On May 11, 1999, the Company entered into a Settlement and Mutual Release
Agreement with the State of Hawaii to resolve the its long standing litigation.
The Company agreed to pay the State $1 million over four years as follows:
June 1999--$250,000, June 2000--$250,000, June 2001--$250,000,
June 2002--$125,000 and June 2003--$125,000. The first payment was reduced by a
$50,000 credit for the settlement of a lease obligation on computer equipment.
The equipment lessor, who had filed suit against the Company, accepted $50,000
from the Company in full payment of that obligation. As of December 31, 1999,
the remaining principal was $750,000.

    Scheduled maturities of secured and unsecured long-term debt, including
annual deferred fee, as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
YEAR                                                              AMOUNT
----                                                           ------------
<S>                                                            <C>
2000........................................................    $  449,141
2001........................................................       459,019
2002........................................................       339,379
2003........................................................       327,238
2004........................................................       192,239
                                                                ----------
                                                                $1,767,016
                                                                ==========
</TABLE>

(5) LEASES

    The Company leases office space and equipment under several operating and
capital leases expiring at various times through 2000. Rent expense including
utilities for the years ended December 31, 1999, 1998 and 1997 was approximately
$216,000, $192,000, and $186,000, respectively. Rental obligations as of
December 31, 1999 for the remainder of the lease terms are as follows:

<TABLE>
<CAPTION>
                                                  CAPITAL LEASES   OPERATING LEASES
                                                  --------------   ----------------
<S>                                               <C>              <C>
2000                                                  $8,235           $171,369
                                                      ------           --------
Total lease payments............................       8,235           $171,369
                                                      ------           --------
Amount representing interest....................         102
                                                      ------
Net present value of payments...................       8,133
Less current portion............................       8,133
                                                      ------
Long term portion...............................          --
                                                      ======
</TABLE>

    During 1995, the Company leased various computer equipment from its vendors,
then in turn leased those assets to two of its customers. The Company's lease
obligation is included above. The lease to the customers is accounted for as a
sales type lease. Consequently, the Company recognized a gross profit of
approximately $402, $2,200 and $5,300, respectively for 1999, 1998 and 1997.
Over the life of these leases the Company will recognize approximately $107,000
of lease interest income. Approximately $5,100, $12,200 and $18,500 of lease
interest income was recognized in 1999, 1998 and 1997, respectively, and is
included in contract revenue in the statement of operations.

                                      F-13
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    Future minimum lease payments to be received are as follows:

<TABLE>
<S>                                                           <C>
2000........................................................  $13,103
2001........................................................    1,420
                                                              -------
                                                               14,523
Amount representing interest................................      114
                                                              -------
Net present value of payments...............................   14,409
Less current portion........................................   12,989
                                                              -------
Long term portion...........................................  $ 1,420
                                                              =======
</TABLE>

(6) INCOME TAXES

    The components of income tax expense (benefit) for the years ended
December 31, are as follows:

<TABLE>
<CAPTION>
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Current taxes:
  Federal...................................................         --   $ 599,000   $  36,000
  State.....................................................         --     163,000      17,000
                                                              ---------   ---------   ---------
Sub total...................................................         --     762,000      53,000
                                                              ---------   ---------   ---------
Deferred taxes:
  Federal...................................................   (666,000)   (119,000)     53,000
  State.....................................................   (177,000)    (30,000)     22,000
                                                              ---------   ---------   ---------
Sub total...................................................   (843,000)   (149,000)     75,000
                                                              ---------   ---------   ---------
Total.......................................................  $(843,000)  $ 613,000   $ 128,000
                                                              =========   =========   =========
</TABLE>

                                      F-14
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    Actual income tax expense (benefit) for the years ended December 31,
differed from the amounts computed by applying the U.S. federal income tax rate
of 34 percent to pretax income (loss) from operations as a result of the
following:

<TABLE>
<CAPTION>
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Computed "expected" tax expense (benefit)...................  $(701,969)  $ 569,162   $ 181,883
Increase in income tax expense (benefit) resulting from
  state and local taxes, net of federal income tax
  benefit...................................................   (115,618)     93,744      25,740
Change in beginning of the year balance of the valuation
  allowance for deferred tax asset, allocated to income tax
  expense...................................................         --     (50,000)    (84,000)
Other, net..................................................    (25,413)         94       4,377
                                                              ---------   ---------   ---------
Total income tax expense (benefit)..........................  $(843,000)  $ 613,000   $ 128,000
                                                              =========   =========   =========
Effective tax rate (%)......................................         41          37          24
                                                              =========   =========   =========
</TABLE>

    Deferred tax assets and liabilities at December 31 are comprised of the
following:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   ---------
<S>                                                           <C>        <C>
Deferred tax assets
  Accounts receivable, principally due to
    Allowance for doubtful accounts.........................  $ 19,508   $  27,396
  Deferred compensation.....................................    43,089      61,592
  Loss carryforward.........................................   429,497          --
  Property and equipment depreciation.......................     1,043      13,017
  Non-deductible loss on contract...........................        --      81,012
  Hawaii settlement.........................................   247,580          --
  Vacation expense..........................................    54,765      58,295
  Contingent liability......................................        --     202,030
  Stock bonus...............................................    20,146      31,580
  Loan facility fee.........................................     7,933       9,901
                                                              --------   ---------
    Total deferred tax assets...............................   823,561     484,823
Deferred tax liability
  Retainage, due to deferral for tax reporting..............    22,683     490,217
                                                              --------   ---------
    Net deferred tax asset (liability)......................  $800,878   ($  5,394)
                                                              ========   =========
</TABLE>

    In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The Company believes their future taxable earnings
will be sufficient to support the recognition of deferred tax assets.

    As of December 31, 1999, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $1,080,000. Such loss
carryforwards expire in 2019.

                                      F-15
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(7) STOCKHOLDERS' EQUITY

    (A) PREFERRED STOCK

    On October 29, 1992, the Company issued 714,285.71 shares of its Series A
Convertible preferred stock at its par value of $3.50 per share. Proceeds from
the issuance were $2,500,000. Costs of issuance were $264,326, and were netted
against the proceeds of the offering. This stock had a redemption provision,
which was exercisable at the option of the shareholder for $3.50. On March 10,
1993, an amendment to the original Stock Purchase Agreement dated October 29,
1992 was signed. The effective date of the amendment was October 29, 1992 and
the agreement removed the redemption option and increased the dividend rate to
the preferred stockholders beginning on October 1, 1997 as noted below. In
addition, the preferred shareholders have a right and option to require the
Company to buy back the preferred shares at a price of $5.60 per share upon a
greater than fifty percent change in the ownership of the Company's common
stock. Also, the Company has the right and option, anytime after October 30,
1997, to purchase no less than all of the preferred shares at the liquidation
value of $3.50 per share plus any accrued and unpaid dividends.

    Each share of preferred stock may be converted at any time into common
stock, on a basis of four shares of preferred stock for one share of common
stock and the holders of preferred stock are entitled to one vote per four
shares on all matters on which stockholders are entitled to vote, including the
election of Directors. So long as there are at least 238,071 shares of preferred
stock outstanding, the holders thereof are entitled as a class to elect one
member of the Board of Directors. The affirmative vote of a majority of the
issued and outstanding shares of preferred stock is required: (i) for the
issuance of a class of equity securities with dividend rights superior to the
preferred stock; (ii) for the Company to engage in any transaction that would
materially impair the rights of the preferred stock; (iii) for the Company to
declare, pay or otherwise distribute any dividends except out of retained
earnings of the Company; (iv) to increase or decrease the size of the Company's
Board of Directors (v) or to issue Common Stock or rights to purchase common
stock to officers, employees, directors or consultants of the Company if the
total number of shares held by such persons would exceed 10% of the issued and
outstanding shares of Common Stock after giving effect to such issuance.

    Until September 30, 1997, the holders of preferred stock are entitled to
receive dividends at the rate of 7.5% per share per annum payable quarterly in
arrears commencing on December 31, 1992. Effective October 1, 1997, the dividend
rate becomes the prime rate of interest as of the first business day following
the end of the quarter, plus five (5) percent. The Company is required to pay
such dividends before any dividends may be declared or paid for any of the
common stock. In the event the Company shall be in arrears in whole or in part
with respect to at least three quarterly dividend payments due to holders of
preferred stock, such holders voting as a class are entitled to elect two
members of the Board of Directors. Accrued and unpaid dividends as of
December 31, 1999 were $1,119,468, which equals $1.57 per share of outstanding
preferred stock.

    (B) COMMON STOCK WARRANTS

    Warrants to purchase 3,750 shares of the Company's common stock at an
exercise price ranging from $12.00-$18.00 per share were authorized and issued
April 14, 1995. At December 31, 1999 all of these warrants remain outstanding
and are exercisable until April 14, 2000.

                                      F-16
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    Warrants to purchase 10,000 shares of the Company's common stock at an
exercise price of $16.00 per share were authorized and issued in 1993. At
December 31, 1999 all of these warrants remain outstanding and are exercisable
until November 23, 2003.

    Warrants to purchase 50,487 shares of the Company's common stock at an
exercise price of $1.75 per share were authorized and issued in 1997 to the
Company's principal lender at that time. On January 26, 1998, however, these
warrants were returned to the Company, per the terms of the Loan agreement with
the Company's principal lender.

    Warrants to purchase 11,500 shares of the Company's common stock at an
exercise price of $4.50 per share were authorized and issued in 1998. At
December 31, 1999 all of these warrants remain outstanding and are exercisable
until September 20, 2003.

    (C) STOCK OPTION PLANS

    The Company's Board of Directors and stockholders adopted the Company's
Incentive Stock Option Plans (the "Stock Option Plans") on April 1, 1993 and
April 25, 1994, respectively. Options granted under the Stock Option Plans are
intended to qualify as incentive options under Section 422(a) of the Internal
Revenue Code of 1986, as amended. The Board of Directors administers the Stock
Option Plans. Subject to certain limitations, the Board of Directors has
authority to determine the exercise prices, vesting schedules and terms of the
options. The maximum term of any option outstanding is ten years.

    The exercise price of options granted pursuant to the Stock Option Plans may
not be less than the fair market value of the Common Stock on the date of grant.
The exercise price of options granted to any participants who own stock
possessing more than 10% of the total combined voting power of all classes of
outstanding stock of the Company must be at least equal to 110% of the fair
market value of the Common Stock on the date of grant. Any options granted to
such participants must expire within ten years from the date of grant. Stock
options under the Stock Option Plans are not transferable, except by estate
succession.

    In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting and Disclosure for Stock Based Compensation," which
provides for a fair value based methodology of accounting for all stock option
plans.

    The Company applies APB Opinion 25 and related interpretations in accounting
for these plans. Since options were granted at fair market value at date of
grant, no compensation cost has been recognized. Had compensation cost been
determined pursuant to SFAS No. 123, the Company's net income (loss) and net
income (loss) per share would have been adjusted to the pro forma amounts
indicated in the table below. The effects on pro forma net income (loss)
obtained from applying SFAS No. 123 may not be representative of the effects on
reported net income (loss) for future years.

<TABLE>
<CAPTION>
                                                         1999          1998
                                                      -----------   ----------
<S>                                      <C>          <C>           <C>
Net income (loss):.....................  As Reported  $(1,221,615)  $1,061,006
                                         Pro Forma     (1,299,742)     904,264
Net income (loss)
per share:.............................  As Reported  $     (1.96)  $     0.96
                                         Pro Forma          (2.06)        0.75
</TABLE>

                                      F-17
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999 and 1998, respectively; no dividend yield;
expected volatility of 81.9% and 85.2%; risk-free interest rate of 5.1% and
4.9%; and expected lives of five years. The weighted-average fair market value
of options granted during 1999 and 1998 was $2.70 and $2.56, respectively.

    A summary of the status of the Company's stock option plans as of
December 31, 1999, 1998 and 1997 and changes during the years on those dates is
presented below:

<TABLE>
<CAPTION>
                                                1999                  1998                  1997
                                              --------   WEIGHTED   --------   WEIGHTED   --------   WEIGHTED
                                                         AVERAGE               AVERAGE               AVERAGE
                                                         EXERCISE              EXERCISE              EXERCISE
                                               SHARES     PRICE      SHARES     PRICE      SHARES     PRICE
                                              --------   --------   --------   --------   --------   --------
<S>                                           <C>        <C>        <C>        <C>        <C>        <C>
Outstanding at beginning of year............  252,440     $2.66     136,225    $   1.64     92,850    $1.71
Granted.....................................   53,000      3.93     131,410        3.65     71,600     1.58
Cancelled...................................       --        --          --          --         --       --
Exercised...................................  (14,200)     2.57      (6,275)       2.05         --       --
Forfeited...................................  (75,955)     3.80      (8,920)       2.59    (28,225)    1.71
                                              -------               -------               --------
Outstanding at end of year..................  215,285      2.57     252,440        2.66    136,225     1.64
                                              =======               =======               ========
Exercisable at year end.....................  113,379      2.04      80,750        1.88     46,392     1.82
                                              =======               =======               ========
</TABLE>

    The following table summarizes information about the Company's stock
options, considered compensation under SFAS 123, outstanding at December 31,
1999:

<TABLE>
<CAPTION>
                                                                                              OPTIONS
                                                            OPTIONS OUTSTANDING             EXERCISABLE
                                                            -------------------             -----------
                                                         NUMBER          WEIGHTED AVG         NUMBER
                                                       OUTSTANDING        REMAINING         EXERCISABLE
EXERCISE PRICE                                       AT DEC 31, 1999   CONTRACTUAL LIFE   AT DEC 31, 1999
--------------                                       ---------------   ----------------   ---------------
<S>                                                  <C>               <C>                <C>
$1.125.............................................       18,750              7.1              12,500
 1.500.............................................       29,700              6.9              29,700
 1.750.............................................       34,450              7.3              22,967
 2.000.............................................       21,125              6.9              21,125
 3.000.............................................       39,510              8.4              12,337
 3.125.............................................       18,750              8.1               6,250
 3.188.............................................        2,500              9.9                  --
 3.250.............................................        6,000              9.9                  --
 3.750.............................................        5,000              9.4               5,000
 3.813.............................................        4,000              9.0               1,000
 4.125.............................................       33,000              9.3                  --
 4.250.............................................        2,500              9.2               2,500
                                                         -------                              -------
                                                         215,285                              113,379
                                                         =======                              =======
</TABLE>

    At December 31, 1999, 1998, and 1997, common shares reserved for issuance
under the Company's Incentive Stock Option plan was 275,000, 275,000 and
200,000, respectively. At December 31, 1999, 1998 and 1997, common shares
available under the Non-Employee Director Option Plan were 50,000, 50,000 and
25,000, respectively. Each director will be awarded 2,500 options, each year in
January, for a maximum of 10,000 options per director.

                                      F-18
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(8) COMMITMENTS

    The Company has a profit sharing plan under which all full-time employees
with at least one year of service with the Company are eligible to participate.
The Board of Directors administers the profit sharing plan and establishes the
formula for each year's distributions. Distributions for each calendar year are
made in the following year to eligible employees who were employed for the full
previous calendar year. There was no profit sharing plan expense for the years
ended December 31, 1999, 1998 and 1997.

    The Company sponsors a 401(k) Plan Trust in which all employees are eligible
to participate. Participants can contribute up to 15% of total compensation
subject to the annual Internal Revenue Service dollar limitation. Effective
January 1, 1999 the Company elected to match 50% of employee contributions, up
to 3% of each employee's annual total compensation. Company matching
contributions vest ratably over 5 years. The Company's matching contributions
totaled approximately $64,000 for the year ended December 31, 1999.

    Pursuant to a consulting agreement and a deferred compensation agreement
with the former Chairman, the Company agreed to pay $48,000 per year for a fixed
number of consulting hours, and also fund $60,000 per year to a non-qualified
deferred compensation plan. The original term for the consulting agreement was
seven years and eight years for the deferred compensation agreement. Effective
September 1995, the consulting agreement was amended to eliminate the required
consulting payments of $48,000 per year. The payments to the deferred
compensation agreement will remain at $60,000 per year through the end of 2001.
Accordingly, in the third quarter of 1995, the Company was required to record a
liability and a related expense of approximately $245,000 for the present value
of the deferred compensation payments, which will be paid at $5,000 per month
through the end of 2001.

(9) CONCENTRATION OF REVENUE

    During 1999, 1998 and 1997 the Company had the following sales from
customers whose individual sales exceeded 10% of the Company's total sales:

<TABLE>
<CAPTION>
                                              1999         1998         1997
                                           ----------   ----------   ----------
<S>                                        <C>          <C>          <C>
Rhode Island DHS.........................  $5,617,033   $5,361,955   $4,222,923
Maine Dept of Human Services.............   2,111,323    2,651,893    5,721,103
MIM Corporation..........................     798,926    1,188,327           --
                                           ----------   ----------   ----------
                                           $8,527,282   $9,202,175   $9,944,026
                                           ==========   ==========   ==========
</TABLE>

(10) LITIGATION

    In June 1995, the Company began negotiating a significant amendment to its
contract for a child support enforcement ("CSE") system with the State of Hawaii
("the State") when it determined that the total estimated cost to complete the
system would be significantly greater than expected. In March 1996, the Company
received final State and federal government approval for this contract amendment
totaling $4.4 million. As a result of numerous in-depth reviews of this contract
amendment, management determined that remaining contract costs would exceed the
contract value by $440,000, and therefore, accrued this loss in December 1995.

                                      F-19
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

    In June 1996 the Company announced a new subcontract agreement with Complete
Business Solutions, Inc. ("CBSI") to expand CBSI's role in the Hawaii CSE
contract. CBSI, at the request of Hawaii, was contracted to lead a detailed
review of the current system under development. Hawaii, in turn, agreed to pay
CBSI $1.2 million from the Company's remaining contract budget when various
milestones were achieved. The Company had a significant role in the detailed
review and had hoped that its results would facilitate the resolution of open
contractual scope issues.

    On September 13, 1996, the State of Hawaii terminated its contract with the
Company, effective September 23, 1996, claiming that the Company had failed to
fulfill its obligations under the contract. In response, the Company also
terminated the contract with the State effective September 23, 1996. The Hawaii
contract, originally estimated to be a $20.7 million contract, was increased to
$25.2 million by the State in February 1996, and was the Company's largest
contract at the time. Prior to termination, approximately $16.5 million of costs
had been incurred towards completion of the contract, and $11 million had been
billed and substantially paid.

    On November 12, 1996, the State of Hawaii filed a lawsuit in the Circuit
Court of the First Circuit of the State of Hawaii (the "Court") against the
Company and Aetna Casualty and Surety and Federal Insurance Company for damages
due to breach of contract (the "Hawaii litigation"). Aetna Casualty and Surety
and Federal Insurance Company provided the $10.3 million performance bond on the
Company's contract with the State of Hawaii to develop and install the State's
child support enforcement system. The suit alleged that the Company failed to
meet contractual deadlines, provided late, incomplete and/or unsuitable
deliverables, materially breached the contract by never completing the design,
the application programming, and the system test and systems implementation. The
State sought an unspecified amount for general damages, consequential and
special damages, liquidated damages, attorneys' fees, reimbursement for the cost
of the suit and interest costs that the court might deem just and proper.

    The Company denied the State's allegation and, on January 23, 1997, filed a
counter claim against the State alleging that the State has breached the
contract. The Company sought $70 million in damages and alleged that the State
fraudulently induced the Company into designing and building a system having
capabilities and features far beyond the scope of the Company's contract. The
fraudulent inducement was in the form of withholding payments, improper
rejection of work that satisfied the requirements of the contract and verbal and
written abuse of the Company's employees and management.

    In addition, Unisys, a vendor providing equipment under the Company's Hawaii
contract, submitted a $896,000 claim against the $10.3 million performance bond.
In February of 1997, the State released all but $1.1 million of the performance
bond; the remainder is intended to cover amounts payable to Unisys and other
subcontractors. In April of 1997, after a detailed review of their records and
discussions with the Company, Unisys agreed to lower their claim to $859,602 and
Aetna Casualty and Surety paid that claim. Lockheed Martin IMS ("Lockheed"), who
guaranteed the performance bond, reimbursed Aetna for that claim. In
December 1997, the Company reached an agreement with Lockheed to repay the
$859,602 over a five-year period.

    On December 13, 1996, CBSI filed a lawsuit in the Superior Court of the
State of Rhode Island for $517,503, which the Company had previously accrued,
plus interest costs and attorney's fees. The Company disputed the $517,503 owed
to CBSI and filed a counterclaim against CBSI on January 13, 1997, alleging,
among other things, that CBSI failed to complete its duties required under the
subcontract with the Company in a timely manner, improperly engaged in
negotiations with the State of

                                      F-20
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

Hawaii to complete the project, hired and attempted to hire employees of the
Company in violation of its subcontract agreement with the Company and obtained
and utilized confidential information and proprietary intellectual property
inappropriately. Also, the Company alleged that CBSI owed the Company $482,750
as of December 31, 1996, for which the Company did not establish a reserve for
uncollectibility.

    On February 3, 1997, the Company filed a third-party complaint ("TPC") as
part of the Hawaii litigation against MAXIMUS Corporation ("MAXIMUS") and CBSI.
MAXIMUS had been the State of Hawaii's contract supervisor and advisor since the
inception of the Hawaii project. The allegations the Company made against CBSI
in this TPC were substantially similar to the allegations made against CBSI in
the Company's counterclaim to CBSI's December 13, 1996, lawsuit brought against
the Company in Rhode Island. The Company alleged that MAXIMUS was liable to the
Company on grounds that: (i) the Company was an intended third party beneficiary
under the contract between MAXIMUS and Hawaii; (ii) MAXIMUS tortuously
interfered in the contract between the Company and Hawaii; (iii) MAXIMUS
negligently breached duties to the Company, and (iv) MAXIMUS aided and abetted
Hawaii in Hawaii's breach of contract. The Company's complaint sought
$70 million in damages.

    Due to the significant uncertainty created by these events, the Company
ceased recognition of revenue on the Hawaii contract in 1996. An adjustment of
$1.8 million was recorded in the fourth quarter of 1996 to reverse revenue of
$1 million, $400 thousand and $400 thousand recorded previously in the first,
second and third quarters, respectively. In addition, the Company expensed
$1.96 million of costs incurred related to the Hawaii contract in 1996.

    On May 11, 1999 the Company reached a settlement agreement with both the
State and CBSI, which was approved by the court on July 22, 1999. All claims of
the Company, the State and CBSI were dismissed, except the Company's claims
against MAXIMUS. Per the settlement, the Company agreed to pay the State
$1 million over four years as follows: June 1999--$250,000, June 2000--
$250,000, June 2001--$250,000, June 2002--$125,000 and June 2003--$125,000. The
first payment was reduced by a $50,000 credit for the settlement of a lease
obligation on computer equipment. The equipment lessor, who had filed suit
against the Company, accepted $50,000 from the Company in full payment of that
obligation. CBSI agreed to pay the Company $300,000 immediately, which the
Company has received. Neither party to these agreements admitted any wrongdoing.
To facilitate the settlement, Lockheed agreed to modify certain aspects of a
promissory note issued to it by the Company in 1997. Lockheed agreed to extend
the note's maturity several years, to reschedule favorably certain principal
payments and to reduce the interest rate on the remaining principal, which is
$642,000 as of December 31, 1999.

    On October 29, 1999 the Company and MAXIMUS entered into a settlement
agreement whereby the Company released MAXIMUS from all claims and potential
claims in relation to the Hawaii contract and vice versa in exchange for a
payment to the Company of $50,000, which the Company received in November 1999.

    As of December 31, 1999, the Company was not involved in any litigation.

                                      F-21
<PAGE>
                               NETWORK SIX, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997

(11) LITIGATION SETTLEMENT

    On May 11, 1999 the Company announced it had entered into a settlement
agreement with the State of Hawaii and Complete Business Solutions, Inc.
("CBSI"). See Note 10--Litigation. Prior to the settlement, the Company had
assets related to the Hawaii project of $3.46 million and liabilities of
$856,000. After tax considerations are taken into effect, the settlement will
result in a reduction of net assets of $1.85 million. The effect of the
settlement on net income for the twelve months ended December 31, 1999 was as
follows:

<TABLE>
<S>                                                           <C>
Write off of contract receivables and costs in excess of
  billings on Hawaii contract...............................  $(3,459,382)
Present value of litigation settlement......................     (868,957)
Payment received from CBSI..................................      300,000
Payment received from MAXIMUS...............................       50,000
Hawaii payable..............................................      576,483
Capital leases, short and long term portion.................       57,994
Other accrued expenses......................................      217,197
                                                              -----------
  Decrease in income before income taxes....................   (3,126,665)
Income tax effect...........................................    1,281,933
                                                              -----------
  Decrease in net income....................................  $(1,844,732)
                                                              ===========
</TABLE>

(12) QUARTERLY FINANCIAL DATA (UNAUDITED)

    The following is a summary of quarterly results from operations:

<TABLE>
<CAPTION>
                                                                     QUARTER
                                                -------------------------------------------------
                                                  FIRST        SECOND       THIRD        FOURTH
                                                ----------   ----------   ----------   ----------
<S>                                             <C>          <C>          <C>          <C>
1999:
Contract revenue earned.......................  $2,688,400   $2,550,370   $2,575,188   $2,411,718
Gross profit..................................   1,113,878      985,142      942,542    1,005,828
Net income (loss).............................     257,198   (1,712,238)     149,725       83,700
Earnings per share............................        0.23        (2.27)        0.09         0.00
Weight average shares outstanding.............     774,975      788,573      792,881      794,123

1998:
Contract revenue earned.......................  $2,221,618   $3,253,696   $2,662,603   $2,262,062
Gross profit..................................     774,962    1,095,167    1,127,215      983,957
Net income (loss).............................     140,465      309,798      298,136      312,607
Earnings (loss) per share.....................        0.08         0.30         0.28         0.30
Weight average shares outstanding.............     794,503      756,176      763,880      764,630
</TABLE>

                                      F-22