NTWK NetSol Technologies Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported): February 11, 2015

 

Commission file number: 0-22773

 

NETSOL TECHNOLOGIES, INC.

(Exact name of small business issuer as specified in its charter)

 

NEVADA		95-4627685
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer NO.)

 

24025 Park Sorrento, Suite 410, Calabasas, CA 91302

(Address of principal executive offices) (Zip Code)

 

(818) 222-9195 / (818) 222-9197

(Issuer’s telephone/facsimile numbers, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On February 11, 2015, NetSol Technologies, Inc. issued a press release announcing results of operations and financial conditions for the six months and quarter ended December 31, 2014. The press release is furnished as Exhibit 99.1 to this Form 8-K.

 

The information in this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document field under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Exhibits

 

Item 9.01

 

99.1 News Release dated February 11, 2015

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	NETSOL TECHNOLOGIES, INC.
Date: February 12, 2015	/s/ Najeeb Ghauri
	NAJEEB GHAURI
	Chief Executive Officer
Date: February 12, 2015	/s/ Roger Almond
	Roger Almond
	Chief Financial Officer

 

 

 

 

EXHIBIT 99.1

 

NEWS RELEASE DATED February 11, 2015

 

	Investor Contacts:
	PondelWilkinson
	Roger Pondel | Matt Sheldon
	investors@netsoltech.com
	(310) 279-5980
	Media Contacts:
	PondelWilkinson
	George Medici | gmedici@pondel.com
	(310) 279-5968

 

NetSol Technologies Reports Fiscal 2015 Second Quarter Results

 

Second Quarter Revenue Gains Reflect Early Momentum in NetSol’s Return to Growth

 

	●	Revenue Grew to $12.4 Million from $8.6 Million, with $5 Million in Gross Profit
	●	Cash and Cash Equivalents Increased to $13.5 Million from $11.5 Million at Fiscal Year-End
	●	Company Builds Out European Presence; Signs Two New Agreements in the Region

 

Conference Call Scheduled Today at 4:15 p.m. ET (1:15 p.m. PT)

 

CALABASAS, Calif. – February 11, 2015 – NetSol Technologies, Inc. (NASDAQ: NTWK), a global provider of IT and enterprise software solutions, today reported non-GAAP adjusted diluted earnings per share of $0.09 for the second quarter ended December 31, 2014, compared with breakeven for the same period last year. The company reported net revenue of $12.4 million for the quarter, compared with $8.6 million for the same period last year. GAAP loss per share for the 2015 fiscal second quarter was reduced to $0.14 from a loss of $0.18 per share for the same period last year.

 

“Our top-line growth for the second quarter reflected strong maintenance and services revenue, as well as the beginning of revenue recognition for the $16 million contract announced in August of last year, further confirming that our resurgence is real,” said Najeeb Ghauri, CEO. “Considering the implementation of contracts underway, we are fast approaching our fiscal 2013 record net revenue, a time marked by strong growth prior to our next-generation product transition period. Further adding to our optimism are two recent developments in Europe, along with expanding relationships with clients in North America, and continued growth in the Asia Pacific region both for NFS Ascent^TM and our legacy solutions.

 

“On the bottom line, increased depreciation and amortization, reflecting the launch of NFS Ascent, and depreciation for the new building on the NetSol campus, as well as investment in additional staff to support our growth objectives, impacted financial results on a GAAP basis,” added Ghauri.

 

 

Fiscal 2015 Second Quarter Financial Results

 

The following comparison refers to results for the fiscal 2015 second quarter versus the fiscal 2014 second quarter.

 

Total net revenues improved to $12.4 million from $8.6 million, with license, maintenance and services revenue all contributing to the increase.

 

	●	License revenue was $2.1 million, versus $456,000 in the same period last year primarily due to additional license sales for NFSTM;
	●	Maintenance revenue increased to $3.3 million from $2.9 million last year as a result of completed implementations;
	●	Services revenue improved to $5.6 million from $4.0 million in the same period last year as a result of incremental increases in NetSol’s day rates for all skill sets, and additional deliveries of customer change requests;
	●	Services revenue – related party, reflecting revenue from NetSol’s joint venture with the Innovation Group – was $1.4 million, compared with $1.3 million last year.

 

Gross profit improved to $5.0 million from $2.9 million last year.

 

Total operating expenses amounted to $6.0 million, versus $4.4 million last year. The increase relates to higher selling and marketing expenses and increased general and administrative costs as the company continues to invest in Germany, the U.K., Thailand and China.

 

Total operating loss was reduced to $1.0 million from $1.5 million last year.

 

GAAP net loss was $1.4 million for the fiscal 2015 second quarter, equal to $0.14 per share, compared with a GAAP net loss of $1.6 million, or $0.18 per share, in the comparable period last fiscal year.

 

Adjusted EBITDA (a non-GAAP measure) was $900,000, or $0.09 per adjusted diluted share, for the fiscal 2015 first quarter, which removed $2.2 million in depreciation and amortization. This compares with adjusted EBITDA of $6,479, or breakeven per adjusted diluted share, last year, which removed $1.6 million in depreciation and amortization.

 

The reconciliation of adjusted EBITDA to net income, the most comparable financial measure based upon GAAP, as well as a further explanation of adjusted EBITDA, is included in the financial tables at the end of this press release.

 

 

Fiscal 2015 First Half Financial Results

 

For the first six months of fiscal 2015, total net revenue rose to $22.6 million compared to $17.5 million for the first six months of fiscal 2014. The company reported a GAAP net loss of $3.2 million, or $0.34 per share, compared with a GAAP net loss of $2.7 million, or $0.30 per share, in the comparable period last year.

 

Adjusted EBITDA (a non-GAAP measure) for the first six months of fiscal 2015 increased to $1.5 million, or $0.16 per adjusted diluted share, which removed $4.6 million in depreciation and amortization. This compares with adjusted EBITDA of $310,000, or $0.03 per adjusted diluted share, last year, which removed $2.9 million in depreciation and amortization.

 

At September 30, 2014, cash and cash equivalents grew to $13.5 million from $11.5 million at June 30, 2014.

 

Recent Highlights:

 

	●	Expanded presence in Europe with two new senior executives— Paul Stevens in the newly created position of chief information officer – Europe, and Tim O’Sullivan as head of sales – Europe;
	●	Signed two new agreements in Europe, one with a major U.S. auto captive finance company, and the other with a major U.K-based asset finance company;
	●	Added 50 LeasePak license seats with a major U.S.-based auto captive leasing company; and
	●	Attended the Equipment Leasing and Finance Association and Auto Finance Summit conferences to demo NetSol’s next-generation financing and leasing solution, NFS Ascent and NFS MobilityTM.

 

Fiscal 2015 Second Quarter Conference Call

 

	When:	Wednesday, February 11
	Time:	4:15 p.m. Eastern Time
	Phone:	1-888-505-4369 (domestic)
		1-719-325-2455 (international)

 

A live Webcast will be available online within the investor relations section of NetSol’s website at http://www.netsoltech.com, where it will be archived for 90 days.

 

 

About NetSol Technologies

 

NetSol Technologies, Inc. (Nasdaq: NTWK) is a worldwide provider of IT and enterprise software solutions primarily serving the global leasing and financing industry. The Company’s suite of applications are backed by 40 years of domain expertise and supported by a committed team of more than 1000 professionals placed in eight strategically located support and delivery centers throughout the world.

 

To learn more about NetSol, visit www.netsoltech.com or watch the corporate video at https://www.youtube.com/user/netsolwebmaster.

 

Forward-Looking Statements

 

This press release may contain forward-looking statements relating to the development of the Company’s products and services and future operation results, including statements regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words “expects,” “anticipates,” variations of such words, and similar expressions, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Factors that could affect the Company’s actual results include the progress and costs of the development of products and services and the timing of the market acceptance. The subject Companies expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

 

(Tables Follow)

 

###

 

 

NetSol Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

 

		As of December 31,				As of June 30,
		2014				2014
ASSETS
Current assets:
Cash and cash equivalents		$	13,486,526			$	11,462,695
Restricted cash			90,000				2,528,844
Accounts receivable, net of allowance of $1,058,214 and $1,088,172			7,706,162				5,403,165
Accounts receivable, net - related party			2,123,567				2,232,610
Revenues in excess of billings			3,098,226				2,377,367
Other current assets			2,564,116				2,857,879
Total current assets			29,068,597				26,862,560
Property and equipment, net			27,543,489				29,721,128
Intangible assets, net			26,030,664				28,803,018
Goodwill			9,516,568				9,516,568
Total assets		$	92,159,318			$	94,903,274
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	4,971,101			$	5,234,887
Current portion of loans and obligations under capitalized leases			3,217,397				5,791,258
Unearned revenues			8,141,083				3,239,852
Common stock to be issued			721,592				347,518
Total current liabilities			17,051,173				14,613,515
Long term loans and obligations under capitalized leases; less current maturities			1,082,310				1,532,080
Total liabilities			18,133,483				16,145,595
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 500,000 shares authorized;			-				-
Common stock, $.01 par value; 14,500,000 shares authorized; 9,743,850 and 9,150,889 issued and outstanding as of December 31, 2014 and June 30, 2014			97,439				91,509
Additional paid-in-capital			117,834,686				115,394,097
Treasury stock			(415,425	)			(415,425	)
Accumulated deficit			(38,382,498	)			(35,177,303	)
Stock subscription receivable			(2,280,488	)			(2,280,488	)
Other comprehensive loss			(16,208,648	)			(14,979,223	)
Total NetSol stockholders' equity			60,645,066				62,633,167
Non-controlling interest			13,380,769				16,124,512
Total stockholders' equity			74,025,835				78,757,679
Total liabilities and stockholders' equity		$	92,159,318			$	94,903,274

 

 

NetSol Technologies, Inc. and Subsidiaries

Consolidated Statement of Operations

 

		For the Three Months								For the Six Months
		Ended December 31,								Ended December 31,
		2014				2013				2014				2013
Net Revenues:
License fees		$	2,100,715			$	455,616			$	3,685,268			$	2,708,183
Maintenance fees			3,329,587				2,867,195				6,178,228				5,247,604
Services			5,567,826				3,974,591				9,965,783				7,294,814
Services - related party			1,354,476				1,256,899				2,750,476				2,224,442
Total net revenues			12,352,604				8,554,301				22,579,755				17,475,043
Cost of revenues:
Salaries and consultants			4,298,900				3,160,760				8,415,117				6,420,551
Travel			590,353				347,670				1,012,224				736,255
Depreciation and amortization			1,800,753				1,120,363				3,602,320				2,046,678
Other			662,046				1,006,465				1,336,909				1,695,009
Total cost of revenues			7,352,052				5,635,258				14,366,570				10,898,493
Gross profit			5,000,552				2,919,043				8,213,185				6,576,550
Operating expenses:
Selling and marketing			1,574,955				893,781				2,707,315				1,948,922
Depreciation and amortization			438,003				430,947				1,018,776				857,564
General and administrative			3,911,754				2,997,431				7,587,510				6,404,431
Research and development cost			80,437				55,114				146,702				113,802
Total operating expenses			6,005,149				4,377,273				11,460,303				9,324,719
Loss from operations			(1,004,597	)			(1,458,230	)			(3,247,118	)			(2,748,169	)
Other income and (expenses)
Loss on sale of assets			(69,543	)			(175,237	)			(80,595	)			(189,032	)
Interest expense			(47,265	)			(92,738	)			(120,358	)			(161,955	)
Interest income			106,078				39,931				163,997				72,785
Gain (loss) on foreign currency exchange transactions			(421,082	)			96,039				(341,862	)			1,207,462
Other income			18,162				59				18,539				665
Total other income (expenses)			(413,650	)			(307,786	)			(360,279	)			763,277
Net loss before income taxes			(1,418,247	)			(1,766,016	)			(3,607,397	)			(1,984,892	)
Income tax provision			(87,683	)			(29,270	)			(127,759	)			(40,401	)
Net loss from continuing operations			(1,505,930	)			(1,795,286	)			(3,735,156	)			(2,025,293	)
Loss from discontinued operations			-				(145,527	)			-				(378,468	)
Net loss			(1,505,930	)			(1,940,813	)			(3,735,156	)			(2,403,761	)
Non-controlling interest			138,764				313,905				529,961				(320,262	)
Net loss attributable to NetSol		$	(1,367,166	)		$	(1,626,908	)		$	(3,205,195	)		$	(2,724,023	)
Amount attributable to NetSol common shareholders:
Loss from continuing operations		$	(1,367,166	)		$	(1,481,381	)		$	(3,205,195	)		$	(2,345,555	)
Loss from discontinued operations			-				(145,527	)			-				(378,468	)
Net loss		$	(1,367,166	)		$	(1,626,908	)		$	(3,205,195	)		$	(2,724,023	)
Net loss per share:
Net loss per share from continuing operations:
Basic		$	(0.14	)		$	(0.16	)		$	(0.34	)		$	(0.26	)
Diluted		$	(0.14	)		$	(0.16	)		$	(0.34	)		$	(0.26	)
Net loss per share from discontinued operations:
Basic		$	-			$	(0.02	)		$	-			$	(0.04	)
Diluted		$	-			$	(0.02	)		$	-			$	(0.04	)
Net loss per common share
Basic		$	(0.14	)		$	(0.18	)		$	(0.34	)		$	(0.30	)
Diluted		$	(0.14	)		$	(0.18	)		$	(0.34	)		$	(0.30	)
Weighted average number of shares outstanding
Basic			9,654,334				9,056,024				9,433,829				9,006,015
Diluted			9,654,334				9,056,024				9,433,829				9,006,015

 

 

NetSol Technologies, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

 

		For the Six Months
		Ended December 31,
		2014				2013
Cash flows from operating activities:
Net loss		$	(3,735,156	)		$	(2,403,761	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			4,621,096				3,144,948
Provision for bad debts			-				259,306
Share of net loss from investment under equity method			-				166,648
Loss on sale of assets			80,595				189,032
Stock issued for services			606,536				640,247
Fair market value of warrants and stock options granted			311,244				158,783
Changes in operating assets and liabilities:
Accounts receivable			(2,279,774	)			(1,246,995	)
Accounts receivable - related party			40,907				(842,503	)
Revenues in excess of billing			(765,672	)			8,612,283
Other current assets			286,838				367,741
Accounts payable and accrued expenses			59				1,388,473
Unearned revenue			4,857,469				2,228,992
Net cash provided by operating activities			4,024,142				12,663,194
Cash flows from investing activities:
Purchases of property and equipment			(1,772,866	)			(6,059,596	)
Sales of property and equipment			179,904				78,678
Purchase of non-controlling interest in subsidiaries			(577,222	)			(17,853	)
Increase in intangible assets			-				(2,312,919	)
Net cash used in investing activities			(2,170,184	)			(8,311,690	)
Cash flows from financing activities:
Proceeds from sale of common stock			1,610,000				-
Proceeds from the exercise of stock options and warrants			116,400				560,500
Proceeds from exercise of subsidiary options			-				311,709
Restricted cash			2,438,844				(660,672	)
Dividend paid by subsidiary to Non controlling interest			(780,106	)			(266,343	)
Proceeds from bank loans			57,405				1,276,505
Payments on capital lease obligations and loans - net			(2,867,974	)			(781,756	)
Net cash provided by financing activities			574,569				439,943
Effect of exchange rate changes			(404,696	)			(1,084,723	)
Net increase in cash and cash equivalents			2,023,831				3,706,724
Cash and cash equivalents, beginning of the period			11,462,695				7,874,318
Cash and cash equivalents, end of period		$	13,486,526			$	11,581,042

 

 

NetSol Technologies, Inc. and Subsidiaries

Reconciliation to GAAP

 

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		December 31, 2014				December 31, 2013				December 31, 2014				December 31, 2013
Net Income (loss) before preferred dividend, per GAAP		$	(1,367,166	)		$	(1,626,908	)		$	(3,205,195	)		$	(2,724,023	)
Income Taxes			87,683				29,270				127,759				40,401
Depreciation and amortization			2,238,756				1,551,310				4,621,096				2,904,242
Interest expense			47,265				92,738				120,358				161,955
Interest (income)			(106,078	)			(39,931	)			(163,997	)			(72,785	)
EBITDA		$	900,460			$	6,479			$	1,500,021			$	309,790
Weighted Average number of shares outstanding
Basic			9,654,334				9,056,024				9,433,829				9,006,015
Diluted			9,654,334				9,089,846				9,433,829				9,039,838
Basic EBITDA		$	0.09			$	0.00			$	0.16			$	0.03
Diluted EBITDA		$	0.09			$	0.00			$	0.16			$	0.03

 

Although the net EBITDA income is a non-GAAP measure of performance, we are providing it because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. It should not be considered as an alternative to net income, operating income or any other financial measures calculated and presented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. It may not be indicative of the Company’s historical operating results nor is it intended to be predictive of potential future results.