NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The
Company designs, develops, markets, and exports proprietary software products to customers in the automobile financing and leasing,
banking, and financial services industries worldwide. The Company also provides system integration, consulting, and IT products
and services in exchange for fees from customers.
The
consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information
presented not misleading. The year-end condensed consolidated balance sheet data was derived from audited financial statements,
but does not include all disclosures required by accounting principles generally accepted in the United States of America.
These
statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary
for fair presentation of the information contained therein. It is suggested that these condensed consolidated financial statements
be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K
for the year ended June 30, 2018. The Company follows the same accounting policies in preparation of interim reports. Results
of operations for the interim periods are not indicative of annual results.
The
accompanying condensed consolidated financial statements include the accounts of NetSol Technologies, Inc. and subsidiaries (collectively,
the “Company”) as follows:
Wholly
owned Subsidiaries
NetSol
Technologies Americas, Inc. (“NTA”)
NetSol
Connect (Private), Ltd. (“Connect”)
NetSol
Technologies Australia Pty Ltd. (“Australia”)
NetSol
Technologies Europe Limited (“NTE”)
NTPK
(Thailand) Co. Limited (“NTPK Thailand”)
NetSol
Technologies (Beijing) Co. Ltd. (“NetSol Beijing”)
Ascent
Europe Ltd. (“AEL”)
Majority-owned
Subsidiaries
NetSol
Technologies, Ltd. (“NetSol PK”)
NetSol
Innovation (Private) Limited (“NetSol Innovation”)
NetSol
Technologies Thailand Limited (“NetSol Thai”)
Virtual
Lease Services Holdings Limited (“VLSH”)
Virtual
Lease Services Limited (“VLS”)
Virtual
Lease Services (Ireland) Limited (“VLSIL”)
NOTE
2 – ACCOUNTING POLICIES
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America 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. The areas requiring significant estimates are provision for doubtful accounts, provision
for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, and estimated contract costs.
The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
Concentration
of Credit Risk
Cash
includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries. Certain
financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company
maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured
limits for the banks located in the United States. Balances at financial institutions within certain foreign countries are not
covered by insurance. As of March 31, 2019, and June 30, 2018, the Company had uninsured deposits related to cash deposits in
accounts maintained within foreign entities of approximately $15,525,141 and $20,933,224, respectively. The Company has not experienced
any losses in such accounts.
The
Company’s operations are carried out globally. Accordingly, the Company’s business, financial condition and results
of operations may be influenced by the political, economic and legal environments of each country and by the general state of
the country’s economy. The Company’s operations in each foreign country are subject to specific considerations and
significant risks not typically associated with companies in economically developed nations. These include risks associated with,
among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be
adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other things.
Fair
Value of Financial Instruments
The
Company applies the provisions of ASC 820-10,
“Fair Value Measurements and Disclosures.”
ASC 820-10 defines
fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure
requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, accounts receivable,
accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively short maturities. The
carrying amounts of the convertible note receivable and the long-term debt approximate their fair values based on current interest
rates for instruments with similar characteristics.
The
three levels of valuation hierarchy are defined as follows:
|
Level
1:
|
Valuations
consist of unadjusted quoted prices in active markets for identical assets and liabilities and has the highest priority.
|
|
|
|
|
Level
2:
|
Valuations
rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability.
|
|
|
|
|
Level
3:
|
Valuations
are based on prices or third party or internal valuation models that require inputs that are significant to the fair value
measurement and are less observable and thus have the lowest priority.
|
The
Company does not have any financial assets that are measured at fair value on a recurring basis as of March 31, 2019.
The
Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2018, were as follows:
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
Assets
|
|
|
Revenues
in excess of billing - long term
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,206,669
|
|
|
$
|
1,206,669
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,206,669
|
|
|
$
|
1,206,669
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
reconciliation from June 30, 2018 to March 31, 2019 is as follows:
|
|
|
Revenues
in excess of billing - long term
|
|
|
Fair value
discount
|
|
|
Total
|
|
|
Balance
at June 30, 2018
|
|
$
|
1,445,245
|
|
|
$
|
(238,576
|
)
|
|
$
|
1,206,669
|
|
|
Effect
of ASC 606 adoption
|
|
|
(1,445,245
|
)
|
|
|
238,576
|
|
|
|
(1,206,669
|
)
|
|
Balance
at March 31, 2019
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Management
analyzes all financial instruments with features of both liabilities and equity under ASC 480,
“Distinguishing Liabilities
from Equity”
and ASC 815,
“Derivatives and Hedging.”
Derivative liabilities are adjusted to reflect
fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments
to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving
at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such
as warrants and option derivatives are valued using the Black-Scholes model.
New
Accounting Pronouncements
Recent
Accounting Standards Adopted by the Company:
In
January 2016, the FASB issued ASU 2016-01,
Recognition and Measurement of Financial Assets and Financial Liabilities
(ASU
2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at
fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is
effective beginning after December 15, 2017. The adoption of this guidance did not have a material impact on the Company’s
results of operations, financial position or disclosures.
In
August 2016, the FASB issued ASU 2016-15,
Clarification of Certain Cash Receipts and Cash Payments
, which eliminates the
diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding
or clarifying guidance on eight specific cash flow issues. This guidance is effective for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years, with early adoption permitted. The amendments in this update should
be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted.
The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position
or disclosures.
On
November 17, 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash.
It is intended to
reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The new
standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents
as presented on the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents
and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods
beginning after December 15, 2017, including interim periods within those fiscal years. Earlier adoption is permitted. The adoption
of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.
In
January 2017, the FASB issued ASU 2017-01,
Clarifying the Definition of a Business
, which clarifies and provides a more
robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should
be applied prospectively on or after the effective date. This update is effective for annual periods beginning after December
15, 2017, and interim periods within those periods. Early adoption is permitted for acquisition or deconsolidation transactions
occurring before the issuance date or effective date and only when the transactions have not been reported in issued or made available
for issuance financial statements. The adoption of this guidance did not have a material impact on the Company’s results
of operations, financial position or disclosures.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
In
May 2017, the FASB issued ASU 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,
which
clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new
guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as a modification.
The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
The new standard will be effective prospectively for the Company for the fiscal year beginning July 1, 2018. Early adoption is
permitted. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial
position or disclosures.
In
August 2018, the Securities and Exchange Commission issued Release No. 33-10532 that amends and clarifies certain financial reporting
requirements. The principal change to the Company’s financial reporting is the inclusion of the annual disclosure requirement
of changes in stockholders’ equity in Rule 3-04 of Regulation S-X to interim periods. The Company adopted this new rule
beginning the quarter ended September 30, 2018.
In
May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
(Topic 606), which supersedes the revenue
recognition requirements in
Revenue Recognition
(Topic 605) and Subtopic 985-605
Software - Revenue Recognition
.
Topic 605 and Subtopic 985-605 are collectively referred to as “Topic 605” or “prior GAAP.” Under Topic
606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures,
including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The
Company adopted Topic 606 on the first day of fiscal 2019 using the modified retrospective transition method. Under this method,
the Company evaluated contracts that were in effect at the beginning of fiscal 2019 as if those contracts had been accounted for
under Topic 606. The Company did not evaluate individual modifications for those periods prior to the adoption date, but the aggregate
effect of all modifications as of the adoption date and such effects are provided below. Under the modified retrospective transition
method, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical, pre-Topic
606 accounting. A cumulative catch-up adjustment was recorded to beginning accumulated deficit to reflect the impact of all existing
arrangements under Topic 606.
As
a result of adopting ASC 606, the Company recorded a net decrease of $5,795,795 to opening accumulated deficit and $2,957,860
to non-controlling interest as of July 1, 2018 as a cumulative catch-up adjustment for all open contracts as of the date of adoption.
The most significant drivers of this adjustment related to the allocation of revenue to certain performance obligations on a stand-alone
selling price basis. Specifically, contracts with one customer were required to be aggregated under the guidance of ASC 606, resulting
in additional revenue allocated to the maintenance services under these contracts. Under the guidance of ASC 605, the Company
had recognized one of these contracts as a stand-alone and separate contract with this customer, which resulted in additional
revenue allocated to the license and services that had previously been delivered to this customer.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
T
he
following table presents the cumulative effect adjustments, net of income tax effects, to beginning consolidated balance sheet
accounts for the new accounting standards adopted by the Company on the first day of fiscal 2019:
|
|
|
As
of
June
30, 2018
|
|
|
Topic
606
Adjustments
|
|
|
As
of
July
1,2018
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
22,088,853
|
|
|
|
|
|
|
$
|
22,088,853
|
|
|
Accounts
receivable, net of allowance of $610,061 and $571,511
|
|
|
12,775,461
|
|
|
|
|
|
|
|
12,775,461
|
|
|
Accounts
receivable, net - related party
|
|
|
3,374,272
|
|
|
|
|
|
|
|
3,374,272
|
|
|
Revenues
in excess of billings
|
|
|
14,285,778
|
|
|
|
(7,328,812
|
)
|
|
|
6,956,966
|
|
|
Convertible
note receivable - related party
|
|
|
2,123,500
|
|
|
|
|
|
|
|
2,123,500
|
|
|
Other
current assets
|
|
|
2,703,032
|
|
|
|
|
|
|
|
2,703,032
|
|
|
Total
current assets
|
|
|
57,350,896
|
|
|
|
(7,328,812
|
)
|
|
|
50,022,084
|
|
|
Revenues
in excess of billings, net - long term
|
|
|
1,206,669
|
|
|
|
(1,206,669
|
)
|
|
|
-
|
|
|
Property
and equipment, net
|
|
|
16,165,491
|
|
|
|
|
|
|
|
16,165,491
|
|
|
Long
term investment
|
|
|
3,217,162
|
|
|
|
|
|
|
|
3,217,162
|
|
|
Other
assets
|
|
|
70,299
|
|
|
|
|
|
|
|
70,299
|
|
|
Intangible
assets, net
|
|
|
12,247,196
|
|
|
|
|
|
|
|
12,247,196
|
|
|
Goodwill
|
|
|
9,516,568
|
|
|
|
|
|
|
|
9,516,568
|
|
|
Total
assets
|
|
$
|
99,774,281
|
|
|
$
|
(8,535,481
|
)
|
|
$
|
91,238,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
7,873,809
|
|
|
|
|
|
|
$
|
7,873,809
|
|
|
Current
portion of loans and obligations under capitalized leases
|
|
|
8,595,919
|
|
|
|
|
|
|
|
8,595,919
|
|
|
Unearned
revenues
|
|
|
5,949,581
|
|
|
|
218,174
|
|
|
|
6,167,755
|
|
|
Common
stock to be issued
|
|
|
88,324
|
|
|
|
|
|
|
|
88,324
|
|
|
Total
current liabilities
|
|
|
22,507,633
|
|
|
|
218,174
|
|
|
|
22,725,807
|
|
|
Loans
and obligations under capitalized leases; less current maturities
|
|
|
330,596
|
|
|
|
|
|
|
|
330,596
|
|
|
Total
liabilities
|
|
|
22,838,229
|
|
|
|
218,174
|
|
|
|
23,056,403
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 500,000 shares authorized;
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $.01 par value; 14,500,000 shares authorized; 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018
and 11,225,385 shares issued and 11,190,606 outstanding as of June 30, 2017
|
|
|
117,085
|
|
|
|
|
|
|
|
117,085
|
|
|
Additional
paid-in-capital
|
|
|
126,479,147
|
|
|
|
|
|
|
|
126,479,147
|
|
|
Treasury
stock (At cost, 205,853 shares and 34,779 shares as of June 30, 2018 and June 30, 2017, respectively)
|
|
|
(1,205,024
|
)
|
|
|
|
|
|
|
(1,205,024
|
)
|
|
Accumulated
deficit
|
|
|
(37,994,502
|
)
|
|
|
(5,795,795
|
)
|
|
|
(43,790,297
|
)
|
|
Stock
subscription receivable
|
|
|
(221,000
|
)
|
|
|
|
|
|
|
(221,000
|
)
|
|
Other
comprehensive loss
|
|
|
(24,386,071
|
)
|
|
|
|
|
|
|
(24,386,071
|
)
|
|
Total
NetSol stockholders’ equity
|
|
|
62,789,635
|
|
|
|
(5,795,795
|
)
|
|
|
56,993,840
|
|
|
Non-controlling
interest
|
|
|
14,146,417
|
|
|
|
(2,957,860
|
)
|
|
|
11,188,557
|
|
|
Total
stockholders’ equity
|
|
|
76,936,052
|
|
|
|
(8,753,655
|
)
|
|
|
68,182,397
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
99,774,281
|
|
|
$
|
(8,535,481
|
)
|
|
$
|
91,238,800
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
following table presents the cumulative effect adjustments, net of income tax effects, to beginning consolidated balance sheet
accounts for the new accounting standards adopted by the Company as of March 31, 2019:
|
|
|
As
reported under Topic 606
|
|
|
|
|
|
Balances
under Prior GAAP
|
|
|
|
|
March
31, 2019
|
|
|
Adjustments
|
|
|
March
31, 2019
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
17,014,590
|
|
|
|
|
|
|
$
|
17,014,590
|
|
|
Accounts
receivable, net of allowance of $373,329 and $610,061
|
|
|
15,971,676
|
|
|
|
|
|
|
|
15,971,676
|
|
|
Accounts
receivable, net - related party
|
|
|
3,012,133
|
|
|
|
|
|
|
|
3,012,133
|
|
|
Revenues
in excess of billings
|
|
|
13,381,205
|
|
|
|
7,964,871
|
|
|
|
21,346,076
|
|
|
Revenues
in excess of billings - related party
|
|
|
61,822
|
|
|
|
|
|
|
|
61,822
|
|
|
Convertible
note receivable - related party
|
|
|
3,250,000
|
|
|
|
|
|
|
|
3,250,000
|
|
|
Other
current assets
|
|
|
3,593,057
|
|
|
|
|
|
|
|
3,593,057
|
|
|
Total
current assets
|
|
|
56,284,483
|
|
|
|
7,964,871
|
|
|
|
64,249,354
|
|
|
Revenues
in excess of billings, net - long term
|
|
|
-
|
|
|
|
1,370,111
|
|
|
|
1,370,111
|
|
|
Property
and equipment, net
|
|
|
14,374,262
|
|
|
|
|
|
|
|
14,374,262
|
|
|
Long
term investment
|
|
|
2,501,299
|
|
|
|
|
|
|
|
2,501,299
|
|
|
Other
assets
|
|
|
23,994
|
|
|
|
|
|
|
|
23,994
|
|
|
Intangible
assets, net
|
|
|
9,042,726
|
|
|
|
|
|
|
|
9,042,726
|
|
|
Goodwill
|
|
|
9,516,568
|
|
|
|
|
|
|
|
9,516,568
|
|
|
Total
assets
|
|
$
|
91,743,332
|
|
|
$
|
9,334,982
|
|
|
$
|
101,078,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
6,881,435
|
|
|
|
|
|
|
$
|
6,881,435
|
|
|
Current
portion of loans and obligations under capitalized leases
|
|
|
8,111,332
|
|
|
|
|
|
|
|
8,111,332
|
|
|
Unearned
revenues
|
|
|
6,241,741
|
|
|
|
(1,013,469
|
)
|
|
|
5,228,272
|
|
|
Common
stock to be issued
|
|
|
88,324
|
|
|
|
|
|
|
|
88,324
|
|
|
Total
current liabilities
|
|
|
21,322,832
|
|
|
|
(1,013,469
|
)
|
|
|
20,309,363
|
|
|
Loans
and obligations under capitalized leases; less current maturities
|
|
|
716,563
|
|
|
|
|
|
|
|
716,563
|
|
|
Total
liabilities
|
|
|
22,039,395
|
|
|
|
(1,013,469
|
)
|
|
|
21,025,926
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 500,000 shares authorized;
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $.01 par value; 14,500,000 shares authorized; 11,879,056 shares issued and 11,673,203 outstanding as of March 31,
2019 and 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018
|
|
|
118,791
|
|
|
|
|
|
|
|
118,791
|
|
|
Additional
paid-in-capital
|
|
|
127,551,606
|
|
|
|
|
|
|
|
127,551,606
|
|
|
Treasury
stock (At cost, 205,853 shares and 205,853 shares as of March 31, 2019 and June 30, 2018, respectively)
|
|
|
(1,205,024
|
)
|
|
|
|
|
|
|
(1,205,024
|
)
|
|
Accumulated
deficit
|
|
|
(38,704,519
|
)
|
|
|
6,851,550
|
|
|
|
(31,852,969
|
)
|
|
Stock
subscription receivable
|
|
|
(221,000
|
)
|
|
|
|
|
|
|
(221,000
|
)
|
|
Other
comprehensive loss
|
|
|
(28,474,832
|
)
|
|
|
|
|
|
|
(28,474,832
|
)
|
|
Total
NetSol stockholders’ equity
|
|
|
59,065,022
|
|
|
|
6,851,550
|
|
|
|
65,916,572
|
|
|
Non-controlling
interest
|
|
|
10,638,915
|
|
|
|
3,496,901
|
|
|
|
14,135,816
|
|
|
Total
stockholders’ equity
|
|
|
69,703,937
|
|
|
|
10,348,451
|
|
|
|
80,052,388
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
91,743,332
|
|
|
$
|
9,334,982
|
|
|
$
|
101,078,314
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
following table summarizes the effects of adopting Topic 606 on the Company’s Condensed Consolidated Statement of Income
for the three and nine months ended March 31, 2019:
|
|
|
For
the Three Months Ended
March
31, 2019
|
|
|
For
the Nine Months Ended
March
31, 2019
|
|
|
|
|
As
reported
under
Topic
606
|
|
|
Adjustments
|
|
|
Under
prior
GAAP
|
|
|
As
reported under
Topic
606
|
|
|
Adjustments
|
|
|
Under
prior
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
fees
|
|
$
|
2,536,320
|
|
|
$
|
175,507
|
|
|
$
|
2,711,827
|
|
|
$
|
13,310,002
|
|
|
$
|
175,507
|
|
|
$
|
13,485,509
|
|
|
Maintenance
fees
|
|
|
3,562,412
|
|
|
|
232,110
|
|
|
|
3,794,522
|
|
|
|
10,735,432
|
|
|
|
589,466
|
|
|
|
11,324,898
|
|
|
Services
|
|
|
10,519,219
|
|
|
|
|
|
|
|
10,519,219
|
|
|
|
25,175,187
|
|
|
|
-
|
|
|
|
25,175,187
|
|
|
Maintenance
fees - related party
|
|
|
142,344
|
|
|
|
|
|
|
|
142,344
|
|
|
|
370,723
|
|
|
|
-
|
|
|
|
370,723
|
|
|
Services
- related party
|
|
|
366,760
|
|
|
|
|
|
|
|
366,760
|
|
|
|
934,883
|
|
|
|
-
|
|
|
|
934,883
|
|
|
Total
net revenues
|
|
|
17,127,055
|
|
|
|
407,617
|
|
|
|
17,534,672
|
|
|
|
50,526,227
|
|
|
|
764,973
|
|
|
|
51,291,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and consultants
|
|
|
4,833,611
|
|
|
|
|
|
|
|
4,833,611
|
|
|
|
14,351,227
|
|
|
|
-
|
|
|
|
14,351,227
|
|
|
Travel
|
|
|
1,793,964
|
|
|
|
|
|
|
|
1,793,964
|
|
|
|
4,652,143
|
|
|
|
-
|
|
|
|
4,652,143
|
|
|
Depreciation
and amortization
|
|
|
874,654
|
|
|
|
|
|
|
|
874,654
|
|
|
|
2,692,306
|
|
|
|
-
|
|
|
|
2,692,306
|
|
|
Other
|
|
|
1,067,506
|
|
|
|
|
|
|
|
1,067,506
|
|
|
|
3,176,602
|
|
|
|
-
|
|
|
|
3,176,602
|
|
|
Total
cost of revenues
|
|
|
8,569,735
|
|
|
|
-
|
|
|
|
8,569,735
|
|
|
|
24,872,278
|
|
|
|
-
|
|
|
|
24,872,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
8,557,320
|
|
|
|
407,617
|
|
|
|
8,964,937
|
|
|
|
25,653,949
|
|
|
|
764,973
|
|
|
|
26,418,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and marketing
|
|
|
1,864,990
|
|
|
|
|
|
|
|
1,864,990
|
|
|
|
5,614,619
|
|
|
|
-
|
|
|
|
5,614,619
|
|
|
Depreciation
and amortization
|
|
|
252,442
|
|
|
|
|
|
|
|
252,442
|
|
|
|
658,453
|
|
|
|
-
|
|
|
|
658,453
|
|
|
General
and administrative
|
|
|
3,833,209
|
|
|
|
|
|
|
|
3,833,209
|
|
|
|
12,241,988
|
|
|
|
-
|
|
|
|
12,241,988
|
|
|
Research
and development cost
|
|
|
513,770
|
|
|
|
|
|
|
|
513,770
|
|
|
|
1,256,577
|
|
|
|
-
|
|
|
|
1,256,577
|
|
|
Total
operating expenses
|
|
|
6,464,411
|
|
|
|
-
|
|
|
|
6,464,411
|
|
|
|
19,771,637
|
|
|
|
-
|
|
|
|
19,771,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
2,092,909
|
|
|
|
407,617
|
|
|
|
2,500,526
|
|
|
|
5,882,312
|
|
|
|
764,973
|
|
|
|
6,647,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on sale of assets
|
|
|
16,380
|
|
|
|
|
|
|
|
16,380
|
|
|
|
65,170
|
|
|
|
-
|
|
|
|
65,170
|
|
|
Interest
expense
|
|
|
(70,447
|
)
|
|
|
|
|
|
|
(70,447
|
)
|
|
|
(233,685
|
)
|
|
|
-
|
|
|
|
(233,685
|
)
|
|
Interest
income
|
|
|
201,084
|
|
|
|
13,474
|
|
|
|
214,558
|
|
|
|
680,469
|
|
|
|
163,442
|
|
|
|
843,911
|
|
|
Gain
on foreign currency exchange transactions
|
|
|
47,218
|
|
|
|
(73,088
|
)
|
|
|
(25,870
|
)
|
|
|
2,594,885
|
|
|
|
666,381
|
|
|
|
3,261,266
|
|
|
Share
of net loss from equity investment
|
|
|
(245,389
|
)
|
|
|
|
|
|
|
(245,389
|
)
|
|
|
(843,373
|
)
|
|
|
-
|
|
|
|
(843,373
|
)
|
|
Other
income
|
|
|
3,116
|
|
|
|
|
|
|
|
3,116
|
|
|
|
12,998
|
|
|
|
-
|
|
|
|
12,998
|
|
|
Total
other income (expenses)
|
|
|
(48,038
|
)
|
|
|
(59,614
|
)
|
|
|
(107,652
|
)
|
|
|
2,276,464
|
|
|
|
829,823
|
|
|
|
3,106,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income before income taxes
|
|
|
2,044,871
|
|
|
|
348,003
|
|
|
|
2,392,874
|
|
|
|
8,158,776
|
|
|
|
1,594,796
|
|
|
|
9,753,572
|
|
|
Income
tax provision
|
|
|
(275,476
|
)
|
|
|
|
|
|
|
(275,476
|
)
|
|
|
(777,262
|
)
|
|
|
-
|
|
|
|
(777,262
|
)
|
|
Net
income
|
|
|
1,769,395
|
|
|
|
348,003
|
|
|
|
2,117,398
|
|
|
|
7,381,514
|
|
|
|
1,594,796
|
|
|
|
8,976,310
|
|
|
Non-controlling
interest
|
|
|
(501,835
|
)
|
|
|
(117,625
|
)
|
|
|
(619,460
|
)
|
|
|
(2,295,736
|
)
|
|
|
(539,041
|
)
|
|
|
(2,834,777
|
)
|
|
Net
income attributable to NetSol
|
|
$
|
1,267,560
|
|
|
$
|
230,378
|
|
|
$
|
1,497,938
|
|
|
$
|
5,085,778
|
|
|
$
|
1,055,755
|
|
|
$
|
6,141,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
|
$
|
0.44
|
|
|
$
|
0.09
|
|
|
$
|
0.53
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
|
$
|
0.44
|
|
|
$
|
0.09
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,656,098
|
|
|
|
11,656,098
|
|
|
|
11,656,098
|
|
|
|
11,580,066
|
|
|
|
11,580,066
|
|
|
|
11,580,066
|
|
|
Diluted
|
|
|
11,691,342
|
|
|
|
11,691,342
|
|
|
|
11,691,342
|
|
|
|
11,615,310
|
|
|
|
11,615,310
|
|
|
|
11,615,310
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
following table summarizes the effects of adopting Topic 606 on the financial statement line items of the Company’s Consolidated
Statement of Cash Flows for the three months ended March 31, 2019:
|
|
|
For
the Nine Months Ended
March
31, 2019
|
|
|
|
|
As
reported under
|
|
|
|
|
|
Under
prior
|
|
|
|
|
Topic
606
|
|
|
Adjustments
|
|
|
GAAP
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
7,381,514
|
|
|
$
|
1,594,796
|
|
|
$
|
8,976,310
|
|
Adjustments
to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3,350,759
|
|
|
|
|
|
|
|
3,350,759
|
|
|
Share
of net loss from investment under equity method
|
|
|
843,373
|
|
|
|
|
|
|
|
843,373
|
|
|
Loss
on sale of assets
|
|
|
(65,170
|
)
|
|
|
|
|
|
|
(65,170
|
)
|
|
Stock
based compensation
|
|
|
980,682
|
|
|
|
|
|
|
|
980,682
|
|
|
Fair
market value of stock options
|
|
|
43,612
|
|
|
|
|
|
|
|
43,612
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Accounts
receivable
|
|
|
(4,249,540
|
)
|
|
|
|
|
|
|
(4,249,540
|
)
|
|
Accounts
receivable - related party
|
|
|
(461,435
|
)
|
|
|
|
|
|
|
(461,435
|
)
|
|
Revenues
in excess of billing
|
|
|
(6,862,451
|
)
|
|
|
(799,501
|
)
|
|
|
(7,661,952
|
)
|
|
Revenues
in excess of billing - related party
|
|
|
(97,359
|
)
|
|
|
|
|
|
|
(97,359
|
)
|
|
Other
current assets
|
|
|
(1,189,909
|
)
|
|
|
|
|
|
|
(1,189,909
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
(540,615
|
)
|
|
|
|
|
|
|
(540,615
|
)
|
|
Unearned
revenue
|
|
|
611,157
|
|
|
|
(795,295
|
)
|
|
|
(184,138
|
)
|
|
Net
cash used in operating activities
|
|
|
(255,382
|
)
|
|
|
-
|
|
|
|
(255,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(2,590,302
|
)
|
|
|
|
|
|
|
(2,590,302
|
)
|
|
Sales
of property and equipment
|
|
|
1,005,214
|
|
|
|
|
|
|
|
1,005,214
|
|
|
Convertible
note receivable - related party
|
|
|
(1,126,500
|
)
|
|
|
|
|
|
|
(1,126,500
|
)
|
|
Net
cash used in investing activities
|
|
|
(2,711,588
|
)
|
|
|
-
|
|
|
|
(2,711,588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the exercise of stock options and warrants
|
|
|
85,000
|
|
|
|
|
|
|
|
85,000
|
|
|
Proceeds
from exercise of subsidiary options
|
|
|
2,650
|
|
|
|
|
|
|
|
2,650
|
|
|
Dividend
paid by subsidiary to non-controlling interest
|
|
|
(566,465
|
)
|
|
|
|
|
|
|
(566,465
|
)
|
|
Proceeds
from bank loans
|
|
|
1,337,092
|
|
|
|
|
|
|
|
1,337,092
|
|
|
Payments
on capital lease obligations and loans - net
|
|
|
(298,610
|
)
|
|
|
|
|
|
|
(298,610
|
)
|
|
Net
cash provided by financing activities
|
|
|
559,667
|
|
|
|
-
|
|
|
|
559,667
|
|
|
Effect
of exchange rate changes
|
|
|
(2,666,960
|
)
|
|
|
|
|
|
|
(2,666,960
|
)
|
|
Net
increase in cash and cash equivalents
|
|
|
(5,074,263
|
)
|
|
|
-
|
|
|
|
(5,074,263
|
)
|
|
Cash
and cash equivalents at beginning of the period
|
|
|
22,088,853
|
|
|
|
|
|
|
|
22,088,853
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
17,014,590
|
|
|
$
|
-
|
|
|
$
|
17,014,590
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
Accounting
Standards Recently Issued but Not Yet Adopted by the Company:
In
February 2016, the FASB issued ASU 2016-02,
Leases
, which requires lessees to recognize right-of-use assets and lease liabilities,
for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to
apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease
is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based
on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods
beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments
of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and
measure leases at the beginning of the earliest period presented. The Company is currently evaluating its lease portfolio; assessing
system needs to support adoption of the new lease standard; and analyzing procedural changes, including updating our lease accounting
policy as needed to reflect the new requirements of this standard. The Company continues to evaluate the impact that these changes
in methodology will have on its financial condition, results of operations and disclosures.
In
January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment
. Under the new standard, goodwill
impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed
the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment
by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its
assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual
periods beginning after December 15, 2019, and interim periods within those periods. Early adoption is permitted for interim or
annual goodwill impairment test performed on testing dates after January 1, 2017. The Company will apply this guidance to applicable
impairment tests after the adoption date.
In
July 2017, the FASB issued ASU 2017-11,
Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480);
Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II)
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.
The ASU was issued to address the complexity associated
with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities
and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible
debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion
option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round
feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively.
Early adoption is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the
impact of the adoption of this standard on its consolidated financial statements.
In
February 2018, the FASB issued ASU 2018-02, “
Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income.”
This ASU allows a reclassification from accumulated
other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently, the amendments
eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial
statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Act,
the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations
is not affected. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments in this
ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the
change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The amendments in this ASU are effective for
all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is
currently in the process of evaluating the impact of adoption of this standard on its consolidated financial statements.
In
March 2018, FASB issued ASU No. 2018-05,
“Income Taxes (Topic 740).”
This ASU was issued to provide guidance
on the income tax accounting implications of the Tax Act and allows for entities to report provisional amounts for specific income
tax effects of the Tax Act for which the accounting under ASC Topic 740 was not yet complete, but a reasonable estimate could
be determined. A measurement period of one year is allowed to complete the accounting effects under ASC Topic 740 and revise any
previous estimates reported. Any provisional amounts or subsequent adjustments included in an entity’s financial statements
during the measurement period should be included in income from continuing operations as an adjustment to tax expense in the reporting
period the amounts are determined.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
In
June 2018, the FASB issued ASU 2018-07
“Compensation — Stock compensation — Improvements to Nonemployee Share-Based
Payment Accounting”
. This update aims to simplify the accounting for share-based payments awarded to non-employees for
goods or services acquired. The update specifies that the measurement date is the grant date and that awards are required to be
measured at fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. The Company is currently in the process of evaluating the impact of adoption of this
standard on its consolidated financial statements.
In
August 2018, the FASB issued ASU No. 2018-13, “
Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to
the Disclosure Requirements for Fair Value Measurement,”
which is designed to improve the effectiveness of disclosures
by removing, modifying and adding disclosures related to fair value measurements. The update is effective for the Company on July
1, 2020, with early adoption permitted. The Company is currently assessing the impact this update will have on its consolidated
financial statements.
In
August 2018, the FASB issued ASU 2018-15, “
Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
.” The amendments
in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service
contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and
hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement
that is a service contract is not affected by the amendments in this update. The amendments in this update are effective for the
Company on July 1, 2020, with early adoption permitted. The amendments in this update should be applied either retrospectively
or prospectively to all implementation costs incurred after the date of adoption. The Company is in the process of assessing the
impact of the amendments in this update but does not expect it to have a material impact on the Company’s consolidated financial
statements.
All
other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
3 – REVENUE RECOGNITION
The
Company determines revenue recognition through the following steps:
|
●
|
Identification
of the contract, or contracts, with a customer;
|
|
●
|
Identification
of the performance obligations in the contract;
|
|
●
|
Determination
of the transaction price;
|
|
●
|
Allocation
of the transaction price to the performance obligations in the contract; and
|
|
●
|
Recognition
of revenue when, or as, the Company satisfies a performance obligation.
|
The
Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation)
or an agent (net presentation) by evaluating the nature of its promise to the customer. Revenue is presented net of sales, value-added
and other taxes collected from customers and remitted to government authorities.
The
Company has two primary revenue streams: core revenue and non-core revenue.
Core
Revenue
The
Company generates its core revenue from the following sources: (1) software licenses, (2) services, which include implementation
and consulting services, and (3) maintenance, which includes post contract support, of its enterprise software solutions for the
lease and finance industry. The Company offers its software using the same underlying technology via two models: a traditional
on-premises licensing model and a subscription model. The on-premises model involves the sale or license of software on a perpetual
basis to customers who take possession of the software and install and maintain the software on their own hardware. Under the
subscription delivery model, the Company provides access to its software on a hosted basis as a service and customers generally
do not have the contractual right to take possession of the software.
Non-Core
Revenue
The
Company generates its non-core revenue by providing business process outsourcing (“BPO”), other IT services and internet
services.
Performance
Obligations
A
performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account
under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or
as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies
and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations
over the life of the contract.
The
Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription
or licenses and a professional services engagement. License purchases generally have multiple performance obligations as customers
purchase maintenance and services in addition to the licenses. The Company’s single performance obligation arrangements
are typically maintenance renewals, subscription renewals and services engagements.
For
contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”)
for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance
obligation using its best estimate for the SSP.
Subscription
Subscription
revenue is recognized ratably over the initial subscription period committed to by the customer commencing when the product is
made available to the customer. The initial subscription period is typically 12 to 60 months. The Company generally invoices its
customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment within
30 days of invoice.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
Software
Licenses
Transfer
of control for software is considered to have occurred upon delivery of the product to the customer. The Company’s typical
payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice.
Maintenance
Revenue
from support services and product updates, referred to as maintenance revenue, is recognized ratably over the term of the maintenance
period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product
updates, maintenance releases and patches released during the term of the support period on a when-and-if available basis. The
Company’s customers purchase both product support and license updates when they acquire new software licenses. In addition,
a majority of customers renew their support services contracts annually and typical payment terms provide that customers make
payment within 30 days of invoice.
Professional
Services
Revenue
from professional services is typically comprised of implementation, development, data migration, training or other consulting
services. Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from
software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments.
The Company recognizes revenue for time-and-materials arrangements as the services are performed. In fixed fee arrangements, revenue
is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the
services project. Management applies judgment when estimating project status and the costs necessary to complete the services
projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency
variances and specification and testing requirement changes. Services are generally invoiced upon milestones in the contract or
upon consumption of the hourly resources and payments are typically due 30 days after invoice.
BPO
and Internet Services
Revenue
from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date
as a percentage of total estimated labor hours for each contract. Internet services are invoiced either monthly, quarterly or
half yearly in advance to the customers and revenue is recognized ratably overtime on a monthly basis.
Disaggregated
Revenue
The
Company disaggregates revenue from contracts with customers by category -- core and non-core, as it believes it best depicts how
the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
Company’s disaggregated revenue by category is as follows:
|
|
|
For
the Three Months Ended March 31,
|
|
|
For
the Nine Months Ended March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
2,536,320
|
|
|
$
|
2,648,870
|
|
|
$
|
13,310,002
|
|
|
$
|
3,210,868
|
|
|
Maintenance
|
|
|
3,562,412
|
|
|
|
3,659,998
|
|
|
|
10,735,432
|
|
|
|
10,702,171
|
|
|
Services
|
|
|
9,069,468
|
|
|
|
7,810,118
|
|
|
|
20,841,207
|
|
|
|
21,497,937
|
|
|
License
- related party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
261,513
|
|
|
Maintenance
fees - related party
|
|
|
142,344
|
|
|
|
105,325
|
|
|
|
370,723
|
|
|
|
309,539
|
|
|
Services
- related party
|
|
|
236,422
|
|
|
|
349,637
|
|
|
|
658,666
|
|
|
|
1,289,587
|
|
|
Total
core revenue, net
|
|
|
15,546,966
|
|
|
|
14,573,948
|
|
|
|
45,916,030
|
|
|
|
37,271,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Core:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
1,449,751
|
|
|
|
1,535,092
|
|
|
|
4,333,980
|
|
|
|
3,952,201
|
|
|
Services
- related party
|
|
|
130,338
|
|
|
|
934,780
|
|
|
|
276,217
|
|
|
|
3,085,215
|
|
|
Total
non-core revenue, net
|
|
|
1,580,089
|
|
|
|
2,469,872
|
|
|
|
4,610,197
|
|
|
|
7,037,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net revenue
|
|
$
|
17,127,055
|
|
|
$
|
17,043,820
|
|
|
$
|
50,526,227
|
|
|
$
|
44,309,031
|
|
Significant
Judgments
More
judgments and estimates are required under Topic 606 than were required under Topic 605. Due to the complexity of certain contracts,
the actual revenue recognition treatment required under Topic 606 for the Company’s arrangements may be dependent on contract-specific
terms and may vary in some instances.
Judgment
is required to determine the SSP for each distinct performance obligation. The Company rarely licenses or sells products on a
stand-alone basis, so the Company is required to estimate the range of SSPs for each performance obligation. In instances where
SSP is not directly observable because the Company does not sell the license, product or service separately, the Company determines
the SSP using information that may include market conditions and other observable inputs. In making these judgments, the Company
analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer
demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product
or service delivered to customers.
The
most significant inputs involved in the Company’s revenue recognition policies are: The (1) stand-alone selling prices of
the Company’s software license, and the (2) the method of recognizing revenue for installation/customization, and other
services.
The
stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when
quoting prices to customers. Although the Company has no history of selling its software separately from maintenance and other
services, the Company does have historical experience with amending contracts with customers to provide additional modules of
its software or providing those modules at an optional price. This information guides the Company in assessing the stand-alone
selling price of the Company’s software, since the Company can observe instances where a customer had a particular component
of the Company’s software that was essentially priced separate from other goods and services that the Company delivered
to that customer.
The
Company recognized revenue from implementation and customization services using the percentage of estimated “man-days”
that the work requires. The Company believes the level of effort to complete the services is best measured by the amount of time
(measured as an employee working for one day on implementation/customization work) that is required to complete the implementation
or customization work. The Company reviews its estimate of man-days required to complete implementation and customization services
each reporting period.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
Revenue
is recognized over time for the Company’s subscription, maintenance and fixed fee professional services that are separate
performance obligations. For the Company’s professional services, revenue is recognized over time, generally using costs
incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete
projects. A number of internal and external factors can affect these estimates, including labor rates, utilization, specification
variances and testing requirement changes.
If
a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement,
such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant
judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately
or as a single arrangement. The Company’s judgments about whether a group of contracts comprise a single arrangement can
affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations
for the periods involved.
If
a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which
the entity will be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable
consideration, the Company will consider all relevant facts and circumstances. Variable consideration will be estimated and included
in the contract price only when it is probable that a significant reversal in the amount of revenue recognized will not occur.
Contract
Balances
The
timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables,
contract assets (revenues in excess of billings), or contract liabilities (deferred revenue) on the Company’s Consolidated
Balance Sheets. The Company records revenues in excess of billings when the Company has transferred goods or services but does
not yet have the right to consideration. The Company records deferred revenue when the Company has received or has the right to
receive consideration but has not yet transferred goods or services to the customer.
The
revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon
completion of a milestone.
The
Company’s revenues in excess of billings and deferred revenue are as follows:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31, 2019
|
|
|
July
1, 2018
|
|
|
|
|
|
|
|
|
|
|
Revenues
in excess of billings
|
|
$
|
13,381,205
|
|
|
$
|
6,956,966
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Revenue
|
|
$
|
6,241,741
|
|
|
$
|
6,167,755
|
|
During
the three and nine months ended March 31, 2019, the Company recognized revenue of $1,758,521 and $5,422,772, respectively, which
was included in the deferred revenue balance, as adjusted for Topic 606, at the beginning of the period. All other activity in
deferred revenue is due to the timing of invoicing in relation to the timing of revenue recognition.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
Revenue
allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that
are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as
revenue in future periods. Contracted but unsatisfied performance obligations were approximately $76,692,255 as of March 31, 2019,
of which the Company estimates to recognize approximately $13,185,913 in revenue over the next 12 months and the remainder over
an estimated 6 years thereafter. Actual revenue recognition depends in part on the timing of software modules installed at various
customer sites. Accordingly, some factors that affect the Company’s revenue, such as the availability and demand for modules
within customer geographic locations, is not entirely within the Company’s control. In instances where the timing of revenue
recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant
financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing
the Company’s products and services, and not to facilitate financing arrangements.
Deferred
Revenue
The
Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment
due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable license and services starting
in future periods are included in accounts receivable and deferred revenue.
Practical
Expedients and Exemptions
There
are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s
disclosures. Below is a list of practical expedients the Company applied in the adoption and application of Topic 606:
Application
●
The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.
● The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have
been one year or less or the commissions are based on cashed received. These costs are recorded within sales and marketing
expense in the Consolidated Statement of Operations.
● The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company
recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).
Modified
Retrospective Transition Adjustments
● For contract modifications, the Company reflected the aggregate effect of all modifications that occurred prior to the adoption
date when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating
the transaction price to satisfied and unsatisfied performance obligations for the modified contract at transition.
Costs
to Obtain a Contract
The
Company does not have a material amount of costs to obtain a contract capitalized at any balance sheet date. In general, the Company
incurs few direct incremental costs of obtaining new customer contracts. The Company rarely incurs incremental costs to review
or otherwise enter into contractual arrangements with customers. In addition, the Company’s sales personnel receive fees
that are referred to as commissions, but that are based on more than simply signing up new customers. The Company’s sales
personnel are required to perform additional duties beyond new customer contract inception dates, including fulfilment duties
and collections efforts.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
4 – EARNINGS PER SHARE
Basic
earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive
potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include
outstanding stock options and stock awards.
The
components of basic and diluted earnings per share were as follows:
|
|
|
For
the three months ended March 31, 2019
|
|
|
For
the nine months ended March 31, 2019
|
|
|
|
|
Net
Income
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Net
Income
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Basic
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$
|
1,267,560
|
|
|
|
11,656,098
|
|
|
$
|
0.11
|
|
|
$
|
5,085,778
|
|
|
|
11,580,066
|
|
|
$
|
0.44
|
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
-
|
|
|
|
4,948
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,948
|
|
|
|
-
|
|
|
Share
grants
|
|
|
-
|
|
|
|
30,296
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,296
|
|
|
|
-
|
|
|
Diluted
income per share
|
|
$
|
1,267,560
|
|
|
|
11,691,342
|
|
|
$
|
0.11
|
|
|
$
|
5,085,778
|
|
|
|
11,615,310
|
|
|
$
|
0.44
|
|
|
|
|
For
the three months ended March 31, 2018
|
|
|
For
the nine months ended March 31, 2018
|
|
|
|
|
Net
Income
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Net
Income
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Basic
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$
|
2,864,445
|
|
|
|
11,190,048
|
|
|
$
|
0.26
|
|
|
$
|
3,129,368
|
|
|
|
11,118,529
|
|
|
$
|
0.28
|
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
-
|
|
|
|
78,794
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,836
|
|
|
|
-
|
|
|
Diluted
income per share
|
|
$
|
2,864,445
|
|
|
|
11,268,842
|
|
|
$
|
0.25
|
|
|
$
|
3,129,368
|
|
|
|
11,152,365
|
|
|
$
|
0.28
|
|
The
following potential dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion
would be anti-dilutive.
|
|
|
For
the Three Months
|
|
|
For
the Nine Months
|
|
|
|
|
Ended
March 31,
|
|
|
Ended
March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Grants
|
|
|
-
|
|
|
|
243,684
|
|
|
|
-
|
|
|
|
243,684
|
|
|
|
|
|
-
|
|
|
|
243,684
|
|
|
|
-
|
|
|
|
243,684
|
|
NOTE
5 – OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY:
The
accounts of NTE, AEL, VLSH and VLS use the British Pound; VLSIL uses the Euro; NetSol PK, Connect, and NetSol Innovation use the
Pakistan Rupee; NTPK Thailand and NetSol Thai use the Thai Baht; Australia uses the Australian dollar; and NetSol Beijing uses
the Chinese Yuan as the functional currencies. NetSol Technologies, Inc., and its subsidiary, NTA, use the U.S. dollar as the
functional currency. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results
are translated at the average exchange rate throughout the period. Accumulated translation losses classified as an item of accumulated
other comprehensive loss in the stockholders’ equity section of the consolidated balance sheet were $28,474,832 and $24,836,071
as of March 31, 2019 and June 30, 2018, respectively. During the three and nine months ended March 31, 2019, comprehensive income
(loss) in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of $28,021
and $4,088,761, respectively. During the three and nine months ended March 31, 2018, comprehensive income (loss) in the consolidated
statements of comprehensive income (loss) included a translation loss attributable to NetSol of $1,729,215 and $3,930,675, respectively.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
6 – RELATED PARTY TRANSACTIONS
NetSol-Innovation
In
November 2004, the Company entered into a joint venture with 1insurer, formerly
Innovation Group,
called NetSol-Innovation.
NetSol-Innovation provides support services to 1insurer. During the three and nine months ended March 31, 2019, NetSol Innovation
provided services of $nil and $67,286, respectively. During the three and nine months ended March 31, 2018, NetSol Innovation
provided services of $774,393 and $2,702,906, respectively. Accounts receivable at March 31, 2019 and June 30, 2018 were $2,348,134
and $2,521,533, respectively.
Investec
Asset Finance
In
October 2011, NTE entered into an agreement with Investec Asset Finance to acquire VLS. NTE and VLS provide support services to
Investec. During the three and nine months ended March 31, 2019, NTE and VLS provided license, maintenance and services of $352,108
and $743,987, respectively. During the three and nine months ended March 31, 2018, NTE and VLS provided license, maintenance and
services of $464,976 and $1,508,867, respectively. Accounts receivable at March 31, 2019 and June 30, 2018 were $142,774 and $379,521,
respectively.
NOTE
7 – MAJOR CUSTOMERS
During
the nine months ended March 31, 2019, revenues from two customers were $17,137,545 and $10,339,704 representing 33.9% and 20.5%
of revenues. During the nine months ended March 31, 2018, revenues from one customer was $16,242,790 representing 36.7% or revenues.
The revenue from these customers are shown in the Asia – Pacific segment.
Accounts
receivable from the two customers at March 31, 2019, were $12,178,689 and 163,121, respectively. Accounts receivable at June 30,
2018, were $4,417,709 and $nil, respectively. Revenues in excess of billings at March 31, 2019, were $2,771,761 and $5,572,940,
respectively. Revenues in excess of billings at June 30, 2018, were $12,508,815 and $nil, respectively. Included in this amount
was $Nil and $1,206,669 shown as long term at March 31, 2019 and June 30, 2018, respectively.
NOTE
8 – CONVERTIBLE NOTE RECEIVABLE – RELATED PARTY
Convertible
Note Receivable - May 25, 2017
The
Company entered into an agreement with WRLD3D, whereby the Company was issued a Convertible Promissory Note (the “Convertible
Note”) which was fully executed on May 25, 2017. The maximum principal amount of the Convertible Note is $750,000, and as
of June 30, 2018, the Company had disbursed $750,000. The Convertible Note bears interest at 5% per annum and all unpaid interest
and principal is due and payable upon the Company’s request on or after February 1, 2018. The Company has a security interest
in all of WRLD3D’s personal property, inventory, equipment, general intangibles, financial assets, investment property,
securities, deposit accounts, and the proceeds thereof.
The
Convertible Note is convertible upon the occurrence of the following events:
|
|
1.
|
Upon
a qualified financing which is an equity financing of at least $2,000,000.
|
|
|
2.
|
Optionally,
upon an equity financing less than $2,000,000.
|
|
|
3.
|
Optionally
after the maturity date.
|
|
|
4.
|
Upon
a change of control.
|
The
Convertible Note is convertible into Series BB Preferred shares at the lesser of (i) the price paid per share for the equity security
by the investors in the qualified financing and (ii) $0.6788 per share (adjusted for any stock dividends, combinations, splits,
recapitalizations or the like with respect to WRLD3D’s Series BB Preferred Stock after the date of the Convertible Note).
The
Company has accrued interest of $63,250 and $35,099 at March 31, 2019 and June 30, 2018, respectively, which is included in “Other
current assets”.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
Convertible
Note Receivable – February 9, 2018
The
Company’s subsidiary NetSol Thai entered into an agreement with WRLD3D, whereby NetSol Thai was issued a Convertible Promissory
Note (the “Thai Convertible Note”) which was fully executed on February 9, 2018. The maximum principal amount of the
Thai Convertible Note is $2,500,000, and as of March 31, 2019, NetSol Thai had disbursed $2,406,500. The Thai Convertible Note
bears interest at 10% per annum and all unpaid interest and principal is due and payable upon request on or after March 31, 2019.
The Company has a security interest in all of WRLD3D’s personal property, inventory, equipment, general intangibles, financial
assets, investment property, securities, deposit accounts, and the proceeds thereof.
The
Thai Convertible Note is convertible upon the occurrence of the following events:
|
|
1.
|
Conversion
upon a qualified financing which is an equity financing of at least $1,000,000.
|
|
|
2.
|
Optional
conversion upon an equity financing less than $1,000,000.
|
|
|
3.
|
Optional
conversion after the maturity date.
|
|
|
4.
|
Change
of control.
|
If
the Company converts the Thai Convertible Note upon the occurrence of a financing, then the conversion price will be equal to
the product of: (A) the price paid per share for the equity securities by the investors multiplied by (B) 70%.
If
the Company converts the Thai Convertible Note either as an optional conversion after the maturity date or due to a change of
control, then the conversion price is equal to $0.6788 per share (adjusted for any stock dividends, combinations, splits, recapitalizations
or the like with respect to WRLD3D’s Series BB Preferred Stock after the date of the Thai Convertible Note).
The
Company has accrued interest of $187,759 and $23,593 at March 31, 2019 and June 30, 2018, respectively, which is included in “Other
current assets.
NOTE
9 - OTHER CURRENT ASSETS
Other
current assets consisted of the following:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31,
2019
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
Prepaid
Expenses
|
|
$
|
1,068,575
|
|
|
$
|
662,431
|
|
|
Advance
Income Tax
|
|
|
940,472
|
|
|
|
838,799
|
|
|
Employee
Advances
|
|
|
165,132
|
|
|
|
48,096
|
|
|
Security
Deposits
|
|
|
97,891
|
|
|
|
85,249
|
|
|
Other
Receivables
|
|
|
894,747
|
|
|
|
497,632
|
|
|
Other
Assets
|
|
|
426,240
|
|
|
|
570,825
|
|
|
Total
|
|
$
|
3,593,057
|
|
|
$
|
2,703,032
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
10 – REVENUES IN EXCESS OF BILLINGS – LONG TERM
Revenues
in excess of billings, net consisted of the following:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31,
2019
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
Revenues
in excess of billing - long term
|
|
$
|
-
|
|
|
$
|
1,445,245
|
|
|
Present
value discount
|
|
|
-
|
|
|
|
(238,576
|
)
|
|
Net
Balance
|
|
$
|
-
|
|
|
$
|
1,206,669
|
|
Pursuant
to revenue recognition for contract accounting, the Company had recorded revenues in excess of billings long-term for amounts
billable after one year. During the three and nine months ended March 31, 2018, the Company accreted $66,304 and $177,298, respectively,
which was recorded in interest income for that period. The Company used the discounted cash flow method with interest rates ranging
from 3.87% to 4.43%.
NOTE
11 - PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31,
2019
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
Office
Furniture and Equipment
|
|
$
|
3,407,947
|
|
|
$
|
3,496,653
|
|
|
Computer
Equipment
|
|
|
21,354,509
|
|
|
|
23,708,034
|
|
|
Assets
Under Capital Leases
|
|
|
2,091,538
|
|
|
|
1,479,976
|
|
|
Building
|
|
|
6,958,502
|
|
|
|
8,005,351
|
|
|
Land
|
|
|
1,809,070
|
|
|
|
2,088,463
|
|
|
Autos
|
|
|
1,153,028
|
|
|
|
1,053,749
|
|
|
Improvements
|
|
|
126,654
|
|
|
|
324,023
|
|
|
Subtotal
|
|
|
36,901,248
|
|
|
|
40,156,249
|
|
|
Accumulated
Depreciation
|
|
|
(22,526,986
|
)
|
|
|
(23,990,758
|
)
|
|
Property
and Equipment, Net
|
|
$
|
14,374,262
|
|
|
$
|
16,165,491
|
|
For
the three and nine months ended March 31, 2019, depreciation expense totaled $606,641 and $1,704,606, respectively. Of these amounts,
$354,199 and $1,046,153, respectively, are reflected in cost of revenues. For the three and nine months ended March 31, 2018,
depreciation expense totaled $705,429 and $2,141,756, respectively. Of these amounts, $474,121 and $1,441,790, respectively, are
reflected in cost of revenues.
Following
is a summary of fixed assets held under capital leases as of March 31, 2019 and June 30, 2018:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31,
2019
|
|
|
June
30,
2018
|
|
|
Computers
and Other Equipment
|
|
$
|
339,781
|
|
|
$
|
228,581
|
|
|
Furniture
and Fixtures
|
|
|
65,084
|
|
|
|
65,084
|
|
|
Vehicles
|
|
|
1,686,673
|
|
|
|
1,186,311
|
|
|
Total
|
|
|
2,091,538
|
|
|
|
1,479,976
|
|
|
Less:
Accumulated Depreciation - Net
|
|
|
(586,514
|
)
|
|
|
(477,620
|
)
|
|
|
|
$
|
1,505,024
|
|
|
$
|
1,002,356
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
12 – LONG TERM INVESTMENT-RELATED PARTY
On
March 2, 2017, the Company purchased a 4.9% interest in WRLD3D, a non-public company, for $1,111,111. The Company paid $555,556
at the initial closing and $555,555 on September 1, 2017. NetSol PK, the subsidiary of the Company, purchased a 12.2% investment
in WRLD3D, for $2,777,778 which will be earned over future periods by providing IT and enterprise software solutions. Per the
agreement, NetSol PK is to provide a minimum of $200,000 of services in each three-month period and the entire balance is required
to be provided within three years of the date of the agreement. If NetSol PK fails to provide the future services, it may be required
to forfeit the shares back to WRLD3D. As of June 30, 2018, the investment earned by NetSol PK was $2,777,778.
In
connection with the investment, the Company and NetSol PK received a warrant to purchase preferred stock of WRLD3D which included
the following key terms and features:
|
|
●
|
The
warrants are exercisable into shares of the “Next Round Preferred”, only if and when the Next Round Preferred
is issued by WRLD3D in a “Qualified Financing”.
|
|
|
●
|
The
warrants expire on March 2, 2020.
|
|
|
●
|
“Next
Round Preferred” is defined as occurring if WRLD3D’s preferred stock (or securities convertible into preferred
stock) are issued in a Qualified Financing that occurs after March 2, 2016.
|
|
|
●
|
“Qualified
Financing” is defined as financing with total proceeds of at least $2 million.
|
|
|
●
|
The
total number of common stock shares to be issued is equal to $1,250,000 divided by the per share price of the Next Round Preferred.
|
|
|
●
|
The
exercise price of the warrants is equal to the greater of
|
|
|
a)
|
70%
of the per share price of the Next Round Preferred sold in a Qualified Financing, or
|
|
|
b)
|
25,000,000
divided by the total number of shares of common stock outstanding immediately prior to the Qualified Financing (on a fully-diluted
basis, excluding the number of common stock shares issuable upon the exercise of any given warrant).
|
The
Company determined that it met the significant influence criteria since the CEO of WRLD3D is the son of the CEO, Najeeb Ghauri,
and also an employee of the Company; therefore, the Company accounts for the investment using equity method of accounting.
During
the three months and nine months ended March 31, 2019, NetSol PK provided services valued at $156,996 and $494,333, respectively,
which is recorded as services-related party. During the three and nine months ended March 31, 2018, NetSol PK provided services
valued at $150,373 and $734,081, respectively. Accounts receivable at March 31, 2019 and June 30, 2018 were $521,225 and $473,218,
respectively. Revenue in excess of billing at March 31, 2019 and June 30, 2018 were $61,822 and $Nil, respectively.
Under
the equity method of accounting, the Company recorded its share of net loss of $245,389 and $843,373 for the three and nine months
ended March 31, 2019, respectively, and the Company recorded its share of net loss of $263,678 and $534,576 for the three and
nine months ended March 31, 2018, respectively.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
13 - INTANGIBLE ASSETS
Intangible
assets consisted of the following:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31,
2019
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
Product
Licenses - Cost
|
|
$
|
47,244,997
|
|
|
$
|
47,244,997
|
|
|
Effect
of Translation Adjustment
|
|
|
(11,792,021
|
)
|
|
|
(7,857,270
|
)
|
|
Accumulated
Amortization
|
|
|
(26,410,250
|
)
|
|
|
(27,140,531
|
)
|
|
Net
Balance
|
|
$
|
9,042,726
|
|
|
$
|
12,247,196
|
|
(A)
Product Licenses
Product
licenses include internally developed original license issues, renewals, enhancements, copyrights, trademarks, and trade names.
Product licenses are amortized on a straight-line basis over their respective lives, and the unamortized amount of $9,042,726
will be amortized over the next 4.5 years. Amortization expense for the three and nine months ended March 31, 2019 was $520,455
and $1,646,153, respectively. Amortization expense for the three and nine months ended March 31, 2018 was $652,956 and $2,026,503,
respectively.
(B)
Future Amortization
Estimated
amortization expense of intangible assets over the next five years is as follows:
|
Year
ended:
|
|
|
|
|
March
31, 2020
|
|
$
|
2,069,753
|
|
|
March
31, 2021
|
|
|
2,069,753
|
|
|
March
31, 2022
|
|
|
2,069,753
|
|
|
March
31, 2023
|
|
|
2,069,753
|
|
|
March
31, 2024
|
|
|
763,714
|
|
|
|
|
$
|
9,042,726
|
|
NOTE
14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consisted of the following:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31,
2019
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$
|
1,510,757
|
|
|
$
|
1,665,865
|
|
|
Accrued
Liabilities
|
|
|
4,508,155
|
|
|
|
5,505,312
|
|
|
Accrued
Payroll & Taxes
|
|
|
465,400
|
|
|
|
302,640
|
|
|
Taxes
Payable
|
|
|
263,191
|
|
|
|
233,959
|
|
|
Other
Payable
|
|
|
133,932
|
|
|
|
166,033
|
|
|
Total
|
|
$
|
6,881,435
|
|
|
$
|
7,873,809
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
15 – DEBTS
Notes
payable and capital leases consisted of the following:
|
|
|
|
|
As
of March 31, 2019
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Long-Term
|
|
|
Name
|
|
|
|
Total
|
|
|
Maturities
|
|
|
Maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D&O
Insurance
|
|
(1)
|
|
$
|
132,971
|
|
|
$
|
132,971
|
|
|
$
|
-
|
|
|
Loan
Payable Bank - Export Refinance
|
|
(3)
|
|
|
3,557,865
|
|
|
|
3,557,865
|
|
|
|
-
|
|
|
Loan
Payable Bank - Running Finance
|
|
(4)
|
|
|
377,144
|
|
|
|
377,144
|
|
|
|
-
|
|
|
Loan
Payable Bank - Export Refinance II
|
|
(5)
|
|
|
2,704,049
|
|
|
|
2,704,049
|
|
|
|
-
|
|
|
Loan
Payable Bank - Running Finance II
|
|
(6)
|
|
|
853,910
|
|
|
|
853,910
|
|
|
|
-
|
|
|
Related
Party Loan
|
|
(7)
|
|
|
89,033
|
|
|
|
16,002
|
|
|
|
73,031
|
|
|
|
|
|
|
|
7,714,972
|
|
|
|
7,641,941
|
|
|
|
73,031
|
|
|
Subsidiary
Capital Leases
|
|
(8)
|
|
|
1,112,923
|
|
|
|
469,391
|
|
|
|
643,532
|
|
|
|
|
|
|
$
|
8,827,895
|
|
|
$
|
8,111,332
|
|
|
$
|
716,563
|
|
|
|
|
|
|
As
of June 30, 2018
|
|
|
Name
|
|
|
|
Total
|
|
|
Current
Maturities
|
|
|
Long-Term
Maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D&O
Insurance
|
|
(1)
|
|
$
|
69,578
|
|
|
$
|
69,578
|
|
|
$
|
-
|
|
|
Loan
Payable Bank - Export Refinance
|
|
(3)
|
|
|
4,107,451
|
|
|
|
4,107,451
|
|
|
|
-
|
|
|
Loan
Payable Bank - Running Finance
|
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Loan
Payable Bank - Export Refinance II
|
|
(5)
|
|
|
2,875,216
|
|
|
|
2,875,216
|
|
|
|
-
|
|
|
Loan
Payable Bank - Running Finance II
|
|
(6)
|
|
|
1,232,235
|
|
|
|
1,232,235
|
|
|
|
-
|
|
|
Related
Party Loan
|
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
8,284,480
|
|
|
|
8,284,480
|
|
|
|
-
|
|
|
Subsidiary
Capital Leases
|
|
(8)
|
|
|
642,035
|
|
|
|
311,439
|
|
|
|
330,596
|
|
|
|
|
|
|
$
|
8,926,515
|
|
|
$
|
8,595,919
|
|
|
$
|
330,596
|
|
(1)
The Company finances Directors’ and Officers’ (“D&O”) liability insurance and Errors and Omissions
(“E&O”) liability insurance, for which the D&O and E&O balances are renewed on an annual basis and, as
such, are recorded in current maturities. The interest rate on these financings were ranging from 5.2% to 6.5% as of March 31,
2019 and June 30, 2018.
(2)
The Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts
up to £300,000, or approximately $389,610. The annual interest rate was 5.1% as of March 31, 2019. Total outstanding balance
as of March 31, 2019 and June 30, 2018 was £nil.
This
overdraft facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts
and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility.
As of March 31, 2019, NTE was in compliance with this covenant.
(3)
The Company’s subsidiary, NetSol PK, has an export refinance facility with Askari Bank Limited, secured by NetSol PK’s
assets. This is a revolving loan that matures every six months. Total facility amount is Rs. 500,000,000 or $3,557,865 and Rs.
500,000,000 or $4,107,451 at March 31, 2019 and June 30, 2018, respectively. The interest rate for the loan was 3% at March 31,
2019 and June 30, 2018.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
(4)
The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s
assets. Total facility amount is Rs. 75,000,000 or $533,694, at March 31, 2019. NetSol PK used Rs. 53,000,000 or $377,144, at
March 31, 2019. The interest rate for the loan was 12.99% at March 31, 2019.
This
facility requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. As of March 31, 2019,
NetSol PK was in compliance with this covenant.
(5)
The Company’s subsidiary, NetSol PK, has an export refinance facility with Samba Bank Limited, secured by NetSol PK’s
assets. This is a revolving loan that matures every six months. Total facility amount is Rs. 380,000,000 or $2,704,049 and Rs.
350,000,000 or $2,875,216, at March 31, 2019 and June 30, 2018, respectively. The interest rate for the loan was 3% at March 31,
2019 and June 30, 2018.
(6)
The Company’s subsidiary, NetSol PK, has a running finance facility with Samba Bank Limited, secured by NetSol PK’s
assets. Total facility amount is Rs. 120,000,000 or $853,910 and Rs. 150,000,000 or $1,232,235, at March 31, 2019 and June 30,
2018, respectively. The interest rate for the loan was 12.43% and 8.1% at March 31, 2019 and June 30, 2018, respectively.
During
the tenure of loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a current ratio of 1:1,
an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times. As of March
31, 2019, NetSol PK was in compliance with these covenants.
(7) In March 2019, the Company’s subsidiary,
VLS, entered into a loan agreement with Investec a related party. The loan amount was £69,549, or $90,323, for a period
of 5 years with monthly payment of £1,349, or $1,752. As of March 31, 2019, the subsidiary has used this facility up to
$89,033, of which $73,031 was shown as long-term liabilities and remainder $16,002 as current maturity. The interest rate
was 6.14% at March 31, 2019.
(8)
The Company leases various fixed assets under capital lease arrangements expiring in various years through 2022. The assets and
liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value
of the asset. The assets are secured by the assets themselves. Depreciation of assets under capital leases is included in depreciation
expense for the three and nine months ended March 31, 2019 and 2017.
Following
is the aggregate minimum future lease payments under capital leases as of March 31, 2019:
|
|
|
Amount
|
|
|
Minimum
Lease Payments
|
|
|
|
|
|
Due
FYE 3/31/20
|
|
$
|
563,847
|
|
|
Due
FYE 3/31/21
|
|
|
412,570
|
|
|
Due
FYE 3/31/22
|
|
|
253,643
|
|
|
Due
FYE 3/31/23
|
|
|
20,883
|
|
|
Due
FYE 3/31/24
|
|
|
19,143
|
|
|
Total
Minimum Lease Payments
|
|
|
1,270,086
|
|
|
Interest
Expense relating to future periods
|
|
|
(157,163
|
)
|
|
Present
Value of minimum lease payments
|
|
|
1,112,923
|
|
|
Less:
Current portion
|
|
|
(469,391
|
)
|
|
Non-Current
portion
|
|
$
|
643,532
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
16 - STOCKHOLDERS’ EQUITY
During
the nine months ended March 31, 2019, the Company issued 31,448 shares of common stock for services rendered by officers of the
Company. These shares were valued at the fair market value of $192,832.
During
the nine months ended March 31, 2019, the Company issued 28,278 shares of common stock for services rendered by the independent
members of the Board of Directors as part of their board compensation. These shares were valued at the fair market value of $159,926.
During
the nine months ended March 31, 2019, the Company issued 97,785 shares of its common stock to employees pursuant to the terms
of their employment agreements valued at $599,424.
During
the nine months ended March 31, 2019, the Company adjusted the opening balance of retained earnings on adoption of the new revenue
recognition standard ASC 606. Total adjustment was $8,753,655 of which $5,795,795 adjusted against the Company’s retained
earnings and $2,957,860 were adjusted against non-controlling interest.
A
summary of the changes in equity for the nine months ended March 31, 2019 is provided below:
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
Stock
Subscriptions
|
|
|
Shares to
|
|
|
Other
Comprehensive
|
|
|
Non
Controlling
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Deficit
|
|
|
Receivable
|
|
|
be Issued
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance
at June 30, 2018
|
|
|
11,708,469
|
|
|
$
|
117,085
|
|
|
$
|
126,479,147
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(37,994,502
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(24,386,071
|
)
|
|
$
|
14,146,417
|
|
|
|
76,936,052
|
|
|
Adjustment
in retained earnings on adoption of ASC 606
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,795,795
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,957,860
|
)
|
|
|
(8,753,655
|
)
|
|
Exercise
of subsidiary common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,629
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,279
|
|
|
|
2,650
|
|
|
Common
stock issued for: Services
|
|
|
73,891
|
|
|
|
739
|
|
|
|
445,801
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
446,540
|
|
|
Equity
component shown as current liability at June 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
September
30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(263,203
|
)
|
|
|
(200,873
|
)
|
|
|
(464,076
|
)
|
|
Net
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
962,589
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
318,546
|
|
|
|
1,281,135
|
|
|
Balance
at September 30, 2018
|
|
|
11,782,360
|
|
|
$
|
117,824
|
|
|
$
|
126,918,319
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(42,827,708
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(24,649,274
|
)
|
|
$
|
11,315,509
|
|
|
$
|
69,448,646
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
Stock
Subscriptions
|
|
|
Shares to
|
|
|
Other
Comprehensive
|
|
|
Non
Controlling
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Deficit
|
|
|
Receivable
|
|
|
be
Issued
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance
at September 30, 2018
|
|
|
11,782,360
|
|
|
$
|
117,824
|
|
|
$
|
126,918,319
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(42,827,708
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(24,649,274
|
)
|
|
$
|
11,315,509
|
|
|
|
69,448,646
|
|
|
Exercise
of common stock options
|
|
|
10,000
|
|
|
|
100
|
|
|
|
64,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
|
Common
stock issued for: Services
|
|
|
67,950
|
|
|
|
679
|
|
|
|
415,519
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
416,198
|
|
|
Equity
component shown as current liability at September 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
December
31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
Dividend
to non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(566,465
|
)
|
|
|
(566,465
|
)
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,797,537
|
)
|
|
|
(1,986,953
|
)
|
|
|
(5,784,490
|
)
|
|
Net
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,855,629
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,475,355
|
|
|
|
4,330,984
|
|
|
Balance
at December 31, 2018
|
|
|
11,860,310
|
|
|
$
|
118,603
|
|
|
$
|
127,398,738
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(39,972,079
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(28,446,811
|
)
|
|
$
|
10,237,446
|
|
|
$
|
67,909,873
|
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
Stock
Subscriptions
|
|
|
Shares to
|
|
|
Other
Comprehensive
|
|
|
Non
Controlling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Deficit
|
|
|
Receivable
|
|
|
be
Issued
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance
at December 31, 2018
|
|
|
11,860,310
|
|
|
$
|
118,603
|
|
|
$
|
127,398,738
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(39,972,079
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(28,446,811
|
)
|
|
$
|
10,237,446
|
|
|
|
67,909,873
|
|
|
Exercise
of common stock options
|
|
|
3,076
|
|
|
|
31
|
|
|
|
19,969
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
Common
stock issued for: Services
|
|
|
15,670
|
|
|
|
157
|
|
|
|
89,287
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,444
|
|
|
Equity
component shown as current liability at December 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
March
31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
Fair
value of options extended
|
|
|
-
|
|
|
|
-
|
|
|
|
43,612
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,612
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,021
|
)
|
|
|
(100,366
|
)
|
|
|
(128,387
|
)
|
|
Net
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,267,560
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
501,835
|
|
|
|
1,769,395
|
|
|
Balance
at March 31, 2019
|
|
|
11,879,056
|
|
|
$
|
118,791
|
|
|
$
|
127,551,606
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(38,704,519
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(28,474,832
|
)
|
|
$
|
10,638,915
|
|
|
$
|
69,703,937
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
A
summary of the changes in equity for the nine months ended March 31, 2018 is provided below:
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
Stock
Subscriptions
|
|
|
Shares to
|
|
|
Other
Comprehensive
|
|
|
Non
Controlling
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Deficit
|
|
|
Receivable
|
|
|
be
Issued
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance
at June 30, 2017
|
|
|
11,225,385
|
|
|
$
|
112,254
|
|
|
$
|
124,409,998
|
|
|
$
|
(454,310
|
)
|
|
$
|
(42,301,390
|
)
|
|
$
|
(297,511
|
)
|
|
$
|
-
|
|
|
$
|
(18,074,570
|
)
|
|
$
|
14,799,082
|
|
|
|
78,193,553
|
|
|
Exercise
of common stock options
|
|
|
35,773
|
|
|
|
358
|
|
|
|
138,442
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
138,800
|
|
|
Common
stock issued for: Services
|
|
|
71,971
|
|
|
|
719
|
|
|
|
438,589
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
439,308
|
|
|
Purchase
of treasury shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(500,663
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(500,663
|
)
|
|
Equity
component shown as current liability at June 30, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
September
30, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
Payment
received for stock subscription
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,585
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(588,579
|
)
|
|
|
(237,165
|
)
|
|
|
(825,744
|
)
|
|
Net
income (loss) for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(369,498
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
188,233
|
|
|
|
(181,265
|
)
|
|
Balance
at September 30, 2017
|
|
|
11,333,129
|
|
|
$
|
113,331
|
|
|
$
|
124,987,029
|
|
|
$
|
(954,973
|
)
|
|
$
|
(42,670,888
|
)
|
|
$
|
(273,926
|
)
|
|
$
|
-
|
|
|
$
|
(18,663,149
|
)
|
|
$
|
14,750,150
|
|
|
$
|
77,287,574
|
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
Stock
Subscriptions
|
|
|
Shares to
|
|
|
Other
Comprehensive
|
|
|
Non
Controlling
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Deficit
|
|
|
Receivable
|
|
|
be
Issued
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance
at September 30, 2017
|
|
|
11,333,129
|
|
|
$
|
113,331
|
|
|
$
|
124,987,029
|
|
|
$
|
(954,973
|
)
|
|
$
|
(42,670,888
|
)
|
|
$
|
(273,926
|
)
|
|
$
|
-
|
|
|
$
|
(18,663,149
|
)
|
|
$
|
14,750,150
|
|
|
|
77,287,574
|
|
|
Exercise
of subsidiary common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,600
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,355
|
|
|
|
7,755
|
|
|
Common
stock issued for: Services
|
|
|
62,272
|
|
|
|
623
|
|
|
|
383,606
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
384,229
|
|
|
Purchase
of treasury shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100,357
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100,357
|
)
|
|
Equity
component shown as current liability at September 30, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
December
31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
Dividend
to non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(417,853
|
)
|
|
|
(417,853
|
)
|
|
Payment
received for stock subscription
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,926
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,926
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,612,881
|
)
|
|
|
(841,009
|
)
|
|
|
(2,453,890
|
)
|
|
Net
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
634,421
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,027,581
|
|
|
|
1,662,002
|
|
|
Balance
at December 31, 2017
|
|
|
11,395,401
|
|
|
$
|
113,954
|
|
|
$
|
125,354,035
|
|
|
$
|
(1,055,330
|
)
|
|
$
|
(42,036,467
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(20,276,030
|
)
|
|
$
|
14,543,224
|
|
|
$
|
76,422,386
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
Other
|
|
|
Non
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Treasury
|
|
|
Accumulated
|
|
|
Sub-scriptions
|
|
|
Shares to
|
|
|
Compre-hensive
|
|
|
Controlling
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Deficit
|
|
|
Receivable
|
|
|
be
issued
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance at December 31, 2017
|
|
|
11,395,401
|
|
|
$
|
113,954
|
|
|
$
|
125,354,035
|
|
|
$
|
(1,055,330
|
)
|
|
$
|
(42,036,467
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(20,276,030
|
)
|
|
$
|
14,543,224
|
|
|
|
76,422,386
|
|
|
Exercise of subsidiary common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,560
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,154
|
|
|
|
2,594
|
|
|
Common stock issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
62,272
|
|
|
|
623
|
|
|
|
383,606
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
384,229
|
|
|
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(149,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(149,694
|
)
|
|
Equity component shown as current liability at December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,324
|
|
|
March 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(88,324
|
)
|
|
Acquisition of non-controlling interest in subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
1,892
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,879
|
)
|
|
|
(33,987
|
)
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,729,215
|
)
|
|
|
(944,207
|
)
|
|
|
(2,673,422
|
)
|
|
Net income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,864,445
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,994,869
|
|
|
|
4,859,314
|
|
|
Balance at March 31, 2018
|
|
|
11,457,673
|
|
|
$
|
114,577
|
|
|
$
|
125,733,973
|
|
|
$
|
(1,205,024
|
)
|
|
$
|
(39,172,022
|
)
|
|
$
|
(221,000
|
)
|
|
$
|
-
|
|
|
$
|
(22,005,245
|
)
|
|
$
|
15,566,161
|
|
|
$
|
78,811,420
|
|
NOTE
17 - INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
Common
stock purchase options consisted of the following:
OPTIONS:
|
|
|
#
of shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
|
|
Aggregated
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable, June 30, 2018
|
|
|
53,462
|
|
|
$
|
6.50
|
|
|
|
0.61
|
|
|
$
|
-
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(13,076
|
)
|
|
$
|
6.50
|
|
|
|
|
|
|
|
|
|
|
Expired
/ Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable, March 31, 2019
|
|
|
40,386
|
|
|
$
|
6.50
|
|
|
|
0.85
|
|
|
$
|
-
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
following table summarizes information about stock options outstanding and exercisable at March 31, 2019.
|
Exercise Price
|
|
|
Number
Outstanding
and
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Weighted
Average
Exercise
Price
|
|
|
OPTIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
6.50
|
|
|
|
40,386
|
|
|
|
0.85
|
|
|
$
|
6.50
|
|
|
Totals
|
|
|
|
40,386
|
|
|
|
0.85
|
|
|
$
|
6.50
|
|
During
the nine months ended March 31, 2019, the Company extended the life of 40,386 options with an exercise price of $6.50, for a period
of one year. The Company recorded $43,612 in compensation expense for the extension of these options in the accompanying condensed
consolidated financial statements. The fair market value was calculated using the Black-Scholes option pricing model with the
following assumptions:
|
|
|
March
31, 2019
|
|
|
Risk-free
interest rate
|
|
|
2.56
|
%
|
|
Expected
life
|
|
|
1
year
|
|
|
Expected
volatility
|
|
|
45
|
%
|
|
Expected
dividend
|
|
|
0
|
%
|
The
following table summarizes stock grants awarded as compensation:
|
|
|
#
of shares
|
|
|
Weighted
Average Grant
Date Fair Value ($)
|
|
|
|
|
|
|
|
|
|
|
Unvested,
June 30, 2018
|
|
|
155,648
|
|
|
$
|
6.07
|
|
|
Granted
|
|
|
112,276
|
|
|
$
|
5.73
|
|
|
Vested
|
|
|
(157,511
|
)
|
|
$
|
6.05
|
|
|
Unvested,
March 31, 2019
|
|
|
110,413
|
|
|
$
|
5.88
|
|
For
the three and nine months ended March 31, 2019, the Company recorded compensation expense of $110,939 and $980,682, respectively.
For the three and nine months ended March 31, 2018, the Company recorded compensation expense of $448,221 and $1,281,751, respectively.
The compensation expense related to the unvested stock grants as of March 31, 2019 was $593,480 which will be recognized during
the fiscal years 2019 through 2022.
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
18 – CONTINGENCIES
From
time to time, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business including
tax assessments. The Company defends itself vigorously against any such claims. When (i) it is probable that an asset has been
impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the
estimated loss. The Company provides disclosure in the notes to the consolidated financial statements for loss contingencies that
do not meet both conditions if there is a reasonable possibility that a loss may have been incurred that would be material to
the financial statements. Significant judgment is required to determine the probability that a liability has been incurred and
whether such liability is reasonably estimable. The Company bases accruals on the best information available at the time, which
can be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying
consolidated financial statements.
NOTE
19 – OPERATING SEGMENTS
The
Company has identified three segments for its products and services; North America, Europe and Asia-Pacific. Our reportable segments
are business units located in different global regions. Each business unit provides similar products and services; license fees
for leasing and asset-based software, related maintenance fees, and implementation and IT consulting services. Separate management
of each segment is required because each business unit is subject to different operational issues and strategies due to their
particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third
parties and eliminates them in the consolidation.
The
following table presents a summary of identifiable assets as of March 31, 2019 and June 30, 2018:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31, 2019
|
|
|
June
30, 2018
|
|
|
Identifiable
assets:
|
|
|
|
|
|
|
|
|
|
Corporate
headquarters
|
|
$
|
3,304,985
|
|
|
$
|
2,839,049
|
|
|
North
America
|
|
|
5,063,406
|
|
|
|
5,764,042
|
|
|
Europe
|
|
|
7,952,095
|
|
|
|
7,242,080
|
|
|
Asia
- Pacific
|
|
|
75,422,846
|
|
|
|
83,929,110
|
|
|
Consolidated
|
|
$
|
91,743,332
|
|
|
$
|
99,774,281
|
|
The
following table presents a summary of investment under equity method as of March 31, 2019 and June 30, 2018:
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
March
31, 2019
|
|
|
June
30, 2018
|
|
|
Investment
in WRLD3D:
|
|
|
|
|
|
|
|
|
|
Corporate
headquarters
|
|
$
|
713,497
|
|
|
$
|
918,628
|
|
|
Asia
- Pacific
|
|
|
1,787,802
|
|
|
|
2,298,534
|
|
|
Consolidated
|
|
$
|
2,501,299
|
|
|
$
|
3,217,162
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
The
following table presents a summary of operating information for the three and nine months ended March 31:
|
|
|
For
the Three Months
|
|
|
For
the Nine Months
|
|
|
|
|
Ended
March 31,
|
|
|
Ended
March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Revenues
from unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
1,022,655
|
|
|
$
|
998,403
|
|
|
$
|
2,843,190
|
|
|
$
|
3,134,113
|
|
|
Europe
|
|
|
2,075,049
|
|
|
|
1,764,651
|
|
|
|
5,746,614
|
|
|
|
4,873,688
|
|
|
Asia
- Pacific
|
|
|
13,542,170
|
|
|
|
12,891,024
|
|
|
|
40,696,025
|
|
|
|
31,355,376
|
|
|
|
|
|
16,639,874
|
|
|
|
15,654,078
|
|
|
|
49,285,829
|
|
|
|
39,363,177
|
|
|
Revenue
from affiliated customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
330,185
|
|
|
|
464,976
|
|
|
|
678,779
|
|
|
|
1,508,867
|
|
|
Asia
- Pacific
|
|
|
156,996
|
|
|
|
924,766
|
|
|
|
561,619
|
|
|
|
3,436,987
|
|
|
|
|
|
487,181
|
|
|
|
1,389,742
|
|
|
|
1,240,398
|
|
|
|
4,945,854
|
|
|
Consolidated
|
|
$
|
17,127,055
|
|
|
$
|
17,043,820
|
|
|
$
|
50,526,227
|
|
|
$
|
44,309,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
$
|
120,153
|
|
|
$
|
137,864
|
|
|
$
|
416,483
|
|
|
$
|
379,567
|
|
|
Asia
- Pacific
|
|
|
1,389,773
|
|
|
|
338,201
|
|
|
|
6,887,631
|
|
|
|
1,483,569
|
|
|
Eliminated
|
|
$
|
1,509,926
|
|
|
$
|
476,065
|
|
|
$
|
7,304,114
|
|
|
$
|
1,863,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) after taxes and before non-controlling interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
headquarters
|
|
$
|
692,854
|
|
|
$
|
(529,048
|
)
|
|
$
|
(1,667,600
|
)
|
|
$
|
(2,825,689
|
)
|
|
North
America
|
|
|
(92,029
|
)
|
|
|
(11,777
|
)
|
|
|
(426,209
|
)
|
|
|
(242,229
|
)
|
|
Europe
|
|
|
330,039
|
|
|
|
265,831
|
|
|
|
735,972
|
|
|
|
545,876
|
|
|
Asia
- Pacific
|
|
|
838,531
|
|
|
|
5,134,307
|
|
|
|
8,739,351
|
|
|
|
8,862,092
|
|
|
Consolidated
|
|
$
|
1,769,395
|
|
|
$
|
4,859,313
|
|
|
$
|
7,381,514
|
|
|
$
|
6,340,050
|
|
The
following table presents a summary of capital expenditures for the nine months ended March 31:
|
|
|
For
the Nine Months
|
|
|
|
|
Ended
March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Capital
expenditures:
|
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
1,383
|
|
|
$
|
3,556
|
|
|
Europe
|
|
|
461,376
|
|
|
|
254,548
|
|
|
Asia
- Pacific
|
|
|
2,127,543
|
|
|
|
849,628
|
|
|
Consolidated
|
|
$
|
2,590,302
|
|
|
$
|
1,107,732
|
|
NETSOL
TECHNOLOGIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
(UNAUDITED)
NOTE
20 – NON-CONTROLLING INTEREST IN SUBSIDIARY
The
Company had non-controlling interests in several of its subsidiaries. The balance of non-controlling interest was as follows:
|
SUBSIDIARY
|
|
Non-Controlling
Interest %
|
|
|
Non-Controlling
Interest at
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
NetSol
PK
|
|
|
33.80
|
%
|
|
$
|
8,244,871
|
|
|
NetSol-Innovation
|
|
|
49.90
|
%
|
|
|
1,575,624
|
|
|
VLS,
VLSH & VLSIL Combined
|
|
|
49.00
|
%
|
|
|
818,451
|
|
|
NetSol
Thai
|
|
|
0.006
|
%
|
|
|
(31
|
)
|
|
Total
|
|
|
|
|
|
$
|
10,638,915
|
|
|
SUBSIDIARY
|
|
Non-Controlling
Interest %
|
|
|
Non-Controlling
Interest at
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
NetSol
PK
|
|
|
33.79
|
%
|
|
$
|
11,873,029
|
|
|
NetSol-Innovation
|
|
|
49.90
|
%
|
|
|
1,699,661
|
|
|
VLS,
VLHS & VLSIL Combined
|
|
|
49.00
|
%
|
|
|
573,742
|
|
|
NetSol
Thai
|
|
|
0.006
|
%
|
|
|
(15
|
)
|
|
Total
|
|
|
|
|
|
$
|
14,146,417
|
|
NetSol
PK
During
the nine months ended March 31, 2019, employees of NetSol PK exercised 20,000 options of common stock and NetSol PK received cash
of $2,650. Due to the exercise of options, the non-controlling interest increased from 33.79% to 33.80%. During the nine months
ended March 31, 2019, NetSol PK paid a cash dividend of $1,675,936.
During
the nine months ended March 31, 2018, employees of NetSol PK exercised 67,000 options of common stock and NetSol PK received cash
of $10,349. The Company purchased 55,500 shares of common stock of NetSol PK from the open market for $33,987. Due to the exercise
of options and the shares purchase, the non-controlling interest decreased from 33.80% to 33.79%. During the nine months ended
March 31, 2018, NetSol PK paid a cash dividend of $1,234,991.