UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-QSB/A
(Mark
One)
x Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange
Act of 1934
For the quarterly
period ended September 30, 2004
o For the transition period from __________ to
__________
Commission
file number: 0-22773
NETSOL
TECHNOLOGIES, INC.
(Exact
name of small business issuer as specified in its charter)
|
NEVADA |
|
95-4627685 |
|
(State
or other Jurisdiction of
Incorporation
or Organization) |
|
(I.R.S.
Employer NO.) |
23901
Calabasas Road, Suite 2072, Calabasas, CA 91302
(Address
of principal executive offices) (Zip Code)
(818)
222-9195 / (818) 222-9197
(Issuer's
telephone/facsimile numbers, including area code)
Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes x No o
The
issuer had 10,045,796 shares of its $.001 par value Common Stock issued and
outstanding as of November 4, 2004.
Transitional
Small Business Disclosure Format (check one)
Yes o No x
NETSOL
TECHNOLOGIES, INC.
INDEX
|
PART
I. FINANCIAL
INFORMATION |
Page
No. |
| |
|
|
Item
1. Financial Statements |
|
| |
|
|
Consolidated
Unaudited Balance Sheet as of September 30, 2004(restated) |
3 |
| |
|
|
Comparative
Unaudited Consolidated Statements of Operations |
4 |
|
for
the Three Months Ended September 30, 2004 (restated) and 2003
(restated) |
|
| |
|
|
Comparative
Unaudited Consolidated Statements of Cash Flow |
5 |
|
for
the Three Months Ended September 30, 2004 (restated) and 2003(restated) |
|
| |
|
|
Notes
to the Unaudited Consolidated Financial Statements |
7 |
| |
|
|
Item
2. Management's Discussion and Analysis or Plan of
Operation |
16 |
| |
|
|
Item
3. Controls and Procedures |
22 |
| |
|
| |
|
|
PART
II. OTHER
INFORMATION |
|
| |
|
|
Item
1. Legal Proceedings |
22 |
| |
|
|
Item
2. Changes in Securities |
22 |
| |
|
|
Item
3. Defaults Upon Senior Securities |
22 |
| |
|
|
Item
4. Submission of Matters to a Vote of Security
Holders |
23 |
| |
|
|
Item
5. Other Information |
23 |
| |
|
|
Item
6. Exhibits and Reports on Form 8-K |
23 |
(a)
Exhibits
(b)
Reports on Form 8-K
NETSOL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET — SEPTEMBER 30, 2004
(UNAUDITED)
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
204,850 |
|
|
|
|
|
Certificates
of deposit |
|
|
141,403
|
|
|
|
|
|
Accounts
receivable, net of allowance for doubtful accounts of
$80,000 |
|
|
1,166,521
|
|
|
|
|
|
Revenues
in excess of billings |
|
|
1,562,045
|
|
|
|
|
|
Other
current assets |
|
|
718,134
|
|
|
|
|
|
Total
current assets |
|
|
|
|
|
3,792,953
|
|
|
Property
and equipment,
net of accumulated depreciation |
|
|
|
|
|
4,163,787
|
|
|
Intangibles: |
|
|
|
|
|
|
|
|
Product licenses, renewals, enhancedments,
copyrights,
trademarks,
and tradenames, net |
|
|
2,336,768
|
|
|
|
|
|
Customer
lists, net |
|
|
562,653
|
|
|
|
|
|
Goodwill,
(restated) |
|
|
1,166,611
|
|
|
|
|
|
Total
intangibles (restated) |
|
|
|
|
|
4,066,032 |
|
|
Total
assets (Restated) |
|
|
|
|
$ |
12,022,772 |
|
| |
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
1,856,704 |
|
|
|
|
|
Current
portion of notes and obligations under capitalized
leases |
|
|
349,660
|
|
|
|
|
|
Billings
in excess of revenues |
|
|
54,900
|
|
|
|
|
|
Loans
payable, bank |
|
|
439,609
|
|
|
|
|
|
Total
current liabilities |
|
|
|
|
|
2,700,873
|
|
|
Obligations
under capitalized leases, less
current maturities |
|
|
|
|
|
73,895
|
|
|
Notes
payable |
|
|
|
|
|
75,075
|
|
|
Convertible
debenture |
|
|
|
|
|
825,000
|
|
|
Total
liabilities |
|
|
|
|
|
3,674,843
|
|
|
Minority
interest |
|
|
|
|
|
186,615
|
|
|
Contingencies |
|
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
(restated) |
|
|
|
|
Common
stock, $.001 par value; 25,000,000 share authorized;
9,613,468
issued and outstanding |
|
|
9,613
|
|
|
|
|
|
Additional
paid-in-capital (restated) |
|
|
39,391,087
|
|
|
|
|
|
Treasury
stock |
|
|
(27,197 |
) |
|
|
|
|
Accumulated
deficit (restated) |
|
|
(30,775,441 |
) |
|
|
|
|
Stock
subscription receivable |
|
|
(458,809 |
) |
|
|
|
|
Common
stock to be issued |
|
|
255,960
|
|
|
|
|
|
Other
comprehensive loss |
|
|
(233,899 |
) |
|
|
|
|
Total
stockholders' equity (Restated) |
|
|
|
|
|
8,161,314
|
|
|
Total
liabilities and stockholders' equity (Restated) |
|
|
|
|
$ |
12,022,772 |
|
See
accompanying notes to consolidated financial statements.
NETSOL
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
|
For
the Three Months |
|
| |
|
Ended
September 30, |
|
| |
|
2004
|
|
2003
|
|
| |
|
(Restated) |
|
(Restated) |
|
| |
|
|
|
|
|
|
Net
revenues |
|
$ |
2,058,305 |
|
$ |
972,612 |
|
|
Cost
of revenues |
|
|
751,647
|
|
|
460,377
|
|
|
Gross
profit |
|
|
1,306,658
|
|
|
512,235
|
|
| |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Selling
and marketing |
|
|
119,348
|
|
|
19,222
|
|
|
Depreciation
and amortization |
|
|
306,158
|
|
|
305,135
|
|
|
Bad
debt expense |
|
|
-
|
|
|
52,318
|
|
|
Salaries
and wages |
|
|
347,237
|
|
|
315,540
|
|
Professional
services, including non-cash
compensation |
|
|
114,334
|
|
|
29,801
|
|
|
General
and adminstrative |
|
|
277,515
|
|
|
512,651
|
|
|
Total
operating expenses |
|
|
1,164,592
|
|
|
1,234,667 |
|
|
Income
(loss) from operations |
|
|
142,066
|
|
|
(772,432 |
) |
|
Other
income and (expenses) |
|
|
|
|
|
|
|
|
Loss
on sale of assets |
|
|
(620 |
) |
|
(36,988 |
) |
|
Beneficial
conversion feature |
|
|
(37,500 |
) |
|
-
|
|
|
Fair
market value of warrants issued |
|
|
(28,024 |
) |
|
-
|
|
|
Gain
on forgiveness of debt |
|
|
50,274
|
|
|
-
|
|
|
Interest
expense |
|
|
(21,575 |
) |
|
(37,169 |
) |
|
Other
income and (expenses) |
|
|
22,335
|
|
|
596
|
|
|
Total
other expenses |
|
|
(15,110 |
) |
|
(73,561 |
) |
|
Net
income (loss) before minority interest in sub
subsidiary |
|
|
126,956
|
|
|
(795,993 |
) |
|
Minority
interest in subsidiary |
|
|
15,068
|
|
|
35,309
|
|
|
Net
income (loss) |
|
|
142,024
|
|
|
(760,684 |
) |
|
Other
comprehensive loss: |
|
|
|
|
|
|
|
|
Translation
adjustment |
|
|
(83,689 |
) |
|
(79,788 |
) |
|
Comprehensive
income (loss) |
|
$ |
58,335 |
|
$ |
(840,472 |
) |
| |
|
|
|
|
|
|
|
|
Net
income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.01 |
|
$ |
(0.12 |
) |
|
Diluted |
|
$ |
0.01 |
|
$ |
(0.12 |
) |
| |
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
9,504,789
|
|
|
6,577,913
|
|
|
Diluted |
|
|
12,065,735
|
|
|
6,577,913
|
|
See
accompanying notes to consolidated financial statements.
NETSOL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
For
the Three Months |
|
| |
|
Ended
September 30, |
|
| |
|
2004
|
|
2003
|
|
|
|
|
(Restated) |
|
(Restated) |
|
|
Cash
flows from operating activities: |
|
|
|
|
|
|
Net
income (loss) from continuing operations |
|
$ |
142,024 |
|
$ |
(760,684 |
) |
Adjustments
to reconcile net income (loss) to net cash
Used in operating
activities: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
374,199
|
|
|
305,135
|
|
|
Gain
on settlement of debt |
|
|
(50,274 |
) |
|
-
|
|
|
Loss
on sale of assets |
|
|
620
|
|
|
36,988
|
|
|
Minority
interest in subsidiary |
|
|
(15,068 |
) |
|
(35,309 |
) |
|
Stock
issued for services |
|
|
25,745
|
|
|
-
|
|
|
Fair
market value of warrants and stock options granted |
|
|
28,024
|
|
|
-
|
|
|
Beneficial
conversion feature |
|
|
37,500
|
|
|
-
|
|
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
(Increase)
decrease in assets: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(214,527 |
) |
|
(475,023 |
) |
|
Other
current assets |
|
|
(826,311 |
) |
|
48,129
|
|
|
Decrease
in liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
|
(564,159 |
) |
|
(205,295 |
) |
|
Net
cash used in operating activities |
|
|
(1,062,227 |
) |
|
(1,086,059 |
) |
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases
of property and equipment |
|
|
(213,990 |
) |
|
(78,189 |
) |
|
Sales
of property and equipment |
|
|
86,988
|
|
|
130,185
|
|
|
Purchases
of certificates of deposit |
|
|
-
|
|
|
(920,000 |
) |
|
Proceeds
from sale of certificates of deposit |
|
|
250,000
|
|
|
400,000
|
|
|
Increase
in intangible assets - development costs |
|
|
(77,990 |
) |
|
-
|
|
|
Capital
investments in minority interest of subsidiary |
|
|
191,606
|
|
|
-
|
|
|
Proceeeds
from sale of minority interest of subsidiary |
|
|
-
|
|
|
200,000
|
|
|
Net
cash provided by (used in) investing activities |
|
|
236,614
|
|
|
(268,004 |
) |
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock |
|
|
220,000
|
|
|
1,112,050
|
|
|
Proceeds
from the exercise of stock options |
|
|
-
|
|
|
238,250
|
|
|
Purchase
of treasury shares |
|
|
(51,704 |
) |
|
-
|
|
|
Proceeds
from loans |
|
|
-
|
|
|
500,000
|
|
|
Payments
on capital lease obligations & loans |
|
|
(30,967 |
) |
|
(358,589 |
) |
|
Net
cash provided by financing activities |
|
|
137,329
|
|
|
1,491,711
|
|
|
Effect
of exchange rate changes in cash |
|
|
21,973
|
|
|
(59,610 |
) |
|
Net
(decrease) increase in cash and cash equivalents |
|
|
(666,311 |
) |
|
78,038
|
|
|
Cash
and cash equivalents, beginning of period |
|
|
871,161
|
|
|
214,490
|
|
|
Cash
and cash equivalents, end of period |
|
$ |
204,850 |
|
$ |
292,528 |
|
See
accompanying notes to consolidated financial statements.
NETSOL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
| |
|
For
the Three Months Ended |
|
| |
|
Ended
September 30, |
|
| |
|
2004 |
|
2003 |
|
|
SUPPLEMENTAL
DISCLOSURES: |
|
|
|
|
|
|
Cash
paid during the period for: |
|
|
|
|
|
|
Interest |
|
$ |
21,575 |
|
$ |
37,169 |
|
|
Taxes |
|
$ |
1,514 |
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Common
stock issued for services and compensation |
|
$ |
111,920 |
|
$ |
- |
|
|
Common
stock issued for conversion of convertible debenture |
|
$ |
150,000 |
|
$ |
- |
|
|
Common
stock issued for settlement of debt |
|
$ |
45,965 |
|
$ |
- |
|
See
accompanying notes to consolidated financial statements.
NETSOL TECHNOLOGIES, INC. AND
SUBSIDIARIES
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The
Company designs, develops, markets, and exports proprietary software products to
customers in the automobile finance and leasing, banking and financial services
industries worldwide. The Company also provides consulting 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.
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 consolidated condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company’s annual report on Form 10-KSB for
the year ended June 30, 2004. 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 consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, NetSol Technologies (PVT), Ltd. (“PK
Tech”), NetSol (PVT), Limited (“PK Private”), NetSol CONNECT (PVT), Ltd. (now,
NetSol Akhter Pvt. Ltd.) (“Connect”), NetSol Abraxas Australia Pty Ltd., NetSol
USA and NetSol Technologies UK, Ltd. All material inter-company accounts have
been eliminated in consolidation.
For
comparative purposes, prior year’s consolidated financial statements have been
reclassified to conform to report classifications of the current
year.
NOTE
2 - USE OF ESTIMATES:
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States, 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. Actual results could differ from those
estimates.
NOTE
3 - NEW ACCOUNTING PRONOUNCEMENTS:
On May
15, 2003, the Financial Accounting Standards Board (FASB) issued FASB Statement
No. 150 (FAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150 changes the accounting
for certain financial instruments that, under previous guidance, could be
classified as equity or "mezzanine" equity, by now requiring those instruments
to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, FAS 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. FAS 150 affects an
entity's classification of the following freestanding instruments: a)
Mandatorily redeemable instruments b) Financial instruments to repurchase an
entity's own equity instruments c) Financial instruments embodying obligations
that the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own equity
instruments d) FAS 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. The guidance in FAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. For private companies, mandatorily
redeemable financial instruments are subject to the provisions of FAS 150 for
the fiscal period beginning after December 15, 2003. The adoption of SFAS No.
150 does not have a material impact on the Company’s financial position or
results of operations or cash flows.
In
December 2003, the Financial Accounting Standards Board (FASB) issued a revised
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R).
FIN 46R addresses consolidation by business enterprises of variable interest
entities and significantly changes the consolidation application of
consolidation policies to variable interest entities and, thus improves
comparability between enterprises engaged in similar activities when those
activities are conducted through variable interest entities. The Company does
not hold any variable interest entities.
In March
2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No.
03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to
Certain Investments.” The EITF reached a consensus about the criteria that
should be used to determine when an investment is considered impaired, whether
that impairment is other-than-temporary, and the measurement of an impairment
loss and how that criteria should be applied to investments accounted for under
SFAS No. 115, “ACCOUNTING IN CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES.”
EITF 03-01 also included accounting considerations subsequent to the recognition
of other-than-temporary impairment and requires certain disclosures about
unrealized losses that have not been recognized as other-than-temporary
impairments. Additionally, EITF 03-01 includes new disclosure requirements for
investments that are deemed to be temporarily impaired. In September 2004, the
Financial Accounting Standards Board (FASB) delayed the accounting provisions of
EITF 03-01; however, the disclosure requirements remain effective for annual
reports ending after June 15, 2004. The Company will evaluate the impact of EITF
03-01 once final guidance is issued.
In April
of 2004, the EITF reached consensus on the guidance provided in EITF Issue No.
03-6, “Participating Securities and the Two-Class Method under SFAS No. 128
Earnings Per Share” (“EITF 03-6”). EITF 03-6 clarifies whether a security should
be considered a “participating security” for purposes of computing earnings per
share (“EPS”) and how earnings should be allocated to a “participating security”
when using the two-class method for computing basic EPS. The adoption of EITF
03-6 does not have a significant impact on the Company’s financial position or
results of operations.
In May of
2004, the FASB revised FASB Staff Position (“FSP”) No. 106-1, “Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003” and issued FSP No. 106-2, “Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003” (“FSP No. 106-2”). FSP 106-2 provides accounting
guidance to the employers who sponsor post retirement health care plans that
provide prescription drug benefits; and the prescription drug benefit provided
by the employer is “actuarially equivalent” to Medicare Part D and hence
qualifies for the subsidy under the Medicare amendment act. The adoption of FSP
106-2 does not have a significant impact on the Company’s financial position or
results of operations.
SEC Staff
Accounting Bulletin (SAB) No. 105, “APPLICATION OF ACCOUNTING PRINCIPLES TO LOAN
COMMITMENTS,” summarizes the views of the staff of the SEC regarding the
application of generally accepted accounting principles to loan commitments
accounted for as derivative instruments. SAB No.105 provides that the fair value
of recorded loan commitments that are accounted for as derivatives under SFAS
No. 133, “ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES,” should
not incorporate the expected future cash flows related to the associated
servicing of the future loan. In addition, SAB No. 105 requires registrants to
disclose their accounting policy for loan commitments. The provisions of SAB No.
105 must be applied to loan commitments accounted for as derivatives that are
entered into after March 31, 2004. The adoption of this accounting standard does
not have a material impact on the Company’s financial statements.
NOTE
4 - NET LOSS PER SHARE:
Net loss
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings per share”. Basic net loss
per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.
The
following is a reconciliation of the numerators and denominators of the basic
and diluted earnings per share computations:
| |
|
|
|
|
|
|
|
|
For
the three months ended September 30, 2004 |
|
Net
Income |
|
Shares
|
|
Per
Share |
|
|
Basic
earnings per share: |
|
$ |
142,024 |
|
|
9,504,789
|
|
$ |
0.01 |
|
|
Net
income available to common shareholders |
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
Stock
options |
|
|
|
|
|
1,852,277
|
|
|
|
|
|
Warrants |
|
|
|
|
|
708,668
|
|
|
|
|
|
Diluted
earnings per share |
|
$ |
142,024 |
|
|
12,065,734
|
|
$ |
0.01 |
|
Weighted
average number of shares used to compute basic and diluted loss per share is the
same in the financial statements for the period ended September 30, 2003, since
the effect of dilutive securities is anti-dilutive.
NOTE
5 - FOREIGN CURRENCY:
The
accounts of NetSol Technologies UK, Ltd. use the British Pound; NetSol
Technologies, (PVT), Ltd, NetSol (Pvt), Limited and NetSol Connect PVT, Ltd. use
Pakistan Rupees; and NetSol Abraxas Australia Pty, Ltd. uses the Australian
dollar as the functional currencies. NetSol Technologies, Inc., and subsidiary
NetSol USA, Inc., use the U.S. dollars as the functional currencies. 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 of $233,899 at September 30, 2004 are
classified as an item of accumulated other comprehensive loss in the
stockholders’ equity section of the consolidated balance sheet. During the three
months ended September 30, 2004 and 2003, comprehensive loss in the consolidated
statements of operation included translation loss of $83,689 and $79,788,
respectively.
NOTE
6 - OTHER CURRENT ASSETS
Other
current assets consist of the following at September 30, 2004:
|
Prepaid
Expenses |
|
$ |
441,206 |
|
|
Advance
Income Tax |
|
|
80,559
|
|
|
Employee
Advances |
|
|
33,948
|
|
|
Security
Deposits |
|
|
20,334
|
|
|
Other
Receivables |
|
|
142,087
|
|
| |
|
|
|
|
|
Total
|
|
$ |
718,134 |
|
In August
2004, the Company entered into a two-year consulting agreement with a
non-related third party whereby the Company agreed to pay the consultant a total
of 100,000 shares of its common stock valued at $111,920. This has been recorded
as a prepaid expense and is being amortized over the life of the service
agreement. During the quarter ended September 30, 2004, $6,995 was
expensed.
NOTE
7 - DEBTS
NOTES
PAYABLE
Notes
payable as of September 30, 2004 consist of the following:
| |
|
|
|
|
|
|
|
| |
|
Balance
at |
|
Current
|
|
Long-Term
|
|
|
Name |
|
9/30/04 |
|
Maturities |
|
Maturities |
|
|
A.
Cowler Settlement |
|
|
131,935
|
|
|
65,160
|
|
|
66,775
|
|
|
H.
Smith Settlement |
|
|
180,321
|
|
|
180,321
|
|
|
-
|
|
|
A.
Zaman Settlement |
|
|
26,300
|
|
|
18,000
|
|
|
8,300
|
|
|
D&O
Insurance |
|
|
14,827
|
|
|
14,827
|
|
|
-
|
|
|
Subsidiary
capital leases |
|
|
71,352
|
|
|
71,352
|
|
|
-
|
|
| |
|
|
424,735
|
|
|
349,660
|
|
|
75,075
|
|
On
September 25, 2002 the Company signed a settlement agreement with Adrian Cowler
(“Cowler”) and Surrey Design Partnership Ltd. The Company agreed to pay Cowler
£218,000 pound sterling or approximately $320,460 USD including interest, which
the Company has recorded as a note payable in the accompanying consolidated
financial statements. The agreement calls for monthly payments of £3,000 until
March 2004 and then £4,000 per month until paid. As of June 30, 2004, the
balance was $146,516. During the three months ended September 30, 2004, the
Company paid £8,000 or $14,694. As of September 30, 2004, the balance was
$131,822. Of this amount, $65,160 has been classified as a current liability and
$66,775 as long-term liability in the accompanying consolidated financial
statements.
In
November 2002, the Company signed a settlement agreement with Herbert Smith for
£171,733 or approximately $248,871, including interest, which the Company has
recorded as a note payable in the accompanying consolidated financial
statements. The Company agreed to pay $10,000 upon signing of the agreement,
$4,000 per month for twelve months, and then $6,000 per month until paid. The
balance owing at June 30, 2004 was $199,321. During the three months ended
September 30, 2004, the Company paid $19,000. The balance owing at September 30,
2004 was $180,321. The entire balance has been classified as current and is
included in “Current maturities of notes and obligations under capitalized
leases” in the accompanying consolidated financial statements.
In June
2002, the Company signed a settlement agreement with a former employee for
payment of past services rendered. The Company agreed to pay the employee a
total of $75,000. The agreement calls for monthly payments of $1,500 per month
until paid. The balance owing at June 30, 2004 and September 30, 2004 was
$26,300. Of this amount, $18,000 has been classified as a current liability and
$8,300 as long-term in the accompanying consolidated financials
statements.
In
January 2004, the Company renewed its director’s and officer liability insurance
for which the annual premium is $167,000. In April 2004, the Company arranged
financing with AFCO Credit Corporation with a down payment of $50,100 with the
balance to be paid in monthly installments. The balance owing as of September
30, 2004 was $14,827.
In
addition, the various subsidiaries had current maturities of capital leases of
$71,352 as of September 30, 2004.
BANK
NOTE
The
Company’s Pakistan subsidiary, NetSol Technologies (Private) Ltd., has three
loans with a bank, secured by the Company’s assets. These notes consist of the
following as of September 30, 2004:
TYPE
OF |
|
MATURITY |
|
INTEREST |
|
BALANCE
|
|
|
LOAN |
|
DATE |
|
RATE |
|
USD
|
|
| |
|
|
|
|
|
|
|
|
Export
Refinance |
|
|
Every
6 months |
|
|
4 |
% |
$ |
328,449 |
|
|
Term
Loan |
|
|
April
20, 2005 |
|
|
10 |
% |
|
26,950
|
|
|
Line
of Credit |
|
|
On
Demand |
|
|
8 |
% |
|
84,210
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
439,609 |
|
NOTE
8 - STOCKHOLDERS’ EQUITY:
REVERSE
STOCK SPLIT
On August
18, 2003, the Company affected a 1 for 5 reverse stock split for all the issued
and outstanding shares of common stock. All historical share and per share
amounts in the accompanying consolidated financial statements have been restated
to reflect the 5:1 reverse stock split.
EQUITY
TRANSACTIONS
Private
Placements
In August
2004, the Company received $200,000 for the purchase of 190,476 shares of the
Company’s common stock. As of September 30, 2004, the stock had not been issued
and is reflected as “Stock to be Issued” on the accompanying consolidated
financial statements.
Services
In August
2004, the Company entered into a two-year consulting agreement with a
non-related third party whereby the Company issued 50,000 shares of its common
stock valued at $55,960 for the first year of service and has agreed to issue an
additional 50,000 shares at the beginning of the second year. The value of these
shares of $55,960 is included in the “Stock to be Issued” on the accompanying
consolidated financial statements.
Issuance
of shares for Conversion of Debt
During
the quarter ended September 30, 2004, three of the convertible debenture holders
elected to convert their notes into common stock. The total of the notes
converted was $150,000 and the Company issued 80,646 shares of its common stock
to the note holders.
STOCK
SUBSCRIPTION RECEIVABLE
Stock
subscription receivable represents stock options exercised and issued that the
Company has not yet received the payment from the purchaser as they were in
processing when the quarter ended.
The
balance at June 30, 2004 was $497,559.
During
the quarter ended September 30, 2004, the Company received a payment of $20,000
on the receivable. In addition, $18,750 of accrued salaries for the
CFO was
applied against his
receivable.
The balance at September 30, 2004 was $458,809.
COMMON
STOCK PURCHASE WARRANTS AND OPTIONS
From time
to time, the Company issues options and warrants as incentives to employees,
officers and directors, as well as to non-employees.
Common
stock purchase options and warrants consisted of the following during the three
months ended September 30, 2004:
| |
|
Options |
|
|
|
Warrants
|
|
|
|
|
Outstanding
and exercisable, June 30, 2004 |
|
|
1,862,277
|
|
|
|
|
|
693,182
|
|
|
|
|
|
Granted |
|
|
-
|
|
|
- |
|
|
40,323
|
|
|
|
|
|
Exercised |
|
|
-
|
|
|
- |
|
|
-
|
|
|
- |
|
|
Expired |
|
|
(10,000 |
) |
|
|
|
|
-
|
|
|
|
|
|
Outstanding
and exercisable, Sept. 30, 2004 |
|
|
1,852,277
|
|
|
|
|
|
733,505
|
|
|
|
|
There
were no options granted or exercised during the quarter ended September 30,
2004.
During
the quarter ended September 30, 2004, three debenture holders converted their
notes into common stock. As part of the conversion, warrants to purchase a total
of 40,323 common shares were issued to the note holders. The warrants expire in
five years and have an exercise price of $3.30 per share. The warrants were
valued using the fair value method at $28,024 or $0.69 per share and recorded
the expense in the accompanying consolidated financial statements. The
Black-Scholes option pricing model used the following assumptions:
| |
Risk-free
interest rate |
3.25% |
| |
Expected
life |
5
years |
| |
Expected
volatility |
82% |
| |
Dividend
yield |
0% |
NOTE
9 - INTANGIBLE ASSETS:
Intangible
assets consist of product licenses, renewals, enhancements, copyrights,
trademarks, trade names, customer lists and goodwill. The Company evaluates
intangible assets, goodwill and other long-lived assets for impairment, at least
on an annual basis and whenever events or changes in circumstances indicate that
the carrying value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets, other long-lived assets and, goodwill is
measured by comparing their net book value to the related projected undiscounted
cash flows from these assets, considering a number of factors including past
operating results, budgets, economic projections, market trends and product
development cycles. If the net book value of the asset exceeds the related
undiscounted cash flows, the asset is considered impaired, and a second test is
performed to measure the amount of impairment loss. Potential impairment of
goodwill after July 1, 2002 has been evaluated in accordance with SFAS
No. 142. The SFAS No. 142 is applicable to the financial statements of
the Company beginning July 1, 2002.
As part
of intangible assets, the Company capitalizes certain computer software
development costs in accordance with SFAS No. 86, “Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed.” Costs incurred
internally to create a computer software product or to develop an enhancement to
an existing product are charged to expense when incurred as research and
development expense until technological feasibility for the respective product
is established. Thereafter, all software development costs are capitalized and
reported at the lower of unamortized cost or net realizable value.
Capitalization ceases when the product or enhancement is available for general
release to customers.
The
Company makes on-going evaluations of the recoverability of its capitalized
software projects by comparing the amount capitalized for each product to the
estimated net realizable value of the product. If such evaluations indicate that
the unamortized software development costs exceed the net realizable value, the
Company writes off the amount by which the unamortized software development
costs exceed net realizable value. Capitalized and purchased computer software
development costs are being amortized ratably based on the projected revenue
associated with the related software or on a straight-line basis over three
years, whichever method results in a higher level of amortization.
Product
licenses and customer lists were comprised of the following as of September
30, 2004:
| |
|
Product
Licenses |
|
Customer
Lists |
|
Total
|
|
|
Intangible
asset - June 30, 2004 |
|
$ |
5,450,357 |
|
$ |
1,977,877 |
|
$ |
7,428,234 |
|
|
Additions
|
|
|
77,990
|
|
|
-
|
|
|
77,990
|
|
|
Effect
of translation adjustment |
|
|
(15,517 |
) |
|
-
|
|
|
(15,517 |
) |
|
Accumulated
amortization |
|
|
(3,176,062 |
) |
|
(1,415,224 |
) |
|
(4,591,286 |
) |
|
Net
balance - June 30, 2004 |
|
$ |
2,336,768 |
|
$ |
562,653 |
|
$ |
2,889,421 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Amortization
expense: |
|
|
|
|
|
|
|
|
|
|
|
Three
months ended Sept. 30, 2004 |
|
$ |
200,907 |
|
$ |
78,916 |
|
$ |
279,823 |
|
|
Three
months ended Sept. 30, 2003 |
|
$ |
196,856 |
|
$ |
78,916 |
|
$ |
275,772 |
|
Amortization
expense of intangible assets over the next five years is as
follows:
| |
|
|
FISCAL
YEAR ENDING |
|
|
Asset |
|
6/30/05 |
|
6/30/06 |
|
6/30/07 |
|
6/30/08 |
|
6/30/09 |
|
TOTAL
|
|
|
Product
Licences |
|
$ |
535,122 |
|
$ |
713,498 |
|
$ |
33,372 |
|
$ |
33,372 |
|
$ |
7,612 |
|
$ |
1,322,976 |
|
|
Customer
Lists |
|
|
236,751
|
|
|
276,326
|
|
|
44,076
|
|
|
5,500
|
|
|
-
|
|
|
562,653
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
771,873 |
|
$ |
989,824 |
|
$ |
77,448 |
|
$ |
38,872 |
|
$ |
7,612 |
|
$ |
1,885,629 |
|
There
were no impairments of the goodwill asset in the periods ending September 30,
2004 and 2003.
NOTE
10 - LITIGATION:
On March
3, 2004 Uecker and Associates, Inc. as the assignee for the benefit of the
creditors of PGC Systems, Inc. formerly known as Portera Systems, Inc. filed a
request for arbitration demanding payment from NetSol for the amounts due under
a software agreement in the amount of $175,700. On March 31, 2004, the Company
filed an answering statement to the request of Uecker & Associates denying
each and every allegation contained in the Claim filed by Uecker &
Associates and stating NetSol’s affirmative defenses. The claim is being settled
by binding arbitration before the American Arbitration Association (AAA). The
parties selected an arbitrator in April 2004; however, due to demands to her
schedule, in August 2004, AAA requested that the parties select another
arbitrator. The parties have selected a new arbitrator. A preliminary hearing
was set with the new arbitrator on September 29, 2004. Discovery deadlines and
motion deadlines were set by the new arbitrator. Dates for the arbitration
hearing have been set for November 15 and 16, 2004. NetSol intends to vigorously
defend this action.
NOTE
11 - GOING CONCERN:
The
Company’s consolidated financial statements are prepared using the accounting
principles generally accepted in the United States of America applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. As of September 30, 2004, the
Company had net working capital of $1,092,079, and an accumulated deficit of
$30,775,441. This factor raises substantial doubt about the Company’s ability to
continue as a going concern.
Management
recognizes that the Company must generate additional resources to enable it to
continue operations. In the current period, the Company realized a significant
increase in net revenues. Management is taking steps to continue comparable
revenue increases in the upcoming periods. Management is also continuing to
pursue cost cutting measures at every entity level. Additionally, management’s
plans include the sale of additional equity securities and debt financing from
related parties and outside third parties. However, of course, no assurance can
be guaranteed that the Company will be successful in raising additional capital
or continue the current growth trend in net revenues. Further, there can be no
assurance, assuming the Company successfully raises additional equity, that the
Company will achieve profitability or positive cash flow.
NOTE
12 - SEGMENT INFORMATION
The
following table presents a summary of operating information and certain year-end
balance sheet information for the three months ended September 30:
| |
|
2004 |
|
2003 |
|
|
Revenues
from unaffiliated customers: |
|
|
|
|
|
|
North
America |
|
$ |
170,134 |
|
$ |
80,348 |
|
|
International
|
|
|
1,888,171
|
|
|
892,264
|
|
|
Consolidated
|
|
$ |
2,058,305 |
|
$ |
972,612 |
|
| |
|
|
|
|
|
|
|
|
Operating
income (loss): |
|
|
|
|
|
|
|
|
North
America |
|
$ |
(536,290 |
) |
$ |
(733,523 |
) |
|
International
|
|
|
678,356
|
|
|
11,091
|
|
|
Consolidated
|
|
$ |
142,066 |
|
$ |
(830,098 |
) |
| |
|
|
|
|
|
|
|
|
Identifiable
assets: |
|
|
|
|
|
|
|
|
North
America |
|
$ |
3,615,895 |
|
$ |
4,897,721 |
|
|
International
|
|
|
8,406,877
|
|
|
4,534,952
|
|
|
Consolidated
|
|
$ |
12,022,772 |
|
$ |
9,325,007 |
|
| |
|
|
|
|
|
|
|
|
Depreciation
and amortization: |
|
|
|
|
|
|
|
|
North
America |
|
$ |
263,503 |
|
$ |
264,001 |
|
|
International
|
|
|
42,655
|
|
|
41,134
|
|
|
Consolidated
|
|
$ |
306,158 |
|
$ |
412,801 |
|
| |
|
|
|
|
|
|
|
|
Capital
expenditures: |
|
|
|
|
|
|
|
|
North
America |
|
$ |
- |
|
$ |
19,019 |
|
|
International
|
|
|
213,990
|
|
|
59,170
|
|
|
Consolidated
|
|
$ |
213,990 |
|
$ |
78,189 |
|
NOTE
13 - MINORITY INTEREST IN SUBSIDIARY
In August
2003, the Company entered into an agreement with United Kingdom based Akhter
Group PLC (“Akhter”). Under the terms of the agreement, Akhter Group acquired
49.9 percent of the Company’s subsidiary; Pakistan based NetSol Connect PVT Ltd.
(“Connect”), an Internet service provider (“ISP”), in Pakistan through the
issuance of additional Connect shares. As part of this Agreement, Connect
changed its name to NetSol Akhter. The new partnership with Akhter Computers is
designed to rollout connectivity and wireless services to the Pakistani national
market. On signing of this Agreement, the Shareholders agreed to make the
following investment in the Company against issuance of shares of
Connect.
| |
Akhter |
US$
200,000 |
| |
The
Company |
US$
50,000 |
During
the quarter ended September 30, 2003, the funds were received by Connect and a
minority interest of $200,000 was recorded for Akhter’s portion of the
subsidiary. During the quarter ended December 31, 2003, Akhter paid an
additional $10,000 to the Company for this purchase. Per the agreement, it was
envisaged that Connect would require a maximum $500,000 for expansion of its
business from each partner. Akhter was to meet the initial financial
requirements of the Connect until November 1, 2003. As of September 30, 2004,
both NetSol and Akhter had injected the majority of their committed cash to meet
the expansion requirement of the company. As of September 30, 2004, a total of
$615,493 had been transferred to Connect.
For the
three months ended September 30, 2004, the subsidiary had net losses of $30,196,
of which $15,068 was recorded against the minority interest. The balance of the
minority interest at September 30, 2004 was $186,615.
NOTE
14 - CONVERTIBLE DEBENTURE
On March
24, 2004, the Company entered into an agreement with several investors to
acquire Series A Convertible Debentures (the “Bridge Loan”) whereby a total of
$1,200,000 in debentures were procured through Maxim Group, LLC. The Company
received a net of $1,049,946 after placement expenses. In addition, the
beneficial conversion feature of the debenture was valued at $300,000. The
Company has recorded this as a contra-account against the loan balance and is
amortizing the beneficial conversion feature over the life of the loan. The net
balance at September 30, 2004, is $825,000.
Under the
terms of the Bridge Loan agreements, and supplements thereto, the debentures
bear interest at the rate of 10% per annum, payable on a quarterly basis in
common stock or cash at the election of the Company. The maturity date is 24
months from the date of signing, or March 26, 2006. The debentures are to be
converted at the rate of $1.86 and are automatically convertible as of August 6,
2004.
During
the quarter ended September 30, 2004, three of the convertible debenture holders
elected to convert their notes into common stock. The total of the notes
converted was $150,000 and the Company issued 80,646 shares of its common stock
to the note holders.
NOTE
15 - GAIN ON SETTLEMENT OF DEBT
In
September 2004, the Company transferred 24,004 of its treasury shares valued at
$45,965 to Brobeck Phleger & Harrison, Llp, in exchange of debt, as part of
the settlement agreement . The Company recorded a gain of $8,285 on the
settlement.
During
the quarter ended September 30, 2004, the Company evaluated the liabilities of
its discontinued operations and determined that $41,989 was no longer payable.
The Company recorded a gain of $41,989 as a result of the write-off of these
liabilities from its financial statements.
NOTE
16 - SUBSEQUENT EVENTS
In
October 2004, several employees exercised stock options to purchase 205,000
shares of the Company’s common stock for $200,000 in cash.
In
October 2004, a private placement was made for the purchase of 200,000 shares of
the Company’s common stock for $200,000 cash.
NOTE
17- RESTATEMENT
Subsequent
to the issuance of the Company's financial statements for the three months ended
September 30, 2004, the Company determined that certain transactions and
presentation in the financial statements had not been accounted for properly in
the Company's financial statements. Specifically, the amount of impairment of
goodwill was over-recorded.
The
Company has restated its financial statements for these adjustments as of
September 30, 2004 and 2003.
The
effect of the correction of the error is as follows:
| |
|
AS
|
|
|
|
|
|
|
|
|
|
PREVIOUSLY
|
|
AS
|
|
|
|
|
|
|
|
|
REPORTED
|
|
RESTATED
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
BALANCE
SHEET |
|
|
|
|
|
|
|
|
|
| |
|
As
of September 30, 2004 |
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
831,594 |
|
$ |
1,166,611 |
|
|
|
|
|
|
|
|
Total
intangibles |
|
$ |
3,731,015 |
|
$ |
4,066,032 |
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
11,687,755 |
|
$ |
12,022,772 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital |
|
$ |
39,621,500 |
|
$ |
39,391,087 |
|
|
|
|
|
|
|
|
Accumulated
deficit |
|
$ |
(31,340,872 |
) |
$ |
(30,775,441 |
) |
|
|
|
|
|
|
|
Total
stockholder's equity |
|
$ |
7,826,296 |
|
$ |
8,161,314 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENT
OF OPERATIONS: |
|
|
|
|
|
|
|
|
|
| |
|
For
the three months ended |
|
For
the three months ended |
|
|
|
September
30, 2004 |
|
September
30, 2003 |
|
|
Depreciation
and amortization |
|
$ |
413,824 |
|
$ |
306,158 |
|
$ |
412,801 |
|
$ |
305,135 |
|
|
Total
operating expenses |
|
$ |
1,272,258 |
|
$ |
1,164,592 |
|
$ |
1,342,333 |
|
$ |
1,234,667 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations |
|
$ |
34,400 |
|
$ |
142,066 |
|
$ |
(830,098 |
) |
$ |
(722,432 |
) |
|
Net
income (loss) |
|
$ |
34,358 |
|
$ |
142,024 |
|
$ |
(868,350 |
) |
$ |
(760,684 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.00 |
|
$ |
0.01 |
|
$ |
(0.13 |
) |
$ |
(0.12 |
) |
|
Diluted |
|
$ |
0.00 |
|
$ |
0.01 |
|
$ |
(0.13 |
) |
$ |
(0.12 |
) |
Item
2. Management's Discussion and Analysis Or Plan Of
Operation
The
following discussion is intended to assist in an understanding of the Company's
financial position and results of operations for the quarter and three months
ending September 30, 2004.
Forward-Looking
Information.
This
report contains certain forward-looking statements and information relating to
the Company that is based on the beliefs of its management as well as
assumptions made by and information currently available to its management. When
used in this report, the words "anticipate", "believe", "estimate", "expect",
"intend", "plan", and similar expressions as they relate to the Company or its
management, are intended to identify forward-looking statements. These
statements reflect management's current view of the Company with respect to
future events and are subject to certain risks, uncertainties and assumptions.
Should any of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described in this report as anticipated, estimated or expected. The Company's
realization of its business aims could be materially and adversely affected by
any technical or other problems in, or difficulties with, planned funding and
technologies, third party technologies which render the Company's technologies
obsolete, the unavailability of required third party technology licenses on
commercially reasonable terms, the loss of key research and development
personnel, the inability or failure to recruit and retain qualified research and
development personnel, or the adoption of technology standards which are
different from technologies around which the Company's business ultimately is
built. The Company does not intend to update these forward-looking
statements.
INTRODUCTION
NetSol is
an end-to-end information technology (“IT”) and business consulting services
provider for the lease and finance, banking and financial services industries.
Operating on a global basis with locations in the U.S., Europe, India, East Asia
and Asia Pacific, the Company helps its clients identify, evaluate, and
implement technology solutions to meet their most critical business challenges
and maximize their bottom line. The Company’s products include sophisticated
software applications for the asset-based lease and finance industry, and with
the acquisition of Pearl Treasury Systems, the “PTS System” designed to
seamlessly handle foreign exchange and money market trading for use by financial
institutions and customers.
The
Company’s IP backbone, located in Karachi, Pakistan at our subsidiary, Network
Technologies Pvt. Ltd., develops the majority of the Company’s software and has
achieved the ISO 9001 and Software Engineering Institute Capability Maturity
Model Level 3 software development assessment. The economies of scale presented
by our Pakistani operations have permitted the Company to capitalize on the
upward trend in information technology outsourcing. Economic pressures have
driven more companies to outsource major elements of their IT operations,
particularly application development and technology consulting. NetSol has
capitalized on this market trend by providing an off-shore development model at
costs well below those of companies located in India, Europe and the United
States.
Together
with this focus on providing an outsourcing, off-shore solution to existing and
new customers, NetSol has also adopted a dynamic growth strategy through
accretive acquisitions.
PLAN
OF OPERATIONS
Management
has set the following new goals for the Company’s next 12 months.
Initiatives
and Investment to Grow Revenues and Capabilities
| · |
Achieve
CMM Level 4 Accreditation in 2004. |
| · |
Enhance
Software Design, Engineering and Service Delivery Capabilities by
increasing investment in training. |
| · |
Enhance
and invest in R&D or between 5-7% of yearly budgets in financial,
banking and various other domains within NetSol’s core
competencies. |
| · |
Recruit
additional senior level marketing and technical professionals in Lahore,
London, and Adelaide offices to be able to support potential new customers
from the North American and European
markets. |
| · |
Embark
on a program of recruiting the best available talent in project and
program management. |
| · |
In
June 2004, the Company relocated its entire staff in Lahore to three
floors of its newly built, fully dedicated and wholly owned Technology
Campus. The Company is in the process of expanding the last two
remaining floors to add new
personnel. |
| · |
Increase
Capex, to enhance Communications and Development
Infrastructure. |
| · |
Launch
new business development initiatives for various products and services
such as LeaseSoft in hyper growth economies such as
China. |
| · |
Create
new technology partnership with Oracle and strengthen our relationship
with Intel in Asia Pacific and in the USA. |
| · |
Aggressive
marketing strategy in local government and private sectors in
Pakistan. |
| · |
Ramping
up the telecom sectors through its majority owned subsidiary NetSol Akhter
and injecting needed capital. The telecom sector is one of the most
untouched sectors in Pakistan. NetSol has seized this opportunity to
aggressively market its products and services with its strong
infrastructure, brand name and resources in this
region. |
| · |
Aggressive
new business development activities in UK and European markets through
organic growth, new alliances and mergers and
acquisition. |
Top Line
Growth through Investment in Marketing Organically and by Mergers and
Acquisition (“M&A”) activities:
| · |
Launch
LeaseSoft into new markets by assigning new, well established companies as
distributors in Europe, Asia Pacific including
Japan. |
| · |
Expand
relationships with key customers in the US, Europe and Asia
Pacific. |
| · |
Product
Positioning through alliances, joint ventures and
partnerships. |
| · |
Direct Marketing of
Services |
| · |
Embark
on roll up strategy by broadening M&A activities broadly in the
software development domain. |
| · |
Effectively
position and marketing campaign for ‘Trapeze’ or PTS. This is a
potentially big revenue generator in the banking domain for which NetSol
has already invested significant time and resources towards completing the
development of this application. Seeking major development partners to
market this treasury systems in the global
markets. |
With
these goals in mind, the Company entered in to the following significant and new
strategic alliances and relationships:
LeaseSoft
Distributors. NetSol
is also very active in appointing key distributors in Japan, Asia and in Europe
for its LeaseSoft products. As soon we have signed these agreements, the
shareholders will be notified through press releases.
DaimlerChrysler. NetSol
signed a global frame agreement with DaimlerChrysler, Germany for LeaseSoft
products and services that now expands the marketing reach to over 60 countries.
DaimlerChrysler as a group represent the largest customers for
NetSol.
Intel
Corporation. NetSol
forged what management believes to be a very important and strategic alliance
with Intel Corporation to develop a blueprint that would give broader exposure
and introduction to NetSol’s LeaseSoft products to a global market. NetSol
recently attended major events in China and in San Francisco through its Intel
relationship, which was designed to connect and introduce the Company to Intel
partners worldwide.
Investment
Banking Relations. The
relationship with Maxim Group, LLC, NetSol’s investment banker located in New
York, continues to grow as the bank has effectively raised new capital and has
been assisting the Company in executing its M&A and growth strategy. NetSol
UK, the Company’s wholly owned United Kingdom subsidiary, has engaged The Altra
Group, a local M&A company to assist it in identifying opportunities in the
European markets.
Launch
of Indian Subsidiary. On March
17, 2004, NetSol announced that it
has launched a wholly-owned subsidiary, NetSol International Pvt. Ltd., in
Bangalore, India. NetSol established this subsidiary as a service delivery base
for legacy systems migration, IT consultancy and certain software engineering
skills that are more readily available in India. The Indian IT-enabled services
business produces over $12 billion in export earnings and is growing at over 20%
annually. By establishing the Indian subsidiary, NetSol hopes to tap into the
growing Indian market.
Funding
and Investor Relations.
| · |
The
Company is exploring various means and most cost efficient methods to
inject new capital for the explosive growth it is experiencing. Our focus
is in emerging capital markets, UK and USA.
|
| · |
Continue
to raise capital at attractive terms through private placements offering
restricted securities, convertible debt debentures and, as needed, new
public offerings, for its many initiatives and programs. Several of the
Company’s current institutional investors based in the UK and USA have
regularly participated through new private placement transactions or by
exercising their warrants or converting their notes into NetSol restricted
common shares. |
| · |
Infuse
new capital from potential exercise of outstanding investor warrants and
employees options for business development and enhancement of
infrastructures. |
| · |
Continuing
to efficiently and prudently manage cash requirements and raise capital
from the markets only as it deems absolutely necessary to execute the
growth strategy. |
| · |
NetSol
has engaged a brokerage house in New York for new investor relations and
company coverage. Just recently they initiated and distributed research
coverage of NetSol with a ‘buy’ rating. |
Improving
the Bottom Line.
| · |
Continue
to review costs at every level and take appropriate steps to further
reduce operating overheads. |
| · |
Discontinue
any programs, projects or offices that are not producing desirable and
positive results. |
| · |
Grow
process automation. |
| · |
Profit
Centric Management Incentives. |
| · |
More
local empowerment and P&L Ownership in each Country
Office. |
| · |
Improve
productivity at the development facility and business development
activities. |
| · |
Cost
efficient management of every operation and continue further consolidation
to improve bottom line. |
| · |
Improve
prices of all our product offerings, yet maintain the competitiveness.
This will further improve gross margins across the
board. |
After
streamlining key operations, Management believes that NetSol is in a position to
derive higher productivity based on current capital employed. Nonetheless, as
the business ramps up, management anticipates the need to hire additional
personnel.
Management
continues to be focused on building its delivery capability and has achieved key
milestones in that respect. Key projects are being delivered on time and on
budget, quality initiatives are succeeding, especially in maturing internal
processes. Management believes that further leverage was provided by the
development ‘engine’ of NetSol, which became CMM Level 2 in early 2002. In a
quest to continuously improve its quality standards, NetSol reached CMM Level 3
assessment in July 2003. According to the website of SEI of Carnegie Mellon
University, USA, only a few software companies in the world have announced their
assessment of level 3. As a result of achieving CMM level 3, the Company is
experiencing a growing demand for its products and alliances from blue chip
companies worldwide. NetSol is now aiming for CMM level 4 in 2004 and
potentially CMM level 5, the highest CMM level, in 2005. NetSol plans to further
enhance its capabilities by creating similar development engines in other
Southeast Asian countries with CMM levels quality standards. This would make
NetSol much more competitive in the industry and provide the capabilities for
development in multiple locations. Increases in the number of development
locations with these CMM levels of quality standards will provide customers with
options and flexibility based on costs and broader access to skills and
technology.
MATERIAL
TRENDS AFFECTING THE COMPANY
NetSol
has identified the following material trends affecting the Company
Positive
trends:
| · |
Outsourcing
of services and software development is growing
worldwide. |
| ·
|
The
Global IT budgets are estimated to exceed $1.2 trillion in 2004, according
to the internal estimates of Intel Corporation. About 50% of this IT
budget would be consumed in the U.S. market alone primarily on the people
and processes. |
| ·
|
Burgeoning
Chinese markets and economic boom. |
| ·
|
Overall
economic expansion worldwide and explosive growth in the merging markets
specifically. |
| ·
|
Regional
stability and improving political environment between Pakistan and
India. |
| ·
|
Economic
turnaround in Pakistan including: a steady increase in gross domestic
product; much stronger dollar reserves, which is at an all time high of
over $13 billion; stabilizing reforms of government and financial
institutions; improved credit ratings in the western markets, and strong
stock markets. |
| ·
|
Pakistan’s
continuous fight against extremism and terrorism in the region, boosting
confidence of foreign investors and
companies. |
| ·
|
Major
turnarounds in the telecom sector as new opportunities are arising due to
privatization, new incentives, reduction of bandwidth prices and
tariffs. |
Negative
trends:
| ·
|
The
disturbance in Middle East and rising terrorist activities post 9/11
worldwide have resulted in issuance of travel advisory in some of the most
opportunistic markets. In addition, travel restrictions and new
immigration laws provide delays and limitations on business travel.
|
| ·
|
The
potential impact of higher U.S. interest rates including, but not limited
to, fear of inflation that may drive down IT budges and spending by U.S.
companies. |
| ·
|
Higher
oil prices worldwide may slow down the global economy causing delays in
new orders and reduction in budgets. |
CRITICAL
ACCOUNTING POLICIES
Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, and expense amounts reported. These estimates can also
affect supplemental information contained in the external disclosures of the
Company including information regarding contingencies, risk and financial
condition. Management believes our use of estimates and underlying accounting
assumptions adhere to GAAP and are consistently and conservatively applied.
Valuations based on estimates are reviewed for reasonableness and conservatism
on a consistent basis throughout the Company. Primary areas where our financial
information is subject to the use of estimates, assumptions and the application
of judgment include our evaluation of impairments of intangible assets, and the
recoverability of deferred tax assets, which must be assessed as to whether
these assets are likely to be recovered by us through future operations. We base
our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions or conditions. We
continue to monitor significant estimates made during the preparation of our
financial statements.
VALUATION
OF LONG-LIVED AND INTANGIBLE ASSETS
The
recoverability of these assets requires considerable judgment and is evaluated
on an annual basis or more frequently if events or circumstances indicate that
the assets may be impaired. As it relates to definite life intangible assets, we
apply the impairment rules as required by SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets” which requires significant judgment
and assumptions related to the expected future cash flows attributable to the
intangible asset. The impact of modifying any of these assumptions can have a
significant impact on the estimate of fair value and, thus, the recoverability
of the asset.
INCOME
TAXES
We
recognize deferred tax assets and liabilities based on the differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance based upon historical losses, projected future
taxable income and the expected timing of the reversals of existing temporary
differences. During fiscal year 2004-2005, we estimated the allowance on net
deferred tax assets to be one hundred percent of the net deferred tax
assets.
CHANGES
IN FINANCIAL CONDITION
Quarter Ended
September 30, 2004 as compared to the Quarter Ended September 30,
2003:
Net
revenues for the quarter ended September 30, 2004 were $2,058,305 as compared to
$972,612 for the quarter ended September 30, 2003. Net revenues are broken out
among the subsidiaries as follows:
| |
|
2004 |
|
2003 |
|
|
Netsol
USA |
|
$ |
170,134 |
|
$ |
80,348 |
|
|
Netsol
Tech |
|
|
1,113,859
|
|
|
546,897
|
|
|
Netsol
Private |
|
|
302,809
|
|
|
60,579
|
|
|
Netsol
Connect |
|
|
268,334
|
|
|
144,212
|
|
|
Netsol
UK |
|
|
172,261
|
|
|
67,874
|
|
|
Netsol-Abraxas
Australia |
|
|
30,908
|
|
|
72,702
|
|
|
Total
Net Revenues |
|
$ |
2,058,305 |
|
$ |
972,612 |
|
This
reflects an increase of $1,085,693 or 111.63% in the current quarter as compared
to the quarter ended September 30, 2003. The increase is attributable to new
orders of licenses and an increase in services business, including additional
maintenance work. The Company’s biggest revenue growth was achieved in all three
of its Pakistan based subsidiaries, which generated sales both domestically and
internationally. The Company has experienced solid and consistent demand for IT
services in the domestic sectors of Pakistan. The export licenses of LeaseSoft
and maintenance related services surged primarily due to the most recent
endorsement by our biggest customer DaimlerChrysler of Germany. NetSol and
DaimlerChrysler signed a global frame agreement that added new revenues and
assisted in acquiring new customers such as Toyota Leasing Thailand and
Mauritius Commercial Bank.
Our
telecom company, NetSol Akhter, added its 50th new
corporate customer in Pakistan which customers include, but are not limited to:
AKD Securities, Reuters and, Marriot Hotels.
Its U.S.
subsidiary, NetSol Altvia, has created a growing niche in the “not-for-profit”
business space in the Washington D.C. area. The Washington D.C. area office
continues to sign new business for both its Knowledge Base Product and
professional services. NetSol USA has been managing several projects with
Seattle based Capital Stream since November 2003. Overall, NetSol USA has
generated revenue in excess of $600,000 with margins exceeding 40%.
NetSol UK
continues its business development activities and has seen good traction in its
sales pipeline. NetSol UK added a very strategic new customer TiG (“The
Innovation Group”), a publicly listed UK company. We believe our relationship
with TiG will yield significant new recurring revenues to the subsidiary. NetSol
UK has ongoing relationships with Habib Allied Bank and DCD Group. These
relationships are bringing recurring revenues and are expected to continue in
the near term.
As a
direct result of the successful implementations of some of our current systems
with DaimlerChrysler, we are noticing an increasing demand for LeaseSoft.
Although the sales cycle for LeaseSoft is rather long, we are experiencing a
100% increase in product demonstration, evaluation and assessment by blue chip
companies in the UK, Australia, Japan, Europe and Pakistan. The crown jewel of
our product line “CMS’ (“Contract Management System”) which was sold to three
companies of DaimlerChrysler Asia Pacific Region in 2001 for a combined value in
excess of two million dollars was implemented and delivered to customers in
2003. Based on ELA, (Equipment and Leasing Association of N. America) the size
of the world market for the leasing and financing industry is in excess of $500
billion of which the software sector represents over a billion dollars. A number
of large leasing companies will be looking to renew legacy applications. This
places NetSol in a very strong position to capitalize on any upturn in IT
spending by these companies. NetSol is well positioned to sell several new
licenses in fiscal year 2005 that could potentially increase the sales and
bottom line. As the Company sells more of these licenses, management believes it
is possible that the margins could increase to upward of 70%. The license prices
of these products vary from $100,000 to $500,000 with additional charges for
customization and maintenance of between 20%-30% each year. The Company, in
parallel, has developed banking applications software to boost its product line
and these systems were sold to Citibank and Askari Banks in Pakistan in 2002.
New customers in the banking sector are also growing and the Company expects
substantial growth in this area in the coming year.
The gross
profit was $1,306,658 in the quarter ending September 30, 2004 as compared with
$512,235 for the same quarter of the previous year for an increase of 794,423.
The gross profit percentage has increased to approximately 63% in the quarter
ended September 30, 2004 from approximately 53% for the quarter ended September
30, 2003. In comparison to the prior quarter ended June 30, 2004, the cost of
sales decreased approximately $259,194 and revenues increased $190,974, an
overall increase 52% in gross profit.
Operating
expenses were $1,164,592 for the
quarter ending September 30, 2004 as compared to $1,234,667 for the
corresponding period last year. The increase is selling and marketing expenses
and salaries was offset by a similar decrease in general and administrative
expenses and professional fees. The Company has streamlined its operations by
consolidation, divestment and enhanced operating efficiencies. Depreciation and
amortization expense amounted to $306,158 and
$305,135 for the
quarter ended September 30, 2004 and 2003, respectively. Combined salaries and
wage costs were $347,237 and $315,540 for the comparable periods, respectively,
or an increase of $31,697 from the corresponding period last year.
Selling
and marketing expenses were $119,348 and $19,222, in the quarter ended September
30, 2004 and 2003, respectively, reflecting the growing sales activity of the
Company. The Company wrote-off as uncollectible bad debts of $0 in the current
quarter compared to $52,318 for the comparable prior period in the prior year.
Professional services expense increased to $114,334 in the quarter ended
September 30, 2004, from $29,801 in the corresponding period last
year.
Income
from operations was $142,066 compared
to a loss of $830,098 for the quarters ended September 30, 2004 and 2003,
respectively. This represents a decrease of $972,164 for the
quarter compared with the comparable period in the prior year. This is directly
due to reduction of operational expenses and improved gross
margins.
Net
income was $142,024 compared to net losses of $722,432 for the quarters ended
September 30, 2004 and 2003, respectively. This is a reduction of 120% compared
to the prior year. The add-back for the 49.9% minority interest in NetSol
Connect owned by another party was $15,068 compared to $35,309. During the
current quarter, the Company also recognized an expense of $37,500 for the
beneficial conversion feature on convertible debentures, an expense of $28,024
for the fair market value of warrants issued and a gain of $50,274 from the
settlement of a debt. Net income per share, basic and diluted, was $0.01 for the
quarter ended September 30, 2004 as compared with a loss per share of
$0.12 for the corresponding period last year.
The net
EBITDA income was $448,182 compared to loss of $455,549 after amortization and
depreciation charges of $306,158 and $305,135 respectively. Although the net
EBITDA income is a non-GAAP measure of performance we are providing it for the
benefit of our investors and shareholders to assist them in their
decision-making process.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company's cash position was $204,850 at September 30, 2004 compared to $292,528
at September 30, 2003. In addition the Company had $141,403 in certificates of
deposit, of which $121,163 is being used as collateral for the financing of the
directors’ and officers’ liability insurance. In October 2004, the balance of
the loan for the insurance was paid off and the certificate released. The total
cash position, including the certificates of deposits, was $346,253 as of
September 30, 2004.
Net cash
used for operating activities amounted to $1,062,227 for the quarter ended
September 30, 2004, as compared to $1,086,059 for the comparable period last
fiscal year. The increase is mainly due to an increase in prepaid expenses and
accounts receivable. In addition, the Company experienced a decrease of $564,159
in its accounts payable and accrued expenses.
Net cash
provided by investing activities amounted to $236,614 for the quarter ended
September 30, 2004, as compared to using $268,004 for the comparable period last
fiscal year. The difference lies primarily in the net proceeds of $250,000 in
certificates of deposits in the current fiscal year compared to purchases of
$520,000 in the prior year. During the current fiscal year, an additional
$191,606 was infused into the Company’s minority interest in the Company’s
subsidiary NetSol Connect. In addition, the Company had net purchases of
property and equipment of $127,002 compared to net sales of $51,996 for the
comparable period last fiscal year.
Net cash
provided by financing activities amounted to $137,329 and $1,491,711 for the
quarters ended September 30, 2004, and 2003, respectively. The quarter ended
September 30, 2004 included the cash inflow of $220,000 compared to $1,112,050
from issuance of equity and $0 compared to $238,250 from the exercising of stock
options and warrants. In the current fiscal period, the Company had net payments
on loans and capital leases of $30,967 as compared to net proceeds of $141,411
in the comparable period last year.
The
management expects to continue to improve its cash position in the current and
future quarters due to the new business signed up in the last quarter. In
addition, the Company anticipates additional exercises of investor warrants and
employee stock options in the current and subsequent quarters. The cash position
has declined in the last quarter as compared with quarter ended in June 30,
2004. This was primarily due to new capital raised in the quarter ended in June
30, 2004. During the current quarter, management reduced the current liabilities
significantly by paying down these obligations. Management anticipates receiving
proceeds from option exercises in the coming months and will continue to explore
the best possible means and terms to raise new capital . Management is confident
of being able to strengthen its cash position and further improve the liquidity
position. Management is committed to implementing the growth business strategy
that was ratified by the board of directors in December 2003. The Company would
continue to inject new capital towards expansion, growing sales and marketing
and further enhancement of delivery capabilities. However, management is
committed to ensuring the most efficient and cost effective means of raising
capital and utilization.
As a
growing company, we have on-going capital expenditure needs based on our short
term and long term business plans. Although our requirements for capital
expenses vary from time to time, for next 12 months, we have following capital
needs:
|
· |
Injection
of new capital of up to $500,000 in a strategic joint-venture of
NetSol-TiG. This partnership serves to outsource TiG’s software
development business to our offshore-based development facility.
|
|
· |
New
capital requirement for NetSol Akhter, the telecom division in an amount
up to $2.0 million as required by the agreement with
Akhter. |
|
· |
Working
capital of $1.0 million for debts payments, new business development
activities and infrastructure enhancements. |
While
there is no guarantee that any of these methods will result in raising
sufficient funds to meet our capital needs or that even if available will be on
terms acceptable to the Company, we will consider raising capital through the
following methods: equity based financing; warrant and option
exercises.
The
methods of raising funds for capital needs may differ based on the following:
| · |
stock
volatility due to market conditions in general and NetSol stock
performance in particular. This may cause a shift in our approach to raise
new capital through other sources such as secured long term
debt. |
| · |
Analysis
of the cost of raising capital in the U.S., Europe or emerging markets. By
way of example only, if the cost of raising capital is high in one market
and it may negatively affect the company’s stock performance, we may
explore options available in other markets.
|
Should
global or other general macro economic factors cause an adverse climate, we
would defer new financing and use internal cash flow for capital
expenditures.
Item
3. Controls
and Procedures
Management,
under the supervision and with the participation of the chief executive officer
and chief financial officer, conducted an evaluation of the disclosure controls
and procedures as of the end of the period covered by this interim report on
Form 10-QSB. Based on their evaluation, the chief executive officer and chief
financial officer have concluded that, as of the evaluation date, the disclosure
controls and procedures are effective to ensure that all material information
required to be filed in this Interim Report on Form 10-QSB has been made known
to them.
Additionally,
in response to the passage of the Sarbanes-Oxley Act of 2002, the Board of
directors and management plans, among other actions, has formed a Nominating and
Corporate Governance Committee comprised of members of the board of directors.
This committee is charged with, among other things, reviewing and developing
policies and procedures to enhance our disclosure controls and procedures.
Our Audit
Committee is charged with
reviewing our periodic reports and other public disclosures.
Other
than as described above, there have been no changes, including corrective
actions with regard to deficiencies or weaknesses in the Company’s internal
controls or in other factors that could significantly affect these controls
subsequent to the evaluation date set forth above.
PART
II OTHER
INFORMATION
Item
1. Legal Proceedings
On March
3, 2004 Uecker and Associates, Inc. as the assignee for the benefit of the
creditors of PGC Systems, Inc. formerly known as Portera Systems, Inc. filed a
request for arbitration demanding payment from NetSol for the amounts due under
a software agreement in the amount of $175,700. On March 31, 2004, we filed an
answering statement to the request of Uecker & Associates denying each and
every allegation contained in the Claim filed by Uecker & Associates and
stating NetSol’s affirmative defenses. The claim is being settled by binding
arbitration before the American Arbitration Association (AAA). The parties
selected an arbitrator in April 2004; however, due to demands to her schedule,
in August 2004, AAA requested that the parties select another arbitrator. The
parties selected a new arbitrator. A preliminary hearing was set with the new
arbitrator on September 29, 2004. The Parties entered into a Settlement
Agreement in November 2004, whereby NetSol is to pay a one time payment of
$75,000. At the time payment is received, Uecker is to file a dismissal with
prejudice on this matter.
Item
2. Changes
in Securities.
In August
2004, the Company issued 50,000 shares valued at $55,960 to Westrock Advisors
for consulting services. These shares were issued in reliance on an exemption
from registration available under Regulation D of the Securities Act of 1933, as
amended.
In August
and September 2004, three holders of $150,000 in convertible debentures
converted their notes into 80,646 shares of the Company’s common stock.
In
September 2004, the Company sold 190,476 shares of its common stock in private
placements valued at $200,000. As of September 30, 2004, these shares have not
been issued. These shares were issued in reliance on an exemption from
registration available under Regulation S of the Securities Act of 1933, as
amended.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission Of Matters To A Vote Of Security Holders
None
Item
5. Other Information
None.
Item
6. Exhibits
and Reports on Form 8-K
Exhibits:
|
31.1 |
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(CEO) |
|
31.2 |
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(CFO) |
|
32.1 |
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (CEO) |
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (CFO) |
Reports
on Form 8-K.
a)
On August 10, 2004, NetSol Technologies, Inc. issued a press release announcing
that it expects to meet is financial guidance for the year ended June 30, 2004
and providing guidance for the 2005 fiscal year.
b)
On September 15, 2004, NetSol Technologies, Inc. issued a press release
announcing results of operations and financial conditions for the fiscal year
ended June 30, 2004 and providing additional guidance for the 2005 fiscal
year.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
amended
report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
| |
|
|
| |
NETSOL
TECHNOLOGIES, INC. |
|
|
|
| Date: March 23,
2005 |
By: |
/s/ Naeem Ghauri |
| |
NAEEM GHAURI |
| |
Chief Executive
Officer |
| |
|
|
| |
|
| Date: March 23,
2005 |
By: |
/s/ Najeeb
Ghauri |
| |
NAJEEB GHAURI |
| |
Chief Financial Officer and
Chairman |