AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 14, 2001
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
NETSOL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-4627685
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
24025 PARK SORRENTO, SUITE 220, CALABASAS, CA 91302
(818) 222-9195
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
-----------
MALEA FARSAI, ESQ.
GENERAL COUNSEL
NETSOL INTERNATIONAL, INC.
24025 PARK SORRENTO, SUITE 220
CALABASAS, CALIFORNIA 91302
(818) 222-9195
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------
COPIES TO:
KAREN C. GOODIN, ESQ.
Riordan & McKinzie
600 Anton Boulevard, 18th Floor
Costa Mesa, CA 92626
(714) 433-2900
-----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT IS EFFECTIVE.
-----------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ___
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ___
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------- --------------------- --------------------- ---------------------- ----------------
TITLE OF EACH CLASS OF PROPOSED PROPOSED
SECURITIES TO BE REGISTERED MAXIMUM MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED PER UNIT (1) OFFERING PRICE FEE
- ----------------------------------------------- --------------------- --------------------- ---------------------- ----------------
Common Stock, $.001 par value 624,875 $3.32 $2,074,585 $519
- ----------------------------------------------- --------------------- --------------------- ---------------------- ----------------
(1) Based upon the average of the high and low sales prices of the common stock
as reported on the Nasdaq Small Cap Market on March 9, 2001 and estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457(c) under the Securities Act of 1933.
-----------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
================================================================================
SUBJECT TO COMPLETION Dated March 14, 2001 The information in this prospectus in
not complete and may be changed. The selling securityholders may not sell these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
PROSPECTUS
NETSOL INTERNATIONAL, INC.
624,875 Shares of Common Stock
This prospectus is part of the registration statement we filed with the
Securities and Exchange Commission using a "shelf" registration process. This
means:
- The selling securityholders set forth on page 10 of this
prospectus may issue up to 624,875 shares of our common
stock from time to time.
- You should read this prospectus and any prospectus supplement
carefully before you invest.
Our common stock, $.001 par value is listed on the Nasdaq SmallCap
Market, under the symbol "NTWK". On March 9, 2001, the last reported sale price
for our common stock was $3 9/32 per share.
The selling securityholders may offer these shares directly to
purchasers, through agents that they designate from time to time or to or
through underwriters or dealers. We will not receive any of the proceeds from
the sale of such shares.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. PLEASE
CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
-----------
Our principal executive offices are located at 24025 Park Sorrento,
Suite 220, Calabasas, CA 91302 and our telephone number is (818) 222-9195. Our
web site is located at www.netsol-intl.com. Information contained in our web
site is not part of this prospectus.
-----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 2001
TABLE OF CONTENTS
Risk Factors...................................................... 3
The Company....................................................... 9
Special Note Regarding Forward-Looking Statements................. 9
Use of Proceeds................................................... 9
Selling Securityholders........................................... 10
General Description of Securities................................. 11
Plan of Distribution.............................................. 12
Legal Matters..................................................... 13
Experts........................................................... 13
Where You Can Find More Information............................... 14
2
RISK FACTORS
An investment in the shares of common stock offered by this prospectus
involves a high degree of risk. You should carefully review the following risk
factors as well as the other information set forth in this prospectus before
making an investment.
SOME OF THE INFORMATION IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES. YOU CAN IDENTIFY THESE STATEMENTS BY FORWARD-LOOKING
WORDS SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "BELIEVE," "ESTIMATE" AND
"CONTINUE" OR SIMILAR WORDS. YOU SHOULD READ STATEMENTS THAT CONTAIN THESE WORDS
CAREFULLY BECAUSE THEY:
- DISCUSS OUR FUTURE EXPECTATIONS;
- CONTAIN PROJECTIONS OF OUR FUTURE OPERATING RESULTS OR OF OUR
FUTURE FINANCIAL CONDITION; AND/OR
- STATE OTHER "FORWARD-LOOKING" INFORMATION.
WE BELIEVE IT IS IMPORTANT TO COMMUNICATE OUR EXPECTATIONS TO OUR
INVESTORS. THERE MAY BE EVENTS IN THE FUTURE, HOWEVER, THAT WE ARE NOT
ACCURATELY ABLE TO PREDICT OR OVER WHICH WE HAVE NO CONTROL. THE RISK FACTORS
LISTED IN THIS SECTION, AS WELL AS ANY CAUTIONARY LANGUAGE IN THIS PROSPECTUS,
PROVIDE EXAMPLES OF RISKS, UNCERTAINTIES AND EVENTS THAT MAY CAUSE OUR ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS WE DESCRIBE IN OUR
FORWARD-LOOKING STATEMENTS. BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE
AWARE THAT THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN THESE RISK FACTORS
AND ELSEWHERE IN THIS PROSPECTUS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS AND THAT UPON THE OCCURRENCE
OF ANY OF THESE EVENTS, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND
YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
IF WE DO NOT ATTRACT AND RETAIN QUALIFIED PROFESSIONAL STAFF, WE MAY NOT BE ABLE
TO ADEQUATELY PERFORM OUR CLIENT ENGAGEMENTS, WHICH COULD LIMIT ACCEPT OUR
ABILITY TO NEW CLIENT ENGAGEMENTS.
Our business is labor intensive and our success depends in large part
upon our ability to attract, retain, train and motivate highly skilled
employees. Because of the rapid growth in the Information Technology or I/T
sector, there is intense competition for employees who have modeling, creative
design, technical and program management experience. In addition, the Internet
has created many opportunities for people with the skills we seek to form their
own companies or join startup companies and these opportunities frequently offer
the potential for significant future financial profit through equity incentives
which we cannot match. We may not be successful in attracting a sufficient
number of highly skilled employees in the future, or in retaining, training and
motivating the employees we are able to attract. Any inability to attract,
retain, train and motivate employees could impair our ability to adequately
manage and complete existing projects and to bid for or accept new client
engagements.
IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR OPERATING RESULTS WILL BE
ADVERSELY AFFECTED.
Our growth has placed significant demands on our management and other
resources. Our revenues increased approximately 100% from $3.5 million
(restated) in 1999 to $7.0 million in 2000. Our staff increased from 112
full-time employees at June 30, 1999 to 425 at December 31, 2000. Our future
success will depend on our ability to manage our growth effectively, including
by:
- developing and improving our operational, financial and other
internal systems;
- integrating and managing acquired businesses, joint ventures
and strategic investments;
- training, motivating and managing our employees;
3
- estimating fixed-price fees and project timeframes accurately;
- maintaining high rates of employee utilization; and
- maintaining project quality and client satisfaction.
WE HAVE SIGNIFICANT FIXED OPERATING COSTS, WHICH MAY BE DIFFICULT TO ADJUST IN
RESPONSE TO UNANTICIPATED FLUCTUATIONS IN REVENUES.
A high percentage of our operating expenses, particularly personnel and
rent, are fixed in advance of any particular quarter. As a result, unanticipated
variations in the number, or progress toward completion, of our projects may
cause significant variations in operating results in any particular quarter and
could have a material adverse effect on operations for that quarter.
An unanticipated termination of a major project, a client's decision
not to proceed with a project we anticipated, or the completion during a quarter
of several major client projects could require us to maintain underutilized
employees and could therefore have a material adverse effect on our business,
financial condition and results of operations. Our revenues and earnings may
also fluctuate from quarter to quarter based on such factors as:
- the contractual terms and timing of completion of projects;
- any delays incurred in connection with projects;
- the adequacy of provisions for losses and bad debts;
- the accuracy of our estimates of resources required to
complete ongoing projects; and
- general economic conditions.
IF BUSINESSES DO NOT INCREASE THEIR USE OF THE INTERNET AS A MEANS FOR
CONDUCTING COMMERCE, OUR REVENUES WILL BE ADVERSELY AFFECTED.
One of the sources of our revenue is use of our software on-line. We
have spent our resources to develop our software so that it will be used via the
Internet. Our future success depends on the increased acceptance and use of the
Internet as a means for conducting commerce. If commerce on the Internet does
not continue to grow, or grows more slowly than expected, revenue growth would
slow or decline and our business, financial condition and results of operations
would be materially adversely affected. Consumers and businesses may delay
adoption of the Internet as a viable medium for commerce for a number of reasons
not within our control, including:
- inadequate network infrastructure;
- delays in the development of Internet enabling technologies
and performance improvements;
- delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet
activity;
- delays in the development of security and authentication
technology necessary to effect secure transmission of
confidential information;
- changes in, or insufficient availability of,
telecommunications services to support the Internet; and
- failure of companies to meet their customers' expectations in
delivering goods and services over the Internet.
4
INTERNATIONAL EXPANSION OF OUR BUSINESS COULD RESULT IN FINANCIAL LOSSES DUE TO
CHANGES IN FOREIGN ECONOMIC CONDITIONS OR FLUCTUATIONS IN CURRENCY AND EXCHANGE
RATES.
We expect to continue to expand our international operations. We
currently have offices in the United Kingdom, Germany, Pakistan and Australia.
We have limited experience in marketing, selling and providing our services
internationally. International operations are subject to other inherent risks,
including:
- recessions in foreign countries;
- fluctuations in currency exchange rates;
- difficulties and costs of staffing and managing foreign
operations;
- reduced protection for intellectual property in some
countries;
- political instability or changes in regulatory requirements or
overthrowing the current government in the foreign countries;
and
- U.S. imposed restrictions on the import and export of
technologies.
WE DEPEND HEAVILY ON A LIMITED NUMBER OF CLIENT PROJECTS AND THE LOSS OF ANY
WOULD ADVERSELY AFFECT OUR OPERATING RESULTS.
We have derived, and believe that we will continue to derive, a
significant portion of our revenues from a limited number of clients for whom we
perform large projects. For the year ended June 30, 2000, our four largest
clients accounted for over 30% of our revenues. In addition, revenues from a
large client may constitute a significant portion of our total revenues in a
particular quarter. The loss of any principal client for any reason, including
as a result of the acquisition of that client by another entity, could have a
material adverse effect on our business, financial condition and results of
operations.
IF WE ARE UNABLE TO ACHIEVE ANTICIPATED BENEFITS FROM ACQUISITIONS, JOINT
VENTURES AND STRATEGIC INVESTMENTS, OUR BUSINESS COULD BE ADVERSELY AFFECTED.
During the past year, we have completed four acquisitions and entered
into one alliance. The anticipated benefits from these and future acquisitions,
joint ventures and strategic investments may not be achieved. For example, when
we acquire a company, we cannot be certain that customers of the acquired
business will continue to do business with us or that employees of the acquired
business will continue their employment or become well integrated into our
operations and culture. The identification, consummation and integration of
acquisitions, joint ventures and strategic investments require substantial
attention from management. The diversion of the attention of management relating
to these activities, as well as any difficulties encountered in the integration
process, could have an adverse impact on our business, financial condition and
results of operations.
IF ANY CLIENT UNEXPECTEDLY TERMINATES THEIR CONTRACTS WITH US OUR BUSINESS COULD
BE ADVERSELY AFFECTED.
Our clients, with limited advance notice and without significant
penalty, can cancel some of our contracts. Termination by any client of a
contract for our services could result in a loss of expected revenues and
additional expenses for staff which were allocated to that client's project. The
cancellation or a significant reduction in the scope of a large project could
have a material adverse effect on our business, financial condition and results
of operations.
OUR STOCK PRICE IS VOLATILE AND MAY RESULT IN SUBSTANTIAL LOSSES FOR INVESTORS.
The trading price of our common stock could be subject to wide
fluctuations in response to:
- quarterly variations in operating results and our achievement
of key business metrics;
5
- changes in earnings estimates by securities analysts;
- any differences between reported results and securities
analysts' published or unpublished expectations;
- announcements of new contracts or service offerings by us or
our competitors;
- market reaction to any acquisitions, joint ventures or
strategic investments announced by us or our competitors; and
- general economic or stock market conditions unrelated to our
operating performance.
In the past, securities class action litigation has often been
instituted against companies following periods of volatility in the market price
of their securities. This type of litigation could result in substantial costs
and a diversion of management attention and resources.
IF WE DO NOT KEEP PACE WITH TECHNOLOGICAL CHANGES, OUR COMPETITIVE POSITION WILL
SUFFER.
Our markets and the technologies used in our solutions are
characterized by rapid technological change. Failure to respond in a timely and
cost-effective way to these technological developments would have a material
adverse effect on our business, financial condition and results of operations.
We expect to derive a substantial portion of our revenues from providing
software that is based upon leading technologies and that is capable of adapting
to future technologies. As a result, our success will depend on our ability to
offer services that keep pace with continuing changes in technology, evolving
industry standards and changing client preferences. We may not be successful in
addressing future developments on a timely basis. Our failure to keep pace with
the latest technological developments would have a material adverse effect on
our business, financial condition and results of operations.
WE FACE SIGNIFICANT COMPETITION IN MARKETS THAT ARE NEW AND RAPIDLY CHANGING.
The markets for the services we provide are highly competitive. We
believe that we currently compete principally with strategy consulting firms,
Internet professional services firms, systems integration firms, software
developers, technology vendors and internal information systems groups. Many of
the companies that provide services in our markets have significantly greater
financial, technical and marketing resources than we do and generate greater
revenues and have greater name recognition than we do. In addition, there are
relatively low barriers to entry into our markets and we have faced, and expect
to continue to face competition from new entrants into our markets.
We believe that the principal competitive factors in our markets
include:
- ability to integrate strategy, experience modeling, creative
design and technology services;
- quality of service, speed of delivery and price;
- industry knowledge;
- sophisticated project and program management capability; and
- Internet technology expertise and talent.
We believe that our ability to compete also depends in part on a number
of competitive factors outside our control, including:
- the ability of our competitors to hire, retain and motivate
professional staff;
6
- the development by others of Internet services or software
that is competitive with our solutions; and
- the extent of our competitors' responsiveness to client needs.
There can be no assurance that we will be able to compete successfully
in our markets.
IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY SOFTWARE, OUR BUSINESS COULD BE
ADVERSELY AFFECTED.
Our success depends, in part, upon our proprietary software and other
intellectual property rights. We rely upon a combination of trade secrets,
nondisclosure and other contractual arrangements, and copyright and trademark
laws to protect our proprietary rights. We enter into confidentiality agreements
with our employees, generally require that our consultants and clients enter
into these agreements, and limit access to and distribution of our proprietary
information. There can be no assurance that the steps we take in this regard
will be adequate to deter misappropriation of our proprietary information or
that we will be able to detect unauthorized use and take appropriate steps to
enforce our intellectual property rights. In addition, although we believe that
our services and products do not infringe on the intellectual property rights of
others, there can be no assurance that infringement claims will not be asserted
against us in the future, or that if asserted that any infringement claim will
be successfully defended. A successful claim against us could materially
adversely affect our business, financial condition and results of operations. We
may not have the right to resell or reuse software developed for specific
clients A portion of our business involves the development of software for
specific client engagements. Ownership of these solutions is the subject of
negotiation and is frequently assigned to the client, although we may retain a
license for certain uses. Some clients have prohibited us from marketing the
software developed for them for specified periods of time or to specified third
parties and there can be no assurance that clients will not demand similar or
other restrictions in the future. Issues relating to the ownership of and rights
to use solutions can be complicated and there can be no assurance that disputes
will not arise that affects our ability to resell or reuse these solutions. Any
limitation on our ability to resell or reuse a solution could require us to
incur additional expenses to develop new solutions for future projects.
WE ARE DEPENDENT ON OUR KEY PERSONNEL.
Our success will depend in large part upon the continued services of a
number of key employees, including Messrs. Salim Ghauri, Najeeb Ghauri and Naeem
Ghauri. The loss of the services of either of these or of one or more of our
other key personnel could have a material adverse effect on our business,
financial condition and results of operations. In addition, if one or more of
our key employees resigns from NetSol to join a competitor or to form a
competing company, the loss of such personnel and any resulting loss of existing
or potential clients to any such competitor could have a material adverse effect
on our business, financial condition and results of operations. In the event of
the loss of any personnel, there can be no assurance that we would be able to
prevent the unauthorized disclosure or use of our technical knowledge, practices
or procedures by such personnel.
WE DO NOT PAY CASH DIVIDENDS.
We have never paid dividends and do not presently intend to pay any
dividends in the foreseeable future.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
Future sales of our common stock could negatively impact the market
price of our common stock. Shares of our common stock that have not been
previously traded in the public market but may at some time be sold in the
public market include:
- shares held by affiliates;
- shares issued or to be issued in acquisitions;
- shares issuable upon conversion of convertible notes; and
7
- shares to be issued pursuant to stock options and warrants.
The aggregate number of such shares is much greater than the number of
shares of our common stock which have previously traded on the public market.
There is only a limited trading market for our common stock and it is possible
that you may not be able to sell your shares easily There is currently only a
limited trading market for our common stock. Our common stock trades on the
Nasdaq SmallCap Market under the symbol "NTWK" with very limited trading volume.
There can be no assurance that a substantial trading market will ever develop
(or be sustained, if developed) for our common stock upon completion of this
offering, or that purchasers will be able to resell their securities or
otherwise liquidate their investment without delay.
THE FUTURE ISSUANCE OF COMMON STOCK UPON EXERCISE OF OPTIONS AND WARRANTS MAY
DEPRESS THE PRICE OF OUR COMMON STOCK.
As of December 31, 2000, there were outstanding options to purchase
an aggregate of 2,391,750 shares of our common stock under our 1999 and 1997
option plans and outstanding warrants to purchase an aggregate of 125,092
shares of common stock. In addition, in connection with a recent financing,
we issued to the selling securityholders warrants to purchase an aggregate of
63,015, 79,197 and 19,973 shares of our common stock in January, February and
March of 2001, respectively.
During the respective terms of the warrants and options granted or
to be granted under our option plans, the holders thereof are given an
opportunity to benefit from a rise in the market price of the common stock,
with a resultant dilution of the interests of existing stockholders. The
existence of these warrants and options could make it more difficult for us
to obtain additional financing while such securities are outstanding. The
holders may be expected to exercise their rights to acquire common stock and
sell at a time when we would, in all likelihood, be able to obtain needed
capital through a new offering of securities on terms more favorable than
those provided by these warrants and options.
8
THE COMPANY
NetSol International, Inc. (formerly Mirage Holding, Inc.) was founded
in 1997 and is now in the business of information technology or I/T services.
NetSol has helped clients use I/T more efficiently in order to improve their
operations and profitability and to achieve business results. Network Solutions
Pvt. Ltd. or NetSol PK develops the majority of the software for NetSol. NetSol
PK was the first company in Pakistan to achieve the ISO 9001 accreditation.
NetSol is in the process of attaining SEI CMM Level 3 accreditation. This is one
of the highest levels of recognition for quality and best practices that a
software house can achieve.
NetSol offers a broad array of professional services to clients in the
global commercial markets and specializes in the application of advanced and
complex I/T to achieve its customers' strategic objectives. Its service
offerings include outsourcing, systems integration, and I/T and management
consulting and other professional services, including e-business solutions.
Our principal executive offices are located at 24025 Park Sorrento,
Suite 220, Calabasas, California 91302 and our telephone number is (818)
222-9195.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
prospectus are forward-looking statements concerning our operations, economic
performance and financial condition. Forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, are
included, for example, in the discussions about:
- our strategy;
- product sales and revenues;
- new product development or product introduction;
- expenses, earnings and net income; and
- our operational and legal risks.
These statements involve risks and uncertainties. Actual results may
differ materially from those expressed or implied in those statements. Factors
that could cause such differences include, but are not limited to, those
discussed under "Risk Factors".
USE OF PROCEEDS
As the shares of our common stock to which this prospectus relates are
offered by the selling securityholders and not by us, we will not receive any of
the proceeds from the resales of those shares.
9
SELLING SECURITYHOLDERS
The following table sets forth the selling securityholders, and the
number of shares of our common stock beneficially owned by them as of March
13, 2001 which may be offered pursuant to this prospectus. This information
is based upon information provided to us by the named selling
securityholders. Given that the selling securityholders may offer all, some
or none of their respective shares of common stock, no definitive estimate as
to the number of shares that will be held by the selling securityholders
after such offering can be provided.
Deephaven Private Placement Trading Ltd. is a private investment fund
that is owned by all of its investors and managed by Deephaven Capital
Management LLC. Deephaven Capital Management LLC, of which Mr. Irvin Kessler is
the fund manager, has voting and investment control over the shares listed below
owned by Deephaven Private Placement Trading Ltd. Deephaven Capital Management
LLC is an indirect subsidiary of Knight Trading Group, Inc.
Each of the selling securityholders has represented to us that it
did, or will with respect to the common stock issuable upon the exercise of
warrants, acquire the securities listed opposite its name below in the
ordinary course of business, and that it does not have any agreement or
understanding, directly or indirectly, with any person to distribute those
securities.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE OFFERING NUMBER OF SHARES AFTER OFFERING
SELLING STOCKHOLDERS NUMBER (1) PERCENT (2) BEING OFFERED NUMBER (3) PERCENT
-------------------- ---------- ----------- ------------- ---------- -------
Deephaven Private Placement Trading Ltd. 601,731(4) * 601,731(4) 0 *
Jesup & Lamont Securities Corporation 23,144(5) * 23,144(5) 0 *
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock that
the selling stockholders have the right to acquire pursuant to the exercise
of warrants and options exercisable within 60 days are deemed to be
outstanding and beneficially owned by the person holding the warrants for
the purpose of computing the number of shares beneficially owned.
(2) Percentage ownership is based on 11,580,497 shares of common stock
outstanding as of March 9, 2001.
(3) Assumes the sale of all shares of common stock offered hereby.
(4) Includes 138,861 shares of common stock issuable upon the exercise of
warrants.
(5) Represents shares of common stock issuable upon the exercise of warrants.
10
GENERAL DESCRIPTION OF SECURITIES
As of the date of this prospectus, we are authorized to issue up to
25,000,000 shares of common stock. As of March 9, 2001, we had 11,580,497
shares of common stock issued and outstanding.
DIVIDENDS
The holders of common stock are entitled to receive dividends when, as
and if declared by our board of directors, out of funds legally available for
their payment.
RIGHTS UPON LIQUIDATION
In the event of our voluntary or involuntary liquidation, dissolution
or winding up, the holders of common stock will be entitled to share equally in
any of our assets available for distribution after the payment in full of all
debts and distributions and after the holders of all series of outstanding
preferred stock, if any, have received their liquidation preferences in full.
VOTING RIGHTS
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders.
MISCELLANEOUS
The holders of common stock are not entitled to redemption rights.
Shares of common stock are not convertible into shares of any other class of
capital stock. Compushare, Inc. is the transfer agent and registrar for our
common stock. Our common stock is traded on the Nasdaq Small Cap Market under
the symbol "NTWK."
11
PLAN OF DISTRIBUTION
The selling securityholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock offered pursuant to this prospectus on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The selling
securityholders may use any one or more of the following methods when selling
shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales
- broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling securityholders may also sell shares under Rule 144 under
the Securities Act of 1933, if available, rather than under this prospectus.
The selling securityholders may pledge their shares to their brokers
under the margin provisions of customer agreements. If a selling securityholder
defaults on a margin loan, the broker may, from time to time, offer and sell the
pledged shares. The selling securityholders have advised us that they have not
entered into any agreements, understandings or arrangements with any
underwirters or broker-dealers regarding the sale of their shares other than
ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
selling securityholders.
Broker-dealers engaged by the selling securityholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling securityholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The selling securityholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The selling securityholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933.
We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling securityholders. We have agreed to indemnify the selling securityholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act of 1933.
12
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
us by Malea Farsai, Esq. General Counsel of NetSol International, Inc.
EXPERTS
The consolidated financial statements incorporated by reference in this
prospectus have been audited by Stonefield Josephson, Inc., Saeed Kamran Patel &
Co., and Mazars Neville Russell, independent public accountants, as indicated in
their reports with respect thereto and are incorporated herein by reference in
reliance upon the authority of said firms as experts in giving said reports.
13
WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS. We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
you free of charge at the SEC's web site at http://www.sec.gov. Our web site can
be found at http:/ /www.netsol-intl.com. Information contained in our web site
is not part of this prospectus.
STOCK MARKET. The common shares are traded on the Nasdaq SmallCap Market.
Materials filed by us can be inspected at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C.
20006.
INFORMATION INCORPORATED BY REFERENCE. The SEC allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede previously filed information, including information
contained in this prospectus.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering has been completed:
- our Annual Report on Form 10-KSB (File No. 0-22773) for the
year ended June 30, 2000 as filed with the SEC on October 13,
2000; and Amendment No. 1 to our Annual Report on Form
10-KSB/A (File No. 0-22773) for the year ended June 30, 2000
and filed with the SEC on February 2, 2001;
- our Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2000 as filed with the SEC on November 14, 2000;
and Amendment No. 1 to our Quarterly Report on Form 10-QSB/A
for the quarter ended September 30, 2000 and filed with the
SEC on February 2, 2001;
- our Quarterly Report on Form 10-QSB for the quarter ended
December 31, 2000 as filed with the SEC on February 14, 2001;
- our Current Reports on Form 8-K dated July 25, 2000, October
25, 2000 and January 23, 2001; and
- the description of our common stock, which is contained in our
registration statement filed on Form 8-A filed on June 30,
1996 as amended by Form 8-A/A filed on November 21, 1997.
You may request free copies of these filings by writing or telephoning
us at the following address:
Rick Poole
NetSol International, Inc.
24025 Park Sorrento, Suite 220
Calabasas, CA 91302
(818) 222-9195
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses we will pay in
connection with the issuance and distribution of the securities being
registered. None of these expenses will be paid by the selling securityholders.
ITEM AMOUNT
SEC registration fee.............................................. $519
Printing fees..................................................... $10,000
Nasdaq fees....................................................... $5,000
Blue sky fees and expenses........................................ $5,000
Legal fees and expenses........................................... $15,000
Accountants' fees and expenses.................................... $5,000
Transfer agent fees............................................... $1,000
Miscellaneous..................................................... $2,000
Total........................................................... $43,519
All of the above amounts, except for the SEC registration fee, have
been estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Law allows us to indemnify our officers
and directors from liability incurred by reason of the fact that he or she is or
was an officer or director of the corporation. We may authorize such
indemnification if we determine that it is proper under the circumstances. This
determination can be authorized based on a vote of our stockholders, by a
majority vote of a quorum of directors who were not parties to the relevant
legal action, or under certain circumstances, by independent legal counsel in a
written opinion. The indemnification can include, but is not limited to,
reimbursement of all fees, including amounts paid in settlement and attorney's
fees actually and reasonably incurred, in connection with the defense or
settlement of any action or suit by the officer or director.
We have purchased and maintained insurance covering our officers and
directors for the purpose of covering indemnification expenses.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of our company as to which indemnification
is being sought.
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION
NUMBER -----------
------
4.1 Securities Purchase Agreement, dated as of January 8, 2001, between
Netsol International, Inc. and Deephaven Private Placement Trading
Ltd.
4.2 Registration Rights Agreement, dated as of January 8, 2001, between
Netsol International, Inc. and Deephaven Private Placement Trading
Ltd.
4.3 Letter Agreement, dated February 23, 2001, between Netsol
International, Inc. and Deephaven Private Placement Trading Ltd.
II-1
5.1 Opinion of Malea Farsai, Esq., General Counsel of NetSol
International, Inc.
23.1 Consent of Stonefield Josephson, Inc.
23.2 Consent of Saeed Kamran Patel & Co.
23.3 Consent of Mazars Neville Russell.
23.4 Consent of Malea Farsai, Esq., General Counsel of NetSol
International, Inc. (included in Exhibit 5).
24.1 Powers of Attorney (included on page II-3).
ITEM 17. UNDERTAKINGS.
(1) We hereby undertake:
(a) To file, during any period in which the selling
securityholders offer or sell securities, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any additional or changed material
information of the plan of distribution.
(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered, and the offering of securities at that time shall be deemed to
be the initial bona fide offering.
(c) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the
termination of the offering.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by our directors,
officers or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether indemnification by us is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(3) We also undertake that we will:
(a) For determining any liability under the Securities Act of
1933, treat the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by us under the Rule 424(b)(1),
or (4) or 497(h) under the Securities Act of 1933 as part of this
registration statement as of the time the Securities and Exchange
Commission declared it effective.
(b) For determining any liability under the Securities Act of
1933, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered
in the registration statement, and that offering of the securities at
that time as the bona fide offering of those securities.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Calabasas, State of California on March 12, 2001.
NETSOL INTERNATIONAL, INC.
By: /s/ Najeeb U. Ghauri
-----------------------------
Najeeb U. Ghauri,
CHIEF EXECUTIVE OFFICER
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Najeeb U. Ghauri, Chief Executive
Officer of NetSol International, Inc., his or her true and lawful
attorney-in-fact and agent with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities (unless revoked in writing), to sign any and all
amendments to this registration statement, including any post-effective
amendments as well as any related registration statement (or amendment
thereto) filed in reliance upon Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Salim Ghauri
- -------------------------------------- President and Director March 12, 2001
Salim Ghauri (Principal Executive Officer)
/s/ Syed Husain
- -------------------------------------- Chief Financial Officer March 12, 2001
Syed Husain (Principal Financial and Accounting Officer)
/s/ Najeeb U. Ghauri
- -------------------------------------- Chief Executive Officer and Director March 12, 2001
Najeeb U. Ghauri
/s/ Shahab Ghauri
- -------------------------------------- Director March 12, 2001
Shahab Ghauri
/s/ Irfan Mustafa
- -------------------------------------- Chairman of the Board and Director March 12, 2001
Irfan Mustafa
/s/ Naeem Ghauri
- -------------------------------------- Chief Operating Officer and Director March 12, 2001
Naeem Ghauri
/s/ Cary Burch
- -------------------------------------- Director March 12, 2001
Cary Burch
/s/ Waheed Akbar
- -------------------------------------- Director March 12, 2001
Waheed Akbar
/s/ Nasim Ashraf
- -------------------------------------- Director March 12, 2001
Nasim Ashraf
II-3
EXHIBIT INDEX
EXHIBIT DESCRIPTION
NUMBER -----------
------
4.1 Securities Purchase Agreement, dated as of January 8, 2001, between
Netsol International, Inc. and Deephaven Private Placement Trading
Ltd.
4.2 Registration Rights Agreement, dated as of January 8, 2001, between
Netsol International, Inc. and Deephaven Private Placement Trading
Ltd.
4.3 Letter Agreement, dated February 23, 2001, between Netsol
International, Inc. and Deephaven Private Placement Trading Ltd.
5.1 Opinion of Malea Farsai, Esq., General Counsel of NetSol
International, Inc.
23.1 Consent of Stonefield Josephson, Inc.
23.2 Consent of Saeed Kamran Patel & Co.
23.3 Consent of Mazars Neville Russell.
23.4 Consent of Malea Farsai, Esq., General Counsel of NetSol
International, Inc. (included in Exhibit 5).
24.1 Powers of Attorney (included on page II-3).
II-4