UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
For
the quarterly period ended
Commission
file number:
(Exact name of Registrant as specified in its charter)
| (State or other Jurisdiction of | (I.R.S. | |
| Incorporation or Organization) | Employer NO.) |
(Address of principal executive offices) (Zip Code)
(818)
222-9195 / (
(Issuer’s telephone/facsimile numbers, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes
☐
The issuer had 12,183,570 shares issued and outstanding of its $.01 par value Common Stock and no Preferred Stock outstanding as of November 5, 2021.
NETSOL TECHNOLOGIES, INC.
| Page 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
| As of | As of | |||||||
| September 30, 2021 | June 30, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts
receivable, net of allowance of $ | ||||||||
| Accounts
receivable - related party, net of allowance of $ | - | - | ||||||
| Revenues
in excess of billings, net of allowance of $ | ||||||||
| Revenues
in excess of billings - related party, net of allowance of $ | - | - | ||||||
| Other
current assets, net of allowance of $ | ||||||||
| Total current assets | ||||||||
| Revenues in excess of billings, net - long term | ||||||||
| Convertible
note receivable - related party, net of allowance of $ | - | - | ||||||
| Property and equipment, net | ||||||||
| Right of use of assets - operating leases | ||||||||
| Long term investment | ||||||||
| Other assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current portion of loans and obligations under finance leases | ||||||||
| Current portion of operating lease obligations | ||||||||
| Unearned revenue | ||||||||
| Total current liabilities | ||||||||
| Loans and obligations under finance leases; less current maturities | ||||||||
| Operating lease obligations; less current maturities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized; | - | - | ||||||
Common stock, $ par value; shares authorized; shares issued and outstanding as of September 30, 2021 and shares issued and outstanding as of June 30, 2021 | ||||||||
| Additional paid-in-capital | ||||||||
| Treasury stock (at cost, shares and shares as of September 30, 2021 and June 30, 2021, respectively) | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Other comprehensive loss | ( | ) | ( | ) | ||||
| Total NetSol stockholders’ equity | ||||||||
| Non-controlling interest | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Page 3 |
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net Revenues: | ||||||||
| License fees | $ | $ | ||||||
| Subscription and support | ||||||||
| Services | ||||||||
| Total net revenues | ||||||||
| Cost of revenues: | ||||||||
| Salaries and consultants | ||||||||
| Travel | ||||||||
| Depreciation and amortization | ||||||||
| Other | ||||||||
| Total cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| Depreciation and amortization | ||||||||
| General and administrative | ||||||||
| Research and development cost | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income and (expenses) | ||||||||
| Loss on sale of assets | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Gain on foreign currency exchange transactions | ||||||||
| Share of net loss from equity investment | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Total other income (expenses) | ||||||||
| Net income before income taxes | ||||||||
| Income tax provision | ( | ) | ( | ) | ||||
| Net income | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Net income attributable to NetSol | $ | $ | ||||||
| Net income per share: | ||||||||
| Net income per common share | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average number of shares outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Page 4 |
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net income | $ | $ | ||||||
| Other comprehensive income (loss): | ||||||||
| Translation adjustment | ( | ) | ||||||
| Translation adjustment attributable to non-controlling interest | ( | ) | ||||||
| Net translation adjustment | ( | ) | ||||||
| Comprehensive income (loss) attributable to NetSol | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Page 5 |
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
A statement of the changes in equity for the three months ended September 30, 2021 is provided below:
| Other | ||||||||||||||||||||||||||||||||
| Additional | Compre- | Non | Total | |||||||||||||||||||||||||||||
| Common Stock | Paid-in | Treasury | Accumulated | hensive | Controlling | Stockholders’ | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Deficit | Loss | Interest | Equity | |||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Subsidiary common stock issued for: | ||||||||||||||||||||||||||||||||
| -Services | - | - | - | - | - | ( | ) | - | ||||||||||||||||||||||||
| Common stock issued for: | ||||||||||||||||||||||||||||||||
| Services | - | - | - | - | ||||||||||||||||||||||||||||
| Purchase of treasury shares | - | - | - | ( | ) | - | - | - | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Net income | - | - | - | - | - | |||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
A statement of the changes in equity for the three months ended September 30, 2020 is provided below:
| Other | ||||||||||||||||||||||||||||||||
| Additional | Compre- | Non | Total | |||||||||||||||||||||||||||||
| Common Stock | Paid-in | Treasury | Accumulated | hensive | Controlling | Stockholders’ | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Deficit | Loss | Interest | Equity | |||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Cumulative effect adjustment (1) | - | - | - | - | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||
| Subsidiary common stock issued for: | ||||||||||||||||||||||||||||||||
| -Services | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Common stock issued for: | ||||||||||||||||||||||||||||||||
| Services | - | - | - | - | ||||||||||||||||||||||||||||
| Purchase of treasury shares | - | - | - | ( | ) | - | - | - | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | |||||||||||||||||||||||||||
| Net income | - | - | - | - | - | |||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Page 6 |
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision for bad debts | ( | ) | ( | ) | ||||
| Share of net loss from investment under equity method | ||||||||
| Loss on sale of assets | ||||||||
| Stock based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Revenues in excess of billing | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Unearned revenue | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Sales of property and equipment | ||||||||
| Investment in associates | - | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Purchase of treasury stock | ( | ) | ( | ) | ||||
| Proceeds from bank loans | - | |||||||
| Payments on finance lease obligations and loans - net | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Page 7 |
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (CONTINUED)
(Unaudited)
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Page 8 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The Company designs, develops, markets, and exports proprietary software products to customers in the automobile financing and leasing, banking, and financial services industries worldwide. The Company also provides system integration, consulting, and IT products and services in exchange for fees from customers.
The consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, 2021. 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 as follows:
Wholly owned Subsidiaries
NetSol Technologies Americas, Inc. (“NTA”)
NetSol Connect (Private), Ltd. (“Connect”)
NetSol Technologies Australia Pty Ltd. (“Australia”)
NetSol Technologies Europe Limited (“NTE”)
NTPK (Thailand) Co. Limited (“NTPK Thailand”)
NetSol Technologies (Beijing) Co. Ltd. (“NetSol Beijing”)
Ascent Europe Ltd. (“AEL”)
Virtual Lease Services Holdings Limited (“VLSH”)
Virtual Lease Services Limited (“VLS”)
Virtual Lease Services (Ireland) Limited (“VLSIL”)
Majority-owned Subsidiaries
NetSol Technologies, Ltd. (“NetSol PK”)
NetSol Innovation (Private) Limited (“NetSol Innovation”)
NetSol Technologies Thailand Limited (“NetSol Thai”)
OTOZ, Inc. (“OTOZ”)
OTOZ (Thailand) Limited (“OTOZ Thai”)
| Page 9 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 2 – ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas requiring significant estimates are provision for doubtful accounts, provision for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, assumptions used to determine the net present value of operating lease liabilities, and estimated contract costs. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates.
Concentration of Credit Risk
Cash
includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries. Certain financial
instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company maintains balances
at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located
in the United States. Balances at financial institutions within certain foreign countries are not covered by insurance except balances
maintained in China are insured for RMB
The Company’s operations are carried out globally. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments of each country and by the general state of the country’s economy. The Company’s operations in each foreign country are subject to specific considerations and significant risks not typically associated with companies in economically developed nations. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Fair Value of Financial Instruments
The Company applies the provisions of Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively short maturities. The carrying amounts of the convertible note receivable and the long-term debt approximate their fair values based on current interest rates for instruments with similar characteristics.
The three levels of valuation hierarchy are defined as follows:
| Level 1: | Valuations consist of unadjusted quoted prices in active markets for identical assets and liabilities and has the highest priority. |
| Level 2: | Valuations rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability. |
| Level 3: | Valuations are based on prices or third party or internal valuation models that require inputs that are significant to the fair value measurement and are less observable and thus have the lowest priority. |
| Page 10 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
The Company’s financial assets that were measured at fair value on a recurring basis as of September 30, 2021, were as follows:
| Level 1 | Level 2 | Level 3 | Total Assets | |||||||||||||
| Revenues in excess of billings - long term | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2021, were as follows:
| Level 1 | Level 2 | Level 3 | Total Assets | |||||||||||||
| Revenues in excess of billing - long term | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The reconciliation from June 30, 2021 to September 30, 2021 is as follows:
| Revenues in excess of billings - long term | Fair value discount | Total | ||||||||||
| Balance at June 30, 2021 | $ | $ | ( | ) | $ | |||||||
| Amortization during the period | ||||||||||||
| Effect of Translation Adjustment | ( | ) | ||||||||||
| Balance at September 30, 2021 | $ | $ | ( | ) | $ | |||||||
Management analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrants and option derivatives are valued using the Black-Scholes model.
Recent Accounting Standards:
Accounting Standards Recently Issued but Not Yet Adopted by the Company:
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock and results in fewer instruments with embedded conversion features being separately recognized from the host contract as compared with current standards. Those instruments that do not have a separately recognized embedded conversion feature will no longer recognize a debt issuance discount related to such a conversion feature and would recognize less interest expense on a periodic basis. Additionally, the ASU amends the calculation of the share dilution impact related to a conversion feature and eliminates the treasury method as an option. For instruments that do not have a component mandatorily settled in cash, the change will likely result in a higher amount of share dilution in the calculation of earnings per share. This ASU is effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2021, which for the Company is the first quarter of fiscal 2023, with early adoption permitted beginning in the first quarter of fiscal 2022. The Company is currently assessing the impact and timing of adoption of this ASU.
| Page 11 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The elective amendments provide expedients to contract modification, affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. This guidance is not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The guidance can be applied immediately through December 31, 2022. The Company will adopt this standard when LIBOR is discontinued and does not expect a material impact to its financial condition, results of operations or disclosures based on the current debt portfolio and capital structure.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
NOTE 3 – REVENUE RECOGNITION
The Company determines revenue recognition through the following steps:
| ● | Identification of the contract, or contracts, with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
The Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation) or an agent (net presentation) by evaluating the nature of its promise to the customer. Revenue is presented net of sales, value-added and other taxes collected from customers and remitted to government authorities.
The Company has two primary revenue streams: core revenue and non-core revenue.
Core Revenue
The Company generates its core revenue from the following sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) subscription and support, which includes post contract support, of its enterprise software solutions for the lease and finance industry. The Company offers its software using the same underlying technology via two models: a traditional on-premises licensing model and a subscription model. The on-premises model involves the sale or license of software on a perpetual basis to customers who take possession of the software and install and maintain the software on their own hardware. Under the subscription delivery model, the Company provides access to its software on a hosted basis as a service and customers generally do not have the contractual right to take possession of the software.
Non-Core Revenue
The Company generates its non-core revenue by providing business process outsourcing (“BPO”), other IT services and internet services.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract.
| Page 12 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
The Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription or licenses and a professional services engagement. License purchases generally have multiple performance obligations as customers purchase post contract support and services in addition to the licenses. The Company’s single performance obligation arrangements are typically post contract support renewals, subscription renewals and services engagements.
For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance obligation using its best estimate for the SSP.
Software Licenses
Transfer of control for software is considered to have occurred upon delivery of the product to the customer. The Company’s typical payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice.
Subscription
Subscription revenue is recognized ratably over the initial subscription period committed to by the customer commencing when the product is made available to the customer. The initial subscription period is typically 12 to 60 months. The Company generally invoices its customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment within 30 days of invoice.
Post Contract Support
Revenue from support services and product updates, referred to as subscription and support revenue, is recognized ratably over the term of the maintenance period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product updates and patches released during the term of the support period on a when-and-if available basis. The Company’s customers purchase both product support and license updates when they acquire new software licenses. In addition, a majority of customers renew their support services contracts annually and typical payment terms provide that customers make payment within 30 days of invoice.
Professional Services
Revenue from professional services is typically comprised of implementation, development, data migration, training or other consulting services. Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments. The Company recognizes revenue for time-and-materials arrangements as the services are performed. In fixed fee arrangements, revenue is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the services project. Management applies judgment when estimating project status and the costs necessary to complete the services projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Services are generally invoiced upon milestones in the contract or upon consumption of the hourly resources and payments are typically due 30 days after invoice.
BPO and Internet Services
Revenue from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date as a percentage of total estimated labor hours for each contract. Internet services are invoiced either monthly, quarterly or half yearly in advance to the customers and revenue is recognized ratably overtime on a monthly basis.
| Page 13 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by category — core and non-core, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The Company’s disaggregated revenue by category is as follows:
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Core: | ||||||||
| License | $ | $ | ||||||
| Subscription and support | ||||||||
| Services | ||||||||
| Total core revenue, net | ||||||||
| Non-Core: | ||||||||
| Services | ||||||||
| Total non-core revenue, net | ||||||||
| Total net revenue | $ | $ | ||||||
Significant Judgments
Due to the complexity of certain contracts, the actual revenue recognition treatment required under Topic 606 for the Company’s arrangements may be dependent on contract-specific terms and may vary in some instances.
Judgment is required to determine the SSP for each distinct performance obligation. The Company rarely licenses or sells products on a stand-alone basis, so the Company is required to estimate the range of SSPs for each performance obligation. In instances where SSP is not directly observable because the Company does not sell the license, product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. In making these judgments, the Company analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers.
The most significant inputs involved in the Company’s revenue recognition policies are: The (1) stand-alone selling prices of the Company’s software license, and the (2) the method of recognizing revenue for installation/customization, and other services.
The stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when quoting prices to customers. Although the Company has no history of selling its software separately from post contract support and other services, the Company does have historical experience with amending contracts with customers to provide additional modules of its software or providing those modules at an optional price. This information guides the Company in assessing the stand-alone selling price of the Company’s software, since the Company can observe instances where a customer had a particular component of the Company’s software that was essentially priced separate from other goods and services that the Company delivered to that customer.
The Company recognizes revenue from implementation and customization services using the percentage of estimated “man-days” that the work requires. The Company believes the level of effort to complete the services is best measured by the amount of time (measured as an employee working for one day on implementation/customization work) that is required to complete the implementation or customization work. The Company reviews its estimate of man-days required to complete implementation and customization services each reporting period.
| Page 14 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
Revenue is recognized over time for the Company’s subscription, post contract support and fixed fee professional services that are separate performance obligations. For the Company’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances and testing requirement changes.
If a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single arrangement. The Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.
If a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company will consider all relevant facts and circumstances. Variable consideration will be estimated and included in the contract price only when it is probable that a significant reversal in the amount of revenue recognized will not occur.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets (revenues in excess of billings), or contract liabilities (deferred revenue) on the Company’s Consolidated Balance Sheets. The Company records revenues in excess of billings when the Company has transferred goods or services but does not yet have the right to consideration. The Company records deferred revenue when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer.
The revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon completion of a milestone.
The Company’s revenues in excess of billings and unearned revenue are as follows:
| As of | As of | |||||||
| September 30, 2021 | June 30, 2021 | |||||||
| Revenues in excess of billings | $ | $ | ||||||
| Unearned revenue | $ | $ | ||||||
During
the three months ended September 30, 2021, the Company recognized revenue of $
| Page 15 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
Revenue
allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied,
or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.
Contracted but unsatisfied performance obligations were approximately $
Unearned Revenue
The Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable license and services starting in future periods are included in accounts receivable and unearned revenue.
Practical Expedients and Exemptions
There are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s disclosures. The Company has applied the following practical expedients:
● The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.
● The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less or the commissions are based on cashed received. These costs are recorded within sales and marketing expense in the Consolidated Statement of Operations.
● The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).
Costs to Obtain a Contract
The Company does not have a material amount of costs to obtain a contract capitalized at any balance sheet date. In general, the Company incurs few direct incremental costs of obtaining new customer contracts. The Company rarely incurs incremental costs to review or otherwise enter into contractual arrangements with customers. In addition, the Company’s sales personnel receive fees that are referred to as commissions, but that are based on more than simply signing up new customers. The Company’s sales personnel are required to perform additional duties beyond new customer contract inception dates, including fulfillment duties and collections efforts.
| Page 16 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.
| For the three months ended September 30, 2021 | ||||||||||||
| Net Income | Shares | Per Share | ||||||||||
| Basic income per share: | ||||||||||||
| Net income available to common shareholders | $ | $ | ||||||||||
| Effect of dilutive securities | ||||||||||||
| Share grants | - | - | ||||||||||
| Diluted income per share | $ | $ | ||||||||||
| For the three months ended September 30, 2020 | ||||||||||||
| Net Income | Shares | Per Share | ||||||||||
| Basic income per share: | ||||||||||||
| Net income available to common shareholders | $ | $ | ||||||||||
| Effect of dilutive securities | ||||||||||||
| Share grants | - | - | ||||||||||
| Diluted income per share | $ | $ | ||||||||||
NOTE 5 – OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY
The
accounts of NTE, AEL, VLSH and VLS use the British Pound; VLSIL uses the Euro; NetSol PK, Connect, and NetSol Innovation use the Pakistan
Rupee; NTPK Thailand and NetSol Thai use the Thai Baht; Australia uses the Australian dollar; and NetSol Beijing uses the Chinese Yuan
as the functional currencies. NetSol Technologies, Inc., and its subsidiary, NTA, use the U.S. dollar as the functional currency. Assets
and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange
rate throughout the period. Accumulated translation losses classified as an item of accumulated other comprehensive loss in the stockholders’
equity section of the consolidated balance sheet were $
| Page 17 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 6 – MAJOR CUSTOMERS
During
the three months ended September 30, 2021, revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”)
were $
Accounts
receivable from DFS and BMW at September 30, 2021, were $
NOTE 7 – CONVERTIBLE NOTES RECEIVABLE – RELATED PARTY
The
Company has entered into multiple convertible note receivable agreements with WRLD3D. The convertible notes bear interest ranging from
The following table summarizes the convertible notes receivable from WRLD3D.
| Convertible | ||||||||||||||
| Agreement | Interest | Maturity | Note | Accrued | ||||||||||
| Date | Rate | Date | Amount | Interest | ||||||||||
| May 25, 2017 | $ | $ | ||||||||||||
| February 9, 2018 | ||||||||||||||
| April 1, 2019 | ||||||||||||||
| August 19, 2019 | ||||||||||||||
| Less allowance for doubtful account | ( | ) | ( | ) | ||||||||||
| Net Balance | $ | $ | ||||||||||||
The
Company has accrued interest of $
| Page 18 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 8 - OTHER CURRENT ASSETS
Other current assets consisted of the following:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Prepaid Expenses | $ | $ | ||||||
| Advance Income Tax | ||||||||
| Employee Advances | ||||||||
| Security Deposits | ||||||||
| Other Receivables | ||||||||
| Other Assets | ||||||||
| Due From Related Party | ||||||||
| Less allowance for doubtful account | ( | ) | ( | ) | ||||
| Net Balance | $ | $ | ||||||
NOTE 9 – REVENUES IN EXCESS OF BILLINGS – LONG TERM
Revenues in excess of billings, net consisted of the following:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Revenues in excess of billings - long term | $ | $ | ||||||
| Present value discount | ( | ) | ( | ) | ||||
| Net Balance | $ | $ | ||||||
Pursuant
to revenue recognition for contract accounting, the Company had recorded revenues in excess of billings long-term for amounts billable
after one year. During the three months ended September 30, 2021 and 2020, the Company accreted $
| Page 19 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 10 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Office Furniture and Equipment | $ | $ | ||||||
| Computer Equipment | ||||||||
| Assets Under Capital Leases | ||||||||
| Building | ||||||||
| Land | ||||||||
| Autos | ||||||||
| Improvements | ||||||||
| Subtotal | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
For
the three months ended September 30, 2021 and 2020, depreciation expense totaled $
Following is a summary of fixed assets held under finance leases as of September 30, 2021 and June 30, 2021:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Computers and Other Equipment | $ | $ | ||||||
| Furniture and Fixtures | ||||||||
| Vehicles | ||||||||
| Total | ||||||||
| Less: Accumulated Depreciation - Net | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Finance lease term and discount rate were as follows:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Weighted average remaining lease term - Finance leases | ||||||||
| Weighted average discount rate - Finance leases | % | % | ||||||
| Page 20 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 11 - LEASES
The
Company leases certain office space, office equipment and autos with remaining lease terms of year to
The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.
The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.
The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts.
Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a re-measurement of lease liabilities. The Company’s variable lease payments include payments for finance leases that are adjusted based on a change in the Karachi Inter Bank Offer Rate. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.
Supplemental balance sheet information related to leases was as follows:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Assets | ||||||||
| Operating lease assets, net | $ | $ | ||||||
| Liabilities | ||||||||
| Current | ||||||||
| Operating | $ | $ | ||||||
| Non-current | ||||||||
| Operating | ||||||||
| Total Lease Liabilities | $ | $ | ||||||
| Page 21 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
The components of lease cost were as follows:
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Amortization of finance lease assets | $ | $ | ||||||
| Interest on finance lease obligation | ||||||||
| Operating lease cost | ||||||||
| Short term lease cost | - | |||||||
| Sub lease income | ( | ) | ( | ) | ||||
| Total lease cost | $ | $ | ||||||
Lease term and discount rate were as follows:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Weighted average remaining lease term - Operating leases | ||||||||
| Weighted average discount rate - Operating leases | % | % | ||||||
Supplemental disclosures of cash flow information related to leases were as follows:
| For the Three Months | ||||||||
| Ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Cash flows related to lease liabilities | ||||||||
| Operating cash flows related to operating leases | $ | $ | ||||||
| Operating cash flows from finance leases | $ | $ | ||||||
| Financing cash flows from finance leases | $ | $ | ||||||
| Page 22 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
Maturities of operating lease liabilities were as follows as of September 30, 2021:
| Amount | ||||
| Within year 1 | $ | |||
| Within year 2 | ||||
| Within year 3 | ||||
| Within year 4 | ||||
| Within year 5 | ||||
| Thereafter | ||||
| Total Lease Payments | ||||
| Less: Imputed interest | ( | ) | ||
| Present Value of lease liabilities | ||||
| Less: Current portion | ( | ) | ||
| Non-Current portion | $ | |||
NOTE 12 – LONG TERM INVESTMENT
Drivemate
The
Company and Drivemate Co., Ltd. (“Drivemate”) entered into a subscription agreement on April 25, 2019, (“Drivemate
Agreement”) whereby the Company purchased an equity interest of
The
Company did
Under the equity method of accounting, the Company recorded its share of net loss of $ compared to its share of net income of $ for the three months ended September 30, 2021 and 2020, respectively.
WRLD3D-Related Party
On
March 2, 2017, the Company purchased a
NetSol
PK has
Under the equity method of accounting, the Company recorded its share of net loss of $ and $ for the three months ended September 30, 2021 and 2020, respectively.
| Page 23 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
The following table reflects the above investments at September 30, 2021.
| Drivemate | WRLD3D | Total | ||||||||||
| Gross investment | $ | $ | $ | |||||||||
| Cumulative net loss on investment | ( | ) | ( | ) | ( | ) | ||||||
| Cumulative other comprehensive income (loss) | - | ( | ) | ( | ) | |||||||
| Net investment | $ | $ | $ | |||||||||
NOTE 13 - INTANGIBLE ASSETS
Intangible assets consisted of the following:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Product Licenses - Cost | $ | $ | ||||||
| Effect of Translation Adjustment | ( | ) | ( | ) | ||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Net Balance | $ | $ | ||||||
(A) Product Licenses
Product
licenses include internally developed original license issues, renewals, enhancements, copyrights, trademarks, and trade names. Product
licenses are amortized on a straight-line basis over their respective lives, and the unamortized amount of $
(B) Future Amortization
Estimated amortization expense of intangible assets is as follows:
| Period ended: | ||||
| September 30, 2022 | $ | |||
| September 30, 2023 | ||||
| $ |
NOTE 14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Liabilities | ||||||||
| Accrued Payroll & Taxes | ||||||||
| Taxes Payable | ||||||||
| Other Payable | ||||||||
| Total | $ | $ | ||||||
| Page 24 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 15 – DEBTS
Notes payable and finance leases consisted of the following:
| As of September 30, 2021 | ||||||||||||||
| Current | Long-Term | |||||||||||||
| Name | Total | Maturities | Maturities | |||||||||||
| D&O Insurance | (1) | $ | $ | $ | ||||||||||
| Bank Overdraft Facility | (2) | |||||||||||||
| Term Finance Facility | (3) | |||||||||||||
| Loan Payable Bank - Export Refinance | (4) | |||||||||||||
| Loan Payable Bank - Running Finance | (5) | |||||||||||||
| Loan Payable Bank - Export Refinance II | (6) | |||||||||||||
| Loan Payable Bank - Running Finance II | (7) | |||||||||||||
| Loan Payable Bank - Export Refinance III | (8) | |||||||||||||
| Sale and Leaseback Financing | (9) | |||||||||||||
| Term Finance Facility | (10) | |||||||||||||
| Insurance Financing | (11) | |||||||||||||
| Subsidiary Finance Leases | (12) | |||||||||||||
| $ | $ | $ | ||||||||||||
| As of June 30, 2021 | ||||||||||||||
| Current | Long-Term | |||||||||||||
| Name | Total | Maturities | Maturities | |||||||||||
| D&O Insurance | (1) | $ | $ | $ | ||||||||||
| Bank Overdraft Facility | (2) | |||||||||||||
| Term Finance Facility | (3) | |||||||||||||
| Loan Payable Bank - Export Refinance | (4) | |||||||||||||
| Loan Payable Bank - Running Finance | (5) | |||||||||||||
| Loan Payable Bank - Export Refinance II | (6) | |||||||||||||
| Loan Payable Bank - Running Finance II | (7) | |||||||||||||
| Loan Payable Bank - Export Refinance III | (8) | |||||||||||||
| Sale and Leaseback Financing | (9) | |||||||||||||
| Term Finance Facility | (10) | |||||||||||||
| Insurance Financing | (11) | |||||||||||||
| Subsidiary Finance Leases | (12) | |||||||||||||
| $ | $ | $ | ||||||||||||
| (1) |
| (2) | The
Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £ |
| Page 25 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
| This overdraft
facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding
intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to | |
| (3) | |
| (4) | |
| (5) | The Company’s subsidiary, NetSol PK, has a running finance
facility with Askari Bank Limited, secured by NetSol PK’s assets. The total facility amount is Rs. |
| (6) | |
| (7) | The Company’s
subsidiary, NetSol PK, has a running finance facility with Samba Bank Limited, secured by NetSol PK’s assets. The total
facility amount is Rs. |
| (8) | |
| (9) | |
| (10) |
| Page 26 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
| (11) | |
| (12) |
Following is the aggregate minimum future lease payments under finance leases as of September 30, 2021:
| Amount | ||||
| Minimum Lease Payments | ||||
| Within year 1 | $ | |||
| Within year 2 | ||||
| Within year 3 | ||||
| Total Minimum Lease Payments | ||||
| Interest Expense relating to future periods | ( | ) | ||
| Present Value of minimum lease payments | ||||
| Less: Current portion | ( | ) | ||
| Non-Current portion | $ | |||
NOTE 16 - STOCKHOLDERS’ EQUITY
During
the three months ended September 30, 2021, the Company issued shares of common stock for services rendered by the independent members
of the Board of Directors as part of their board compensation. These shares were valued at the fair market value of $
During
the three months ended September 30, 2021, the Company purchased shares of its own stock for $
| # of shares | Weighted Average Grant Date Fair Value ($) | |||||||
| Unvested, June 30, 2021 | $ | |||||||
| Granted | $ | |||||||
| Vested | ) | $ | ||||||
| Forfeited / Cancelled | $ | |||||||
| Unvested, September 30, 2021 | $ | |||||||
For the three months ended September 30, 2021 and 2020, the Company recorded compensation expense of $ and $, respectively. The compensation expense related to the unvested stock grants as of September 30, 2021 was $ which will be recognized during the fiscal year 2022.
| Page 27 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
NOTE 18 – CONTINGENCIES
From time to time, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business including tax assessments. The Company defends itself vigorously against any such claims. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the estimated loss. The Company provides disclosure in the notes to the consolidated financial statements for loss contingencies that do not meet both conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the financial statements. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable. The Company bases accruals on the best information available at the time, which can be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.
NOTE 19 – OPERATING SEGMENTS
The Company has identified three segments for its products and services; North America, Europe and Asia-Pacific. Our reportable segments are business units located in different global regions. Each business unit provides similar products and services; license fees for leasing and asset-based software, related maintenance fees, and implementation and IT consulting services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation.
The following table presents a summary of identifiable assets as of September 30, 2021 and June 30, 2021:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Identifiable assets: | ||||||||
| Corporate headquarters | $ | $ | ||||||
| North America | ||||||||
| Europe | ||||||||
| Asia - Pacific | ||||||||
| Consolidated | $ | $ | ||||||
The following table presents a summary of investment under equity method as of September 30, 2021 and June 30, 2021:
| As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
| Investment in associates under equity method: | ||||||||
| Corporate headquarters | $ | $ | ||||||
| Asia - Pacific | ||||||||
| Consolidated | $ | $ | ||||||
| Page 28 |
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
The following table presents a summary of operating information for the three months ended September 30:
| For the Three Months | ||||||||
| Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenues from unaffiliated customers: | ||||||||
| North America | $ | $ | ||||||
| Europe | ||||||||
| Asia - Pacific | ||||||||
| Revenue from affiliated customers | ||||||||