Annual report pursuant to Section 13 and 15(d)

Long-Term Investment

v3.19.2
Long-Term Investment
 12 Months Ended
Jun. 30, 2019
Investments, All Other Investments [Abstract]  
Long-Term Investment

NOTE 11 – LONG-TERM INVESTMENT

 

Drivemate

 

The Company and Drivemate Co., Ltd. (“Drivemate”) entered into a subscription agreement (“Drivemate Agreement”) whereby the Company will purchase an equity interest of 30% in Drivemate. Per the Drivemate Agreement, the Company will purchase 5,469 preferred shares for $1,800,000 consisting of $500,000 cash and $1,300,000 in services. The Company paid $250,000 on May 2, 2019 and received 760 shares for a 5.27% holding in Drivemate. The remaining $250,000 will be paid in $62,500 increments beginning 15 months from the date of the Drivemate Agreement signing with the final payment due 24 months from the date of the Drivemate Agreement signing. Per the Drivemate Agreement, the Company appointed two directors to the Drivemate board. The Company determined that it met the significant influence criteria since two of the four directors are appointed by the Company and the Company is to own 30% of Drivemate at the final payment date; therefore, the Company accounts for the investment using the equity method of accounting.

 

During the year ended June 30, 2019, the Company performed $245,280 of services.

 

Under the equity method of accounting, the Company recorded its share of net loss of $3,235 for the year ended June 30, 2019.

 

WRLD3D-Related Party

 

On March 2, 2017, the Company purchased a 4.9% interest in WRLD3D, a non-public company, for $1,111,111. The Company paid $555,556 at the initial closing and $555,555 on September 1, 2017. NetSol PK, the subsidiary of the Company, purchased a 12.2% investment in WRLD3D, for $2,777,778 which was earned by providing IT and enterprise software solutions. As of June 30, 2019, the investment earned by NetSol PK was $2,777,778.

 

In connection with the investment, the Company and NetSol PK received a warrant to purchase preferred stock of WRLD3D which included the following key terms and features:

 

  ● The warrants are exercisable into shares of the “Next Round Preferred”, only if and when the Next Round Preferred is issued by WRLD3D in a “Qualified Financing”.
  ● The warrants expire on March 2, 2020.
  ● “Next Round Preferred” is defined as occurring if WRLD3D’s preferred stock (or securities convertible into preferred stock) are issued in a Qualified Financing that occurs after March 2, 2016.
  ● “Qualified Financing” is defined as financing with total proceeds of at least $2 million.
  ● The total number of common stock shares to be issued is equal to $1,250,000 divided by the per share price of the Next Round Preferred.
  ● The exercise price of the warrants is equal to the greater of

 

  a) 70% of the per share price of the Next Round Preferred sold in a Qualified Financing, or
  b) 25,000,000 divided by the total number of shares of common stock outstanding immediately prior to the Qualified Financing (on a fully-diluted basis, excluding the number of common stock shares issuable upon the exercise of any given warrant).

 

The Company determined that it met the significant influence criteria since the CEO of WRLD3D is the son of the CEO, Najeeb Ghauri, and also an employee of the Company; therefore, the Company accounts for the investment using equity method of accounting.

 

During the years ended June 30, 2019 and 2018, NetSol PK provided services valued at $636,731 and $939,749, respectively, which is recorded as services-related party. Accounts receivable at June 30, 2019 and 2018 were $1,020,589 and $473,218, respectively. Revenue in excess of billing at June 30, 2019 and 2018 were $110,827 and $Nil, respectively. Under the equity method of accounting, the Company recorded its share of net loss of $838,610 and $262,556 for the years ended June 30, 2019 and 2018, respectively.