Quarterly report pursuant to Section 13 or 15(d)

Accounting Policies (Tables)

v3.10.0.1
Accounting Policies (Tables)
3 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Schedule of Fair Value of Financial Assets Measured On Recurring Basis

The Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2018, were as follows:

 

    Level 1     Level 2     Level 3     Total Assets  
Revenues in excess of billing - long term   $ -     $ -     $ 1,206,669     $ 1,206,669  
Total   $ -     $ -     $ 1,206,669     $ 1,206,669

Schedule of Fair Value of Financial Instruments Reconciliation

The reconciliation from June 30, 2018 to September 30, 2018 is as follows:

 

    Revenues in excess
of billing - long term
    Fair value
discount
    Total  
Balance at June 30, 2018   $ 1,445,245     $ (238,576 )   $ 1,206,669  
Effect of ASC 606 adoption     (1,445,245 )     238,576       (1,206,669 )
Balance at September 30, 2018   $ -     $ -     $ -

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The following table presents the cumulative effect adjustments, net of income tax effects, to beginning consolidated balance sheet accounts for the new accounting standards adopted by the Company on the first day of fiscal 2019:

 

    As of     Topic 606     As of  
    June 30, 2018     Adjustments     July 1, 2018  
ASSETS                        
Current assets:                        
Cash and cash equivalents   $ 22,088,853             $ 22,088,853  
Accounts receivable, net of allowance of $610,061 and $571,511     12,775,461               12,775,461  
Accounts receivable, net - related party     3,374,272               3,374,272  
Revenues in excess of billings     14,285,778       (7,328,812 )     6,956,966  
Revenues in excess of billings - related party     -               -  
Convertible note receivable - related party     2,123,500               2,123,500  
Other current assets     2,703,032               2,703,032  
Total current assets     57,350,896       (7,328,812 )     50,022,084  
Revenues in excess of billings, net - long term     1,206,669       (1,206,669 )     -  
Property and equipment, net     16,165,491               16,165,491  
Long term investment     3,217,162               3,217,162  
Other assets     70,299               70,299  
Intangible assets, net     12,247,196               12,247,196  
Goodwill     9,516,568               9,516,568  
Total assets   $ 99,774,281     $ (8,535,481 )   $ 91,238,800  
                         
LIABILITIES AND STOCKHOLDERS’ EQUITY                        
Current liabilities:                        
Accounts payable and accrued expenses   $ 7,873,809             $ 7,873,809  
Current portion of loans and obligations under capitalized leases     8,595,919               8,595,919  
Unearned revenues     5,949,581       218,174       6,167,755  
Common stock to be issued     88,324               88,324  
Total current liabilities     22,507,633       218,174       22,725,807  
Loans and obligations under capitalized leases; less current maturities     330,596               330,596  
Total liabilities     22,838,229       218,174       23,056,403  
Commitments and contingencies                        
Stockholders’ equity:                        
Preferred stock, $.01 par value; 500,000 shares authorized;     -       -       -  
Common stock, $.01 par value; 14,500,000 shares authorized; 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018 and 11,225,385 shares issued and 11,190,606 outstanding as of June 30, 2017     117,085               117,085  
Additional paid-in-capital     126,479,147               126,479,147  
Treasury stock (At cost, 205,853 shares and 34,779 shares as of June 30, 2018 and June 30, 2017, respectively)     (1,205,024 )             (1,205,024 )
Accumulated deficit     (37,994,502 )     (5,795,795 )     (43,790,297 )
Stock subscription receivable     (221,000 )             (221,000 )
Other comprehensive loss     (24,386,071 )             (24,386,071 )
Total NetSol stockholders’ equity     62,789,635       (5,795,795 )     56,993,840  
Non-controlling interest     14,146,417       (2,957,860 )     11,188,557  
Total stockholders’ equity     76,936,052       (8,753,655 )     68,182,397  
Total liabilities and stockholders’ equity   $ 99,774,281     $ (8,535,481 )   $ 91,238,800  

  

The following table presents the cumulative effect adjustments, net of income tax effects, to beginning consolidated balance sheet accounts for the new accounting standards adopted by the Company as of September 30, 2018:

 

    As reported under
Topic 606
          Balances under
Prior GAAP
 
    September 30, 2018     Adjustments     September 30, 2018  
ASSETS                        
Current assets:                        
Cash and cash equivalents   $ 20,435,744             $ 20,435,744  
Accounts receivable, net of allowance of $600,833 and $610,061     7,487,381               7,487,381  
Accounts receivable, net - related party     3,039,320               3,039,320  
Revenues in excess of billings     13,335,529       7,458,067       20,793,596  
Revenues in excess of billings - related party     70,250               70,250  
Convertible note receivable - related party     2,881,500               2,881,500  
Other current assets     3,438,861               3,438,861  
Total current assets     50,688,585       7,458,067       58,146,652  
Revenues in excess of billings, net - long term     -       1,281,652       1,281,652  
Property and equipment, net     15,650,128               15,650,128  
Long term investment     2,958,692               2,958,692  
Other assets     54,936               54,936  
Intangible assets, net     11,465,925               11,465,925  
Goodwill     9,516,568               9,516,568  
Total assets   $ 90,334,834     $ 8,739,719     $ 99,074,553  
                         
LIABILITIES AND STOCKHOLDERS’ EQUITY                        
Current liabilities:                        
Accounts payable and accrued expenses   $ 7,153,778             $ 7,153,778  
Current portion of loans and obligations under capitalized leases     8,433,675               8,433,675  
Unearned revenues     4,913,731       (289,099 )     4,624,632  
Common stock to be issued     88,324               88,324  
Total current liabilities     20,589,508       (289,099 )     20,300,409  
Loans and obligations under capitalized leases; less current maturities     296,680               296,680  
Total liabilities     20,886,188       (289,099 )     20,597,089  
Commitments and contingencies                        
Stockholders’ equity:                        
Preferred stock, $.01 par value; 500,000 shares authorized;     -       -       -  
Common stock, $.01 par value; 14,500,000 shares authorized; 11,782,360 shares issued and 11,576,507 outstanding as of September 30, 2018 and 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018     117,824               117,824  
Additional paid-in-capital     126,918,319               126,918,319  
Treasury stock (At cost, 205,853 shares and 205,853 shares as of September 30, 2018 and June 30, 2018, respectively)     (1,205,024 )             (1,205,024 )
Accumulated deficit     (42,827,708 )     5,977,953       (36,849,755 )
Stock subscription receivable     (221,000 )             (221,000 )
Other comprehensive loss     (24,649,274 )             (24,649,274 )
Total NetSol stockholders’ equity     58,133,137       5,977,953       64,111,090  
Non-controlling interest     11,315,509       3,050,865       14,366,374  
Total stockholders’ equity     69,448,646       9,028,818       78,477,464  
Total liabilities and stockholders’ equity   $ 90,334,834     $ 8,739,719     $ 99,074,553  

 

The following table summarizes the effects of adopting Topic 606 on the Company’s Condensed Consolidated Statement of Income for the three months ended September 30, 2018:

 

    For the Three Months  
    Ended September 30, 2018  
    As reported under           Under prior  
    Topic 606     Adjustments     GAAP  
                   
Net Revenues:                        
License fees   $ 5,956,113             $ 5,956,113  
Maintenance fees     3,638,327       146,477       3,784,804  
Services     6,418,634               6,418,634  
License fees - related party     -               -  
Maintenance fees - related party     101,349               101,349  
Services - related party     282,122               282,122  
                         
Total net revenues     16,396,545       146,477       16,543,022  
                         
Cost of revenues:                        
Salaries and consultants     5,020,562               5,020,562  
Travel     1,151,997               1,151,997  
Depreciation and amortization     937,604               937,604  
Other     1,048,324               1,048,324  
Total cost of revenues     8,158,487       -       8,158,487  
                         
Gross profit     8,238,058       146,477       8,384,535  
                         
Operating expenses:                        
Selling and marketing     1,701,326               1,701,326  
Depreciation and amortization     212,232               212,232  
General and administrative     4,406,720               4,406,720  
Research and development cost     318,155               318,155  
Total operating expenses     6,638,433       -       6,638,433  
                         
Income (loss) from operations     1,599,625       146,477       1,746,102  
                         
Other income and (expenses)                        
Gain (loss) on sale of assets     52,294               52,294  
Interest expense     (99,434 )             (99,434 )
Interest income     248,964       74,983       323,947  
Gain on foreign currency exchange transactions     10,912       53,703       64,615  
Share of net loss from equity investment     (299,691 )             (299,691 )
Other income (expense)     5,379               5,379  
Total other income (expenses)     (81,576 )     128,686       47,110  
                         
Net income (loss) before income taxes     1,518,049       275,163       1,793,212  
Income tax provision     (236,914 )             (236,914 )
Net income (loss)     1,281,135       275,163       1,556,298  
Non-controlling interest     (318,546 )     (93,005 )     (411,551 )
Net income (loss) attributable to NetSol   $ 962,589     $ 182,158     $ 1,144,747  
                         
Net income (loss) per share:                        
Net income (loss) per common share                        
Basic   $ 0.08     $ 0.02     $ 0.10  
Diluted   $ 0.08     $ 0.02     $ 0.10  
                         
Weighted average number of shares outstanding                        
Basic     11,502,616       11,502,616       11,502,616  
Diluted     11,507,730       11,507,730       11,507,730  

  

The following table summarizes the effects of adopting Topic 606 on the financial statement line items of the Company’s Consolidated Statement of Cash Flows for the three months ended September 30, 2018:

 

    For the Three Months  
    Ended September 30, 2018  
    As reported under           Under prior  
    Topic 606     Adjustments     GAAP  
Cash flows from operating activities:                        
Net income (loss)   $ 1,281,135     $ 275,163     $ 1,556,298  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
Depreciation and amortization     1,149,836               1,149,836  
Share of net loss from investment under equity method     299,691               299,691  
(Gain) loss on sale of assets     (52,294 )             (52,294 )
Stock based compensation     432,048               432,048  
Changes in operating assets and liabilities:                     -  
Accounts receivable     5,136,381               5,136,381  
Accounts receivable - related party     284,869               284,869  
Revenues in excess of billing     (6,347,196 )     (204,238 )     (6,551,434 )
Revenues in excess of billing - related party     (70,102 )             (70,102 )
Other current assets     (571,246 )             (571,246 )
Accounts payable and accrued expenses     (680,147 )             (680,147 )
Unearned revenue     (1,202,420 )     (70,925 )     (1,273,345 )
Net cash used in operating activities     (339,445 )     -       (339,445 )
                         
Cash flows from investing activities:                        
Purchases of property and equipment     (563,413 )             (563,413 )
Sales of property and equipment     184,032               184,032  
Convertible note receivable - related party     (758,000 )             (758,000 )
Net cash used in investing activities     (1,137,381 )     -       (1,137,381 )
                         
Cash flows from financing activities:                        
Proceeds from the exercise of stock options and warrants     -               -  
Proceeds from exercise of subsidiary options     2,650               2,650  
Purchase of treasury stock     -               -  
Proceeds from bank loans     119,895               119,895  
Payments on capital lease obligations and loans - net     (179,237 )             (179,237 )
Net cash provided by (used in) financing activities     (56,692 )     -       (56,692 )
Effect of exchange rate changes     (119,591 )             (119,591 )
Net increase in cash and cash equivalents     (1,653,109 )     -       (1,653,109 )
Cash and cash equivalents at beginning of the period     22,088,853               22,088,853  
Cash and cash equivalents at end of period   $ 20,435,744     $ -     $ 20,435,744