Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies
12 Months Ended
Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies



(A) Non-cancellable operating leases


  The Company’s headquarters is located in Calabasas California with approximately 7,210 rentable square feet for $23,812 per month. The term of the lease is for five years and five months and expires October 31, 2017. A $23,821 security deposit is included in other assets in the accompanying consolidated financial statements.
  The Australia lease is a three-year lease that expires in June 2018 with a monthly rent of approximately $5,296.
  The Beijing lease is a three-year lease that expires in August 2019 with a monthly rent of approximately $32,427.
  The Bangkok lease is a three years lease expiring in May 2020 with a monthly rent of approximately $9,303.
  The NetSol Europe facilities, located in Horsham, United Kingdom, are leased until June 23, 2021 with a monthly rent of approximately $10,353.
  VLS facilities, located in Chester, United Kingdom, are leased until July 2026 with a monthly rent of approximately $3,082.


Upon expiration of the leases, the Company does not anticipate any difficulty in obtaining renewals or alternative space. Rent expense amounted to $1,887,840 and $1,529,618 for the years ended June 30, 2017 and 2016, respectively.


The total annual lease commitment for the next five years is as follows:


FYE 6/30/18   $ 1,121,034  
FYE 6/30/19     660,466  
FYE 6/30/20     285,563  
FYE 6/30/21     175,391  
FYE 6/30/22     50,770  


(B) Litigation


On October 27, 2015, a shareholder derivative lawsuit was filed in the California state court entitled McArthur v Ghauri, et al., Case No. BC599020 (Los Angeles, Cty.), naming current and former members of the Company’s board of directors as defendants. The complaint alleges that the defendants breached their fiduciary duties. The Company was named as a nominal defendant only and no damages are sought from it. On March 16, 2016, the parties in the California lawsuit reached an agreement-in-principle providing for the settlement of that case.


On December 30, 2015, a virtually identical shareholder derivative lawsuit was filed in Nevada state court, Paulovits v. Ghauri, et al., Case No. CV15-02470 (Washoe Cty.). The Nevada complaint named the same defendants and was based on the same alleged facts as the earlier-filed California case. On April 29, 2016, the Company filed a motion to dismiss or stay the Nevada proceeding on multiple grounds, including that is it duplicative of the first-filed California action. On May 23, 2016, pursuant to the parties’ stipulation, the Nevada court ordered that matter to be stayed for a period of one year.


On June 15, 2016, the parties in the California and the Nevada cases jointly executed a Stipulation and Agreement of Settlement of Derivative Claims, which is intended to fully resolve both cases. Pursuant to the stipulation and subject to the court’s approval, the Company has agreed to adopt or maintain certain corporate governance measures, and has agreed to cause its insurers to pay plaintiff counsel’s fees and expenses in an aggregate amount not to exceed $175,000. On June 16, 2016, the California plaintiff filed a motion for preliminary approval of the derivative settlement.


On May 30, 2017, Los Angeles Superior Court Judge Kenneth R. Freeman signed the Final Judgment and Order approving settlement and dismissing with prejudice the shareholder derivative litigation involving the Company. The order became effective on June 29, 2017. 


On April 7, 2017, Conister Bank Limited filed a complaint in the High Court of Justice Chancery Division, as claim no HC-2017-001045 against our subsidiary, Virtual Lease Services Limited (“VLS”).  The complaint alleges that VLS was in willful default of their agreements with Conister Bank Limited by failing to fulfill its obligations under the agreements with Conister. The complaint alleges damages in excess of £200,000 (approximately $260,000).  VLS has responded to the complaint and its expenses are currently covered by available insurance.  VLS denies all claims and intends to vigorously defend the action.