Annual report pursuant to Section 13 and 15(d)

Long Term Investment

v3.10.0.1
Long Term Investment
 12 Months Ended
Jun. 30, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Long Term Investment

NOTE 10 – LONG TERM INVESTMENT

 

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 will be earned over future periods by providing IT and enterprise software solutions. Per the agreement, NetSol PK is to provide a minimum of $200,000 of services in each three-month period and the entire balance is required to be provided within three years of the date of the agreement. If NetSol PK fails to provide the future services, it may be required to forfeit the shares back to WRLD3D. As of June 30, 2018, the investment earned by NetSol PK is $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 had originally accounted for the investment under the cost method. On May 31, 2017, the Company determined that it met the significant influence criteria since the newly appointed CEO of WRLD3D is the son of the CEO, Najeeb Ghauri, and also an employee of the Company; therefore, the Company changed the accounting treatment from the cost method to the equity method.

 

During the years ended June 30, 2018 and 2017, NetSol PK provided services valued at $939,749 and $1,225,434, respectively, which is recorded as services-related party. These services are recorded as accounts receivable until approved by WRLD3D after which the shares are released from restriction. Accounts receivable at June 30, 2018 and 2017 were $473,218 and $49,646, respectively. Revenue in excess of billing at June 30, 2018 and 2017 were $Nil and $80,705, respectively. During the years ended June 30, 2018 and 2017, NetSol PK services valued at $601,869 and $1,231,115, respectively, were released from restriction. During the years ended June 30, 2018 and 2017, NetSol PK paid $230,000 and $550,000 to WRLD3D to buy out a portion of the services requirement. Under the equity method of accounting, the Company recorded its share of net loss of $262,556 for the year ended June 30, 2018.

 

At June 30, 2018, the Company has determined that there is no impairment.