NetSol Technologies Reports Third Quarter Fiscal Year 2009 Financial Results

NetSol Witnessing Improved Visibility in License and IT Services Revenue in Current Quarter as Business Stabilizes and Refocuses on Growth

EMERYVILLE, CA -- (MARKET WIRE) -- 05/12/09 -- NetSol Technologies Inc. "NetSol" (NASDAQ: NTWK) (NASDAQ DUBAI: NTWK), a U.S. corporation providing global business services and enterprise application solutions to private and public sector organizations worldwide, today announced third quarter financial results for fiscal year 2009, for the period ended March 31, 2009.

Nine Month Fiscal 2009 Results

--  Revenues totaled $19.6 million, down 25% nine months year-to-date

      --  Service fees totaled $11.3 million year-to-date

      --  Maintenance fees totaled $4.8 million year-to-date

      --  License fees totaled $3.5 million year-to-date

--  Year-to-date GAAP net loss applicable to common shareholders of
    $7.3 million, or a loss of $0.27 per fully diluted share, compared to
    GAAP net income applicable to common shareholders of $3.5 million, or
    $0.15 per fully diluted share, in the year ago period

--  Year-to-date EBITDA loss of $3.0 million, or EBITDA loss of $0.11 per
    diluted share, versus EBITDA of $6.5 million, or $0.27 per diluted
    share, in the year ago period

Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "While our fiscal third quarter results reflect the most challenging period of the current global economic downturn on our business, I believe we made significant progress in terms of cost reductions as well as the streamlining of our global organizational structure. The combination of our North American and European businesses into one operating segment provides improved cost efficiencies and sales effectiveness across the combined organization. Most importantly, I believe the fiscal third quarter represents the trough of the current downturn for NetSol. Improved customer and sales pipeline activity are currently providing us confidence that we have turned the corner and expect to see improved financial performance in the coming quarters. We are very excited about our growth opportunities in China as well as traction in Latin American emerging economies.

"Strategically, during the fiscal third quarter we also made excellent progress within our SAP Practice Group as we secured a SAP services contract with a leading U.S. utility client representing excess of $1 million in projected annualized revenue and we also set the stage for the launch of our own proprietary SAP compatible software solutions. As part of our stated strategic objectives, during the quarter we set the foundation for key strategic alliances aimed at increasing our customer penetration of key geographic markets, diversifying our global delivery platform and ultimately driving growth. As a result of these efforts, shortly after the quarter end we launched Atheeb NetSol Limited, a new NetSol majority owned software engineering and joint venture company focused on serving the growing Saudi Arabian, GCC and Middle Eastern markets. We also signed a strategic partnership with Neptune Software extending the reach of NetSol's Financial Suite, LeaseSoft Evolve and attendant professional services in more than 12 African countries. I believe these key initiatives, with leading partners in their respective fields, provide additional growth drivers and strengthen NetSol's global market position," concluded Mr. Ghauri.

NetSol reported consolidated revenues of $5.0 million for the third quarter of fiscal year 2009, representing a 45% decline as compared to the $9.1 million in revenues reported for the same period a year ago.

U.S. GAAP (Generally Accepted Accounting Principles) net loss applicable to common shareholders for the third quarter of fiscal year 2009 was approximately $5.0 million, or a loss of $0.19 per diluted share, which compares to GAAP net income applicable to common shareholders of $2.2 million, or $0.09 per diluted share, in the same period of fiscal year 2008. Included in the fiscal third quarter 2009 financial results are exceptional expenses of $1.8 million for a doubtful debt reserve provision, one-time redundancy charge of approximately $200,000 and $1.0 million to modify a loan agreement with more favorable terms to NetSol.

NetSol reported an EBITDA loss of $3.5 million, or a loss of $0.13 per diluted share, for the third quarter of fiscal year 2009 compared to EBITDA of $3.2 million, or $0.13 per diluted share, in the year ago period.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. The Company uses EBITDA as a measure of the Company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under Generally Accepted Accounting Principles (GAAP). The EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the financial table heading "Reconciliation to GAAP."


Business Highlights

--  North American and European operations combined in management
    restructuring and streamlining of the global operations

--  Comprehensive cost cutting program to reduce operating expenses by $6
    million to $8 million annually and support the company's return to long-
    term profitability

--  Toyota Motor Finance China Co. Ltd. went live with NetSol Technologies
    suite of financial products

--  Leading global automobile manufacturer implementing NetSol Financial
    Suite (NFS) products for 300 dealers in Latin America as NetSol increases
    market penetration in the Latin American region

--  New customer agreement from Maroof Hospital for the implementation of
    a new Hospital Management System, expanding NetSol's presence in the global
    healthcare vertical

--  NetSol's SAP practice group secures services contract with a leading
    U.S.-based energy utility company, representing in excess of $1 million in
    projected annualized revenue

--  NetSol joins Winshuttle's SHUTTLEpro partner program to offer SAP Data
    Entry and Extraction Tools

--  Rackspace Hosting and NetSol announce solution partnership
    

Conference Call & Webcast Information

Following the distribution of the fiscal third quarter 2009 financial results, NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the quarterly financial and operational performance. Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available on the investor relations section of the NetSol corporate website at www.netsoltech.com. Telephone access to the conference call will be available in North America by dialing +1 (877) 407-0782 or internationally by dialing +1 (201) 689-8567.

An audio replay of the conference call will be available approximately two hours following the conclusion of the call and for the following 30 day period. To access the replay in North America, dial +1 (877) 660-6853 or, when calling internationally, dial +1 (201) 612-7415, using replay account code # 286 and conference ID # 322543. An archived replay of the conference webcast will also be available on the investor relations section of the NetSol corporate website at www.netsoltech.com.

About NetSol Technologies Inc.

NetSol Technologies, Inc. (NASDAQ: NTWK) (NASDAQ DUBAI: NTWK) is a worldwide provider of global business services and enterprise application solutions. Since its inception in 1995, NetSol has used its BestShoring(TM) practices and highly experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Specialized by industry, these product and services offerings include credit and finance portfolio management systems, hospital/healthcare information management systems (HIMS), SAP consulting and services, custom development, systems integration, and technical services for the global Financial, Healthcare, Insurance, Energy, and Technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 27001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Maturity Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 500 manufacturers, global automakers, financial institutions, utilities, technology providers, and government agencies. Headquartered in Emeryville, California, NetSol Technologies has operations and offices in Adelaide, Beijing, Bangkok, Lahore, and London.

To learn more about NetSol Technologies, Inc., visit www.netsoltech.com.

To join the NetSol Technologies, Inc. email communications list, visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.

NetSol Technologies, Inc. Forward-looking Statement

This press release may contain forward-looking statements relating to the development of the Company's products and services and future operation results, including statements regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "anticipate," "intend," variations of such words, and similar expressions, identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Factors that could affect the Company's actual results include the progress and costs of the development of products and services and the timing of the market acceptance.

Financial Tables Follow


                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF OPERATIONS
                                (Unaudited)


                        For the Three Months      For the Nine Months
                          Ended March 31,           Ended March 31,
                        2009          2008          2009          2008
                     (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                                    (Restated)                  (Restated)
                    ------------  ------------  ------------  ------------
Net Revenues:
  License fees       $   324,845  $  2,998,867  $  3,502,632  $  7,769,226
  Maintenance fees     1,664,492     1,482,654     4,771,519     4,556,450
  Services             3,033,684     4,585,292    11,320,846    13,800,844
                    ------------  ------------  ------------  ------------
    Total revenues     5,023,021     9,066,813    19,594,997    26,126,520
Cost of revenues
  Salaries and
   consultants         2,629,081     2,620,722     7,652,671     7,342,743
  Travel                 280,390       394,841       993,290       972,998
  Repairs and
   maintenance            81,536        99,262       290,436       332,448
  Insurance               43,478        30,005       135,390       153,760
  Depreciation and
   amortization          532,099       316,652     1,615,853       847,288
  Other                  917,051       522,013     2,208,265     1,341,513
                    ------------  ------------  ------------  ------------
    Total cost
     of sales          4,483,635     3,983,495    12,895,905    10,990,750
                    ------------  ------------  ------------  ------------
Gross profit             539,386     5,083,318     6,699,092    15,135,770
Operating expenses:
  Selling and
   marketing             629,145       898,686     2,479,509     2,817,908
  Depreciation and
   amortization          501,239       477,630     1,476,281     1,422,181
  Bad debt expense     1,772,188             -     2,420,658         3,277
  Salaries and
   wages                 773,757     1,034,784     2,697,531     2,758,434
  Professional
   services,
   including
   non-cash
   compensation          257,926       125,107       877,752       424,108
  General and
   adminstrative         862,623       781,828     2,693,451     2,277,022
                    ------------  ------------  ------------  ------------
    Total operating
     expenses          4,796,878     3,318,035    12,645,182     9,702,930
                    ------------  ------------  ------------  ------------
Income (loss) from
 operations           (4,257,491)    1,765,283    (5,946,090)    5,432,840
Other income and
 (expenses):
  Gain (loss) on
   sale of assets       (127,558)         (891)     (308,256)      (33,044)
  Interest expense      (483,501)     (121,719)     (983,971)     (544,665)
  Interest income        177,771        84,431       246,607       159,869
  Gain on sale of
   subsidiary
   shares                      -     1,240,808             -     1,240,808
  Loss on
   extinguishment
   of  debt           (1,000,000)            -    (1,000,000)            -
  Exchange gain
   /(loss) on
   foreign currency        8,902       388,859     1,821,754       590,170
  Other income and
   (expenses)             15,378        59,031        47,518       118,944
                    ------------  ------------  ------------  ------------
    Total other
     income
     (expenses)       (1,409,008)    1,650,519      (176,348)    1,532,082
                    ------------  ------------  ------------  ------------
Net income (loss)
 before minority
 interest in
 subsidiary           (5,666,500)    3,415,802    (6,122,438)    6,964,922
Minority interest
 in subsidiary -
 restated in 2008        689,584    (1,159,134)     (972,238)   (3,288,490)
Income taxes             (21,594)      (15,314)      (79,631)      (46,272)
                    ------------  ------------  ------------  ------------
Net income (loss)     (4,998,510)    2,241,354    (7,174,308)    3,630,160
Dividend required
 for preferred
 stockholders            (33,140)      (33,508)     (100,892)     (145,033)
                    ------------  ------------  ------------  ------------
Net income (loss)
 applicable to
 common
 shareholders         (5,031,650)    2,207,846    (7,275,200)    3,485,127
Other comprehensive
 income (loss):
  Translation
   adjustment
   - restated
   in 2008              (179,358)     (634,280)   (4,036,926)   (1,065,613)
                    ------------  ------------  ------------  ------------
Comprehensive
 income (loss)      $ (5,211,008) $  1,573,566  $(11,312,126) $  2,419,514
                    ============  ============  ============  ============
Net income (loss)
 per share:
  Basic             $      (0.19) $      (0.09) $      (0.27) $      (0.15)
                    ============  ============  ============  ============
  Diluted           $      (0.19) $      (0.09) $      (0.27) $      (0.15)
                    ============  ============  ============  ============
Weighted average
 number of shares
 outstanding
  Basic               26,601,587    25,205,995    26,350,098    23,686,204
  Diluted             26,601,587    25,665,924    26,350,098    24,146,133



                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


                                                    As of         As of
                                                  March 31,     June 30,
                                                    2009          2008
                                                (Unaudited)     (Audited)
                                                               (Restated)
                                                ------------  ------------
                    ASSETS
Current assets:
  Cash and cash equivalents                    $  2,481,591  $  6,275,238
  Restricted cash                                 5,000,000             -
  Accounts receivable, net of allowance for
   doubtful accounts                             11,182,706    10,988,888
  Revenues in excess of billings                  6,728,374    11,053,042
  Other current assets                            2,145,522     2,406,407
                                                ------------  ------------
    Total current assets                          27,538,193    30,723,575
Property and equipment, net of accumulated
 depreciation                                      9,463,524    10,220,545
Other assets, long-term                              204,823       822,672
Intangibles:
  Product licenses, renewals, enhancements,
   copyrights, trademarks, and tradenames, net    12,452,357    10,837,856
  Customer lists, net                              1,535,328     1,732,761
  Goodwill                                         9,439,285     9,439,285
                                                ------------  ------------
    Total intangibles                             23,426,970    22,009,902
                                                ------------  ------------
    Total assets                                $ 60,633,510  $ 63,776,694
                                                ============  ============

     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses         $  4,833,319  $  4,116,659
  Current portion of loans and obligations
   under capitalized leases                        6,103,585     2,280,110
  Other payables - acquisitions                      103,226       846,215
  Unearned revenues                                3,358,180     3,293,728
  Due to officers                                          -       184,173
  Dividend to preferred stockholders payable          49,974        33,508
  Loans payable, bank                              2,108,919     2,932,551
                                                ------------  ------------
    Total current liabilities                     16,557,203    13,686,944
Obligations under capitalized leases, less
 current maturities                                1,046,801       332,307
Convertible notes payable                          5,786,456             -
Long term loans; less current maturities             416,341       411,608
                                                ------------  ------------
    Total liabilities                             23,806,801    14,430,859
Minority interest                                  5,661,417     7,857,969
Commitments and contingencies                              -             -

Stockholders' equity:
  Preferred stock,  5,000,000 shares
   authorized; 1,920 issued and outstanding        1,920,000     1,920,000
  Common stock, $.001 par value; 95,000,000
   shares authorized;
     26,666,987 issued and 26,438,491 outstanding
      as of March 31, 2009
     25,545,482 issued and 25,525,886 outstanding
      as of June 30, 2008                             26,667        25,545
  Additional paid-in-capital                      77,320,715    74,950,286
  Treasury stock (228,496; 19,596 shares)           (396,008)      (35,681)
  Accumulated deficit                            (40,346,904)  (33,071,702)
  Stock subscription receivable                     (692,654)     (600,907)
  Common stock to be issued                          118,325     1,048,249
  Other comprehensive loss                        (6,784,849)   (2,747,924)
                                                ------------  ------------
    Total stockholders' equity                    31,165,292    41,487,866
                                                ------------  ------------
    Total liabilities and stockholders' equity  $ 60,633,510  $ 63,776,694
                                                ============  ============



                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                         STATEMENTS OF CASH FLOWS
                                (Unaudited)


                                                      For Nine Months
                                                      Ended March 31,
                                                    2009          2008
                                                               (Restated)
                                                ------------  ------------
Cash flows from operating activities:
  Net income (loss)                             $ (7,174,308) $  3,630,160
  Adjustments to reconcile net income to
   net cash (used in) provided by
   operating activities:
    Depreciation and amortization                  3,092,134     2,269,469
    Provision for uncollectible accounts           2,420,658         3,277
    Loss on sale of assets                                 -        33,044
    Gain on sale of subsidiary shares in
     Pakistan                                        308,256    (1,240,808)
    Minority interest in subsidiary -
     restated in 2008                                972,238     3,288,490
    Stock issued for services                        227,516        48,163
    Stock based compensation expense                 147,639        24,320
    Beneficial feature of convertible notes
     payable                                          17,225             -
    Changes in operating assets and
     liabilities:
       Increase in accounts receivable            (3,934,511)   (2,087,736)
       Increase (decrease) in other current
        assets                                     3,175,947    (4,885,181)
       Increase (decrease) in accounts
        payable and accrued expenses                 588,689      (510,968)
                                                ------------  ------------
    Net cash (used in) provided by operating
     activities                                     (158,517)      572,230
Cash flows from investing activities:
  Purchases of property and equipment             (1,501,508)   (1,985,651)
  Sales of property and equipment                     13,376       120,436
  Payments of acquisition payable                   (973,758)     (879,007)
  Purchase of treasury stock                        (360,328)            -
  Increase in intangible assets                   (5,281,642)   (2,219,673)
                                                ------------  ------------
  Net cash used in investing activities           (8,103,860)   (4,963,895)
Cash flows from financing activities:
  Proceeds from sale of common stock                 377,421     1,500,000
  Proceeds from the exercise of stock options
   and warrants                                      526,569     2,800,917
  Purchase of subsidary stock in Pakistan           (250,000)    1,765,615
  Finance costs incurred for sale of common
   stock                                                   -       (10,000)
  Purchase of treasury stock                               -       (25,486)
  Restricted cash                                 (5,000,000)            -
  Proceeds from convertible notes payable          6,000,000             -
  Proceeds from bank loans                         3,843,541     3,862,759
  Payments on bank loans                            (235,486)   (1,245,846)
  Dividend Paid to Preferred Shareholders            (33,876)            -
  Bank overdraft                                     161,134             -
  Payments on capital lease obligations &
   loans - net                                      (467,397)   (3,462,334)
                                                ------------  ------------
  Net cash provided by financing activities        4,921,906     5,185,625
Effect of exchange rate changes in cash             (453,177)       44,390
                                                ------------  ------------
Net increase in cash and cash equivalents         (3,793,648)      838,350
Cash and cash equivalents, beginning of period     6,275,238     4,010,164
                                                ------------  ------------
Cash and cash equivalents, end of period        $  2,481,591  $  4,848,514
                                                ============  ============



                NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                          RECONCILIATION TO GAAP
                                (Unaudited)


                                                Three Months  Nine Months
                                                    Ended         Ended
                                                  March 31,     March 31,
                                                    2009          2009
                                                ------------  ------------

Net (loss) before preferred dividend,
 per GAAP                                       $ (4,998,510) $ (7,174,308)
  Income Taxes                                        21,594        79,631
  Depreciation and amortization                    1,033,338     3,092,134
  Interest expense                                   483,501       983,971

                                                ------------  ------------
EBITDA (loss)                                   $ (3,460,077) $ (3,018,572)
                                                ============  ============


Weighted Average number of shares outstanding
  Basic                                           26,601,587    26,350,098
  Diluted                                         26,695,173    26,443,684
                                                ------------  ------------

  Basic EBITDA EPS                              $      (0.13) $      (0.11)
                                                ============  ============

  Diluted EBITDA EPS                            $      (0.13) $      (0.11)
                                                ============  ============

Contact -- Investor Relations:
Christopher Chu
Grayling
Phone:  +1 646-284-9426
Email:  Christopher.chu@us.grayling.com