NETSOL Technologies, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Retatement of Previously Issued Financial Statements

Retatement of Previously Issued Financial Statements

9 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Retatement of Previously Issued Financial Statements

NOTE 19 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During the preparation of the Company's Form 10-Q for the nine months ended March 31, 2017, misstatements were identified in the previous financial statements relating to the recording of revenue in the proper period. The Company determined that the Company's quarterly financial statements for the quarters ended September 30, 2015, December 31, 2015, September 31, 2016 and December 31, 2016 should no longer be relied upon.

On August 31, 2015, the Company signed a consulting services agreement by which the Company would provide a model office at the customer’s data center which would include a base installation of the Company’s NFS Ascent product, along with certain agreed upon services. The Company received €1,800,000, approximately $2,024,000, as a non-refundable fee, which was received in two equal payments. The Company then entered into a 10-year contract with the same customer on December 21, 2015. The Company recorded the revenue for the model office in the periods that the cash was received. However, since the two contracts were with the same customer and signed within a short period of time, and both contracts stipulate an offset of payments made for services provided for the model office, the two contracts should have been combined and accounted for as a single contract. Revenue was recognized on the percentage-of-completion method in accordance with Accounting Standards Codification (“ASC”) 605-35 for this arrangement. As a result, for the quarter ended September 30, 2015, license revenue was overstated by $591,119 and for the quarter ended December 31, 2015 license revenue was understated by $406,146.

On December 21, 2015, the Company signed a 10 year contract for a 12 country installation of its NFS Ascent product which included a perpetual license, continued maintenance on the existing product and then maintenance on NFS Ascent upon installation. The Company did not appropriately apply the percentage-of-completion method for this arrangement in accordance with ASC 605-35. As a result, for quarter ended September 30, 2016, license revenue was understated by $1,953,935 and for the quarter ended December 31, 2016, license revenue was overstated by $1,580,529.

The Company charges maintenance revenue on the license value plus any additional customization that the customer may require. For one customer, the Company did not increase the maintenance fee for the additional customization that was performed during the year. This resulted in an understatement of maintenance revenue of $88,888, $96,085, and $120,976 for the quarters ended September 30, 2015, December 31, 2015, and September 30, 2016, respectively. Maintenance revenue was overstated by $198,797 for the quarter ended December 31, 2016.

Balance Sheet
	As of September 30, 2015

	As Originally			Amount of
	Presented			Restatement			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	10,075,324					$	10,075,324
Restricted cash		90,000						90,000
Accounts receivable, net of allowance of $518,657 and $524,565		7,485,807						7,485,807
Accounts receivable, net - related party		4,409,186						4,409,186
Revenues in excess of billings		6,560,754			(591,119	)		5,969,635
Other current assets		2,279,083						2,279,083
Total current assets		30,900,154			(591,119	)		30,309,035
Property and equipment, net		24,053,908						24,053,908
Intangible assets, net		21,837,105						21,837,105
Goodwill		9,516,568						9,516,568
Total assets	$	86,307,735		$	(591,119	)	$	85,716,616

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	5,030,352					$	5,030,352
Current portion of loans and obligations under capitalized leases		4,241,836						4,241,836
Unearned revenues		4,302,524			(88,888	)		4,213,636
Common stock to be issued		88,324						88,324
Total current liabilities		13,663,036			(88,888	)		13,574,148
Long term loans and obligations under capitalized leases; less current maturities		329,834						329,834
Total liabilities		13,992,870			(88,888	)		13,903,982
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-			-
Common stock, $.01 par value; 14,500,000 shares authorized; 10,322,826 shares issued and 10,295,547 outstanding as of September 30, 2015 and 10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015		103,228						103,228
Additional paid-in-capital		119,287,407						119,287,407
Treasury stock (27,279 shares)		(415,425	)					(415,425	)
Accumulated deficit		(41,137,149	)		(326,952	)		(41,464,101	)
Stock subscription receivable		(1,139,672	)					(1,139,672	)
Other comprehensive loss		(18,130,300	)					(18,130,300	)
Total NetSol stockholders’ equity		58,568,089			(326,952	)		58,241,137
Non-controlling interest		13,746,776			(175,279	)		13,571,497
Total stockholders’ equity		72,314,865			(502,231	)		71,812,634
Total liabilities and stockholders’ equity	$	86,307,735		$	(591,119	)	$	85,716,616

For the Three Months
	Ended September 30, 2015

	As Originally			Amount of
	Presented			Restatement			As Restated
Net Revenues:
License fees	$	1,193,354		$	(591,119	)	$	602,235
Maintenance fees		3,012,238			88,888			3,101,126
Services		6,753,873						6,753,873
Maintenance fees - related party		158,231						158,231
Services - related party		2,187,408						2,187,408
Total net revenues		13,305,104			(502,231	)		12,802,873

Cost of revenues:
Salaries and consultants		4,999,890						4,999,890
Travel		481,453						481,453
Depreciation and amortization		1,474,235						1,474,235
Other		938,797						938,797
Total cost of revenues		7,894,375			-			7,894,375

Gross profit		5,410,729			(502,231	)		4,908,498

Operating expenses:
Selling and marketing		1,698,404						1,698,404
Depreciation and amortization		291,172						291,172
General and administrative		3,366,047						3,366,047
Research and development cost		112,070						112,070
Total operating expenses		5,467,693			-			5,467,693

Loss from operations		(56,964	)		(502,231	)		(559,195	)

Other income and (expenses)
Loss on sale of assets		(11,873	)					(11,873	)
Interest expense		(68,173	)					(68,173	)
Interest income		52,112						52,112
Loss on foreign currency exchange transactions		(113,719	)					(113,719	)
Other income		54,314						54,314
Total other income (expenses)		(87,339	)		-			(87,339	)

Net loss before income taxes		(144,303	)		(502,231	)		(646,534	)
Income tax provision		(75,223	)					(75,223	)
Net loss		(219,526	)		(502,231	)		(721,757	)
Non-controlling interest		(191,502	)		175,279			(16,223	)
Net loss attributable to NetSol	$	(411,028	)	$	(326,952	)	$	(737,980	)

Net loss per share:
Net loss per common share
Basic	$	(0.04	)	$	(0.03	)	$	(0.07	)
Diluted	$	(0.04	)	$	(0.03	)	$	(0.07	)

Weighted average number of shares outstanding
Basic		10,281,335			10,281,335			10,281,335
Diluted		10,281,335			10,281,335			10,281,335

	For the Three Months
	Ended September 30, 2015

	As Originally			Amount of
	Presented			Restatement			As Restated
Net loss	$	(411,028	)	$	(326,952	)	$	(737,980	)
Other comprehensive income (loss):
Translation adjustment		(1,248,567	)		-			(1,248,567	)
Comprehensive income (loss)		(1,659,595	)		(326,952	)		(1,986,547	)
Comprehensive income (loss) attributable to non-controlling interest		(285,367	)		-			(285,367	)
Comprehensive income (loss) attributable to NetSol	$	(1,374,228	)	$	(326,952	)	$	(1,701,180	)

For the Three Months
	Ended September 30, 2015

	As Originally			Amount of
	Presented			Restatement			As Restated
Cash flows from operating activities:
Net loss	$	(219,526	)	$	(502,231	)	$	(721,757	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,765,407						1,765,407
Provision for bad debts		36,780						36,780
Loss on sale of assets		11,873						11,873
Stock issued for services		77,750						77,750
Changes in operating assets and liabilities:
Accounts receivable		(1,268,570	)					(1,268,570	)
Accounts receivable - related party		(975,266	)					(975,266	)
Revenues in excess of billing		(773,583	)		591,119			(182,464	)
Revenues in excess of billing - related party		(138,926	)					(138,926	)
Other current assets		(322,533	)					(322,533	)
Accounts payable and accrued expenses		(833,638	)					(833,638	)
Unearned revenue		(538,259	)		(88,888	)		(627,147	)
Net cash used in operating activities		(3,178,491	)		-			(3,178,491	)

Cash flows from investing activities:
Purchases of property and equipment		(625,794	)					(625,794	)
Sales of property and equipment		180,258						180,258
Net cash used in investing activities		(445,536	)		-			(445,536	)

Cash flows from financing activities:
Proceeds from sale of common stock		64,931						64,931
Proceeds from bank loans		437,070						437,070
Payments on capital lease obligations and loans - net		(174,385	)					(174,385	)
Net cash provided by financing activities		327,616			-			327,616
Effect of exchange rate changes		(797,222	)					(797,222	)
Net decrease in cash and cash equivalents		(4,093,633	)		-			(4,093,633	)
Cash and cash equivalents, beginning of the period		14,168,957						14,168,957
Cash and cash equivalents, end of period	$	10,075,324		$	-		$	10,075,324

Balance Sheet As of December 31, 2015

	As Originally			Amount of
	Presented			Restatement			As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	13,986,773					$	13,986,773
Restricted cash		90,000						90,000
Accounts receivable, net of allowance of $487,937 and $524,565		6,025,334						6,025,334
Accounts receivable, net - related party		5,749,523						5,749,523
Revenues in excess of billings		5,061,568			(184,973	)		4,876,595
Other current assets		2,671,613						2,671,613
Total current assets		33,584,811			(184,973	)		33,399,838
Property and equipment, net		23,251,920						23,251,920
Intangible assets, net		20,877,711						20,877,711
Goodwill		9,516,568						9,516,568
Total assets	$	87,231,010		$	(184,973	)	$	87,046,037

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	5,907,103					$	5,907,103
Current portion of loans and obligations under capitalized leases		3,767,193						3,767,193
Unearned revenues		3,546,819			(184,973	)		3,361,846
Common stock to be issued		88,324						88,324
Total current liabilities		13,309,439			(184,973	)		13,124,466
Long term loans and obligations under capitalized leases; less current maturities		273,109						273,109
Total liabilities		13,582,548			(184,973	)		13,397,575
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-			-
Common stock, $.01 par value; 14,500,000 shares authorized; 10,418,350 shares issued and 10,391,071 outstanding as of December 31, 2015 and 10,307,826 shares issued and 10,280,547 outstanding as of June 30, 2015		104,184						104,184
Additional paid-in-capital		119,890,798						119,890,798
Treasury stock (27,279 shares)		(415,425	)					(415,425	)
Accumulated deficit		(40,262,084	)					(40,262,084	)
Stock subscription receivable		(1,139,672	)					(1,139,672	)
Other comprehensive loss		(18,546,296	)					(18,546,296	)
Total NetSol stockholders’ equity		59,631,505			-			59,631,505
Non-controlling interest		14,016,957						14,016,957
Total stockholders’ equity		73,648,462			-			73,648,462
Total liabilities and stockholders’ equity	$	87,231,010		$	(184,973	)	$	87,046,037

For the Three Months									For the Six Months
	Ended December 31, 2015									Ended December 31, 2015

	As Originally			Amount of			As			As Originally			Amount of			As
	Presented			Restatement			Restated			Presented			Restatement			Restated
Net Revenues:
License fees	$	709,691		$	406,146		$	1,115,837		$	1,903,045		$	(184,973	)	$	1,718,072
Maintenance fees		3,240,472			96,085			3,336,557			6,252,710			184,973			6,437,683
Services		9,574,104						9,574,104			16,327,977						16,327,977
Maintenance fees - related party		31,755						31,755			189,986						189,986
Services - related party		2,635,675						2,635,675			4,823,083						4,823,083
Total net revenues		16,191,697			502,231			16,693,928			29,496,801			-			29,496,801

Cost of revenues:
Salaries and consultants		4,925,565						4,925,565			9,925,455						9,925,455
Travel		754,009						754,009			1,235,462						1,235,462
Depreciation and amortization		1,461,466						1,461,466			2,935,701						2,935,701
Other		1,022,682						1,022,682			1,961,479						1,961,479
Total cost of revenues		8,163,722			-			8,163,722			16,058,097			-			16,058,097

Gross profit		8,027,975			502,231			8,530,206			13,438,704			-			13,438,704

Operating expenses:
Selling and marketing		2,002,990						2,002,990			3,701,394						3,701,394
Depreciation and amortization		285,616						285,616			576,788						576,788
General and administrative		3,536,676						3,536,676			6,902,723						6,902,723
Research and development cost		117,924						117,924			229,994						229,994
Total operating expenses		5,943,206			-			5,943,206			11,410,899			-			11,410,899

Income from operations		2,084,769			502,231			2,587,000			2,027,805			-			2,027,805

Other income and (expenses)
Loss on sale of assets		(2,333	)					(2,333	)		(14,206	)					(14,206	)
Interest expense		(72,156	)					(72,156	)		(140,329	)					(140,329	)
Interest income		35,299						35,299			87,411						87,411
Loss on foreign currency exchange transactions		(134,527	)					(134,527	)		(248,246	)					(248,246	)
Other income		120,684						120,684			174,998						174,998
Total other income (expenses)		(53,033	)		-			(53,033	)		(140,372	)		-			(140,372	)

Net Income (loss) before income taxes		2,031,736			502,231			2,533,967			1,887,433			-			1,887,433
Income tax provision		(273,275	)					(273,275	)		(348,498	)					(348,498	)
Net income (loss) from continuing operations		1,758,461			502,231			2,260,692			1,538,935			-			1,538,935
Non-controlling interest		(883,396	)		(175,279	)		(1,058,675	)		(1,074,898	)		-			(1,074,898	)
Net Income (loss) attributable to NetSol	$	875,065		$	326,952		$	1,202,017		$	464,037		$	-		$	464,037

Net income per share:

Net income per common share
Basic	$	0.08		$	0.04		$	0.12		$	0.05		$	-		$	0.05
Diluted	$	0.08		$	0.03		$	0.11		$	0.04		$	-		$	0.04

Weighted average number of shares outstanding
Basic		10,308,186			10,308,186			10,308,186			10,294,760			10,294,760			10,294,760
Diluted		10,548,922			10,548,922			10,548,922			10,535,496			10,535,496			10,535,496

For the Three Months
	Ended December 31, 2015

	As Originally			Amount of
	Presented			Restatement		As Restated
Net income	$	875,065		$	326,952	$	1,202,017
Other comprehensive income (loss):
Translation adjustment		(665,906	)		-		(665,906	)
Comprehensive income (loss)		209,159			326,952		536,111
Comprehensive income (loss) attributable to non-controlling interest		(249,910	)		-		(249,910	)
Comprehensive income attributable to NetSol	$	459,069		$	326,952	$	786,021

	For the Six Months
	Ended December 31, 2015

	As Originally			Amount of
	Presented			Restatement		As Restated
Net income (loss)	$	464,037		$	-	$	464,037
Other comprehensive income (loss):
Translation adjustment		(1,914,473	)		-		(1,914,473	)
Comprehensive income (loss)		(1,450,436	)		-		(1,450,436	)
Comprehensive income (loss) attributable to non-controlling interest		(535,277	)		-		(535,277	)
Comprehensive income (loss) attributable to NetSol	$	(915,159	)	$	-	$	(915,159	)

For the Six Months
	Ended December 31, 2015

	As Originally			Amount of
	Presented			Restatement			As Restated
Cash flows from operating activities:
Net income (loss)	$	1,538,935					$	1,538,935
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		3,512,489						3,512,489
Provision for bad debts		37,043						37,043
Loss on sale of assets		14,206						14,206
Stock issued for services		326,019						326,019
Fair market value of warrants and stock options granted		145,716						145,716
Changes in operating assets and liabilities:
Accounts receivable		111,967						111,967
Accounts receivable - related party		(2,383,828	)					(2,383,828	)
Revenues in excess of billing		535,937			184,973			720,910
Other current assets		(758,802	)					(758,802	)
Accounts payable and accrued expenses		142,008						142,008
Unearned revenue		(1,190,072	)		(184,973	)		(1,375,045	)
Net cash provided by operating activities		2,031,618			-			2,031,618

Cash flows from investing activities:
Purchases of property and equipment		(1,177,443	)					(1,177,443	)
Sales of property and equipment		357,933						357,933
Purchase of subsidiary shares from open market		(347,623	)		-			(347,623	)
Net cash used in investing activities		(1,167,133	)		-			(1,167,133	)

Cash flows from financing activities:
Proceeds from sale of common stock		64,931						64,931
Proceeds from the exercise of stock options and warrants		194,680						194,680
Proceeds from bank loans		306,750						306,750
Payments on capital lease obligations and loans - net		(530,733	)					(530,733	)
Net cash provided by financing activities		35,628			-			35,628
Effect of exchange rate changes		(1,082,297	)					(1,082,297	)
Net decrease in cash and cash equivalents		(182,184	)		-			(182,184	)
Cash and cash equivalents, beginning of the period		14,168,957						14,168,957
Cash and cash equivalents, end of period	$	13,986,773		$	-		$	13,986,773

	Balance Sheet
	As of September 30, 2016

	As Originally			Amount of
	Presented			Restatement		As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	11,156,437				$	11,156,437
Accounts receivable, net of allowance of $500,853 and $492,498		7,142,255					7,142,255
Accounts receivable, net - related party		5,384,573					5,384,573
Revenues in excess of billings		13,358,858			2,074,911		15,433,769
Revenues in excess of billings - related party		682,049					682,049
Other current assets		3,192,425					3,192,425
Total current assets		40,916,597			2,074,911		42,991,508
Restricted cash		90,000					90,000
Property and equipment, net		22,612,752					22,612,752
Other assets		1,604,731					1,604,731
Intangible assets, net		19,326,259					19,326,259
Goodwill		9,516,568					9,516,568
Total assets	$	94,066,907		$	2,074,911	$	96,141,818

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	6,389,128				$	6,389,128
Current portion of loans and obligations under capitalized leases		4,408,173					4,408,173
Unearned revenues		4,419,692					4,419,692
Common stock to be issued		88,324					88,324
Total current liabilities		15,305,317			-		15,305,317
Long term loans and obligations under capitalized leases; less current maturities		539,859					539,859
Total liabilities		15,845,176			-		15,845,176
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-		-
Common stock, $.01 par value; 14,500,000 shares authorized; 10,882,281 shares issued and 10,855,002 outstanding as of September 30, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016		108,823					108,823
Additional paid-in-capital		122,367,231					122,367,231
Treasury stock (27,279 shares)		(415,425	)				(415,425	)
Accumulated deficit		(39,089,079	)		1,379,608		(37,709,471	)
Stock subscription receivable		(602,811	)				(602,811	)
Other comprehensive loss		(17,960,133	)				(17,960,133	)
Total NetSol stockholders’ equity		64,408,606			1,379,608		65,788,214
Non-controlling interest		13,813,125			695,303		14,508,428
Total stockholders’ equity		78,221,731			2,074,911		80,296,642
Total liabilities and stockholders’ equity	$	94,066,907		$	2,074,911	$	96,141,818

For the Three Months
	Ended September 30, 2016

	As Originally			Amount of
	Presented			Restatement			As Restated
Net Revenues:
License fees	$	3,499,860		$	1,953,935		$	5,453,795
Maintenance fees		3,402,821			120,976			3,523,797
Services		5,806,717						5,806,717
License fees - related party		246,957						246,957
Maintenance fees - related party		130,631						130,631
Services - related party		1,914,572						1,914,572
Total net revenues		15,001,558			2,074,911			17,076,469

Cost of revenues:
Salaries and consultants		5,893,349						5,893,349
Travel		711,895						711,895
Depreciation and amortization		1,330,872						1,330,872
Other		972,338						972,338
Total cost of revenues		8,908,454			-			8,908,454

Gross profit		6,093,104			2,074,911			8,168,015

Operating expenses:
Selling and marketing		2,411,136						2,411,136
Depreciation and amortization		269,097						269,097
General and administrative		4,552,098						4,552,098
Research and development cost		92,932						92,932
Total operating expenses		7,325,263			-			7,325,263

Income (loss) from operations		(1,232,159	)		2,074,911			842,752

Other income and (expenses)
Loss on sale of assets		(2,403	)					(2,403	)
Interest expense		(54,475	)					(54,475	)
Interest income		30,440						30,440
Loss on foreign currency exchange transactions		(414,896	)					(414,896	)
Other income		21,560						21,560
Total other income (expenses)		(419,774	)		-			(419,774	)

Net income (loss) before income taxes		(1,651,933	)		2,074,911			422,978
Income tax provision		(39,875	)					(39,875	)
Net income (loss)		(1,691,808	)		2,074,911			383,103
Non-controlling interest		(73,911	)		(695,303	)		(769,214	)
Net income (loss) attributable to NetSol	$	(1,765,719	)	$	1,379,608		$	(386,111	)

Net Income (loss) per share:
Net income (loss) per common share
Basic	$	(0.17	)	$	0.14		$	(0.04	)
Diluted	$	(0.17	)	$	0.14		$	(0.04	)

Weighted average number of shares outstanding
Basic		10,697,425			10,697,425			10,697,425
Diluted		10,697,425			10,697,425			10,697,425

For the Three Months
	Ended September 30, 2016

	As Originally			Amount of
	Presented			Restatement		As Restated
Net income (loss)	$	(1,765,719	)	$	1,379,608	$	(386,111	)
Other comprehensive income (loss):
Translation adjustment		1,094,074			-		1,094,074
Comprehensive income (loss)		(671,645	)		1,379,608		707,963
Comprehensive income (loss) attributable to non-controlling interest		323,713			-		323,713
Comprehensive income (loss) attributable to NetSol	$	(995,358	)	$	1,379,608	$	384,250

For the Three Months
	Ended September 30, 2016

	As Originally			Amount of
	Presented			Restatement			As Restated
Cash flows from operating activities:
Net income (loss)	$	(1,691,808	)	$	2,074,911		$	383,103
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		1,599,969						1,599,969
Loss on sale of assets		2,403						2,403
Stock issued for services		865,456						865,456
Fair market value of warrants and stock options granted		21,804						21,804
Changes in operating assets and liabilities:
Accounts receivable		2,336,894						2,336,894
Accounts receivable - related party		121,800						121,800
Revenues in excess of billing		(2,746,917	)		(2,074,911	)		(4,821,828	)
Revenues in excess of billing - related party		93,208						93,208
Other current assets		306,339						306,339
Accounts payable and accrued expenses		(780,569	)					(780,569	)
Unearned revenue		(346,108	)					(346,108	)
Net cash used in operating activities		(217,529	)		-			(217,529	)

Cash flows from investing activities:
Purchases of property and equipment		(554,873	)					(554,873	)
Sales of property and equipment		151,818						151,818
Investment		(555,555	)					(555,555	)
Net cash used in investing activities		(958,610	)		-			(958,610	)

Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants		276,861						276,861
Proceeds from exercise of subsidiary options		14,013						14,013
Payments on capital lease obligations and loans - net		(49,117	)					(49,117	)
Net cash provided by financing activities		241,757			-			241,757
Effect of exchange rate changes		533,292						533,292
Net decrease in cash and cash equivalents		(401,090	)		-			(401,090	)
Cash and cash equivalents, beginning of the period		11,557,527						11,557,527
Cash and cash equivalents, end of period	$	11,156,437		$	-		$	11,156,437

The following tables present the restated financial statements for the quarter ended December 31, 2016.

	Balance Sheet
	As of December 31, 2016

	As Originally			Amount of
	Presented			Restatement		As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	9,505,383				$	9,505,383
Accounts receivable, net of allowance of $495,760 and $492,498		5,840,490					5,840,490
Accounts receivable, net - related party		4,303,380					4,303,380
Revenues in excess of billings		17,646,488			373,406		18,019,894
Revenues in excess of billings - related party		469,030					469,030
Other current assets		2,904,650					2,904,650
Total current assets		40,669,421			373,406		41,042,827
Restricted cash		90,000					90,000
Property and equipment, net		21,873,277					21,873,277
Other assets		2,054,938					2,054,938
Intangible assets, net		18,423,439					18,423,439
Goodwill		9,516,568					9,516,568
Total assets	$	92,627,643		$	373,406	$	93,001,049

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	7,373,097				$	7,373,097
Current portion of loans and obligations under capitalized leases		4,368,930					4,368,930
Unearned revenues		2,806,804			77,821		2,884,625
Common stock to be issued		88,324					88,324
Total current liabilities		14,637,155			77,821		14,714,976
Long term loans and obligations under capitalized leases; less current maturities		501,554					501,554
Total liabilities		15,138,709			77,821		15,216,530
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-		-
Common stock, $.01 par value; 14,500,000 shares authorized; 10,993,054 shares issued and 10,958,275 outstanding as of December 31, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016		109,931					109,931
Additional paid-in-capital		123,019,215					123,019,215
Treasury stock (34,779 shares and 27,279 shares)		(454,310	)				(454,310	)
Accumulated deficit		(40,074,755	)		196,890		(39,877,865	)
Stock subscription receivable		(450,220	)				(450,220	)
Other comprehensive loss		(18,628,395	)				(18,628,395	)
Total NetSol stockholders’ equity		63,521,466			196,890		63,718,356
Non-controlling interest		13,967,468			98,695		14,066,163
Total stockholders’ equity		77,488,934			295,585		77,784,519
Total liabilities and stockholders’ equity	$	92,627,643		$	373,406	$	93,001,049

For the Three Months									For the Six Months
	Ended December 31, 2016									Ended December 31, 2016

	As Originally			Amount of			As			As Originally			Amount of			As
	Presented			Restatement			Restated			Presented			Restatement			Restated
Net Revenues:
License fees	$	5,350,086		$	(1,580,529	)	$	3,769,557		$	8,849,946		$	373,406		$	9,223,352
Maintenance fees		3,787,696			(198,797	)		3,588,899			7,190,517			(77,821	)		7,112,696
Services		6,984,084						6,984,084			12,790,801						12,790,801
License fees - related party		-						-			246,957						246,957
Maintenance fees - related party		51,345						51,345			181,976						181,976
Services - related party		1,464,901						1,464,901			3,379,473						3,379,473
Total net revenues		17,638,112			(1,779,326	)		15,858,786			32,639,670			295,585			32,935,255

Cost of revenues:
Salaries and consultants		5,979,804						5,979,804			11,873,153						11,873,153
Travel		836,240						836,240			1,548,135						1,548,135
Depreciation and amortization		1,318,764						1,318,764			2,649,636						2,649,636
Other		1,065,727						1,065,727			2,038,065						2,038,065
Total cost of revenues		9,200,535			-			9,200,535			18,108,989			-			18,108,989

Gross profit		8,437,577			(1,779,326	)		6,658,251			14,530,681			295,585			14,826,266

Operating expenses:
Selling and marketing		2,713,478						2,713,478			5,057,516						5,057,516
Depreciation and amortization		271,485						271,485			540,582						540,582
General and administrative		3,933,413						3,933,413			8,552,609						8,552,609
Research and development cost		91,607						91,607			184,539						184,539
Total operating expenses		7,009,983			-			7,009,983			14,335,246			-			14,335,246

Income (loss) from operations		1,427,594			(1,779,326	)		(351,732	)		195,435			295,585			491,020

Other income and (expenses)
Loss on sale of assets		(32,339	)					(32,339	)		(34,742	)					(34,742	)
Interest expense		(62,127	)					(62,127	)		(116,602	)					(116,602	)
Interest income		23,416						23,416			53,856						53,856
Loss on foreign currency exchange transactions		(621,887	)					(621,887	)		(1,036,783	)					(1,036,783	)
Other income		6,823						6,823			28,383						28,383
Total other income (expenses)		(686,114	)		-			(686,114	)		(1,105,888	)		-			(1,105,888	)

Net income (loss) before income taxes		741,480			(1,779,326	)		(1,037,846	)		(910,453	)		295,585			(614,868	)
Income tax provision		(338,884	)					(338,884	)		(378,759	)					(378,759	)
Net income (loss) from continuing operations		402,596			(1,779,326	)		(1,376,730	)		(1,289,212	)		295,585			(993,627	)
Non-controlling interest		(1,388,272	)		596,608			(791,664	)		(1,462,183	)		(98,695	)		(1,560,878	)
Net income (loss) attributable to NetSol	$	(985,676	)	$	(1,182,718	)	$	(2,168,394	)	$	(2,751,395	)	$	196,890		$	(2,554,505	)

Net income (loss) per share:

Net income (loss) per common share
Basic	$	(0.09	)	$	(0.11	)	$	(0.20	)	$	(0.26	)	$	0.03		$	(0.24	)
Diluted	$	(0.09	)	$	(0.11	)	$	(0.20	)	$	(0.26	)	$	0.03		$	(0.24	)

Weighted average number of shares outstanding
Basic		10,877,446			10,877,446			10,877,446			10,783,685			10,783,685			10,783,685
Diluted		10,877,446			10,877,446			10,877,446			10,783,685			10,783,685			10,783,685

	For the Three Months
		Ended December 31, 2016

		As Originally			Amount of
		Presented			Restatement			As Restated
Net income (loss)		$	(985,676	)	$	(1,182,718	)	$	(2,168,394	)
Other comprehensive income (loss):
Translation adjustment			(944,837	)		-			(944,837	)
Comprehensive income (loss)			(1,930,513	)		(1,182,718	)		(3,113,231	)
Comprehensive income (loss) attributable to non-controlling interest			(276,575	)		-			(276,575	)
Comprehensive income (loss) attributable to NetSol		$	(1,653,938	)	$	(1,182,718	)	$	(2,836,656	)

	For the Six Months
	Ended December 31, 2016

	As Originally			Amount of
	Presented			Restatement		As Restated
Net income (loss)	$	(2,751,395	)	$	262,469	$	(2,488,926	)
Other comprehensive income (loss):
Translation adjustment		149,237			-		149,237
Comprehensive income (loss)		(2,602,158	)		262,469		(2,339,689	)
Comprehensive income (loss) attributable to non-controlling interest		47,138			-		47,138
Comprehensive income (loss) attributable to NetSol	$	(2,649,296	)	$	262,469	$	(2,386,827	)

For the Six Months
	Ended December 31, 2016

	As Originally			Amount of
	Presented			Restatement			As Restated
Cash flows from operating activities:
Net income (loss)	$	(1,289,212	)	$	295,585		$	(993,627	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		3,190,218						3,190,218
Provision for bad debts		1,026						1,026
Loss on sale of assets		34,742						34,742
Stock issued for services		1,525,775						1,525,775
Fair market value of warrants and stock options granted		21,804						21,804
Changes in operating assets and liabilities:
Accounts receivable		3,678,110						3,678,110
Accounts receivable - related party		829,285						829,285
Revenues in excess of billing		(7,219,089	)		(373,406	)		(7,592,495	)
Revenues in excess of billing - related party		285,791						285,791
Other current assets		585,147						585,147
Accounts payable and accrued expenses		334,241						334,241
Unearned revenue		(1,908,440	)		77,821			(1,830,619	)
Net cash used in operating activities		69,398			-			69,398

Cash flows from investing activities:
Purchases of property and equipment		(1,074,316	)					(1,074,316	)
Sales of property and equipment		181,087						181,087
Purchase of treasury stock		(38,885	)					(38,885	)
Investment		(705,555	)					(705,555	)
Net cash used in investing activities		(1,637,669	)		-			(1,637,669	)

Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants		429,452						429,452
Proceeds from exercise of subsidiary options		18,089						18,089
Dividend paid by subsidiary to Non controlling interest		(968,657	)					(968,657	)
Payments on capital lease obligations and loans - net		(69,998	)					(69,998	)
Net cash provided by financing activities		(591,114	)		-			(591,114	)
Effect of exchange rate changes		107,241						107,241
Net decrease in cash and cash equivalents		(2,052,144	)		-			(2,052,144	)
Cash and cash equivalents, beginning of the period		11,557,527						11,557,527
Cash and cash equivalents, end of period	$	9,505,383		$	-		$	9,505,383