SOURCE: NetSol Technologies, Inc.

NetSol Technologies, Inc.

November 12, 2009 09:36 ET

NetSol Technologies Reports First Quarter Fiscal Year 2010 Financial Results

First Quarter Revenue of $7.6 Million Reflects 11% Sequential Revenue Growth; First Quarter License Revenue Nearly Doubles Sequentially to $2.6 Million; GAAP EPS Nears Breakeven at Less Than $0.01 per Diluted Share

CALABASAS, CA--(Marketwire - November 12, 2009) - 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 first quarter financial results for fiscal year 2010, for the period ended September 30, 2009.

First Quarter Fiscal Year 2010 Results

-- Revenues totaled $7.6 million

    -- Service fees totaled $3.3 million
    -- License fees totaled $2.6 million
    -- Maintenance fees totaled $1.8 million

-- GAAP net loss applicable to common shareholders of $264,000, or a loss
   of less than $0.01 per diluted share, compared to GAAP net income
   applicable to common shareholders of $1.0 million, or $0.04 per diluted
   share, in the year ago period.  Compared to the prior quarter ended
   June 30, 2009, fiscal first quarter 2010 quarterly GAAP net loss was
   reduced by 71%.

-- EBITDA of $1.2 million, or $0.04 per diluted share, versus EBITDA of
   $2.3 million, or $0.08 per diluted share, in the year ago period.
   Compared to the prior quarter ended June 30, 2009, fiscal first
   quarter 2010 quarterly EBITDA increased 117%.

Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "NetSol began its fiscal year 2010 with continued positive momentum as the company delivered another quarter of double digit top line revenue growth compared to the prior quarter ended June 30, 2009, including a 99% sequential increase in license fees driven by the strength of our core NetSol Financial Suite (NFS). Higher sales, compared to the prior quarter, combined with significant improvements in our fiscal first quarter 2010 gross margin and operating margin, contributed to another significant reduction in GAAP net loss as we approach our targeted breakeven quarterly revenue run rate of $8 million. Fiscal first quarter EBITDA profitability also improved materially, more than doubling compared to the prior quarter ended June 30, 2009. Overall, our revenue and profitability gains reflect our improved execution and the greater leverage we are achieving from our streamlined global operating model.

"We are very optimistic of NetSol's short-term and long-term outlook as we see strong growth in Asia Pacific as well as the South East Asian emerging markets, while we envision unlimited scope for our niche solutions and services in the Americas from 2010 onwards. Based on the intrinsic value of NetSol's years of capital investment in its offerings, product maturity and the surge in demand amongst fortune 500 clients worldwide, we believe the company is extremely well positioned globally to become a significant IT company within our space. We are noticing very positive trends of clients interested in acquiring our solutions and services as our turnaround began in the fiscal fourth quarter of 2009. With our new business pipeline for fiscal 2010 continuing to expand, with particular strength in our China, Asia Pacific and Kingdom of Saudi Arabia operations, we are creating new global opportunities as customers in those regions look for asset finance and lending software solutions to meet the various needs of their other international and local operations," concluded Mr. Ghauri.

NetSol reported consolidated revenues of $7.6 million for the first quarter of fiscal year 2010, representing an 11% increase compared to the prior quarter ended June 30, 2009 and an 18% decline as compared to the same period a year ago.

U.S. GAAP (Generally Accepted Accounting Principles) net loss applicable to common shareholders for the first quarter of fiscal year 2010 was approximately $264,000, or a loss of less than $0.01 per diluted share, which compares to GAAP net income applicable to common shareholders of $1.0 million, or $0.04 per diluted share, in the same period a year ago. Compared to the prior quarter ended June 30, 2009, fiscal first quarter 2010 quarterly GAAP net loss was reduced by 71%.

NetSol reported EBITDA of $1.2 million, or $0.04 per diluted share, for the first quarter of fiscal year 2010 compared to EBITDA of $2.3 million, or $0.08 per diluted share, in the year ago period. Compared to the prior quarter ended June 30, 2009, fiscal first quarter 2010 quarterly EBITDA increased 117%.

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."

First Quarter Business Highlights

--  NetSol was awarded another NFS license and services contract including
    NetSol's Credit Application Processing (CAP), Contract Management System
    (CMS) as well as comprehensive IT support services in China
    
--  Based on the strong growth of the Chinese captive finance and
    automotive industries, NetSol announced the expansion of its Beijing
    operations with the addition of enterprise systems engineers, sales and
    support staff locally
    
--  NR Finance Mexico, S.A., an affiliate of Nissan Motor Company, awarded
    NetSol a new contract to implement key NFS solution components
    
--  Major United Kingdom based short-term loan company awarded NetSol a
    new NFS solutions contract
    
--  Netherlands based finance company awarded NetSol a European contract
    to implement the a wholesale finance system, marking a new NFS penetration
    in the European channel finance sector
    
--  The proposal for the Land Record Management Information Systems
    (LRMIS) project has been revived by the province of Punjab in Pakistan
    
--  Positive momentum in services and development revenue with North
    America based clients enhanced North America's contribution to 23% of group
    revenue with positive net income
    
--  Cost rationalization continued across the group with additional
    streamlining of NetSol North American office space aimed at improving
    operating efficiencies
    

Conference Call & Webcast Information

Following the distribution of the fiscal first quarter 2010 financial results, NetSol will host a conference call today 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 # 336672. 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® 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 Calabasas, California, NetSol Technologies has operations and offices in Adelaide, Bangkok, Beijing, Lahore, London, and San Pedro Sula.

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 Three Months
                                  Ended                     Ended
                              September 30,        September 30,  June 30
                            2009         2008         2009         2009
                        -----------  -----------  -----------  -----------
Net Revenues:
   License fees         $ 2,551,593  $ 2,529,808  $ 2,551,593  $ 1,283,700
   Maintenance fees       1,807,716    1,593,734    1,807,716    1,892,947
   Services               3,262,764    5,177,425    3,262,764    3,676,533
                        -----------  -----------  -----------  -----------
     Total revenues       7,622,073    9,300,967    7,622,073    6,853,180
Cost of revenues:
   Salaries and
    consultants           2,013,753    2,640,713    2,013,753    2,135,294
   Travel                    60,200      485,936       60,200      341,589
   Repairs and
    maintenance              67,611      106,665       67,611       80,051
   Insurance                 36,679       32,839       36,679       39,371
   Depreciation and
    amortization            498,504      551,325      498,504      598,358
   Other                    882,338      751,068      882,338    1,107,766
                        -----------  -----------  -----------  -----------
     Total cost of
      revenues            3,559,085    4,568,546    3,559,085    4,302,429
                        -----------  -----------  -----------  -----------
Gross profit              4,062,988    4,732,421    4,062,988    2,550,751
Operating expenses:
   Selling and
    marketing               493,629      969,518      493,629      636,374
   Depreciation and
    amortization            512,362      480,208      512,362      497,716
   Bad debt expense               -            -            -      (26,973)
   Salaries and wages       714,899      979,254      714,899      745,859
   Professional
    services, including
    non-cash
    compensation             96,106      306,886       96,106      338,187
   General and
    administrative        1,099,806      868,117    1,099,806      896,667
                        -----------  -----------  -----------  -----------
     Total operating
      expenses            2,916,802    3,603,983    2,916,802    3,087,830
                        -----------  -----------  -----------  -----------
Income  from operations   1,146,186    1,128,438    1,146,186     (537,079)
Other income and
 (expenses)
   Gain/(Loss) on sale
    of assets                    18     (165,738)          18      (96,564)
   Interest expense        (468,615)    (203,892)    (468,615)    (327,547)
   Interest income           47,352       27,941       47,352       44,423
   Gain on sale of
    subsidiary shares             -            -            -      351,522
   Gain on foreign
    currency exchange
    rates                   383,825    2,007,882      383,825      549,733
   Fair market value of
    options issued                -     (117,300)           -            -
   Other income (loss)     (258,691)      16,454     (258,691)      (1,823)
                        -----------  -----------  -----------  -----------
     Total other income
      (expenses)           (296,111)   1,565,347     (296,111)     519,744
                        -----------  -----------  -----------  -----------
Net income (loss)
 before minority
 interest in subsidiary     850,075    2,693,785      850,075      (17,335)
Non-controlling
 interest in subsidiary  (1,108,975)  (1,629,761)  (1,108,975)    (843,904)
Income taxes                 (5,017)      (7,182)      (5,017)     (11,501)
                        -----------  -----------  -----------  -----------
Net income (loss)          (263,917)   1,056,842     (263,917)    (872,740)
Dividend required for
 preferred stockholders           -      (33,876)           -      (33,508)
                        -----------  -----------  -----------  -----------
Net income (loss)
 applicable to common
 shareholders              (263,917)   1,022,966     (263,917)    (906,248)
Other comprehensive
 income (loss):
   Translation
    adjustment             (315,864)  (2,895,310)    (315,864)    (114,548)
                        -----------  -----------  -----------  -----------
Comprehensive income
 (loss)                 $  (579,781) $(1,872,344) $  (579,781) $(1,020,796)
                        ===========  ===========  ===========  ===========

Net income (loss) per
 share:
   Basic                $     (0.01) $      0.04  $     (0.01) $     (0.03)
                        ===========  ===========  ===========  ===========
   Diluted              $     (0.01) $      0.04  $     (0.01) $     (0.03)
                        ===========  ===========  ===========  ===========
Weighted average number
 of shares outstanding
   Basic                 31,636,379   26,307,175   31,636,379   28,706,163
   Diluted               31,636,379   28,029,442   31,636,379   28,706,163




                  NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (Unaudited)


                                              As of Sept 30, As of June 30,
                                                    2009          2009
                            ASSETS
Current assets:
  Cash and cash equivalents                     $  3,956,279  $  4,403,762
  Restricted Cash                                  5,000,000     5,000,000
  Accounts receivable, net of allowance for
   doubtful accounts                              12,724,576    11,394,844
  Revenues in excess of billings                   6,362,818     5,686,277
  Other current assets                             2,042,661     2,307,246
                                                ------------  ------------
    Total current assets                          30,086,334    28,792,129
Property and equipment, net of accumulated
 depreciation                                      8,705,379     9,186,163
Other assets, long-term                                    -       204,823
Intangibles:
  Product licenses, renewals, enhancements,
   copyrights, trademarks, and tradenames, net    14,633,099    13,802,607
  Customer lists, net                              1,152,710     1,344,019
  Goodwill                                         9,439,285     9,439,285
                                                ------------  ------------
    Total intangibles                             25,225,094    24,585,911
                                                ------------  ------------
    Total assets                                $ 64,016,807  $ 62,769,026
                                                ============  ============

              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses         $  5,177,398  $  5,106,266
  Current portion of loans and obligations under
   capitalized leases                              6,771,389     6,207,830
  Other payables - acquisitions                      103,226       103,226
  Unearned revenues                                3,131,669     3,473,228
  Dividend to preferred stockholders payable           2,445        44,409
  Loans payable, bank                              2,398,369     2,458,757
                                                ------------  ------------
    Total current liabilities                     17,584,496    17,393,716
Obligations under capitalized leases, less
 current maturities                                  973,828     1,090,901
Convertible notes payable                          5,763,418     5,809,508
Long term loans; less current maturities           1,049,287     1,113,832
                                                ------------  ------------
    Total liabilities                             25,371,029    25,407,957
Commitments and contingencies                              -             -
Stockholders' equity:
  Preferred stock,  5,000,000 shares authorized;
   Nil; 1,920 issued and outstanding                       -     1,920,000
  Common stock, $.001 par value; 95,000,000
   shares authorized; 33,461,307; 30,046,987
   issued and outstanding                             33,461        30,047
  Additional paid-in-capital                      83,037,807    78,198,523
  Treasury stock                                    (396,008)     (396,008)
  Accumulated deficit                            (41,492,581)  (41,253,152)
  Stock subscription receivable                   (2,549,813)     (842,619)
  Common stock to be issued                           98,075       220,365
  Other comprehensive loss                        (7,215,261)   (6,899,397)
  Non-controlling interest                         7,130,098     6,383,310
                                                ------------  ------------
    Total stockholders' equity                    38,645,778    37,361,069
                                                ------------  ------------
    Total liabilities and stockholders' equity  $ 64,016,807  $ 62,769,026
                                                ============  ============



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



                                                  For the Three Months
                                                      Ended Sept 30,
                                                    2009          2008
                                                ------------  ------------
Cash flows from operating activities:
    Net income (loss)                           $   (263,917) $  1,056,842
    Adjustments to reconcile net income (loss)
     to net cash provided by (used in)
     operating activities:
    Depreciation and amortization                  1,010,867     1,031,533
    Loss on transaction of debt                       16,429             -
    Loss on sale of assets                                 -       165,738
    Minority interest in subsidiary                1,108,975     1,629,761
    Stock issued for services                        226,720        33,163
    Fair market value of warrants and stock
     options granted                                 283,500       207,000
    Beneficial conversion feature                    297,999             -
    Changes in operating assets and
     liabilities:
      Increase in accounts receivable               (693,290)   (3,942,317)
      Increase in other current assets              (345,240)   (1,960,129)
      Decrease in accounts payable and accrued
       expenses                                     (949,731)     (259,967)
                                                ------------  ------------
    Net cash provided by/(used in) operating
     activities                                      692,312    (2,038,376)
Cash flows from investing activities:
    Purchases of property and equipment              (95,160)     (930,058)
    Sales of property and equipment                        -        40,900
    Payments of acquisition payable                        -      (742,989)
    Purchase of treasury stock                             -      (285,328)
    Short-term investments held for sale                   -      (113,738)
    Increase in intangible assets                 (1,612,840)     (689,544)
                                                ------------  ------------
    Net cash used in investing activities         (1,708,000)   (2,720,757)
Cash flows from financing activities:
    Proceeds from sale of common stock               158,906       150,000
    Proceeds from the exercise of stock options
     and warrants                                          -       520,569
    Purchase of subsidiary stock in Pakistan               -      (250,000)
    Redemption of preferred stock                 (1,920,000)            -
    Proceeds from convertible notes payable        2,000,000     6,000,000
    Dividend Paid                                    (41,740)            -
    Bank overdraft                                    86,922       257,502
    Proceeds from bank loans                       2,617,881     1,768,212
    Payments on bank loans                          (215,144)      (75,732)
    Payments on capital lease obligations &
     loans                                        (2,043,769)     (121,418)
                                                ------------  ------------
    Net cash provided by financing activities        643,057     8,249,133
Effect of exchange rate changes in cash              (74,852)       13,451
                                                ------------  ------------
Net increase in cash and cash equivalents           (447,483)    3,503,451
Cash and cash equivalents, beginning of year       4,403,762     6,275,239
                                                ------------  ------------
Cash and cash equivalents, end of year          $  3,956,279  $  9,778,690
                                                ============  ============


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


                        Three Months Three Months Three Months Three Months
                           Ended        Ended        Ended        Ended
                       September 30, September 30, September 30, June 30,
                            2009         2008         2009         2009
                        -----------  ------------ -----------  -----------

Net Income (loss)
 before preferred
 dividend, per GAAP     $  (263,917) $  1,056,842 $  (263,917) $  (872,740)
   Income Taxes               5,017         7,182       5,017       11,501
   Depreciation and
    amortization          1,010,866     1,031,533   1,010,866    1,096,074
   Interest expense         468,615       203,892     468,615      327,547

                        -----------  ------------ -----------  -----------
EBITDA                  $ 1,220,581  $  2,299,449 $ 1,220,581  $   562,382
                        ===========  ============ ===========  ===========

Weighted Average
 number of shares
 outstanding
Basic                    31,636,379    26,307,175  31,636,379   28,706,163
Diluted                  31,636,379    28,029,442  31,636,379   28,706,163
                        -----------  ------------ -----------  -----------

Basic EBITDA            $      0.04  $       0.09 $      0.04  $      0.02
                        ===========  ============ ===========  ===========
Diluted EBITDA          $      0.04  $       0.08 $      0.04  $      0.02
                        ===========  ============ ===========  ===========

Contact Information