SOURCE: NetSol Technologies, Inc.

NetSol Technologies, Inc.

February 13, 2009 09:35 ET

NetSol Technologies Reports Second Quarter Fiscal Year 2009 Financial Results

EMERYVILLE, CA--(Marketwire - February 13, 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 second quarter financial results for fiscal year 2009, for the period ended December 31, 2008.


First Half Fiscal 2009 Results

--  Revenues totaled $14.6 million, down 15% six months year-to-date

      --  Service fees totaled $8.3 million year-to-date

      --  License fees totaled $3.2 million year-to-date

      --  Maintenance fees totaled $3.1 million year-to-date

--  Year-to-date GAAP net loss of $2.2 million, or a loss of $0.08 per
    fully diluted share, compared to GAAP net income of $1.3 million,
    or $0.05 per fully diluted share, in the year ago period

--  Year-to-date EBITDA of $0.4 million, or $0.02 per diluted share,
    versus EBITDA of $3.3 million, or $0.14 per diluted share, in the
    year ago period.

Najeeb Ghauri, NetSol Technologies chairman and chief executive officer, commented, "Our fiscal second quarter 2009 was highlighted by a strategic evolution and expansion of our global business service offerings around our core areas of excellence in order to better position NetSol to navigate the historic deceleration in the global economic environment. The decline in year-over-year financial results was primarily a result of the lengthening, or delay, of purchasing decisions for high value software licenses and business services, related to the global economic slowdown. In response to the dramatic pullback within the global economy, we have taken steps to implement a range of streamlining and cost efficiency measures aimed at better aligning our resources to current business conditions.

"Strategically, our expansion into the vibrant and global SAP practice area through the acquisition of Ciena Solutions marked another major milestone in our long-term strategy and provides an entrée into one of the largest markets for information technology solutions and services within the industry. Our new U.S. based SAP Services Practice reflects the latest step forward in our expansion plans in the North American market. To adapt our execution to shifting end market conditions, we are also focusing on leveraging joint venture activities with international partners seeking to leverage our high quality, low cost offshore development capabilities as well as our CMMI Maturity Level 5 center of excellence. These potential joint venture opportunities would offer NetSol high quality recurring revenue streams, increased visibility, and long-term customer relationships. Furthermore, we are expanding our efforts in what we see as more recession resistant market segments where NetSol has areas of expertise such as global BestShoring IT solutions, business process outsourcing and hospital software management systems.

"Subsequent to the end of the quarter, the Company signed a letter of intent to acquire a majority stake in ID Interactive, a private U.K. based company, in a proposed transaction aimed at extending NetSol's software development capabilities into leading edge mobile technology and multimedia content delivery. Overall, as we navigate these historic market conditions, we believe that the long-term need for our IT software and services remains intact and the strategic adaptations we are making today will help better position NetSol to outperform once market conditions improve," concluded Mr. Ghauri.

NetSol reported consolidated revenues of $5.3 million for the second quarter of fiscal year 2009, representing a 37% decrease as compared to the $8.4 million in revenues reported for the same period a year ago. Consolidated gross profit for the second quarter was approximately $1.4 million, or 27% of total revenues.

U.S. GAAP (Generally Accepted Accounting Principles) net loss for the second quarter of fiscal year 2009 was approximately $3.3 million, or a loss of $0.12 per diluted share, which compares to GAAP net income of $0.4 million or $0.02 per diluted share, in the same period of fiscal year 2008. NetSol reported an EBITDA loss of $1.9 million, or a loss of $0.07 per diluted share, for the second quarter of fiscal year 2009 compared to EBITDA of $1.4 million, or $0.05 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

--  Invested in North American infrastructure, branding and market
    development building on the relocation of NetSol's global headquarters
    to the San Francisco Bay area, supporting future growth in the world's
    largest market for software and IT services.

--  NetSol acquires Ciena Solutions LLC bringing SAP Consulting Services
    into the NetSol Solutions portfolio.

--  SAP Solutions Practice joins the SAP® PartnerEdge™ program as an
    SAP services partner.

--  Nissan Financial Services Australia Pty. Ltd. went live with NetSol
    Technologies' suite of financial products including licensing,
    customization and implementation of the NetSol Financial Suite (NFS)
    Credit Application Processing System (CAP), Contract Management System
    (CMS) for retail business operations and Wholesale Finance System (WFS)
    for wholesale finance management.

--  NetSol was awarded a major consulting services contract with a leading
    commercial bank located in the United Arab Emirates to provide
    consultancy services in the areas of information security and quality
    engineering.

--  NetSol signs Business Process Outsourcing agreement with the AJK Group
    to provide accounting services to the companies, trusts and foundations
    under the administration of AJK.

--  Signed healthcare and public sectors projects in Pakistan.

--  NetSol Financial Suite (NFS) of products expanded its platform to
    support the Alternative and Renewable Energy sector.

--  Dan Lee named to the role of NetSol Chief Financial Officer, to further
    strengthen corporate team.

--  NetSol University North America (NUNA), located at NetSol's new global
    headquarters, in Emeryville, California opens. The current course
    curriculum for 2009 includes introductory and advanced instruction in
    all components of the NetSol Financial Suite, including LeasePak,
    Contract Management System (CMS), Wholesale Finance System (WFS) and
    Credit Application & Processing (CAP).

--  Annual NetSol Solutions Conference attended by more than 30 clients
    from around the world as the Company hosts a unique, interactive,
    customer forum focused on NetSol's Financial Suite product offerings,
    BestShoring solutions, global business services, and client delivery
    initiatives.

Conference Call & Webcast Information

Following the distribution of the fiscal second 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 # 311773. 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 Emeryville, California, NetSol Technologies has operations and offices in Adelaide, Dubai, 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.

Forward-Looking Statements

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 Six Months
                               Ended                       Ended
                            December 31,                December 31,
                                      2007                       2007
                        2008       (Restated)       2008       (Restated)
                    ------------  ------------  ------------  ------------
Net Revenues:
 License fees       $    647,979  $  2,866,807  $  3,177,787  $  4,770,359
 Maintenance fees      1,513,293     1,490,376     3,107,027     3,073,796
 Services              3,109,737     4,049,287     8,287,162     9,215,552
                    ------------  ------------  ------------  ------------
   Total revenues      5,271,009     8,406,470    14,571,976    17,059,707
Cost of revenues
  Salaries and
   consultants         2,382,877     2,400,991     5,023,590     4,722,021
  Travel                 226,964       311,329       712,900       578,157
  Repairs and
   maintenance           102,235       119,032       208,900       233,186
  Insurance               59,073        85,110        91,912       123,755
  Depreciation and
   amortization          532,429       271,729     1,083,754       530,636
  Other                  540,146       431,609     1,291,214       819,500
                    ------------  ------------  ------------  ------------
   Total cost of
    sales              3,843,724     3,619,800     8,412,270     7,007,255
                    ------------  ------------  ------------  ------------
Gross profit           1,427,285     4,786,670     6,159,706    10,052,452
Operating expenses:
 Selling and
  marketing              880,846     1,086,729     1,850,364     1,919,222
 Depreciation and
  amortization           494,834       479,904       975,042       944,551
 Bad debt expense        648,470           838       648,470         3,277
 Salaries and wages      944,520       815,771     1,923,774     1,723,650
 Professional
  services,
  including
  non-cash
  compensation           312,940       129,539       619,826       299,001
 General and
  adminstrative          962,711       826,033     1,830,828     1,495,194
                    ------------  ------------  ------------  ------------
   Total operating
    expenses           4,244,321     3,338,814     7,848,304     6,384,895
                    ------------  ------------  ------------  ------------
Income from
 operations           (2,817,036)    1,447,856    (1,688,598)    3,667,557
Other income and
 (expenses):
 Gain (loss) on
  sale of assets         (14,960)           70      (180,698)      (32,153)
 Interest expense       (296,578)     (189,142)     (500,470)     (422,946)
 Interest income          40,895        41,575        68,836        75,438
 Transaction gain
  (loss) on foreign
  currency              (195,030)      145,325     1,812,852       201,311
 Other income and
  (expenses)             132,986         3,952        32,140        59,913
                    ------------  ------------  ------------  ------------
   Total other
    income
    (expenses)          (332,687)        1,780     1,232,660      (118,437)
                    ------------  ------------  ------------  ------------
Net income (loss)
 before minority
 interest in
 subsidiary           (3,149,723)    1,449,636      (455,938)    3,549,120
Minority interest
 in subsidiary -
 restated                (32,062)     (977,248)   (1,661,823)   (2,129,356)
Income taxes             (50,855)        1,483       (58,037)      (30,958)
                    ------------  ------------  ------------  ------------
Net income (loss)     (3,232,640)      473,871    (2,175,798)    1,388,806
Dividend required
 for preferred
 stockholders            (33,876)      (40,368)      (67,752)     (111,525)
                    ------------  ------------  ------------  ------------
Net income (loss)
 applicable to
 common
 shareholders         (3,266,516)      433,503    (2,243,550)    1,277,281
Other comprehensive
 income (loss):
 Translation
  adjustment -
  restated              (962,258)     (538,248)   (3,857,568)     (431,333)
                    ------------  ------------  ------------  ------------
Comprehensive
 income (loss)      $ (4,228,774) $   (104,745) $ (6,101,118) $    845,948
                    ============  ============  ============  ============
Net income (loss)
 per share:
 Basic              $      (0.12) $       0.02  $      (0.08) $       0.06
                    ============  ============  ============  ============
 Diluted            $      (0.12) $       0.02  $      (0.08) $       0.05
                    ============  ============  ============  ============
Weighted average
 number of shares
 outstanding
 Basic                26,525,259    24,443,901    26,416,217    22,934,568
                    ============  ============  ============  ============
 Diluted              27,417,262    27,712,335    27,308,220    26,203,002
                    ============  ============  ============  ============




               NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS


                                                December 31,    June 30,
                                                    2008          2008
                                                (Unaudited)    (Restated)
                                                ------------  ------------
                         ASSETS
Current assets:
  Cash and cash equivalents                     $  5,416,302  $  6,275,238
  Certificates of deposit                            100,859             -
  Restricted cash                                  5,000,000             -
  Accounts receivable, net of allowance
   for doubtful accounts                          12,360,726    10,988,888
  Revenues in excess of billings                   8,381,596    11,053,042
  Other current assets                             2,252,715     2,406,407
                                                ------------  ------------
    Total current assets                          33,512,198    30,723,575
Property and equipment, net of accumulated
 depreciation                                      9,768,890    10,220,545
Other assets, non current                            516,406       822,672
Intangibles:
  Product licenses, renewals, enhancements,
   copyrights, trademarks, and tradenames, net    10,888,876    10,837,856
  Customer lists, net                              1,726,637     1,732,761
  Goodwill                                         9,439,285     9,439,285
                                                ------------  ------------
    Total intangibles                             22,054,798    22,009,902
                                                ------------  ------------
    Total assets                                $ 65,852,292  $ 63,776,694
                                                ============  ============
       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses         $  3,465,444  $  4,116,659
  Current portion of loans and obligations
   under capitalized leases                        6,090,445     2,280,110
  Other payables - acquisitions                      103,226       846,215
  Unearned revenues                                3,601,261     3,293,728
  Due to officers                                          -       184,173
  Dividend to preferred stockholders payable          55,065        33,508
  Loans payable, bank                              2,521,480     2,932,551
                                                ------------  ------------
    Total current liabilities                     15,836,921    13,686,944
Obligations under capitalized leases, less
 current maturities                                1,115,474       332,307
Convertible notes payable                          5,849,306             -
Long term loans; less current maturities             530,421       411,608
                                                ------------  ------------
    Total liabilities                             23,332,122    14,430,859
Minority interest                                  6,549,427     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;
    26,513,987 issued and 26,285,491
     outstanding as of December 31, 2008
    25,545,482 issued and 25,525,886
     outstanding as of June 30, 2008                  26,514        25,545
  Additional paid-in-capital                      76,898,220    74,950,286
  Treasury stock (228,496 and 19,596 shares)        (396,008)      (35,681)
  Accumulated deficit                            (35,315,253)  (33,071,702)
  Stock subscription receivable                     (658,904)     (600,907)
  Common stock to be issued                          101,665     1,048,249
  Other comprehensive loss                        (6,605,491)   (2,747,924)
                                                ------------  ------------
    Total stockholders' equity                    35,970,743    41,487,866
                                                ------------  ------------
    Total liabilities and stockholders' equity  $ 65,852,292  $ 63,776,694
                                                ============  ============




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


                                                    For the Six Months
                                                    Ended December 31,
                                                    2008          2007
                                                               (Restated)
                                                ------------  ------------
Cash flows from operating activities:
  Net income (loss)                             $ (2,175,798) $  1,388,806
  Adjustments to reconcile net income to
   net cash provided by operating activities:
  Depreciation and amortization                    2,058,796     1,475,187
  Provision for uncollectible accounts               648,470         3,277
  Loss on sale of assets                             180,698        32,153
  Minority interest in subsidiary                  1,661,823     2,129,356
  Stock issued for services                          159,867        15,000
  Fair market value of warrants and stock
   options granted                                    89,700        24,320
  Changes in operating assets and liabilities:
    Increase in accounts receivable               (3,563,977)      715,359
    Increase in other current assets               1,344,525    (1,749,271)
    Decrease in accounts payable and accrued
     expenses                                        106,229    (1,450,545)
                                                ------------  ------------
  Net cash provided by operating activities          510,333     2,583,642
Cash flows from investing activities:
  Purchases of property and equipment             (1,551,217)   (1,556,424)
  Sales of property and equipment                     40,900        16,076
  Payments of acquisition payable                   (742,989)     (879,007)
  Purchase of treasury stock                        (360,328)            -
  Short-term investments held for sale              (105,040)            -
  Increase in intangible assets                   (3,023,777)   (1,479,492)
                                                ------------  ------------
  Net cash used in investing activities           (5,742,451)   (3,898,847)
Cash flows from financing activities:
  Proceeds from sale of common stock                 150,000     1,500,000
  Proceeds from the exercise of stock options
   and warrants                                      520,569     2,707,167
  Purchase of subsidiary shares                     (250,000)            -
  Proceeds from convertible notes payable          5,849,306             -
  Proceeds from bank loans                         3,618,590     2,702,454
  Payments on bank loans                            (138,975)     (323,488)
  Bank overdraft                                     130,436             -
  Payments on capital lease obligations
   & loans - net                                    (259,048)     (760,919)
  Increase in restricted cash                     (5,000,000)            -
                                                ------------  ------------
  Net cash provided by financing activities        4,620,878     5,825,214
Effect of exchange rate changes in cash             (247,696)       22,936
                                                ------------  ------------
Net increase (decrease) in cash and cash
 equivalents                                        (858,936)    4,532,945
Cash and cash equivalents, beginning of period     6,275,238     4,010,164
                                                ------------  ------------
Cash and cash equivalents, end of period        $  5,416,302  $  8,543,109
                                                ============  ============




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


                                        Three Months         Six Months
                                            Ended              Ended
                                      December 31, 2008  December 31, 2008
                                      -----------------  -----------------

Net income, before preferred
 dividend, per GAAP                   $      (3,232,640) $      (2,175,798)
  Income taxes                                   50,855             58,037
  Depreciation and amortization               1,027,263          2,058,796
  Interest expense                              296,578            500,470
                                      -----------------  -----------------
    EBITDA income                     $      (1,857,944) $         441,505
                                      =================  =================

Weighted average number of shares
 outstanding
  Basic                                      26,525,259         26,416,217
  Diluted                                    26,525,259         27,308,220

                                      -----------------  -----------------
Basic EBITDA EPS                      $           (0.07) $            0.02
                                      =================  =================
Diluted EBITDA EPS                    $           (0.07) $            0.02
                                      =================  =================

Contact Information

  • Contacts:

    NetSol Technologies, Inc.
    Dan Lee
    Chief Financial Officer
    Phone: +1 510-250-8899

    Investor Relations
    Christopher Chu
    Grayling
    Phone: +1 646-284-9426