EX-99.1 2 v035036_ex99-1.txt EXHIBIT 99.1 NetSol Technologies, Inc. News Release Contacts: NetSol Technologies: Marty Tullio or Mark D. Tullio Najeeb U. Ghauri, Chairman McCloud Communications, LLC Tina Gilger, CFO 949.553.9748 818.222.9195 marty@McCloudCommunications.com najeeb@netsoltek.com mark@McCloudCommunications.com tina@netsoltek.com ================================================================================ NETSOL TECHNOLOGIES CONTINUES REVENUE GROWTH AND PROFITABILITY FOR SECOND QUARTER OF FISCAL 2006 Revenues for Six Month Period Grow By 88 Percent as Company Marks Sixth Consecutive Quarter of Profitability Calabasas, CA - February 9, 2006 - NetSol Technologies, Inc. (NASDAQ:NTWK), a developer of proprietary software applications and provider of information technology (IT) services, today reported financial results for its second quarter of fiscal 2006, ended December 31, 2005. Second Quarter Highlights - Net revenue for the second quarter of fiscal 2006 was approximately $4.52 million, an increase of 66 percent, when compared to revenue of $2.72 million for the second quarter of fiscal 2005. - Net income before minority interest adjustments was $270,567, or net income per weighted average diluted share of approximately $0.02, compared to net income before minority interest adjustments of $179,456, or net income per weighted average diluted share of approximately $0.01, for the comparable quarter of fiscal 2005. - Net income after minority interest adjustments was $125,035, or net income per weighted average diluted share of $0.01, compared to net income after minority interest adjustments of $178,647, or net income per weighted average diluted share of $0.01 for the comparable second quarter of fiscal 2005. - The minority interest adjustments reflect the minority-owned portion of net income of three of NetSol's subsidiaries: NetSol Technologies, Ltd., NetSol Connect and NetSol TiG Joint Venture. - The October earthquake in Pakistan had a direct impact on our Pakistan subsidiary as a number of contracts were deferred. The company will benefit from rebuilding projects and expects to close new contracts during the third quarter in the public and private sector in Pakistan. - Gross profit for the second quarter of fiscal 2006 increased more than 35 percent to $2,547,339, with gross profit margin of 56.3 percent, compared to gross profit of $1,883,840, with gross profit margin of 69 percent, for the second quarter of fiscal 2005. According to NetSol CFO Tina Gilger, the decrease in gross profit margin was primarily attributable to the salaries and training of additional programmers hired for upcoming projects. - NetSol's second quarter EBITDA (earnings before interest, tax, deprecation and amortization), a fundamental way to value a company's performance, was $769,001, an approximately 27 percent increase, when compared to EBITDA of $605,013 for the same period ended December 31, 2004. - more - NETSOL TECHNOLOGIES CONTINUES REVENUE GROWTH AND PROFITABILITY FOR SECOND QUARTER OF FISCAL 2006 Page 2 "We are pleased to announce our sixth consecutive quarter of revenue growth and profitability during what is historically a slow quarter for the software and services industry," said NetSol CEO Naeem Ghauri. "To facilitate our aggressive growth plans, we have continued hiring the best and brightest engineering, sales and technology services talent. Although this has had a negative short-term impact on gross margin, we anticipate that the new hires will start to be productive and add to the top line in the current and future quarters." Six Month Highlights - Net revenue for the first six months of fiscal 2006 was approximately $9 million, an increase of 88 percent, when compared to revenue of $4.8 million for the first six months of fiscal 2005. - Net income before minority interest adjustments was $841,527, or net income per weighted average diluted share of approximately $0.06, a 177 percent increase, when compared to net income before minority interest adjustments was $304,121, or net income per weighted average diluted share of approximately $0.02, for the comparable six month period of fiscal 2005, . - Net income after minority interest adjustments was $328,782, or net income per weighted average diluted share of $0.02, compared to net income after minority interest adjustments of $318,380, or net income per weighted average diluted share of $0.02, for the comparable period of fiscal 2005. - Gross profit increased more than 68 percent to $5,349,974, with a gross profit margin of 60 percent, as compared to gross profit of $3,179,877, or a gross profit margin of 67 percent, for the comparable period of fiscal 2005. - EBITDA for the six month period ended December 31, 2005, was $1,678,864, an approximate 56 percent increase, when compared to EBITDA of $1,073,993 for the same period ended December 31, 2004. "The outstanding top-line growth and continued profitability trend not only highlights the increased brand awareness and global acceptance of NetSol as a top tier provider of IT solutions, but are also a reflection of our success in managing growth of our joint ventures and subsidiaries," said Najeeb U. Ghauri, Chairman of NetSol Technologies. "I would also like to personally take a moment to comment on the recent events in Pakistan. We are happy to report that in the aftermath of the devastating earthquake, the majority of citizens and businesses are now getting back to work, and the local economy should return to normal levels. Existing contracts, both in the private and public sectors that were previously put on hold are now back in the pipeline, and we anticipate they will contribute to a very strong second half of fiscal 2006." About NetSol Technologies, Inc. NetSol Technologies is an end-to-end solution provider for the lease and finance industry. Headquartered in Calabasas, CA, NetSol Technologies, Inc. operates on a global basis with locations in the U.S., Europe, East Asia and Asia Pacific. NetSol helps its clients identify, evaluate and implement technology solutions to meet their most critical business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol delivers high-quality, cost-effective IT services ranging from consulting and application development to systems integration and outsourcing. NetSol's commitment to quality is demonstrated by its achievement of both ISO 9001 and SEI (Software Engineering Institute) CMM (Capability Maturity Model) Level 4 assessment. For more information, visit NetSol Technologies' web site at www.netsoltek.com. - more - NETSOL TECHNOLOGIES CONTINUES REVENUE GROWTH AND PROFITABILITY FOR SECOND QUARTER OF FISCAL 2006 Page 3 Securities Exchange Act of 1934 This release is comprised of inter-related information that must be interpreted in the context of all the information provided; accordingly, care should be exercised not to consider portions of this release out of context. This release is provided in compliance with Commission Regulation FD and contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance, are not statements of historical fact and may be "forward-looking statements." Forward-looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through the use of words such as "expects", "will", "anticipates", "estimates", "believes", or statements indicating certain actions "may", "could", or "might" occur. Such statements reflect the current views of NetSol Technologies with respect to future events and are subject to certain assumptions, including those described in this release. Should one or more of the underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed or expected. NetSol Technologies does not intend to update these forward-looking statements prior to announcement of quarterly or annual results. (Tables Follow) NETSOL TECHNOLOGIES CONTINUES REVENUE GROWTH AND PROFITABILITY FOR SECOND QUARTER OF FISCAL 2006 Page 4 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Ended December 31, Ended December 31, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Net revenues $ 4,524,373 $ 2,723,227 $ 8,994,358 $ 4,781,532 Cost of revenues 1,977,034 839,387 3,644,384 1,601,655 ------------ ------------ ------------ ------------ Gross profit 2,547,339 1,883,840 5,349,974 3,179,877 Operating expenses: Selling and marketing 412,570 135,352 731,434 254,700 Depreciation and amortization 564,855 316,982 1,117,386 623,140 General and adminstrative 1,295,085 914,493 2,541,663 1,642,958 ------------ ------------ ------------ ------------ Total operating expenses 2,272,510 1,366,827 4,390,483 2,520,798 ------------ ------------ ------------ ------------ Income from operations 274,829 517,013 959,491 659,079 Other income and (expenses): Gain (loss) on sale of assets 4,219 -- 4,610 (620) Non-cash expenses (5,192) (386,079) (21,250) (451,603) Gain on forgiveness of debt 3,335 139,367 6,976 189,641 Interest expense (86,862) (108,425) (165,885) (130,000) Interest income 94,629 1,236 179,041 1,797 Other income and (expenses) (22,142) 17,303 (54,645) 38,300 Income taxes 7,751 (959) (66,811) (2,473) ------------ ------------ ------------ ------------ Income before minority interest in subsidiary 270,567 179,456 841,527 304,121 Minority interest in subsidiary (income)/loss (145,532) (809) (512,745) 14,259 ------------ ------------ ------------ ------------ Net income 125,035 178,647 328,782 318,380 Other comprehensive gain/(loss): Translation adjustment 437,660 (89,720) 316,840 (173,409) ------------ ------------ ------------ ------------ Comprehensive income $ 562,695 $ 88,927 $ 645,622 $ 144,971 ============ ============ ============ ============ Net income per share: Basic $ 0.01 $ 0.02 $ 0.02 $ 0.03 ============ ============ ============ ============ Diluted $ 0.01 $ 0.01 $ 0.02 $ 0.02 ============ ============ ============ ============ Weighted average number of shares outstanding: Basic 14,064,968 10,643,113 13,981,426 10,073,951 Diluted 14,444,665 13,455,875 14,361,123 12,760,805
NETSOL TECHNOLOGIES CONTINUES REVENUE GROWTH AND PROFITABILITY FOR SECOND QUARTER OF FISCAL 2006 Page 5 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET -- DECEMBER 31, 2005 (Unaudited)
ASSETS Current assets: Cash and cash equivalents $ 1,884,573 Certificates of deposit 1,501,752 Restricted cash 206,900 Accounts receivable, net of allowance for doubtful accounts of $80,000 5,673,145 Revenues in excess of billings 3,379,287 Other current assets 1,448,164 ------------ Total current assets 14,093,821 Property and equipment, net of accumulated depreciation 6,052,896 Intangibles: Product licenses, renewals, enhancements, copyrights, trademarks, and tradenames, net 4,740,085 Customer lists, net 1,240,682 Goodwill 1,166,611 ------------ Total intangibles 7,147,378 ------------ Total assets $ 27,294,095 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 3,315,622 Current portion of notes and obligations under capitalized leases 977,382 Billings in excess of revenues 110,397 Due to officers 53,157 Deferred liability 313,397 Loans payable, bank 500,584 ------------ Total current liabilities 5,270,539 Obligations under capitalized leases, less current maturities 145,828 Convertible debenture 97,372 ------------ Total liabilities 5,513,739 Minority interest 1,213,277 Commitments and contingencies - Stockholders' equity: Common stock, $.001 par value; 45,000,000 share authorized; 14,084,604 issued and outstanding 14,085 Additional paid-in-capital 50,962,347 Treasury stock (27,197) Accumulated deficit (29,990,203) Stock subscription receivable (320,188) Common stock to be issued 132,086 Other comprehensive loss (203,851) ------------ Total stockholders' equity 20,567,079 ------------ Total liabilities and stockholders' equity $ 27,294,095 ============