EX-99.1 2 v088107_99-1.htm
EXHIBIT 99.1

NEWS RELEASE DATED SEPTEMBER 19, 2007
 
PRESS RELEASE
  

 
NetSol Technologies Reports Record Fiscal Fourth Quarter 2007 Financial Results

Quarterly GAAP EPS increases to $0.07 as net income grows to a record $1.3 million

Quarterly revenue grows 84% year-over-year to a record $8.6 million


CALABASAS, CA - September 19, 2007 -- NetSol Technologies Inc. (“NetSol”) (NASDAQ: NTWK), a multinational provider of enterprise software and IT services to the financial services industry, today announced financial results for the fiscal year 2007, ended June 30, 2007.

Fiscal Fourth Quarter 2007 Financial Highlights
 
·
Revenues increased 84% year-over-year to $8.6 million
·
License fees increased 137% year-over-year to $2.9 million
·
Maintenance fees increased 97% year-over-year to $1.5 million
·
Services increased 57% year-over-year to $4.2 million
·
Gross margin increased to 62% compared to 34% in the prior year period
·
Operating income improved to $1.9 million compared to an operating loss of $1.5 million in the year ago period
·
GAAP net income increased to $1.3 million, or $0.07 per share, versus a loss of ($0.11) in the year ago period
·
EBITDA increased to $2.0 million, or $0.10 per basic and diluted share
·
Business outlook and revenue generation for fiscal year 2008 remains strong as NetSol scales up to deliver another solid year of growth.

NetSol Technologies, Inc. reported consolidated revenues of $8.6 million for the fourth quarter of fiscal year 2007, an 84% increase compared to the $4.7 million in revenues reported for the same period in fiscal year 2006. Consolidated gross profit for the fourth quarter was approximately $5.3 million, an increase of 234% as compared to the prior year. Gross margin for the fourth quarter of fiscal year 2007 was 62% compared to 34% in the prior year period.

GAAP (Generally Accepted Accounting Principles) net income for the fourth quarter of fiscal year 2007 was $1.3 million, or $0.07 per basic and diluted share, compared to a GAAP net loss of $1.7 million, or ($0.11) per basic and diluted share, reported in the fourth quarter of fiscal year 2006. EBITDA for the fourth quarter was $2.0 million, or $0.10 per basic and diluted share, compared to negative EBITDA of $672 thousand in the fourth quarter of fiscal year 2006.

Najeeb Ghauri, chairman and CEO stated, “Our fiscal fourth quarter 2007 financial performance was exceptional, highlighted by record quarterly revenue and GAAP net income. This represents a remarkable turnaround from a GAAP net loss in the year ago fourth quarter compared to a $1.3 million GAAP profit in the current fiscal fourth quarter, within a 12 month period. Our record top line revenue growth was fuelled by strong demand for our LeaseSoft and LeasePak solutions which experienced a 137% jump in license revenue year-over-year.

“Our services business also posted strong double digit year-over-year growth as NetSol’s IT consulting services group extended its reach into new verticals. We successfully combined the strong demand for our enterprise software and IT consulting services with a clear focus on managing internal operating efficiencies and were able to achieve our goal of returning NetSol to GAAP profitability on a quarterly basis,” concluded Mr. Ghauri.

 
1
 
NetSol Technologies recently announced its new offering for IT outsourcing and customized development services to the North American equipment and finance market, as well as the recent deployment of LeasePak 6.0. The Company continues to invest in an array of new products for the financial services vertical as well as other complementary businesses and aims to introduce additional new incremental growth engines to its business in the foreseeable future. These areas align directly with the Company’s strategic vision of being a leading provider of innovative software applications and high-value IT consulting services.

Fiscal Fourth Quarter 2007 Business Highlights
 
·
Launch of NetSol’s outsourcing and customized development services to North American equipment and finance market.
 
·
Strategic partnership formed with Field Solutions to deliver comprehensive, robust solution for the broking market
 
·
NetSol’s North American Division hosts its annual user conference
 
·
Key customer wins included:
 
 
·
First fleet management system contract signed with a major automotive finance company
 
 
·
Major automotive finance company in China signed a follow-on contract valued at more than $1.0 million
 
 
·
NetSol won its fifth major contract in China with the signing of a multi-million dollar LeaseSoft contract
 
 
·
Terex Corporation selected NetSol’s LeasePak 6.0 Enterprise Edition
 
 
·
A Fortune 100 information technology company selected NetSol’s LeasePak 6.0 Enterprise Edition
 
 
·
Kaupthing Singer & Friedlander Premium Finance selected NetSol to develop web based credit facilities
 
 
·
NetSol was awarded a software development contract for a new e-Government initiative at the Pakistan Ministry of Population Welfare
 
 
·
Pakistan Ministry of Health awarded NetSol a software development contract for a new e-Government initiative
 

Full Year Fiscal 2007 Consolidated Financial Highlights

·
Revenues for the year increased 57% to $29.3 million
·
License fees increased 89% year-over-year to $9.8 million
·
Maintenance fees increased 123% year-over-year to $5.4 million
·
Services increased 27% year-over-year to $14.1 million
·
Gross margin increased to 53% compared to 52% in the prior year period
·
Operating income improved to $2.6 million compared to an operating loss of $259,347 in the year ago period
·
GAAP net loss was $4.9 million, or ($0.27) per basic and diluted share, including non-cash charges totaling $5.0 million relating to the financing for the acquisition of McCue Systems
·
EBITDA loss for the year totaled $1.5 million, or ($0.08) per basic and diluted share, including one-time non-cash charges of $5.0 million

NetSol Technologies, Inc. reported consolidated revenues of $29.3 million for fiscal year 2007, a 57% increase compared to the $18.7 million in revenues reported for fiscal year 2006. Consolidated gross profit for the fiscal year 2007 was $15.6 million, an increase of 62% as compared to the prior year. Gross margin for the fiscal year 2007 was 53% compared to 52% in the prior year period.

GAAP net loss for fiscal year 2007 was approximately $4.9 million, or ($0.27) per basic and diluted share, which compares to a GAAP net loss of $1.4 million, or ($0.09) per basic and diluted share for fiscal year 2006. EBITDA loss for fiscal year 2007 was approximately $1.5 million, or ($0.08) per basic and diluted share, which compares to EBITDA of $2.2 million, or $0.15 per basic and diluted share, for fiscal year 2006.

 
 
 
During the first half of fiscal year 2007, NetSol recorded non-cash charges totaling $5.0 million related to the financing for the acquisition of McCue Systems in June 2006. Excluding these non-cash charges, NetSol would have reported proforma EBITDA for fiscal 2007 of approximately $3.6 million, or $0.20 per basic and diluted share, compared to EBITDA of approximately $2.2 million, or $0.15 per basic and diluted share, for the fiscal year 2006.

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”.

NetSol ended fiscal year 2007 with approximately $4.0 million dollars in cash and cash equivalents.

The Company’s subsidiary, NetSol Technologies, Ltd, a Pakistani company listed on the Karachi Stock Exchange (Symbol: NETSOL), released its June 30 fiscal year end results on September 17, 2007. These results may be found on the Karachi Stock Exchange website www.kse.com.pk. The subsidiary’s results represent only a portion of the Company-wide results. Consolidated results of NetSol Technologies, Inc. may be found in the Company’s annual report filed on form 10-KSB.

Conference Call Information
 
NetSol Technologies will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) today to review these results. The conference call will be web cast live and will be accompanied by a PowerPoint presentation, both may be accessed online at: http://www.netsoltek.com/investors/investor_relations.htm To access the live teleconference investors and analysts in North America may dial +1 (877) 407-8033 or when calling internationally dial +1 (201) 689-8033.

An audio replay of the conference call will be available approximately one hour following the conclusion of the call and will be available for 30 days. 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 # 253380. An archived replay of the conference webcast also will be available on the NetSol Technologies web site at: http://www.netsoltek.com/investors/investor_relations.htm

About NetSol Technologies
 
NetSol Technologies is a multinational provider of enterprise software and IT services to the financial services industry. NetSol helps clients to identify, evaluate and implement technology solutions to meet their strategic business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol delivers high-quality, cost-effective equipment and vehicle finance portfolio management solutions. The Company also delivers managed IT services ranging from consulting and application development to systems integration and development outsourcing. NetSol’s commitment to quality is demonstrated by its achievement of both ISO 9001 and SEI (Software Engineering Institute) CMMi (Capability Maturity Model) Level 5 assessment, a distinction shared by only 94 companies worldwide. The Company’s clients include global automakers, financial institutions, technology companies and governmental agencies. Headquartered in Calabasas, CA, NetSol Technologies also has operations and/or offices in London, San Francisco, Adelaide, Beijing, Lahore and Karachi, Pakistan. To learn more about NetSol Technologies, visit the Company’s web site at www.netsoltek.com. Click here to join the NetSol Technologies, Inc. email distribution list: 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.

Contacts:
   
NetSol Technologies, Inc.
Investor Relations
Tina Gilger
Christopher Chu
Chief Financial Officer
The Global Consulting Group
Tel: +1 818-222-9195, x112
Tel: +1-646-284-9426
 
Email: cchu@hfgcg.com
 
 
 
 
 

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS — JUNE 30, 2007

   
For the Three Months Ended
 
For the Years Ended
 
   
June 30, 2007
 
June 30, 2006
 
June 30, 2007
 
June 30, 2006
  
Revenues:
  
(unaudited)
 
(unaudited)
 
(audited)
 
(audited)
  
Licence fees 
  
$
2,936,770
  
$
1,239,984
  
$
9,788,266
  
$
5,192,371
  
Maintenance fees 
    
1,451,243
   
735,537
   
5,441,339
   
2,444,075
 
Services 
    
4,188,426
   
2,674,706
   
14,052,481
   
11,053,966
 
 Total revenues
    
8,576,439
   
4,650,227
   
29,282,086
   
18,690,412
 
Cost of revenues:
                          
Salaries and consultants  
    
2,204,328
   
2,020,271
   
8,812,934
   
6,117,886
 
Travel and entertainment  
    
334,481
   
283,851
   
1,529,796
   
756,880
 
Communication  
    
47,292
   
46,372
   
161,128
   
129,741
 
Depreciation and amortization  
    
60,404
   
239,356
   
652,669
   
733,370
 
Other  
    
603,795
   
467,755
   
2,502,452
   
1,282,641
 
 Total cost of sales
    
3,250,300
   
3,057,605
   
13,658,979
   
9,020,518
 
Gross profit
    
5,326,139
   
1,592,622
   
15,623,107
   
9,669,894
 
Operating expenses:
                          
Selling and marketing 
    
811,328
   
598,443
   
2,356,831
   
1,789,349
 
Depreciation and amortization 
    
497,461
   
574,907
   
1,988,603
   
2,286,678
 
Salaries and wages 
    
895,610
   
870,922
   
4,294,368
   
2,557,648
 
Professional services, including non-cash compensation 
    
293,499
   
242,554
   
1,067,702
   
607,706
 
Bad debt expense 
    
72,606
   
2,929
   
189,873
   
30,218
 
General and adminstrative 
    
866,220
   
790,804
   
3,078,862
   
2,657,642
 
 Total operating expenses
    
3,436,724
   
3,080,559
   
12,976,239
   
9,929,241
 
Income (loss) from operations
    
1,889,415
   
(1,487,937
)
  
2,646,868
   
(259,347
)
Other income and (expenses)
                          
Loss on sale of assets 
    
16,090
   
(1,076
)
  
(2,977
)
  
(35,090
)
Beneficial conversion feature 
    
—
   
—
   
(2,208,334
)
  
(14,389
)
Amortization of debt discount and capitalized cost of debt 
    
—
   
—
   
(2,803,691
)
  
—
 
Liquidation damages 
    
—
   
—
   
(180,890
)
  
—
 
Fair market value of warrants issued 
    
(34,424
)
  
—
   
(68,411
)
  
(21,505
)
Gain on forgiveness of debt 
    
—
   
—
   
—
   
8,294
 
Interest expense 
    
(74,476
)
  
(201,987
)
  
(617,818
)
  
(442,887
)
Interest income 
    
73,248
   
10,391
   
339,164
   
280,276
 
Other income and (expenses) 
    
25,488
   
246,333
   
114,423
   
191,736
 
 Total other expenses
    
5,926
   
53,661
   
(5,428,534
)
  
(33,565
)
Net income (loss) before taxes and minority interest in subsidiary
    
1,895,341
   
(1,434,276
)
  
(2,781,666
)
  
(292,912
)
Minority interest in earnings of subsidiary
    
(561,508
)
  
(254,248
)
  
(1,935,589
)
  
(954,120
)
Income taxes
    
(33,686
)
  
(15,130
)
  
(160,306
)
  
(106,021
)
Net income (loss)
    
1,300,147
   
(1,703,654
)
  
(4,877,561
)
  
(1,353,053
)
Dividend required for preferred stockholders
    
(77,640
)
  
—
   
(237,326
)
  
—
 
Bonus stock dividend (minority holders portion)
    
(345,415
)
  
—
   
(345,415
)
  
—
 
Net income (loss) applicable to common shareholders
    
877,092
   
(1,703,654
)
  
(5,460,302
)
  
(1,353,053
)
Other comprehensive (loss) gain:
                          
Translation adjustment 
    
(259,113
)
  
(100,069
)
  
(55,770
)
  
101,031
 
Comprehensive loss
  
$
617,979
  
$
(1,803,723
)
$
(5,516,072
)
$
(1,252,022
)
                           
Net income/loss per share:
                          
Basic 
  
$
0.07
  
$
(0.11
)
$
(0.27
)
$
(0.09
)
Diluted 
  
$
0.07
  
$
(0.11
)
$
(0.27
)
$
(0.09
)
Weighted average number of shares outstanding
                          
Basic 
    
19,706,920
   
15,468,248
   
18,189,590
   
14,567,007
 
Diluted 
    
19,835,177
   
15,468,248
   
18,189,590
   
14,567,007
 
 
 
 
 
 
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(AUDITED)
 
   
As of June 30, 2007
  
 ASSETS      
Current assets:
      
Cash and cash equivalents 
  
$
4,010,164
  
Accounts receivable, net of allowance for doubtful accounts of $168,718 
    
7,937,686
 
Revenues in excess of billings 
    
8,501,769
 
Other current assets 
    
2,278,749
 
 Total current assets
    
22,728,368
 
Property and equipment, net of accumulated depreciation
    
7,583,752
 
Other assets, long-term
    
1,308,267
 
Intangibles:
        
Product licenses, renewals, enhancements, copyrights, 
        
 trademarks, and tradenames, net
    
7,772,848
 
Customer lists, net 
    
2,427,405
 
Goodwill 
    
7,708,501
 
 Total intangibles
    
17,908,754
 
 Total assets
  
$
49,529,141
  
         
LIABILITIES AND STOCKHOLDERS' EQUITY 
        
Current liabilities:
        
Accounts payable and accrued expenses 
  
$
3,590,652
  
Current portion of notes and obligations under capitalized leases 
    
887,098
 
Other payables - acquisitions 
    
962,406
 
Unearned revenues 
    
2,815,660
 
Due to officers 
    
356,422
 
Dividend to preferred stockholders payable 
    
77,640
 
Loans payable, bank 
    
3,097,928
 
 Total current liabilities
    
11,787,806
 
Obligations under capitalized leases, less current maturities
    
339,759
 
 Total liabilities
    
12,127,565
 
Minority interest
    
3,552,635
 
Commitments and contingencies
    
—
 
         
Stockholders' equity:
        
Preferred stock, 5,000,000 shares authorized;  
        
 4,130 issued and outstanding
    
4,130,000
 
Common stock, $.001 par value; 45,000,000 shares authorized; 
        
 20,556,553 issued and outstanding
    
20,556
 
Additional paid-in-capital 
    
66,988,147
 
Treasury stock 
    
(10,194
)
Accumulated deficit  
    
(37,132,343
)
Stock subscription receivable 
    
(1,001,407
)
Common stock to be issued 
    
1,329,612
 
Other comprehensive loss 
    
(475,430
)
 Total stockholders' equity
    
33,848,941
 
 Total liabilities and stockholders' equity
  
$
49,529,141
  
 

 
 
 

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(AUDITED)
 
   
For the Years
 
   
Ended June 30,
 
   
2007
 
2006
 
Cash flows from operating activities:
         
Net loss from continuing operations
 
$
(5,460,302
)
$
(1,353,053
)
Adjustments to reconcile net loss to net cash
             
(used in)/provided by operating activities:  
              
Depreciation and amortization
   
2,641,272
   
3,020,048
 
Provision for uncollectible accounts
   
189,873
   
30,218
 
Gain on forgiveness of debt
   
—
   
(8,294
)
Loss on sale of assets
   
2,977
   
35,090
 
Minority interest in subsidiary
   
1,935,589
   
954,120
 
Stock issued for services
   
88,099
   
200,194
 
Stock issued for convertible note payable interest
   
311,868
   
—
 
Stock issued for dividends payable to preferred stockholders
   
159,686
   
—
 
Bonues stock dividend issued by subsidiary
   
345,415
   
—
 
Fair market value of warrants and stock options granted
   
136,571
   
25,618
 
Beneficial conversion feature
   
2,208,334
   
14,389
 
Amortization of capitalized cost of debt
   
2,815,358
   
100,172
 
Changes in operating assets and liabilities:
             
Increase in accounts receivable  
    
(2,858,608
)
  
(1,351,660
)
Increase in other current assets  
    
(3,199,796
)
  
(3,789,179
)
Increase in accounts payable and accrued expenses  
    
560,136
   
430,419
 
Net cash (used in)/provided by operating activities
   
(123,528
)
  
(1,691,918
)
Cash flows from investing activities:
             
Purchases of property and equipment
   
(2,420,470
)
  
(2,709,569
)
Sales of property and equipment
   
366,088
   
301,684
 
Purchases of certificates of deposit
   
—
   
(1,534,371
)
Proceeds from sale of certificates of deposit
   
1,737,481
   
—
 
(Payments)/accruals of acquisition payable
   
(4,027,753
)
  
4,086,204
 
Increase in intangible assets
   
(3,295,262
)
  
(5,027,968
)
Cash brought in at acquisition
   
—
   
473,890
 
Net cash used in investing activities
   
(7,639,916
)
  
(4,410,130
)
Cash flows from financing activities:
             
Proceeds from sale of common stock
   
1,030,093
   
1,400,000
 
Proceeds from the exercise of stock options and warrants
   
1,008,250
   
669,382
 
Capital contributed from sale of subsidiary stock
   
—
   
4,031,001
 
Dividend to preferred shareholders payable
   
77,640
   
—
 
Reduction of restricted cash
   
4,533,555
   
(4,533,555
)
Proceeds from convertible notes payable
   
—
   
5,500,000
 
Proceeds from loans from officers
   
165,000
   
—
 
Payments on capital lease obligations & loans - net
   
2,359,017
   
82,650
 
Net cash provided by financing activities
   
9,173,555
   
7,149,478
 
Effect of exchange rate changes in cash
   
106,285
   
74,611
 
Net increase in cash and cash equivalents
   
1,516,396
   
1,122,041
 
Cash and cash equivalents, beginning of year
   
2,493,768
   
1,371,727
 
Cash and cash equivalents, end of year
 
$
4,010,164
  
$
2,493,768
  
 
 
 
 
 


NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
RECONCILIATION TO GAAP
(UNAUDITED)
 
   
For the Year
 
 
 
Ended
 
 
 
June 30, 2007
  
       
Net loss per GAAP
 
$
(4,877,561
)
One-time, non-cash expenses:  
        
 Beneficial conversion feature
   
2,208,334
 
 Amortization of debt discount and capitalized cost of debt
   
2,803,691
 
     
5,012,025
 
         
Pro-forma income
 
$
134,464
  
         
Weighted average number of shares outstanding
        
Basic and diluted 
    
18,189,590
 
         
Pro-forma EPS
 
$
0.01
  
         
         
         
EBITDA - GAAP
   
(1,458,165
)
One-time, non-cash expenses:  
        
 Beneficial conversion feature
   
2,208,334
 
 Amortization of debt discount and capitalized cost of debt
   
2,803,691
 
     
5,012,025
 
         
Pro-forma EBITDA
 
$
3,553,860
  
         
Weighted average number of shares outstanding
        
Basic and diluted 
    
18,189,590
 
         
Pro-forma EBITDA EPS
 
$
0.20