NEVADA | 95-4627685 | |
(State or other Jurisdiction of | (I.R.S. Employer NO.) | |
Incorporation or Organization) | ||
23901 Calabasas Road, Suite 2072, Calabasas, CA 91302 | ||
Address of principal executive offices) (Zip Code) | ||
(818) 222-9195 / (818) 222-9197 | ||
(Issuer's telephone/facsimile numbers, including area code) |
Page No.
|
|||||
3 | |||||
As of September 30,
|
As of June 30,
|
|||||||
ASSETS
|
2011
|
2011
|
||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 3,123,686 | $ | 4,172,802 | ||||
Restricted Cash
|
2,700,000 | 5,700,000 | ||||||
Accounts receivable, net
|
13,864,226 | 15,062,503 | ||||||
Revenues in excess of billings
|
7,038,291 | 7,601,230 | ||||||
Other current assets
|
2,081,864 | 2,053,904 | ||||||
Total current assets
|
28,808,066 | 34,590,439 | ||||||
Property and equipment, net
|
16,469,748 | 16,014,461 | ||||||
Intangibles:
|
||||||||
Product licenses, renewals, enhancements, copyrights, trademarks, and tradenames, net
|
26,364,728 | 25,437,479 | ||||||
Customer lists, net
|
147,067 | 164,715 | ||||||
Goodwill
|
9,439,285 | 9,439,285 | ||||||
Total intangibles
|
35,951,080 | 35,041,480 | ||||||
Total assets
|
$ | 81,228,895 | $ | 85,646,380 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$ | 4,069,230 | $ | 4,730,027 | ||||
Current portion of loans and obligations under capitalized leases
|
4,092,747 | 7,062,535 | ||||||
Other payables - acquisitions
|
103,226 | 103,226 | ||||||
Unearned revenues
|
2,475,387 | 2,653,460 | ||||||
Convertible notes payable , current portion
|
- | 2,745,524 | ||||||
Loans payable, bank
|
2,269,632 | 2,319,378 | ||||||
Common stock to be issued
|
206,625 | 400,700 | ||||||
Total current liabilities
|
13,216,848 | 20,014,850 | ||||||
Obligations under capitalized leases, less current maturities
|
257,711 | 285,472 | ||||||
Convertible notes payable less current maturities
|
3,587,464 | - | ||||||
Long term loans; less current maturities
|
425,556 | 434,884 | ||||||
Total liabilities
|
17,487,579 | 20,735,206 | ||||||
Commitments and contingencies
|
||||||||
Stockholders' equity:
|
||||||||
Common stock, $.001 par value; 95,000,000 shares authorized; 56,076,355
& 55,531,855 issued and outstanding as of September 30, 2011 and June 30, 2011
|
56,077 | 55,532 | ||||||
Additional paid-in-capital
|
98,844,487 | 97,886,492 | ||||||
Treasury stock
|
(396,008 | ) | (396,008 | ) | ||||
Accumulated deficit
|
(35,589,651 | ) | (34,130,944 | ) | ||||
Stock subscription receivable
|
(2,031,210 | ) | (2,198,460 | ) | ||||
Other comprehensive loss
|
(9,362,762 | ) | (8,805,922 | ) | ||||
Total NetSol shareholders' equity
|
51,520,932 | 52,410,690 | ||||||
Non-controlling interest
|
12,220,383 | 12,500,484 | ||||||
Total stockholders' equity
|
63,741,315 | 64,911,174 | ||||||
Total liabilities and stockholders' equity
|
$ | 81,228,895 | $ | 85,646,380 |
For the Three Months
|
||||||||
Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Net Revenues:
|
||||||||
License fees
|
$ | 1,075,850 | $ | 3,477,793 | ||||
Maintenance fees
|
2,037,206 | 1,669,919 | ||||||
Services
|
3,115,652 | 3,255,360 | ||||||
Total revenues
|
6,228,708 | 8,403,071 | ||||||
Cost of revenues:
|
||||||||
Salaries and consultants
|
2,383,411 | 1,986,888 | ||||||
Travel
|
285,673 | 231,612 | ||||||
Repairs and maintenance
|
74,194 | 57,058 | ||||||
Insurance
|
35,868 | 30,992 | ||||||
Depreciation and amortization
|
789,105 | 630,941 | ||||||
Other
|
516,409 | 243,138 | ||||||
Total cost of revenues
|
4,084,660 | 3,180,629 | ||||||
Gross profit
|
2,144,048 | 5,222,442 | ||||||
Operating expenses:
|
||||||||
Selling and marketing
|
700,281 | 483,970 | ||||||
Depreciation and amortization
|
191,674 | 266,443 | ||||||
Bad debt expense
|
192,250 | 254,632 | ||||||
Salaries and wages
|
806,564 | 920,264 | ||||||
Professional services, including non-cash compensation
|
186,749 | 139,085 | ||||||
General and adminstrative
|
892,972 | 1,132,519 | ||||||
Total operating expenses
|
2,970,490 | 3,196,913 | ||||||
Income (loss) from operations
|
(826,442 | ) | 2,025,530 | |||||
Other income and (expenses)
|
||||||||
Loss on sale of assets
|
(1,641 | ) | (14,794 | ) | ||||
Interest expense
|
(251,430 | ) | (315,644 | ) | ||||
Interest income
|
32,805 | 84,461 | ||||||
Gain (loss) on foreign currency exchange transactions
|
(120,906 | ) | 1,073,894 | |||||
Share of net loss from equity investment
|
(100,000 | ) | (70,438 | ) | ||||
Beneficial conversion feature
|
(21,583 | ) | (177,411 | ) | ||||
Other expense
|
(7,718 | ) | (55,554 | ) | ||||
Total other income (expenses)
|
(470,474 | ) | 524,515 | |||||
Net income (loss) before income taxes
|
(1,296,916 | ) | 2,550,045 | |||||
Income taxes
|
(24,534 | ) | (8,556 | ) | ||||
Net income (loss) after tax
|
(1,321,450 | ) | 2,541,489 | |||||
Non-controlling interest
|
(137,258 | ) | (974,508 | ) | ||||
Net income (loss) attibutable to NetSol
|
(1,458,708 | ) | 1,566,980 | |||||
Other comprehensive loss:
|
||||||||
Translation adjustment
|
(974,199 | ) | (475,902 | ) | ||||
Comprehensive income (loss)
|
(2,432,907 | ) | 1,091,078 | |||||
Comprehensive loss attributable to non controlling interest
|
(417,360 | ) | (206,888 | ) | ||||
Comprehensive income (loss) attributable to NetSol
|
$ | (2,015,547 | ) | $ | 1,297,966 | |||
Net income (loss) per share:
|
||||||||
Basic
|
$ | (0.03 | ) | $ | 0.04 | |||
Diluted
|
$ | (0.03 | ) | $ | 0.04 | |||
Weighted average number of shares outstanding
|
||||||||
Basic
|
55,883,268 | 39,544,096 | ||||||
Diluted
|
55,883,268 | 43,251,519 | ||||||
Amounts attributable to NetSol common shareholders
|
||||||||
Net income (loss)
|
$ | (1,458,708 | ) | $ | 1,566,980 |
For the Three Months
|
||||||||
Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$ | (1,321,451 | ) | $ | 2,541,489 | |||
Adjustments to reconcile net income
to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
980,778 | 897,383 | ||||||
Provision for bad debts
|
192,250 | 254,632 | ||||||
Share of net loss from investment under equity method
|
100,000 | 70,438 | ||||||
Loss on sale of assets
|
1,641 | 14,794 | ||||||
Stock issued for interest on notes payable
|
- | 14,419 | ||||||
Stock issued for services
|
118,300 | 383,950 | ||||||
Fair market value of warrants and stock options granted
|
59,852 | 53,594 | ||||||
Beneficial conversion feature
|
21,583 | 177,411 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Increase/ decrease in accounts receivable
|
1,658,236 | (2,708,406 | ) | |||||
Increase/ decrease in other current assets
|
169,558 | (1,453,577 | ) | |||||
Increase/ decrease in accounts payable and accrued expenses
|
(1,096,849 | ) | (359,946 | ) | ||||
Net cash provided by (used in) operating activities
|
883,900 | (113,820 | ) | |||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(1,427,884 | ) | (682,676 | ) | ||||
Sales of property and equipment
|
2,591 | 4,550 | ||||||
Purchase of non-controlling interest in subsidiary
|
- | (180,000 | ) | |||||
Short-term investments held for sale
|
- | (254,632 | ) | |||||
Investment under equity method
|
(100,000 | ) | - | |||||
Increase in intangible assets
|
(1,768,681 | ) | (1,574,143 | ) | ||||
Net cash used in investing activities
|
(3,293,974 | ) | (2,686,900 | ) | ||||
Cash flows from financing activities:
|
||||||||
Proceeds from sale of common stock
|
- | 2,021,139 | ||||||
Proceeds from the exercise of stock options and warrants
|
140,000 | 186,875 | ||||||
Proceeds from convertible notes payable
|
4,000,000 | - | ||||||
Payments on convertible notes payable
|
(2,758,330 | ) | - | |||||
Restricted cash
|
3,000,000 | - | ||||||
Bank overdraft
|
40,201 | 90,944 | ||||||
Proceeds from bank loans
|
1,731,634 | 1,064,554 | ||||||
Payments on bank loans
|
141,852 | (45,427 | ) | |||||
Payments on capital lease obligations & loans - net
|
(4,885,224 | ) | (2,365,852 | ) | ||||
Net cash provided by financing activities
|
1,410,133 | 952,233 | ||||||
Effect of exchange rate changes in cash
|
(49,174 | ) | (72,246 | ) | ||||
Net increase in cash and cash equivalents
|
(1,049,115 | ) | (1,920,733 | ) | ||||
Cash and cash equivalents, beginning of year
|
4,172,802 | 4,075,546 | ||||||
Cash and cash equivalents, end of year
|
$ | 3,123,686 | $ | 2,154,813 |
For the Three Months
|
||||||||
Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
SUPPLEMENTAL DISCLOSURES:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | 464,156 | $ | 429,289 | ||||
Taxes
|
$ | (6,810 | ) | $ | 659 | |||
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Stock issued for the conversion of Notes Payable
|
$ | - | $ | 1,900,598 |
For the three months ended September 30, 2011
|
Net Loss
|
Shares
|
Per Share
|
|||||||||
Basic loss per share:
|
$ | (1,458,708 | ) | 55,883,268 | $ | (0.03 | ) | |||||
Dividend to preferred shareholders
|
- | |||||||||||
Net income available to common shareholders
|
||||||||||||
Effect of dilutive securities *
|
||||||||||||
Stock options
|
||||||||||||
Warrants
|
||||||||||||
Diluted loss per share
|
$ | (1,458,708 | ) | 55,883,268 | $ | (0.03 | ) | |||||
For the three months ended September 30, 2010 | Net Income | Shares | Per Share | |||||||||
Basic income per share:
|
$ | 1,566,980 | 39,544,096 | $ | 0.04 | |||||||
Dividend to preferred shareholders
|
- | $ | - | |||||||||
Net income available to common shareholders
|
||||||||||||
Effect of dilutive securities
|
||||||||||||
Stock options
|
1,159,964 | |||||||||||
Warrants
|
2,547,459 | |||||||||||
Diluted income per share
|
$ | 1,566,980 | 43,251,519 | $ | 0.04 | |||||||
As of September 30
|
As of June 30
|
|||||||
2011
|
2011
|
|||||||
Prepaid Expenses
|
$ | 213,399 | $ | 245,194 | ||||
Advance Income Tax
|
686,966 | 726,979 | ||||||
Employee Advances
|
36,415 | 53,404 | ||||||
Security Deposits
|
163,124 | 161,263 | ||||||
Tender Money Receivable
|
123,961 | 133,166 | ||||||
Other Receivables
|
502,535 | 535,597 | ||||||
Other Assets
|
355,464 | 198,301 | ||||||
Total
|
$ | 2,081,864 | $ | 2,053,904 |
As of September 30
|
As of June 30
|
|||||||
2011
|
2011
|
|||||||
Office furniture and equipment
|
$ | 1,162,054 | $ | 1,179,993 | ||||
Computer equipment
|
13,937,589 | 13,463,560 | ||||||
Assets under capital leases
|
2,075,151 | 2,024,282 | ||||||
Building
|
2,287,618 | 2,337,758 | ||||||
Land
|
2,191,991 | 2,240,036 | ||||||
Capital work in progress
|
3,277,018 | 2,659,750 | ||||||
Autos
|
643,246 | 794,617 | ||||||
Improvements
|
160,013 | 162,896 | ||||||
Subtotal
|
25,734,679 | 24,862,892 | ||||||
Accumulated depreciation
|
(9,264,932 | ) | (8,848,431 | ) | ||||
$ | 16,469,748 | $ | 16,014,461 |
Product Licenses
|
Customer Lists
|
Total
|
||||||||||
Intangible assets - June 30, 2010 - cost
|
$ | 29,960,803 | $ | 5,804,057 | $ | 35,764,860 | ||||||
Additions
|
8,159,168 | - | 8,159,168 | |||||||||
Effect of translation adjustment
|
106,429 | - | 106,429 | |||||||||
Accumulated amortization
|
(12,788,921 | ) | (5,639,341 | ) | (18,428,262 | ) | ||||||
Net balance - June 30, 2011
|
$ | 25,437,479 | $ | 164,715 | $ | 25,602,194 | ||||||
Intangible assets - June 30, 2011 - cost
|
$ | 38,226,400 | $ | 5,804,057 | $ | 44,030,457 | ||||||
Additions
|
1,788,199 | - | 1,788,199 | |||||||||
Effect of translation adjustment
|
(621,424 | ) | - | (621,424 | ) | |||||||
Accumulated amortization
|
(13,028,447 | ) | (5,656,990 | ) | (18,685,436 | ) | ||||||
Net balance - September 30, 2011
|
$ | 26,364,728 | $ | 147,067 | $ | 26,511,795 | ||||||
Weighted average amortization period
|
8.02 | 5.00 | 7.63 | |||||||||
Amortization expense for:
|
||||||||||||
Three months ended September 30, 2011
|
$ | 326,562 | $ | 17,648 | $ | 344,210 | ||||||
Three months ended September 30, 2010
|
$ | 402,353 | $ | 125,465 | $ | 527,818 |
FISCAL YEAR ENDING
|
||||||||||||||||||||||||||||
Asset
|
9/30/12
|
9/30/13
|
9/30/14
|
9/30/15
|
9/30/16
|
Thereafter
|
TOTAL
|
|||||||||||||||||||||
Product Licences
|
$ | 1,498,017 | $ | 1,367,778 | $ | 1,237,911 | $ | 848,608 | $ | 848,608 | $ | 20,563,806 | $ | 26,364,728 | ||||||||||||||
Customer Lists
|
70,592 | 70,592 | 5,883 | - | - | - | 147,067 | |||||||||||||||||||||
$ | 1,568,609 | $ | 1,438,370 | $ | 1,243,794 | $ | 848,608 | $ | 848,608 | $ | 20,563,806 | $ | 26,511,795 |
As of September 30,
|
As of June 30,
|
|||||||
2011
|
2011
|
|||||||
Asia Pacific
|
$ | 1,303,372 | $ | 1,303,372 | ||||
Europe
|
3,471,813 | 3,471,813 | ||||||
North America
|
4,664,100 | 4,664,100 | ||||||
Total
|
$ | 9,439,285 | $ | 9,439,285 |
Net book value at June 30, 2010
|
$ | 200,506 | ||
Net loss for the year ended June 30, 2011
|
(542,929 | ) | ||
NetSol's share (50.1%)
|
(272,007 | ) | ||
Loss adjusted against investment
|
(200,506 | ) | ||
Net book value at June 30, 2011
|
$ | 0 | ||
Investment during the period
|
100,000 | |||
Net loss for the three months ended September 30, 2011
|
(134,075 | ) | ||
NetSol's share (50.1%)
|
(67,172 | ) | ||
Unabsorbed losses brought forward
|
(51,731 | ) | ||
Total loss
|
(118,903 | ) | ||
Loss adjusted against investment
|
(100,000 | ) | ||
Net book value at September 30, 2011
|
$ | 0 |
As of September 30
|
As of June 30
|
|||||||
2011
|
2011
|
|||||||
Accounts Payable
|
$ | 1,113,114 | $ | 1,348,453 | ||||
Accrued Liabilities
|
2,200,197 | 2,364,233 | ||||||
Accrued Payroll
|
14,289 | 148,565 | ||||||
Accrued Payroll Taxes
|
348,987 | 216,485 | ||||||
Interest Payable
|
118,560 | 380,808 | ||||||
Deferred Revenues
|
32,066 | 32,066 | ||||||
Taxes Payable
|
242,017 | 239,417 | ||||||
Total
|
$ | 4,069,230 | $ | 4,730,027 |
As of September 30
|
Current
|
Long-Term
|
||||||||||
Name
|
2011
|
Maturities
|
Maturities
|
|||||||||
Habib Bank Line of Credit
|
$ | 2,583,594 | 2,583,594 | - | ||||||||
Bank Overdraft Facility
|
288,475 | 288,475 | - | |||||||||
Term Finance Facility
|
709,260 | 283,704 | 425,556 | |||||||||
Subsidiary Capital Leases
|
1,194,686 | 936,975 | 257,711 | |||||||||
Lease abandonment liability
|
- | - | - | |||||||||
$ | 4,776,014 | $ | 4,092,747 | $ | 683,267 | |||||||
As of June 30
|
Current
|
Long-Term
|
||||||||||
Name
|
2011 |
Maturities
|
Maturities
|
|||||||||
D&O Insurance
|
$ | 21,429 | $ | 21,429 | $ | - | ||||||
Habib Bank Line of Credit
|
5,404,608 | 5,404,608 | - | |||||||||
Bank Overdraft Facility
|
254,502 | 254,502 | - | |||||||||
Term Finance Facility
|
869,767 | 434,883 | 434,884 | |||||||||
Subsidiary Capital Leases
|
1,232,585 | 947,113 | 285,472 | |||||||||
$ | 7,782,891 | $ | 7,062,535 | $ | 720,356 |
As of September 30
|
As of June 30
|
|||||||
2011
|
2011
|
|||||||
Minimum Lease Payments
|
||||||||
Due FYE 9/30/11
|
$ | - | $ | 1,010,836 | ||||
Due FYE 9/30/12
|
995,967 | 209,260 | ||||||
Due FYE 9/30/13
|
208,513 | 115,346 | ||||||
Due FYE 9/30/14
|
80,910 | - | ||||||
Due FYE 9/30/15
|
- | - | ||||||
Total Minimum Lease Payments
|
1,285,389 | 1,335,442 | ||||||
Interest Expense relating to future periods
|
(90,703 | ) | (102,856 | ) | ||||
Present Value of minimum lease payments
|
1,194,686 | 1,232,585 | ||||||
Less: Current portion
|
(936,975 | ) | (947,113 | ) | ||||
Non-Current portion
|
$ | 257,711 | $ | 285,472 |
As of September 30
|
As of June 30
|
|||||||
2011
|
2011
|
|||||||
Computer Equipment and Software
|
$ | 552,905 | $ | 518,911 | ||||
Furniture and Fixtures
|
767,579 | 769,106 | ||||||
Vehicles
|
452,451 | 434,049 | ||||||
Building Equipment
|
302,216 | 302,216 | ||||||
Total
|
2,075,151 | 2,024,282 | ||||||
Less: Accumulated Depreciation
|
(905,411 | ) | (807,562 | ) | ||||
Net
|
$ | 1,169,740 | $ | 1,216,720 |
For the year ended September 30, 2011:
|
|||||||||
TYPE OF
|
MATURITY
|
INTEREST
|
BALANCE
|
||||||
LOAN
|
DATE
|
RATE
|
USD
|
||||||
Export Refinance
|
Every 6 months
|
11.00 | % | $ | 2,269,632 | ||||
Total
|
$ | 2,269,632 | |||||||
For the year ended June 30, 2011:
|
|||||||||
TYPE OF
|
MATURITY
|
INTEREST
|
BALANCE
|
||||||
LOAN
|
DATE
|
RATE
|
USD
|
||||||
Export Refinance
|
Every 6 months
|
11.00 | % | $ | 2,319,378 | ||||
Total
|
$ | 2,319,378 |
Issue Date
|
Balance net of BCF @
9/30/11
|
Current
Portion
|
Long Term
|
Maturity
Date
|
|||||||||
Sep-11
|
3,587,464 | - | 3,587,464 |
Sep-13
|
|||||||||
Total
|
3,587,464 | - | 3,587,464 | ||||||||||
Issue Date
|
Balance net of BCF @
6/30/11
|
Current
Portion
|
Long Term
|
Maturity
Date
|
|||||||||
Jul-08
|
2,745,524 | 2,745,524 | - |
Jul-11
|
|||||||||
Total
|
2,745,524 | 2,745,524 | - |
(A)
|
Shares Issued for Services to Related Parties
|
(B)
|
Share-Based Payment Transactions
|
(C)
|
Share Issued Against Cash Payments
|
OPTIONS:
|
Exercise
|
Aggregated
|
||||||||||
Issued by the Company
|
# of shares
|
Price
|
Intrinsic Value | |||||||||
Outstanding and exercisable, June 30, 2010
|
7,706,917 | $ | 0.30 to $5.00 | $ | - | |||||||
Granted
|
1,471,000 | $ | 0.65 to $1.25 | |||||||||
Exercised
|
(1,771,000 | ) | $ | 0.65 to $1.25 | ||||||||
Expired / Cancelled
|
(487,600 | ) | ||||||||||
Outstanding and exercisable, June 30, 2011
|
6,919,317 | $ | 0.30 to $5.00 | $ | 1,637,459 | |||||||
Granted
|
330,000 | $ | 0.50 | |||||||||
Exercised
|
(430,000 | ) | $ | 0.50 to $1.25 | ||||||||
Expired / Cancelled
|
||||||||||||
Outstanding and exercisable, September 30, 2011
|
6,819,317 | $ | 0.30 to $5.00 | $ | (113,682 | ) | ||||||
WARRANTS:
|
||||||||||||
Outstanding and exercisable, June 30, 2010
|
4,763,319 | $ | 1.65 to $3.70 | $ | - | |||||||
Granted
|
||||||||||||
Exercised
|
(3,879,028 | ) | $ | 0.31 | ||||||||
Expired
|
(706,061 | ) | $ | 1.68 | ||||||||
Outstanding and exercisable, June 30, 2011
|
178,230 | $ | 1.65 to $3.70 | $ | 219,119 | |||||||
Granted
|
1,408,451 | $ | 0.895 | |||||||||
Exercised
|
||||||||||||
Expired
|
||||||||||||
Outstanding and exercisable, September 30, 2011
|
1,586,681 | $ | 0.31 to $3.70 | $ | (417,907 | ) |
Exercise Price
|
Number
Outstanding
and
Exercisable
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Ave
Exericse
Price
|
||||||||||
OPTIONS:
|
|||||||||||||
Issued by the Company
|
|||||||||||||
$ | 0.01 - $0.99 | 1,406,000 | 7.24 | 0.65 | |||||||||
$ | 1.00 - $1.99 | 1,933,317 | 3.89 | 1.89 | |||||||||
$ | 2.00 - $2.99 | 2,830,000 | 3.58 | 2.70 | |||||||||
$ | 3.00 - $5.00 | 650,000 | 2.29 | 4.38 | |||||||||
Totals
|
6,819,317 | 4.30 | 2.21 | ||||||||||
WARRANTS:
|
|||||||||||||
$ | 0.31 - $1.99 | 1,574,181 | 4.76 | 0.85 | |||||||||
$ | 3.00 - $5.00 | 12,500 | 0.03 | 3.70 | |||||||||
Totals
|
1,586,681 | 4.72 | 0.87 |
Risk-free interest rate | 2.01% | ||
Expected life | 1 year | ||
Expected volatility | 90% |
Risk-free interest rate | 2.01% | ||
Expected life | 1 year | ||
Expected volatility | 90% |
Risk-free interest rate | 1.81% | ||
Expected life | 4 months | ||
Expected volatility | 90% |
Risk-free interest rate | 1.65% | ||
Expected life | 1 month | ||
Expected volatility | 99% |
Risk-free interest rate | 1.65% | ||
Expected life | 1 month | ||
Expected volatility | 99% |
Risk-free interest rate | 2.16% | ||
Expected life | 1 month | ||
Expected volatility | 99% |
Risk-free interest rate | 2.4% | ||
Expected life | 1 month | ||
Expected volatility | 99% |
Risk-free interest rate | 3.13% | ||
Expected life | 1 month | ||
Expected volatility | 99% |
Risk-free interest rate | 3.13% | ||
Expected life | 1 month | ||
Expected volatility | 100% |
2011
|
2010
|
|||||||
Revenues from unaffiliated customers:
|
||||||||
North America
|
$ | 909,069 | $ | 1,242,982 | ||||
Europe
|
916,618 | 2,089,979 | ||||||
Asia - Pacific
|
4,403,020 | 5,070,110 | ||||||
Consolidated
|
$ | 6,228,708 | $ | 8,403,071 | ||||
Operating income (loss):
|
||||||||
Corporate headquarters
|
$ | (905,144 | ) | $ | (1,056,548 | ) | ||
North America
|
28,714 | 321,093 | ||||||
Europe
|
(128,395 | ) | 1,079,667 | |||||
Asia - Pacific
|
178,382 | 1,681,317 | ||||||
Consolidated
|
$ | (826,442 | ) | $ | 2,025,530 | |||
Net income (loss) after taxes and before minority interest:
|
||||||||
Corporate headquarters
|
$ | (1,208,576 | ) | $ | (1,481,129 | ) | ||
North America
|
28,526 | 324,250 | ||||||
Europe
|
(58,419 | ) | 1,016,852 | |||||
Asia - Pacific
|
(82,980 | ) | 2,681,517 | |||||
Consolidated
|
$ | (1,321,450 | ) | $ | 2,541,489 | |||
Identifiable assets:
|
||||||||
Corporate headquarters
|
$ | 14,310,339 | $ | 17,043,137 | ||||
North America
|
1,856,621 | 2,278,499 | ||||||
Europe
|
4,184,885 | 4,783,665 | ||||||
Asia - Pacific
|
60,877,049 | 52,068,480 | ||||||
Consolidated
|
$ | 81,228,895 | $ | 76,173,781 | ||||
Depreciation and amortization:
|
||||||||
Corporate headquarters
|
$ | 17,705 | $ | 153,724 | ||||
North America
|
75,434 | 132,077 | ||||||
Europe
|
121,448 | 179,440 | ||||||
Asia - Pacific
|
766,191 | 432,141 | ||||||
Consolidated
|
$ | 980,778 | $ | 897,383 | ||||
Capital expenditures:
|
||||||||
Corporate headquarters
|
$ | - | $ | - | ||||
North America
|
1,444 | 3,405 | ||||||
Europe
|
- | - | ||||||
Asia - Pacific
|
1,426,440 | 679,271 | ||||||
Consolidated
|
$ | 1,427,884 | $ | 682,676 |
2011
|
2010
|
|||||||
$ | 1,075,850 | $ | 3,477,793 | |||||
2,037,206 | 1,669,919 | |||||||
3,115,652 | 3,255,360 | |||||||
Total
|
$ | 6,228,708 | $ | 8,403,071 |
SUBSIDIARY
|
Non Controlling
Interest %
|
Non-Controlling
Interest at
September 30, 2011
|
||||||
NetSol PK
|
39.48 | % | $ | 11,097,960 | ||||
NetSol-Innovation
|
49.90 | % | 1,122,423 | |||||
Total
|
$ | 12,220,383 | ||||||
SUBSIDIARY
|
Non Controlling
Interest %
|
Non-Controlling
Interest at
June 30, 2011
|
||||||
NetSol PK
|
39.48 | % | $ | 11,531,694 | ||||
NetSol-Innovation
|
49.90 | % | 968,790 | |||||
Total
|
$ | 12,500,484 |
•
|
Further expansion in the China market by adding new customers.
|
•
|
Formalized the Joint Venture Agreement with Brasilinvest Group to launch a joint venture in Brazil.Formed an e-commerce division, Vroozi Inc., to provide a dedicated sales and delivery channel for the company’s existing smartOCI™ product line, as well as developing the next generation of e-commerce and search engine technologies. Vroozi Inc. formed this past quarter, is a wholly owned subsidiary of NetSol Technologies, Inc.Signed an agreement with a major U.S. aerospace defense contractor to implement NetSol’s smartOCI™ search engine software in its SAP e-Procurement environment.
|
•
|
Signed an agreement with a major U.S. chipmaker to implement smartOCI™ search engine in its SAP e-Procurement environment.
|
•
|
Won a major contract in the area of ‘Information Security’ with a leading telecom company in Pakistan.NetSol Innovation, a majority owned subsidiary, recently expanded its services to Australia, Europe and North America. In turn, the demand of NetSol PK resources has increased to support the growing development and programming of our JV partner.
|
•
|
Signed a new contract to supply LeaseSoft to a leading independent UK leasing and asset finance company. A major European Bank went live with the LeaseSoft portal application. The deployment included full integration with a Europe-wide credit search agency to provide enhanced data accuracy and better informed credit decisions.
|
•
|
A major European auto finance captive and one of the Company’s longest running client went live with NFS in India. This was delivered and implemented by NetSol Thai team in Bangkok.
|
•
|
Restructured global operational units by streamlining the regional delivery capabilities and sales organization Consolidated from three global regions to two regions with Region 1 the Americas and Europe and Region 2 Asia Pacific and the Middle East.
|
o
|
The remarkable success and demand of NFS™ in China has led to long term planning to expand in the Chinese market. The overall steady economic growth in China and historic transformation of the auto sector (China outsold cars against the United States in number of units in 2009) combined with growing consumer spending, warrants hiring additional local Chinese staff and infrastructure improvement. Management is poised to create a ‘proximity development center’ or PDC and clients support team to better serve our growing customers base. The Chinese market offers huge opportunities in the auto sectors in comparison with the US market, thus offers a very strong growth opportunities for NFS.
|
o
|
NetSol’s Beijing office more than doubled its office space on March 1, 2011; new local Chinese staff has been added and additional hiring continues. The process of forming a new wholly owned subsidiary by the Company, as a Wholly Owned Foreign Enterprise under Chinese laws, is in progress and is expected to be completed in the current calendar year. NetSol is positioning China to become a dominant market for lending enterprise solutions for captive multinationals and local Chinese companies, including equipment finance, big ticket leasing markets and the banking industry. In the lease and finance domain NetSol can claim the de facto leadership position in the rapidly growing Chinese market.
|
o
|
Thailand has emerged as a new market for banking and auto finance. NetSol has formalized its presence in Bangkok by establishing a wholly owned subsidiary, NetSol Thai. The office space in Bangkok has been enhanced with new hires of local and international staff to address and support a very rapidly growing market. The pipeline of new customers is growing from the markets in Japan, South Korea, Australia, India and other regional markets. These markets will be serviced and supported from the Thailand office with strong sales and client support team. The Bangkok facility is intended to become the prime location for delivery and implementation for global customers and partners particularly in Asia Pacific.
|
o
|
To date, few US-based fortune 500 captive auto finance companies have shown serious interest in NFS™. We expect, however, to achieve stronger results through strengthening NetSol’s North American operation by augmenting the service levels of the local technical team with effective integration of the NetSol PK center of excellence, resulting in a seamless integration of core project delivery and global support teams. Recently we have noticed elongated decision making by C level executives for NFS solutions and this is primarily due to challenging economic times in developed markets and economies. However NetSol is experiencing a growing interest in our next generation NFS solution which is positioned to go to market by late 2012 to expand our revenue base.
|
o
|
The new and fast growing manifestations of e-commerce, such as Cloud computing, are being utilized by some of our offerings and will be further explored by us for other offerings. Our new IP, AKA, smartOCI™ has been demonstrated and presented to major fortune 500 companies in the US as an on-demand, catalogue content management system. The demand of e-procurement search engine seems robust and attractive. Several new license sales activities are in the pipeline that led to formation of new subsidiary known as Vroozi, Inc. Presently smartOCI™ is the main asset in this entity while we explore other channels of growth in e-commerce and search engine space. There has been a surge of interest amongst fortune 500 corporations for demos and workshops for smartOCI™ in recent months.
|
o
|
Europe continues to experience a severe recession coupled with regional debt crises.. Despite this, NetSol Europe’s operations have been steady. Further, the business outlook is positive and, if this continues, NTE is expected to expand its product line and hire stronger management personnel. Our relationship with existing clientele is very strong and we are cautiously expanding the sales and marketing efforts in the region.
|
o
|
The market of the Kingdom of Saudi Arabia is robust, rich and well capitalized, offering vast opportunities for NetSol through our joint venture. Recently, there have been a few new local IT contracts awarded but our vision is based on long term and high value projects in the defense, public, infrastructure and multinational auto captive markets. In order to be equal partners with a major conglomerate, Atheeb Group, a $2 billion group in revenue, we need to have the serious financial wherewithal and resources to bid on major projects exceeding $100 million each in value. Currently, the joint venture has 10 employees based in Riyadh with direct delivery and implementation support from NetSol PK. The long term plan is to expand staffing levels and provide financial capability to bid in major projects with Atheeb. We are noticing an impressive traction for NFS in the Kingdom markets and ANSCL teams are aggressively positioning NetSol overall offering in this robust and rich economy.
|
o
|
Our NFS™ suite of products is currently undergoing a major initiative towards developing the next generation of solutions. The Company believes that this would change the landscape for NetSol and increase both demand and the market. We are in the middle of developing a comprehensive sales and marketing plan requiring new personnel, markets and investment.
|
o
|
In order to maximize the market and product potential of our SAP and Ecommerce line, highlighted by our smartOCI™ product, we are spinning this line off into its own operational entity. We believe this will better enhance product and market development by providing a dedicated management and fulfillment staff.
|
·
|
Expansion in China, Thailand and other emerging markets, including Latin America.
|
·
|
Expanding the North American operation to roll out NetSol new generation solutions and enter Cloud Computing Solutions.
|
·
|
Diversify in Ecommerce space such as smartOCI™ search engine.
|
·
|
Support of bigger IT related public and defense sectors projects in the Kingdom of Saudi Arabia with our joint venture partner.
|
·
|
Capital Expenditures for our next generation products, technology and infrastructure.
|
·
|
Improve credit ratings for our new big customers and win the confidence of new and existing investors.
|
·
|
Hiring and training of programmers, engineers, sales and marketing.
|
·
|
Working to grow our institutional investor base.
|
·
|
Sharing the NetSol story with sell side analysts, funds, portfolio managers and the financial media.
|
·
|
Aggressively positioning NetSol in front of major investors’ conferences and road shows to be organized by our newly hired IR firm and other major institutions.
|
·
|
Utilizing US mainstream media to highlight NetSol’s image and ‘niche’ business offering.
|
·
|
Founding management’s anticipated continued investment in the Company displaying management’s belief in NetSol’s potential to new investors.
|
·
|
Dedicating and focusing efforts to improve shareholder value.
|
·
|
Improve pricing, sales volume and fee structures.
|
·
|
Continue consolidation and reevaluating operating margins as ongoing activities.
|
·
|
Streamline further cost of goods sold to improve gross margins to historical levels over 60%, as sales ramp up.
|
·
|
Generate higher revenues per employee, enhance productivity and lower cost per employee.
|
·
|
Optimize the utilization of NetSol’s best talent and resources, infrastructure, processes and disciplines to maximize the bottom-line and fully leverage the cost arbitrage.
|
·
|
Grow process automation and leverage the best practices of CMMI level 5. Global delivery concept and integration will further improve both gross and net margins.
|
·
|
Cost efficient management of every operation and continue further consolidation to improve bottom line.
|
·
|
Create more visibility and predictability by implementing SaaS model in mature markets. Retire Debt to reduce the interest cost significantly and to make every effort to avoid any one time charges.
|
·
|
The global recession and consolidations have opened doors for low cost solution providers such as NetSol. The BestShoring® model of NetSol is a catalyst in today’s environment.
|
·
|
Global economic pressures and the recession have shifted users of IT processes and technology to utilize both offshore and onshore solutions providers, to control costs and improve ROIs.
|
·
|
Serious interest in NetSol’s next generation solution has been expressed by a few global companies. Demos and workshops with key global clients and partners of have been very well received. Hence, the new generation solution appears to be gaining momentum.
|
·
|
GMAC – China, the implementation of first R2 for Wholesale Finance (WFS) is on track setting a strong foundation for growth. Two other key modules (CMS / CAP) are in the development stage and are expected to be marketed in fiscal 2012.
|
·
|
China has become the world’s second largest economy, continuing to grow by over 9% a year while growth in other industrial nations has declined or grown only marginally.
|
·
|
China’s automobile and banking sectors have been unaffected by the global meltdown and their recent automobile sales statistics have outperformed all other economies.
|
·
|
As reported by the Associated Press, China surpassed the US as the number one automobile market in auto sales. JD Powers & Associates anticipated further strong growth in future auto sales. It is anticipated that this market opportunity will result in further penetration by NetSol into China’s burgeoning leasing and finance market.
|
·
|
E-Commerce, new technologies, innovations and online activities are gaining momentum in many verticals. New areas for diversification are opening for NetSol.
|
·
|
The surviving IT companies, such as NetSol, with price advantage and a global presence, will gain further momentum as economic indicators turn positive. The bigger customers and targeted verticals are much more cost conscious and are seeking a better rate of return on investments in IT services. NetSol has an edge due to its BestShoring® model and proven track record of delivery and implementations worldwide.
|
·
|
The Kingdom of Saudi Arabia is investing billions in healthcare, education, IT, infrastructure and many other new sectors. This makes it a most promising market for the Atheeb NetSol joint venture.
|
·
|
Noticeable new interest emanating from the Latin America markets for NFS™.
|
·
|
NetSol has never lost a product customer despite the recent severe recession. The dependency of our blue chip clients on NetSol solutions has further elevated new enhancements and services orders in the US.
|
·
|
Improved outlook and earnings of bellwether technology companies in USA, reflecting the turnaround of this sector after recession.
|
·
|
Global opportunities for NetSol to diversify its delivery capabilities to Bangkok, Thailand and such other new emerging economies that offer geopolitical stability and low cost IT resources, thereby reducing dependency upon the Lahore technology campus.
|
·
|
Our global multi-national clients have continued to pursue deeper relationships in newer regions and countries. This reflects our customers’ dependencies and satisfaction with our NetSol Financial Suite of products.
|
·
|
The levy of Indian IT sector excise tax of 35% (NASSCOM) on software exports is very positive for NetSol. In Pakistan there is a 15 year tax holiday on IT exports of services. There are 5 more years remaining on this tax incentive.
|
·
|
Geopolitical unrest due to extremism in the regions of Pakistan and Afghanistan.
|
·
|
Significant strains in US-Pakistan relations.
|
·
|
Recent turbulent political developments in the Arab world might delay activities and plans.
|
·
|
Natural disasters in Japan, Thailand and Pakistan have damaged these economies.
|
·
|
The emergence of many smaller players offering IT solutions in China has resulted in greater price competition.
|
·
|
The fear of renewed recession in light of U.S debt down-grade and the continued sluggish European market, could lead to our business in North America and Europe suffering.
|
·
|
Dramatic and deep global recession has created a serious decline in business spending causing significant budget cuts for many of the Company’s target verticals.
|
·
|
Tightened liquidity and credit restrictions in consumer spending has either delayed or reduced spending on business solutions and systems, squeezing IT budgets and extending decision making cycles.
|
·
|
Tighter internal processes and budgets will cause delays in the receivables from a few clients.
|
·
|
Anticipated worsening US deficit and a rise in inflation in coming years would put further stress on consumers and business spending.
|
·
|
Volatility in oil prices, Euro zone in European markets and uncertainty overall in global economies could deter the growth and GDP in the US.
|
·
|
Unrest and growing war in Afghanistan could increase the migration of both refugees and extremists to Pakistan, thus creating domestic and regional challenges.
|
·
|
Management believes that the Pakistan rupee is overvalued and that once adjustments are made there might be both positive and negative impacts on the financial statements of the Company. Positive impact could be in terms of the price of our services while translating Pakistan revenues at a higher exchange rate in the consolidated revenue statement might result in negative impact on the financial statements in future.
|
2011
|
2010
|
|||||||||||||||
Revenue
|
%
|
Revenue
|
%
|
|||||||||||||
Corporate headquarters
|
$ | - | 0.00 | % | $ | - | 0.00 | % | ||||||||
North America:
|
||||||||||||||||
Netsol Tech NA
|
909,069 | 14.59 | % | 1,242,982 | 14.79 | % | ||||||||||
Vroozi
|
- | 0.00 | % | - | ||||||||||||
909,069 | 14.59 | % | 1,242,982 | 14.79 | % | |||||||||||
Europe:
|
||||||||||||||||
Netsol UK
|
- | 0.00 | % | - | 0.00 | % | ||||||||||
Netsol Tech Europe
|
916,618 | 14.72 | % | 2,089,979 | 24.87 | % | ||||||||||
916,618 | 14.72 | % | 2,089,979 | 24.87 | % | |||||||||||
Asia-Pacific:
|
||||||||||||||||
Netsol Tech (PK)
|
3,184,046 | 51.12 | % | 4,064,454 | 48.37 | % | ||||||||||
Netsol-Innovation
|
902,195 | 14.48 | % | 666,805 | 7.94 | % | ||||||||||
Netsol Connect
|
149,795 | 2.40 | % | 132,275 | 1.57 | % | ||||||||||
Netsol-Abraxas Australia
|
68,782 | 1.10 | % | 2,844 | 0.03 | % | ||||||||||
Netsol-Thailand
|
98,202 | 1.58 | % | 203,732 | 2.42 | % | ||||||||||
4,403,020 | 70.69 | % | 5,070,110 | 60.34 | % | |||||||||||
Total
|
$ | 6,228,708 | 100.00 | % | $ | 8,403,071 | 100.00 | % |
For the Three Months
|
||||||||||||||||
Ended September 30,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
Net Revenues:
|
%
|
%
|
||||||||||||||
License fees
|
$ | 1,075,850 | 17.27 | % | $ | 3,477,793 | 41.39 | % | ||||||||
Maintenance fees
|
2,037,206 | 32.71 | % | 1,669,919 | 19.87 | % | ||||||||||
Services
|
3,115,651 | 50.02 | % | 3,255,360 | 38.74 | % | ||||||||||
Total revenues
|
6,228,708 | 100.00 | % | 8,403,071 | 100.00 | % | ||||||||||
Cost of revenues:
|
||||||||||||||||
Salaries and consultants
|
2,383,411 | 38.26 | % | 1,986,888 | 23.64 | % | ||||||||||
Travel
|
285,673 | 4.59 | % | 231,612 | 2.76 | % | ||||||||||
Repairs and maintenance
|
74,194 | 1.19 | % | 57,058 | 0.68 | % | ||||||||||
Insurance
|
35,868 | 0.58 | % | 30,992 | 0.37 | % | ||||||||||
Depreciation and amortization
|
789,105 | 12.67 | % | 630,941 | 7.51 | % | ||||||||||
Other
|
516,409 | 8.29 | % | 243,138 | 2.89 | % | ||||||||||
Total cost of revenues
|
4,084,660 | 65.58 | % | 3,180,629 | 37.85 | % | ||||||||||
Gross profit
|
2,144,048 | 34.42 | % | 5,222,442 | 62.15 | % | ||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
700,281 | 11.24 | % | 483,970 | 5.76 | % | ||||||||||
Depreciation and amortization
|
191,674 | 3.08 | % | 266,443 | 3.17 | % | ||||||||||
Bad debt expense
|
192,250 | 3.09 | % | 254,632 | 3.03 | % | ||||||||||
Salaries and wages
|
806,564 | 12.95 | % | 920,264 | 10.95 | % | ||||||||||
Professional services, including non-cash compensation
|
186,749 | 3.00 | % | 139,085 | 1.66 | % | ||||||||||
General and adminstrative
|
892,972 | 14.34 | % | 1,132,519 | 13.48 | % | ||||||||||
Total operating expenses
|
2,970,490 | 47.69 | % | 3,196,913 | 38.04 | % | ||||||||||
Income from operations
|
(826,442 | ) | -13.27 | % | 2,025,530 | 24.10 | % | |||||||||
Other income and (expenses)
|
||||||||||||||||
Loss on sale of assets
|
(1,641 | ) | -0.03 | % | (14,794 | ) | -0.18 | % | ||||||||
Interest expense
|
(251,430 | ) | -4.04 | % | (315,644 | ) | -3.76 | % | ||||||||
Interest income
|
32,805 | 0.53 | % | 84,461 | 1.01 | % | ||||||||||
Gain (loss) on foreign currency exchange transactions
|
(120,906 | ) | -1.94 | % | 1,073,894 | 12.78 | % | |||||||||
Share of net loss from equity investment
|
(100,000 | ) | -1.61 | % | (70,438 | ) | -0.84 | % | ||||||||
Beneficial conversion feature
|
(21,583 | ) | -0.35 | % | (177,411 | ) | -2.11 | % | ||||||||
Other expense
|
(7,718 | ) | -0.12 | % | (55,554 | ) | -0.66 | % | ||||||||
Total other income (expenses)
|
(470,474 | ) | -7.55 | % | 524,515 | 6.24 | % | |||||||||
Net income (loss) before income taxes
|
(1,296,916 | ) | -20.82 | % | 2,550,045 | 30.35 | % | |||||||||
Income taxes
|
(24,534 | ) | -0.39 | % | (8,556 | ) | -0.10 | % | ||||||||
Net income (loss) after tax
|
(1,321,451 | ) | -21.22 | % | 2,541,489 | 30.24 | % | |||||||||
Non-controlling interest
|
(137,258 | ) | -2.20 | % | (974,508 | ) | -11.60 | % | ||||||||
Net income (loss) attibutable to NetSol
|
(1,458,708 | ) | -23.42 | % | 1,566,980 | 18.65 | % |
For the Three Months
|
||||||||
Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Net cash provided by (used in) operating activities
|
0.884 | (0.114 | ) | |||||
Net cash used in investing activities
|
(3.294 | ) | (2.687 | ) | ||||
Net cash provided by financing activities
|
1.410 | 0.952 |
10.45
|
Amendment to Employment Agreement of Najeeb Ghauri dated November 7, 2011
|
10.46
|
Amendment to Employment Agreement of Naeem Ghauri dated November 7, 2011
|
10.47
|
Amendment to Employment Agreement of Salim Ghauri dated November 7, 2011
|
10.48
|
Amendment to Employment Agreement of Boo-Ali Siddiqui dated November 7, 2011
|
10.49
|
Amendment to Employment Agreement of Patti L. W. McGlasson dated November 7, 2011
|
31.1
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO)
|
31.2
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO)
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO)
|
32.2
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO)
|
NETSOL TECHNOLOGIES, INC.
|
||||
Date:
|
8-Nov-11
|
/s/ Najeeb Ghauri
|
||
NAJEEB GHAURI
|
||||
Chief Executive Officer
|
||||
Date:
|
8-Nov-11
|
/s/Boo-Ali Siddiqui
|
||
BOO-ALI SIDDIQUI
|
||||
Chief Financial Officer
|
||||
Principal Accounting Officer
|
Employee
|
|||||
By:
|
|||||
Najeeb Ghauri
|
|||||
NetSol Technologies, Inc.
|
|||||
By:
|
By:
|
||||
Boo Ali Siddiqui
|
Patti L. W. McGlasson
|
||||
Chief Financial Officer
|
Secretary
|
||||
By:
|
|||||
Mark Caton
|
|||||
Chairman of Compensation
|
|||||
Committee
|
|||||
Employee
|
|||||
By:
|
|||||
Naeem Ghauri
|
|||||
NetSol Technologies, Inc.
|
|||||
By:
|
By:
|
||||
Boo Ali Siddiqui
|
Patti L. W. McGlasson
|
||||
Chief Financial Officer
|
Secretary
|
||||
By:
|
|||||
Mark Caton
|
|||||
Chairman of Compensation
|
|||||
|
Committee
|
Employee
|
|||||
By:
|
|||||
Salim Ghauri
|
|||||
NetSol Technologies, Inc.
|
|||||
By:
|
By:
|
||||
Boo Ali Siddiqui
|
Patti L. W. McGlasson
|
||||
Chief Financial Officer
|
Secretary
|
||||
By:
|
|||||
Mark Caton
|
|||||
Chairman of Compensation
|
|||||
|
Committee
|
Employee
|
|||||
By:
|
|||||
Boo-Ali Siddiqui
|
|||||
NetSol Technologies, Inc.
|
|||||
By:
|
By:
|
||||
Najeeb Ghauri
|
Patti L. W. McGlasson
|
||||
Chief Executive Officer
|
Secretary
|
Employee
|
|||||
By:
|
|||||
Patti L. W. McGlasson
|
|||||
NetSol Technologies, Inc.
|
|||||
By:
|
By:
|
||||
Najeeb Ghauri
|
Boo-Ali Siddiqui
|
||||
Chief Executive Officer
|
Chief Financial Officer
|
Date: November 8, 2011
|
/s/Najeeb Ghauri
|
|
Najeeb Ghauri,
|
||
Chief Executive Officer
|
||
Principal executive officer
|
Date: November 8, 2011
|
/s/ Boo-Ali Siddiqui
|
|
Boo-Ali Siddiqui
|
||
Chief Financial Officer
|
||
Principal Accounting Officer
|
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $) | Sep. 30, 2011 | Jun. 30, 2011 |
---|---|---|
Common stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 95,000,000 | 95,000,000 |
Common stock, shares issued | 56,076,355 | 55,531,855 |
Common stock, shares outstanding | 56,076,355 | 55,531,855 |
Note 18 - Income Taxes | 3 Months Ended |
---|---|
Sep. 30, 2011 | |
Income Tax Disclosure [Text Block] |
NOTE
18 – INCOME TAXES
Our
effective tax rates were approximately 1.89% and 0.34% for
the three months ended September 30, 2011 and 2010,
respectively. Our effective tax rate was lower than the U.S.
federal statutory rate due to the fact that our operations
are carried out in foreign jurisdictions, which are subject
to lower income tax rates. Also, the Company has
established a full valuation allowance as management believes
it is more likely than not that these assets will not be
realized in the future.
|
Document And Entity Information | 3 Months Ended | |
---|---|---|
Sep. 30, 2011 | Nov. 07, 2011 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NETSOL TECHNOLOGIES INC | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --06-30 | |
Entity Common Stock, Shares Outstanding | 56,503,855 | |
Amendment Flag | false | |
Entity Central Index Key | 0001039280 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Well-known Seasoned Issuer | No | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q1 |
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Note 7 - Property, Plant and Equipment | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment Disclosure [Text Block] |
NOTE
7 - PROPERTY AND EQUIPMENT
Property
and equipment, net, consisted of the following:
For
the three months ended September 30, 2011 and 2010,
depreciation expense totaled $636,568 and $369,565
respectively. Of these amounts, $462,543 and
$256,484 respectively, are reflected as part of cost of goods
sold.
The
Company’s capital work in progress consists of ongoing
enhancements to its facilities and infrastructure as
necessary to meet the Company’s expected long-term
growth needs. The Company recorded capitalized interest of
$77,627 and $278,308as of September 30, 2011 and June 30,
2011, respectively.
|
Note 12 - Debts | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt and Capital Leases Disclosures [Text Block] |
NOTE
12 - DEBTS
(A)
LOANS AND LEASES PAYABLE
Notes
payable consisted of the following:
The
Company finances Directors’ and Officers’
(“D&O”) liability insurance as well as Errors
and Omissions (“E&O”) liability insurance,
for which the total balances are renewed on an annual basis
and as such are recorded in current maturities. The interest
rate on the insurance financing was 0.49% as of September 30,
2011 and June 30, 2011. Interest paid during the period-ended
September 30, 2011 and 2010 was nominal.
In
April 2008, the Company entered into an agreement with Habib
American Bank to secure a line of credit to be collateralized
by Certificates of Deposit held at the bank. The interest
rate on this line of credit is variable and was 2% as of
September 30, 2011 and June 30, 2011, respectively. Interest
expense for the three months ended September 30, 2011 and
2010 was $20,114 and $40,123, respectively. During the
quarter ended September 30, 2011, the company redeemed
certificate of deposits worth $3 million. Consequently, the
line of credit was also reduced to $2,583,594.
During
the year ended June 30, 2008, the Company’s subsidiary,
NTE, entered into an overdraft facility with HSBC Bank plc
whereby the bank would cover any overdrafts up to
£200,000, approximately $312,560. The annual interest
rate is 3.25% over the bank’s sterling base rate, which
was 5.00% as of September 30, 2011 and June 30, 2011,
respectively.
The Company’s subsidiary, NetSol PK, entered into a term finance facility from Askari Bank to finance the construction of a new building. The total amount of the facility is Rs. 200,000,000 or approximately $2,269,632 (secured by the first charge of Rs. 580 million over the land, building and equipment of the company). The interest rate is 2.75% above the six-month Karachi Inter Bank Offering Rate. As on June 30, 2011, the subsidiary had used Rs. 75,000,000 or approximately $851,112 of which $425,556 was shown as long term liabilities and the remainder of $425,556 as current maturity. As of the three months ended September 30, 2011, the Company paid back another installment of Rs. 12,500,000 reducing the outstanding principal amount to Rs. 62,500,000 or approximately $709,260 of which $425,556 is shown as long term liabilities and the remainder of $283,704 as current maturity. Interest expense for the three months ended September 30, 2011 and 2010 was $35,091 and $44,170, respectively which was capitalized by the company.
The
Company leases various fixed assets under capital lease
arrangements expiring in various years through 2015. The
assets and liabilities under capital leases are recorded at
the lower of the present value of the minimum lease payments
or the fair value of the asset. The assets are depreciated
over the lesser of their related lease terms or their
estimated useful lives and are secured by the assets
themselves. Depreciation of assets under capital leases is
included in depreciation expense for the three months ended
September 30, 2011 and 2010.
Following
is the estimated aggregate minimum future lease payments
under capital leases:
Following is a summary of fixed assets held under capital leases:
Interest
expense for the three months ended September 30, 2011 and
2010 was $18,688 and $8,790, respectively.
(B)
LOANS PAYABLE- BANK
The
Company’s subsidiary, NetSol PK, has a loan with a
bank, secured by the company’s assets. This loan
consisted of the following:
Interest
expense for the three months ended September 30, 2011 and
2010 was $19,776 and $51,812, respectively.
(C)
OTHER PAYABLE – ACQUISITION
On
June 30, 2006, the Company acquired McCue Systems, Inc.
(“McCue”), a California corporation (subsequently
renamed as NetSol Technologies North America, Inc.) The total
purchase price was $7,080,385, including $3,784,635 of cash
and 1,712,332 shares of the Company’s common stock. Of
the total purchase price, the accompanying consolidated
financial statements include certain amounts payable to McCue
shareholders that have not been located as of the date of
this report.
As
of the period-ended September 30, 2011 and June 30, 2011, the
remaining cash due of $103,226 is shown as “Other
Payable – Acquisition” and the remaining stock to
be issued of 46,704 shares at an average price of $1.89 is
shown in “Shares to be issued” in the
accompanying consolidated financial statements. Amounts
payable represent the remaining McCue shareholders that have
not been located as of the date of this report.
|
Note 3 - New Accounting Pronouncements | 3 Months Ended |
---|---|
Sep. 30, 2011 | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] |
NOTE
3 - NEW ACCOUNTING PRONOUNCEMENTS:
In
September 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update No. 2011-08,
Intangibles—Goodwill
and Other (Topic 350)—Testing Goodwill for
Impairment (ASU 2011-08), to allow entities to
use a qualitative approach to test goodwill for impairment.
ASU 2011-08 permits an entity to first perform a
qualitative assessment to determine whether it is more
likely than not that the fair value of a reporting unit is
less than its carrying value. If it is concluded that this
is the case, it is necessary to perform the currently
prescribed two-step goodwill impairment test. Otherwise,
the two-step goodwill impairment test is not required. ASU
2011-08 is effective for us in fiscal 2013 and earlier
adoption is permitted. We are currently evaluating the
impact of our pending adoption of ASU 2011-08 on our
consolidated financial statements.
In June
2011, the FASB issued Accounting Standards Update
No. 2011-05, Comprehensive
Income (Topic 220)—Presentation of Comprehensive
Income (ASU
2011-05), to require an entity to present the total of
comprehensive income, the components of net income, and the
components of other comprehensive income either in a single
continuous statement of comprehensive income or in two
separate but consecutive statements. ASU 2011-05 eliminates
the option to present the components of other comprehensive
income as part of the statement of equity. ASU 2011-05 is
effective for us in our first quarter of fiscal 2013 and
should be applied retrospectively. We are currently
evaluating the impact of our pending adoption of ASU 2011-05
on our consolidated financial statements.
In May
2011, the FASB issued Accounting Standards Update
No. 2011-04, Amendments
to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and International Financial
Reporting Standards (Topic 820)—Fair Value
Measurement (ASU
2011-04), to provide a consistent definition of fair value
and ensure that the fair value measurement and disclosure
requirements are similar between U.S. Generally Accepted
Accounting Principles (GAAP) and International Financial
Reporting Standards. ASU 2011-04 changes certain fair value
measurement principles and enhances the disclosure
requirements particularly for Level 3 fair value measurements
(as defined in Note 3 below). ASU 2011-04 is effective for us
in our fourth quarter of fiscal 2012 and should be applied
prospectively. We are currently evaluating the impact of our
pending adoption of ASU 2011-04 on our consolidated financial
statements.
|
Note 9 - Goodwill | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill Disclosure [Text Block] |
NOTE
9 – GOODWILL
Goodwill
represents the excess of the aggregate purchase price over
the fair value of the net assets acquired in prior period
businesses combinations. Goodwill was comprised of the
following amounts:
There
was no impairment of the goodwill for the periods ended
September 30, 2011 and June 30, 2011.
|
Note 14 - Stockholders' Equity | 3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||
Stockholders' Equity Note Disclosure [Text Block] | NOTE
14 - STOCKHOLDERS’ EQUITY:
During
the periods ended September 30, 2011 and June 30, 2011, the
Company issued a total of 22,500 and 442,500 shares of
restricted common stock for services rendered by the officers
of the company. The issuances were approved by both the
compensation committee and the board of directors. These
shares were valued at the fair market value of $37,575 and
$528,900 respectively. The expense of $37,575 was recorded in
the year ended June 30, 2011.
During
the periods ended September 30, 2011 and June 30, 2011, the
Company issued a total of 80,000 and 90,000 shares of
restricted common stock for services rendered by the
independent members of the Board of Directors as part of
their board compensation. The issuances were approved by both
the compensation committee and the board of directors. These
shares were valued at the fair market value of $133,600 and
$135,300 respectively. The expense of $133,600 was recorded
in the year ended June 30, 2011.
During
the periods ended September 30, 2011 and June 30, 2011, the
Company issued a total of nil and 139,881 shares of its
common stock to employees as required according to the terms
of their employment agreements valued at nil and $33,300,
respectively.
During
the periods ended September 30, 2011 and June 30, 2011, the
Company issued a total of 12,000 and 337,857 shares of its
common stock for provision of services to unrelated
consultants valued at $16,200 and $152,543,
respectively.
During
the periods ended September 30, 2011 and June 30, 2011, the
Company issued a total of nil and 5,106,756 shares of its
common stock against cash valued of nil and $4,106,250,
respectively.
|
Note 10 - Investment Under Equity Method | 3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments Disclosure [Text Block] |
NOTE
10 – INVESTMENT UNDER EQUITY METHOD
On
April 10, 2009, the Company entered into an agreement to form
a joint venture with the Atheeb Trading Company, a member of
the Atheeb Group (“Atheeb”). The joint venture
entity, Atheeb NetSol Saudi Company Ltd., is a company
organized under the laws of the Kingdom of Saudi Arabia. The
venture was formed with an initial capital contribution of
$268,000 by the Company and $266,930 by Atheeb with a profit
sharing ratio of 50.1:49.9, respectively. The final formation
of the company was completed on March 7, 2010. The joint
venture was accounted for as an equity method investment as
the Company has not established control over the affairs of
Atheeb NetSol Saudi Company Ltd. due to its minority
representation on the board of directors.
The
Company's investment in equity for the period ended September
30, 2011 was as follows:
|
Ntoe 8 - Intangible assets | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets Disclosure [Text Block] |
NOTE
8 - INTANGIBLE ASSETS:
(A)
Product Licenses
Product
licenses include original license issue, renewals,
enhancements, copyrights, trademarks, and trade names.
Product licenses included unamortized software development
and enhancement costs of $20,239,681.
(B)
Customer Lists
On
October 31, 2008, the Company entered into an agreement to
purchase the rights to the customer list of Ciena Solutions,
LLC, a California limited liability company
(“Ciena”). Under the terms of the agreement, the
total consideration for these rights included an initial
payment of $350,000 (plus interest of $2,963), and deferred
consideration to be paid in cash and the Company’s
common stock based on the operational results of Ciena, and
certain other factors, over a four-year fiscal period. Each
fiscal period is measured from July 1 to June 30 with fiscal
period one being the period from July 1, 2008 to June 30,
2009. No other assets or liabilities were acquired by the
Company as a result of this transaction.
As
a result of operational losses of Ciena in the first three
fiscal periods, 2009, 2010 and 2011 respectively, the annual
deferred consideration installment payments were determined
to be zero.
(C)
Amortization
Amortization
expense of intangible assets over the next five years is
estimated to be as follows:
|
Note 1 - Basis of Presentation and Principles of Consolidation | 3 Months Ended |
---|---|
Sep. 30, 2011 | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] |
NOTE
1 - BASIS OF PRESENTATION AND PRINCIPLES OF
CONSOLIDATION
The
Company designs, develops, markets, and exports proprietary
software products to customers in the automobile finance and
leasing, banking, healthcare, and financial services
industries worldwide. The Company also provides
system integration, consulting, IT products and services in
exchange for fees from customers.
The
consolidated condensed interim financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information
presented not misleading.
These
statements reflect all adjustments, consisting of normal
recurring adjustments, which, in the opinion of management,
are necessary for fair presentation of the information
contained therein. It is suggested that these
consolidated condensed financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company’s annual report on
Form 10-K for the year ended June 30,
2010. The Company follows the same accounting
policies in preparation of interim
reports. Results of operations for the interim
periods are not indicative of annual results.
The
accompanying consolidated financial statements include the
accounts of NetSol Technologies, Inc. and subsidiaries
(collectively, the “Company”) as follows:
Wholly-owned
Subsidiaries
NetSol
Technologies North America, Inc. (“NTNA”)
NetSol
Technologies Limited (“NetSol UK”)
NetSol
Connect (Private), Ltd. (“Connect)
NetSol-Abraxas
Australia Pty Ltd. (“Abraxas”)
NetSol
Technologies Europe Limited (“NTE”)
NTPK
(Thailand) Co. Limited (“NTPK Thailand”)
Vroozi,
Inc. (Vroozi)
Majority-owned
Subsidiaries
NetSol
Technologies, Ltd. (“NetSol PK”)
NetSol
Innovation (Private) Limited (“NetSol
Innovation”)
For
comparative purposes, prior year’s consolidated
financial statements have been reclassified to conform to
report classifications of the current year.
|
Note 4 - Earnings/(Loss) Per Share | 3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Text Block] |
NOTE
4 – EARNINGS/ (LOSS) PER SHARE:
Basic
earnings per share are computed based on the weighted average
number of shares of common stock outstanding during the
period. Diluted earnings per share is computed based on the
weighted average number of shares of common stock plus the
effect of dilutive potential common shares outstanding during
the period using the treasury stock method. Dilutive
potential common shares include outstanding stock options,
warrants, and stock awards.
The
components of basic and diluted earnings per share were as
follows:
*As there is a loss, these securities
are anti-dilutive. The basic and diluted loss per
share is
the same for the three months ended September 30,
2011 |
Note 5 - Other Comprehensive Income & Foreign Currency | 3 Months Ended |
---|---|
Sep. 30, 2011 | |
Comprehensive Income (Loss) Note [Text Block] |
NOTE
5 – OTHER COMPREHENSIVE INCOME & FOREIGN
CURRENCY:
The
accounts of NetSol UK and NTE use the British Pound; NetSol
PK, Connect, and NetSol Innovation use Pakistan Rupees; NTPK
Thailand uses Thai Baht and Abraxas uses the Australian
dollar as the functional currencies. NetSol
Technologies, Inc., and subsidiaries, NTNA and Vroozi, Inc.,
use the U.S. dollar as the functional
currency. Assets and liabilities are translated at
the exchange rate on the balance sheet date, and operating
results are translated at the average exchange rate
throughout the period. Accumulated translation
losses of $9,362,762 and $8,805,922 as of September 30, 2011
and June 30, 2011, respectively, are classified as an item of
accumulated other comprehensive loss in the
stockholders’ equity section of the consolidated
balance sheet. During the three months ended September 30,
2011 and 2010, comprehensive loss in the consolidated
statements of operations included translation loss of
$556,839 and $269,014 respectively.
|
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