EX-99.1 2 v113956_ex99-1.htm
EXHIBIT 99.1
NEWS RELEASE DATED MAY 13, 2008
NEWS RELEASE
NetSol Technologies Reports Third Quarter
Fiscal Year 2008 Financial Results
Revenues Increased 19% Year-Over-Year to $9.1 million; Gross Margin Improved to 56%
Net Income Increased to $2.3 Million or $0.09 Per Diluted Share; EBITDA Increased to $3.2 Million
CALABASAS, CA - May 13, 2008 -- NetSol Technologies Inc. (“NetSol”) (NasdaqCM: NTWK), a worldwide provider of global business services and enterprise application solutions, today announced financial results for the third quarter of fiscal year 2008, ending March 31, 2008.
Third Quarter Fiscal Year 2008 Consolidated Financial Highlights

· | Revenues increased 19% to $9.1 million

- | Services increased 23% to $4.6 million

- | License fees increased 17% to $3.0 million

- | Maintenance fees increased 11% to $1.5 million

· | Gross margin increased to 56% compared to 48% in the same period a year ago

· | Operating income increased 245% year-over-year to $1.8 million

· | GAAP net income increased to $2.3 million, or $0.09 per diluted share, versus a loss of $229,000, or a loss of ($0.01) per diluted share, in the same period a year ago

· | EBITDA totaled $3.2 million, or $0.13 per diluted share, versus EBITDA of $676,000, or $0.04 per diluted share, in the same period a year ago

· | Company reiterated guidance for fiscal year 2008: Annual revenue growth between 25% to 30% and diluted earnings per share between $0.28 and $0.32

Najeeb Ghauri, chairman and chief executive officer, commented, “Our third quarter results provide an excellent start to the second half of fiscal 2008, which is historically NetSol’s stronger half-year period. With double-digit year-over-year growth in services, licenses, and maintenance fees translating into a significant rise in profitability, we remain on track to achieve our full year top and bottom line financial objectives. Complementing our significant financial progress, we recently launched our new BestShoring™ strategic initiative that represents our best practices approach to delivering our customers the BestSolution™. Unlike traditional outsourcing offshore vendors, BestShoring™ reflects our ability to draw upon NetSol’s global delivery infrastructure, expertise, and workforce to construct the best possible solution at the best possible price.
“Additionally, during the quarter we made key strategic investments in our North American operations to strengthen and expand our presence in the region, a critical market for NetSol’s future growth. To support this effort we made several key North American management appointments, including Greg Brinton as head of sales and Morgan Rees as senior vice president of marketing, working under the leadership of Mitch Van Wye, our chief operating officer in the region. We see these additions to NetSol’s management, as well as our investments in infrastructure, as critical to supporting our long-term growth throughout the Americas, as well as supporting our new globally-focused BestShoring™ customer solutions. We are offering BestShoring™ enterprise solutions and global business services to both new clients in various vertical markets and our 35 plus existing clients in North America.

“As a global enterprise, it is NetSol’s goal to progress with our operational objectives for each division while sustaining profitability and delivering excellent financial results. NetSol’s double-digit revenue growth and strong net income performance reflect broad-based success towards our objectives of improving margins, effectively leveraging our worldwide infrastructure, and improving operating efficiencies while expanding each of our division’s revenue streams,” concluded Mr. Ghauri.
NetSol reported consolidated revenues of $9.1 million for the third quarter of fiscal year 2008, a 19% increase compared to the $7.6 million in revenues reported for the same period a year ago. Consolidated gross profit for the third quarter was approximately $5.1 million, or 56% of revenues.
GAAP (Generally Accepted Accounting Principles) net income for the third quarter of fiscal year 2008 was approximately $2.3 million, or $0.09 per diluted share, which compares to GAAP net loss of $229,000, or a loss of $0.01 per diluted share, in the same period of fiscal year 2007. NetSol reported EBITDA of $3.2 million, or $0.13 per diluted share, for the third quarter of fiscal year 2008 compared to EBITDA of $0.7 million, or $0.04 per diluted share, in the same period a year ago.
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 the third quarter of fiscal year 2008 with approximately $4.8 million dollars in cash and cash equivalents.
Fiscal Third Quarter 2008 Business Highlights

· | Ranked in Software Magazine's Software 500 list of the world's largest software and service providers, joining the Software 500 list for the first time this year with a rank of 340 worldwide.

· | Had NetSol’s Lahore-based IT development campus, "NetSol Village", achieve ISO 27001 certification from the International Organization for Standardization (ISO), the world's largest developer and publisher of International Standards.

· | Secured a contract valued at approximately $1.5 million with one of the largest leasing companies in the Middle East.

· | Sold a new LeaseSoft license in China to a major European auto manufacturer, maintaining robust momentum in the Chinese market.

· | Awarded a contract for the implementation of a Land Record Management Information System (LRMIS) for the Islamabad Capital Territory, Pakistan, the second LRMIS project NetSol has been awarded.

· | Launched the new LeasePak "Asset Focus Module," giving vehicle finance and commercial equipment finance product managers a robust means for tracking the revenue performance of financed assets.

· | Successfully implemented the LeaseSoft product suite for Dongfeng-Nissan Automotive Finance (DNAF) China.

· | Had Venture Finance, a subsidiary of ABN Amro, go live with LeaseSoft for its Block Discounting portfolio.

First Nine Months of Fiscal Year 2008 Consolidated Financial Highlights

· | Revenues for the first nine months increased 26% to $26.1 million

- | Service fees increased 40% to $13.8 million

- | License fees increased 13% to $7.8 million

- | Maintenance fees increased nearly 14% to $4.6 million

· | Gross margin improved to 58%, compared to 50% for the same nine months period a year ago

NetSol reported consolidated revenues of $26.1 million for the first nine months of fiscal year 2008, a 26% increase compared to the $20.7 million in revenues reported for the same period in fiscal year 2007. Consolidated gross profit for the first nine months was $15.1 million, or 58% of revenues.
GAAP net income for the first nine months of fiscal year 2008 was approximately $5.2 million, or $0.21 per diluted share, compared to a net loss of $6.2 million, or $0.35 per diluted share, in the same period of fiscal year 2007. EBITDA increased to $8.0 million, or $0.33 per diluted share, as compared to an EBITDA loss of $3.4 million, or ($0.18) per diluted share, in the same period a year ago.
Conference Call & Webcast Information
NetSol will host a conference call at 11:00 a.m. ET (8:00 a.m. PT) to review the results. Najeeb Ghauri, chairman and chief executive officer, and Tina Gilger, chief financial officer, will host the call, which will be webcast live. The webcast and a supporting slide presentation will be made available online at http://www.netsoltek.com/investors/investor_relations.htm. Telephone access to the conference call is available in North America by dialing +1 (877) 407-0782 or internationally by dialing +1 (201) 689-8567.
An audio replay of the conference call will be available approximately 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 # 283654. An archived replay of the conference webcast will also be available on the NetSol Technologies web site at http://www.netsoltek.com/investors/investor_relations.htm.
About NetSol Technologies
NetSol Technologies (NasdaqCM: NTWK) is a worldwide provider of global business services and enterprise application solutions. NetSol uses its BestShoring™ practices and highly-experienced resources in analysis, development, quality assurance, and implementation to deliver high-quality, cost-effective solutions. Organized into specialized practices, these product and services offerings include portfolio management systems for the financial services industry, consulting, custom development, systems integration, and technical services for the global Healthcare, Insurance, Real Estate and Technology markets. NetSol's commitment to quality is demonstrated by its achievement of the ISO 9001, ISO 279001, and SEI (Software Engineering Institute) CMMI (Capability Maturity Model) Level 5 assessments, a distinction shared by fewer than 100 companies worldwide. NetSol Technologies' clients include Fortune 50 manufacturers, global automakers, financial institutions, technology providers, and governmental agencies. Headquartered in Calabasas, California, NetSol Technologies has operations and offices in London, San Francisco, Sydney, Beijing, Bangkok and Lahore. To join the NetSol Technologies Inc. email distribution list please visit: http://www.b2i.us/irpass.asp?BzID=897&to=ea&s=0.

Forward-Looking Statements
This press release may contain forward-looking statements relating to the development of the Company's products and services and future operation results, including statements regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "anticipate," "intend," variations of such words, and similar expressions, identify forward looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect the Company's actual results include the progress and costs of the development of products and services and the timing of the market acceptance.
# # #
Contacts:

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

Financial Tables Follow

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

|  | For the Three Months |  | For the Nine Months |
|  | Ended March 31, |  | Ended March 31, |
|  | 2008 |  | 2007 |  | 2008 |  | 2007 |
Net Revenues: |  |  |  |  |  |  |  |  |
Licence fees |  | $ | 2,998,867 |  | $ | 2,554,289 |  | $ | 7,769,226 |  | $ | 6,851,496 |
Maintenance fees |  |  | 1,482,654 |  |  | 1,335,893 |  |  | 4,556,450 |  |  | 3,990,096 |
Services |  |  | 4,585,292 |  |  | 3,725,784 |  |  | 13,800,844 |  |  | 9,864,055 |
Total revenues |  |  | 9,066,813 |  |  | 7,615,966 |  |  | 26,126,520 |  |  | 20,705,647 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and consultants |  |  | 2,620,722 |  |  | 2,234,809 |  |  | 7,342,743 |  |  | 6,608,606 |
Travel |  |  | 394,841 |  |  | 447,288 |  |  | 972,998 |  |  | 1,195,315 |
Repairs and maintenance |  |  | 99,262 |  |  | 133,961 |  |  | 332,448 |  |  | 313,514 |
Insurance |  |  | 30,005 |  |  | 51,294 |  |  | 153,760 |  |  | 153,595 |
Depreciation and amortization |  |  | 316,652 |  |  | 279,405 |  |  | 847,288 |  |  | 693,703 |
Other |  |  | 522,013 |  |  | 790,927 |  |  | 1,341,513 |  |  | 1,479,478 |
Total cost of sales |  |  | 3,983,495 |  |  | 3,937,684 |  |  | 10,990,750 |  |  | 10,444,211 |
Gross profit |  |  | 5,083,318 |  |  | 3,678,282 |  |  | 15,135,770 |  |  | 10,261,436 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  | 898,686 |  |  | 825,586 |  |  | 2,817,908 |  |  | 2,105,920 |
Depreciation and amortization |  |  | 477,630 |  |  | 483,801 |  |  | 1,422,181 |  |  | 1,389,704 |
Bad debt expense |  |  | - |  |  | (231 | ) |  | 3,277 |  |  | 117,267 |
Salaries and wages |  |  | 1,034,784 |  |  | 915,481 |  |  | 2,758,434 |  |  | 2,914,707 |
Professional services, including non-cash compensation |  |  | 114,436 |  |  | 254,359 |  |  | 413,437 |  |  | 774,203 |
General and adminstrative |  |  | 792,499 |  |  | 687,881 |  |  | 2,287,693 |  |  | 2,202,182 |
Total operating expenses |  |  | 3,318,035 |  |  | 3,166,877 |  |  | 9,702,930 |  |  | 9,503,983 |
Income from operations |  |  | 1,765,283 |  |  | 511,405 |  |  | 5,432,840 |  |  | 757,453 |
Other income and (expenses): |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on sale of assets |  |  | (891 | ) |  | (6,729 | ) |  | (33,044 | ) |  | (19,067 | )
Beneficial conversion feature |  |  | - |  |  | - |  |  | - |  |  | (2,208,334 | )
Amortization of debt discount and capitalized cost of debt |  |  | - |  |  | - |  |  | - |  |  | (2,803,691 | )
Liquidation damages |  |  | - |  |  | (47,057 | ) |  | - |  |  | (180,890 | )
Fair market value of warrants issued |  |  | - |  |  | (33,987 | ) |  | - |  |  | (33,987 | )
Interest expense |  |  | (121,651 | ) |  | (83,819 | ) |  | (544,597 | ) |  | (543,342 | )
Interest income |  |  | 84,363 |  |  | 46,867 |  |  | 159,801 |  |  | 265,916 |
Gain on sale of subsidiary shares |  |  | 1,240,808 |  |  | - |  |  | 1,240,808 |  |  | - |
Other income and (expenses) |  |  | 447,889 |  |  | 10,081 |  |  | 709,113 |  |  | 88,935 |
Total other income (expenses) |  |  | 1,650,518 |  |  | (114,644 | ) |  | 1,532,081 |  |  | (5,434,460 | )
Net income (loss) before minority interest in subsidiary |  |  | 3,415,801 |  |  | 396,761 |  |  | 6,964,921 |  |  | (4,677,007 | )
Minority interest in subsidiary |  |  | (1,098,703 | ) |  | (568,237 | ) |  | (1,756,509 | ) |  | (1,374,081 | )
Income taxes |  |  | (15,314 | ) |  | (57,655 | ) |  | (46,272 | ) |  | (126,620 | )
Net income (loss) |  |  | 2,301,784 |  |  | (229,131 | ) |  | 5,162,140 |  |  | (6,177,708 | )
Dividend required for preferred stockholders |  |  | (33,508 | ) |  | (94,088 | ) |  | (145,033 | ) |  | (159,686 | )
Subsidiary dividend (minority holders portion) |  |  | - |  |  | - |  |  | (817,173 | ) |  | - |
Bonus stock distribution (minority holders portion) |  |  | - |  |  | - |  |  | (545,359 | ) |  | - |
Net income (loss) applicable to common shareholders |  |  | 2,268,276 |  |  | (323,219 | ) |  | 3,654,575 |  |  | (6,337,394 | )
Other comprehensive gain: |  |  |  |  |  |  |  |  |  |  |  |  |
Translation adjustment |  |  | (910,838 | ) |  | 81,564 |  |  | (1,401,831 | ) |  | 203,343 |
Comprehensive income (loss) |  | $ | 1,357,438 |  | $ | (241,655 | ) | $ | 2,252,744 |  | $ | (6,134,051 | )
Net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.09 |  | $ | (0.02 | ) | $ | 0.21 |  | $ | (0.36 | )
Diluted |  | $ | 0.09 |  | $ | (0.01 | ) | $ | 0.21 |  | $ | (0.35 | )
Weighted average number of shares outstanding |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 25,205,995 |  |  | 18,311,290 |  |  | 23,686,204 |  |  | 17,680,115 |
Diluted |  |  | 25,665,924 |  |  | 18,311,290 |  |  | 24,146,133 |  |  | 17,680,115 |

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - AS OF MARCH 31, 2008
(UNAUDITED)

ASSETS |  |  |  |  |
Current assets: |  |  |  |  |
Cash and cash equivalents |  | $ | 4,848,513 |  |  |  |
Accounts receivable, net of allowance for doubtful accounts of $168,443 |  |  | 10,227,903 |  |  |  |
Revenues in excess of billings |  |  | 12,006,231 |  |  |  |
Other current assets |  |  | 2,933,047 |  |  |  |
Total current assets |  |  |  |  |  | 30,015,694 |
Property and equipment, net of accumulated depreciation |  |  |  |  |  | 8,153,405 |
Other assets, long-term |  |  |  |  |  | 800,435 |
Intangibles: |  |  |  |  |  |  |
Product licenses, renewals, enhancements, copyrights, |  |  |  |  |  |  |
trademarks, and tradenames, net |  |  | 9,137,381 |  |  |  |
Customer lists, net |  |  | 1,906,422 |  |  |  |
Goodwill |  |  | 7,786,032 |  |  |  |
Total intangibles |  |  |  |  |  | 18,829,835 |
Total assets |  |  |  |  | $ | 57,799,369 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 3,323,046 |  |  |  |
Current portion of loans and obligations under capitalized leases |  |  | 605,551 |  |  |  |
Other payables - acquisitions |  |  | 83,399 |  |  |  |
Unearned revenues |  |  | 3,616,555 |  |  |  |
Due to officers |  |  | 184,173 |  |  |  |
Dividend to preferred stockholders payable |  |  | 33,508 |  |  |  |
Loans payable, bank |  |  | 1,977,689 |  |  |  |
Total current liabilities |  |  |  |  |  | 9,823,921 |
Obligations under capitalized leases, less current maturities |  |  |  |  |  | 270,927 |
Long term loans; less current maturities |  |  |  |  |  | 552,166 |
Total liabilities |  |  |  |  |  | 10,647,014 |
Minority interest |  |  |  |  |  | 5,834,732 |
Commitments and contingencies |  |  |  |  |  |  |
Stockholders' equity: |  |  |  |  |  |  |
Preferred stock, 5,000,000 shares authorized; |  |  |  |  |  |  |
1,920 issued and outstanding |  |  | 1,920,000 |  |  |  |
Common stock, $.001 par value; 45,000,000 shares authorized; |  |  |  |  |  |  |
25,247,568 issued and outstanding |  |  | 25,248 |  |  |  |
Additional paid-in-capital |  |  | 75,299,379 |  |  |  |
Treasury stock |  |  | (35,681 | ) |  |  |
Accumulated deficit |  |  | (33,477,767 | ) |  |  |
Stock subscription receivable |  |  | (600,907 | ) |  |  |
Common stock to be issued |  |  | 64,612 |  |  |  |
Other comprehensive loss |  |  | (1,877,261 | ) |  |  |
Total stockholders' equity |  |  |  |  |  | 41,317,623 |
Total liabilities and stockholders' equity |  |  |  |  | $ | 57,799,369 |

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

|  | For the Nine Months |
|  | Ended March 31, |
|  | 2008 |  | 2007 |
Cash flows from operating activities: |  |  |  |  |
Net income (loss) applicable to common shareholders |  | $ | 5,162,140 |  | $ | (6,177,708 | )
Adjustments to reconcile net income (loss) applicable to common |  |  |  |  |  |  |
shareholders to net cash provided by (used in) operating activities: |  |  |  |  |  |  |
Depreciation and amortization |  |  | 2,269,469 |  |  | 2,083,407 |
Bad debt expense |  |  | 3,277 |  |  | 117,267 |
Loss on sale of assets |  |  | 33,044 |  |  | 19,067 |
Gain on sale of subsidiary shares in Pakistan |  |  | (1,240,808 | ) |  | - |
Minority interest in subsidiary |  |  | 1,756,509 |  |  | 1,374,081 |
Stock issued for services |  |  | 48,163 |  |  | 88,099 |
Stock issued for convertible note payable interest |  |  | - |  |  | 311,868 |
Fair market value of warrants and stock options granted |  |  | 24,320 |  |  | 33,987 |
Beneficial conversion feature |  |  | - |  |  | 2,208,334 |
Amortization of debt discount and capitalized cost of debt |  |  | - |  |  | 2,803,691 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |
Decrease/(increase) in accounts receivable |  |  | (2,087,736 | ) |  | (1,913,135 | )
Increase in other current assets |  |  | (4,885,181 | ) |  | (2,793,410 | )
(Decrease)/increase in accounts payable and accrued expenses |  |  | (510,968 | ) |  | 1,716,251 |
Net cash provided by (used in) operating activities |  |  | 572,229 |  |  | (128,201 | )
Cash flows from investing activities: |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (1,985,651 | ) |  | (1,282,427 | )
Sales of property and equipment |  |  | 120,436 |  |  | 208,419 |
Net proceeds of certificates of deposit |  |  | - |  |  | 1,737,481 |
Payment for acquisition |  |  | (879,007 | ) |  | (4,027,753 | )
Increase in intangible assets |  |  | (2,219,673 | ) |  | (2,001,502 | )
Net cash used in investing activities |  |  | (4,963,895 | ) |  | (5,365,782 | )
Cash flows from financing activities: |  |  |  |  |  |  |
Proceeds from sale of common stock |  |  | 1,500,000 |  |  | 30,093 |
Proceeds from the exercise of stock options |  |  | 2,800,917 |  |  | 704,250 |
Proceeds from sale of subsidiary stock |  |  | 1,765,615 |  |  | - |
Finance costs incurred for sale of common stock |  |  | (10,000 | ) |  | - |
Purchase of treasury stock |  |  | (25,486 | ) |  | - |
Reduction in restricted cash |  |  | - |  |  | 4,533,555 |
Proceeds from loans from officers |  |  | - |  |  | 165,000 |
Proceeds from bank loans |  |  | 3,862,759 |  |  | - |
Payments on bank loans |  |  | (1,245,846 | ) |  | - |
Capital lease obligations & loans (net) |  |  | (3,462,334 | ) |  | 874,128 |
Net cash provided by financing activities |  |  | 5,185,625 |  |  | 6,307,026 |
Effect of exchange rate changes in cash |  |  | 44,390 |  |  | 76,159 |
Net increase in cash and cash equivalents |  |  | 838,349 |  |  | 889,202 |
Cash and cash equivalents, beginning of period |  |  | 4,010,164 |  |  | 2,493,768 |
Cash and cash equivalents, end of period |  | $ | 4,848,513 |  | $ | 3,382,970 |

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

|  | Three Months |  | Nine Months |
|  | Ended |  | Ended |
|  | March 31, 2008 |  | March 31, 2008 |
Net income per GAAP (applicable to common shareholders) |  | $ | 2,301,785 |  | $ | 5,162,140 |
Income taxes |  |  | 15,314 |  |  | 46,272 |
Depreciaiton and amortization |  |  | 794,282 |  |  | 2,285,985 |
Interest expense |  |  | 121,651 |  |  | 544,597 |
EBITDA income |  | $ | 3,233,032 |  | $ | 8,038,994 |
Weighted average number of shares outstanding |  |  |  |  |  |  |
Basic |  |  | 25,205,995 |  |  | 23,686,204 |
Diluted |  |  | 25,665,924 |  |  | 24,146,133 |
Basic EBITDA EPS |  | $ | 0.13 |  | $ | 0.34 |
Diluted DBITDA EPS |  | $ | 0.13 |  | $ | 0.33 |