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Restatement of Previously Issued Financial Statements | 6 Months Ended
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Dec. 31, 2017
Accounting Changes and Error Corrections [Abstract] |
Restatement of Previously Issued Financial Statements | NOTE 21 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS During the preparation of the Company’s Form 10-Q for the nine months ended March 31, 2017, misstatements were identified in the previous financial statements relating to the recording of revenue in the proper period. The restated financial statements for the periods affected were disclosed in Note 19 of the Notes to Condensed Consolidated Financial Statement contained in the Company’s Form 10-Q for the nine months ended March 31, 2017. On December 21, 2015, the Company signed a 10-year contract for a 12-country installation of its NFS Ascent product which included a perpetual license, continued maintenance on the existing product and then maintenance on NFS Ascent upon installation. The Company did not appropriately apply the percentage-of-completion method for this arrangement in accordance with ASC 605-35. As a result, for quarter ended September 30, 2016, license revenue was understated by $1,953,935 and for the quarter ended December 31, 2016, license revenue was overstated by $1,580,529. The Company charges maintenance revenue on the license value plus any additional customization that the customer may require. For one customer, the Company did not increase the maintenance fee for the additional customization that was performed during the year. This resulted in an understatement of maintenance revenue of $120,976 for the quarter ended September 30, 2016 and an overstatement of maintenance revenue of $198,797 for the quarter ended December 31, 2016. The following tables present the restated financial statements for the three and six months ended December 31, 2016.
|  | Balance Sheet |
|  | As of December 31, 2016 |
|  |  | As Originally |  |  |  | Amount of |  |  |  |  |
|  |  | Presented |  |  |  | Restatement |  |  |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 9,505,383 |  |  |  |  |  |  | $ | 9,505,383 |
Accounts receivable, net of allowance of $495,760 and $492,498 |  |  | 5,840,490 |  |  |  |  |  |  |  | 5,840,490 |
Accounts receivable, net - related party |  |  | 4,303,380 |  |  |  |  |  |  |  | 4,303,380 |
Revenues in excess of billings |  |  | 17,646,488 |  |  |  | 373,406 |  |  |  | 18,019,894 |
Revenues in excess of billings - related party |  |  | 469,030 |  |  |  |  |  |  |  | 469,030 |
Other current assets |  |  | 2,904,650 |  |  |  |  |  |  |  | 2,904,650 |
Total current assets |  |  | 40,669,421 |  |  |  | 373,406 |  |  |  | 41,042,827 |
Restricted cash |  |  | 90,000 |  |  |  |  |  |  |  | 90,000 |
Property and equipment, net |  |  | 21,873,277 |  |  |  |  |  |  |  | 21,873,277 |
Other assets |  |  | 2,054,938 |  |  |  |  |  |  |  | 2,054,938 |
Intangible assets, net |  |  | 18,423,439 |  |  |  |  |  |  |  | 18,423,439 |
Goodwill |  |  | 9,516,568 |  |  |  |  |  |  |  | 9,516,568 |
Total assets |  | $ | 92,627,643 |  |  | $ | 373,406 |  |  | $ | 93,001,049 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 7,373,097 |  |  |  |  |  |  | $ | 7,373,097 |
Current portion of loans and obligations under capitalized leases |  |  | 4,368,930 |  |  |  |  |  |  |  | 4,368,930 |
Unearned revenues |  |  | 2,806,804 |  |  |  | 77,821 |  |  |  | 2,884,625 |
Common stock to be issued |  |  | 88,324 |  |  |  |  |  |  |  | 88,324 |
Total current liabilities |  |  | 14,637,155 |  |  |  | 77,821 |  |  |  | 14,714,976 |
Long term loans and obligations under capitalized leases; less current maturities |  |  | 501,554 |  |  |  |  |  |  |  | 501,554 |
Total liabilities |  |  | 15,138,709 |  |  |  | 77,821 |  |  |  | 15,216,530 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |
Stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $.01 par value; 500,000 shares authorized; |  |  | - |  |  |  | - |  |  |  | - |
Common stock, $.01 par value; 14,500,000 shares authorized; |  |  |  |  |  |  |  |  |  |  |  |
10,993,054 shares issued and 10,958,275 outstanding as of December 31, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016 |  |  | 109,931 |  |  |  |  |  |  |  | 109,931 |
Additional paid-in-capital |  |  | 123,019,215 |  |  |  |  |  |  |  | 123,019,215 |
Treasury stock (34,779 shares and 27,279 shares) |  |  | (454,310 | ) |  |  |  |  |  |  | (454,310 | )
Accumulated deficit |  |  | (40,074,755 | ) |  |  | 196,890 |  |  |  | (39,877,865 | )
Stock subscription receivable |  |  | (450,220 | ) |  |  |  |  |  |  | (450,220 | )
Other comprehensive loss |  |  | (18,628,395 | ) |  |  |  |  |  |  | (18,628,395 | )
Total NetSol stockholders’ equity |  |  | 63,521,466 |  |  |  | 196,890 |  |  |  | 63,718,356 |
Non-controlling interest |  |  | 13,967,468 |  |  |  | 98,695 |  |  |  | 14,066,163 |
Total stockholders’ equity |  |  | 77,488,934 |  |  |  | 295,585 |  |  |  | 77,784,519 |
Total liabilities and stockholders’ equity |  | $ | 92,627,643 |  |  | $ | 373,406 |  |  | $ | 93,001,049 |
|  | For the Three Months |  |  | For the Six Months |
|  | Ended December 31, 2016 |  |  | Ended December 31, 2016 |
|  | As Originally |  |  | Amount of |  |  |  |  |  | As Originally |  |  | Amount of |  |  |  |
|  | Presented |  |  | Restatement |  |  | As Restated |  |  | Presented |  |  | Restatement |  |  | As Restated |
Net Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
License fees |  | $ | 5,350,086 |  |  | $ | (1,580,529 | ) |  | $ | 3,769,557 |  |  | $ | 8,849,946 |  |  | $ | 373,406 |  |  | $ | 9,223,352 |
Maintenance fees |  |  | 3,787,696 |  |  |  | (198,797 | ) |  |  | 3,588,899 |  |  |  | 7,190,517 |  |  |  | (77,821 | ) |  |  | 7,112,696 |
Services |  |  | 6,984,084 |  |  |  |  |  |  |  | 6,984,084 |  |  |  | 12,790,801 |  |  |  |  |  |  |  | 12,790,801 |
License fees - related party |  |  | - |  |  |  |  |  |  |  | - |  |  |  | 246,957 |  |  |  |  |  |  |  | 246,957 |
Maintenance fees - related party |  |  | 51,345 |  |  |  |  |  |  |  | 51,345 |  |  |  | 181,976 |  |  |  |  |  |  |  | 181,976 |
Services - related party |  |  | 1,464,901 |  |  |  |  |  |  |  | 1,464,901 |  |  |  | 3,379,473 |  |  |  |  |  |  |  | 3,379,473 |
Total net revenues |  |  | 17,638,112 |  |  |  | (1,779,326 | ) |  |  | 15,858,786 |  |  |  | 32,639,670 |  |  |  | 295,585 |  |  |  | 32,935,255 |
Cost of revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and consultants |  |  | 5,979,804 |  |  |  |  |  |  |  | 5,979,804 |  |  |  | 11,873,153 |  |  |  |  |  |  |  | 11,873,153 |
Travel |  |  | 836,240 |  |  |  |  |  |  |  | 836,240 |  |  |  | 1,548,135 |  |  |  |  |  |  |  | 1,548,135 |
Depreciation and amortization |  |  | 1,318,764 |  |  |  |  |  |  |  | 1,318,764 |  |  |  | 2,649,636 |  |  |  |  |  |  |  | 2,649,636 |
Other |  |  | 1,065,727 |  |  |  |  |  |  |  | 1,065,727 |  |  |  | 2,038,065 |  |  |  |  |  |  |  | 2,038,065 |
Total cost of revenues |  |  | 9,200,535 |  |  |  | - |  |  |  | 9,200,535 |  |  |  | 18,108,989 |  |  |  | - |  |  |  | 18,108,989 |
Gross profit |  |  | 8,437,577 |  |  |  | (1,779,326 | ) |  |  | 6,658,251 |  |  |  | 14,530,681 |  |  |  | 295,585 |  |  |  | 14,826,266 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  | 2,713,478 |  |  |  |  |  |  |  | 2,713,478 |  |  |  | 5,057,516 |  |  |  |  |  |  |  | 5,057,516 |
Depreciation and amortization |  |  | 271,485 |  |  |  |  |  |  |  | 271,485 |  |  |  | 540,582 |  |  |  |  |  |  |  | 540,582 |
General and administrative |  |  | 3,933,413 |  |  |  |  |  |  |  | 3,933,413 |  |  |  | 8,552,609 |  |  |  |  |  |  |  | 8,552,609 |
Research and development cost |  |  | 91,607 |  |  |  |  |  |  |  | 91,607 |  |  |  | 184,539 |  |  |  |  |  |  |  | 184,539 |
Total operating expenses |  |  | 7,009,983 |  |  |  | - |  |  |  | 7,009,983 |  |  |  | 14,335,246 |  |  |  | - |  |  |  | 14,335,246 |
Income (loss) from operations |  |  | 1,427,594 |  |  |  | (1,779,326 | ) |  |  | (351,732 | ) |  |  | 195,435 |  |  |  | 295,585 |  |  |  | 491,020 |
Other income and (expenses) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss on sale of assets |  |  | (32,339 | ) |  |  |  |  |  |  | (32,339 | ) |  |  | (34,742 | ) |  |  |  |  |  |  | (34,742 | )
Interest expense |  |  | (62,127 | ) |  |  |  |  |  |  | (62,127 | ) |  |  | (116,602 | ) |  |  |  |  |  |  | (116,602 | )
Interest income |  |  | 23,416 |  |  |  |  |  |  |  | 23,416 |  |  |  | 53,856 |  |  |  |  |  |  |  | 53,856 |
Loss on foreign currency exchange transactions |  |  | (621,887 | ) |  |  |  |  |  |  | (621,887 | ) |  |  | (1,036,783 | ) |  |  |  |  |  |  | (1,036,783 | )
Other income |  |  | 6,823 |  |  |  |  |  |  |  | 6,823 |  |  |  | 28,383 |  |  |  |  |  |  |  | 28,383 |
Total other income (expenses) |  |  | (686,114 | ) |  |  | - |  |  |  | (686,114 | ) |  |  | (1,105,888 | ) |  |  | - |  |  |  | (1,105,888 | )
Net income (loss) before income taxes |  |  | 741,480 |  |  |  | (1,779,326 | ) |  |  | (1,037,846 | ) |  |  | (910,453 | ) |  |  | 295,585 |  |  |  | (614,868 | )
Income tax provision |  |  | (338,884 | ) |  |  |  |  |  |  | (338,884 | ) |  |  | (378,759 | ) |  |  |  |  |  |  | (378,759 | )
Net income (loss) from continuing operations |  |  | 402,596 |  |  |  | (1,779,326 | ) |  |  | (1,376,730 | ) |  |  | (1,289,212 | ) |  |  | 295,585 |  |  |  | (993,627 | )
Non-controlling interest |  |  | (1,388,272 | ) |  |  | 596,608 |  |  |  | (791,664 | ) |  |  | (1,462,183 | ) |  |  | (98,695 | ) |  |  | (1,560,878 | )
Net income (loss) attributable to NetSol |  | $ | (985,676 | ) |  | $ | (1,182,718 | ) |  | $ | (2,168,394 | ) |  | $ | (2,751,395 | ) |  | $ | 196,890 |  |  | $ | (2,554,505 | )
Net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) per common share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.09 | ) |  | $ | (0.11 | ) |  | $ | (0.20 | ) |  | $ | (0.26 | ) |  | $ | 0.03 |  |  | $ | (0.24 | )
Diluted |  | $ | (0.09 | ) |  | $ | (0.11 | ) |  | $ | (0.20 | ) |  | $ | (0.26 | ) |  | $ | 0.03 |  |  | $ | (0.24 | )
Weighted average number of shares outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 10,877,446 |  |  |  | 10,877,446 |  |  |  | 10,877,446 |  |  |  | 10,783,685 |  |  |  | 10,783,685 |  |  |  | 10,783,685 |
Diluted |  |  | 10,877,446 |  |  |  | 10,877,446 |  |  |  | 10,877,446 |  |  |  | 10,783,685 |  |  |  | 10,783,685 |  |  |  | 10,783,685 |
|  | For the Three Months |
|  | Ended December 31, 2016 |
|  | As Originally |  |  | Amount of |  |  |  |
|  | Presented |  |  | Restatement |  |  | As Restated |
Net income (loss) |  | $ | (985,676 | ) |  | $ | (1,182,718 | ) |  | $ | (2,168,394 | )
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Translation adjustment |  |  | (944,837 | ) |  |  | - |  |  |  | (944,837 | )
Comprehensive income (loss) |  |  | (1,930,513 | ) |  |  | (1,182,718 | ) |  |  | (3,113,231 | )
Comprehensive income (loss) attributable to non-controlling interest |  |  | (276,575 | ) |  |  | - |  |  |  | (276,575 | )
Comprehensive income (loss) attributable to NetSol |  | $ | (1,653,938 | ) |  | $ | (1,182,718 | ) |  | $ | (2,836,656 | )
|  | For the Six Months |
|  | Ended December 31, 2016 |
|  | As Originally |  |  | Amount of |  |  |  |
|  | Presented |  |  | Restatement |  |  | As Restated |
Net income (loss) |  | $ | (2,751,395 | ) |  | $ | 262,469 |  |  | $ | (2,488,926 | )
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Translation adjustment |  |  | 149,237 |  |  |  | - |  |  |  | 149,237 |
Comprehensive income (loss) |  |  | (2,602,158 | ) |  |  | 262,469 |  |  |  | (2,339,689 | )
Comprehensive income (loss) attributable to non-controlling interest |  |  | 47,138 |  |  |  | - |  |  |  | 47,138 |
Comprehensive income (loss) attributable to NetSol |  | $ | (2,649,296 | ) |  | $ | 262,469 |  |  | $ | (2,386,827 | )
|  | For the Six Months |
|  | Ended December 31, 2016 |
|  | As Originally |  |  | Amount of |  |  |  |
|  | Presented |  |  | Restatement |  |  | As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (1,289,212 | ) |  | $ | 295,585 |  |  | $ | (993,627 | )
Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 3,190,218 |  |  |  |  |  |  |  | 3,190,218 |
Provision for bad debts |  |  | 1,026 |  |  |  |  |  |  |  | 1,026 |
Loss on sale of assets |  |  | 34,742 |  |  |  |  |  |  |  | 34,742 |
Stock issued for services |  |  | 1,525,775 |  |  |  |  |  |  |  | 1,525,775 |
Fair market value of warrants and stock options granted |  |  | 21,804 |  |  |  |  |  |  |  | 21,804 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | 3,678,110 |  |  |  |  |  |  |  | 3,678,110 |
Accounts receivable - related party |  |  | 829,285 |  |  |  |  |  |  |  | 829,285 |
Revenues in excess of billing |  |  | (7,219,089 | ) |  |  | (373,406 | ) |  |  | (7,592,495 | )
Revenues in excess of billing - related party |  |  | 285,791 |  |  |  |  |  |  |  | 285,791 |
Other current assets |  |  | 585,147 |  |  |  |  |  |  |  | 585,147 |
Accounts payable and accrued expenses |  |  | 334,241 |  |  |  |  |  |  |  | 334,241 |
Unearned revenue |  |  | (1,908,440 | ) |  |  | 77,821 |  |  |  | (1,830,619 | )
Net cash used in operating activities |  |  | 69,398 |  |  |  | - |  |  |  | 69,398 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (1,074,316 | ) |  |  |  |  |  |  | (1,074,316 | )
Sales of property and equipment |  |  | 181,087 |  |  |  |  |  |  |  | 181,087 |
Purchase of treasury stock |  |  | (38,885 | ) |  |  |  |  |  |  | (38,885 | )
Investment |  |  | (705,555 | ) |  |  |  |  |  |  | (705,555 | )
Net cash used in investing activities |  |  | (1,637,669 | ) |  |  | - |  |  |  | (1,637,669 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from the exercise of stock options and warrants |  |  | 429,452 |  |  |  |  |  |  |  | 429,452 |
Proceeds from exercise of subsidiary options |  |  | 18,089 |  |  |  |  |  |  |  | 18,089 |
Dividend paid by subsidiary to Non controlling interest |  |  | (968,657 | ) |  |  |  |  |  |  | (968,657 | )
Payments on capital lease obligations and loans - net |  |  | (69,998 | ) |  |  |  |  |  |  | (69,998 | )
Net cash provided by financing activities |  |  | (591,114 | ) |  |  | - |  |  |  | (591,114 | )
Effect of exchange rate changes |  |  | 107,241 |  |  |  |  |  |  |  | 107,241 |
Net decrease in cash and cash equivalents |  |  | (2,052,144 | ) |  |  | - |  |  |  | (2,052,144 | )
Cash and cash equivalents, beginning of the period |  |  | 11,557,527 |  |  |  |  |  |  |  | 11,557,527 |
Cash and cash equivalents, end of period |  | $ | 9,505,383 |  |  | $ | - |  |  | $ | 9,505,383 |

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- Definition The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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