XML 38 R27.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Accounting Policies (Policies) | 3 Months Ended
--- | ---
Sep. 30, 2018
Accounting Policies [Abstract] |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas requiring significant estimates are provision for doubtful accounts, provision for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, and estimated contract costs. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates.
Concentration of Credit Risk | Concentration of Credit Risk Cash includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. Balances at financial institutions within certain foreign countries are not covered by insurance. As of September 30, 2018, and June 30, 2018, the Company had uninsured deposits related to cash deposits in accounts maintained within foreign entities of approximately $19,253,434 and $20,933,224, respectively. The Company has not experienced any losses in such accounts. The Company’s operations are carried out globally. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments of each country and by the general state of the country’s economy. The Company’s operations in each foreign country are subject to specific considerations and significant risks not typically associated with companies in economically developed nations. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively short maturities. The carrying amounts of the convertible note receivable and the long-term debt approximate their fair values based on current interest rates for instruments with similar characteristics. The three levels of valuation hierarchy are defined as follows:
Level 1: | Valuations consist of unadjusted quoted prices in active markets for identical assets and liabilities and has the highest priority.
Level 2: | Valuations rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability.
Level 3: | Valuations are based on prices or third party or internal valuation models that require inputs that are significant to the fair value measurement and are less observable and thus have the lowest priority.
The Company does not have any financial assets that are measured at fair value on a recurring basis as of September 30, 2018. The Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2018, were as follows:
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total Assets |
Revenues in excess of billing - long term |  | $ | - |  |  | $ | - |  |  | $ | 1,206,669 |  |  | $ | 1,206,669 |
Total |  | $ | - |  |  | $ | - |  |  | $ | 1,206,669 |  |  | $ | 1,206,669 |
The reconciliation from June 30, 2018 to September 30, 2018 is as follows:
|  | Revenues in excess of billing - long term |  |  | Fair value discount |  |  | Total |
Balance at June 30, 2018 |  | $ | 1,445,245 |  |  | $ | (238,576 | ) |  | $ | 1,206,669 |
Effect of ASC 606 adoption |  |  | (1,445,245 | ) |  |  | 238,576 |  |  |  | (1,206,669 | )
Balance at September 30, 2018 |  | $ | - |  |  | $ | - |  |  | $ | - |
Management analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrants and option derivatives are valued using the Black-Scholes model.
New Accounting Pronouncements | New Accounting Pronouncements Recent Accounting Standards Adopted by the Company: In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is effective beginning after December 15, 2017. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. In August 2016, the FASB issued ASU 2016-15, Clarification of Certain Cash Receipts and Cash Payments, which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. On November 17, 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. It is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The new standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Earlier adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those periods. Early adoption is permitted for acquisition or deconsolidation transactions occurring before the issuance date or effective date and only when the transactions have not been reported in issued or made available for issuance financial statements. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as a modification. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new standard will be effective prospectively for the Company for the fiscal year beginning July 1, 2018. Early adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) and Subtopic 985-605 Software - Revenue Recognition. Topic 605 and Subtopic 985-605 are collectively referred to as “Topic 605” or “prior GAAP.” Under Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures, including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted Topic 606 on the first day of fiscal 2019 using the modified retrospective transition method. Under this method, the Company evaluated contracts that were in effect at the beginning of fiscal 2019 as if those contracts had been accounted for under Topic 606. The Company did not evaluate individual modifications for those periods prior to the adoption date, but the aggregate effect of all modifications as of the adoption date and such effects are provided below. Under the modified retrospective transition method, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical, pre-Topic 606 accounting. A cumulative catch-up adjustment was recorded to beginning accumulated deficit to reflect the impact of all existing arrangements under Topic 606. As a result of adopting ASC 606, the Company recorded a net decrease of $5,795,795 to opening accumulated deficit and $2,957,860 to non-controlling interest as of July 1, 2018 as a cumulative catch-up adjustment for all open contracts as of the date of adoption. The most significant drivers of this adjustment related to the allocation of revenue to certain performance obligations on a stand-alone selling price basis. Specifically, contracts with one customer were required to be aggregated under the guidance of ASC 606, resulting in additional revenue allocated to the maintenance services under these contracts. Under the guidance of ASC 605, the Company had recognized one of these contracts as a stand-alone and separate contract with this customer, which resulted in additional revenue allocated to the license and services that had previously been delivered to this customer. The following table presents the cumulative effect adjustments, net of income tax effects, to beginning consolidated balance sheet accounts for the new accounting standards adopted by the Company on the first day of fiscal 2019:
|  | As of |  |  | Topic 606 |  |  | As of |
|  | June 30, 2018 |  |  | Adjustments |  |  | July 1, 2018 |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 22,088,853 |  |  |  |  |  |  | $ | 22,088,853 |
Accounts receivable, net of allowance of $610,061 and $571,511 |  |  | 12,775,461 |  |  |  |  |  |  |  | 12,775,461 |
Accounts receivable, net - related party |  |  | 3,374,272 |  |  |  |  |  |  |  | 3,374,272 |
Revenues in excess of billings |  |  | 14,285,778 |  |  |  | (7,328,812 | ) |  |  | 6,956,966 |
Revenues in excess of billings - related party |  |  | - |  |  |  |  |  |  |  | - |
Convertible note receivable - related party |  |  | 2,123,500 |  |  |  |  |  |  |  | 2,123,500 |
Other current assets |  |  | 2,703,032 |  |  |  |  |  |  |  | 2,703,032 |
Total current assets |  |  | 57,350,896 |  |  |  | (7,328,812 | ) |  |  | 50,022,084 |
Revenues in excess of billings, net - long term |  |  | 1,206,669 |  |  |  | (1,206,669 | ) |  |  | - |
Property and equipment, net |  |  | 16,165,491 |  |  |  |  |  |  |  | 16,165,491 |
Long term investment |  |  | 3,217,162 |  |  |  |  |  |  |  | 3,217,162 |
Other assets |  |  | 70,299 |  |  |  |  |  |  |  | 70,299 |
Intangible assets, net |  |  | 12,247,196 |  |  |  |  |  |  |  | 12,247,196 |
Goodwill |  |  | 9,516,568 |  |  |  |  |  |  |  | 9,516,568 |
Total assets |  | $ | 99,774,281 |  |  | $ | (8,535,481 | ) |  | $ | 91,238,800 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 7,873,809 |  |  |  |  |  |  | $ | 7,873,809 |
Current portion of loans and obligations under capitalized leases |  |  | 8,595,919 |  |  |  |  |  |  |  | 8,595,919 |
Unearned revenues |  |  | 5,949,581 |  |  |  | 218,174 |  |  |  | 6,167,755 |
Common stock to be issued |  |  | 88,324 |  |  |  |  |  |  |  | 88,324 |
Total current liabilities |  |  | 22,507,633 |  |  |  | 218,174 |  |  |  | 22,725,807 |
Loans and obligations under capitalized leases; less current maturities |  |  | 330,596 |  |  |  |  |  |  |  | 330,596 |
Total liabilities |  |  | 22,838,229 |  |  |  | 218,174 |  |  |  | 23,056,403 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |
Stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $.01 par value; 500,000 shares authorized; |  |  | - |  |  |  | - |  |  |  | - |
Common stock, $.01 par value; 14,500,000 shares authorized; 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018 and 11,225,385 shares issued and 11,190,606 outstanding as of June 30, 2017 |  |  | 117,085 |  |  |  |  |  |  |  | 117,085 |
Additional paid-in-capital |  |  | 126,479,147 |  |  |  |  |  |  |  | 126,479,147 |
Treasury stock (At cost, 205,853 shares and 34,779 shares as of June 30, 2018 and June 30, 2017, respectively) |  |  | (1,205,024 | ) |  |  |  |  |  |  | (1,205,024 | )
Accumulated deficit |  |  | (37,994,502 | ) |  |  | (5,795,795 | ) |  |  | (43,790,297 | )
Stock subscription receivable |  |  | (221,000 | ) |  |  |  |  |  |  | (221,000 | )
Other comprehensive loss |  |  | (24,386,071 | ) |  |  |  |  |  |  | (24,386,071 | )
Total NetSol stockholders’ equity |  |  | 62,789,635 |  |  |  | (5,795,795 | ) |  |  | 56,993,840 |
Non-controlling interest |  |  | 14,146,417 |  |  |  | (2,957,860 | ) |  |  | 11,188,557 |
Total stockholders’ equity |  |  | 76,936,052 |  |  |  | (8,753,655 | ) |  |  | 68,182,397 |
Total liabilities and stockholders’ equity |  | $ | 99,774,281 |  |  | $ | (8,535,481 | ) |  | $ | 91,238,800 |
The following table presents the cumulative effect adjustments, net of income tax effects, to beginning consolidated balance sheet accounts for the new accounting standards adopted by the Company as of September 30, 2018:
|  | As reported under Topic 606 |  |  |  |  |  | Balances under Prior GAAP |
|  | September 30, 2018 |  |  | Adjustments |  |  | September 30, 2018 |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 20,435,744 |  |  |  |  |  |  | $ | 20,435,744 |
Accounts receivable, net of allowance of $600,833 and $610,061 |  |  | 7,487,381 |  |  |  |  |  |  |  | 7,487,381 |
Accounts receivable, net - related party |  |  | 3,039,320 |  |  |  |  |  |  |  | 3,039,320 |
Revenues in excess of billings |  |  | 13,335,529 |  |  |  | 7,458,067 |  |  |  | 20,793,596 |
Revenues in excess of billings - related party |  |  | 70,250 |  |  |  |  |  |  |  | 70,250 |
Convertible note receivable - related party |  |  | 2,881,500 |  |  |  |  |  |  |  | 2,881,500 |
Other current assets |  |  | 3,438,861 |  |  |  |  |  |  |  | 3,438,861 |
Total current assets |  |  | 50,688,585 |  |  |  | 7,458,067 |  |  |  | 58,146,652 |
Revenues in excess of billings, net - long term |  |  | - |  |  |  | 1,281,652 |  |  |  | 1,281,652 |
Property and equipment, net |  |  | 15,650,128 |  |  |  |  |  |  |  | 15,650,128 |
Long term investment |  |  | 2,958,692 |  |  |  |  |  |  |  | 2,958,692 |
Other assets |  |  | 54,936 |  |  |  |  |  |  |  | 54,936 |
Intangible assets, net |  |  | 11,465,925 |  |  |  |  |  |  |  | 11,465,925 |
Goodwill |  |  | 9,516,568 |  |  |  |  |  |  |  | 9,516,568 |
Total assets |  | $ | 90,334,834 |  |  | $ | 8,739,719 |  |  | $ | 99,074,553 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 7,153,778 |  |  |  |  |  |  | $ | 7,153,778 |
Current portion of loans and obligations under capitalized leases |  |  | 8,433,675 |  |  |  |  |  |  |  | 8,433,675 |
Unearned revenues |  |  | 4,913,731 |  |  |  | (289,099 | ) |  |  | 4,624,632 |
Common stock to be issued |  |  | 88,324 |  |  |  |  |  |  |  | 88,324 |
Total current liabilities |  |  | 20,589,508 |  |  |  | (289,099 | ) |  |  | 20,300,409 |
Loans and obligations under capitalized leases; less current maturities |  |  | 296,680 |  |  |  |  |  |  |  | 296,680 |
Total liabilities |  |  | 20,886,188 |  |  |  | (289,099 | ) |  |  | 20,597,089 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |
Stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $.01 par value; 500,000 shares authorized; |  |  | - |  |  |  | - |  |  |  | - |
Common stock, $.01 par value; 14,500,000 shares authorized; 11,782,360 shares issued and 11,576,507 outstanding as of September 30, 2018 and 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018 |  |  | 117,824 |  |  |  |  |  |  |  | 117,824 |
Additional paid-in-capital |  |  | 126,918,319 |  |  |  |  |  |  |  | 126,918,319 |
Treasury stock (At cost, 205,853 shares and 205,853 shares as of September 30, 2018 and June 30, 2018, respectively) |  |  | (1,205,024 | ) |  |  |  |  |  |  | (1,205,024 | )
Accumulated deficit |  |  | (42,827,708 | ) |  |  | 5,977,953 |  |  |  | (36,849,755 | )
Stock subscription receivable |  |  | (221,000 | ) |  |  |  |  |  |  | (221,000 | )
Other comprehensive loss |  |  | (24,649,274 | ) |  |  |  |  |  |  | (24,649,274 | )
Total NetSol stockholders’ equity |  |  | 58,133,137 |  |  |  | 5,977,953 |  |  |  | 64,111,090 |
Non-controlling interest |  |  | 11,315,509 |  |  |  | 3,050,865 |  |  |  | 14,366,374 |
Total stockholders’ equity |  |  | 69,448,646 |  |  |  | 9,028,818 |  |  |  | 78,477,464 |
Total liabilities and stockholders’ equity |  | $ | 90,334,834 |  |  | $ | 8,739,719 |  |  | $ | 99,074,553 |
The following table summarizes the effects of adopting Topic 606 on the Company’s Condensed Consolidated Statement of Income for the three months ended September 30, 2018:
|  | For the Three Months |
|  | Ended September 30, 2018 |
|  | As reported under |  |  |  |  |  | Under prior |
|  | Topic 606 |  |  | Adjustments |  |  | GAAP |
Net Revenues: |  |  |  |  |  |  |  |  |  |  |  |
License fees |  | $ | 5,956,113 |  |  |  |  |  |  | $ | 5,956,113 |
Maintenance fees |  |  | 3,638,327 |  |  |  | 146,477 |  |  |  | 3,784,804 |
Services |  |  | 6,418,634 |  |  |  |  |  |  |  | 6,418,634 |
License fees - related party |  |  | - |  |  |  |  |  |  |  | - |
Maintenance fees - related party |  |  | 101,349 |  |  |  |  |  |  |  | 101,349 |
Services - related party |  |  | 282,122 |  |  |  |  |  |  |  | 282,122 |
Total net revenues |  |  | 16,396,545 |  |  |  | 146,477 |  |  |  | 16,543,022 |
Cost of revenues: |  |  |  |  |  |  |  |  |  |  |  |
Salaries and consultants |  |  | 5,020,562 |  |  |  |  |  |  |  | 5,020,562 |
Travel |  |  | 1,151,997 |  |  |  |  |  |  |  | 1,151,997 |
Depreciation and amortization |  |  | 937,604 |  |  |  |  |  |  |  | 937,604 |
Other |  |  | 1,048,324 |  |  |  |  |  |  |  | 1,048,324 |
Total cost of revenues |  |  | 8,158,487 |  |  |  | - |  |  |  | 8,158,487 |
Gross profit |  |  | 8,238,058 |  |  |  | 146,477 |  |  |  | 8,384,535 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  | 1,701,326 |  |  |  |  |  |  |  | 1,701,326 |
Depreciation and amortization |  |  | 212,232 |  |  |  |  |  |  |  | 212,232 |
General and administrative |  |  | 4,406,720 |  |  |  |  |  |  |  | 4,406,720 |
Research and development cost |  |  | 318,155 |  |  |  |  |  |  |  | 318,155 |
Total operating expenses |  |  | 6,638,433 |  |  |  | - |  |  |  | 6,638,433 |
Income (loss) from operations |  |  | 1,599,625 |  |  |  | 146,477 |  |  |  | 1,746,102 |
Other income and (expenses) |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on sale of assets |  |  | 52,294 |  |  |  |  |  |  |  | 52,294 |
Interest expense |  |  | (99,434 | ) |  |  |  |  |  |  | (99,434 | )
Interest income |  |  | 248,964 |  |  |  | 74,983 |  |  |  | 323,947 |
Gain on foreign currency exchange transactions |  |  | 10,912 |  |  |  | 53,703 |  |  |  | 64,615 |
Share of net loss from equity investment |  |  | (299,691 | ) |  |  |  |  |  |  | (299,691 | )
Other income (expense) |  |  | 5,379 |  |  |  |  |  |  |  | 5,379 |
Total other income (expenses) |  |  | (81,576 | ) |  |  | 128,686 |  |  |  | 47,110 |
Net income (loss) before income taxes |  |  | 1,518,049 |  |  |  | 275,163 |  |  |  | 1,793,212 |
Income tax provision |  |  | (236,914 | ) |  |  |  |  |  |  | (236,914 | )
Net income (loss) |  |  | 1,281,135 |  |  |  | 275,163 |  |  |  | 1,556,298 |
Non-controlling interest |  |  | (318,546 | ) |  |  | (93,005 | ) |  |  | (411,551 | )
Net income (loss) attributable to NetSol |  | $ | 962,589 |  |  | $ | 182,158 |  |  | $ | 1,144,747 |
Net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) per common share |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.08 |  |  | $ | 0.02 |  |  | $ | 0.10 |
Diluted |  | $ | 0.08 |  |  | $ | 0.02 |  |  | $ | 0.10 |
Weighted average number of shares outstanding |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 11,502,616 |  |  |  | 11,502,616 |  |  |  | 11,502,616 |
Diluted |  |  | 11,507,730 |  |  |  | 11,507,730 |  |  |  | 11,507,730 |
The following table summarizes the effects of adopting Topic 606 on the financial statement line items of the Company’s Consolidated Statement of Cash Flows for the three months ended September 30, 2018:
|  | For the Three Months |
|  | Ended September 30, 2018 |
|  | As reported under |  |  |  |  |  | Under prior |
|  | Topic 606 |  |  | Adjustments |  |  | GAAP |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 1,281,135 |  |  | $ | 275,163 |  |  | $ | 1,556,298 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 1,149,836 |  |  |  |  |  |  |  | 1,149,836 |
Share of net loss from investment under equity method |  |  | 299,691 |  |  |  |  |  |  |  | 299,691 |
(Gain) loss on sale of assets |  |  | (52,294 | ) |  |  |  |  |  |  | (52,294 | )
Stock based compensation |  |  | 432,048 |  |  |  |  |  |  |  | 432,048 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  | - |
Accounts receivable |  |  | 5,136,381 |  |  |  |  |  |  |  | 5,136,381 |
Accounts receivable - related party |  |  | 284,869 |  |  |  |  |  |  |  | 284,869 |
Revenues in excess of billing |  |  | (6,347,196 | ) |  |  | (204,238 | ) |  |  | (6,551,434 | )
Revenues in excess of billing - related party |  |  | (70,102 | ) |  |  |  |  |  |  | (70,102 | )
Other current assets |  |  | (571,246 | ) |  |  |  |  |  |  | (571,246 | )
Accounts payable and accrued expenses |  |  | (680,147 | ) |  |  |  |  |  |  | (680,147 | )
Unearned revenue |  |  | (1,202,420 | ) |  |  | (70,925 | ) |  |  | (1,273,345 | )
Net cash used in operating activities |  |  | (339,445 | ) |  |  | - |  |  |  | (339,445 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (563,413 | ) |  |  |  |  |  |  | (563,413 | )
Sales of property and equipment |  |  | 184,032 |  |  |  |  |  |  |  | 184,032 |
Convertible note receivable - related party |  |  | (758,000 | ) |  |  |  |  |  |  | (758,000 | )
Net cash used in investing activities |  |  | (1,137,381 | ) |  |  | - |  |  |  | (1,137,381 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from the exercise of stock options and warrants |  |  | - |  |  |  |  |  |  |  | - |
Proceeds from exercise of subsidiary options |  |  | 2,650 |  |  |  |  |  |  |  | 2,650 |
Purchase of treasury stock |  |  | - |  |  |  |  |  |  |  | - |
Proceeds from bank loans |  |  | 119,895 |  |  |  |  |  |  |  | 119,895 |
Payments on capital lease obligations and loans - net |  |  | (179,237 | ) |  |  |  |  |  |  | (179,237 | )
Net cash provided by (used in) financing activities |  |  | (56,692 | ) |  |  | - |  |  |  | (56,692 | )
Effect of exchange rate changes |  |  | (119,591 | ) |  |  |  |  |  |  | (119,591 | )
Net increase in cash and cash equivalents |  |  | (1,653,109 | ) |  |  | - |  |  |  | (1,653,109 | )
Cash and cash equivalents at beginning of the period |  |  | 22,088,853 |  |  |  |  |  |  |  | 22,088,853 |
Cash and cash equivalents at end of period |  | $ | 20,435,744 |  |  | $ | - |  |  | $ | 20,435,744 |
Accounting Standards Recently Issued but Not Yet Adopted by the Company: In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company will apply this guidance to applicable impairment tests after the adoption date. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact of the adoption of this standard on its consolidated financial statements. All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition Disclosure of accounting policy for credit risk. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 825 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=108315417&loc=d3e61044-112788 + Details
Name: | us-gaap_ConcentrationRiskCreditRisk
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition Disclosure of accounting policy for determining the fair value of financial instruments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 60 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7493716&loc=d3e21868-110260 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=109250915&loc=d3e13279-108611 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=84158767&loc=d3e18780-107790 + Details
Name: | us-gaap_FairValueOfFinancialInstrumentsPolicy
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact. + References No definition available. + Details
Name: | us-gaap_NewAccountingPronouncementsPolicyPolicyTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e6191-108592 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e6161-108592 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e6143-108592 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e6061-108592 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 8 -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e6132-108592 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 + Details
Name: | us-gaap_UseOfEstimates
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration