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Accounting Policies (Tables) | 3 Months Ended
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Sep. 30, 2018
Accounting Policies [Abstract] |
Schedule of Fair Value of Financial Assets Measured On Recurring Basis | 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 |
Schedule of Fair Value of Financial Instruments Reconciliation | 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 |  | $ | - |  |  | $ | - |  |  | $ | - |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | 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 |

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