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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Estimated Useful Lives of Assets

Following is the summary of estimated useful lives of the assets:

Category		Estimated Useful Life
Computer equipment & software		3 to 5 Years
Office furniture and equipment		5 to 10 Years
Building		20 Years
Autos		5 Years
Assets under capital leases		3 to 10 Years
Improvements		5 to 10 Years

Schedule of Fair Value of Financial Assets Measured on Recurring Basis

Our financial assets that are measured at fair value on a recurring basis as of June 30, 2019 are as follows:

		Level 1				Level 2				Level 3				Total Assets
Revenues in excess of billing - long term		$	-			$	-			$	1,281,492			$	1,281,492
Total		$	-			$	-			$	1,281,492			$	1,281,492

Our financial assets that are measured at fair value on a recurring basis as of June 30, 2018, are 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 June 30, 2019 is as follows:

		Revenues in excess of billing - long term				Fair value discount				Total
Balance at June 30, 2017		$	5,483,869			$	(310,331	)		$	5,173,538
Additions			2,432,244				(180,526	)			2,251,718
Transfers to short term			(6,470,868	)			-				(6,470,868	)
Amortization during the period			-				252,281				252,281
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	)
Additions			1,380,631				(99,139	)			1,281,492
Balance at June 30, 2019		$	1,380,631			$	(99,139	)		$	1,281,492

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
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 June 30, 2019:

		As reported under Topic 606								Balances under Prior GAAP
		June 30, 2019				Adjustments				June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents		$	17,366,364							$	17,366,364
Accounts receivable, net of allowance of $192,786 and $610,061			12,332,714								12,332,714
Accounts receivable, net of allowance of $166,075 and $0 - related party			3,266,600								3,266,600
Revenues in excess of billings, net of allowance of $194,684 and $0			14,719,047				9,324,173				24,043,220
Revenues in excess of billings - related party			110,827								110,827
Convertible note receivable - related party			3,650,000								3,650,000
Other current assets			3,146,264								3,146,264
Total current assets			54,591,816				9,324,173				63,915,989
Revenues in excess of billings, net - long term			1,281,492				1,383,585				2,665,077
Property and equipment, net			12,096,855								12,096,855
Long term investment			2,653,769								2,653,769
Other assets			23,569								23,569
Intangible assets, net			7,332,950								7,332,950
Goodwill			9,516,568								9,516,568
Total assets		$	87,497,019			$	10,707,758			$	98,204,777
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	7,476,560							$	7,476,560
Current portion of loans and obligations under capitalized leases			6,905,597								6,905,597
Unearned revenues			5,977,736				(908,100	)			5,069,636
Common stock to be issued			88,324								88,324
Total current liabilities			20,448,217				(908,100	)			19,540,117
Loans and obligations under capitalized leases; less current maturities			564,572								564,572
Total liabilities			21,012,789				(908,100	)			20,104,689
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;			-				-				-
Common stock, $.01 par value; 14,500,000 shares authorized; 11,911,742 shares issued and 11,664,239 outstanding as of June 30, 2019 and 11,708,469 shares issued and 11,502,616 outstanding as of June 30, 2018			119,117								119,117
Additional paid-in-capital			127,737,999								127,737,999
Treasury stock (At cost, 247,503 shares and 205,853 shares as of June 30, 2019 and June 30, 2018, respectively)			(1,455,969	)							(1,455,969	)
Accumulated deficit			(35,206,898	)			7,690,573				(27,516,325	)
Stock subscription receivable			-								-
Other comprehensive loss			(33,125,006	)							(33,125,006	)
Total NetSol stockholders’ equity			58,069,243				7,690,573				65,759,816
Non-controlling interest			8,414,987				3,925,285				12,340,272
Total stockholders’ equity			66,484,230				11,615,858				78,100,088
Total liabilities and stockholders’ equity		$	87,497,019			$	10,707,758			$	98,204,777

The following table summarizes the effects of adopting Topic 606 on the Company’s Consolidated Statement of Income for the year ended June 30, 2019:

		For the Year
		Ended June 30, 2019
		As reported under								Under prior
		Topic 606				Adjustments				GAAP
Net Revenues:
License fees		$	16,768,749			$	357,259			$	17,126,008
Maintenance fees			15,010,171				587,194				15,597,365
Services			34,185,992				-				34,185,992
License fees - related party			-				-				-
Maintenance fees - related party			511,242				-				511,242
Services - related party			1,343,029				-				1,343,029
Total net revenues			67,819,183				944,453				68,763,636
Cost of revenues:
Salaries and consultants			19,253,364				-				19,253,364
Travel			6,527,868				-				6,527,868
Depreciation and amortization			3,525,857				-				3,525,857
Other			4,066,443				-				4,066,443
Total cost of revenues			33,373,532				-				33,373,532
Gross profit			34,445,651				944,453				35,390,104
Operating expenses:
Selling and marketing			7,831,758				-				7,831,758
Depreciation and amortization			897,800				-				897,800
General and administrative			16,916,953				-				16,916,953
Research and development cost			1,971,228				-				1,971,228
Total operating expenses			27,617,739				-				27,617,739
Income from operations			6,827,912				944,453				7,772,365
Other income and (expenses)
Gain (loss) on sale of assets			81,455				-				81,455
Interest expense			(311,798	)			-				(311,798	)
Interest income			955,061				176,916				1,131,977
Gain on foreign currency exchange transactions			6,345,859				1,740,834				8,086,693
Share of net loss from equity investment			(841,845	)			-				(841,845	)
Other income			18,680				-				18,680
Total other income (expenses)			6,247,412				1,917,750				8,165,162
Net income before income taxes			13,075,324				2,862,203				15,937,527
Income tax provision			(1,057,784	)			-				(1,057,784	)
Net income			12,017,540				2,862,203				14,879,743
Non-controlling interest			(3,434,141	)			(967,425	)			(4,401,566	)
Net income attributable to NetSol		$	8,583,399			$	1,894,778			$	10,478,177
Net income per share:
Net income per common share
Basic		$	0.74			$	0.16			$	0.90
Diluted		$	0.74			$	0.16			$	0.90
Weighted average number of shares outstanding
Basic			11,599,290				11,599,290				11,599,290
Diluted			11,621,990				11,621,990				11,621,990

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 year ended June 30, 2019:

		For the Year
		Ended June 30, 2019
		As reported under								Under prior
		Topic 606				Adjustments				GAAP
Cash flows from operating activities:
Net income		$	12,017,540			$	2,862,203			$	14,879,743
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,423,657								4,423,657
Provision for bad debts			474,516								474,516
Share of net loss from investment under equity method			841,845								841,845
Loss on sale of assets			(80,470	)							(80,470	)
Stock based compensation			1,131,013								1,131,013
Fair market value of stock options			43,612								43,612
Accounts receivable			(1,836,962	)							(1,836,962	)
Accounts receivable - related party			(977,445	)							(977,445	)
Revenues in excess of billing			(10,764,428	)			(2,172,277	)			(12,936,705	)
Revenues in excess of billing - related party			(122,810	)							(122,810	)
Other current assets			(861,128	)							(861,128	)
Accounts payable and accrued expenses			(47,819	)							(47,819	)
Unearned revenue			692,089				(689,926	)			2,163
Net cash provided by operating activities			4,933,210				-				4,933,210
Cash flows from investing activities:
Purchases of property and equipment			(2,726,558	)							(2,726,558	)
Sales of property and equipment			1,170,878								1,170,878
Convertible note receivable - related party			(1,526,500	)							(1,526,500	)
Investment in associates			(250,000	)							(250,000	)
Purchase of subsidiary shares from open market			(317,500	)							(317,500	)
Net cash used in investing activities			(3,649,680	)			-				(3,649,680	)
Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants			85,000								85,000
Proceeds from exercise of subsidiary options			2,650								2,650
Purchase of treasury stock			(250,945	)							(250,945	)
Dividend paid by subsidiary to non-controlling interest			(566,465	)							(566,465	)
Proceeds from bank loans			1,227,158								1,227,158
Payments on capital lease obligations and loans - net			(480,231	)							(480,231	)
Net cash provided by financing activities			17,167				-				17,167
Effect of exchange rate changes			(6,023,186	)							(6,023,186	)
Net decrease in cash and cash equivalents			(4,722,489	)			-				(4,722,489	)
Cash and cash equivalents at beginning of the period			22,088,853								22,088,853
Cash and cash equivalents at end of period		$	17,366,364			$	-			$	17,366,364

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