EX-99.1 2 v017666_ex99-1.txt EXHIBIT 99.1 NEWS RELEASE DATED MAY 6, 2005 [LOGO) netsol Contacts: NetSol Technologies: Marty Tullio or Mark Tullio Najeeb U. Ghauri McCloud Communications, LLC 949.553.9748 Chairman marty@McCloudCommunications.com 818.222.9195 mark@McCloudCommunications.com najeeb@netsoltek.com NETSOL TECHNOLOGIES REVENUE AND PROFIT GROWTH CONTINUES WITH THIRD QUARTER REVENUES INCREASING 88 PERCENT NetSol Issues New Guidance for Fiscal 2005 as Company Delivers Record Revenues and Three Consecutive Quarters of Earnings Calabasas, CA - May 6, 2005 - NetSol Technologies, Inc. (NASDAQ:NTWK), a developer of proprietary software applications and provider of information technology (IT) services, today reported revenue for its third quarter of fiscal 2005, ended March 31, 2005. Net revenue for the third quarter of fiscal 2005 was $3.2 million, an increase of 88.2 percent, compared to revenues of $1.7 million for the third quarter of fiscal 2004. Net income for the quarter was $135,194, or net income per weighted average diluted share of $0.01, compared to a net loss of $(295,885), or a net loss per weighted average diluted share of $(0.04), for the third quarter of fiscal 2004. The net stockholders equity increased to over $15.2 million in the third quarter of fiscal 2005, compared to $10.5 million for the second quarter of fiscal 2005. Net cash balance improved to $2.7 million, from approximately $1.0 million in the second quarter of fiscal 2005. The consolidation of CQ's balance sheet with NetSol's has brought additional tangible value, as CQ's balance sheet carried no debt or long term liabilities, and has added cash and receivables of over $1 million to the NetSol consolidated balance sheet. For the nine months ended March 31, 2005, the company reported revenue of $8.0 million, an increase of 105 percent, compared to revenue of $3.9 million for the nine months ended March 31, 2004. NetSol reported net income of $429,218, or net income per weighted diluted share of $0.04, for the nine-month period of fiscal 2005, versus a net loss of $(1.5) million, or a net loss per weighted average diluted share of $(0.18) for the comparable nine-month period of fiscal 2004. Gross profit margins for both the third quarter of fiscal 2005 and the comparable 2004 quarter was approximately 59 percent. For the nine months ended March 31, 2005, gross profits rose to $5.1 million, with gross profit margins of 63.6 percent, compared to gross profits of $2.2 million, or gross profit margins of 57.6 percent for the comparable nine-month period. The increase in profit margin is due to a strict focus on managing operating expenses, along with increased sales of high-margin products and services. NetSol's third quarter EBITDA (earnings before interest, tax, deprecation and amortization), a fundamental way to value a company's performance, was $586,178, compared to an EBITDA loss of $(26,380) for the same period ended March 31, 2004. The EBITDA gain for the first nine months of fiscal 2005 was approximately $1.63 million, compared to the EBITDA loss of $(494,527) for the comparable nine months of fiscal 2004. - more - NETSOL TECHNOLOGIES REVENUE AND PROFIT GROWTH CONTINUES WITH THIRD QUARTER REVENUES INCREASING 88 PERCENT Page 2-2-2 "We are pleased with the significant increases in revenue and net income over the past three quarters, as the company-generated $1.5 million in free cash since our move to profitability in the first quarter of fiscal 2005 - a stunning turnaround when compared to fiscal 2004," commented NetSol Technologies CEO Naeem Ghauri. "Our LeaseSoft license sales are now consistently driving revenue, as evidenced by a recent contract for $2.1 million from a top five automotive finance company," continued Ghauri. "These recent LeaseSoft license agreements and exponential growth in our services business have resulted in a significant sales backlog. It is important to note that each LeaseSoft licensing agreement produces a recurring, high-gross-margined revenue stream for an average of five years." "We fully expect our NetSol-TiG joint venture, which began operations in March 2005, along with our telecommunications subsidiary, NetSol-Akhter, and the newest member of the NetSol family, CQ Systems, to assist in propelling our robust revenue growth well into fiscal 2006, as the company executes on global marketing and sales initiatives and continues to leverage its strategic partnerships to drive significant increase in sales," said NetSol Chairman Najeeb U. Ghauri. Ghauri noted, "The traction in the market from our LeaseSoft product line will be augmented by CQ Systems' complementary product line and aggressive sales team. Our inBanking(TM) product has been significantly enhanced utilizing the n-Tier Architecture standard and is progressing well as a development-stage product. Based on our marketing information, we believe this product has the potential to be as successful, if not more so, than our flagship LeaseSoft product. We look forward to the commercialization of our inBanking product in late 2005." Third Quarter Business Highlights: o NetSol awarded the first of what promises to be several Federal Government software development contracts from the Pakistan government; o NetSol adds five new Customers and 95 new employees including 45 from CQ Systems' acquisition; o NetSol's wholly-owned subsidiary, NetSol Technologies Ltd., enters into underwriting agreement with AKD Securities and other blue chip institutions for IPO and listing on the KSE; o Filed listing application on KSE for subsidiary, expected to raise up to $6.0 million without using NASDAQ:NTWK stock; o NetSol's state-of-the-art technology campus inauguration ceremony, presided over by Pakistan's Prime Minister Shaukat Aziz, while the World Economic Forum survey ranks Pakistan as second best in South Asia, using information technology to drive economic growth; o NetSol signs $2.1 million LeaseSoft contract with big five auto finance company; o NetSol completes acquisition of CQ Systems; o CQ Systems adds 55 new lease and finance customers to NetSol's portfolio; o CQ Systems reports revenues of $5.2 million and net income of $730,000; o E-Commerce Times News Network adopts NetSol as a case study entitled "Choosing a Software Business Model" discussing how business models such as NetSol's positions companies for long term success; - more - NETSOL TECHNOLOGIES REVENUE AND PROFIT GROWTH CONTINUES WITH THIRD QUARTER REVENUES INCREASING 88 PERCENT Page 3-3-3 o NetSol's wholly-owned subsidiary, CQ Systems, completes $650,000 software implementation; and, o NetSol appoints leasing industry leader to its board of directors. Guidance Fiscal Year End June 30, 2005 o Revenues to exceed $11.0 million; previous guidance $10.0 million in revenues; o EPS to exceed $0.05; o More focus in Europe and penetration in Asia Pacific region. Outlook For Fiscal Year 2005/06 o Launching major initiative in china to target leasing and finance companies; o Revive US sales with new acquisition targets; o Begin Phase two of the IT Village expansion, with another 500 seat facility to accommodate sales backlog; o Projecting 600-plus headcount in Lahore; o New initiative in high end business process outsourcing (BPO) product for specific business verticals; o Expansion of CQ Systems into Central/Eastern Europe; o CMMi Level 5 certification. About NetSol Technologies, Inc. NetSol Technologies is a leading end-to-end solution provider for the lease and finance industry. Headquartered in Calabasas, CA, NetSol Technologies, Inc. operates on a global basis with locations in the U.S., Europe, East Asia and Asia Pacific. NetSol helps its clients identify, evaluate and implement technology solutions to meet their most critical business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol delivers high-quality, cost-effective IT services ranging from consulting and application development to systems integration and outsourcing. NetSol's commitment to quality is demonstrated by its achievement of both ISO 9001 and SEI (Software Engineering Institute) CMM (Capability Maturity Model) Level 4 assessment. For more information, visit NetSol Technologies' web site at www.netsoltek.com. Securities Exchange Act of 1934 This release is comprised of inter-related information that must be interpreted in the context of all the information provided; accordingly, care should be exercised not to consider portions of this release out of context. This release is provided in compliance with Commission Regulation FD and contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance, are not statements of historical fact and may be "forward-looking statements." Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those - more - NETSOL TECHNOLOGIES REVENUE AND PROFIT GROWTH CONTINUES WITH THIRD QUARTER REVENUES INCREASING 88 PERCENT Page 4-4-4 presently anticipated. Forward looking statements in this action may be identified through the use of words such as "expects", "will", "anticipates", "estimates", "believes", or statements indicating certain actions "may", "could", or "might" occur. Such statements reflect the current views of NetSol Technologies with respect to future events and are subject to certain assumptions, including those described in this release. Should one or more of the underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed or expected. NetSol Technologies does not intend to update these forward-looking statements prior to announcement of quarterly or annual results. (Tables Follow) NETSOL TECHNOLOGIES REVENUE AND PROFIT GROWTH CONTINUES WITH THIRD QUARTER REVENUES INCREASING 88 PERCENT Page 4-4-4
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months For the Nine Months Ended March 31, Ended March 31, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (restated) (restated) Net revenues $ 3,190,918 $ 1,700,774 $ 7,972,450 $ 3,881,731 Cost of revenues 1,323,237 694,823 2,903,857 1,645,536 ------------ ------------ ------------ ------------ Gross profit 1,867,681 1,005,951 5,068,593 2,236,195 Operating expenses: Selling and marketing 219,399 49,690 474,099 96,377 Depreciation and amortization 403,628 294,486 1,026,769 903,182 Settlement costs -- 22,500 43,200 122,500 Bad debt expense -- 59,821 -- 153,327 Salaries and wages 453,226 408,840 1,248,447 1,003,289 Professional services, including non-cash compensation 112,830 70,701 368,135 310,403 General and adminstrative 462,421 490,936 1,032,687 1,239,420 ------------ ------------ ------------ ------------ Total operating expenses 1,651,504 1,396,974 4,193,337 3,828,498 ------------ ------------ ------------ ------------ Income (loss) from operations 216,177 (391,023) 875,256 (1,592,303) Other income and (expenses) Gain (Loss) on sale of assets -- 160 (620) (33,759) Beneficial conversion feature (7,500) (3,323) (239,416) (99,350) Fair market value of warrants issued -- -- (249,638) -- Gain on forgiveness of debt 49,865 99,146 239,506 203,234 Interest expense (47,356) (27,779) (177,356) (117,368) Other income and (expenses) (45,998) (44,115) (2,779) (39,918) ------------ ------------ ------------ ------------ Total other expenses (50,989) 24,089 (430,303) (87,161) ------------ ------------ ------------ ------------ Net income (loss) before minority interest in sub subsidiary 165,188 (366,934) 444,953 (1,679,464) Minority interest in subsidiary (29,994) 71,049 (15,735) 164,387 ------------ ------------ ------------ ------------ Net income (loss) 135,194 (295,885) 429,218 (1,515,077) Other comprehensive (loss)/gain: Translation adjustment (11,252) (53,590) (184,661) (160,797) ------------ ------------ ------------ ------------ Comprehensive income (loss) $ 123,942 $ (349,475) $ 244,557 $ (1,675,874) ============ ============ ============ ============ Net income (loss) per share: Basic $ 0.01 $ (0.04) $ 0.04 $ (0.18) ============ ============ ============ ============ Diluted $ 0.01 $ (0.04) $ 0.03 $ (0.18) ============ ============ ============ ============ Weighted average number of shares outstanding Basic 12,704,226 7,475,148 10,937,910 8,255,680 Diluted 15,642,431 7,475,148 13,750,981 8,255,680
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NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET -- MARCH 31, 2005 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 1,596,031 Certificates of deposit 1,083,450 Accounts receivable, net of allowance for doubtful accounts of $80,000 3,699,180 Revenues in excess of billings 1,914,242 Other current assets 1,207,016 ------------ Total current assets 9,499,919 Property and equipment, net of accumulated depreciation 4,809,751 Intangibles: Product licenses, renewals, enhancements, copyrights, trademarks, and tradenames, net 4,658,299 Customer lists, net 1,699,752 Goodwill 3,404,886 ------------ Total intangibles 9,762,937 ------------ Total assets $ 24,072,607 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,729,779 Current portion of notes and obligations under capitalized leases 4,814,463 Billings in excess of revenues 218,200 Loans payable, bank 463,241 ------------ Total current liabilities 8,225,683 Obligations under capitalized leases, less current maturities 161,122 Convertible debenture 120,000 ------------ Total liabilities 8,506,805 Minority interest 379,752 Contingencies -- Stockholders' equity: Common stock, $.001 par value; 25,000,000 share authorized; 13,225,937 issued and outstanding 13,226 Additional paid-in-capital 46,817,522 Treasury stock (27,197) Accumulated deficit (30,488,248) Stock subscription receivable (1,328,142) Common stock to be issued 533,760 Other comprehensive loss (334,871) ------------ Total stockholders' equity 15,186,050 ------------ Total liabilities and stockholders' equity $ 24,072,607 ============
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