NetSol(NTWK) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents NETSOL Technologies' unaudited condensed consolidated financial statements and related notes for the specified interim periods Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric | March 31, 2023 | June 30, 2022 | | :-------------------------------- | :------------- | :------------ | | Total assets | $59,549,867 | $72,608,632 | | Total liabilities | $18,522,814 | $21,754,409 | | Total stockholders' equity | $41,027,053 | $50,854,223 | - Total assets decreased by approximately $13.06 million from June 30, 2022, to March 31, 2023. Total liabilities decreased by approximately $3.23 million, and total stockholders' equity decreased by approximately $9.83 million during the same period[8] Condensed Consolidated Statements of Operations This section reports the company's revenues, expenses, and net income or loss over specific interim periods | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total net revenues | $13,506,389 | $14,809,826 | $38,602,866 | $43,703,549 | | Gross profit | $4,705,029 | $5,834,570 | $12,099,489 | $18,920,180 | | Income (loss) from operations | $(930,435) | $(539,305) | $(5,873,140) | $474,953 | | Net income (loss) attributable to NetSol | $2,544,623 | $(278,470) | $(169,032) | $1,316,284 | | Basic EPS | $0.23 | $(0.02) | $(0.01) | $0.12 | | Diluted EPS | $0.23 | $(0.02) | $(0.01) | $0.12 | - For the three months ended March 31, 2023, total net revenues decreased by 8.8% YoY, while net income attributable to NetSol significantly improved from a loss of $278,470 to a gain of $2,544,623. For the nine months ended March 31, 2023, total net revenues decreased by 11.7% YoY, and net income attributable to NetSol shifted from a gain of $1,316,284 to a loss of $169,032[10] Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents net income or loss alongside other comprehensive income items, such as foreign currency translation adjustments | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to NetSol | $2,544,623 | $(278,470) | $(169,032) | $1,316,284 | | Net translation adjustment | $(5,181,654) | $(1,804,777) | $(7,829,909) | $(4,871,925) | | Comprehensive income (loss) attributable to NetSol | $(2,637,031) | $(2,083,247) | $(7,998,941) | $(3,555,641) | - The company experienced significant negative translation adjustments, leading to comprehensive losses for both the three and nine months ended March 31, 2023 and 2022, despite a net income for the three months ended March 31, 2023[12] Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit | Metric | March 31, 2023 | June 30, 2022 | | :-------------------------- | :------------- | :------------ | | Common Stock Shares | 12,238,042 | 12,196,570 | | Common Stock Amount | $122,382 | $121,966 | | Additional Paid-in Capital | $128,536,955 | $128,218,247 | | Accumulated Deficit | $(39,821,470) | $(39,652,438) | | Other Comprehensive Loss | $(47,192,994) | $(39,363,085) | | Total Stockholders' Equity | $41,027,053 | $50,854,223 | - Total stockholders' equity decreased by approximately $9.83 million from June 30, 2022, to March 31, 2023, primarily due to an increase in other comprehensive loss (translation adjustment) and accumulated deficit, partially offset by an increase in additional paid-in capital[8][15][17] - The company issued 41,472 shares of common stock for services rendered by independent board members during the nine months ended March 31, 2023, valued at $119,250[123] Condensed Consolidated Statements of Cash Flows This section reports cash inflows and outflows from operating, investing, and financing activities over specific interim periods | Cash Flow Activity | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :--------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $2,564,619 | $5,525,951 | | Net cash used in investing activities | $(1,421,657) | $(1,359,605) | | Net cash used in financing activities | $(517,349) | $(833,103) | | Effect of exchange rate changes | $(9,329,913) | $(6,465,085) | | Net decrease in cash and cash equivalents | $(8,704,300) | $(3,131,842) | | Cash and cash equivalents at end of period | $15,259,497 | $30,573,312 | - Net cash provided by operating activities decreased by approximately 53.6% YoY for the nine months ended March 31, 2023. The significant negative effect of exchange rate changes contributed to a larger net decrease in cash and cash equivalents compared to the prior year[21] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION This note describes the company's business, the basis for preparing interim financial statements, and its consolidation principles - NETSOL Technologies, Inc. provides proprietary software products and IT services to the automobile financing, leasing, banking, and financial services industries worldwide[26] - The company's consolidated financial statements include accounts of wholly-owned subsidiaries (e.g., NetSol Technologies Americas, NetSol Technologies Europe Limited) and majority-owned subsidiaries (e.g., NetSol Technologies, Ltd., Otoz, Inc.)[29] NOTE 2 – ACCOUNTING POLICIES This note outlines significant accounting policies, including estimates, credit risk, and fair value measurements - Significant estimates are made for doubtful accounts, taxation, useful lives of depreciable and intangible assets, contingencies, operating lease liabilities, and estimated contract costs[31] - As of March 31, 2023, the company had approximately $13.09 million in uninsured cash deposits in foreign entities, down from $22.76 million at June 30, 2022[32] - The company did not have any financial assets measured at fair value on a recurring basis at March 31, 2023, compared to $853,601 at June 30, 2022, primarily due to transfers to short term and amortization[37][38] NOTE 3 – REVENUE RECOGNITION This note details the company's revenue recognition policies, including core and non-core streams and contract balances - The company's primary revenue streams are core revenue (software licenses, services, subscription and support) and non-core revenue (BPO, other IT services, internet services)[44][45][46] Total Net Revenue by Category | Revenue Category | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :----------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total core revenue, net | $12,508,511 | $13,592,002 | $35,533,685 | $39,887,101 | | Total non-core revenue, net | $997,878 | $1,217,824 | $3,069,181 | $3,816,448 | | Total net revenue | $13,506,389 | $14,809,826 | $38,602,866 | $43,703,549 | - Contracted but unsatisfied performance obligations were approximately $33.6 million as of March 31, 2023, with an estimated $15.2 million to be recognized in the next 12 months[73] NOTE 4 – EARNINGS PER SHARE This note explains the calculation of basic and diluted earnings per share, noting the absence of dilutive instruments - Basic EPS is computed based on weighted average common shares outstanding; diluted EPS includes dilutive potential common shares. No dilutive instruments were outstanding for the periods ended March 31, 2023 and 2022[81] NOTE 5 – OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY This note addresses foreign currency translation adjustments and their impact on comprehensive income and accumulated losses - Various subsidiaries use different functional currencies (e.g., British Pound, Euro, Pakistan Rupee, Thai Baht, Australian dollar, AED, Chinese Yuan), while NetSol Technologies, Inc. uses the U.S. dollar[82] Accumulated Translation Losses and Net Translation Adjustment | Metric | March 31, 2023 | June 30, 2022 | | :-------------------------- | :------------- | :------------ | | Accumulated translation losses | $(47,192,994) | $(39,363,085) | | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net translation adjustment attributable to NetSol | $(5,181,654) | $(1,804,777) | $(7,829,909) | $(4,871,925) | NOTE 6 – MAJOR CUSTOMERS This note identifies key customers, Daimler Financial Services and BMW Financial, and their revenue and receivable contributions Revenue from Major Customers | Customer | 9 Months Ended Mar 31, 2023 Revenue | % of Total Revenue (9M 2023) | 9 Months Ended Mar 31, 2022 Revenue | % of Total Revenue (9M 2022) | | :--------------------- | :-------------------------------- | :--------------------------- | :-------------------------------- | :--------------------------- | | Daimler Financial Services (DFS) | $10,824,636 | 28.0% | $15,692,171 | 35.9% | | BMW Financial (BMW) | $3,208,649 | 8.3% | $3,203,536 | 7.3% | Accounts Receivable and Revenues in Excess of Billings from Major Customers | Customer | Accounts Receivable (Mar 31, 2023) | Accounts Receivable (Jun 30, 2022) | Revenues in Excess of Billings (Mar 31, 2023) | Revenues in Excess of Billings (Jun 30, 2022) | | :--------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Daimler Financial Services (DFS) | $2,284,979 | $2,005,463 | $2,016,970 | $365,863 | | BMW Financial (BMW) | $1,104,698 | $2,498,645 | $2,002,579 | $2,199,381 | NOTE 7 - OTHER CURRENT ASSETS This note details the components of other current assets, including prepaid expenses and various receivables Other Current Assets Breakdown | Category | March 31, 2023 | June 30, 2022 | | :----------------- | :------------- | :------------ | | Prepaid Expenses | $1,438,244 | $1,389,370 | | Advance Income Tax | $218,352 | $202,783 | | Other Receivables | $188,157 | $21,581 | | Net Balance | $2,599,532 | $2,223,361 | NOTE 8 – REVENUES IN EXCESS OF BILLINGS – LONG TERM This note explains the decrease in long-term revenues in excess of billings due to accretion and reclassification to short-term Revenues in Excess of Billings - Long Term | Metric | March 31, 2023 | June 30, 2022 | | :---------------------------------- | :------------- | :------------ | | Revenues in excess of billings - long term | $0 | $881,940 | | Present value discount | $0 | $(28,339) | | Net Balance | $0 | $853,601 | - During the three and nine months ended March 31, 2023, the company accreted $9,372 and $28,029, respectively, which was recorded in interest income[87] NOTE 9 - PROPERTY AND EQUIPMENT This note details changes in property and equipment, net, primarily due to accumulated depreciation and related expenses Property and Equipment, Net | Category | March 31, 2023 | June 30, 2022 | | :-------------------------- | :------------- | :------------ | | Subtotal (Gross) | $18,307,788 | $23,451,688 | | Accumulated Depreciation | $(11,436,752) | $(14,069,064) | | Property and Equipment, Net | $6,871,036 | $9,382,624 | - Depreciation expense for the nine months ended March 31, 2023, was $1,598,325, with $1,029,012 reflected in cost of revenues[88] NOTE 10 - LEASES This note outlines the company's lease accounting, including ROU assets, lease liabilities, and total lease costs Lease Assets and Liabilities | Metric | March 31, 2023 | June 30, 2022 | | :------------------------ | :------------- | :------------ | | Operating lease assets, net | $1,102,729 | $969,163 | | Total Lease Liabilities | $1,072,666 | $995,938 | Lease Cost Components | Lease Cost Component | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | | Amortization of finance lease assets | $13,701 | $59,201 | | Interest on finance lease obligation | $4,402 | $13,780 | | Operating lease cost | $346,993 | $518,048 | | Short term lease cost | $143,978 | $166,789 | | Sub lease income | $(23,697) | $(27,012) | | Total lease cost | $485,377 | $730,806 | - Maturities of operating lease liabilities as of March 31, 2023, show $450,939 due within year 1 and $651,443 as non-current portion[101] NOTE 11 – LONG TERM INVESTMENT This note describes the company's equity method investment in Drivemate Co., Ltd., and its impact on net income - The company owns a 30% equity interest in Drivemate Co., Ltd., accounted for using the equity method[104] Net Investment in Drivemate | Metric | March 31, 2023 | June 30, 2022 | | :-------------------------- | :------------- | :------------ | | Gross investment | $1,800,000 | $1,800,000 | | Cumulative net loss on investment | $(733,122) | $(740,632) | | Net investment | $1,066,878 | $1,059,368 | - For the nine months ended March 31, 2023, the company recorded a share of net income of $7,510 from its equity investment in Drivemate[105] NOTE 12 - INTANGIBLE ASSETS This note details intangible assets, primarily product licenses, their amortization, and net balance changes Intangible Assets, Net | Metric | March 31, 2023 | June 30, 2022 | | :-------------------------- | :------------- | :------------ | | Product Licenses - Cost | $47,244,997 | $47,244,997 | | Accumulated Amortization | $(22,198,513) | $(25,743,121) | | Net Balance | $381,878 | $1,587,670 | - The unamortized amount of $381,878 will be amortized over one year. Amortization expense for the nine months ended March 31, 2023, was $921,144[109] NOTE 13 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES This note explains the changes in accounts payable and accrued expenses, driven by accrued liabilities Accounts Payable and Accrued Expenses | Category | March 31, 2023 | June 30, 2022 | | :-------------------------- | :------------- | :------------ | | Accounts Payable | $987,963 | $1,175,527 | | Accrued Liabilities | $4,102,715 | $3,507,415 | | Accrued Payroll | $1,182,049 | $1,397,605 | | Total | $7,098,206 | $6,813,541 | NOTE 14 – DEBTS This note details the company's notes payable and finance leases, including current maturities and varying interest rates Debt and Finance Lease Obligations | Debt Type | March 31, 2023 Total | March 31, 2023 Current | March 31, 2023 Long-Term | June 30, 2022 Total | June 30, 2022 Current | June 30, 2022 Long-Term | | :-------------------------------- | :------------------- | :--------------------- | :----------------------- | :------------------- | :--------------------- | :----------------------- | | Loans and obligations under finance leases | $6,148,260 | $5,938,717 | $209,543 | $8,974,797 | $8,532,050 | $442,747 | | Subsidiary Finance Leases | $36,027 | $30,327 | $5,700 | $68,571 | $35,095 | $33,476 | | Total | $6,184,287 | $5,969,044 | $215,243 | $9,043,368 | $8,567,145 | $476,223 | - Interest rates on export refinance facilities for NetSol PK increased significantly, for example, from 3.0% to 17.0% for Askari Bank Limited and from 3.0% to 10.0% for Samba Bank Limited and Habib Metro Bank Limited[116][117][118] - Minimum future lease payments under finance leases total $39,187, with $33,135 due within year 1. Aggregate future long-term debt payments total $376,712, with $167,169 due within year 1[120] NOTE 15 - STOCKHOLDERS' EQUITY This note reports the issuance of common stock for services rendered by independent board members - The company issued 15,057 common shares ($39,750 fair value) for services in the three months ended March 31, 2023, and 41,472 common shares ($119,250 fair value) for the nine months ended March 31, 2023[123] NOTE 16 – CONTINGENCIES This note addresses legal proceedings, claims, and tax assessments, and the company's policy for estimating losses - The company faces legal proceedings, claims, and litigation, including tax assessments, in the ordinary course of business[124] - Estimated losses are accrued when probable and reasonably estimable; otherwise, disclosures are provided if a material loss is reasonably possible[124] NOTE 17 – OPERATING SEGMENTS This note outlines the company's three operating segments: North America, Europe, and Asia-Pacific, with Asia-Pacific being the largest - The company's three operating segments are North America, Europe, and Asia-Pacific, each offering similar products and services[125] Identifiable Assets by Segment | Segment | Identifiable Assets (Mar 31, 2023) | Identifiable Assets (Jun 30, 2022) | | :-------------- | :------------------------------- | :------------------------------- | | North America | $6,332,955 | $6,442,219 | | Europe | $8,351,282 | $8,727,530 | | Asia - Pacific | $43,231,859 | $56,594,705 | | Consolidated | $59,549,867 | $72,608,632 | Revenue by Segment | Segment | 9 Months Ended Mar 31, 2023 Revenue | 9 Months Ended Mar 31, 2022 Revenue | | :-------------- | :-------------------------------- | :-------------------------------- | | North America | $4,088,696 | $3,104,433 | | Europe | $7,643,408 | $7,483,911 | | Asia - Pacific | $26,870,762 | $33,115,205 | | Consolidated | $38,602,866 | $43,703,549 | NOTE 18 – NON-CONTROLLING INTEREST IN SUBSIDIARY This note explains the changes in non-controlling interest, primarily due to NetSol PK's net income and Otoz share issuance Non-Controlling Interest by Subsidiary | Subsidiary | Non-Controlling Interest % (Mar 31, 2023) | Non-Controlling Interest (Mar 31, 2023) | Non-Controlling Interest % (Jun 30, 2022) | Non-Controlling Interest (Jun 30, 2022) | | :---------------- | :---------------------------------------- | :-------------------------------------- | :---------------------------------------- | :-------------------------------------- | | NetSol PK | 32.38% | $3,630,559 | 32.38% | $5,479,905 | | Otoz, Inc. | 10.94% | $(156,930) | 5.59% | $(47,698) | | Total | - | $3,303,036 | - | $5,450,389 | - The non-controlling interest in Otoz, Inc. increased from 5.59% to 10.94% due to the issuance of 191,011 shares to an employee[131] NOTE 19– INCOME TAXES This note details the income tax provision and effective tax rate, noting tax exemptions for Pakistan-developed software exports Income Tax Provision | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax provision | $(227,718) | $(157,604) | $(641,122) | $(526,737) | - Income from the export of computer software and related services developed in Pakistan is tax-exempt through June 30, 2025; tax is applied to non-core business activities[135] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, covering business, trends, financial changes, non-GAAP measures, liquidity, and covenants Business Overview This section describes NETSOL's global IT and enterprise software solutions, focusing on its NFS Ascent suite for the finance and leasing industry - NETSOL's primary revenue sources are licensing, subscriptions, modification, enhancement, and support of its NFS Ascent financial applications for the global finance and leasing space[143] - Key offerings include NFS Ascent (cloud-enabled, SaaS/subscription-based), NFS Digital (digital transformation solutions), and OTOZ (white-labeled SaaS platform for on-demand mobility and digital auto retail)[146][147][148] - The company maintains regional offices in North America (Los Angeles, Austin), Europe (London, Horsham), and Asia Pacific (Lahore, Karachi, Bangkok, Beijing, Shanghai, Jakarta, Sydney)[145][148] Highlights This section summarizes key achievements for the quarter, including new agreements, product implementations, and strategic partnerships - Signed a new $5 million NFS Ascent agreement with Kubota Australia Pty Ltd - Went live with the API-first cloud-based calculation engine, Flex™, for Haydock Finance in the United Kingdom - Successfully implemented NFS Ascent CMS system for DFS in Japan - Otoz expanded its network to 38 dealers across 16 states - Generated approximately $1.0 million from successfully implementing change requests - Achieved API Gateway Delivery Partner status with Amazon Web Services (AWS), enhancing API capabilities and potential sales[153] Trends This section outlines positive and negative market trends impacting the company, such as vehicle sales, inflation, currency fluctuations, and geopolitical events - Positive Trends: Global new vehicle sales expected to reach 84 million units in 2023 (5.6% increase), U.S. sales volumes projected to increase by 8% to 15 million units. Reduction of U.S. inflation rate to approximately 5% annually. Elimination of COVID-19 travel testing. NFS Ascent SaaS offerings gaining traction. Auto and banking sectors show momentum towards increased mobility and digital solutions. China Pakistan Economic Corridor (CPEC) investment exceeding $65 billion. China's auto sector remains steady with government incentives. Positive business development activities in the US and China - Negative Trends: Global recession fears impacting future expansions and budgets. Continued interest rate increases by the U.S. Federal Reserve Board. Negative currency impact due to devaluation of Pakistan Rupee and British Pound Sterling against the US Dollar. Political, monetary, and economic challenges in Pakistan. Inflation and higher global interest rates increasing the cost of doing business. War and hostility between Russia and Ukraine fostering global uncertainty. Decline in U.S. markets limiting access to capital. Potential impact of remote work on employee collaboration. Unsteady political and economic environment in Pakistan[154] CHANGES IN FINANCIAL CONDITION This section analyzes changes in financial condition, revenues, and expenses for the three and nine months, emphasizing constant currency impacts Key Financial Changes (3 Months Ended March 31) | Metric | 2023 (Reported) | 2022 (Reported) | Change (Reported) | Change (Constant Currency) | | :------------------------------------------ | :-------------- | :-------------- | :---------------- | :------------------------- | | Net Revenues | $13,506,389 | $14,809,826 | $(1,303,437) | $(707,932) | | Gross profit | $4,705,029 | $5,834,570 | $(1,129,541) | $(3,424,282) | | Income (loss) from operations | $(930,435) | $(539,305) | $(391,130) | $(3,914,670) | | Gain on foreign currency exchange transactions | $5,385,591 | $499,516 | $4,886,075 | - | | Net income (loss) attributable to NetSol | $2,544,623 | $(278,470) | $2,823,093 | $1,511,612 | Key Financial Changes (9 Months Ended March 31) | Metric | 2023 (Reported) | 2022 (Reported) | Change (Reported) | Change (Constant Currency) | | :------------------------------------------ | :-------------- | :-------------- | :---------------- | :------------------------- | | Net Revenues | $38,602,866 | $43,703,549 | $(5,100,683) | $(3,069,077) | | Gross profit | $12,099,489 | $18,920,180 | $(6,820,691) | $(12,116,799) | | Income (loss) from operations | $(5,873,140) | $474,953 | $(6,348,093) | $(15,133,081) | | Gain on foreign currency exchange transactions | $7,358,519 | $2,684,680 | $4,673,839 | - | | Net income (loss) attributable to NetSol | $(169,032) | $1,316,284 | $(1,485,316) | $(6,151,678) | - Foreign currency exchange gains significantly impacted other income, with a gain of $5,385,591 for the three months and $7,358,519 for the nine months ended March 31, 2023, primarily due to the strengthening of the U.S. dollar and Euro against the Pakistani Rupee[172][194] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures like Adjusted EBITDA, used to evaluate business performance - EBITDA is GAAP net income or loss before net interest expense, income tax expense, depreciation and amortization - Non-GAAP adjusted EBITDA is EBITDA plus stock-based compensation expense - Adjusted EBITDA per basic and diluted share is Adjusted EBITDA allocated to common stock divided by weighted average shares outstanding and diluted shares outstanding[203] Adjusted EBITDA Reconciliation | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (loss) attributable to NetSol | $2,544,623 | $(278,470) | $(169,032) | $1,316,284 | | EBITDA | $5,177,558 | $809,820 | $4,069,741 | $5,522,169 | | Adjusted EBITDA, net | $3,258,434 | $358,948 | $1,904,612 | $3,217,673 | | Basic adjusted EBITDA per share | $0.29 | $0.03 | $0.17 | $0.29 | LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's cash position, operating cash flow, investing and financing activities, and future capital expenditure plans | Metric | March 31, 2023 | June 30, 2022 | | :--------------------------------- | :------------- | :------------ | | Cash and cash equivalents | $15,259,497 | $23,963,797 | | Current assets | $40,824,397 | $49,428,136 | | Current liabilities | $17,656,128 | $20,830,926 | | Cash Flow Activity | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :--------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $2,564,619 | $5,525,951 | | Net cash used in investing activities | $(1,421,657) | $(1,359,605) | | Net cash used in financing activities | $(517,349) | $(833,103) | - Approximately $13.1 million of cash and cash equivalents are held by foreign subsidiaries as of March 31, 2023. The company anticipates needing $2.5 million for capital expenditures in the next 12 months, to be funded from current operations[210][212] Financial Covenants This section details financial covenants associated with subsidiary borrowings and confirms the company's compliance - NTE (UK) overdraft facility requires invoiced trade debtors (net of provisions, excluding intra-group, not exceeding 90 days old) to be at least 200% of the £300,000 facility - NetSol PK (Pakistan) facilities require maintaining a long-term debt-to-equity ratio of 60:40 and a current ratio of 1:1 - NetSol PK's export refinance facilities from Samba Bank Limited also require a minimum current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times - The company is in compliance with all financial covenants as of the report date[214][215] CRITICAL ACCOUNTING POLICIES This section highlights critical accounting policies involving significant management judgments and estimates, with no recent changes - Critical accounting policies involve significant management judgments, estimates, and assumptions that can materially affect reported results[216] - There have been no significant changes to the company's accounting policies and estimates since the Annual Report on Form 10-K for the fiscal year ended June 30, 2022[216] RECENT ACCOUNTING PRONOUNCEMENTS This section refers to Note 2 for information on recent accounting pronouncements and their impact on financial statements - Refer to Note 2 for information on recent accounting pronouncements and their impact on the consolidated financial statements[217] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reported no material quantitative or qualitative disclosures about market risks for the period - There are no quantitative or qualitative disclosures about market risk[218] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023[219] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023[220] PART II. OTHER INFORMATION Item 1. Legal Proceedings There are no legal proceedings to report for the current period - No legal proceedings to report[221] Item 1A. Risk Factors There are no new risk factors to report for the current period - No new risk factors to report[221] Item 2. Unregistered Sales of Equity and Use of Proceeds There were no unregistered sales of equity or use of proceeds to report - No unregistered sales of equity or use of proceeds to report[222] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[223] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[224] Item 5. Other Information There is no other information to report for the current period - No other information to report[225] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications and Inline XBRL documents - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO and CFO) - Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO and CFO) - Inline XBRL Instance Document, Taxonomy Extension Schema Document, Calculation Linkbase Document, Definition Linkbase Document, Label Linkbase Document, Presentation Linkbase Document, and Cover Page Interactive Data File[227]