
PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended September 30, 2023 Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, for the period ended September 30, 2023 Condensed Consolidated Balance Sheets The company's total assets decreased to $55.87 million as of September 30, 2023, from $58.38 million as of June 30, 2023, primarily driven by a decrease in accounts receivable Condensed Consolidated Balance Sheet Highlights (in USD) | Account | September 30, 2023 | June 30, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $16,551,677 | $15,533,254 | | Accounts receivable, net | $6,870,956 | $11,714,422 | | Total current assets | $38,675,408 | $41,603,867 | | Total assets | $55,865,033 | $58,379,410 | | Liabilities & Equity | | | | Total current liabilities | $18,268,130 | $20,769,234 | | Total liabilities | $19,201,912 | $21,597,657 | | Total stockholders' equity | $36,663,121 | $36,781,753 | Condensed Consolidated Statements of Operations For the three months ended September 30, 2023, the company reported a net income attributable to NetSol of $30,890, a significant improvement from a net loss of $620,729 in the same period of 2022 Consolidated Statements of Operations (in USD) | Metric | Q1 FY2024 (Ended Sep 30, 2023) | Q1 FY2023 (Ended Sep 30, 2022) | | :--- | :--- | :--- | | Total net revenues | $14,242,181 | $12,706,119 | | Gross profit | $6,162,017 | $4,251,997 | | Income (loss) from operations | $350,629 | $(1,896,191) | | Net income (loss) attributable to NetSol | $30,890 | $(620,729) | | Basic EPS | $0.003 | $(0.06) | | Diluted EPS | $0.003 | $(0.06) | Condensed Consolidated Statements of Cash Flows For the three months ended September 30, 2023, net cash provided by operating activities was $1.66 million, an increase from $1.30 million in the prior-year period, with reduced cash usage in investing and financing activities Consolidated Cash Flow Summary (in USD) | Cash Flow Activity | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,663,619 | $1,298,857 | | Net cash used in investing activities | $(370,400) | $(893,994) | | Net cash used in financing activities | $(44,474) | $(445,737) | | Net increase (decrease) in cash | $1,018,423 | $(3,040,849) | | Cash and cash equivalents at end of period | $16,551,677 | $20,922,948 | Notes to the Condensed Consolidated Financial Statements The notes detail the company's accounting policies, including revenue recognition, leases, and segment reporting, with key disclosures on revenue disaggregation, major customers, and debt obligations - The company designs, develops, markets, and exports proprietary software products for the automobile financing and leasing, banking, and financial services industries worldwide25 Disaggregated Revenue by Category (in USD) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Core Revenue | | | | License | $1,280,449 | $249,960 | | Subscription and support | $6,512,243 | $6,016,834 | | Services | $4,974,554 | $5,421,366 | | Total core revenue | $12,767,246 | $11,688,160 | | Non-Core Revenue | | | | Services | $1,474,935 | $1,017,959 | | Total net revenue | $14,242,181 | $12,706,119 | - Contracted but unsatisfied performance obligations were approximately $29.1 million as of September 30, 2023, of which an estimated $15.8 million is expected to be recognized as revenue over the next 12 months72 - Daimler Financial Services (DFS) was a major customer, accounting for 25.9% of revenues ($3.69 million) for the three months ended September 30, 202379 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's performance, highlighting a return to profitability in Q1 FY2024, covering revenue, gross profit, operating expenses, liquidity, and non-GAAP measures Business Overview and Highlights NetSol is a global provider of IT and enterprise software solutions, primarily for the finance and leasing industry, with key highlights for the quarter including a $1.1 million license extension and new professional services contracts - The company's primary offerings include its enterprise software suite NFS Ascent™, digital solutions like NFS Digital and Otoz, an API marketplace called AppexNow, and professional services134146154163 - Key business highlights for the quarter include a license term extension with a client in Thailand worth approximately $1.1 million, over $1.1 million in revenue from modifications for existing customers, an additional $1.9 million in service revenue from an existing customer in the APAC region, and a new professional services project in China expected to generate approximately $1 million177 Results of Operations For Q1 FY2024, total net revenues increased 12.1% to $14.24 million, with gross profit margin improving to 43.3%, leading to an operating income of $350,629 and net income of $30,890 Revenue by Type (in USD) | Revenue Type | Q1 FY2024 | Q1 FY2023 | | :--- | :--- | :--- | | License fees | $1,280,449 | $249,960 | | Subscription and support | $6,512,243 | $6,016,834 | | Services | $6,449,489 | $6,439,325 | | Total net revenues | $14,242,181 | $12,706,119 | - Gross profit increased by $1.91 million to $6.16 million, with the gross margin expanding to 43.3% from 33.5% in the prior-year quarter187 - The company reported income from operations of $350,629, a positive swing of $2.25 million from a loss of $1,896,191 in the same period last year197 - A significant factor in profitability was a foreign currency exchange loss of $134,253, compared to a gain of $1,315,705 in the prior-year quarter, due to currency fluctuations against the Pakistani Rupee (PKR)198 Non-GAAP Financial Measures The company provides non-GAAP measures, including EBITDA and Adjusted EBITDA, to offer additional insight into its operational performance, with Adjusted EBITDA (net) significantly improving to $465,974 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in USD) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net Income (loss) attributable to NetSol | $30,890 | $(620,729) | | EBITDA | $805,043 | $290,133 | | Adjusted EBITDA, net | $465,974 | $(27,568) | | Basic adjusted EBITDA per share | $0.04 | $(0.002) | | Diluted adjusted EBITDA per share | $0.04 | $(0.002) | Liquidity and Capital Resources As of September 30, 2023, the company's cash position increased to $16.6 million, with $1.7 million net cash from operating activities, and anticipates $2.5 million in capital expenditures - Cash and cash equivalents increased to $16.6 million at September 30, 2023, with approximately $15.2 million held by foreign subsidiaries209214 - Net cash provided by operating activities was $1.66 million for the quarter210 - The company anticipates needing $2.5 million for capital expenditures over the next 12 months, expected to be funded by operations216 - The company is in compliance with all financial covenants related to its various debt facilities in the UK and Pakistan218219 Quantitative and Qualitative Disclosures about Market Risk The company reported no new quantitative and qualitative disclosures about market risks for the period covered by this report - The company stated 'None' in response to this item, indicating no new disclosures222 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period223 - There were no changes in internal controls over financial reporting during the quarter that materially affected, or are likely to materially affect, the company's internal controls224 PART II. OTHER INFORMATION This section provides other required disclosures, including legal proceedings, risk factors, and recent corporate policy adoptions Legal Proceedings The company reported no legal proceedings during the period - The company reported 'NA' (Not Applicable) for this item225 Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2023 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended June 30, 2023, have been reported225 Other Information The company disclosed that on October 24, 2023, its Board of Directors adopted a Clawback Policy, effective retroactively to October 2, 2023 - A Clawback Policy was adopted on October 24, 2023, effective retroactively to October 2, 2023, to comply with SEC and NASDAQ rules229 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Clawback Policy, CEO/CFO certifications, and Inline XBRL financial data files - Filed exhibits include the company's Clawback Policy (10.1), CEO/CFO certifications (31.1, 31.2, 32.1, 32.2), and XBRL data files (101 series)231