Christopher Chu – IR, Grayling Global Najeeb Ghauri – Chairman and CEO Boo-Ali Siddiqui - Chief Financial Officer Naeem Ghauri – President, Global Products

Joe Giamichael - Rodman & Renshaw, LLC Matthew Weiss - Maxim Group, LLC [Dan Nye - Tail Wind]

Greetings and welcome to the NetSol fourth quarter fiscal year 2009 conference call. (Operator Instructions) It is now my pleasure to introduce your host, Christopher Chu, for Grayling Global. Thank you, Mr. Chu, you may begin.

Thank you, Operator. Hello, everyone, and thank you for joining us on the NetSol Technologies fiscal fourth quarter and full year 2009 financial results conference call for the period ending June 30, 2009. I hope you have found the PowerPoint presentation we prepared to supplement this call and will follow along with us. The slide numbers we refer to are found at the bottom of each slide. The presentation may be found on the main page of the IR section of the NetSol website, located at www.NetSolTech.com. That's NetSol TECH - all one word - dot-com. In addition, I would like to remind you that we are recording and webcasting today's call. The webcast archive of the call also will be available in the Investor Relations section of the NetSol website. Please proceed to Slide 2 as I read a brief safe harbor statement. This conference call and presentation may contain forward-looking statements. These statements reflect the current belief of NetSol Technologies management as well as assumptions made by and information available to NetSol. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual future results and developments could differ materially from those set forth in these statements due to various factors. These factors include, among others, changes in the general economic and competitive situation, particularly in NetSol's businesses and markets. In addition, future results and developments could be affected by the performance of financial markets, fluctuations in exchange rates and changes in national and supernational law, particularly with regard to tax regulations. The company assumes no obligation to update forward-looking statements. Now moving to Slide 3, we are pleased to have presenting today Najeeb Ghauri, NetSol Chairman and Chief Executive Officer. He is joined by Boo-Ali Siddiqui, NetSol Chief Financial Officer, and Naeem Ghauri, President, Global Sales, joins today's call and will be available in the question-and-answer session. I would now like to pass the call over to Najeeb Ghauri. Najeeb, please go ahead.

Thank you, Chris, and good morning and thank you for joining us today. If you join me on Slide 4, I'll start with a top line overview of key perspectives on the fiscal fourth quarter 2009. When we spoke on our last conference call I expressed our confidence that the fiscal third quarter 2009 marked the bottom of the economic cycle for our global business and we had begun to make the turn toward new sequential top line revenue growth and improved bottom line performance in the quarters ahead. I'm extremely pleased to report we delivered on these objective, and our outlook continues to brighten. NetSol's fiscal fourth quarter revenue exceeded the high end of our sequential growth rate projection, rising 36% driven by increased license demand and higher sales of IT services sales. While our full year results reflect the challenges of the global economic downturn compared to a 2008 period which was the strongest in the company's history, NetSol's fiscal fourth quarter results provide clear evidence that our NetSol Financial Suite and Global BestShoring IT services offerings are gaining fresh momentum. The success of our comprehensive cost efficiencies measures yielded an impressive 23% reduction in operating expenses from Q4 2008 to the same period in 2009, and when combined with our renewed revenue growth drove material improvements in reducing the company's sequential quarterly GAAP net loss as well as a return to quarterly EBITDA profitability. On the cash front I expressed last quarter that it was our long-term goal to maintain a high level of cash, and I'm pleased to say we executed on that goal with cash and cash equivalents rising about $2 million sequentially. Based on our improved financial outlook let's move to Slide 5 and let me provide some top line perspective around our expectations for NetSol's financial performance in fiscal year 2010. In looking ahead to fiscal 2010, we anticipate continuous improvements in revenue as well as our bottom line GAAP and EBITDA performance. This includes a strict focus on returning to GAAP profitability. If we couple our more-efficient global operating structure with the fresh momentum on the sales side, we currently forecast a quarterly GAAP breakeven revenue run rate of approximately $8 million and about $6.5 million on a cash basis. I'm very pleased to report we enter our fiscal year 2010 with a significant stronger revenue backlog and pipeline, including a near doubling of the long-term sales pipeline sequentially. We're also seeing excellent new opportunities in the government and defense sectors. Moving to Slide 6, so what is driving the positive change? We see improvement being driven from two fronts - first, improved operational efficiencies and strategic initiatives within our global organization, and secondly, through improved customer demand and purchasing trends. Let me quickly walk you through the positive strategic changes implemented within NetSol that are helping drive our sequential performance gains. First, the streamlining of our global corporate structure under our previously announced comprehensive cost reduction measures is providing a highly efficient operating platform, bringing operating expenses in line with revenue and helping restore margins and profitability as revenue has begun to ramp again. Second, our unified global sales and marketing structure under the leadership of Naeem Ghauri is providing improving sales effectiveness and improved visibility around new opportunities. Also, we successfully established two IT services joint ventures recently. First, Atheeb NetSol Limited, a software engineering and joint venture company focused on Saudi Arabia, Gulf States and the Middle East in general, and secondly, NetSol GK Latin America, an IT services and software development joint venture serving the broader Americas. We also established a new Neptune Software PLC partnership, extending the reach of the NetSol Financial Suite and LeaseSoft Evolve product in Africa as leasing is rapidly expanding as a financing solution across the continent. Subsequent to the launch of this partnership we announced our first joint customer win. Our NetSol North America operation, which is much leaner now, has stabilized after internal consolidation. NetSol North America remains solid, with 30-plus U.S.-based clients, sustainable maintenance revenue streams, and excellent growth potential for our SAP integration practice group. We also added 2 million new customers, including Nissan of Mexico. Also our new joint venture and partnership activities provide highly cost-efficient ways to penetrate new global markets with the assistance of a local partner with key relationships on the ground. And finally - and most importantly - we continue to have a powerful portfolio of products and services supported by CMMI Level 5 expertise and a global delivery platform that provides our customers high quality service and support. If you now move to Slide 7, here we will walk through some key perspectives on this rising customer demand we are noticing, focusing here on the exceptional strong activity we are seeing out of Asia, where our NetSol Financial Suite of solutions for the captive finance markets stand as the de facto leader in the market. During the fourth quarter sales activity in China was exceptionally strong, with several significant wins for licensing of the NetSol Financial Suite, including securing a new licensing agreement with a major Chinese captive finance company to implement the NetSol Financial Suite including NetSol's flagship LeaseSoft solution and a major international automotive manufacturer which signed a LeaseSoft license contract for captive finance in China. China is now the world's largest single market for automotive sales, recently surpassing the U.S. in terms of unit volume. This is an excellent opportunity for us based on our leadership in the automotive sectors. Overall, we are noticing excellent interest across customer verticals including banking, finance, leasing and automotive companies. Currently we are taking steps to strengthen our local market presence in China in terms of sales, marketing and IT services and [inaudible]. We also see excellent opportunities in the government and defense sectors, including a new contract with the governments of Sindh and Pakistan. Moving to Slide 8, here I would like to focus a little more on the defense space and our NetSol defense division. The defense division at NetSol has been providing military and defense organization customers since 2005 with software development, integration and IT services. Mostly recently they have teamed with a top five U.S. defense contractor for the digitization of the Pakistan military forces as well as an automated command and control system. They've jointly bid on a major project recently and for NetSol the proposed work would focus on providing system development and local market integration support as well as follow-on services. While very complex and big in scope, there are few other bidders competing with our defense partners. The client will go through their due diligence and evaluations of eight bidders and is expected to make some decisions within the next few months. The final decision rests in the hands of the Pakistan military forces. While we are cautiously optimistic, we are fully dependent on this potential client's own objective and choices. I look forward to reporting back on any material development in the process. This concludes my operation overview. If you turn to Slide 9 for the financial review, I would like to pass the call to our CFO, Boo-Ali Siddiqui. Boo-Ali Siddiqui: Thank you, Najeeb. Good morning and we want to thank you for joining us on today's call. I would like to kick off the financial review by moving to Slide 10, where we see NetSol's revenue performance over time. For the full fiscal year revenue totaled $26.4 million, which represents a year-over-year decline of 28%. Annual decline in revenue reflects the impact of global economic recession and growth in our global business, practically impacting the finance and automotive sectors where we are especially strong, as compared to the full year 2008, which was our strongest year ever. From an historical backdrop back to the impact of global recession in 2009, NetSol's annual compounded growth rate [passed] 58% over the past six full fiscal years. Most importantly of all has been our revenue performance in the most currently completed quarter. In the fiscal fourth quarter of 2009, revenues totaled $6.9 million, representing a 36% rise in sequential revenues. Turning to Slide 11, we take a look at the major components of revenues for the fiscal fourth quarter as compared to the year ago as well as sequential periods. In the year-over-year comparison, our fiscal fourth quarter [inaudible] results were negatively impacted by the global economic slowdown, resulting in significantly lower license sales and total revenues as customers worldwide spent at a slower pace than they did in 2008. When we look at a sequential revenue comparison we see significant growth in license and services sales as we see signs of customers beginning to open up their pocketbooks again. This includes a near tripling of license sales revenue and a 27% increase in IT consulting and services fees, which combine to push up total revenue by an impressive 36%, propping up projected range of top line growth for the quarter, which called for total sales to rise between 30% to 35%. Slide 12 shows the breakdown of revenue by business. For the fiscal year 2009 as a percentage of total revenue IT consulting and services represented 57%, maintenance fees stayed relatively stable at 25%, and license fees represented 18%. On a geographical basis for the fiscal year 2009 as a percentage of total revenue Asia-Pacific represented 65%, North America, 20%, and Europe, 15%. Slide 13 shows operating expenses for the fiscal fourth quarter of 2009 as compared to the year ago period and sequential periods. Q4 operating expenses decreased 23% year-over-year as a result of NetSol's comprehensive loss reduction program and on improving operational efficiencies across the globe, including a voluntary reduction in management's wages and an overall reduction in the global force. Total operating expenses increased 15% year-over-year primarily as a result of a charge taken for bad debt in the third quarter and the fact that our cost efficiency measures were not deployed over the full year timeline. Sequentially, in the fiscal fourth quarter of 2009 operating expenses declined an impressive 36% partially benefiting from the absence of bad debt expense in the latest period. These cost savings are an excellent foundation for leveraging improved cost efficiencies across our base of [sliding] revenues. Moving to Slide 14 and a look at GAAP EPS, NetSol's GAAP net loss applicable to common shareholders for the quarter was $906,000 or a loss of $0.03 per diluted share versus GAAP net income applicable to common shareholders of $0.05 per fully diluted share in the year ago period. Minority interest deducted was $843,000 for the fiscal fourth quarter. Minority interest income is related to the minority interest in earnings in several of our subsidiaries as [inaudible] net income attributable to the minority owners must be deducted from NetSol's earnings. Slide 15 shows NetSol's EBITDA performance on a quarterly basis over time. Fiscal fourth quarter marks NetSol's return to quarterly EBITDA profitability with recorded EBITDA income of $562,000 or EBITDA of $0.02 per diluted share. EBITDA is defined as earnings before interest, tax, depreciation and amortization. The company uses EBITDA as the measure of the company's operating trends. Investors are cautioned that EBITDA is not a measure of liquidity or of financial performance under generally accepted accounting principals. EBITDA numbers presented may not be comparable to the similarly titled measures reported by other companies. EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. We believe EBITDA is one of the best [measures] to measure the underlying profitability of our business. I would now like to turn the call back to Najeeb for some closing remarks.

Thank you, Boo-Ali. At this point I want to thank and congratulate every employee for their dedication, support, and their unwavering commitment. While fiscal year 2009 was no doubt a challenging time in face of an historic global recession, we finished the year with 36% sequential revenue growth, a return to quarterly EBITDA profitability, a rise in sequential cash balances, and a near doubling of our pipeline over the course of the most recently reported first fiscal quarter 2009. We continue to see the license sale market in the automotive and banking sectors, particularly in the Asia-Pacific markets, as quite promising for the next few quarters. We also believe that the [use] market is the ultimate target market for our interface and service offering as economies start to show some visible signs of recovery. Overall, we are quite optimistic on our outlook for our fiscal year 2010. With that, I would now like to turn the call back to the operator to facilitate the question-and-answer session.

Thank you. (Operator Instructions) Your first question comes from Joe Giamichael - Rodman & Renshaw, LLC. Joe Giamichael - Rodman & Renshaw, LLC: The company's had a number of different contract announcements throughout the quarter. Do you mind just sort of walking us through what you feel are the most significant announcements, excluding the potential military contract and how that's been progressing.

Yes, Joe, I will come in and Naeem will answer more up to date. Definitely, the announcements we have made - [break in audio] Joe Giamichael - Rodman & Renshaw, LLC: I'm sorry. Can you hear me?

There's some background noise, Joe. [break in audio]

Hello? Joe, I think you have some background noise. Joe Giamichael - Rodman & Renshaw, LLC: I'm here. I'm sorry. I don't know where the interference is coming from.

Okay, okay. Najeeb, do you want me to pick this up?

Go ahead.

Okay. Yes, Joe, the most significant contract - there's two of them, in fact, almost equal size - they're from China. They both are LeaseSoft [NSS] contracts, and one of them is with the Minsheng bank; there's a wholly owned subsidiary called Minsheng Financial Leasing Company. So that's one. And the other one, we haven't named the client, but it's a captive auto finance company with a European bank as a partner with a major automotive company in China. Those are quite significant. We've only just started the actual implementation, so we believe that these two will actually grow in terms of revenue as they put in more and more phases, and so really those two are the biggest. And then we've signed another good-sized deal in the U.K. with a loan and finance company. Those are the three that stand out. We also announced a deal in Mexico, so really all in all they're all good-sized deals, with two which are the biggest - the first two. Joe Giamichael - Rodman & Renshaw, LLC: And then just to touch upon the military contract, I know it's still in the competitive phase but do you have any sense for what the timeframe is prior to the decision?

Yes, Joe, let me answer that. As I said, it is a very competitive process between all the bidders, and the client is obviously a military situation. Nobody can put any timeframe here, but we are cautiously optimistic. And the good thing is we have not factored any impact of revenue in our outlook for 2010, the way we look at the outlook of the company. So if it happens within this year, then obviously we'll come back and update our projections in a different way, but other than that we believe that we're comfortable with our continuous outlook on [inaudible]. Joe Giamichael - Rodman & Renshaw, LLC: And do you have a sense for what the competitive variables are that will ultimately determine who is selected?

Yes, I think there is, I believe, technical requirements with financial requirements and could be the local partners available in this whole process, is any other local partner less or more qualified than we are. Obviously, we don't know who the other partners are; these are very confidential bids. But as I said in the report of [inaudible] about a month ago it is something that could potentially help the company in a big way if that happens. So we will be, again, very cautious because we don't want to [inaudible]. We don't know where and when this would happen; if we are going to be selected out of five or three, we don't know that yet. But we are in the running and, again, the scope is quite big. It's a very complex project. But the military is the ultimate decision maker who are the lucky winners; whether they're from the U.S. or Europe, we don't know that yet. But, you know, we are in the running, so that's [inaudible] right now. Joe Giamichael - Rodman & Renshaw, LLC: Good. Well, I mean, obviously it's a tremendous opportunity. It'd be a huge game-changer for you guys.

Absolutely. Absolutely. But, you know, the good thing is, Joe, like I said, we have not factored anything in our projections or [inaudible]. That's a good thing because, you know, while the whole division is working on it, we are running our business as usual, and we're very excited about the prospect. Beginning now, beginning last quarter, the team is really committed in building deals in China and the U.S., in Europe and Asia. Our core business looks quite good now, you know? Joe Giamichael - Rodman & Renshaw, LLC: Exactly. I guess that'll lead into my next question. I apologize, just two more quick questions and I'll be out of the way. Just to better understand the guidance that you gave, the company will be breakeven at a run rate of $8 million revenues, $6.5 million of EBITDA, that's basically what you were trying to get to, rather, through the communication, correct?

Yes, that's right. We're saying $8 million on a GAAP basis and $6.5 million on the cash basis. Joe Giamichael - Rodman & Renshaw, LLC: Okay. So I guess given all the recent announcements that we've talked to coupled with the cost-cutting efforts that you guys have been going through over the past year, are you in a position to provide revenue and/or operating guidance for the next 12 months?

No, we discussed [inaudible] with the team and the Board. We believe although we see a turnaround here, as you know, we believe that some of the sectors that we operate in, the auto, banking and [inaudible], they need to be more stabilized before we can really start giving some directions as we used to do in the past. In the past we would look at the [inaudible], which we believe [inaudible] very impressive growth from 2009. And it is also prudent to stick to that principle until things are so stabilized that we can really put out some kind of strong numbers. Naeem, what do you think? You want to make any comments?

Yes. I mean, Joe, you know what we've been through globally and our own business suffered. As you know, two previous quarters were pretty brutal. And so I think we are a little bit hurt because of that. And although we are very excited, I know we just want to be sure before we put any numbers out we build the backlog and then give the numbers out. So the momentum is extremely good. We will make progress from the last fiscal year; I'm pretty certain of that. To put in exact numbers at the moment, I think that would be premature. Give us until maybe the end of the first quarter, Q1. We will have better visibility, and I think we'll update the market. Joe Giamichael - Rodman & Renshaw, LLC: Okay, that's fair enough. I think directionally we understand what you're saying. So I guess just as a management team, then, given the trends that you're seeing and I guess the recent announcements and the potential pipeline of opportunities, I'm assuming that you guys are comfortable with the current capitalization structure and the ability to continue to service debt through your ongoing operations?

Yes, we are. As you've seen, a good improvement on our cash position from Q3 to Q4. And, you know, the company's taken some strides and taken some tough decisions in the last nine months, beginning with recession time. Everybody was supportive in the company to take part cuts and some layoffs. But we are in a good position in terms of our cost base, operating expenses. I don't expect to see any rise in expenses, on the fixed expenses - China, which is actually quite on the move. But this can help us improve our net margins [inaudible] gross sales and top line.

(Operator Instructions) Your next question comes from Matthew Weiss - Maxim Group, LLC. Matthew Weiss - Maxim Group, LLC: In terms of the revenue number, I'm trying to get a better handle on what we're seeing. Do you think that the number you put up this quarter is more reflective of seasonal strength in the fiscal fourth quarter or more reflective of a more notable improvement in business conditions and the macro environment or a combination of both? How should we look at that going forward? I know you're not giving specific guidance, but would we expect into the next quarter a seasonal dip in the revenue number or should we use the 6.9 maybe as a base case going forward?

Well, I'll let Naeem jump in, but I want to make the comment that we did beat your estimate, I believe, slightly. But, Naeem, do you want to jump in on a specific direction on the business environment?

Yes, sure. Matthew, as we say, the environment is difficult. So like two quarters ago if you had asked me where we would end up in Q4, we were nowhere near this. But I think we built up some momentum. I don’t think that's our traditional seasonal momentum like we normally have Q4. And as you rightly said, Q4 is normally the strongest, but I think our momentum happened because there were a number of deals which were sort of frozen and as the clients started to feel a bit more comfortable they actually then started signing contracts. There is a little bit of that, there was some sort of Q4 seasonality in it, but essentially I think it was pent-up demand. And we're starting to see, especially in China and the U.K., we're starting to see real, tangible feel for a change of sentiment. I'm not saying we have a total turnaround, but I'm certainly saying that the sentiment where we were six months ago to where it is now is quite different and a lot more positive. So we are seeing change not only in Asia but also in the U.K., Europe. Matthew Weiss - Maxim Group, LLC: Would that suggest then - and, again, I know you're not giving specific guidance - but then, as we look into fiscal first quarter if this is based on pent-up demand and some of the budgets being unfrozen that you could maybe be flat to up in fiscal first quarter, even taking into account seasonal weakness?

What we're saying is that we think we hit the bottom already, and we are only going to get better from there. We're only going to get better. I don't know whether you want to benchmark this quarter as the bottom or the previous but certainly we said in our last statement the previous quarter was the benchmark and the bottom, and we are certainly going to improve from there. As we've delivered a good set of numbers, let's just build on that. Q1 is always our slowest quarter, so I would say you want to build in maybe a little bit of flexibility and then see if we can build it up from there. Matthew Weiss - Maxim Group, LLC: And just quickly on the top line, you do mention, again, you'd be breakeven on a GAAP basis on an $8 million run rate. That's something you threw out there. Is that $8 million number you think achievable at some point in fiscal '10?

I think, so, yes. I think so. We have, like I said in the earlier portion, we've really worked diligently to bring down our cost structure in the last 20 months or so. $8 million on a GAAP basis and $6.5 million on a cash basis are quite good numbers. Boo-Ali? Boo-Ali Siddiqui: Yes, yes.

So our CFO has - obviously this is the first 10-K [inaudible] and [inaudible] on the margins. We could set some kind of guidelines, direction, internally to achieve our breakeven. So these are quite good numbers, Matthew.

The message, Matthew, we're trying to give with that number is that we have made visible - you can now see how much we have cut in costs; nothing we [inaudible] very lean now. Our fixed overhead is really at a level where we haven't seen it in awhile. We've had several quarters of above $8 million before - $9 million and $10 million - so we believe we can start to hit those numbers sooner rather than later and start to be more profitable, be profitable on a GAAP basis. Matthew Weiss - Maxim Group, LLC: And then on the gross margin front, obviously those came back nicely in the fourth quarter. Is it your expectation that those will continue to trend upward into the 40 range? Boo-Ali Siddiqui: Yes. I think, Matthew, a good observation. We are looking to regaining our [inaudible] position of 50-plus range. We used to, if you look back a year and a half, two years ago. It's built off our global integration and using our BestShoring model in both onshore and offshore. So that will continue to help improve our [break in audio]. That's our goal, actually Matthew Weiss - Maxim Group, LLC: And then you said in the release qualitatively that your pipeline is significantly stronger. Maybe you can talk about what that is comprised of, which geographic regions are maybe more resilient. Obviously, China's become a big market for you guys; I know you're making a bigger push in Latin America. Maybe you can talk about some of the dynamics there that are contributing to the larger pipeline.

Yes. I'll just make one comment and Naeem will help me because he's obviously heading the global sales. The good thing about the last three months is that we're noticing improved pipeline in all the continents, including North America and Central America. Our team is working on some good developments in Central America also. There's a sustainable revenue stream in North America for maintenance and services. And that, of course, is the hardest right now; it's quite strong. And I believe this is pretty much broad-based. Of course, we're getting a lot more momentum in the Asia market, especially in China. And Naeem, you may want to add some more additions.

Yes, Matthew, look, the pipeline is extremely healthy in Asia, especially China and Thailand. We've had a number of opportunities in Australia and New Zealand as well. These all sort of in the last three months they built up. And, as you know, we closed some of these deals already. And keep in mind that the deals we've closed already will bring in additional revenue because we haven't picked up most of the revenue yet, so that is a backlog. So the new pipeline, quite strong in China and Asia-Pacific, and then, U.K., as I said to you, is building nicely. And recently in the U.S. we've picked up a couple of very nice opportunities. So, you know, this is quite a significant transformation to how things were. And when you were asking the same question last quarter how difficult for us it was for us to give an indication, but really we feel more confident. And you'll see Q2 onward a lot of these licensing deals actually coming through because stuff we sign now this quarter, then revenue comes in a few months later. So you'll see this year tracking really nicely, with quite a big improvement on the license income side, so that will definitely push up the gross profit. And where we are with our cost base, I think, bodes well for the overall P&L.

I would add one more thing, Matthew. I'm sure you would like to use this information. What we're seeing is that as the economy is settling down the CIOs and CEOs and CFOs in our business space, they're looking for the best cost solutions in terms of how they can improve their bottom line. That's pretty much a global phenomenon. Whether you are in China, [inaudible], U.S. or U.K. or Asia, everywhere they want to see the best process and the best solutions. So I think in that respect we are in an extremely good position to offer those best practices, best quality and the best pricing. Matthew Weiss - Maxim Group, LLC: Maybe you could talk a little bit about the mix between new business with new customers and then repeat business with your installed base, sort of how that's tracking, if you could give us a little color there.

You know, what really helped us in the bad times was that existing customers were still paying maintenance and support and doing what they needed to do to keep going in business, and new license income historically dropped off. But now actually I believe that a combination of new license sales and the revenue from existing clients is actually driving in a similar way because a lot of the customers who held back projects are now actually approving budgets. And we've signed a couple of various interesting deals in the U.K. which are for existing customers. They're quite significant in value. They were holding back for nearly a year, so all of a sudden they feel more confident. So I believe they go hand in hand because when there's an improvement in sentiment, it's just a new spend. So if you need a new system you'll spend money on it; if you need to make an improvement to an existing system, you'll spend money. It's that sentiment that changes. It just changes our whole business outlook. Matthew Weiss - Maxim Group, LLC: Okay, do you guys have a number that you track internally? I don't know if you've ever given it to us in the past. I'm just curious if you have maybe what the split is in a given quarter or if you look back at the last four quarters what that split is between new business and repeat business?

Well, what happens, Matthew, is that our business support issued from an existing customer we get 18% to 22%, right, in terms of year-on-year maintenance. So if you break this thing down, our maintenance is typically one-third of total revenue. I'm talking purely about LeaseSoft, right, only about the product, not the business outside of product. So on the product side we have one-third as maintenance. We try to target one-third, again, on new business from existing clients. And one-third is purely new business in terms of license.

Also, Matthew, interesting about our business is that we have not lost one single license customer, even in the worst time last year and this year. So it shows that the customers are pretty dependent on our products, whether it's leased in the U.S. or leased in Asia or whatever customers we have in Europe. So we've not lost one customer due to the downturn in economic conditions. So that gives us the strength and sustainability to compete [inaudible], improve our development [inaudible] business. Matthew Weiss - Maxim Group, LLC: And then as a follow on, I guess, maybe you could speak to some aspects related to pricing. Have you guys been negotiable with that? Have you pretty much stuck firm with pricing? I would assume it's maybe come down a little bit in order to facilitate the license growth, but could you talk a little bit there and then maybe what you're thinking about going forward now that things have stabilized?

Okay, with pricing on licensing we found that when things were bad the last two quarters people aren't willing to sign deals at any price because they just didn't have the green light. But the two deals that we signed in China, we got our price, close to what we normally charge, so we didn't discount it heavily, maybe 5% - 10% of the price. In the U.K. we find that the pricing is under more pressure than it is in Asia, surprisingly. The other very interesting thing you may want to make a note of is that our daily [man day] rates have really increased from an average of $250 a day to getting close to $500 to $600 a day, which is quite a strange phenomenon in a down market. We're finding that people are willing to pay more on the man day rate if we negotiate a little bit on the license. So what we're doing is, our tactic now is that okay, we can discount the license, but we get the man day rate, which is higher. And if you can double the man day rate, that is an ongoing revenue even when the license income is gone. We stay engaged with the client for years and if we can set a higher benchmark on the daily rate for what we charge for writing or developing software, then that's perpetual income. So we are getting that now at $500 to $600 a day; every new business we're signing literally is coming at that rate. So the impact of that will start to filter in over the next three or four quarters, you know? Matthew Weiss - Maxim Group, LLC: Not to harp on the defense contract but you threw out a timetable of a couple months there. Is that a timetable to short list the number of bidders down to a couple? Are all the bidders that were in at the beginning of the process still around? Maybe just a little more color, whatever you can give there, would be helpful.

What we know as a recent update is that all the bidders are still there and the military has not started [inaudible] but they are meeting with all the bidders one on one. They have recently with us or with our partners. I think the reason I'm not giving you a specific time is because we don't know. We're dealing with a big institution, an army, and it would be the first time we're indirectly dealing with them on a project of this size and scope. So it looks promising, but we have to really wait and see how things unfold in the next few weeks, so a couple of months.

I think even in normal circumstances you wouldn't put the news out, but because when we bid these things do leak in the market. It became material, so we did make an announcement. But certainly it is at an early stage and it will take time. It's a bureaucracy as well as you're dealing with the army, so really it's a tough one. But the announcement was made because we thought it might leak and it wouldn't be fair, so we put an announcement out.

Your next question comes from [Dan Nye - Tail Wind]. Dan Nye - Tail Wind: On your income statement under operating expenses you've got a rather large line item that's ballooned from $548,000 to $1.1 million classified as other. Can you guys give me some clarity on that, please? Boo-Ali Siddiqui: Yes, you're looking at other, about $1.1 million, right? Dan Nye - Tail Wind: Correct. Boo-Ali Siddiqui: That is almost $600,000 of expense to do with the hardware [inaudible] that we bid for a project in the province of Sindh in Pakistan. And the other has to do with the addition of SAP resources in this fiscal year. Dan Nye - Tail Wind: So it's a one-off, basically? Boo-Ali Siddiqui: Yes, yes. And, of course, because we had won a project in the province of Sindh for over $1 million, we had to acquire the hardware for a special system. Dan Nye - Tail Wind: The second quarter is further down in your P&L you've got a gain on sale of subsidiary shares. Have you been selling NetSol PK shares? Boo-Ali Siddiqui: We've had a little bit of activity because there were some lows and highs in the market and we wanted to monetize [inaudible] percentage. It didn't affect our percentage as such because [inaudible] this is an [immaterial] thing in terms of [inaudible] in Pakistan. [Inaudible], so we only get some bit of currency exchanges for the cash [inaudible]. We're still holding our 59% - 58 point something percentage - for the period holding [inaudible] PK entity. Dan Nye - Tail Wind: Okay, so how many shares did you sell? Boo-Ali Siddiqui: [Inaudible]? It was around 2 million shares.

Around 2 million shares? Boo-Ali Siddiqui: Yes.

[inaudible] right? Boo-Ali Siddiqui: Yes. We bought 6 million shares.

This is actually the net effect of some [inaudible] gain to the [inaudible]. Dan Nye - Tail Wind: Oh, I see. It's actually bought and sold shares. Okay, that's fine. But your net position is zero?

Yes, exactly. We're still holding [inaudible] ownership. Dan Nye - Tail Wind: Then back to your top line revenues, you had quite a few contracts signed, which is great news, but your license fees are only coming up gradually. What percentage of the $1.3 million in license fees comprised new orders?

Boo-Ali, what is the number because, you're right, Daniel, we did sign more business than that. But obviously we don't take all of it in one hit. It has to be recognized over a period of time. So Boo-Ali, you might be able to share with Daniel what percentage have we taken in? Boo-Ali Siddiqui: [Inaudible]. The new business signed in the quarter, we have around 70% to 75% of the revenue, and the remaining license revenue comes from deals already signed to the customers in previous quarters. Dan Nye - Tail Wind: So you've recorded 75% of the license - of the contracts you've signed you've recorded 75% of those license fees? Boo-Ali Siddiqui: On 70%. The license which came through in Q4. Dan Nye - Tail Wind: And the 30% is amortized over the period that you -

We have to link to a delivery schedule, Daniel, and then we start recognizing some of the services revenue because that has to be based on delivery. So license is recognized as we deliver the software, but then as we deliver customization then we recognize the services revenue. Dan Nye - Tail Wind: And can you give me some indication of how your backlog looks?

Backlog is actually healthier than at least the last six months because of the new business we've signed. So new business is being signed both with entirely new license sales as well as business from existing clients. So for example in the U.K. with all the cuts we made, we literally have reach capacity in terms of the business we've signed. So the backlog is quite healthy here; in Asia, again, quite strong. So I believe in the coming quarters we'll be picking up quite a bit of that revenue as we deliver, as well as any new license sales that will be coming through. So backlog is healthy. I cannot quantify with a number. Boo-Ali, are we privy to share that information? Boo-Ali Siddiqui: [Inaudible]

Daniel, I don't know if we can share that information at the moment, but it is healthy.

(Operator Instructions) There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Thank you again for joining us on the call today. We'll look forward to talking to you again next quarter to provide an update on our progress. Thank you and have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you all for your participation.