What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-05-13 compared with 2020-02-12 · 889 added, 666 removed, 1008 unchanged (61% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

and cash equivalents

receivable, net of allowance of $351,431 and $192,786

receivable, net of allowance of $0 and $166,075 - related party

in excess of billings, net of allowance of $205,006 and $194,684

in excess of billings - related party

note receivable - related party

current assets

March 31, 2020

June 30, 2019

Current assets:

in excess of billings, net - long term

and equipment, net

of use of assets - operating leases

term investment

AND STOCKHOLDERS’

payable and accrued expenses

portion of loans and obligations under finance leases

portion of operating lease obligations

stock to be issued

Cash and cash equivalents

Accounts receivable, net of allowance of $364,383 and $192,786

Accounts receivable, net of allowance of $54,307 and $166,075 - related party

Revenues in excess of billings, net of allowance of $190,811 and $194,684

Revenues in excess of billings - related party

Convertible note receivable - related party

Other current assets

Total current assets

Revenues in excess of billings, net - long term

Property and equipment, net

Right of use of assets - operating leases

Long term investment

Intangible assets, net

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

and obligations under finance leases;

Accounts payable and accrued expenses

Current portion of loans and obligations under finance leases

Current portion of operating lease obligations

Unearned revenues

Common stock to be issued

Total current liabilities

Loans and obligations under finance leases;

less current maturities

lease obligations;

Operating lease obligations;

less current maturities

and contingencies

Total liabilities

Commitments and contingencies

Stockholders’

stock, $.01 par value;

Preferred stock, $.01 par value;

500,000 shares authorized;

stock, $.01 par value;

Common stock, $.01 par value;

14,500,000 shares authorized;

12,000,566 shares issued and 11,753,063 outstanding as of December 31,

2019 and 11,911,742 shares issued and 11,664,239 outstanding as of June 30, 2019

paid-in-capital

stock (At cost, 247,503 shares and 247,503 shares as of December 31, 2019 and June 30, 2019, respectively)

12,038,697 shares issued and 11,791,194 outstanding as of March 31, 2020 and

11,911,742 shares issued and 11,664,239 outstanding as of June 30, 2019

Additional paid-in-capital

Treasury stock (At cost, 247,503 shares and 247,503 shares as of March 31, 2020 and June 30, 2019,

respectively)

Accumulated deficit

(35,448,063 )

(35,206,898 )

comprehensive loss

Other comprehensive loss

(34,065,385 )

(33,125,006 )

NetSol stockholders’

Non-controlling

stockholders’

liabilities and stockholders’

Total NetSol stockholders’

Non-controlling interest

Total stockholders’

Total liabilities and stockholders’

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Consolidated Statements of Operations

the Three Months

the Six Months

- related party

and consultants

and amortization

For the Three Months

For the Nine Months

Ended March 31,

Net Revenues:

Maintenance fees

Services - related party

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

and development cost

Salaries and consultants

Depreciation and amortization

Total cost of revenues

Operating expenses:

from operations

income and (expenses)

(loss) on sale of assets

(loss) on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income (loss) before income taxes

tax provision

income (loss)

Non-controlling

income (loss) attributable to NetSol

$ (1,241,972 )

income (loss) per share:

income (loss) per common share

Weighted average

number of shares outstanding

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

Net income (loss) per share:

Net income (loss) per common share

Weighted average number of shares outstanding

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TECHNOLOGIES, INC.

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

the Three Months

the Six Months

income (loss)

$ (1,241,972 )

comprehensive income (loss):

adjustment attributable to non-controlling interest

NETSOL TECHNOLOGIES, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the Three Months

For the Nine Months

Ended March 31,

Net income (loss)

Other comprehensive income (loss):

Translation adjustment

Comprehensive

income (loss) attributable to NetSol

Translation adjustment attributable to non-controlling interest

Net translation adjustment

Comprehensive income (loss) attributable to NetSol

$ (2,607,946 )

$ (1,181,544 )

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AND SUBSIDIARIES

Consolidated Statement of Stockholders’

Condensed Consolidated Statement of Stockholders’

statement of the changes in equity for the three months ended March 31, 2020 is provided below:

Stockholders’

Balance at December 31, 2019

$ 128,197,589

$ (1,455,969 )

$ (36,448,870 )

$ (30,456,632 )

Common stock issued for:

Foreign currency translation adjustment

Balance at March 31, 2020

$ 128,374,098

$ (1,455,969 )

$ (35,448,063 )

$ (34,065,385 )

statement of the changes in equity for the three months ended December 31, 2019 is provided below:

Comprehensive

Stockholders’

at September 30, 2019

Balance at September 30, 2019

$ 128,052,079

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$ (32,221,661 )

stock issued for:

to non-controlling interest

currency translation adjustment

at December 31, 2019

Common stock issued for:

Dividend to non-controlling interest

Foreign currency translation adjustment

Balance at December 31, 2019

$ 128,197,589

2 unchanged sentences

$ (30,456,632 )

TECHNOLOGIES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’

statement of the changes in equity for the three months ended September 30, 2019 is provided below:

Comprehensive

Stockholders’

at June 30, 2019

Balance at June 30, 2019

$ 127,737,999

2 unchanged sentences

$ (33,125,006 )

of subsidiary common stock options

stock issued for:

currency translation adjustment

at September 30, 2019

Exercise of subsidiary common stock options

Common stock issued for:

Foreign currency translation adjustment

Balance at September 30, 2019

$ 128,052,079

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AND SUBSIDIARIES

Consolidated Statement of Stockholders’

Condensed Consolidated Statement of Stockholders’

statement of the changes in equity for the three months ended March 31, 2019 is provided below:

Stockholders’

Balance at December 31, 2018

$ 127,398,738

$ (1,205,024 )

$ (39,972,079 )

$ (28,446,811 )

Exercise of common stock options

Common stock issued for:

Fair value of options extended

Foreign currency translation adjustment

Balance at March 31, 2019

$ 127,551,606

$ (1,205,024 )

$ (38,704,519 )

$ (28,474,832 )

statement of the changes in equity for the three months ended December 31, 2018 is provided below:

Comprehensive

Stockholders’

at September 30, 2018

Balance at September 30, 2018

$ 126,918,319

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$ (24,649,274 )

of common stock options

stock issued for:

to non-controlling interest

currency translation adjustment

at December 31, 2018

Exercise of common stock options

Common stock issued for:

Dividend to non-controlling interest

Foreign currency translation adjustment

Balance at December 31, 2018

$ 127,398,738

2 unchanged sentences

$ (28,446,811 )

TECHNOLOGIES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’

statement of the changes in equity for the three months ended September 30, 2018 is provided below:

Comprehensive

Stockholders’

at June 30, 2018

Balance at June 30, 2018

$ 126,479,147

2 unchanged sentences

$ (24,386,071 )

in retained earnings on adoption of ASC 606

of subsidiary common stock options

stock issued for:

currency translation adjustment

at September 30, 2018

Adjustment in retained earnings on adoption of ASC 606

Exercise of subsidiary common stock options

Common stock issued for:

Foreign currency translation adjustment

Balance at September 30, 2018

$ 126,918,319

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Consolidated Statements of Cash Flows

the Six Months

flows from operating activities:

income (loss)

$ (1,714,323 )

to reconcile net income (loss) to net cash provided by operating activities:

and amortization

for bad debts

of net loss from investment under equity method

on sale of assets

based compensation

in operating assets and liabilities:

receivable - related party

in excess of billing

in excess of billing - related party

current assets

payable and accrued expenses

cash provided by operating activities

flows from investing activities:

of property and equipment

note receivable - related party

cash used in investing activities

flows from financing activities:

from the exercise of stock options and warrants

from exercise of subsidiary options

paid by subsidiary to non-controlling interest

from bank loans

on finance lease obligations and loans - net

cash provided by (used in) financing activities

of exchange rate changes

increase (decrease) in cash and cash equivalents

and cash equivalents at beginning of the period

and cash equivalents at end of period

For the Nine Months

Ended March 31,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

Provision for bad debts

Share of net loss from investment under equity method

Gain on sale of assets

Stock based compensation

Fair market value of stock options

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable - related party

Revenues in excess of billing

Revenues in excess of billing - related party

Other current assets

Accounts payable and accrued expenses

Unearned revenue

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchases of property and equipment

Sales of property and equipment

Convertible note receivable - related party

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the exercise of stock options and warrants

Proceeds from exercise of subsidiary options

Dividend paid by subsidiary to non-controlling interest

Proceeds from bank loans

Payments on finance lease obligations and loans - net

Net cash provided by (used in) financing activities

Effect of exchange rate changes

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the period

Cash and cash equivalents at end of period

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

the Six Months

paid during the period for:

INVESTING AND FINANCING ACTIVITIES:

acquired under finance lease

recognized under operating lease

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Nine Months

Ended March 31,

SUPPLEMENTAL DISCLOSURES:

Cash paid during the period for:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Assets acquired under finance lease

Assets recognized under operating lease

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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banking, and financial services industries worldwide.

The Company also provides system integration, consulting, and IT products

and services in exchange for fees from customers.

The Company also provides system integration,

consulting, and IT products and services in exchange for fees from customers.

consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant

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Below is the table of reclassified amounts:

the Three Months Ended

the Six Months Ended

fees - related party

- related party

For the Three Months Ended

For the Nine Months Ended

March 31, 2019

Originally reported

Maintenance fees

Maintenance fees - related party

Services - related party

Total net revenues

ACCOUNTING POLICIES

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covered by insurance.

As of December 31, 2019, and June 30, 2019, the Company had uninsured deposits related to cash deposits

in accounts maintained within foreign entities of approximately $20,260,523 and $16,124,339, respectively.

The Company has not

experienced any losses in such accounts.

As of March 31, 2020, and June 30, 2019, the Company had uninsured deposits related to cash deposits in

accounts maintained within foreign entities of approximately $14,677,110 and $16,124,339, respectively.

The Company has not experienced

any losses in such accounts.

Company’s operations are carried out globally.

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measurement and are less observable and thus have the lowest priority.

Company’s assets that were measured at fair value on a recurring basis as of December 31, 2019, were as follows:

in excess of billing - long term

Company’s assets that were measured at fair value on a recurring basis as of March 31, 2020, were as follows:

Revenues in excess of billings - long term

Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2019, were as follows:

in excess of billing - long term

reconciliation from June 30, 2019 to December 31, 2019 is as follows:

in excess of billing - long term

value discount

at June 30, 2019

during the period

of Translation Adjustment

at December 31, 2019

Revenues in excess of billings - long term

reconciliation from June 30, 2019 to March 31, 2020 is as follows:

Revenues in excess

of billings - long term

Fair value discount

Balance at June 30, 2018

Effect of ASC 606 adoption

Balance at June 30, 2019

Amortization during the period

Effect of Translation Adjustment

Balance at March 31, 2020

TECHNOLOGIES, INC.

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the Company adopted the policy election to not recognize ROU assets and lease liabilities for short-term leases for all asset

of the new standard resulted in the recording of a non-cash transitional adjustment to ROU assets and lease liabilities of approximately

of the new standard resulted in the recording of a non-cash transitional adjustment to ROU assets and lease liabilities of $3,011,814

and $3,091,236, respectively, as of July 1, 2019.

The difference between the ROU assets and lease liabilities represented

existing deferred rent expense and prepaid rent that were derecognized and adjusted ROU assets in the Condensed Consolidated Balance

The difference between the ROU assets and lease liabilities represented existing

deferred rent expense and prepaid rent that were derecognized and adjusted the ROU assets in the Condensed Consolidated Balance

The adoption of ASU 2016-02 did not materially impact the results of operations or cash flows.

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impact of the adoption of this standard on its consolidated financial statements.

other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

REVENUE RECOGNITION

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Company’s disaggregated revenue by category is as follows:

the Three Months

the Six Months

- related party

core revenue, net

- related party

non-core revenue, net

For the Three Months

For the Nine Months

Ended March 31,

Services - related party

Total core revenue, net

Services - related party

Total non-core revenue, net

Total net revenue

to the complexity of certain contracts, the actual revenue recognition treatment required under Topic 606 for the Company’s

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Company’s revenues in excess of billings and deferred revenue are as follows:

in excess of billings

the three and six months ended December 31, 2019, the Company recognized revenue of $2,051,136 and $5,051,198, respectively, that

March 31, 2020

June 30, 2019

Revenues in excess of billings

Deferred Revenue

the three and nine months ended March 31, 2020, the Company recognized revenue of $586,899 and $5,638,097, respectively, that

was included in the deferred revenue balance at the beginning of the period.

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revenue in future periods.

Contracted but unsatisfied performance obligations were approximately $65,347,649 as of December 31,

2019, of which the Company estimates to recognize approximately $13,454,230 in revenue over the next 12 months and the remainder

over an estimated 5 years thereafter.

Actual revenue recognition depends in part on the timing of software modules installed at

various customer sites.

Accordingly, some factors that affect the Company’s revenue, such as the availability and demand

for modules within customer geographic locations, is not entirely within the Company’s control.

In instances where the timing

of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include

a significant financing component.

The primary purpose of invoicing terms is to provide customers with simplified and predictable

ways of purchasing the Company’s products and services, and not to facilitate financing arrangements.

Contracted but unsatisfied performance obligations were approximately $63,609,872 as of March 31, 2020,

of which the Company estimates to recognize approximately $13,066,505 in revenue over the next 12 months and the remainder over

an estimated 5 years thereafter.

Actual revenue recognition depends in part on the timing of software modules installed at various

customer sites.

Accordingly, some factors that affect the Company’s revenue, such as the availability and demand for modules

within customer geographic locations, is not entirely within the Company’s control.

In instances where the timing of revenue

recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant

financing component.

The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing

the Company’s products and services, and not to facilitate financing arrangements.

Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment

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components of basic and diluted earnings per share were as follows:

the three months ended

the six months ended

the three months ended March 31, 2020

the nine months ended March 31, 2020

Basic income (loss) per share:

(loss) available to common shareholders

Effect of dilutive securities

Stock options

Diluted income

(loss) per share

income (loss) available to common shareholders

$ (1,241,972 )

of dilutive securities

income (loss) per share

$ (1,241,972 )

the three months ended

the six months ended

income available to common shareholders

of dilutive securities

income per share

the three months ended March 31, 2019

the nine months ended March 31, 2019

Basic income per share:

available to common shareholders

Effect of dilutive securities

Stock options

Diluted income

following potential dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion

would be anti-dilutive.

the Three Months

the Six Months

For the Three Months

For the Nine Months

Ended March 31,

TECHNOLOGIES, INC.

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equity section of the consolidated balance sheet were $34,065,385 and $33,125,006

as of December 31, 2019 and June 30, 2019, respectively.

During the three and six months ended December 31, 2019, comprehensive

income (loss) in the consolidated statements of comprehensive income (loss) included a translation gain attributable to NetSol

of $1,765,029 and $2,668,374, respectively.

During the three and six months ended December 31, 2018, comprehensive income (loss)

in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of $3,797,537

as of March 31, 2020 and June 30, 2019, respectively.

During the three and nine months ended March 31, 2020, comprehensive income

(loss) in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of $3,608,753

and $940,379, respectively.

During the three and nine months ended March 31, 2019, comprehensive income (loss) in the consolidated

statements of comprehensive income (loss) included a translation loss attributable to NetSol of $28,021 and $4,088,761, respectively.

RELATED PARTY TRANSACTIONS

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NetSol-Innovation provided support services to 1insurer.

During the three and six months ended December 31, 2019, NetSol Innovation

During the three and nine months ended March 31, 2020, NetSol Innovation

provided $Nil services.

During the three and six months ended December 31, 2018, NetSol Innovation provided services of $Nil and

During the three and nine months ended March 31, 2019, NetSol Innovation provided services of $Nil and

$67,286, respectively.

Accounts receivable at December 31, 2019 and June 30, 2019 were $Nil and $2,130,041, respectively.

Accounts receivable at March 31, 2020 and June 30, 2019 were $Nil and $2,130,041, respectively.

MAJOR CUSTOMERS

the six months ended December 31, 2019 revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”)

were $8,691,233 and $4,793,304 representing 29.7% and 16.4% of revenues.

During the six months ended December 31, 2018, revenues

from DFS and BMW were $10,563,362 and $7,353,916 representing 31.6% and 22.0% of revenues.

The revenue from these customers are

shown in the Asia –

the nine months ended March 31, 2020, revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”)

were $11,906,959 and $6,893,438, respectively representing 27.8% and 16.1%, respectively of revenues.

During the nine months ended

March 31, 2019, revenues from DFS and BMW were $17,137,545 and $10,339,704, respectively representing 33.9% and 20.5%, respectively

The revenue from these customers are shown in the Asia –

Pacific segment.

receivable from the DFS and BMW at December 31, 2019, were $1,230,133 and $359,838, respectively.

receivable from DFS and BMW at March 31, 2020, were $5,186,256 and $3,271,459, respectively.

Accounts receivable at June 30, 2019,

were $7,917,814 and $159,322, respectively.

Revenues in excess of billings at December 31, 2019 were $6,605,189 and

$5,465,422, respectively.

Revenues in excess of billings at March 31, 2020 were $5,982,097 and $5,365,137, respectively.

Revenues in excess of billings at June 30, 2019, were $4,371,081 and $5,472,043, respectively.

in this amount was $1,291,025 and $1,281,492 shown as long term at December 31, 2019 and June 30, 2019, respectively.

Included in this amount was $1,282,898

and $1,281,492 shown as long term at March 31, 2020 and June 30, 2019, respectively.

CONVERTIBLE NOTE RECEIVABLE –

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following table summarizes the convertible notes receivable from WRLD3D.

Company has accrued interest of $508,235 and $328,748 at December 31, 2019 and June 30, 2019, respectively, which is included

in “Other current assets.

February 9, 2018

April 1, 2019

March 31, 2020

August 19, 2019

March 31, 2020

Company has accrued interest of $604,452 and $328,748 at March 31, 2020 and June 30, 2019, respectively, which is included in

“Other current assets.

9 - OTHER CURRENT ASSETS

current assets consisted of the following:

March 31, 2020

June 30, 2019

Prepaid Expenses

Advance Income Tax

Employee Advances

Security Deposits

Other Receivables

TECHNOLOGIES, INC.

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in excess of billings, net consisted of the following:

in excess of billing - long term

value discount

March 31, 2020

June 30, 2019

Revenues in excess of billings - long term

Present value discount

to revenue recognition for contract accounting, the Company had recorded revenues in excess of billings long-term for amounts

billable after one year.

During the three and six months ended December 31, 2019, the Company accreted $13,821 and $27,681 which

During the three and nine months ended March 31, 2020, the Company accreted $13,940 and $41,621 which

was recorded in interest income for that period.

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and equipment consisted of the following:

Furniture and Equipment

Under Capital Leases

Work In Progress

March 31, 2020

June 30, 2019

Office Furniture and Equipment

Computer Equipment

Assets Under Capital Leases

Capital Work In Progress

Accumulated Depreciation

(21,046,178 )

(20,371,589 )

and Equipment, Net

the three and six months ended December 31, 2019, depreciation expense totaled $484,662 and $950,113, respectively.

Property and Equipment, Net

the three and nine months ended March 31, 2020, depreciation expense totaled $479,350 and $1,429,463, respectively.

Of these amounts,

$273,315 and $805,562, respectively, are reflected in cost of revenues.

For the three months ended December 31, 2018, depreciation

For the three and nine months ended March 31, 2019, depreciation

expense totaled $606,641 and $1,704,606, respectively.

Of these amounts, $340,058 and $691,954, respectively, are reflected in

cost of revenues.

Of these amounts, $354,199 and $1,046,153, respectively, are reflected

in cost of revenues.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

is a summary of fixed assets held under finance leases as of December 31, 2019 and June 30, 2019:

and Other Equipment

is a summary of fixed assets held under finance leases as of March 31, 2020 and June 30, 2019:

March 31, 2020

June 30, 2019

Computers and Other Equipment

Furniture and Fixtures

Accumulated Depreciation - Net

lease term and discount rate were as follows:

average remaining lease term - finance leases

average discount rate - finance leases

March 31, 2020

Weighted average remaining lease term - Finance leases

Weighted average discount rate - Finance leases

Company leases certain office space, office equipment and autos with remaining lease terms of one year to 10 years under leases

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payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not

result in a remeasurement of lease liabilities.

result in a re-measurement of lease liabilities.

The Company’s variable lease payments include payments for finance leases

that are adjusted based on a change in Karachi Inter Bank Offer Rate.

The Company’s lease agreements do not contain any

significant residual value guarantees or restrictive covenants.

that are adjusted based on a change in the Karachi Inter Bank Offer Rate.

The Company’s lease agreements do not contain

any significant residual value guarantees or restrictive covenants.

balance sheet information related to leases was as follows:

lease assets, net

Lease Liabilities

March 31, 2020

Operating lease assets, net

Total Lease Liabilities

components of lease cost were as follows:

the Six Months

December 31, 2019

of finance lease assets

on finance lease obligation

term lease cost

For the Nine Months

Ended March 31, 2020

Amortization of finance lease assets

Interest on finance lease obligation

Operating lease cost

Short term lease cost

Sub lease income

Total lease cost

term and discount rate were as follows:

average remaining lease term - Operating leases

average discount rate - Operating leases

March 31, 2020

Weighted average remaining lease term - Operating leases

Weighted average discount rate - Operating leases

TECHNOLOGIES, INC.

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disclosures of cash flow information related to leases were as follows:

the Six Months

December 31, 2019

flows related to lease liabilities

cash flows related to operating leases

of operating lease liabilities were as follows as of December 31, 2019:

Lease Payments

For the Nine Months

Ended March 31, 2020

Cash flows related to lease liabilities

Operating cash flows related to operating leases

of operating lease liabilities were as follows as of March 31, 2020:

Within year 1

Within year 2

Within year 3

Within year 4

Within year 5

Total Lease Payments

Imputed interest

Present Value

of lease liabilities

Present Value of lease liabilities

Current portion

Non-Current portion

of June 30, 2019, future minimum lease payments, as defined under the previous lease accounting guidance of ASC Topic 840, under

non-cancelable operating leases for the following five fiscal years and thereafter were as follows:

Within year 1

Within year 2

Within year 3

Within year 4

Within year 5

Company is a lessor for certain office space leased by the Company and sub-leased to others under non-cancelable leases.

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no rights to purchase the premises and no residual value guarantees.

For the three and six months ended December 31, 2019, the

Company received $8,514 and $16,713 of lease income.

For the three and nine months ended March 31, 2020, the Company

received $8,514 and $25,227 of lease income.

TECHNOLOGIES, INC.

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of accounting.

the three and six months ended December 31, 2019, the Company performed $303,101 and $507,716 of services, respectively.

the equity method of accounting, the Company recorded its share of net loss of $5,856 and $11,248 for the three and six months

ended December 31, 2019, respectively.

the three and nine months ended March 31, 2020, the Company performed $355,051 and $862,767 of services, respectively.

the equity method of accounting, the Company recorded its share of net loss of $5,667 and $16,915 for the three and nine months

ended March 31, 2020, respectively.

WRLD3D-Related

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in WRLD3D, for $2,777,778 which was earned by providing IT and enterprise software solutions.

the three and six months ended December 31, 2019, NetSol PK provided services valued at $57,424 and $140,357, respectively, which

the three and nine months ended March 31, 2020, NetSol PK provided services valued at $61,842 and $202,199, respectively, which

is recorded as services-related party.

During the three months and six months ended December 31, 2018, NetSol PK provided services

During the three months and nine months ended March 31, 2019, NetSol PK provided services

valued at $156,996 and $494,333, respectively, which is recorded as services-related party.

Accounts receivable at December 31,

Accounts receivable at March 31, 2020

and June 30, 2019 were $1,332,575 and $1,020,589, respectively.

Revenue in excess of billing at December 31, 2019 and June

Revenue in excess of billings at March 31, 2020 and June 30, 2019

were $8,245 and $110,827, respectively.

the equity method of accounting, the Company recorded its share of net loss of $158,940 and $342,772 for the three and six months

ended December 31, 2019, respectively, and the Company recorded its share of net loss of $298,293 and $597,984 for the three and

six months ended December 31, 2018, respectively.

following table reflects the above investments at December 31, 2019.

net loss on investment

Other comprehensive income (loss)

the equity method of accounting, the Company recorded its share of net loss of $72,835 and $415,607 for the three and nine months

ended March 31, 2020, respectively, and the Company recorded its share of net loss of $245,389 and $843,373 for the three and

nine months ended March 31, 2019, respectively.

following table reflects the above investments at March 31, 2020.

Initial investment

Cumulative net loss on investment

Cumulative Other comprehensive income (loss)

Net Investment

TECHNOLOGIES, INC.

2 unchanged sentences

assets consisted of the following:

Licenses - Cost

of Translation Adjustment

March 31, 2020

June 30, 2019

Product Licenses - Cost

Effect of Translation Adjustment

(15,833,112 )

(15,343,727 )

Accumulated Amortization

(25,531,126 )

4 unchanged sentences

will be amortized over the next 3.5 years.

Amortization expense for the three and six months ended December 31, 2019 was $465,169

Amortization expense for the three and nine months ended March 31, 2020 was $464,322

and $1,386,092, respectively.

Amortization expense for the three and six months ended December 31, 2018 was $539,990 and $1,125,698,

Amortization expense for the three and nine months ended March 31, 2019 was $520,455 and $1,646,153,

respectively.

1 unchanged sentence

amortization expense of intangible assets over the next five years is as follows:

March 31, 2021

March 31, 2022

March 31, 2023

March 31, 2024

15 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses consisted of the following:

Payroll & Taxes

March 31, 2020

June 30, 2019

Accounts Payable

Accrued Liabilities

Accrued Payroll & Taxes

Taxes Payable

Other Payable

TECHNOLOGIES, INC.

1 unchanged sentence

payable and finance leases consisted of the following:

of December 31, 2019

Overdraft Facility

Payable Bank - Export Refinance

Payable Bank - Running Finance

Payable Bank - Export Refinance II

Payable Bank - Running Finance II

Payable Bank - Export Refinance III

Finance Leases

of June 30, 2019

Overdraft Facility

Payable Bank - Export Refinance

Payable Bank - Running Finance

Payable Bank - Export Refinance II

Payable Bank - Running Finance II

Payable Bank - Export Refinance III

Finance Leases

As of March 31, 2020

D&O Insurance

Bank Overdraft Facility

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance II

Loan Payable Bank - Running Finance II

Loan Payable Bank - Export Refinance III

Related Party Loan

Subsidiary Finance Leases

As of June 30, 2019

D&O Insurance

Bank Overdraft Facility

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance II

Loan Payable Bank - Running Finance II

Loan Payable Bank - Export Refinance III

Related Party Loan

Subsidiary Finance Leases

The Company finances Directors’

3 unchanged sentences

such, are recorded in current maturities.

The interest rate on these financings were ranging from 5.0% to 7.0% as of December

The interest rate on these financings were ranging from 5.0% to 7.0% as of March 31,

2020 and June 30, 2019.

1 unchanged sentence

up to £300,000, or approximately $370,370.

The annual interest rate was 5.12% as of December 31, 2019.

Total outstanding

balance as of December 31, 2019 was £Nil.

The annual interest rate was 5.12% as of March 31, 2020.

Total outstanding balance

as of March 31, 2020 was £Nil.

overdraft facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts

and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility.

As of December 31, 2019, NTE was in compliance with this covenant.

As of March 31, 2020, NTE was in compliance with this covenant.

TECHNOLOGIES, INC.

1 unchanged sentence

The Company’s subsidiary, NetSol PK, has an export refinance facility with Askari Bank Limited, secured by NetSol PK’s

This is a revolving loan that matures every six months.

This is a revolving loan that matures every nine months.

Total facility amount is Rs.

500,000,000 or $3,228,931 at December

500,000,000 or $3,005,350 at March

31, 2020 and Rs.

500,000,000 or $3,066,355 at June 30, 2019.

The interest rate for the loan was 3% at December 31, 2019 and June

The interest rate for the loan was 3% at March 31, 2020 and June

The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s

Total facility amount is Rs.

75,000,000 or $484,340, at December 31, 2019.

75,000,000 or $450,802, at March 31, 2020.

NetSol PK used Rs.

Nil, or $Nil at December

The interest rate for the loan was 15.9% and 13.0% at December 31, 2019 and June 30, 2019, respectively.

Nil, or $Nil at March 31, 2020.

The interest rate for the loan was 13.2% and 13.0% at March 31, 2020 and June 30, 2019, respectively.

facility requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1.

As of December 31,

As of March 31, 2020,

NetSol PK was in compliance with this covenant.

The Company’s subsidiary, NetSol PK, has an export refinance facility with Samba Bank Limited, secured by NetSol PK’s

This is a revolving loan that matures every six months.

This is a revolving loan that matures every nine months.

Total facility amount is Rs.

380,000,000 or $2,284,065 and Rs.

380,000,000 or $2,330,431 at December 31, 2019 and June 30, 2019, respectively.

The interest rate for the loan was 3% at December

380,000,000 or $2,330,431 at March 31, 2020 and June 30, 2019, respectively.

The interest rate for the loan was 3% at March 31,

2020 and June 30, 2019.

2 unchanged sentences

120,000,000 or $721,284 and Rs.

120,000,000 or $735,925, at December 31, 2019 and June 30,

120,000,000 or $735,925, at March 31, 2020 and June 30, 2019,

respectively.

The interest rate for the loan was 14.2% and 14.3% at December 31, 2019 and June 30, 2019, respectively.

The interest rate for the loan was 12.9% and 14.3% at March 31, 2020 and June 30, 2019, respectively.

Total outstanding

balance at March 31, 2020 was Rs.

the tenure of loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a 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.

As of December

31, 2020, NetSol PK was in compliance with these covenants.

The Company’s subsidiary, NetSol PK, has an export refinance facility with Habib Metro Bank Limited, secured by NetSol PK’s

This is a revolving loan that matures every six months.

This is a revolving loan that matures every nine months.

Total facility amount is Rs.

900,000,000 or $5,409,629 and NetSol

500,000,000 or $3,228,931 at December 31, 2019.

The interest rate for the loan was 3% at December 31, 2019.

500,000,000 or $3,005,350 at March 31, 2020.

The interest rate for the loan was 3% at March 31, 2020.

In March 2019, the Company’s subsidiary, VLS, entered into a loan agreement.

1 unchanged sentence

for a period of 5 years with monthly payment of £1,349, or $1,666.

As of December 31, 2019, the subsidiary has used this

facility up to $78,139, of which $61,163 was shown as long-term and $16,976 as current.

The interest rate was 6.14% at December

As of March 31, 2020, the subsidiary has used this facility

up to $69,425, of which $53,251 was shown as long-term and $16,174 as current.

The interest rate was 6.14% at March 31, 2020.

The Company leases various fixed assets under finance lease arrangements expiring in various years through 2024.

4 unchanged sentences

Depreciation of assets under finance leases is included in depreciation

expense for the three months ended December 31, 2019 and 2018.

expense for the three months ended March 31, 2020 and 2019.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

is the aggregate minimum future lease payments under finance leases as of December 31, 2019:

Lease Payments

is the aggregate minimum future lease payments under finance leases as of March 31, 2020:

Minimum Lease Payments

Expense relating to future periods

Value of minimum lease payments

Within year 1

Within year 2

Within year 3

Within year 4

Total Minimum Lease Payments

Interest Expense relating to future periods

Present Value of minimum lease payments

Current portion

Non-Current portion

17 - STOCKHOLDERS’

the six months ended December 31, 2019, the Company issued 38,861 shares of common stock for services rendered by officers of

the nine months ended March 31, 2020, the Company issued 42,818 shares of common stock for services rendered by officers of the

These shares were valued at the fair market value of $239,799.

the six months ended December 31, 2019, the Company issued 21,615 shares of common stock for services rendered by the independent

the nine months ended March 31, 2020, the Company issued 21,615 shares of common stock for services rendered by the independent

members of the Board of Directors as part of their board compensation.

These shares were valued at the fair market value of $106,601.

the six months ended December 31, 2019, the Company issued 28,348 shares of its common stock to employees pursuant to the terms

the nine months ended March 31, 2020, the Company issued 62,522 shares of its common stock to employees pursuant to the terms

of their employment agreements valued at $319,066.

1 unchanged sentence

stock purchase options consisted of the following:

and exercisable, June 30, 2019

and exercisable, December 31, 2019

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (in years)

Aggregated Intrinsic Value

Outstanding and exercisable, June 30, 2019

Expired / Cancelled

Outstanding and exercisable, March 31, 2020

the nine months ended March 31, 2020, 40,386 options outstanding and exercisable, became expired.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

following table summarizes information about stock options outstanding and exercisable at December 31, 2019.

following table summarizes stock grants awarded as compensation:

Average Grant

Date Fair Value

June 30, 2019

December 31, 2019

the three and six months ended December 31, 2019, the Company recorded compensation expense of $164,292 and $328,585, respectively.

For the three and six months ended December 31, 2018, the Company recorded compensation expense of $437,695 and $869,743, respectively.

The compensation expense related to the unvested stock grants as of December 31, 2018 was $662,589 which will be recognized during

Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2019

Forfeited / Cancelled

Unvested, March 31, 2020

the three and nine months ended March 31, 2020, the Company recorded compensation expense of $236,702 and $565,287, respectively.

For the three and nine months ended March 31, 2019, the Company recorded compensation expense of $110,939 and $980,682, respectively.

The compensation expense related to the unvested stock grants as of March 31, 2019 was $539,603 which will be recognized during

the fiscal years 2020 through 2022.

29 unchanged sentences

to Condensed Consolidated Financial Statements

following table presents a summary of identifiable assets as of December 31, 2019 and June 30, 2019:

following table presents a summary of investment under equity method as of December 31, 2019 and June 30, 2019:

in associates under equity method:

following table presents a summary of operating information for the three and six months ended December 31:

the Three Months

the Six Months

from unaffiliated customers:

from affiliated customers

income (loss) after taxes and before non-controlling interest:

$ (1,142,067 )

$ (1,244,092 )

following table presents a summary of identifiable assets as of March 31, 2020 and June 30, 2019:

March 31, 2020

June 30, 2019

Identifiable assets:

Corporate headquarters

North America

Asia - Pacific

following table presents a summary of investment under equity method as of March 31, 2020 and June 30, 2019:

March 31, 2020

June 30, 2019

Investment in associates under equity method:

Corporate headquarters

Asia - Pacific

following table presents a summary of operating information for the three and nine months ended March 31:

For the Three Months

For the Nine Months

Ended March 31,

Revenues from unaffiliated customers:

North America

Asia - Pacific

Revenue from affiliated customers

Asia - Pacific

Intercompany revenue

Asia - Pacific

Net income (loss) after taxes and before non-controlling interest:

Corporate headquarters

$ (1,003,798 )

$ (1,667,600 )

North America

Asia - Pacific

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

following table presents a summary of capital expenditures for the six months ended December 31:

the Six Months

expenditures:

following table presents a summary of capital expenditures for the nine months ended March 31:

For the Nine Months

Ended March 31,

Capital expenditures:

North America

Asia - Pacific

NON-CONTROLLING INTEREST IN SUBSIDIARY

1 unchanged sentence

The balance of non-controlling interest was as follows:

Non-Controlling

December 31, 2019

Non-Controlling Interest %

Non-Controlling Interest at

March 31, 2020

NetSol-Innovation

Non-Controlling

Non-Controlling Interest %

Non-Controlling Interest at

June 30, 2019

NetSol-Innovation

the six months ended December 31, 2019, employees of NetSol PK exercised 114,000 options of common stock and NetSol PK received

the nine months ended March 31, 2020, employees of NetSol PK exercised 114,000 options of common stock and NetSol PK received

cash of $11,261.

Due to the exercise of options, the non-controlling interest increased from 33.80% to 33.88%.

During the six

months ended December 31, 2019, NetSol PK paid a cash dividend of $1,610,909.

the six months ended December 31, 2019, NetSol Innovation paid a cash dividend of $2,778,453.

During the nine

months ended March 31, 2020, NetSol PK paid a cash dividend of $1,610,909.

the nine months ended March 31, 2020, NetSol Innovation paid a cash dividend of $2,778,453.

SUBSEQUENT EVENTS

recent outbreak of the coronavirus, also known as "COVID-19", has spread across the globe and is impacting worldwide

economic activity.

Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented

emergency measures to mitigate the spread of the virus.

The outbreak and the related mitigation measures have had and will continue

to have a material adverse impact on global economic conditions as well as on the Company's business activities.

The extent to

which COVID-19 may impact the Company's business activities will depend on future developments, such as the ultimate geographic

spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions

taken in the United States and other countries to contain and treat the disease.

These events are highly uncertain and, as such,

the Company cannot determine their financial impact at this time.

No adjustments have been made to the amounts reported in these

condensed consolidated financial statements as a result of this matter.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion is intended to assist in an understanding of the Company’s financial position and results of operations

for the three and six months ended December 31, 2019.

for the three and nine months ended March 31, 2020.

The following discussion should be read in conjunction with the information

47 unchanged sentences

applications under the brand name NFS™

(NetSol Financial Suite) and NFS Ascent TM for leading businesses in the

global lease and finance industry.

(NetSol Financial Suite) and NFS Ascent ®

for leading businesses in

the global lease and finance industry.

NetSol’s

18 unchanged sentences

the entire leasing/financing cycle for companies of any size, including those with multi-billion-dollar portfolios.

, the Company’s next generation platform, offers a technologically advanced solution for the

auto and equipment finance and leasing industry.

, the Company’s next generation platform, offers a technologically advanced solution for the auto

and equipment finance and leasing industry.

NFS Ascent’s ®

architecture and user interfaces were

designed based on the Company’s collective experience with global Fortune 500 companies over the past 40 years combined

with UX design concepts.

The platform’s framework allows auto captive and asset finance companies to rapidly transform legacy

driven technology into a state-of-the-art IT and business process environment.

architecture and user interfaces were designed

based on the Company’s collective experience with global Fortune 500 companies over the past 40 years combined with UX design

The platform’s framework allows auto captive and asset finance companies to rapidly transform legacy driven technology

into a state-of-the-art IT and business process environment.

At the core of the NFS Ascent ®

platform is a lease accounting and contract processing engine, which allows for an array of interest calculation methods, as well

as robust accounting of multi-billion-dollar lease portfolios in compliance with various regulatory standards.

platform, is a lease

accounting and contract processing engine, which allows for an array of interest calculation methods, as well as robust accounting

of multi-billion-dollar lease portfolios in compliance with various regulatory standards.

NFS Ascent ®

with its distributed and clustered deployment across parallel application and high-volume data servers, enables finance companies

to process voluminous data in a hyper speed environment.

distributed and clustered deployment across parallel application and high-volume data servers, enables finance companies to process

voluminous data in a hyper speed environment.

NFS Ascent ®

has been developed using the latest

tools and technologies and its n-tier SOA architecture allows the system to greatly improve a myriad of areas including, but not

limited to, scalability, performance, fault tolerance and security.

Pricing models for NFS Ascent are also available on a software

as a service (“SaaS”) or subscription-based pricing as an alternative to the traditional license model.

has been developed using the latest tools and technologies

and its n-tier SOA architecture allows the system to greatly improve a myriad of areas including, but not limited to, scalability,

performance, fault tolerance and security.

Pricing models for NFS Ascent ®

are also available on a software as a

service (“SaaS”) or subscription-based pricing as an alternative to the traditional license model.

Subscription-based

24 unchanged sentences

addition to offering NFS Ascent ®

to the European market, NTE has some regional offerings, including LeaseSoft

and LoanSoft.

to the European market, NTE has some regional offerings, including LeaseSoft and

LeaseSoft is a full lifecycle lease and finance system aimed predominantly at the UK funder market, including modules

1 unchanged sentence

is similar to LeaseSoft, but optimized for the consumer loan market.

below are a few of NetSol’s highlights for the quarter ended December 31, 2019:

Business Highlights:

announced our “Cloud readiness”

at the 20th anniversary of our listing on NASDAQ at the closing bell on January

of our largest customers, BMW, successfully went live in China with our NFS Ascent TM Wholesale Platform.

generated $2 million in services revenue by supporting our clients with change requests in multiple regions.

further advanced our “Innovation Lab”

initiatives with multiple new engagements with multiple large tier one customers

announced the SaaS or subscription-based pricing model for our global markets in addition to our existing license options.

top-tier, major finance company from Japan went Live with our mCollector digital solution in multiple locations in APAC.

successfully went Live in Hong Kong with our Ascent Retail Platform.

signed a new customer, SCI Lease Corp, a Canadian-based national automotive leasing company, for the deployment of our first

cloud-enabled NFS Ascent ®

Contract Management System (CMS) in North America.

made significant progress towards the deployment of our Flagship NFS Ascent ®

Retail Platform for a major

Japanese captive finance company operating in New Zealand.

made substantial progress towards the cloud-enabled Wholesale implementation for a UK based leading auction house.

below are a few of NetSol’s highlights for the quarter ended March 31, 2020:

generated close to $2.0 million from the successful implementation of change requests from various customers across multiple

of the largest independently owned finance companies in the UK had a successful go live with our LeaseSoft application.

signed a contract with one of the leading banks in the UK to implement its NFS Ascent ®

Retail Platform.

has now marked the first retail customer of NFS Ascent ®

innovation lab project “OTOZ”

entered into a contract with the captive auto finance company of a leading German

auto manufacturer in China to launch its pilot program in China.

upsold system enhancements during the implementation phase worth approximately $4.0 million of additional revenue to the captive

auto finance company of a leading German Auto manufacturer in China.

delivered our NFS Ascent ®

Retail system to the first NFS Ascent ®

customer in North America.

delivered our NFS Ascent ®

Retail platform to the captive auto finance company of a notable Japanese equipment

manufacturer in Australia/New Zealand.

leading captive finance company of a notable Japanese bank in Indonesia implemented the i-OPS (i-operations) system in a bid

to extend their market reach by allowing their call center workforce contact prospects and act as an additional channel for

lead generation.

success, in the near term, will depend, in large part, on the Company’s ability to continue to grow revenues and improve

4 unchanged sentences

has identified the following material trends affecting NetSol.

SaaS offering is gaining traction in mid-size auto captives in North American and European markets.

and digital transformation is the new norm showing acceleration in every sector particularly in auto and banking.

Cloud demand for our solution is on the rise.

-19 has created new dynamics for businesses and corporations to have employees and executives work from home.

the decreased office and maintenance costs as well as the sharply reduced travel expenses, should positively impact our financials.

is creating newer opportunities in our space or complementary sectors while our R&D teams are exploring new windows to

American markets, primarily in Mexico, remain largely untapped.

stability in US and Pakistan relations as both countries explore trade relations and continued strategic ally in Afghanistan.

(NPR, July 23, 2019)

Moody’s

recently revised Pakistan’s ranking to positive.

investment or CPEC (China Pakistan Economic Corridor) has exceeded $62 billion from an original commitment of $46 billion

in Pakistan on energy and infrastructure projects.

emerging markets and IT destinations in Thailand, Malaysia, Indonesia, Africa and Australia.

interest from Fortune 500 multinational auto captives and global companies in NetSol Ascent™.

traction from mid-market clients for SaaS pricing model in Flagship Ascent

interest and engagements by tier 1 existing clients for OTOZ™

platform and NetSol innovative products in development

paradigm shift to new market dynamics of shared car ownership either through ride hailing and car sharing encouraging NetSol’s

innovative development tools.

interest from existing clients in the NFS™

legacy systems in emerging and developing markets.

demand and traction for upgrading to NFS Ascent™

by existing tier one auto captive clients.

interest in the NFS Ascent™

SaaS offering.

China “Coronavirus”

may impact business growth and implementation in China.

unrest in the Middle East, South East Asia and potential terrorism and the disruption risk it creates.

tension between the U.S.

and Iran could impact regional stability.

global market worries of recession and uncertainty due to the fall-out from Brexit in Europe and the continued US China trade

threats of conflict between in the Middle Eastern countries could potentially create volatility in oil prices, causing readjustments

of corporate budgets and consumer spending slowing global auto sales.

developing markets, new interests are emerging from existing clients for upgradation and mobility platform.

opportunities and dynamics of shared car ownership either through ride hailing and car sharing encouraging our innovation

and development tools.

engagement and continued traction by tier 1 existing and new customers in the OTOZ platform.

stability in US and Pakistan relationship boosting confidence and trade relations.

China’s

China Pakistan Economic Corridor (CPEC) investment has exceeded $62 billion investment from the originally planned $46 billion

on Pakistan energy and infrastructure sectors.

has caused a global recession that will adversely impact every one of our business sectors.

NetSol Board member, Shahid

Burki, a renowned World Bank economist (1974 to 1999), warns that the COVID-19 crisis will bring about important global change.

The United States is heading towards a major economic slowdown and what we are seeing, therefore, is not a typical recession

but a hurricane.

OEMs and auto sectors are experiencing major slowdown due to lockdowns and health concerns.

C-level decision making to acquire new systems or even upgrade will be elongated due to uncertainty of the COVID-19 virus.

steep drop of global oil prices reflects a sudden drop in transportation, air travels and road travels.

The lockdowns worldwide

present layers of challenges for every business worldwide.

tensions between US and Iran could further accelerate.

and China trade conflicts tend to further aggravate the global business environment.

IN FINANCIAL CONDITION

Ended December 31, 2019 Compared to the Quarter Ended December 31, 2018

following table sets forth the items in our unaudited condensed consolidated statement of operations for the quarter ended December

Ended March 31, 2020 Compared to the Quarter Ended March 31, 2019

following table sets forth the items in our unaudited condensed consolidated statement of operations for the quarter ended March

31, 2020 and 2019 as a percentage of revenues.

the Three Months

- related party

and consultants

and amortization

For the Three Months

Ended March 31,

Net Revenues:

Maintenance fees

Services - related party

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

and development cost

Salaries and consultants

Depreciation and amortization

Total cost of revenues

Operating expenses:

from operations

income and (expenses)

(loss) on sale of assets

(loss) on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income (loss) before income taxes

tax provision

income (loss)

Non-controlling

income (loss) attributable to NetSol

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

significant portion of our business is conducted in currencies other than the U.S.

19 unchanged sentences

(Unfavorable)

Ended December 31,

$ (2,593,911 )

$ (1,002,307 )

$ (3,596,218 )

(loss) from operations

revenues for the quarter ended December 31, 2019 and 2018 are broken out among the segments as follows:

fees for the three months ended December 31, 2019 were $383,963 compared to $4,817,569 for the three months ended December 31,

$ (2,486,719 )

$ (2,468,971 )

revenues for the quarter ended March 31, 2020 and 2019 are broken out among the segments as follows:

North America

fees for the three months ended March 31, 2020 were $312,133 compared to $2,536,320 for the three months ended March 31, 2019

reflecting a decrease of $2,224,187 with a change in constant currency of $2,222,978.

During the three months ended December

31, 2018, we recognized approximately $1,100,000 related to the DFS contract, approximately $1,900,000 related to the five-year

contract that was signed with a tier-one auto captive finance company to implement our NFS Ascent™

Retail Platform in China,

and approximately $1,300,000 related to the contract signed in China with a major American multinational automaker to implement

our NFS Ascent™

During the three months ended March 31,

2019, we recognized approximately $2,100,000 related to the DFS contract, to implement our NFS Ascent ®

Retail Platform.

During the three months ended December 31, 2019, license fees related to additional licenses

being sold with our other regional offerings.

fees for the three months ended December 31, 2019 were $4,965,877 compared to $3,661,723 for the three months ended December 31,

During the three months ended March 31, 2020, license fees were for additional licenses being sold with our other regional offerings.

fees for the three months ended March 31, 2020 were $4,934,635 compared to $3,704,756 for the three months ended March 31, 2019

reflecting an increase of $1,229,879 with a change in constant currency of $1,597,826.

Maintenance fees begin once a customer

has “gone live”

The increase is primarily due to the DFS

markets going live with NFS Ascent®.

Maintenance fees begin once a customer has “gone live”

with our product.

We anticipate maintenance fees to gradually increase as we implement both our NFS

legacy product and NFS Ascent™.

income for the three months ended December 31, 2019 was $10,282,755 compared to $8,348,843 for the three months ended December

31, 2018 reflecting an increase of $1,933,912 with an increase in constant currency of $2,821,714.

The increase in services revenue

was due to an increase in services revenue associated with new implementations and change requests.

Services revenue is derived

from services provided to both current customers as well as services provided to new customers as part of the implementation process.

We anticipate maintenance fees to gradually increase as we implement both our NFS legacy product and NFS Ascent ®

income for the three months ended March 31, 2020 was $8,222,227 compared to $10,728,983 for the three months ended March 31, 2019

reflecting a decrease of $2,506,756 with a decrease in constant currency of $1,880,980.

The decrease in services revenue was due

to a decrease in services revenue associated with new implementations for DFS and BMW and change requests.

Services revenue is

derived from services provided to both current customers as well as services provided to new customers as part of the implementation

related party

income from related party for the three months ended December 31, 2019 was $57,424 compared to $174,492 for the three months ended

December 31, 2018 reflecting a decrease of $117,068 with a change in constant currency of $107,957.

The decrease in related party

service revenue is due to a decrease in revenue from WRLD3D.

gross profit was $7,801,960, for the three months ended December 31, 2019 as compared with $8,858,571 for the three months ended

December 31, 2018.

income from related party for the three months ended March 31, 2020 was $61,842 compared to $156,996 for the three months ended

March 31, 2019 reflecting a decrease of $95,154 with a change in constant currency of $87,779.

The decrease in related party service

revenue is due to a decrease in revenue from WRLD3D.

gross profit was $6,022,238, for the three months ended March 31, 2020 as compared with $8,557,320 for the three months ended

March 31, 2019.

This is a decrease of $2,535,082 with a change in constant currency of $2,192,410.

The gross profit percentage

for the three months ended December 31, 2019 also decreased to 49.7% from 52.1% for the three months ended December 31, 2018.

The cost of sales was $7,888,059 for the three months ended December 31, 2019 compared to $8,144,056 for the three months ended

December 31, 2018 for a decrease of $255,997 and on a constant currency basis an increase of $644,052.

As a percentage of sales,

cost of sales increased from 47.9% for the three months ended December 31, 2018 to 50.3% for the three months ended December 31,

and consultant fees increased by $128,818 from $4,497,054 for the three months ended December 31, 2018 to $4,625,872 for the three

months ended December 31, 2019 and on a constant currency basis increased $635,432.

The increase, based on constant currency,

is due to annual salary increases and the hiring of technical personnel.

for the three months ended March 31, 2020 also decreased to 44.5% from 50.0% for the three months ended March 31, 2019.

of sales was $7,508,599 for the three months ended March 31, 2020 compared to $8,569,735 for the three months ended March 31,

2019 for a decrease of $1,061,136 and on a constant currency basis a decrease of $401,501.

As a percentage of sales, cost of sales

increased from 50.0% for the three months ended March 31, 2019 to 55.5% for the three months ended March 31, 2020.

and consultant fees increased by $16,827 from $4,833,611 for the three months ended March 31, 2019 to $4,850,438 for the three

months ended March 31, 2020 and on a constant currency basis increased $426,558.

The increase, based on constant currency, is

due to annual salary increases and the hiring of technical personnel.

As a percentage of sales, salaries and consultant expense

increased from 26.5% for the three months ended December 31, 2018 to 29.5% for the three months ended December 31, 2019.

and amortization expense decreased to $734,352 compared to $880,048 for the three months ended December 31, 2018 or a decrease

of $145,696 and on a constant currency basis a decrease of $28,912.

increased from 28.2% for the three months ended March 31, 2019 to 35.9% for the three months ended March 31, 2020.

costs decreased by $741,931 from $1,793,964 for the three months ended March 31, 2019 to $1,052,033 for the three months ended

March 31, 2020 and on a constant currency basis decreased by $652,344.

The decrease in travel expense is due to the spread of

As a percentage of sales, travel expense decreased from 10.5% for the three months ended March 31, 2019 to 7.8% for

the three months ended March 31, 2020.

and amortization expense decreased to $737,637 compared to $874,654 for the three months ended March 31, 2019 or a decrease of

$137,017 and on a constant currency basis a decrease of $48,712.

Depreciation and amortization expense decreased as some products

became fully amortized.

expenses were $7,096,970 for the three months ended December 31, 2019 compared to $6,668,793, for the three months ended December

31, 2018 for an increase of 6.4% or $428,177 and on a constant currency basis an increase of 11.3% or $754,692.

As a percentage

of sales, it increased from 39.2% to 45.2%.

expenses were $6,398,300 for the three months ended March 31, 2020 compared to $6,464,411, for the three months ended March 31,

2019 for a decrease of 1.0% or $66,111 and on a constant currency basis an increase of 4.6% or $294,309.

As a percentage of sales,

it increased from 37.7% to 47.3%.

The increase in operating expenses was primarily due to increases in general and administrative

expenses offset by decreases in selling and marketing expenses, salaries and wages, and professional services.

expenses, and salaries and wages offset by decreases in selling and marketing expenses, and professional services.

and marketing expenses decreased $277,169 or 14.9% and on a constant currency basis decreased $191,188 or 10.3%.

The decrease was

primarily due to a decrease in salaries and commissions.

and administrative expenses were $4,568,790 for the three months ended December 31, 2019 compared to $4,002,059 for the three

months ended December 31, 2018 or an increase of $566,731 or 14.2% and on a constant currency basis an increase of $701,103 or

The increase is primarily due to the increase in withholding taxes on dividends received from Pakistan and funds received

from China, travel costs, and rent expense, offset by decreases in salaries, due to less share grants expensed during the current

quarter, and professional services.

from Operations

from operations was $704,990 for the three months ended December 31, 2019 compared to $2,189,778 for the three months ended December

was primarily due to a decrease in salaries and commissions.

and administrative expenses were $4,151,394 for the three months ended March 31, 2020 compared to $3,833,209 for the three months

ended March 31, 2019 or an increase of $318,185 or 5.8% and on a constant currency basis an increase of $528,536 or 13.8%.

increase is primarily due to the increase in withholding taxes on funds received from China, , provision for doubtful debts, salaries,

and rent expense, offset by decreases in professional services.

and development cost were $453,050 for the three months ended March 31, 2020 compared to $513,770 for the three months ended March

31, 2019 or a decrease of $60,720 or 11.8% and on a constant currency basis a decrease of $8,608 or 1.7%.

(loss) from Operations

from operations was $376,062 for the three months ended March 31, 2020 compared to income of $2,092,909 for the three months ended

March 31, 2019.

This represents a decrease of $2,468,971 with a decrease of $2,486,719 on a constant currency basis.

As a percentage

of sales, income from operations was 4.5% for the three months ended December 31, 2019 compared to 12.9% for the three months

ended December 31, 2018.

of sales, loss from operations was 2.8% for the three months ended March 31, 2020 compared to income of 12.2% for the three months

ended March 31, 2019.

Income and Expense

income was $452,456 for the three months ended December 31, 2019 compared with $2,406,078 for the three months ended December

This represents a decrease of $1,953,622 with a decrease of $1,907,977 on a constant currency basis.

The decrease is

primarily due to the foreign currency exchange transactions.

income was $2,063,506 for the three months ended March 31, 2020 compared to other expense of $48,038 for the three months ended

March 31, 2019.

This represents an increase of $2,111,544 with an increase of $2,306,768 on a constant currency basis.

is primarily due to the foreign currency exchange transactions.

The majority of the contracts with NetSol PK are either in U.S.

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of

the PKR compared to the U.S.

dollars or Euros;

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the

value of the PKR compared to the U.S.

dollar and the Euro.

During the three months ended December 31, 2019, we recognized a gain of $61,061

in foreign currency exchange transactions compared to $2,536,755 for the three months ended December 31, 2018.

During the three

months ended December 31, 2019, the value of the U.S.

dollar decreased 1.4% and the value of the Euro increased 1.3%, compared to the PKR.

During the three months ended December 31, 2018, the value of the U.S.

dollar and the Euro increased 12.7%

and 11.2%, respectively, compared to the PKR.

During the three months ended March 31, 2020, we recognized a gain

of $1,770,894 in foreign currency exchange transactions compared to $47,218 for the three months ended March 31, 2019.

the three months ended March 31, 2020, the value of the U.S.

dollar increased 7.4% and the value of the Euro increased 5.4%, respectively,

compared to the PKR.

During the three months ended March 31, 2019, the value of the U.S.

dollar and the Euro increased 0.8% and

1.2%, respectively, compared to the PKR.

Non-controlling

the three months ended December 31, 2019, the net loss attributable to non-controlling interest was $39,039, compared to income

of $1,475,355 for the three months ended December 31, 2018.

The change in non-controlling interest is primarily due to the increase

in net loss of NetSol PK.

the three months ended March 31, 2020, the net income attributable to non-controlling interest was $468,286, compared to $501,835

for the three months ended March 31, 2019.

The change in non-controlling interest is primarily due to the decrease in net income

of NetSol PK.

Income attributable to NetSol

income was $585,975 for the three months ended December 31, 2019 compared to net income of $2,855,629 for the three months ended

December 31, 2018.

This is a decrease of $2,269,654 with a decrease of $2,323,795 on a constant currency basis, compared to the

For the three months ended December 31, 2019, net income per share was $0.05 for basic and diluted shares compared

to $0.25 for basic and diluted shares for the three months ended December 31, 2018.

Months Ended December 31, 2019 Compared to the Six Months Ended December 31, 2018

following table sets forth the items in our unaudited condensed consolidated statement of operations for the six months ended

December 31, 2019 and 2018 as a percentage of revenues.

the Six Months

- related party

and consultants

and amortization

income was $1,000,807 for the three months ended March 31, 2020 compared to $1,267,560 for the three months ended March 31, 2019.

This is a decrease of $266,753 with a decrease of $169,054 on a constant currency basis, compared to the prior year.

For the three

months ended March 31, 2020, net income per share was $0.09 for basic and diluted shares compared to $0.11 for basic and diluted

shares for the three months ended March 31, 2019.

Months Ended March 31, 2020 Compared to the Nine Months Ended March 31, 2019

following table sets forth the items in our unaudited condensed consolidated statement of operations for the nine months ended

March 31, 2020 and 2019 as a percentage of revenues.

For the Nine Months

Ended March 31,

Net Revenues:

Maintenance fees

Services - related party

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

and development cost

Salaries and consultants

Depreciation and amortization

Total cost of revenues

Operating expenses:

from operations

income and (expenses)

(loss) on sale of assets

(loss) on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income (loss) before income taxes

tax provision

income (loss)

Non-controlling

income (loss) attributable to NetSol

$ (1,241,972 )

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

significant portion of our business is conducted in currencies other than the U.S.

17 unchanged sentences

(Unfavorable)

For the Six Months

For the Nine Months

Change due to

(Unfavorable)

Ended December 31,

(loss) from operations

revenues for the six months ended December 31, 2019 and 2018 are broken out among the segments as follows:

fees for the six months ended December 31, 2019 were $3,063,108 compared to $10,773,682 for the six months ended December 31,

Ended March 31,

Net Revenues:

$ (2,887,868 )

$ (4,845,087 )

$ (7,732,955 )

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (5,776,537 )

$ (5,980,594 )

revenues for the nine months ended March 31, 2020 and 2019 are broken out among the segments as follows:

North America

fees for the nine months ended March 31, 2020 were $3,375,241 compared to $13,310,002 for the nine months ended March 31, 2019

reflecting a decrease of $9,934,761 with a change in constant currency of $9,248,402.

The decrease in license revenue for

the fiscal six months ended December 31, 2019 compared to 2018 is primarily due to the license revenue recognized with the five-year

contract that was signed with a tier-one auto captive finance company to implement our NFS Ascent TM platform in China

and the license revenue recognized with the contract signed with a major American multinational automaker to implement our NFS

Ascent TM Retail Platform in China in the six months ended 2018.

fees for the six months ended December 31, 2019 were $9,357,324 compared to $7,401,399 for the six months ended December 31, 2018

The decrease in license revenue for the

nine months ended March 31, 2020 compared to the nine months ended March 31, 2019 is primarily due to the decrease in license

revenue recognized for the DFS and BMW contracts to implement our NFS Ascent ®

Retail Platform.

fees for the nine months ended March 31, 2020 were $14,291,959 compared to $11,106,155 for the nine months ended March 31, 2019

reflecting an increase of $3,185,804 with a change in constant currency of $4,689,011.

Maintenance fees begin once a customer

has “gone live”

The increase is primarily due to the DFS

markets going live with NFS Ascent®.

Maintenance fees begin once a customer has “gone live”

with our product.

We anticipate maintenance fees to gradually increase as we implement both our NFS

legacy product and NFS Ascent™.

income for the six months ended December 31, 2019 was $16,701,646 compared to $14,819,468 for the six months ended December 31,

2018 reflecting an increase of $1,882,178 with an increase in constant currency of $3,815,525.

The services revenue increase was

due to an increase in services revenue associated with new implementations and change requests.

Services revenue is derived from

services provided to both current customers as well as services provided to new customers as part of the implementation process.

We anticipate maintenance fees to gradually increase as we implement both our NFS legacy product and NFS Ascent ®

income for the nine months ended March 31, 2020 was $24,923,873 compared to $25,548,451 for the nine months ended March 31, 2019

reflecting a decrease of $624,578 with an increase in constant currency of $1,934,545.

The services revenue increase in constant

currency was due to an increase in services revenue associated with new implementations and change requests.

Services revenue

is derived from services provided to both current customers as well as services provided to new customers as part of the implementation

related party

income from related party for the six months ended December 31, 2019 was $140,357 compared to $404,623 for the six months ended

December 31, 2018 reflecting a decrease of $264,266 with a change in constant currency of $175,243.

income from related party for the nine months ended March 31, 2020 was $202,199 compared to $561,619 for the nine months ended

March 31, 2019 reflecting a decrease of $359,420 with a decrease in constant currency of $263,022.

The decrease in related party

1 unchanged sentence

$292,134 in service revenue related to services performed for WRLD3D.

gross profit was $13,912,588, for the six months ended December 31, 2019 as compared with $17,096,629 for the six months ended

December 31, 2018.

gross profit was $19,934,826, for the nine months ended March 31, 2020 as compared with $25,653,949 for the nine months ended

March 31, 2019.

This is a decrease of $5,719,123 with a change in constant currency of $3,954,141.

The gross profit percentage

for the six months ended December 31, 2019 decreased to 47.5% from 51.2% for the six months ended December 31, 2018.

of sales was $15,349,847 for the six months ended December 31, 2019 compared to $16,302,543 for the six months ended December

31, 2018 for a decrease of $952,696 and on a constant currency basis an increase of $1,467,774.

As a percentage of sales, cost

of sales increased from 48.8% for the six months ended December 31, 2018 to 52.5% for the six months ended December 31, 2019.

and consultant fees decreased by $436,780 from $9,517,616 for the six months ended December 31, 2018 to $9,080,836 for the six

months ended December 31, 2019 and on a constant currency basis increased $952,456.

The increase is due to annual salary increases

and the hiring of technical personnel.

As a percentage of sales, salaries and consultant expense increased from 28.5% for the

six months ended December 31, 2018 to 31.0% for the six months ended December 31, 2019.

and amortization expense decreased to $1,454,017 compared to $1,817,652 for the six months ended December 31, 2018 or a decrease

of $363,635 and on a constant currency basis a decrease of $48,766.

Depreciation and amortization expense decreased as some products

became fully amortized.

expenses were $13,634,808 for the six months ended December 31, 2019 compared to $13,307,226, for the six months ended December

for the nine months ended March 31, 2020 decreased to 46.6% from 50.8% for the nine months ended March 31, 2019.

The cost of sales

was $22,858,446 for the nine months ended March 31, 2020 compared to $24,872,278 for the nine months ended March 31, 2019 for

a decrease of $2,013,832 and on a constant currency basis an increase of $1,066,273.

As a percentage of sales, cost of sales increased

from 49.2% for the nine months ended March 31, 2019 to 53.4% for the nine months ended March 31, 2020.

and consultant fees decreased by $419,953 from $14,351,227 for the nine months ended March 31, 2019 to $13,931,274 for the nine

months ended March 31, 2020 and on a constant currency basis increased $1,379,014.

The increase on a constant currency basis is

due to annual salary increases and the hiring of technical personnel.

As a percentage of sales, salaries and consultant expense

increased from 28.4% for the nine months ended March 31, 2019 to 32.6% for the nine months ended March 31, 2020.

expenses decreased by $684,552 from $4,652,143 for the nine months ended March 31, 2019 to $3,967,591 for the nine months ended

March 31, 2020 and on a constant currency basis decreased by $155,239.

The decrease in travel expenses is due to the spread of

As a percentage of sales, travel expense increased from 9.2% for the nine months ended March 31, 2019 to 9.3% for the

nine months ended March 31, 2020.

and amortization expense decreased to $2,191,654 for the nine months ended March 31, 2020 compared to $2,692,306 for the nine

months ended March 31, 2019 or a decrease of $500,652 and on a constant currency basis a decrease of $97,478.

Depreciation and

amortization expense decreased as some products became fully amortized.

expenses were $20,033,108 for the nine months ended March 31, 2020 compared to $19,771,637, for the nine months ended March 31,

2019 for an increase of 1.3% or $261,471 and on a constant currency basis an increase of 9.2% or $1,822,396.

As a percentage

of sales, it increased from 39.8% to 46.6%.

The increase in operating expenses was primarily due to increases in general and admin,

professional services and research and development cost.

and marketing expenses decreased by $147,665 or 3.9% and on a constant currency basis an increase of $228,253 or 6.1%.

on a constant currency basis is due to commissions, travel expenses, and business development costs to market and sell NFS Ascent™

and administrative expenses were $8,487,403 for the six months ended December 31, 2019 compared to $8,408,779 at December 31,

As a percentage of

sales, it increased from 39.1% to 46.8%.

The increase in operating expenses was primarily due to increases in general and administrative

expenses, professional services and research and development cost.

and marketing expenses decreased by $424,834 or 7.6% and on a constant currency basis increased $37,065 or 0.7%.

and administrative expenses were $12,638,797 for the nine months ended March 31, 2020 compared to $12,241,988 at March 31, 2019

or an increase of $396,809 or 3.2% and on a constant currency basis an increase of $1,167,758 or 9.5%.

2 unchanged sentences

expense, offset by decreases in salaries due to less share grants expensed during the current quarter.

from Operations

from operations was $277,780 for the six months ended December 31, 2019 compared to $3,789,403 for the six months ended December

and development cost were $1,580,625 for the nine months ended March 31, 2020 compared to $1,256,577 for the nine months ended

March 31, 2019 or an increase of $324,048 or 25.8% and on a constant currency basis an increase of $603,654 or 48.0%.

(loss) from Operations

from operations was $98,282 for the nine months ended March 31, 2020 compared to income of $5,882,312 for the nine months ended

March 31, 2019.

This represents a decrease of $5,980,594 with a decrease of $5,776,537 on a constant currency basis.

As a percentage

of sales, income from operations was 1.0% for the six months ended December 31, 2019 compared to 11.4% for the six months ended

December 31, 2018.

of sales, loss from operations was 0.2% for the nine months ended March 31, 2020 compared to income of 11.6% for the nine months

ended March 31, 2019.

Income and Expense

expense was $1,143,355 for the six months ended December 31, 2019 compared with other income of $2,324,502 for the six months

ended December 31, 2018.

income was $920,151 for the nine months ended March 31, 2020 compared to $2,276,464 for the nine months ended March 31, 2019.

This represents a decrease of $1,356,313 with a decrease of $1,563,686 on a constant currency basis.

The decrease is primarily due to the foreign currency exchange transactions.

The majority of the contracts with NetSol PK are

either in U.S.

dollars or Euros;

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending

on the value of the PKR compared to the U.S.

dollar and the Euro.

During the six months ended December 31, 2019, we recognized

a loss of $1,699,129 in foreign currency exchange transactions compared to a gain of $2,547,667 for the six months ended

December 31, 2018.

During the six months ended December 31, 2019, the value of the U.S.

dollar and the Euro decreased 5.3% and

6.3%, respectively, compared to the PKR.

During the six months ended December 31, 2018, the value of the U.S.

The decrease is primarily

due to the foreign currency exchange transactions.

The majority of the contracts with NetSol PK are either in U.S.

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the

PKR compared to the U.S.

dollar and the Euro.

increased 14.5% and 12.2%, respectively, compared to the PKR.

During the nine months ended March 31, 2020, we recognized gain of $71,765 in foreign

currency exchange transactions compared to $2,594,885 for the nine months ended March 31, 2019.

During the nine months ended March

31, 2020, the value of the U.S.

dollar increased 2.0% and the Euro decreased 1.3% , respectively, compared to the PKR.

the nine months ended March 31, 2019, the value of the U.S.

dollar and the Euro increased 15.4% and 10.8%, respectively, compared

Non-controlling

the six months ended December 31, 2019 and 2018, the net loss attributable to non-controlling interest was $472,351 compared to

net income of $1,793,901, respectively.

The change in non-controlling interest is primarily due to the increase in net loss of

the nine months ended March 31, 2020 and 2019, the net loss attributable to non-controlling interest was $4,065 compared to net

income of $2,295,736, respectively.

The change in non-controlling interest is primarily due to the increase in net loss of NetSol

Income (loss) attributable to NetSol

loss was $1,241,972 for the six months ended December 31, 2019 compared to net income of $3,818,218 for the six months ended December

loss was $241,165 for the nine months ended March 31, 2020 compared to net income of $5,085,778 for the nine months ended March

This is a decrease of $5,326,943 with a decrease of $5,428,055 on a constant currency basis, compared to the prior year.

For the six months ended December 31, 2019, net loss per share was $0.11 for basic and diluted shares compared to net income of

$0.33 for basic and diluted shares for the six months ended December 31, 2018.

For the nine months ended March 31, 2020, net loss per share was $0.02 for basic and diluted shares compared to net income of

$0.44 for basic and diluted shares for the nine months ended March 31, 2019.

Financial Measures

35 unchanged sentences

reconciliation of the non-GAAP financial measures of adjusted EBITDA and non-GAAP earnings per basic and diluted share to the

most comparable GAAP measures for the three and six months ended December 31, 2019 and 2018 are as follows:

December 31, 2019

December 31, 2018

December 31, 2019

December 31, 2018

Income (loss) attributable to NetSol

$ (1,241,972 )

Non-controlling

and amortization

stock-based compensation

EBITDA, gross

non-controlling interest (a)

Average number of shares outstanding

adjusted EBITDA

The reconciliation of adjusted EBITDA of non-controlling interest to net income attributable to non-controlling interest is

Income attributable to non-controlling interest

and amortization

stock-based compensation

EBITDA of non-controlling interest

most comparable GAAP measures for the three and nine months ended March 31, 2020 and 2019 are as follows:

For the Three Months Ended

For the Nine Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

March 31, 2019

Net Income (loss) attributable to NetSol

Non-controlling interest

Depreciation and amortization

Interest expense

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA, gross

Less non-controlling interest (a)

Adjusted EBITDA, net

Weighted Average number of shares outstanding

Basic adjusted EBITDA

Diluted adjusted EBITDA

(a)The reconciliation of adjusted EBITDA of non-controlling interest to net income attributable

to non-controlling interest is as follows

Net Income attributable to non-controlling interest

Depreciation and amortization

Interest expense

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA of non-controlling interest

AND CAPITAL RESOURCES

cash position was $22,083,584 at December 31, 2019, compared to $17,366,364 at June 30, 2019.

cash provided by operating activities was $3,792,927 for the six months ended December 31, 2019 compared to $3,154,647 for the

six months ended December 31, 2018.

At December 31, 2019, we had current assets of $55,245,470 and current liabilities of $21,770,750.

We had accounts receivable of $9,633,016 at December 31, 2019 compared to $15,599,314 at June 30, 2019.

We had revenues in excess

of billings of $17,242,705 at December 31, 2019 compared to $16,111,366 at June 30, 2019 of which $1,291,025 and $1,281,492 is

shown as long term as of December 31, 2019 and June 30, 2019, respectively.

cash position was $15,743,328 at March 31, 2020, compared to $17,366,364 at June 30, 2019.

cash provided by operating activities was $411,119 for the nine months ended March 31, 2020 compared to $255,382 used in operating

activities for the nine months ended March 31, 2019.

At March 31, 2020, we had current assets of $53,129,075 and current liabilities

of $20,578,474.

We had accounts receivable of $14,232,987 at March 31, 2020 compared to $15,599,314 at June 30, 2019.

We had revenues

in excess of billings of $16,592,293 at March 31, 2020 compared to $16,111,366 at June 30, 2019 of which $1,282,898 and $1,281,492

is shown as long term at March 31, 2020 and June 30, 2019, respectively.

The long-term portion was discounted by $54,893 and $99,139

$99,139 at December 31, 2019 and June 30, 2019, respectively, using the discounted cash flow method with an interest rate of 4.35%.

During the six months ended December 31, 2019, our revenues in excess of billings were reclassified to accounts receivable pursuant

to billing requirements detailed in each contract.

at March 31, 2020 and June 30, 2019, respectively, using the discounted cash flow method with an interest rate of 4.35%.

the nine months ended March 31, 2020, our revenues in excess of billings were reclassified to accounts receivable pursuant to

billing requirements detailed in each contract.

The combined totals for accounts receivable and revenues in excess of billings

decreased by $4,834,959 from $31,710,680 at June 30, 2019 to $26,875,721 at December 31, 2019.

decreased by $885,400 from $31,710,680 at June 30, 2019 to $30,825,280 at March 31, 2020.

Accounts payable and accrued expenses,

and current portions of loans and lease obligations amounted to $7,927,523 and $9,436,332, respectively at December 31, 2019.

Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $7,476,560 and $6,905,597,

respectively at June 30, 2019.

average days sales outstanding for the six months ended December 31, 2019 and 2018 were 184 and 155 days, respectively, for each

and current portions of loans and lease obligations amounted to $7,107,933 and $8,794,858, respectively at March 31, 2020.

payable and accrued expenses, and current portions of loans and lease obligations amounted to $7,476,560 and $6,905,597, respectively

at June 30, 2019.

average days sales outstanding for the nine months ended March 31, 2020 and 2019 were 201 and 174 days, respectively, for each

The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts

receivable and revenues in excess of billings.

cash used in investing activities was $1,288,475 for the six months ended December 31, 2019, compared to $1,954,592 for the three

months ended December 31, 2018.

We had purchases of property and equipment of $785,999 compared to $1,441,237 for the six months

ended December 31, 2018.

For the six months ended December 31, 2019 and 2018, we invested $535,000 and $1,033,000, respectively,

in a short-term convertible note receivable from WRLD3D.

cash provided by financing activities was $62,845 for the six months ended December 31, 2019, compared to $405,602 used in financing

activities for the six months ended December 31, 2018.

The six months ended December 31, 2019 included the cash inflow of $2,074,341

cash used in investing activities was $1,577,465 for the nine months ended March 31, 2020, compared to $2,711,588 for the nine

months ended March 31, 2019.

We had purchases of property and equipment of $1,011,285 compared to $2,590,302 for the nine months

ended March 31, 2019.

For the nine months ended March 31, 2020 and 2019, we invested $600,000 and $1,126,500, respectively, in

a short-term convertible notes receivable from WRLD3D.

cash used in financing activities was $18,080 for the nine months ended March 31, 2020, compared to $559,667 provided by financing

activities for the nine months ended March 31, 2019.

The nine months ended March 31, 2020 included the cash inflow of $2,312,968

from bank proceeds compared to $1,337,092 for the same period last year.

During the six months ended December 31, 2019, we had net

payments for bank loans and finance leases of $102,499 compared to $289,027 for the six months ended December 31, 2018.

operating in various geographical regions of the world through our various subsidiaries.

During the nine months ended March 31, 2020, we had net

payments for bank loans and finance leases of $422,051 compared to $298,610 for the nine months ended March 31, 2019.

We are operating

in various geographical regions of the world through our various subsidiaries.

Those subsidiaries have financial arrangements

9 unchanged sentences

intercompany charges for corporate services, and through the exercise of options and warrants.

As of December 31, 2019, we had

approximately $22.0 million of cash, cash equivalents and marketable securities of which approximately $20.3 million is held by

our foreign subsidiaries.

As of June 30, 2019, we had approximately $17.4 million of cash, cash equivalents and marketable securities

of which approximately $16.1 million is held by our foreign subsidiaries.

As of March 31, 2020, we had approximately

$15.7 million of cash, cash equivalents and marketable securities of which approximately $14.7 million is held by our foreign

subsidiaries.

As of June 30, 2019, we had approximately $17.4 million of cash, cash equivalents and marketable securities of which

approximately $16.1 million is held by our foreign subsidiaries.

remain open to strategic relationships that would provide value added benefits.

47 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements