What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2020-09-28 compared with 2019-09-23 · 353 added, 332 removed, 436 unchanged (61% of the section changed)

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for each quarter during the last two fiscal years.

Fiscal Year 2019

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal Year 2018

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

HOLDERS - As of September 18, 2020, the number of holders of record of the Company’s common stock was 149.

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securities to

Weighted-average

exercise price of

options, warrants

Number of securities

of securities

available for

future issuance

Equity Compensation

Plans approved by

Security holders

Equity Compensation

Plans not approved by

Security holders

of 40,386 under the 2005 Incentive and Nonstatutory Stock Option Plan.

weighted average exercise price of the options is $6.50.

(3) Represents

1,000 available for issuance under the 2003 Incentive and Nonstatutory Stock Option Plan,

7,723 under the 2011 Incentive and Nonstatutory Stock Option Plan, 249,746 under the

2013 Incentive and Nonstatutory Stock Option Plan and 296,503 under the 2015 Incentive

and Nonstatutory Stock Option Plan.

20,386 available for issuance under the 2005 Incentive and Nonstatutory Stock Option Plan, 98,196 under the 2013 Incentive

and Nonstatutory Stock Option Plan and 306,422 under the 2015 Incentive and Nonstatutory Stock Option Plan.

of June 30, 2020, 66,421 shares of common stock that have been granted as compensation, but have not yet vested.

RECENT SALES OF UNREGISTERED SECURITIES

ISSUER PURCHASES OF EQUITY SECURITIES

May 29, 2019, the Company’s Board of Directors approved a stock repurchase program permitting the Company

to repurchase up to $2,500,000 in share repurchases during an initial six-month period beginning on May 30, 2019 and expiring

on November 30, 2019.

After the date of the initial expiration, management will have the option to approve a secondary phase,

which will cover up to $2,500,000 in additional share repurchases for another six-month period.

The following table provides the

repurchases made from May 30, 2019 through June 30, 2019.

Issuer Purchases of Equity Securities

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that may be Purchased Under the Plans or Programs (1)

number of shares that may be purchased under the plan have been calculated by dividing

$2,500,000 by the closing stock price at June 28, 2019.

July 30, 2020, the Company’s, Board of Directors authorized the repurchase of up to two million dollars’

of the Company’s issued and outstanding common shares.

The repurchase plan is authorized commencing July 30, 2020,

and ending December 24, 2020, subject to an additional six-month extension at the discretion of management.

shares were repurchased during fiscal year 2020, the Company purchased 147,052 shares at an average price of $3.16 per share subsequent

to the fiscal year ended June 30, 2020.

SELECTED FINANCIAL DATA

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this Annual Report on Form 10-K.

few of our highlights for fiscal year 2018-19 were:

lead in the global asset finance and leasing space continued this fiscal year with several significant successful implementations,

new major multimillion-dollar contract signings and a high number of potential leads.

had multiple successful implementations for our largest customer (Daimler Financial Services) across various markets in the

Asia Pacific region.

secured a multimillion-dollar contract with a leading Asian auto finance company for the implementation of NFS Ascent’s

Retail Platform, which consists of NFS Ascent CAP (Credit Application Processing) and NFS Ascent Contract Management System

The client is an existing customer and an international tier-one finance business with a multibillion-dollar loan portfolio.

major contract for $30 million was signed with another tier-one German auto captive (BMW Financial) to implement Ascent Retail

and Wholesale Platforms in China.

Our premier solution was selected by this client from a list of four potential vendors due

to Ascent’s unmatched reputation, unrivaled capabilities and due to our 100% successful implementation rate.

multimillion-dollar contract was secured with a major American automaker to implement Ascent’s Retail Platform in China.

This customer, another powerhouse in the automotive industry, has also grown into an important tier-one player in China over

the last decade and a half.

entered into a multimillion-dollar contract with a large UK vehicle finance company (BCA) to implement the Ascent Wholesale

signed a multimillion-dollar contract with one of the subsidiaries of a Japanese equipment finance companies in New Zealand

for the implementation of Ascent retail solution.

view of our innovation-focused brand philosophy, we officially launched our rebranded corporate website which offers a simplistic,

intuitive modern interface with smart navigation and a superior overall user experience.

Adaptive, the theme of the new corporate

website, is designed to signify our primary principles alongside the philosophy we hold in maintaining ourselves as a leader

in the asset finance and leasing sector worldwide.

success, in the near term, will depend on the Company’s ability to:

(a) continue to grow revenues and improve profits, (b)

adequately capitalize for growth in various markets and verticals, (c) make progress in the North American and European markets

(d) exploring potential product and service diversity through business combinations and, (d) continue to increase sales and marketing

efforts in every market where we operate.

few of our highlights for the fiscal year ended June 30, 2020 were:

acquired the remaining stake in Virtual Lease Services, a UK-based portfolio and risk management servicing partner for business

and consumer finance providers.

By acquiring the remaining stake, NETSOL became the outright owner of the organization.

to the demand for the Company’s premier solution NFS Ascent’s ®

Wholesale Platform in Europe, NETSOL

appointed Chris Mobley as Head of NFS Ascent ®

Wholesale Operations in Europe.

Mobley brings over two decades

of industry experience to NETSOL with an accomplished background and domain-specific knowledge and expertise within the wholesale

finance space.

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

All global contracts now provide NETSOL customers with the option for subscription-based pricing as an alternative to the

traditional license model.

This Software-as-a-Service (SaaS) pricing option is now available for all cloud-based NETSOL products

and services, including NETSOL’s core, next-gen solution NFS Ascent ®

signed a multi-million-dollar agreement with a large UK vehicle finance company to implement its NFS Ascent ®

Wholesale Platform.

This agreement pertains to accessing NFS Ascent ®

Wholesale Finance System (WFS) via subscription-based

pricing, the dynamic pricing model that NETSOL has introduced in all operating regions in response to growing demand for this

This monumental implementation marked the first roll-out of NFS Ascent ®

in the United Kingdom.

signed an agreement with a bank in the United Kingdom for NFS Ascent ®

on the cloud.

This contract covers the

implementation of NFS Ascent’s ®

Retail platform, including its Omni Point of Sale solution (Omni POS)

and Contract Management System (CMS).

Similar to the previous contract with a large independent used vehicle finance company

in the United Kingdom, implementation is expected in less than six months, enabling the bank to gain value from Ascent’s

technology in the shortest possible timeframe and setting a new standard for time to deployment in the industry.

agreement not only validates increasing traction and demand for NFS Ascent ®

in the United Kingdom, but also

its European market readiness.

announced its first North American customer for NFS Ascent ®

This was done as the company secured a contract

with SCI Lease Corp, a Canadian-based national automotive leasing company, for the deployment of its NFS Ascent ®

Contract Management System (CMS) on the cloud.

This contract represented NETSOL’s first official sale of NFS Ascent ®

in the North American market and also the first Software-as-a-Service (SaaS) based agreement for Ascent in this region.

major American multinational automaker went live in China with NETSOL’s next-gen solution NFS Ascent’s ®

Retail Platform.

This deployment covered the complete Ascent ®

Retail Platform, which includes its Omni-Point

of Sale (Omni-POS) and Contract Management System (CMS).

This multi-million-dollar contract marked the second successful implementation

of NETSOL’s next-gen product NFS Ascent ®

went live with its NFS Ascent ®

Wholesale Platform with BMW Automotive Finance in China.

This second largest

customer has a strong presence in China as well as the rest of the Asia-Pacific region, and this deployment was part of a

previously announced $30 million contract in which NETSOL was selected as the vendor of choice after an extensive evaluation

went live with its NFS Digital Mobile Collector application for a top tier multi-finance company in Indonesia.

This mCollector

go-live, which was part of a larger contract originally signed in 2018, was carried out to improve the client’s existing

business practices through the use of new digital technology.

part of the previously announced $100 million plus contract with Daimler Financial Services, the largest signing in NETSOL’s

history, for implementations in 12 countries, NFS Ascent ®

went live in Hong Kong.

NETSOL implemented its NFS

Retail Platform, consisting of its Omni Point of Sale (Omni POS) and Contract Management System (CMS),

for this existing customer.

part of the DFS contract, the Company’s next-gen solution NFS Ascent ®

also went live in Malaysia.

implementation consisted of the full suite of NFS Ascent ®

, including its Omni Point of Sale (Omni POS) and

Contract Management System (CMS), as well as its Wholesale Finance System (WFS).

Malaysia marked the ninth deployment to go

live following successful implementations in Japan, China, South Africa, Thailand, New Zealand, Australia, South Korea, and

This series of deployments constitutes the largest and most prestigious contract signing in NETSOL’s history.

to NETSOL’s wholly-owned subsidiary Otoz, as the first in a number of planned rollouts, the new mobility technology

startup announced the creation of an Ai-powered chatbot that is intended to cater to renters and car owners, which will be

integrated into the current Drivemate chat application LINE.

Otoz also provided further information regarding its ongoing

strategic partnership with Drivemate, the leading peer-to-peer car-sharing service in Thailand.

also announced a pilot car-sharing program with an existing tier-one European auto captive finance customer in China.

of the program, thousands of the auto captive’s employees will be eligible to use flexible car-sharing products, all

of which will be deployed on the Otoz platform.

Among the many use cases and trials being conducted, Otoz will enable options

for flexible car rentals as well as peer-to-peer car-sharing and other subscription-based programs.

and Business Development Activities

has developed, and the board of directors has ratified, an aggressive growth strategy aimed at increasing competitiveness, enhancing

global delivery capabilities and increasing financial strength to become a leading global IT institution in the leasing and finance

has developed a growth strategy aimed at increasing competitiveness, enhancing global delivery capabilities and increasing financial

strength to become a leading global IT institution in the leasing and finance space.

growth strategy contemplates the following enhanced activities and initiatives to accomplish these goals:

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the quality of our delivery, after delivery support, and client relationships.

penetration of NFS Ascent™

into the leasing and financing sectors in China, APAC, Europe and North America by focusing

on multi-national auto captive Fortune 500 companies.

penetration of NFS Ascent ®

into the leasing and financing sectors in China, APAC, Europe and North America

by focusing on multi-national auto captive Fortune 500 companies.

a well thought out strategy to diversify into complimentary verticals by way of organic expansion, partnerships and synergistic

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and operating margins.

Prospects for NFS Ascent™

prospects for NFS Ascent™

are linked to the maturing of the product portfolio and its growing customer base across different

geographic and product markets.

a cloud enabled NFS Ascent ®

at subscription-based pricing models to generate additional interest from prospects.

investing in Otoz and our innovation lab to generate new verticals for the business.

Prospects for NFS Ascent ®

prospects for NFS Ascent ®

are linked to the maturing of the product portfolio and its growing customer base across

different geographic and product markets.

We are eyeing key international markets for growth in sales.

Our sales strategy now carefully

balances expansion into new geographic markets, including the Americas, Europe, and further penetration of our leading position

in Asia Pacific.

Our sales strategy now

carefully balances expansion into new geographic markets, including the Americas, Europe, and further penetration of our leading

position in Asia Pacific.

in North America is expected to come from the potential market for replacement of legacy systems.

NFS Ascent™

providing a highly flexible and robust solution based on the latest technology and advanced architecture for the North American

customers looking to replace their legacy systems.

We believe that NFS Ascent™

can provide substantial competitive disruption

to the market’s lagging technology provided by incumbent vendors.

The existing customer base may also represent latent demand

for increased service and maintenance revenues by offering business process optimization, customization and upgrade services.

in Europe will come from the introduction of NFS Ascent TM , which will allow NTE to support larger organizations than

those typically selecting the existing LeaseSoft product set, and opens the door for European expansion.

This is designed to attract

larger license and professional services revenues across a wider geography.

In addition, leveraging the core strengths of NFS

Ascent TM will increasingly provide opportunities in the automotive sector where NTE is currently underrepresented.

NFS Ascent ®

aimed at providing a highly flexible and robust solution based on the latest technology and advanced architecture for the North

American customers looking to replace their legacy systems.

We believe that NFS Ascent ®

can provide substantial

competitive disruption to the market’s lagging technology provided by incumbent vendors.

The existing customer base may

also represent latent demand for increased service and maintenance revenues by offering business process optimization, customization

and upgrade services.

in Europe will come from the introduction of NFS Ascent ®

, which will allow NTE to support larger organizations

than those typically selecting the existing LeaseSoft product set, and opens the door for European expansion.

This is designed

to attract larger license and professional services revenues across a wider geography.

In addition, leveraging the core strengths

of NFS Ascent ®

will increasingly provide opportunities in the automotive sector where NTE is currently underrepresented.

in our traditionally strong base in Asia Pacific is expected through diversification across market segments to include new customers

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In addition, there is a potential

for NFS Ascent TM in Asia Pacific in the form of existing customers who are looking for replacement of their current

for NFS Ascent ®

in Asia Pacific in the form of existing customers who are looking for replacement of their current

China, we are a de facto leader in the leasing and finance enterprise solution domain.

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demand for the current NFS™

solution, as well as NFS Ascent™.

We will continue strengthening our position within existing

multinational auto manufacturers, as well as, local Chinese captive finance and leasing companies.

The Chinese auto leasing market

is young and low on consumer penetration in comparison with the giant U.S.

solution, as well as NFS Ascent ®

We will continue strengthening our position

within existing multinational auto manufacturers, as well as, local Chinese captive finance and leasing companies.

auto leasing market is young and low on consumer penetration in comparison with the giant U.S.

Thailand, we established a sales headquarters, client service center, as well as a headquarters for OTOZ.

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has identified the following material trends affecting NetSol.

American markets, primarily in Mexico, remain largely untapped.

GDP of Pakistan is projected to have grown at a rate of 5.79% during the fiscal year 2018-19 according to Trading Economics.

The newly elected Government is focused in “good governance”, infrastructure, education, rid of geo political

issues, law and order, with a progressive mandate to become a leading economy in South East Asia.

and Pakistan relations are more stable as both countries explore trade relations as well as considering Pakistan as a strong

ally to end the US-Afghanistan occupation.

(NPR, July 23, 2019)

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™.

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.

caliber and quality talent joining us, globally.

NetSol’s

ability and vision to have built a new innovation lab to remain competitive and strong in the marketplace.

tensions in Afghanistan and uncertainty caused in neighboring Kashmir and Indian territories.

US Trade war could have negative ancillary effect on automobile lease industry.

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

global market worries of recession and uncertainty due to Brexit in Europe and US China trade war.

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.

growing tensions between Pakistan and India.

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.

COVID-19 has created new dynamics for businesses and corporations with employees and executives working from home.

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

is creating new opportunities for our R&D teams to expand and monetize mobile and digital solutions in our space and complementary

developing markets, new interests are emerging from existing clients for upgrades and mobility platforms.

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

and development tools.

platform is showing positive trajectory of interest from existing and new auto leasing and Tier 1 companies in all of our

markets, including China, the US and Europe.

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.

auto sector remains strong as our customers are constantly demanding ‘Change Requests’

or additional services

and reflects resilience.

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

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.

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

from office poses its own risk of virus spread until it vanishes completely.

outlook for auto sector is uncertain if the recessionary impact worsens.

This might cause delay or procrastination on decision

making by our customers.

activities have been reduced dramatically particularly global and regional industry conferences.

The indications it will be

quite some time before these marketing activities can resume.

ACCOUNTING POLICIES

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Below is a list of practical expedients the Company applied in the adoption and application of Topic 606:

The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less

from the transfer of the promised items to the customer.

The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been

one year or less or the commissions are based on cashed received.

These costs are recorded within sales and marketing expense

in the Consolidated Statement of Operations.

The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes

revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).

Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from

the transfer of the promised items to the customer.

Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one

year or less or the commissions are based on cashed received.

These costs are recorded within sales and marketing expense in the

Consolidated Statement of Operations.

Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue

at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).

Retrospective Transition Adjustments

For contract modifications, the Company reflected the aggregate effect of all modifications that occurred prior to the adoption

date when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating

the transaction price to satisfied and unsatisfied performance obligations for the modified contract at transition.

contract modifications, the Company reflected the aggregate effect of all modifications that occurred prior to the adoption date

when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction

price to satisfied and unsatisfied performance obligations for the modified contract at transition.

to Obtain a Contract

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Our sales personnel are required to perform additional duties beyond

new customer contract inception dates, including fulfilment duties and collections efforts.

new customer contract inception dates, including fulfillment duties and collections efforts.

assets consist of product licenses, renewals, enhancements, copyrights, trademarks, trade names, and customer lists.

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a percentage of revenues.

For the Years

Ended June 30,

Net Revenues:

Maintenance fees

License fees - related party

Maintenance fees - related party

Services - related party

Total net revenues

- related party

and consultants

and amortization

cost of revenues

Salaries and consultants

Depreciation and amortization

Total cost of revenues

and marketing

and amortization

and administrative

and development cost

operating expenses

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 on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income before income taxes

Income tax provision

Non-controlling interest

Net income attributable to NetSol

from operations

income and (expenses)

on sale of assets

on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income before income taxes

tax provision

Non-controlling

income attributable to NetSol

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

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(Unfavorable)

Change due to

(Unfavorable)

Ended June 30,

Net Revenues:

$ (5,684,344 )

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (5,762,520 )

$ (11,446,864 )

(loss) from operations

$ (5,487,220 )

$ (5,757,574 )

revenues for the years ended June 30, 2020 and 2019 by segment are as follows:

North America

fees for the year ended June 30, 2019 were $16,768,749 compared to $6,598,254 for the year ended June 30, 2018 reflecting an increase

fees for the year ended June 30, 2020 were $4,564,560 compared to $16,768,749 for the year ended June 30, 2019 reflecting a decrease

of $12,204,189 with a change in constant currency of $11,493,282.

The increase in license revenue for the fiscal year ended June

30, 2019 compared to 2018 is primarily due to the $6,600,000 of license revenue recognized for the DFS, 12 country NFS Ascent™

contract in financial year 2019, $8,000,000 related to the NFS Ascent™

contracts signed with a tier-one auto captive finance

company and a major American multinational automaker to implement our product in China, and $2,200,000 from license revenues through

sales of our regional offerings in China, Australia, the U.S.

During fiscal year 2018, we had NFS Ascent TM

Digital license revenue of approximately $2,600,000 and NFS Ascent™

CAP and CMS license revenue of approximately $2,600,000.

We also had license revenues through sales of our regional offerings in the U.S.

for approximately $1,300,000.

related party

fees from related party for the year ended June 30, 2019 were $Nil compared to $261,513 for the year ended June 30, 2018 reflecting

a decrease of $261,513 with a change in constant currency of $261,513.

The decrease in license revenue for the fiscal year ended June

30, 2020 compared to 2019 is primarily due to the decrease in license revenue recognized for the DFS and BMW contracts to implement

our NFS Ascent ®

Retail Platform.

In the fiscal year ended June 30, 2020, we recorded $2,500,000 of license revenue

for the DFS, 12 country NFS Ascent ®

contract, $470,000 for an NFS Ascent ®

contract in the U.K.,

and $1,540,000 from license revenues through sales of our regional offerings in China, Australia, the U.S.

year ended June 30, 2019, we recorded $6,600,000 of license revenue recognized for the DFS, 12 country NFS Ascent ®

contract, $8,000,000 related to the NFS Ascent ®

contracts signed with a tier-one auto captive finance company and

a major American multinational automaker to implement our product in China, and $2,200,000 from license revenues through sales

of our regional offerings in China, Australia, the U.S.

fees for the year ended June 30, 2020, were $18,951,248 compared to $15,521,413 for the year ended June 30, 2019 reflecting an

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We anticipate maintenance fees to gradually

increase as we implement both our NFS legacy product and NFS Ascent™.

related party

fees from related party for the year ended June 30, 2019, were $511,242 compared to $418,444 for the year ended June 30, 2018,

reflecting an increase of $92,798 with a change in constant currency of $116,694.

increase as we implement both our NFS legacy product and NFS Ascent ®

income for the year ended June 30, 2020, was $32,555,690 compared to $34,892,290 for the year ended June 30, 2019, reflecting

an increase of $574,010 with a change in constant currency of $6,025,805.

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.

a decrease of $2,336,600 with an increase in constant currency of $751,124.

The services revenue increase based on 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 process.

related party

income from related party for the year ended June 30, 2020 was $300,821 compared to $636,731 for the year ended June 30, 2019

reflecting a decrease of $4,314,727 with a change in constant currency of $4,146,153.

reflecting a decrease of $335,910 with a decrease in constant currency of $228,507.

The decrease in related party service revenue

is due to a decrease in revenue from our joint venture with 1insurer of approximately $3,220,000 or $3,230,000 on a constant currency

basis, a decrease of approximately $303,000 or $180,394 on a constant currency basis due to services performed for WRLD3D, and

a decrease of approximately $792,000 or $758,000 on a constant currency basis related to services performed for Investec.

is due to a decrease in revenue due to less services performed for WRLD3D.

gross profit was $26,963,370, for the year ended June 30, 2020 as compared with $34,886,616 for the year ended June 30, 2019.

This is an increase of $5,238,734 with an increase in constant currency of $9,597,166.

This is a decrease of $7,923,246 with a decrease in constant currency of $5,774,477.

The gross profit percentage for the year

ended June 30, 2019 also increased to 50.8% from 47.9% for the year ended June 30, 2018.

ended June 30, 2020 also decreased to 47.8% from 51.4% for the year ended June 30, 2019.

The cost of sales was $29,408,949 for

the year ended June 30, 2019 compared to $31,723,341 for the year ended June 30, 2018 for an increase of $1,650,191 and on a constant

currency basis an increase of $7,906,912.

As a percentage of sales, cost of sales decreased from 52.1% for the year ended June

the year ended June 30, 2020 compared to $32,932,567 for the year ended June 30, 2019 for a decrease of $3,523,618 and on a constant

currency basis a decrease of $90,133.

As a percentage of sales, cost of sales increased from 48.6% for the year ended June 30,

2019 to 52.2% for the year ended June 30, 2020.

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June 30, 2020 and on a constant currency basis increased by $1,754,053.

The decrease in salaries and consultant fees is due to the

devaluation of the Pakistan Rupee (“PKR”) compared to the U.S.

We had 1,081,976 and 932 technical employees

as of June 30, 2017, 2018 and 2019, respectively.

As a percentage of sales, salaries and consultant expense decreased from 35.9%

for the year ended June 30, 2018 to 28.4% for the year ended June 30, 2019.

increased by $4,752,541 from $1,775,327 for the year ended June 30, 2018 to $6,527,868 for the year ended June 30, 2019 and on

a constant currency basis increased by $6,084,526.

The increase in travel is due to the continuing implementation costs

related to the 12 country contract and the implementation of the five-year contract signed with a tier-one auto captive finance

company to implement NFS Ascent TM in China.

As a percentage of sales, travel expense increased from 2.9% for year ended

June 30, 2018 to 9.6% for the year ended June 30, 2019.

The decrease in salaries and consultant fees is due to

the devaluation of the Pakistan Rupee (“PKR”) compared to the U.S.

The increase in salaries on a constant

currency basis is due to the increase in the number of technical employees and the annual increase in salaries and wages.

976, 932, and 1,009 technical employees as of June 30, 2018, 2019 and 2020, respectively.

As a percentage of sales, salaries and

consultant expense increased from 28.4% for the year ended June 30, 2019 to 33.4% for the year ended June 30, 2020.

decreased by $2,346,126 from $6,527,868 for the year ended June 30, 2019 to $4,181,742 for the year ended June 30, 2020 and on

a constant currency basis decreased by $1,799,905.

The decrease in travel is due to the COVID-19 Pandemic.

As a percentage of

sales, travel expense decreased from 9.6% for year ended June 30, 2019 to 7.4% for the year ended June 30, 2020.

and amortization expense decreased to $2,897,371 compared to $3,525,857 for the year ended June 30, 2019 or a decrease of $628,486

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fully amortized.

expenses were $27,617,739 for the year ended June 30, 2019 compared to $26,152,006, for the year ended June 30, 2018 for an increase

of 5.6% or $1,465,733 and on a constant currency basis an increase of 19.1% or $4,995,343.

As a percentage of sales, it decreased

from 42.9% to 40.7%.

The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries

and wages and research and development cost.

and marketing expenses increased $211,282 or 2.8% and on a constant currency basis an increase of $1,377,067 or 18.1%.

in selling and marketing expenses is due to increase in our salaries and commissions, travel expenses, and business development

costs to market and sell NFS Ascent™

and administrative expenses were $16,916,953 for the year ended June 30, 2019 compared to $16,714,797 at June 30, 2018 or an increase

expenses were $25,893,032 for the year ended June 30, 2020 compared to $28,058,704, for the year ended June 30, 2019 for a decrease

of 7.7% or $2,165,672 and on a constant currency basis a decrease of 1.0% or $287,257.

As a percentage of sales,

it increased from 41.4% to 45.9%.

The decrease in operating expenses was primarily due to decreases in selling and marketing expenses,

salaries and wages and research and development cost offset by an increase in general and administrative expenses.

and marketing expenses decreased $1,381,095 or 17.6% and on a constant currency basis a decrease of $844,758 or 10.8%.

in selling and marketing expenses is due to decrease in our salaries and commissions, travel expenses, and business development

costs to market and sell NFS Ascent ®

and administrative expenses were $17,138,832 for the year ended June 30, 2020 compared to $17,357,918 at June 30, 2019 or a decrease

of $219,086 or 1.3% and on a constant currency basis an increase of $797,684 or 4.6%.

During the year ended June 30, 2019,

salaries increased by approximately $936,624 or $1,851,230 on a constant currency basis due to bonuses, annual raises, and grants

Professional services decreased by approximately $80,167 or $49,453 on a constant currency basis and other

general and administrative expenses decreased by approximately $668,087 or increased approximately $157,690 on a constant currency

and development costs were $1,971,228 for the year ended June 30, 2019 compared to $853,996 at June 30, 2018 or an increase of

$1,117,232 or 130.8% and on constant currency basis an increase of $1,523,863 or 178.4%.

The increase in research and development

costs is due to our innovation initiatives with Blockchain, AI, and IoT.

During the year ended June 30, 2020, salaries

decreased by $1,112,184 or $512,629 on a constant currency basis due to reduction in salaries, and less share grants.

services increased by $104,726 or $130,533 on a constant currency basis and other general and administrative expenses increased

by $1,077,944 or increased $1,466,481 on a constant currency basis.

The increase on a constant currency basis is primarily due

to the increase in withholding taxes on payments from customers and funds transferred from China of approximately $850,000, a

new office lease in London of approximately $150,000, and software license and subscription fees of approximately $140,000.

and development costs were $1,468,954 for the year ended June 30, 2020 compared to $1,971,228 at June 30, 2019 or a decrease of

$502,274 or 25.5% and on constant currency basis a decrease of $239,075 or 12.1%.

The decrease in research and development costs

is due to less spending on our innovation initiatives with Blockchain, AI, and IoT.

from Operations

from operations was $1,070,338 for the year ended June 30, 2020 compared to $6,827,912 for the year ended June 30, 2019.

represents an increase of $3,773,001 with an increase of 4,601,823 on a constant currency basis for the year ended June 30, 2019

represents a decrease of $5,757,574 with a decrease of $5,487,220 on a constant currency basis for the year ended June 30, 2020

compared with the year ended June 30, 2019.

4 unchanged sentences

This represents

an increase of $1,279,318 with an increase of $3,119,892 on a constant currency basis.

The increase is primarily due to the foreign

a decrease of $4,984,659 with a decrease of $5,137,165 on a constant currency basis.

The decrease is primarily due to the foreign

currency exchange transactions.

4 unchanged sentences

Dollar and the Euro.

During the year ended June 30, 2019, we recognized a gain of $6,345,859 in foreign currency exchange

transactions compared to a $5,010,383 for the year ended June 30, 2018.

During the year ended June 30, 2019, the value of the

During the year ended June 30, 2020, we recognized a gain of $398,610 in foreign currency exchange transactions

compared to a gain of $6,345,859 for the year ended June 30, 2019.

During the year ended June 30, 2020, the value of the U.S.

dollar and the Euro increased 3.1% and 1.8%, respectively, compared to the PKR.

During year ended June 30, 2018, the value

During year ended June 30, 2019, the value of

dollar and the Euro increased 33.9% and 30.8%, respectively, compared to the PKR.

Interest income was $1,569,536 for

the year ended June 30, 2020 compared to $955,061 for the period ended June 30, 2019.

This represent an increase of $614,475 or

a change of $800,815 on constant currency basis.

The increase is due to the increase in cash which is invested into short term

deposits and interest accrued on convertible note receivables.

Non-controlling

the year ended June 30, 2019 and 2018, the net income attributable to non-controlling interest was $3,434,141 and $2,843,090,

respectively.

The increase in non-controlling interest is primarily due to the increase in net income of NetSol PK offset by a

decrease in net income of NetSol Innovation.

the year ended June 30, 2020 and 2019, the net income attributable to non-controlling interest was $254,942 and $3,434,141, respectively.

The decrease in non-controlling interest is primarily due to the decrease in net income of NetSol PK.

Income/Loss attributable to NetSol

income was $937,081 for the year ended June 30, 2020 compared to $8,583,399 for the year ended June 30, 2019.

This is an increase

of $4,276,511 with an increase of $5,934,990 on a constant currency basis, compared to the prior year.

This is a decrease

of $7,646,318 with a decrease of $7,622,678 on a constant currency basis, compared to the prior year.

For the year ended June

9 unchanged sentences

define the non-GAAP measures as follows:

is GAAP net income before net interest expense, income tax expense, depreciation and

amortization.

is GAAP net income before net interest expense, income tax expense, depreciation and amortization.

adjusted EBITDA is EBITDA plus stock-based compensation expense.

EBITDA per basic and diluted share – Adjusted EBITDA allocated to common stock

divided by the weighted average shares outstanding and diluted shares outstanding.

EBITDA per basic and diluted share –

Adjusted EBITDA allocated to common stock divided by the weighted average shares

outstanding and diluted shares outstanding.

use non-GAAP measures internally to evaluate the business and believe that presenting non-GAAP measures provides useful information

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most comparable GAAP measures for the years ended June 30, 2020 and 2019 are as follows:

June 30, 2019

June 30, 2018

Net Income (loss) before preferred dividend, per GAAP

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

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

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

the Year Ended

Income (loss) attributable to NetSol

Non-controlling

and amortization

stock-based compensation

EBITDA, gross

non-controlling interest (a)

Weighted Average

number of shares outstanding

adjusted EBITDA

The reconciliation of adjusted EBITDA of non-controlling interest

net income attributable to non-controlling interest is as follows

Income attributable to non-controlling interest

and amortization

stock-based compensation

EBITDA of non-controlling interest

AND CAPITAL RESOURCES

cash position was $20,166,830 at June 30, 2020, compared to $17,366,364 at June 30, 2019.

cash provided by operating activities was $4,933,210 for the year ended June 30, 2019 compared to $15,714,322 for the year

ended June 30, 2018.

cash provided by operating activities was $3,972,426 for the year ended June 30, 2020 compared to $4,933,210 for the year ended

June 30, 2019.

At June 30, 2020, we had current assets of $51,895,711 and current liabilities of $20,116,106.

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The long-term portion was discounted by $41,286 and $99,139 at June 30, 2020 and 2019,

2018, respectively, using the discounted cash flow method with interest rates ranging from 3.87% to 4.43%, during years ended

June 30, 2019 and 2018.

During the year ended June 30, 2019, 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 increased by $68,500 from $31,642,180 at June 30, 2018 to $31,710,680 at June 30, 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.

The average days sales outstanding for the years ended June 30, 2019 and 2018 were 171 and 192 days respectively.

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

and revenue in excess of billings.

cash used by investing activities amounted to $3,649,680 for the year ended June 30, 2019, compared to $3,693,684 for the

year ended June 30, 2018.

We had net purchases of property and equipment of $1,555,680 compared to $1,506,197 for the comparable

period last fiscal year.

respectively, using the discounted cash flow method with an interest rate of 4.35%, during years ended June 30, 2020 and 2019.

During the year ended June 30, 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 $1,789,690 from $31,710,680 at June 30, 2019 to $29,920,990 at June 30, 2020.

Accounts payable and accrued expenses, and current

portions of loans and lease obligations amounted to $5,680,837 and $9,139,561, respectively at June 30, 2020.

The average days

sales outstanding for the years ended June 30, 2020 and 2019 were 200 and 171 days respectively.

The days sales outstanding have

been calculated by taking into consideration the average combined balances of accounts receivable and revenue in excess of billings.

cash used by investing activities amounted to $2,054,890 for the year ended June 30, 2020, compared to $3,649,680 for the year

ended June 30, 2019.

We had net purchases of property and equipment of $1,270,965 compared to $1,555,680 for the comparable period

last fiscal year.

For the year ended June 30, 2020 and 2019, we invested $600,000 and $1,526,500, respectively, in short-term

1 unchanged sentence

For the year ended June 30, 2019, we purchased the remaining 49% share of VLS for $927,100.

of $317,500 at the closing date with $317,500 due on December 31, 2019 and $292,100 due June 30, 2020.

cash provided by financing activities was $17,167 compared to $1,016,766 used in financing activities, for the years ended June

30, 2019, and 2018, respectively.

The year ended June 30, 2019 included the cash inflow of $85,000 from the exercising of stock

options compared to $312,311 for the year ended June 30, 2018.

During the year ended June 30, 2019, we purchased

41,650 shares of our common stock from the open market for $250,945 compared to 171,074 shares of common stock for $750,714 for

the same period last year.

We paid cash of

$317,500 at the closing date and accrued the remaining $609,600, which was subsequently paid during the fiscal year ended June

Net cash provided by financing activities was $1,700,293 compared

to $17,167, for the years ended June 30, 2020, and 2019, respectively.

The year ended June 30, 2020 included the cash inflow of

$Nil from the exercising of stock options compared to $85,000 for the year ended June 30, 2019.

During the year ended June 30,

2020, we purchased zero shares of our common stock from the open market compared to 41,650 shares of common stock for $250,945

for the same period last year.

The year ended June 30, 2020, included cash inflow of $4,221,203 from bank proceeds compared to

$1,227,158 for the same period last year.

During the year ended June 30, 2019, we had net payments for bank loans and capital leases of $480,231

compared to $1,626,109 for the year ended June 30, 2018.

We are operating in various geographical regions of the world through

our various subsidiaries.

Those subsidiaries have financial arrangements from various financial institutions to meet both their

short and long-term funding requirements.

These loans will become due at different maturity dates as described in Note 15 of the

financial statements.

We are in compliance with the covenants of the financial arrangements and there is no default which may

lead to early payment of these obligations.

During the year ended June 30, 2020, we had net payments for bank loans and capital leases

of $611,913 compared to $480,231 for the year ended June 30, 2019.

We are operating in various geographical regions of the world

through our various subsidiaries.

Those subsidiaries have financial arrangements from various financial institutions to meet both

their short and long-term funding requirements.

These loans will become due at different maturity dates as described in Note 15

of the financial statements.

We are in compliance with the covenants of the financial arrangements and there is no default which

may lead to early payment of these obligations.

We anticipate paying back all these obligations on their respective due dates.

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As of June 30, 2020, we had approximately $20.2

$17.4 million of cash, cash equivalents and marketable securities of which approximately $16.1 million is held by our foreign

subsidiaries.

As of June 30, 2018, we have approximately $22.1 million of cash, cash equivalents and marketable securities of

which approximately $20.9 million is held by our foreign subsidiaries.

The Tax Act, which was passed on December 22, 2017, imposed

a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries.

At June 30, 2018, we calculated

the deemed repatriation earnings to be $14,130,337 which was fully offset with our net operating loss carry forwards.

million of cash, cash equivalents and marketable securities of which approximately $18.2 million is held by our foreign subsidiaries.

As of June 30, 2019, we have 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.

14 unchanged sentences

facility for export refinance from Askari Bank Limited amounting to Rupees 500 million ($2,975,482) and a running finance facility

of Rupees 75 million ($459,953) which requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio

of Rupees 75 million ($446,322).

NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited

amounting to Rupees 900 million ($5,355,868).

These facilities require NetSol PK to maintain a long-term debt equity ratio of

60:40 and the current ratio of 1:1.

NetSol PK also has an approved export refinance facility of Rs.

380 million ($2,330,431) and a running finance facility

380 million ($2,261,366) and

a running finance facility of Rs.

120 million ($714,116) from Samba Bank Limited.

During the tenure of loan, these two facilities 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.

During the tenure of loan, these two facilities

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.

of the date of this report, we are in compliance with the financial covenants associated with our borrowings.

9 unchanged sentences

contractual obligations are as follows:

Payment due by period

Contractual Obligation

Less than 1 year

More than 5 years

Debt Obligations

D&O Insurance

Bank Overdraft Facility

Loan Payable Bank - Export Refinance

Loan Payable Bank - Export Refinance II

Loan Payable Bank - Running Finance

Related party note payable

Subsidiary Capital Leases

Operating Lease Obligations

Non-cancellable operating lease

due by period

Protection Program Loans

Finance Facility

Payable Bank - Export Refinance

Payable Bank - Export Refinance II

Payable Bank - Export Refinance III

Finance Facility

Finance Leases

Lease Obligations

Sheet Arrangements

2 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-K

Item 5. Market for Registrant’s Common Equity