What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-16 compared with 2020-11-16 · 795 added, 455 removed, 1066 unchanged (54% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

Consolidated Balance Sheets

Current assets:

and cash equivalents

receivable, net of allowance of $279,903 and $435,611

receivable - related party, net of allowance of $1,373,099 and $90,594

in excess of billings, net of allowance of $91,250 and $188,914

in excess of billings - related party, net of allowance of $8,163 and $0

Accounts receivable,

net of allowance of $308,236 and $435,611

Accounts receivable

- related party, net of allowance of $1,373,099 and $90,594

Revenues in excess

of billings, net of allowance of $153,650 and $188,914

Revenues in excess

of billings - related party, net of allowance of $8,163 and $0

current assets, net of allowance of $1,243,633 and $0

current assets

in excess of billings, net - long term

note receivable - related party, net of allowance of $4,250,000 and $0

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

Total current assets

Revenues in excess of billings, net

Convertible note receivable - related

party, net of allowance of $4,250,000 and $0

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

stock to be issued

Total current liabilities

Loans and obligations under finance

less current maturities

lease obligations;

Operating lease

less current maturities

and contingencies

Commitments and contingencies

Stockholders’

stock, $.01 par value;

Preferred stock, $.01 par value;

shares authorized;

stock, $.01 par value;

Common stock, $.01 par value;

shares authorized;

12,137,045 shares issued and 11,742,490 outstanding as of September 30,

2020 and 12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020

paid-in-capital

stock (at cost, 394,555 shares and 247,503 shares as of September 30, 2020 and June 30, 2020, respectively)

12,147,458 shares issued and 11,452,959

outstanding as of December 31, 2020 and 12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020

Additional paid-in-capital

Treasury stock (at cost, 694,499 shares

and 247,503 shares as of December 31, 2020 and June 30, 2020, respectively)

Accumulated deficit

(40,104,089 )

3 unchanged sentences

(34,085,047 )

NetSol stockholders’

Total NetSol stockholders’

Non-controlling

5 unchanged sentences

Condensed Consolidated Statements of Operations

the Three Months

September 30,

For the Three Months

For the Six Months

Net Revenues:

Subscription and

- related party

and consultants

and amortization

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

Salaries and consultants

Depreciation and

Total cost of revenues

Operating expenses:

Selling and marketing

Depreciation and

General and administrative

and development cost

operating expenses

(loss) from operations

income and (expenses)

on sale of assets

(loss) on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income (loss) before income taxes

Income from operations

Other income and

Gain (loss) on sale

Interest expense

Interest income

Gain (loss) on foreign

currency exchange transactions

Share of net loss

from equity investment

Total other income

Net income (loss)

before income taxes

tax provision

income (loss)

Net income (loss)

Non-controlling

1 unchanged sentence

$ (1,241,972 )

income per share:

income per common share

average number of shares outstanding

Net income (loss) per share:

Net income (loss) per common

Weighted average number of shares outstanding

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

2 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Loss)

the Three Months

September 30,

income (loss)

For the Three Months

For the Six Months

$ (1,241,972 )

comprehensive income (loss):

Other comprehensive

income (loss):

Translation adjustment

adjustment attributable to non-controlling interest

5 unchanged sentences

AND SUBSIDIARIES

Consolidated Statement of Stockholders’

Condensed Consolidated Statement of Stockholders’

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

Comprehensive

Stockholders’

Balance at September 30, 2020

$ 128,764,618

$ (1,920,645 )

$ (39,861,985 )

$ (33,210,231 )

Common stock issued for:

Purchase of treasury shares

Foreign currency translation adjustment

Net income (loss)

for the period

Balance at December

$ 128,823,181

$ (2,848,640 )

$ (40,104,089 )

$ (32,060,151 )

statement of the changes in equity for the three months ended September 30, 2020 is provided below:

Comprehensive

Stockholders’

at June 30, 2020

Balance at June 30, 2020

$ 128,677,754

2 unchanged sentences

$ (34,085,047 )

effect adjustment (1)

Cumulative effect adjustment (1)

Subsidiary common stock issued for:

Common stock issued for:

stock issued for:

of treasury shares

currency translation adjustment

income for the period

at September 30, 2020

Purchase of treasury shares

Foreign currency translation adjustment

Net income for

Balance at September 30, 2020

$ 128,764,618

9 unchanged sentences

more information.

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

TECHNOLOGIES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’

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

Comprehensive

Stockholders’

Balance at September 30, 2019

$ 128,052,079

$ (1,455,969 )

$ (37,034,845 )

$ (32,221,661 )

Common stock issued for:

Dividend to non-controlling interest

Foreign currency translation adjustment

Balance at December

$ 128,197,589

$ (1,455,969 )

$ (36,448,870 )

$ (30,456,632 )

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

loss for the period

at September 30, 2019

Exercise of subsidiary common stock

Common stock issued

Foreign currency translation adjustment

Balance at September 30, 2019

$ 128,052,079

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows

the Three Months

September 30,

flows from operating activities:

For the Six Months

Cash flows from operating

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

Adjustments to reconcile

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

Depreciation and

Provision for bad

Share of net loss

from investment under equity method

Loss on sale of

Stock 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

Accounts receivable

- related party

Revenues in excess

of billing - related party

Other current assets

Accounts payable

and accrued expenses

cash provided by operating activities

flows from investing activities:

of property and equipment

note receivable - related party

Cash flows from investing

Purchases of property

and equipment

Sales of property

and equipment

Convertible note

receivable - related party

in associates

cash used in investing activities

flows from financing activities:

from exercise of subsidiary options

of treasury stock

from bank loans

Cash flows from financing

Proceeds from exercise

of subsidiary options

Purchase of treasury

Dividend paid by

subsidiary to non-controlling interest

Proceeds from bank

on finance lease obligations and loans - net

1 unchanged sentence

of exchange rate changes

increase in cash and cash equivalents

and cash equivalents at beginning of the period

Net increase in cash

and cash equivalents

Cash and cash

equivalents at beginning of the period

and cash equivalents at end of period

2 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Three Months

September 30,

paid during the period for:

INVESTING AND FINANCING ACTIVITIES:

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Six Months

SUPPLEMENTAL DISCLOSURES:

Cash paid during

the period for:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

acquired under finance lease

services for investment in Drivemate

recognized under operating lease

51 unchanged sentences

Below is the table of reclassified amounts:

the Three Months Ended

Three Months Ended

Six Months ended

Subscription and

- related party

Total net revenues

ACCOUNTING POLICIES

19 unchanged sentences

The Company maintains two bank accounts in China and six bank accounts in the UK.

As of September

As of December

31, 2020, and June 30, 2020, the Company had uninsured deposits related to cash deposits in accounts maintained within foreign

29 unchanged sentences

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

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

in excess of billings - long term

Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2020, were as follows:

in excess of billing - long term

reconciliation from June 30, 2020 to September 30, 2020 is as follows:

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

in excess of billings - long term

value discount

at June 30, 2019

during the period

of Translation Adjustment

at June 30, 2020

to short term

at September 30, 2020

Balance at June 30, 2020

Amortization during the period

Balance at December 31, 2020

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities

8 unchanged sentences

as warrants and option derivatives are valued using the Black-Scholes model.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

Accounting Standards Adopted by the Company:

24 unchanged sentences

Classification

for credit losses - accounts receivable

for credit losses - accounts receivable - related party

for credit losses - revenue in excess of billings - related party

for credit losses - convertible notes receivable - related party

for credit losses - other current assets

Allowance for credit losses

- accounts receivable

Allowance for credit losses - accounts

receivable - related party

Allowance for credit losses - revenue

in excess of billings - related party

Allowance for credit losses - convertible

notes receivable - related party

Allowance for

credit losses - other current assets

receivable includes trade accounts receivables from the Company’s customers, net of an allowance for credit risk.

5 unchanged sentences

have been exhausted and the potential for recovery is considered remote.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

in excess of billings, relates to services performed which were not billed, net of an allowance for credit risk.

12 unchanged sentences

and the potential for recovery is considered remote.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

REVENUE RECOGNITION

34 unchanged sentences

over the life of the contract.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription

7 unchanged sentences

obligation using its best estimate for the SSP.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

of control for software is considered to have occurred upon delivery of the product to the customer.

39 unchanged sentences

Company’s disaggregated revenue by category is as follows:

the Three Months

September 30,

Subscription and

- related party

core revenue, net

non-core revenue, net

Total core revenue, net

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

64 unchanged sentences

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

December 31, 2020

June 30, 2020

in excess of billings

the three months ended September 30, 2020, the Company recognized revenue of $3,027,636 that was included in the deferred revenue

balance at the beginning of the period.

All other activity in deferred revenue is due to the timing of invoicing in relation to

the timing of revenue recognition.

Deferred Revenue

the three and six months ended December 31, 2020, the Company recognized revenue of $762,484 and $3,790,120, respectively, that

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

All other activity in deferred revenue is due to

the timing of invoicing in relation to the timing of revenue recognition.

TECHNOLOGIES, INC.

3 unchanged sentences

revenue in future periods.

Contracted but unsatisfied performance obligations were approximately $55,260,261 as of September 30,

Contracted but unsatisfied performance obligations were approximately $48,262,490 as of December 31,

2020, of which the Company estimates to recognize approximately $12,922,159 in revenue over the next 12 months and the remainder

44 unchanged sentences

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

the three months ended September 30, 2020

income per share:

income available to common shareholders

of dilutive securities

income per share

the three months ended September 30, 2019

loss per share:

loss available to common shareholders

the three months ended December 31, 2020

the six months ended December 31, 2020

Basic income (loss) per share:

income (loss) available to common shareholders

Effect of dilutive securities

Diluted income (loss) per share

the three months ended December 31, 2019

the six months ended December 31, 2019

Basic income (loss) per share:

income (loss) available to common shareholders

$ (1,241,972 )

of dilutive securities

loss per share

Effect of dilutive

Diluted income (loss) per share

$ (1,241,972 )

1 unchanged sentence

would be anti-dilutive.

the Three Months

September 30,

Stock Options

OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY

15 unchanged sentences

equity section of the consolidated balance sheet were $32,060,151 and $34,085,047

as of September 30, 2020 and June 30, 2020, respectively.

During the three months ended September 30, 2020 and 2019, comprehensive

as of December 31, 2020 and June 30, 2020, respectively.

During the three and six months ended December 31, 2020, comprehensive

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

of $1,150,080 and $2,024,896, 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.

TECHNOLOGIES, INC.

1 unchanged sentence

MAJOR CUSTOMERS

the three months ended September 30, 2020, revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”)

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

were $5,402,152 and $3,051,244, respectively representing 21.0% and 11.8%, respectively of revenues.

During the three months ended

September 30, 2019 revenues from these two customers were $5,041,367 and $951,369 representing 37.1% and 7.0% of revenues.

During the six months ended

December 31, 2019 revenues from these two customers were $8,691,233 and $4,793,304 representing 29.7% and 16.4% of revenues.

revenue from these customers are shown in the Asia –

Pacific segment.

receivable from DFS and BMW at September 30, 2020, were $1,994,215 and $190,217, respectively.

receivable from DFS and BMW at December 31, 2020, were $1,263,670 and $22,697, respectively.

Accounts receivable at June 30, 2020,

were $4,821,468 and $474,271, respectively.

Revenues in excess of billings at September 30, 2020 were $5,287,222 and $6,873,337

Revenues in excess of billings at December 31, 2020 were $6,800,273 and $1,084,396

for DFS and BMW, respectively.

1 unchanged sentence

respectively.

Included in this amount was $Nil and $1,300,289 shown as long term at September 30, 2020 and June 30, 2020, respectively.

Included in this amount was $Nil and $1,300,289 shown as long term at December 31, 2020 and June 30, 2020, respectively.

CONVERTIBLE NOTES RECEIVABLE –

9 unchanged sentences

following table summarizes the convertible notes receivable from WRLD3D.

February 9, 2018

April 1, 2019

August 19, 2019

allowance for doubtful account

Company has accrued interest of $701,062 at September 30, 2020 and June 30, 2020, respectively, which is included in “Other

current assets”.

As of July 1, 2020, the Company is not accruing interest.

Company has an accrued interest balance of $701,062 at December 31, 2020 and June 30, 2020, respectively, which is included in

“Other current assets”.

Starting July 1, 2020, the Company is not accruing interest.

TECHNOLOGIES, INC.

2 unchanged sentences

current assets consisted of the following:

Prepaid Expenses

Advance Income Tax

Employee Advances

Security Deposits

Other Receivables

REVENUES IN EXCESS OF BILLINGS –

in excess of billings, net consisted of the following:

in excess of billings - long term

value discount

Revenues in excess of billings

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 months ended September 30, 2020 and 2019, the Company accreted $14,060 and $13,860,

respectively, which was recorded in interest income for that period.

The Company used the discounted cash flow method with an

interest rate of 4.35%.

During the quarter, the long-term amount was reclassified as short term upon meeting the billing criteria.

During the three and six months ended December 31, 2020, the Company accreted $27,766 and $41,826, respectively.

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

in interest income for those periods.

The Company used the discounted cash flow method with an interest rate of 4.65% and 4.35%

for the period ended December 31, 2020 and June 30, 2020, respectively.

TECHNOLOGIES, INC.

2 unchanged sentences

and equipment consisted of the following:

Furniture and Equipment

Under Capital Leases

Work In Progress

Office Furniture and Equipment

Computer Equipment

Assets Under Capital Leases

Capital Work In Progress

Accumulated Depreciation

(23,099,590 )

(21,288,868 )

and Equipment, Net

the three months ended September 30, 2020 and 2019, depreciation expense totaled $496,267 and $465,451, respectively.

amounts, $274,477 and $263,064, respectively, are reflected in cost of revenues.

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

and Other Equipment

Less:Accumulated

Equipment, Net

the three and six months ended December 31, 2020, depreciation expense totaled $485,456 and $981,723, respectively.

Of these amounts,

$263,884 and $538,361, respectively, are reflected in cost of revenues.

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

depreciation expense totaled $484,662 and $950,113, respectively.

Of these amounts, $269,183 and $532,247, respectively, are reflected

in cost of revenues.

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

Computers and Other Equipment

Furniture and Fixtures

Depreciation - Net

1 unchanged sentence

average remaining lease term - Finance leases

average discount rate - Finance leases

Weighted average

discount rate - Finance leases

TECHNOLOGIES, INC.

39 unchanged sentences

lease assets, net

Lease Liabilities

Total Lease Liabilities

TECHNOLOGIES, INC.

1 unchanged sentence

components of lease cost were as follows:

the Three Months

September 30,

of finance lease assets

on finance lease obligation

term lease cost

For the Three Months

For the Six Months

Amortization of finance

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

Weighted average

discount rate - Operating leases

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

the Three Months Ended

flows related to lease liabilities

the Six Months Ended

Cash flows related to lease

cash flows related to operating leases

of operating lease liabilities were as follows as of September 30, 2020:

Lease Payments

Imputed interest

Value of lease liabilities

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

Within year 2

Within year 3

Within year 4

Within year 5

Total Lease Payments

Present Value of lease liabilities

Non-Current portion

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

2 unchanged sentences

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

For the three months ended September 30, 2020 and 2019, the

For the three and six months ended December 31, 2020, the

Company received lease income of $8,738 and $17,362, respectively.

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

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

LONG TERM INVESTMENT

5 unchanged sentences

The Company has paid

$405,000 and has received 1,267 shares.

The remaining $95,000 will be paid in increments based on the contract with the final

payment due 24 months from the date of the Drivemate Agreement signing.

As of September 30, 2020, the Company owns 6.23% of Drivemate.

Per the Drivemate Agreement, the Company appointed two directors to the Drivemate board.

The Company determined that it met the

significant influence criteria since two of the four directors are appointed by the Company and the Company is to own 30% of Drivemate

at the final payment date;

therefore, the Company accounts for the investment using the equity method of accounting.

the three months ended September 30, 2020 and 2019, the Company performed $Nil and $204,615 of services, respectively.

the equity method of accounting, the Company recorded its share of net income of $595 and share of net loss of $5,392 for the

three months ended September 30, 2020 and 2019, respectively.

$437,500 in cash, provided services of $1,300,000 and has received 5,217 shares.

The remaining $62,500 will be paid in increments

based on the contract with the final payment due 24 months from the date of the Drivemate Agreement signing.

As of December 31,

2020, the Company owns 21.47% of Drivemate.

Per the Drivemate Agreement, the Company appointed two directors to the Drivemate

The Company determined that it met the significant influence criteria since two of the four directors are appointed by

the Company and the Company is to own 30% of Drivemate at the final payment date;

therefore, the Company accounts for the investment

using the equity method of accounting.

Company did not perform any services during the three and six months ended December 31, 2020.

During 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 income of $3,324 and $3,919 for the three and six months

ended December 31, 2020, 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.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

WRLD3D-Related

4 unchanged sentences

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

NetSol PK has not provided services

to WRLD3D for the three months ended September 30, 2020, and has provided services of $82,933 for the three months ended

September 30, 2019, which is recorded as services-related party.

Accounts receivable and revenue in excess of billing were

$1,373,099 and $8,163 at June 30, 2020, respectively.

Upon adoption of ASC 326, an allowance was established for the full amounts

of these accounts.

The net balances of accounts receivable and revenues in excess of billing were $Nil at September 30, 2020.

the equity method of accounting, the Company recorded its share of net loss of $108,445 and $183,832 for the three months ended

September 30, 2020 and 2019, respectively.

following table reflects the above investments at September 30, 2020.

net loss on investment

other comprehensive income (loss)

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

PK has not provided services to WRLD3D for the three and six months ended December 31, 2020, and has provided services of $57,424

and $140,357 for the three and six months ended December 31, 2019, which is recorded as services-related party.

Accounts receivable

and revenue in excess of billing were $1,373,099 and $8,163 at June 30, 2020, respectively.

Upon adoption of ASC 326, an allowance

was established for the full amounts of these accounts.

The net balances of accounts receivable and revenues in excess of billing

were $Nil at December 31, 2020.

the equity method of accounting, the Company recorded its share of net loss of $47,009 and $155,454 for the three and six months

ended December 31, 2020 and 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.

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

Gross investment

Cumulative net loss on investment

Cumulative other

comprehensive income (loss)

Net investment

13 - INTANGIBLE ASSETS

assets consisted of the following:

Licenses - Cost

of Translation Adjustment

Product Licenses - Cost

Effect of Translation Adjustment

(14,779,667 )

(16,045,322 )

Accumulated Amortization

(27,711,787 )

4 unchanged sentences

will be amortized over the next 2.75 years.

Amortization expense for the three months ended September 30, 2020 and 2019 was $432,772

Amortization expense for the three and six months ended December 31, 2020 was $449,865

and $882,637, respectively.

Amortization expense for the three and six months ended December 31, 2019 was $465,169 and $921,770,

respectively.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

Future Amortization

2 unchanged sentences

payable and accrued expenses consisted of the following:

Payroll & Taxes

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 September 30, 2020

Protection Program Loans

Overdraft Facility

Finance 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 Facility

Finance Leases

of December 31, 2020

D&O Insurance

Paycheck Protection Program Loans

Bank Overdraft Facility

Term Finance Facility

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance

Subsidiary Finance

of June 30, 2020

Protection Program Loans

Overdraft Facility

Finance 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 Facility

Finance Leases

D&O Insurance

Paycheck Protection Program Loans

Bank Overdraft Facility

Term Finance Facility

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance

Subsidiary Finance

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 September

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

31, 2020 and June 30, 2020.

3 unchanged sentences

carry an interest rate of 1% and have a maturity date of two years from the date of the disbursement of the loan.

As of September

As of December

31, 2020, the Company has not applied for the loan forgiveness.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

The Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts

up to £300,000, or approximately $410,959.

The annual interest rate was 5.12% as of September 30, 2020.

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

The total outstanding

balance as of September 30, 2020 was £Nil.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

balance as of December 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 September 30, 2020, NTE was in compliance with this covenant.

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

The Company’s subsidiary, NetSol PK, has a term finance facility from Askari Bank Limited, approved by the Government of

2 unchanged sentences

facility amount was Rs.

348,509,008 or $2,103,507, at September 30, 2020, of which $719,364 is shown as current and the remaining

347,601,639 or $2,168,714, at December 31, 2020, of which $850,166 is shown as current and the remaining

$1,318,548 is shown as long term.

2 unchanged sentences

is shown as current and the remaining $1,026,541 is shown as long term.

The interest rate for the loan was 3% at September 30,

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

2020 and June 30, 2020.

3 unchanged sentences

500,000,000 or $3,119,541 at

September 30, 2020 and Rs.

December 31, 2020 and Rs.

500,000,000 or $2,975,482 at June 30, 2020.

The interest rate for the loan was 3% at September 30,

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

and June 30, 2020.

1 unchanged sentence

The total facility amount is Rs.

75,000,000 or $452,680, at September 30, 2020.

The balance outstanding at September 30,

75,000,000 or $467,931, at December 31, 2020.

The balance outstanding at December 31,

2020 and June 30, 2020 was Rs.

The interest rate for the loan was 9.25% and 7.2% at September 30, 2020 and June 30, 2020,

The interest rate for the loan was 9.29% and 7.2% at December 31, 2020 and June 30, 2020,

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 September 30,

As of December 31,

2020, NetSol PK was in compliance with this covenant.

3 unchanged sentences

380,000,000 or $2,370,851 and

380,000,000 or $2,261,366 at September 30, 2020 and June 30, 2020, respectively.

The interest rate for the loan was 3% at

September 30, 2020 and June 30, 2020.

380,000,000 or $2,261,366 at December 31, 2020 and June 30, 2020, respectively.

The interest rate for the loan was 3% at December

31, 2020 and June 30, 2020.

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

1 unchanged sentence

120,000,000 or $748,690 and Rs.

120,000,000 or $714,116, at September 30, 2020

and June 30, 2020, respectively.

The interest rate for the loan was 8.75% and 7.7% at September 30, 2020 and June 30, 2020, respectively.

The balance outstanding at September 30, 2020 and June 30, 2020 was Rs.

120,000,000 or $714,116, at December 31, 2020 and June

30, 2020, respectively.

The interest rate for the loan was 8.79% and 7.7% at December 31, 2020 and June 30, 2020, respectively.

The balance outstanding at December 31, 2020 and June 30, 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 September

As of December

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

4 unchanged sentences

NetSol PK used Rs.

500,000,000 or $3,017,867 at September 30, 2020.

500,000,000 or $3,119,541 at December 31, 2020.

The total facility amount is Rs.

2 unchanged sentences

500,000,000 or $2,975,482 at June 30, 2020.

The interest rate for the loan was 3% at September 30, 2020

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

and June 30, 2020.

2 unchanged sentences

for a period of 5 years with monthly payments of £1,349, or $1,848.

As of September 30, 2020, the subsidiary has used this

As of December 31, 2020, the subsidiary has used this

facility up to $63,677, of which $44,887 was shown as long-term and $18,790 as current.

The interest rate was 6.14% at September

The interest rate was 6.14% at December

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

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Depreciation of assets under finance leases is included in depreciation

expense for the three months ended September 30, 2020 and 2019.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

is the aggregate minimum future lease payments under finance leases as of September 30, 2020:

Lease Payments

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

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

Minimum Lease Payments

Expense relating to future periods

Value of minimum lease payments

Within year 2

Within year 3

Total Minimum Lease

Interest Expense

relating to future periods

Present Value of minimum lease payments

Non-Current portion

16 - STOCKHOLDERS’

the three months ended September 30, 2020, the Company issued 3,020 shares of common stock for services rendered by officers of

These shares were valued at the fair market value of $17,068.

the three months ended September 30, 2020, the Company issued 1,983 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 $11,997.

the three months ended September 30, 2020, the Company issued 9,893 shares of its common stock to employees pursuant to the terms

of their employment agreements valued at $57,948.

the three and six months ended December 31, 2020, the Company issued 3,020 and 6,040 shares of common stock for services rendered

by officers of the Company.

These shares were valued at the fair market value of $17,068 and $34,136, respectively.

the three and six months ended December 31, 2020, the Company issued nil and 1,983 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 $Nil and $11,997.

the three and six months ended December 31, 2020, the Company issued 7,393 and 17,286 shares of its common stock to employees

pursuant to the terms of their employment agreements valued at $41,600 and $99,548, respectively.

17 - INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

1 unchanged sentence

Average Grant Date Fair Value ($)

June 30, 2020

September 30, 2020

the three months ended September 30, 2020 and 2019, the Company recorded compensation expense of $90,617 and $164,293, respectively.

The compensation expense related to the unvested stock grants as of September 30, 2020 was $282,612 which will be recognized during

Unvested, June 30, 2020

Unvested, December 31, 2020

the three and six months ended December 31, 2020, the Company recorded compensation expense of $74,167 and $164,784, respectively.

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

The compensation expense related to the unvested stock grants as of December 31, 2020 was $208,445 which will be recognized during

the fiscal years 2021 through 2022.

29 unchanged sentences

parties and eliminates them in the consolidation.

following table presents a summary of identifiable assets as of September 30, 2020 and June 30, 2020:

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

in associates under equity method:

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

Identifiable assets:

North America

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

Investment in associates under equity

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

following table presents a summary of operating information for the three months ended September 30:

the Three Months

September 30,

from unaffiliated customers:

from affiliated customers

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

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

For the Three Months

For the Six Months

Revenues from unaffiliated customers:

Revenue from affiliated customers

Intercompany revenue

Net income (loss) after taxes and before

non-controlling interest:

Corporate headquarters

$ (1,244,092 )

following table presents a summary of capital expenditures for the three months ended September 30:

the Three Months

September 30,

expenditures:

North America

$ (1,714,323 )

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

For the Six Months

Capital expenditures:

TECHNOLOGIES, INC.

5 unchanged sentences

Non-Controlling

Interest at September 30, 2020

Interest at December 31, 2020

NetSol-Innovation

1 unchanged sentence

Non-Controlling

June 30, 2020

Interest at June 30, 2020

NetSol-Innovation

11 unchanged sentences

however, tax at the applicable rates is charged to the income from revenue generated from other than core business

the three months ended September 30, 20120 and 2019, the Company recorded an income tax provision of $264,294 and $238,238, respectively,

the three and six months ended December 31, 2020, the Company recorded an income tax provision of $245,434 and $509,728, respectively,

resulting in an effective tax rate of 147.6% and 32.8%, respectively.

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

the Company recorded an income tax provision of $610,510 and $848,748, respectively, resulting in an effective tax rate of 52.7%

and (98.1%), respectively.

SUBSEQUENT EVENTS

to September 30, 2020, the Company purchased an additional 102,023 shares at an average price of $2.94 per share pursuant to the

to December 31, 2020, the Company purchased an additional 92,440 shares at an average price of $4.03 per share pursuant to the

stock repurchase plan approved by the Company’s Board of Directors on July 30, 2020.

1 unchanged sentence

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

for the three months ended September 30, 2020.

The following discussion should be read in conjunction with the information included

within our Annual Report on Form 10-K for the year ended June 30, 2020, and the Condensed Consolidated Financial Statements and

notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

for the three and six months ended December 31, 2020.

The following discussion should be read in conjunction with the information

included within our Annual Report on Form 10-K for the year ended June 30, 2020, and the Condensed Consolidated Financial Statements

and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

website is located at www.netsoltech.com , and our investor relations website is located at http://ir.netsoltech.com.

129 unchanged sentences

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

below are a few of NetSol’s highlights for the quarter ended September 30, 2020:

Lease Corp, our first North American Ascent™

customer, successfully went live with NFS Ascent™.

Minshall was appointed Executive Vice President for NetSol Technologies Americas.

leading captive finance company of a notable U.S.

based auto manufacturer went live with LeasePak cloud.

NETSOL’s

majority owned mobility startup, Otoz, is partnering to launch its digital automotive retail platform for a U.S.

based subsidiary

of a renowned German Auto Manufacturer for one of its key brands.

effectively generated approximately $1.3 million by successfully implementing change requests from various customers

across multiple regions.

Financial Services went live with NFS Ascent™

Retail Platform on a single code, single instance and involving multi-tenancy

setup in Singapore.

began the implementation process for Daimler Financial Services in New Zealand and Australia.

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

entered into an agreement with an existing tier one finance company in China for them to upgrade to our NFS Ascent ®

Retail and Wholesale platforms.

The contract is expected to generate approximately $9,000,000 during the contract term.

Captive auto finance company of a leading German Auto manufacturer based in China went successfully live with our NFS Ascent ®

Retail Platform.

and WRLD3D introduced NXT - a smart workplace platform to support companies to

return to work safely

rapidly growing U.K.

bank serving small and medium-sized enterprises has successfully gone live with the NFS Ascent ®

Retail Platform.

This is our first go live of an NFS Ascent ®

Retail client in the U.K.

Financial Services went live with our NSF Ascent ®

Retail Platform in Thailand.

generated approximately $1,500,000 by successfully implementing change requests from various customers across multiple regions.

entered into an agreement with a renowned financial services company in the U.S.

to implement LeasePak, one of our

legacy solutions.

The contract is expected to generate approximately $1,000,000 over the life of the contract.

has identified the following material trends affecting NetSol.

22 unchanged sentences

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

to travel restrictions caused by COVID-19, it is increasingly difficult to conduct face to face meetings for global clients

and new prospects removing the personal connection essential to some decision making.

COVID-19 pandemic has adversely affected live industry conferences and events, such as those held by the Equipment Leasing

and Finance Association (ELFA), reducing leads and market exposure.

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

2 unchanged sentences

IN FINANCIAL CONDITION

Ended September 30, 2020 Compared to the Quarter Ended September 30, 2019

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

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

September 30, 2020 and 2019 as a percentage of revenues.

the Three Months

September 30,

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

For the Three Months

Net Revenues:

Subscription and

- related party

and consultants

and amortization

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

Salaries and consultants

Depreciation and

cost of revenues

Operating expenses:

Selling and marketing

Depreciation and

General and administrative

and development cost

operating expenses

(loss) from operations

income and (expenses)

on sale of assets

(loss) on foreign currency exchange transactions

of net loss from equity investment

Income from operations

Other income and

Gain (loss) on sale

Interest expense

Interest income

Gain (loss) on foreign

currency exchange transactions

Share of net loss

from equity investment

other income (expenses)

income (loss) before income taxes

Net income (loss)

before income taxes

tax provision

income (loss)

Net income (loss)

Non-controlling

income (loss) attributable to NetSol

$ (1,827,947 )

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

16 unchanged sentences

(Unfavorable)

the Three Months

(Unfavorable)

For the Three Months

Change due to

(Unfavorable)

September 30,

(loss) from operations

revenues for the quarter ended September 30, 2020 and 2019 are broken out among the segments as follows:

fees for the three months ended September 30, 2020 were $3,475 compared to $2,464,216 for the three months ended September 30,

2019 reflecting a decrease of $2,460,741 with a change in constant currency of $2,465,909.

During the three months ended September

30, 2019, we recognized approximately $2,455,000 related to the DFS contract.

and support fees for the three months ended September 30, 2020 were $5,171,863 compared to $4,606,376 for the three months ended

September 30, 2019 reflecting an increase of $565,487 with a change in constant currency of $682,173.

Net Revenues:

$ (2,429,677 )

$ (2,568,559 )

Cost of revenues:

Operating expenses:

Income (loss) from

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

North America

fees for the three months ended December 31, 2020 were $2,586,504 compared to $176,706 for the three months ended December 31,

2019 reflecting an increase of $2,409,798 with a change in constant currency of $2,263,574.

During the three months ended December

31, 2020, we recognized approximately $2,410,000 related to a new agreement with an existing tier one finance company in China

to upgrade to our NFS Ascent ®

Retail and Wholesale platforms.

and support fees for the three months ended December 31, 2020 were $5,724,802 compared to $5,104,736 for the three months ended

December 31, 2019 reflecting an increase of $620,066 with a change in constant currency of $646,870.

Subscription and support

3 unchanged sentences

and we anticipate these fees to gradually increase as we implement both our NFS legacy products and NFS Ascent ®

income for the three months ended September 30, 2020 was $7,472,040 compared to $6,418,891 for the three months ended September

30, 2019 reflecting an increase of $1,053,149 with an increase in constant currency of $1,127,724.

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.

income for the three months ended December 31, 2020 was $4,810,154 compared to $10,351,153 for the three months ended December

31, 2019 reflecting a decrease of $5,540,999 with a decrease in constant currency of $5,282,697.

The decrease in services revenue

is due to the decrease in implementation revenue associated with customers who have gone live with our products.

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 September 30, 2020 was $Nil compared to $82,933 for the three months ended

September 30, 2019 reflecting a decrease of $82,933 with a change in constant currency of $82,933.

income from related party for the three months ended December 31, 2020 was $Nil compared to $57,424 for the three months ended

December 31, 2019 reflecting a decrease of $57,424 with a change in constant currency of $57,424.

The decrease in related party

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

gross profit was $6,381,575, for the three months ended September 30, 2020 as compared with $6,110,628 for the three months ended

September 30, 2019.

This is an increase of $270,947 with a change in constant currency of $272,784.

gross profit was $6,042,309, for the three months ended December 31, 2020 compared with $7,801,960 for the three months ended

December 31, 2019.

This is a decrease of $1,759,651 with a change in constant currency of $1,748,997.

The gross profit percentage

for the three months ended September 30, 2020 also increased to 50.5% from 45.0% for the three months ended September 30, 2019.

The cost of sales was $6,265,803 for the three months ended September 30, 2020 compared to $7,461,788 for the three months ended

September 30, 2019 for a decrease of $1,195,985 and on a constant currency basis a decrease of $1,011,729.

for the three months ended December 31, 2020 also decreased to 46.0% from 49.7% for the three months ended December 31, 2019.

The cost of sales was $7,079,151 for the three months ended December 31, 2020 compared to $7,888,059 for the three months

ended December 31, 2019 for a decrease of $808,908 and on a constant currency basis a decrease of $680,680.

As a percentage of

sales, cost of sales decreased from 55.0% for the three months ended September 30, 2019 to 49.5% for the three months ended September

and consultant fees increased by $71,685 from $4,454,964 for the three months ended September 30, 2019 to $4,526,649 for the three

months ended September 30, 2020 and on a constant currency basis increased $199,662.

sales, cost of sales increased from 50.3% for the three months ended December 31, 2019 to 54.0% for the three months ended December

and consultant fees increased by $668,790 from $4,625,872 for the three months ended December 31, 2019 to $5,294,662 for the three

months ended December 31, 2020 and on a constant currency basis increased $762,252.

The increase is due to annual salary raises

offset by a reduction in salaries as part of our cost savings measure due to the COVID-19 pandemic.

As a percentage of

sales, salaries and consultant expense increased from 32.8% for the three months ended September 30, 2019 to 35.8% for the three

months ended September 30, 2020.

expense was $103,752 for the three months ended September 30, 2020 compared to $1,342,635 for the three months ended September

and the hiring of additional personnel to fulfill delivery requirements.

As a percentage of sales, salaries and consultant expense

increased from 29.9% for the three months ended December 31, 2019 to 40.4% for the three months ended December 31, 2020.

expense was $159,174 for the three months ended December 31, 2020 compared to $1,572,923 for the three months ended December 31,

2019 for a decrease of $1,413,749 with a decrease in constant currency of $1,422,378.

The decrease in travel expense is due

to the travel restrictions associated with the COVID-19 pandemic.

and amortization expense decreased to $707,249 compared to $719,665 for the three months ended September 30, 2019 or a decrease

The decrease in travel expense is due to

the travel restrictions associated with the COVID-19 pandemic.

and amortization expense decreased to $713,749 compared to $734,352 for the three months ended December 31, 2019 or a decrease

of $20,603 and on a constant currency basis an increase of $3,330.

expenses were $5,345,019 for the three months ended September 30, 2020 compared to $6,537,838, for the three months ended September

expenses were $5,955,806 for the three months ended December 31, 2020 compared to $7,096,970, for the three months ended December

31, 2019 for a decrease of 16.1% or $1,141,164 and on a constant currency basis a decrease of 14.6% or $1,032,304.

As a percentage

of sales, it decreased from 48.2% to 42.3%.

of sales, it increased from 45.2% to 45.4%.

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

1 unchanged sentence

and marketing expenses decreased $300,069 or 16.2% and on a constant currency basis decreased $288,331 or 15.5%.

The decrease in

selling and marketing expenses based on constant currency is due to a decrease in travel expenses and business development costs

to market and sell NFS Ascent ®

and administrative expenses were $3,427,636 for the three months ended September 30, 2020 compared to $3,918,613 at September

30, 2019 or a decrease of $490,977 or 12.5% and on a constant currency basis a decrease of $509,864 or 13.0%.

During the three

months ended September 30, 2020, salaries increased by approximately $33,860 or $38,692 on a constant currency basis, other general

and administrative expenses decreased approximately $423,507 or $446,399 on a constant currency basis, and professional services

decreased approximately $101,330 or $102,157 on constant currency bases.

in selling and marketing expenses based on constant currency is due to a decrease in travel expenses and business development

costs to market and sell NFS Ascent ®

and administrative expenses were $4,065,788 for the three months ended December 31, 2020 compared to $4,568,790 for the three

months ended December 31, 2019 or a decrease of $503,002 or 11.0% and on a constant currency basis a decrease of $408,015 or 8.9%.

The decrease is primarily due to a reduction of approximately $320,000 related to a withholding tax on dividends paid by NetSol

PK and approximately $105,000 of reduced travel expenses.

from Operations

from operations was $1,036,556 for the three months ended September 30, 2020 compared to a loss from operations of $427,210 for

the three months ended September 30, 2019.

This represents an increase of $1,463,766 with an increase of $1,444,694 on a constant

currency basis for the three months ended September 30, 2020 compared with the three months ended September 30, 2019.

from operations was $86,503 for the three months ended December 31, 2020 compared to $704,990 for the three months ended December

This represents a decrease of $618,487 with a decrease of $716,693 on a constant currency basis for the three months

ended December 31, 2020 compared with the three months ended December 31, 2019.

As a percentage of sales, income from operations

was 1.0% for the three months ended December 31, 2020 compared to 4.5% for the three months ended December 31, 2019.

Income and Expense

income was $79,743 for the three months ended December 31, 2020 compared to $452,456 for the three months ended December 31, 2019.

This represents a decrease of $372,713 with a decrease of $407,870 on a constant currency basis.

The decrease is primarily due

to the interest income and foreign currency exchange transactions.

We did not accrue any interest income on the convertible notes

receivable for the three months ended December 31, 2021.

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.

During the three months ended December 31, 2020, we recognized a gain of $13,981

in foreign currency exchange transactions compared to a gain of $61,061 for the three months ended December 31, 2019.

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

dollar decreased 3.3% and the value of the Euro increased 1.2%, respectively,

compared to the PKR.

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

dollar decreased 1.4% and the value

of and the Euro increased 1.3%, respectively, compared to the PKR.

Non-controlling

the three months ended December 31, 2020, the net income attributable to non-controlling interest was $162,916, compared to a

loss of $39,039 for the three months ended December 31, 2019.

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

increase in net income of NetSol PK.

Income / Loss attributable to NetSol

net loss was $242,104 for the three months ended December 31, 2020 compared to net income of $585,975 for the three months ended

December 31, 2019.

This is a decrease of $828,079 with a decrease of $961,226 on a constant currency basis, compared to the prior

For the three months ended December 31, 2020, the net loss per share was $0.02 for basic and diluted shares compared to

net income per share of $0.05 for basic and diluted shares for the three months ended December 31, 2019.

Months Ended December 31, 2020 Compared to the Six Months Ended December 31, 2019

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

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

For the Six Months

Net Revenues:

Subscription and

- related party

Total net revenues

Cost of revenues:

Salaries and consultants

Depreciation and

cost of revenues

Operating expenses:

Selling and marketing

Depreciation and

General and administrative

and development cost

operating expenses

Income from operations

Other income and

Gain (loss) on sale

Interest expense

Interest income

Gain (loss) on foreign

currency exchange transactions

Share of net loss

from equity investment

other income (expenses)

Net income (loss)

before income taxes

tax provision

Net income (loss)

Non-controlling

income (loss) attributable to NetSol

$ (1,241,972 )

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

We operate in several geographical

regions as described in Note 19 “Operating Segments”

within the Notes to the Condensed Consolidated Financial Statements.

Weakening of the value of the U.S.

dollar compared to foreign currency exchange rates generally has the effect of increasing our

revenues but also increasing our expenses denominated in currencies other than the U.S.

Similarly, strengthening of the

dollar compared to foreign currency exchange rates generally has the effect of reducing our revenues but also reducing our

expenses denominated in currencies other than the U.S.

We plan our business accordingly by deploying additional resources

to areas of expansion, while continuing to monitor our overall expenditures given the economic uncertainties of our target markets.

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency

fluctuations, we compare the changes in results from one period to another period using constant currency.

In order to calculate

our constant currency results, we apply the current period results to the prior period foreign currency exchange rates.

table below, we present the change based on actual results in reported currency and in constant currency.

(Unfavorable)

For the Six Months

Change due to

(Unfavorable)

Net Revenues:

$ (3,144,421 )

$ (3,493,597 )

Cost of revenues:

Operating expenses:

Income (loss) from

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

North America

fees for the six months ended December 31, 2020 were $2,589,979 compared to $2,640,922 for the six months ended December 31, 2019

reflecting a decrease of $50,943 with a change in constant currency of $197,338.

During the six months ended December 31, 2020,

we recognized approximately $2,410,000 related to a new agreement with an existing tier one finance company in China to upgrade

to our NFS Ascent ®

Retail and Wholesale platforms.

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

approximately $2,455,000 related to the DFS contract.

and support fees for the six months ended December 31, 2020 were $10,896,665 compared to $9,711,112 for the six months ended December

31, 2019 reflecting an increase of $1,185,553 with a change in constant currency of $1,336,273.

Subscription and support fees

begin once a customer has “gone live”

with our product.

Subscription and support fees are recurring in nature, and

we anticipate these fees to gradually increase as we implement both our NFS legacy products and NFS Ascent ®

income for the six months ended December 31, 2020 was $12,282,194 compared to $16,770,044 for the six months ended December 31,

2019 reflecting a decrease of $4,487,850 with a decrease in constant currency of $4,142,999.

The decrease in services revenue

is due to the decrease in implementation revenue associated with customers who have gone live with our products.

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, 2020 was $Nil compared to $140,357 for the six months ended December

31, 2019 reflecting a decrease of $140,357 with a change in constant currency of $140,357.

The decrease in related party service

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

gross profit was $12,423,884, for the six months ended December 31, 2020 compared with $13,912,588 for the six months ended December

This is a decrease of $1,488,704 with a change in constant currency of $1,452,012.

The gross profit percentage for the

six months ended December 31, 2020 increased to 48.2% from 47.5% for the six months ended December 31, 2019.

The cost of sales

was $13,344,954 for the six months ended December 31, 2020 compared to $15,349,847 for the six months ended December 31, 2019

for a decrease of $2,004,893 and on a constant currency basis a decrease of $1,692,409.

As a percentage of sales, cost of sales

decreased from 52.5% for the six months ended December 31, 2019 to 51.8% for the six months ended December 31, 2020.

and consultant fees increased by $740,475 from $9,080,836 for the six months ended December 31, 2019 to $9,821,311 for the six

months ended December 31, 2020 and on a constant currency basis increased $961,914.

The increase is due to annual salary raises

and the hiring of additional personnel to fulfill delivery requirements.

As a percentage of sales, salaries and consultant expense

increased from 31.0% for the six months ended December 31, 2019 to 38.1% for the six months ended December 31, 2020.

expense was $262,926 for the six months ended December 31, 2020 compared to $2,915,558 for the six months ended December 31, 2019

for a decrease of $2,652,632 with a decrease in constant currency of $2,660,808.

The decrease in travel expense is due to the

travel restrictions associated with the COVID-19 pandemic.

and amortization expense decreased to $1,420,998 compared to $1,454,017 for the six months ended December 31, 2019 or a decrease

of $33,019 and on a constant currency basis an increase of $29,474.

expenses were $11,300,825 for the six months ended December 31, 2020 compared to $13,634,808, for the six months ended December

31, 2019 for a decrease of 17.1% or $2,333,983 and on a constant currency basis a decrease of 15.3% or $2,085,410.

As a percentage

of sales, income from operations was 8.2% for the three months ended September 30, 2020 compared to a loss of 3.1% for the three

months ended September 30, 2019.

of sales, it decreased from 46.6% to 43.9%.

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

expenses, professional services, research and development and general and administrative expenses.

and marketing expenses decreased $434,333 or 12.1% and on a constant currency basis decreased $385,481 or 10.7%.

in selling and marketing expenses based on constant currency is due to a decrease in travel expenses and business development

costs to market and sell NFS Ascent ®

and administrative expenses were $7,493,424 for the six months ended December 31, 2020 compared to $8,487,403 for the six months

ended December 31, 2019 for a decrease of $993,979 or 11.7% and on a constant currency basis a decrease of $799,075 or 9.4%.

decrease is primarily due to a reduction of approximately $320,000 related to a withholding tax on dividends paid by NetSol

PK, approximately $173,000 of reduced travel expenses, approximately $109,000 of reduced professional services and approximately

$102,000 reductions in rent expense.

from Operations

from operations was $1,123,059 for the six months ended December 31, 2020 compared to $277,780 for the six months ended December

This represents an increase of $845,279 with an increase of $633,398 on a constant currency basis for the six months

ended December 31, 2020 compared with the six months ended December 31, 2019.

As a percentage of sales, income from operations

was 4.4% for the six months ended December 31, 2020 compared to 1.0% for the six months ended December 31, 2019.

Income and Expense

income was $351,215 for the three months ended September 30, 2020 compared to other expense of $1,595,811 for the three months

ended September 30, 2019.

income was $430,958 for the six months ended December 31, 2020 compared to other expense of $1,143,355 for the six months ended

December 31, 2019.

This represents an increase of $1,574,313 with an increase of $1,527,205 on a constant currency basis.

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

The majority of the contracts with NetSol PK are

either in U.S.

increase is primarily due to the foreign currency exchange transactions.

The majority of the contracts with NetSol PK are either

dollars or Euros;

2 unchanged sentences

dollar and the Euro.

During the three months ended September 30, 2020, we recognized

a gain of $296,041 in foreign currency exchange transactions compared to a loss of $1,760,190 for the three months ended September

During the three months ended September 30, 2020, the value of the U.S.

dollar decreased 1.4% and the value of the Euro

increased 3.0%, respectively, compared to the PKR.

During the three months ended September 30, 2019, the value of the U.S.

and the Euro decreased 3.7% and 7.6%, respectively, compared to the PKR.

During the six months ended December 31, 2020, we recognized

a gain of $310,022 in foreign currency exchange transactions compared to a loss of $1,699,129 for the six months ended December

During the six months ended December 31, 2020, the value of the U.S.

dollar and the Euro increased 3.5% and 13.2%, respectively,

compared to the PKR.

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.

Non-controlling

the three months ended September 30, 2020, the net income attributable to non-controlling interest was $405,923, compared to a

loss of $433,312 for the three months ended September 30, 2019.

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

increase in net income of NetSol PK.

the six months ended December 31, 2020, the net income attributable to non-controlling interest was $568,839, compared to a loss

of $472,351 for the six months ended December 31, 2019.

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

in net income of NetSol PK.

Income / Loss attributable to NetSol

income was $717,554 for the three months ended September 30, 2020 compared to a net loss of $1,827,947 for the three months ended

September 30, 2019.

This is an increase of $2,545,501 with an increase of $2,493,546 on a constant currency basis, compared to

the prior year.

For the three months ended September 30, 2020, net income per share was $0.06 for basic and diluted shares compared

to net loss of $0.16 for basic and diluted shares for the three months ended September 30, 2019.

income was $475,450 for the six months ended December 31, 2020 compared to a net loss of $1,241,972 for the six months ended December

This is an increase of $1,717,422 with an increase of $1,437,716 on a constant currency basis, compared to the prior

For the six months ended December 31, 2020, net income per share was $0.04 for basic and diluted shares compared to a net

loss of $0.11 for basic and diluted shares for the six months ended December 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 months ended September 30, 2020 and 2019 are as follows:

the Three Months Ended

Income (loss) attributable to NetSol

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

For the Three Months Ended

For the Six Months Ended

Net Income (loss) attributable

$ (1,241,972 )

Non-controlling

and amortization

$ (1,436,535 )

Depreciation and

Interest expense

stock-based compensation

EBITDA, gross

$ (1,272,242 )

non-controlling interest (a)

$ (1,081,007 )

Average number of shares outstanding

adjusted EBITDA

Adjusted EBITDA, gross

Less non-controlling

Adjusted EBITDA,

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

Income (loss) attributable to non-controlling interest

and amortization

Weighted Average number of shares outstanding

Basic adjusted

Diluted adjusted

(a)The reconciliation of adjusted EBITDA

of non-controlling interest to net income attributable to non-controlling interest is as follows

Net Income (loss) attributable to non-controlling

Depreciation and

Interest expense

stock-based compensation

EBITDA of non-controlling interest

Adjusted EBITDA

of non-controlling interest

AND CAPITAL RESOURCES

cash position was $24,885,365 at September 30, 2020, compared to $20,166,830 at June 30, 2020.

cash provided by operating activities was $4,711,604 for the three months ended September 30, 2020 compared to $266,080 for the

three months ended September 30, 2019.

At September 30, 2020, we had current assets of $52,665,475 and current liabilities of

We had accounts receivable of $6,732,575 at September 30, 2020 compared to $11,414,257 at June 30, 2020.

We had revenues

in excess of billings of $18,430,766 at September 30, 2020 compared to $18,506,733 at June 30, 2020 of which $Nil and $1,300,289

is shown as long term as of September 30, 2020 and June 30, 2020, respectively.

The long-term portion was discounted by $Nil and

$41,286 at September 30, 2020 and June 30, 2020, respectively, using the discounted cash flow method with an interest rate of

During the three months ended September 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 $4,757,649 from $29,920,990 at June 30, 2020 to $25,163,341 at September 30, 2020.

Accounts payable and

accrued expenses, and current portions of loans and lease obligations amounted to $6,005,999 and $9,677,277, respectively at September

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.

average days sales outstanding for the three months ended September 30, 2020 and 2019 were 200 and 205 days, respectively, for

cash position was $32,003,647 at December 31, 2020, compared to $20,166,830 at June 30, 2020.

cash provided by operating activities was $12,650,844 for the six months ended December 31, 2020 compared to $3,792,927 for the

six months ended December 31, 2019.

At December 31, 2020, we had current assets of $52,903,246 and current liabilities of $21,722,829.

We had accounts receivable of $5,213,604 at December 31, 2020 compared to $11,414,257 at June 30, 2020.

We had revenues in excess

of billings of $13,646,069 at December 31, 2020 compared to $18,506,733 at June 30, 2020 of which $356,059 and $1,300,289 is shown

as long term as of December 31, 2020 and June 30, 2020, respectively.

The long-term portion was discounted by $20,815 and $41,286

at December 31, 2020 and June 30, 2020, respectively, using the discounted cash flow method with an interest rate of 4.65% and

4.35%, respectively.

During the six months ended December 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 $11,061,317 from $29,920,990 at June 30, 2020 to $18,859,673 at December 31, 2020.

payable and accrued expenses, and current portions of loans and lease obligations amounted to $6,327,192 and $10,383,572, respectively

at December 31, 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.

average days sales outstanding for the six months ended December 31, 2020 and 2019 were 174 and 184 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 $517,116 for the three months ended September 30, 2020, compared to $755,167 for the three

months ended September 30, 2019.

We had purchases of property and equipment of $489,289 compared to $321,125 for the three months

ended September 30, 2019.

For the three months ended September 30, 2020 and 2019, we invested $Nil and $435,000, respectively,

in a short-term convertible note receivable from WRLD3D.

For the three months ended September 30, 2020 and 2019, we invested $60,500

cash used in investing activities was $1,219,701 for the six months ended December 31, 2020, compared to $1,288,475 for the six

months ended December 31, 2019.

We had purchases of property and equipment of $1,249,895 compared to $785,999 for the six months

ended December 31, 2019.

For the six months ended December 31, 2020 and 2019, we invested $Nil and $535,000, respectively, in

a short-term convertible note receivable from WRLD3D.

For the six months ended December 31, 2020 and 2019, we invested $93,000

and $Nil, respectively, in DriveMate.

cash provided by financing activities was $89,113 for the three months ended September 30, 2020, compared to cash used in financing

activities of $135,755 for the three months ended September 30, 2019.

For the three months ended September 30, 2020, we purchased

147,052 shares of our own stock for $464,676 compared to $Nil for the same period last year.

The three months ended September

30, 2020 included the cash inflow of $697,295 from bank proceeds compared to $Nil for the same period last year.

During the three

months ended September 30, 2020, we had net payments for bank loans and finance leases of $143,506 compared to $147,376 for the

three months ended September 30, 2019.

cash used in financing activities was $862,685 for the six months ended December 31, 2020, compared to $62,845 provided by financing

activities, for the six months ended December 31, 2019.

For the six months ended December 31, 2020, we purchased 446,996 shares

of our own stock for $1,392,671 compared to $Nil for the same period last year.

The six months ended December 31, 2020 included

the cash inflow of $705,338 from bank proceeds compared to $2,074,341 for the same period last year.

During the six months ended

December 31, 2020, we had net payments for bank loans and finance leases of $175,352 compared to $102,499 for the six months ended

December 31, 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.

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 from its own sources.

Those subsidiaries

have financial arrangements from various financial institutions to meet both their short and long-term funding requirements.

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.

anticipate paying back all these obligations on their respective due dates from its own sources.

typically fund the cash requirements for our operations in the U.S.

1 unchanged sentence

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

As of September 30,

As of December 31,

2020, we had approximately $32.0 million of cash, cash equivalents and marketable securities of which approximately $28.9 million

55 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