What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2021-02-16 · 1306 added, 1280 removed, 581 unchanged (82% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

March 31, 2021

June 30, 2020

Current assets:

and cash equivalents

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

Cash and cash equivalents

Accounts receivable, net of allowance of $272,936 and $435,611

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

Revenues in excess of billings, net of allowance of $94,706 and $188,914

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

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

Total current assets

Revenues in excess of billings, net

Convertible note receivable - related

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

Revenues in excess of billings, net - long term

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

Property and equipment, net

2 unchanged sentences

Intangible assets, net

LIABILITIES AND

STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

and accrued expenses

Current portion

of loans and obligations under finance leases

Current portion

of operating lease obligations

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

Common stock to be issued

Total current liabilities

Loans and obligations under finance

Loans and obligations under finance leases;

less current maturities

Operating lease

Operating lease obligations;

less current maturities

Total liabilities

Commitments and contingencies

Stockholders’

Stockholders' equity:

Preferred stock, $.01 par value;

2 unchanged sentences

14,500,000 shares authorized;

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

12,157,871 shares issued and 11,306,680 outstanding as of March 31, 2021 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)

Treasury stock (at cost, 851,191 shares and 247,503 shares as of March 31, 2021 and June 30,

2020, respectively)

Accumulated deficit

1 unchanged sentence

(34,269,817 )

comprehensive loss

Other comprehensive loss

(31,118,798 )

(34,085,047 )

Total NetSol stockholders’

Non-controlling

stockholders’

liabilities and stockholders’

Total NetSol stockholders' equity

Non-controlling interest

Total stockholders' equity

Total liabilities and stockholders' equity

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

1 unchanged sentence

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Consolidated Statements of Operations

For the Three Months

For the Six Months

For the Nine Months

Ended March 31,

Net Revenues:

Subscription and

- related party

Subscription and support

Services - related party

Total net revenues

1 unchanged sentence

Salaries and consultants

Depreciation and

Depreciation and amortization

Total cost of revenues

1 unchanged sentence

Selling and marketing

Depreciation and

Depreciation and amortization

General and administrative

and development cost

operating expenses

Income from operations

Other income and

Gain (loss) on sale

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign

currency exchange transactions

Share of net loss

from equity investment

Total other income

Net income (loss)

before income taxes

tax provision

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling

income (loss) attributable to NetSol

Non-controlling interest

Net income (loss) attributable to NetSol

$ 1,000,807 #

Net income (loss) per share:

Net income (loss) per common

Net income (loss) per common share

Weighted average number of shares outstanding

2 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income (Loss)

For the Three Months

For the Six Months

$ (1,241,972 )

Other comprehensive

income (loss):

Translation adjustment

adjustment attributable to non-controlling interest

For the Nine Months

Ended March 31,

Net income (loss)

Other comprehensive income (loss):

Translation adjustment

Comprehensive

income (loss) attributable to NetSol

Translation adjustment attributable to non-controlling interest

Net translation adjustment

Comprehensive income (loss) attributable to NetSol

$ (2,607,946 )

$ (1,181,544 )

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

1 unchanged sentence

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’

Consolidated Statement of Stockholders’

statement of the changes in equity for the three months ended March 31, 2021 is provided below:

Stockholders'

Balance at December 31, 2020

Common stock issued for:

Purchase of treasury shares

Foreign currency translation adjustment

Net loss for the period

Balance at March 31, 2021

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

Comprehensive

Stockholders’

Balance at September 30, 2020

Stockholders'

September 30, 2020

$ 128,764,618

4 unchanged sentences

Purchase of treasury shares

Foreign currency translation adjustment

Net income (loss)

for the period

Foreign currency

translation adjustment

Net income (loss) for the period

Balance at December 31, 2020

4 unchanged sentences

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

Comprehensive

Stockholders’

Balance at June 30, 2020

Stockholders'

June 30, 2020

$ 128,677,754

6 unchanged sentences

Purchase of treasury shares

Foreign currency translation adjustment

Net income for

Foreign currency

translation adjustment

Net income for the period

Balance at September 30, 2020

5 unchanged sentences

2016-13, Financial Instruments –

Losses (Topic 326):

Credit Losses

Measurement of Credit Losses on Financial Instruments.

Refer to Note 2 –

Accounting Policies for

more information.

Accounting Policies for more information.

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

1 unchanged sentence

AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’

Consolidated Statement of Stockholders’

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

Stockholders'

Balance at December 31, 2019

$ 128,197,589

$ (1,455,969 )

$ (36,448,870 )

$ (30,456,632 )

Common stock issued for:

Foreign currency

translation adjustment

Net income for the period

Balance at March 31, 2020

$ 128,374,098

$ (1,455,969 )

$ (35,448,063 )

$ (34,065,385 )

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

Comprehensive

Stockholders’

Stockholders'

Balance at September 30, 2019

6 unchanged sentences

Foreign currency translation adjustment

Net income (loss) for the period

Balance at December 31, 2019

4 unchanged sentences

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

Comprehensive

Stockholders’

Stockholders'

Balance at June 30, 2019

3 unchanged sentences

$ (33,125,006 )

Exercise of subsidiary common stock

Common stock issued

Exercise of subsidiary common stock options

Common stock issued for:

Foreign currency translation adjustment

Net loss for the period

Balance at September 30, 2019

6 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the Six Months

Cash flows from operating

income (loss)

$ (1,714,323 )

Consolidated Statements of Cash Flows

For the Nine Months

Ended March 31,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile

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

Depreciation and

Provision for bad

Share of net loss

from investment under equity method

Loss on sale of

Depreciation and amortization

Provision for bad debts

Share of net loss from investment under equity method

(Gain) loss on sale of assets

Stock based compensation

in operating assets and liabilities:

Accounts receivable

Changes in operating assets and liabilities:

Accounts receivable

- related party

Revenues in excess

of billing - related party

Accounts receivable - related party

Revenues in excess of billing

Revenues in excess of billing - related party

Other current assets

Accounts payable

and accrued expenses

cash provided by operating activities

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

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

cash provided by (used in) financing activities

of exchange rate changes

Net increase in cash

and cash equivalents

Cash and cash

equivalents at beginning of the period

and cash equivalents at end of period

Accounts payable and accrued expenses

Unearned revenue

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property and equipment

Sales of property and equipment

Convertible note receivable - related party

Investment in associates

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from exercise of subsidiary options

Purchase of treasury stock

Dividend paid by subsidiary to non-controlling interest

Proceeds from bank loans

Payments on finance lease obligations and loans - net

Net cash used in financing activities

Effect of exchange rate changes

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the period

Cash and cash equivalents at end of period

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

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Six Months

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Nine Months

Ended March 31,

SUPPLEMENTAL DISCLOSURES:

Cash paid during

the period for:

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

Assets acquired under finance lease

Drivemate shares acquired for services rendered

Assets recognized under operating lease

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

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1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Company designs, develops, markets, and exports proprietary software products to customers in the automobile financing and leasing,

banking, and financial services industries worldwide.

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

and services in exchange for fees from customers.

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

to the rules and regulations of the Securities and Exchange Commission.

Certain information and footnote disclosures normally

included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted

pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information

presented not misleading.

The year-end condensed consolidated balance sheet data was derived from audited financial statements,

but does not include all disclosures required by accounting principles generally accepted in the United States of America.

statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary

for fair presentation of the information contained therein.

It is suggested that these condensed consolidated financial statements

be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K

for the year ended June 30, 2020.

Company designs, develops, markets, and exports proprietary software products to customers in the automobile financing and leasing, banking,

and financial services industries worldwide.

The Company also provides system integration, consulting,

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

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

rules and regulations of the Securities and Exchange Commission.

Certain information and footnote disclosures normally included in financial

statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules

and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures

required by accounting principles generally accepted in the United States of America.

statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for

fair presentation of the information contained therein.

It is suggested that these condensed consolidated financial statements be read

in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year

ended June 30, 2020.

The Company follows the same accounting policies in preparation of interim reports.

of operations for the interim periods are not indicative of annual results.

Results of operations for the

interim periods are not indicative of annual results.

accompanying consolidated financial statements include the accounts of the Company as follows:

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to Condensed Consolidated Financial Statements

comparative purposes, prior year’s condensed consolidated financial statements have been reclassified to conform to report

classifications of the current period.

comparative purposes, prior year’s condensed consolidated financial statements have been reclassified to conform to report classifications

of the current period.

Below is the table of reclassified amounts:

Three Months Ended

Six Months ended

Subscription and

- related party

For the Three Months Ended

For the Nine Months ended

March 31, 2020

Originally reported

Subscription and support

Services - related party

Total net revenues

ACCOUNTING POLICIES

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States

of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period.

The areas requiring significant estimates are provision for doubtful accounts, provision

for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, assumptions used to determine

the net present value of operating lease liabilities, and estimated contract costs.

The estimates and underlying assumptions are

reviewed on an ongoing basis.

Actual results could differ from those estimates.

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of

America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting period.

The areas requiring significant estimates are provision for doubtful accounts, provision for taxation, useful life

of depreciable assets, useful life of intangible assets, contingencies, assumptions used to determine the net present value of operating

lease liabilities, and estimated contract costs.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Actual results

could differ from those estimates.

Concentration

1 unchanged sentence

includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries.

financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash.

maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured

limits for the banks located in the United States.

Balances at financial institutions within certain foreign countries are not

covered by insurance except balances maintained in China are insured for RMB 500,000 ($76,570) in each bank and in UK for GBP

85,000 ($116,438) in each bank.

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

As of December

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

entities of approximately $28,954,360 and $18,210,378, respectively.

Certain financial

instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash.

The Company maintains balances

at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located

in the United States.

Balances at financial institutions within certain foreign countries are not covered by insurance except balances

maintained in China are insured for RMB 500,000 ($76,220) in each bank and in the UK for GBP 85,000 ($116,438) in each bank.

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

As of March 31, 2021, and June 30, 2020, the Company had uninsured

deposits related to cash deposits in accounts maintained within foreign entities of approximately $28,713,152 and $18,210,378, respectively.

The Company has not experienced any losses in such accounts.

Company’s operations are carried out globally.

Accordingly, the Company’s business, financial condition and results

of operations may be influenced by the political, economic and legal environments of each country and by the general state of

the country’s economy.

The Company’s operations in each foreign country are subject to specific considerations and

significant risks not typically associated with companies in economically developed nations.

These include risks associated with,

among others, the political, economic and legal environments and foreign currency exchange.

The Company’s results may be

adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency

conversion and remittance abroad, and rates and methods of taxation, among other things.

Accordingly, the Company’s business, financial condition and results of operations

may be influenced by the political, economic and legal environments of each country and by the general state of the country’s economy.

The Company’s operations in each foreign country are subject to specific considerations and significant risks not typically associated

with companies in economically developed nations.

These include risks associated with, among others, the political, economic and legal

environments and foreign currency exchange.

The Company’s results may be adversely affected by changes in governmental policies

with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of

taxation, among other things.

TECHNOLOGIES, INC.

1 unchanged sentence

Value of Financial Instruments

Company applies the provisions of Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements

and Disclosures.”

ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of

fair value measurement that enhances disclosure requirements for fair value measures.

For certain financial instruments, including

cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value

due to their relatively short maturities.

The carrying amounts of the convertible note receivable and the long-term debt approximate

their fair values based on current interest rates for instruments with similar characteristics.

Company applies the provisions of Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and

Disclosures.”

ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value

measurement that enhances disclosure requirements for fair value measures.

For certain financial instruments, including cash and cash

equivalents, accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively

short maturities.

The carrying amounts of the convertible note receivable and the long-term debt approximate their fair values based

on current interest rates for instruments with similar characteristics.

three levels of valuation hierarchy are defined as follows:

1 unchanged sentence

rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability.

are based on prices or third party or internal valuation models that require inputs that are significant to the fair value

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

are based on prices or third party or internal valuation models that require inputs that are significant to the fair value 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 March 31, 2021, were as follows:

Revenues in excess of billings - long term

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

in excess of billing - long term

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

in excess of billings - long term

value discount

Revenues in excess of billing - long term

reconciliation from June 30, 2020 to March 31, 2021 is as follows:

Revenues in excess of billings - long term

Balance at June 30, 2020

Amortization during the period

Balance at December 31, 2020

Transfers to short term

Effect of Translation Adjustment

Balance at March 31, 2021

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

from Equity”

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

Equity”

and ASC 815, “Derivatives and Hedging.”

Derivative liabilities are adjusted to reflect

fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments

to fair value of derivatives.

The effects of interactions between embedded derivatives are calculated and accounted for in arriving

at the overall fair value of the financial instruments.

In addition, the fair values of freestanding derivative instruments such

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

Derivative liabilities are adjusted to reflect fair value

at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value

of derivatives.

The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall

fair value of the financial instruments.

In addition, the fair values of freestanding derivative instruments such as warrants and option

derivatives are valued using the Black-Scholes model.

Accounting Standards Adopted by the Company:

January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Simplifying the Test for Goodwill

Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s

carrying value exceeds its fair value, not to exceed the carrying value of goodwill.

This ASU eliminates existing guidance that

requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning

the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business

This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods.

Early adoption is permitted for interim or annual goodwill impairment test performed on testing dates after January 1, 2017.

Company adopted this standard on July 1, 2020 and the adoption did not have a material effect on our condensed consolidated

financial statements.

Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying

value exceeds its fair value, not to exceed the carrying value of goodwill.

This ASU eliminates existing guidance that requires an entity

to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting

unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination.

This update is effective

for annual periods beginning after December 15, 2019, and interim periods within those periods.

Early adoption is permitted for interim

or annual goodwill impairment test performed on testing dates after January 1, 2017.

The Company adopted this standard on July 1, 2020

and the adoption did not have a material effect on our condensed consolidated financial statements.

June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments .

ASU 2016-13 introduced a new forward-looking approach, based on expected losses, to estimate credit

losses on certain types of financial instruments, including trade receivables, contract assets and held-to-maturity debt securities,

which requires the Company to incorporate considerations of historical information, current information and reasonable and supportable

ASU 2016-13 also expands disclosure requirements.

Measurement of Credit Losses on Financial

Instruments .

ASU 2016-13 introduced a new forward-looking approach, based on expected losses, to estimate credit losses on certain

types of financial instruments, including trade receivables, contract assets and held-to-maturity debt securities, which requires the

Company to incorporate considerations of historical information, current information and reasonable and supportable forecasts.

also expands disclosure requirements.

Company adopted the standard on July 1, 2020 using the modified retrospective approach.

The adoption of ASU 2016-13 resulted in

changes to the Company’s accounting policies for trade and other receivables, contract assets and convertible notes receivable.

Based on the results of the Company’s evaluation, the adoption of ASU 2016-13 resulted in a one-time cumulative-effect adjustment

through retained earnings of $6,784,300 to increase its allowance for credit losses related to the convertible notes receivable,

interest receivable, accounts receivable, revenues in excess of billings, and other receivables.

The adoption of ASU 2016-13 resulted in changes

to the Company’s accounting policies for trade and other receivables, contract assets and convertible notes receivable.

the results of the Company’s evaluation, the adoption of ASU 2016-13 resulted in a one-time cumulative-effect adjustment through

retained earnings of $6,784,300 to increase its allowance for credit losses related to the convertible notes receivable, interest receivable,

accounts receivable, revenues in excess of billings, and other receivables.

following table presents the impact of adopting ASC Topic 326 as of July 1, 2020:

Classification

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

Asset Classification

ASC Topic 326

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.

receivable are recorded at the invoiced amount and do not bear interest.

In establishing the required allowance, management regularly

reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic

trends and changes in customer payment patterns.

Account balances are charged off against the allowance after all means of collection

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

Accounts receivable

are recorded at the invoiced amount and do not bear interest.

In establishing the required allowance, management regularly reviews the

composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends and changes

in customer payment patterns.

Account balances are charged off against the allowance after all means of collection have been exhausted

and the potential for recovery is considered remote.

TECHNOLOGIES, INC.

1 unchanged sentence

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

are billed under the terms of the contract, the corresponding amount is transferred to accounts receivable.

In establishing the

required allowance, management regularly reviews the composition of and analyzes customer credit worthiness, customer concentrations,

current economic trends, changes in customer payment patterns, the project status and assesses individual unbilled contract assets

over a specific aging and amount.

Account balances are charged off against the allowance after all means of collection have been

exhausted and the potential for recovery is considered remote.

As customers are billed

under the terms of the contract, the corresponding amount is transferred to accounts receivable.

In establishing the required allowance,

management regularly reviews the composition of and analyzes customer credit worthiness, customer concentrations, current economic trends,

changes in customer payment patterns, the project status and assesses individual unbilled contract assets over a specific aging and amount.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery

is considered remote.

convertible notes receivable represents loans provided to WRLD3D.

The allowance for credit risk for the convertible notes is established

based on various quantitative and qualitative factors including customer credit worthiness, current economic trends and changes

in payment patterns.

Account balances are charged off against the allowance after all means of collection have been exhausted

and the potential for recovery is considered remote.

based on various quantitative and qualitative factors including customer credit worthiness, current economic trends and changes in payment

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential

for recovery is considered remote.

REVENUE RECOGNITION

8 unchanged sentences

of revenue when, or as, the Company satisfies a performance obligation.

Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation)

or an agent (net presentation) by evaluating the nature of its promise to the customer.

Revenue is presented net of sales, value-added

and other taxes collected from customers and remitted to government authorities.

Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation) or an agent

(net presentation) by evaluating the nature of its promise to the customer.

Revenue is presented net of sales, value-added and other

taxes collected from customers and remitted to government authorities.

Company has two primary revenue streams:

1 unchanged sentence

Company generates its core revenue from the following sources:

(1) software licenses, (2) services, which include implementation

and consulting services, and (3) subscription and support, which includes subscription revenue and post contract customer support,

of its enterprise software solutions for the lease and finance industry.

The Company offers its software using the same underlying

technology via two models:

(1) software licenses, (2) services, which include implementation and

consulting services, and (3) subscription and support, which includes subscription revenue and post contract customer support, of its

enterprise software solutions for the lease and finance industry.

The Company offers its software using the same underlying technology

via two models:

a traditional on-premises licensing model and a subscription model.

The on-premises model involves

the sale or license of software on a perpetual basis to customers who take possession of the software and install and maintain

the software on their own hardware.

Under the subscription delivery model, the Company provides access to its software on a hosted

basis as a service and customers generally do not have the contractual right to take possession of the software.

The on-premises model involves the sale or license

of software on a perpetual basis to customers who take possession of the software and install and maintain the software on their own

Under the subscription delivery model, the Company provides access to its software on a hosted basis as a service and customers

generally do not have the contractual right to take possession of the software.

Company generates its non-core revenue by providing business process outsourcing (“BPO”), other IT services and internet

performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account

under Topic 606.

The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or

as, the performance obligation is satisfied by transferring the promised good or service to the customer.

The Company identifies

and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations

over the life of the contract.

performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under

The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance

obligation is satisfied by transferring the promised good or service to the customer.

The Company identifies and tracks the performance

obligations at contract inception so that the Company can monitor and account for the performance obligations 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

or licenses and a professional services engagement.

License purchases generally have multiple performance obligations as customers

purchase maintenance and services in addition to the licenses.

The Company’s single performance obligation arrangements

are typically maintenance renewals, subscription renewals and services engagements.

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

licenses and a professional services engagement.

License purchases generally have multiple performance obligations as customers purchase

maintenance and services in addition to the licenses.

The Company’s single performance obligation arrangements are typically maintenance

renewals, subscription renewals and services engagements.

contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”)

2 unchanged sentences

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

The Company’s typical

payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice.

from subscriptions is recognized ratably over the initial subscription period committed to by the customer commencing when the

product is made available to the customer.

The Company’s typical payment

terms tend to vary by region, but its standard payment terms are within 30 days of invoice.

from subscriptions is recognized ratably over the initial subscription period committed to by the customer commencing when the product

is made available to the customer.

The initial subscription period is typically 12 to 60 months.

The Company generally

invoices its customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment

The Company generally invoices its customers

in advance in quarterly or annual installments and typical payment terms provide that customers make payment within 30 days of invoice.

from support services and product updates, referred to as post contract customer support revenue, is recognized ratably over the term

of the maintenance period, which in most instances is one year.

Software license updates provide customers with rights to unspecified

software product updates, maintenance releases and patches released during the term of the support period on a when-and-if available

The Company’s customers purchase both product support and license updates when they acquire new software licenses.

a majority of customers renew their support services contracts annually and typical payment terms provide that customers make payment

within 30 days of invoice.

from support services and product updates, referred to as post contract customer support revenue, is recognized ratably over the

term of the maintenance period, which in most instances is one year.

Software license updates provide customers with rights to

unspecified software product updates, maintenance releases and patches released during the term of the support period on a when-and-if

available basis.

The Company’s customers purchase both product support and license updates when they acquire new software

In addition, a majority of customers renew their support services contracts annually and typical payment terms provide

that customers make payment within 30 days of invoice.

from professional services is typically comprised of implementation, development, data migration, training or other consulting

Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from

software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments.

The Company recognizes revenue for time-and-materials arrangements as the services are performed.

In fixed fee arrangements, revenue

is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the

services project.

Management applies judgment when estimating project status and the costs necessary to complete the services

A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency

variances and specification and testing requirement changes.

Services are generally invoiced upon milestones in the contract or

upon consumption of the hourly resources and payments are typically due 30 days after invoice.

from professional services is typically comprised of implementation, development, data migration, training or other consulting services.

Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from software installation

to data conversion and building non-complex interfaces to allow the software to operate in integrated environments.

The Company recognizes

revenue for time-and-materials arrangements as the services are performed.

In fixed fee arrangements, revenue is recognized as services

are performed as measured by costs incurred to date, compared to total estimated costs to complete the services project.

Management applies

judgment when estimating project status and the costs necessary to complete the services projects.

A number of internal and external

factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement

Services are generally invoiced upon milestones in the contract or upon consumption of the hourly resources and payments are

typically due 30 days after invoice.

and Internet Services

from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date

as a percentage of total estimated labor hours for each contract.

Internet services are invoiced either monthly, quarterly or

half yearly in advance to the customers and revenue is recognized ratably overtime on a monthly basis.

from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date as a

percentage of total estimated labor hours for each contract.

Internet services are invoiced either monthly, quarterly or half yearly

in advance to the customers and revenue is recognized ratably overtime on a monthly basis.

TECHNOLOGIES, INC.

2 unchanged sentences

Company disaggregates revenue from contracts with customers by category —

core and non-core, as it believes it best depicts

how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

core and non-core, as it believes it best depicts how

the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Company’s disaggregated revenue by category is as follows:

Subscription and

- related party

For the Three Months

For the Nine Months

Ended March 31,

Subscription and support

Services - related party

Total core revenue, net

1 unchanged sentence

Total net revenue

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

arrangements may be dependent on contract-specific terms and may vary in some instances.

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

may be dependent on contract-specific terms and may vary in some instances.

is required to determine the SSP for each distinct performance obligation.

The Company rarely licenses or sells products on a

stand-alone basis, so the Company is required to estimate the range of SSPs for each performance obligation.

In instances where

SSP is not directly observable because the Company does not sell the license, product or service separately, the Company determines

the SSP using information that may include market conditions and other observable inputs.

In making these judgments, the Company

analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer

demographics and overall market and economic conditions.

Based on these results, the estimated SSP is set for each distinct product

or service delivered to customers.

The Company rarely licenses or sells products on a stand-alone

basis, so the Company is required to estimate the range of SSPs for each performance obligation.

In instances where SSP is not directly

observable because the Company does not sell the license, product or service separately, the Company determines the SSP using information

that may include market conditions and other observable inputs.

In making these judgments, the Company analyzes various factors, including

its pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic

Based on these results, the estimated SSP is set for each distinct product or service delivered to customers.

most significant inputs involved in the Company’s revenue recognition policies are:

The (1) stand-alone selling prices of

the Company’s software license, and the (2) the method of recognizing revenue for installation/customization, and other

stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when

quoting prices to customers.

Although the Company has no history of selling its software separately from post contract customer

support and other services, the Company does have historical experience with amending contracts with customers to provide additional

modules of its software or providing those modules at an optional price.

This information guides the Company in assessing the

stand-alone selling price of the Company’s software, since the Company can observe instances where a customer had a particular

component of the Company’s software that was essentially priced separate from other goods and services that the Company

delivered to that customer.

The (1) stand-alone selling prices of the Company’s

software license, and the (2) the method of recognizing revenue for installation/customization, and other services.

stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when quoting

prices to customers.

Although the Company has no history of selling its software separately from post contract customer support and other

services, the Company does have historical experience with amending contracts with customers to provide additional modules of its software

or providing those modules at an optional price.

This information guides the Company in assessing the stand-alone selling price of the

Company’s software, since the Company can observe instances where a customer had a particular component of the Company’s

software that was essentially priced separate from other goods and services that the Company delivered to that customer.

Company recognized revenue from implementation and customization services using the percentage of estimated “man-days”

that the work requires.

The Company believes the level of effort to complete the services is best measured by the amount of time

(measured as an employee working for one day on implementation/customization work) that is required to complete the implementation

or customization work.

The Company reviews its estimate of man-days required to complete implementation and customization services

each reporting period.

the work requires.

The Company believes the level of effort to complete the services is best measured by the amount of time (measured

as an employee working for one day on implementation/customization work) that is required to complete the implementation or customization

The Company reviews its estimate of man-days required to complete implementation and customization services each reporting period.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

is recognized over time for the Company’s subscription, post contract customer support and fixed fee professional services

that are separate performance obligations.

For the Company’s professional services, revenue is recognized over time, generally

using costs incurred or hours expended to measure progress.

Judgment is required in estimating project status and the costs necessary

to complete projects.

A number of internal and external factors can affect these estimates, including labor rates, utilization,

specification variances and testing requirement changes.

is recognized over time for the Company’s subscription, post contract customer support and fixed fee professional services that

are separate performance obligations.

For the Company’s professional services, revenue is recognized over time, generally using

costs incurred or hours expended to measure progress.

Judgment is required in estimating project status and the costs necessary to complete

A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances

and testing requirement changes.

a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement,

such agreements are deemed to be combined as one arrangement for revenue recognition purposes.

The Company exercises significant

judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately

or as a single arrangement.

The Company’s judgments about whether a group of contracts comprise a single arrangement can

affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations

for the periods involved.

a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which

the entity will be entitled in exchange for transferring the promised goods or services to a customer.

When estimating variable

consideration, the Company will consider all relevant facts and circumstances.

Variable consideration will be estimated and included

in the contract price only when it is probable that a significant reversal in the amount of revenue recognized will not occur.

The Company exercises significant judgment

to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single

The Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation

of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity

will be entitled in exchange for transferring the promised goods or services to a customer.

When estimating variable consideration, the

Company will consider all relevant facts and circumstances.

Variable consideration will be estimated and included in the contract price

only when it is probable that a significant reversal in the amount of revenue recognized will not occur.

timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables,

contract assets (revenues in excess of billings), or contract liabilities (deferred revenue) on the Company’s Consolidated

Balance Sheets.

The Company records revenues in excess of billings when the Company has transferred goods or services but does

not yet have the right to consideration.

The Company records deferred revenue when the Company has received or has the right to

receive consideration but has not yet transferred goods or services to the customer.

revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon

completion of a milestone.

contract assets (revenues in excess of billings), or contract liabilities (deferred revenue) on the Company’s Consolidated Balance

The Company records revenues in excess of billings when the Company has transferred goods or services but does not yet have the

right to consideration.

The Company records deferred revenue when the Company has received or has the right to receive consideration

but has not yet transferred goods or services to the customer.

revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon completion

of a milestone.

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

December 31, 2020

March 31, 2021

June 30, 2020

in excess of billings

Revenues in excess of billings

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.

the three and nine months ended March 31, 2021, the Company recognized revenue of $364,835 and $4,154,955, 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.

to Condensed Consolidated Financial Statements

allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that

are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as

revenue in future periods.

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

over an estimated 5 years thereafter.

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

various customer sites.

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

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

In instances where the timing

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

a significant financing component.

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

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

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

due at the start of the subscription or support term.

Unpaid invoice amounts for non-cancelable license and services starting

in future periods are included in accounts receivable and deferred revenue.

allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied,

or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.

Contracted but unsatisfied performance obligations were approximately $46,352,850 as of March 31, 2021, of which the Company estimates

to recognize approximately $14,216,398 in revenue over the next 12 months and the remainder over an estimated 5 years thereafter.

revenue recognition depends in part on the timing of software modules installed at various customer sites.

Accordingly, some factors

that affect the Company’s revenue, such as the availability and demand for modules within customer geographic locations, is not

entirely within the Company’s control.

In instances where the timing of revenue recognition differs from the timing of invoicing,

the Company has determined that its contracts generally do not include a significant financing component.

The primary purpose of invoicing

terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, and not to

facilitate financing arrangements.

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

at the start of the subscription or support term.

Unpaid invoice amounts for non-cancelable license and services starting in future periods

are included in accounts receivable and deferred revenue.

Expedients and Exemptions

1 unchanged sentence

Below is a list of practical expedients applied by the Company:

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).

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).

to Obtain a Contract

2 unchanged sentences

incurs few direct incremental costs of obtaining new customer contracts.

The Company rarely incurs incremental costs to review

or otherwise enter into contractual arrangements with customers.

In addition, the Company’s sales personnel receive fees

that are referred to as commissions, but that are based on more than simply signing up new customers.

The Company’s sales

personnel are required to perform additional duties beyond new customer contract inception dates, including fulfilment duties

and collections efforts.

The Company rarely incurs incremental costs to review or otherwise

enter into contractual arrangements with customers.

In addition, the Company’s sales personnel receive fees that are referred to

as commissions, but that are based on more than simply signing up new customers.

The Company’s sales personnel are required to

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

TECHNOLOGIES, INC.

2 unchanged sentences

earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive

potential common shares outstanding during the period using the treasury stock method.

Dilutive potential common shares include

outstanding stock options and stock awards.

earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common

shares outstanding during the period using the treasury stock method.

Dilutive potential common shares include outstanding stock options

and stock awards.

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

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

For the three months ended

March 31, 2021

For the nine months ended

March 31, 2021

Basic loss per share:

Net 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

Diluted loss per share

For the three months ended

March 31, 2020

For the nine months ended

March 31, 2020

Basic income (loss) per share:

income (loss) available to common shareholders

$ (1,241,972 )

Effect of dilutive

Net income (loss) available to common shareholders

Effect of dilutive securities

Diluted income (loss) per share

$ (1,241,972 )

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

would be anti-dilutive.

Stock Options

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

be anti-dilutive.

For the Three Months

For the Nine Months

Ended March 31,

OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY

1 unchanged sentence

VLSIL uses the Euro;

NetSol PK, Connect, and NetSol Innovation use the

Pakistan Rupee;

NetSol PK, Connect, and NetSol Innovation use the Pakistan

NTPK Thailand and NetSol Thai use the Thai Baht;

Australia uses the Australian dollar;

and NetSol Beijing uses

the Chinese Yuan as the functional currencies.

and NetSol Beijing uses the Chinese Yuan

as the functional currencies.

NetSol Technologies, Inc., and its subsidiary, NTA, use the U.S.

dollar as the

functional currency.

Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results

are translated at the average exchange rate throughout the period.

Accumulated translation losses classified as an item of accumulated

other comprehensive loss in the stockholders’

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

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.

dollar as the functional currency.

and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange

rate throughout the period.

Accumulated translation losses classified as an item of accumulated other comprehensive loss in the stockholders’

equity section of the consolidated balance sheet were $31,118,798 and $34,085,047 as of March 31, 2021 and June 30, 2020, respectively.

During the three and nine months ended March 31, 2021, comprehensive income (loss) in the consolidated statements of comprehensive income

(loss) included a translation gain attributable to NetSol of $941,353 and $2,966,249, respectively.

During the three and nine months

ended March 31, 2020, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation

loss attributable to NetSol of $3,608,753 and $940,379, respectively.

TECHNOLOGIES, INC.

1 unchanged sentence

MAJOR CUSTOMERS

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

the nine months ended March 31, 2021, revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”)

were $7,763,189 and $4,295,139, respectively representing 19.6% and 10.9%, respectively 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 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 December 31, 2020 were $6,800,273 and $1,084,396

for DFS and BMW, respectively.

Revenues in excess of billings at June 30, 2020, were $5,709,226 and $6,977,375 for DFS and BMW,

During the nine months ended March

31, 2020, revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”) were $11,906,959 and $6,893,438,

respectively representing 27.8% and 16.1%, respectively of revenues.

The revenue from these customers are shown in the Asia –

receivable from DFS and BMW at March 31, 2021, were $7,972,487 and $45,269, respectively.

Accounts receivable at June 30, 2020, were

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

Revenues in excess of billings at March 31, 2021 were $1,014,268 and $1,620,158 for DFS and BMW,

respectively.

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

Revenues in excess of billings at June 30, 2020, were $5,709,226 and $6,977,375 for DFS and BMW, respectively.

in this amount was $Nil and $1,300,289 shown as long term at March 31, 2021 and June 30, 2020, respectively.

CONVERTIBLE NOTES RECEIVABLE –

1 unchanged sentence

Company has entered into multiple convertible note receivable agreements with WRLD3D.

The convertible notes bear interest ranging

from 5% to 10% with various maturity dates.

The convertible notes have conversion features which allow the Company to convert

the notes into shares of WRLD3D stock upon the occurrence of certain events.

The Company has a security interest in all of WRLD3D’s

personal property, inventory, equipment, general intangibles, financial assets, investment property, securities, deposit accounts

and the proceeds thereof.

The convertible notes bear interest ranging from

5% to 10% with various maturity dates.

The convertible notes have conversion features which allow the Company to convert the notes into

shares of WRLD3D stock upon the occurrence of certain events.

The Company has a security interest in all of WRLD3D’s personal property,

inventory, equipment, general intangibles, financial assets, investment property, securities, deposit accounts and the proceeds thereof.

following table summarizes the convertible notes receivable from WRLD3D.

March 2, 2018

February 9, 2018

March 31, 2019

April 1, 2019

March 31, 2020

August 19, 2019

allowance for doubtful account

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”.

March 31, 2020

Less allowance for doubtful account

Company has an accrued interest balance of $701,062 at March 31, 2021 and June 30, 2020, respectively, which is included in “Other

current assets”.

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

3 unchanged sentences

current assets consisted of the following:

March 31, 2021

June 30, 2020

Prepaid Expenses

5 unchanged sentences

in excess of billings, net consisted of the following:

Revenues in excess of billings

March 31, 2021

June 30, 2020

Revenues in excess of billings - long term

Present value discount

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

billable after one year.

During the three and six months ended December 31, 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.

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

after one year.

During the three and nine months ended March 31, 2021, the Company accreted $2,331 and $44,157, respectively.

the three and nine months ended March 31, 2020, the Company accreted $13,940 and $41,621, respectively, which were recorded in interest

income for those periods.

The Company used the discounted cash flow method with interest rates ranging from 4.65% to 6.25% for the period

ended March 31, 2021 and an interest rate of 4.35% for the period ended June 30, 2020.

TECHNOLOGIES, INC.

2 unchanged sentences

and equipment consisted of the following:

March 31, 2021

June 30, 2020

Office Furniture and Equipment

5 unchanged sentences

(21,288,868 )

Equipment, Net

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

Property and Equipment, Net

the three and nine months ended March 31, 2021, depreciation expense totaled $575,855 and $1,557,578, respectively.

Of these amounts,

$303,780 and $842,141, 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:

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

expense totaled $479,350 and $1,429,463, respectively.

Of these amounts, $273,315 and $805,562, respectively, are reflected in cost of

is a summary of fixed assets held under finance leases as of March 31, 2021 and June 30, 2020:

March 31, 2021

June 30, 2020

Computers and Other Equipment

Furniture and Fixtures

Depreciation - Net

Accumulated Depreciation - Net

lease term and discount rate were as follows:

average remaining lease term - Finance leases

Weighted average

discount rate - Finance leases

March 31, 2021

Weighted average remaining lease term - Finance leases

Weighted average discount rate - Finance leases

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

classified as financing and operating.

For certain leases, the Company has options to extend the lease term for additional periods

ranging from one year to 10 years.

Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time

in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits

of the asset.

These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases

with terms greater than 12 months.

ROU assets represent the Company’s right to use an underlying asset for the entirety

of the lease term.

Lease liabilities represent the Company’s obligation to make payments over the life of the lease.

asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over

the life of the lease.

Initial direct costs are included as part of the ROU asset upon commencement of the lease.

Since the interest

rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing

rate to determine the present value of the lease payments.

The incremental borrowing rate represents the rate of interest the

Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.

Company used the incremental borrowing rate on July 1, 2019 for all leases that commenced prior to that date.

For finance leases,

the Company used the incremental borrowing rate implicit in the lease.

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

as financing and operating.

For certain leases, the Company has options to extend the lease term for additional periods ranging from

one year to 10 years.

Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange

for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset.

leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12

ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term.

Lease liabilities

represent the Company’s obligation to make payments over the life of the lease.

A ROU asset and a lease liability are recognized

at commencement of the lease based on the present value of the lease payments over the life of the lease.

Initial direct costs are included

as part of the ROU asset upon commencement of the lease.

Since the interest rate implicit in a lease is generally not readily determinable

for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments.

The incremental

borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease

term to obtain an asset of similar value.

The Company used the incremental borrowing rate on July 1, 2019 for all leases that commenced

prior to that date.

For finance leases, the Company used the incremental borrowing rate implicit in the lease.

Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets.

The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the

carrying value of the asset may not be recoverable.

The assessment of possible impairment is based on the Company’s ability

to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU

asset and lease liability accounts.

Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying

value of the asset may not be recoverable.

The assessment of possible impairment is based on the Company’s ability to recover the

carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset

and lease liability accounts.

expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

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

result in a re-measurement of lease liabilities.

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

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

The Company’s lease agreements do not contain

any significant residual value guarantees or restrictive covenants.

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

in a re-measurement of lease liabilities.

The Company’s variable lease payments include payments for finance leases that are adjusted

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

The Company’s lease agreements do not contain any significant residual

value guarantees or restrictive covenants.

balance sheet information related to leases was as follows:

lease assets, net

March 31, 2021

June 30, 2020

Operating lease assets, net

Total Lease Liabilities

3 unchanged sentences

For the Three Months

For the Six Months

Amortization of finance

For the Nine Months

Ended March 31,

Amortization of finance lease assets

Interest on finance lease obligation

4 unchanged sentences

term and discount rate were as follows:

average remaining lease term - Operating leases

Weighted average

discount rate - Operating leases

March 31, 2021

Weighted average remaining lease term - Operating leases

Weighted average discount rate - Operating leases

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

the Six Months Ended

Cash flows related to lease

cash flows related to operating leases

For the Nine Months

Ended March 31

Cash flows related to lease liabilities

Operating cash flows related to operating leases

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

of operating lease liabilities were as follows as of March 31, 2021:

Within year 1

2 unchanged sentences

Within year 4

Within year 5

Total Lease Payments

Imputed interest

Present Value of lease liabilities

Current portion

Non-Current portion

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

lease agreements provide for a fixed base rent and terminate by July 2021.

agreements provide for a fixed base rent and terminate by July 2021.

All leases are considered operating leases.

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

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.

There are no rights

to purchase the premises and no residual value guarantees.

For the three and nine months ended March 31, 2021, the Company received lease

income of $9,1558 and $26,517, respectively.

For the three and nine months ended March 31, 2020, the Company received lease income of

$8,514 and $25,227, respectively.

LONG TERM INVESTMENT

6 unchanged sentences

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.

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 March 31, 2021, the Company owns

21.47% 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.

Company did not perform any services during the three and nine months ended March 31, 2021.

During the three and nine months ended March

31, 2020, the Company performed $355,051 and $862,767 of services, respectively.

the equity method of accounting, the Company recorded its share of net income of $Nil and $3,919 for the three and nine months ended

March 31, 2021, respectively.

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

March 31, 2020, respectively.

TECHNOLOGIES, INC.

2 unchanged sentences

March 2, 2017, the Company purchased a 4.9% interest in WRLD3D, a non-public company, for $1,111,111.

The Company paid $555,556

at the initial closing and $555,555 on September 1, 2017.

NetSol PK, the subsidiary of the Company, purchased a 12.2% investment

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

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.

The Company paid $555,556 at the

initial closing and $555,555 on September 1, 2017.

NetSol PK, the subsidiary of the Company, purchased a 12.2% investment in WRLD3D,

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

PK has not provided services to WRLD3D for the three and nine months ended March 31, 2021, and has provided services of $61,842 and $202,199

for the three and nine months ended March 31, 2020, 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 March 31, 2021.

the equity method of accounting, the Company recorded its share of net loss of $80,953 and $236,407 for the three and nine months ended

March 31, 2021 and the Company recorded its share of net loss of $72,835 and $415,607 for the three and nine months ended March 31, 2020,

respectively.

following table reflects the above investments at March 31, 2021.

Gross investment

Cumulative net loss on investment

Cumulative other

comprehensive income (loss)

Cumulative other comprehensive income (loss)

Net investment

1 unchanged sentence

assets consisted of the following:

March 31, 2021

June 30, 2020

Product Licenses - Cost

7 unchanged sentences

licenses include internally developed original license issues, renewals, enhancements, copyrights, trademarks, and trade names.

Product licenses are amortized on a straight-line basis over their respective lives, and the unamortized amount of $4,753,543

will be amortized over the next 2.75 years.

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.

licenses are amortized on a straight-line basis over their respective lives, and the unamortized amount of $4,507,155 will be amortized

over the next 2.5 years.

Amortization expense for the three and nine months ended March 31, 2021 was $455,988 and $1,338,625, respectively.

Amortization expense for the three and nine months ended March 31, 2020 was $464,322 and $1,386,092, respectively.

TECHNOLOGIES, INC.

2 unchanged sentences

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

Period ended:

March 31, 2022

March 31, 2023

March 31, 2024

14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses consisted of the following:

March 31, 2021

June 30, 2020

Accounts Payable

6 unchanged sentences

payable and finance leases consisted of the following:

of December 31, 2020

As of March 31, 2021

D&O Insurance

4 unchanged sentences

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

Loan Payable Bank - Export Refinance II

Loan Payable Bank - Running Finance II

Loan Payable Bank - Export Refinance III

Term Finance Facility

Insurance Financing

Subsidiary Finance Leases

As of June 30, 2020

D&O Insurance

4 unchanged sentences

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance

Loan Payable Bank - Running Finance

Loan Payable Bank - Export Refinance

Subsidiary Finance

Loan Payable Bank - Export Refinance II

Loan Payable Bank - Running Finance II

Loan Payable Bank - Export Refinance III

Term Finance Facility

Insurance Financing

Subsidiary Finance Leases

The Company finances Directors’

and Officers’

(“D&O”) liability insurance and Errors and Omissions

(“E&O”) liability insurance, for which the D&O and E&O balances are renewed on an annual basis and, as

such, are recorded in current maturities.

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

31, 2020 and June 30, 2020.

(“D&O”) liability insurance and Errors and Omissions (“E&O”)

liability insurance, for which the D&O and E&O balances are renewed on an annual basis and, as such, are recorded in current

The interest rate on these financings were ranging from 5.0% to 7.0% as of March 31, 2021 and June 30, 2020.

The Company and its subsidiary, NTA, received Paycheck Protection Program loans of $469,721 introduced by the U.S.

during the COVID-19 Pandemic.

Government during

the COVID-19 Pandemic.

This loan is forgivable if the Company meets the criteria set by the U.S.

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 December

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

The loans 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 March 31, 2021, 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 December 31, 2020.

The total outstanding

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 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

Pakistan to protect the employment situation during the Pandemic COVID-19.

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 March 31, 2021.

The total outstanding balance as of March 31, 2021

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 March 31,

2021, 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 Pakistan

to protect the employment situation during the Pandemic COVID-19.

This is a term loan payable in three years.

facility amount was Rs.

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.

The availed facility amount

311,727,320 or $2,036,103, at March 31, 2021, of which $1,322,065 is shown as current and the remaining $714,038 is shown as

The availed facility amount was Rs.

232,042,664 or $1,380,878, at June 30, 2020, of which $354,337

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

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

2020 and June 30, 2020.

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

232,042,664 or $1,380,878, at June 30, 2020, of which $354,337 is shown as current and

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

The interest rate for the loan was 3% at March 31, 2021 and June 30, 2020.

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

This is a revolving loan that matures every nine months.

The total facility amount is Rs.

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

December 31, 2020 and Rs.

500,000,000 or $3,265,839 at March 31, 2021

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

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 Askari Bank Limited, secured by NetSol PK’s

The interest rate for the loan was 3% at March 31, 2021 and June 30, 2020.

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

The total facility amount is Rs.

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 9.29% and 7.2% at December 31, 2020 and June 30, 2020,

respectively.

75,000,000 or $489,876, at March 31, 2021.

The balance outstanding at March 31, 2021 and June 30, 2020

The interest rate for the loan was 9.59% and 7.2% at March 31, 2021 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 December 31,

2020, NetSol PK was in compliance with this covenant.

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

As of March 31, 2021, NetSol

PK was in compliance with this covenant.

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

This is a revolving loan that matures every nine months.

The total facility amount is Rs.

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

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

380,000,000 or $2,482,037 and Rs.

or $2,261,365 at March 31, 2021 and June 30, 2020, respectively.

The interest rate for the loan was 3% at March 31, 2021 and June 30,

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

The total facility amount is Rs.

120,000,000 or $783,801 and 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 December

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

120,000,000 or $714,116, at March 31, 2021 and June 30, 2020, respectively.

The interest rate for the loan was 9.09% and 7.7% at March 31, 2021 and June 30, 2020, respectively.

The balance outstanding at March

31, 2021 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 March 31, 2021, NetSol PK

was in compliance with these covenants.

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

1 unchanged sentence

The total facility amount is Rs.

900,000,000 or $5,615,173 and

NetSol PK used Rs.

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

900,000,000 or $5,878,511 and NetSol

700,000,000 or $4,572,176 at March 31, 2021.

The total facility amount is Rs.

900,000,000 or $5,355,868

and NetSol PK used Rs.

900,000,000 or $5,355,868 and NetSol PK used

500,000,000 or $2,975,483 at June 30, 2020.

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

and June 30, 2020.

The interest rate for the loan was 3% at March 31, 2021 and June 30, 2020.

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

The loan amount was £69,549, or $95,273,

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

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 December

The loan amount was £69,549, or $95,273, for

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

As of March 31, 2021, the subsidiary has used this facility up

to $59,087, of which $40,007 was shown as long-term and $19,080 as current.

The interest rate was 6.14% at March 31, 2021.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

The Company’s subsidiary, VLS finances Directors’

and Officers’

(“D&O”) liability insurance, and recorded

in current maturities.

The interest rate on this financing was 4.5% as of March 31, 2021.

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

The assets and

liabilities under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value

of the asset.

The assets are secured by the assets themselves.

Depreciation of assets under finance leases is included in depreciation

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:

The assets and liabilities

under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset.

assets are secured by the assets themselves.

Depreciation of assets under finance leases is included in depreciation expense for the

three and nine months ended March 31, 2021 and 2020.

is the aggregate minimum future lease payments under finance leases as of March 31, 2021:

Minimum Lease Payments

1 unchanged sentence

Within year 2

Total Minimum Lease

Interest Expense

relating to future periods

Within year 3

Total Minimum Lease Payments

Interest Expense relating to future periods

Present Value of minimum lease payments

Current portion

Non-Current portion

16 - STOCKHOLDERS’

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.

the three and nine months ended March 31, 2021, the Company issued 3,020 and 9,060 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 $51,204, 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.

the three and nine months ended March 31, 2021, 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, respectively.

the three and nine months ended March 31, 2021, the Company issued 7,393 and 24,679 shares of its common stock to employees pursuant

to the terms of their employment agreements valued at $41,599 and $141,147, respectively.

17 - INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

following table summarizes stock grants awarded as compensation:

Average Grant Date Fair Value ($)

Weighted Average Grant Date Fair Value ($)

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.

Unvested, March 31, 2021

the three and nine months ended March 31, 2021, the Company recorded compensation expense of $74,169 and $239,333, respectively.

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

compensation expense related to the unvested stock grants as of March 31, 2021 was $134,276 which will be recognized during the fiscal

years 2021 through 2022.

TECHNOLOGIES, INC.

4 unchanged sentences

The Company defends itself vigorously against any such claims.

When (i) it is probable that an asset has been

impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the

estimated loss.

The Company provides disclosure in the notes to the consolidated financial statements for loss contingencies that

do not meet both conditions if there is a reasonable possibility that a loss may have been incurred that would be material to

the financial statements.

Significant judgment is required to determine the probability that a liability has been incurred and

whether such liability is reasonably estimable.

The Company bases accruals on the best information available at the time, which

can be highly subjective.

The final outcome of these matters could vary significantly from the amounts included in the accompanying

consolidated financial statements.

When (i) it is probable that an asset has been impaired

or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the estimated loss.

The Company provides disclosure in the notes to the consolidated financial statements for loss contingencies that do not meet both conditions

if there is a reasonable possibility that a loss may have been incurred that would be material to the financial statements.

judgment is required to determine the probability that a liability has been incurred and whether such liability is reasonably estimable.

The Company bases accruals on the best information available at the time, which can be highly subjective.

The final outcome of these

matters could vary significantly from the amounts included in the accompanying consolidated financial statements.

OPERATING SEGMENTS

4 unchanged sentences

Each business unit provides similar products and services;

for leasing and asset-based software, related maintenance fees, and implementation and IT consulting services.

Separate management

of each segment is required because each business unit is subject to different operational issues and strategies due to their

particular regional location.

The Company accounts for intra-company sales and expenses as if the sales or expenses were to third

parties and eliminates them in the consolidation.

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

license fees for leasing

and asset-based software, related maintenance fees, and implementation and IT consulting services.

Separate management of each segment

is required because each business unit is subject to different operational issues and strategies due to their particular regional location.

The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the

consolidation.

following table presents a summary of identifiable assets as of March 31, 2021 and June 30, 2020:

March 31, 2021

June 30, 2020

Identifiable assets:

Corporate headquarters

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

Asia - Pacific

following table presents a summary of investment under equity method as of March 31, 2021 and June 30, 2020:

March 31, 2021

June 30, 2020

Investment in associates under equity method:

Corporate headquarters

Asia - Pacific

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

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

For the Three Months

For the Six Months

For the Nine Months

Ended March 31,

Revenues from unaffiliated customers:

North America

Asia - Pacific

Revenue from affiliated customers

Asia - Pacific

Intercompany revenue

Net income (loss) after taxes and before

non-controlling interest:

Asia - Pacific

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

Corporate headquarters

1 unchanged sentence

North America

$ (1,714,323 )

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

For the Six Months

Asia - Pacific

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

For the Nine Months

Ended March 31,

Capital expenditures:

North America

Asia - Pacific

TECHNOLOGIES, INC.

3 unchanged sentences

The balance of non-controlling interest was as follows:

Non-Controlling

Interest at December 31, 2020

Non-Controlling Interest %

Non-Controlling Interest at

March 31, 2021

NetSol-Innovation

Non-Controlling

Interest at June 30, 2020

Non-Controlling Interest %

Non-Controlling Interest at

June 30, 2020

NetSol-Innovation

current tax provision is based on taxable income for the year determined in accordance with the prevailing law for taxation of

The charge for tax on income is calculated at the current rates of taxation as applicable after considering tax credit

and tax rebates available, if any.

current tax provision is based on taxable income for the year determined in accordance with the prevailing law for taxation of income.

The charge for tax on income is calculated at the current rates of taxation as applicable after considering tax credit and tax rebates

available, if any.

We are subject to income taxes in the U.S.

and numerous foreign jurisdictions.

Our effective

tax rate is lower than the U.S.

statutory rate primarily because of more earnings realized in countries that have lower statutory

Our effective tax rate in the future will depend on the portion of our profits earned within and outside the United

Income from the export of computer software and its related services developed in Pakistan is exempt from tax through

June 30, 2025;

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

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

Our effective tax rate is lower than

statutory rate primarily because of more earnings realized in countries that have lower statutory tax rates.

Our effective tax

rate in the future will depend on the portion of our profits earned within and outside the United States.

Income from the export of computer

software and its related services developed in Pakistan is exempt from tax through June 30, 2025;

however, tax at the applicable rates

is charged to the income from revenue generated from other than core business activities.

the three and nine months ended March 31, 2021, the Company recorded an income tax provision of $133,156 and $642,884, respectively,

resulting in an effective tax rate of (15.8%) and 90.3%, 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 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.

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

recorded an income tax provision of $218,351 and $1,067,099, respectively, resulting in an effective tax rate of 12.9% and 129.8%, respectively.

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

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

for the three and six months ended December 31, 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.

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

the three and nine months ended March 31, 2021.

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.

The following filings are available through our investor relations website after we file with the SEC:

Annual Reports on Form

10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders.

These filings are also

available for download free of charge on our investor relations website.

We also provide a link to the section of the SEC’s

website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on

Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements and other ownership related filings.

Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE,

Washington D.C.

Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor

relations website.

Additionally, we provide notifications of news or announcements regarding our financial performance, including

SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website and on social media

platforms linked to our corporate website.

Investors and others can receive notifications of new information posted on our investor

relations website by signing up for e-mail alerts.

Further corporate governance information, including our committee charters

and code of conduct, is also available on our investor relations website at http:// netsoltech.com/about-us .

of our websites is not intended to be incorporated by reference into this or in any other report or document we file with the

SEC, and any references to our websites are intended to be inactive textual references only.

The following

filings are available through our investor relations website after we file with the SEC:

Annual Reports on Form 10-K, Quarterly Reports

on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders.

These filings are also available for download free of

charge on our investor relations website.

We also provide a link to the section of the SEC’s website at www.sec.gov that has all

of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments

to those reports, our Proxy Statements and other ownership related filings.

Further, a copy of this Quarterly Report on Form 10-Q is

located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C.

Information on the operation of the Public

Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations

Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings,

investor events, press and earnings releases, and blogs as part of our investor relations website and on social media platforms linked

to our corporate website.

Investors and others can receive notifications of new information posted on our investor relations website

by signing up for e-mail alerts.

Further corporate governance information, including our committee charters and code of conduct, is also

available on our investor relations website at http:// netsoltech.com/about-us .

The content of our websites is not intended to

be incorporated by reference into this or in any other report or document we file with the SEC, and any references to our websites are

intended to be inactive textual references only.

Forward-Looking

report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of its

management as well as assumptions made by and information currently available to its management.

When used in this report, the

words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”,

and similar expressions as they relate to the Company or its management, are intended to identify forward-looking statements.

These statements reflect management’s current view of the Company with respect to future events and are subject to certain

risks, uncertainties and assumptions.

Should any of these risks or uncertainties materialize, or should underlying assumptions

prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected.

The Company’s realization of its business aims could be materially and adversely affected by any technical or other problems

in, or difficulties with, planned funding and technologies, third party technologies which render the Company’s technologies

obsolete, the unavailability of required third party technology licenses on commercially reasonable terms, the loss of key research

and development personnel, the inability or failure to recruit and retain qualified research and development personnel, or the

adoption of technology standards which are different from technologies around which the Company’s business ultimately is

report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of its management

as well as assumptions made by and information currently available to its management.

When used in this report, the words “anticipate”,

“believe”, “estimate”, “expect”, “intend”, “plan”, and similar expressions

as they relate to the Company or its management, are intended to identify forward-looking statements.

These statements reflect management’s

current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions.

of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from

those described in this report as anticipated, estimated or expected.

The Company’s realization of its business aims could be materially

and adversely affected by any technical or other problems in, or difficulties with, planned funding and technologies, third party technologies

which render the Company’s technologies obsolete, the unavailability of required third party technology licenses on commercially

reasonable terms, the loss of key research and development personnel, the inability or failure to recruit and retain qualified research

and development personnel, or the adoption of technology standards which are different from technologies around which the Company’s

business ultimately is built.

The Company does not intend to update these forward-looking statements.

1 unchanged sentence

NTWK) is a worldwide provider of IT and enterprise software solutions.

We believe that our solutions

constitute mission critical applications for clients, as they encapsulate end-to-end business processes, facilitating faster processing

and increased transactions.

Company’s primary source of revenue is the licensing, customization, enhancement and maintenance of its suite of financial

applications under the brand name NFS™

We believe that our solutions constitute

mission critical applications for clients, as they encapsulate end-to-end business processes, facilitating faster processing and increased

transactions.

Company’s primary source of revenue is the licensing, customization, enhancement and maintenance of its suite of financial applications

under the brand name NFS™

(NetSol Financial Suite) and NFS Ascent ®

for leading businesses in

the global lease and finance industry.

for leading businesses in the global lease and

finance industry.

NetSol’s

clients include Dow-Jones 30 Industrials and Fortune 500 manufacturers and financial institutions, global vehicle manufacturers,

and enterprise technology providers, all of which are serviced by NetSol delivery locations around the globe.

clients include Dow-Jones 30 Industrials and Fortune 500 manufacturers and financial institutions, global vehicle manufacturers, and

enterprise technology providers, all of which are serviced by NetSol delivery locations around the globe.

in 1997, NetSol is headquartered in Calabasas, California.

While the Company follows a global strategy for sales and delivery

of its portfolio of solutions and services, it continues to maintain regional offices in the following locations:

While the Company follows a global strategy for sales and delivery of its

portfolio of solutions and services, it continues to maintain regional offices in the following locations:

Metropolitan area

2 unchanged sentences

offerings include its flagship global solution, NFS™.

A robust suite of four software applications that is an end-to-end

solution for the asset finance industry covering the complete leasing and finance cycle starting from quotation origination through

end of contract transactions and including digital channel support with intuitive mobile applications.

The four applications under

have been designed and developed for a highly flexible setting and are capable of dealing with multinational, multi-company,

multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments.

Each application is a complete system in itself

and can be used independently to address specific sub-domains of the leasing/financing cycle.

When used together, they fully automate

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

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

and equipment finance and leasing industry.

A robust suite of four software applications that is an end-to-end solution

for the asset finance industry covering the complete leasing and finance cycle starting from quotation origination through end of contract

transactions and including digital channel support with intuitive mobile applications.

The four applications under NFS™

designed and developed for a highly flexible setting and are capable of dealing with multinational, multi-company, multi-asset, multi-lingual,

multi-distributor and multi-manufacturer environments.

Each application is a complete system in itself and can be used independently

to address specific sub-domains of the leasing/financing cycle.

When used together, they fully automate the entire leasing/financing

cycle for companies of any size, including those with multi-billion-dollar portfolios.

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

finance and leasing industry.

NFS Ascent’s ®

architecture and user interfaces were designed

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

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

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

architecture and user interfaces were designed based on the Company’s

collective experience with global Fortune 500 companies over the past 40 years combined with UX design concepts.

The platform’s

framework allows auto captive and asset finance companies to rapidly transform legacy driven technology into a state-of-the-art IT and

business process environment.

At the core of the NFS Ascent ®

platform, is a lease

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

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

platform, is a lease accounting and contract processing engine,

which allows for an array of interest calculation methods, as well as robust accounting of multi-billion-dollar lease portfolios in compliance

with various regulatory standards.

NFS Ascent ®

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

voluminous data in a hyper speed environment.

, with its distributed and clustered deployment across parallel application

and high-volume data servers, enables finance companies to process voluminous data in a hyper speed environment.

NFS Ascent ®

has been developed using the latest tools and technologies

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

performance, fault tolerance and security.

has been developed using the latest tools and technologies and its n-tier SOA architecture allows the system to greatly improve

a myriad of areas including, but not limited to, scalability, performance, fault tolerance and security.

Pricing models for NFS Ascent ®

are also available on a software as a

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

Subscription-based

pricing is being offered on a monthly, quarterly or annual basis and decreases the cost of the initial buy-in for new customers

while providing an alternative to current customers seeking lower software usage and maintenance costs.

are also available on a software as a service (“SaaS”) or subscription-based pricing as an alternative to the traditional

license model.

Subscription-based pricing is being offered on a monthly, quarterly or annual basis and decreases the cost of the initial

buy-in for new customers while providing an alternative to current customers seeking lower software usage and maintenance costs.

Digital enables a sales force for a finance and leasing company to access different channels like point of sale, field investigation

1 unchanged sentence

Mobility Orchestration System

is a digital platform that helps automotive asset-holders (auto-manufacturers, auto-captives and fleet owners) and start-ups to

launch, orchestrate and scale mobility businesses.

Otoz platform is built on cutting-edge technology stack which comprises of

Cloud-Native Architecture, Microservices, Artificial Intelligence, Machine Learning, Blockchain, DevOps and APIs.

Otoz powerful

feature-set allows automotive asset-holders with the ability to orchestrate a range of car-share and vehicle subscription services.

The data-driven nature of platform empowers automotive asset-holders to maximize optimize and utilize mobility offerings.

enables customers to book car-share and subscribe to vehicles through its intuitive, digital, and easy to use interface.

driven architecture allows quick integration of ecosystem partners such as maintenance, roadside and offline jobs providers to

allow seamless operation of mobility services.

North America, NTA has and continues to develop the LeasePak CMS product which is now tailored to be an offering on the Microsoft

LeasePak streamlines the lease and loan management lifecycle, enabling superior portfolio management, flexible

financial products (lease or loan terms) and sophisticated financial analysis and management to reduce operating costs, simplify

accounting and improve profits.

It is scalable from a basic offering to a collection of highly specialized add on modules for

systems, portfolios and accounting methods for virtually all sizes and complexity of operations.

It is the centerpiece of vehicle

leasing infrastructure at leading Fortune 500 banks and Automotive Captives, as well as for some of the industry’s leading

independent lessors.

It handles every aspect of the lease or loan lifecycle, including credit application origination, credit

adjudication, pricing, documentation, booking, payments, customer service, collections, midterm adjustments, and end-of-term options

for asset disposition and remarketing.

is a digital platform that helps automotive asset-holders (auto-manufacturers, auto-captives and fleet owners) and start-ups to launch,

orchestrate and scale mobility businesses.

Otoz platform is built on cutting-edge technology stack which comprises of Cloud-Native Architecture,

Microservices, Artificial Intelligence, Machine Learning, Blockchain, DevOps and APIs.

Otoz powerful feature-set allows automotive asset-holders

with the ability to orchestrate a range of car-share and vehicle subscription services.

The data-driven nature of platform empowers automotive

asset-holders to maximize optimize and utilize mobility offerings.

Otoz enables customers to book car-share and subscribe to vehicles

through its intuitive, digital, and easy to use interface.

An API driven architecture allows quick integration of ecosystem partners

such as maintenance, roadside and offline jobs providers to allow seamless operation of mobility services.

North America, NTA has and continues to develop the LeasePak CMS product which is now tailored to be an offering on the Microsoft Azure™

LeasePak streamlines the lease and loan management lifecycle, enabling superior portfolio management, flexible financial products

(lease or loan terms) and sophisticated financial analysis and management to reduce operating costs, simplify accounting and improve

It is scalable from a basic offering to a collection of highly specialized add on modules for systems, portfolios and accounting

methods for virtually all sizes and complexity of operations.

It is the centerpiece of vehicle leasing infrastructure at leading Fortune

500 banks and Automotive Captives, as well as for some of the industry’s leading independent lessors.

It handles every aspect of

the lease or loan lifecycle, including credit application origination, credit adjudication, pricing, documentation, booking, payments,

customer service, collections, midterm adjustments, and end-of-term options for asset disposition and remarketing.

LeasePak-SaaS

also offers the LeasePak SaaS business line, which provides high performance with a reduced total cost of ownership.

a proven deployment option whereby customers only require access to the internet to use the software.

With an elastic cloud price,

revenue stream predictability and improved return on investment for customers, management believes that its SaaS customers will

experience the performance, the reliability and the speed usually associated with a highly scalable private cloud.

LeasePak-SaaS

targets small and mid-sized leasing and finance companies.

SaaS offers a proven

deployment option whereby customers only require access to the internet to use the software.

With an elastic cloud price, revenue stream

predictability and improved return on investment for customers, management believes that its SaaS customers will experience the performance,

the reliability and the speed usually associated with a highly scalable private cloud.

LeasePak-SaaS targets small and mid-sized leasing

and finance companies.

addition to offering NFS Ascent ®

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

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

to support web portals and an electronic data interchange manager to facilitate integration between funders and introducers.

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

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

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

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

portals and an electronic data interchange manager to facilitate integration between funders and introducers.

LoanSoft is similar to

LeaseSoft, but optimized for the consumer loan market.

below are a few of NetSol’s highlights for the quarter ended March 31, 2021:

leasing division of a mid-sized regional bank in the U.S.

went live with the SaaS version of our LeasePak solution.

generated over $1,000,000 of revenue by successfully implementing change requests from various customers across multiple regions.

started the NFS Ascent®

Retail implementation process for the subsidiary of a leading German Auto Manufacturer based in South

generated approximately $2,100,000 of license revenue with the renewal of our NFS CAP and CMS solutions with an existing customer

has identified the following material trends affecting NetSol.

1 unchanged sentence

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

Cloud demand for our solution is on the rise.

Cloud demand for our solutio n is on the rise.

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

Essentially, the

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

Essentially, 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.

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

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 U.S.

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.

China Pakistan Economic Corridor (CPEC), a Chinese investment initiative, 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.

or additional services and reflects

dealerships in the U.S.

reported record profits in 2020 even with reduced staff and a national recession.

degree to which the COVID-19 pandemic impacts our future business globally, results of operations and financial condition will depend

on future developments, which are uncertain, including but not limited to the duration, spread and severity of the pandemic, the

availability, adoption and efficacy of vaccines, government responses and other actions to mitigate the spread of and to treat COVID-19,

and when and to what extent normal business, economic and social activity and conditions resume.

are unable to predict the extent to which the pandemic impacts our customers and other partners and their financial conditions, but

adverse effects on these parties could also adversely affect us.

OEMs and auto sectors are experiencing a 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.

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.

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.

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

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

actions, including trade protection and national security policies of the U.S.

and Chinese governments, such as tariffs or bans could

in the future limit or prevent companies from transacting business with China and aggravate the global business environment.

IN FINANCIAL CONDITION

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

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

Ended March 31, 2021 Compared to the Quarter Ended March 31, 2020

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

31, 2021 and 2020 as a percentage of revenues.

For the Three Months

Ended March 31,

Net Revenues:

Subscription and

- related party

Subscription and support

Services - related party

Total net revenues

1 unchanged sentence

Salaries and consultants

Depreciation and

cost of revenues

Depreciation and amortization

Total cost of revenues

Operating expenses:

Selling and marketing

Depreciation and

Depreciation and amortization

General and administrative

and development cost

operating expenses

Income from operations

Other income and

Gain (loss) on sale

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign

currency exchange transactions

Share of net loss

from equity investment

other income (expenses)

Net income (loss)

before income taxes

tax provision

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling

income (loss) attributable to NetSol

Non-controlling interest

Net income (loss) attributable to NetSol

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”

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.

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 U.S.

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.

In the table below, we present the change based on actual results in reported

currency and in constant currency.

(Unfavorable)

3 unchanged sentences

(Unfavorable)

Ended March 31,

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:

Income (loss) from operations

revenues for the quarter ended March 31, 2021 and 2020 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,

fees for the three months ended March 31, 2021 were $2,120,963 compared to $93,076 for the three months ended March 31, 2020 reflecting

an increase of $2,027,887 with a change in constant currency of $1,958,142.

During the three months ended March 31, 2021, we recognized

approximately $2,100,000 related to a license agreement with an existing tier one finance company in Thailand for out CAP and CMS solutions.

and support fees for the three months ended March 31, 2021 were $5,674,776 compared to $5,153,692 for the three months ended March 31,

2020 reflecting an increase of $521,084 with a change in constant currency of $462,578.

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

fees begin once a customer has “gone live”

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 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

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 three months ended March 31, 2021 was $5,988,257 compared to $8,222,227 for the three months ended March 31, 2020 reflecting

a decrease of $2,233,970 with a decrease in constant currency of $2,295,498.

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 process.

related party

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 $6,042,309, 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 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 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

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

income from related party for the three months ended March 31, 2021 was $Nil compared to $61,842 for the three months ended March 31,

2020 reflecting a decrease of $61,842 with a change in constant currency of $61,842.

The decrease in related party service revenue is

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

gross profit was $6,425,448, for the three months ended March 31, 2021 compared with $6,022,238 for the three months ended March 31,

This is an increase of $403,210 with a change in constant currency of $232,192.

The gross profit percentage for the three months

ended March 31, 2021 also increased to 46.6% from 44.5% for the three months ended March 31, 2020.

The cost of sales was $7,358,548 for

the three months ended March 31, 2021 compared to $7,508,599 for the three months ended March 31, 2020 for a decrease of $150,051 and

on a constant currency basis a decrease of $168,812.

As a percentage of sales, cost of sales decreased from 55.5% for the three months

ended March 31, 2020 to 53.4% for the three months ended March 31, 2021.

and consultant fees increased by $521,864 from $4,850,438 for the three months ended March 31, 2020 to $5,372,302 for the three months

ended March 31, 2021 and on a constant currency basis increased $507,676.

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 35.9%

for the three months ended March 31, 2020 to 39.0% for the three months ended March 31, 2021.

expense was $151,075 for the three months ended March 31, 2021 compared to $1,052,033 for the three months ended March 31, 2020 for a

decrease of $900,958 with a decrease in constant currency of $910,293.

The decrease in travel expense is due to the travel restrictions

associated with the COVID-19 pandemic.

and amortization expense increased to $759,768 compared to $737,637 for the three months ended March 31, 2020 or an increase of $22,131

and on a constant currency basis an increase of $35,712.

expenses were $5,963,229 for the three months ended March 31, 2021 compared to $6,398,300, for the three months ended March 31, 2020

for a decrease of 6.8% or $435,071 and on a constant currency basis a decrease of 7.1% or $456,508.

As a percentage

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

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

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.

As a percentage of sales, it decreased

from 47.3% to 43.3%.

The decrease in operating expenses was primarily due to decreases in the general administrative expenses and research

and development costs.

and administrative expenses were $3,860,509 for the three months ended March 31, 2021 compared to $4,151,394 for the three months ended

March 31, 2020 or a decrease of $290,885 or 7.0% and on a constant currency basis a decrease of $282,262 or 6.8%.

The decrease is primarily

due to a reduction of approximately $200,000 related to the decrease in the provision for doubtful accounts and approximately $175,000

related to reduced travel expenses, offset by approximately $68,000 increase in salaries.

Research and Development costs decreased $218,372

from $453,050 for the three months ended March 31, 2020 to $234,678 for the three months ended March 31, 2021 and on a constant currency

basis decreased $216,814.

from Operations

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.

from operations was $462,219 for the three months ended March 31, 2021 compared to a loss of $376,062 for the three months ended March

This represents an increase of $838,281 with an increase of $688,700 on a constant currency basis for the three months ended

March 31, 2021 compared with the three months ended March 31, 2020.

As a percentage of sales, income from operations was 3.4% for the

three months ended March 31, 2021 compared to loss of 2.8% for the three months ended March 31, 2020.

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.

expense was $1,304,233 for the three months ended March 31, 2021 compared to other income of $2,063,506 for the three months ended March

This represents a decrease of $3,367,739 with a decrease of $3,453,699 on a constant currency basis.

The decrease is primarily due

to the interest income and foreign currency exchange transactions.

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.

receivable for the three months ended March 31, 2021 compared to $96,217 for the three months ended March 31, 2020.

The majority of the

contracts with NetSol PK are either in U.S.

dollars or Euros;

therefore, the currency fluctuations will lead to foreign currency exchange

gains or losses depending on the value of the PKR compared to the U.S.

dollar and the Euro.

During the 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,

During the three months ended March 31, 2021,

we recognized a loss of $1,825,349 in foreign currency exchange transactions compared to a gain of $1,770,894 for the three months ended

March 31, 2020.

During the three months ended March 31, 2021, the value of the U.S.

dollar and the Euro decreased 4.5% and 8.7%, 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.

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

dollar and the Euro increased 7.4% and 5.4%,

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.

the three months ended March 31, 2021, the net loss attributable to non-controlling interest was $351,939, compared to income of $468,286

for the three months ended March 31, 2020.

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

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 loss was $623,231 for the three months ended March 31, 2021 compared to net income of $1,000,807 for the three months ended March

This is a decrease of $1,624,038 with a decrease of $1,850,389 on a constant currency basis, compared to the prior year.

the three months ended March 31, 2021, the net loss per share was $0.05 for basic and diluted shares compared to net income per share

of $0.09 for basic and diluted shares for the three months ended March 31, 2020.

Months Ended March 31, 2021 Compared to the Nine Months Ended March 31, 2020

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

31, 2021 and 2020 as a percentage of revenues.

For the Nine Months

Ended March 31,

Net Revenues:

Subscription and

- related party

Subscription and support

Services - related party

Total net revenues

1 unchanged sentence

Salaries and consultants

Depreciation and

cost of revenues

Depreciation and amortization

Total cost of revenues

Operating expenses:

Selling and marketing

Depreciation and

Depreciation and amortization

General and administrative

and development cost

operating expenses

Income from operations

Other income and

Gain (loss) on sale

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign

currency exchange transactions

Share of net loss

from equity investment

other income (expenses)

Net income (loss)

before income taxes

tax provision

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling

income (loss) attributable to NetSol

$ (1,241,972 )

Non-controlling interest

Net income (loss) attributable to NetSol

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”

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.

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 U.S.

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.

In the table below, we present the change based on actual results in reported

currency and in constant currency.

(Unfavorable)

For the Six Months

For the Nine Months

Change due to

(Unfavorable)

Ended March 31,

Net Revenues:

3 unchanged sentences

Operating expenses:

Income (loss) from

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

Income (loss) from operations

revenues for the nine months ended March 31, 2021 and 2020 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

fees for the nine months ended March 31, 2021 were $4,710,942 compared to $2,733,998 for the nine months ended March 31, 2020 reflecting

an increase of $1,976,944 with a change in constant currency of $1,760,804.

During the nine months ended March 31, 2021, 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 approximately $2,100,000 related to an agreement with an existing tier one finance company in

During the nine months ended March 31, 2020, we recognized approximately $2,455,000 related to the DFS contract.

and support fees for the nine months ended March 31, 2021 were $16,571,441 compared to $14,864,804 for the nine months ended March 31,

2020 reflecting an increase of $1,706,637 with a change in constant currency of $1,798,851.

Subscription and support fees

begin once a customer has “gone live”

The increase in subscription and support

fees is due to going live with several markets related to the DFS contract and going live with the BMW contract.

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

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 nine months ended March 31, 2021 was $18,270,451 compared to $24,992,271 for the nine months ended March 31, 2020 reflecting

a decrease of $6,721,820 with a decrease in constant currency of $6,438,497.

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 process.

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

income from related party for the nine months ended March 31, 2021 was $Nil compared to $202,199 for the nine months ended March 31,

2020 reflecting a decrease of $202,199 with a change in constant currency of $202,199.

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

The decrease in related party service revenue

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

gross profit was $18,849,332, for the nine months ended March 31, 2021 compared with $19,934,826 for the nine months ended March 31,

This is a decrease of $1,085,494 with a change in constant currency of $1,219,820.

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

The gross profit percentage for the nine months

ended March 31, 2021 increased to 47.7% from 46.6% for the nine months ended March 31, 2020.

The cost of sales was $20,703,502 for the

nine months ended March 31, 2021 compared to $22,858,446 for the nine months ended March 31, 2020 for a decrease of $2,154,944 and on

a constant currency basis a decrease of $1,861,221.

As a percentage of sales, cost of sales decreased from 53.4% for the nine months

ended March 31, 2020 to 52.3% for the nine months ended March 31, 2021.

and consultant fees increased by $1,262,339 from $13,931,274 for the nine months ended March 31, 2020 to $15,193,613 for the nine months

ended March 31, 2021 and on a constant currency basis increased $1,469,590.

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 32.6%

for the nine months ended March 31, 2020 to 38.4% for the nine months ended March 31, 2021.

expense was $414,001 for the nine months ended March 31, 2021 compared to $3,967,591 for the nine months ended March 31, 2020 for a decrease

of $3,553,590 with a decrease in constant currency of $3,571,101.

The decrease in travel expense is due to the travel restrictions associated

with the COVID-19 pandemic.

and amortization expense decreased to $2,180,766 compared to $2,191,654 for the nine months ended March 31, 2020 or a decrease of $10,888

and on a constant currency basis an increase of $65,186.

expenses were $17,264,054 for the nine months ended March 31, 2021 compared to $20,033,108, for the nine months ended March 31, 2020

for a decrease of 13.8% or $2,769,054 and on a constant currency basis a decrease of 12.7% or $2,541,918.

As a percentage

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.

As a percentage of sales, it

decreased from 46.8% to 43.7%.

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 $426,187 or 8.2% and on a constant currency basis decreased $399,596 or 7.7%.

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.

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 $11,353,933 for the nine months ended March 31, 2021 compared to $12,638,797 for the nine months ended

March 31, 2020 for a decrease of $1,284,864 or 10.1% and on a constant currency basis a decrease of $1,081,337 or 8.6%.

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

$351,000 of reduced travel expenses, approximately $92,000 of reduced professional services, approximately $302,000 related to the decrease

in the provision for doubtful accounts and approximately $104,000 reduction in rent expense offset by an increase in salaries of approximately

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.

from operations was $1,585,278 for the nine months ended March 31, 2021 compared to a loss of $98,282 for the nine months ended March

This represents an increase of $1,683,560 with an increase of $1,322,098 on a constant currency basis for the nine months ended

March 31, 2021 compared with the nine months ended March 31, 2020.

As a percentage of sales, income from operations was 4.0% for the

nine months ended March 31, 2021 compared to a loss of 0.2% for the nine months ended March 31, 2020.

Income and Expense

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.

increase is primarily due to the foreign currency exchange transactions.

The majority of the contracts with NetSol PK are either

expense was $873,275 for the nine months ended March 31, 2021 compared to other income of $920,151 for the nine months ended March 31,

This represents a decrease of $1,793,426 with a decrease of $1,926,494 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 nine months ended March 31, 2021compared to $275,704 for the nine months ended March 31, 2020.

The majority of the

contracts with NetSol PK are either in U.S.

dollars or Euros;

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

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

therefore, the currency fluctuations will lead to foreign currency exchange

gains or losses depending on the value of the PKR compared to the U.S.

dollar and the Euro.

During the six months ended December 31, 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,

During the nine months ended March 31, 2021,

we recognized a loss of $1,515,327 in foreign currency exchange transactions compared to a gain of $71,765 for the nine months ended

March 31, 2020.

During the nine months ended March 31, 2021, the value of the U.S.

dollar and the Euro decreased 8.0% and 1.9%, 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.

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

dollar increased 2.0% and the value of the Euro

decreased 1.3%, respectively, compared to the PKR.

Non-controlling

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.

the nine months ended March 31, 2021, the net income attributable to non-controlling interest was $216,900, compared to a loss of $4,065

for the nine months ended March 31, 2020.

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

Income / Loss attributable to NetSol

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.

net loss was $147,781 for the nine months ended March 31, 2021 compared to a net loss of $241,565 for the nine months ended March 31,

This is a decrease in the net loss of $93,384 with an increase in the net loss of $412,673 on a constant currency basis, compared

to the prior year.

For the nine months ended March 31, 2021, net loss per share was $0.01 for basic and diluted shares compared to $0.02

for basic and diluted shares for the nine months ended March 31, 2020.

Financial Measures

S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,”

defines and prescribes the conditions

for use of non-GAAP financial information.

Our measures of adjusted EBITDA and adjusted EBITDA per basic and diluted share meet

the definition of a non-GAAP financial measure.

defines and prescribes the conditions for use

of non-GAAP financial information.

Our measures of adjusted EBITDA and adjusted EBITDA per basic and diluted share meet the definition

of a non-GAAP financial measure.

define the non-GAAP measures as follows:

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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

to investors regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for

monitoring our performance and evaluating it against industry peers.

The non-GAAP financial measures presented should be used

in addition to, and in conjunction with, results presented in accordance with GAAP, and should not be relied upon to the exclusion

of GAAP financial measures.

Management strongly encourages investors to review our consolidated financial statements in their

entirety and not to rely on any single financial measure in evaluating the Company.

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 to

investors regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for monitoring

our performance and evaluating it against industry peers.

The non-GAAP financial measures presented should be used in addition to, and

in conjunction with, results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures.

Management strongly encourages investors to review our consolidated financial statements in their entirety and not to rely on any single

financial measure in evaluating the Company.

non-GAAP measures reflect adjustments based on the following items:

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from net income or loss because doing so makes internal comparisons to our historical operating results more consistent.

we believe providing an EBITDA calculation is a more useful comparison of our operating results to the operating results of our

we believe providing an EBITDA calculation is a more useful comparison of our operating results to the operating results of our peers.

compensation expense :

We have excluded the effect of stock-based compensation expense from the non-GAAP adjusted EBITDA and

non-GAAP adjusted EBITDA per basic and diluted share calculations.

Although stock-based compensation expense is calculated in

accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results

because it is not an expense which generally requires cash settlement by NetSol, and therefore is not used by us to assess the

profitability of our operations.

We also believe the exclusion of stock-based compensation expense provides a more useful comparison

of our operating results to the operating results of our peers.

We have excluded the effect of stock-based compensation expense from the non-GAAP adjusted EBITDA and non-GAAP

adjusted EBITDA per basic and diluted share calculations.

Although stock-based compensation expense is calculated in accordance with

current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense

which generally requires cash settlement by NetSol, and therefore is not used by us to assess the profitability of our operations.

also believe the exclusion of stock-based compensation expense provides a more useful comparison of our operating results to the operating

results of our peers.

Non-controlling

We add back the non-controlling interest in calculating gross adjusted EBITDA and then subtract out the income taxes,

depreciation and amortization and net interest expense attributable to the non-controlling interest to arrive at a net adjusted

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

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

We add back the non-controlling interest in calculating gross adjusted EBITDA and then subtract out the income taxes, depreciation

and amortization and net interest expense attributable to the non-controlling interest to arrive at a net adjusted EBITDA.

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

GAAP measures for the three and nine months ended March 31, 2021 and 2020 are as follows:

For the Three Months Ended

For the Six Months Ended

Net Income (loss) attributable

$ (1,241,972 )

Non-controlling

Depreciation and

For the Nine Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Net Income (loss) attributable to NetSol

Non-controlling interest

Depreciation and amortization

Interest expense

stock-based compensation

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA, gross

Less non-controlling

Adjusted EBITDA,

Less non-controlling interest (a)

Adjusted EBITDA, net

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

Basic adjusted EBITDA

Diluted adjusted EBITDA

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

Net Income (loss) attributable to non-controlling interest

Depreciation and amortization

Interest expense

stock-based compensation

Adjusted EBITDA

of non-controlling interest

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA of non-controlling interest

AND CAPITAL RESOURCES

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 $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 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.

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.

cash position was $30,599,137 at March 31, 2021, compared to $20,166,830 at June 30, 2020.

cash provided by operating activities was $10,387,344 for the nine months ended March 31, 2021 compared to $411,119 for the nine months

ended March 31, 2020.

At March 31, 2021, we had current assets of $55,561,592 and current liabilities of $25,564,816.

We had accounts

receivable of $12,176,722 at March 31, 2021 compared to $11,414,257 at June 30, 2020.

We had revenues in excess of billings of $10,748,231

at March 31, 2021 compared to $18,506,733 at June 30, 2020 of which $946,184 and $1,300,289 is shown as long term as of March 31, 2021

and June 30, 2020, respectively.

The long-term portion was discounted by $75,727 and $41,286 at March 31, 2021 and June 30, 2020, respectively,

using the discounted cash flow method with interest rates ranging from 4.65% to 6.25% at March 31, 2021, and an interest rate of 4.35%

at June 30, 2020.

During the nine months ended March 31, 2021, 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 $6,996,037 from $29,920,990 at June 30, 2020 to $22,924,953 at March 31, 2021.

Accounts payable and accrued expenses, and

current portions of loans and lease obligations amounted to $6,156,782 and $12,634,914, respectively at March 31, 2021.

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

average days sales outstanding for the nine months ended March 31, 2021 and 2020 were 183 and 201 days, respectively, for each period.

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 $2,133,265 for the nine months ended March 31, 2021, compared to $1,577,465 for the nine months

ended March 31, 2020.

We had purchases of property and equipment of $2,109,058 compared to $1,011,285 for the nine months ended March

For the nine months ended March 31, 2021 and 2020, we invested $Nil and $600,000, respectively, in a short-term convertible

note receivable from WRLD3D.

For the nine months ended March 31, 2021 and 2020, we invested $155,500 and $Nil, respectively, in DriveMate.

cash provided by financing activities was $488,572 for the nine months ended March 31, 2021, compared to $18,080, for the nine months

ended March 31, 2020.

For the nine months ended March 31, 2021, we purchased 603,688 shares of our own stock for $2,064,800 compared

to $Nil for the same period last year.

The nine months ended March 31, 2021 included the cash inflow of $2,109,572 from bank proceeds

compared to $2,312,968 for the same period last year.

During the nine months ended March 31, 2021, we had net payments for bank loans

and finance leases of $533,344 compared to $422,051 for the nine months ended March 31, 2020.

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 from its

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

through our license, services, and subscription and support

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

As of December 31,

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

is held by our foreign subsidiaries.

As of June 30, 2020, we had approximately $20.2 million of cash, cash equivalents and marketable

securities of which approximately $18.2 million is held by our foreign subsidiaries.

through our license, services, and subscription and support agreements,

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

As of March 31, 2021, we had approximately

$30.6 million of cash, cash equivalents and marketable securities of which approximately $28.7 million is held by our foreign subsidiaries.

As of June 30, 2020, we had approximately $20.2 million of cash, cash equivalents and marketable securities of which approximately $18.2

million is held by our foreign subsidiaries.

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

The focus will remain on continuously improving

cash reserves internally and reduced reliance on external capital raise.

The focus will remain on continuously improving cash

reserves internally and reduced reliance on external capital raise.

a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans.

requirements for capital expenses vary from time to time, for the next 12 months, we anticipate needing $2 million for APAC, U.S.

and Europe new business development activities and infrastructure enhancements, which we expect to provide from current operations.

there is no guarantee that any of these methods will result in raising sufficient funds to meet our capital needs or that even

if available will be on terms acceptable to us, we will be very cautious and prudent about any new capital raise given the global

market uncertainties.

Although our requirements

for capital expenses vary from time to time, for the next 12 months, we anticipate needing $2 million for APAC, U.S.

and Europe new business

development activities and infrastructure enhancements, which we expect to provide from current operations.

there is no guarantee that any of these methods will result in raising sufficient funds to meet our capital needs or that even if available

will be on terms acceptable to us, we will be very cautious and prudent about any new capital raise given the global market uncertainties.

However, we are very conscious of the dilutive effect and price pressures in raising equity-based capital.

UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($410,959) which 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.

The Pakistani subsidiary, NetSol PK has an approved

facility for export refinance from Askari Bank Limited amounting to Rupees 500 million ($3,119,541) and a running finance facility

of Rupees 75 million ($467,931).

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

amounting to Rupees 900 million ($5,615,173).

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 ($2,370,850) and

a running finance facility of Rs.

120 million ($748,690) 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.

UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($410,959) which 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.

The Pakistani subsidiary, NetSol PK has an approved facility for

export refinance from Askari Bank Limited amounting to Rupees 500 million ($3,265,839) and a running finance facility of Rupees 75 million

NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 900 million

($5,878,511).

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

PK also has an approved export refinance facility of Rs.

380 million ($2,482,037) and a running finance facility of Rs.

120 million ($783,801)

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.

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

The maturity dates

of the borrowings of respective subsidiaries may accelerate if they do not comply with these covenants.

In case of any change

in control in subsidiaries, they may have to repay their respective credit facilities.

The maturity dates of the

borrowings of respective subsidiaries may accelerate if they do not comply with these covenants.

In case of any change in control in

subsidiaries, they may have to repay their respective credit facilities.

ACCOUNTING POLICIES

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as those that require application of management’s most difficult, subjective, or complex judgments.

Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject

to variations and may significantly affect our reported results and financial position for the period or in future periods.

in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition

and results of operations.

Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to

variations and may significantly affect our reported results and financial position for the period or in future periods.

Changes in underlying

factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of

Our financial statements are prepared in accordance with U.S.

GAAP, and they conform to general practices

in our industry.

We apply critical accounting policies consistently from period to period and intend that any change in methodology

occur in an appropriate manner.

There have been no significant changes to our accounting policies and estimates as discussed in

our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

GAAP, and they conform to general practices in our industry.

We apply critical accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate

There have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K

for the fiscal year ended June 30, 2020.

ACCOUNTING PRONOUNCEMENTS

information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial

statements, see Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements,

see Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Quantitative and Qualitative Disclosures about Market Risks.

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