What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-05-13 · 508 added, 1268 removed, 619 unchanged (74% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

March 31, 2021

June 30, 2020

and cash equivalents

receivable, net of allowance of $ 176,986 and $ 166,231

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

in excess of billings, net of allowance of $ 70,919 and $ 136,976

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

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

current assets

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 - long term

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

Revenues in excess of billings,

net - long term

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

Property and equipment, net

Right of use of assets - operating leases

Right of use of assets - operating

Long term investment

1 unchanged sentence

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

Unearned revenues

Common stock to be issued

Accounts payable and accrued

Current portion of loans and

obligations under finance leases

Current portion of operating

lease obligations

Total current liabilities

Loans and obligations under finance leases;

Loans and obligations under

finance leases;

less current maturities

Operating lease obligations;

lease obligations;

less current maturities

Total liabilities

Commitments and contingencies

Stockholders' equity:

and contingencies

Stockholders’

Preferred stock, $ .01 par value;

500,000 shares authorized;

Common stock, $.01 par value;

14,500,000 shares authorized;

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

stock, $ .01 par

14,500,000 shares

12,183,570 shares issued and 11,244,539

outstanding as of September 30, 2021 and 12,181,585

shares issued and 11,265,064

outstanding as of June 30, 2021

Additional paid-in-capital

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

2020, respectively)

Treasury stock (at cost, 939,031 shares and 916,521 shares as

of September 30, 2021 and June 30, 2021, respectively)

( 3,920,856 )

( 3,820,750 )

Accumulated deficit

1 unchanged sentence

( 38,801,282 )

Other comprehensive loss

comprehensive loss

( 34,013,886 )

( 31,868,481 )

Total NetSol stockholders' equity

Non-controlling interest

Total stockholders' equity

Total liabilities and stockholders' equity

Total NetSol stockholders’

Non-controlling

stockholders’ equity

liabilities and stockholders’ equity

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

3 unchanged sentences

For the Three Months

For the Nine Months

Ended March 31,

Ended September 30,

Net Revenues:

Subscription and support

Services - related party

Total net revenues

11 unchanged sentences

Other income and (expenses)

Gain (loss) on sale of assets

Loss on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Gain on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Net income before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

$ 1,000,807 #

Net income (loss) per share:

Net income (loss) per common share

Net income attributable to NetSol

Net income per share:

Net income per common share

Weighted average number of shares outstanding

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Consolidated Statements of Comprehensive Income (Loss)

For the Three Months

For the Nine Months

Ended March 31,

Net income (loss)

Other comprehensive income (loss):

For the Three

September 30,

comprehensive income (loss):

Translation adjustment

Translation adjustment attributable to non-controlling interest

Net translation adjustment

Comprehensive income (loss) attributable to NetSol

( 3,284,396 )

adjustment attributable to non-controlling interest

Net translation

( 2,145,405 )

Comprehensive

income (loss) attributable to NetSol

$ ( 1,957,436 )

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

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AND SUBSIDIARIES

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:

Stockholders'

September 30, 2020

$ 128,764,618

$ (1,920,645 )

$ (39,861,985 )

$ (33,210,231 )

Common stock issued for:

Purchase of treasury shares

Foreign currency

translation adjustment

Net income (loss) for the period

Balance at December 31, 2020

$ 128,823,181

$ (2,848,640 )

$ (40,104,089 )

$ (32,060,151 )

Consolidated Statement of Stockholders’ Equity

statement of the changes in equity for the three months ended September 30, 2021 is provided below:

Stockholders’

June 30, 2020

Balance at June 30, 2021

$ 129,018,826

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Purchase of treasury shares

Foreign currency

translation adjustment

Net income for the period

Balance at September 30, 2020

$ 128,764,618

$ (1,920,645 )

$ (39,861,985 )

$ (33,210,231 )

effect adjustment relates to the adoption of Accounting Standard Update No.

2016-13, Financial Instruments –

Credit Losses

Measurement of Credit Losses on Financial Instruments.

Refer to Note 2 –

Accounting Policies for more information.

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

TECHNOLOGIES, INC.

AND SUBSIDIARIES

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

Foreign currency translation adjustment

( 2,145,405 )

1 unchanged sentence

( 3,284,396 )

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

Stockholders'

Balance at September 30, 2021

3 unchanged sentences

$ ( 34,013,886 )

Common stock issued for:

Dividend to non-controlling interest

Foreign currency translation adjustment

Net income (loss) for the period

Balance at December 31, 2019

$ 128,197,589

$ (1,455,969 )

$ (36,448,870 )

$ (30,456,632 )

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

5 unchanged sentences

$ ( 34,085,047 )

Exercise of subsidiary common stock options

Cumulative effect adjustment (1)

( 6,309,722 )

( 6,784,300 )

Subsidiary common stock issued for:

Common stock issued for:

Purchase of treasury shares

Foreign currency translation adjustment

Net loss for the period

Balance at September 30, 2020

7 unchanged sentences

Consolidated Statements of Cash Flows

For the Nine Months

Ended March 31,

For the Three Months

Ended September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile

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

Adjustments to reconcile net income to net cash provided by operating

Depreciation and amortization

1 unchanged sentence

Share of net loss from investment under equity method

(Gain) loss on sale of assets

Loss on sale of assets

Stock based compensation

1 unchanged sentence

Accounts receivable

Accounts receivable - related party

( 2,034,434 )

Revenues in excess of billing

Revenues in excess of billing - related party

( 1,952,228 )

Other current assets

1 unchanged sentence

Unearned revenue

Net cash provided by operating activities

( 1,086,151 )

( 1,383,619 )

Net cash provided by (used in) operating activities

( 3,391,653 )

Cash flows from investing activities:

1 unchanged sentence

Sales of property and equipment

Convertible note receivable - related party

Investment in associates

1 unchanged sentence

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

Net cash provided by (used in) financing activities

Effect of exchange rate changes

( 2,653,648 )

Net increase (decrease) in cash and cash equivalents

( 6,705,278 )

Cash and cash equivalents at beginning of the period

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Consolidated Statements of Cash Flows (CONTINUED)

For the Nine Months

Ended March 31,

For the Three Months

Ended September 30,

SUPPLEMENTAL DISCLOSURES:

Cash paid during the period for:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

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.

4 unchanged sentences

and financial services industries worldwide.

The Company also provides system integration, consulting,

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

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

exchange for fees from customers.

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

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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, 2021.

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Technologies Americas, Inc.

(“NTA”)

Connect (Private), Ltd.

(“Connect”)

Technologies Australia Pty Ltd.

(“Australia”)

Technologies Europe Limited (“NTE”)

(“Australia”)

Technologies Europe Limited (“NTE”)

(Thailand) Co.

Limited (“NTPK Thailand”)

Technologies (Beijing) Co.

(“NetSol Beijing”)

(“AEL”)

Lease Services Holdings Limited (“VLSH”)

Lease Services Limited (“VLS”)

Lease Services (Ireland) Limited (“VLSIL”)

(“NetSol Beijing”)

Lease Services Holdings Limited (“VLSH”)

Lease Services Limited (“VLS”)

Lease Services (Ireland) Limited (“VLSIL”)

Majority-owned

Technologies, Ltd.

(“NetSol PK”)

Innovation (Private) Limited (“NetSol Innovation”)

Technologies Thailand Limited (“NetSol Thai”)

(“OTOZ”)

(Thailand) Limited (“OTOZ Thai”)

(“NetSol PK”)

Innovation (Private) Limited (“NetSol Innovation”)

Technologies Thailand Limited (“NetSol Thai”)

(Thailand) Limited (“OTOZ Thai”)

TECHNOLOGIES, INC.

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.

Below is the table of reclassified amounts:

For the Three Months Ended

For the Nine Months ended

March 31, 2020

Originally reported

Subscription and support

Services - related party

Total net revenues

2 – ACCOUNTING POLICIES

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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.

maintained in China are insured for RMB 500,000 ($ 77,399 ) in each bank and in UK for GBP 85,000 ($ 114,865 ) 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

As of September 30, 2021, and June 30, 2021, the Company had uninsured

deposits related to cash deposits in accounts maintained within foreign entities of approximately $ 25,245,529 and $ 31,662,035 , 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

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.

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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.

to Condensed Consolidated Financial Statements

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

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.

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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:

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

Company’s financial assets that were measured at fair value on a recurring basis as of September 30, 2021, were as follows:

SCHEDULE OF FAIR VALUE OF FINANCIAL ASSETS MEASURED ON RECURRING BASIS

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:

Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2021, were as follows:

Revenues in excess of billing - long term

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

reconciliation from June 30, 2021 to September 30, 2021 is as follows:

SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS RECONCILIATION

Revenues in excess of billings - long term

Fair value discount

Balance at June 30, 2021

Amortization during the period

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”

and ASC 815, “Derivatives and Hedging.”

Derivative liabilities are adjusted to reflect fair value

Balance at September 30, 2021

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

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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 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 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.

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:

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.

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.

Accounting Standards:

Standards Recently Issued but Not Yet Adopted by the Company:

August 2020, the FASB issued ASU No.

2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity” (“ASU 2020-06”).

ASU 2020-06 reduces the number of accounting models for convertible debt

instruments and convertible preferred stock and results in fewer instruments with embedded conversion features being separately recognized

from the host contract as compared with current standards.

Those instruments that do not have a separately recognized embedded conversion

feature will no longer recognize a debt issuance discount related to such a conversion feature and would recognize less interest expense

on a periodic basis.

Additionally, the ASU amends the calculation of the share dilution impact related to a conversion feature and eliminates

the treasury method as an option.

For instruments that do not have a component mandatorily settled in cash, the change will likely result

in a higher amount of share dilution in the calculation of earnings per share.

This ASU is effective for fiscal years (and interim periods

within those fiscal years) beginning after December 15, 2021, which for the Company is the first quarter of fiscal 2023, with early adoption

permitted beginning in the first quarter of fiscal 2022.

The Company is currently assessing the impact and timing of adoption of this

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

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

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

for recovery is considered remote.

March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial

Reporting , which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions

affected by reference rate reform if certain criteria are met.

The elective amendments provide expedients to contract modification, affected

by reference rate reform if certain criteria are met.

The expedients and exceptions provided by this guidance apply only to contracts,

hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference

rate expected to be discontinued as a result of reference rate reform.

This guidance is not applicable to contract modifications made

and hedging relationships entered into or evaluated after December 31, 2022.

The guidance can be applied immediately through December

The Company will adopt this standard when LIBOR is discontinued and does not expect a material impact to its financial condition,

results of operations or disclosures based on the current debt portfolio and capital structure.

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

3 – REVENUE RECOGNITION

16 unchanged sentences

(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

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

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

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

5 unchanged sentences

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.

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

for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance

post contract support and services in addition to the licenses.

The Company’s single performance obligation arrangements are typically

post contract support renewals, subscription renewals and services engagements.

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

for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance

obligation using its best estimate for the SSP.

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.

revenue 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 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.

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.

Contract Support

from support services and product updates, referred to as subscription and 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 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 licenses.

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 services.

19 unchanged sentences

Disaggregated

Company disaggregates revenue from contracts with customers by category —

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

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.

Company’s disaggregated revenue by category is as follows:

SCHEDULE OF DISAGGREGATED REVENUE BY CATEGORY

For the Three Months

For the Nine Months

Ended March 31,

Ended September 30,

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.

8 unchanged sentences

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

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 services.

1 unchanged sentence

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”

Although the Company has no history of selling its software separately from post contract 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 recognizes revenue from implementation and customization services using the percentage of estimated “man-days” that

the work requires.

4 unchanged sentences

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

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 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.

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,

2 unchanged sentences

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.

6 unchanged sentences

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

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

4 unchanged sentences

of a milestone.

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

March 31, 2021

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

OF REVENUES IN EXCESS OF BILLINGS AND DEFERRED REVENUE

September 30, 2021

June 30, 2021

Revenues in excess of billings

Deferred Revenue

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.

Unearned revenue

the three months ended September 30, 2021, the Company recognized revenue of $ 1,996,511 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.

2 unchanged sentences

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

Contracted but unsatisfied performance obligations were approximately $ 44,365,579 as of September 30, 2021, of which the Company estimates

to recognize approximately $ 14,599,321 in revenue over the next 12 months and the remainder over an estimated 6 years thereafter.

1 unchanged sentence

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.

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,

1 unchanged sentence

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.

2 unchanged sentences

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

are included in accounts receivable and deferred revenue.

are included in accounts receivable and unearned revenue.

Expedients and Exemptions

are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s

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

are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s

The Company has applied the following practical expedients:

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

transfer of the promised items to the customer.

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

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

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

These costs are recorded within sales and marketing expense in the

Consolidated Statement of Operations.

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

These costs are recorded within sales and marketing expense in the Consolidated

Statement of Operations.

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

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

5 unchanged sentences

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’s sales personnel are required to

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

TECHNOLOGIES, INC.

7 unchanged sentences

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

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

SCHEDULE OF COMPONENTS OF BASIC AND DILUTED EARNINGS PER SHARE

For the three months ended September 30, 2021

Basic income per share:

Net income available to common shareholders

Effect of dilutive securities

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:

Net income (loss) available to common shareholders

Diluted income per share

For the three months ended September 30, 2020

Basic income per share:

Net income available to common shareholders

Effect of dilutive securities

Diluted income (loss) per share

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,

Diluted income per share

5 – OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY

10 unchanged sentences

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.

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

equity section of the consolidated balance sheet were $ 34,013,886 and $ 31,868,481 as of September 30, 2021 and June 30, 2021, respectively.

During the three months ended September 30, 2021 and 2020, comprehensive income (loss) in the consolidated statements of comprehensive

income (loss) included a translation loss attributable to NetSol of $ ( 2,145,405 ) and a translation gain of $ 874,816 , respectively.

TECHNOLOGIES, INC.

1 unchanged sentence

6 – MAJOR CUSTOMERS

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

the three months ended September 30, 2021, revenues from Daimler Financial Services (“DFS”) and BMW Financial (“BMW”)

were $ 3,542,284 and $ 891,679 , respectively representing 26.4 % and 6.6 %, respectively of revenues.

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.

During the three months ended September

30, 2020 revenues from these two customers were $ 2,598,652 and $ 2,485,229 , respectively representing 20.6 % and 19.7 %, respectively of

The revenue from these customers are shown in the Asia – Pacific segment.

receivable from DFS and BMW at September 30, 2021, were $ 1,198,049 and $ 189,964 , respectively.

Accounts receivable at June 30, 2021,

were $ 462,861 and $ 35,063 , respectively.

Revenues in excess of billings at September 30, 2021 were $ 2,987,736 and $ 5,158,269 for DFS

and BMW, respectively.

Revenues in excess of billings at June 30, 2021, were $ 2,041,750 and $ 4,453,299 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 –

RELATED PARTY

7 – CONVERTIBLE NOTES RECEIVABLE – RELATED PARTY

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

3 unchanged sentences

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.

SCHEDULE OF CONVERTIBLE NOTES

March 2, 2018

5 unchanged sentences

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.

Less allowance for doubtful

( 4,250,000 )

Company has accrued interest of $ 701,062 at September 30, 2021 and June 30, 2021, which is included in “Other current assets”.

As of July 1, 2020, the Company stopped accruing interest.

TECHNOLOGIES, INC.

2 unchanged sentences

current assets consisted of the following:

March 31, 2021

June 30, 2020

OF OTHER CURRENT ASSETS

September 30,

Prepaid Expenses

3 unchanged sentences

Other Receivables

REVENUES IN EXCESS OF BILLINGS –

Due From Related Party

Less allowance for doubtful account

( 1,243,633 )

9 – REVENUES IN EXCESS OF BILLINGS – LONG TERM

in excess of billings, net consisted of the following:

March 31, 2021

June 30, 2020

SCHEDULE OF REVENUES IN EXCESS OF BILLINGS

September 30,

Revenues in excess of billings - long term

2 unchanged sentences

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.

During the three months ended September 30, 2021 and 2020, the Company accreted $ 9,502 and $ 14,060 , respectively, which

was recorded in interest income for that period.

The Company used the discounted cash flow method with interest rates ranging from 4.65 %

TECHNOLOGIES, INC.

2 unchanged sentences

and equipment consisted of the following:

March 31, 2021

June 30, 2020

SCHEDULE OF PROPERTY AND EQUIPMENT

September 30,

Office Furniture and Equipment

1 unchanged sentence

Assets Under Capital Leases

Capital Work In Progress

Accumulated Depreciation

2 unchanged sentences

Property and Equipment, Net

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

the three months ended September 30, 2021 and 2020, depreciation expense totaled $ 539,722 and $ 496,267 , respectively.

Of these amounts,

$ 325,451 and $ 274,477 , respectively, are reflected in cost of revenues.

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

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

OF FIXED ASSETS HELD UNDER FINANCE LEASES

September 30,

Computers and Other Equipment

2 unchanged sentences

lease term and discount rate were as follows:

March 31, 2021

SCHEDULE OF FINANCE LEASE TERM

September 30,

Weighted average remaining lease term - Finance leases

8 unchanged sentences

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.

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.

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

1 unchanged sentence

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.

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.

4 unchanged sentences

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.

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:

March 31, 2021

June 30, 2020

SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES

September 30,

Operating lease assets, net

Operating, current

Operating, non-current

Total Lease Liabilities

2 unchanged sentences

components of lease cost were as follows:

SCHEDULE OF COMPONENTS OF LEASE COST

For the Three Months

For the Nine Months

Ended March 31,

Ended September 30,

Amortization of finance lease assets

5 unchanged sentences

term and discount rate were as follows:

March 31, 2021

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

September 30,

Weighted average remaining lease term - Operating leases

1 unchanged sentence

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

For the Nine Months

Ended March 31

SCHEDULE OF SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION RELATED TO LEASES

For the Three Months

Ended September 30

Cash flows related to lease liabilities

Operating cash flows related to operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

of operating lease liabilities were as follows as of September 30, 2021:

SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

Within year 1

9 unchanged sentences

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

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

agreements provide for a fixed base rent and are currently on a month by month basis.

All leases are considered operating leases.

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.

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

For the three months ended September 30, 2021 and 2020, the

Company received lease income of $ 9,155 and $ 8,624 , respectively.

12 – LONG TERM INVESTMENT

Company and Drivemate Co., Ltd.

(“Drivemate”) entered into a subscription agreement on April 25, 2019, (“Drivemate

Agreement”) whereby the Company will purchase an equity interest of 30% in Drivemate.

Per the Drivemate Agreement, the Company

will purchase 5,469 preferred shares for $1,800,000 consisting of $500,000 cash and $1,300,000 in services.

The Company has paid $437,500

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

The remaining $62,500 will be paid in increments based on the

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

As of 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.

to Condensed Consolidated Financial Statements

(“Drivemate”) entered into a subscription agreement on April 25, 2019, (“Drivemate

Agreement”) whereby the Company purchased an equity interest of 30 % in Drivemate.

Per the Drivemate Agreement, the Company purchased

5,469 preferred shares for $ 1,800,000 consisting of $ 500,000 cash to be paid over a two-year period and $ 1,300,000 to be provided in

The Company has paid the $ 500,000 in cash and has provided services of $ 1,300,000 .

Pursuant to the agreement, the number of

shares to be issued is adjusted as necessary to result in an equity ownership equal to 30% of the issued and outstanding shares at the

final payment date.

As of September 30, 2021, the Company has been issued 8,178 shares equal to 30% 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 owns 30 % of Drivemate;

therefore, the Company accounts for the

investment using the equity method of accounting.

Company did no t provide any services during the three months ended September 30, 2021 and 2020.

the equity method of accounting, the Company recorded its share of net loss of $ 63,571 compared to its share of net income of $ 595 for

the three months ended September 30, 2021 and 2020, respectively.

WRLD3D-Related

4 unchanged sentences

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.

PK has no t provided services to WRLD3D for the three months ended September 30, 2021 and September 30, 2020.

Accounts receivable and

revenue in excess of billing were $ 1,373,099 and $ 8,163 at September 30, 2021, respectively.

The Company has established an allowance

for the full amounts of these accounts.

the equity method of accounting, the Company recorded its share of net loss of $ 97,394 and $ 108,445 for the three months ended September

30, 2021 and 2020, respectively.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

following table reflects the above investments at September 30, 2021.

SCHEDULE OF LONG TERM INVESTMENT

Gross investment

Cumulative net loss on investment

( 2,018,782 )

( 2,117,558 )

Cumulative other comprehensive income (loss)

2 unchanged sentences

assets consisted of the following:

March 31, 2021

June 30, 2020

SCHEDULE OF INTANGIBLE ASSETS

September 30,

Product Licenses - Cost

9 unchanged sentences

over the next 2.0 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.

to Condensed Consolidated Financial Statements

Amortization expense for the three months ended September 30, 2021 and 2020 was $ 440,284 and $ 432,772 , respectively.

Future Amortization

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

amortization expense of intangible assets is as follows:

SUMMARY OF ESTIMATED AMORTIZATION EXPENSE OF INTANGIBLE ASSETS

Period ended:

March 31, 2022

March 31, 2023

March 31, 2024

September 30, 2022

September 30, 2023

14 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses consisted of the following:

March 31, 2021

June 30, 2020

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Accounts Payable

6 unchanged sentences

payable and finance leases consisted of the following:

As of March 31, 2021

SCHEDULE OF COMPONENTS OF NOTES PAYABLE AND CAPITAL LEASES

As of September 30, 2021

D&O Insurance

Paycheck Protection Program Loans

Bank Overdraft Facility

5 unchanged sentences

Loan Payable Bank - Export Refinance III

Sale and Leaseback Financing

Term Finance Facility

3 unchanged sentences

D&O Insurance

Paycheck Protection Program Loans

Bank Overdraft Facility

5 unchanged sentences

Loan Payable Bank - Export Refinance III

Sale and Leaseback Financing

Term Finance Facility

1 unchanged sentence

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

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.

Government during

the COVID-19 Pandemic.

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

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.

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 September 30, 2021 and June 30, 2021.

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 $ 405,405 .

The annual interest rate was 5.12 %

as of September 30, 2021.

The total outstanding balance as of September 30, 2021 was £ Nil .

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 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

This 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.

September 30, 2021, NTE was in compliance with this covenant.

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 $ 405,405 .

The annual interest rate was 5.12 % as of September 30, 2021.

The total outstanding balance as of September 30, 2021 was £ Nil .

This overdraft facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200 % of the facility.

As of September 30, 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 COVID-19 pandemic.

This is a term loan payable in three years.

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 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.

217,248,351 or $ 1,270,755 , at September 30, 2021, of

which $ 990,623 is shown as current and the remaining $ 280,132 is shown as long term.

The availed facility amount was Rs.

or $ 1,648,818 , at June 30, 2021, of which $ 1,090,259 is shown as current and the remaining $ 558,559 is shown as long term.

rate for the loan was 3 % at September 30, 2021 and June 30, 2021.

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 $3,265,839 at March 31, 2021

total facility amount is Rs.

500,000,000 or $ 2,924,661 at September 30, 2021 and Rs.

500,000,000 or $ 3,162,555 at June 30, 2021.

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.

interest rate for the loan was 3 % at September 30, 2021 and June 30, 2021.

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 $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 March 31, 2021, NetSol

75,000,000 or $ 438,699 , at September

The balance outstanding at September 30, 2021 and June 30, 2021 was Rs.

The interest rate for the loan was 9.8 % and 9.5 %

at September 30, 2021 and June 30, 2021, respectively.

This facility

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

As of September 30, 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 $2,482,037 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.

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 $ 438,699 , at September 30, 2021.

The balance outstanding at September 30, 2021 and June 30, 2021 was Rs.

The interest rate for the loan was 9.8 % and 9.5 % at September 30, 2021 and June 30, 2021, respectively.

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

As of September 30, 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.

facility amount is Rs.

380,000,000 or $ 2,222,742 and Rs.

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

380,000,000 or $ 2,403,542 at September 30, 2021 and June 30, 2021, respectively.

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

The Company’s

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

facility amount is Rs.

or $ 759,013 ,

at September 30, 2021 and June 30, 2021, respectively.

The interest rate for the loan was 9.3 %

at September 30, 2021 and June 30, 2021, respectively.

The balance outstanding at September 30, 2021 and June 30, 2021 was Rs.

tenure of the loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a current ratio of 1:1, an

interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.

As of September 30,

2021, NetSol PK was in compliance with these covenants.

The Company’s

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

facility amount is Rs.

or $ 759,013 ,

at September 30, 2021 and June 30, 2021, respectively.

The interest rate for the loan was 9.3 %

at September 30, 2021 and June 30, 2021, respectively.

The balance outstanding at September 30, 2021 and June 30, 2021 was Rs.

tenure of the loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a current ratio of 1:1, an

interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.

As of September 30,

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 assets.

This is a revolving loan that matures every nine months.

The total facility amount is Rs.

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

500,000,000 or $2,975,483 at 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 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.

Total facility amount is Rs.

900,000,000 or $ 5,264,389 and Rs.

900,000,000 or $ 5,692,600 , at September 30, 2021 and June 30, 2021, respectively.

NetSol PK used Rs.

700,000,000 or $ 4,094,525 and Rs.

700,000,000 or $ 4,427,578 , at September 30, 2021 and June 30, 2021, respectively.

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

The Company’s subsidiary, NetSol PK, availed sale and

leaseback financing from First Habib Modaraba secured by the transfer of the vehicles’ title.

As of June 30, 2021, NetSol PK used

12,499,891 or $ 73,117 of which $ 47,054 was shown as long term and $ 26,063 as current.

As of June 30, 2021, NetSol PK used Rs.

or $ 85,313 of which $ 57,130 was shown as long term and $ 28,183 as current.

The interest rate for the loan was 9.0 % at September 30, 2021,

and June 30, 2021.

In March 2020, the Company’s subsidiary, VLS, entered

into a loan agreement.

The loan amount was £ 69,549 , or $ 93,985 , for a period of 5 years with monthly payments of £ 1,349 ,

As of September 30, 2021, the subsidiary has used this facility up to $ 49,021 , of which $ 29,613 was shown as long-term and

$ 19,408 as current.

As of June 30, 2021, the subsidiary has used this facility up to $ 55,182 , of which $ 35,538 was shown as long-term

and $ 19,644 as current.

The interest rate was 6.14 % at September 30, 2021 and June 30, 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.

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:

The Company’s subsidiary, VLS, finances Directors’

and Officers’ (“D&O”) liability insurance, and the $ 45,198 and $ 41,774 was recorded in current maturities, at September

30, 2021 and June 30, 2021, respectively.

The interest rate on this financing ranged from 9.7 % to 12.7 % as of September 30, 2021 and

was 9.7 % as of June 30, 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.

of assets under finance leases is included in depreciation expense for the three months ended September 30, 2021 and 2020.

is the aggregate minimum future lease payments under finance leases as of September 30, 2021:

SCHEDULE OF AGGREGATE FUTURE LONG TERM DEBT PAYMENTS

Minimum Lease Payments

7 unchanged sentences

Non-Current portion

16 - STOCKHOLDERS’

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 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

16 - STOCKHOLDERS’ EQUITY

the three months ended September 30, 2021, the Company issued 1,985 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 $ 12,009 .

the three months ended September 30, 2021, the Company purchased 22,510 shares of its own stock for $ 100,106 pursuant to the Company’s

stock repurchase plan.

17 – SHARE BASED PAYMENTS

following table summarizes stock grants awarded as compensation:

SUMMARY OF UNVESTED STOCK GRANTS AWARDED AS COMPENSATION

Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2021

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.

Forfeited / Cancelled

Unvested, September 30, 2021

the three months ended September 30, 2021 and 2020, the Company recorded compensation expense of $ 3,003 and $ 90,617 , respectively.

compensation expense related to the unvested stock grants as of September 30, 2021 was $ 28,450 which will be recognized during the fiscal

TECHNOLOGIES, INC.

24 unchanged sentences

consolidation.

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

March 31, 2021

June 30, 2020

following table presents a summary of identifiable assets as of September 30, 2021 and June 30, 2021:

SUMMARY OF IDENTIFIABLE ASSETS

September 30,

Identifiable assets:

2 unchanged sentences

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

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

SUMMARY OF INVESTMENT UNDER EQUITY METHOD

September 30,

Investment in associates under equity method:

3 unchanged sentences

to Condensed Consolidated Financial Statements

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

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

SUMMARY OF OPERATING INFORMATION

For the Three Months

For the Nine Months

Ended March 31,

Ended September 30,

Revenues from unaffiliated customers:

7 unchanged sentences

Corporate headquarters

$ (1,003,798 )

North America

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:

Depreciation and amortization:

North America

Asia - Pacific

Interest expense:

Corporate headquarters

North America

Asia - Pacific

Income tax expense:

Corporate headquarters

North America

Asia - Pacific

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

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

SUMMARY OF CAPITAL EXPENDITURES

For the Three Months

Ended September 30,

Capital expenditures:

North America

Asia - Pacific

20 – NON-CONTROLLING INTEREST IN SUBSIDIARY

1 unchanged sentence

The balance of non-controlling interest was as follows:

SCHEDULE OF BALANCE OF NON-CONTROLLING INTEREST

Non-Controlling Interest %

Non-Controlling Interest at

March 31, 2021

Non-Controlling

September 30, 2021

NetSol-Innovation

Non-Controlling Interest %

Non-Controlling Interest at

Non-Controlling

June 30, 2021

NetSol-Innovation

Company’s subsidiary, OTOZ, issued 19,633 shares to one of its employees as part of their employment agreement resulting in an

increase of non-controlling interest from 5.0 % to 5.59 %.

effective shareholding of the non-controlling interest for OTOZ Thai increased to 5.6 %.

TECHNOLOGIES, INC.

to Condensed Consolidated Financial Statements

21 – INCOME TAXES

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

11 unchanged sentences

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,

the three months ended September 30, 20120 and 2020, the Company recorded an income tax provision of $ 167,627 and $ 264,294 , respectively,

resulting in an effective tax rate of 23.3 % and 19.0 %, respectively.

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 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

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.

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.

Technologies, Inc.

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™

(NetSol Financial Suite) and NFS Ascent ®

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.

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:

Metropolitan area

Karachi, Bangkok, Beijing, Shanghai, Jakarta and Sydney

NetSol’s

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 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 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.

NFS Ascent ®

, with its distributed and clustered deployment across parallel application

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

NFS Ascent ®

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

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

Pricing models for NFS Ascent ®

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

license model.

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

and auditing as well as allowing end customers to access their contract details through a self-service mobile application.

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.

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.

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 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.

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

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

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.

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

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 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

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.

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

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 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 support

Services - related party

Total net revenues

Cost of revenues:

Salaries and consultants

Depreciation and amortization

Total cost of revenues

Operating expenses:

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

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

We operate in several geographical regions

as described in Note 19 “Operating Segments”

within the Notes to the Condensed Consolidated Financial Statements.

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 Three Months

Change due to

(Unfavorable)

Ended March 31,

Net Revenues:

Cost of revenues:

Operating expenses:

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 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.

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 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 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 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 $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

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.

We did not accrue any interest income on the convertible notes

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 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 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 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 $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 support

Services - related party

Total net revenues

Cost of revenues:

Salaries and consultants

Depreciation and amortization

Total cost of revenues

Operating expenses:

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

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

We operate in several geographical regions

as described in Note 19 “Operating Segments”

within the Notes to the Condensed Consolidated Financial Statements.

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 Nine Months

Change due to

(Unfavorable)

Ended March 31,

Net Revenues:

$ (3,081,041 )

$ (3,240,438 )

Cost of revenues:

Operating expenses:

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 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.

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 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 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 $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 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 46.8% 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%.

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 $1,585,278 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

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.

dollar and the Euro.

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 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 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

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.

define the non-GAAP measures as follows:

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

adjusted EBITDA is EBITDA plus stock-based compensation expense.

EBITDA per basic and diluted share –

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

and diluted shares outstanding.

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:

We report EBITDA as a non-GAAP metric by excluding the effect of net interest expense, income tax expense, depreciation and amortization

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 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.

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 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 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

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA, gross

Less non-controlling interest (a)

Adjusted EBITDA, net

Weighted Average number of shares outstanding

Basic adjusted EBITDA

Diluted adjusted EBITDA

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

Net Income (loss) attributable to non-controlling interest

Depreciation and amortization

Interest expense

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA of non-controlling interest

AND CAPITAL RESOURCES

cash position was $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 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.

a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans.

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 ($3,265,839) 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.

ACCOUNTING POLICIES

condensed consolidated financial statements are prepared applying certain critical accounting policies.

The SEC defines “critical

accounting policies”

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.

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

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.

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