UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 20172020

or

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-22773

NETSOL TECHNOLOGIES, INC.

(Exact nameName of Registrant as specified in its charter)

2402523975 Park Sorrento, Suite 410,250,

Calabasas, CA 91302

(Address of principal executive offices) (Zip code)

(818) 222-9195

(Issuer’s telephone number including area code)

SECURITIES REGISTERED UNDER SECTIONSecurities registered pursuant to Section 12(b) OF THE EXCHANGE ACT:of the Act:

COMMON STOCK, $.01 PAR VALUE

THE NASDAQ CAPITAL MARKET

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K(§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

The aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $50,679,647$40,605,532 based upon the closing price of the stock as reported on NASDAQ Capital Market ($5.24.0 per share) on December 31, 2016,2019, the last business day of the registrant’s second quarter. As of September 25, 2017,18, 2020, there were 11,114,59911,727,594 shares of common stock outstanding and no shares of its Preferred Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

(None)

ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES ACT OF 1934

TABLE OF CONTENTS AND CROSS REFERENCE SHEET

NOTE ABOUT FORWARD LOOKINGFORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to the development of the Company’s products and services and future operation results, including statements regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words “believe,” “expect,” “anticipate,” “intend,” variations of such words, and similar expressions, identify forward looking statements, but their absence does not mean that the statement is not forward looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect the Company’s actual results include the progress and costs of the development of products and services and the timing of the market acceptance. Forward looking statements may appear throughout this report, including without limitation, the following sections: Item 1 “Business,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risk and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

As used herein, “NetSol,“NETSOL,” “we”, “our,” and similar terms include NetSol Technologies, Inc. and its subsidiaries, unless the context indicates otherwise.

PART 1

ITEM 1 - BUSINESS

GENERAL

NetSol Technologies, Inc. (NasdaqCM:(Nasdaq CM: 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.

The 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^TM® for leading businesses in the global leasefinance and financeleasing industry.

NetSol’sNETSOL’s clients include blue chip organizations, Dow-Jones 30 Industrials, and Fortune 500 manufacturers and financial institutions, global vehicle manufacturers, and enterprise technology providers, all of which are serviced by NetSolNETSOL delivery locations around the globe.

Founded in 1997, NetSolNETSOL 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:

The Company continues to maintain services, solutions and/or sales specific offices in the USA, England, Pakistan,Australia, Thailand, China, Indonesia and Australia.Pakistan.

OUR BUSINESS

Company Business Model

NetSolNETSOL believes that strong technology solutions with provable returns on investment are required to sell to its globally competitive and mature marketplace. NetSolNETSOL believes that people are the drivers of success and we invest in hiring, training and retaining top-notch staff to ensure not only successful selling but also the ongoing satisfaction of our clients. Taken together, this “selling and attentive servicing” approach creates a distinctive advantage for NetSolNETSOL and a unique value for its customers. NetSolNETSOL continues to underpin this effective business model with a combination of careful cost arbitrage, subject matter expertise, domain experience, scalability and proximity with its global and regional customers.

Niche Market Focus

By specializing in leasing and financing solutions, we have gained footholds in several global locations and a market leading position in the captive auto-finance segment and a growing presence in the general asset finance space.

Subject Matter Expertise

NetSol’sOur dual expertise in enterprise technology implementation and financial application development has helped itus emerge as a global contender in the lease and finance industry and secure a broad footprint throughout the major markets of North America, Asia Pacific and Europe. The Asia Pacific operating region has particularly benefitted from the organic growth in the fast-developing leasing automation industry, which is still nascent by Western standards.

Domain Experience

NetSolNETSOL has a strong presence in the captive auto-finance domain. With a collective experience of over two decades in Asia Pacific and over three decades in North America and Europe, NetSolNETSOL is one of a few global competitors in this niche industry.

Proximity with Global and Regional Customers

The Company has offices across the world, located strategically to maintain close contact and proximity with its customers in various key markets. ItThis has helped in strengthening customer relationships and building a deeper understanding of local market dynamics. Simultaneously, the Company is able to extend services and even support development support through a combination of local/onsite and central/off-site resources. This approach allows the Company to offer blended rates to its customers by employing a unique and cost effectivecost-effective global development model.

While our business model is built around the development, implementation and maintenance of our suite of financial applications, under NFS™, NetSolNETSOL has employed the same facilities and competencies to extend its offerings into related segments, including:

Our global operation is broken down into three regions: North America, Europe and Asia Pacific. All of the subsidiaries are seamlessly integrated to function effectively with global delivery capabilities, cross selling to multinational asset finance companies, leveraging a centralized marketing and pre-sales organization and, a network of employees connected across the globe to support local and global customers and partners.

OUR SOLUTIONS

NetSol Financial Suite™NFS Ascent^®

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 coveringCovering the complete leasingfinance and financeleasing cycle starting from quotation origination through end of contract transactions, and including digital channel support with intuitive mobile applications. The four applications under NFS™ haveNFS Ascent^® has been designed and developed for a highly flexible setting and areis 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, theyThe solution fully automateautomates the entire leasing/financingfinancing/leasing cycle for companies of any size, including those with multi-billion dollarmulti-billion-dollar portfolios.

On October 24, 2013, we announced the introductionNFS Ascent^® is built on cutting-edge, modern technology that enables auto, equipment and releasebig-ticket finance companies to run their retail and wholesale finance business with ease. With comprehensive domain coverage and powerful configuration engines, it is architected to empower finance and leasing companies with a platform that supports their growth in terms of NFS Ascent™, thebusiness volume and transactions.

The Company’s next generation platform offeringoffers a technologically advanced solution for the auto and equipment finance and leasing industry. NFS Ascent’s™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™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 dollarmulti-billion-dollar lease portfolios in compliance with various regulatory standards. NFS Ascent™Ascent^®, with its distributed and clustered deployment across parallel application and high volumehigh-volume data servers, enables finance companies to process voluminous data in a hyper speed environment.

NFS Ascent™The Company’s premier solution 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. We believe that the transition from NFS™ to NFS Ascent™Ascent^® allows:

NFS™ and NFS Ascent™ have the following as their constituent applicationsASCENT:^®CONSTITUENT APPLICATIONS

Loan Origination System (LOS)Omni Point of Sale (Omni POS)

PointA highly agile, easy-to-use, web-based application - also accessible through mobile devices - Ascent’s Omni POS system delivers an intuitive user experience, with features that enable rapid data capture. Information captured at the point of Sale (POS)

POS is a front office processing system for companiessale can be made available to anyone in an organization at any point in the financial sector. It provides a quotation system which also incorporates a simulation for all kindslifecycle of financial products using a powerful built-in loan calculator.

Credit Application Processing System (CAP)

CAP provides companies in the financial sector with an environment to handle the incoming credit applications from dealers, agents, brokers and the direct sales force. CAP automatically gathers information from different interfaces like credit rating agencies, evaluation guides, and contract management systems and gives the applications a score against a user defined point scoring system. This automated workflow permits the credit team members to make their decisions more quickly and accurately. CAP is a database independent online system developed in Microsoft’s.Net framework. It can be run from any computer system with normal specifications, which is a key benefit for clients.each transaction.

Contract Management System (CMS)

CMS provides comprehensive business functionality that enables its users to effectivelyAscent’s Contract Management System (CMS) is a powerful, highly agile, functionally rich application for managing and smoothly managemaintaining detailed credit contracts throughout their lifecycle – from pre-activation and maintain a contract with the most comprehensive details throughout its life cycle. It provides interfaces with external systems such as banksactivation through customer management, asset financial management, billing and collections, finance and accounting, systems. CMS effectively maintains details of all business partners that do business with the company including, but not limited to, customers, dealers, debtors, guarantors, insurance companiesrestructuring and banks.maturity.

Wholesale Finance System (WFS)

WFS automatesThe Ascent Wholesale Finance System (WFS) provides a powerful, seamless and managesefficient system for automating and managing the entire lifecycle of wholesale finance. With floor plan/bailment activitiesplanning, dealer and inventory financing, it is ideal for a culture of dealerships through a finance company. The designcollaboration. Dealers, distributors, partners and anyone in the supply chain are empowered to realize the benefits of financing – and leverage the system is based on the conceptadvantages of one asset/one loan to facilitate asset tracking and costing.real-time business intelligence. The system covers credit limit, payment of loan, billingalso supports asset and settlement, stock auditing, online dealer and auditor access, and ultimately the pay-off functions.non-asset-based financing.

Dealer Auditor Access System (DAAS)

DAAS is a web-based solution that can be used in conjunction with WFS or any third partythird-party wholesale finance system. It addresses the needs of dealer, distributor and auditor access in a wholesale financing arrangement.

Fleet Management System (FMS)

FMS is designed to efficiently handle all fleet management needs. FMS is easily integrated with CMS and WFS as well as with any third party contract management system to ensure a single comprehensive system. FMS key features include: a detailed tracking of information on every driver and vehicle; customizable reports; periodic reporting on fleet related aspects; internet based access to information; integration with third party software; and, linkage to GPS for real time tracking.

NFS MobilityAscent^®On The Cloud

The Company’s premier, next generation solution NFS mobility enablesAscent^® is now also available on the Cloud at a sales forceSaaS/Subscription based pricing. With quick, seamless deployments and easy scalability, it is an extremely adaptive retail and wholesale platform for athe global finance and leasing company to access different channels like pointindustry. This cloud-version of sale, field investigation and auditing as well as allowing end customers to access their contract details through a self-service mobile application.NFS Ascent^® is offered via flexible, value-driven subscription-based pricing options.

Mobile AccountNFS Digital

The powerfulmAccountNFS Digital is a self-service mobile solution. It empowerscombination of our core strengths, domain and technology. Our insight into the dealerevolving landscape along with a commanding backend systemour valuable experience enables us to define sound digital transformation strategies and allowscompliment them with smart digital solutions so our customers always remain competitive and relevant to the customerdynamic environment. Our digital transformation solutions are extremely robust and can be used with or without our core, next-gen solution (NFS Ascent^®) to setup a secured accounteffectively augment and view information 24/7 to keep track of contract status, reducing inbound calls for customer queries and improving turnaround time for repayments.enhance our customer’s ecosystem.

OTOZ INC.

Otoz Mobility Orchestration System

Otoz is a subsidiary of NetSol Technologies, Inc. and provides customer-friendly, business-to-business, white-label solutions for mobility. Our suite of agile and configurable solutions includes a range of car-sharing and subscription products. With just over 16 months since its inception, Otoz’s team of 40 individuals from 7 nationalities has developed a product which has been benchmarked by a partner company of Google in the UK. Otoz has recorded strong interests from tier 1 auto-finance companies across the globe.

Otoz 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. Salient features are:

Mobile Point of SaleOtoz Mobility Orchestration System Applications:

Back Office

Otoz back-office consists of highly flexible and configurable modules that help manage and orchestrate mobility services. These modules include: Fleet Management, Trip Management, Communications Management, Notification Management, Payment Management, Member Management, Promotions and Discounts, WorkQueue and Template Management. In addition, Otoz back office provides insights related to market intelligence, business KPIs and car-usage analytics. The applicationmPOSback-office modules are configured according to client’s requirement and the module is a web and mobile enabled platform featuring a customizable home screen dashboard along with multiple quotation, application submission, work queues and detailed reporting to empower dealer networks in making the right decisions at the right time, in turn optimizing productivity.white-labelled as well.

Front Office

Mobile DealerApps

Mobile PlatformmDealer provides more visibilityOtoz offers its customers with native iOS and control over inventories –Android mobile apps. These apps serve as a channel to reach out to the end customers and offer multi-services on a single app.

Web Interface

Otoz offers a complete digital platform on a web-based front-office application. End customers of Otoz clients can visit the website to attain mobility services such as car-share, car subscription and rentals.

Chatbots

Otoz offers its client an AI powered chatbot that offers customers the ability to book a vehicle for their mobility needs on the chatbot. The chatbot is equipped with minimal effort. Dealerscomputer vision APIs that serve as a medium to verify customer’s documents. Customers can view their usepay through the chatbot and ultimately complete the booking. Otoz offers this chatbot as a white-label solution as well.

Artificial Intelligence Models

Otoz applications contain a suite of floor plan facility, stock statusAI models that makes the digital platform truly data driven in nature. Otoz has intelligence around, pricing, customer retention and financial conditions, while entering settlement requests or relocating assets.lifetime value, vehicle recommendations and customer segmentation. These models work seamlessly within the Otoz platform in harmony with other microservices. Team Otoz is working on packaging these AI models in a way to sell it independently to clients that requires only AI capability.

Super App

Otoz is a multi-service, multi-product platform comprising of various customer journeys such as car-share, car subscription, rentals, airport transfers, digital retail and more. Team Otoz has a product roadmap of building a Super App which will carry all services and features in one package; allowing our B2B customers to subscribe to different products on the go.

REGIONAL OFFERINGS

Mobile Auditor

ThemAuditor schedules visits, records audit exceptions and tracks assets for higher levels of transparency, in real time.

Mobile Field Investigator

By using Mobile Field Investigator (mFI), the applicant has access to powerful features that permit detailed verification on the go. The application features a reporting dashboard that displays progress stats, action items and latest notifications, enabling the client to achieve daily goals while tracking performance.

Regional NFS™ Offerings

While NFS Ascent™Ascent^® is designed to be a truly global solution ready for customization in any market, the Company has historically provided products tailored to various markets. As such, we offer the following additional regional products:

LeasePak

In North America, NetSol Technologies Americas, Inc. (NTA) has and continues to develop the LeasePak CMS product.product which is now tailored to be an offering on the Microsoft Azure™ cloud. LeasePak streamlines the lease and loan management lifecycle, enabling superior lease and loan portfolio management, flexible financial products (lease or loan terms) and sophisticated financial analysis and management to reducingreduce operating costs, simplify accounting and improve profits. It is scalable from a basic offering to a collection of highly specialized add on modules for systems, portfolios and accrualaccounting methods for virtually all sizes and varying complexity of operations. It is partthe centerpiece of the vehicle leasing infrastructure at leading Fortune 500 banks and manufacturers,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 asset disposition. It is also integrated with important partners in the asset-finance ecosystem, such as Vertex Series O.remarketing.

LeasePak Cloud - SaaS

NTA also offers the LeasePak Software-as-a-Service (“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.

LeaseSoft

In addition to offering NFS Ascent™Ascent^® to the EuropeEuropean market, NTE has some regional offerings, including:

Implementation ProcessIMPLEMENTATION PROCESS

The implementation process of our products can span from three to eighteen months depending upon the complexity and scope. The implementation process may also includesinclude related software services such as configuration, data migration, training, gaps development and any other additional third partythird-party interfaces. Even after implementation, customers seek enhancements and additions to improve their business processes. NetSolNETSOL charges these efforts in a man-day rate.

Post implementation, NetSolNETSOL consultants may remain at the client site to assist the customer in smooth operations. After this phase, the regular maintenance and support services phase for the implemented software begins. In addition to the daily rate paid by the customer for each consultant, the customer also pays for all the transportation related expenses, boarding of the consultants, and a living allowance. NetSol’sNETSOL’s involvement in all of the above steps is priced to bring value to our customers and increase our profitability from our interactions.

Cloud-enabled NFS Ascent^® solutions are offered via seamless and rapid deployments. The swift speed of implementations for our cloud ready products enables businesses to be more responsive and attain a competitive advantage.

Pricing and Revenue StreamsPRICING AND REVENUE STREAMS

The Company’s revenue streams occur through the following three main areas:

License fees in a single market can vary generally between $100,000based on relatively low cost for a simple SaaS minimal modulesarrangement to more than $2,000,000a multi-million-dollar fee for more robust multiple module implementations. There are various attributes which determine the level of complexity, a few of which are: number of contracts; size of the portfolio; business strategy of the customer; internal business processes followed by the customer; number of business users; amount of customization required; complexity of data migration and branch network of the customer.

The Company recognizes revenue from license contracts without major customization when a non-cancelable, non-contingent license agreement has been signed, delivery of the software has occurred,been delivered to the fee is fixed or determinable, and collectability is probable. However, revenue from sale of licenses with major customization, modification, and development is recognized on a percentage of completion basis.customer. Implementation related services, including configuration, data migration and third partythird-party interfaces are recognized in accordance withas the percentage of completion method.services are performed. Maintenance and support related services are then provided on a continued basis. The annual maintenance fee, which typically is an agreed upon percentage of overall monetary value of the license, then becomes an ongoing revenue stream realized on a yearly basis. Revenue from software services includes fixed price and time and materials-based contracts and is recognized in accordance withas the percentage of completion method using the output measure of “Unit of Work Completed.”

Joint Ventures

NetSol-Innovation

In November 2004, the Company entered into a joint venture agreement with 1insurer (formerly the Innovation Group) forming NetSol-Innovation (Pvt) Ltd., (“NetSol-Innovation”), a Pakistani company. NetSol-Innovation provides support services enabling 1insurer to scale solution delivery operations in key growth markets. NetSol-Innovation operations are centered in NetSol’s delivery center in Lahore, Pakistan. NetSol owns a majority of the venture. The entities share in the profits of the joint venture on the basis of their shareholding. The outsourcing model between 1insurer and NetSol involves services pertaining to business analyses, configuration, testing, software quality assurance, technical communication, research and development regarding its insurance platform, client support as well as project management for development of software for 1insurer.

Initiated with a 10-person outsourcing team in Lahore in February 2005, this arrangement has extended to 156 persons with the additional resources catering to the increased influx of outsourcing of configuration and testing assignments from 1insurer. Currently, prominent 1insurer’s customers being serviced from Lahore include GuideOne USA, Homesite USA, UPC USA and MDU UK.

Virtual Lease Services

Virtual Lease Services (VLS) is a joint venture partnership with NTE and Investec Bank. NetSol owns a majority of the venture. VLS provides an asset finance services proposition complementing our core solutions offerings. VLS provides three core services, covering business process outsourcing (BPO), provision of standby servicing to the securitization markets, and audit services. The cornerstone of VLS’s range of services is the BPO offering which provides portfolio management to a range of businesses, including start-ups, growth businesses, and those in run down mode. The BPO service also supports portfolio acquirers. VLS carries a Fitch ABS Primary Servicer Rating of “ABPS3”, upgraded from “ABPS3-” in October 2014.performed.

Additionally, in order to avoid lumpiness in its revenues and to ensure a predictable revenue base over coming years, the business has shifted to a new pricing strategy whereby the business is now offering its cloud ready products at SaaS/subscription-based pricing models. Rapid deployments coupled with affordable prices/payment schedules is expected to lead the business towards volume-based selling. Moreover, this value-driven pricing plan is intended to decrease the initial buy-in cost for new customers by eliminating heavy license fees and provides an alternative to current customers seeking lower software usage and maintenance costs.

ALLIANCES

Alliances

Daimler South East Asia Pte. Ltd. (“DSEA”), (through the regional office Daimler Financial Services (“DFS”) Africa Asia Pacific), has established a “Centre of Competence” (“CoC”) in Singapore to facilitate the regional companies in NFS™product related matters. The DSEA CoC is powered by highly qualified technical and business personnel. In conjunction with our Asia Pacific region, the CoC supports DFS companies in twelve different countries in Asia and Africa and this list can increase as more DFS companies from other countries opt for NFS Ascent™Ascent^®. In July 2004, the Company entered into a Frame Agreement with DFS for the Asia Pacific and Africa region. This agreement was renewed in 2008, 2010, 2013 and most recently in January 2016. The agreement serves as a guideline for managing the business relationship with DFS and the use of licensed NFS^TMproducts of the company by DFS and its affiliated companies.

Technical AffiliationsNETSOL has strategic partnerships with Microsoft and CGI pertaining to cloud-hosting activities for the Company’s cloud-based products. NETSOL hosts its cloud version of Ascent, NFS Ascent^® on the Cloud and LeasePak Cloud - SaaS in the high performance and cost-effective Microsoft Azure cloud environment. A quick start implementation program combined with hassle-free Microsoft Azure™ cloud connectivity ensures new clients see a time-to-value faster than ever before.

NETSOL and CGI agreed to promote each other for their respective products and services amongst their respective existing customers across various regions. NETSOL also utilizes CGI for managed services and cloud hosting related activities for NETSOL’s engagements with their customers in Europe particularly.

TECHNICAL AFFILIATIONS

The Company is a Microsoft Certified Silver Partner and an Oracle Certified Partner.

Marketing and SellingMARKETING AND SELLING

NetSolNETSOL management continues its optimism that the Company will experience ever increasing opportunities for its product and services offerings in 20172020 and beyond. The objective of the Company’s marketing program is to create and sustain preference and loyalty for NetSol.NETSOL. Marketing is performed at the corporate and business unit levels. The corporate marketing department has overall responsibility for communications, advertising, public relations and the website. In addition, corporate marketing oversees central marketing and communications programs for use by each of the business units.

Our dedicated marketing personnel, within the regions, undertake a variety of marketing activities, including sponsoring focused client events to demonstrate our skills and products, sponsoring and participating in targeted conferences and holding private briefings with individual companies. We believe that the industry focus of our sales professionals and our business unit marketing personnel enhances their knowledge and expertise in these industries and will generate additional client engagements.

The MarketsTHE MARKETS

NetSolNETSOL provides its services primarily to clients in global commercial industries. In the global commercial area, the Company’s service offerings are marketed to clients in a wide array of industries including, automotive, software, banks, higher education and financial services.

The Asian continent, including Australia and New Zealand, from the perspective of marketing, are targeted by the Asia Pacific Region from its Bangkok, Beijing, Jakarta, Lahore, Shanghai and LahoreSydney facilities. The marketing for our core offerings in the Americas and Europe is carried out from our Los Angeles Area and London Metropolitan areaArea offices, respectively.

PEOPLE AND CULTURE

The Company believes it has developed a strong corporate culture that is critical to its success. Its key values are delivering world-class quality software, client-focused timely delivery, leadership, long-term relationships, creativity, openness and transparency and professional growth. The services provided by NetSolNETSOL require proficiency in many fields, such as software engineering, project management, business analysis, technical writing, sales and marketing, and communication and presentation skills.

Due to the growing demand for our core offerings and IT services, retention of technical and management personnel is essential. We have enhanced the compensation structure for our technical teams and senior management to stay ahead of global and regional competition. As a result, we have improved ITOur employee turnover from almost 20%was under 10% in 2014 to less than 15% today2020 with a goal is to improvemaintain the turnover level to under 10% in thisduring the 2021 fiscal year and onwards. In addition, we are committed to improving key performance indicators such as efficiency, productivity and revenue per employee.

To encourage all employees to build on our core values, we reward teamwork and promote individuals that demonstrate these values. We believe that our growth and success are attributable in large part to the high caliber of our employees and our commitment to maintain the values on which our success has been based. We support gender diversity on a global basis. NetSolNETSOL is an equal opportunity employer with the largest concentration of female employees in Lahore, Pakistan and our U.S. headquarters.

NetSol

NETSOL believes it should give back to the community and employees as much as possible. Certain of our subsidiaries are located in regions where basic services are not readily available. Where possible, NetSolNETSOL acts to not only improve the quality of life of its employees but also the standard of living in these regions. Examples of such programs are:

There is significant competition for employees with the skills required to perform the services we offer. The Company runs an elaborate training program for different cadre of employees to cover technical skills and business domain knowledge, as well as communication, management and leadership skills. The Company believes that it has been successful in its efforts to attract and retain the highest level of talent available, in part because of the emphasis on core values, training and professional growth. We intend to continue to recruit, hire and promote employees who share our vision.

As of June 30, 2017,2020, we had approximately 1,4611,400 employees; comprised of 1,082 IT80% software engineers, programmers, project and technical personnel; and 380 non-IT personnel. The IT project and technical personnel include 766managers, quality assurance, sales, pre-sales, business development, dedicated employees dedicated to core NFS and NFS Ascent™, 151 employees dedicated to the joint venture with 1insurerAscent^® and 16520% non-IT personnel, and 140 plus employees supporting the regional offerings as well as IT consulting and services. None of our employees are subject to a collective bargaining agreement.

CompetitionCOMPETITION

Neither a single company, nor a small number of companies, dominate the IT market in the space in which the Company competes. A substantial number of companies offer services that overlap and are competitive with those offered by NetSol.NETSOL. Some of these are large include computer manufacturers and computer consulting firms that have greater financial resources than NetSolNETSOL and, in some cases, may have greater capacity to perform services similar to those provided by NetSol.NETSOL.

In the NFS™ business space, the barriers to entry are getting higher. The products are becoming more cutting-edge while richness in functionality is paramount. Older companies have prolonged the life of their legacy products by creating web-based front ends, while the core of the systems has not been re-engineered. In the case of NFS™, weWe compete chiefly against leading suppliers of IT solutions to the financialglobal asset finance and leasing industry, including names such as White Clarke Fimasys,Group, Alfa, Cassiopae, LineData, FIS, International Decision Systems (IDS), and Data Scan, Alfa, 3i Infotech, Finnone and Nucleus Software.Scan.

In the IT based business services areas, we compete with both smaller local firms and many global IT services providers, including names such as Wipro, InfoSys, Satyam Infoway, HCL and TCS (Tata Consulting).

Many ofOtoz competes in a niche space which has seen growth in the competitors of NetSolcompetition recently. Mature players include RideCell, Invers and Vulog that have longer operating history, larger client bases,been around for more than 7 years. These players dominate the market share in the US, Europe and longer relationships with clients, greater brand or name recognitionIndia. Recently, new players have emerged which includes Wunder Mobility and significantly greater financial, technical, and public relations resources than NetSol. Existing or future competitors may develop or offer servicesM-Tribes that are comparable or superior to ours at a lower price,focused towards micromobility and delivery-based services. Otoz competes with these companies over shared mobility offerings which could have a material adverse effectincludes P2P car-share, daily rentals, station-based car-share and free-float car-share. Otoz does not compete with the aforementioned players on our business, financial condition and results of operations.fleet management hardware. Lastly, Otoz also offers vehicle subscription SaaS platform for which it competes with Clutch Technologies.

CustomersCUSTOMERS

NetSolNETSOL’s solutions and services cater to a broad spectrum of finance and leasing businesses, from automotive captive finance companies to equipment finance and leasing companies to large regional banks.

NETSOL customers include world renowned auto manufacturers through their finance arms and large regional banks. In addition, NetSol provides offshore development and testing services to 1insurer, formerly Innovation Group Plc UK, and their blue chip global insurance customers through the NetSol-Innovation joint venture, which contributes about 8.67% of NetSol’s revenues. NetSolarms. NETSOL is also a strategic business partner for Daimler and BMW (which consists of a group of many companies in different countries), which accounts for 44.25%approximately 26.4% and 15.8% of our revenue.revenue for our fiscal year ended June 30, 2020, respectively. Other globally renowned auto captives that are customers of the Company include Toyota, Nissan, Ford, and FIAT.

Other customers of the Company include equipment finance and leasing companies and banks worldwide.

Global Operations and Geographic DataGLOBAL OPERATIONS AND GEOGRAPHIC DATA

The Company divides its operations into three regions: the Americas, Europe and Asia Pacific. The regions consist of individual subsidiaries which operate as autonomous companies and are strategically managed on a regional basis.

The Americas

At NTA, Mr. Jeffrey Bilbrey, formerly aPeter Minshall joined NetSol Technologies Americas, Inc. independent board member for three years and also(NTA) as executive Vice President at Majesco Softwarein August 2020 and Services, actsis responsible for the entire portion of NTA’s business operations. He brings over three decades of international experience in the financial services industry holding various senior leadership roles with Daimler Financial Services. Peter continues to be supported by Doug Jones as President.Vice President - Operations for NTA. Doug is a visionary, focused, and driven technology leader credited with shaping team performance to deliver best-in-class, leading web-based and embedded software applications for the finance and leasing industry.

Otoz CEO and Founder, Mr. Bilbrey brings 24 years of software product management, consulting services delivery and technology business operations leadership to NTA. His focusNaeem Ghauri is to expand the presencebased out of NetSol Thai offices located in Bangkok, Thailand. Co-founder and Chief Product Officer, Murad Baig is based out of NetSol London office. Co-founder and Chief Strategy Officer, Heidi Bauer is based out of the Americas region while assuring elevated service levels to all existing clients.U.S. where she leads global business development and sales.

Europe

Mr. Asad Ghauri leads our European market asis the President of Asia Pacific (APAC) and Group Managing Director.Director of Europe. Mr. Ghauri has a long history of experience in the Company, including a tenure as a board of director member, and vast experience in leading our Asia PacificAPAC unit. We believe this experience will be utilized to lead growth in Europe. The NTE entity is led by Mr. Tim O’Sullivan

Due to the demand for the Company’s premier solution NFS Ascent’s^® Wholesale Platform in Europe, the Company appointed Chris Mobley as Managing Director. Mr. O’Sullivan hasHead of NFS Ascent^® Wholesale Operations in Europe. Mobley brings over two decades of industry experience to NETSOL with an accomplished background and domain-specific knowledge and expertise within the necessary industry expertise and domain knowledge to servicewholesale finance space.

At the needsstarting of the European Market.previous financial year, NETSOL acquired the remaining stake in Virtual Lease Services (VLS), a UK-based portfolio and risk management servicing partner for business and consumer finance providers. By acquiring the remaining stake, NETSOL became the outright owner of the organization.

VLS is led by Ms. Louise Ikonomides. As Managing Director and founding shareholder of VLS, Ms. Ikonomides has been with VLS since its inception in 1999.

Asia Pacific Region

NetSolNETSOL Technologies, Ltd., (“NETSOL PK”) a majority owned subsidiary of the parent company is located in Lahore, Pakistan and is headed by Mr. Salim Ghauri as its CEO. Mr. Ghauri is a co-founder of NetSol TechnologiesNETSOL PK and has been with the Company since 1996. NETSOL PK is the “Center of Excellence” and state of the art facility for programming, R&D, global implementations and 24-hour support to our customers worldwide.

NetSolNETSOL Beijing entity is headed by Mr. Umar QadriHui Liang as President. Mr. QadriA two-decade long veteran of the tech industry, Liang brings his vast expertise to the Company. He has been with NetSolpreviously worked at Abeam Consulting, a Japanese consulting company specializing in enterprise solutions in a vast range of industries as well as for over five years where he has gained valuable experience in both technology and management.IBM Japan.

The Global Sales Division is headed by Mr. NaeemAsad Ghauri as President of Sales from the NetSol Thai offices located in Bangkok, Thailand.NETSOL Lahore office. Mr. Ghauri has been with NetSolNETSOL since 19992000 and has over 28 combined20 years of experience in business and IT. He is also a member of the board of directors of the parent Company.

The Asia Pacific region including Australia/New Zealand and the Middle East, is targetedsupported and clients serviced from the Asia PacificAPAC region offices located in Sydney, Beijing, China;Shanghai, Bangkok, Thailand;Indonesia, Lahore and Karachi, Pakistan.Karachi. While Lahore, Pakistan continues to be a mainstaynucleus of the Company’s delivery and research and development, Bangkok’s expanded sales operation and client relations facility has grown into a back-up to the Lahore facility. With the continued growth of the Chinese market, our Beijing office continues to expand as both a sales and support facility. Finally, the Asia Pacific region maintains and will establish offices through the region as is necessary to support its customers and to explore potential new markets.

Our Asia PacificAPAC Region accounted for approximately 81%71% of our revenues in 2017 and our North America and European regions together accounted for approximately 19% of our revenues in 2017.2020. Information regarding financial data by geographic areas is set forth in Item 7 and Item 8 of this Annual Report on form 10-K. See note 1921 of Notes to Consolidated Financial Statements under Item 8.

Intellectual PropertyINTELLECTUAL PROPERTY

The Company relies upon a combination of nondisclosure and other contractual arrangements, as well as common law trade secret, copyright and trademark laws to protect its proprietary rights. The Company enters into confidentiality agreements with its employees, generally requires its consultants and clients to enter into these agreements, and limits access to and distribution of its proprietary information. The NetSolNETSOL “N” logo and name, as well as the NFS logo and product name have been copyrighted and trademark registered in Pakistan. The NetSolNETSOL “N” logo and BestShoring® name has been registered with the U.S. Patent and Trademark Office. An application NFS Ascent^® has been filed to trademark the NFS Ascent™registered with the U.S. Patent and Trademark Office and is currently being processed.Office.. The Company intends to trademark and copyright its intellectual property as necessary and in the appropriate jurisdictions.

GOVERNMENTAL APPROVAL AND REGULATION

Current Company operations do not require specific governmental approvals. Like all companies, including those with multinational subsidiaries, we are subject to the laws of the countries in which the Company maintains subsidiaries and conducts operations. Pakistani law allows a tax exemption on income from exports of IT services and products up to 2018.2025. While foreign based companies may invest in Pakistan, repatriation of their investment, in the form of dividends or other methods, requires approval of the State Bank of Pakistan.

Available InformationAVAILABLE INFORMATION

Our website is located atwww.netsoltech.com, and our investor relations website is located athttp://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 atwww.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 Annual Report on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. 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 athttp://ir.netsoltech.com/governance-docs. The content of our websites areis not intended to be incorporated by reference into this Annual Report on Form 10-K 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.

ITEM 1A - RISK FACTORS

Not Applicable

ITEM 1A - RISK FACTORS1B – UNRESOLVED STAFF COMMENTS

Not Applicable.None

ITEM 2 - PROPERTIES

Our corporate headquarters are located in Calabasas, California where we lease 7,2105,000 square feet of office space. We own our Lahore Technology Campus which consists of approximately 140,000 square feet of computer and general office space. This includes the newly constructed buildingtwo adjacent five story buildings having a covered area of approximately 90,000 square feet with the capacity to house approximately 1,000 resources. In addition, we maintain leased office spacespaces in the UK, China, Australia, Thailand and a shared office in Indonesia. Our NTA office has been consolidated with the corporate headquarters. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.

ITEM 3 - LEGAL PROCEEDINGS

On October 27, 2015, a shareholder derivative lawsuit was filed inor about July 13, 2020, the California state court entitledMcArthur v Ghauri, et al., Case No. BC599020 (Los Angeles, Cty.), naming current and former members of the Company’s board of directors as defendants. The complaint alleges that the defendants breached their fiduciary duties. The Company was named as a nominal defendant onlyin a civil lawsuit based on an alleged breach of contract claim filed by Royal News Corp. d/b/a Royal Media Group (“RMG”). The lawsuit is captioned Royal News Corp. d/b/a Royal Media Group v. Netsol Techs., Inc., U.S. District Court Case No. 1:20-cv-05381-PAE (S.D.N.Y.) (the “Lawsuit”). On or about August 24, 2020, the Company and no damages are sought from it. On March 16, 2016, the parties in the California lawsuitRMG reached an agreement-in-principle providing for the settlement of that case.

On December 30, 2015, a virtually identical shareholder derivative lawsuit was filed in Nevada state court,Paulovits v. Ghauri, et al., Case No. CV15-02470 (Washoe Cty.). The Nevada complaint named the same defendants and was based on the same alleged facts as the earlier-filed California case. On April 29, 2016, the Company filed a motion to dismiss or stay the Nevada proceeding on multiple grounds, including that is it duplicative of the first-filed California action. On May 23, 2016, pursuant to the parties’ stipulation, the Nevada court ordered that matter to be stayed for a period of one year.

On June 15, 2016, the parties in the California and the Nevada cases jointly executed a Stipulation and Agreement of Settlement of Derivative Claims, which is intendedagreement to fully resolve both cases. Pursuant to the stipulationcase and subject toare in the court’s approval,process of documenting the agreement, which includes a release of each other from all obligations, contractual or otherwise, claims, disputes or other matters, in exchange for (i) a payment by the Company has agreed to adopt or maintain certain corporate governance measures,RMG in the amount of $100,000; and has agreed(ii) RMG dismissing the Lawsuit, with prejudice, pursuant to cause its insurers to pay plaintiff counsel’s fees and expenses in an aggregate amount not to exceed $175,000. On June 16, 2016, the California plaintiff filed a motion for preliminary approvalRule 41(a) of the derivative settlement.

Federal Rules of Civil Procedure. On May 30, 2017, Los Angeles Superior Court Judge Kenneth R. Freeman signed the Final Judgment and Order approving settlement and dismissingSeptember 22, 2020, a notice of dismissal with prejudice was filed with the shareholder derivative litigation involving the Company. The order became effective on June 29, 2017.

On April 7, 2017, Conister Bank Limited filed a complaint in the HighUnited States District Court Southern District of Justice Chancery Division, as claim no HC-2017-001045 against our subsidiary, Virtual Lease Services Limited (“VLS”). The complaint alleges that VLS was in willful default of their agreements with Conister Bank Limited by failing to fulfill its obligations under the agreements with Conister. The complaint alleges damages in excess of £200,000 (approximately $260,000).  VLS has responded to the complaint and its expenses are currently covered by available insurance.  VLS denies all claims and intends to vigorously defend the action.New York.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITY

(a) MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION - Common stock of NetSol Technologies, Inc. is listed and traded on NASDAQ Capital Market under the ticker symbol “NTWK”.

The table shows the high and low intra-day prices of the Company’s common stock as reported on the composite tape of the NASDAQ for each quarter during the last two fiscal years.

RECORD HOLDERS - As of September 25, 2017,18, 2020, the number of holders of record of the Company’s common stock was 162.149.

DIVIDENDS - The Company has not paid dividends on its Common Stock in the past two fiscal years.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN

The table shows information related to our equity compensation plans as of June 30, 2017:2020:

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

(b) RECENT SALES OF UNREGISTERED SECURITIES

None.

(c) ISSUER PURCHASES OF EQUITY SECURITIES

Effective July 30, 2020, the Company’s, Board of Directors authorized the repurchase of up to two million dollars’ worth of the Company’s issued and outstanding common shares. The repurchase plan is authorized commencing July 30, 2020, and ending December 24, 2020, subject to an additional six-month extension at the discretion of management. Although no shares were repurchased during fiscal year 2020, the Company purchased 147,052 shares at an average price of $3.16 per share subsequent to the fiscal year ended June 30, 2020.

ITEM 6 – SELECTED FINANCIAL DATA

Not applicable.

ITEM 7- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDResults RESULTS OF OPERATIONS

The following discussion is intended to assist in an understanding our financial position and results of operations for the year ended June 30, 2017.2020. It should be read together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.

A few of our highlights for 2016-2017the fiscal year ended June 30, 2020 were:

Our success, in the near term, will depend in large part on the Company’s ability to: (a) continue to grow revenues and improve profits, (b) adequately capitalize for growth in various markets and verticals, (c) make progress in the North American and European markets and, (d) continue to increase sales and marketing efforts in every market we operate.

Marketing and Business Development Activities

Management has developed and the board of directors has ratified, an aggressivea growth strategy aimed at increasing competitiveness, enhancing global delivery capabilities and increasing financial strength to become a leading global IT institution in the leasing and finance space.

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

Growth Prospects for NFS™NFS Ascent^®

Growth prospects for NFS™NFS Ascent^® are linked to the maturing of the product portfolio and its growing customer base across different geographic and product markets. NetSol isWe are eyeing key international markets for growth in sales. ItsOur sales strategy now carefully balances expansion into new geographic markets, including North and South America,the Americas, Europe, and further penetration of our leading position in Asia Pacific.

Growth in North America is expected to come from the potential market for replacement of legacy systems. NFS Ascent™Ascent^® is aimed at providing a highly flexible and robust solution based on the latest technology and advanced architecture for the North American customers looking to replace their legacy systems. We believe that NFS Ascent™Ascent^® can provide substantial competitive disruption to the market’s lagging technology provided by incumbent vendors. The existing customer base may also represent latent demand for increased service and maintenance revenues by offering business process optimization, customization and upgrade services.

Growth in Europe will come from the introduction of NFS Ascent^TM®, which will allow NTE to support larger organizations than those typically selecting the existing LeaseSoft product set, and also opens the door for European expansion. This willis designed to attract larger license and professional services revenues across a wider geography. In addition, leveraging the core strengths of NFS Ascent^TM® will increasingly provide opportunities in the automotive sector where NTE is currently underrepresented.

Growth in NetSol’sour traditionally strong base in Asia Pacific is expected through diversification across market segments to include new customers in related banking and commercial lending areas. At the same time, the existing customer base is tapped for increased service and maintenance revenues by offering enhanced features and new solutions to emerging customer needs. In addition, there is a potential for NFS Ascent^TM® in Asia Pacific in the form of existing customers who are looking for replacement of their current system.

In China, NetSol iswe are a de facto leader in the leasing and finance enterprise solution domain. With this position, NetSol continueswe continue to enjoy demand for the current NFS™ solution, as well as NFS Ascent™Ascent^®. NetSolWe will continue strengthening itsour position within existing multinational auto manufacturers, as well as, local Chinese captive finance and leasing companies. The Chinese auto leasing market is young and low on consumer penetration in comparison with the giant U.S. market. We see a tremendous opportunity to grow demand for our products widely and in new markets in China such as Shanghai.

In Thailand, NetSolwe established a sales headquarters, and client service center.center, as well as a headquarters for OTOZ. The NetSol Thai operation is the hub for NetSol Globalour global markets and directly supports all APAC markets including China, Indonesia and Australia. Our operation in Bangkok serves a very robust and growing market for leasing companies and regional banks.

MATERIAL TRENDS AFFECTING NETSOL

Management has identified the following material trends affecting NetSol.

Positive trends:

Negative trends:

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies for us include revenue recognition and multiple element arrangements, intangible assets, software development costs, and goodwill.

REVENUE RECOGNITION

The Company derives revenuesdetermines revenue recognition through the following steps:

The Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation) or an agent (net presentation) by evaluating the nature of its promise to the customer. Revenue is presented net of sales, value-added and other taxes collected from customers and remitted to government authorities.

The Company has two primary revenue streams: core revenue and non-core revenue.

Core Revenue

The Company generates its core revenue from the following sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) maintenance, which includes post contract support.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.

Non-Core Revenue

The Company recognizesgenerates its non-core revenue from license contracts without major customizationby providing business process outsourcing (“BPO”), other IT services and internet services.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, a non-cancelable, non-contingent license agreement has been signed, deliveryor as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the software has occurred,contract.

The Company’s contracts which contain multiple performance obligations generally consist of the feeinitial 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.

For 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.

Subscription

Subscription revenue is fixedrecognized 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 determinable,annual installments and collectability is probable. Deliverytypical payment terms provide that customers make payment within 30 days of invoice.

Software Licenses

Transfer of control for software is considered to have occurred upon electronic transfer of the license key that provides immediate availabilitydelivery of the product to the purchaser. Determining whether and when somecustomer. The Company’s typical payment terms tend to vary by region, but its standard payment terms are within 30 days of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue the Company reports.invoice.

If an arrangement does not qualify for separate accounting of the software license and consulting transactions, then new software license revenue is generally recognized together with the consulting services based on contract accounting using either the percentage-of-completion or completed contract method. Contract accounting is applied to any arrangements: (1) that include milestones or customer specific acceptance criteria that may affect collection of the software license fees; (2) where services include significant modification or customization of the software; (3) where significant consulting services are provided for in the software license contract without additional charge or are substantially discounted; or (4) where the software license payment is tied to the performance of consulting services.Maintenance

Revenue from consultingsupport services is recognizedand product updates, referred to as the services are performed for time-and-materials contracts. Revenue from training and development services is recognized as the services are performed.

Revenue from maintenance agreementsrevenue, is recognized ratably over the term of the maintenance agreement,period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product updates, maintenance releases and patches released during the term of the support period on a when-and-if available basis. The Company’s customers purchase both product support and license updates when they acquire new software 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.

Professional Services

Revenue from professional services is typically one year.comprised of implementation, development, data migration, training or other consulting services. Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments. The Company recognizes revenue for time-and-materials arrangements as the services are performed. In fixed fee arrangements, revenue is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the services project. Management applies judgment when estimating project status and the costs necessary to complete the services projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Services are generally invoiced upon milestones in the contract or upon consumption of the hourly resources and payments are typically due 30 days after invoice.

BPO and Internet Services

Revenue from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date as a percentage of total estimated labor hours for each contract. Internet services are invoiced either monthly, quarterly or half yearly in advance to the customers and revenue is recognized ratably overtime on a monthly basis.

Multiple Element ArrangementsSignificant Judgments

More judgments and estimates are required under Topic 606 than were required under Topic 605. Due 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.

Judgment is required to determine the SSP for each distinct performance obligation. The Company rarely licenses or sells products on a stand-alone basis, so the Company is required to estimate the range of SSPs for each performance obligation. In instances where SSP is not directly observable because the Company does not sell the license, product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. In making these judgments, the Company analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers.

The 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.

The stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when quoting prices to customers. Although the Company has no history of selling its software separately from maintenance and other services, the Company does have historical experience with amending contracts with customers to provide additional modules of its software or providing those modules at an optional price. This information guides the Company in assessing the stand-alone selling price of the Company’s software, since the Company can observe instances where a customer had a particular component of the Company’s software that was essentially priced separate from other goods and services that the Company delivered to that customer.

The Company recognized revenue from implementation and customization services using the percentage of estimated “man-days” that the work requires. The Company believes the level of effort to complete the services is best measured by the amount of time (measured as an employee working for one day on implementation/customization work) that is required to complete the implementation or customization work. The Company reviews its estimate of man-days required to complete implementation and customization services each reporting period.

Revenue is recognized over time for the Company’s subscription, maintenance 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.

If a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single arrangement. The Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

If a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company will consider all relevant facts and circumstances. Variable consideration will be estimated and included in the contract price only when it is probable that a significant reversal in the amount of revenue recognized will not occur.

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets (revenues in excess of billings), or contract liabilities (deferred revenue) on the Company’s Consolidated Balance Sheets. The Company records revenues in excess of billings when the Company has transferred goods or services but does not yet have the right to consideration. The Company records deferred revenue when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer.

Deferred Revenue

The Company may enter into multiple element revenue arrangements in which a customer may purchase a number of different combinations of software licenses, consulting services, maintenancetypically invoices its customers for subscription and support as well as trainingfees in advance on a quarterly or annual basis, with payment due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable license and development.services starting in future periods are included in accounts receivable and deferred revenue.

Practical Expedients and Exemptions

Vendor specific objective evidence (“VSOE”)There are several practical expedients and exemptions allowed under Topic 606 that impact timing of fair valuerevenue recognition and the Company’s disclosures. Below is a list of practical expedients the Company applied in the adoption and application of Topic 606:

Application

●     The Company does not evaluate a contract for each elementa significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.

●     The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less or the commissions are based on cashed received. These costs are recorded within sales and marketing expense in the priceConsolidated Statement of Operations.

●     The Company does not disclose the value of unsatisfied performance obligations for contracts for which the element is sold separately. The Company determinesrecognizes revenue at the VSOEamount to which it has the right to invoice for services performed (applies to time-and-material engagements).

Modified Retrospective Transition Adjustments

●     For contract modifications, the Company reflected the aggregate effect of fair value of each element based on historical evidence ofall modifications that occurred prior to the Company’s stand-alone sales of these elementsadoption date when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price to third-parties or from the stated renewal ratesatisfied and unsatisfied performance obligations for the elements contained in the initial software license arrangement. When VSOE of fair value does not exist for any undelivered element, revenue is deferred until the earlier of the pointmodified contract at which such VSOE of fair value exists or until all elements of the arrangement have been delivered. The only exception to this guidance is when the only undelivered element is maintenance and support or other services, then the entire arrangement fee is recognized ratably over the performance period.

COST OF REVENUEStransition.

Cost of revenues includes salaries and benefits for technical employees, consultant costs, amortization of capitalized computer software development costs, depreciation of computer and equipment, travel costs, and indirect costs such as rent and insurance.

ALLOWANCE FOR DOUBTFUL ACCOUNTSCosts to Obtain a Contract

The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio.does not have a material amount of costs to obtain a contract capitalized at any balance sheet date. In establishing thegeneral, we incur few direct incremental costs of obtaining new customer contracts. We rarely incur incremental costs to review or otherwise enter into contractual arrangements with customers. In addition, our sales personnel receive fees that we refer to as commissions, but that are based on more than simply signing up new customers. Our sales personnel are required allowance, management regularly reviews the composition of accounts receivableto perform additional duties beyond new customer contract inception dates, including fulfillment duties and analyzes customer credit worthiness, customer concentrations, current economic trends and changes in customer payment patterns. Reserves are recorded primarily on a specific identification basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.collections efforts.

INTANGIBLE ASSETS

Intangible assets consist of product licenses, renewals, enhancements, copyrights, trademarks, trade names, and customer lists. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We assess recoverability by determining whether the carrying value of such assets will be recovered through the discountedundiscounted expected future cash flows. If the future discountedundiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

SOFTWARE DEVELOPMENT COSTS

Costs incurred to internally develop computer software products or to enhance an existing product are recorded as research and development costs and expensed when incurred until technological feasibility for the respective product is established. Thereafter, all software development costs are capitalized and reported at the lower of unamortized cost or net realizable value. Capitalization ceases when the product or enhancement is available for general release to customers.

The Company makes on-going evaluations of the recoverability of its capitalized software projects by comparing the amount capitalized for each product to the estimated presentnet realizable value of future net income from the product. If such evaluations indicate that the unamortized software development costs exceed the presentnet realizable value, of expected future net income, the Company writes off the amount which the unamortized software development costs exceed such presentnet realizable value. Capitalized and purchased computer software development costs are being amortized ratably based on the projected revenue associated with the related software or on a straight-line basis.

STOCK-BASED COMPENSATION

The Company records stockOur stock-based compensation in accordance with ASC 718,Compensation – Stock Compensation. ASC 718 requires companies to measure compensation cost for stock employee compensation at fair valueexpense is estimated at the grant date based on the award’s fair value as calculated by the Black-Scholes-Merton (BSM) option pricing model and recognize theis recognized as expense over the employee’s requisite service period. The Company recognizesBSM model requires various highly judgmental assumptions including expected volatility and expected term. If any of the assumptions used in the statement of operationsBSM model changes significantly, stock-based compensation expense may differ materially in the grant-date fair value of stock optionsfuture from that recorded in the current period. In addition, we are required to estimate the expected forfeiture rate and other equity-based compensation issuedonly recognize expense for those shares expected to employees and non-employees.vest. We estimate the grant date fair valueforfeiture rate based on historical experience and our expectations regarding future pre-vesting termination behavior of employees. To the extent our stock options using the Black-Scholes option-pricing model with the assumptions of expected term, expected volatility, risk-free interestactual forfeiture rate and expected dividend. Each of these assumptions is subjective and generally requires significant judgment to determine. We estimate the volatility usingdifferent from our own common stock data.estimate; stock-based compensation expense is adjusted accordingly.

GOODWILL

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase businesses combination. Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

The source Fair value of the Company’s goodwill relatesreporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to the acquisition of four companies. NetSol PK operates in the Asia Pacific region; CQ Systems (now NetSol Technologies Europe Limited) and VLS both operate in Europe; and McCue Systems (now NetSol Technologies Americas, Inc.) operates in the North American region. All these geographies are considered as different reporting segments. Goodwill arising from the acquisition of these companies has been allocated to their respective geographical segments to which they relate. While identifying reporting segments, we take into consideration the reports reviewed by the CEO (chief operating decision maker). As our financial reports are analyzed on this regional basis, we have defined this as segment reporting for purposes of goodwill impairment testing. The Company tests for goodwill impairment at each reporting unit.be performed.

Recent Accounting Pronouncement

See Note 2 “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, for a full description of recent accounting pronouncements, including the expected dates of adoption.

RESULTS OF OPERATIONS

THE YEAR ENDED JUNE 30, 20172020 COMPARED TO THE YEAR ENDED JUNE 30, 20162019

The following table sets forth the items in our consolidated statement of operations for the years ended June 30, 20172020 and 20162019 as a percentage of revenues.

A significant portion of our business is conducted in currencies other than the U.S. dollar. We operate in several geographical regions as described in Note 1921 “Segment Information and Geographic Areas” within the Notes to the Consolidated Financial Statements. Weakening of the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues but also increasing our expenses denominated in currencies other than the U.S. dollar. 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. dollar. 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.

Net revenues for the years ended June 30, 20172020 and 20162019 by segment are as follows:

Revenues

License fees

License fees for the year ended June 30, 20172020 were $18,218,912$4,564,560 compared to $8,352,441$16,768,749 for the year ended June 30, 20162019 reflecting an increasea decrease of $9,866,471$12,204,189 with a change in constant currency of $9,933,367. The increase in license revenue for the fiscal year ended June 30, 2017 compared to 2016 is primarily due to the $16,345,000 of license revenue recognized for the 12 country NFS Ascent contract. We also had license revenues through sales of our regional offerings in the U.S. and the U.K.

License fees – related party

License fees from related party for the year ended June 30, 2017 were $246,957 compared to $1,616,138 for the year ended June 30, 2016 reflecting a decrease of $1,369,181 with a change in constant currency of $1,326,335.$11,493,282. The decrease in license revenue for the fiscal year ended June 30, 20172020 compared to 20162019 is primarily due to unexpected delaysthe decrease in a complex implementation duringlicense revenue recognized for the DFS and BMW contracts to implement our NFS Ascent^® Retail Platform. In the fiscal year 2017.ended June 30, 2020, we recorded $2,500,000 of license revenue for the DFS, 12 country NFS Ascent^® contract, $470,000 for an NFS Ascent^® contract in the U.K., and $1,540,000 from license revenues through sales of our regional offerings in China, Australia, the U.S. and the U.K. In fiscal year ended June 30, 2019, we recorded $6,600,000 of license revenue recognized for the DFS, 12 country NFS Ascent^® contract, $8,000,000 related to the NFS Ascent^® contracts signed with a tier-one auto captive finance company and a major American multinational automaker to implement our product in China, and $2,200,000 from license revenues through sales of our regional offerings in China, Australia, the U.S. and the U.K.

Maintenance fees

Maintenance fees for the year ended June 30, 20172020, were $14,157,367$18,951,248 compared to $13,310,591$15,521,413 for the year ended June 30, 20162019 reflecting an increase of $846,776$3,429,835 with a change in constant currency of $1,170,153.$5,286,321. Maintenance fees begin once a customer has “gone live” with our product. The increase was due to the start of new maintenance agreements from customers who went live with our product during the latter stages of fiscal year 20162019 and into fiscal year 2017.2020. We anticipate maintenance fees to gradually increase as we implement both our NFS legacy product and NFS Ascent™Ascent^®.

Maintenance fees – related party

Maintenance fees from related party for the year ended June 30, 2017 were $311,359 compared to $365,772 for the year ended June 30, 2016 reflecting a decrease of $54,413 with a change in constant currency of $1,353. The decrease was due to fluctuation in foreign currency translation.

Services

Services income for the year ended June 30, 20172020, was $24,798,899$32,555,690 compared to $30,037,459$34,892,290 for the year ended June 30, 20162019, reflecting a decrease of $5,238,560$2,336,600 with a changean increase in constant currency of $4,486,525.$751,124. The services revenue decreaseincrease based on constant currency was due to a decreasean increase in services revenue associated with new implementations and change requests. Services revenue is derived from services provided to both current customers as well as services provided to new customers as part of the implementation process.

Services – related party

Services income from related party for the year ended June 30, 20172020 was $7,632,774$300,821 compared to $10,867,792$636,731 for the year ended June 30, 20162019 reflecting a decrease of $3,235,018$335,910 with a changedecrease in constant currency of $3,125,381.$228,507. The decrease in related party service revenue is due to a decrease in revenue from our joint venture with 1insurer of approximately $2,500,000 and a decrease of approximately $1,700,000 due to implementation delays, offset by an approximately $975,000 increase in service revenue related toless services performed for WRLD3D.

Gross Profit

The gross profit was $28,407,936,$26,963,370, for the year ended June 30, 20172020 as compared with $30,801,586$34,886,616 for the year ended June 30, 2016.2019. This is a decrease of $2,393,650$7,923,246 with a decrease in constant currency of $1,711,648.$5,774,477. The gross profit percentage for the year ended June 30, 20172020 also decreased to 43.5%47.8% from 47.7%51.4% for the year ended June 30, 2016.2019. The cost of sales was $36,958,332$29,408,949 for the year ended June 30, 20172020 compared to $33,748,607$32,932,567 for the year ended June 30, 2016,2019 for an increasea decrease of $3,209,725$3,523,618 and on a constant currency basis an increasea decrease of $3,878,280.$90,133. As a percentage of sales, cost of sales increased from 52.3%48.6% for the year ended June 30, 20162019 to 56.5%52.2% for the year ended June 30, 2017.2020.

Salaries and consultant fees increaseddecreased by $2,855,894$431,626 from $21,789,329$19,253,364 for the year ended June 30, 20162019 to $24,645,223$18,821,738 for the year ended June 30, 20172020 and on a constant currency basis increased $3,253,753.by $1,754,053. The increasedecrease in salaries and consultant fees is due to the hiring and trainingdevaluation of the Pakistan Rupee (“PKR”) compared to the U.S. Dollar. The increase in salaries on a constant currency basis is due to the increase in the number of technical employees at key locations including Pakistan, Thailand, China, UK and North America as we anticipated new projects associated with NFS Ascent™. In order to prepare for growth with our new product NFS Ascent^TM, we continued to focus on hiring technical personnel. However, due to the declineannual increase in revenues, we began cost cutting measures during Q3 of fiscal year 2017.salaries and wages. We had 1,195, 1,234976, 932, and 1,0811,009 technical employees as of June 30, 2015, 20162018, 2019 and 2017,2020, respectively. As a percentage of sales, salaries and consultant expense increased from 33.8%28.4% for the year ended June 30, 20162019 to 37.7%33.4% for the year ended June 30, 2017.2020.

Travel decreased by $2,346,126 from $6,527,868 for the year ended June 30, 2019 to $4,181,742 for the year ended June 30, 2020 and on a constant currency basis decreased by $1,799,905. The decrease in travel is due to the COVID-19 Pandemic. As a percentage of sales, travel expense decreased from 9.6% for year ended June 30, 2019 to 7.4% for the year ended June 30, 2020.

Depreciation and amortization expense decreased to $5,448,059$2,897,371 compared to $5,926,969$3,525,857 for the year ended June 30, 20162019 or a decrease of $478,910$628,486 and on a constant currency basis a decrease of $504,554.$146,175. Depreciation and amortization expense decreased as some products became fully amortized.

Operating Expenses

Operating expenses were $29,409,150$25,893,032 for the year ended June 30, 20172020 compared to $24,499,885,$28,058,704, for the year ended June 30, 20162019 for an increasea decrease of 20.0%7.7% or $4,909,265$2,165,672 and on a constant currency basis an increasea decrease of 23.9%1.0% or $5,855,816.$287,257. As a percentage of sales, it increased from 38.0%41.4% to 45.0%45.9%. The increasedecrease in operating expenses was primarily due to increasesdecreases in selling and marketing expenses, provision for bad debt,salaries and wages and research and development cost offset by an increase in general and administrative expenses.

Selling and marketing expenses increased $1,922,313decreased $1,381,095 or 24.6%17.6% and on a constant currency basis an increasea decrease of $2,228,963$844,758 or 28.5%10.8%. The increasedecrease in selling and marketing expenses is due to the increasedecrease in our salaries and commissions, travel expenses, and business development costs to market and sell NFS Ascent™Ascent^® globally.

General and administrative expenses were $16,747,550$17,138,832 for the year ended June 30, 20172020 compared to $14,727,313$17,357,918 at June 30, 20162019 or an increasea decrease of $2,020,237$219,086 or 13.7%1.3% and on a constant currency basis an increase of $2,499,144$797,684 or 17.0%4.6%. During the year ended June 30, 2017,2020, salaries increaseddecreased by approximately $2,758,127$1,112,184 or $2,957,980$512,629 on a constant currency basis due to the increasereduction in the number of employees, annual raises,salaries, and less share grants, cash bonuses and options,grants. Professional services increased by $104,726 or $130,533 on a constant currency basis and other general and administrative expenses decreasedincreased by approximately $770,208$1,077,944 or $526,883increased $1,466,481 on a constant currency basis. The increase on a constant currency basis is primarily due to the increase in withholding taxes on payments from customers and funds transferred from China of approximately $850,000, a new office lease in London of approximately $150,000, and software license and subscription fees of approximately $140,000.

Research and development costs were $1,468,954 for the year ended June 30, 2020 compared to $1,971,228 at June 30, 2019 or a decrease of $502,274 or 25.5% and on constant currency basis a decrease of $239,075 or 12.1%. The decrease in research and development costs is due to less spending on our innovation initiatives with Blockchain, AI, and IoT.

Income/Loss from Operations

LossIncome from operations was $1,001,214$1,070,338 for the year ended June 30, 20172020 compared to income of $6,301,701$6,827,912 for the year ended June 30, 2016.2019. This represents a decrease of $7,302,915$5,757,574 with a decrease of 7,567,464$5,487,220 on a constant currency basis for the year ended June 30, 20172020 compared with the year ended June 30, 2016.2019. As a percentage of sales, lossincome from operations was 1.53%1.9% for the year ended June 30, 20172020 compared to income of 9.76% %10.1% for the year ended June 30, 2016.2019.

Net Income/LossOther Income and Expense

Net lossOther income was $4,978,030$1,262,753 for the year ended June 30, 20172020 compared to net income of $3,402,761$6,247,412 for the year ended June 30, 2016.2019. This represents a decrease of $4,984,659 with a decrease of $5,137,165 on a constant currency basis. The decrease is primarily due to the foreign currency exchange transactions. 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 year ended June 30, 2020, we recognized a gain of $398,610 in foreign currency exchange transactions compared to a gain of $6,345,859 for the year ended June 30, 2019. During the year ended June 30, 2020, the value of the U.S. dollar and the Euro increased 3.1% and 1.8%, respectively, compared to the PKR. During year ended June 30, 2019, the value of the U.S. dollar and the Euro increased 33.9% and 30.8%, respectively, compared to the PKR. Interest income was $1,569,536 for the year ended June 30, 2020 compared to $955,061 for the period ended June 30, 2019. This represent an increase of $614,475 or a change of $800,815 on constant currency basis. The increase is due to the increase in cash which is invested into short term deposits and interest accrued on convertible note receivables.

Non-controlling Interest

For the year ended June 30, 2020 and 2019, the net income attributable to non-controlling interest was $254,942 and $3,434,141, respectively. The decrease in non-controlling interest is primarily due to the decrease in net income of NetSol PK.

Net Income/Loss attributable to NetSol

Net income was $937,081 for the year ended June 30, 2020 compared to $8,583,399 for the year ended June 30, 2019. This is a decrease of $8,380,791$7,646,318 with a decrease of $8,684,151$7,622,678 on a constant currency basis, compared to the prior year. For the year ended June 30, 2017,2020, net lossincome per share was $0.46$0.08 for basic and diluted shares. For the year ended June 30, 2016,2019, net income per share was $0.33 and $0.32$0.74 for basic and diluted shares, respectively.shares.

Non-GAAP Financial Measures

Regulation 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.

We define the non-GAAP measures as follows:

We 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.

The non-GAAP measures reflect adjustments based on the following items:

EBITDA: 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 because doing so makes internal comparisons to our historical operating results more consistent. In addition, we believe providing an EBITDA calculation is a more useful comparison of our operating results to the operating results of our peers.

Stock-based compensation expense: We have excluded the effect of stock-based compensation expense from the non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA per basic and diluted share calculations. Although stock-based compensation expense is calculated in accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense which generally requires cash settlement by NetSol, and therefore is not used by us to assess the profitability of our operations. We also believe the exclusion of stock-based compensation expense provides a more useful comparison of our operating results to the operating results of our peers.

Non-controlling interest: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.

Our 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 years ended June 30, 20172020 and 20162019 are as follows: