UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~December~~March 31, ~~2017~~2021

[ ] For the transition period from __________ to __________

Commission file number: 0-22773

NETSOL TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

NEVADA		95-4627685
(State or other Jurisdiction of		(I.R.S. ~~Employer NO.)~~
Incorporation or Organization)		Employer NO.)

23975Park Sorrento, Suite 250, Calabasas, CA 91302

(Address of principal executive offices) (Zip Code)

(818) 222-9195 / (818) 222-9197

(Issuer’s telephone/facsimile numbers, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common Stock, $0.01 par value per share		NTWK		NASDAQ

Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer 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 acheck mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes [X] No [ ]

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

	Large Accelerated Filer [ ]	Accelerated Filer [ ]
~~Non-Accelerated~~	Non-accelerated Filer [X]	Smaller reporting company [X]
		Emerging growth company [ ]	~~Small Reporting Company [X]~~

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [ ] No [X]

The issuer had ~~11,395,401~~12,157,871 shares issued and 11,306,680 outstanding of its $.01 par value Common Stock and no Preferred Stock ~~issued and~~ outstanding as of ~~February 10, 2018.~~May 9, 2021.

NETSOL TECHNOLOGIES, INC.

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets ~~as of December 31, 2017 and June 30, 2017~~	3
Condensed Consolidated Statements of Operations ~~for the Three and Six Months Ended December 31, 2017 and 2016~~	4
Condensed Consolidated Statements of Comprehensive Income (Loss) ~~for the Three and Six Months Ended December 31, 2017 and 2016~~	5
Condensed Consolidated Statements of Stockholders’ Equity	6
Condensed Consolidated Statements of Cash Flows ~~for the Six Months Ended December 31, 2017 and 2016~~	68
Notes to the Condensed Consolidated Financial Statements	810
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3034
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4550
Item 4. Controls and Procedures	4650

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	4751
Item 1A Risk Factors	4751
Item 2. Unregistered Sales of Equity and Use of Proceeds	4751
Item 3. Defaults Upon Senior Securities	4751
Item 4. Mine Safety Disclosures	4751
Item 5. Other Information	4851
Item 6. Exhibits	4851

Page 2

PART I. FINANCIAL INFORMATION

~~PART I. FINANCIAL INFORMATION~~

Item 1. Financial Statements (Unaudited)

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(UNAUDITED)~~Condensed Consolidated Balance Sheets

(Unaudited)

	As of December 31,			As of June 30,			As of			As of
	2017			2017			March 31, 2021			June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	10,004,650		$	14,172,954		$	30,599,137		$	20,166,830
Accounts receivable, net of allowance of $347,413 and $571,511		19,106,677			6,583,199
Accounts receivable, net - related party		2,582,403			1,644,942
Revenues in excess of billings		16,094,026			19,126,389
Revenues in excess of billings - related party		107,562			80,705
Convertible note receivable - related party		750,000			200,000
Other current assets		2,819,183			2,463,886
Accounts receivable, net of allowance of $272,936 and $435,611								12,176,722			10,131,752
Accounts receivable - related party, net of allowance of $1,373,099 and $90,594								-			1,282,505
Revenues in excess of billings, net of allowance of $94,706 and $188,914								9,802,047			17,198,281
Revenues in excess of billings - related party, net of allowance of $8,163 and $0								-			8,163
Other current assets, net of allowance of $1,243,633 and $0								2,983,686			3,108,180
Total current assets		51,464,501			44,272,075			55,561,592			51,895,711
Restricted cash		90,000			90,000
Revenues in excess of billings, net - long term		6,668,854			5,173,538			946,184			1,300,289
Convertible note receivable - related party, net of allowance of $4,250,000 and $0								-			4,250,000
Property and equipment, net		18,443,494			20,370,703			12,902,342			11,329,631
Right of use of assets - operating leases								1,637,125			2,360,129
Long term investment								3,195,980			2,387,692
Other assets		3,543,315			3,211,295			48,841			41,992
Intangible assets, net		14,810,605			17,043,151			4,507,155			5,391,077
Goodwill		9,516,568			9,516,568			9,516,568			9,516,568
Total assets	$	104,537,337		$	99,677,330		$	88,315,787		$	88,473,089

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	7,560,298		$	6,880,194		$	6,156,782		$	5,680,837
Current portion of loans and obligations under capitalized leases		10,133,100			10,222,795
Current portion of loans and obligations under finance leases								12,634,914			9,139,561
Current portion of operating lease obligations								956,006			1,111,912
Unearned revenues		10,082,346			3,925,702			5,728,790			4,095,472
Common stock to be issued		88,324			88,324			88,324			88,324
Total current liabilities		27,864,068			21,117,015			25,564,816			20,116,106
Loans and obligations under capitalized leases; less current maturities		250,883			366,762
Loans and obligations under finance leases; less current maturities								910,107			1,539,975
Operating lease obligations; less current maturities								761,653			1,339,965
Total liabilities		28,114,951			21,483,777			27,236,576			22,996,046
Commitments and contingencies
Stockholders’ equity:
Stockholders' equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-			-			-
Common stock, $.01 par value; 14,500,000 shares authorized; 11,395,401 shares issued and 11,221,347 outstanding as of December 31, 2017 and 11,225,385 shares issued and 11,190,606 outstanding as of June 30, 2017		113,954			112,254
Common stock, $.01 par value; 14,500,000 shares authorized;
12,157,871 shares issued and 11,306,680 outstanding as of March 31, 2021 and 12,122,149 shares issued and 11,874,646 outstanding as of June 30, 2020								121,580			121,222
Additional paid-in-capital		125,354,035			124,409,998			128,881,744			128,677,754
Treasury stock (At cost, 174,054 shares and 34,779 shares as of December 31, 2017 and June 30, 2017, respectively)		(1,055,330	)		(454,310	)
Treasury stock (at cost, 851,191 shares and 247,503 shares as of March 31, 2021 and June 30, 2020, respectively)								(3,520,769	)		(1,455,969	)
Accumulated deficit		(42,036,467	)		(42,301,390	)		(40,727,320	)		(34,269,817	)
Stock subscription receivable		(221,000	)		(297,511	)
Other comprehensive loss		(20,276,030	)		(18,074,570	)		(31,118,798	)		(34,085,047	)
Total NetSol stockholders’ equity		61,879,162			63,394,471
Total NetSol stockholders' equity								53,636,437			58,988,143
Non-controlling interest		14,543,224			14,799,082			7,442,774			6,488,900
Total stockholders’ equity		76,422,386			78,193,553
Total liabilities and stockholders’ equity	$	104,537,337		$	99,677,330
Total stockholders' equity								61,079,211			65,477,043
Total liabilities and stockholders' equity							$	88,315,787		$	88,473,089

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

Page 3

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(UNAUDITED)~~Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months						For the Six Months
	Ended December 31,						Ended December 31,						For the Three Months						For the Nine Months
	2017			2016			2017			2016			Ended March 31,						Ended March 31,
				Restated						Restated			2021			2020			2021			2020
Net Revenues:
License fees	$	235,932		$	3,769,557		$	561,998		$	9,223,352		$	2,120,963		$	93,076		$	4,710,942		$	2,733,998
Maintenance fees		3,568,448			3,588,899			7,042,173			7,112,696
Subscription and support														5,674,776			5,153,692			16,571,441			14,864,804
Services		9,087,191			6,619,158			16,104,928			12,175,293			5,988,257			8,222,227			18,270,451			24,992,271
License fees - related party		217,105			-			261,513			246,957
Maintenance fees - related party		101,251			51,345			204,214			181,976
Services - related party		1,236,508			1,829,827			3,090,385			3,994,981			-			61,842			-			202,199
Total net revenues		14,446,435			15,858,786			27,265,211			32,935,255			13,783,996			13,530,837			39,552,834			42,793,272

Cost of revenues:
Salaries and consultants		5,362,092			5,979,804			10,826,252			11,873,153			5,372,302			4,850,438			15,193,613			13,931,274
Travel		287,901			836,240			801,013			1,548,135			151,075			1,052,033			414,001			3,967,591
Depreciation and amortization		1,168,103			1,318,764			2,341,216			2,649,636			759,768			737,637			2,180,766			2,191,654
Other		939,986			1,065,727			1,796,568			2,038,065			1,075,403			868,491			2,915,122			2,767,927
Total cost of revenues		7,758,082			9,200,535			15,765,049			18,108,989			7,358,548			7,508,599			20,703,502			22,858,446

Gross profit		6,688,353			6,658,251			11,500,162			14,826,266			6,425,448			6,022,238			18,849,332			19,934,826

Operating expenses:
Selling and marketing		1,932,140			2,713,478			3,643,436			5,057,516			1,595,967			1,587,821			4,763,598			5,189,785
Depreciation and amortization		222,785			271,485			468,658			540,582			272,075			206,035			715,437			623,901
Provision for bad debts		-			1,026			-			1,026
General and administrative		4,026,706			3,932,387			7,814,264			8,551,583			3,860,509			4,151,394			11,353,933			12,638,797
Research and development cost		189,891			91,607			374,976			184,539			234,678			453,050			431,086			1,580,625
Total operating expenses		6,371,522			7,009,983			12,301,334			14,335,246			5,963,229			6,398,300			17,264,054			20,033,108

Income from operations		316,831			(351,732	)		(801,172	)		491,020
Income (loss) from operations														462,219			(376,062	)		1,585,278			(98,282	)

Other income and (expenses)
Loss on sale of assets		(8,939	)		(32,339	)		(16,069	)		(34,742	)
Gain (loss) on sale of assets														(53,012	)		129			(127,285	)		368
Interest expense		(109,675	)		(62,127	)		(227,746	)		(116,602	)		(98,656	)		(94,395	)		(296,224	)		(246,064	)
Interest income		115,570			23,416			252,481			53,856			231,979			448,368			643,654			1,283,279
Gain (loss) on foreign currency exchange transactions		1,737,967			(621,887	)		2,754,329			(1,036,783	)		(1,825,349	)		1,770,894			(1,515,327	)		71,765
Share of net loss from equity investment		(203,336	)		-			(270,898	)		-			(80,953	)		(78,502	)		(232,488	)		(432,522	)
Other income		14,511			6,823			15,610			28,383			521,758			17,012			654,395			243,325
Total other income (expenses)		1,546,098			(686,114	)		2,507,707			(1,105,888	)		(1,304,233	)		2,063,506			(873,275	)		920,151

Net income (loss) before income taxes		1,862,929			(1,037,846	)		1,706,535			(614,868	)		(842,014	)		1,687,444			712,003			821,869
Income tax provision		(200,927	)		(338,884	)		(225,798	)		(378,759	)		(133,156	)		(218,351	)		(642,884	)		(1,067,099	)
Net income (loss)		1,662,002			(1,376,730	)		1,480,737			(993,627	)		(975,170	)		1,469,093			69,119			(245,230	)
Non-controlling interest		(1,027,581	)		(791,664	)		(1,215,814	)		(1,560,878	)		351,939			(468,286	)		(216,900	)		4,065
Net income (loss) attributable to NetSol	$	634,421		$	(2,168,394	)	$	264,923		$	(2,554,505	)	$	(623,231	)	$	1,000,807	#	$	(147,781	)	$	(241,165	)

Net income (loss) per share:
Net income (loss) per common share
Basic	$	0.06		$	(0.20	)	$	0.02		$	(0.24	)	$	(0.05	)	$	0.09		$	(0.01	)	$	(0.02	)
Diluted	$	0.06		$	(0.20	)	$	0.02		$	(0.24	)	$	(0.05	)	$	0.09		$	(0.01	)	$	(0.02	)

Weighted average number of shares outstanding
Basic		11,159,075			10,877,446			11,115,346			10,783,685			11,343,406			11,753,063	#		11,571,878			11,713,827
Diluted		11,171,543			10,877,446			11,127,814			10,783,685			11,343,406			11,753,063	#		11,571,878			11,713,827

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

Page 4

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(UNAUDITED)~~Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

For the Three Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016
Restated Restated
Net income (loss) $ 634,421 $ (2,168,394 ) $ 264,923 $ (2,554,505 )
Other comprehensive income (loss):
Translation adjustment (2,453,890 ) (944,837 ) (3,279,634 ) 149,237
Translation adjustment attributable to non-controlling interest 841,009 276,575 1,078,174 (47,138 )
Net translation adjustment (1,612,881 ) (668,262 ) (2,201,460 ) 102,099
Comprehensive income (loss) attributable to NetSol $ (978,460 ) $ (2,836,656 ) $ (1,936,537 ) $ (2,452,406 )
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2021 2020 2021 2020
Net income (loss) $ (623,231 ) $ 1,000,807 $ (147,781 ) $ (241,165 )
Other comprehensive income (loss):
Translation adjustment 1,448,793 (4,605,609 ) 4,177,423 (1,108,848 )
Translation adjustment attributable to non-controlling interest (507,440 ) 996,856 (1,211,174 ) 168,469
Net translation adjustment 941,353 (3,608,753 ) 2,966,249 (940,379 )
Comprehensive income (loss) attributable to NetSol $ 318,122 $ (2,607,946 ) $ 2,818,468 $ (1,181,544 )

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

Page 5

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(UNAUDITED)~~Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)

For the Six Months
Ended December 31,
2017 2016
Restated
Cash flows from operating activities:
Net income (loss) $ 1,480,737 $ (993,627 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 2,809,874 3,190,218
Provision for bad debts - 1,026
Share of net loss from investment under equity method 270,898 -
Loss on sale of assets 16,069 34,742
Stock based compensation 833,530 1,525,775
Fair market value of warrants and stock options granted - 21,804
Changes in operating assets and liabilities:
Accounts receivable (13,231,059 ) 3,678,110
Accounts receivable - related party (1,637,829 ) 829,285
Revenues in excess of billing 602,676 (7,592,495 )
Revenues in excess of billing - related party (32,308 ) 285,791
Other current assets (524,547 ) 585,147
Accounts payable and accrued expenses 887,824 334,241
Unearned revenue 6,469,146 (1,830,619 )
Net cash provided by (used in) operating activities (2,054,989 ) 69,398

Cash flows from investing activities:
Purchases of property and equipment (543,123 ) (1,074,316 )
Sales of property and equipment 193,241 181,087
Convertible note receivable - related party (500,000 ) -
Investment in WRLD3D (50,000 ) (705,555 )
Net cash used in investing activities (899,882 ) (1,598,784 )

Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 215,311 429,452
Proceeds from exercise of subsidiary options 7,755 18,089
Purchase of treasury stock (601,020 ) (38,885 )
Dividend paid by subsidiary to non-controlling interest (417,853 ) (968,657 )
Proceeds from bank loans 708,457 -
Payments on capital lease obligations and loans - net (361,814 ) (69,998 )
Net cash used in financing activities (449,164 ) (629,999 )
Effect of exchange rate changes (764,269 ) 107,241
Net decrease in cash and cash equivalents (4,168,304 ) (2,052,144 )
Cash and cash equivalents, beginning of the period 14,172,954 11,557,527
Cash and cash equivalents, end of period $ 10,004,650 $ 9,505,383
A statement of the changes in equity for the three months ended March 31, 2021 is provided below:
Additional Compre- Non Total
Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders'
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at December 31, 2020 12,147,458 $ 121,476 $ 128,823,181 $ (2,848,640 ) $ (40,104,089 ) $ (32,060,151 ) $ 7,287,273 $ 61,219,050
Common stock issued for:
Services 10,413 104 58,563 - - - - 58,667
Purchase of treasury shares - - - (672,129 ) - - - (672,129 )
Foreign currency translation adjustment - - - - - 941,353 507,440 1,448,793
Net loss for the period - - - - (623,231 ) - (351,939 ) (975,170 )
Balance at March 31, 2021 12,157,871 $ 121,580 $ 128,881,744 $ (3,520,769 ) $ (40,727,320 ) $ (31,118,798 ) $ 7,442,774 $ 61,079,211
A statement of the changes in equity for the three months ended December 31, 2020 is provided below:
Additional Compre- Non Total
Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders'
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at
September 30, 2020
12,137,045 $ 121,371 $ 128,764,618 $ (1,920,645 ) $ (39,861,985 ) $ (33,210,231 ) $ 6,640,531 $ 60,533,659
Common stock issued for:
Services 10,413 105 58,563 - - - - 58,668
Purchase of treasury shares - - - (927,995 ) - - - (927,995 )
Foreign currency
translation adjustment
- - - - - 1,150,080 483,826 1,633,906
Net income (loss) for the period - - - - (242,104 ) - 162,916 (79,188 )
Balance at December 31, 2020 12,147,458 $ 121,476 $ 128,823,181 $ (2,848,640 ) $ (40,104,089 ) $ (32,060,151 ) $ 7,287,273 $ 61,219,050
A statement of the changes in equity for the three months ended September 30, 2020 is provided below:
Other
Additional Compre- Non Total
Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders'
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at
June 30, 2020
12,122,149 $ 121,222 $ 128,677,754 $ (1,455,969 ) $ (34,269,817 ) $ (34,085,047 ) $ 6,488,900 $ 65,477,043
Cumulative effect adjustment (1) - - - - (6,309,722 ) (474,578 ) (6,784,300 )
Subsidiary common stock issued for:
-Services - - - - - - 378 378
Common stock issued for:
Services 14,896 149 86,864 - - - - 87,013
Purchase of treasury shares - - - (464,676 ) - - - (464,676 )
Foreign currency
translation adjustment
- - - - - 874,816 219,908 1,094,724
Net income for the period - - - - 717,554 - 405,923 1,123,477
Balance at September 30, 2020 12,137,045 $ 121,371 $ 128,764,618 $ (1,920,645 ) $ (39,861,985 ) $ (33,210,231 ) $ 6,640,531 $ 60,533,659

(1) Cumulative effect adjustment relates to the adoption of Accounting Standard Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Refer to Note 2 – Accounting Policies for more information.

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

Page 6

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)~~
~~(UNAUDITED)~~(Unaudited)

For the Six Months
Ended December 31,
2017 2016
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 189,769 $ 123,682
Taxes $ 226,098 $ 77,414

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Provided services for investment in WRLD3D $ 553,678 $ 549,621
Assets acquired under capital lease $ 113,220 $ -
A statement of the changes in equity for the three months ended March 31, 2020 is provided below:
Additional Compre- Non Total
Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders'
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at December 31, 2019 12,000,566 $ 120,006 $ 128,197,589 $ (1,455,969 ) $ (36,448,870 ) $ (30,456,632 ) $ 6,890,123 $ 66,846,247
Common stock issued for:
Services 38,131 381 176,509 - - - - 176,890
Foreign currency
translation adjustment - - - - - (3,608,753 ) (996,856 ) (4,605,609 )
Net income for the period - - - - 1,000,807 - 468,286 1,469,093
Balance at March 31, 2020 12,038,697 $ 120,387 $ 128,374,098 $ (1,455,969 ) $ (35,448,063 ) $ (34,065,385 ) $ 6,361,553 $ 63,886,621

A statement of the changes in equity for the three months ended December 31, 2019 is provided below:
Additional Compre- Non Total
Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders'
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at September 30, 2019 11,972,109 $ 119,721 $ 128,052,079 $ (1,455,969 ) $ (37,034,845 ) $ (32,221,661 ) $ 8,605,749 $ 66,065,074
Common stock issued for:
Services 28,457 285 145,510 - - - - 145,795
Dividend to non-controlling interest - - - - - - (1,920,618 ) (1,920,618 )
Foreign currency translation adjustment - - - - - 1,765,029 244,031 2,009,060
Net income (loss) for the period - - - - 585,975 - (39,039 ) 546,936
Balance at December 31, 2019 12,000,566 $ 120,006 $ 128,197,589 $ (1,455,969 ) $ (36,448,870 ) $ (30,456,632 ) $ 6,890,123 $ 66,846,247
A statement of the changes in equity for the three months ended September 30, 2019 is provided below:
Additional Compre- Non Total
Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders'
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at June 30, 2019 11,911,742 $ 119,117 $ 127,737,999 $ (1,455,969 ) $ (35,206,898 ) $ (33,125,006 ) $ 8,414,987 $ 66,484,230
Exercise of subsidiary common stock options - - (28,097 ) - - - 39,718 11,621
Common stock issued for:
Services 60,367 604 342,177 - - - - 342,781
Foreign currency translation adjustment - - - - - 903,345 584,356 1,487,701
Net loss for the period - - - - (1,827,947 ) - (433,312 ) (2,261,259 )
Balance at September 30, 2019 11,972,109 $ 119,721 $ 128,052,079 $ (1,455,969 ) $ (37,034,845 ) $ (32,221,661 ) $ 8,605,749 $ 66,065,074

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

Page 7

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ AND SUBSIDIARIES
~~DECEMBER 31, 2017~~Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended March 31,
2021 2020
Cash flows from operating activities:
Net income (loss) $ 69,119 $ (245,230 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 2,896,203 2,815,555
Provision for bad debts (280,363 ) 75,437
Share of net loss from investment under equity method 232,488 432,522
(Gain) loss on sale of assets 127,285 (368 )
Stock based compensation 239,333 565,287
Changes in operating assets and liabilities:
Accounts receivable (777,953 ) (651,991 )
Accounts receivable - related party - 1,979,232
Revenues in excess of billing 7,485,646 (1,394,184 )
Revenues in excess of billing - related party - 106,592
Other current assets (791,849 ) (824,068 )
Accounts payable and accrued expenses (69,021 ) 63,289
Unearned revenue 1,256,456 (2,510,954 )
Net cash provided by operating activities 10,387,344 411,119

Cash flows from investing activities:
Purchases of property and equipment (2,109,058 ) (1,011,285 )
Sales of property and equipment 131,293 33,820
Convertible note receivable - related party - (600,000 )
Investment in associates (155,500 ) -
Net cash used in investing activities (2,133,265 ) (1,577,465 )

Cash flows from financing activities:
Proceeds from exercise of subsidiary options - 11,621
Purchase of treasury stock (2,064,800 ) -
Dividend paid by subsidiary to non-controlling interest - (1,920,618 )
Proceeds from bank loans 2,109,572 2,312,968
Payments on finance lease obligations and loans - net (533,344 ) (422,051 )
Net cash used in financing activities (488,572 ) (18,080 )
Effect of exchange rate changes 2,666,800 (438,610 )
Net increase (decrease) in cash and cash equivalents 10,432,307 (1,623,036 )
Cash and cash equivalents at beginning of the period 20,166,830 17,366,364
Cash and cash equivalents at end of period $ 30,599,137 $ 15,743,328
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 8
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Nine Months
Ended March 31,
2021 2020
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 392,950 $ 220,041
Taxes $ 468,628 $ 1,112,179

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Assets acquired under finance lease $ 222,391 $ -
Drivemate shares acquired for services rendered $ 1,300,000 $ -
Assets recognized under operating lease $ - $ 3,474,583
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 9
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The Company designs, develops, markets, and exports proprietary software products to customers in the automobile financing and leasing, banking, and financial services industries worldwide.The Company also provides system integration, consulting, and IT products and services in exchange for fees from customers.

The consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, ~~2017.~~2020. The Company follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods are not indicative of annual results.

The accompanying ~~condensed~~ consolidated financial statements include the accounts of ~~NetSol Technologies, Inc. and subsidiaries (collectively,~~ the ~~“Company”)~~Company as follows:

Wholly owned Subsidiaries

NetSol Technologies Americas, Inc. (“NTA”)
NetSol Connect (Private), Ltd. (“Connect”)
NetSol Technologies Australia Pty Ltd. (“Australia”)
NetSol Technologies Europe Limited (“NTE”)
NTPK (Thailand) Co. Limited (“NTPK Thailand”)
NetSol Technologies (Beijing) Co. Ltd. (“NetSol Beijing”)
~~NetSol Technologies (GmbH)~~Ascent Europe Ltd. (“~~NTG”~~AEL”)
Virtual Lease Services Holdings Limited (“VLSH”)
Virtual Lease Services Limited (“VLS”)
Virtual Lease Services (Ireland) Limited (“VLSIL”)

Majority-owned Subsidiaries

NetSol Technologies, Ltd. (“NetSol PK”)
NetSol Innovation (Private) Limited (“NetSol Innovation”)
NetSol Technologies Thailand Limited (“NetSol Thai”)
~~Virtual Lease Services Holdings~~OTOZ, Inc. (“OTOZ”)
OTOZ (Thailand) Limited (“~~VLSH”~~OTOZ Thai”)
~~Virtual Lease Services Limited (“VLS”)~~
Page 10
~~Virtual Lease Services (Ireland) Limited (“VLSIL”)~~NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)

For comparative purposes, prior year’s condensed consolidated financial statements have been reclassified to conform to report classifications of the current period. Below is the table of reclassified amounts:

For the Three Months For the Six Months
Ended December 31, 2016 Ended December 31, 2016
Originally reported Reclassified Originally reported Reclassified

Net Revenues:
Services $ 6,984,084 $ 6,619,158 $ 12,790,801 $ 12,175,293
Services - related party 1,464,901 1,829,827 3,379,473 3,994,981
$ 8,448,985 $ 8,448,985 $ 16,170,274 $ 16,170,274

Operating expenses:
Provision for bad debts $ - $ 1,026 $ - $ 1,026
General and administrative 3,933,413 3,932,387 8,552,609 8,551,583
$ 3,933,413 $ 3,933,413 $ 8,552,609 $ 8,552,609
~~Page 8~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Three Months Ended For the Nine Months ended
March 31, 2020 March 31, 2020
Originally reported Reclassified Originally reported Reclassified

REVENUES
License fees $ 312,133 $ 93,076 $ 3,375,241 $ 2,733,998
Subscription and support 4,934,635 5,153,692 14,291,959 14,864,804
Services 8,222,227 8,222,227 24,923,873 24,992,271
Services - related party 61,842 61,842 202,199 202,199
Total net revenues $ 13,530,837 $ 13,530,837 $ 42,793,272 $ 42,793,272

NOTE 2 – ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas requiring significant estimates are provision for doubtful accounts, provision for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, assumptions used to determine the net present value of operating lease liabilities, and estimated contract costs. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates.

Concentration of Credit Risk

Cash includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. Balances at financial institutions within certain foreign countries are not covered by ~~insurance.~~insurance except balances maintained in China are insured for RMB 500,000 ($76,220) in each bank and in the UK for GBP 85,000 ($116,438) in each bank. The Company maintains two bank accounts in China and six bank accounts in the UK. As of ~~December~~March 31, ~~2017,~~2021, and June 30, ~~2017,~~2020, the Company had uninsured deposits related to cash deposits in accounts maintained within foreign entities of approximately ~~$8,463,863~~$28,713,152 and ~~$11,564,343,~~$18,210,378, respectively. The Company has not experienced any losses in such accounts.

The Company’s operations are carried out globally. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments of each country and by the general state of the country’s economy. The Company’s operations in each foreign country are subject to specific considerations and significant risks not typically associated with companies in economically developed nations. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Page 11
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Fair Value of Financial Instruments
The Company applies the provisions of ~~ASC~~Accounting Standards Codification (“ASC”) 820-10,“Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, ~~restricted cash,~~ accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively short maturities. The carrying amounts of the convertible note receivable and the long-term debt approximate their fair values based on current interest rates for instruments with similar characteristics.

The three levels of valuation hierarchy are defined as follows:

Level 1: Valuations consist of unadjusted quoted prices in active markets for identical assets and liabilities and has the highest priority.

Level 2: Valuations rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability.

Level 3: Valuations are based on prices or third party or internal valuation models that require inputs that are significant to the fair value measurement and are less observable and thus have the lowest priority.

~~Page 9~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
The Company’s financial assets that ~~are~~were measured at fair value on a recurring basis as of ~~December~~March 31, ~~2017, are~~2021, were as follows:

Level 1 Level 2 Level 3 Total Assets Level 1 Level 2 Level 3 Total Assets
Revenue in excess of billing - long term $ - $ - $ 6,668,854 $ 6,668,854
Revenues in excess of billings - long term $ - $ - $ 946,184 $ 946,184
Total $ - $ - $ 6,668,854 $ 6,668,854 $ - $ - $ 946,184 $ 946,184

The Company’s financial assets that were measured at fair value on a recurring basis as of June 30, ~~2017,~~2020, were as follows:

Level 1 Level 2 Level 3 Total Assets Level 1 Level 2 Level 3 Total Assets
Revenue in excess of billing - long term $ - $ - $ 5,173,538 $ 5,173,538
Revenues in excess of billing - long term $ - $ - $ 1,300,289 $ 1,300,289
Total $ - $ - $ 5,173,538 $ 5,173,538 $ - $ - $ 1,300,289 $ 1,300,289

The reconciliation from June 30, ~~2017~~2020 to ~~December~~March 31, ~~2017~~2021 is as follows:

Revenue in excess of billing - long term Fair value discount Total Revenues in excess of billings - long term
Fair value
discount
Total
Balance at June 30, 2017 $ 5,483,869 $ (310,331 ) $ 5,173,538
Balance at June 30, 2020 $ 1,341,575 $ (41,286 ) $ 1,300,289
Additions 1,469,379 $ (85,057 ) 1,384,322 1,023,634 (78,124 ) 945,510
Amortization during the period - 110,994 110,994 - 43,617 43,617
Balance at December 31, 2017 $ 6,953,248 $ (284,394 ) $ 6,668,854
Transfers to short term (1,341,575 ) - (1,341,575 )
Effect of Translation Adjustment (1,723 ) 66 (1,657 )
Balance at March 31, 2021 $ 1,021,911 $ (75,727 ) $ 946,184
Page 12

~~The Company applied the discounted cash flow method~~NETSOL TECHNOLOGIES, INC.
Notes to ~~calculate the fair value and used NetSol PK’s weighted average borrowing rate, ranging from 3.93% to 4.43%.~~Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)

Management analyzes all financial instruments with features of both liabilities and equity under ASC 480,“Distinguishing Liabilities ~~From~~from Equity”and ASC 815,“Derivatives and Hedging.”Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as ~~warrant~~warrants and option derivatives are valued using the Black-Scholes model.
~~New Accounting Pronouncements~~

Recent Accounting Standards Adopted by the Company:

In ~~November 2015,~~January 2017, the Financial Accounting Standards Board ~~(FASB) issued ASU 2015-17,~~~~Balance Sheet Classification of Deferred Taxes~~ (ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and is effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires all deferred tax assets and liabilities to be classified as non-current. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.
~~In March 2016, the FASB issued ASU 2016-09,~~~~Improvements to Employee Share-Based Payment Accounting~~. The guidance simplifies accounting for share-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.
~~Page 10~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~Accounting Standards Recently Issued but Not Yet Adopted by the Company:~~
~~In May 2014, the~~ (“FASB”) issued ~~Accounting Standards Update (“ASU”) 2014-09,~~~~Revenue from Contracts with Customers~~, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date of the new revenue standard by one year, which will make it effective for the Company in the first quarter of its fiscal year ending June 30, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU ~~on its consolidated financial statements.~~
~~In January 2016, the FASB issued ASU 2016-01,~~~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is effective beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases~~, which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
~~In August 2016, the FASB issued ASU 2016-15,~~~~Clarification of Certain Cash Receipts and Cash Payments~~, which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
~~On November 17, 2016, the FASB issued Accounting Standards Update No. 2016-18,~~~~Statement of Cash Flows (Topic 230): Restricted Cash.~~ It is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The new standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Earlier adoption is permitted. The Company maintains restricted cash balances and will show restricted cash as part of cash and restricted cash equivalents in the statement of cash flows.
~~In January 2017, the FASB issued ASU No. 2017-01,~~~~Clarifying the Definition of a Business~~, which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those periods. Early adoption is permitted for acquisition or deconsolidation transactions occurring before the issuance date or effective date and only when the transactions have not been reported in issued or made available for issuance financial statements. The Company does not expect the adoption to have any significant impact on its Consolidated Financial Statements.
~~In January 2017, the FASB issued ASU No.~~ 2017-04,Simplifying the Test for Goodwill Impairment. Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company ~~will apply~~adopted this ~~guidance to applicable impairment tests after~~standard on July 1, 2020 and the adoption ~~date.~~did not have a material effect on our condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduced a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables, contract assets and held-to-maturity debt securities, which requires the Company to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also expands disclosure requirements.
The Company adopted the standard on July 1, 2020 using the modified retrospective approach. The adoption of ASU 2016-13 resulted in changes to the Company’s accounting policies for trade and other receivables, contract assets and convertible notes receivable. Based on the results of the Company’s evaluation, the adoption of ASU 2016-13 resulted in a one-time cumulative-effect adjustment through retained earnings of $6,784,300 to increase its allowance for credit losses related to the convertible notes receivable, interest receivable, accounts receivable, revenues in excess of billings, and other receivables.
The following table presents the impact of adopting ASC Topic 326 as of July 1, 2020:
Adjustment
to Adopt
Asset Classification ASC Topic 326
Allowance for credit losses - accounts receivable $ 109,486
Allowance for credit losses - accounts receivable - related party 1,282,505
Allowance for credit losses - revenue in excess of billings - related party 8,163
Allowance for credit losses - convertible notes receivable - related party 4,250,000
Allowance for credit losses - other current assets 1,134,146
$ 6,784,300
Accounts receivable includes trade accounts receivables from the Company’s customers, net of an allowance for credit risk. Accounts receivable are recorded at the invoiced amount and do not bear interest. In establishing the required allowance, management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends and changes in customer payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Page 1113

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)
Revenue in excess of billings, relates to services performed which were not billed, net of an allowance for credit risk. As customers are billed under the terms of the contract, the corresponding amount is transferred to accounts receivable. In establishing the required allowance, management regularly reviews the composition of and analyzes customer credit worthiness, customer concentrations, current economic trends, changes in customer payment patterns, the project status and assesses individual unbilled contract assets over a specific aging and amount. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The convertible notes receivable represents loans provided to WRLD3D. The allowance for credit risk for the convertible notes is established based on various quantitative and qualitative factors including customer credit worthiness, current economic trends and changes in payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
NOTE 3 – REVENUE RECOGNITION
The Company determines revenue recognition through the following steps:
● Identification of the contract, or contracts, with a customer;
● Identification of the performance obligations in the contract;
● Determination of the transaction price;
● Allocation of the transaction price to the performance obligations in the contract; and
● Recognition of revenue when, or as, the Company satisfies a performance obligation.
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) subscription and support, which includes subscription revenue and post contract customer support, of its enterprise software solutions for the lease and finance industry. The Company offers its software using the same underlying technology via two models: a traditional on-premises licensing model and a subscription model. The on-premises model involves the sale or license of software on a perpetual basis to customers who take possession of the software and install and maintain the software on their own hardware. Under the subscription delivery model, the Company provides access to its software on a hosted basis as a service and customers generally do not have the contractual right to take possession of the software.
Non-Core Revenue
The Company generates its non-core revenue by 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, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract.
Page 14
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
The Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription or licenses and a professional services engagement. License purchases generally have multiple performance obligations as customers purchase maintenance and services in addition to the licenses. The Company’s single performance obligation arrangements are typically maintenance renewals, subscription renewals and services engagements.
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.
Software Licenses
Transfer of control for software is considered to have occurred upon delivery of the product to the customer. The Company’s typical payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice.
Subscription and Support

~~In May 2017,~~Subscription
Revenue from subscriptions is recognized ratably over the ~~FASB issued ASU 2017-09,~~~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,~~~~which clarifies~~initial subscription period committed to by the customer commencing when ~~changes~~the product is made available to the customer. The initial subscription period is typically 12 to 60 months. The Company generally invoices its customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment within 30 days of invoice.
Support
Revenue from support services and product updates, referred to as post contract customer support revenue, is recognized ratably over the term of the maintenance period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product updates, maintenance releases and patches released during the term of the support period on a when-and-if available basis. The Company’s customers purchase both product support and license updates when they acquire new software 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 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.
Page 15
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by category — core and non-core, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The Company’s disaggregated revenue by category is as follows:
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2021 2020 2021 2020
Core:
License $ 2,120,963 $ 93,076 $ 4,710,942 $ 2,733,998
Subscription and support 5,674,776 5,153,692 16,571,441 14,864,804
Services 4,379,316 6,430,189 13,443,629 19,684,385
Services - related party - 61,842 - 202,199
Total core revenue, net 12,175,055 11,738,799 34,726,012 37,485,386

Non-Core:
Services 1,608,941 1,792,038 4,826,822 5,307,886
Total non-core revenue, net 1,608,941 1,792,038 4,826,822 5,307,886

Total net revenue $ 13,783,996 $ 13,530,837 $ 39,552,834 $ 42,793,272
Significant Judgments
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 post contract customer support and other services, the Company does have historical experience with amending contracts with customers to provide additional modules of its software or providing those modules at an optional price. This information guides the Company in assessing the stand-alone selling price of the Company’s software, since the Company can observe instances where a customer had a particular component of the Company’s software that was essentially priced separate from other goods and services that the Company delivered to that customer.
The 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.
Page 16
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Revenue is recognized over time for the Company’s subscription, post contract customer support and fixed fee professional services that are separate performance obligations. For the Company’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances and testing requirement changes.
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 ~~share-based payment award must~~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 ~~modifications.~~a single arrangement. The ~~new guidance will reduce diversity in practice and result in fewer changes~~Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the ~~terms~~distinct performance obligations, which could have an effect on results of ~~an award being accounted~~operations for asthe periods involved.
If a ~~modification. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new standard~~contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity will be ~~effective prospectively~~entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company ~~for~~will consider all relevant facts and circumstances. Variable consideration will be estimated and included in the ~~fiscal year beginning July 1, 2018. Early adoption~~contract price only when it is ~~permitted. The Company is currently evaluating~~probable that a significant reversal in the ~~impact~~amount of ~~the adoption of the new standard on its consolidated financial statements and related disclosures.~~revenue recognized will not occur.
Contract Balances

~~In July 2017,~~The timing of revenue recognition may differ from the ~~FASB issued ASU No. 2017-11,~~~~“Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives~~timing of invoicing to customers and ~~Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement~~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.
The revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon completion of a milestone.
The Company’s revenues in excess of billings and deferred revenue are as follows:
As of As of
March 31, 2021 June 30, 2020

Revenues in excess of billings $ 10,748,231 $ 18,506,733

Deferred Revenue $ 5,728,790 $ 4,095,472
During the three and nine months ended March 31, 2021, the Company recognized revenue of $364,835 and $4,154,955, respectively, that was included in the deferred revenue balance at the beginning of the ~~Indefinite Deferral for Mandatorily Redeemable~~period. All other activity in deferred revenue is due to the timing of invoicing in relation to the timing of revenue recognition.
Page 17
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial ~~Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”.~~ The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact of the adoption of this standard on its consolidated financial statements.Statements
March 31, 2021
(Unaudited)

~~All other newly issued accounting pronouncements~~Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but unsatisfied performance obligations were approximately $46,352,850 as of March 31, 2021, of which the Company estimates to recognize approximately $14,216,398 in revenue over the next 12 months and the remainder over an estimated 5 years thereafter. Actual revenue recognition depends in part on the timing of software modules installed at various customer sites. Accordingly, some factors that affect the Company’s revenue, such as the availability and demand for modules within customer geographic locations, is not ~~yet effective~~entirely within the Company’s control. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, and not to facilitate financing arrangements.
Deferred Revenue
The Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable license and services starting in future periods are included in accounts receivable and deferred revenue.
Practical Expedients and Exemptions
There are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s disclosures. Below is a list of practical expedients applied by the Company:
● The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.
● The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less or the commissions are based on cashed received. These costs are recorded within sales and marketing expense in the Consolidated Statement of Operations.
● The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).
Costs to Obtain a Contract
The Company does not have ~~been deemed either immaterial~~a material amount of costs to obtain a contract capitalized at any balance sheet date. In general, the Company incurs few direct incremental costs of obtaining new customer contracts. The Company rarely incurs incremental costs to review or ~~not applicable.~~otherwise enter into contractual arrangements with customers. In addition, the Company’s sales personnel receive fees that are referred to as commissions, but that are based on more than simply signing up new customers. The Company’s sales personnel are required to perform additional duties beyond new customer contract inception dates, including fulfilment duties and collections efforts.
Page 18
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)

NOTE 34 – EARNINGS PER SHARE

Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options ~~warrants,~~ and stock awards.
~~Page 12~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~

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

For the three months ended
December 31, 2017 For the six months ended
December 31, 2017
Net Income Shares Per Share Net Income Shares Per Share
Basic income per share:
Net income available to common shareholders $ 634,421 11,159,075 $ 0.06 $ 264,923 11,115,346 $ 0.02
Effect of dilutive securities
Stock options - 12,468 - - 12,468 -
Diluted income per share $ 634,421 11,171,543 $ 0.06 $ 264,923 11,127,814 $ 0.02
For the three months ended
March 31, 2021 For the nine months ended
March 31, 2021
Net Loss Shares Per Share Net Loss Shares Per Share
Basic loss per share:
Net loss available to common shareholders $ (623,231 ) 11,343,406 $ (0.05 ) $ (147,781 ) 11,571,878 $ (0.01 )
Effect of dilutive securities
Share grants - - - - - -
Diluted loss per share $ (623,231 ) 11,343,406 $ (0.05 ) $ (147,781 ) 11,571,878 $ (0.01 )

For the three months ended
December 31, 2016 For the six months ended
December 31, 2016
Net Loss Shares Per Share Net Loss Shares Per Share
Restated Restated Restated Restated
Basic loss per share:
Net loss available to common shareholders $ (2,168,394 ) 10,877,446 $ (0.20 ) $ (2,554,505 ) 10,783,685 $ (0.24 )
Effect of dilutive securities
Stock options - - - - - -
Diluted loss per share $ (2,168,394 ) 10,877,446 $ (0.20 ) $ (2,554,505 ) 10,783,685 $ (0.24 )
For the three months ended
March 31, 2020 For the nine months ended
March 31, 2020
Net Income Shares Per Share Net Loss Shares Per Share

Basic income (loss) per share:
Net income (loss) available to common shareholders $ 1,000,807 11,753,063 $ 0.09 $ (241,165 ) 11,713,827 $ (0.02 )
Effect of dilutive securities
Share grants - - - - - -
Diluted income (loss) per share $ 1,000,807 11,753,063 $ 0.09 $ (241,165 ) 11,713,827 $ (0.02 )

The following potential dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

For the Three Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016

Stock Options - 480,133 - 480,133
Warrants - 11,075 - 11,075
Share Grants 285,956 629,258 285,956 629,258
285,956 1,120,466 285,956 1,120,466
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2021 2020 2021 2020

Share Grants 30,699 101,790 30,699 101,790
30,699 101,790 30,699 101,790

NOTE 45 – OTHER COMPREHENSIVE INCOME AND FOREIGN ~~CURRENCY:~~CURRENCY

The accounts of NTE, AEL, VLSH and VLS use the British Pound; VLSIL ~~and NTG use~~uses the Euro; NetSol PK, Connect, and NetSol Innovation use the Pakistan Rupee; NTPK Thailand and NetSol Thai use the Thai Baht; Australia uses the Australian dollar; and NetSol Beijing uses the Chinese Yuan as the functional currencies. NetSol Technologies, Inc., and its subsidiary, NTA, use the U.S. dollar as the functional currency. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange rate throughout the period. Accumulated translation losses classified as an item of accumulated other comprehensive loss in the stockholders’ equity section of the consolidated balance sheet were ~~$20,276,030~~$31,118,798 and ~~$18,074,570~~$34,085,047 as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, respectively. During the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation gain attributable to NetSol of $941,353 and $2,966,249, respectively. During the three and nine months ended March 31, 2020, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of ~~$1,612,881~~$3,608,753 and $2,201,460, respectively. During the three and six months ended December 31, 2016, comprehensive income (loss) in the consolidated statements of operations included a translation loss of $668,262 and translation income of $102,099,$940,379, respectively.

Page 1319

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)
~~NOTE 5 – RELATED PARTY TRANSACTIONS~~
~~NetSol-Innovation~~
~~In November 2004, the Company entered into a joint venture with 1insurer, formerly~~~~Innovation Group,~~ called NetSol-Innovation. NetSol-Innovation provides support services to 1insurer. During the three and six months ended December 31, 2017, NetSol Innovation provided services of $796,757 and $1,928,513, respectively. During the three and six months ended December 31, 2016, NetSol-Innovation provided services of $1,401,144 and $2,956,619, respectively. Accounts receivable at December 31, 2017 and June 30, 2017 were $2,429,771 and $1,462,078, respectively.
~~Investec Asset Finance~~
In October 2011, NTE entered into an agreement with Investec Asset Finance to acquire VLS. NTE and VLS provide support services to Investec. During the three and six months ended December 31, 2017, NTE and VLS provided license, maintenance and services of $442,699 and $1,043,891, respectively. During the three and six months ended December 31, 2016, NTE and VLS provided license, maintenance and services of $115,102 and $851,787, respectively. Accounts receivable at December 31, 2017 and June 30, 2017 were $113,310 and $133,218, respectively.
~~WRLD3D~~
On May 31, 2017, Faizaan Ghauri, son of CEO Najeeb Ghauri, and an employee of the Company was appointed CEO of WRLD3D, Inc. (“WRLD3D”) a non-public company. On March 2, 2016, the Company purchased a 4.9% interest in WRLD3D for $1,111,111 and the Company’s subsidiary NetSol PK purchased a 12.2% investment in WRLD3D for $2,777,778 which will be earned over future periods by providing IT and enterprise software solutions. See Note 7 and Note 11.
~~G-FORCE~~
Najeeb Ghauri, CEO and Chairman of the Board, and Naeem Ghauri, Director, have a financial interest in G-Force, LLC, which purchased a 4.9% investment in WRLD3D, Inc. for $1,111,111. See Note 11 “Other Long-Term Assets”

NOTE 6 – MAJOR CUSTOMERS

~~The Company is a strategic business partner for~~During the nine months ended March 31, 2021, revenues from Daimler Financial Services ~~(which consists~~(“DFS”) and BMW Financial (“BMW”) were $7,763,189 and $4,295,139, respectively representing 19.6% and 10.9%, respectively of ~~a group of many companies in different countries), which accounts for approximately 35.90% and 41.54% of revenue for~~revenues. During the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2020, revenues from Daimler Financial Services (“DFS”) and ~~2016, respectively.~~BMW Financial (“BMW”) were $11,906,959 and $6,893,438, respectively representing 27.8% and 16.1%, respectively of revenues. The revenue from ~~this customer is~~these customers are shown in the Asia – Pacific segment.
Accounts receivable from DFS and BMW at March 31, 2021, were $7,972,487 and $45,269, respectively. Accounts receivable at ~~December~~June 30, 2020, were $4,821,468 and $474,271, respectively. Revenues in excess of billings at March 31, ~~2017~~2021 were $1,014,268 and $1,620,158 for DFS and BMW, respectively. Revenues in excess of billings at June 30, 2020, were $5,709,226 and $6,977,375 for DFS and BMW, respectively. Included in this amount was $Nil and $1,300,289 shown as long term at March 31, 2021 and June 30, ~~2017, were $12,761,829 and $1,620,717,~~2020, respectively. Revenue in excess of billing at December 31, 2017 was $16,674,348, which included $6,668,854 shown as long term. Revenue in excess of billing at June 30, 2017 was $18,579,540, which included $5,173,538 shown as long term.
On December 21, 2015, the Company entered into a 10-year contract with Daimler Financial Services to provide license, maintenance and services for 12 countries in the Asia Pacific Region. The implementation phase is expected to be over a five-year period with maintenance and support over 10 years. The contract is a fixed fee arrangement with total license and maintenance fees of approximately €71,000,000 (approximately $85,054,591) with services to be separately agreed upon and billed as they are performed. The customer will make fixed annual payments of €5,850,000 (approximately $7,008,019) for years 1-5 and €8,350,000 (approximately $10,002,899) for years 6-10. Under the terms of the contract, the customer has the right to withdraw from certain modules and terminate the agreement as to certain countries based on good cause or business reasons prior to the beginning of implementation.
On, September 4, 2017, the Company amended the agreement which provided for an additional €7,700,000 (approximately $9,277,108) to be earned over the remaining life of the contract. The amended agreement provides for €7,000,000 (approximately $8,433,735) to be paid in the current fiscal year with €100,000 (approximately $120,482) to be paid each year over the remaining seven years.
~~Page 14~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~

NOTE 7 – CONVERTIBLE ~~NOTE~~NOTES RECEIVABLE – RELATED PARTY

The Company has entered into ~~an agreement~~multiple convertible note receivable agreements with ~~WRLD3D, whereby~~WRLD3D. The convertible notes bear interest ranging from 5% to 10% with various maturity dates. The convertible notes have conversion features which allow the Company ~~was issued a Convertible Promissory Note (the “Convertible Note”) which was fully executed on May 25, 2017. The maximum principal amount~~to convert the notes into shares of the Convertible Note is $750,000, and as of December 31, 2017, the Company had disbursed the full amount. The Convertible Note bears interest at 5% per annum and all unpaid interest and principal is due and payable upon the Company’s request on or after February 1, 2018. The Convertible Note is convertible into Series BB Preferred shares at the lesser of (i) the price paid per share for the equity security by the investors in the qualified financing and (ii) $0.6788 per share (adjusted for anyWRLD3D stock ~~dividends, combinations, splits, recapitalizations or the like with respect to WRLD3D’s Series BB Preferred Stock after the date of the Convertible Note). The Convertible Note is convertible~~ upon the occurrence of certain events. The Company has a security interest in all of WRLD3D’s personal property, inventory, equipment, general intangibles, financial assets, investment property, securities, deposit accounts and the ~~following events:~~proceeds thereof.

~~1. Upon a qualified financing~~The following table summarizes the convertible notes receivable from WRLD3D.
Convertible
Agreement Interest Maturity Note Accrued
Date Rate Date Amount Interest
May 25, 2017 5 % March 2, 2018 $ 750,000 $ 110,202
February 9, 2018 10 % March 31, 2019 2,500,000 500,773
April 1, 2019 10 % March 31, 2020 600,000 57,648
August 19, 2019 10 % March 31, 2020 400,000 32,439
4,250,000 701,062
Less allowance for doubtful account (4,250,000 ) (701,062 )
Net Balance $ - $ -
The Company has an accrued interest balance of $701,062 at March 31, 2021 and June 30, 2020, respectively, which is ~~an equity financing of at least $2,000,000.~~included in “Other current assets”. Starting July 1, 2020, the Company is not accruing interest.

~~2. Optionally, upon an equity financing less than $2,000,000.~~
Page 20

~~3. Optionally after the maturity date.~~NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
~~4. Upon a change of control.~~March 31, 2021
(Unaudited)

NOTE 8 - OTHER CURRENT ASSETS

Other current assets consisted of the following:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020

Prepaid Expenses $ 660,417 $ 597,687 $ 1,790,064 $ 1,035,415
Advance Income Tax 979,296 1,052,935 369,327 355,482
Employee Advances 114,147 128,100 169,430 44,415
Security Deposits 84,934 103,255 276,913 270,403
Other Receivables 648,237 252,590 105,905 1,239,221
Other Assets 332,152 329,319 272,047 163,244
Total $ 2,819,183 $ 2,463,886 $ 2,983,686 $ 3,108,180

NOTE 9 – ~~REVENUE~~REVENUES IN EXCESS OF BILLINGS – LONG TERM

~~Revenue~~Revenues in excess of billings, net consisted of the following:

As of December 31, As of June 30,
2017 2017
Revenue in excess of billing - long term $ 6,953,248 �� $ 5,483,869
Present value discount (284,394 ) (310,331 )
Net Balance $ 6,668,854 $ 5,173,538
As of As of
March 31, 2021 June 30, 2020

Revenues in excess of billings - long term $ 1,021,911 $ 1,341,575
Present value discount (75,727 ) (41,286 )
Net Balance $ 946,184 $ 1,300,289

Pursuant to revenue recognition for contract accounting, the Company ~~has~~had recorded ~~revenue~~revenues in excess of billings long-term for amounts billable after one year. During the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, the Company accreted ~~$59,272~~$2,331 and ~~$110, 994,~~$44,157, respectively. During the three and nine months ended March 31, 2020, the Company accreted $13,940 and $41,621, respectively, which iswere recorded in interest ~~income.~~income for those periods. The Company used the discounted cash flow method with interest rates ranging from ~~3.93%~~4.65% to ~~4.43%.~~6.25% for the period ended March 31, 2021 and an interest rate of 4.35% for the period ended June 30, 2020.

Page 1521

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)

NOTE 10 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020

Office Furniture and Equipment $ 3,908,883 $ 3,755,710 $ 3,488,507 $ 3,143,833
Computer Equipment 25,788,684 26,693,730 20,250,373 19,256,543
Assets Under Capital Leases 1,522,708 1,965,650 1,544,826 1,443,423
Building 8,794,381 9,243,866 6,401,979 5,848,813
Land 2,299,047 2,428,626 1,660,539 1,512,905
Capital Work In Progress 31,489 27,648
Autos 1,287,043 1,270,339 1,944,062 1,348,405
Improvements 534,900 592,652 36,456 36,929
Subtotal 44,135,646 45,950,573 35,358,231 32,618,499
Accumulated Depreciation (25,692,152 ) (25,579,870 ) (22,455,889 ) (21,288,868 )
Property and Equipment, Net $ 18,443,494 $ 20,370,703 $ 12,902,342 $ 11,329,631

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, depreciation expense totaled ~~$707,668~~$575,855 and ~~$1,436,327,~~$1,557,578, respectively. Of these amounts, ~~$484,883~~$303,780 and ~~$967,669,~~$842,141, respectively, are reflected in cost of revenues. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2016,~~2020, depreciation expense totaled ~~$902,678~~$479,350 and ~~$1,801,981,~~$1,429,463, respectively. Of these amounts, ~~$631,193~~$273,315 and ~~$1,261,399,~~$805,562, respectively, are reflected in cost of revenues.

Following is a summary of fixed assets held under ~~capital~~finance leases as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017:~~2020:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020
Computers and Other Equipment $ 236,518 $ 309,863 $ 364,183 $ 328,621
Furniture and Fixtures 65,084 227,914 56,722 51,119
Vehicles 1,221,106 1,427,873 1,123,921 1,063,683
Total 1,522,708 1,965,650 1,544,826 1,443,423
Less: Accumulated Depreciation - Net (568,087 ) (711,622 ) (803,250 ) (667,096 )
$ 954,621 $ 1,254,028 $ 741,576 $ 776,327
Finance lease term and discount rate were as follows:
As of
March 31, 2021
Weighted average remaining lease term - Finance leases 0.79 Years
Weighted average discount rate - Finance leases 5.9 %
Page 22
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)

NOTE 11 - LEASES
The Company leases certain office space, office equipment and autos with remaining lease terms of one year to 10 years under leases classified as financing and operating. For certain leases, the Company has options to extend the lease term for additional periods ranging from one year to 10 years.
The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value. The Company used the incremental borrowing rate on July 1, 2019 for all leases that commenced prior to that date. For finance leases, the Company used the incremental borrowing rate implicit in the lease.
The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.
The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts.
Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a re-measurement of lease liabilities. The Company’s variable lease payments include payments for finance leases that are adjusted based on a change in the Karachi Inter Bank Offer Rate. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.
Supplemental balance sheet information related to leases was as follows:
As of As of
March 31, 2021 June 30, 2020
Assets
Operating lease assets, net $ 1,637,125 $ 2,360,129

Liabilities
Current
Operating $ 956,006 $ 1,111,912
Non-current
Operating 761,653 1,339,965
Total Lease Liabilities $ 1,717,659 $ 2,451,877
Page 23
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
The components of lease cost were as follows:
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
2021 2020 2021 2020

Amortization of finance lease assets $ 65,628 $ 59,632 $ 142,807 $ 194,632
Interest on finance lease obligation 6,662 19,085 25,307 71,416
Operating lease cost 319,712 333,886 950,538 931,955
Short term lease cost 33,138 75,897 63,209 228,869
Sub lease income (9,155 ) (8,514 ) (26,517 ) (25,227 )
Total lease cost $ 415,985 $ 479,986 $ 1,155,344 $ 1,401,645
Lease term and discount rate were as follows:
As of
March 31, 2021
Weighted average remaining lease term - Operating leases 1.64 Years
Weighted average discount rate - Operating leases 5.6 %
Supplemental disclosures of cash flow information related to leases were as follows:
For the Nine Months
Ended March 31
2021 2020

Cash flows related to lease liabilities
Operating cash flows related to operating leases $ 856,135 $ 905,076
Page 24
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Maturities of operating lease liabilities were as follows as of March 31, 2021:
Amount
Within year 1 $ 1,022,176
Within year 2 634,186
Within year 3 130,701
Within year 4 21,450
Within year 5 862
Thereafter 2,802
Total Lease Payments 1,812,177
Less: Imputed interest (94,518 )
Present Value of lease liabilities 1,717,659
Less:  Current portion (956,006 )
Non-Current portion $ 761,653
The Company is a lessor for certain office space leased by the Company and sub-leased to others under non-cancelable leases. These lease agreements provide for a fixed base rent and terminate by July 2021. All leases are considered operating leases. There are no rights to purchase the premises and no residual value guarantees. For the three and nine months ended March 31, 2021, the Company received lease income of $9,1558 and $26,517, respectively. For the three and nine months ended March 31, 2020, the Company received lease income of $8,514 and $25,227, respectively.
NOTE 12 – ~~OTHER~~ LONG TERM ~~ASSETS~~INVESTMENT

As of December 31, As of June 30,
2017 2017

Investment (1) $ 3,389,801 $ 3,057,020
Long Term Security Deposits 153,514 154,275
Total $ 3,543,315 $ 3,211,295
Drivemate

~~(1) Investment~~The Company and Drivemate Co., Ltd. (“Drivemate”) entered into a subscription agreement on April 25, 2019, (“Drivemate Agreement”) whereby the Company will purchase an equity interest of 30% in ~~WRLD3D~~Drivemate. Per the Drivemate Agreement, the Company will purchase 5,469 preferred shares for $1,800,000 consisting of $500,000 cash and $1,300,000 in services. The Company has paid $437,500 in cash, provided services of $1,300,000 and has received 5,217 shares. The remaining $62,500 will be paid in increments based on the contract with the final payment due 24 months from the date of the Drivemate Agreement signing. As of March 31, 2021, the Company owns 21.47% of Drivemate. Per the Drivemate Agreement, the Company appointed two directors to the Drivemate board. The Company determined that it met the significant influence criteria since two of the four directors are appointed by the Company and the Company is to own 30% of Drivemate at the final payment date; therefore, the Company accounts for the investment using the equity method of accounting.
The Company did not perform any services during the three and nine months ended March 31, 2021. During the three and nine months ended March 31, 2020, the Company performed $355,051 and $862,767 of services, respectively.
Under the equity method of accounting, the Company recorded its share of net income of $Nil and $3,919 for the three and nine months ended March 31, 2021, respectively.
Under the equity method of accounting, the Company recorded its share of net loss of $5,667 and $16,915 for the three and nine months ended March 31, 2020, respectively.
Page 25
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
WRLD3D-Related Party

On March 2, ~~2016,~~2017, the Company purchased a 4.9% interest in WRLD3D, a non-public company, for $1,111,111. The Company paid $555,556 at the initial closing and $555,555 on September 1, ~~2016.~~2017. NetSol PK, the subsidiary of the Company, purchased a 12.2% investment in WRLD3D, for $2,777,778 which ~~will be~~was earned ~~over future periods~~ by providing IT and enterprise software solutions. Per the agreement, NetSol PK is to provide a minimum of $200,000 of services in each three-month period and the entire balance is required to be provided within three years of the date of the agreement. If NetSol PK fails to provide the future services, it may be required to forfeit the unearned shares back to WRLD3D. As of December 31, the investment earned by NetSol PK is $2,549,587.
~~Page 16~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~

~~In connection with the investment, the Company and~~ NetSol PK ~~received a warrant~~has not provided services to ~~purchase preferred stock of~~ WRLD3D ~~which included the following key terms and features:~~
● ~~The warrants are exercisable into shares of the “Next Round Preferred”, only if and when the Next Round Preferred is issued by WRLD3D in a “Qualified Financing”.~~
● ~~The warrants expire on March 2, 2020.~~
● ~~“Next Round Preferred” is defined as occurring if WRLD3D’s preferred stock (or securities convertible into preferred stock) are issued in a Qualified Financing that occurs after March 2, 2016.~~
● ~~“Qualified Financing” is defined as financing with total proceeds of at least $2 million.~~
● ~~The total number of common stock shares to be issued is equal to $1,250,000 divided by the per share price of the Next Round Preferred.~~
● ~~The exercise price of the warrants is equal to the greater of~~
a) ~~70% of the per share price of the Next Round Preferred sold in a Qualified Financing, or~~
b) 25,000,000 divided by the total number of shares of common stock outstanding immediately prior to the Qualified Financing (on a fully-diluted basis, excluding the number of common stock shares issuable upon the exercise of any given warrant).
~~The Company had originally accounted~~ for the investment under the cost method. On May 31, 2017, the Company determined that it met the significant influence criteria since the newly appointed CEO of WRLD3D is the son of the CEO, Najeeb Ghauri, and also an employee of the Company; therefore, the Company changed the accounting treatment from the cost method to the equity method.
~~During~~ the three and ~~six~~nine months ended ~~December~~March 31, ~~2017, NetSol PK~~2021, and has provided services ~~valued at $315,408~~of $61,842 and ~~$583,708, respectively. During~~$202,199 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2016, NetSol PK provided services valued at $300,963 and $549,621, respectively. This revenue~~2020, which is recorded as services-related party. ~~These services are recorded as accounts receivable until approved by WRLD3D after which the shares are released from restriction.~~ Accounts receivable ~~at December 31, 2017~~ and ~~June 30, 2017 were $39,322 and $49,646, respectively. Revenue~~revenue in excess of billing were $1,373,099 and $8,163 at ~~December 31, 2017 and~~ June 30, ~~2017~~2020, respectively. Upon adoption of ASC 326, an allowance was established for the full amounts of these accounts. The net balances of accounts receivable and revenues in excess of billing were ~~$107,562 and $80,705, respectively. During the three and six months ended December~~$Nil at March 31, 2017, NetSol PK services valued at $285,378 and $553,678, respectively, were released from restriction. During the three and six months ended December 31, 2016, NetSol PK services valued at $300,963 and $549,621, respectively, were released from restriction. 2021.
Under the equity method of accounting, the Company recorded its share of net loss of ~~$203,336~~$80,953 and ~~$270,898~~$236,407 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021 and the Company recorded its share of net loss of $72,835 and $415,607 for the three and nine months ended March 31, 2020, respectively.

The following table reflects the above investments at March 31, 2021.
Drivemate WRLD3D Total
Gross investment $ 1,800,000 $ 3,888,889 $ 5,688,889
Cumulative net loss on investment (15,839 ) (1,926,723 ) (1,942,562 )
Cumulative other comprehensive income (loss) - (550,347 ) (550,347 )
Net investment $ 1,784,161 $ 1,411,819 $ 3,195,980
NOTE 1213 - INTANGIBLE ASSETS

Intangible assets consisted of the following:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020

Product Licenses - Cost $ 47,244,997 $ 47,244,997 $ 47,244,997 $ 47,244,997
Effect of Translation Adjustment (4,850,984 ) (3,134,488 ) (13,740,208 ) (16,045,322 )
Accumulated Amortization (27,583,408 ) (27,067,358 ) (28,997,634 ) (25,808,598 )
Net Balance $ 14,810,605 $ 17,043,151 $ 4,507,155 $ 5,391,077

(A) Product Licenses

Product licenses include internally developed original license issues, renewals, enhancements, copyrights, trademarks, and trade names. Product licenses are amortized on a straight-line basis over their respective lives, and the unamortized amount of ~~$14,810,605~~$4,507,155 will be amortized over the next ~~5.5~~2.5 years. Amortization expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 was ~~$683,220~~$455,988 and ~~$1,373,547,~~$1,338,625, respectively. Amortization expense for the three and ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 was ~~$687,571~~$464,322 and ~~$1,388,237,~~$1,386,092, respectively.

Page 1726

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)

(B) Future Amortization

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

Year ended:
December 31, 2018 $ 2,630,334
December 31, 2019 2,630,334
December 31, 2020 2,630,334
December 31, 2021 2,630,334
December 31, 2022 2,630,334
Thereafter 1,658,935
$ 14,810,605
Period ended:
March 31, 2022 $ 1,899,819
March 31, 2023 1,899,819
March 31, 2024 707,517
$ 4,507,155

NOTE 1314 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020

Accounts Payable $ 1,639,112 $ 1,466,265 $ 1,172,727 $ 1,351,158
Accrued Liabilities 5,086,258 4,498,958 4,103,183 3,349,624
Accrued Payroll & Taxes 488,491 520,719 363,660 537,888
Taxes Payable 167,994 174,485 385,540 303,996
Other Payable 178,443 219,767 131,672 138,171
Total $ 7,560,298 $ 6,880,194 $ 6,156,782 $ 5,680,837

Page 1827

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)

NOTE 1415 – DEBTS

Notes payable and ~~capital~~finance leases consisted of the following:

As of December 31, 2017 As of March 31, 2021
Current Long-Term Current Long-Term
Name Total Maturities Maturities Total Maturities Maturities

D&O Insurance (1) $ 105,023 $ 105,023 $ - (1 ) $ 160,222 $ 160,222 $ -
Paycheck Protection Program Loans (2 ) 469,721 369,162 100,559
Bank Overdraft Facility (2) - - - (3 ) - - -
Term Finance Facility (4 ) 2,036,103 1,322,065 714,038
Loan Payable Bank - Export Refinance (3) 4,521,613 4,521,613 - (5 ) 3,265,839 3,265,839 -
Loan Payable Bank - Running Finance (4) 678,217 678,217 - (6 ) - - -
Loan Payable Bank - Export Refinance II (5) 3,165,130 3,165,130 - (7 ) 2,482,037 2,482,037 -
Loan Payable Bank - Running Finance II (6) 1,356,484 1,356,484 - (8 ) - - -
Loan Payable Bank - Export Refinance III (9 ) 4,572,176 4,572,176 -
Term Finance Facility (10 ) 59,087 19,080 40,007
Insurance Financing (11 ) 71,245 71,245 -
9,826,467 9,826,467 - 13,116,430 12,261,826 854,604
Subsidiary Capital Leases (7) 557,516 306,633 250,883
Subsidiary Finance Leases (12 ) 428,591 373,088 55,503
$ 10,383,983 $ 10,133,100 $ 250,883 $ 13,545,021 $ 12,634,914 $ 910,107

As of June 30, 2017 As of June 30, 2020
Current Long-Term Current Long-Term
Name Total Maturities Maturities Total Maturities Maturities

D&O Insurance (1) $ 87,485 $ 87,485 $ - (1 ) $ 81,728 $ 81,728 $ -
Paycheck Protection Program Loans (2 ) 469,721 182,669 287,052
Bank Overdraft Facility (2) 221,379 221,379 - (3 ) - - -
Term Finance Facility (4 ) 1,380,878 354,337 1,026,541
Loan Payable Bank - Export Refinance (3) 4,776,461 4,776,461 - (5 ) 2,975,482 2,975,482 -
Loan Payable Bank - Running Finance (6 ) - - -
Loan Payable Bank - Export Refinance II (5) 1,910,585 1,910,585 - (7 ) 2,261,365 2,261,365 -
Loan Payable Bank - Running Finance II (6) 2,865,877 2,865,877 - (8 ) - - -
Loan Payable Bank - Export Refinance III (9 ) 2,975,483 2,975,483 -
Term Finance Facility (10 ) 65,473 16,423 49,050
Insurance Financing (11 ) - - -
9,861,787 9,861,787 - 10,210,130 8,847,487 1,362,643
Subsidiary Capital Leases (7) 727,770 361,008 366,762
Subsidiary Finance Leases (12 ) 469,406 292,074 177,332
$ 10,589,557 $ 10,222,795 $ 366,762 $ 10,679,536 $ 9,139,561 $ 1,539,975

(1) The Company finances Directors’ and Officers’ (“D&O”) liability insurance and Errors and Omissions (“E&O”) liability insurance, ~~and some account payables,~~ for which the D&O and E&O balances are renewed on an annual basis and, as such, are recorded in current maturities. The interest rate on these financings were ranging from ~~4.8%~~5.0% to ~~7.69%~~7.0% as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017.~~2020.

(2) The Company and its subsidiary, NTA, received Paycheck Protection Program loans of $469,721 introduced by the U.S. Government during the COVID-19 Pandemic. This loan is forgivable if the Company meets the criteria set by the U.S. Government. The loans carry an interest rate of 1% and have a maturity date of two years from the date of the disbursement of the loan. As of March 31, 2021, the Company has not applied for the loan forgiveness.
Page 28
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
(3) The Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £300,000, or approximately ~~$405,405.~~$410,959. The annual interest rate was ~~4.75%~~5.12% as of ~~December~~March 31, ~~2017. Total~~2021. The total outstanding balance as of ~~December~~March 31, ~~2017~~2021 was £Nil. ~~Interest expense for three and six months ended December 31, 2017, was $5,991 and $8,045, respectively. Interest expense for three and six months ended December 31, 2016, was $nil.~~

This overdraft facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. As of ~~December~~March 31, ~~2017,~~2021, NTE was in compliance with this covenant.

~~(3)~~(4) The Company’s subsidiary, NetSol PK, has a term finance facility from Askari Bank Limited, approved by the Government of Pakistan to protect the employment situation during the Pandemic COVID-19. This is a term loan payable in three years. The availed facility amount was Rs. 311,727,320 or $2,036,103, at March 31, 2021, of which $1,322,065 is shown as current and the remaining $714,038 is shown as long term. The availed facility amount was Rs. 232,042,664 or $1,380,878, at June 30, 2020, of which $354,337 is shown as current and the remaining $1,026,541 is shown as long term. The interest rate for the loan was 3% at March 31, 2021 and June 30, 2020.
(5) The Company’s subsidiary, NetSol PK, has an export refinance facility with Askari Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every ~~six~~nine months. ~~Total~~The total facility amount is Rs. 500,000,000 or ~~$4,521,613~~$3,265,839 at ~~December~~March 31, ~~2017~~2021 and Rs. 500,000,000 or $2,975,482 at June 30, ~~2017.~~2020. The interest rate for the ~~loans~~loan was 3% at ~~December~~March 31, ~~2017~~2021 and June 30, 2017. Interest expense for the three and six months ended December 31, 2017 was $35,533 and $71,431, respectively. Interest expense for the three and six months ended December 31, 2016 was $28,527 and $57,592, respectively.2020.

~~(4)~~(6) The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s assets. ~~Total~~The total facility amount is Rs. 75,000,000 or ~~$678,242,~~$489,876, at ~~December~~March 31, ~~2017. NetSol PK used~~2021. The balance outstanding at March 31, 2021 and June 30, 2020 was Rs. ~~74,997,233 or $678,217, at December 31, 2017.~~Nil. The interest rate for the ~~loans~~loan was ~~8.16%~~9.59% and 7.2% at ~~December~~March 31, ~~2017.~~
~~Page 19~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~2021 and June 30, 2020, respectively.

This facility requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. As of ~~December~~March 31, ~~2017,~~2021, NetSol PK was in compliance with this covenant.

~~(5)~~(7) The Company’s subsidiary, NetSol PK, has an export refinance facility with Samba Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every ~~six~~nine months. ~~Total~~The total facility amount is Rs. ~~350,000,000~~380,000,000 or ~~$3,165,130~~$2,482,037 and Rs. ~~200,000,000~~380,000,000 or ~~$1,910,585,~~$2,261,365 at ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, respectively. The interest rate for the ~~loans~~loan was 3% at ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017. Interest expense for the three and six months ended December 31, 2017 was $17,656 and $39,778, respectively. Interest expense for three and six months ended December 31, 2016, was $nil.~~2020.

~~(6)~~(8) The Company’s subsidiary, NetSol PK, has a running finance facility with Samba Bank Limited, secured by NetSol PK’s assets. ~~Total~~The total facility amount is Rs. ~~150,000,000~~120,000,000 or ~~$1,356,484~~$783,801 and Rs. ~~300,000,000~~120,000,000 or ~~$2,865,877,~~$714,116, at ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, respectively. The interest rate for the ~~loans~~loan was ~~8.13%~~9.09% and 7.7% at ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, respectively. ~~Interest expense for the three~~The balance outstanding at March 31, 2021 and ~~six months ended December 31, 2017~~June 30, 2020 was ~~$35,626 and $79,721, respectively. Interest expense for three and six months ended December 31, 2016, was $nil.~~Rs. Nil.

During the tenure of loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times. As of ~~December~~March 31, ~~2017,~~2021, NetSol PK was in compliance with these covenants.

~~(6)~~(9) The Company’s subsidiary, NetSol PK, has an export refinance facility with Habib Metro Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every nine months. The total facility amount is Rs. 900,000,000 or $5,878,511 and NetSol PK used Rs. 700,000,000 or $4,572,176 at March 31, 2021. The total facility amount is Rs. 900,000,000 or $5,355,868 and NetSol PK used Rs. 500,000,000 or $2,975,483 at June 30, 2020. The interest rate for the loan was 3% at March 31, 2021 and June 30, 2020.
(10) In March 2019, the Company’s subsidiary, VLS, entered into a loan agreement. The loan amount was £69,549, or $95,273, for a period of 5 years with monthly payments of £1,349, or $1,848. As of March 31, 2021, the subsidiary has used this facility up to $59,087, of which $40,007 was shown as long-term and $19,080 as current. The interest rate was 6.14% at March 31, 2021.
Page 29
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
(11) The Company’s subsidiary, VLS finances Directors’ and Officers’ (“D&O”) liability insurance, and recorded in current maturities. The interest rate on this financing was 4.5% as of March 31, 2021.
(12) The Company leases various fixed assets under ~~capital~~finance lease arrangements expiring in various years through ~~2022.~~2024. The assets and liabilities under ~~capital~~finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are secured by the assets themselves. Depreciation of assets under ~~capital~~finance leases is included in depreciation expense for the three and nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016.~~2020.

Following is the aggregate minimum future lease payments under ~~capital~~finance leases as of ~~December~~March 31, ~~2017:~~2021:

Amount Amount
Minimum Lease Payments
Due FYE 12/31/18 $ 336,546
Due FYE 12/31/19 220,855
Due FYE 12/31/20 36,412
Due FYE 12/31/21 5,182
Due FYE 12/31/22 -
Within year 1 $ 382,384
Within year 2 31,336
Within year 3 27,949
Total Minimum Lease Payments 598,995 441,669
Interest Expense relating to future periods (41,479 ) (13,078 )
Present Value of minimum lease payments 557,516 428,591
Less: Current portion (306,633 ) (373,088 )
Non-Current portion $ 250,883 $ 55,503

NOTE 1516 - STOCKHOLDERS’ EQUITY

During the ~~six~~three and nine months ended ~~December~~March 31, ~~2017,~~2021, the Company issued ~~26,136~~3,020 and 9,060 shares of common stock for services rendered by officers of the Company. These shares were valued at the fair market value of ~~$163,350.~~$17,068 and $51,204, respectively.

During the ~~six~~three and nine months ended ~~December~~March 31, ~~2017,~~2021, the Company issued ~~9,699~~nil and 1,983 shares of common stock for services rendered by the independent members of the Board of Directors as part of their board compensation. These shares were valued at the fair market value of ~~$55,080.~~$Nil and $11,997, respectively.

During the ~~six~~three and nine months ended ~~December~~March 31, ~~2017,~~2021, the Company issued ~~98,408~~7,393 and 24,679 shares of its common stock to employees pursuant to the terms of their employment agreements valued at ~~$605,107.~~
~~Page 20~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~During the six months ended December 31, 2017, the Company collected subscription receivable of $76,511 related to the exercise of stock options in previous years.~~
~~During the six months ended December 31, 2017, the Company received $138,800 pursuant to a stock option agreement for the exercise of 35,773 shares of common stock at a price of $3.88 per share.~~
~~During the six months ended December 31, 2017, the Company paid $601,020 to purchase 139,275 of shares of its common stock from the open market at an average price of $4.32 per share.~~$41,599 and $141,147, respectively.

NOTE 1617 - INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
~~Common stock purchase options and warrants consisted of the following:~~
~~OPTIONS:~~
# of shares Weighted Ave Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregated Intrinsic Value

Outstanding and exercisable, June 30, 2016 610,133 $ 4.90 0.99 $ 799,030
Granted 79,838 $ 4.53
Exercised (84,838 ) $ 4.49
Expired / Cancelled (130,000 ) $ 7.50
Outstanding and exercisable, June 30, 2017 475,133 $ 4.20 1.05 $ 8,413
Granted - -
Exercised (35,773 ) $ 3.88
Expired / Cancelled (1,000 ) $ 16.00
Outstanding and exercisable, December 31, 2017 438,360 $ 4.20 0.57 $ 319,465
~~The following table summarizes information about stock options and warrants outstanding and exercisable at December 31, 2017.~~
Exercise Price Number Outstanding and Exercisable Weighted Average Remaining Contractual Life Weighted Ave Exercise Price
OPTIONS:

$ 3.88 384,898 0.49 $ 3.88
$ 6.50 53,462 1.10 $ 6.50
Totals 438,360 0.57 $ 4.20
~~Page 21~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~

The following table summarizes stock grants awarded as compensation:

# of shares Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2016 630,228 $ 6.07
Granted 222,146 $ 5.92
Forfeited / Cancelled (5,000 ) $ 5.55
Vested (427,175 ) $ 5.90
Unvested, June 30, 2017 420,199 $ 6.07
Vested (134,243 ) $ 6.13
Unvested, December 31, 2017 285,956 $ 6.18
# of shares Weighted Average Grant Date Fair Value ($)
Unvested, June 30, 2020 66,421 $ 5.88
Vested (35,722 ) $ 5.72
Unvested, March 31, 2021 30,699 $ 5.79

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, the Company recorded compensation expense of ~~$405,721~~$74,169 and ~~$833,530,~~$239,333, respectively. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2016,~~2020, the Company recorded compensation expense of ~~$682,640~~$236,702 and ~~$1,547,579,~~$565,287, respectively. The compensation expense related to the unvested stock grants as of ~~December~~March 31, ~~2017~~2021 was ~~$1,731,908~~$134,276 which will be recognized during the fiscal years ~~2018~~2021 through 2022.
~~NOTE 17 – TAXES~~
~~U.S. Tax Reform~~
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U. S. corporate income tax rates and implementing a territorial tax system. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years.
There are also certain transitional impacts of the Tax Act. As part of the transition to the new territorial tax system, the Tax Act imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. As of December 31, 2017, the provisional undistributed earnings of foreign subsidiaries were $22.8 million which the Company anticipates being able to offset fully with net operating loss carry forwards. In addition, the modified territorial tax system includes a new anti-deferral provision, referred to as global intangible low taxed income (“GILTI”), which subjects certain foreign income to current U.S. tax.
The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries.
In December 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Reform Act. Under SAB 118, companies are able to record a reasonable estimate of the impacts of the Tax Reform Act if one is able to be determined and report it as a provisional amount during the measurement period. The measurement period is not to extend beyond one year from the enactment date. Impacts of the Tax Reform Act that a company is not able to make a reasonable estimate for should not be recorded until a reasonable estimate can be made during the measurement period.
~~We currently anticipate finalizing and recording any resulting adjustments by the end of our current fiscal year ending June 30, 2018.~~

Page 2230

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)

NOTE 18 – CONTINGENCIES

~~On April 7, 2017, Conister Bank Limited filed a complaint~~From time to time, the Company is subject to legal proceedings, claims, and litigation arising in the ~~High Court~~ordinary course of ~~Justice Chancery Division, as claim no. HC-2017-001045~~business including tax assessments. The Company defends itself vigorously against ~~our subsidiary, Virtual Lease Services Limited (“VLS”).~~any such claims. When (i) it is probable that an asset has been impaired or a liability has been incurred and (ii) the amount of the loss can be reasonably estimated, the Company records the estimated loss. The ~~complaint alleges that VLS was~~Company provides disclosure 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 $270,270). VLS has responded~~notes to the ~~complaint~~consolidated financial statements for loss contingencies that do not meet both conditions if there is a reasonable possibility that a loss may have been incurred that would be material to the financial statements. Significant judgment is required to determine the probability that a liability has been incurred and ~~its expenses are currently covered by~~whether such liability is reasonably estimable. The Company bases accruals on the best information available ~~insurance. VLS denies all claims and intends to vigorously defend~~at the ~~action.~~time, which can be highly subjective. The final outcome of these matters could vary significantly from the amounts included in the accompanying consolidated financial statements.

NOTE 19 – OPERATING SEGMENTS

The Company has identified three segments for its products and services; North America, Europe and Asia-Pacific. Our reportable segments are business units located in different global regions. Each business unit provides similar products and services; license fees for leasing and asset-based software, related maintenance fees, and implementation and IT consulting services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation.

The following table presents a summary of identifiable assets as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017:~~2020:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020
Identifiable assets:
Corporate headquarters $ 3,308,334 $ 2,922,514 $ 2,262,773 $ 4,508,724
North America 5,513,464 6,717,366 5,798,737 5,949,653
Europe 6,590,233 6,056,514 10,928,592 10,856,814
Asia - Pacific 89,125,306 83,980,936 69,325,685 67,157,898
Consolidated $ 104,537,337 $ 99,677,330 $ 88,315,787 $ 88,473,089

The following table presents a summary of investment under equity method as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017:~~2020:

As of December 31, As of June 30, As of As of
2017 2017 March 31, 2021 June 30, 2020
Investment in WRLD3D:
Investment in associates under equity method:
Corporate headquarters $ 1,033,486 $ 1,111,111 $ 401,307 $ 473,692
Asia - Pacific 2,356,315 1,945,909 2,794,673 1,914,000
Consolidated $ 3,389,801 $ 3,057,020 $ 3,195,980 $ 2,387,692

Page 2331

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)

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

For the Three Months For the Six Months
Ended December 31, Ended December 31, For the Three Months For the Nine Months
2017 2016 2017 2016 Ended March 31, Ended March 31,
Restated Restated 2021 2020 2021 2020
Revenues from unaffiliated customers:
North America $ 1,287,638 $ 1,513,997 $ 2,135,710 $ 3,355,428 $ 1,008,011 $ 1,210,187 $ 2,837,445 $ 3,464,705
Europe 1,661,213 1,298,037 3,109,037 1,888,578 2,748,945 2,791,238 8,627,042 8,225,906
Asia - Pacific 10,258,128 11,530,506 18,464,352 23,267,335 10,027,040 9,467,570 28,088,347 30,900,462
13,206,979 14,342,540 23,709,099 28,511,341 13,783,996 13,468,995 39,552,834 42,591,073
Revenue from affiliated customers
Europe 442,699 115,102 1,043,891 1,467,295
Asia - Pacific 796,757 1,401,144 2,512,221 2,956,619 - 61,842 - 202,199
1,239,456 1,516,246 3,556,112 4,423,914 - 61,842 - 202,199
Consolidated $ 14,446,435 $ 15,858,786 $ 27,265,211 $ 32,935,255 $ 13,783,996 $ 13,530,837 $ 39,552,834 $ 42,793,272

Intercompany revenue
Europe $ 139,228 $ 95,053 $ 241,703 $ 231,180 $ 160,970 $ 143,814 $ 426,883 $ 455,040
Asia - Pacific 768,431 1,462,603 1,145,368 1,922,554 3,810,340 2,048,652 9,094,697 5,618,855
Eliminated $ 907,659 $ 1,557,656 $ 1,387,071 $ 2,153,734 $ 3,971,310 $ 2,192,466 $ 9,521,580 $ 6,073,895

Net income (loss) after taxes and before non-controlling interest:
Corporate headquarters $ (1,258,717 ) $ (1,190,559 ) $ (2,296,641 ) $ (2,179,432 ) $ (804,636 ) $ 240,294 $ 1,536,305 $ (1,003,798 )
North America 65,194 (71,134 ) (230,452 ) (266,817 ) 57,460 134,390 (271,356 ) 230,738
Europe 180,655 (698,364 ) 280,045 (1,293,771 ) (474,629 ) 122,974 301,472 927,717
Asia - Pacific 2,674,870 583,327 3,727,785 2,746,393 246,635 971,435 (1,497,302 ) (399,887 )
Consolidated $ 1,662,002 $ (1,376,730 ) $ 1,480,737 $ (993,627 ) $ (975,170 ) $ 1,469,093 $ 69,119 $ (245,230 )

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

For the Six Months For the Nine Months
Ended December 31, Ended March 31,
2017 2016 2021 2020
Capital expenditures:
North America $ - $ 41,275 $ 1,520 $ 2,404
Europe 123,335 273,794 388,367 487,693
Asia - Pacific 419,788 759,247 1,719,171 521,188
Consolidated $ 543,123 $ 1,074,316 $ 2,109,058 $ 1,011,285

Page 2432

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~March 31, ~~2017~~2021
~~(UNAUDITED)~~(Unaudited)

NOTE 20 – NON-CONTROLLING INTEREST IN SUBSIDIARY

The Company had non-controlling interests in several of its subsidiaries. The balance of non-controlling interest was as follows:

SUBSIDIARY Non-Controlling Interest % Non-Controlling Interest at
December 31, 2017 Non-Controlling Interest %
Non-Controlling Interest at
March 31, 2021

NetSol PK 33.83 % $ 12,386,620 33.88 % $ 7,322,241
NetSol-Innovation 49.90 % 1,749,551 33.88 % 137,985
VLS, VLSH & VLSIL Combined 49.00 % 407,132
NetSol Thai 0.006 % (79 ) 0.006 % (196 )
OTOZ Thai 0.006 % (48 )
OTOZ 5.00 % (17,208 )
Total $ 14,543,224 $ 7,442,774

SUBSIDIARY Non-Controlling Interest % Non-Controlling Interest at
June 30, 2017

NetSol PK 33.80 % $ 12,887,938
NetSol-Innovation 49.90 % 1,599,734
VLS, VLHS & VLSIL Combined 49.00 % 311,502
NetSol Thai 0.006 % (92 )
Total $ 14,799,082
~~NetSol PK~~
During the six months ended December 31, 2017, employees of NetSol PK exercised 50,000 of options of common stock pursuant to employees exercising stock options and NetSol PK received cash of $7,755 resulting in an increase in non-controlling interest from 33.80% to 33.83%.
~~During the six months ended December 31, 2017, NetSol PK paid a cash dividend of $1,234,991.~~
SUBSIDIARY Non-Controlling Interest %
Non-Controlling Interest at
June 30, 2020

NetSol PK 33.88 % $ 6,361,747
NetSol-Innovation 33.88 % 128,514
NetSol Thai 0.006 % (39 )
OTOZ Thai 0.006 % 4
OTOZ 5.00 % (1,326 )
Total $ 6,488,900

NOTE 21 – ~~RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS~~INCOME TAXES
The current tax provision is based on taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for tax on income is calculated at the current rates of taxation as applicable after considering tax credit and tax rebates available, if any. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our effective tax rate is lower than the U.S. statutory rate primarily because of more earnings realized in countries that have lower statutory tax rates. Our effective tax rate in the future will depend on the portion of our profits earned within and outside the United States. Income from the export of computer software and its related services developed in Pakistan is exempt from tax through June 30, 2025; however, tax at the applicable rates is charged to the income from revenue generated from other than core business activities.

During the ~~preparation of the Company’s Form 10-Q for the~~three and nine months ended March 31, ~~2017, misstatements were identified~~2021, the Company recorded an income tax provision of $133,156 and $642,884, respectively, resulting in an effective tax rate of (15.8%) and 90.3%, respectively. During the previous financial statements relating to the recording of revenue in the proper period. The restated financial statements for the periods affected were disclosed in Note 19 of the Notes to Condensed Consolidated Financial Statement contained in the Company’s Form 10-Q for thethree and nine months ended March 31, ~~2017.~~
~~On December 21, 2015,~~2020, the Company ~~signed a 10-year contract for a 12-country installation~~recorded an income tax provision of ~~its NFS Ascent product which included a perpetual license, continued maintenance on the existing product~~$218,351 and then maintenance on NFS Ascent upon installation. The Company did not appropriately apply the percentage-of-completion method for this arrangement in accordance with ASC 605-35. As a result, for quarter ended September 30, 2016, license revenue was understated by $1,953,935 and for the quarter ended December 31, 2016, license revenue was overstated by $1,580,529.
The Company charges maintenance revenue on the license value plus any additional customization that the customer may require. For one customer, the Company did not increase the maintenance fee for the additional customization that was performed during the year. This resulted$1,067,099, respectively, resulting in an ~~understatement~~effective tax rate of ~~maintenance revenue of $120,976 for the quarter ended September 30, 2016~~12.9% and ~~an overstatement of maintenance revenue of $198,797 for the quarter ended December 31, 2016.~~129.8%, respectively.
~~The following tables present the restated financial statements for the three and six months ended December 31, 2016.~~
~~Page 25~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
Balance Sheet
As of December 31, 2016
As Originally Amount of
Presented Restatement As Restated
ASSETS
Current assets:
Cash and cash equivalents $ 9,505,383 $ 9,505,383
Accounts receivable, net of allowance of $495,760 and $492,498 5,840,490 5,840,490
Accounts receivable, net - related party 4,303,380 4,303,380
Revenues in excess of billings 17,646,488 373,406 18,019,894
Revenues in excess of billings - related party 469,030 469,030
Other current assets 2,904,650 2,904,650
Total current assets 40,669,421 373,406 41,042,827
Restricted cash 90,000 90,000
Property and equipment, net 21,873,277 21,873,277
Other assets 2,054,938 2,054,938
Intangible assets, net 18,423,439 18,423,439
Goodwill 9,516,568 9,516,568
Total assets $ 92,627,643 $ 373,406 $ 93,001,049

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 7,373,097 $ 7,373,097
Current portion of loans and obligations under capitalized leases 4,368,930 4,368,930
Unearned revenues 2,806,804 77,821 2,884,625
Common stock to be issued 88,324 88,324
Total current liabilities 14,637,155 77,821 14,714,976
Long term loans and obligations under capitalized leases; less current maturities 501,554 501,554
Total liabilities 15,138,709 77,821 15,216,530
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized; - - -
Common stock, $.01 par value; 14,500,000 shares authorized;
10,993,054 shares issued and 10,958,275 outstanding as of December 31, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016 109,931 109,931
Additional paid-in-capital 123,019,215 123,019,215
Treasury stock (34,779 shares and 27,279 shares) (454,310 ) (454,310 )
Accumulated deficit (40,074,755 ) 196,890 (39,877,865 )
Stock subscription receivable (450,220 ) (450,220 )
Other comprehensive loss (18,628,395 ) (18,628,395 )
Total NetSol stockholders’ equity 63,521,466 196,890 63,718,356
Non-controlling interest 13,967,468 98,695 14,066,163
Total stockholders’ equity 77,488,934 295,585 77,784,519
Total liabilities and stockholders’ equity $ 92,627,643 $ 373,406 $ 93,001,049

Page 2633

~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Three Months For the Six Months
Ended December 31, 2016 Ended December 31, 2016
As Originally Amount of As Originally Amount of
Presented Restatement As Restated Presented Restatement As Restated
Net Revenues:
License fees $ 5,350,086 $ (1,580,529 ) $ 3,769,557 $ 8,849,946 $ 373,406 $ 9,223,352
Maintenance fees 3,787,696 (198,797 ) 3,588,899 7,190,517 (77,821 ) 7,112,696
Services 6,984,084 6,984,084 12,790,801 12,790,801
License fees - related party - - 246,957 246,957
Maintenance fees - related party 51,345 51,345 181,976 181,976
Services - related party 1,464,901 1,464,901 3,379,473 3,379,473
Total net revenues 17,638,112 (1,779,326 ) 15,858,786 32,639,670 295,585 32,935,255

Cost of revenues:
Salaries and consultants 5,979,804 5,979,804 11,873,153 11,873,153
Travel 836,240 836,240 1,548,135 1,548,135
Depreciation and amortization 1,318,764 1,318,764 2,649,636 2,649,636
Other 1,065,727 1,065,727 2,038,065 2,038,065
Total cost of revenues 9,200,535 - 9,200,535 18,108,989 - 18,108,989

Gross profit 8,437,577 (1,779,326 ) 6,658,251 14,530,681 295,585 14,826,266

Operating expenses: ��
Selling and marketing 2,713,478 2,713,478 5,057,516 5,057,516
Depreciation and amortization 271,485 271,485 540,582 540,582
General and administrative 3,933,413 3,933,413 8,552,609 8,552,609
Research and development cost 91,607 91,607 184,539 184,539
Total operating expenses 7,009,983 - 7,009,983 14,335,246 - 14,335,246

Income (loss) from operations 1,427,594 (1,779,326 ) (351,732 ) 195,435 295,585 491,020

Other income and (expenses)
Loss on sale of assets (32,339 ) (32,339 ) (34,742 ) (34,742 )
Interest expense (62,127 ) (62,127 ) (116,602 ) (116,602 )
Interest income 23,416 23,416 53,856 53,856
Loss on foreign currency exchange transactions (621,887 ) (621,887 ) (1,036,783 ) (1,036,783 )
Other income 6,823 6,823 28,383 28,383
Total other income (expenses) (686,114 ) - (686,114 ) (1,105,888 ) - (1,105,888 )

Net income (loss) before income taxes 741,480 (1,779,326 ) (1,037,846 ) (910,453 ) 295,585 (614,868 )
Income tax provision (338,884 ) (338,884 ) (378,759 ) (378,759 )
Net income (loss) from continuing operations 402,596 (1,779,326 ) (1,376,730 ) (1,289,212 ) 295,585 (993,627 )
Non-controlling interest (1,388,272 ) 596,608 (791,664 ) (1,462,183 ) (98,695 ) (1,560,878 )
Net income (loss) attributable to NetSol $ (985,676 ) $ (1,182,718 ) $ (2,168,394 ) $ (2,751,395 ) $ 196,890 $ (2,554,505 )

Net income (loss) per share:

Net income (loss) per common share
Basic $ (0.09 ) $ (0.11 ) $ (0.20 ) $ (0.26 ) $ 0.03 $ (0.24 )
Diluted $ (0.09 ) $ (0.11 ) $ (0.20 ) $ (0.26 ) $ 0.03 $ (0.24 )

Weighted average number of shares outstanding
Basic 10,877,446 10,877,446 10,877,446 10,783,685 10,783,685 10,783,685
Diluted 10,877,446 10,877,446 10,877,446 10,783,685 10,783,685 10,783,685
~~Page 27~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Three Months
Ended December 31, 2016
As Originally Amount of
Presented Restatement As Restated
Net income (loss) $ (985,676 ) $ (1,182,718 ) $ (2,168,394 )
Other comprehensive income (loss):
Translation adjustment (944,837 ) - (944,837 )
Comprehensive income (loss) (1,930,513 ) (1,182,718 ) (3,113,231 )
Comprehensive income (loss) attributable to non-controlling interest (276,575 ) - (276,575 )
Comprehensive income (loss) attributable to NetSol $ (1,653,938 ) $ (1,182,718 ) $ (2,836,656 )
For the Six Months
Ended December 31, 2016
As Originally Amount of
Presented Restatement As Restated
Net income (loss) $ (2,751,395 ) $ 262,469 $ (2,488,926 )
Other comprehensive income (loss):
Translation adjustment 149,237 - 149,237
Comprehensive income (loss) (2,602,158 ) 262,469 (2,339,689 )
Comprehensive income (loss) attributable to non-controlling interest 47,138 - 47,138
Comprehensive income (loss) attributable to NetSol $ (2,649,296 ) $ 262,469 $ (2,386,827 )
~~Page 28~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Six Months
Ended December 31, 2016
As Originally Amount of
Presented Restatement As Restated
Cash flows from operating activities:
Net income (loss) $ (1,289,212 ) $ 295,585 $ (993,627 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 3,190,218 3,190,218
Provision for bad debts 1,026 1,026
Loss on sale of assets 34,742 34,742
Stock issued for services 1,525,775 1,525,775
Fair market value of warrants and stock options granted 21,804 21,804
Changes in operating assets and liabilities:
Accounts receivable 3,678,110 3,678,110
Accounts receivable - related party 829,285 829,285
Revenues in excess of billing (7,219,089 ) (373,406 ) (7,592,495 )
Revenues in excess of billing - related party 285,791 285,791
Other current assets 585,147 585,147
Accounts payable and accrued expenses 334,241 334,241
Unearned revenue (1,908,440 ) 77,821 (1,830,619 )
Net cash used in operating activities 69,398 - 69,398

Cash flows from investing activities:
Purchases of property and equipment (1,074,316 ) (1,074,316 )
Sales of property and equipment 181,087 181,087
Purchase of treasury stock (38,885 ) (38,885 )
Investment (705,555 ) (705,555 )
Net cash used in investing activities (1,637,669 ) - (1,637,669 )

Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 429,452 429,452
Proceeds from exercise of subsidiary options 18,089 18,089
Dividend paid by subsidiary to Non controlling interest (968,657 ) (968,657 )
Payments on capital lease obligations and loans - net (69,998 ) (69,998 )
Net cash provided by financing activities (591,114 ) - (591,114 )
Effect of exchange rate changes 107,241 107,241
Net decrease in cash and cash equivalents (2,052,144 ) - (2,052,144 )
Cash and cash equivalents, beginning of the period 11,557,527 11,557,527
Cash and cash equivalents, end of period $ 9,505,383 $ - $ 9,505,383
~~Page 29~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist in an understanding of the Company’s financial position and results of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2021. The following discussion should be read in conjunction with the information included within our Annual Report on Form 10-K for the year ended June 30, ~~2017,~~2020, and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Our website is located at www.netsoltech.com, and our investor relations website is located at http://ir.netsoltech.com. The following filings are available through our investor relations website after we file with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders. These filings are also available for download free of charge on our investor relations website. We also provide a link to the section of the SEC’s website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements and other ownership related filings. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 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 and on social media platforms linked to our corporate website. Investors and others can receive notifications of new information posted on our investor relations website by signing up for e-mail alerts. Further corporate governance information, including our committee charters and code of conduct, is also available on our investor relations website at http:// netsoltech.com/about-us. The content of our websites is not intended to be incorporated by reference into this or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Forward-Looking Information

This report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of its management as well as assumptions made by and information currently available to its management. When used in this report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, and similar expressions as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management’s current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. The Company’s realization of its business aims could be materially and adversely affected by any technical or other problems in, or difficulties with, planned funding and technologies, third party technologies which render the Company’s technologies obsolete, the unavailability of required third party technology licenses on commercially reasonable terms, the loss of key research and development personnel, the inability or failure to recruit and retain qualified research and development personnel, or the adoption of technology standards which are different from technologies around which the Company’s business ultimately is built. The Company does not intend to update these forward-looking statements.

Business Overview

NetSol Technologies, Inc. (NasdaqCM: 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 lease and finance industry.

NetSol’s clients include Dow-Jones 30 Industrials and Fortune 500 manufacturers and financial institutions, global vehicle manufacturers, and enterprise technology providers, all of which are serviced by NetSol delivery locations around the globe.
Page 34

Founded in 1997, NetSol is headquartered in Calabasas, California. While the Company follows a global strategy for sales and delivery of its portfolio of solutions and services, it continues to maintain regional offices in the following locations:

● North America Los Angeles Area
● Europe London Metropolitan area
● Asia Pacific Lahore, Karachi, Bangkok, Beijing, Shanghai, Jakarta and Sydney

NetSol’s offerings include its flagship global solution, NFS™. A robust suite of ~~five~~four software applications itthat is an end-to-end solution for the ~~lease and~~asset finance industry covering the complete leasing and ~~financing~~finance cycle starting from quotation origination through end of contract ~~transactions.~~transactions and including digital channel support with intuitive mobile applications. The ~~five software~~four applications under NFS™ have been designed and developed for a highly flexible setting and are capable of dealing with multinational, multi-company, multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. Each application is a complete system in itself and can be used independently to address specific sub-domains of the leasing/financing cycle. When used together, they fully automate the entire leasing/financing cycle for companies of any size, ~~company,~~ including those with multi-billion-dollar portfolios.

~~Page 30~~
NFS Ascent^®

NFS ~~Ascent™~~
~~NFS Ascent™ is~~Ascent^®, the Company’s ~~next-generation~~next generation platform, ~~offering~~offers 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 ~~30 years.~~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 ~~multibillion dollar~~multi-billion-dollar lease portfolios ~~under~~in compliance with various ~~generally accepted accounting principles (GAAP), as well as international financial reporting standards (IFRS).~~regulatory standards. NFS ~~Ascent™~~Ascent^®, with its distributed and clustered deployment across parallel application and high-volume data servers, enables finance companies to process voluminous data in a hyper speed environment. NFS ~~Ascent™~~ Ascent^®has been developed using the latest tools and technologies and its n-tier SOA architecture allows the system to greatly improve a myriad of areas including, but not limited to, scalability, performance, fault tolerance and security. Pricing models for NFS Ascent^®are also available on a software as a service (“SaaS”) or subscription-based pricing as an alternative to the traditional license model. Subscription-based pricing is being offered on a monthly, quarterly or annual basis and decreases the cost of the initial buy-in for new customers while providing an alternative to current customers seeking lower software usage and maintenance costs.

NFS Digital

~~NetSol launched~~ NFS ~~digital in 2014. It~~Digital enables a sales force for ~~the~~a finance and leasing company ~~across~~to access different channels ~~such as~~like point of sale, field investigation and auditing ~~and allows~~as well as allowing end customers to access their contract details through a self-service mobile application. ~~NFS~~
Otoz Mobility Orchestration System
Otoz is a digital ~~includes mAccount, mPOS, mDealer, mAuditor,~~platform that helps automotive asset-holders (auto-manufacturers, auto-captives and ~~Mobile Field Investigator (mFI).~~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.
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LeasePak

In North America, 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 ~~reducing~~reduce operating costs, simplify accounting and improve profits. It is scalable from a basic offering to a collection of highly specialized add on modules for systems, portfolios and ~~accrual~~accounting methods for virtually all sizes and ~~varying~~ complexity of operations. It is ~~part~~the 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-SaaS

NTA also offers the LeasePak ~~Software-as-a-Service (“SaaS”)~~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 European market, NTE has some regional offerings, including LeaseSoft and LoanSoft. LeaseSoft is a full lifecycle lease and finance system aimed predominantly at the UK funder market, including modules to support web portals and an electronic data interchange manager to facilitate integration between funders and introducers. LoanSoft is similar to LeaseSoft, but optimized for the consumer loan market.

Highlights

Listed below are a few of NetSol’s ~~major successes achieved in~~highlights for the ~~six months~~quarter ended ~~December~~March 31, ~~2017:~~2021:

● ~~We amended~~The leasing division of a mid-sized regional bank in the ~~12 countyNFSAscent™ contract securing €7.7 million Euros (approximately $9.3 million) in future revenues in addition to what was previously projected from~~U.S. went live with the ~~customer. The revenue will be recognized over the contract term as the support services are performed.~~SaaS version of our LeasePak solution.
● ~~Pursuant to the 12 countryNFSAscent™ contract, we~~We generated over $1,000,000 of revenue by successfully ~~implemented the Loan Origination System and the Wholesale Financial System in Thailand and Korea, respectively.~~implementing change requests from various customers across multiple regions.
● ~~Pursuant to~~We started the ~~12 country~~NFS~~Ascent™ contract, we delivered~~ Ascent® Retail implementation process for the ~~first major release~~subsidiary of a leading German Auto Manufacturer based in South Korea.
● We generated approximately $2,100,000 of license revenue with the renewal of our NFS ~~Ascent™ to China.~~CAP and CMS solutions with an existing customer in Thailand.

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● An increase in software modification requests from some of our existing customers spread across the various regions contributed reasonably to the revenues for the quarter. A trend which is believed will be continued in the following quarters.
● We signed a chargeable proof of concept agreement with one of the oldest and largest banks in Australia. The proof of concept project will add to our revenues and assist us in making further progress in the selection process for our NFS Ascent™ product.
● ~~Mizhou Balimore, a Japanese bank in Indonesia, went live with the first phase of its NFS Ascent™ digital solution.~~
● Our existing customer, an auto finance company of a leading bank in Indonesia, kicked off its leasing project. We believe that this is likely to help increase revenues in the following quarters of the current fiscal year. This kick off has further strengthened our relationship with this Indonesian business partner paving the way for further success in the market. Additionally, all the branches of the same business partner successfully went live with NFS Ascent™ during the first quarter of the current fiscal year culminating into a maturing and long-standing delivery commitment.
● NFS Ascent™ and Ascent Digital continue to generate interest across all major regions and industries as some significant new prospects have come through the pipeline, further strengthening projections and forecasts. Revenue could also be boosted as customization requests grow in addition to new business volume.
Our success, in the near term, will depend, in large part, on the Company’s ability to continue to grow revenues and improve profits, adequately capitalize for growth in various markets and verticals, make progress in the North American and European markets and, continue to streamline sales and marketing efforts in every market we operate. However, management’s outlook for the continuing operations, which has been consolidated and has been streamlined, remains optimistic.

Management has identified the following material trends affecting NetSol.

Positive trends:

● ~~Improving U.S. economy generally,~~NFS Ascent^® SaaS offering is gaining traction in mid-size auto captives in the North American and European markets.
● Mobility and digital transformation are the new norm showing acceleration in every sector particularly in auto and ~~banking markets.~~banking.
● ~~According to Automotive World December 2017 publication,global~~On Cloud demand for ~~light weight trucks~~our solution is ~~expected to reach an all-time high in 2018.~~on the rise.
● COVID-19 has created new dynamics for businesses and corporations with employees and executives working from home. Essentially, the decreased office and maintenance costs, as well as the sharply reduced travel expenses, should positively impact our financials.
● ~~Total industry sales of more than 20 million vehicles annually by 2018, according~~COVID-19 is creating new opportunities for our R&D teams to ~~John Murphy, an analyst for Bank of America Merrill Lynch annual industry outlook.~~expand and monetize mobile and digital solutions in our space and complementary sectors.
● ~~Robust Chinese~~In developing markets, ~~as asset based leasing~~new interests are emerging from existing clients for upgrades and ~~finance sector are far from maturity levels.~~mobility platforms.
● ~~Latin American markets, primarily in Mexico, remain largely untapped.~~Growing opportunities and dynamics of shared car ownership either through ride hailing and car sharing encouraging our innovation and development tools.
● OTOZ platform is showing positive trajectory of interest from existing and new auto leasing and Tier 1 companies in all of our markets, including China, the US and Europe.
● Improved stability in U.S. and Pakistan ~~economy growth in gross domestic product reached 4.7% in 2016, according to~~relationship boosting confidence and trade relations.
● The China Pakistan Economic Corridor (CPEC), a Chinese investment initiative, has exceeded $62 billion investment from the originally planned $46 billion on Pakistan ~~Bureau of Statistics;~~energy and ~~improved credit ratings by Bloomberg, S&P, Moody’s and Forbes Pakistan security and geopolitical environment has improved.~~infrastructure sectors.
● China ~~investment~~auto sector remains strong as our customers are constantly demanding ‘Change Requests’ or ~~CPEC (China Pakistan Economic Corridor) has exceeded $50 billion from originally $46 billion in Pakistan on energy~~additional services and ~~infrastructure projects.~~reflects resilience.
● ~~New emerging markets and IT destinations in Thailand, Malaysia, Indonesia, China and Australia.~~
● ~~Continued interest from Fortune 500 multinational auto captives and global companies in NetSol Ascent™.~~
● ~~Continuing interest from existing clients~~Car dealerships in the ~~NFS™ legacy systems~~U.S. reported record profits in ~~emerging~~2020 even with reduced staff and ~~developing markets.~~a national recession.
● ~~Growing demand and traction for upgrading to NFS Ascent™ by existing tier one auto captive clients.~~
● ~~Increased visits to NetSol PK by senior executives of existing clients and potential new customers.~~

Negative trends:

● ~~Continued Global terrorism~~The degree to which the COVID-19 pandemic impacts our future business globally, results of operations and ~~extremism threats in European countries.~~financial condition will depend on future developments, which are uncertain, including but not limited to the duration, spread and severity of the pandemic, the availability, adoption and efficacy of vaccines, government responses and other actions to mitigate the spread of and to treat COVID-19, and when and to what extent normal business, economic and social activity and conditions resume.
● ~~Geopolitical unrest in~~We are unable to predict the ~~Middle East~~extent to which the pandemic impacts our customers and ~~potential terrorism~~other partners and ~~the disruption risk it creates.~~their financial conditions, but adverse effects on these parties could also adversely affect us.
● ~~Restricted liquidity~~Most OEMs and ~~financial burden~~auto sectors are experiencing a major slowdown due to ~~tighter internal processes~~lockdowns and ~~limited budgets might cause delays in the receivables from some clients.~~health concerns.
● The ~~threats~~C-level decision making to acquire new systems or even upgrade will be elongated due to uncertainty of ~~conflict between~~the COVID-19 virus.
● Due to travel restrictions caused by COVID-19, it is increasingly difficult to conduct face to face meetings for global clients and new prospects removing the personal connection essential to some decision making.
● The COVID-19 pandemic has adversely affected live industry conferences and events, such as those held by the Equipment Leasing and Finance Association (ELFA), reducing leads and market exposure.
● Working from the office poses its own risk of virus spread until it vanishes completely.
● Political actions, including trade protection and national security policies of the U.S. and Chinese governments, such as tariffs or bans could in the ~~Middle Eastern countries could potentially create volatility in oil prices, causing readjustments of corporate budgets~~future limit or prevent companies from transacting business with China and ~~consumer spending slowing~~aggravate the global ~~auto sales.~~business environment.

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CHANGES IN FINANCIAL CONDITION

Quarter Ended ~~December~~March 31, ~~2017 compared~~2021 Compared to ~~December~~the Quarter Ended March 31, ~~2016~~2020

The following table sets forth the items in our unaudited condensed consolidated statement of operations for the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 as a percentage of revenues.

For the Three Months For the Three Months
Ended December 31, Ended March 31,
2017 %
2016
Restated
% 2021 % 2020 %
Net Revenues:
License fees $ 235,932 1.63 % $ 3,769,557 23.77 % $ 2,120,963 15.4 % $ 93,076 0.7 %
Maintenance fees 3,568,448 24.70 % 3,588,899 22.63 %
Subscription and support 5,674,776 41.2 % 5,153,692 38.1 %
Services 9,087,191 62.90 % 6,619,158 41.74 % 5,988,257 43.4 % 8,222,227 60.8 %
License fees - related party 217,105 1.50 % - 0.00 %
Maintenance fees - related party 101,251 0.70 % 51,345 0.32 %
Services - related party 1,236,508 8.56 % 1,829,827 11.54 % —   0.0 % 61,842 0.5 %
Total net revenues 14,446,435 100.00 % 15,858,786 100.00 % 13,783,996 100.0 % 13,530,837 100.0 %

Cost of revenues:
Salaries and consultants 5,362,092 37.12 % 5,979,804 37.71 % 5,372,302 39.0 % 4,850,438 35.8 %
Travel 287,901 1.99 % 836,240 5.27 % 151,075 1.1 % 1,052,033 7.8 %
Depreciation and amortization 1,168,103 8.09 % 1,318,764 8.32 % 759,768 5.5 % 737,637 5.5 %
Other 939,986 6.51 % 1,065,727 6.72 % 1,075,403 7.8 % 868,491 6.4 %
Total cost of revenues 7,758,082 53.70 % 9,200,535 58.02 % 7,358,548 53.4 % 7,508,599 55.5 %

Gross profit 6,688,353 46.30 % 6,658,251 41.98 % 6,425,448 46.6 % 6,022,238 44.5 %
Operating expenses:
Selling and marketing 1,932,140 13.37 % 2,713,478 17.11 % 1,595,967 11.6 % 1,587,821 11.7 %
Depreciation and amortization 222,785 1.54 % 271,485 1.71 % 272,075 2.0 % 206,035 1.5 %
Provision for bad debts - 0.00 % 1,026 0.01 %
General and administrative 4,026,706 27.87 % 3,932,387 24.80 % 3,860,509 28.0 % 4,151,394 30.7 %
Research and development cost 189,891 1.31 % 91,607 0.58 % 234,678 1.7 % 453,050 3.3 %
Total operating expenses 6,371,522 44.10 % 7,009,983 44.20 % 5,963,229 43.3 % 6,398,300 47.3 %

Income (loss) from operations 316,831 2.19 % (351,732 ) -2.22 % 462,219 3.4 % (376,062 ) -2.8 %
Other income and (expenses)
Loss on sale of assets (8,939 ) -0.06 % (32,339 ) -0.20 %
Gain (loss) on sale of assets (53,012 ) -0.4 % 129 0.0 %
Interest expense (109,675 ) -0.76 % (62,127 ) -0.39 % (98,656 ) -0.7 % (94,395 ) -0.7 %
Interest income 115,570 0.80 % 23,416 0.15 % 231,979 1.7 % 448,368 3.3 %
Gain (loss) on foreign currency exchange transactions 1,737,967 12.03 % (621,887 ) -3.92 % (1,825,349 ) -13.2 % 1,770,894 13.1 %
Share of net loss from equity investment (203,336 ) -1.41 % - 0.00 % (80,953 ) -0.6 % (78,502 ) -0.6 %
Other income 14,511 0.10 % 6,823 0.04 % 521,758 3.8 % 17,012 0.1 %
Total other income (expenses) 1,546,098 10.70 % (686,114 ) -4.33 % (1,304,233 ) -9.5 % 2,063,506 15.3 %

Net income (loss) before income taxes 1,862,929 12.90 % (1,037,846 ) -6.54 % (842,014 ) -6.1 % 1,687,444 12.5 %
Income tax provision (200,927 ) -1.39 % (338,884 ) -2.14 % (133,156 ) -1.0 % (218,351 ) -1.6 %
Net income (loss) 1,662,002 11.50 % (1,376,730 ) -8.68 % (975,170 ) -7.1 % 1,469,093 10.9 %
Non-controlling interest (1,027,581 ) -7.11 % (791,664 ) -4.99 % 351,939 2.6 % (468,286 ) -3.5 %
Net income (loss) attributable to NetSol $ 634,421 4.39 % $ (2,168,394 ) -13.67 % $ (623,231 ) -4.5 % $ 1,000,807 7.4 %

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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 19 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening of the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues but also increasing our expenses denominated in currencies other than the U.S. 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.

Favorable Favorable Total Favorable Favorable Total
For the Three Months (Unfavorable) (Unfavorable) Favorable (Unfavorable) (Unfavorable) Favorable
Ended December 31, Change in Change due to (Unfavorable) For the Three Months Change in Change due to (Unfavorable)
2016 Constant Currency Change as Ended March 31, Constant Currency Change as
2017 % Restated % Currency Fluctuation Reported 2021 % 2020 % Currency Fluctuation Reported

Net Revenues: 14,446,435 100.00 % 15,858,786 100.00 % (1,506,082 ) 93,731 (1,412,351 ) $ 13,783,996 100.0 % $ 13,530,837 100.0 % $ 63,380 $            189,779 $ 253,159

Cost of revenues: 7,758,082 53.70 % 9,200,535 58.02 % 1,473,242 (30,789 ) 1,442,453 7,358,548 53.4 % 7,508,599 55.5 % 168,812 (18,761 ) 150,051

Gross profit 6,688,353 46.30 % 6,658,251 41.98 % (32,840 ) 62,942 30,102 6,425,448 46.6 % 6,022,238 44.5 % 232,192 171,018 403,210

Operating expenses: 6,371,522 44.10 % 7,009,983 44.20 % 730,914 (92,453 ) 638,461 5,963,229 43.3 % 6,398,300 47.3 % 456,508 (21,437 ) 435,071

Income (loss) from operations 316,831 2.19 % (351,732 ) -2.22 % 698,074 (29,511 ) 668,563 $ 462,219 3.4 % $ (376,062 ) -2.8 % $ 688,700 $ 149,581 $ 838,281

Net revenues for the quarter ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 are broken out among the segments as follows:

2021 2020
2017 2016 Revenue % Revenue %
Revenue % Revenue
Restated %
North America $ 1,287,638 8.91 % $ 1,513,997 9.55 % $ 1,008,011 7.3 % $ 1,210,187 8.9 %
Europe 2,103,912 14.56 % 1,413,139 8.91 % 2,748,945 19.9 % 2,791,238 20.6 %
Asia-Pacific 11,054,885 76.52 % 12,931,650 81.54 % 10,027,040 72.7 % 9,529,412 70.4 %
Total $ 14,446,435 100.00 % $ 15,858,786 100.00 % $ 13,783,996 100.0 % $ 13,530,837 100.0 %

Revenues

License fees

License fees for the three months ended ~~December~~March 31, ~~2017~~2021 were ~~$235,932~~$2,120,963 compared to ~~$3,769,557~~$93,076 for the three months ended ~~December~~March 31, ~~2016~~2020 reflecting ~~a decrease~~an increase of ~~$3,533,625~~$2,027,887 with a change in constant currency of ~~$3,556,109. The decrease in license revenue for~~$1,958,142. During the ~~fiscal~~ three months ended ~~December~~March 31, ~~2017 compared~~2021, we recognized approximately $2,100,000 related to ~~2016 is primarily due to the decrease of~~a license ~~revenue recognized~~agreement with an existing tier one finance company in Thailand for ~~the 12 country NFS Ascent™ contract. During the current quarter, we had license revenues through sales of our regional offerings in the U.S.~~out CAP and ~~the U.K.~~CMS solutions.

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~~License fees – related party~~Subscription and support

~~License~~Subscription and support fees ~~from related party~~ for the three months ended ~~December~~March 31, ~~2017~~2021 were ~~$217,105~~$5,674,776 compared to ~~$Nil~~$5,153,692 for the three months ended ~~December~~March 31, ~~2016~~2020 reflecting an increase of ~~$217,105~~$521,084 with a change in constant currency of ~~$210,400.~~
~~Maintenance fees~~
Maintenance fees for the three months ended December 31, 2017 were $3,568,448 compared to $3,588,899 for the three months ended December 31, 2016 reflecting a decrease of $20,451 with a change in constant currency of $51,595. Maintenance$462,578. Subscription and support fees begin once a customer has “gone live” with our product. ~~The decrease was due to some customers not renewing their maintenance agreements. We~~Subscription and support fees are recurring in nature, and we anticipate ~~maintenance~~these fees to gradually increase as we implement both our NFS legacy ~~product~~products and NFS ~~Ascent™~~Ascent^®.
~~Maintenance fees – related party~~
Maintenance fees from related party for the three months ended December 31, 2017 were $101,251 compared to $51,345 for the three months ended December 31, 2016 reflecting an increase of $49,906 with a change in constant currency of $44,670. The decrease was due to the fluctuation in usage of active users.

Services

Services income for the three months ended ~~December~~March 31, ~~2017~~2021 was ~~$9,087,191~~$5,988,257 compared to ~~$6,619,158~~$8,222,227 for the three months ended ~~December~~March 31, ~~2016~~2020 reflecting ~~an increase~~a decrease of ~~$2,468,033~~$2,233,970 with a ~~change~~decrease in constant currency of ~~$2,451,053.~~$2,295,498. The ~~services revenue increase was due to an increase~~decrease in services revenue is due to the decrease in implementation revenue associated with ~~new implementations and change requests.~~customers who have gone live with our products. Services revenue is derived from services provided to both current customers as well as services provided to new customers as part of the implementation process.

Services – related party

Services income from related party for the three months ended ~~December~~March 31, ~~2017~~2021 was ~~$1,236,508~~$Nil compared to ~~$1,829,827~~$61,842 for the three months ended ~~December~~March 31, ~~2016~~2020 reflecting a decrease of ~~$593,319~~$61,842 with a change in constant currency of ~~$604,501.~~$61,842. The decrease in related party service revenue is due to a decrease in service revenue ~~from our joint venture with 1insurer.~~related to services performed for WRLD3D.

Gross Profit

The gross profit was ~~$6,688,353,~~$6,425,448, for the three months ended ~~December~~March 31, ~~2017 as~~2021 compared with ~~$6,658,251~~$6,022,238 for the three months ended ~~December~~March 31, ~~2016.~~2020. This is an increase of ~~$30,102~~$403,210 with a ~~decrease~~change in constant currency of ~~$32,840.~~$232,192. The gross profit percentage for the three months ended ~~December~~March 31, ~~2017~~2021 also increased to ~~46.30%~~46.6% from ~~41.98%~~44.5% for the three months ended ~~December~~March 31, ~~2016.~~2020. The cost of sales was ~~$7,758,082~~$7,358,548 for the three months ended ~~December~~March 31, ~~2017~~2021 compared to ~~$9,200,535~~$7,508,599 for the three months ended ~~December~~March 31, ~~2016~~2020 for a decrease of ~~$1,442,453~~$150,051 and on a constant currency basis a decrease of ~~$1,473,242.~~$168,812. As a percentage of sales, cost of sales decreased from ~~58.02%~~55.5% for the three months ended ~~December~~March 31, ~~2016~~2020 to ~~53.70%~~53.4% for the three months ended ~~December~~March 31, ~~2017.~~2021.

Salaries and consultant fees ~~decreased~~increased by ~~$617,712~~$521,864 from ~~$5,979,804~~$4,850,438 for the three months ended ~~December~~March 31, ~~2016~~2020 to ~~$5,362,092~~$5,372,302 for the three months ended ~~December~~March 31, ~~2017~~2021 and on a constant currency basis ~~decreased $629,888.~~increased $507,676. The ~~decrease in salaries and consultant fees~~increase is due to annual salary raises and the ~~right sizing~~hiring of ~~technical employees at key locations including Pakistan, Thailand, China, UK and North America.~~additional personnel to fulfill delivery requirements. As a percentage of sales, salaries and consultant expense ~~decreased~~increased from ~~37.71%~~35.9% for the three months ended ~~December~~March 31, ~~2016~~2020 to ~~37.12%~~39.0% for the three months ended ~~December~~March 31, ~~2017.~~2021.
Travel expense was $151,075 for the three months ended March 31, 2021 compared to $1,052,033 for the three months ended March 31, 2020 for a decrease of $900,958 with a decrease in constant currency of $910,293. The decrease in travel expense is due to the travel restrictions associated with the COVID-19 pandemic.

Depreciation and amortization expense ~~decreased~~increased to ~~$1,168,103~~$759,768 compared to ~~$1,318,764~~$737,637 for the three months ended ~~December~~March 31, ~~2016~~2020 or ~~a decrease~~an increase of ~~$150,661~~$22,131 and on a constant currency basis ~~a decrease~~an increase of ~~$143,439. Depreciation and amortization expense decreased as some products became fully amortized.~~$35,712.
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Operating Expenses

Operating expenses were ~~$6,371,522~~$5,963,229 for the three months ended ~~December~~March 31, ~~2017~~2021 compared to ~~$7,009,983,~~$6,398,300, for the three months ended ~~December~~March 31, ~~2016~~2020 for a decrease of ~~9.11%~~6.8% or ~~$638,461~~$435,071 and on a constant currency basis a decrease of ~~10.43%~~7.1% or ~~$730,914.~~$456,508. As a percentage of sales, it decreased from ~~44.2%~~47.3% to ~~44.1%~~43.3%. The decrease in operating expenses was primarily due to decreases in ~~selling~~the general administrative expenses and ~~marketing expenses, salaries~~research and ~~wages, and depreciation.~~development costs.

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~~Selling~~
General and ~~marketing~~administrative expenses ~~decreased by $781,338~~were $3,860,509 for the three months ended March 31, 2021 compared to $4,151,394 for the three months ended March 31, 2020 or ~~28.79%~~a decrease of $290,885 or 7.0% and on a constant currency basis a decrease of ~~$816,557~~$282,262 or ~~30.09%~~6.8%. The decrease ~~in selling and marketing expenses~~ is primarily due to a reduction ~~in staff,~~of approximately $200,000 related to the decrease in ~~our salaries~~the provision for doubtful accounts and ~~commissions,~~approximately $175,000 related to reduced travel expenses, offset by approximately $68,000 increase in salaries. Research and ~~business development~~Development costs ~~to market and sell NFS Ascent™ globally.~~
~~General and administrative expenses were $4,026,706~~decreased $218,372 from $453,050 for the three months ended ~~December~~March 31, ~~2017 compared~~2020 to ~~$3,933,413 at December~~$234,678 for the three months ended March 31, ~~2016 or an increase of $93,293 or 2.37%~~2021 and on a constant currency basis ~~an increase of $42,545 or 1.08%. During the three months ended December 31, 2017, salaries~~ decreased by approximately $155,400 or $174,016 on a constant currency basis due to the decrease in the number of employees, minimal annual raises, less share grants and options, offset by an increase in professional services of approximately $73,308 or $69,760 on a constant currency basis and other general and administrative expenses of approximately $176,411 or $147,827 on a constant currency basis.$216,814.

Income/Loss from Operations
Income from operations was ~~$316,831~~$462,219 for the three months ended ~~December~~March 31, ~~2017~~2021 compared to a loss of ~~$351,732~~$376,062 for the three months ended ~~December~~March 31, ~~2016.~~2020. This represents an increase of ~~$668,563~~$838,281 with an increase of ~~$698,074~~$688,700 on a constant currency basis for the three months ended ~~December~~March 31, ~~2017~~2021 compared with the three months ended ~~December~~March 31, ~~2016.~~2020. As a percentage of sales, income from operations was ~~2.19%~~3.4% for the three months ended ~~December~~March 31, ~~2017~~2021 compared to a loss of ~~2.22%~~2.8% for the three months ended ~~December~~March 31, ~~2016.~~2020.
Other ~~income~~Income and ~~expense~~Expense
Other ~~income~~expense was ~~$1,546,098~~$1,304,233 for the three months ended ~~December~~March 31, ~~2017~~2021 compared ~~with a loss~~to other income of ~~$686,114~~$2,063,506 for the three months ended ~~December~~March 31, ~~2016.~~2020. This represents ~~an increase~~a decrease of ~~$2,232,212~~$3,367,739 with ~~an increase~~a decrease of ~~$2,243,765~~$3,453,699 on a constant currency basis. The ~~increase~~decrease is primarily due to the interest income and foreign currency exchange transactions. We did not accrue any interest income on the convertible notes receivable for the three months ended March 31, 2021 compared to $96,217 for the three months ended March 31, 2020. The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the ~~Pakistan Rupee (“PKR”)~~PKR compared to the U.S. dollar and the Euro. ~~In December 2017, Pakistan’s central bank withdrew its support of the PKR, which caused the PKR to drop in value.~~ During the three months ended ~~December~~March 31, ~~2017,~~2021, we recognized a ~~gain~~loss of ~~$1,737,967~~$1,825,349 in foreign currency exchange transactions compared to a ~~loss~~gain of ~~$621,887~~$1,770,894 for the three months ended ~~December~~March 31, ~~2016.~~2020. During the three months ended ~~December~~March 31, ~~2017,~~2021, the value of the U.S. dollar and the Euro ~~increased 4.30%~~decreased 4.5% and ~~5.76%~~8.7%, respectively, compared to the PKR. During the three months ended ~~December~~March 31, ~~2016,~~2020, the value of the U.S. dollar ~~increased 1.08%~~ and the Euro ~~decreased 5.14%~~increased 7.4% and 5.4%, respectively, compared to the PKR.
Non-controlling Interest
For the three months ended ~~December~~March 31, ~~2017 and 2016,~~2021, the net ~~income~~loss attributable to non-controlling interest was ~~$1,027,581 and $791,664, respectively.~~$351,939, compared to income of $468,286 for the three months ended March 31, 2020. The ~~increase~~decrease in non-controlling interest is primarily due to the increase in the net ~~income~~loss of NetSol ~~PK offset by a decrease in net income of NetSol Innovation.~~PK.
Net Income / Loss attributable to NetSol
~~Net income~~Our net loss was ~~$634,421~~$623,231 for the three months ended ~~December~~March 31, ~~2017~~2021 compared to ~~a loss~~net income of ~~$2,168,394~~$1,000,807 for the three months ended ~~December~~March 31, ~~2016.~~2020. This is ~~an increase~~a decrease of ~~$2,802,815~~$1,624,038 with ~~an increase~~a decrease of ~~$2,843,590~~$1,850,389 on a constant currency basis, compared to the prior year. For the three months ended ~~December~~March 31, ~~2017,~~2021, the net ~~income~~loss per share was ~~$0.06~~$0.05 for basic and diluted shares compared to ~~a loss~~net income per share of ~~$0.20~~$0.09 for basic and diluted shares for the three months ended ~~December~~March 31, ~~2016.~~2020.

Page 3641

~~Six~~Nine Months Ended ~~December~~March 31, ~~2017 compared~~2021 Compared to ~~December~~the Nine Months Ended March 31, ~~2016~~2020

The following table sets forth the items in our unaudited condensed consolidated statement of operations for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 as a percentage of revenues.

For the Six Months
Ended December 31, For the Nine Months
2016 Ended March 31,
2017 % Restated % 2021 % 2020 %
Net Revenues:
License fees $ 561,998 2.06 % $ 9,223,352 28.00 % $ 4,710,942 11.9 % $ 2,733,998 6.4 %
Maintenance fees 7,042,173 25.83 % 7,112,696 21.60 %
Subscription and support 16,571,441 41.9 % 14,864,804 34.7 %
Services 16,104,928 59.07 % 12,175,293 36.97 % 18,270,451 46.2 % 24,992,271 58.4 %
License fees - related party 261,513 0.96 % 246,957 0.75 %
Maintenance fees - related party 204,214 0.75 % 181,976 0.55 %
Services - related party 3,090,385 11.33 % 3,994,981 12.13 % - 0.0 % 202,199 0.5 %
Total net revenues 27,265,211 100.00 % 32,935,255 100.00 % 39,552,834 100.0 % 42,793,272 100.0 %

Cost of revenues:
Salaries and consultants 10,826,252 39.71 % 11,873,153 36.05 % 15,193,613 38.4 % 13,931,274 32.6 %
Travel 801,013 2.94 % 1,548,135 4.70 % 414,001 1.0 % 3,967,591 9.3 %
Depreciation and amortization 2,341,216 8.59 % 2,649,636 8.04 % 2,180,766 5.5 % 2,191,654 5.1 %
Other 1,796,568 6.59 % 2,038,065 6.19 % 2,915,122 7.4 % 2,767,927 6.5 %
Total cost of revenues 15,765,049 57.82 % 18,108,989 54.98 % 20,703,502 52.3 % 22,858,446 53.4 %

Gross profit 11,500,162 42.18 % 14,826,266 45.02 % 18,849,332 47.7 % 19,934,826 46.6 %
Operating expenses:
Selling and marketing 3,643,436 13.36 % 5,057,516 15.36 % 4,763,598 12.0 % 5,189,785 12.1 %
Depreciation and amortization 468,658 1.72 % 540,582 1.64 % 715,437 1.8 % 623,901 1.5 %
Provision for bad debts - 0.00 % 1,026 0.00 %
General and administrative 7,814,264 28.66 % 8,551,583 25.96 % 11,353,933 28.7 % 12,638,797 29.5 %
Research and development cost 374,976 1.38 % 184,539 0.56 % 431,086 1.1 % 1,580,625 3.7 %
Total operating expenses 12,301,334 45.12 % 14,335,246 43.53 % 17,264,054 43.6 % 20,033,108 46.8 %

Income (loss) from operations (801,172 ) -2.94 % 491,020 1.49 % 1,585,278 4.0 % (98,282 ) -0.2 %
Other income and (expenses)
Loss on sale of assets (16,069 ) -0.06 % (34,742 ) -0.11 %
Gain (loss) on sale of assets (127,285 ) -0.3 % 368 0.0 %
Interest expense (227,746 ) -0.84 % (116,602 ) -0.35 % (296,224 ) -0.7 % (246,064 ) -0.6 %
Interest income 252,481 0.93 % 53,856 0.16 % 643,654 1.6 % 1,283,279 3.0 %
Gain (loss) on foreign currency exchange transactions 2,754,329 10.10 % (1,036,783 ) -3.15 % (1,515,327 ) -3.8 % 71,765 0.2 %
Share of net loss from equity investment (270,898 ) -0.99 % - 0.00 % (232,488 ) -0.6 % (432,522 ) -1.0 %
Other income 15,610 0.06 % 28,383 0.09 % 654,395 1.7 % 243,325 0.6 %
Total other income (expenses) 2,507,707 9.20 % (1,105,888 ) -3.36 % (873,275 ) -2.2 % 920,151 2.2 %

Net income (loss) before income taxes 1,706,535 6.26 % (614,868 ) -1.87 % 712,003 1.8 % 821,869 1.9 %
Income tax provision (225,798 ) -0.83 % (378,759 ) -1.15 % (642,884 ) -1.6 % (1,067,099 ) -2.5 %
Net income (loss) 1,480,737 5.43 % (993,627 ) -3.02 % 69,119 0.2 % (245,230 ) -0.6 %
Non-controlling interest (1,215,814 ) -4.46 % (1,560,878 ) -4.74 % (216,900 ) -0.5 % 4,065 0.0 %
Net income (loss) attributable to NetSol $ 264,923 0.97 % $ (2,554,505 ) -7.76 % $ (147,781 ) -0.4 % $ (241,165 ) -0.6 %

Page 3742

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 19 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening of the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues but also increasing our expenses denominated in currencies other than the U.S. 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.

Favorable Favorable Total Favorable Favorable Total
For the Six Months (Unfavorable) (Unfavorable) Favorable (Unfavorable) (Unfavorable) Favorable
Ended December 31, Change in Change due to (Unfavorable) For the Nine Months Change in Change due to (Unfavorable)
2016 Constant Currency Change as Ended March 31, Constant Currency Change as
2017 % Restated % Currency Fluctuation Reported 2021 % 2020 % Currency Fluctuation Reported

Net Revenues: 27,265,211 100.00 % 32,935,255 100.00 % (5,650,244 ) (19,800 ) (5,670,044 ) $ 39,552,834 100.0 % $ 42,793,272 100.0 % $ (3,081,041 ) $ (159,397 ) $ (3,240,438 )

Cost of revenues: 15,765,049 57.82 % 18,108,989 54.98 % 2,269,770 74,170 2,343,940 20,703,502 52.3 % 22,858,446 53.4 % 1,861,221 293,723 2,154,944

Gross profit 11,500,162 42.18 % 14,826,266 45.02 % (3,380,474 ) 54,370 (3,326,104 ) 18,849,332 47.7 % 19,934,826 46.6 % (1,219,820 ) 134,326 (1,085,494 )

Operating expenses: 12,301,334 45.12 % 14,335,246 43.53 % 2,097,944 (64,032 ) 2,033,912 17,264,054 43.6 % 20,033,108 46.8 % 2,541,918 227,136 2,769,054

Income (loss) from operations (801,172 ) -2.94 % 491,020 1.49 % (1,282,530 ) (9,662 ) (1,292,192 ) $ 1,585,278 4.0 % $ (98,282 ) -0.2 % $ 1,322,098 $ 361,462 $ 1,683,560

Net revenues for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 are broken out among the segments as follows:

2021 2020
2017 2016 Revenue % Revenue %
Revenue %
Revenue Restated
%
North America $ 2,135,710 7.83 % $ 3,355,428 10.19 % $ 2,837,445 7.2 % $ 3,464,705 8.1 %
Europe 4,152,928 15.23 % 3,355,873 10.19 % 8,627,042 21.8 % 8,225,906 19.2 %
Asia-Pacific 20,976,573 76.94 % 26,223,954 79.62 % 28,088,347 71.0 % 31,102,661 72.7 %
Total $ 27,265,211 100.00 % $ 32,935,255 100.00 % $ 39,552,834 100.0 % $ 42,793,272 100.0 %

Revenues

License fees

License fees for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 were ~~$561,998~~$4,710,942 compared to ~~$9,223,352~~$2,733,998 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 reflecting ~~a decrease~~an increase of ~~$8,661,354~~$1,976,944 with a change in constant currency of ~~$8,683,204. The decrease in license revenue for~~$1,760,804. During the ~~fiscal six~~nine months ended ~~December~~March 31, ~~2017 compared~~2021, we recognized approximately $2,410,000 related to ~~2016 is primarily due~~a new agreement with an existing tier one finance company in China to upgrade to our NFS Ascent^®Retail and Wholesale platforms and approximately $2,100,000 related to an agreement with an existing tier one finance company in Thailand. During the nine months ended March 31, 2020, we recognized approximately $2,455,000 related to the ~~decrease of license revenue recognized for the 12 country NFS Ascent™~~DFS contract. ~~During the current quarter, we had license revenues through sales of our regional offerings in the U.S. and the U.K.~~

Page 3843

~~License fees – related party~~Subscription and support

~~License~~Subscription and support fees ~~from related party~~ for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 were ~~$261,513~~$16,571,441 compared to ~~$246,957~~$14,864,804 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 reflecting an increase of ~~$14,556~~$1,706,637 with a change in constant currency of ~~$7,851.~~
~~Maintenance~~$1,798,851. The increase in subscription and support fees
~~Maintenance fees for~~ is due to going live with several markets related to the ~~six months ended December 31, 2017 were $7,042,173 compared to $7,112,696 for~~DFS contract and going live with the ~~six months ended December 31, 2016 reflecting a decrease of $70,523 with a change in constant currency of $80,252. Maintenance~~BMW contract. Subscription and support fees begin once a customer has “gone live” with our product. ~~The decrease was due to some customers not renewing their maintenance agreements. We~~Subscription and support fees are recurring in nature, and we anticipate ~~maintenance~~these fees to gradually increase as we implement both our NFS legacy ~~product~~products and NFS ~~Ascent™~~Ascent^®.
~~Maintenance fees – related party~~
Maintenance fees from related party for the six months ended December 31, 2017 were $204,214 compared to $181,976 for the six months ended December 31, 2016 reflecting an increase of $22,238 with a change in constant currency of $17,002. The increase was due to the fluctuation in usage of active users.

Services

Services income for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 was ~~$16,104,928~~$18,270,451 compared to ~~$12,175,293~~$24,992,271 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 reflecting ~~an increase~~a decrease of ~~$3,929,635~~$6,721,820 with a ~~change~~decrease in constant currency of ~~$3,987,343.~~$6,438,497. The ~~services revenue increase was due to an increase~~decrease in services revenue is due to the decrease in implementation revenue associated with ~~new implementations and change requests.~~customers who have gone live with our products. Services revenue is derived from services provided to both current customers as well as services provided to new customers as part of the implementation process.

Services – related party

Services income from related party for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 was ~~$3,090,385~~$Nil compared to ~~$3,994,981~~$202,199 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 reflecting a decrease of ~~$904,596~~$202,199 with a change in constant currency of ~~$898,984.~~$202,199. The decrease in related party service revenue is due to a decrease in service revenue ~~from our joint venture with the company, 1insurer.~~related to services performed for WRLD3D.

Gross Profit

The gross profit was ~~$11,500,162,~~$18,849,332, for the ~~six~~nine months ended ~~December~~March 31, ~~2017 as~~2021 compared with ~~$14,826,266~~$19,934,826 for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. This is a decrease of ~~$3,326,104~~$1,085,494 with a change in constant currency of ~~$3,380,474.~~$1,219,820. The gross profit percentage for the ~~six~~nine months ended ~~December~~March 31, ~~2017 decreased~~2021 increased to ~~42.18%~~47.7% from ~~45.02%~~46.6% for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. The cost of sales was ~~$15,765,049~~$20,703,502 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to ~~$18,108,989~~$22,858,446 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 for a decrease of ~~$2,343,940~~$2,154,944 and on a constant currency basis a decrease of ~~$2,269,770.~~$1,861,221. As a percentage of sales, cost of sales ~~increased~~decreased from ~~54.98%~~53.4% for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 to ~~57.82%~~52.3% for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2021.

Salaries and consultant fees ~~decreased~~increased by ~~$1,046,901~~$1,262,339 from ~~$11,873,153~~$13,931,274 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 to ~~$10,826,252~~$15,193,613 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and on a constant currency basis ~~decreased $972,201.~~increased $1,469,590. The ~~decrease in salaries and consultant fees~~increase is due to annual salary raises and the ~~right sizing~~hiring of ~~technical employees at key locations including Pakistan, Thailand, China, UK and North America.~~additional personnel to fulfill delivery requirements. As a percentage of sales, salaries and consultant expense increased from ~~36.05%~~32.6% for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 to ~~39.71%~~38.4% for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2021.
Travel expense was $414,001 for the nine months ended March 31, 2021 compared to $3,967,591 for the nine months ended March 31, 2020 for a decrease of $3,553,590 with a decrease in constant currency of $3,571,101. The decrease in travel expense is due to the travel restrictions associated with the COVID-19 pandemic.

Depreciation and amortization expense decreased to ~~$2,341,216~~$2,180,766 compared to ~~$2,649,636~~$2,191,654 for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 or a decrease of ~~$308,420~~$10,888 and on a constant currency basis ~~a decrease~~an increase of ~~$283,783. Depreciation and amortization expense decreased as some products became fully amortized.~~$65,186.
~~Page 39~~

Operating Expenses

Operating expenses were ~~$12,301,334~~$17,264,054 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to ~~$14,335,246,~~$20,033,108, for the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2020 for a decrease of ~~14.19%~~13.8% or ~~$2,033,912~~$2,769,054 and on a constant currency basis a decrease of ~~14.63%~~12.7% or ~~$2,097,944.~~$2,541,918. As a percentage of sales, it ~~increased~~decreased from ~~43.53%~~46.8% to ~~45.12%~~43.7%. The decrease in operating expenses was primarily due to decreases in selling and marketing expenses, ~~salaries~~professional services, research and ~~wages~~development and ~~depreciation.~~general and administrative expenses.

Selling and marketing expenses decreased ~~by $1,414,080~~$426,187 or ~~27.96%~~8.2% and on a constant currency basis ~~a decrease of $1,445,637~~decreased $399,596 or ~~28.58%~~7.7%. The decrease in selling and marketing expenses based on constant currency is due to ~~reduction in staff,~~a decrease in ~~our salaries and commissions,~~ travel expenses and business development costs to market and sell NFS ~~Ascent™~~Ascent^® globally.
Page 44

General and administrative expenses were ~~$7,814,264~~$11,353,933 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to ~~$8,552,609 at December~~$12,638,797 for the nine months ended March 31, ~~2016 or~~2020 for a decrease of ~~$738,345~~$1,284,864 or ~~8.63%~~10.1% and on a constant currency basis ~~an increase~~a decrease of ~~$768,732~~$1,081,337 or ~~8.99%~~8.6%. ~~During the six months ended December 31, 2017, salaries decreased~~The decrease is primarily due to a reduction of approximately $320,000 related to a withholding tax on dividends paid by NetSol PK, approximately ~~$1,052,356 or $1,043,147 on a constant currency basis due~~$351,000 of reduced travel expenses, approximately $92,000 of reduced professional services, approximately $302,000 related to the decrease in the ~~number of employees, minimal annual raises, less share grants~~provision for doubtful accounts and ~~options,~~approximately $104,000 reduction in rent expense offset by an increase in ~~other general and administrative expenses~~salaries of approximately ~~$249,382 or $213,461 on a constant currency basis and professional services approximately $65,655 or $61,980 on constant currency bases.~~$113,000.

Income/Loss from Operations
~~Loss~~Income from operations was ~~$801,172~~$1,585,278 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to ~~income~~a loss of ~~$491,020~~$98,282 for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. This represents ~~a decrease~~an increase of ~~$1,292,192~~$1,683,560 with ~~a decrease~~an increase of ~~$1,282,530~~$1,322,098 on a constant currency basis for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared with the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. As a percentage of sales, ~~loss~~income from operations was ~~2.94%~~4.0% for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to ~~income~~a loss of ~~1.49%~~0.2% for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020.
Other Income and Expense
Other ~~income~~expense was ~~$2,507,707~~$873,275 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to other income of $920,151 for the nine months ended March 31, 2020. This represents a decrease of $1,793,426 with a ~~loss~~decrease of ~~$1,105,888 for the six months ended December 31, 2016. This represents an increase of $3,613,595 with an increase of $3,641,001~~$1,926,494 on a constant currency basis. The ~~increase~~decrease is primarily due to the interest income and foreign currency exchange transactions. We did not accrue any interest income on the convertible notes receivable for the nine months ended March 31, 2021compared to $275,704 for the nine months ended March 31, 2020. The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared to the U.S. dollar and the Euro. ~~In December 2017, Pakistan’s central bank withdrew its support of the PKR, which caused the PKR to drop in value.~~ During the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, we recognized a ~~gain~~loss of ~~$2,754,329~~$1,515,327 in foreign currency exchange transactions compared to a ~~loss~~gain of ~~$1,036,783~~$71,765 for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2020. During the ~~six~~nine months ended ~~December~~March 31, ~~2017, the value of the U.S. dollar and the Euro increased 5.63% and 10.77%, respectively, compared to the PKR. During the six months ended December 31, 2016,~~2021, the value of the U.S. dollar and the Euro decreased ~~0.69%~~8.0% and ~~5.93%~~1.9%, respectively, compared to the PKR. During the nine months ended March 31, 2020, the value of the U.S. dollar increased 2.0% and the value of the Euro decreased 1.3%, respectively, compared to the PKR.
Non-controlling Interest
For the ~~six~~nine months ended ~~December~~March 31, ~~2017 and 2016,~~2021, the net income attributable to non-controlling interest was ~~$1,215,814 and $1,560,878, respectively.~~$216,900, compared to a loss of $4,065 for the nine months ended March 31, 2020. The ~~decrease~~increase in non-controlling interest is primarily due to the ~~decrease~~increase in net income of NetSol ~~Innovation.~~PK.
Net Income / Loss attributable to NetSol
~~Net income~~The net loss was ~~$264,923~~$147,781 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 compared to a net loss of ~~$2,554,505~~$241,565 for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. This is ~~an increase~~a decrease in the net loss of ~~$2,819,428~~$93,384 with an increase in the net loss of ~~$2,851,849~~$412,673 on a constant currency basis, compared to the prior year. For the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, net ~~income~~loss per share was ~~$0.02~~$0.01 for basic and diluted shares compared to ~~a loss of $0.24~~$0.02 for basic and diluted shares for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020.
Page 45

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:

● EBITDA is GAAP net income or loss before net interest expense, income tax expense, depreciation and amortization.
● Non-GAAP adjusted EBITDA is EBITDA ~~less~~plus stock-based compensation expense.
● Adjusted EBITDA per basic and diluted share – Adjusted EBITDA allocated to common stock divided by the weighted average shares outstanding and diluted shares outstanding.
~~Page 40~~

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 or loss 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.

Page 46
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 three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 are as follows:

For the Three Months Ended For the Three Months Ended For the Nine Months Ended For the Nine Months Ended
March 31, 2021 March 31, 2020 March 31, 2021 March 31, 2020

Net Income (loss) attributable to NetSol $ (623,231 ) $ 1,000,807 $ (147,781 ) $ (241,165 )
Non-controlling interest (351,939 ) 468,286 216,900 (4,065 )
Income taxes 133,156 218,351 642,884 1,067,099
Depreciation and amortization 1,031,843 943,672 2,896,203 2,815,555
Interest expense 98,656 94,395 296,224 246,064
Interest (income) (231,979 ) (448,368 ) (643,654 ) (1,283,279 )
EBITDA $ 56,506 $ 2,277,143 $ 3,260,776 $ 2,600,209
Add back:
Non-cash stock-based compensation 74,169 236,702 239,333 565,287
Adjusted EBITDA, gross $ 130,675 $ 2,513,845 $ 3,500,109 $ 3,165,496
Less non-controlling interest (a) 66,659 (729,735 ) (1,074,038 ) (885,144 )
Adjusted EBITDA, net $ 197,334 $ 1,784,110 $ 2,426,071 $ 2,280,352

Weighted Average number of shares outstanding
Basic 11,343,406 11,753,063 11,571,878 11,713,827
Diluted 11,343,406 11,753,063 11,571,878 11,713,827

Basic adjusted EBITDA $ 0.02 $ 0.15 $ 0.21 $ 0.19
Diluted adjusted EBITDA $ 0.02 $ 0.15 $ 0.21 $ 0.19

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

Net Income (loss) attributable to non-controlling interest $ (351,939 ) $ 468,286 $ 216,900 $ (4,065 )
Income Taxes 34,867 59,983 127,749 303,610
Depreciation and amortization 283,716 271,244 812,816 800,882
Interest expense 29,585 28,068 89,929 72,600
Interest (income) (71,440 ) (113,413 ) (204,604 ) (334,584 )
EBITDA $ (75,211 ) $ 714,168 $ 1,042,790 $ 838,443
Add back:
Non-cash stock-based compensation 8,552 15,567 31,248 46,701
Adjusted EBITDA of non-controlling interest $ (66,659 ) $ 729,735 $ 1,074,038 $ 885,144
Page 4147
Three Months Six Months
Three Months Ended Six Months Ended
Ended December 31, 2016 Ended December 31, 2016
December 31, 2017 Restated December 31, 2017 Restated

Net Income (loss) before preferred dividend, per GAAP $ 634,421 $ (2,168,394 ) $ 264,923 $ (2,554,505 )
Non-controlling interest 1,027,581 791,664 1,215,814 1,560,878
Income taxes 200,927 338,884 225,798 378,759
Depreciation and amortization 1,390,888 1,590,249 2,809,874 3,190,218
Interest expense 109,675 62,127 227,746 116,602
Interest (income) (115,570 ) (23,416 ) (252,481 ) (53,856 )
EBITDA $ 3,247,922 $ 591,114 $ 4,491,674 $ 2,638,096
Add back:
Non-cash stock-based compensation 405,721 660,319 833,530 1,547,579
Adjusted EBITDA, gross $ 3,653,643 $ 1,251,433 $ 5,325,204 $ 4,185,675
Less non-controlling interest (a) (1,562,303 ) (1,550,729 ) (2,264,167 ) (3,183,972 )
Adjusted EBITDA, net $ 2,091,340 $ (299,296 ) $ 3,061,037 $ 1,001,703

Weighted Average number of shares outstanding
Basic 11,159,075 10,877,446 11,115,346 10,783,685
Diluted 11,171,543 10,877,446 11,127,814 10,939,177

Basic adjusted EBITDA $ 0.19 $ (0.03 ) $ 0.28 $ 0.09
Diluted adjusted EBITDA $ 0.19 $ (0.03 ) $ 0.28 $ 0.09

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

Net Income attributable to non-controlling interest $ 1,027,581 $ 791,664 $ 1,215,814 $ 1,560,878
Income Taxes 29,945 23,907 40,423 37,781
Depreciation and amortization 465,138 730,672 932,320 1,556,538
Interest expense 34,463 12,991 73,535 31,333
Interest (income) (36,918 ) (34,947 ) (82,075 ) (51,397 )
EBITDA $ 1,520,209 $ 1,524,287 $ 2,180,017 $ 3,135,133
Add back:
Non-cash stock-based compensation 42,094 26,442 84,150 48,839
Adjusted EBITDA of non-controlling interest $ 1,562,303 $ 1,550,729 $ 2,264,167 $ 3,183,972

LIQUIDITY AND CAPITAL RESOURCES

Our cash position was ~~$10,004,650~~$30,599,137 at ~~December~~March 31, ~~2017,~~2021, compared to ~~$14,172,954~~$20,166,830 at June 30, ~~2017.~~2020.

Net ~~cash used in operating activities was $2,054,989 for the six months ended December 31, 2017 compared to net~~ cash provided by operating activities ~~of $69,398~~was $10,387,344 for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2021 compared to $411,119 for the nine months ended March 31, 2020. At ~~December~~March 31, ~~2017,~~2021, we had current assets of ~~$51,464,501~~$55,561,592 and current liabilities of ~~$27,864,068.~~$25,564,816. We had accounts receivable of ~~$21,689,080~~$12,176,722 at ~~December~~March 31, ~~2017~~2021 compared to ~~$8,228,141~~$11,414,257 at June 30, ~~2017. The increase in accounts receivable includes $8,433,735 due to billing for the code split per the amended DFS contract of which approximately $4,216,737 was received in January 2018.~~2020. We had revenues in excess of billings of ~~$22,870,442~~$10,748,231 at ~~December~~March 31, ~~2017~~2021 compared to ~~$24,380,632~~$18,506,733 at June 30, ~~2017~~2020 of which ~~$6,668,854~~$946,184 and ~~$5,173,538~~$1,300,289 is shown as long term as of ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, respectively. The long-term portion iswas discounted by ~~$284,394~~$75,727 and ~~$310,331~~$41,286 at ~~December~~March 31, ~~2017~~2021 and June 30, ~~2017,~~2020, respectively, using the discounted cash flow method with interest rates ranging from ~~3.93%~~4.65% to ~~4.43% which is NetSol PK’s weighted average borrowing rate.~~6.25% at March 31, 2021, and an interest rate of 4.35% at June 30, 2020. During the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and revenues in excess of billings ~~increased~~decreased by ~~$11,950,749~~$6,996,037 from ~~$32,608,773~~$29,920,990 at June 30, ~~2017~~2020 to ~~$44,559,522~~$22,924,953 at ~~December~~March 31, ~~2017. The increase is due to recognition of revenue according to progress of contracts and billing for the amended DFS contract.~~2021. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to ~~$7,560,298~~$6,156,782 and ~~$10,133,100,~~$12,634,914, respectively at ~~December~~March 31, ~~2017.~~2021. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to ~~$6,880,194~~$5,680,837 and ~~$10,222,795,~~$9,139,561, respectively at June 30, ~~2017.~~2020.
~~Page 42~~

The average days sales outstanding for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2021 and ~~2016~~2020 were ~~260~~183 and ~~145~~201 days, respectively, for each period. The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and ~~revenue~~revenues in excess of billings.

Net cash used in investing activities was ~~$899,882~~$2,133,265 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021, compared to ~~$1,598,784~~$1,577,465 for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. We had purchases of property and equipment of ~~$543,123~~$2,109,058 compared to ~~$1,074,316~~$1,011,285 for the ~~comparable period last fiscal year.~~nine months ended March 31, 2020. For the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021 and 2020, we invested ~~$500,000~~$Nil and $600,000, respectively, in a short-term convertible note receivable from WRLD3D. For the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2021 and 2020, we invested ~~$50,000~~$155,500 and $Nil, respectively, in ~~WRLD3D compared to $705,555 for the six months ended December 31, 2016.~~DriveMate.

Net cash ~~used in~~provided by financing activities was ~~$449,164,~~$488,572 for the nine months ended March 31, 2021, compared to ~~$629,999~~$18,080, for the ~~six~~nine months ended ~~December~~March 31, ~~2017, and 2016, respectively. The six~~2020. For the nine months ended ~~December~~March 31, ~~2017~~2021, we purchased 603,688 shares of our own stock for $2,064,800 compared to $Nil for the same period last year. The nine months ended March 31, 2021 included the cash inflow of ~~$215,311~~$2,109,572 from ~~the exercising of stock options and warrants~~bank proceeds compared to ~~$429,452~~$2,312,968 for the same period last year. During the ~~six~~nine months ended ~~December~~March 31, 2017, we purchased 139,275 shares of our common stock from the open market for $601,020 compared to 7,500 shares of common stock for $38,885 for the same period last year. During the six months ended December 31, 2017,2021, we had net payments for bank loans and ~~capital~~finance leases of ~~$361,814~~$533,344 compared to ~~$69,998~~$422,051 for the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2020. We are operating in various geographical regions of the world through our various subsidiaries. Those subsidiaries have financial arrangements from various financial institutions to meet both their short and long-term funding requirements. These loans will become due at different maturity dates as described in Note 1415 of the financial statements. We are in compliance with the covenants of the financial arrangements and there is no default, which may lead to early payment of these obligations. We anticipate paying back all these obligations on their respective due dates from its own sources.

We typically fund the cash requirements for our operations in the U.S. through our license, services, and ~~maintenance~~subscription and support agreements, intercompany charges for corporate services, and through the exercise of options and warrants. As of ~~December~~March 31, ~~2017,~~2021, we had approximately ~~$10~~$30.6 million of cash, cash equivalents and marketable securities of which approximately ~~$8.46~~$28.7 million is held by our foreign subsidiaries. As of June 30, ~~2017,~~2020, we had approximately ~~$14.17~~$20.2 million of cash, cash equivalents and marketable securities of which approximately ~~$11.56~~$18.2 million is held by our foreign subsidiaries. The Tax Act, which was passed on December 22, 2017, imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. As of December 31, 2017, the provisional undistributed earnings of foreign subsidiaries were $22.8 million which we anticipate being able to offset fully with net operating loss carry forwards.

We remain open to strategic relationships that would provide value added benefits. The focus will remain on continuously improving cash reserves internally and reduced reliance on external capital raise.

As a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans. Although our requirements for capital expenses vary from time to time, for the next 12 months, we anticipate needing $2 million for APAC, U.S. and Europe new business development activities and infrastructure enhancements, which we expect to provide from current operations.

While there is no guarantee that any of these methods will result in raising sufficient funds to meet our capital needs or that even if available will be on terms acceptable to us, we will be very cautious and prudent about any new capital raise given the global market uncertainties. However, we are very conscious of the dilutive effect and price pressures in raising equity-based capital.

Page 48
Financial Covenants

Our UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($~~405,405)~~410,959) which requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. The Pakistani subsidiary, NetSol PK has an approved facility for export refinance from Askari Bank Limited amounting to Rupees 500 million ($~~4,521,613)~~3,265,839) and a running finance facility of Rupees 75 million ($~~678,217) which requires~~489,876). NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 900 million ($5,878,511). These facilities require NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. NetSol PK also has an approved export refinance facility of Rs. ~~350~~380 million ($~~3,165,130)~~2,482,037) and a running finance facility of Rs. ~~150~~120 million ($~~1,356,484)~~783,801) from Samba Bank Limited. During the tenure of loan, these two facilities require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.
~~Page 43~~

As of the date of this report, we are in compliance with the financial covenants associated with our borrowings. The maturity dates of the borrowings of respective subsidiaries may accelerate if they do not comply with these covenants. In case of any change in control in subsidiaries, they may have to repay their respective credit facilities.

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements are prepared applying certain critical accounting policies. The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments. Critical accounting policies require numerous estimates and ~~accompanying notes~~strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect our reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations. Our financial statements are prepared in accordance with ~~accounting principles generally accepted~~U.S. GAAP, and they conform to general practices 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. Criticalour industry. We apply critical accounting policies ~~for us include revenue recognition~~consistently from period to period and ~~multiple element arrangements, intangible assets, software development costs, and goodwill.~~
~~REVENUE RECOGNITION~~
The Company derives revenues from the following sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) maintenance, which includes post contract support.
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, the fee is fixed or determinable, and collectability is probable. Delivery is considered to have occurred upon electronic transfer of the license keyintend that ~~provides immediate availability of the product to the purchaser. Determining whether and when some of these criteria~~any change in methodology occur in an appropriate manner. There have been ~~satisfied often involves assumptions~~no significant changes to our accounting policies and ~~judgments that can have a significant impact~~estimates as discussed in our Annual Report on ~~the timing and amount of revenue the Company reports.~~
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.
Revenue from consulting services is recognized 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 agreements is recognized ratably over the term of the maintenance agreement, typically one year.~~
~~Multiple Element Arrangements~~
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, maintenance and support, as well as training and development.
Vendor specific objective evidence (“VSOE”) of fair value for each element is based on the price for which the element is sold separately. The Company determines the VSOE of fair value of each element based on historical evidence of the Company’s stand-alone sales of these elements to third-parties or from the stated renewal rateForm 10-K 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 point 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.
~~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 undiscounted expected future cash flows. If the future undiscounted 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.
~~Page 44~~
~~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 net realizable value of the product. If such evaluations indicate that the unamortized software development costs exceed the net realizable value, the Company writes off the amount which the unamortized software development costs exceed net 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~~
Our stock-based compensation expense 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 is recognized as expense over the requisite service period. The BSM model requires various highly judgmental assumptions including expected volatility and expected term. If any of the assumptions used in the BSM model changes significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience and our expectations regarding future pre-vesting termination behavior of employees. To the extent our actual forfeiture rate is different from our 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 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. Fair value of the reporting 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 be performed.fiscal year ended June 30, 2020.

RECENT ACCOUNTING PRONOUNCEMENTS

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Page 49
Item 3.Quantitative and Qualitative Disclosures about Market Risks.

None.
~~Page 45~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Financial Officer and Chief Executive Officer concluded that our disclosure controls and procedures were ~~ineffective.~~effective.

~~The material weakness relates to the lack of qualified Internal Audit resources dedicated to documenting and testing legacy accounting systems and Corporate functions.~~
The Company is in the process of remediating the material weakness, including, but not limited to, by continuing the implementation of a leading cloud-based global ERP system, as approved by the Company’s Board in fiscal year 2016, which is already live in certain locations, and is expected to be completed by June 30, 2018. Further, the Company engaged an internal audit consulting firm to advise and assist with the remediation and internal control improvements, including to assist with the expansion and training of the Company’s internal audit function, and to augment corporate oversight and internal audit coverage.
Changes in Internal Control over Financial Reporting

~~Except for progress made in the remediation actions described above, there~~There were no changes in our internal controls over financial reporting during the three months ended ~~December~~March 31, ~~2017,~~2021, that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)).

Page 4650

PART II OTHER INFORMATION

Item 1. Legal Proceedings

On April 7, 2017, Conister Bank Limited filed a complaint in the High Court 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 $270,270). 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.None

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The repurchases provided in the table below were made through the quarter ended ~~December~~March 31, ~~2017:~~2021:

Issuer Purchases of Equity Securities (1)
Month Total Number of Shares Purchased Average
Price Paid
Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that may be Purchased Under the Plans or Programs
Jul-17 20,247 $ 4.32 20,247 -
Aug-17 91,533 $ 4.51 111,780 -
Sep-17 - $ - 111,780 -
Oct-17 27,495 $ 3.65 139,275 -
Nov-17 - $ - - -
Dec-17 - $ - - -
Total 139,275 $ 4.32 139,275 1,000,000
Issuer Purchases of Equity Securities (1)
Month Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that may be Purchased Under the Plans or Programs
Jul-20 21,940 $ 3.02 21,940 -
Aug-20 125,112 $ 3.18 147,052 -
Oct-20 102,023 $ 2.94 249,075 -
Nov-20 124,715 $ 3.00 373,790 -
Dec-20 73,206 $ 3.47 446,996 -
Jan-21 92,440 $ 4.03 539,436 -
Feb-21 30,021 $ 4.87 569,457
Mar-21 34,231 $ 4.49 603,688
Total       603,688 603,688 641,025
(1) The Board of Directors approved a repurchase of shares up to $2,000,000 on July 30, 2020. Based on the share price reported on NASDAQ on July 30, 2020, the maximum number of shares that could be purchased was 641,205. The actual maximum number of shares will vary depending on the actual price paid per share purchased. The Board of Directors agreed to the extension of the repurchasing plan through June 28, 2021.

On July 18, 2017, the Company announced that it had authorized a stock repurchase program permitting the Company to repurchase up to 1,000,000 of its shares of common stock through December 15, 2017. The shares were to be repurchased from time to time in open market transactions or privately negotiated transactions in the Company’s discretion. The repurchase plan expired on its own terms on December 15, 2017.
Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

~~Page 47~~
Item 5. Other Information

On February 9, 2018, the Board of Directors of the Company amended and restated the bylaws of the Company. The Company has attached a copy of the Amended and Restated Bylaws of NetSol Technologies, Inc. dated February 9, 2018 (the “Bylaws”) in its entirety as Exhibit 3.10. The Bylaws were amended and restated to consolidate into one comprehensive document all prior amendments and to reflect prior amendments to the Articles of Incorporation relevant to the Bylaws. This document is further amended as follows:None.
● ~~To change the Company’s name in the Bylaws from NetSol International, Inc. to NetSol Technologies, Inc consistent with the Company’s Articles of Incorporation.~~
● ~~Article II, Section 2 and Section 4, amending to clarify that the minimum and maximum number of board members to 3 and 9, respectively, and to confirm the board’s ability to fill board vacancies.~~
● ~~Article IV, Section 2 amending the date of the annual shareholders meeting to be in line with the Company’s current fiscal year end and practices.~~

Item 6. Exhibits

~~3.10~~ ~~Amended and Restated Bylaws of NetSol Technologies, Inc. dated February 9, 2018.~~
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO)
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO)
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO)
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO)

Page 4851

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~NETSOL TECHNOLOGIES, INC.~~
NETSOL TECHNOLOGIES, INC.
Date: ~~February~~May 13, ~~2018~~2021 /s/ Najeeb U. Ghauri
NAJEEB U. GHAURI
Chief Executive Officer

Date: ~~February~~May 13, ~~2018~~2021 /s/Roger K. Almond
ROGER K. ALMOND
Chief Financial Officer
Principal Accounting Officer

Page 4952

					Additional								Compre-			Non			Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling			Stockholders'
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest			Equity
Balance at December 31, 2020		12,147,458	$	121,476	$	128,823,181	$	(2,848,640	)	$	(40,104,089	)	$	(32,060,151	)	$	7,287,273		$	61,219,050
Common stock issued for:
Services		10,413		104		58,563		-			-			-			-			58,667
Purchase of treasury shares		-		-		-		(672,129	)		-			-			-			(672,129	)
Foreign currency translation adjustment		-		-		-		-			-			941,353			507,440			1,448,793
Net loss for the period		-		-		-		-			(623,231	)		-			(351,939	)		(975,170	)
Balance at March 31, 2021		12,157,871	$	121,580	$	128,881,744	$	(3,520,769	)	$	(40,727,320	)	$	(31,118,798	)	$	7,442,774		$	61,079,211

	For the Three Months				For the Six Months
	Ended December 31, 2016				Ended December 31, 2016
	Originally reported		Reclassified		Originally reported		Reclassified

Net Revenues:
Services	$	6,984,084	$	6,619,158	$	12,790,801	$	12,175,293
Services - related party		1,464,901		1,829,827		3,379,473		3,994,981
	$	8,448,985	$	8,448,985	$	16,170,274	$	16,170,274

Operating expenses:
Provision for bad debts	$	-	$	1,026	$	-	$	1,026
General and administrative		3,933,413		3,932,387		8,552,609		8,551,583
	$	3,933,413	$	3,933,413	$	8,552,609	$	8,552,609

	For the Three Months Ended				For the Nine Months ended
	March 31, 2020				March 31, 2020
	Originally reported		Reclassified		Originally reported		Reclassified

REVENUES
License fees	$	312,133	$	93,076	$	3,375,241	$	2,733,998
Subscription and support		4,934,635		5,153,692		14,291,959		14,864,804
Services		8,222,227		8,222,227		24,923,873		24,992,271
Services - related party		61,842		61,842		202,199		202,199
Total net revenues	$	13,530,837	$	13,530,837	$	42,793,272	$	42,793,272

	Level 1		Level 2		Level 3		Total Assets		Level 1		Level 2		Level 3		Total Assets
Revenue in excess of billing - long term	$	-	$	-	$	6,668,854	$	6,668,854
Revenues in excess of billings - long term									$	-	$	-	$	946,184	$	946,184
Total	$	-	$	-	$	6,668,854	$	6,668,854	$	-	$	-	$	946,184	$	946,184

	Revenue in excess of billing - long term		Fair value discount			Total		Revenues in excess of billings - long term			Fair value discount			Total
Balance at June 30, 2017	$	5,483,869	$	(310,331	)	$	5,173,538
Balance at June 30, 2020								$	1,341,575		$	(41,286	)	$	1,300,289
Additions		1,469,379	$	(85,057	)		1,384,322		1,023,634			(78,124	)		945,510
Amortization during the period		-		110,994			110,994		-			43,617			43,617
Balance at December 31, 2017	$	6,953,248	$	(284,394	)	$	6,668,854
Transfers to short term									(1,341,575	)		-			(1,341,575	)
Effect of Translation Adjustment									(1,723	)		66			(1,657	)
Balance at March 31, 2021								$	1,021,911		$	(75,727	)	$	946,184

	Adjustment
	to Adopt
Asset Classification	ASC Topic 326
Allowance for credit losses - accounts receivable	$	109,486
Allowance for credit losses - accounts receivable - related party		1,282,505
Allowance for credit losses - revenue in excess of billings - related party		8,163
Allowance for credit losses - convertible notes receivable - related party		4,250,000
Allowance for credit losses - other current assets		1,134,146
	$	6,784,300

●	Identification of the contract, or contracts, with a customer;
●	Identification of the performance obligations in the contract;
●	Determination of the transaction price;
●	Allocation of the transaction price to the performance obligations in the contract; and
●	Recognition of revenue when, or as, the Company satisfies a performance obligation.

●	The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.
●	The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less or the commissions are based on cashed received. These costs are recorded within sales and marketing expense in the Consolidated Statement of Operations.
●	The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).

	For the three months ended December 31, 2017						For the six months ended December 31, 2017
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
Basic income per share:
Net income available to common shareholders	$	634,421		11,159,075	$	0.06	$	264,923		11,115,346	$	0.02
Effect of dilutive securities
Stock options		-		12,468		-		-		12,468		-
Diluted income per share	$	634,421		11,171,543	$	0.06	$	264,923		11,127,814	$	0.02

	For the three months ended March 31, 2021								For the nine months ended March 31, 2021
	Net Loss			Shares		Per Share			Net Loss			Shares		Per Share
Basic loss per share:
Net loss available to common shareholders	$	(623,231	)		11,343,406	$	(0.05	)	$	(147,781	)		11,571,878	$	(0.01	)
Effect of dilutive securities
Share grants		-			-		-			-			-		-
Diluted loss per share	$	(623,231	)		11,343,406	$	(0.05	)	$	(147,781	)		11,571,878	$	(0.01	)

	For the three months ended March 31, 2020						For the nine months ended March 31, 2020
	Net Income		Shares		Per Share		Net Loss			Shares		Per Share

Basic income (loss) per share:
Net income (loss) available to common shareholders	$	1,000,807		11,753,063	$	0.09	$	(241,165	)		11,713,827	$	(0.02	)
Effect of dilutive securities
Share grants		-		-		-		-			-		-
Diluted income (loss) per share	$	1,000,807		11,753,063	$	0.09	$	(241,165	)		11,713,827	$	(0.02	)

						Convertible
Agreement	Interest			Maturity		Note			Accrued
Date	Rate			Date		Amount			Interest
May 25, 2017		5	%		March 2, 2018	$	750,000		$	110,202
February 9, 2018		10	%		March 31, 2019		2,500,000			500,773
April 1, 2019		10	%		March 31, 2020		600,000			57,648
August 19, 2019		10	%		March 31, 2020		400,000			32,439
							4,250,000			701,062
Less allowance for doubtful account							(4,250,000	)		(701,062	)
Net Balance						$	-		$	-

	As of
	March 31, 2021

Weighted average remaining lease term - Finance leases		0.79 Years

Weighted average discount rate - Finance leases		5.9	%

	For the Nine Months
	Ended March 31
	2021		2020

Cash flows related to lease liabilities
Operating cash flows related to operating leases	$	856,135	$	905,076

	Amount
Within year 1	$	1,022,176
Within year 2		634,186
Within year 3		130,701
Within year 4		21,450
Within year 5		862
Thereafter		2,802
Total Lease Payments		1,812,177
Less: Imputed interest		(94,518	)
Present Value of lease liabilities		1,717,659
Less: Current portion		(956,006	)
Non-Current portion	$	761,653

	●	~~The warrants are exercisable into shares of the “Next Round Preferred”, only if and when the Next Round Preferred is issued by WRLD3D in a “Qualified Financing”.~~
	●	~~The warrants expire on March 2, 2020.~~
	●	~~“Next Round Preferred” is defined as occurring if WRLD3D’s preferred stock (or securities convertible into preferred stock) are issued in a Qualified Financing that occurs after March 2, 2016.~~
	●	~~“Qualified Financing” is defined as financing with total proceeds of at least $2 million.~~
	●	~~The total number of common stock shares to be issued is equal to $1,250,000 divided by the per share price of the Next Round Preferred.~~
	●	~~The exercise price of the warrants is equal to the greater of~~

	a)	~~70% of the per share price of the Next Round Preferred sold in a Qualified Financing, or~~

	b)	25,000,000 divided by the total number of shares of common stock outstanding immediately prior to the Qualified Financing (on a fully-diluted basis, excluding the number of common stock shares issuable upon the exercise of any given warrant).

	Drivemate			WRLD3D			Total
Gross investment	$	1,800,000		$	3,888,889		$	5,688,889
Cumulative net loss on investment		(15,839	)		(1,926,723	)		(1,942,562	)
Cumulative other comprehensive income (loss)		-			(550,347	)		(550,347	)
Net investment	$	1,784,161		$	1,411,819		$	3,195,980

Year ended:
December 31, 2018	$	2,630,334
December 31, 2019		2,630,334
December 31, 2020		2,630,334
December 31, 2021		2,630,334
December 31, 2022		2,630,334
Thereafter		1,658,935
	$	14,810,605

Period ended:
March 31, 2022	$	1,899,819
March 31, 2023		1,899,819
March 31, 2024		707,517
	$	4,507,155

		As of December 31, 2017								As of March 31, 2021
				Current		Long-Term						Current		Long-Term
Name		Total		Maturities		Maturities				Total		Maturities		Maturities

D&O Insurance	(1)	$	105,023	$	105,023	$	-	(1	)	$	160,222	$	160,222	$	-
Paycheck Protection Program Loans								(2	)		469,721		369,162		100,559
Bank Overdraft Facility	(2)		-		-		-	(3	)		-		-		-
Term Finance Facility								(4	)		2,036,103		1,322,065		714,038
Loan Payable Bank - Export Refinance	(3)		4,521,613		4,521,613		-	(5	)		3,265,839		3,265,839		-
Loan Payable Bank - Running Finance	(4)		678,217		678,217		-	(6	)		-		-		-
Loan Payable Bank - Export Refinance II	(5)		3,165,130		3,165,130		-	(7	)		2,482,037		2,482,037		-
Loan Payable Bank - Running Finance II	(6)		1,356,484		1,356,484		-	(8	)		-		-		-
Loan Payable Bank - Export Refinance III								(9	)		4,572,176		4,572,176		-
Term Finance Facility								(10	)		59,087		19,080		40,007
Insurance Financing								(11	)		71,245		71,245		-
			9,826,467		9,826,467		-				13,116,430		12,261,826		854,604
Subsidiary Capital Leases	(7)		557,516		306,633		250,883
Subsidiary Finance Leases								(12	)		428,591		373,088		55,503
		$	10,383,983	$	10,133,100	$	250,883			$	13,545,021	$	12,634,914	$	910,107

		As of June 30, 2017								As of June 30, 2020
				Current		Long-Term						Current		Long-Term
Name		Total		Maturities		Maturities				Total		Maturities		Maturities

D&O Insurance	(1)	$	87,485	$	87,485	$	-	(1	)	$	81,728	$	81,728	$	-
Paycheck Protection Program Loans								(2	)		469,721		182,669		287,052
Bank Overdraft Facility	(2)		221,379		221,379		-	(3	)		-		-		-
Term Finance Facility								(4	)		1,380,878		354,337		1,026,541
Loan Payable Bank - Export Refinance	(3)		4,776,461		4,776,461		-	(5	)		2,975,482		2,975,482		-
Loan Payable Bank - Running Finance								(6	)		-		-		-
Loan Payable Bank - Export Refinance II	(5)		1,910,585		1,910,585		-	(7	)		2,261,365		2,261,365		-
Loan Payable Bank - Running Finance II	(6)		2,865,877		2,865,877		-	(8	)		-		-		-
Loan Payable Bank - Export Refinance III								(9	)		2,975,483		2,975,483		-
Term Finance Facility								(10	)		65,473		16,423		49,050
Insurance Financing								(11	)		-		-		-
			9,861,787		9,861,787		-				10,210,130		8,847,487		1,362,643
Subsidiary Capital Leases	(7)		727,770		361,008		366,762
Subsidiary Finance Leases								(12	)		469,406		292,074		177,332
		$	10,589,557	$	10,222,795	$	366,762			$	10,679,536	$	9,139,561	$	1,539,975

	Amount			Amount
Minimum Lease Payments
Due FYE 12/31/18	$	336,546
Due FYE 12/31/19		220,855
Due FYE 12/31/20		36,412
Due FYE 12/31/21		5,182
Due FYE 12/31/22		-
Within year 1				$	382,384
Within year 2					31,336
Within year 3					27,949
Total Minimum Lease Payments		598,995			441,669
Interest Expense relating to future periods		(41,479	)		(13,078	)
Present Value of minimum lease payments		557,516			428,591
Less: Current portion		(306,633	)		(373,088	)
Non-Current portion	$	250,883		$	55,503

	# of shares			Weighted Ave Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregated Intrinsic Value

Outstanding and exercisable, June 30, 2016		610,133		$	4.90		0.99	$	799,030
Granted		79,838		$	4.53
Exercised		(84,838	)	$	4.49
Expired / Cancelled		(130,000	)	$	7.50
Outstanding and exercisable, June 30, 2017		475,133		$	4.20		1.05	$	8,413
Granted		-			-
Exercised		(35,773	)	$	3.88
Expired / Cancelled		(1,000	)	$	16.00
Outstanding and exercisable, December 31, 2017		438,360		$	4.20		0.57	$	319,465

Exercise Price		Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life		Weighted Ave Exercise Price
OPTIONS:

$	3.88		384,898		0.49	$	3.88
$	6.50		53,462		1.10	$	6.50
Totals			438,360		0.57	$	4.20

	# of shares			Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2016		630,228		$	6.07
Granted		222,146		$	5.92
Forfeited / Cancelled		(5,000	)	$	5.55
Vested		(427,175	)	$	5.90
Unvested, June 30, 2017		420,199		$	6.07
Vested		(134,243	)	$	6.13
Unvested, December 31, 2017		285,956		$	6.18

	# of shares			Weighted Average Grant Date Fair Value ($)
Unvested, June 30, 2020		66,421		$	5.88
Vested		(35,722	)	$	5.72
Unvested, March 31, 2021		30,699		$	5.79

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at December 31, 2017			Non-Controlling Interest %			Non-Controlling Interest at March 31, 2021

NetSol PK		33.83	%	$	12,386,620			33.88	%	$	7,322,241
NetSol-Innovation		49.90	%		1,749,551			33.88	%		137,985
VLS, VLSH & VLSIL Combined		49.00	%		407,132
NetSol Thai		0.006	%		(79	)		0.006	%		(196	)
OTOZ Thai								0.006	%		(48	)
OTOZ								5.00	%		(17,208	)
Total				$	14,543,224					$	7,442,774

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at June 30, 2017

NetSol PK		33.80	%	$	12,887,938
NetSol-Innovation		49.90	%		1,599,734
VLS, VLHS & VLSIL Combined		49.00	%		311,502
NetSol Thai		0.006	%		(92	)
Total				$	14,799,082

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at June 30, 2020

NetSol PK		33.88	%	$	6,361,747
NetSol-Innovation		33.88	%		128,514
NetSol Thai		0.006	%		(39	)
OTOZ Thai		0.006	%		4
OTOZ		5.00	%		(1,326	)
Total				$	6,488,900