Item 1A Risk Factors 13
Item 1B Unresolved Staff Comments 13
Item 2 Properties 13
Item 3 Legal Proceedings 13
Item 4 Mine Safety Disclosures 13
PART II
Item 6 Selected Financial Data 14
Item 7A Quantitative and Qualitative Disclosures about Market Risk 31
Item 8 Financial Statements and Supplementary Data 31
Item 9A Controls and Procedures 32
Item 9B Other Information
PART III
Item 10 Directors, Executive Officers and Corporate Governance 33
Item 11 Executive Compensation 37
Item 14 Principal Accountant Fees and Services 53
PART IV
Item 15 Exhibits and Financial Statement Schedules 54
NOTE
ABOUT FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 relating to the development of the Company’s products and services and future operation results, including statements
regarding the Company that are subject to certain risks and uncertainties that could cause actual results to differ materially
from those projected. The words “believe,” “expect,” “anticipate,” “intend,” variations
of such words, and similar expressions, identify forward looking statements, but their absence does not mean that the statement
is not forward looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict. Factors that could affect the Company’s actual results include the progress
and costs of the development of products and services and the timing of the market acceptance. Forward looking statements may
appear throughout this report, including without limitation, the following sections: Item 1 “Business,” and Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation
to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given
these risk and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
As
used herein, “NETSOL,” “we”, “our,” and similar terms include NetSol Technologies, Inc. and
its subsidiaries, unless the context indicates otherwise.
PART
1
ITEM
1 - BUSINESS
GENERAL
NetSol
Technologies, Inc. (Nasdaq CM: NTWK) is a worldwide provider of IT and enterprise software solutions. We believe that our solutions
constitute mission critical applications for clients, as they encapsulate end-to-end business processes, facilitating faster processing
and increased transactions.
The
Company’s primary source of revenue is the licensing, customization, enhancement and maintenance of its suite of financial
applications under the brand name NFS Ascent® for leading businesses in the global finance and leasing industry.
NETSOL’s
clients include blue chip organizations, Dow-Jones 30 Industrials, 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.
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, Horsham
● Asia Pacific Lahore, Karachi, Bangkok, Beijing, Shanghai, Jakarta and Sydney
The
Company continues to maintain services, solutions and/or sales specific offices in the USA, England, Australia, Thailand, China,
Indonesia and Pakistan.
OUR
BUSINESS
Company
Business Model
NETSOL
believes that strong technology solutions with provable returns on investment are required to sell to its globally competitive
and mature marketplace. NETSOL believes that people are the drivers of success and we invest in hiring, training and retaining
top-notch staff to ensure not only successful selling but also the ongoing satisfaction of our clients. Taken together, this “selling
and attentive servicing” approach creates a distinctive advantage for NETSOL and a unique value for its customers. NETSOL
continues to underpin this effective business model with a combination of careful cost arbitrage, subject matter expertise, domain
experience, scalability and proximity with its global and regional customers.
Niche
Market Focus
By
specializing in leasing and financing solutions, we have gained footholds in several global locations and a market leading position
in the captive auto-finance segment and a growing presence in the general asset finance space.
Subject
Matter Expertise
Our
dual expertise in enterprise technology implementation and financial application development has helped us emerge as a global
contender in the lease and finance industry and secure a broad footprint throughout the major markets of North America, Asia Pacific
and Europe. The Asia Pacific operating region has particularly benefitted from the organic growth in the fast-developing leasing
automation industry, which is still nascent by Western standards.
Domain
Experience
NETSOL
has a strong presence in the captive auto-finance domain. With a collective experience of over two decades in Asia Pacific and
over three decades in North America and Europe, NETSOL is one of a few global competitors in this niche industry.
Proximity
with Global and Regional Customers
The
Company has offices across the world, located strategically to maintain close contact and proximity with its customers in various
key markets. This has helped in strengthening customer relationships and building a deeper understanding of local market dynamics.
Simultaneously, the Company is able to extend services and even support development through a combination of local/onsite and
central/off-site resources. This approach allows the Company to offer blended rates to its customers by employing a unique and
cost-effective global development model.
While
our business model is built around the development, implementation and maintenance of our suite of financial applications, NETSOL
has employed the same facilities and competencies to extend its offerings into related segments, including:
● IT consulting & services
● business intelligence
● information security
● independent system review
● outsourcing services and software process improvement consulting
● maintenance and support of existing systems
● project management
● technology/start-up incubation
Our
global operation is broken down into three regions: North America, Europe and Asia Pacific. All of the subsidiaries are seamlessly
integrated to function effectively with global delivery capabilities, cross selling to multinational asset finance companies,
leveraging a centralized marketing and pre-sales organization and, a network of employees connected across the globe to support
local and global customers and partners.
OUR
SOLUTIONS
NFS
Ascent®
Covering
the complete finance and leasing cycle starting from quotation origination through end of contract transactions, NFS Ascent®
has been designed and developed for a highly flexible setting and is capable of dealing with multinational, multi-company,
multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. The solution fully automates the entire financing/leasing
cycle for companies of any size, including those with multi-billion-dollar portfolios.
NFS
Ascent® is built on cutting-edge, modern technology that enables auto, equipment and big-ticket finance companies
to run their retail and wholesale finance business with ease. With comprehensive domain coverage and powerful configuration engines,
it is architected to empower finance and leasing companies with a platform that supports their growth in terms of business volume
and transactions.
The
Company’s next generation platform offers a technologically advanced solution for the auto and equipment finance and leasing
industry. NFS Ascent’s® architecture and user interfaces were designed based on the Company’s collective
experience with global Fortune 500 companies over the past 40 years combined with UX design concepts. The platform’s framework
allows auto captive and asset finance companies to rapidly transform legacy driven technology into a state-of-the-art IT and business
process environment.
At
the core of the NFS Ascent® platform is a lease accounting and contract processing engine, which allows for an
array of interest calculation methods, as well as robust accounting of multi-billion-dollar lease portfolios in compliance with
various regulatory standards. NFS Ascent®, with its distributed and clustered deployment across parallel application
and high-volume data servers, enables finance companies to process voluminous data in a hyper speed environment.
The
Company’s premier solution has been developed using the latest tools and technologies and its n-tier SOA architecture allows
the system to greatly improve a myriad of areas including, but not limited to, scalability, performance, fault tolerance and security.
We believe NFS Ascent® allows:
● Improvement in overall productivity throughout the delivery organization:
● Improvement in talent acquisition and retention:
● Better customer satisfaction:
NFS
ASCENT®CONSTITUENT APPLICATIONS
Omni
Point of Sale (Omni POS)
A
highly agile, easy-to-use, web-based application - also accessible through mobile devices - Ascent’s Omni POS system delivers
an intuitive user experience, with features that enable rapid data capture. Information captured at the point of sale can be made
available to anyone in an organization at any point in the lifecycle of each transaction.
Contract
Management System (CMS)
Ascent’s
Contract Management System (CMS) is a powerful, highly agile, functionally rich application for managing and maintaining detailed
credit contracts throughout their lifecycle – from pre-activation and activation through customer management, asset financial
management, billing and collections, finance and accounting, restructuring and maturity.
Wholesale
Finance System (WFS)
The
Ascent Wholesale Finance System (WFS) provides a powerful, seamless and efficient system for automating and managing the entire
lifecycle of wholesale finance. With floor planning, dealer and inventory financing, it is ideal for a culture of collaboration.
Dealers, distributors, partners and anyone in the supply chain are empowered to realize the benefits of financing – and
leverage the advantages of real-time business intelligence. The system also supports asset and non-asset-based financing.
Dealer
Auditor Access System (DAAS)
DAAS
is a web-based solution that can be used in conjunction with WFS or any third-party wholesale finance system. It addresses the
needs of dealer, distributor and auditor access in a wholesale financing arrangement.
NFS
Ascent®On The Cloud
The
Company’s premier, next generation solution NFS Ascent® is now also available on the Cloud at a SaaS/Subscription
based pricing. With quick, seamless deployments and easy scalability, it is an extremely adaptive retail and wholesale platform
for the global finance and leasing industry. This cloud-version of NFS Ascent® is offered via flexible, value-driven
subscription-based pricing options.
NFS
Digital
NFS
Digital is a combination of our core strengths, domain and technology. Our insight into the evolving landscape along with our
valuable experience enables us to define sound digital transformation strategies and compliment them with smart digital solutions
so our customers always remain competitive and relevant to the dynamic environment. Our digital transformation solutions are extremely
robust and can be used with or without our core, next-gen solution (NFS Ascent®) to effectively augment and enhance
our customer’s ecosystem.
● Self Point of Sale
● Mobile Account
● Mobile Point of Sale
● Mobile Dealer
● Mobile Auditor
● Mobile Collector
● Mobile Field Investigator
OTOZ
INC.
Otoz
Mobility Orchestration System
Otoz
is a subsidiary of NetSol Technologies, Inc. and provides customer-friendly, business-to-business, white-label solutions for mobility.
Our suite of agile and configurable solutions includes a range of car-sharing and subscription products. With just over 16 months
since its inception, Otoz’s team of 40 individuals from 7 nationalities has developed a product which has been benchmarked
by a partner company of Google in the UK. Otoz has recorded strong interests from tier 1 auto-finance companies across the globe.
Otoz
is a digital platform that helps automotive asset-holders (auto-manufacturers, auto-captives and fleet owners) and start-ups to
launch, orchestrate and scale mobility businesses. Otoz platform is built on cutting-edge technology stack which comprises of
Cloud-Native Architecture, Microservices, Artificial Intelligence, Machine Learning, Blockchain, DevOps and APIs. Otoz powerful
feature-set allows automotive asset-holders with the ability to orchestrate a range of car-share and vehicle subscription services.
The data-driven nature of platform empowers automotive asset-holders to maximize optimize and utilize mobility offerings. Otoz
enables customers to book car-share and subscribe to vehicles through its intuitive, digital, and easy to use interface. An API
driven architecture allows quick integration of ecosystem partners such as maintenance, roadside and offline jobs providers to
allow seamless operation of mobility services. Salient features are:
● An AI-driven chatbot ensures 24-hour availability of customer services.
Otoz
Mobility Orchestration System Applications:
Back
Office
Otoz
back-office consists of highly flexible and configurable modules that help manage and orchestrate mobility services. These modules
include: Fleet Management, Trip Management, Communications Management, Notification Management, Payment Management, Member Management,
Promotions and Discounts, WorkQueue and Template Management. In addition, Otoz back office provides insights related to market
intelligence, business KPIs and car-usage analytics. The back-office modules are configured according to client’s requirement
and the module is white-labelled as well.
Front
Office
Mobile
Apps
Otoz
offers its customers with native iOS and Android mobile apps. These apps serve as a channel to reach out to the end customers
and offer multi-services on a single app.
Web
Interface
Otoz
offers a complete digital platform on a web-based front-office application. End customers of Otoz clients can visit the website
to attain mobility services such as car-share, car subscription and rentals.
Chatbots
Otoz
offers its client an AI powered chatbot that offers customers the ability to book a vehicle for their mobility needs on the chatbot.
The chatbot is equipped with computer vision APIs that serve as a medium to verify customer’s documents. Customers can pay
through the chatbot and ultimately complete the booking. Otoz offers this chatbot as a white-label solution as well.
Artificial
Intelligence Models
Otoz
applications contain a suite of AI models that makes the digital platform truly data driven in nature. Otoz has intelligence around,
pricing, customer retention and lifetime value, vehicle recommendations and customer segmentation. These models work seamlessly
within the Otoz platform in harmony with other microservices. Team Otoz is working on packaging these AI models in a way to sell
it independently to clients that requires only AI capability.
Super
App
Otoz
is a multi-service, multi-product platform comprising of various customer journeys such as car-share, car subscription, rentals,
airport transfers, digital retail and more. Team Otoz has a product roadmap of building a Super App which will carry all services
and features in one package; allowing our B2B customers to subscribe to different products on the go.
REGIONAL
OFFERINGS
While
NFS Ascent® is designed to be a truly global solution ready for customization in any market, the Company has historically
provided products tailored to various markets. As such, we offer the following additional regional products:
LeasePak
In
North America, NetSol Technologies Americas, Inc. (NTA) has and continues to develop the LeasePak CMS product which is now tailored
to be an offering on the Microsoft AzureTM cloud. LeasePak streamlines the lease and loan management lifecycle, enabling
superior portfolio management, flexible financial products (lease or loan terms) and sophisticated financial analysis and management
to reduce operating costs, simplify accounting and improve profits. It is scalable from a basic offering to a collection
of highly specialized add on modules for systems, portfolios and accounting methods for virtually all sizes and complexity of
operations. It is the centerpiece of vehicle leasing infrastructure at leading Fortune 500 banks and Automotive Captives, as well
as for some of the industry’s leading independent lessors. It handles every aspect of the lease or loan lifecycle, including
credit application origination, credit adjudication, pricing, documentation, booking, payments, customer service, collections,
midterm adjustments, and end-of-term options for asset disposition and remarketing.
LeasePak
Cloud - SaaS
NTA
also offers the LeasePak Software-as-a-Service (“SaaS”) business line, which provides high performance with a reduced
total cost of ownership. SaaS offers a proven deployment option whereby customers only require access to the internet to use the
software. With an elastic cloud price, revenue stream predictability and improved return on investment for customers, management
believes that its SaaS customers will experience the performance, the reliability and the speed usually associated with a highly
scalable private cloud. LeasePak-SaaS targets small and mid-sized leasing and finance companies.
LeaseSoft
In
addition to offering NFS Ascent® to the European market, NTE has some regional offerings, including:
● LoanSoft – similar to LeaseSoft, but optimized for the consumer loan market.
IMPLEMENTATION
PROCESS
The
implementation process of our products can span from three to eighteen months depending upon the complexity and scope. The implementation
process may also include related software services such as configuration, data migration, training, gaps development and any other
additional third-party interfaces. Even after implementation, customers seek enhancements and additions to improve their business
processes. NETSOL charges these efforts in a man-day rate.
Post
implementation, NETSOL consultants may remain at the client site to assist the customer in smooth operations. After this phase,
the regular maintenance and support services phase for the implemented software begins. In addition to the daily rate paid by
the customer for each consultant, the customer also pays for all the transportation related expenses, boarding of the consultants,
and a living allowance. NETSOL’s involvement in all the above steps is priced to bring value to our customers and increase
our profitability from our interactions.
Cloud-enabled
NFS Ascent® solutions are offered via seamless and rapid deployments. The swift speed of implementations for our
cloud ready products enables businesses to be more responsive and attain a competitive advantage.
PRICING
AND REVENUE STREAMS
The
Company’s revenue streams occur through the following three main areas:
● Product licensing
● Implementation related services
● Maintenance and support related services
License
fees in a single market can vary based on relatively low cost for a simple SaaS arrangement to a multi-million-dollar fee for
multiple module implementations. There are various attributes which determine the level of complexity, a few of which are: number
of contracts; size of the portfolio; business strategy of the customer; internal business processes followed by the customer;
number of business users; amount of customization required; complexity of data migration and branch network of the customer.
The
Company recognizes revenue from license contracts when the software has been delivered to the customer. Implementation related
services, including configuration, data migration and third-party interfaces are recognized as the services are performed. Maintenance
and support related services are then provided on a continued basis. The annual maintenance fee, which typically is an agreed
upon percentage of overall monetary value of the license, then becomes an ongoing revenue stream realized on a yearly basis. Revenue
from software services includes fixed price and time and materials-based contracts and is recognized as the services are performed.
Additionally,
in order to avoid lumpiness in its revenues and to ensure a predictable revenue base over coming years, the business has shifted
to a new pricing strategy whereby the business is now offering its cloud ready products at SaaS/subscription-based pricing models.
Rapid deployments coupled with affordable prices/payment schedules is expected to lead the business towards volume-based selling.
Moreover, this value-driven pricing plan is intended to decrease the initial buy-in cost for new customers by eliminating heavy
license fees and provides an alternative to current customers seeking lower software usage and maintenance costs.
ALLIANCES
Daimler
South East Asia Pte. Ltd. (“DSEA”), (through the regional office Daimler Financial Services (“DFS”) Africa
Asia Pacific), has established a “Centre of Competence” (“CoC”) in Singapore to facilitate the regional
companies in product related matters. The DSEA CoC is powered by highly qualified technical and business personnel. In conjunction
with our Asia Pacific region, the CoC supports DFS companies in twelve different countries in Asia and Africa and this list can
increase as more DFS companies from other countries opt for NFS Ascent®. In July 2004, the Company entered into
a Frame Agreement with DFS for the Asia Pacific and Africa region. This agreement was renewed in 2008, 2010, 2013 and most recently
in January 2016. The agreement serves as a guideline for managing the business relationship with DFS and the use of licensed products
of the company by DFS and its affiliated companies.
NETSOL
has strategic partnerships with Microsoft and CGI pertaining to cloud-hosting activities for the Company’s cloud-based products.
NETSOL hosts its cloud version of Ascent, NFS Ascent® on the Cloud and LeasePak Cloud - SaaS in the high performance
and cost-effective Microsoft Azure cloud environment. A quick start implementation program combined with hassle-free Microsoft
AzureTM cloud connectivity ensures new clients see a time-to-value faster than ever before.
NETSOL
and CGI agreed to promote each other for their respective products and services amongst their respective existing customers across
various regions. NETSOL also utilizes CGI for managed services and cloud hosting related activities for NETSOL’s engagements
with their customers in Europe particularly.
TECHNICAL
AFFILIATIONS
The
Company is a Microsoft Certified Silver Partner and an Oracle Certified Partner.
MARKETING
AND SELLING
NETSOL
management continues its optimism that the Company will experience ever increasing opportunities for its product and services
offerings in 2020 and beyond. The objective of the Company’s marketing program is to create and sustain preference and loyalty
for NETSOL. Marketing is performed at the corporate and business unit levels. The corporate marketing department has overall responsibility
for communications, advertising, public relations and the website. In addition, corporate marketing oversees central marketing
and communications programs for use by each of the business units.
Our
dedicated marketing personnel, within the regions, undertake a variety of marketing activities, including sponsoring focused client
events to demonstrate our skills and products, sponsoring and participating in targeted conferences and holding private briefings
with individual companies. We believe that the industry focus of our sales professionals and our business unit marketing personnel
enhances their knowledge and expertise in these industries and will generate additional client engagements.
THE
MARKETS
NETSOL
provides its services primarily to clients in global commercial industries. In the global commercial area, the Company’s
service offerings are marketed to clients in a wide array of industries including, automotive, software, banks, higher education
and financial services.
The
Asian continent, including Australia and New Zealand, from the perspective of marketing, are targeted by the Asia Pacific Region
from its Bangkok, Beijing, Jakarta, Lahore, Shanghai and Sydney facilities. The marketing for our core offerings in the Americas
and Europe is carried out from our Los Angeles Area and London Metropolitan Area offices, respectively.
PEOPLE
AND CULTURE
The
Company believes it has developed a strong corporate culture that is critical to its success. Its key values are delivering world-class
quality software, client-focused timely delivery, leadership, long-term relationships, creativity, openness and transparency and
professional growth. The services provided by NETSOL require proficiency in many fields, such as software engineering, project
management, business analysis, technical writing, sales and marketing, and communication and presentation skills.
Due
to the growing demand for our core offerings and IT services, retention of technical and management personnel is essential. Our
employee turnover was under 10% in 2020 with a goal to maintain the turnover level under 10% during the 2021 fiscal year and onwards.
In addition, we are committed to improving key performance indicators such as efficiency, productivity and revenue per employee.
To
encourage all employees to build on our core values, we reward teamwork and promote individuals that demonstrate these values.
We believe that our growth and success are attributable in large part to the high caliber of our employees and our commitment
to maintain the values on which our success has been based. We support gender diversity on a global basis. NETSOL is an equal
opportunity employer with the largest concentration of female employees in Lahore, Pakistan and our U.S. headquarters.
NETSOL
believes it should give back to the community and employees as much as possible. Certain of our subsidiaries are located in regions
where basic services are not readily available. Where possible, NETSOL acts to not only improve the quality of life of its employees
but also the standard of living in these regions. Examples of such programs are:
There
is significant competition for employees with the skills required to perform the services we offer. The Company runs an elaborate
training program for different cadre of employees to cover technical skills and business domain knowledge, as well as communication,
management and leadership skills. The Company believes that it has been successful in its efforts to attract and retain the highest
level of talent available, in part because of the emphasis on core values, training and professional growth. We intend to continue
to recruit, hire and promote employees who share our vision.
As
of June 30, 2020, we had approximately 1,400 employees; comprised of 80% software engineers, programmers, project managers, quality
assurance, sales, pre-sales, business development, dedicated employees to core NFS and NFS Ascent® and 20% non-IT
personnel, and 140 plus employees supporting the regional offerings as well as IT consulting and services. None of our employees
are subject to a collective bargaining agreement.
COMPETITION
Neither
a single company, nor a small number of companies, dominate the IT market in the space in which the Company competes. A substantial
number of companies offer services that overlap and are competitive with those offered by NETSOL. Some of these are large computer
manufacturers and computer consulting firms that have greater financial resources than NETSOL and, in some cases, may have greater
capacity to perform services similar to those provided by NETSOL.
We
compete chiefly against leading suppliers of IT solutions to the global asset finance and leasing industry, including names such
as White Clarke Group, Alfa, Cassiopae, LineData, FIS, International Decision Systems (IDS) and Data Scan.
In
the IT based business services areas, we compete with both smaller local firms and many global IT services providers, including
names such as Wipro, InfoSys, Satyam Infoway, HCL and TCS (Tata Consulting).
Otoz
competes in a niche space which has seen growth in the competition recently. Mature players include RideCell, Invers and Vulog
that have been around for more than 7 years. These players dominate the market share in the US, Europe and India. Recently, new
players have emerged which includes Wunder Mobility and M-Tribes that are focused towards micromobility and delivery-based services.
Otoz competes with these companies over shared mobility offerings which includes P2P car-share, daily rentals, station-based car-share
and free-float car-share. Otoz does not compete with the aforementioned players on fleet management hardware. Lastly, Otoz also
offers vehicle subscription SaaS platform for which it competes with Clutch Technologies.
CUSTOMERS
NETSOL’s
solutions and services cater to a broad spectrum of finance and leasing businesses, from automotive captive finance companies
to equipment finance and leasing companies to large regional banks.
NETSOL
customers include world renowned auto manufacturers through their finance arms. NETSOL is a strategic business partner for Daimler
and BMW (which consists of a group of many companies in different countries), which accounts for approximately 26.4% and
15.8% of our revenue for our fiscal year ended June 30, 2020, respectively. Other globally renowned auto captives that are customers
of the Company include Toyota, Nissan, Ford, and FIAT.
Other
customers of the Company include equipment finance and leasing companies and banks worldwide.
GLOBAL
OPERATIONS AND GEOGRAPHIC DATA
The
Company divides its operations into three regions: the Americas, Europe and Asia Pacific. The regions consist of individual subsidiaries
which operate as autonomous companies and are strategically managed on a regional basis.
The
Americas
Mr.
Peter Minshall joined NetSol Technologies Americas, Inc. (NTA) as executive Vice President in August 2020 and is responsible for
the entire portion of NTA’s business operations. He brings over three decades of international experience in the financial
services industry holding various senior leadership roles with Daimler Financial Services. Peter continues to be supported by
Doug Jones as Vice President - Operations for NTA. Doug is a visionary, focused, and driven technology leader credited
with shaping team performance to deliver best-in-class, leading web-based and embedded software applications for the finance and
leasing industry.
Otoz
CEO and Founder, Mr. Naeem Ghauri is based out of NetSol Thai offices located in Bangkok, Thailand. Co-founder and Chief Product
Officer, Murad Baig is based out of NetSol London office. Co-founder and Chief Strategy Officer, Heidi Bauer is based out of the
U.S. where she leads global business development and sales.
Europe
Mr.
Asad Ghauri is the President of Asia Pacific (APAC) and Group Managing Director of Europe. Mr. Ghauri has a long history of experience
in the Company, including a tenure as a board of director member, and vast experience in leading our APAC unit. We believe this
experience will be utilized to lead growth in Europe.
Due
to the demand for the Company’s premier solution NFS Ascent’s® Wholesale Platform in Europe, the Company
appointed Chris Mobley as Head of NFS Ascent® Wholesale Operations in Europe. Mobley brings over two decades of
industry experience to NETSOL with an accomplished background and domain-specific knowledge and expertise within the wholesale
finance space.
At
the starting of the previous financial year, NETSOL acquired the remaining stake in Virtual Lease Services (VLS), a UK-based portfolio
and risk management servicing partner for business and consumer finance providers. By acquiring the remaining stake, NETSOL became
the outright owner of the organization.
VLS
is led by Ms. Louise Ikonomides. As Managing Director and founding shareholder of VLS, Ms. Ikonomides has been with VLS since
its inception in 1999.
Asia
Pacific Region
NETSOL
Technologies, Ltd., (“NETSOL PK”) a majority owned subsidiary of the parent company is located in Lahore, Pakistan
and is headed by Mr. Salim Ghauri as its CEO. Mr. Ghauri is a co-founder of NETSOL PK and has been with the Company since 1996.
NETSOL PK is the “Center of Excellence” and state of the art facility for programming, R&D, global implementations
and 24-hour support to our customers worldwide.
NETSOL
Beijing entity is headed by Mr. Hui Liang as President. A two-decade long veteran of the tech industry, Liang brings his vast
expertise to the Company. He has previously worked at Abeam Consulting, a Japanese consulting company specializing in enterprise
solutions in a vast range of industries as well as for IBM Japan.
The
Global Sales Division is headed by Mr. Asad Ghauri as President of Sales from the NETSOL Lahore office. Mr. Ghauri has been with
NETSOL since 2000 and has over 20 years of experience in business and IT.
The
Asia Pacific region including Australia/New Zealand and the Middle East, is supported and clients serviced from the APAC region
offices located in Sydney, Beijing, Shanghai, Bangkok, Indonesia, Lahore and Karachi. While Lahore, Pakistan continues to be a
nucleus of the Company’s delivery and research and development, Bangkok’s expanded sales operation and client relations
facility has grown into a back-up to the Lahore facility. With the continued growth of the Chinese market, our Beijing office
continues to expand as both a sales and support facility. Finally, the Asia Pacific region maintains and will establish offices
through the region as is necessary to support its customers and to explore potential new markets.
Our
APAC Region accounted for approximately 71% of our revenues in 2020. Information regarding financial data by geographic areas
is set forth in Item 7 and Item 8 of this Annual Report on form 10-K. See note 21 of Notes to Consolidated Financial Statements
under Item 8.
INTELLECTUAL
PROPERTY
The
Company relies upon a combination of nondisclosure and other contractual arrangements, as well as common law trade secret, copyright
and trademark laws to protect its proprietary rights. The Company enters into confidentiality agreements with its employees, generally
requires its consultants and clients to enter into these agreements, and limits access to and distribution of its proprietary
information. The NETSOL “N” logo and name, as well as the NFS logo and product name have been copyrighted and trademark
registered in Pakistan. The NETSOL “N” logo has been registered with the U.S. Patent and Trademark Office. NFS Ascent®
has been registered with the U.S. Patent and Trademark Office.. The Company intends to trademark and copyright its intellectual
property as necessary and in the appropriate jurisdictions.
GOVERNMENTAL
APPROVAL AND REGULATION
Current
Company operations do not require specific governmental approvals. Like all companies, including those with multinational subsidiaries,
we are subject to the laws of the countries in which the Company maintains subsidiaries and conducts operations. Pakistani law
allows a tax exemption on income from exports of IT services and products up to 2025. While foreign based companies may invest
in Pakistan, repatriation of their investment, in the form of dividends or other methods, requires approval of the State Bank
of Pakistan.
AVAILABLE
INFORMATION
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 Annual Report on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington
D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
We
webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor
relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including
SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. Investors and
others can receive notifications of new information posted on our investor relations website by signing up for e-mail alerts.
Further corporate governance information, including our committee charters and code of conduct, is also available on our investor
relations website at http://ir.netsoltech.com/governance-docs. The content of our websites is not intended to be incorporated
by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references
to our websites are intended to be inactive textual references only.
ITEM
1A - RISK FACTORS
Not
Applicable
ITEM
1B – UNRESOLVED STAFF COMMENTS
None
ITEM
2 - PROPERTIES
Our
corporate headquarters are located in Calabasas, California where we lease 5,000 square feet of office space. We own our Lahore
Technology Campus which consists of approximately 140,000 square feet of computer and general office space. This includes two
adjacent five story buildings having a covered area of approximately 90,000 square feet with the capacity to house approximately
1,000 resources. In addition, we maintain leased office spaces in the UK, China, Australia, Thailand and a shared office in Indonesia.
Our NTA office has been consolidated with the corporate headquarters. We believe our existing facilities, both owned and leased,
are in good condition and suitable for the conduct of our business.
ITEM
3 - LEGAL PROCEEDINGS
On
or about July 13, 2020, the Company was named as a defendant in a civil lawsuit based on an alleged breach of contract claim filed
by Royal News Corp. d/b/a Royal Media Group (“RMG”). The lawsuit is captioned Royal News Corp. d/b/a Royal Media
Group v. Netsol Techs., Inc., U.S. District Court Case No. 1:20-cv-05381-PAE (S.D.N.Y.) (the “Lawsuit”). On or
about August 24, 2020, the Company and RMG reached an agreement to fully resolve the case and are in the process of documenting
the agreement, which includes a release of each other from all obligations, contractual or otherwise, claims, disputes or other
matters, in exchange for (i) a payment by the Company to RMG in the amount of $100,000; and (ii) RMG dismissing the Lawsuit, with
prejudice, pursuant to Rule 41(a) of the Federal Rules of Civil Procedure. On September 22, 2020, a notice of dismissal with
prejudice was filed with the United States District Court Southern District of New York.
ITEM
4 – MINE SAFETY DISCLOSURES
Not
applicable.
PART
II
ITEM
5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITY
(a)
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET
INFORMATION - Common stock of NetSol Technologies, Inc. is listed and traded on NASDAQ Capital Market under the ticker symbol
“NTWK”.
The
table shows the high and low intra-day prices of the Company’s common stock as reported on the composite tape of the NASDAQ
for each quarter during the last two fiscal years.
Fiscal Year 2020 High Low
Fiscal Year 2019 High Low
RECORD
HOLDERS - As of September 18, 2020, the number of holders of record of the Company’s common stock was 149.
DIVIDENDS
- The Company has not paid dividends on its Common Stock in the past two fiscal years.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
The
table shows information related to our equity compensation plans as of June 30, 2020:
Equity Compensation Plans approved by Security holders None None 425,004 (1)
Equity Compensation Plans not approved by Security holders None None None
As
of June 30, 2020, 66,421 shares of common stock that have been granted as compensation, but have not yet vested.
(b)
RECENT SALES OF UNREGISTERED SECURITIES
None.
(c)
ISSUER PURCHASES OF EQUITY SECURITIES
Effective
July 30, 2020, the Company’s, Board of Directors authorized the repurchase of up to two million dollars’ worth
of the Company’s issued and outstanding common shares. The repurchase plan is authorized commencing July 30, 2020,
and ending December 24, 2020, subject to an additional six-month extension at the discretion of management. Although no
shares were repurchased during fiscal year 2020, the Company purchased 147,052 shares at an average price of $3.16 per share subsequent
to the fiscal year ended June 30, 2020.
ITEM
6 – SELECTED FINANCIAL DATA
Not
applicable.
ITEM
7- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion is intended to assist in understanding our financial position and results of operations for the year ended