10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
FOR
THE FISCAL YEAR ENDED JUNE 30, 2021
or
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Commission
File Number 0-22773
NETSOL
TECHNOLOGIES, INC.
(Exact
Name of Registrant specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23975
Park Sorrento, Suite 250,
Calabasas,
CA 91302
(Address
of principal executive offices) (Zip code)
(818)
222-9195
(Issuer’s
telephone number 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 if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No
☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No
☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer ☐ Accelerated Filer ☐
Non-accelerated Filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $39,499,442 based upon the closing
price of the stock as reported on NASDAQ Capital Market ($3.8 per share) on December 31, 2020, the last business day of the registrant’s
second quarter. As of September 16, 2021, there were 11,265,064 shares of common stock outstanding and no shares of its Preferred Stock
issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
(None)
ANNUAL
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
ACT OF 1934
TABLE
OF CONTENTS AND CROSS REFERENCE SHEET
PAGE
PART I
Note About Forward-Looking Statements
Item 1 Business 1
Item 1A Risk Factors 12
Item 1B Unresolved Staff Comments 12
Item 2 Properties 12
Item 3 Legal Proceedings 12
Item 4 Mine Safety Disclosures 12
PART II
Item 6 [Reserved] 14
Item 7A Quantitative and Qualitative Disclosures about Market Risk 30
Item 8 Financial Statements and Supplementary Data 30
Item 9A Controls and Procedures 31
Item 9B Other Information 31
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 31
PART III
Item 10 Directors, Executive Officers and Corporate Governance 32
Item 11 Executive Compensation 36
Item 14 Principal Accountant Fees and Services 52
PART IV
Item 15 Exhibits and Financial Statement Schedules 53
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 to the global finance and leasing
industry. 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.
NETSOL’s
primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of its suite of financial applications,
under the brand name NFS Ascent® for leading businesses in the global finance and leasing space. With constant innovation
being a major part of NETSOL’s DNA, we have enabled NFS Ascent® deployment on the cloud with several implementations
already live and some underway. This shift to the cloud will enable NETSOL’s new customers to opt for a subscription-based pricing
model rather than the traditional licensing model.
NETSOL’s
clients include blue chip organizations, Dow-Jones 30 Industrials, Fortune 500 manufacturers, financial institutions, global vehicle
manufacturers and enterprise technology providers, all of which are serviced by NETSOL’s strategically placed support and 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
OUR
BUSINESS
Company
Business Model
NETSOL
believes that our strong technology solutions offer our customers a return on their investment and allows us to thrive in a hyper competitive
and mature global marketplace. Our solutions are bolstered by our people. NETSOL believes that people are the drivers of success; therefore,
we invest heavily in our hiring, training and retention of 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 its proven and effective business model which is 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 a strong foothold in several global locations and a market leading position
in the captive auto-finance segment. NETSOL has a significantly growing presence in the general asset finance space, including equipment
and the big ticket financing industry together with startups and banks.
Subject
Matter Expertise
Our
dual expertise in enterprise technology implementation and financial application development has helped us emerge as a global player
in the finance and leasing industry and secure a broad footprint across the major markets of North America, Asia Pacific and Europe.
The Asia Pacific region has particularly benefitted from the organic growth in the fast-developing leasing automation industry, which
is still nascent per 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 Europe
and of nearly four decades in North America, NETSOL is one of the few players in this niche industry with a global presence.
Proximity
with Global and Regional Customers
We
have offices across the world, located strategically to maintain close contact and proximity with our customers in various key markets.
This has not only helped us in strengthening our customer relationships but also in building a deeper understanding of local market dynamics.
Simultaneously, we are able to extend services and even support development through a combination of onsite and off-site resources. This
approach has allowed us to offer blended rates to our 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, we have employed
the same facilities and competencies to extend our offerings into related segments, including but not limited to:
● IT consulting and services
● Business intelligence
● Outsourcing services and software process improvement consulting
● Maintenance and support of existing systems
● Project management
● Technology/start-up incubation
● White label digital retailing for auto-captives
● 3D mapping
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® empowers financial institutions
to effectively manage their complex lending and leasing portfolios, enabling them to thrive in hyper-competitive global markets.
NFS
Ascent® is built on cutting-edge, modern technology that enables auto, equipment and big-ticket finance companies, alongside
banks, 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.
NETSOL’s
next generation platform offers a technologically advanced solution for the asset finance and leasing industry. NFS Ascent’s®
architecture and user interfaces were designed based on NETSOL’s collective experience with blue chip organizations and global
Fortune 500 companies over the past 40 years combined with modern 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.
Our
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. NFS Ascent®
empowers users with:
●
Improvement in overall productivity throughout the delivery organization:
●
Improvement in talent acquisition and retention:
●
Amplified 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®deployed on the cloud
Our
premier, next generation solution NFS Ascent® is now also available on the cloud via SaaS/subscription-based pricing.
With swift, 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 without the need to pay any upfront license fees.
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.
OtozTM
Digital Auto Retail
OtozTM
provides a white-labelled SaaS platform to OEMs, auto-captives,
dealers and start-ups that helps them launch short and long-term on-demand mobility models (car-share and car subscription) and digital
retail in minimum time.
Our
white-label, turn-key platform helps dealers to make the move into digital era by offering an end-to-end car buying experience completely
online.
Digital
auto-retail is not a one-size-fits-all. OtozTM will provide a flexible, configurable and scalable turn-key platform
that helps define, launch and scale a variety of retail products (finance, lease, buy, etc.). OtozTM platform will
empower dealers to compete in digital era by addressing a range of customer segments with varied needs.
OtozTM
Ecosystem
The
OtozTM powerful API-based architecture allows OEMs, auto-captives and dealerships to integrate with a plethora of providers
to offer an end-to-end Omni-channel digital car finance and lease experience.
Out-of-the-box
APIs by OtozTM help dealers and auto-captives connect with ecosystem partners which are crucial for running their auto
retail business. It includes, finance and insurance products, trade-in tools, fraud checks, CRM system, websites (Tier 1 – Tier
3), marketing toolkit, inventory feeds, KYCs, payment processors, vehicle delivery providers etc.
In
addition, OtozTM is equipped with smart lead generation and product analytics capabilities. It empowers dealers with
the capability to convert qualified leads and never lose contact with customers. The product analytics capability allows us to improve
the customer journey by addressing friction points, herein improving customer experience and conversions – a win-win scenario for
dealers and customers.
OtozTM
Platform
A
fully digital, white label platform for lease, finance, and cash transactions that delivers a frictionless customer experience.
OtozTMplatform
consists of two portals:
- Dealer Tool
- Customer App
Dealer
Tool
● Account creation
● Order management work queue
● User roles and rights
● Tax configurator
● Customer KYC reports
● Vehicle delivery scheduling
● Payment gateways
● Inventory management
● Finance and insurance products feed and prioritization
● Accessories / add-on management and association
● Dealer fee management
● Ecosystem APIs
Customer
App
● Get vehicles via cash, finance and lease
● Vehicle delivery and pick-up scheduling
● Buy finance and insurance products
● Buy accessories
● License checks (paperless)
● Personalized pricing
● Vehicle options and finance and insurance products
● Trade-in valuation
● Credit application and decision
● Paperless contracts and e-signing
● Digital payments
● Deal builder
IMPLEMENTATION
PROCESS
The
implementation process of our products can span from nine to eighteen months depending upon the methodology, 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. We charge these efforts in a man-day rate.
Post
implementation, our 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 transportation-related expenses, boarding of the consultants, and a living allowance. Our
involvement in all the above steps is priced to bring value to our customers and increase our profitability.
Cloud-enabled
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 are the outcome of the following four main areas:
● Product licensing
● Subscription-based pricing
● Implementation and customization-related services
● Post contract support-related services
License
fees can range to a multi-million-dollar fee for single or multiple module implementations. License revenue is realized with traditional,
non-SaaS-based agreements, whereas SaaS-based agreements do not contain license fees and are offered via flexible, value-driven, subscription-based
pricing. 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.
We
recognize 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. Post customer support services
are then provided on a continued basis. The annual support 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 our 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.
We
have strategic partnerships with Microsoft and CGI pertaining to cloud-hosting activities for our cloud-based products. NETSOL hosts
its cloud version of Ascent, NFS Ascent® deployed 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. We also utilize CGI for managed services and cloud hosting-related activities for our engagements with their customers in Europe
particularly.
TECHNICAL
AFFILIATIONS
We
are a Microsoft Certified Silver Partner and an Oracle Certified Partner.
MARKETING
AND SELLING
We
continue our optimism that we will experience ever increasing opportunities for our product and services offerings in 2021 and beyond.
The objective of our 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 management of all digital owned and paid mediums including website, social media channels and collaboration with industry partners.
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 and participating in targeted conferences, webinars 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.
GROWTH
PROSPECTS FOR NFS ASCENT®
Growth
prospects for NFS Ascent® are linked to the constant innovation in the product and its growing customer base across different
geographic and product markets. NETSOL is eyeing key international markets for growth in sales. Its sales strategy not only focuses on
expansion into new geographic markets, including the Americas, Europe, and further penetration of our leading position in Asia Pacific,
but also within existing markets into new verticals with targeting of Tier 2 and Tier 3 prospects as well.
Growth
in North America is expected to come from the potential market for replacement of legacy systems as well as acquisition of new customers.
NFS Ascent® is aimed at providing a highly flexible and robust solution based on the latest technology and advanced architecture
for North American customers looking to replace their legacy systems. We believe that NFS Ascent® can provide substantial
competitive disruption to the market’s lagging technology provided by incumbent vendors. The existing customer base may also represent
latent demand for increased service and support revenues by offering business process optimization, customization and upgrade services.
With a market ready product with successful implementation, the prospects for NFS Ascent® in the region are positive.
Further
traction in Europe will come from NFS Ascent® deployed on the cloud, which will continue to allow the Europe division
to support not only larger organizations, but also small and medium sized organizations including startups.
Growth
in NETSOL’s traditionally strong base in Asia Pacific is expected through diversification across market segments to include new
customers in related banking and commercial lending areas. At the same time, the existing customer base is tapped for increased service
and support revenues by offering enhanced features and new solutions to emerging customer needs. In addition, there is a potential for
NFS Ascent® in Asia Pacific in the form of existing customers who are looking for replacement of their current system.
In
China, NETSOL is a leader in the leasing and finance enterprise solution domain. With this position, NETSOL continues to enjoy demand
for the current NFSTM solution, as well as NFS Ascent®. NETSOL will continue strengthening its position within existing
multinational auto manufacturers, as well as local Chinese captive finance and leasing companies.
THE
MARKETS
We
provide our services primarily to clients in global commercial industries. In the global commercial area, our 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
We
believe we have developed a strong corporate culture that is critical to our success. Our 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 20% in 2021 with a goal to maintain the turnover level under 20% during the 2022 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. We are 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 subsidiaries of ours 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 as follows:
There
is significant competition for employees with the skills required to perform the services we offer. We run an elaborate training program
for different cadres of employees to cover technical skills and business domain knowledge, as well as communication, management and leadership
skills. We believe that we have been successful in our 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, 2021, we had approximately 1,447 employees; comprised of 77% technical staff and 23% non-IT personnel.
COMPETITION
Neither
a single company, nor a small number of companies, dominate the IT market in the space in which we compete. 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).
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’s
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 21.0% and 13.0%, respectively,
of our revenue for our fiscal year ended June 30, 2021. 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 such as GAC Sofinco, Paccar, Mololease,
SCI, and BMO Harris, etc.
GLOBAL
OPERATIONS AND GEOGRAPHIC DATA
NETSOL
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.
OtozTM
CEO and Co-founder, Mr. Naeem Ghauri, also recently appointed
as NETSOL’s President for the parent group NetSol Technologies, Inc., is based out of our Pakistan office in Lahore, Pakistan.
OtozTM Co-founder and Chief Product Officer, Murad Baig is based out of our London office.
Europe
Mr.
Asad Ghauri is the President of Asia Pacific (APAC) and Group Managing Director of Europe. Mr. Ghauri has a strong management team
in the U.K. comprised of Chris Mobley, Chris Tobey and Johannes Riedl.
Due
to the demand for our premier solution NFS Ascent’s® Wholesale Platform in Europe, we 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) rebranded as Banking
Works. Previously limited to being a UK-based portfolio and risk management servicing partner for business and consumer finance providers,
Banking Works will now focus on supporting financial services businesses to achieve their own transformation ambitions. By acquiring
the remaining stake, NETSOL became the outright owner of the organization. Banking Works recently announced the appointment of Mark
Cawood, an industry veteran, as the company’s new Managing Director. Mark Cawood will pick up the baton passed by Louise Ikonomides,
who left Banking Works after over 20 years to pursue new ventures. While Mr. Cawood is going through the Financial Conduct Authority’s
approval process, Diane Roberts, Finance Director, will serve as the interim Managing Director.
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 is the
“Center of Excellence” and a state-of-the-art facility for programming, R&D, global implementations and 24-hour support
to our customers worldwide.
NetSol
Technologies (Beijing) Co. Ltd. (“NetSol Beijing”) is headed by Amanda Li as President. Ms. Li previously worked as a managing
director for Sopra Banking Software where she was instrumental in developing business and driving sales.
The
Global Sales Division is headed by Mr. Asad Ghauri as President of Sales from the NetSol PK 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 are 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 NETSOL’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 72.7% of our revenues in 2021. 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 non-disclosure 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 we maintain subsidiaries and conduct 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