f10k_091411.htm

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Description	Page

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of June 30, 2011 and 2010	F-3

Consolidated Statements of Operations and Comprehensive Losses for the Years Ended June 30, 2011 and 2010	F-4

Consolidated Statements of Equity for the Years Ended June 30, 2011 and 2010	F-5

Consolidated Statements of Cash Flows for the Years Ended June 30, 2011 and 2010	F-7

Notes to Consolidated Financial Statements	F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

NetSol Technologies, Inc. and subsidiaries

Calabasas, California

We have audited the accompanying consolidated balance sheets of NetSol Technologies, Inc. and subsidiaries (The "Company") as of June 30, 2011 and 2010, and the related consolidated statements of operations and comprehensive losses, equity and cash flows for each of years in the two-year period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NetSol Technologies, Inc. and subsidiaries as of June 30, 2011 and 2010 and the results of its consolidated operations and comprehensive loss, equity and cash flows for each of years in the two-year period then ended in conformity with accounting principles generally accepted in the United States of America.

Los Angeles, CA

September 16, 2011

F-2

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

As of June 30, 2011 and 2010

ASSETS	2011			2010
Current assets:
Cash and cash equivalents	$	4,172,802		$	4,075,546
Restricted Cash		5,700,000			5,700,000
Accounts receivable, net		15,062,503			12,280,331
Revenues in excess of billings		7,601,230			9,477,278
Other current assets		2,053,904			1,821,661
Total current assets		34,590,439			33,354,816
Investment under equity method		-			200,506
Property and equipment, net		16,014,461			9,472,917
Intangibles:
Product licenses, renewals, enhancements, copyrights, trademarks, and tradenames, net		25,437,479			19,002,081
Customer lists, net		164,715			666,575
Goodwill		9,439,285			9,439,285
Total intangibles		35,041,480			29,107,941
Total assets	$	85,646,380		$	72,136,180

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	4,730,027		$	4,937,987
Due to officers		-			10,911
Current portion of loans and obligations under capitalized leases		7,062,535			7,285,773
Other payables - acquisitions		103,226			103,226
Unearned revenues		2,653,460			2,545,314
Convertible notes payable , current portion		2,745,524			3,017,096
Loans payable, bank		2,319,378			2,327,476
Common stock to be issued		400,700			239,525
Total current liabilities		20,014,850			20,467,308
Obligations under capitalized leases, less current maturities		285,472			204,620
Convertible notes payable less current maturities		-			4,066,109
Long term loans; less current maturities		434,884			727,336
Lease abandonment liability; long term		-			867,583
Total liabilities		20,735,206			26,332,956
Commitments and contingencies
Equity:
Common stock, $.001 par value; 95,000,000 shares authorized; 55,531,855 & 37,103,396 issued and outstanding as of June 30, 2011 and 2010		55,532			37,104
Additional paid-in-capital		97,886,492			86,002,648
Treasury stock		(396,008	)		(396,008	)
Accumulated deficit		(34,130,944	)		(39,859,030	)
Stock subscription receivable		(2,198,460	)		(2,007,960	)
Other comprehensive loss		(8,805,922	)		(8,396,086	)
Total NetSol shareholders' equity		52,410,690			35,380,668
Non-controlling interest		12,500,484			10,422,557
Total equity		64,911,174			45,803,224
Total liabilities and equity	$	85,646,380		$	72,136,180

F-3

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

As of June 30, 2011 and 2010

	2011			2010
Net Revenues:
License fees	$	11,284,472		$	14,157,107
Maintenance fees		7,488,387			7,047,936
Services		17,774,715			15,574,853
Total revenues		36,547,575			36,779,897
Cost of revenues:
Salaries and consultants		8,716,495			8,164,147
Travel		1,044,767			843,626
Repairs and maintenance		307,115			256,997
Insurance		126,584			140,496
Depreciation and amortization		3,108,286			2,298,092
Other		1,500,880			2,163,689
Total cost of revenues		14,804,127			13,867,048
Gross profit		21,743,448			22,912,849
Operating expenses:
Selling and marketing		3,016,402			2,222,841
Depreciation and amortization		1,180,226			1,609,854
Bad debt expense		367,064			442,804
Salaries and wages		3,347,896			3,026,275
Professional services, including non-cash compensation		806,212			900,125
Lease abandonment charges		(858,969	)		867,583
General and adminstrative		3,719,797			4,115,658
Total operating expenses		11,578,627			13,185,141
Income from operations		10,164,821			9,727,709
Other income and (expenses)
Loss on sale of assets		(21,461	)		(224,741	)
Interest expense		(863,707	)		(1,478,474	)
Interest income		154,856			261,296
Gain (loss) on foreign currency exchange transactions		1,115,647			(66,919	)
Share of net loss from equity investment		(220,506	)		(67,494	)
Beneficial conversion feature		(453,989	)		(1,867,787	)
Other (expense) income		(52,149	)		56,571
Total other income (expenses)		(341,309	)		(3,387,548	)
Net income before income taxes		9,823,512			6,340,160
Income taxes		(120,542	)		(53,943	)
Net income after tax		9,702,970			6,286,217
Non-controlling interest		(3,974,882	)		(4,892,097	)
Net income attibutable to NetSol		5,728,087			1,394,120

Other comprehensive income (loss):
Translation adjustment		(525,907	)		(2,349,539	)
Comprehensive income (loss)		5,202,180			(955,419	)
Comprehensive loss attributable to non controlling interest		(116,070	)		(852,852	)
Comprehensive income (loss) attributable to NetSol	$	5,318,251		$	(102,567	)

Net income per share:
Basic	$	0.12		$	0.04
Diluted	$	0.12		$	0.04
Weighted average number of shares outstanding
Basic		48,543,200			34,516,428
Diluted		49,568,190			37,796,745

Amounts attributable to NetSol common shareholders
Net income	$	5,728,087		$	1,394,120

F-4

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

As of June 30, 2011 and 2010

																Stock						Other
											Additional					Sub-						Compre-						Non
	Preferred Stock						Common Stock				Paid-in		Treasury			scriptions			Shares to			hensive			Accumulated			Controling			Total
	Shares			Amount			Shares		Amount		Capital		Shares			Receivable			be Issued			Loss			Deficit			Interest			Equity

Balance at June 30, 2009		1,920		$	1,920,000			30,046,987	$	30,047	$	78,198,522	$	(396,008	)	$	(842,619	)	$	220,365		$	(6,899,399	)	$	(41,253,150	)	$	6,383,310			37,361,069
Excercise of common stock options								423,000		423		276,937					(153,750	)		(52,360	)											71,250
Excercise of common stock warrants																																-
Common stock issued for:
Cash								2,541,929		2,542		1,933,488					(1,011,591	)		(69,930	)											854,509
Services								932,812		933		659,302					-			141,450												801,684
Conversion of convertible note								3,095,240		3,096		1,946,904																				1,950,000
Payment of interest
Payment of interest on convertible note								63,428		63		39,897																				39,961
Equity component shown as current liability																				(239,525	)											(239,525	)
Fair market value of options issued												803,508																				803,508
Redemption of preferred stock		(1,920	)		(1,920,000	)																										(1,920,000	)
Recognition of
Recognition of beneficial conversion feature												2,144,089																				2,144,089
Foreign currency translation adjusts								-		-		-											(1,496,687	)		-			(852,852	)		(2,349,539	)
Net income for the year								-		-		-														1,394,120			4,892,097			6,286,217
Balance at June 30, 2010		-		$	-			37,103,396	$	37,104	$	86,002,648	$	(396,008	)	$	(2,007,960	)	$	-		$	(8,396,086	)	$	(39,859,030	)	$	10,422,557		$	45,803,224

F-5

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

For the years ended June 30, 2011 and 2010

															Stock						Other
									Additional						Sub-						Compre-						Non
	Preferred Stock				Common Stock				Paid-in			Treasury			scriptions			Shares to			hensive			Accumulated			Controling			Total
	Shares		Amount		Shares		Amount		Capital			Shares			Receivable			be Issued			Loss			Deficit			Interest			Equity

Balance at June 30, 2010		-	$	-		37,103,396	$	37,104	$	86,002,648		$	(396,008	)	$	(2,007,960	)	$	-		$	(8,396,086	)	$	(39,859,030	)	$	10,422,557			45,803,224
Excercise of common stock options						1,771,000		1,771		1,361,779						(183,500	)		125,000												1,305,050
Excercise of common stock warrants						3,384,390		3,384		306,616																					310,000
Common stock issued for:
Cash						5,106,756		5,107		4,101,143						(7,000	)		-												4,099,250
Services						903,056		903		849,140						-			36,175												886,218
Conversion of convertible note						7,008,101		7,008		4,796,331																					4,803,339
Payment of interest on convertible note						255,156		255		191,553																					191,808
Equity component shown as current liability at
June 30, 2010																			239,525												239,525
June 30, 2011																			(400,700	)											(400,700	)
Fair market value of options issued										459,174																					459,174
Acqusition of non controlling interest in subsidiary										(181,891	)																	(489,569	)		(671,460	)
Dividend to non controlling interest																												(1,291,313	)		(1,291,313	)
Foreign currency translation adjusts																						(409,837	)					(116,070	)		(525,907	)
Net income for the year																									5,728,087			3,974,882			9,702,969
Balance at June 30, 2011		-	$	-		55,531,855	$	55,532	$	97,886,492		$	(396,008	)	$	(2,198,460	)	$	-		$	(8,805,923	)	$	(34,130,943	)	$	12,500,484		$	64,911,174

F-6

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For The Year Ended June 30, 2011 and 2010

	For the Year
	Ended June 30,
	2011			2010
Cash flows from operating activities:
Net income	$	9,702,970		$	6,286,217
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,288,512			3,907,945
Provision for bad debts		367,064			442,804
Loss on foreign currency exchange transaction		-			4,144
Share of net loss from investment under equity method		220,506			67,494
Loss on sale of assets		21,462			224,741
(Gain) on settlement of lease abandonment provision		(858,969	)		867,583
Stock issued for interest on notes payable		191,808			39,960
Stock issued for services		886,218			801,684
Fair market value of warrants and stock options granted		459,174			803,508
Beneficial conversion feature		453,989			1,867,787
Changes in operating assets and liabilities:
Increase/ decrease in accounts receivable		(3,422,252	)		(1,316,995	)
Increase/ decrease in other current assets		1,987,996			(3,701,022	)
Increase/ decrease in accounts payable and accrued expenses		(376,287	)		(1,626,140	)
Net cash provided by operating activities		13,922,189			8,669,710
Cash flows from investing activities:
Purchases of property and equipment		(9,085,148	)		(2,986,495	)
Sales of property and equipment		313,935			641,484
Purchase of non-controlling interest in subsidiary		(671,460	)		-
Short-term investments held for sale		(256,522	)		-
Investment under equity method		-			(268,000	)
Increase in intangible assets		(8,096,401	)		(7,603,779	)
Net cash used in investing activities		(17,795,596	)		(10,216,790	)
Cash flows from financing activities:
Proceeds from sale of common stock		4,099,250			854,509
Proceeds from the exercise of stock options and warrants		1,615,050			71,250
Proceeds from convertible notes payable		-			3,500,000
Redemption of preferred stock		-			(1,920,000	)
Restricted cash		-			(700,000	)
Dividend Paid		(1,291,313	)		(43,828	)
Bank overdraft		39,026			(7,008	)
Proceeds from bank loans		2,969,146			4,540,971
Payments on bank loans		(46,033	)		(258,358	)
Payments on capital lease obligations & loans - net		(3,118,344	)		(4,328,700	)
Net cash provided by financing activities		4,266,782			1,708,837
Effect of exchange rate changes in cash		(296,116	)		(489,973	)
Net increase in cash and cash equivalents		97,259			(328,216	)
Cash and cash equivalents, beginning of year		4,075,546			4,403,762
Cash and cash equivalents, end of year	$	4,172,802		$	4,075,546

F-7

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended June 30, 2011 and 2010

	For the Year
	Ended June 30,
	2011		2010
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest	$	1,043,065	$	1,420,559
Taxes	$	5,725	$	117,808

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issued for the conversion of Notes Payable	$	4,803,339	$	1,950,000
Purchase of property and equipment under capital lease	$	492,567	$	98,866

F-8

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

NetSol Technologies, Inc. and subsidiaries(collectively, the “Company”), formerly known as NetSol International, Inc. and Mirage Holdings, Inc., was incorporated under the laws of the State of Nevada on March 18, 1997. During November 1998, Mirage Collections, Inc., a wholly owned and non-operating subsidiary, was dissolved.

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A)	Principles of Consolidation

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

Wholly-owned Subsidiaries

NetSol Technologies North America, Inc. (“NTNA”)

NetSol Technologies Limited (“NetSol UK”)

NetSol-Abraxas Australia Pty Ltd. (“Abraxas”)

NetSol Technologies Europe Limited (“NTE”)

NTPK (Thailand) Co. Limited (“NTPK Thailand”)

NetSol Connect (Private), Ltd. (“Connect”)

Majority-owned Subsidiaries

NetSol Technologies, Ltd. (“NetSol PK”)

NetSol Innovation (Private) Limited (“NetSol Innovation”)

The Company consolidates any variable interest entities of which it is the primary beneficiary. Equity investments through which we exercise significant influence over but do not control the investee and are not the primary beneficiary of the investee’s activities are accounted for using the equity method. Investments through which we are not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method. All material inter-company accounts have been eliminated in the consolidation.

(B)	Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

F-9

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(C)	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. Actual results could differ from those estimates.

(D)	Cash and Cash Equivalents and Cash Concentrations

For purposes of the consolidated statement of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

(E)	Restricted Cash

The Company has certificates of deposits (“CD”s) in various configurations and maturity dates with Habib American Bank. A portion of these CDs are restricted as collateral to secure outstanding balances on an existing line of credit, and become unrestricted to the extent that they are not required for collateralization purposes. As of June 30, 2011 the outstanding balance on the line of credit was $5,404,608, with a corresponding restriction to the CD balances. The line of credit has a maximum available balance of $5,700,000.

(F)	Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. 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. Reserves are recorded primarily on a specific identification basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of June 30, 2011 and 2010, the Company had recorded allowance for doubtful accounts of $2,717,745 and $2,525,009, respectively.

(G)	Revenues in Excess of Billings

Revenues in excess of billings represent the total of the project to be billed to the customer over the revenues recognized under the percentage of completion method. As the customer is billed under the terms of their contract, the corresponding amount is transferred from this account to “Accounts Receivable.”

(H)	Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using various methods over the estimated useful lives of the assets, ranging from three to ten years.

F-10

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

The Company capitalizes costs of materials, consultants, and payroll and payroll-related costs for employees incurred in developing internal-use computer software. These costs are included with “Computer equipment and software.” Costs incurred during the preliminary project and post-implementation stages are charged to general and administrative expense as incurred.

(I)	Impairment of Long-Lived Assets

The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

(J)	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.

(K)	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, whichever method results in a higher level of amortization.

F-11

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(L)

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.

(M)	Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, and accounts payable.

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.

(N)	Revenue Recognition

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. Revenue from the sale of licenses with major customization, modification, and development is recognized on a percentage of completion method. Revenue from the implementation of software is recognized on a percentage of completion method.

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, which in most instances is one year.

F-12

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(O)	Multiple Element Arrangements

We 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 (multiple-element arrangements).

VSOE of fair value for each element is based on the price for which the element is sold separately. We determine the VSOE of fair value of each element based on historical evidence of our stand-alone sales of these elements to third-parties or from the stated renewal rate 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.

Net revenues by our various products and services provided for the year ended June 30, 2011 and 2010 are as follows:

	2011		2010
Licensing Fees	$	11,284,472	$	14,157,107
Maintenance Fees		7,488,387		7,047,936
Services		17,774,715		15,574,853
Total	$	36,547,575	$	36,779,897

(P)	Unearned Revenue

Unearned revenue represents billings in excess of revenue earned on contracts and are recognized on a pro-rata basis over the life of the contract. Unearned revenue was $2,653,460 and $2,545,314 as of June 30, 2011 and June 30, 2010 respectively.

(Q)	Advertising Costs

The Company expenses the cost of advertising as incurred. Advertising costs for the years ended June 30, 2011 and 2010 were $246,254 and $227,045 respectively.

(R)	Share-Based Compensation

The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the applicable vesting period of the stock award (generally four to five years) using the straight-line method.

(S)	Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

F-13

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(T)	Foreign Currency Translation

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to other comprehensive income.

(U)	Statement of Cash Flows

The Company's cash flows from operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

(V)	Segment Reporting

The Company defines operating segments as components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. The Company allocates its resources and assesses the performance of its sales activities based on geographic locations of its subsidiaries (see Note 17).

(W)	Reclassifications

Certain 2010 balances have been reclassified to conform to the 2011 presentation.

(X)	New Accounting Pronouncements

In August 2009, the Financial Accounting Standards Board (“FASB”) amended guidance related to the measurement of liabilities at fair value, which was effective upon issuance. These amendments clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB amended guidance related to revenue recognition that will be effective for the Company beginning July 1, 2010. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB amended guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. The adoption of these amendments is not expected to have a material impact on the Company’s consolidated financial statements.

F-14

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

In December 2009, the FASB amended guidance related to fair value measurements and Disclosures, which was effective beginning the 2nd quarter of the Company’s 2010 fiscal year, December 31, 2009. These amendments prescribe new disclosures and clarify certain existing disclosure requirements related to fair value measurements. The objective of the amendments was to improve these disclosures and, thus, increase the transparency in financial reporting. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements.

In February 2010, the FASB amended guidance related to disclosure of subsequent events, which was effective upon issuance. These amendments prescribe that entities that are SEC filers are required to evaluate subsequent events through the date that the financial statements are issued. The adoption of these amendments did not have a material impact on the Company’s consolidated financial statements.

NOTE 3 – EARNINGS PER SHARE

Basic earnings per share is 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.

The components of basic and diluted earnings per share as of June 30, 2011 and 2010 were as follows:

For the year ended June 30, 2011	Net Income		Shares		Per Share
Basic income per share:	$	5,728,087		48,543,200	$	0.12
Dividend to preferred shareholders		-
Net income available to common shareholders
Effect of dilutive securities
Stock options				899,600
Warrants				125,390
Diluted income per share	$	5,728,087		49,568,190	$	0.12


For the year ended June 30, 2010	Net Income		Shares		Per Share
Basic income per share:	$	1,394,120		34,516,428	$	0.04
Dividend to preferred shareholders		-			$	-
Net income available to common shareholders
Effect of dilutive securities
Stock options				566,857
Warrants				2,713,460
Diluted income per share	$	1,394,120		37,796,745	$	0.04

F-15

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

NOTE 4 – MAJOR CUSTOMERS

During fiscal year ended June 30, 2011, there was no single customer who represented 10% or more of the Company’s total revenue.

The Company is a strategic business partner for Daimler Financial Services (which consists of a group of many companies in different countries), which accounts for approximately 20.58% and 8.57% of revenue, Toyota Motors (which consists of a group of many companies in different countries) accounts for approximately 5.40% and 4.51% of revenue, and Nissan (which consists of a group of many companies in different countries) accounts for approximately 4.10% and 7.21% of revenue for the fiscal year ended June 30, 2011 and 2010, respectively. Accounts receivable at June 30, 2011 for these companies were $1,526,762, $1,080,318 and $820,206, respectively. Accounts receivable at June 30, 2010 for these companies were $1,902,499, $690,125 and $732,061.

NOTE 5 – OTHER CURRENT ASSETS

Other current assets consist of the following at June 30, 2011 and 2010:

	As of June 30		As of June 30
	2011		2010

Prepaid Expenses	$	245,194	$	237,702
Advance Income Tax		726,979		422,028
Employee Advances		53,404		57,113
Security Deposits		161,263		131,229
Tender Money Receivable		133,166		252,826
Other Receivables		535,597		535,981
Other Assets		198,301		184,782
Total	$	2,053,904	$	1,821,661

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment, net, consist of the following at June 30, 2011 and 2010:

	As of June 30			As of June 30
	2011			2010

Office furniture and equipment	$	1,179,993		$	1,041,326
Computer equipment		13,463,560			8,038,033
Assets under capital leases		2,024,282			1,838,217
Building		2,337,758			2,314,080
Land		2,240,036			562,109
Capital work in progress		2,659,750			1,925,207
Autos		794,617			744,586
Improvements		162,896			163,365
Subtotal		24,862,892			16,626,923
Accumulated depreciation		(8,848,431	)		(7,154,005	)
	$	16,014,461		$	9,472,917

For the years ended June 30, 2011 and 2010, depreciation expense totaled $2,013,388 and $1,513,998, respectively. Of these amounts, $1,450,723 and $1,068,642 are reflected as part of cost of revenues as of June 30, 2011 and 2010, respectively.

F-16

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

The Company’s capital work in progress consists of ongoing enhancements to its facilities and infrastructure as necessary to meet the Company’s expected long-term growth needs. The Company recorded capitalized interest of $278,308 and 127,790 as of June 30, 2011 and 2010, respectively.

Assets acquired under capital leases were $2,024,282 and $1,838,217 as of June 30, 2011 and 2010, respectively. Accumulated amortization related to those leases were $807,562 and $621,567 for the years ended June 30, 2011 and 2010, respectively.

NOTE 7 – INTANGIBLE ASSETS

Intangible assets consist of the following at June 30, 2011 and 2010:

	Product Licenses			Customer Lists			Total
Intangible assets - June 30, 2009 - cost	$	25,042,331		$	5,804,057		$	30,846,388
Additions		7,652,707			-			7,652,707
Effect of translation adjustment		(2,734,235	)		-			(2,734,235	)
Accumulated amortization		(10,958,723	)		(5,137,482	)		(16,096,205	)
Net balance - June 30, 2010	$	19,002,080		$	666,575		$	19,668,655

Intangible assets - June 30, 2010 - cost	$	29,960,803		$	5,804,057		$	35,764,860
Additions		8,159,168			-			8,159,168
Effect of translation adjustment		106,429			-			106,429
Accumulated amortization		(12,788,921	)		(5,639,341	)		(18,428,262	)
Net balance - June 30, 2011	$	25,437,479		$	164,715		$	25,602,194


Weighted average amortization period		7.96			5.00			7.57

Amortization expense for:
Year ended June 30, 2011	$	1,769,149		$	501,860		$	2,271,009
Year ended June 30, 2010	$	1,716,504		$	677,444		$	2,393,948

(A)	Product Licenses

Product licenses include original license issue, renewals, enhancements, copyrights, trademarks, and trade names. Product licenses included unamortized software development and enhancement costs of $19,213,449.

(B)	Customer Lists

On October 31, 2008, the Company entered into an agreement to purchase the rights to the customer list of Ciena Solutions, LLC, a California limited liability company (“Ciena”). Under the terms of the agreement, the total consideration for these rights included an initial payment of $350,000 (plus interest of $2,963), and deferred consideration to be paid in cash and the Company’s common stock based on the operational results of Ciena, and certain other factors, over a four-year fiscal period. Each fiscal period is measured from July 1 to June 30 with fiscal period one being the period from July 1, 2008 to June 30, 2009. No other assets or liabilities were acquired by the Company as a result of this transaction.

F-17

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

As a result of operational losses of Ciena in the first three fiscal periods, 2009 2010 and 2011, respectively, the first three annual deferred consideration installment payments were determined to be zero.

(C)	Amortization

Software development amortization expense was $1,657,562 and $1,229,450 for the years ended June 30, 2011 and June 30, 2010, respectively, and is recorded in cost of revenues.

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

	FISCAL YEAR ENDING
Asset	6/30/12		6/30/13		6/30/14		6/30/15		6/30/16		Thereafter		TOTAL
Product Licences	$	1,382,702	$	1,279,334	$	1,167,903	$	871,558	$	871,558	$	19,864,424	$	25,437,479
Customer Lists		164,715		-		-		-		-		-		164,715

	$	1,547,417	$	1,279,334	$	1,167,903	$	871,558	$	871,558	$	19,864,424	$	25,602,194

NOTE 8 – GOODWILL

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in prior period businesses combinations. Goodwill is comprised of the following amounts as of June 30, 2011 and 2010:

	2011		2010

Asia Pacific	$	1,303,372	$	1,303,372
Europe		3,471,813		3,471,813
North America		4,664,100		4,664,100

Total	$	9,439,285	$	9,439,285

There was no impairment of goodwill for the years ended June 30, 2011 and 2010.

NOTE 9 – INVESTMENT UNDER EQUITY METHOD

On April 10, 2009, the Company entered into an agreement to form a joint venture with the Atheeb Trading Company, a member of the Atheeb Group (“Atheeb”). The joint venture entity Atheeb NetSol Saudi Company Ltd. is a company organized under the laws of the Kingdom of Saudi Arabia. The venture was formed with an initial capital contribution of $268,000 by the Company and $266,930 by Atheeb with a profit sharing ratio of 50.1:49.9, respectively. The final formation of the company was completed on March 7, 2010. The joint venture was accounted for as an equity method investment as the Company has not established control over the affairs of Atheeb NetSol Saudi Company Ltd. due to its minority representation on the board of directors.

F-18

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

The Company's investment in equity for the year ended June 30, 2011 and 2010 is as follows:

Initial investment in Atheeb at cost	$	268,000
Net loss for the period		(134,719	)
NetSol's share (50.1%)		(67,494	)

Net book value at June 30, 2010	$	200,506

Net loss for the year ended June 30, 2011		(542,929	)
NetSol's share (50.1%)		(272,007	)
Loss adjusted against investment		(200,506	)

Net book value at June 30, 2011	$	0

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following as of June 30, 2011 and 2010:

	As of June 30		As of June 30
	2011		2010

Accounts Payable	$	1,348,453	$	1,321,212
Accrued Liabilities		2,364,233		2,375,625
Accrued Payroll		148,565		158,392
Accrued Payroll Taxes		216,485		299,908
Interest Payable		380,808		602,614
Deferred Revenues		32,066		47,066
Taxes Payable		239,417		133,169
Total	$	4,730,027	$	4,937,987

F-19

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

NOTE 11 – DEBTS

(A)	Loans and Leases Payable

Notes and leases payable consist of the following at June 30, 2011 and 2010:

	As of June 30		Current		Long-Term
Name	2011		Maturities		Maturities

D&O Insurance	$	21,429	$	21,429	$	-
Habib Bank Line of Credit		5,404,608		5,404,608		-
Bank Overdraft Facility		254,502		254,502		-
Term Finance Facility		869,767		434,883		434,884
Subsidiary Capital Leases		1,232,585		947,113		285,472
	$	7,782,891	$	7,062,535	$	720,356


	As of June 30		Current		Long-Term
Name		2010	Maturities		Maturities

D&O Insurance	$	12,122	$	12,122	$	-
E&O Insurance		7,046		7,046		-
Habib Bank Line of Credit		5,677,533		5,677,533		-
Bank Overdraft Facility		202,712		202,712		-
HSBC Loan		43,306		43,306		-
Term Finance Facility		1,163,738		436,402		727,336
Subsidiary Capital Leases		1,111,271		906,651		204,620
Lease abandonment liability		867,583		-		867,583
	$	9,085,311	$	7,285,773	$	1,799,538

The Company finances Directors’ and Officers’ (“D&O”) liability insurance as well as Errors and Omissions (“E&O”) liability insurance, for which the total balances are renewed on an annual basis and as such are recorded in current maturities. The interest rate on the insurance financing was 5.99% as of June 30, 2011 and 2010. Interest paid during the year-ended June 30, 2011 and 2010 was nominal.

In April 2008, the Company entered into an agreement with Habib American Bank to secure a line of credit to be collateralized by Certificates of Deposit held at the bank. The interest rate on this line of credit is variable and was 2% and 3.23% as of June 30, 2011 and 2010, respectively. Interest paid during the year ended June 30, 2011 and 2010 was $118,148 and $123,496, respectively.

During the year ended June 30, 2008, the Company’s subsidiary, NTE entered into an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £200,000, or approximately $320,400. The annual interest rate is 3.25% over the bank’s sterling base rate, which was 5.00% and 5.00% as of June 30, 2011 and 2010, respectively.

In August 2007, the Company’s subsidiary, NetSol UK, entered into an agreement with HSBC Bank whereby the line of credit outstanding of £500,000 or approximately $801,000 was converted into a loan payable with a maturity of three years. The interest rate is 7.5% with monthly payments of £14,436 or approximately $23,126. The Parent has guaranteed payment of the loan in the event the subsidiary should default. Interest paid during the year ended June 30, 2011 and 2010 was $220 and $4,133, respectively.

F-20

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

The Company’s subsidiary, NetSol PK, entered into a term finance facility from Askari Bank to finance the construction of a new building. The total amount of the facility is Rs. 200,000,000 or approximately $2,319,378 (secured by the first charge of Rs. 580 million or approximately $6.73 million over the land, building and equipment of the company). The interest rate is 2.75% above the six-month Karachi Inter Bank Offering Rate. As on June 30, 2010, the subsidiary had used Rs. 100,000,000 or approximately $1,159,689 of which $724,806 was shown as long term liabilities and the remainder of $434,883 as current maturity. As of the year ended June 30, 2011, the Company has used Rs. 75,000,000 or approximately $869,767 of which $434,884 is shown as long term liabilities and the remainder of $434,883 as current maturity.

The Company leases various fixed assets under capital lease arrangements expiring in various years through 2014. The assets and liabilities under capital 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 depreciated over the lesser of their related lease terms or their estimated useful lives and are secured by the assets themselves. Depreciation of assets under capital leases is included in depreciation expense for the years ended June 30, 2011 and 2010.

Following is the aggregate minimum future lease payments under capital leases for the years-ended June 30, 2011 and 2010:

	As of June 30			As of June 30
	2011			2010
Minimum Lease Payments
Due FYE 6/30/11	$	-		$	941,406
Due FYE 6/30/12		1,010,836			189,155
Due FYE 6/30/13		209,260			27,481
Due FYE 6/30/14		115,346			-
Due FYE 6/30/15		-			-
Total Minimum Lease Payments		1,335,442			1,158,042
Interest Expense relating to future periods		(102,856	)		(46,771	)
Present Value of minimum lease payments		1,232,585			1,111,271
Less: Current portion		(947,113	)		(906,651	)
Non-Current portion	$	285,472		$	204,620

F-21

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

Following is a summary of property and equipment held under capital leases as of June 30, 2011 and 2010:

	As of June 30			As of June 30
	2011			2010
Computer Equipment and Software	$	518,911		$	473,033
Furniture and Fixtures		769,106			830,942
Vehicles		434,049			232,026
Building Equipment		302,216			302,216

Total		2,024,282			1,838,217
Less: Accumulated Depreciation		(807,562	)		(621,567	)
Net	$	1,216,720		$	1,216,650

In 2008, the Company’s subsidiary, NTNA, had acquired an office space in Emeryville on a long term lease. However, due to the unprecedented recession experienced in 2009, the company decided to vacate the office space and terminate the lease in October 2009. The Company recorded a lease abandonment charge of $1,076,347 in the quarter-ended December 31, 2009. However, the office space was leased by another company during the quarter-ended March 31, 2010 and the lease abandonment charge was reduced by $208,765 to $867,583 as of June 30, 2010. In March 2011 the Company entered into final settlement agreement with new management of the company. As a result of this settlement the Company recorded a gain of $858,969 in these consolidated financial statements.

(B)	Loans Payable – Bank

The Company’s subsidiary, NetSol Technologies Limited, has a loan with a bank, secured by the Company’s assets. This loan consists of the following as of June 30, 2011 & June 30, 2010:

For the year ended June 30, 2011:
TYPE OF	MATURITY	INTEREST			BALANCE
LOAN	DATE	RATE			USD

Export Refinance	Every 6 months		11.00	%	$	2,319,378

Total					$	2,319,378


For the year ended June 30, 2010:
TYPE OF	MATURITY	INTEREST			BALANCE
LOAN	DATE	RATE			USD

Export Refinance	Every 6 months		8.50	%	$	2,327,476

Total					$	2,327,476

(C)	Other Payable – Acquisition

On June 30, 2006, the Company acquired McCue Systems, Inc. (“McCue”), a California corporation (subsequently renamed as NetSol Technologies North America, Inc.) The total purchase price was $7,080,385, including $3,784,635 of cash and 1,712,332 shares of the Company’s common stock. Of the total purchase price, the accompanying consolidated financial statements include certain amounts payable to McCue shareholders that have not been located as of the date of this report.

F-22

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

As of the year-ended June 30, 2011 and 2010, the remaining cash due of $103,226 is shown as “Other Payable – Acquisition” and the remaining stock to be issued of 46,704 shares at an average price of $1.89 is shown in “Shares to be issued” in the accompanying consolidated financial statements. Amounts payable represent the remaining McCue shareholders that have not been located as of the date of this report.

(D)	Due to Officers

The officers of the Company, from time to time, loan funds to the Company. The balance due to officers as of June 30, 2010 and June 30, 2011 was $10,911 and Nil respectively.

NOTE 12 – CONVERTIBLE NOTE PAYABLE

The net outstanding balance of convertible notes as of June 30, 2011 and 2010 is as follows:

Issue Date	Balance net of BCF @ 6/30/11		Current Portion		Long Term		Maturity Date

Jul-08		2,745,524		2,745,524		-	Jul-11

Total		2,745,524		2,745,524		-

Issue Date	Balance net of BCF @ 6/30/10		Current Portion		Long Term		Maturity Date

Jul-08		4,066,109				4,066,109	Jul-11
Aug-09		1,517,096		1,517,096			Aug-10
Mar-10		1,500,000		1,500,000			Mar-11

Total		7,083,205		3,017,096		4,066,109

For the year-ended June 30, 2011 and 2010, total interest accrued on convertible notes was $248,250 and $375,510, respectively.

Principle commitments related to the convertible notes for the next five years is as follows:

FYE 6-30-2011

2,745,524

(A)	2008 Convertible Debt

In July 2008, the Company issued $6,000,000 of 7% convertible debt maturing in 3 years (the “2008 Notes”), with a conversion price of $3.00 per share.

In January 2009, the 2008 Notes were amended to remove certain anti-dilution protection provisions and participation rights in future filings in exchange for a reduction in the conversion rate to $0.78, and $1,000,000 in cash, payable to the debt holders in 4 quarterly installments. Pursuant to the terms of the amendment, the Company recorded a beneficial conversion feature (“BCF”) in the amount of $230,769 which is being amortized as a component of interest expense over the maturity period. The related liability of $1,000,000 was recorded as a component of interest expense for the year-ended June 30, 2009.

F-23

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

In August 2009, the Company amended the 2008 Notes by reducing the conversion rate to $0.63, and recorded an additional BCF of $715,518, which is being amortized as a component of interest expense over the maturity period.

During the year-ended June 30, 2011 and 2010, Holders of the 2008 Notes elected to convert principal and interest due thereon into a total of 2,744,042 and 2,513,112 shares of common stock. These conversions reduced the total principal of the 2008 Notes to $2,758,330 and $4,450,000 respectively.

(B)	2009 Convertible Debt

In August 2009, the Company issued $2,000,000 of 9% convertible debt maturing in 1 year (the “2009 Notes”) with a conversion price of $0.63 per share, in exchange for the redemption of preferred shares outstanding. The associated BCF of $1,428,571 is being amortized as a component of interest expense through maturity.

During the year-ended June 30, 2011 and 2010, Holders of the 2009 Notes elected to convert principal and interest due thereon into a total of 2,613,333 and 645,556 shares of common stock respectively. This conversion reduced the total principal of the 2009 Notes to $1,600,000 and Nil.

(C)	2010 Convertible Debt

In March 2010, the Company issued $1,500,000 of 8% convertible debt maturing in 1 year (the “2010 Notes”), with a conversion price of $1.15 per share. In August, 2010, the note conversion prices were adjusted to $.0.85 per share.

During the year ended June 30, 2011, the holders of the note elected to convert the entire amount of principal and interest due thereon into a total of 1,905,882 shares of common stock reducing the principal of the 2010 Notes to nil.

NOTE 13 – INCOME TAXES

The Company is incorporated in the State of Nevada and registered to do business in the State of California and has operations in primarily three tax jurisdictions - the United Kingdom (“UK”), Pakistan and the United States (“US”).

Consolidated pre-tax income as of June 30, 2011 and 2010 consists of the following:

	2011			2010
US operations	$	(17,122	)	$	(7,570,321	)
Foreign operations		5,865,750			8,964,441
	$	5,848,628		$	1,394,120

F-24

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

he components of the provision for income taxes as of June 30, 2010 and 2009 are as follows:

Current:	2011		2010
Federal	$	14,762	$	-
State and Local		21,788		-
Foreign		83,992		53,944
Deferred
Federal		-		-
State and Local		-		-
Foreign		-		-
Provision for income taxes	$	120,542	$	53,944

A reconciliation of taxes computed at the statutory federal income tax rate to income tax expense (benefit) as of June 30, 2011 and 2010 is as follows:

	2011					2010
Income taxes (benefit) at statutory rate	$	1,988,532		34.0	%	$	564,632		34.0	%
State income taxes, net of federal tax benefit		103,375		1.8	%		20,137		1.2	%
Foreign earnings taxed at different rates		(1,336,651	)	-22.9	%		(2,552,712	)	-153.7	%
Change in valuation allowance for deferred tax assets		(1,163,238	)	-19.9	%		864,867		52.1	%
Non-deductible expenses		513,760		8.8	%		1,157,020		69.7	%
Alternative minimum tax		14,763		0.3	%		-		0.0	%
							-		0.0	%
Other, net		-		0.0	%		-		0.0	%
Provision for income taxes	$	120,542		2.1	%	$	53,944		3.2	%

Deferred income tax assets and liabilities as of June 30, 2011 and 2010 consist of tax effects of temporary differences related to the following:

Deferred tax asset:	2011			2010
Other	$	102,356		$	81,191
Fixed Assets		(148,278	)		-
AMT Credit		14,763			-
Intangible assets		(70,564	)		(333,365	)
Net operating loss carryforwards		10,268,233			11,581,920
Net deferred tax assets		10,166,509			11,329,746
Valuation allowance for deferred tax assets		(10,166,509	)		(11,329,746	)
Net deferred tax assets	$	-		$	-

F-25

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(A)	United States of America

The Company has established a full valuation allowance as management believes it is more likely than not that these assets will not be realized in the future. The valuation allowance decreased by $1,163,238 for the year ended June 30, 2011 mainly due to adjusting the Company's net operating loss carry forwards for the current year operating loss.

At June 30, 2011, federal and state net operating loss carry forwards were $27,439,816 and $8,171,971 respectively. Federal net operating loss carry forwards begin to expire in 2020, while state net operating loss carry forwards begin to expire in 2015. Due to both historical and recent changes in the capitalization structure of the Company, the utilization of net operating losses may be limited pursuant to section 382 of the Internal Revenue Code.

As of June 30, 2011, the Company does not have any unrecognized tax benefits related to various federal and state income tax matters. The Company will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company is subject to U.S. federal income tax, as well as various state and foreign jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending June 30, 2008 through 2011. The Company does not anticipate any material amount of unrecognized tax benefits within the next 12 months.

The cumulative amount of undistributed earnings of foreign subsidiaries that the Company intends to

permanently invest and upon which no deferred US income taxes have been provided is $26,794,050 as of June 30, 2011. The additional US income tax on unremitted foreign earnings, if repatriated, would be offset in part by foreign tax credits. The extent of this offset would depend on many factors, including the method of distribution, and specific earnings distributed.

(B)

Pakistan

As of June 30, 2011 the Company's Pakistan subsidiaries had net operating loss carry forwards

which can be carried forward six years to offset future taxable income. The deferred tax assets for the Pakistan subsidiaries at June 30, 2011 consists mainly of net operating loss carry forwards in which the Company established a full valuation allowance as the management believes it is more likely than not that these assets will not be realized in the future.

	2011			2010
Net operating loss carry forward	$	276,452		$	734,117
Total deferred tax assets		96,758			256,941
Less : valuation allowance		(96,758	)		(256,941	)
Net deferred tax assets	$	-		$	-

F-26

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(C)	United Kingdom

As of June 30, 2011 the Company's UK subsidiaries had net operating loss carry forwards which can be carried forward indefinitely to offset future taxable income. The deferred tax assets for the UK Subsidiaries at June 30, 2011 consists mainly of net operating loss carry forwards in which the Company established a full valuation allowance as the management believes it is more likely than not that these assets will not be realized in the future.

	2011			2010
Net operating loss carry forward	$	398,449		$	1,776,880
Total deferred tax assets		119,535			533,064
Less : valuation allowance		(119,535	)		(533,064	)
Net deferred tax assets	$	-		$	-

NOTE 14 – STOCKHOLDERS’ EQUITY

(A)	Shares Issued for Services to Related Parties

During the year ended June 30, 2011 and 2010, the Company issued a total of 442,500 and 187,500 shares of restricted common stock for services rendered by the officers of the company. The issuances were approved by both the compensation committee and the board of directors. These shares were valued at the fair market value of $528,900 and $163,125, as of June 30, 2011 and 2010, respectively.

During the year ended June 30, 2011 and 2010, the Company issued a total of 90,000 and 90,000 shares of restricted common stock for services rendered by the independent members of the Board of Directors as part of their board compensation. The issuances were approved by both the compensation committee and the board of directors. These shares were valued at the fair market value of $135,300 and $78,900, as of June 30, 2011 and 2010, respectively.

During the year ended June 30, 2011 and 2010, the Company issued a total of 32,699 and 139,881 shares of its common stock to employees as required according to the terms of their employment agreements valued at $33,300 and $130,500, respectively.

An additional 14,000 shares of restricted common stock was issued to employees as a year-end bonus for services performed in 2009. Subsequent to the close of the quarter ended December 31, 2009, 500 shares of these bonus shares were canceled, resulting in a total issuance of 13,500 shares.

F-27

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(B)	Share-Based Payment Transactions

During the year ended June 30, 2011 and 2010, the Company issued a total of 337,857 and 501,931 shares of its common stock for provision of services to unrelated consultants valued at $152,543 and $275,019, respectively.

(C)	SHARE ISSUED AGAINST CASH PAYMENTS

During the years ended June 30, 2011, and 2010, the Company issued a total of 5,106,756 and 2,541,929 shares of its common stock against cash valued of $4,106,250 and $1,195,432, respectively.

NOTE 15 – INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

Common stock purchase options and warrants consisted of the following as of June 30, 2011:

OPTIONS:				Exercise		Aggregated
Issued by the Company	# of shares			Price		Intrinsic Value

Outstanding and exercisable, June 30, 2009		7,706,917		$	0.30 to $5.00	$	-
Granted		300,000		$	0.75
Exercised		(300,000	)	$	0.75
Expired		-
Outstanding and exercisable, June 30, 2010		7,706,917		$	0.30 to $5.00	$	146,047
Granted		1,471,000		$	0.65 to $1.25
Exercised		(1,771,000	)	$	0.65 to $1.25
Expired / Forfeited		(487,600	)	$	1.00 to $5.00
Outstanding and exercisable, June 30, 2011		6,919,317		$	0.30 to $5.00	$	1,637,459

WARRANTS:
Outstanding and exercisable, June 30, 2009		1,777,617		$	1.65 to $3.70	$	-
Granted		3,274,682		$	0.31
Exercised		-
Expired		(288,980	)		3.3
Outstanding and exercisable, June 30, 2010		4,763,319		$	1.65 to $3.70	$	1,698,387
Granted
Exercised		(3,879,028	)	$	0.31
Expired		(706,061	)	$	1.68
Outstanding and exercisable, June 30, 2011		178,230		$	0.31 to $3.70	$	219,119

F-28

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

The average life remaining on the options and warrants as of June 30, 2011 is as follows:

Exercise Price	Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life		Weighted Ave Exericse Price
OPTIONS:
Issued by the Company
$0.01 - $0.99		1,406,000		7.48		0.65
$1.00 - $1.99		2,033,317		3.93		1.86
$2.00 - $2.99		2,830,000		3.82		2.70
$3.00 - $5.00		650,000		2.54		4.38

Totals		6,919,317		4.48		2.19

WARRANTS:
$0.31 - $1.99		165,730		3.95		0.43
$3.00 - $5.00		12,500		0.27		3.70

Totals		178,230		3.69		0.66

All options and warrants granted are vested and are exercisable as of June 30, 2011. During the fiscal year 2011 and 2010, The Company granted 1,471,000 and 300,000 stock options to its employees at the weighted average grant-date fair value of $0.30 and $0.25 respectively.

(A)	Incentive and Non-Statutory Stock Option Plan

The Company maintains several Incentive and Non-Statutory Stock Option Plans (“Plans”) for its employees and consultants. Options granted under these Plans to an employee of the Company become exercisable over a period of no longer than ten (10) years and no less than twenty percent (20%) of the shares are exercisable annually. Options are not exercisable, in whole or in part, prior to one (1) year from the date of grant unless the board of directors specifically determines otherwise, as provided.

Two types of options may be granted under these Plans: (1) Incentive Stock Options (also known as Qualified Stock Options) which may only be issued to employees of the Company and whereby the exercise price of the option is not less than the fair market value of the common stock on the date it was reserved for issuance under the Plan; and (2) Non-statutory Stock Options which may be issued to either employees or consultants of the Company and whereby the exercise price of the option is less than the fair market value of the common stock on the date it was reserved for issuance under the plan. Grants of options may be made to employees and consultants without regard to any performance measures. All options issued pursuant to the Plan are nontransferable and subject to forfeiture.

Options

During the quarter ended December 31, 2009, the Company granted 250,000 options to two employees with an exercise price of $0.75 per share and an expiration date of 1 year, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $71,238 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions (all dividend rates are assumed to be nil):

F-29

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

Risk-free interest rate 1.56%

Expected life 1 year

Expected volatility 56%

During the quarter ended June 30, 2010, the Company granted 50,000 options to two employees with an exercise price of $0.75 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $3,652 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 1.08%

Expected life 1 month

Expected volatility 39%

During the quarter ended September 30, 2010, the Company granted 750,000 options to five employees with an exercise price of $0.65 per share and an expiration date of 1 Year, vesting quarterly. Using the Black-Scholes method to value the options, the Company recorded $156,630 per quarter in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 2.01%

Expected life 1 year

Expected volatility 90%

During the quarter ended September 30, 2010, the Company granted 10,000 options to one employee with an exercise price of $0.65 per share and an expiration date of 1 Year, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $2,785 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 2.01%

Expected life 1 year

Expected volatility 90%

During the quarter ended September 30, 2010, the Company granted 242,000 options to seven employees with an exercise price of $0.65 per share and an expiration date of 4 months, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $43,441 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 1.81%

Expected life 4 months

Expected volatility 90%

During the quarter ended December 31, 2010, the Company granted 15,000 options to one employee with an exercise price of $0.65 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $11,717 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

F-30

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

Risk-free interest rate 1.65%

Expected life 1 month

Expected volatility 99%

During the quarter ended December 31, 2010, the Company granted 4,000 options to one employee with an exercise price of $1.25 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $1,040 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 1.65%

Expected life 1 month

Expected volatility 99%

During the quarter ended March 31, 2011, the Company granted 250,000 options to three employees with an exercise price of $1.25 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $102,154 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 2.16%

Expected life 1 month

Expected volatility 99%

During the quarter ended June 30, 2011, the Company granted 100,000 options to three employees with an exercise price of $1.25 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $47,338 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 2.4%

Expected life 1 month

Expected volatility 99%

During the quarter ended June 30, 2011, the Company granted 100,000 options to three employees with an exercise price of $1.25 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $17,915 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

Risk-free interest rate 3.13%

Expected life 1 month

Expected volatility 99%

F-31

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

Warrants

During 2010, the Company amended the terms of warrant agreements associated with common stock issued in October, 2007. Pursuant to the terms of the amendment, the exercise price was reduced to $0.31 from $0.63, resulting in a corresponding increase in the number of shares of common stock underlying the warrants by 3,274,682. The above holders exercised 1,000,000 warrants and 2,879,028 warrants through a cashless exercise, resulting in 2,384,390 shares issued.

(B)	Equity Incentive Plan

In May 2008, the shareholders approved the 2008 Equity Incentive Plan (the “2008 Plan”) which provides for the grant of equity-based awards, including options, stock appreciation rights, restricted stock awards or performance share awards or any other right or interest relating to shares or cash, to eligible participants. The aggregate number of shares reserved and available for award under the 2008 Plan is 1,000,000 (the Share Reserve). The 2008 Plan contemplates the issuance of common stock upon exercise of options or other awards granted to eligible persons under the 2008 Plan. Shares issued under the 2008 Plan may be both authorized and unissued shares or previously issued shares acquired by the Company. Upon termination or expiration of an unexercised option, stock appreciation right or other stock-based award under the 2008 Plan, in whole or in part, the number of shares of common stock subject to such award again become available for grant under the 2008 Plan. Any shares of restricted stock forfeited as described below will become available for grant. The maximum number of shares that may be granted to any one participant in any calendar year may not exceed 500,000 shares. All options issued pursuant to the Plan are nontransferable and subject to forfeiture.

Stock Options

Options granted under the 2008 Plan are not generally transferable and must be exercised within 10 years, subject to earlier termination upon termination of the option holder's employment, but in no event later than the expiration of the option's term. The exercise price of each option may not be less than the fair market value of a share of the Company’s common stock on the date of grant (except in connection with the assumption or substitution for another option in a manner qualifying under Section 424(a) of the Internal Revenue Code of 1986, as amended (the Code). Incentive stock options granted to any participant who owns 10% or more of the Company’s outstanding common stock (a Ten Percent Shareholder) must have an exercise price equal to or exceeding 110% of the fair market value of a share of our common stock on the date of the grant and must not be exercisable for longer than five years. Options become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The maximum term of any option granted under the 2008 Plan is ten years, provided that an incentive stock option granted to a Ten Percent Shareholder must have a term not exceeding five years.

Performance Awards

Under the 2008 Plan, a participant may also be awarded a "performance award," which means that the participant may receive cash, stock or other awards contingent upon achieving performance goals established by the Committee. The Committee may also make "deferred share" awards, which entitle the participant to receive our stock in the future for services performed between the date of the award and the date the participant may receive the stock. The vesting of deferred share awards may be based on performance criteria and/or continued service with our Company. A participant who is granted a "stock appreciation right" under the Plan has the right to receive all or a percentage of the fair market value of a share of stock on the date of exercise of the stock appreciation right minus the grant price of the stock appreciation right determined by the Committee (but in no event less than the fair market value of the stock on the date of grant). Finally, the Committee may make "restricted stock" awards under the 2008 Plan, which are subject to such terms and conditions as the Committee determines and as are set forth in the award agreement related to the restricted stock. As of June 30, 2011, 917,000 shares have been issued under this plan.

F-32

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

NOTE 16 – COMMITMENTS AND CONTINGENCIES

(A)

Leases

The Company’s headquarters is located in California in approximately 1,919 rentable square feet and a rent of $4,318 per month. The term of the lease is for two years and expires on December 31, 2011. A security deposit of $4,447 was made and is included in other current assets in the accompanying consolidated financial statements.

The Australia lease is a month to month lease and is rented at the rate of $175 per month. The Beijing lease is a three-year lease that expires in January 2014. The monthly rent is approximately $10,082. The Bangkok lease is a three years lease expiring in November 2013 with monthly rent of approximately $4,141. The NetSol Europe facilities, located in Horsham, United Kingdom, are leased until June 23, 2021 for an annual rent of approximately $123,750. NTNA recently relocated to Alameda, California location. The Alameda lease is a three-year lease with monthly rent of $7,148.

The NetSol Connect Karachi lease is a one-year lease that expires on December 2011 and currently is rented at the rate of approximately $1,118 per month. The NetSol Pindi office lease is a one year-lease that expires in July 2012 and currently is rented at the rate of approximately $639 per month.

Upon expiration of its leases, the Company does not anticipate any difficulty in obtaining renewals or alternative space. Rent expense amounted to $861,262 and $994,280 for the years ended June 30, 2011 and 2010, respectively.

The total annual lease commitment for the next five years is as follows:

FYE 6/30/12	$	999,552
FYE 6/30/13		272,670
FYE 6/30/14		181,490
FYE 6/30/15		123,750
FYE 6/30/16		123,750

(B)	Litigation

The Pakistan subsidiary of the Company, NetSol PK had entered into an agreement with Raseen Technologies LLC ("Raseen"), an Abu Dhabi based company to establish a new joint venture (“JV”) in Pakistan for providing services to telecom sector. Based on that understanding, the Company spent $367,164 for capital equipment and various expenses in preparation for the delivery of services to be provided relative to the operations of the JV. The non-capital related expenditures were recorded as other assets in accordance with the agreement, which provides that all expenditures were to be reimbursed by the JV to the corresponding company upon achievement of positive cash flows.

F-33

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

Subsequent to the execution of the agreement, and previous to the incorporation of the JV, Raseen terminated its participation without cause, as defined. The Company has filed a civil suit against Raseen in the civil court of Lahore, Pakistan for the recovery of the JV-related expenditures disbursed. As a result of the litigation on this matter, and the inherent uncertainty of any recovery, the Company had recorded a loss as of the year-ended June 30, 2010 in the amount of $237,104, which is the total of non-capital related expenditures. The capital assets purchased are computer equipment, as well as furniture and fixtures that are currently being utilized and accordingly depreciated by the Company for use in the normal course of operations.

As of June 30, 2011 and 2010, to the best knowledge of the Company’s management and counsel, there is no material litigation pending or threatened against the Company.

NOTE 17 – SEGMENT INFORMATION AND GEOGRAPHIC AREAS

The Company has identified three global regions or 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 operational issues and strategies unique to their particular regional location. We account for intercompany sales and expenses as if the sales or expenses were to third parties and eliminate them in consolidation.

F-34

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

The following table presents a summary of operating information and certain year-end balance sheet information for the years ended June 30, 2011 and 2010:

	2011			2010
Revenues from unaffiliated customers:
North America	$	4,223,863		$	5,627,277
Europe		7,158,145			5,105,434
Asia - Pacific		25,165,566			26,047,185
Consolidated	$	36,547,574		$	36,779,897

Operating income (loss):
Corporate headquarters	$	(3,762,967	)	$	(4,713,914	)
North America		1,775,501			67,133
Europe		2,705,583			872,249
Asia - Pacific		9,446,703			13,502,240
Consolidated	$	10,164,820		$	9,727,708

Net income (loss) after taxes and before minority interest:
Corporate headquarters	$	(5,043,335	)	$	(7,605,495	)
North America		1,758,835			35,174
Europe		2,601,842			804,350
Asia - Pacific		10,385,627			13,052,189
Consolidated	$	9,702,970		$	6,286,218

Identifiable assets:
Corporate headquarters	$	16,790,104		$	17,598,812
North America		2,316,781			2,073,111
Europe		4,590,556			3,237,702
Asia - Pacific		61,948,940			49,226,555
Consolidated	$	85,646,380		$	72,136,180

Depreciation and amortization:
Corporate headquarters	$	614,063		$	1,166,797
North America		459,219			539,176
Europe		710,022			658,591
Asia - Pacific		2,505,206			1,543,382
Consolidated	$	4,288,511		$	3,907,946

Capital expenditures:
Corporate headquarters	$	-		$	-
North America		53,738			41,569
Europe		1,013			104,922
Asia - Pacific		9,030,397			2,840,005
Consolidated	$	9,085,148		$	2,986,495

Geographic Information

Disclosed in the table below is geographic information for each country that comprised greater than five percent of our total revenues for fiscal 2011 and 2010.

F-35

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

	June 30, 2011		Long-lived		June 30, 2010		Long-lived
	Revenue		Assets		Revenue		Assets

China	$	11,063,164	$	134,202	$	11,500,798	$	45,570
Thailand		5,127,971		154,784		4,975,571		179,125.00
USA		5,829,118		10,896,290		5,805,502		11,299,551
UK		5,300,942		1,044,289		5,937,566		1,654,054
Pakistan & India		3,211,605		38,824,246		1,994,993		25,398,401
Australia & New Zealand		1,995,786		2,130		1,066,013		4,158
Other Countries		4,018,988		-		5,499,454		-
Total	$	36,547,575	$	51,055,941	$	36,779,897	$	38,580,858

NOTE 18 – NON-CONTROLLING INTEREST IN SUBSIDIARY

The Company had non-controlling interests in several of its subsidiaries. The balance of non-controlling interest as of June 30, 2011 and 2010 was as follows:

SUBSIDIARY	Non Controlling Interest %			Non- Controlling Interest at June 30, 2011

NetSol PK		39.48	%	$	11,531,694
NetSol-Innovation		49.90	%		968,790

Total				$	12,500,484

SUBSIDIARY	Non Controlling Interest %			Non- Controlling Interest at June 30, 2010

NetSol PK		42.04	%	$	9,133,392
NetSol-Innovation		49.90	%		1,291,057
Connect		49.90	%		(1,891	)

Total				$	10,422,557

(A)	NetSol Technologies, Limited (“NetSol PK”)

For the fiscal years ended June 30, 2011 and 2010, NetSol Technologies Ltd. (“NetSol PK”) had net income of $8,506,045 and $11,300,445. The related non-controlling interest was $3,469,710 and $4,750,707, respectively.

During the quarter ended March 31, 2011 the company purchased 1,995,309 shares from open market with a value of $491,460. As a result of purchase the corresponding non-controlling interest decreased from 42.04% to 39.48%.

During the year ended June 30, 2011, NetSol PK declared and paid a cash dividend of $1,125,733, of which the Company’s interest was $653,905. The amount attributable to the minority holders was $471,828.

F-36

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

(B)	NetSol Innovation (Private) Limited (“NetSol Innovation”)

For the fiscal years ended June 30, 2011 and 2010, NetSol Innovation (Private) Limited (“NetSol Innovation”) had net income of $1,012,368 and $301,098. The related non-controlling interest was $505,172 and $150,248, respectively.

During the fiscal year-ended June 2011, NetSol Innovation declared a cash dividend of $1,642,647, of which the Company’s interest was $823,162. The amount attributable to the non-controlling interest was $819,485 and is reflected in the accompanying consolidated financial statements.

(C)	NetSol Connect (“Connect”)

On July 1, 2010, the Company acquired the remaining non-controlling interest in NetSol Connect against a payment of $180,000.The balance of non-controlling interest on June 30, 2010 (the acquisition date) was ($1,892). The company adjusted the additional paid in capital by $181,891.

NOTE 19 – SUBSEQUENT EVENTS

(A)	Subsidiary

The Company formed a new subsidiary called Vroozi, Inc. a California corporation on or about August 3, 2011 to head its e-commerce division. Vroozi, Inc. will act as the sales and delivery channel for the Company’s existing product, smartOCI™. Vroozi, Inc. will be developing the next generation of e-commerce and search engine products and technology. Currently, Vroozi, Inc. is located at the Company’s Calabasas offices at 23901 Calabasas Road, Suite 2072, Calabasas, CA 91302.

(B)	Equity Transactions

The Company issued a total of 22,500 shares of common stock to employees as required according to the terms of their employment agreements valued at $37,575. These shares were included in ‘Shares to be issued’ as of June 30, 2011.

The Company issued a total of 80,000 shares of restricted common stock for services rendered by the independent members of the Board of Directors as part of their board compensation. The issuances were approved by both the compensation committee and the board of directors and were included in ‘Shares to be issued’ as of June 30, 2011.

The Company issued a total of 12,000 shares of restricted common stock for services rendered by the consultant as required according to service agreement. These shares were included in ‘Shares to be issued’ as of June 30, 2011.

Employees of the Company exercised options to acquire 430,000 shares of common stock valued at $440,000.

F-37

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

June 30, 2011 and 2010

On September 13, 2011, NetSol Technologies, Inc. entered into a purchase agreement to sell convertible notes with a total principal value of $4,000,000 and warrants to purchase shares of common stock to an investment fund managed by CIM Investment Management Limited and another accredited investor. The notes have a 2 year maturity date and are convertible into shares of common stock at the initial conversion price of $0.895 per share, which conversion price was determined as of September 13, 2011, the date of the purchase agreement. The warrants have a 5 year term and have an initial exercise price of $0.895 per share. The issuance of the notes and warrants was made in reliance on an exemption from registration available under Regulation D of the Securities Act of 1933, as amended. The use of proceeds of the new note were used to pay off the current note of $2,758,330 in full along with interest of $348,929 accrued till September 13, 2011.

F-38

PART I
		PAGE

Note About Forward-Looking Statements

Item 1	Business	1
Item 2	Properties	17
Item 3	Legal Proceedings	17

PART II

Item 5	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6	Selected Financial Data	19
Item 7	Management's Discussion and Analysis and Plan of Operations	20
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	33
Item 8	Financial Statements and Supplementary Data	33
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	33
Item 9A	Controls and Procedures	33
Item 9B	Other Information	34


PART III

Item 10	Directors, Executive Officers and Corporate Governance	35
Item 11	Executive Compensation	39
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13	Certain Relationships and Related Transactions, and Director Independence	53
Item 14	Principal Accountant Fees and Services	53

PART IV

Item 15	Exhibits and Financial Statement Schedules	55

	·	Oracle Microsoft Gold Partner
	·	IBM Business Partner
	·	Sun Microsystems
	·	HP DSPP Partner
	·	Daimler Financial Services
	·	Innovation Group PLC UK
	·	GE
	·	Software Engineering Institute
	·	Kaspersky Lab
	·	SAP
	·	Business Objects
	·	IBM-Internet Security System
	·	REAL Consulting
	·	Intel Solutions Blueprint
	·	Neptune Software, plc;
	·	Field Solutions
	·	Group 88 and,
	·	Lease Dimensions

Location/Approximate	Square Feet	Purpose/Use	Monthly Rental Expense

Alameda, CA	4,298	Computer & General Office		$	7,148

Beijing, China	3,012	General Office		$	10,082

Horsham, UK (NetSol Europe)	6,570	Computer and General Office		$	12,528

NetSol Connect (Karachi Office)	2,310	General Office		$	1,118

NetSol PK (Pindi Office)	1,912	General Office & Guest House		$	639

Bangkok, Thailand	1,980	Computer and General Office		$	4,141

	2010-2011		2009-2010
Fiscal
Quarter	High	Low	High	Low

1st (ended September 30)	1.69	0.71	1.17	.56
2nd (ended December 31)	2.11	1.30	1.23	.75
3rd (ended March 31)	2.39	1.56	1.09	.80
4th (ended June 30)	1.94	1.28	.95	.70

	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Equity Compensation Plans approved by Security holders	7,097,547(1)	$2.15(2)	5,571,013(3)
Equity Compensation Plans not approved by Security holders	None	None	None
Total	7,097,547	$2.15	5,571,013

Reporting Units	2010	2009
Asia Pacific	$1,303,372	$1,303,372
Europe	3,471,813	3,471,813
North America	4,664,100	4,664,100
Total	$9,439,285	$9,439,285

Reporting Units	Percentage by which fair value exceeds carrying value
Asia Pacific	108.42%
Europe	29.61%
North America	99.66%

	For the Three Months
	Ended June 30,
	2011						2010
Net Revenues:				%						%
License fees	$	1,025,446			14.88	%	$	4,641,770			43.36	%
Maintenance fees		1,898,641			27.55	%		1,720,084			16.07	%
Services		3,967,720			57.57	%		4,343,206			40.57	%
Total revenues		6,891,807			100.00	%		10,705,060			100.00	%
Cost of revenues:
Salaries and consultants		2,153,809			31.25	%		1,990,180			18.59	%
Travel		336,685			4.89	%		232,283			2.17	%
Repairs and maintenance		99,530			1.44	%		76,911			0.72	%
Insurance		31,581			0.46	%		27,553			0.26	%
Depreciation and amortization		958,011			13.90	%		647,415			6.05	%
Other		496,190			7.20	%		279,263			2.61	%
Total cost of revenues		4,075,807			59.14	%		3,253,605			30.39	%
Gross profit		2,816,000			40.86	%		7,451,454			69.61	%
Operating expenses:
Selling and marketing		968,677			14.06	%		550,307			5.14	%
Depreciation and amortization		332,058			4.82	%		267,907			2.50	%
Bad debt expense		112,068			1.63	%		233,200			2.18	%
Salaries and wages		734,269			10.65	%		811,515			7.58	%
Professional services, including non-cash compensation		350,841			5.09	%		350,647			3.28	%
General and adminstrative		882,578			12.81	%		849,398			7.93	%
Total operating expenses		3,380,490			49.05	%		3,062,974			28.61	%
Income (loss) from operations		(564,490	)		-8.19	%		4,388,481			40.99	%
Other income and (expenses)
(Loss) on sale of assets		(8,159	)		-0.12	%		(10,221	)		-0.10	%
Interest expense		(107,927	)		-1.57	%		(314,981	)		-2.94	%
Interest income		11,587			0.17	%		27,096			0.25	%
Gain (loss) on foreign currency exchange transactions		217,880			3.16	%		(257,414	)		-2.40	%
Share of net loss from equity investment		-			0.00	%		(43,510	)		-0.41	%
Beneficial conversion feature		(52,970	)		-0.77	%		(515,815	)		-4.82	%
Other income (expense)		10,257			0.15	%		(94,426	)		-0.88	%
Total other income (expenses)		70,668			1.03	%		(1,209,271	)		-11.30	%
Net income before and income taxes		(493,822	)		-7.17	%		3,179,209			29.70	%
Income taxes		(95,083	)		-1.38	%		(5,337	)		-0.05	%
Net income (loss) after tax		(588,905	)		-8.55	%		3,173,872			29.65	%
Non-controlling interest		(504,154	)		-7.32	%		(1,657,004	)		-15.48	%
Net income (loss) attibutable to NetSol		(1,093,059	)		-15.86	%		1,516,869			14.17	%

(I)		Denotes an independent director.
(C)		Denotes the Chairperson of the committee.

Name	Year First Elected As an Officer or Director	Age	Position Held with the Registrant	Family Relationship
Najeeb Ghauri	1997	56	Director and Chairman	Brother to Naeem and Salim Ghauri
Salim Ghauri	1999	55	President and Director	Brother to Naeem and Najeeb Ghauri
Naeem Ghauri	1999	53	Chief Executive Officer, Director	Brother to Najeeb and Salim Ghauri
Boo-Ali Siddiqui	2009	37	Chief Financial Officer	None
Patti L. W. McGlasson	2004	46	Secretary, General Counsel	None
Shahid Javed Burki	2000	72	Director	None
Eugen Beckert	2001	64	Director	None
Mark Caton	2002	61	Director	None
Alexander Shakow	2007	74	Director	None

Najeeb Ghauri	Chief Executive Officer
Salim Ghauri	President of Asia Pacific and Middle East Operations
Naeem Ghauri	President of European Operations
Boo Ali	Chief Financial Officer
Patti L. W. McGlasson	Secretary and General Counsel

Name and Principle Position	Fiscal Year Ended	Salary ($)		Bonus ($)		Stock Awards ($) (1)		Option Awards ($)			All Other Compensation ($)			Total ($)
Najeeb Ghauri	2011	$	375,000	$	-	$	96,875	$	-	(2)	$	81,603	(3)	$	553,478
CEO & Chairman	2010	$	315,000	$	-	$	99,375	$	-	(2)	$	70,981	(3)	$	485,356
Naeem Ghauri	2011	$	250,000	$	-	$	96,875	$	-	(2)	$	26,698	(4)	$	373,573
President EMEA Region	2010	$	225,000	$	-	$	99,375	$	-	(2)	$	27,000	(4)	$	351,375
Salim Ghauri	2011	$	250,000	$	-	$	96,875	$	-	(2)	$	42,014	(5)	$	388,889
President APAC Region	2010	$	212,500	$	-	$	99,375	$	-	(2)	$	9,918	(5)	$	321,793
Boo-Ali Siddiqui	2011	$	84,000	$	-	$	69,250	$	-		$	-	(6)	$	153,250
Chief Financial Officer	2010	$	75,000	$	-	$	9,000	$	-		$	-	(6)	$	84,000
Patti L. W. McGlasson	2011	$	130,500	$	-	$	55,400	$	-	(2)	$	21,281	(7)	$	207,181
Secretary, General Counsel	2010	$	122,747	$	-	$	7,200	$	-	(2)	$	23,594	(7)	$	153,541

NAME	NUMBER OF SECURITIES UNDERLYING OPTIONS (#) EXERCISABLE		NUMBER OF SECURITIES UNDERLYING OPTIONS (#) UNEXERCISABLE		OPTION EXERCISE PRICE ($)		OPTION EXPIRATION DATE
Najeeb Ghauri		100,000		-		2.21	1/1/14
		100,000				3.75	1/1/14
		50,000				5.00	1/1/14
		20,000				2.64	3/26/14
		30,000				5.00	3/26/14
		374,227				1.94	4/1/15
		500,000				2.91	4/1/15
		167,214				1.83	6/2/16
		250,000				2.50	6/2/16
		550,000				0.65	2/12/19
Naeem Ghauri		100,000		-		2.21	1/2/14
		100,000				3.75	1/2/14
		50,000				5.00	1/2/14
		20,000				2.64	3/26/14
		30,000				5.00	3/26/14
		10,000				2.50	2/16/12
		374,227				1.94	4/1/15
		500,000				2.91	4/1/15
		217,214				1.83	6/2/16
		250,000				2.50	6/2/16
		525,000				0.65	2/12/19
Salim Ghauri		100,000		-		2.21	1/2/14
		100,000				3.75	1/2/14
		50,000				5.00	3/26/14
		20,000				2.64	3/26/14
		30,000				5.00	3/26/14
		20,000				2.50	2/16/12
		374,227				1.94	4/1/15
		500,000				2.91	4/1/15
		217,214				1.83	6/2/16
		250,000				2.50	6/2/16
		325,000				0.65	2/12/19
Boo-Ali Siddiqui		-		-		-	1/0/00

Patti L. W. McGlasson		10,000		-		3.00	1/1/14
		20,000				2.64	3/26/14
		30,000				5.00	3/26/14
		20,000				1.65	7/7/15
		20,000				2.25	7/7/15
		10,000				1.60	7/23/17

BENEFITS AND PAYMENTS	CHANGE OF CONTROL		TERMINATION UPON DEATH OR DISABILITY		TERMINATION BY US WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON

Base Salary	$	1,125,000	$	-	$	1,125,000
Bonus		-
Salary Multiple Pay-out		1,121,250
Bonus or Revenue One-time Pay-Out		365,476
Net Cash Value of Options		4,518,302

Total	$	7,130,028	$	-	$	1,125,000

NAME	FEES EARNED OR PAID IN CASH ($)		SHARES AWARDS ($) (1)		TOTAL ($)
Eugen Beckert		25,000		67,225		92,225
Shahid Javed Burki		31,000		67,225		98,225
Mark Caton		28,000		67,225		95,225
Alexander Shakow		18,000		67,225		85,225

BOARD ACTIVITY	CASH PAYMENTS
Board Member Fee	$	48,000
Committee Membership	$	18,000
Chairperson for Audit Committee	$	15,000
Chairperson for Compensation Committee	$	12,000
Chairperson for Nominating and Corporate Governance Committee	$	9,000

		Percentage

Najeeb Ghauri (3)	4,302,823		7.67	%
Naeem Ghauri (3)	3,457,528		6.16	%
Salim Ghauri (3)	3,356,616		5.99	%
Eugen Beckert (3)	308,900		*
Shahid Javed Burki (3)	292,000		*
Mark Caton (3)	92,700		*
Alexander Shakow (3)	85,273		*
Patti McGlasson (3)	195,500		*
Boo-Ali Siddiqui (3)	70,000		*
Newland Capital Management LLC (5)	3,967,868		7.08	%
All officers and directors as a group (nine persons)	12,161,340		21.67	%

3.1	Articles of Incorporation of Mirage Holdings, Inc., a Nevada corporation, dated March 18, 1997, incorporated by reference as Exhibit 3.1 to NetSol’s Registration Statement No. 333-28861 filed on Form SB-2 filed June 10, 1997.*
3.2	Amendment to Articles of Incorporation dated May 21, 1999, incorporated by reference as Exhibit 3.2 to NetSol’s Annual Report for the fiscal year ended June 30, 1999 on Form 10K-SB filed September 28, 1999.*
3.3	Amendment to the Articles of Incorporation of NetSol International, Inc. dated March 20, 2002 incorporated by reference as Exhibit 3.3 to NetSol’s Annual Report on Form 10-KSB/A filed on February 2, 2001.*
3.4	Amendment to the Articles of Incorporation of NetSol Technologies, Inc. dated August 20, 2003 filed as Exhibit A to NetSol’s Definitive Proxy Statement filed June 27, 2003.*
3.5	Amendment to the Articles of Incorporation of NetSol Technologies, Inc. dated March 14, 2005 filed as Exhibit 3.0 to NetSol’s quarterly report filed on Form 10-QSB for the period ended March 31, 2005.*
3.6	Amendment to the Articles of Incorporation dated October 18, 2006 filed as Exhibit 3.5 to NetSol’s Annual Report for the fiscal year ended June 30, 2007 on Form 10-KSB.*
3.7	Amendment to Articles of Incorporation dated May 12, 2008 (1)*
3.8	Bylaws of Mirage Holdings, Inc., as amended and restated as of November 28, 2000 incorporated by reference as Exhibit 3.3 to NetSol’s Annual Report for the fiscal year ending in June 30, 2000 on Form 10K-SB/A filed on February 2, 2001.*
3.9	Amendment to the Bylaws of NetSol Technologies, Inc. dated February 16, 2002 incorporated by reference as Exhibit 3.5 to NetSol’s Registration Statement filed on Form S-8 filed on March 27, 2002.*
4.1	Form of Common Stock Certificate*
4.2	Form of Warrant*.
4.3	Form of Series A 7% Cumulative Preferred Stock filed as Annex E to NetSol’s Definitive Proxy Statement filed September 18, 2006*.
10.1	Lease Agreement for Calabasas executive offices dated December 3, 2003 incorporated by reference as Exhibit 99.1 to NetSol’s Current Report filed on Form 8-K filed on December 24, 2003.*
10.2	Company Stock Option Plan dated May 18, 1999 incorporated by reference as Exhibit 10.2 to the Company’s Annual Report for the Fiscal Year Ended June 30, 1999 on Form 10K-SB filed September 28, 1999.*
10.3	Company Stock Option Plan dated April 1, 1997 incorporated by reference as Exhibit 10.5 to NetSol’s Registration Statement No. 333-28861 on Form SB-2 filed June 10, 1997*
10.4	Company 2003 Incentive and Nonstatutory incorporated by reference as Exhibit 99.1 to NetSol’s Definitive Proxy Statement filed February 6, 2004.*
10.5	Company 2001 Stock Options Plan dated March 27, 2002 incorporated by reference as Exhibit 5.1 to NetSol’s Registration Statement on Form S-8 filed on March 27, 2002.*
10.6	Company 2008 Equity Incentive Plan incorporated by reference as Annex A to NetSol’s Definitive Proxy Statement filed May 28, 2008.*
10.6	Frame Agreement by and between DaimlerChrysler Services AG and NetSol Technologies dated June 4, 2004 incorporated by reference as Exhibit 10.13 to NetSol’s Annual Report for the year ended June 30, 2005 on Form 10-KSB filed on September 15, 2005.*
10.7	Share Purchase Agreement dated as of January 19, 2005 by and between the Company and the shareholders of CQ Systems Ltd. incorporated by reference as Exhibit 2.1 to NetSol’s Current Report filed on form 8-K on January 25, 2005.*
10.8	Stock Purchase Agreement dated May 6, 2006 by and between the Company, McCue Systems, Inc. and the shareholders of McCue Systems, Inc. incorporated by reference as Exhibit 2.1 to NetSol’s Current Report filed on form 8-K on May 8, 2006.*
10.9	Employment Agreement by and between NetSol Technologies, Inc. and Patti L. W. McGlasson dated May 1, 2006 incorporated by reference as Exhibit 10.20 to NetSol’s Annual Report on form 10-KSB dated September 18, 2006.*
10.11.	Employment Agreement by and between the Company and Najeeb Ghauri dated January 1, 2007 filed as Exhibit 10.11 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007.*
10.12	Employment Agreement by and between the Company and Naeem Ghauri dated January 1, 2007 filed as Exhibit 10.11 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007.*
10.13	Employment Agreement by and between the Company and Salim Ghauri dated January 1, 2007 filed as Exhibit 10.11 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007.*
10.14	Employment Agreement by and between the Company and Tina Gilger dated August 1, 2007 filed as Exhibit 10.11 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007.*
10.15	Amendment to Employment Agreement by and between Company and Najeeb Ghauri dated effective January 1, 2007.*

10.16	Amendment to Employment Agreement by and between Company and Naeem Ghauri dated effective January 1, 2007. *
10.17	Amendment to Employment Agreement by and between Company and Salim Ghauri dated effective January 1,*
10.18	Lease Agreement by and between McCue Systems, Inc. and Sea Breeze 1 Venture dated April 29, 2003*.
10.19	Amendment to Lease Agreement by and between McCue Systems, Inc. and Sea Breeze 1 Venture dated June 25, 2007 filed as Exhibit 10.19 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007. *
10.20	Lease Agreement by and between NetSol Pvt Limited and Civic Centres Company (PVT) Limited dated May 28, 2001 incorporated by this reference as Exhibit 10.23 to NetSol’s Annual Report on form 10-KSB dated September 18, 2006.*
10.21	Lease Agreement by and between NetSol Pvt Limited and Mrs. Rameeza Zobairi dated December 5, 2005 incorporated by this reference as Exhibit 10.24 to NetSol’s Annual Report on form 10-KSB dated September 18, 2006.*
10.22	Lease Agreement by and between NetSol Pvt Limited and Mr. Nisar Ahmed dated May 4, 2006 incorporated by this reference as Exhibit 10.25 to NetSol’s Annual Report on form 10-KSB dated September 18, 2006.*
10.23	Lease Agreement by and between NetSol Technologies, Ltd. and Argyll Business Centres Limited dated April 28, 2006 incorporated by this reference as Exhibit 10. 26 to NetSol’s Annual Report on form 10-KSB dated September 18, 2006.*
10.24	Tenancy Agreement by and between NetSol Technologies, Ltd. and Beijing Lucky Goldstar Building Development Co. Ltd. dated June 26, 2007 filed as Exhibit 10.21 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007.*
10.25	Company 2005 Stock Option Plan incorporated by reference as Exhibit 99.1 to NetSol’s Definitive Proxy Statement filed on March 3, 2006.*
10.26	Company 2004 Stock Option Plan incorporated by reference as Exhibit 99.1 to NetSol’s Definitive Proxy Statement filed on February 7, 2005.*
10.27	Working area sublease by and between NetSol Technologies, Ltd. and Toyota Leasing (Thailand) Co. Ltd., dated June 21, 2007 filed as Exhibit 10.24 to the Company’s Annual Report filed on Form 10-KSB for the year ended June 30, 2007.*
10.28	Lease Agreement by and between NetSol Technologies, Inc. and NetSol Technologies North America, Inc. and NOP Watergate LLC dated April 3, 2008.*
10.29	Lease Amendment Number Three by and between NetSol Technologies, Inc. and Century National Properties, Inc. dated December 12, 2007. *
10.30	Rent Agreement by and between Mr. Tahir Mehmood Khan and NetSol Technologies Ltd. Dated January 21, 2008. *
10.31	Amendment to Employment Agreement by and between Company and Najeeb Ghauri dated effective January 1, 2010. *
10.32	Amendment to Employment Agreement by and between Company and Naeem Ghauri dated effective January 1, 2010.*
10.33	Amendment to Employment Agreement by and between Company and Salim Ghauri dated effective January 1, 2010.*
10.34	Lease Amendment No. 4 by and between NetSol Technologies, Inc. and Century National Properties, Inc. dated October 7, 2009.*
10.35	Office Lease by and between NetSol Technologies North America, Inc. and Legacy Partners I Alameda Mariner Loop, LLC dated November 27, 2009.*
10.36	Amendment to Employment Agreement by and between Company and Patti L. W. McGlasson dated effective April 1, 2010.*
10.37	Employment Agreement by and between Company and Boo-Ali Siddiqui dated effective April 1, 2010.*
10.38	Convertible Note and Warrant Purchase Agreement between NetSol Technologies, Inc. and Purchasers dated September 13, 2011.(1)
10.39	Investor Rights Agreement by and between NetSol Technologies, Inc. and Purchasers dated September 13, 2011.(1)
10.40	Common Stock Purchase Warrant Agreement between NetSol Technologies, Inc. and Solomon Strategic Holdings, Inc. (1)
10.41	Common Stock Purchase Warrant Agreement between NetSol Technologies, Inc. and Tail Wind Fund Ltd.(1)
10.42	Convertible Note dated September 13, 2011 by and between NetSol Technologies, Inc. and Solomon Strategic Holdings, Inc. (1)
10.43	Convertible Note dated September 13, 2011 by and between NetSol Technologies, Inc. and Tail Wind Fund.(1)

21.1	A list of all subsidiaries of the Company(1)
23.1	Consent of Kabani & Company(1)
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO) (1)
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO) (1)
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)(1)
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)(1)

	NetSol Technologies, Inc.

Date: September 16, 2011	BY:	/S/ NAJEEB GHAURI

		Najeeb Ghauri
		Chief Executive Officer

Date: September 16, 2011	BY:	/S/ Boo-Ali Siddiqui

		Boo-Ali Siddiqui
		Chief Financial Officer
		Principal Accounting Officer

Date: September 16, 2011	BY:	/S/ NAJEEB U. GHAURI
		Najeeb U. Ghauri
		Chief Executive Officer
		Director, Chairman

Date: September 16, 2011	BY:	/S/BOO-ALI SIDDIQUI
		Boo-Ali Siddiqui
		Chief Financial Officer
		Principal Accounting Officer

Date: September 16, 2011	BY:	/S/ SALIM GHAURI
		Salim Ghauri
		President, APAC
		Director

Date: September 16, 2011	BY:	/S/ NAEEM GHAURI
		Naeem Ghauri
		President, EMEA
		Director

Date: September 16, 2011	BY:	/S/ EUGEN BECKERT
		Eugen Beckert
		Director

Date: September 16, 2011	BY:	/S/ SHAHID JAVED BURKI
		Shahid Javed Burki
		Director

Date: September 16, 2011	BY:	/S/ MARK CATON
		Mark Caton
		Director

Date: September 16, 2011	BY:	/S/ ALEXANDER SHAKOW
		Alexander Shakow
		Director

	Original Principal Amount: $400,000
Issuance Date: September 13, 2011	New York, New York

	Original Principal Amount: $3,600,000
Issuance Date: September 13, 2011	New York, New York