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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS			1
PROSPECTUS SUMMARY			1
RISK FACTORS			5
USE OF PROCEEDS			9
SELLING SECURITY HOLDERS			10
PLAN OF DISTRIBUTION			12
LEGAL MATTERS			13
DESCRIPTION OF SECURITIES			14
EXPERTS			14
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES			15
WHERE YOU CAN FIND MORE INFORMATION			15
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE			15
UNDERTAKING			19

 

 

 

 

 

 

 

 

 

 

 

Common Stock Offered		This prospectus relates to the offering of 230,863 shares of our common stock, which may be sold from time to time by the selling stockholders named in this prospectus. The shares of our common stock are being registered to permit the selling stockholders to sell the shares from time to time in the public market. The selling stockholders will determine the timing and amount of any sale.
Common Stock outstanding		We had 18,449,278 shares of common stock issued and outstanding as of March 13, 2007.
Use of Proceeds		We will not receive any of the proceeds from sale of shares of common stock offered by the selling stockholders.
Trading Market		Our common stock is currently listed on the NASDAQ Capital Market under the trading symbol “NTWK.”
Risk Factors		Investment in our common stock involves a high degree of risk. You should carefully consider the information set forth in the "Risk Factors" section of this prospectus as well as other information set forth in this prospectus, including our financial statements and related notes.

 

 

 

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our ability to integrate strategy, experience modeling, creative design and technology services;

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development by others of Internet services or software that is competitive with our solutions; and

 

 

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quarterly variations in operating results and achievement of key business metrics;

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any differences between reported results and securities analysts’ published or unpublished expectations;

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announcements of new contracts or service offerings by NetSol or competitors;

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market reaction to any acquisitions, joint ventures or strategic investments announced by NetSol or competitors;

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demand for our services and products;

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changes of shares being sold pursuant to Rule 144 or upon exercise of the warrants; and,

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general economic or stock market conditions unrelated to NetSol’s operating performance.

Name of Selling Stockholder(1)(2)		Number of Shares of NetSol Common Stock Beneficially Owned Prior to the Offering(1)			Number of Shares of NetSol Common Stock Being Offered Hereby			Number of Shares of NetSol Common Stock to be Beneficially Owned Upon Completion of the Offering(1)(2)
The Tail Wind Fund Ltd.(4)			1,972,363			115,431			1,972,438
Solomon Strategic Holdings, Inc.(5)			229,608			10,494			240,102
Crestview Capital Master, LLC(6)			918,944			62,962			918,944
Whalehaven Capital Fund Limited(7)			459,217			20,988			480,205
Bristol Investment Fund, Ltd.(8)			459,217			20,988			480,205
TOTAL			4,039,349			230,863			4,091,894

(1)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to such securities.

(2)

None of the Selling Stockholders has held an employment, officer or director position with NetSol within the past three years. Assuming that all shares being registered hereby will be sold, all convertible notes will be converted and all warrants will be exercised, no selling stockholder will hold a percentage interest in the shares of NetSol in excess of 1 percent at the completion of the offering.

(3)

Tail Wind Advisory & Management Ltd., a UK corporation authorized and regulated by the Financial Services Authority of Great Britain (“TWAM”), is the investment manager for The Tail Wind Fund Ltd. (“Tail Wind”), and David Crook is the CEO and controlling shareholder of TWAM. Therefore, TWAM and Mr. Crook may be deemed to have voting and/or investment control over the shares of common stock owned by Tail Wind. Each of TWAM and Mr. Crook expressly disclaims any equitable or beneficial ownership of the shares being referred to hereunder and held by Tail Wind. Tail Wind is not affiliated with a broker-dealer and, acquired the securities in the ordinary course of business. At the time of the acquisition, Tail Wind had no agreements, arrangements or understandings with any other person, either directly or indirectly, to dispose of the securities. The shares of common stock consist of: 1,666,667 shares underlying the Preferred Stock and 833,334 shares of common stock underlying the Warrants, 25,690 shares of common stock issued as dividends on the Preferred Stock and, 115,431 issuable in lieu of cash interest due under the Convertible Notes. The shares issued in lieu of cash interest are the only shares being registered hereunder. Subject to the Ownership Limitation (defined below), Tail Wind would own a total of 2,641,122 shares of Common Stock, including 1,666,667 shares of Common Stock issuable upon conversion of 2,750 Preferred Stock, 833,334 shares of Common Stock issuable upon exercise of Warrants issued to Tail Wind on such date, 25690 shares of common stock issued as dividends on the Preferred Stock and, 115,431 shares issuable as interest payments due under the Convertible Notes. In accordance with Rule 13d-4 under the Securities Exchange Act of 1934, as amended, because the number of shares of Common Stock into which Tail Wind’s Preferred Stock and Warrants are convertible and exercisable is limited, pursuant to the terms of such instruments, to that number of shares of Common Stock which would result in Tail Wind having beneficial ownership of 9.9% of the total issued and outstanding shares of Common Stock (the "Ownership Limitation"), Tail Wind disclaims beneficial ownership of any and all shares of Common Stock that would cause Tail Wind's beneficial ownership to exceed the Ownership Limitation.

 

(4)

Andrew P. Mackeller has been authorized by the Board of Directors of Solomon Strategic Holdings, Inc. (“SSH”), a corporation with a principal address in the Isle of Man, to make voting and disposition decisions with respect to the shares on behalf of SSH. By reason of such delegated authority, Mr. Mackeller may be deemed to have voting and/or investment control over the shares of common stock owned by SSH. Mr. Mackeller expressly disclaims any equitable or beneficial ownership of the shares being registered hereunder and held by SSH, and he does not have any legal right to maintain such delegated authority. SSH is not affiliated with a broker-dealer and, acquired the securities in the ordinary course of business. At the time of the acquisition, SSH had no agreements, arrangements or understandings with any other person, either directly or indirectly, to dispose of the securities. The shares of common stock consist of 151,515 shares of common stock underlying the Preferred Stock; 75,758 shares of common stock underlying the Warrants; 2,335 shares of common stock issued as dividends on the Preferred Stock, and 10,494 as payment of interest due under the Convertible Note. The shares issued in lieu of cash interest are the only shares being registered hereunder.

(5)

Crestview Capital Master, LLC (“Crestview”) is a limited liability company whose sole manager is Crestview Capital Partners, LLC. Mr. Robert Hoyt, Mr. Stewart R. Flink and Mr. Daniel Warsh, as managers of Crestview Capital Partners, have voting and/or investment control over the Securities being registered for the account of Crestview Capital Master, LLC. Messrs. Flink, Hoyt and Warsh disclaim beneficial ownership of such shares. Stewart Flink, a manager of Crestview Capital Partners, is the controlling shareholder of Dillon Capital, Inc., a broker-dealer, registered under the NASD. All securities to be resold were acquired in the ordinary course of business. At the time of acquisition, Crestview had no agreements, understandings or arrangements with any other persons, either directly or indirectly, to dispose of the securities. The shares of common stock consist of 909,090 shares of common stock underlying the Preferred Stock; 454,546 shares of common stock underlying the Warrants; 14,013 shares of common stock issued as dividends on the Preferred Stock, and, 62,962 as payment of interest due under the Convertible Note. The shares issued in lieu of cash interest are the only shares being registered hereunder. In accordance with Rule 13d-4 under the Securities Exchange Act of 1934, as amended, because the number of shares of Common Stock into which Crestview’s Preferred Stock and Warrants are convertible and exercisable is limited, pursuant to the terms of such instruments, to that number of shares of Common Stock which would result in Crestview having beneficial ownership of 4.99% of the total issued and outstanding shares of Common Stock (the "Ownership Limitation"), Crestview disclaims beneficial ownership of any and all shares of Common Stock that would cause Crestview to exceed the 4.99% Ownership Limitation.

 

-	a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction (including crosses in which the same broker acts as agent for both sides of the transaction);

 

-	purchases by a broker-dealer as principal and resale by such broker-dealer, including resales for its account, pursuant to this prospectus;

 

-	ordinary brokerage transactions and transactions in which the broker solicits purchases;

 

-	through options, swaps or derivatives;

 

-	in privately negotiated transactions;

 

-	in making short sales entered into after the date of this prospectus or in transactions to cover such short sales; and

 

-	put or call option transactions relating to the shares.

 

 

 

 

 

 

 

 

-	the name of each such selling security holder and of the participating broker-dealer(s);

 

-	the number of shares involved;

 

-	the initial price at which the shares were sold;

 

-	the commissions paid or discounts or concessions allowed to the broker-dealer(s), where applicable;

 

-	that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and

 

-	other facts material to the transactions.