ネットソルテクノロジーズの四半期報告

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2024

☐ For the transition period from __________ to __________

Commission file number: 0-22773

NETSOL TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

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

16000 Ventura Blvd., Suite 770, Encino, CA 91436
(Address of principal executive offices) (Zip Code)

(818) 222-9195 / (818) 222-9197
(Issuer’s telephone/facsimile numbers, including area code)

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

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

Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

	Large Accelerated Filer ☐	Accelerated Filer ☐
	Non-accelerated Filer ☒	Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

The issuer had 12,344,271 shares issued and 11,405,240 outstanding of its $.01 par value Common Stock and no Preferred Stock outstanding as of May 17, 2024.

NETSOL TECHNOLOGIES, INC.

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023		3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2024 and 2023		4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended March 31, 2024 and 2023		5
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, 2024 and 2023		6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and 2023		9
Notes to the Condensed Consolidated Financial Statements		11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 3. Quantitative and Qualitative Disclosures about Market Risk		53
Item 4. Controls and Procedures		53

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		54
Item 1A Risk Factors		54
Item 2. Unregistered Sales of Equity and Use of Proceeds		54
Item 3. Defaults Upon Senior Securities		54
Item 4. Mine Safety Disclosures		54
Item 5. Other Information		54
Item 6. Exhibits		54

Page 2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

(Unaudited)

	As of			As of
	March 31, 2024			June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	12,338,642		$	15,533,254
Accounts receivable, net of allowance of $414,745 and $420,354		15,826,210			11,714,422
Revenues in excess of billings, net of allowance of $116,023 and $1,380,141		15,659,806			12,377,677
Other current assets		2,398,403			1,978,514
Total current assets		46,223,061			41,603,867
Revenues in excess of billings, net - long term		752,582			-
Property and equipment, net		5,505,609			6,161,186
Right of use assets - operating leases		1,490,669			1,151,575
Other assets		32,341			32,327
Intangible assets, net		-			127,931
Goodwill		9,302,524			9,302,524
Total assets	$	63,306,786		$	58,379,410

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	6,707,937		$	6,552,181
Current portion of loans and obligations under finance leases		6,047,511			5,779,510
Current portion of operating lease obligations		635,168			505,237
Unearned revenue		9,503,548			7,932,306
Total current liabilities		22,894,164			20,769,234
Loans and obligations under finance leases; less current maturities		130,381			176,229
Operating lease obligations; less current maturities		837,756			652,194
Total liabilities		23,862,301			21,597,657

Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-
Common stock, $.01 par value; 14,500,000 shares authorized; 12,344,271 shares issued and 11,405,240 outstanding as of March 31, 2024, 12,284,887 shares issued and 11,345,856 outstanding as of June 30, 2023		123,445			122,850
Additional paid-in-capital		128,736,328			128,476,048
Treasury stock (at cost, 939,031 shares as of March 31, 2024 and June 30, 2023)		(3,920,856	)		(3,920,856	)
Accumulated deficit		(44,129,431	)		(44,896,186	)
Other comprehensive loss		(45,505,920	)		(45,975,156	)
Total NetSol stockholders’ equity		35,303,566			33,806,700
Non-controlling interest		4,140,919			2,975,053
Total stockholders’ equity		39,444,485			36,781,753
Total liabilities and stockholders’ equity	$	63,306,786		$	58,379,410

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

Page 3

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations

(Unaudited)

	2024			2023			2024			2023
	For the Three Months						For the Nine Months
	Ended March 31,						Ended March 31,
	2024			2023			2024			2023
Net Revenues:
License fees	$	558,340		$	1,982,985		$	4,829,242		$	2,248,829
Subscription and support		7,140,358			6,656,082			20,480,382			19,175,585
Services		7,765,818			4,867,322			19,635,014			17,178,452
Total net revenues		15,464,516			13,506,389			44,944,638			38,602,866

Cost of revenues		7,989,696			8,801,360			24,132,064			26,503,377
Gross profit		7,474,820			4,705,029			20,812,574			12,099,489

Operating expenses:
Selling, general and administrative		5,811,335			5,333,202			17,051,798			16,727,836
Research and development cost		345,582			302,262			1,065,412			1,244,793
Total operating expenses		6,156,917			5,635,464			18,117,210			17,972,629

Income (loss) from operations		1,317,903			(930,435	)		2,695,364			(5,873,140	)

Other income and (expenses)
Interest expense		(289,677	)		(188,137	)		(856,016	)		(512,110	)
Interest income		376,466			263,794			1,259,464			1,005,557
Gain (loss) on foreign currency exchange transactions		(963,887	)		5,385,591			(1,112,757	)		7,358,519
Share of net loss from equity investment		-			2,377			-			7,510
Other income (expense)		21,634			(62,941	)		22,210			57,383
Total other income (expenses)		(855,464	)		5,400,684			(687,099	)		7,916,859

Net income before income taxes		462,439			4,470,249			2,008,265			2,043,719
Income tax provision		(146,569	)		(227,718	)		(418,517	)		(641,122	)
Net income		315,870			4,242,531			1,589,748			1,402,597
Non-controlling interest		11,679			(1,697,908	)		(822,993	)		(1,571,629	)
Net income (loss) attributable to NetSol	$	327,549		$	2,544,623	#	$	766,755		$	(169,032	)

Net income (loss) per share:
Net income (loss) per common share
Basic	$	0.03		$	0.23		$	0.07		$	(0.01	)
Diluted	$	0.03		$	0.23		$	0.07		$	(0.01	)

Weighted average number of shares outstanding
Basic		11,390,888			11,283,954			11,369,778			11,270,466
Diluted		11,430,493			11,283,954			11,409,383			11,270,466

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

Page 4

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

	2024			2023			2024			2023
	For the Three Months						For the Nine Months
	Ended March 31,						Ended March 31,
	2024			2023			2024			2023
Net income (loss)	$	327,549		$	2,544,623		$	766,755		$	(169,032	)
Other comprehensive income (loss):
Translation adjustment		441,993			(7,628,982	)		812,109			(11,428,326	)
Translation adjustment attributable to non-controlling interest		(77,604	)		2,447,328			(342,873	)		3,598,417
Net translation adjustment		364,389			(5,181,654	)		469,236			(7,829,909	)
Comprehensive income (loss) attributable to NetSol	$	691,938		$	(2,637,031	)	$	1,235,991		$	(7,998,941	)

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

Page 5

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)

A statement of the changes in equity for the three months ended March 31, 2024 is provided below:

													Other
					Additional								Compre-			Non			Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling			Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest			Equity
Balance at December 31, 2023		12,329,919	$	123,301	$	128,587,384	$	(3,920,856	)	$	(44,456,980	)	$	(45,870,309	)	$	4,074,994		$	38,537,534
Common stock issued for: Services		14,352		144		39,606		-			-			-			-			39,750
Fair value of options issued		-		-		101,424		-			-			-			-			101,424
Fair value of subsidiary options issued		-		-		7,914		-			-			-			-			7,914
Fair value of subsidiary options issued		-		-		7,914		-			-			-			-			7,914
Foreign currency translation adjustment		-		-		-		-			-			364,389			77,604			441,993
Net income (loss) for the year		-		-		-		-			327,549			-			(11,679	)		315,870
Balance at March 31, 2024		12,344,271	$	123,445	$	128,736,328	$	(3,920,856	)	$	(44,129,431	)	$	(45,505,920	)	$	4,140,919		$	39,444,485

A statement of the changes in equity for the three months ended December 31, 2023 is provided below:

													Other
					Additional								Compre-			Non		Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling		Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest		Equity
Balance at September 30, 2023		12,311,850	$	123,120	$	128,536,132	$	(3,920,856	)	$	(44,865,296	)	$	(46,411,702	)	$	3,201,723	$	36,663,121
Common stock issued for: Services		18,069		181		39,569		-			-			-			-		39,750
Fair value of subsidiary options issued		-		-		11,683		-			-			-			-		11,683
Foreign currency translation adjustment		-		-		-		-			-			541,393			298,772		840,165
Net income (loss) for the year		-		-		-		-			408,316			-			574,499		982,815
Balance at December 31, 2023		12,329,919	$	123,301	$	128,587,384	$	(3,920,856	)	$	(44,456,980	)	$	(45,870,309	)	$	4,074,994	$	38,537,534

Page 6

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)

A statement of the changes in equity for the three months ended September 30, 2023 is provided below:

													Other
					Additional								Compre-			Non			Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling			Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest			Equity
Balance at June 30, 2023		12,284,887	$	122,850	$	128,476,048	$	(3,920,856	)	$	(44,896,186	)	$	(45,975,156	)	$	2,975,053		$	36,781,753
Common stock issued for: Services		26,963		270		48,530		-			-			-			-			48,800
Fair value of subsidiary options issued		-		-		11,554		-			-			-			-			11,554
Foreign currency translation adjustment		-		-		-		-			-			(436,546	)		(33,503	)		(470,049	)
Net income (loss) for the year		-		-		-		-			30,890			-			260,173			291,063
Balance at September 30, 2023		12,311,850	$	123,120	$	128,536,132	$	(3,920,856	)	$	(44,865,296	)	$	(46,411,702	)	$	3,201,723		$	36,663,121

A statement of the changes in equity for the three months ended March 31, 2023 is provided below:

													Other
					Additional								Compre-			Non			Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling			Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest			Equity
Balance at December 31, 2022		12,222,985	$	122,231	$	128,484,714	$	(3,920,856	)	$	(42,366,093	)	$	(42,011,340	)	$	4,052,456		$	44,361,112
Common stock issued for: Services		15,057		151		39,599		-			-			-			-			39,750
Fair value of subsidiary options issued		-		-		12,642		-			-			-			-			12,642
Foreign currency translation adjustment		-		-		-		-			-			(5,181,654	)		(2,447,328	)		(7,628,982	)
Net income (loss) for the year		-		-		-		-			2,544,623			-			1,697,908			4,242,531
Balance at March 31, 2023		12,238,042	$	122,382	$	128,536,955	$	(3,920,856	)	$	(39,821,470	)	$	(47,192,994	)	$	3,303,036		$	41,027,053

Page 7

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)

A statement of the changes in equity for the three months ended December 31, 2022 is provided below:

													Other
					Additional								Compre-			Non			Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling			Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest			Equity
Balance at September 30, 2022		12,209,230	$	122,093	$	128,420,519	$	(3,920,856	)	$	(40,273,167	)	$	(42,281,135	)	$	4,279,113		$	46,346,567
Common stock issued for: Services		13,755		138		39,612		-			-			-			-			39,750
Fair value of subsidiary options issued		-		-		24,583		-			-			-			-			24,583
Foreign currency translation adjustment		-		-		-		-			-			269,795			82,380			352,175
Net income (loss) for the year		-		-		-		-			(2,092,926	)		-			(309,037	)		(2,401,963	)
Balance at December 31, 2022		12,222,985	$	122,231	$	128,484,714	$	(3,920,856	)	$	(42,366,093	)	$	(42,011,340	)	$	4,052,456		$	44,361,112

A statement of the changes in equity for the three months ended September 30, 2022 is provided below:

													Other
					Additional								Compre-			Non			Total
	Common Stock				Paid-in		Treasury			Accumulated			hensive			Controlling			Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest			Equity
Balance at June 30, 2022		12,196,570	$	121,966	$	128,218,247	$	(3,920,856	)	$	(39,652,438	)	$	(39,363,085	)	$	5,450,389		$	50,854,223
Balance		12,196,570	$	121,966	$	128,218,247	$	(3,920,856	)	$	(39,652,438	)	$	(39,363,085	)	$	5,450,389		$	50,854,223
Common stock issued for: Services		12,660		127		39,623		-			-			-			-			39,750
Adjustment in APIC for change in subsidiary shares to non-controlling interest		-		-		120,565		-			-			-			(120,565	)		-
Fair value of subsidiary options issued		-		-		42,084		-			-			-			-			42,084
Foreign currency translation adjustment		-		-		-		-			-			(2,918,050	)		(1,233,469	)		(4,151,519	)
Net income (loss) for the year		-		-		-		-			(620,729	)		-			182,758			(437,971	)
Net income (loss)		-		-		-		-			(620,729	)		-			182,758			(437,971	)
Balance at September 30, 2022		12,209,230	$	122,093	$	128,420,519	$	(3,920,856	)	$	(40,273,167	)	$	(42,281,135	)	$	4,279,113		$	46,346,567
Balance		12,209,230	$	122,093	$	128,420,519	$	(3,920,856	)	$	(40,273,167	)	$	(42,281,135	)	$	4,279,113		$	46,346,567

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

Page 8

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(Unaudited)

	2024			2023
	For the Nine Months
	Ended March 31,
	2024			2023
Cash flows from operating activities:
Net income	$	1,589,748		$	1,402,597
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,351,239			2,519,469
Provision for bad debts		9,739			7,648
Share of net (gain) loss from investment under equity method		-			(7,510	)
(Gain) loss on sale of assets		(1,154	)		56,494
Stock based compensation		260,875			198,559
Changes in operating assets and liabilities:
Accounts receivable		(3,922,773	)		(1,855,899	)
Revenues in excess of billing		(3,904,609	)		240,324
Other current assets		(1,525	)		(621,731	)
Accounts payable and accrued expenses		77,541			1,321,289
Unearned revenue		938,242			(696,621	)
Net cash provided by (used in) operating activities		(3,602,677	)		2,564,619

Cash flows from investing activities:
Purchases of property and equipment		(948,337	)		(1,575,059	)
Sales of property and equipment		125,886			153,402
Net cash used in investing activities		(822,451	)		(1,421,657	)

Cash flows from financing activities:
Proceeds from bank loans		340,847			270,292
Payments on finance lease obligations and loans - net		(307,235	)		(787,641	)
Net cash provided by (used in) financing activities		33,612			(517,349	)
Effect of exchange rate changes		1,196,904			(9,329,913	)
Net decrease in cash and cash equivalents		(3,194,612	)		(8,704,300	)
Cash and cash equivalents at beginning of the period		15,533,254			23,963,797
Cash and cash equivalents at end of period	$	12,338,642		$	15,259,497

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

Page 9

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)

	For the Nine Months
	Ended March 31,
	2024		2023
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest	$	1,100,101	$	378,720
Taxes	$	522,633	$	706,658

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Assets acquired under finance lease	$	122,045	$	-

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

Page 10

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

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

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, 2023. The Company follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods are not indicative of annual results.

The accompanying consolidated financial statements include the accounts of the Company as follows:

Wholly owned Subsidiaries

NetSol Technologies Americas, Inc. (“NTA”)

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

NetSol Technologies Australia Pty Ltd. (“Australia”)

NetSol Technologies Europe Limited (“NTE”)

NetSol Technologies (Beijing) Co. Ltd. (“NetSol Beijing”)

Tianjin NuoJinZhiCheng Co., Ltd (“Tianjin”)

Ascent Europe Ltd. (“AEL”)

Virtual Lease Services Holdings Limited (“VLSH”)

Virtual Lease Services Limited (“VLS”)

Virtual Lease Services (Ireland) Limited (“VLSIL”)

Majority-owned Subsidiaries

NetSol Technologies, Ltd. (“NetSol PK”)

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

NETSOL Ascent Middle East Computer Equipment Trading LLC (“Namecet”)

NetSol Technologies Thailand Limited (“NetSol Thai”)

Otoz, Inc. (“Otoz”)

Otoz (Thailand) Limited (“Otoz Thai”)

Page 11

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 2 – ACCOUNTING POLICIES

Use of Estimates

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

Concentration of Credit Risk

Cash includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. Balances at financial institutions within certain foreign countries are not covered by insurance except balances maintained in China are insured for RMB 500,000 ($69,252) in each bank and in the UK for GBP 85,000 ($107,595) in each bank. The Company maintains three bank accounts in China and nine bank accounts in the UK. As of March 31, 2024, and June 30, 2023, the Company had uninsured deposits related to cash deposits in accounts maintained within foreign entities of approximately $11,779,289 and $13,524,518, respectively. The Company has not experienced any losses in such accounts.

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

Fair Value of Financial Instruments

The Company applies the provisions of Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively short maturities. The carrying amounts of the long-term debt approximate their fair values based on current interest rates for instruments with similar characteristics.

The three levels of valuation hierarchy are defined as follows:

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

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

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

Page 12

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

The Company’s financial assets that were measured at fair value on a recurring basis as of March 31, 2024, were as follows:

SCHEDULE OF FAIR VALUE OF FINANCIAL ASSETS MEASURED ON RECURRING BASIS

	Level 1		Level 2		Level 3		Total Assets
Revenues in excess of billings - long term	$	-	$	-	$	752,582	$	752,582
Total	$	-	$	-	$	752,582	$	752,582

The Company did not have any financial assets that were measured at fair value on a recurring basis at June 30, 2023.

The reconciliation from June 30, 2023 to March 31, 2024 is as follows:

SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS RECONCILIATION

	Revenues in excess of billings - long term			Fair value discount			Total
Balance at June 30, 2023	$	-		$	-		$	-
Additions		827,853			(103,958	)		723,895
Amortization during the period		-			30,773			30,773
Effect of Translation Adjustment		(1,404	)		(682	)		(2,086	)
Balance at March 31, 2024	$	826,449		$	(73,867	)	$	752,582

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

Recent Accounting Standards:

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. ASU 2021-08 is effective for annual periods beginning after December 15, 2022, and interim periods within those years, and was adopted by the Company on July 1, 2023. The adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. ASU 2023-05 provides decision-useful information to a joint venture’s investors and reduces diversity in practice by requiring that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). ASU 2023-05 is effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted. The Company does not expect the standard to have a material effect on its consolidated financial statements.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

Page 13

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 3 – REVENUE RECOGNITION

The Company determines revenue recognition through the following steps:

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

The Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation) or an agent (net presentation) by evaluating the nature of its promise to the customer. Revenue is presented net of sales, value-added and other taxes collected from customers and remitted to government authorities.

The Company has two primary revenue streams: core revenue and non-core revenue.

Core Revenue

The Company generates its core revenue from the following sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) subscription and support, which includes post contract support, of its enterprise software solutions for the lease and finance industry. The Company offers its software using the same underlying technology via two models: a traditional on-premises licensing model and a subscription model. The on-premises model involves the sale or license of software on a perpetual basis to customers who take possession of the software and install and maintain the software on their own hardware. Under the subscription delivery model, the Company provides access to its software on a hosted basis as a service and customers generally do not have the contractual right to take possession of the software.

Non-Core Revenue

The Company generates its non-core revenue by providing business process outsourcing (“BPO”), other IT services and internet services.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract.

The Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription or licenses and a professional services engagement. License purchases generally have multiple performance obligations as customers purchase post contract support and services in addition to the licenses. The Company’s single performance obligation arrangements are typically post contract support renewals, subscription renewals and services engagements.

For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance obligation using its best estimate for the SSP.

Software Licenses

Transfer of control for software is considered to have occurred upon delivery of the product to the customer. The Company’s typical payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice.

Page 14

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

Subscription

Subscription revenue is recognized ratably over the initial subscription period committed to by the customer commencing when the product is made available to the customer. The initial subscription period is typically 12 to 60 months. The Company generally invoices its customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment within 30 days of invoice.

Post Contract Support

Revenue from support services and product updates, referred to as subscription and support revenue, is recognized ratably over the term of the maintenance period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product updates and patches released during the term of the support period on a when-and-if available basis. The Company’s customers purchase both product support and license updates when they acquire new software licenses. In addition, most customers renew their support services contracts annually and typical payment terms provide that customers make payment within 30 days of invoice.

Professional Services

Revenue from professional services is typically comprised of implementation, development, data migration, training, or other consulting services. Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments. The Company recognizes revenue for time-and-materials arrangements as the services are performed. In fixed fee arrangements, revenue is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the services project. Management applies judgment when estimating project status and the costs necessary to complete the services projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Services are generally invoiced upon milestones in the contract or upon consumption of the hourly resources and payments are typically due 30 days after invoice.

BPO and Internet Services

Revenue from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date as a percentage of total estimated labor hours for each contract. Internet services are invoiced either monthly, quarterly, or half yearly in advance to the customers and revenue is recognized ratably overtime on a monthly basis.

Disaggregated Revenue

The Company disaggregates revenue from contracts with customers by category — core and non-core, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Page 15

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

The Company’s disaggregated revenue by category is as follows:

SCHEDULE OF DISAGGREGATED REVENUE BY CATEGORY

	2024		2023		2024		2023
	For the Three Months				For the Nine Months
	Ended March 31,				Ended March 31,
	2024		2023		2024		2023
Core:
License	$	558,340	$	1,982,985	$	4,829,242	$	2,248,829
Subscription and support		7,140,358		6,656,082		20,480,382		19,175,585
Services		6,477,849		3,869,444		15,566,480		14,109,271
Total core revenue, net		14,176,547		12,508,511		40,876,104		35,533,685

Non-Core:
Services		1,287,969		997,878		4,068,534		3,069,181
Total non-core revenue, net		1,287,969		997,878		4,068,534		3,069,181

Total net revenue	$	15,464,516	$	13,506,389	$	44,944,638	$	38,602,866

Significant Judgments

Due to the complexity of certain contracts, the actual revenue recognition treatment required under Topic 606 for the Company’s arrangements may be dependent on contract-specific terms and may vary in some instances.

Judgment is required to determine the SSP for each distinct performance obligation. The Company rarely licenses or sells products on a stand-alone basis, so the Company is required to estimate the range of SSPs for each performance obligation. In instances where SSP is not directly observable because the Company does not sell the license, product, or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. In making these judgments, the Company analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers.

The most significant inputs involved in the Company’s revenue recognition policies are: The (1) stand-alone selling prices of the Company’s software license, and the (2) the method of recognizing revenue for installation/customization, and other services.

The stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when quoting prices to customers. Although the Company has no history of selling its software separately from post contract support and other services, the Company does have historical experience with amending contracts with customers to provide additional modules of its software or providing those modules at an optional price. This information guides the Company in assessing the stand-alone selling price of the Company’s software, since the Company can observe instances where a customer had a particular component of the Company’s software that was essentially priced separate from other goods and services that the Company delivered to that customer.

The Company recognizes revenue from implementation and customization services using the percentage of estimated “man-days” that the work requires. The Company believes the level of effort to complete the services is best measured by the amount of time (measured as an employee working for one day on implementation/customization work) that is required to complete the implementation or customization work. The Company reviews its estimate of man-days required to complete implementation and customization services each reporting period.

Revenue is recognized over time for the Company’s subscription, post contract support and fixed fee professional services that are separate performance obligations. For the Company’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances and testing requirement changes.

Page 16

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

If a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single arrangement. The Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

If a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company will consider all relevant facts and circumstances. Variable consideration will be estimated and included in the contract price only when it is probable that a significant reversal in the amount of revenue recognized will not occur.

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets (revenues in excess of billings), or contract liabilities (unearned revenue) on the Company’s Consolidated Balance Sheets. The Company records revenues in excess of billings when the Company has transferred goods or services but does not yet have the right to consideration. The Company records unearned revenue when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer.

The revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon completion of a milestone.

The Company’s revenues in excess of billings and unearned revenue are as follows:

SCHEDULE OF REVENUES IN EXCESS OF BILLINGS AND DEFERRED REVENUE

	As of		As of
	March 31, 2024		June 30, 2023

Revenues in excess of billings	$	16,412,388	$	12,377,677

Unearned revenue	$	9,503,548	$	7,932,306

The Company’s unearned revenue reconciliation is as follows:

SCHEDULE OF UNEARNED REVENUE RECONCILIATION

	Unearned Revenue

Balance at June 30, 2023	$	7,932,306
Invoiced		18,714,384
Revenue Recognized		(17,213,051	)
Adjustments		69,909
Balance at March 31, 2024	$	9,503,548

During the three and nine months ended March 31, 2024, the Company recognized revenue of $620,000 and $7,074,000 that was included in the unearned revenue balance at the beginning of the period. All other activity in unearned revenue is due to the timing of invoicing in relation to the timing of revenue recognition.

Page 17

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but unsatisfied performance obligations were approximately $36,014,000 as of March 31, 2024, of which the Company estimates to recognize approximately $24,225,000 in revenue over the next 12 months and the remainder over an estimated 3 years thereafter. Actual revenue recognition depends in part on the timing of software modules installed at various customer sites. Accordingly, some factors that affect the Company’s revenue, such as the availability and demand for modules within customer geographic locations, is not entirely within the Company’s control. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, and not to facilitate financing arrangements.

Unearned Revenue

The Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable license and services starting in future periods are included in accounts receivable and unearned revenue.

Practical Expedients and Exemptions

There are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s disclosures. The Company has applied the following practical expedients:

●

The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.

●

The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less or the commissions are based on cashed received. These costs are recorded within sales and marketing expense in the Consolidated Statement of Operations.

●

The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).

Costs to Obtain a Contract

The Company does not have a material amount of costs to obtain a contract capitalized at any balance sheet date. In general, the Company incurs few direct incremental costs of obtaining new customer contracts. The Company rarely incurs incremental costs to review or otherwise enter into contractual arrangements with customers. In addition, the Company’s sales personnel receive fees that are referred to as commissions, but that are based on more than simply signing up new customers. The Company’s sales personnel are required to perform additional duties beyond new customer contract inception dates, including fulfillment duties and collections efforts.

NOTE 4 – EARNINGS PER SHARE

Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.

SCHEDULE OF DILUTIVE POTENTIAL COMMON SHARES

	For the three months ended March 31, 2024						For the nine months ended March 31, 2024
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
Basic income (loss) per share:
Net income (loss) available to common shareholders	$	327,549		11,390,888	$	0.03	$	766,755		11,369,778	$	0.07
Effect of dilutive securities
Stock options		-		39,605		-		-		39,605		-
Diluted income (loss) per share	$	327,549		11,430,493	$	0.03	$	766,755		11,409,383	$	0.07

	For the three months ended March 31, 2023						For the nine months ended March 31, 2023
	Net Income		Shares		Per Share		Net Loss			Shares		Per Share

Basic income (loss) per share:
Net income (loss) available to common shareholders	$	2,544,623		11,283,954	$	0.23	$	(169,032	)		11,270,466	$	(0.01	)
Effect of dilutive securities
Stock options		-		-		-		-			-		-
Diluted income (loss) per share	$	2,544,623		11,283,954	$	0.23	$	(169,032	)		11,270,466	$	(0.01	)

Page 18

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 5 – OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY

The following table represents the functional currencies of the Company and its subsidiaries:

The Company and Subsidiaries		Functional Currency

NetSol Technologies, Inc.		USD
NTA		USD
Otoz		USD
NTE		British Pound
AEL		British Pound
VLSH		British Pound
VLS		British Pound
VLSIL		Euro
NetSol PK		Pakistan Rupee
Connect		Pakistan Rupee
NetSol Innovation		Pakistan Rupee
NetSol Thai		Thai Bhat
Otoz Thai		Thai Bhat
Australia		Australian Dollar
Namecet		AED
NetSol Beijing		Chinese Yuan
Tianjin		Chinese Yuan

Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange rate throughout the period. Accumulated translation losses classified as an item of accumulated other comprehensive loss in the stockholders’ equity section of the consolidated balance sheet were $45,505,920 and $45,975,156 as of March 31, 2024 and June 30, 2023, respectively. During the three and nine months ended March 31, 2024, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation gain attributable to NetSol of $364,389 and $469,236, respectively. During the three and nine months ended March 31, 2023, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of $(5,181,654) and $(7,829,909), respectively.

NOTE 6 – MAJOR CUSTOMERS

During the three and nine months ended March 31, 2024, revenues from Daimler Financial Services (“DFS”) were $4,207,409 and $11,840,101, representing 27.2% and 26.3% of revenues, respectively. During the three and nine months ended March 31, 2023, revenues from Daimler Financial Services (“DFS”) were $3,754,752 and $10,824,636, representing 27.8% and 28.0% of revenues. The revenues from DFS are shown in the Asia – Pacific segment.

Accounts receivable from DFS at March 31, 2024 and June 30, 2023, were $7,379,879 and $4,368,881, respectively. Revenues in excess of billings at March 31, 2024 and June 30, 2023, were $2,275,426 and $1,961,750, respectively.

Page 19

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 7 - OTHER CURRENT ASSETS

Other current assets consisted of the following:

SCHEDULE OF OTHER CURRENT ASSETS

	As of		As of
	March 31, 2024		June 30, 2023

Prepaid Expenses	$	1,408,652	$	1,299,334
Advance Income Tax		295,226		144,428
Employee Advances		116,184		68,488
Security Deposits		193,289		177,148
Other Receivables		135,690		92,716
Other Assets		249,362		196,400
Net Balance	$	2,398,403	$	1,978,514

NOTE 8 – REVENUES IN EXCESS OF BILLINGS – LONG TERM

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

SCHEDULE OF REVENUE IN EXCESS OF BILLING

	As of			As of
	March 31, 2024			June 30, 2023

Revenues in excess of billings - long term	$	826,449		$	-
Present value discount		(73,867	)		-
Net Balance	$	752,582		$	-

Pursuant to revenue recognition for contract accounting, the Company has recorded revenues in excess of billings long-term for amounts billable after one year. During the three and nine months ended March 31, 2024, the Company accreted $12,309 and $30,773, respectively, which was recorded in interest income for that period. During the three and nine months ended March 31, 2023, the Company accreted $9,372 and $28,029, respectively. The Company used the discounted cash flow method with an interest rate of 7.34% for the period ended March 31, 2024. The Company used the discounted cash flow method with interest rates ranging from 4.65% to 6.25% for the period ended March 31, 2023.

Page 20

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 9 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	As of			As of
	March 31, 2024			June 30, 2023

Office Furniture and Equipment	$	2,469,658		$	2,678,664
Computer Equipment		8,561,715			8,317,131
Assets Under Capital Leases		154,762			46,554
Building		3,607,498			3,497,913
Land		914,722			885,474
Autos		1,964,370			1,941,063
Improvements		207,726			205,289
Subtotal		17,880,451			17,572,088
Accumulated Depreciation		(12,374,842	)		(11,410,902	)
Property and Equipment, Net	$	5,505,609		$	6,161,186

For the three and nine months ended March 31, 2024, depreciation expense totaled $391,290 and $1,225,198, respectively. Of these amounts, $250,126 and $781,442, respectively, are reflected in cost of revenues. For the three and nine months ended March 31, 2023, depreciation expense totaled $507,314 and $1,598,325, respectively. Of these amounts, $327,177 and $1,029,012, respectively, are reflected in cost of revenues.

Following is a summary of fixed assets held under finance leases as of March 31, 2024 and June 30, 2023:

SCHEDULE OF FIXED ASSETS HELD UNDER CAPITAL LEASES

	As of			As of
	March 31, 2024			June 30, 2023
Vehicles	$	154,762		$	46,554
Total		154,762			46,554
Less: Accumulated Depreciation - Net		(18,647	)		(17,366	)
Fixed assets held under capital leases, Total	$	136,115		$	29,188

Finance lease term and discount rate were as follows:

SCHEDULE OF FINANCE LEASE TERM

	As of			As of
	March 31, 2024			June 30, 2023

Weighted average remaining lease term - Finance leases		3 Years			1.21 Years

Weighted average discount rate - Finance leases		11.3	%		16.4	%

Page 21

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 10 - LEASES

The Company leases certain office space, office equipment and autos with remaining lease terms of one year to 10 years under leases classified as financing and operating. For certain leases, the Company has options to extend the lease term for additional periods ranging from one year to 10 years.

The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.

The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts.

Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a re-measurement of lease liabilities. The Company’s variable lease payments include payments for finance leases that are adjusted based on a change in the Karachi Inter Bank Offer Rate. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Supplemental balance sheet information related to leases was as follows:

SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASE

	As of		As of
	March 31, 2024		June 30, 2023
Assets
Operating lease assets, net	$	1,490,669	$	1,151,575

Liabilities
Current
Operating	$	635,168	$	505,237
Operating, Current	$	635,168	$	505,237
Non-current
Operating		837,756		652,194
Operating, Non Current		837,756		652,194
Total Lease Liabilities	$	1,472,924	$	1,157,431

Page 22

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

The components of lease cost were as follows:

SCHEDULE OF COMPONENTS OF LEASE COST

	2024			2023			2024			2023
	For the Three Months						For the Nine Months
	Ended March 31,						Ended March 31,
	2024			2023			2024			2023

Amortization of finance lease assets	$	3,963		$	2,569		$	8,624		$	8,564
Interest on finance lease obligation		1,434			1,043			3,073			4,402
Operating lease cost		99,201			115,392			304,543			346,993
Short term lease cost		41,087			39,356			122,311			143,978
Sub lease income		(8,406	)		(8,099	)		(25,011	)		(23,697	)
Total lease cost	$	137,279		$	150,261		$	413,540		$	480,240

Lease term and discount rate were as follows:

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

	As of			As of
	March 31, 2024			June 30, 2023

Weighted average remaining lease term - Operating leases		2.2 Years			3.09 Years

Weighted average discount rate - Operating leases		4.6	%		4.0	%

Supplemental disclosures of cash flow information related to leases were as follows:

SCHEDULE OF SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION RELATED TO LEASES


	For the Nine Months
	Ended March 31,
	2024		2023


Operating cash flows related to operating leases	$	230,943	$	358,778

Operating cash flows related to finance leases	$	3,070	$	4,472

Financing cash flows related finance leases	$	20,180	$	24,362

Page 23

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

Maturities of operating lease liabilities were as follows as of March 31, 2024:

SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

	Amount
Within year 1	$	698,961
Within year 2		485,363
Within year 3		275,582
Within year 4		108,551
Within year 5		27,494
Thereafter		119
Total Lease Payments		1,596,070
Less: Imputed interest		(123,146	)
Present Value of lease liabilities		1,472,924
Less: Current portion		(635,168	)
Non-Current portion	$	837,756

The Company is a lessor for certain office space leased by the Company and sub-leased to others under non-cancelable leases. These lease agreements provide for a fixed base rent and are currently on a month-by-month basis. All leases are considered operating leases. There are no rights to purchase the premises and no residual value guarantees. For the three and nine months ended March 31, 2024, the Company received lease income of $8,406 and $25,011, respectively. For the three and nine months ended March 31, 2023, the Company received lease income of $8,099 and $23,697, respectively.

NOTE 11 - INTANGIBLE ASSETS

Intangible assets consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

	As of			As of
	March 31, 2024			June 30, 2023

Product Licenses - Cost	$	39,395,533		$	47,244,997
Effect of Translation Adjustment		(24,348,267	)		(24,756,959	)
Accumulated Amortization		(15,047,266	)		(22,360,107	)
Net Balance	$	-		$	127,931

Product Licenses

Product licenses include internally developed software cost. Product licenses are amortized on a straight-line basis over their respective lives. Amortization expense for the three and nine months ended March 31, 2024, was $nil and $126,041, respectively. Amortization expense for the three and nine months ended March 31, 2023, was $275,652 and $921,144, respectively.

NOTE 12 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

	As of		As of
	March 31, 2024		June 30, 2023

Accounts Payable	$	1,364,926	$	1,114,915
Accrued Liabilities		3,619,695		3,695,091
Accrued Payroll		1,110,573		982,884
Accrued Payroll Taxes		169,967		170,063
Taxes Payable		88,591		195,491
Other Payable		354,185		393,737
Total	$	6,707,937	$	6,552,181

Page 24

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 13 – DEBTS

Notes payable and finance leases consisted of the following:

SCHEDULE OF COMPONENTS OF NOTES PAYABLE AND CAPITAL LEASES

		As of March 31, 2024
				Current		Long-Term
Name		Total		Maturities		Maturities

D&O Insurance	(1)	$	237,600	$	237,600	$	-
Bank Overdraft Facility	(2)		-		-		-
Loan Payable Bank - Export Refinance	(3)		1,799,014		1,799,014		-
Loan Payable Bank - Running Finance	(4)		-		-		-
Loan Payable Bank - Export Refinance II	(5)		1,367,251		1,367,251		-
Loan Payable Bank - Export Refinance III	(6)		2,518,620		2,518,620		-
Sale and Leaseback Financing	(7)		149,141		107,694		41,447
Term Finance Facility	(8)		-		-		-
			6,071,626		6,030,179		41,447
Subsidiary Finance Leases	(9)		106,266		17,332		88,934
		$	6,177,892	$	6,047,511	$	130,381

		As of June 30, 2023
				Current		Long-Term
Name		Total		Maturities		Maturities

D&O Insurance	(1)	$	89,823	$	89,823	$	-
Bank Overdraft Facility	(2)		-		-		-
Loan Payable Bank - Export Refinance	(3)		1,741,493		1,741,493		-
Loan Payable Bank - Running Finance	(4)		-		-		-
Loan Payable Bank - Export Refinance II	(5)		1,323,535		1,323,535		-
Loan Payable Bank - Export Refinance III	(6)		2,438,089		2,438,089		-
Sale and Leaseback Financing	(7)		321,113		148,264		172,849
Term Finance Facility	(8)		13,356		13,356		-
			5,927,409		5,754,560		172,849
Subsidiary Finance Leases	(9)		28,330		24,950		3,380
		$	5,955,739	$	5,779,510	$	176,229

(1)

The Company finances Directors’ and Officers’ (“D&O”) liability insurance and Errors and Omissions (“E&O”) liability insurance, for which the D&O and E&O balances are renewed on an annual basis and, as such, are recorded in current maturities. The interest rate on these financings were ranging from 8.6% to 10.9% as of March 31, 2024 and 5.0% to 7.9% as of June 30, 2023, respectively.

(2)

The Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £300,000, or approximately $379,747. The annual interest rate was 9.5% as of March 31, 2024. The total outstanding balance as of March 31, 2024 and June 30, 2023 was £Nil.

This overdraft facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. As of March 31, 2024, NTE was in compliance with this covenant.

Page 25

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

(3)

The Company’s subsidiary, NetSol PK, has an export refinance facility with Askari Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every nine months. The total facility amount is Rs. 500,000,000 or $1,799,014 at March 31, 2024 and Rs. 500,000,000 or $1,741,493 at June 30, 2023. The interest rate for the loan was 19.0% and 17.0% at March 31, 2024 and June 30, 2023, respectively.

(4)

The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s assets. The total facility amount is Rs. 53,000,000 or $192,854, at March 31, 2024. The balance outstanding at March 31, 2024 and June 30, 2023 was Rs. Nil. The interest rate for the loan was 24.0% and 24.9% at March 31, 2024 and June 30, 2023, respectively.

This facility requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and a current ratio of 1:1. As of March 31, 2024, NetSol PK was in compliance with this covenant.

(5)

The Company’s subsidiary, NetSol PK, has an export refinance facility with Samba Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every nine months. The total facility amount is Rs. 380,000,000 or $1,367,251 and Rs. 380,000,000 or $1,323,535 at March 31, 2024 and June 30, 2023, respectively. The interest rate for the loan was 19.0% and 18.0% at March 31, 2024 and June 30, 2023, respectively.

During the tenure of the loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times. As of March 31, 2024, NetSol PK was in compliance with these covenants.

(6)

The Company’s subsidiary, NetSol PK, has an export refinance facility with Habib Metro Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every nine months. The total facility amount is Rs. 900,000,000 or $3,238,225 and Rs. 900,000,000 or $3,134,687, at March 31, 2024 and June 30, 2023, respectively. NetSol PK used Rs. 700,000,000 or $2,518,620 and Rs. 700,000,000 or $2,438,089, at March 31, 2024 and June 30, 2023, respectively. The interest rate for the loan was 19.0% and 18.0% at March 31, 2024 and June 30, 2023, respectively.

(7)

The Company’s subsidiary, NetSol PK, availed sale and leaseback financing from First Habib Modaraba secured by the transfer of the vehicles’ title. As of March 31, 2024, NetSol PK used Rs. 41,450,876 or $149,141 of which $41,447 was shown as long term and $107,694 as current. As of June 30, 2023, NetSol PK used Rs. 92,194,774 or $321,113 of which $172,849 was shown as long term and $148,264 as current. The interest rate for the loan was 9.0% to 16.0% at March 31, 2024, and June 30, 2023.

(8)

In March 2019, the Company’s subsidiary, VLS, entered into a loan agreement. The loan amount was £69,549, or $88,037, for a period of 5 years with monthly payments of £1,349, or $1,708. As of March 31, 2024, the subsidiary has paid this facility in full. As of June 30, 2023, the subsidiary has used this facility up to $13,356, which was shown as current. The interest rate was 6.14% at March 31, 2024 and June 30, 2023.

(9)

The Company leases various fixed assets under finance lease arrangements expiring in various years through 2028. The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are secured by the assets themselves. Depreciation of assets under finance leases is included in depreciation expense for the three months ended March 31, 2024 and 2023.

Page 26

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

Following are the aggregate minimum future lease payments under finance leases as of March 31, 2024:

SCHEDULE OF AGGREGATE MINIMUM FUTURE LEASE PAYMENTS UNDER CAPITAL LEASES

	Amount
Minimum Lease Payments
Within year 1	$	29,213
Within year 2		22,805
Within year 3		88,023
Total Minimum Lease Payments		140,041
Interest Expense relating to future periods		(33,775	)
Present Value of minimum lease payments		106,266
Less: Current portion		(17,332	)
Non-Current portion	$	88,934

Following are the aggregate future long term debt payments as of March 31, 2024 which consists of “Sale and Leaseback Financing (7)” and “Term Finance Facility (8)”.

SCHEDULE OF AGGREGATE FUTURE LONG TERM DEBT PAYMENTS

	Amount
Loan Payments
Within year 1	$	107,696
Within year 2		41,445
Total Loan Payments		149,141
Less: Current portion		(107,694	)
Non-Current portion	$	41,447

NOTE 14 - STOCKHOLDERS’ EQUITY

During the three and nine months ended March 31, 2024, the Company issued 14,352 and 54,384 shares of common stock for services rendered by the independent members of the Board of Directors as part of their board compensation. These shares were valued at the fair market value of $39,750 and $119,250, respectively.

During the three and nine months ended March 31, 2024, the Company issued nil and 5,000 shares of common stock for services rendered by the employees of the Company as part of their compensation. These shares were valued at the fair market value of $nil and $9,050.

Page 27

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

Stock Grants

The following table summarizes stock grants awarded as compensation:

SUMMARY OF UNVESTED STOCK GRANTS AWARDED AS COMPENSATION

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

Unvested, June 30, 2022		-		$	-
Granted		58,317		$	2.73
Vested		(58,317	)	$	2.73
Unvested, June 30, 2023		-		$	-
Granted		59,384		$	2.16
Vested		(59,384	)	$	2.16
Unvested, March 31, 2024		-		$	-

For the three and nine months ended March 31, 2024, the Company recorded compensation expense of $39,750 and $128,300, respectively. For the three and nine months ended March 31, 2023, the Company recorded compensation expense of $39,750 and $119,250, respectively. The weighted average grant date fair value is determined by the Company’s closing stock price on the grant date.

NOTE 15 – INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

Common stock purchase options consisted of the following:

OPTIONS:

SCHEDULE OF COMMON STOCK PURCHASE OPTIONS

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

Outstanding and exercisable, June 30, 2023		-		-		-
Granted		250,000	$	2.15		0.74
Exercised		-		-		-
Expired / Cancelled		-		-		-
Outstanding and exercisable, March 31, 2024		250,000	$	2.15		0.74	$	155,000

The aggregate intrinsic value at March 31, 2024 represents the difference between the Company’s closing stock price of $2.77 on March 31, 2024 and the exercise price of the in-the-money stock options.

Page 28

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

The following table summarizes information about stock options outstanding and exercisable at March 31, 2024.

SUMMARY OF STOCK OPTIONS OUTSTANDING

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

$2.15		250,000		0.74	$	2.15
$2.15		250,000		0.74	$	2.15
Totals		250,000		0.74	$	2.15

OPTIONS

During the nine months ended March 31, 2024, the Company granted 250,000 options to officers and employees with an exercise price of $2.15 per share, an expiration date of one year, and immediate vesting. Using the Black-Scholes method to value the options, the Company recorded $101,424 in compensation expense for these options in the accompanying condensed consolidated financial statements. The fair market value was calculated using the Black-Scholes option pricing model with the following assumptions:

	●	Risk-free interest rate - 5.24%
	●	Expected life – 6 months
	●	Expected volatility – 63.6%
	●	Expected dividend - 0%

NOTE 16– OPERATING SEGMENTS

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

The following table presents a summary of identifiable assets as of March 31, 2024 and June 30, 2023:

SUMMARY OF IDENTIFIABLE ASSETS

	As of		As of
	March 31, 2024		June 30, 2023
Identifiable assets:
Corporate headquarters	$	984,161	$	878,899
North America		6,060,509		7,344,122
Europe		9,296,634		8,716,656
Asia - Pacific		46,965,482		41,439,733
Consolidated	$	63,306,786	$	58,379,410
Identifiable assets	$	63,306,786	$	58,379,410

Page 29

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

The following table presents a summary of revenue streams by segment for the three months ended March 31, 2024 and 2023:

SUMMARY OF REVENUE STREAMS

	License fees		Subscription and support		Services		Total		License fees		Subscription and support		Services		Total
	2024								2023
	License fees		Subscription and support		Services		Total		License fees		Subscription and support		Services		Total

North America	$	-	$	1,161,417	$	203,657	$	1,365,074	$	-	$	1,075,286	$	290,270	$	1,365,556
Europe		92,925		869,429		2,083,430		3,045,784		65,177		665,585		1,819,610		2,550,372
Asia-Pacific		465,415		5,109,512		5,478,731		11,053,658		1,917,808		4,915,211		2,757,442		9,590,461
Total	$	558,340	$	7,140,358	$	7,765,818	$	15,464,516	$	1,982,985	$	6,656,082	$	4,867,322	$	13,506,389

The following table presents a summary of revenue streams by segment for the nine months ended March 31, 2024 and 2023:

	License fees		Subscription and support		Services		Total		License fees		Subscription and support		Services		Total
	2024								2023
	License fees		Subscription and support		Services		Total		License fees		Subscription and support		Services		Total

North America	$	-	$	3,454,455	$	784,455	$	4,238,910	$	28,000	$	3,251,397	$	809,299	$	4,088,696
Europe		101,891		2,457,513		5,520,770		8,080,174		115,416		1,847,690		5,680,302		7,643,408
Asia-Pacific		4,727,351		14,568,414		13,329,789		32,625,554		2,105,413		14,076,498		10,688,851		26,870,762
Total	$	4,829,242	$	20,480,382	$	19,635,014	$	44,944,638	$	2,248,829	$	19,175,585	$	17,178,452	$	38,602,866
Revenue	$	4,829,242	$	20,480,382	$	19,635,014	$	44,944,638	$	2,248,829	$	19,175,585	$	17,178,452	$	38,602,866

Page 30

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

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

SUMMARY OF OPERATING INFORMATION

	2024			2023			2024			2023
	For the Three Months						For the Nine Months
	Ended March 31,						Ended March 31,
	2024			2023			2024			2023
Revenues from unaffiliated customers:
North America	$	1,365,074		$	1,365,556		$	4,238,910		$	4,088,696
Europe		3,045,784			2,550,372			8,080,174			7,643,408
Asia - Pacific		11,053,658			9,590,461			32,625,554			26,870,762
Revenues from unaffiliated customers		15,464,516			13,506,389			44,944,638			38,602,866
Revenue from affiliated customers
Asia - Pacific		-			-			-			-
Revenue from affiliated customers		-			-			-			-
Consolidated	$	15,464,516		$	13,506,389		$	44,944,638		$	38,602,866
Revenue	$	15,464,516		$	13,506,389		$	44,944,638		$	38,602,866

Intercompany revenue
Europe	$	100,315		$	103,249		$	300,732		$	292,210
Asia - Pacific		2,601,585			3,026,986			8,087,181			7,720,764
Eliminated	$	2,701,900		$	3,130,235		$	8,387,913		$	8,012,974
Revenue	$	2,701,900		$	3,130,235		$	8,387,913		$	8,012,974

Net income (loss) after taxes and before non-controlling interest:
Corporate headquarters	$	(1,003,157	)	$	289,652		$	(2,229,549	)	$	919,914
North America		7,679			(3,702	)		(61,546	)		82,677
Europe		14,516			(103,219	)		(228,303	)		(586,607	)
Asia - Pacific		1,296,832			4,059,800			4,109,146			986,613
Consolidated	$	315,870		$	4,242,531		$	1,589,748		$	1,402,597
Net income (loss) after taxes and before non-controlling interest	$	315,870		$	4,242,531		$	1,589,748		$	1,402,597

Depreciation and amortization:
North America	$	407		$	657		$	1,305		$	1,866
Europe		58,469			65,584			179,128			207,186
Asia - Pacific		332,414			716,725			1,170,806			2,310,417
Consolidated	$	391,290		$	782,966		$	1,351,239		$	2,519,469
Depreciation and amortization	$	391,290		$	782,966		$	1,351,239		$	2,519,469

Interest expense:
Corporate headquarters	$	12,028		$	7,834		$	24,687		$	16,226
North America		-			-			-			-
Europe		508			1,806			6,984			8,146
Asia - Pacific		277,141			178,497			824,345			487,738
Consolidated	$	289,677		$	188,137		$	856,016		$	512,110
Interest Expense	$	289,677		$	188,137		$	856,016		$	512,110

Income tax expense:
Corporate headquarters	$	-		$	-		$	-		$	(44,154	)
North America		800			1,600			800			45,754
Europe		-			2,822			(93,583	)		2,822
Asia - Pacific		145,769			223,296			511,300			636,700
Consolidated	$	146,569		$	227,718		$	418,517		$	641,122
Income tax expense	$	146,569		$	227,718		$	418,517		$	641,122

Page 31

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

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

SUMMARY OF CAPITAL EXPENDITURES

	2024		2023
	For the Nine Months
	Ended March 31,
	2024		2023
Capital expenditures:
North America	$	-	$	4,880
Europe		592,432		31,519
Asia - Pacific		355,905		1,538,660
Consolidated	$	948,337	$	1,575,059
Capital expenditures	$	948,337	$	1,575,059

NOTE 17 – NON-CONTROLLING INTEREST IN SUBSIDIARY

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

SCHEDULE OF BALANCE OF NON-CONTROLLING INTEREST

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at March 31, 2024

NetSol PK		32.38	%	$	4,624,485
NetSol-Innovation		32.38	%		(393,420	)
NAMECET		32.38	%		(15,591	)
NetSol Thai		0.006	%		(136	)
OTOZ Thai		5.60	%		(18,532	)
OTOZ		5.59	%		(55,887	)
Total				$	4,140,919

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at June 30, 2023

NetSol PK		32.38	%	$	3,314,659
NetSol-Innovation		32.38	%		(223,504	)
NAMECET		32.38	%		(5,384	)
NetSol Thai		0.006	%		(194	)
OTOZ Thai		5.60	%		(23,572	)
OTOZ		5.59	%		(86,952	)
Total				$	2,975,053

Page 32

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

NOTE 18– INCOME TAXES

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

During the three and nine months ended March 31, 2024, the Company recorded an income tax provision of $146,569 and $418,517, respectively. During the three and nine months ended March 31, 2023, the Company recorded an income tax provision of $227,718 and $641,122, respectively. The tax is derived from non-core business activities generated from NetSol PK.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist in an understanding of the Company’s financial position and results of operations for the three and nine months ended March 31, 2024. The following discussion should be read in conjunction with the information included within our Annual Report on Form 10-K for the year ended June 30, 2023, and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Our website is located at www.netsoltech.com, and our investor relations website is located at https://ir.netsoltech.com. The following filings are available through our investor relations website after we file with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders. These filings are also available for download free of charge on our investor relations website. We also provide a link to the section of the SEC’s website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements and other ownership related filings. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website and on social media platforms linked to our corporate website. Investors and others can receive notifications of new information posted on our investor relations website by signing up for e-mail alerts. Further corporate governance information, including our committee charters and code of conduct, is also available on our investor relations website at https://netsoltech.com/about-us. The content of our websites is not intended to be incorporated by reference into this or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Forward-Looking Information

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

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Business Overview

NetSol Technologies, Inc. (NasdaqCM: NTWK) is a worldwide provider of IT and enterprise software solutions. We believe that our solutions constitute mission critical applications for clients, as they encapsulate end-to-end business processes, facilitating faster processing and increased transactions.

Our primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of our suite of financial applications, under the brand name NFS Ascent® for leading businesses in the global finance and leasing space. With constant innovation being a major part of our DNA, we have enabled NFS Ascent® deployment on the cloud with several implementations already live and some underway. This shift to the cloud will enable our new customers to opt for a subscription-based pricing model rather than the traditional licensing model.

Our clients include blue chip organizations, Dow-Jones 30 Industrials, Fortune 500 manufacturers, financial institutions, global vehicle manufacturers and enterprise technology providers, all of which are serviced by our strategically placed support and delivery locations around the globe.

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

●	North America	Encino, California and Austin, Texas
●	Europe	London Metropolitan area, Horsham, and Flintshire
●	Asia Pacific	Lahore, Karachi, Bangkok, Beijing, Tianjin, Shanghai, Jakarta and Sydney
●	Middle East	Dubai

We believe that our strong technology solutions offer our customers a return on their investment and allows us to thrive in a hyper competitive and mature global marketplace. Our solutions are bolstered by our people. We believe that people are the drivers of success; therefore, we invest heavily in our hiring, training and retention of outstanding staff to ensure not only successful selling, but also the ongoing satisfaction of our clients. Taken together, this “selling and attentive servicing” approach creates a distinctive advantage for us and a unique value for our customers. We continue to underpin our proven and effective business model which is a combination of careful cost arbitrage, subject matter expertise, domain experience, scalability and proximity with our global and regional customers.

Our primary offerings include the following:

NFS Ascent®

Covering the complete finance and leasing cycle starting from quotation origination through contract settlements, NFS Ascent® is designed and developed for a highly flexible setting and can deal with multinational, multi-company, multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. The solution fully automates the entire financing/leasing cycle for companies of any size, including those with multi-billion-dollar portfolios. NFS Ascent® empowers financial institutions to effectively manage their complex lending portfolios, enabling them to thrive in hyper-competitive global markets.

NFS Ascent® is built on cutting-edge, modern technology that enables auto, equipment and big-ticket finance companies, alongside banks, to run their retail and wholesale finance business with ease. With comprehensive domain coverage and powerful configuration engines, it is well architected to empower finance and leasing companies with a platform that supports their growth in terms of business volume and transactions.

Our next generation platform offers a technologically advanced solution for the asset finance and leasing industry. NFS Ascent’s® architecture and user interfaces were designed based on our collective experience with blue chip organizations and global Fortune 500 companies over the past 40 years combined with modern UX design concepts. The platform’s framework allows auto captive and asset finance companies to rapidly transform legacy driven technology into a state-of-the-art IT and business process environment.

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At the core of the NFS Ascent® platform, is a lease accounting and contract processing engine, which allows for an array of interest calculation methods, as well as robust accounting for multi-billion-dollar lease portfolios in compliance with various regulatory standards. NFS Ascent®, with its distributed and clustered deployment across parallel application and high-volume data servers, enables finance companies to process voluminous data in a hyper speed environment.

Our premier solution has been developed using the latest tools and technologies and its n-tier SOA architecture allows the system to greatly improve a myriad of areas including, but not limited to, scalability, performance, fault tolerance and security. NFS Ascent® empowers users with:

●

Improvement in overall productivity within the delivery organization:

	○	The features of the integrated Business Process Manager, Workflow Engine, Business Rule Engine and Integration Hub provide flexibility to our clients allowing them to configure certain parts of the application themselves rather than requesting customization.

	○	The NFS Ascent® platform and the SOA architecture allow us to develop portals and mobile applications quickly by utilizing our existing services.

	○	The n-tier architecture allows us to intelligently distribute processing and eases application maintenance. The loose coupling between various modules and layers reduces the risk of regression in other parts of the system as a result of changes made in one part of the system and follows proven and accepted SOA principles.

●

Amplified customer satisfaction:

○

NFS Ascent® and NFS Digital empower not only the finance company and dealerships, but the end customer as well with self-service digital tools allowing a seamless customer experience throughout the customer journey from origination through contract maturity.

NFS ASCENT® CONSTITUENT APPLICATIONS

Omni Point of Sale (Omni POS)

A highly agile, easy-to-use, web-based application - also accessible through mobile devices - Ascent’s Omni POS system delivers an intuitive user experience, with features that enable rapid data capture. Information captured at the point of sale can be made available to anyone in an organization at any point in the lifecycle of each transaction.

Contract Management System (CMS)

Ascent’s Contract Management System (CMS) is a powerful, highly agile, functionally rich application for managing and maintaining detailed credit contracts throughout their lifecycle – from pre-activation and activation through customer management, asset financial management, billing and collections, finance and accounting, restructuring and maturity.

Wholesale Finance System (WFS)

The Ascent Wholesale Finance System (WFS) provides a powerful, seamless and efficient system for automating and managing the entire lifecycle of wholesale finance. With floor planning, dealer and inventory financing, it is ideal for a culture of collaboration. Dealers, distributors, partners and anyone in the supply chain are empowered to realize the benefits of financing – and leverage the advantages of real-time business intelligence. The system also supports asset and non-asset-based financing.

Dealer Auditor Access System (DAAS)

DAAS is a web-based solution that can be used in conjunction with WFS or any third-party wholesale finance system. It addresses the needs of dealer, distributor, and auditor access in a wholesale financing arrangement.

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NFS Ascent® deployed on the cloud

Our premier, next generation solution NFS Ascent® is also available on the cloud. With swift, seamless deployments and easy scalability, it is an extremely adaptive retail and wholesale platform for the global finance and leasing industry. This cloud-version of NFS Ascent® is offered via flexible, value-driven subscription-based pricing options without the need to pay any upfront license fees. Clients further benefit from a rapid deployment process and the ability to scale on demand.

NFS Digital

NetSol is the pioneer in the global finance and leasing industry providing a full suite of digital transformation solutions. NFS Digital is a combination of our core strengths, domain, and technology. Our insight into the evolving landscape together with our valuable experience led us to define sound digital transformation strategies and compliment them with smart digital solutions so that our customers always remain competitive and relevant to the dynamic environment. Our digital transformation solutions are extremely robust and can be used with or without our core, next-gen solution (NFS Ascent®) to effectively augment and enhance our customer’s ecosystem.

	■	Self-Point of Sale

		Our Self POS portal allows customers to go through the complete buying and financing process online and on their mobile devices including car configuration, generating quotations, and filling out applications. It is the ultimate origination application that enables users to compare, select and configure an asset using a mobile device anywhere, at any time and submit an accompanying financial product application.

	■	Mobile Account

		mAccount is a powerful, self-service mobile solution. It empowers the dealer with a powerful backend system and allows the customer to setup a secure account and view information 24/7 to keep track of contract status, resolve queries and make payments, reducing inbound calls for customer queries and improving turnaround time for repayments.

	■	Mobile Point of Sale

		The mPOS application is a web and mobile-enabled platform featuring a customizable dashboard along with menu selling, application submission, loan calculator, work queues and detailed reporting. mPOS empowers the dealer to make the origination process quick and seamless, increasing overall productivity and system-wide efficiency.

	■	Mobile Dealer

		mDealer provides more visibility and control over inventories – with minimal effort. Dealers can view their use of floor plan facility, stock status and financial conditions, while entering settlement requests or relocating assets.

	■	Mobile Auditor

		mAuditor schedules visits, records audit exceptions and tracks assets for higher levels of transparency. It also enables the auditor to conduct audits and submit results in real-time through quick audit processing tools, providing visibility and saving significant time.

	■	Mobile Collector

		mCollector empowers collections teams to do more, with an easy-to-use interface and intelligent architecture. The tool exponentially increases the productivity of field teams by enabling them to carry out all collection related tasks on the go.

	■	Mobile Field Investigator

		By using Mobile Field Investigator (mFI), the applicant has access to powerful features that permit detailed applicant field verifications on the go. The application features a reporting dashboard that displays progress stats, action items and the latest notifications, enabling the client to achieve daily goals while tracking performance.

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OtozTM Digital Auto Retail and Mobility Orchestration

OtozTM provides a white-label SaaS platform to OEMs, finance companies, dealers, and start-ups that enables short and long-term on-demand mobility models (subscriptions, rental and car-sharing) and digital retail.

Our turn-key platform helps automotive companies make a move into the digital era, addressing a range of customer segments with evolving needs by offering them a seamless, omni-channel, end-to-end car buying and usage experience. It enables both direct-to-consumer transactions as well as traditional dealer models with the option to add peer-to-peer marketplace functionalities for the future of EV pay-per-use and mobility orchestration.

Digital auto-retail is not a one-size-fits-all. OtozTM offers a flexible, configurable, and scalable platform along with a proven launch strategy framework for auto companies that intend to launch and grow digital retail and mobility businesses quickly and seamlessly.

OtozTM Ecosystem

OtozTM is built on state-of-the-art technology, offering open Application Programming Interfaces (APIs) and ecosystem partner integrations that are crucial to digital retail and mobility operations including finance and insurance providers, trade-in tools, KYC and fraud detection tools, CRM systems, website providers (Tier 1 – Tier 3), marketing toolkits, inventory feeds, pricing engines, tax engine, payment processors, an insurance marketplace and vehicle delivery logistics providers.

In addition, OtozTM is equipped with intelligent lead generation and product analytics capabilities, empowering dealerships with the tools to track customer journeys, personalize customer engagements, and convert qualified leads.

OtozTM Platform

A fully digital, white-label platform for digital auto retail and mobility orchestration that delivers an intuitive and elegant user experience, both online and offline.

OtozTM expands into a comprehensive in-life subscription and rental platform that empowers in-life and end-of-life management of such contracts. The platform’s seamless handling of complex tax rules and contract management processes are compliant with local and state standards for jurisdictions it operates in across the U.S.

OtozTM platform consists of two portals:

	●	Dealer/Admin Tool
	●	Customer Portal

Dealer/Admin Tool

	■	Account creation
	■	Order management work queue
	■	User roles and rights
	■	Tax configurator
	■	Customer KYC reports
	■	Vehicle delivery scheduling
	■	Payment gateways
	■	Inventory management
	■	Finance and insurance products feed and prioritization
	■	Accessories/add-on management and association
	■	Dealer fee management
	■	Ecosystem APIs
	■	DMS integrations
	■	Send referral
	■	Deal builder

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Customer Portal

	■	Inventory search and selection
	■	Multi-lender capabilities
	■	Deal builder and personalized pricing for purchase, lease, finance, subscription, and rentals
	■	Dealer-Customer-Chat tool
	■	Buy finance and insurance products including collision & liability insurance via integrated provider marketplaces
	■	Buy accessories
	■	License checks (paperless)
	■	Vehicle options and finance and insurance products
	■	Trade-in valuation
	■	Credit application and decision
	■	Paperless contracts and e-signing
	■	Digital payments
	■	Vehicle delivery and pick-up scheduling

AppexNow

NetSol introduced AppexNow - the first marketplace for API-first products specifically for the global credit, finance, and leasing industry. Two products, Flex and Hubex, have been launched under the umbrella of the AppexNow marketplace. NetSol will introduce and launch further products and services under this marketplace in the future.

AppexNow: Flex

Flex is an API-based, ready-to-use calculation engine. It is a pure play SaaS product that is cloud-based and can be integrated seamlessly into an organization’s products, services, and ecosystem. The calculation engine intelligently adapts to demand by monitoring usage to maintain reliable and predictable performance at desired costs. It is a one-stop solution that guarantees precise calculations at all stages of the contract lifecycle through various calculation types.

Flex proves versatility by covering all the calculation aspects ranging from the pricing for the end customer at inception, in-life financial modifications, the re-creation of the repayment plan, termination, amortizations/re-amortizations, among other calculation types. All the calculations are parameter-driven, which helps perform simple, multi-dimensional, or complex calculations based on the needs.

It is a comprehensive solution which creates an ecosystem of value across multiple functions, systems and industries to fuel growth and propel businesses into the future by increasing delivery efficiency and product management, centralization through a connected ecosystem.

AppexNow: Hubex

Hubex is an API library that enables companies to standardize all their API integration procedures across multiple API services through a single integration. Hubex is NetSol’s second product offering from the AppexNow marketplace following Flex.

In addition to traditional lending companies, Hubex can also streamline the operations of dealerships, vendors, and consultants through an API library. With a ready-to-use service, Hubex makes it easy for businesses to seamlessly connect with multiple APIs and achieve their desired outcomes. Pre-integrated services in the Hubex library include, but are not limited to, payment processing, bank account authentication, finance and insurance products, fraud check, KYC service, driver license verification, address validation, vehicle valuation and notification service.

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Professional Services

We offer professional services to organizations in different regions to enable them to meet their business objectives. These services primarily consist of technical consultancy, web development, app development, digital marketing, cloud services, outsourcing and co-sourcing.

Pertaining to our professional services offerings, our highly skilled and experienced professionals include skilled software programmers, well-versed business analysists, competent quality assurance engineers, technical and solution architects, project managers, cloud native developers and architects, mobile/web app developers and automation specialists.

We enable businesses to employ the industry’s best talent to help them develop and refine their technology strategy, innovate, execute their roadmap, and optimize service quality.

Amazon Web Services

We have expanded our footprint in the cloud services domain by offering services to the AWS community. We aim for our cloud services to be well recognized, expanding our reach to relevant prospects. Since AWS is the most comprehensive and highly adopted cloud offering, we are leveraging its power to ensure lower costs, increased agility, a secure environment, and innovative solutions across all domains.

Our AWS customer offerings include: analytics, data pipeline and big data services; application modernization services; database migration and modernization; development operations; managed services; and, information security services.

Artificial Intelligence

Under the leadership of Dr. Ali Ahmed, Chief Data Scientist at NetSol, a dedicated team is developing artificial intelligence and machine learning solutions. With experience in machine learning, scientific computing and computer vision, Dr. Ahmed has extensive experience in developing and implementing algorithms for industrial solutions in predictive maintenance.

Our AI team seeks to deploy AI solutions leveraging cutting-edge technologies to enable clients to optimize production, decrease downtime and provide a holistic view of their business processes.

Highlights

Listed below are a few of NetSol’s highlights for the quarter ended March 31, 2024:

	●	Close Brothers, a UK based merchant banking group, successfully went live with Flex Calculation Engine which is part of the Apex Now suite. This solution will facilitate running complex calculations for their business.

	●	We secured Advanced Tier status in the AWS Partner Network, showcasing expertise in cloud transformations and optimizing client’s cloud investments.

	●	Haydock Finance, an award-winning business finance specialist based in the UK, is now offering access to our API-based Flex Calculation Engine to its broker division, following its initial use since 2023. This move aligns with Haydock Finance’s subscription to additional products from Appex Now.

	●	We successfully implemented our NFS Ascent® platform at a captive auto finance company of a notable German auto manufacturer based in Korea.

	●	We successfully renegotiated an existing contract in the UK to accommodate an enhanced scope implementation. This expanded scope implementation will generate approximately $3.5 Million in additional revenues.

	●	We secured a contract to implement our NFS Ascent® wholesale platform at an independent leasing company based in the Netherlands. This contract will generate approximately $1 Million in revenues over forthcoming quarters.

	●	We successfully took GAC-Sofinco Automobile Finance Co., LTD live on our NFC Ascent® platform in China.

	●	We signed a contract with a new customer in the Middle East to develop a ride hailing app under our Professional Services vertical. This contract will generate nearly $300,000 in revenues over the coming months.

	●	We generated approximately $1.5 Million in revenues by successfully implementing modifications and enhancements requests from multiple customers across various regions.

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Management has identified the following material trends affecting NetSol.

Positive trends:

	●	According to PR Newswire, December 14, 2023, and the S&P Global Mobility, new vehicles sales globally are expected to reach 86 million units in 2023 for an 8.9% increase over 2022 and forecasts 2024 auto sales at 88.3 million for a 2.8% increase over 2023.

	●	U.S. automotive sales volumes are expected to reach approximately 15.5 million units, an estimated increase of 9% from the projected 2022 levels, and 2024 sales are expected to reach 15.9 million for an estimated increase of 2% compared to 2023.

	●	The U.S. inflation rate ended at 3.5% as of end of March 2024. (CNBC April 24, 2024)

	●	The U.S. market remains strong and resilient for NetSol to continue investing in building local teams for its core offerings.

	●	The Chinese car market is expected to maintain its position as the world’s largest and fastest growing, projecting 10% sales growth to 25.5 million units, with electric vehicles (EVs) representing nearly 35% of new sales. Government incentives, reduced car taxes, and preferential financing rates contributed to an 8.8% increase in Chinese auto sales in the first half of 2023, with total vehicle sales, including trucks and buses, rising by 9.8% to 13.2 million.

	●	The China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $65 billion from the originally planned $46 billion, in Pakistan energy and infrastructure sectors. Last June, China authorized a new $2.3 billion loan at a discounted rate to Pakistan as a short-term loan.

	●	The overall size of the mobility market in the Europe and the United States is projected to increase over $425 billion combined, by 2035 or a compound CAGR of 5% from 2022. (Deloitte Global Automotive Mobility Market Simulation Tool)

	●	The global automotive finance market accounted for $245 billion in 2022 and is expected to more than double by 2035 at a CAGR of 7.4% according to Precedence Research.

	●	The Russell Index finished 2023 with a 15.1% gain after falling 21.6% in 2022. (CBS News December 29, 2023)

	●	The real gross domestic product (GDP) for the US increased at an annual rate of 3.3% in the fourth quarter of 2023 according to the advance estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%. (Bureau of Economic Analysis - January 25, 2024)

Negative trends:

	●	The conflict in Gaza has disrupted the entire Middle East region since October 7, 2023. This has created uncertainty and has affected the economies of the neighboring nations.

	●	General economic conditions in our geographic markets; inflation, geopolitical tensions, including trade wars, tariffs and/or sanctions in geographic areas; and global conflicts or disasters that impact the global economy or one or more sectors of the global economy.

	●	Continued interest rate increases by the U.S. Federal Reserve Board is restricting buying power for consumers.

	●	Political, monetary, and economic challenges and a higher inflation rate than other regional countries impacting Pakistan exports.

	●	Inflation and higher interest rates globally have greatly increased the cost of doing business, including salaries and benefits worldwide, affecting profitability.

	●	War and hostility between Russia and Ukraine continue to foster global economic uncertainty.

	●	While marginal economic growth is expected in Pakistan, according to a report issued by the World Bank, implementing an ambitious and credibly communicated economic reform plan is critical for a robust economic recovery. See Press Release, dated April 2, 2024, World Bank. There is no guarantee that such reforms will be implemented.

	●	While the US-China bilateral summit exceeded expectations, the objective of the summit was risk management. Continued trade tensions between the U.S. and China are causing some American companies to pull out of China and move their supply chain elsewhere. (Business Insider, Aug. 28, 2023; Bookings, January 12, 2024).

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CHANGES IN FINANCIAL CONDITION

Quarter Ended March 31, 2024 Compared to the Quarter Ended March 31, 2023

The following table sets forth the items in our unaudited condensed consolidated statement of operations for the three months ended March 31, 2024 and 2023 as a percentage of revenues.

	For the Three Months
	Ended March 31,
	2024			%			2023			%
Net Revenues:
License fees	$	558,340			3.6	%	$	1,982,985			14.7	%
Subscription and support		7,140,358			46.2	%		6,656,082			49.3	%
Services		7,765,818			50.2	%		4,867,322			36.0	%
Total net revenues		15,464,516			100.0	%		13,506,389			100.0	%

Cost of revenues		7,989,696			51.7	%		8,801,360			65.2	%
Gross profit		7,474,820			48.3	%		4,705,029			34.8	%
Operating expenses:
Selling, general and administrative		5,811,335			37.6	%		5,333,202			39.5	%
Research and development cost		345,582			2.2	%		302,262			2.2	%
Total operating expenses		6,156,917			39.8	%		5,635,464			41.7	%

Income (loss) from operations		1,317,903			8.5	%		(930,435	)		-6.9	%
Other income and (expenses)
Interest expense		(289,677	)		-1.9	%		(188,137	)		-1.4	%
Interest income		376,466			2.4	%		263,794			2.0	%
Gain (loss) on foreign currency exchange transactions		(963,887	)		-6.2	%		5,385,591			39.9	%
Share of net loss from equity investment		-			0.0	%		2,377			0.0	%
Other income (expense)		21,634			0.1	%		(62,941	)		-0.5	%
Total other income (expenses)		(855,464	)		-5.5	%		5,400,684			40.0	%

Net income before income taxes		462,439			3.0	%		4,470,249			33.1	%
Income tax provision		(146,569	)		-0.9	%		(227,718	)		-1.7	%
Net income		315,870			2.0	%		4,242,531			31.4	%
Non-controlling interest		11,679			0.1	%		(1,697,908	)		-12.6	%
Net income (loss) attributable to NetSol	$	327,549			2.1	%	$	2,544,623			18.8	%

Net income (loss) per share:
Net income (loss) per common share
Basic	$	0.03					$	0.23
Diluted	$	0.03					$	0.23

Weighted average number of shares outstanding
Basic		11,390,888						11,283,954
Diluted		11,430,493						11,283,954

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A significant portion of our business is conducted in currencies other than the U.S. dollar. We operate in several geographical regions as described in Note 16 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening of the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues but also increasing our expenses denominated in currencies other than the U.S. dollar. Similarly, strengthening of the U.S. dollar compared to foreign currency exchange rates generally has the effect of reducing our revenues but also reducing our expenses denominated in currencies other than the U.S. dollar. We plan our business accordingly by deploying additional resources to areas of expansion, while continuing to monitor our overall expenditures given the economic uncertainties of our target markets. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the changes in results from one period to another period using constant currency. In order to calculate our constant currency results, we apply the current period results to the prior period foreign currency exchange rates. In the table below, we present the change based on actual results in reported currency and in constant currency.

															Favorable
												Favorable			(Unfavorable)			Total
	For the Three Months											(Unfavorable) Change in			Change due to			Favorable (Unfavorable)
	Ended March 31,											Constant			Currency			Change as
	2024		%			2023			%			Currency			Fluctuation			Reported

Net Revenues:	$	15,464,516		100.0	%	$	13,506,389			100.0	%	$	2,096,552		$	(138,425	)	$	1,958,127

Cost of revenues:		7,989,696		51.7	%		8,801,360			65.2	%		427,511			384,153			811,664

Gross profit		7,474,820		48.3	%		4,705,029			34.8	%		2,524,063			245,728			2,769,791

Operating expenses:		6,156,917		39.8	%		5,635,464			41.7	%		(692,778	)		171,325			(521,453	)

Income (loss) from operations	$	1,317,903		8.5	%	$	(930,435	)		-6.9	%	$	1,831,285		$	417,053		$	2,248,338

Net revenues for the three months ended March 31, 2024 and 2023 are broken out among the segments as follows:

	2024					2023
	Revenue		%			Revenue		%

North America	$	1,365,074		8.8	%	$	1,365,556		10.1	%
Europe		3,045,784		19.7	%		2,550,372		18.9	%
Asia-Pacific		11,053,658		71.5	%		9,590,461		71.0	%
Total	$	15,464,516		100.0	%	$	13,506,389		100.0	%

Revenues

License fees

License fees for the three months ended March 31, 2024 were $558,340 compared to $1,982,985 for the three months ended March 31, 2023 reflecting a decrease of $1,424,645 with a decrease in constant currency of $1,406,271. During the three months ended March 31, 2024, we recognized approximately $465,000 related to the additional sale of our NFS Ascent® CMS software to a renowned German auto manufacturer based in China. During the three months ended March 31, 2023, we recognized approximately $1,918,000 related to a new NFS Ascent® agreement with Kubota in Australia.

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Subscription and support

Subscription and support fees for the three months ended March 31, 2024 were $7,140,358 compared to $6,656,082 for the three months ended March 31, 2023 reflecting an increase of $484,276 with an increase in constant currency of $534,352. Subscription and support fees begin once a customer has “gone live” with our product. Subscription and support fees are recurring in nature, and we anticipate these fees to gradually increase as we implement both our NFS legacy products and NFS Ascent®.

Services

Services income for the three months ended March 31, 2024 was $7,765,818 compared to $4,867,322 for the three months ended March 31, 2023 reflecting an increase of $2,898,496 with an increase in constant currency of $2,968,472. The increase is due to the increase in fees associated with current implementations.

Gross Profit

The gross profit was $7,474,820, for the three months ended March 31, 2024 compared with $4,705,029 for the three months ended March 31, 2023. This is an increase of $2,769,791 with an increase in constant currency of $2,524,063. The gross profit percentage for the three months ended March 31, 2024 also increased to 48.3% from 34.8% for the three months ended March 31, 2023. The cost of sales was $7,989,696 for the three months ended March 31, 2024 compared to $8,801,360 for the three months ended March 31, 2023 for a decrease of $811,664 and on a constant currency basis a decrease of $427,511. As a percentage of sales, cost of sales decreased from 65.2% for the three months ended March 31, 2023 to 51.7% for the three months ended March 31, 2024.

Salaries and consultant fees decreased by $649,904 from $6,453,814 for the three months ended March 31, 2023 to $5,803,910 for the three months ended March 31, 2024 and on a constant currency basis decreased by $377,178. As a percentage of sales, salaries and consultant expense decreased from 47.8% for the three months ended March 31, 2023 to 37.5% for the three months ended March 31, 2024.

Travel expenses were $799,560 for the three months ended March 31, 2024 compared to $724,431 for the three months ended March 31, 2023 for an increase of $75,129 with an increase in constant currency of $119,840. The increase in travel expense is due to the increase in travel for the current implementations. As a percentage of sales, travel expense slightly decreased from 5.4% for the three months ended March 31, 2023 to 5.2% for the three months ended March 31, 2024.

Depreciation and amortization expense decreased to $250,126 compared to $602,829 for the three months ended March 31, 2023 or a decrease of $352,703 and on a constant currency basis a decrease of $334,639. The decrease is primarily attributed to the full amortization of capitalized software costs in the quarter ending March 31, 2024.

Other costs increased to $1,136,100 for the three months ended March 31, 2024 compared to $1,020,286 for the three months ended March 31, 2023 or an increase of $115,814 and on a constant currency basis an increase of $164,466.

Operating Expenses

Operating expenses were $6,156,917 for the three months ended March 31, 2024 compared to $5,635,464, for the three months ended March 31, 2023 for an increase of $521,453 and on a constant currency basis an increase of $692,778. As a percentage of sales, it decreased from 41.7% to 39.8%. The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages and other general and administrative expenses.

Selling expenses were $1,830,025 for the three months ended March 31, 2024 compared to $1,643,853, for the three months ended March 31, 2023 for an increase of $186,172 and on a constant currency basis an increase of $254,342.

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General and administrative expenses were $3,840,146 for the three months ended March 31, 2024 compared to $3,509,212 for the three months ended March 31, 2023 or an increase of $330,934 and on a constant currency basis an increase of $406,122. During the three months ended March 31, 2024, salaries increased by approximately $214,275 and increased $265,787 on a constant currency basis, and other general and administrative expenses increased approximately $116,659 or increased by $140,335 on a constant currency basis.

Research and development cost was $345,582 for the three months ended March 31, 2024 compared to $302,262, for the three months ended March 31, 2023 for an increase of $43,320 and on a constant currency basis an increase of $67,526.

Income/Loss from Operations

Income from operations was $1,317,903 for the three months ended March 31, 2024 compared to a loss of $930,435 for the three months ended March 31, 2023. This represents an increase in income from operations of $2,248,338 with an increase in income from operations of $1,831,285 on a constant currency basis for the three months ended March 31, 2024 compared with the three months ended March 31, 2023. As a percentage of sales, income from operations was 8.5% for the three months ended March 31, 2024 compared to loss of 6.9% for the three months ended March 31, 2023.

Other Income and Expense

Other expense was $855,464 for the three months ended March 31, 2024 compared to other income of $5,400,684 for the three months ended March 31, 2023. This represents a decrease in other income of $6,256,148 with a decrease of $6,318,621 on a constant currency basis. The decrease is primarily due to the foreign currency exchange transactions. The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared to the U.S. dollar and the Euro. During the three months ended March 31, 2024, we recognized a loss of $963,887 in foreign currency exchange transactions compared to a gain of $5,385,591 for the three months ended March 31, 2023. During the three months ended March 31, 2024, the value of the U.S. dollar and the Euro decreased 0.6% and 2.8%, compared to the PKR. During the three months ended March 31, 2023, the value of the U.S. dollar increased 25.3% and the Euro increased 27.3%, compared to the PKR.

Non-controlling Interest

For the three months ended March 31, 2024, the net loss attributable to non-controlling interest was $11,679, compared to a net income attributable to non-controlling interest of $1,697,908 for the three months ended March 31, 2023. The decrease in non-controlling interest is primarily due to the decrease in net income from NetSol PK and an increase in net loss from NetSol Innovation.

Net income (loss) attributable to NetSol

Net income was $327,549 for the three months ended March 31, 2024 compared to $2,544,623 for the three months ended March 31, 2023. This is a decrease in net income of $2,217,074 with a decrease of $2,579,348 on a constant currency basis, compared to the prior year. For the three months ended March 31, 2024, net income per share was $0.03 for basic and diluted shares compared to net income per share of $0.23 for basic and diluted shares for the three months ended March 31, 2023.

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Nine Months Ended March 31, 2024 Compared to the Nine Months Ended March 31, 2023

The following table sets forth the items in our unaudited condensed consolidated statement of operations for the nine months ended March 31, 2024 and 2023 as a percentage of revenues.

	For the Nine Months
	Ended March 31,
	2024			%			2023			%
Net Revenues:
License fees	$	4,829,242			10.7	%	$	2,248,829			5.8	%
Subscription and support		20,480,382			45.6	%		19,175,585			49.7	%
Services		19,635,014			43.7	%		17,178,452			44.5	%
Total net revenues		44,944,638			100.0	%		38,602,866			100.0	%

Cost of revenues		24,132,064			53.7	%		26,503,377			68.7	%
Gross profit		20,812,574			46.3	%		12,099,489			31.3	%
Operating expenses:
Selling, general and administrative		17,051,798			37.9	%		16,727,836			43.3	%
Research and development cost		1,065,412			2.4	%		1,244,793			3.2	%
Total operating expenses		18,117,210			40.3	%		17,972,629			46.6	%

Income (loss) from operations		2,695,364			6.0	%		(5,873,140	)		-15.2	%
Other income and (expenses)
Interest expense		(856,016	)		-1.9	%		(512,110	)		-1.3	%
Interest income		1,259,464			2.8	%		1,005,557			2.6	%
Gain (loss) on foreign currency exchange transactions		(1,112,757	)		-2.5	%		7,358,519			19.1	%
Share of net loss from equity investment		-			0.0	%		7,510			0.0	%
Other income (expense)		22,210			0.0	%		57,383			0.1	%
Total other income (expenses)		(687,099	)		-1.5	%		7,916,859			20.5	%

Net income before income taxes		2,008,265			4.5	%		2,043,719			5.3	%
Income tax provision		(418,517	)		-0.9	%		(641,122	)		-1.7	%
Net income		1,589,748			3.5	%		1,402,597			3.6	%
Non-controlling interest		(822,993	)		-1.8	%		(1,571,629	)		-4.1	%
Net income (loss) attributable to NetSol	$	766,755			1.7	%	$	(169,032	)		-0.4	%

Net income (loss) per share:
Net income (loss) per common share
Basic	$	0.07					$	(0.01	)
Diluted	$	0.07					$	(0.01	)

Weighted average number of shares outstanding
Basic		11,369,778						11,270,466
Diluted		11,409,383						11,270,466

Page 46

															Favorable
												Favorable			(Unfavorable)			Total
	For the Nine Months											(Unfavorable) Change in			Change due to			Favorable (Unfavorable)
	Ended March 31,											Constant			Currency			Change as
	2024		%			2023			%			Currency			Fluctuation			Reported

Net Revenues:	$	44,944,638		100.0	%	$	38,602,866			100.0	%	$	6,551,321		$	(209,549	)	$	6,341,772

Cost of revenues:		24,132,064		53.7	%		26,503,377			68.7	%		(843,921	)		3,215,234			2,371,313

Gross profit		20,812,574		46.3	%		12,099,489			31.3	%		5,707,400			3,005,685			8,713,085

Operating expenses:		18,117,210		40.3	%		17,972,629			46.6	%		(1,499,467	)		1,354,886			(144,581	)

Income (loss) from operations	$	2,695,364		6.0	%	$	(5,873,140	)		-15.2	%	$	4,207,933		$	4,360,571		$	8,568,504

Net revenues for the nine months ended March 31, 2024 and 2023 are broken out among the segments as follows:

	2024					2023
	Revenue		%			Revenue		%

North America	$	4,238,910		9.4	%	$	4,088,696		10.6	%
Europe		8,080,174		18.0	%		7,643,408		19.8	%
Asia-Pacific		32,625,554		72.6	%		26,870,762		69.6	%
Total	$	44,944,638		100.0	%	$	38,602,866		100.0	%

Revenues

License fees

License fees for the nine months ended March 31, 2024 were $4,829,242 compared to $2,248,829 for the nine months ended March 31, 2023 reflecting an increase of $2,580,413 with an increase in constant currency of $2,631,044. During the nine months ended March 31, 2024, we recognized approximately $2,800,000 related to the sale of our NFS Ascent® CMS software to a renowned US auto manufacturer based in China and we recognized approximately $1,142,000 related to the license renewal with an existing customer, and we recognized approximately $465,000 related to the additional sale of our NFS Ascent® CMS software to a renowned German auto manufacturer based in China. During the nine months ended March 31, 2023, we recognized approximately $465,000 related to the additional sale of our NFS Ascent® CMS software to a renowned German auto manufacturer based in China, approximately $1,918,000 related to a new NFS Ascent® agreement with Kubota in Australia and approximately $188,000 related to a new agreement with the Government of Khyber Pakhtunkhwa for the sale of our Ascent® product.

Page 47

Subscription and support

Subscription and support fees for the nine months ended March 31, 2024 were $20,480,382 compared to $19,175,585 for the nine months ended March 31, 2023 reflecting an increase of $1,304,797 with an increase in constant currency of $1,326,644. Subscription and support fees begin once a customer has “gone live” with our product. Subscription and support fees are recurring in nature, and we anticipate these fees to gradually increase as we implement both our NFS legacy products and NFS Ascent®.

Services

Services income for the nine months ended March 31, 2024 was $19,635,014 compared to $17,178,452 for the nine months ended March 31, 2023 reflecting an increase of $2,456,562 with an increase in constant currency of $2,593,634. The increase is due to the increase in fees associated with current implementations.

Gross Profit

The gross profit was $20,812,574, for the nine months ended March 31, 2024 compared with $12,099,489 for the nine months ended March 31, 2023. This is an increase of $8,713,085 with an increase in constant currency of $5,707,400. The gross profit percentage for the nine months ended March 31, 2024 increased to 46.3% from 31.3% for the nine months ended March 31, 2023. The cost of sales was $24,132,064 for the nine months ended March 31, 2024 compared to $26,503,377 for the nine months ended March 31, 2023 for a decrease of $2,371,313 and on a constant currency basis an increase of $843,921. As a percentage of sales, cost of sales decreased from 68.7% for the nine months ended March 31, 2023 to 53.7% for the nine months ended March 31, 2024.

Salaries and consultant fees decreased by $1,817,305 from $19,482,720 for the nine months ended March 31, 2023 to $17,665,415 for the nine months ended March 31, 2024 and on a constant currency basis increased by $456,886. The increase on a constant currency basis is due to annual salary raises. As a percentage of sales, salaries and consultant expense decreased from 50.5% for the nine months ended March 31, 2023 to 39.3% for the nine months ended March 31, 2024.

Travel expense was $2,207,999 for the nine months ended March 31, 2024 compared to $1,752,074 for the nine months ended March 31, 2023 for an increase of $455,925 with an increase in constant currency of $738,233. The increase in travel expense is due to the increase in travel for current implementations.

Depreciation and amortization expense decreased to $907,483 compared to $1,950,156 for the nine months ended March 31, 2023 or a decrease of $1,042,673 and on a constant currency basis a decrease of $836,777. The decrease is primarily attributed to the full amortization of capitalized software costs in the quarter ending March 31, 2024.

Other costs increased to $3,351,167 for the nine months ended March 31, 2024 compared to $3,318,427 for the nine months ended March 31, 2023 or an increase of $32,740 and on a constant currency basis an increase of $485,579. The increase on a constant currency basis is mainly due to increases in computer costs.

Operating Expenses

Operating expenses were $18,117,210 for the nine months ended March 31, 2024 compared to $17,972,629, for the nine months ended March 31, 2023 for an increase of $144,581 and on a constant currency basis an increase of $1,499,467. As a percentage of sales, it decreased from 46.6% to 40.3%. The increase in operating expenses on constant currency basis was primarily due to increases in selling expenses, general and administrative expenses, and research and development costs.

Selling expenses were $5,323,400 for the nine months ended March 31, 2024 compared to $5,413,492, for the nine months ended March 31, 2023 for a decrease of $90,092 and on a constant currency basis an increase of $356,925.

Page 48

General and administrative expenses were $11,284,642 for the nine months ended March 31, 2024 compared to $10,745,031 for the nine months ended March 31, 2023 or an increase of $539,611 and on a constant currency basis an increase of $1,197,129. During the nine months ended March 31, 2024, salaries increased by approximately $447,568 and increased $900,149 on a constant currency basis, and other general and administrative expenses increased approximately $92,043 and increased $296,980 on a constant currency basis.

Research and development cost was $1,065,412 for the nine months ended March 31, 2024 compared to $1,244,793, for the nine months ended March 31, 2023 for a decrease of $179,381 and on a constant currency basis an increase of $28,575.

Income/Loss from Operations

Income from operations was $2,695,364 for the nine months ended March 31, 2024 compared to a loss from operations of $5,873,140 for the nine months ended March 31, 2023. This represents an increase in income from operations of $8,568,504 with an increase in income from operations of $4,207,933 on a constant currency basis for the nine months ended March 31, 2024 compared with the nine months ended March 31, 2023. As a percentage of sales, income from operations was 6.0% for the nine months ended March 31, 2024 compared to a loss from operations of 15.2% for the nine months ended March 31, 2023.

Other Income and Expense

Other expense was $687,099 for the nine months ended March 31, 2024 compared to other income of $7,916,859 for the nine months ended March 31, 2023. This represents a decrease in other income of $8,603,958 with a decrease of $8,627,361 on a constant currency basis. The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared to the U.S. dollar and the Euro. During the nine months ended March 31, 2024, we recognized a loss of $1,112,757 in foreign currency exchange transactions compared to a gain of $7,358,519 for the nine months ended March 31, 2023. During the nine months ended March 31, 2024, the value of the U.S. dollar and the Euro decreased 3.2% and 4.0%, respectively, compared to the PKR. During the nine months ended March 31, 2023, the value of the U.S. dollar and the Euro increased 38.2% and 43.8%, respectively, compared to the PKR.

Non-controlling Interest

For the nine months ended March 31, 2024, the net income attributable to non-controlling interest was $822,993, compared to $1,571,629 for the nine months ended March 31, 2023. The decrease in non-controlling interest is primarily due to the decrease in net income of NetSol PK and an increase in net loss from NetSol Innovation.

Net income (loss) attributable to NetSol

Net income was $766,755 for the nine months ended March 31, 2024 compared to a net loss of $169,032 for the nine months ended March 31, 2023. This is an increase of $935,787 with a decrease of $2,223,565 on a constant currency basis, compared to the prior year. For the nine months ended March 31, 2024, net income per share was $0.07 for basic and diluted shares compared to net loss per share of $0.01 for basic and diluted shares for the nine months ended March 31, 2023.

Page 49

Non-GAAP Financial Measures

Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of adjusted EBITDA and adjusted EBITDA per basic and diluted share meet the definition of a non-GAAP financial measure.

We define the non-GAAP measures as follows:

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

We use non-GAAP measures internally to evaluate the business and believe that presenting non-GAAP measures provides useful information to investors regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for monitoring our performance and evaluating it against industry peers. The non-GAAP financial measures presented should be used in addition to, and in conjunction with, results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure in evaluating the Company.

The non-GAAP measures reflect adjustments based on the following items:

EBITDA: We report EBITDA as a non-GAAP metric by excluding the effect of net interest expense, income tax expense, depreciation and amortization from net income or loss because doing so makes internal comparisons to our historical operating results more consistent. In addition, we believe providing an EBITDA calculation is a more useful comparison of our operating results to the operating results of our peers.

Stock-based compensation expense: We have excluded the effect of stock-based compensation expense from the non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA per basic and diluted share calculations. Although stock-based compensation expense is calculated in accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense which generally requires cash settlement by NetSol, and therefore is not used by us to assess the profitability of our operations. We also believe the exclusion of stock-based compensation expense provides a more useful comparison of our operating results to the operating results of our peers.

Non-controlling interest: We add back the non-controlling interest in calculating gross adjusted EBITDA and then subtract out the income taxes, depreciation and amortization and net interest expense attributable to the non-controlling interest to arrive at a net adjusted EBITDA.

Page 50

Our reconciliation of the non-GAAP financial measures of adjusted EBITDA and non-GAAP earnings per basic and diluted share to the most comparable GAAP measures for the three and nine months ended March 31, 2024 and 2023 are as follows:

	For the Three Months						For the nine Months
	Ended March 31,						Ended March 31,
	2024			2023			2024			2023

Net Income (loss) attributable to NetSol	$	327,549		$	2,544,623		$	766,755		$	(169,032	)
Non-controlling interest		(11,679	)		1,697,908			822,993			1,571,629
Income taxes		146,569			227,718			418,517			641,122
Depreciation and amortization		391,290			782,966			1,351,239			2,519,469
Interest expense		289,677			188,137			856,016			512,110
Interest (income)		(376,466	)		(263,794	)		(1,259,464	)		(1,005,557	)
EBITDA	$	766,940		$	5,177,558		$	2,956,056		$	4,069,741
Add back:
Non-cash stock-based compensation		149,088			52,392			260,875			198,559
Adjusted EBITDA, gross	$	916,028		$	5,229,950		$	3,216,931		$	4,268,300
Less non-controlling interest (a)		(106,463	)		(1,971,602	)		(1,216,040	)		(2,363,774	)
Adjusted EBITDA, net	$	809,565		$	3,258,348		$	2,000,891		$	1,904,526

Weighted Average number of shares outstanding
Basic		11,390,888			11,283,954			11,369,778			11,270,466
Diluted		11,430,493			11,283,954			11,409,383			11,270,466

Basic adjusted EBITDA	$	0.07		$	0.29		$	0.18		$	0.17
Diluted adjusted EBITDA	$	0.07		$	0.29		$	0.18		$	0.17

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

Net Income (loss) attributable to non-controlling interest	$	(11,679	)	$	1,697,908		$	822,993		$	1,571,629
Income Taxes		43,852			70,033			155,636			198,349
Depreciation and amortization		97,010			219,759			348,092			713,676
Interest expense		89,738			57,797			266,922			157,929
Interest (income)		(115,021	)		(77,988	)		(387,690	)		(303,489	)
EBITDA	$	103,900		$	1,967,509		$	1,205,953		$	2,338,094
Add back:
Non-cash stock-based compensation		2,563			4,093			10,087			25,680
Adjusted EBITDA of non-controlling interest	$	106,463		$	1,971,602		$	1,216,040		$	2,363,774

Page 51

LIQUIDITY AND CAPITAL RESOURCES

Our cash position was $12,338,642 at March 31, 2024, compared to $15,533,254 at June 30, 2023.

Net cash used in operating activities was $3,602,677 for the nine months ended March 31, 2024 compared to cash provided by operating activities of $2,564,619 for the nine months ended March 31, 2023. At March 31, 2024, we had current assets of $46,223,061 and current liabilities of $22,894,164. We had accounts receivable of $15,826,210 at March 31, 2024 compared to $11,714,422 at June 30, 2023. We had revenues in excess of billings of $16,412,388 at March 31, 2024 compared to $12,377,677 at June 30, 2023 of which $752,582 and $nil is shown as long term as of March 31, 2024 and June 30, 2023, respectively. The long-term portion was discounted by $73,867 and $nil at March 31, 2024 and June 30, 2023, respectively, using the discounted cash flow method with an interest rate of 7.24%. During the nine months ended March 31, 2024, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and revenues in excess of billings increased by $8,146,499 from $24,092,099 at June 30, 2023 to $32,238,598 at March 31, 2024. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $6,707,937 and $6,047,511, respectively at March 31, 2024. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $6,552,181 and $5,779,510, respectively, at June 30, 2023.

The average days sales outstanding for the nine months ended March 31, 2024 and 2023 were 172 and 167 days, respectively, for each period. The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and revenues in excess of billings.

Net cash used in investing activities was $822,451 for the nine months ended March 31, 2024, compared to $1,421,657 for the nine months ended March 31, 2023. We had purchases of property and equipment of $948,337 compared to $1,575,059 for the nine months ended March 31, 2023.

Net cash provided by financing activities was $33,612 for the nine months ended March 31, 2024, compared to cash used in financing activities of $517,349 for the nine months ended March 31, 2023. The nine months ended March 31, 2024 and 2023 included the cash inflow of $340,847 and $270,292, respectively, from bank proceeds. During the nine months ended March 31, 2024, we had net payments for bank loans and finance leases of $307,235 compared to $787,641 for the nine months ended March 31, 2023. We are operating in various geographical regions of the world through our various subsidiaries. Those subsidiaries have financial arrangements from various financial institutions to meet both their short and long-term funding requirements. These loans will become due at different maturity dates as described in Note 13 of the financial statements. We are in compliance with the covenants of the financial arrangements and there is no default, which may lead to early payment of these obligations. We anticipate paying back all these obligations on their respective due dates from its own sources.

We typically fund the cash requirements for our operations in the U.S. through our license, services, and subscription and support agreements, intercompany charges for corporate services, and through the exercise of options and warrants. As of March 31, 2024, we had approximately $12.3 million of cash, cash equivalents and marketable securities of which approximately $11.8 million is held by our foreign subsidiaries. As of June 30, 2023, we had approximately $15.5 million of cash, cash equivalents and marketable securities of which approximately $13.5 million is held by our foreign subsidiaries.

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

As a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans. Although our requirements for capital expenses vary from time to time, for the next 12 months, we anticipate needing $1.5 million for APAC, U.S. and Europe new business development activities and infrastructure enhancements, which we expect to provide from current operations.

Page 52

Financial Covenants

Our UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($379,747) which requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. The Pakistani subsidiary, NetSol PK has an approved facility for export refinance from Askari Bank Limited amounting to Rupees 500 million ($1,799,014) and a running finance facility of Rupees 53 million ($192,854). NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 900 million ($3,238,225). These facilities require NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. NetSol PK also has an approved export refinance facility of Rs. 380 million ($1,367,251) from Samba Bank Limited. During the loan tenure, these two facilities require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.

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

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements are prepared applying certain critical accounting policies. The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments. Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect our reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations. Our financial statements are prepared in accordance with U.S. GAAP, and they conform to general practices in our industry. We apply critical accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate manner. There have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

RECENT ACCOUNTING PRONOUNCEMENTS

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

Item 3. Quantitative and Qualitative Disclosures about Market Risks.

None.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the three months ended March 31, 2024, that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)).

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

On May 3, 2024, the SEC (“the Commission”) issued an order whereby the Company’s then auditor, BF Borgers CPA PC (“Borgers”) was banned from appearing or practicing before the Commission as an accountant. This ban results in Borgers being unable to perform the audit or review of financial information included in Commission filings. Issuers who are clients of Borgers were advised that they must: a) engage a new qualified, independent, PCAOB-registered public accountant; (b) may not present financial information that has been reviewed by Borgers in its quarterly reports; and, (c) may not include audit reports from Borgers in its 10-K filings. Further, the Commission advised issuers to consider whether their filings may need to be amended to address any reporting deficiencies arising from the Borgers engagement.

The Company filed an 8-K on May 6, 2024 announcing the dismissal of Borgers and the engagement of a new, independent PCAOB-registered public accountant, Fortune CPA, Inc. (“Fortune”) by the audit committee and board of directors of the Company. Fortune has been engaged to conduct a review for the nine months ending March 31, 2024, to audit the year ending June 30, 2024 and to re-audit the year ending June 30, 2023. While the Company believes that its internal controls and procedures used in preparing its reports were effective in its reporting, there is a risk that Fortune may discover discrepancies during the course of its audit of the years ending June 30, 2024 and 2023 that require an amendment of the Company’s financial statements.

Other than as stated above, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 30, 2023, filed with the SEC on September 22, 2023. Any of such factors could result in a significant or material adverse effect on our result of operations or financial conditions. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Item 6. Exhibits

31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO)
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO)
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO)
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO)
101.	INS Inline XBRL Instance Document
101.	SCH Inline XBRL Taxonomy Extension Schema Document
101.	CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.	DFE Inline XBRL Taxonomy Extension definition Linkbase Document
101.	LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.	PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

Page 54

SIGNATURES

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

NETSOL TECHNOLOGIES, INC.

Date:	May 20, 2024	/s/ Najeeb U. Ghauri

		NAJEEB U. GHAURI
		Chief Executive Officer

Date:	May 20, 2024	/s/ Roger K. Almond

		ROGER K. ALMOND
		Chief Financial Officer
		Principal Accounting Officer

Page 55

EX-31.1 2 ex31-1.htm

Exhibit 31.1

Certification Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Najeeb Ghauri, certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2024 of NetSol Technologies, Inc., (“Registrant”).

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedure, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed suchc internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2024	/s/ Najeeb Ghauri
	Najeeb Ghauri,
	Chief Executive Officer
	Principal executive officer

EX-31.2 3 ex31-2.htm

Exhibit 31.2

Certification Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Roger K. Almond, certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2024 of NetSol Technologies, Inc., (“Registrant”).

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2024	/s/ Roger K. Almond
	Roger K. Almond
	Chief Financial Officer
	Principal Accounting Officer

EX-32.1 4 ex32-1.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NetSol Technologies, Inc. on Form 10-Q for the period ending March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Najeeb Ghauri, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and,

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 20, 2024

/s/ Najeeb Ghauri
Najeeb Ghauri,
Chief Executive Officer
Principal Executive Officer

EX-32.2 5 ex32-2.htm

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NetSol Technologies, Inc. on Form 10-Q for the period ending March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Roger K. Almond, Chief Financial Officer, and Principal Accounting Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and,

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 20, 2024

/s/ Roger K. Almond
Roger K. Almond
Chief Financial Officer
Principal Accounting Officer