What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-14 compared with 2021-11-12 · 420 added, 248 removed, 229 unchanged (74% of the section changed)

1 unchanged sentence

following discussion is intended to assist in an understanding of the Company’s financial position and results of operations for

the three months ended September 30, 2021.

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, 2021, and the Condensed Consolidated Financial Statements and notes thereto

included elsewhere in this Quarterly Report on Form 10-Q.

the three and six months ended December 31, 2021.

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, 2021, and the Condensed Consolidated Financial Statements and notes

thereto included elsewhere in this Quarterly Report on Form 10-Q.

website is located at www.netsoltech.com , and our investor relations website is located at http://ir.netsoltech.com .

The following filings are available through our investor relations website after we file with the SEC:

Annual Reports on Form 10-K,

Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders.

These filings are also available

for download free of charge on our investor relations website.

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

1 unchanged sentence

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.

Information on

the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

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.

Information on the operation

of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations

66 unchanged sentences

which allows for an array of interest calculation methods, as well as robust accounting of multi-billion-dollar lease portfolios.

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.

NFS Ascent ® 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.

Our premier, next generation solution NFS Ascent ®

is now also available on the cloud via SaaS/subscription-based pricing.

With swift, seamless deployments and easy scalability, it is

an extremely adaptive retail and wholesale platform for the global finance and leasing industry.

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.

NFS Ascent ® 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.

Our premier, next generation solution NFS Ascent ® is now also

available on the cloud via SaaS/subscription-based pricing.

With swift, seamless deployments and easy scalability, it is an extremely

adaptive retail and wholesale platform for the global finance and leasing industry.

This cloud-version of NFS Ascent ®

18 unchanged sentences

varied needs.

Otoz powerful API-based architecture allows OEMs, auto-captives and dealerships to integrate with a plethora of providers to offer an

end-to-end Omni-channel digital car finance and lease experience.

Out-of-the-box APIs by Otoz help dealers and auto-captives connect

with ecosystem partners which are crucial for running their auto retail business.

It includes, finance and insurance products, trade-in

tools, fraud checks, CRM system, websites (Tier 1 – Tier 3), marketing toolkit, inventory feeds, KYCs, payment processors, vehicle

delivery providers etc.

In addition, Otoz is equipped with smart lead generation and product analytics capabilities.

It empowers dealers

with the capability to convert qualified leads and never lose contact with customers.

The product analytics capability allows us to improve

the customer journey by addressing friction points, herein improving customer experience and conversions – a win-win scenario for

dealers and customers.

Otoz powerful Application Program Interface (API) based architecture allows OEMs, auto-captives and dealerships to integrate with a plethora

of providers to offer an end-to-end Omni-channel digital car finance and lease experience.

Out-of-the-box APIs by Otoz help dealers and

auto-captives connect with ecosystem partners which are crucial for running their auto retail business.

It includes, finance and insurance

products, trade-in tools, fraud checks, CRM system, websites (Tier 1 – Tier 3), marketing toolkit, inventory feeds, Know Your Customers

(KYC), payment processors, vehicle delivery providers etc.

In addition, Otoz is equipped with smart lead generation and product analytics

capabilities.

It empowers dealers with the capability to convert qualified leads and never lose contact with customers.

The product analytics

capability allows us to improve the customer journey by addressing friction points, herein improving customer experience and conversions

– a win-win scenario for dealers and customers.

fully digital, white label platform for lease, finance, and cash transactions that delivers a frictionless customer experience.

platform consists of two components the Dealer Tool and the Customer App of a Dealer Tool which provides for a myriad of services including

account creation, order management work queue, user roles and rights, tax configurator, customer KYC reports, vehicle delivery scheduling,

payment gateways and inventory management, finance and insurance products feed and prioritization, dealer fee management and ecosystem

The Customer App permits the dealer to work with the customer to get a vehicle via cash, finance or lease, manage vehicle delivery

and pick-up scheduling, buy finance and insurance products, buy accessories, paperless license checks, personalized pricing, vehicle

options, trade-in valuation, credit application and decision, paperless contracts and e-signing, digital payments and a deal builder.

platform consists of two components the Dealer Tool and the Customer Application (APP) of a Dealer Tool which provides for a myriad of

services including account creation, order management work queue, user roles and rights, tax configurator, customer KYC reports, vehicle

delivery scheduling, payment gateways and inventory management, finance and insurance products feed and prioritization, dealer fee management

and ecosystem APIs.

The Customer App permits the dealer to work with the customer to get a vehicle via cash, finance or lease, manage

vehicle delivery and pick-up scheduling, buy finance and insurance products, buy accessories, paperless license checks, personalized

pricing, vehicle options, trade-in valuation, credit application and decision, paperless contracts and e-signing, digital payments and

a deal builder.

Company continues to support its North America and European legacy systems including LeasePak and LeaseSoft.

below are a few of NetSol’s highlights for the quarter ended September 30, 2021:

generated approximately $1,500,000 by successfully implementing change requests from various customers across multiple regions.

went live with NFS Ascent® and NFS Ascent Digital in New Zealand for a leading Japanese equipment manufacturer.

began the NFS Ascent® implementation process in India related to the DFS project.

continued to onboard new dealers on the Otoz TM digital retail platform.

were able to renegotiate certain annual support contracts resulting in additional support revenue of approximately $1,000,000 to

be recognized over the term of the contracts.

below are a few of NetSol’s highlights for the quarter ended December 31, 2021:

went live in Japan and Australia with various NFS Ascent® and NFS implementations with

Daimler Truck Financial Services GmbH (“DTFS”).

These implementations were on

time as per requirements of the Clients.

The implementations will generate over $4,000,000

in revenues including license revenue, services revenue and support revenue over the next

renegotiated a support contract with DFS which will generate over $10,000,000 on top of the

previously projected revenues from the same contract, to be recognized over the next four

generated approximately $1,500,000 by implementing change requests from various customers

across multiple regions.

renegotiated the support contract with BMW in China to additionally generate approximately

$400,000 above the previously expected revenues.

signed a contract with a commercial finance organization in Australia, which is part of a

bigger finance network to implement NFS Ascent®.

This SaaS implementation is expected

to generate approximately $500,000 in subscriptions and services over the next five years.

progressed to the UAT stage in the implementation process of our NFS Ascent® Suite for

DFS in India.

entered into a strategic partnership with CGI in a bid to gain further traction in Europe.

This partnership is expected to not only expand the current business pipeline in Europe but

will also help in successfully delivering future SaaS implementations across Europe and other

were awarded a Five-Star Premier Business Partnership Level Status with the American Financial

Services Association.

has identified the following material trends affecting NetSol.

Ascent ® SaaS offering is gaining traction in mid-size auto captives and financial institutions in North American and

European markets.

and digital transformation is the new norm showing acceleration in every sector particularly in auto and banking.

Cloud demand for our solution is on the rise.

has created new dynamics for businesses and corporations with employees and executives working from home.

Essentially, the decreased

office and maintenance costs, as well as the sharply reduced travel expenses, should positively impact our financials.

have up to 40% of employees working in person at our NetSol PK technology campus since the middle of September.

is creating new opportunities for our R&D teams to expand and monetize mobile and digital solutions in our space and complementary

developing markets, new interests are emerging from existing clients for upgrades and mobility platforms.

opportunities and dynamics of shared car ownership either through ride hailing and car sharing encouraging our innovation and development

platform is showing positive trajectory of interest from existing and new auto leasing and Tier 1 companies in all of our markets,

including China, the US and Europe.

Ascent ® SaaS offering is gaining traction in mid-size auto captives and financial

institutions in North American and European markets and is consistent with our transformation

strategy as market size has expanded globally.

and digital transformation is the new norm showing acceleration in every sector particularly

in auto and banking.

has created new dynamics for businesses and corporations with employees and executives working

Essentially, the decreased office and maintenance costs, as well as the sharply

reduced travel expenses, have positively impacted our financials.

September 2021, we have over 40% of employees working from the office in all of our global

work environment created by COVID-19 has led our R&D teams to expand and monetize mobile

and digital solutions in our space and complementary sectors in an effort to anticipate customer

developing markets, new interests are emerging from existing clients for upgrades and mobility

opportunities and dynamics of shared car ownership either through ride hailing or car sharing

encourage the use of our innovation and development tools.

platform is showing positive trajectory of interest from existing and new auto leasing and

Tier 1 companies in all of our markets, including China, the US and Europe.

stability in US and Pakistan relationship boosting confidence and trade relations.

China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $62 billion investment from the originally planned

$46 billion on Pakistan energy and infrastructure sectors.

auto sector remains strong as our customers are constantly demanding ‘Change Requests’ or additional services and reflects

degree to which the COVID-19 pandemic impacts our future business globally, results of operations and financial condition will depend

on future developments, which are uncertain, including but not limited to the duration, spread and severity of the pandemic, the

availability, adoption and efficacy of vaccines, government responses and other actions to mitigate the spread of and to treat COVID-19,

and when and to what extent normal business, economic and social activity and conditions resume.

are unable to predict the extent to which the pandemic impacts our customers and other partners and their financial conditions, but

adverse effects on these parties could also adversely affect us.

OEMs and auto sectors are experiencing a major slowdown due to lockdowns, health concerns and component part supply chain issues.

C-level decision making to acquire new systems or even upgrade will be elongated due to uncertainty of the COVID-19 virus.

to travel restrictions caused by COVID-19, it has been difficult to conduct face to face meetings for global clients and new prospects

removing the personal connection essential to some decision making.

COVID-19 pandemic has adversely affected live industry conferences and events, such as those held by the Equipment Leasing and Finance

Association (ELFA), reducing leads and market exposure.

China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $62

billion investment from the originally planned $46 billion on Pakistan energy and infrastructure

auto sector remains strong as our customers are constantly demanding ‘Change Requests’

or additional services and reflects resilience.

degree to which the COVID-19 pandemic impacts our future business globally, results of operations

and financial condition will depend on future developments, which are uncertain, including

but not limited to the duration, spread and severity of the pandemic, the availability, adoption

and efficacy of vaccines, government responses and other actions to mitigate the spread of

and to treat COVID-19, and when and to what extent normal business, economic and social activity

and conditions resume.

are unable to predict the extent to which the pandemic impacts our customers and other partners

and their financial conditions, but adverse effects on these parties could also adversely

OEMs and auto sectors are experiencing a major slowdown due to lockdowns, health concerns

and component part supply chain issues.

C-level decision making to acquire new systems or even upgrade will be elongated due to uncertainty

of the COVID-19 virus.

to travel restrictions caused by COVID-19, it has been difficult to conduct face to face

meetings for global clients and new prospects removing the personal connection essential

to some decision making.

COVID-19 pandemic has adversely affected live industry conferences and events, such as those

held by the Equipment Leasing and Finance Association (ELFA), reducing leads and market exposure.

from the office continues to pose its own risk of virus spread until it ameliorated.

actions, including trade protection and national security policies of the U.S.

and Chinese governments, such as tariffs or bans could

in the future limit or prevent companies from transacting business with China and aggravate the global business environment.

governments, such as tariffs or bans could in the future limit or prevent companies from

transacting business with China and aggravate the global business environment.

IN FINANCIAL CONDITION

Ended September 30, 2021 Compared to the Quarter Ended September 30, 2020

following table sets forth the items in our unaudited condensed consolidated statement of operations for the three months ended September

Ended December 31, 2021 Compared to the Quarter Ended December 31, 2020

following table sets forth the items in our unaudited condensed consolidated statement of operations for the three months ended December

31, 2021 and 2020 as a percentage of revenues.

For the Three Months Ended September 30,

Net Revenues:

Subscription and support

Total net revenues

the Three Months

and consultants

and amortization

cost of revenues

Salaries and consultants

Depreciation and amortization

Total cost of revenues

and marketing

and amortization

and administrative

and development cost

operating expenses

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

from operations

income and (expenses)

(loss) on sale of assets

Interest expense

Interest income

Gain on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income before income taxes

Income tax provision

Non-controlling interest

Net income attributable to NetSol

(loss) on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income before income taxes

tax provision

income (loss)

Non-controlling

income (loss) attributable to NetSol

significant portion of our business is conducted in currencies other than the U.S.

19 unchanged sentences

(Unfavorable)

For the Three Months

the Three Months

(Unfavorable)

Ended September 30,

Net Revenues:

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (1,652,026 )

$ (1,676,166 )

revenues for the quarter ended September 30, 2021 and 2020 are broken out among the segments as follows:

North America

fees for the three months ended September 30, 2021 were $10,716 compared to $3,475 for the three months ended September 30, 2020 reflecting

an increase of $7,241 with a change in constant currency of $6,685.

and support fees for the three months ended September 30, 2021 were $6,230,389 compared to $5,171,863 for the three months ended September

(loss) from operations

revenues for the quarter ended December 31, 2021 and 2020 are broken out among the segments as follows:

fees for the three months ended December 31, 2021 were $1,955,331 compared to $2,586,504 for the three months ended December 31, 2020

reflecting a decrease of $631,173 with a change in constant currency of $469,465.

During the three months ended December 31, 2021, we

recognized approximately $1,920,000 related to a new agreement with DTFS for the sale of both our legacy and Ascent product ®

for their new business segment in the Japanese and Australian markets.

During the three months ended December 31, 2020, the

Company recognized approximately $2,410,000 of revenue related to a new agreement with an existing tier one finance company in China

to upgrade to our NFS Ascent ® Retail and Wholesale platforms.

and support fees for the three months ended December 31, 2021 were $9,374,869 compared to $5,724,802 for the three months ended December

31, 2020 reflecting an increase of $3,650,067 with a change in constant currency of $4,170,753.

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 ® .

income for the three months ended September 30, 2021 was $7,179,656 compared to $7,472,040 for the three months ended September 30, 2020

major increase is related to the revised ceiling amount for post contract support due to the software customizations related to the DFS

The Company recorded a one-time post contract support revenue of approximately $3,480,000 using the catch-up approach during

the three months ended December 31, 2021.

In addition, the Company will recognize approximately $7,931,000 of additional subscription

and support revenue over the remaining four years of the contract.

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 ® .

income for the three months ended December 31, 2021 was $4,142,762 compared to $4,810,154 for the three months ended December 31, 2020

reflecting a decrease of $667,392 with a decrease in constant currency of $709,923.

Services revenue is derived from services provided

to both current customers as well as services provided to new customers as part of the implementation process.

gross profit was $5,443,023, for the three months ended September 30, 2021 as compared with $6,381,575 for the three months ended September

This is a decrease of $938,552 with a change in constant currency of $1,038,769.

The decrease is primarily due to the reduction in

implementation services as certain implementations are nearing completion or have gone live.

Services revenue is derived from services

provided to both current customers as well as services provided to new customers as part of the implementation process.

gross profit was $7,642,587, for the three months ended December 31, 2021 as compared with $6,042,309 for the three months ended December

This is an increase of $1,600,278 with a change in constant currency of $1,812,452.

The gross profit percentage for the three

months ended September 30, 2021 also decreased to 40.6% from 50.5% for the three months ended September 30, 2020.

months ended December 31, 2021 also increased to 49.4% from 46.0% for the three months ended December 31, 2020.

The cost of sales was

$7,977,738 for the three months ended September 30, 2021 compared to $6,265,803 for the three months ended September 30, 2020 for an

increase of $1,711,935 and on a constant currency basis an increase of $1,519,306.

As a percentage of sales, cost of sales increased

from 49.5% for the three months ended September 30, 2020 to 59.4% for the three months ended September 30, 2021.

and consultant fees increased by $1,135,761 from $4,526,649 for the three months ended September 30, 2020 to $5,662,410 for the three

months ended September 30, 2021 and on a constant currency basis increased by $1,001,144.

The increase is due to increases in salaries

that had been decreased as part of our cost savings measure due to the COVID-19 pandemic last year, annual salary raises, and new hirings.

As a percentage of sales, salaries and consultant expense increased from 35.8% for the three months ended September 30, 2020 to 42.2%

for the three months ended September 30, 2021.

expense was $214,132 for the three months ended September 30, 2021 compared to $103,752 for the three months ended September 30, 2020

for an increase of $110,380 with an increase in constant currency of $101,312.

The increase in travel expense is due to the increase

in travel as countries begin lifting travel restrictions.

and amortization expense increased to $765,735 compared to $707,249 for the three months ended September 30, 2020 or an increase of $58,486

$7,830,375 for the three months ended December 31, 2021 compared to $7,079,151 for the three months ended December 31, 2020 for an increase

of $751,224 and on a constant currency basis an increase of $1,178,913.

As a percentage of sales, cost of sales decreased from 54.0%

for the three months ended December 31, 2020 to 50.6% for the three months ended December 31, 2021.

and consultant fees increased by $367,255 from $5,294,662 for the three months ended December 31, 2020 to $5,661,917 for the three months

ended December 31, 2021 and on a constant currency basis increased by $666,430.

The increase is due to increases in salaries that had

been decreased as part of our cost savings measure due to the COVID-19 pandemic last year, annual salary raises, and new hirings.

a percentage of sales, salaries and consultant expense decreased from 40.4% for the three months ended December 31, 2020 to 36.6% for

the three months ended December 31, 2021.

expense was $282,836 for the three months ended December 31, 2021 compared to $159,174 for the three months ended December 31, 2020 for

an increase of $123,662 with an increase in constant currency of $133,039.

The increase in travel expense is due to the increase in travel

as countries begin lifting travel restrictions.

and amortization expense increased to $728,868 compared to $713,749 for the three months ended December 31, 2020 or an increase of $15,119

and on a constant currency basis an increase of $76,963.

cost increased to $1,335,461 for the three months ended September 30, 2021 compared to $925,153 for the three months ended September

cost increased to $1,156,754 for the three months ended December 31, 2021 compared to $911,566 for the three months ended December 31,

2020 or an increase of $245,188 and on constant currency basis an increase of $302,481.

The increase is mainly due to a one time

hosting cost of $302,000.

expenses were $6,082,633 for the three months ended September 30, 2021 compared to $5,345,019, for the three months ended September 30,

The increase is mainly due to increase in repair

and maintenance cost and computer cost.

expenses were $5,988,719 for the three months ended December 31, 2021 compared to $5,955,806, for the three months ended December 31,

2020 for an increase of 0.60% or $32,913 and on a constant currency basis an increase of 3.8% or $224,992.

As a percentage of sales,

it increased from 42.3% to 45.3%.

The increase in operating expenses was primarily due to increases in general and administrative expenses

and research and development costs.

and administrative expenses were $3,973,139 for the three months ended September 30, 2021 compared to $3,427,636 at September 30, 2020

or an increase of $545,503 or 15.9% and on a constant currency basis an increase of $453,602 or 13.2%.

During the three months ended

September 30, 2021, salaries increased by approximately $227,932 or $180,026 on a constant currency basis, other general and administrative

expenses increased approximately $199,536 or $164,639 on a constant currency basis, and professional services increased approximately

$118,035 or $108,937 on constant currency basis.

it decreased from 45.4% to 38.7%.

The increase in operating expenses was primarily due to increases in selling expenses and research

and development costs off set by decrease in general and administrative expenses.

expenses were $1,807,162 for the three months ended December 31, 2021 compared to $1,558,027, for the three months ended December 31,

2020 for an increase of $249,135 and on constant currency basis an increase of $330,431.

and administrative expenses were $3,733,303 for the three months ended December 31, 2021 compared to $4,065,788 at December 31, 2020

or a decrease of $332,485 or 8.2% and on a constant currency basis a decrease of $248,398 or 6.1%.

During the three months ended December

31, 2021, salaries decreased by approximately $20,778 and increased $41,105 on a constant currency basis, and other general and administrative

expenses decreased approximately $312,726 or $290,017 on a constant currency basis.

and development cost was $235,390 for the three months ended December 31, 2021 compared to $110,419, for the three months ended December

31, 2020 for an increase of $124,971 and on constant currency basis an increase of $145,160.

from Operations

from operations was $639,610 for the three months ended September 30, 2021 compared to income from operations of $1,036,556 for the three

months ended September 30, 2020.

This represents a decrease of $1,676,166 with a decrease of $1,652,026 on a constant currency basis

for the three months ended September 30, 2021 compared with the three months ended September 30, 2020.

As a percentage of sales, loss

from operations was 4.8% for the three months ended September 30, 2021 compared to income of 8.2% for the three months ended September

from operations was $1,653,868 for the three months ended December 31, 2021 compared to $86,503 for the three months ended December 31,

This represents an increase of $1,567,365 with an increase of $1,587,460 on a constant currency basis for the three months ended

December 31, 2021 compared with the three months ended December 31, 2020.

As a percentage of sales, income from operations was 10.7%

for the three months ended December 31, 2021 compared to 1.0% for the three months ended December 31, 2020.

Income and Expense

income was $1,357,732 for the three months ended September 30, 2021 compared to $351,215 for the three months ended September 30, 2020.

This represents an increase of $1,006,517 with an increase of $958,918 on a constant currency basis.

The increase is primarily due to

the foreign currency exchange transactions.

income was $986,186 for the three months ended December 31, 2021 compared to $79,743 for the three months ended December 31, 2020.

represents an increase of $906,443 with an increase of $990,441 on a constant currency basis.

The increase 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.

During the three months ended December 31, 2021, we recognized a gain of $901,016 in foreign currency exchange transactions

compared to a gain of $13,981 for the three months ended December 31, 2020.

During the three months ended December 31, 2021, the value

dollar and the Euro increased 3.8% and 1.6%, respectively, compared to the PKR.

During the three months ended December 31,

2020, the value of the U.S.

dollar decreased 3.3% and the value of the Euro increased 1.2%, respectively, compared to the PKR.

Non-controlling

the three months ended December 31, 2021, the net income attributable to non-controlling interest was $1,031,763, compared to $162,916

for the three months ended December 31, 2020.

The increase in non-controlling interest is primarily due to the increase in net income

of NetSol PK.

Income (loss) attributable to NetSol

income was $1,406,785 for the three months ended December 31, 2021 compared to a net loss of $242,104 for the three months ended December

This is an increase of $1,648,889 with an increase of $1,641,692 on a constant currency basis, compared to the prior year.

For the three months ended December 31, 2021, net income per share was $0.13 for basic and diluted shares compared to a net loss per

share $0.02 for basic and diluted shares for the three months ended December 31, 2020.

Months Ended December 31, 2021 Compared to the Six Months Ended December 31, 2020

following table sets forth the items in our unaudited condensed consolidated statement of operations for the six months ended December

31, 2021 and 2020 as a percentage of revenues.

the Six Months

and consultants

and amortization

cost of revenues

and marketing

and amortization

and administrative

and development cost

operating expenses

from operations

income and (expenses)

(loss) on sale of assets

(loss) on foreign currency exchange transactions

of net loss from equity investment

other income (expenses)

income before income taxes

tax provision

Non-controlling

income attributable to NetSol

significant portion of our business is conducted in currencies other than the U.S.

We operate in several geographical regions

as described in Note 19 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements.

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.

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.

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.

the Three Months

(Unfavorable)

(loss) from operations

revenues for the six months ended December 31, 2021 and 2020 are broken out among the segments as follows:

fees for the six months ended December 31, 2021 were $1,966,047 compared to $2,589,979 for the six months ended December 31, 2020 reflecting

a decrease of $623,932 with a change in constant currency of $462,780.

During the six months ended December 31, 2021, we recognized approximately

$1,920,000 related to a new agreement with DTFS for the sale of both our legacy and Ascent product ® for their new

business segment in the Japanese and Australian markets.

During the six months ended December 31, 2020, the Company recognized approximately

$2,410,000 of revenue related to a new agreement with an existing tier one finance company in China to upgrade to our NFS Ascent ®

Retail and Wholesale platforms.

and support fees for the six months ended December 31, 2021 were $15,605,258 compared to $10,896,665 for the six months ended December

31, 2020 reflecting an increase of $4,708,593 with a change in constant currency of $5,074,240.

The major increase is related to the

revised ceiling amount for post contract support due to the software customizations related to the DFS contract.

The Company recorded

a one-time post contract support revenue of approximately $3,480,000 using the catch-up approach during the six months ended December

In addition, the Company will recognize approximately $7,931,000 of additional subscription and support revenue over the remaining

four years of the contract.

Subscription and support fees begin once a customer has “gone live” with our product.

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 ® .

income for the six months ended December 31, 2021 was $11,322,418 compared to $12,282,194 for the six months ended December 31, 2020

reflecting a decrease of $959,776 with a decrease in constant currency of $1,139,558.

The decrease is primarily due to the reduction

in implementation services as certain implementations are nearing completion or have gone live.

Services revenue is derived from services

provided to both current customers as well as services provided to new customers as part of the implementation process.

gross profit was $13,085,610, for the six months ended December 31, 2021 as compared with $12,423,884 for the six months ended December

This is an increase of $661,726 with a change in constant currency of $773,682.

The gross profit percentage for the six months

ended December 31, 2021 decreased to 45.3% from 48.2% for the six months ended December 31, 2020.

The cost of sales was $15,808,113 for

the six months ended December 31, 2021 compared to $13,344,954 for the six months ended December 31, 2020 for an increase of $2,463,159

and on a constant currency basis an increase of $2,698,220.

As a percentage of sales, cost of sales increased from 51.8% for the six

months ended December 31, 2020 to 54.7% for the six months ended December 31, 2021.

and consultant fees increased by $1,503,016 from $9,821,311 for the six months ended December 31, 2020 to $11,324,327 for the six months

ended December 31, 2021 and on a constant currency basis increased by $1,667,575.

The increase is due to increases in salaries that had

been decreased as part of our cost savings measure due to the COVID-19 pandemic last year, annual salary raises, and new hirings.

a percentage of sales, salaries and consultant expense increased from 38.1% for the six months ended December 31, 2020 to 39.2% for the

six months ended December 31, 2021.

expense was $496,968 for the six months ended December 31, 2021 compared to $262,926 for the six months ended December 31, 2020 for an

increase of $234,042 with an increase in constant currency of $234,351.

The increase in travel expense is due to the increase in travel

as countries begin lifting travel restrictions.

and amortization expense increased to $1,494,603 compared to $1,420,998 for the six months ended December 31, 2020 or an increase of

$73,605 and on a constant currency basis an increase of $122,301.

cost increased to $2,492,215 for the six months ended December 31, 2021 compared to $1,839,719 for the six months ended December 31,

2020 or an increase of $652,496 and on constant currency basis an increase of $673,993.

The increase is mainly due to a one time hosting

cost of $302,000 and increase in repair and maintenance cost and computer cost.

expenses were $12,071,352 for the six months ended December 31, 2021 compared to $11,300,825, for the six months ended December 31, 2020

for an increase of 6.8% or $770,527 and on a constant currency basis an increase of 7.4% or $838,248.

As a percentage of sales, it decreased

from 43.9% to 41.8%.

The increase in operating expenses was primarily due to increases in general and administrative expenses and research

and development costs.

expenses were $3,427,155 for the six months ended December 31, 2021 compared to $3,167,631, for the six months ended December 31, 2020

for an increase of $259,524 and on constant currency basis an increase of $314,785.

and administrative expenses were $7,706,442 for the six months ended December 31, 2021 compared to $7,493,424 at December 31, 2020 for

an increase of $213,018 or 2.8% and on a constant currency basis an increase of $205,203 or 2.8%.

During the six months ended December

31, 2021, salaries increased by approximately $207,154 or $221,131 on a constant currency basis, and professional services increased

approximately $119,054 or $109,451 on constant currency basis and other general and administrative expenses decreased approximately $113,190

or $125,379 on a constant currency basis.

and development cost was $510,620 for the six months ended December 31, 2021 compared to $196,408, for the six months ended December

31, 2020 for an increase of $314,212 and on constant currency basis an increase of $334,542.

from Operations

from operations was $1,014,258 for the six months ended December 31, 2021 compared to $1,123,059 for the six months ended December 31,

This represents a decrease of $108,801 with a decrease of $64,566 on a constant currency basis for the six months ended December

31, 2021 compared with the six months ended December 31, 2020.

As a percentage of sales, income from operations was 3.5% for the six

months ended December 31, 2021 compared to income from operations of 4.4% for the six months ended December 31, 2020.

Income and Expense

income was $2,343,918 for the six months ended December 31, 2021 compared to $430,958 for the six months ended December 31, 2020.

represents an increase of $1,912,960 with an increase of $1,977,646 on a constant currency basis.

The increase 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;

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 September 30, 2021, we recognized a gain of $1,284,148 in foreign currency exchange

transactions compared to a gain of $296,041for the three months ended September 30, 2020.

During the three months ended September 30,

During the six months ended December 31, 2021, we recognized a gain of $2,185,164 in foreign currency exchange transactions

compared to a gain of $310,022 for the six months ended December 31, 2020.

During the six months ended December 31, 2021, the value of

dollar and the Euro increased 12.3% and 7.2%, respectively, compared to the PKR.

During the six months ended December 31, 2020,

the value of the U.S.

dollar and the Euro increased 3.5% and 13.2%, respectively, compared to the PKR.

During the three months ended

September 30, 2020, the value of the U.S.

dollar decreased 1.4% and the value of the Euro increased 3.0%, respectively, compared to the

Non-controlling

the three months ended September 30, 2021, the net income attributable to non-controlling interest was $362,526, compared to $405,923

for the three months ended September 30, 2020.

The decrease in non-controlling interest is primarily due to the decrease in net income

of NetSol PK.

the six months ended December 31, 2021, the net income attributable to non-controlling interest was $1,394,289, compared to $568,839

for the six months ended December 31, 2020.

The increase in non-controlling interest is primarily due to the increase in net income of

Income attributable to NetSol

income was $187,969 for the three months ended September 30, 2021 compared to $717,554 for the three months ended September 30, 2020.

This is a decrease of $529,585 with a decrease of $550,552 on a constant currency basis, compared to the prior year.

For the three months

ended September 30, 2021, net income per share was $0.02 for basic and diluted shares compared to $0.06 for basic and diluted shares

for the three months ended September 30, 2020.

income was $1,594,754 for the six months ended December 31, 2021 compared to $475,450 for the six months ended December 31, 2020.

is an increase of $1,119,304 with an increase of $1,113,401 on a constant currency basis, compared to the prior year.

For the six months

ended December 31, 2021, net income per share was $0.14 for basic and diluted shares compared to $0.04 for basic and diluted shares for

the six months ended December 31, 2020.

Financial Measures

4 unchanged sentences

define the non-GAAP measures as follows:

is GAAP net income or loss before net interest expense, income tax expense, depreciation and amortization.

is GAAP net income or loss before net interest expense, income tax expense, depreciation

and amortization.

adjusted EBITDA is EBITDA plus stock-based compensation expense.

EBITDA per basic and diluted share – Adjusted EBITDA allocated to common stock divided by the weighted average shares outstanding

and diluted shares outstanding.

EBITDA per basic and diluted share – Adjusted EBITDA allocated to common stock divided

by the weighted average shares outstanding and diluted shares outstanding.

use non-GAAP measures internally to evaluate the business and believe that presenting non-GAAP measures provides useful information to

21 unchanged sentences

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 months ended September 30, 2021 and 2020 are as follows:

For the Three Months Ended

September 30, 2021

September 30, 2020

Net Income (loss) attributable to NetSol

Non-controlling interest

Depreciation and amortization

Interest expense

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA, gross

Less non-controlling interest (a)

Adjusted EBITDA, net

Weighted Average number of shares outstanding

Basic adjusted EBITDA

Diluted adjusted EBITDA

(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

Depreciation and amortization

Interest expense

Interest (income)

Non-cash stock-based compensation

Adjusted EBITDA of non-controlling interest

GAAP measures for the three and six months ended December 31, 2021 and 2020 are as follows:

the Three Months Ended

the Six months Ended

Income (loss) attributable to NetSol

Non-controlling

and amortization

stock-based compensation

EBITDA, gross

non-controlling interest (a)

Weighted Average

number of shares outstanding

adjusted EBITDA

reconciliation of adjusted EBITDA of non-controlling interest to net income attributable to non-controlling interest is as follows

Income (loss) attributable to non-controlling interest

and amortization

stock-based compensation

EBITDA of non-controlling interest

AND CAPITAL RESOURCES

cash position was $26,999,876 at September 30, 2021, compared to $33,705,154 at June 30, 2021.

cash used in operating activities was $3,391,653 for the three months ended September 30, 2021 compared to cash provided by operating

activities $4,711,604 for the three months ended September 30, 2020.

At September 30, 2021, we had current assets of $52,145,259 and

current liabilities of $21,009,866.

We had accounts receivable of $6,043,444 at September 30, 2021 compared to $4,184,096 at June 30,

We had revenues in excess of billings of $17,133,468 at September 30, 2021 compared to $15,637,734 at June 30, 2021 of which $969,456

and $957,603 is shown as long term as of September 30, 2021 and June 30, 2021, respectively.

The long-term portion was discounted by

$57,378 and $66,779 at September 30, 2021 and June 30, 2021, respectively, using the discounted cash flow method with interest rates

ranging from 4.65% to 6.25%.

During the three months ended September 30, 2021, 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 $3,355,082 from $19,821,830 at June 30, 2021 to $23,176,912 at September 30, 2021.

Accounts payable

and accrued expenses, and current portions of loans and lease obligations amounted to $6,369,870 and $10,423,215, respectively at September

Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $6,696,035 and $11,366,171,

respectively at June 30, 2021.

average days sales outstanding for the three months ended September 30, 2021 and 2020 were 147 and 200 days, respectively, for each period.

cash position was $25,587,515 at December 31, 2021, compared to $33,705,154 at June 30, 2021.

cash used in operating activities was $3,036,634 for the six months ended December 31, 2021 compared to cash provided by operating activities

$12,650,844 for the six months ended December 31, 2020.

At December 31, 2021, we had current assets of $54,089,697 and current liabilities

of $21,032,680.

We had accounts receivable of $7,190,759 at December 31, 2021 compared to $4,184,096 at June 30, 2021.

We had revenues

in excess of billings of $19,715,794 at December 31, 2021 compared to $15,637,734 at June 30, 2021 of which $985,772 and $957,603 is

shown as long term as of December 31, 2021 and June 30, 2021, respectively.

The long-term portion was discounted by $48,070 and $66,779

at December 31, 2021 and June 30, 2021, respectively, using the discounted cash flow method with interest rates ranging from 4.65% to

During the six months ended December 31, 2021, 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 $7,084,723 from $19,821,830 at June 30, 2021 to $26,906,553 at December 31, 2021.

Accounts payable and accrued expenses, and current

portions of loans and lease obligations amounted to $6,394,780 and $10,147,993, respectively at December 31, 2021.

Accounts payable and

accrued expenses, and current portions of loans and lease obligations amounted to $6,696,035 and $11,366,171, respectively at June 30,

average days sales outstanding for the six months ended December 31, 2021 and 2020 were 137 and 174 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.

cash used in investing activities was $196,407 for the three months ended September 30, 2021, compared to $517,116 for the three months

ended September 30, 2020.

We had purchases of property and equipment of $216,112 compared to $489,289 for the three months ended September

For the three months ended September 30, 2020, we invested $60,500, in DriveMate.

cash used in financing activities was $463,570 for the three months ended September 30, 2021, compared to cash provided by financing

activities of $89,113 for the three months ended September 30, 2020.

For the three months ended September 30, 2021, we purchased 22,510

shares of our own stock for $100,106 compared to the purchase of 147,052 shares for $464,676 for the same period last year.

months ended September 30, 2021 included the cash inflow of $Nil from bank proceeds compared to $697,295 for the same period last year.

During the three months ended September 30, 2021, we had net payments for bank loans and finance leases of $363,464 compared to $143,506

for the three months ended September 30, 2020.

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 15 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.

cash used in investing activities was $572,180 for the six months ended December 31, 2021, compared to $1,219,701 for the six months

ended December 31, 2020.

We had purchases of property and equipment of $773,953 compared to $1,249,895 for the six months ended December

For the six months ended December 31, 2020, we invested $93,000, in Drivemate.

cash used in financing activities was $626,955 for the six months ended December 31, 2021, compared to $862,685 for the six months ended

December 31, 2020.

For the six months ended December 31, 2021, we purchased 22,510 shares of our own stock for $100,106 compared to the

purchase of 446,996 shares for $1,392,671 for the same period last year.

The six months ended December 31, 2021 included the cash inflow

of $188,272 from bank proceeds compared to $705,338 for the same period last year.

During the six months ended December 31, 2021, we

had net payments for bank loans and finance leases of $715,121 compared to $175,352 for the six months ended December 31, 2020.

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 15 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.

typically fund the cash requirements for our operations in the U.S.

1 unchanged sentence

intercompany charges for corporate services, and through the exercise of options and warrants.

As of September 30, 2021, we had approximately

As of December 31, 2021, we had approximately

$25.6 million of cash, cash equivalents and marketable securities of which approximately $23.5 million is held by our foreign subsidiaries.

As of June 30, 2021, we had approximately $33.7 million of cash, cash equivalents and marketable securities of which approximately $31.7

million is held by our foreign subsidiaries.

million was held by our foreign subsidiaries.

remain open to strategic relationships that would provide value added benefits.

44 unchanged sentences

see Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Quantitative and Qualitative

Disclosures about Market Risks .

Quantitative and Qualitative Disclosures about Market Risks.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis