What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2022-02-14 · 355 added, 336 removed, 313 unchanged (69% 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 and six months ended December 31, 2021.

the three and nine months ended March 31, 2022.

The following discussion should be read in conjunction with the information included

134 unchanged sentences

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 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.

below are a few of NetSol’s highlights for the quarter ended March 31, 2022:

generated approximately $1,300,000 by successfully implementing change requests from various customers across multiple regions.

successfully delivered our cloud enabled Ascent front end (POS/CAP) to a leading commercial finance company in Australia at subscription-based

This implementation has generated revenues of approximately $200,000.

signed a contract with a notable Swedish bank to implement NFS Ascent in Sweden, Norway, Denmark and Finland.

This contract is in

the discovery phase.

onboarded another 5 dealers of a leading German Auto Manufacturer in US on its digital retailing solution.

started the implementation process for NFS Ascent Retail in Taiwan related to the DFS contract.

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 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.

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 from home.

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 locations.

work environment created by COVID-19 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 needs.

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 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

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.

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

Russia’s invasion of Ukraine, the global economy could pose possible barriers to trade

and cross border investment which could lead to lower incomes, inflated prices for goods

and services, and reduced investment opportunities and returns across the world.

global stock markets have continued to decline since the beginning of the year bringing fears of a global recession.

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, and with the recent resurgence in China, 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.

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.

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.

IN FINANCIAL CONDITION

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

Ended March 31, 2022 Compared to the Quarter Ended March 31, 2021

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

31, 2022 and 2021 as a percentage of revenues.

the Three Months

and consultants

and amortization

For the Three Months

Ended March 31,

Net Revenues:

Subscription and support

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

and development cost

Salaries and consultants

Depreciation and amortization

Total cost of revenues

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

income (loss)

Non-controlling

income (loss) attributable to NetSol

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Non-controlling interest

Net loss attributable to NetSol

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

19 unchanged sentences

(Unfavorable)

the Three Months

Total Favorable

For the Three Months

(Unfavorable)

(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

Ended March 31,

Net Revenues:

$ (1,013,957 )

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (1,186,262 )

$ (1,001,524 )

revenues for the quarter ended March 31, 2022 and 2021 are broken out among the segments as follows:

North America

fees for the three months ended March 31, 2022 were $1,620,827 compared to $2,120,963 for the three months ended March 31, 2021 reflecting

a decrease of $500,136 with a change in constant currency of $312,062.

During the three months ended March 31, 2022, we recognized approximately

$1,117,000 related to a new agreement with DTFS for the sale of both our legacy and Ascent product ® for their new business

segment in the South African market and $465,000 from the DFS contract.

During the three months ended March 31, 2021, we recognized approximately

$2,100,000 related to a license agreement with an existing tier one finance company in Thailand for our CAP and CMS solutions.

and support fees for the three months ended March 31, 2022 were $6,554,540 compared to $5,674,776 for the three months ended March 31,

2021 reflecting an increase of $879,764 with a change in constant currency of $1,330,584.

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.

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

The cost of sales was

$7,830,375 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 major increase is related to the revised

ceiling amount for post contract support due to the software customizations related to the DFS 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 March 31, 2022 was $6,634,459 compared to $5,988,257 for the three months ended March 31, 2021 reflecting

an increase of $646,202 with an increase in constant currency of $1,021,265.

The increase is primarily due to services provided to customers

during the implementation phase.

gross profit was $5,834,570, for the three months ended March 31, 2022 as compared with $6,425,448 for the three months ended March 31,

This is a decrease of $590,878 with a change in constant currency of $377,327.

The gross profit percentage for the three months

ended March 31, 2022 also decreased to 39.4% from 46.6% for the three months ended March 31, 2021.

The cost of sales was $8,975,256 for

the three months ended March 31, 2022 compared to $7,358,548 for the three months ended March 31, 2021 for an increase of $1,616,708

and on a constant currency basis an increase of $2,417,114.

As a percentage of sales, cost of sales increased from 53.4% for the three

months ended March 31, 2021 to 60.6% for the three months ended March 31, 2022.

and consultant fees increased by $1,384,596 from $5,372,302 for the three months ended March 31, 2021 to $6,756,898 for the three months

ended March 31, 2022 and on a constant currency basis increased by $1,977,061.

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.

a percentage of sales, salaries and consultant expense increased from 39.0% for the three months ended March 31, 2021 to 45.6% for the

three months ended March 31, 2022.

expense was $256,730 for the three months ended March 31, 2022 compared to $151,075 for the three months ended March 31, 2021 for an

increase of $105,655 with an increase in constant currency of $127,526.

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 amortization expense decreased to $741,587 compared to $759,768 for the three months ended March 31, 2021 or a decrease of $18,181

and on a constant currency basis an increase of $69,770.

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.

cost increased to $1,220,041 for the three months ended March 31, 2022 compared to $1,075,403 for the three months ended March 31, 2021

or an increase of $144,638 and on a constant currency basis an increase of $242,757.

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,

expenses were $6,373,875 for the three months ended March 31, 2022 compared to $5,963,229, for the three months ended March 31, 2021

for an increase of 6.9% or $410,646 and on a constant currency basis an increase of 13.8% or $808,935.

As a percentage of sales,

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.

As a percentage of sales, it decreased

from 43.3% to 43.0%.

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 $2,074,873 for the three months ended March 31, 2022 compared to $1,595,967, for the three months ended March 31, 2021

for an increase of $478,906 and on a constant currency basis an increase of $635,079.

and administrative expenses were $3,841,655 for the three months ended March 31, 2022 compared to $3,860,509 at March 31, 2021 or a decrease

of $18,854 or 0.5% and on a constant currency basis an increase of $178,602 or 4.6%.

During the three months ended March 31, 2022, salaries

decreased by approximately $116,198 and increased $17,034 on a constant currency basis, and other general and administrative expenses

increased approximately $97,344 or $161,568 on a constant currency basis.

and development cost was $251,001 for the three months ended March 31, 2022 compared to $234,678, for the three months ended March 31,

2021 for an increase of $16,323 and on a constant currency basis an increase of $45,325.

from Operations

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.

from operations was $539,305 for the three months ended March 31, 2022 compared to income from operations of $462,219 for the three months

ended March 31, 2021.

This represents a decrease of $1,001,524 with a decrease of $1,186,262 on a constant currency basis for the three

months ended March 31, 2022 compared with the three months ended March 31, 2021.

As a percentage of sales, loss from operations was 3.6%

for the three months ended March 31, 2022 compared to income from operations of 3.4% for the three months ended March 31, 2021.

Income and Expense

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.

income was $679,437 for the three months ended March 31, 2022 compared to other expense of $1,304,233 for the three months ended March

This represents an increase of $1,938,670 with an increase of $2,068,460 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

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared

dollar and the Euro.

During the three months ended March 31, 2022, we recognized a gain of $499,516 in foreign currency exchange

transactions compared to a loss of $1,825,349 for the three months ended March 31, 2021.

During the three months ended March 31, 2022,

the value of the U.S.

dollar and the Euro increased 3.2% and 1.2%, respectively, compared to the PKR.

During the three months ended December 31,

During the three months ended March

31, 2021, the value of the U.S.

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

dollar and the Euro decreased 4.5% and 8.7%, 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

the three months ended March 31, 2022, the net income attributable to non-controlling interest was $260,998, compared to net loss of

$351,939 for the three months ended March 31, 2021.

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

income of NetSol PK.

loss attributable to NetSol

loss was $278,470 for the three months ended March 31, 2022 compared to a net loss of $623,231 for the three months ended

March 31, 2021.

This is a decrease of $344,761 with a decrease of $152,119 on a constant currency basis, compared to the prior year.

For the three months ended March 31, 2022, net loss per share was $0.02 for basic and diluted shares compared to a net loss per

share of $0.05 for basic and diluted shares for the three months ended March 31, 2021.

Months Ended March 31, 2022 Compared to the Nine Months Ended March 31, 2021

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

31, 2022 and 2021 as a percentage of revenues.

the Six Months

and consultants

and amortization

For the Nine Months

Ended March 31,

Net Revenues:

Subscription and support

Total net revenues

Cost of revenues:

and marketing

and amortization

and administrative

and development cost

Salaries and consultants

Depreciation and amortization

Total cost of revenues

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

Selling and marketing

Depreciation and amortization

General and administrative

Research and development cost

Total operating expenses

Income from operations

Other income and (expenses)

Gain (loss) on sale of assets

Interest expense

Interest income

Gain (loss) 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 (loss) attributable to NetSol

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

17 unchanged sentences

currency and in constant currency.

the Three Months

(Unfavorable)

(Unfavorable) Change

For the Nine 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

Ended March 31,

Net Revenues:

$ (1,360,974 )

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (1,250,827 )

$ (1,110,325 )

revenues for the nine months ended March 31, 2022 and 2021 are broken out among the segments as follows:

North America

fees for the nine months ended March 31, 2022 were $3,586,874 compared to $4,710,942 for the nine months ended March 31, 2021 reflecting

a decrease of $1,124,068 with a change in constant currency of $774,842.

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

During the nine months ended March 31, 2022, we recognized approximately

$3,039,000 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, Australian and South African markets and $465,000 from the DFS contract.

During the nine months ended March

31, 2021, we recognized approximately $2,410,000 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 approximately $2,100,000 related to an agreement with an existing

tier one finance company in Thailand.

and support fees for the nine months ended March 31, 2022 were $22,159,798 compared to $16,571,441 for the nine months ended March 31,

2021 reflecting an increase of $5,588,357 with a change in constant currency of $6,404,824.

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.

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 nine months ended March 31, 2022.

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.

1 unchanged sentence

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

income for the nine months ended March 31, 2022 was $17,956,877 compared to $18,270,451 for the nine months ended March 31, 2021 reflecting

a decrease of $313,574 with a decrease in constant currency of $118,293.

The decrease is not material and is due to timing of implementation

services and change requests.

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 $18,920,180, for the nine months ended March 31, 2022 as compared with $18,849,332 for the nine months ended March 31,

This is an increase of $70,848 with a change in constant currency of $396,356.

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 gross profit percentage for the nine months

ended March 31, 2022 decreased to 43.3% from 47.7% for the nine months ended March 31, 2021.

The cost of sales was $24,783,369 for the

nine months ended March 31, 2022 compared to $20,703,502 for the nine months ended March 31, 2021 for an increase of $4,079,867 and on

a constant currency basis an increase of $5,115,333.

As a percentage of sales, cost of sales increased from 52.3% for the nine months

ended March 31, 2021 to 56.7% for the nine months ended March 31, 2022.

and consultant fees increased by $2,887,612 from $15,193,613 for the nine months ended March 31, 2021 to $18,081,225 for the nine months

ended March 31, 2022 and on a constant currency basis increased by $3,644,636.

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

a percentage of sales, salaries and consultant expense increased from 38.4% for the nine months ended March 31, 2021 to 41.4% for the

nine months ended March 31, 2022.

expense was $753,698 for the nine months ended March 31, 2022 compared to $414,001 for the nine months ended March 31, 2021 for an increase

of $339,697 with an increase in constant currency of $361,876.

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

begin lifting travel restrictions.

and amortization expense increased to $2,236,190 compared to $2,180,766 for the nine months ended March 31, 2021 or an increase of $55,424

and on a constant currency basis an increase of $192,071.

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.

cost increased to $3,712,256 for the nine months ended March 31, 2022 compared to $2,915,122 for the nine months ended March 31, 2021

or an increase of $797,134 and on a constant currency basis an increase of $916,750.

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

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

expenses were $18,445,227 for the nine months ended March 31, 2022 compared to $17,264,054, for the nine months ended March 31, 2021

for an increase of 6.8% or $1,181,173 and on a constant currency basis an increase of 9.5% or $1,647,183.

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.

As a percentage of sales, it

decreased from 43.7% to 42.2%.

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

expenses and research and development costs.

expenses were $5,502,028 for the nine months ended March 31, 2022 compared to $4,763,598, for the nine months ended March 31, 2021 for

an increase of $738,430 and on a constant currency basis an increase of $949,864.

and administrative expenses were $11,548,097 for the nine months ended March 31, 2022 compared to $11,353,933 at March 31, 2021 for an

increase of $194,164 or 1.7% and on a constant currency basis an increase of $383,805 or 3.4%.

During the nine months ended March 31,

2022, salaries increased by approximately $90,956 or $238,165 on a constant currency basis, and professional services increased approximately

$155,897 or $151,683 on a constant currency basis and other general and administrative expenses decreased approximately $339,949 or $296,216

on a constant currency basis.

and development cost was $761,621 for the nine months ended March 31, 2022 compared to $431,086, for the nine months ended March 31,

2021 for an increase of $330,535 and on a constant currency basis an increase of $379,867.

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.

from operations was $474,953 for the nine months ended March 31, 2022 compared to $1,585,278 for the nine months ended March 31, 2021.

This represents a decrease of $1,110,325 with a decrease of $1,250,827 on a constant currency basis for the nine months ended March 31,

2022 compared with the nine months ended March 31, 2021.

As a percentage of sales, income from operations was 1.1% for the nine months

ended March 31, 2022 compared to income from operations of 4.0% for the nine months ended March 31, 2021.

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.

income was $3,023,355 for the nine months ended March 31, 2022 compared to other expense of $873,275 for the nine months ended March

This represents an increase of $3,896,630 with an increase of $4,046,106 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.

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared

dollar and the Euro.

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,

During the nine months ended March 31, 2022, we recognized a gain of $2,684,680 in foreign currency

exchange transactions compared to a loss of $1,515,327 for the nine months ended March 31, 2021.

During the nine months ended March 31,

2022, the value of the U.S.

dollar and the Euro increased 15.9% and 8.5%, respectively, compared to the PKR.

During the nine months ended

March 31, 2021, the value of the U.S.

dollar and the Euro decreased 8.0% and 1.9%, respectively, compared to the PKR.

Non-controlling

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 $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.

the nine months ended March 31, 2022, the net income attributable to non-controlling interest was $1,655,287, compared to $216,900 for

the nine months ended March 31, 2021.

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

Income (loss) attributable to NetSol

income was $1,316,284 for the nine months ended March 31, 2022 compared to a net loss of $147,781 for the nine months ended March 31,

This is an increase of $1,464,065 with an increase of $1,265,521 on a constant currency basis, compared to the prior year.

the nine months ended March 31, 2022, net income per share was $0.12 for basic and diluted shares compared to a net loss per share of

$0.01 for basic and diluted shares for the nine months ended March 31, 2021.

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 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

GAAP measures for the three and nine months ended March 31, 2022 and 2021 are as follows:

For the Three Months Ended

For the Nine Months Ended

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

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

AND CAPITAL RESOURCES

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.

cash position was $30,573,312 at March 31, 2022, compared to $33,705,154 at June 30, 2021.

cash provided by operating activities was $5,525,951 for the nine months ended March 31, 2022 compared to $10,387,344 for the nine months

ended March 31, 2021.

At March 31, 2022, we had current assets of $55,103,247 and current liabilities of $23,595,149.

We had accounts

receivable of $7,054,468 at March 31, 2022 compared to $4,184,096 at June 30, 2021.

We had revenues in excess of billings of $15,604,587

at March 31, 2022 compared to $15,637,734 at June 30, 2021 of which $993,862 and $957,603 is shown as long term as of March 31, 2022

and June 30, 2021, respectively.

The long-term portion was discounted by $38,333 and $66,779 at March 31, 2022 and June 30, 2021, respectively,

using the discounted cash flow method with interest rates ranging from 4.65% to 6.25%.

During the nine months ended March 31, 2022, our

revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract.

combined totals for accounts receivable and revenues in excess of billings increased by $2,837,225 from $19,821,830 at June 30, 2021

to $22,659,055 at March 31, 2022.

Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted

to $6,317,127 and $9,622,669, respectively at March 31, 2022.

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 nine months ended March 31, 2022 and 2021 were 133 and 183 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 $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.

cash used in investing activities was $1,359,605 for the nine months ended March 31, 2022, compared to $2,133,265 for the nine months

ended March 31, 2021.

We had purchases of property and equipment of $1,680,856 compared to $2,109,058 for the nine months ended March

For the nine months ended March 31, 2021, we invested $155,000, in Drivemate.

cash used in financing activities was $833,103 for the nine months ended March 31, 2022, compared to $488,572 for the nine months ended

March 31, 2021.

For the nine months ended March 31, 2022, we purchased 22,510 shares of our own stock for $100,106 compared to the purchase

of 603,688 shares for $2,064,800 for the same period last year.

The nine months ended March 31, 2022 included the cash inflow of $312,467

from bank proceeds compared to $2,109,572 for the same period last year.

During the nine months ended March 31, 2022, we had net payments

for bank loans and finance leases of $1,045,464 compared to $533,344 for the nine months ended March 31, 2021.

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.

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 December 31, 2021, we had approximately

As of March 31, 2022, we had approximately

$30.6 million of cash, cash equivalents and marketable securities of which approximately $29.3 million is held by our foreign subsidiaries.

49 unchanged sentences

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