What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-05-12 · 191 added, 362 removed, 306 unchanged (64% 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 nine months ended March 31, 2022.

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 months ended September 30, 2022.

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, 2022, 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 .

57 unchanged sentences

portfolio of solutions and services, it continues to maintain regional offices in the following locations:

Metropolitan area and Horsham in the UK

Karachi, Bangkok, Beijing, Shanghai, Jakarta and Sydney

Los Angeles Area

London Metropolitan area and Horsham in the UK

Lahore, Karachi, Bangkok, Beijing, Shanghai, Jakarta and Sydney

believes that our strong technology solutions offer our customers a return on their investment and allows us to thrive in a hyper competitive

53 unchanged sentences

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.

(KYC), payment processors, and vehicle delivery providers amongst others.

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.

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.

8 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 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.

below are a few of NetSol’s highlights for the quarter ended September 30, 2022:

partnered with Amazon Web Services to offer cloud computing services, providing an innovative transformation of our cloud-based solutions.

Since this launch, we have already signed our first customer, a leading software house based in the US.

We signed a contract with a tier

1 automotive company in the U.S.

for our Otoz mobility solution which will manage the back-office operations for vehicle subscriptions.

launched a new product offering – Flex, which is a cloud-based ready-to-use calculation engine that guarantees precise calculations

at all stages of the contract lifecycle.

We successfully signed our first Flex contract with European

Merchant Bank.

went live with its 28th dealer and is now with dealers in 13 states.

The onboarding of these new dealers will help the business

generate approximately $0.750 million to $1 million in annual recurring revenues.

sales pipeline continues to be strong with the addition of some new prospects who have registered their interests in NFS Ascent®,

digital, and legacy solutions across various regions pushing the total pipeline size to approximately $200 million.

have expanded our footprint within China by opening a new office in Tianjin.

This office will support both the ongoing delivery operations

as well as the professional services vertical growth within China.

Two new statements of work signed with BAIC and BYD by the China team

for Professional Services will be delivered and supported by Tianjin team.

effectively generated approximately $2.0 million by successfully implementing change requests from various customers across multiple

successfully renegotiated an existing maintenance contract with a leading finance company of a U.S.

based auto manufacturer in China

increasing the annual maintenance fees to $500K from $280K.

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 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.

countries no longer require COVID-19 testing and other travel restrictions have been lifted which increases opportunities to meet face

to face with current and potential customers.

Ascent ® SaaS offering is gaining traction in mid-size auto captives in North American and European markets.

auto and banking sectors continue momentum towards increased mobility and digital solutions.

developing markets, we continue to see interest from existing clients for upgrades and mobility platforms.

TM platform is showing a steady growth of interest from existing and new auto leasing and Tier 1 companies in all of our markets.

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.

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.

auto sector remains strong with customers requesting additional services reflecting the resilience of our offerings.

has been an increase in business development activities in the US, the UK, and the Scandinavian regions.

is a growing interest from long-time customers in upgrading from our legacy NFS solution to Ascent ® .

economic conditions in our geographic markets;

geopolitical tensions, including trade wars, tariffs and/or sanctions in our geographic

Global pandemics, including COVID-19;

and, global conflicts or disasters that impact the global economy or one or more sectors

of the global economy.

fear of global recession impacts the future expansions and budgets in every country and every sector.

Negative currency impact due to the devaluation of the Pakistan Rupee and the UK Pounds Sterling in comparison with the US Dollar.

Inflation and higher interest rates have greatly increased the cost of doing business worldwide affecting profitability.

and hostility between Russia and Ukraine have created global uncertainty.

travel and 7 days quarantine rules have yet to soften and is adversely affecting business travels and face to face meetings with decision

inflation globally and in Pakistan has impacted compensation and benefits for employees resulting in increased turnover in Pakistan.

It has also increased costs of salaries and benefits for all of our subsidiaries.

markets including the NASDAQ index and the Russell 2000 index have been down by over 20% in 2022.

from the office might never return to 100% affecting productivity and collaboration.

Pakistan political environment will likely remain unsteady until the new elections are called.

IN FINANCIAL CONDITION

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

Ended September 30, 2022 Compared to the Quarter Ended September 30, 2021

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

30, 2022 and 2021 as a percentage of revenues.

For the Three Months

Ended March 31,

Ended September 30,

Net Revenues:

11 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from operations

Other income and (expenses)

4 unchanged sentences

Share of net loss from equity investment

Other income (expense)

Total other income (expenses)

1 unchanged sentence

Income tax provision

Net income (loss)

Non-controlling interest

Net loss attributable to NetSol

Net income (loss) attributable to NetSol

Net income (loss) per share:

Net income (loss) per common share

Weighted average number of shares outstanding

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

18 unchanged sentences

(Unfavorable)

Total Favorable

For the Three Months

(Unfavorable)

Ended March 31,

(Unfavorable)

Ended September 30,

Net Revenues:

5 unchanged sentences

$ (2,040,016 )

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

$ (1,256,581 )

revenues for the quarter ended September 30, 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.

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

fees for the three months ended September 30, 2022 were $249,960 compared to $10,716 for the three months ended September 30, 2021 reflecting

an increase of $239,244 with a change in constant currency of $314,135.

During the three months ended September 30, 2022, we recognized

approximately $188,000 related to a new agreement with the Government of Khyber Pakhtunkhwa for the sale of our Ascent ®

and support fees for the three months ended September 30, 2022 were $6,016,834 compared to $6,230,389 for the three months ended September

30, 2021 reflecting a decrease of $213,555 with an increase in constant currency of $1,031,505.

The reason for the decrease in subscription

and support revenue is the decrease in the value of major currencies compared to the USD.

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, 2022 was $6,439,325 compared to $7,179,656 for the three months ended September 30, 2021

reflecting a decrease of $740,331 with an increase in constant currency of $753,055.

The decrease is primarily due to the devaluation

of major currencies compared to the USD.

gross profit was $4,251,997, for the three months ended September 30, 2022 as compared with $5,443,023 for the three months ended September

This is a decrease of $1,191,026 with a decrease in constant currency of $736,222.

The gross profit percentage for the three

months ended September 30, 2022 also decreased to 33.5% from 40.6% for the three months ended September 30, 2021.

The cost of sales was

$8,454,122 for the three months ended September 30, 2022 compared to $7,977,738 for the three months ended September 30, 2021 for an

increase of $476,384 and on a constant currency basis an increase of $2,834,917.

As a percentage of sales, cost of sales increased from

59.4% for the three months ended September 30, 2021 to 66.5% for the three months ended September 30, 2022.

and consultant fees increased by $424,325 from $5,662,410 for the three months ended September 30, 2021 to $6,086,735 for the three months

ended September 30, 2022 and on a constant currency basis increased by $2,070,440.

The increase is due to annual salary raises, and new

As a percentage of sales, salaries and consultant expense increased from 42.2% for the three months ended September 30, 2021

to 47.9% for the three months ended September 30, 2022.

expense was $392,345 for the three months ended September 30, 2022 compared to $214,132 for the three months ended September 30, 2021

for an increase of $178,213 with an increase in constant currency of $292,280.

The increase in travel expense is due to the increase

in travel as countries begin lifting travel restrictions.

and amortization expense decreased to $654,049 compared to $765,735 for the three months ended September 30, 2021 or a decrease of $111,686

and on a constant currency basis an increase of $121,361.

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

costs decreased to $1,320,993 for the three months ended September 30, 2022 compared to $1,335,461 for the three months ended September

30, 2021 or a decrease of $14,468 and on a constant currency basis an increase of $350,836.

The increase is mainly due to increases in

repair and maintenance costs and computer costs.

expenses were $6,148,188 for the three months ended September 30, 2022 compared to $6,082,633, for the three months ended September 30,

2021 for an increase of 1.1% or $65,555 and on a constant currency basis an increase of 21.4% or $1,303,794.

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

As a percentage of sales,

it increased from 45.3% to 48.4%.

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

and development costs offset by a decrease in general and administrative expenses.

expenses were $1,762,177 for the three months ended September 30, 2022 compared to $1,619,993, for the three months ended September 30,

2021 for an increase of $142,184 and on a constant currency basis an increase of $513,327.

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,

and administrative expenses were $3,725,430 for the three months ended September 30, 2022 compared to $3,973,139 at September 30, 2021

or a decrease of $247,709 or 6.2% and on a constant currency basis an increase of $415,933 or 10.5%.

During the three months ended September

30, 2022, salaries decreased by approximately $289,982 and increased $88,617 on a constant currency basis, and other general and administrative

expenses increased approximately $156,493 or $437,776 on a constant currency basis.

and development cost was $469,627 for the three months ended September 30, 2022 compared to $275,230, for the three months ended September

30, 2021 for an increase of $194,397 and on a constant currency basis an increase of $347,217.

from Operations

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.

from operations was $1,896,191 for the three months ended September 30, 2022 compared to loss from operations of $639,610 for the three

months ended September 30, 2021.

This represents an increase in the loss of $1,256,581 with an increase in the loss of $2,040,016 on

a constant currency basis for the three months ended September 30, 2022 compared with the three months ended September 30, 2021.

percentage of sales, loss from operations was 14.9% for the three months ended September 30, 2022 compared to loss from operations

of 4.8% for the three months ended September 30, 2021.

Income and Expense

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

income was $1,651,568 for the three months ended September 30, 2022 compared to $1,357,732 for the three months ended September 30, 2021.

This represents an increase of $293,836 with an increase of $880,038 on a constant currency basis.

The increase is primarily

due to the foreign currency exchange transactions.

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

the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared to the U.S.

dollar and the Euro.

During the three months ended March 31, 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,

During the three months ended September 30, 2022, we recognized a gain of $1,315,705 in foreign currency exchange

transactions compared to $1,284,148 for the three months ended September 30, 2021.

During the three months ended September 30, 2022,

the value of the U.S.

dollar and the Euro increased 11.0% and 4.11%, respectively, compared to the PKR.

During the three months ended March

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

dollar and the Euro decreased 4.5% and 8.7%, respectively, compared to the PKR.

During the three months ended

September 30, 2021, the value of the U.S.

dollar and the Euro increased 8.1% and 5.5%, respectively, compared to the PKR.

Non-controlling

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.

the three months ended September 30, 2022, the net income attributable to non-controlling interest was $182,758, compared to $362,526

for the three months ended September 30, 2021.

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

net loss was $620,729 for the three months ended September 30, 2022 compared to net income of $187,969 for the three months ended September

This is a decrease of $808,698 with a decrease of $1,100,209 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.

For the Nine Months

Ended March 31,

Net Revenues:

Subscription and support

Total net revenues

Cost of revenues:

Salaries and consultants

Depreciation and amortization

Total cost of revenues

Operating expenses:

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.

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.

(Unfavorable)

(Unfavorable) Change

For the Nine Months

(Unfavorable)

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 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 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.

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 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 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 38.4% 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 $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 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 43.7% 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 $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 $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;

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 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 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.

the three months ended September 30, 2022, net loss per share was $0.06 for basic and diluted shares compared to net income per share

of $0.02 for basic and diluted shares for the three months ended September 30, 2021.

Financial Measures

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reconciliation of the non-GAAP financial measures of adjusted EBITDA and non-GAAP earnings per basic and diluted share to the most comparable

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

GAAP measures for the three months ended September 30, 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

September 30, 2022

September 30, 2021

Net Income (loss) attributable to NetSol

18 unchanged sentences

AND CAPITAL RESOURCES

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.

cash position was $20,922,948 at September 30, 2022, compared to $23,963,797 at June 30, 2022.

cash provided by operating activities was $1,298,857 for the three months ended September 30, 2022 compared to net cash used in operating

activities $3,391,653 for the three months ended September 30, 2021.

At September 30, 2022, we had current assets of $44,070,743 and

current liabilities of $18,969,718.

We had accounts receivable of $7,319,856 at September 30, 2022 compared to $8,669,202 at June 30,

We had revenues in excess of billings of $14,061,982 at September 30, 2022 compared to $15,425,377 at June 30, 2022 of which $714,458

and $853,601 is shown as long term as of September 30, 2022 and June 30, 2022, respectively.

The long-term portion was discounted by

$18,656 and $28,339 at September 30, 2022 and June 30, 2022, respectively, using the discounted cash flow method with interest rates

ranging from 4.65% to 6.25%.

During the three months ended September 30, 2022, 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 decreased by $2,712,741 from $24,094,579 at June 30, 2022 to $21,381,838 at September 30, 2022.

Accounts payable

and accrued expenses, and current portions of loans and lease obligations amounted to $7,029,527 and $7,426,972, respectively at September

Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $6,813,541 and $8,567,145,

respectively at June 30, 2022.

average days sales outstanding for the three months ended September 30, 2022 and 2021 were 165 and 147 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 $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.

cash used in investing activities was $893,994 for the three months ended September 30, 2022, compared to $196,407 for the three months

ended September 30, 2021.

We had purchases of property and equipment of $1,347,601 compared to $216,112 for the three months ended September

cash used in financing activities was $445,737 for the three months ended September 30, 2022, compared to $463,570 for the three months

ended September 30, 2021.

For the three months ended September 30, 2021, we purchased 22,510 shares of our own stock for $100,106.

the three months ended September 30, 2022, we had net payments for bank loans and finance leases of $445,737 compared to $363,464 for

the three months ended September 30, 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 March 31, 2022, we had approximately

As of September 30, 2022, we had approximately

$20.9 million of cash, cash equivalents and marketable securities of which approximately $18.4 million is held by our foreign subsidiaries.

21 unchanged sentences

PK also has an approved export refinance facility of Rs.

380 million ($2,073,896) and a running finance facility of Rs.

120 million ($654,915)

from Samba Bank Limited.

During the tenure of loan, these two facilities require NetSol PK to maintain at a minimum a current ratio of

1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.

380 million ($1,666,447) from Samba Bank Limited.

During the tenure of loan,

these two facilities require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage

ratio of 2 times, and a debt service coverage ratio of 4 times.

of the date of this report, we are in compliance with the financial covenants associated with our borrowings.

21 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