What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-02-13 compared with 2023-11-07 · 328 added, 160 removed, 470 unchanged (51% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

the three months ended September 30, 2023.

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

our Annual Report on Form 10-K for the year ended June 30, 2023, and the Condensed Consolidated Financial Statements and notes thereto

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

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, 2023.

The following discussion should be read in conjunction with the information

included within our Annual Report on Form 10-K for the year ended June 30, 2023, and the Condensed Consolidated Financial Statements

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

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

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Metropolitan area and Horsham, Flintshire

Karachi, Bangkok, Beijing, Shanghai, Jakarta and Sydney

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

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

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We believe that people are the drivers of success;

we invest heavily in our hiring, training and retention of top-notch staff to ensure not only successful selling, but also the ongoing

we invest heavily in our hiring, training and retention of outstanding staff to ensure not only successful selling, but also the ongoing

satisfaction of our clients.

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It is the ultimate origination application that enables users

to compare, select and configure an asset using a mobile device anywhere, at any time and submit an accompanying financial product

to compare, select and configure an asset using a mobile device anywhere, at any time and submit an accompanying financial product application.

is a powerful, self-service mobile solution.

It empowers the dealer with a powerful backend system and allows the customer to setup

a secure account and view information 24/7 to keep track of contract status, resolve queries and make payments, reducing inbound

calls for customer queries and improving turnaround time for repayments.

It empowers the dealer with a powerful backend system and allows the customer to setup a

secure account and view information 24/7 to keep track of contract status, resolve queries and make payments, reducing inbound calls

for customer queries and improving turnaround time for repayments.

Point of Sale

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loan calculator, work queues and detailed reporting.

mPOS empowers the dealer to make the origination process quick and seamless,

increasing overall productivity and system-wide efficiency.

mPOS empowers the dealer to make the origination process quick and seamless, increasing

overall productivity and system-wide efficiency.

provides more visibility and control over inventories – with minimal effort.

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empowers collections teams to do more, with an easy-to-use interface and intelligent architecture.

The tool exponentially increases

the productivity of field teams by enabling them to carry out all collection related tasks on the go.

The tool exponentially increases the

productivity of field teams by enabling them to carry out all collection related tasks on the go.

Field Investigator

using Mobile Field Investigator (mFI), the applicant has access to powerful features that permit detailed applicant field verifications

The application features a reporting dashboard that displays progress stats, action items and the latest notifications,

enabling the client to achieve daily goals while tracking performance.

The application features a reporting dashboard that displays progress stats, action items and the latest notifications, enabling

the client to achieve daily goals while tracking performance.

Digital Auto Retail and Mobility Orchestration

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and provide a holistic view of their business processes.

below are a few of NetSol’s highlights for the quarter ended September 30, 2023:

Company renegotiated to extend the NFS Ascent license term for an existing client in Thailand for another 3 years.

The extension

generated approximately $1.1 million in revenues.

Company implemented modifications requested by a number of its existing customers across multiple geographies to generate over $1.1

million in revenues.

Company concluded the implementation re-planning activity with one of its existing clients to generate nearly $1.7 million in revenues

on top of the previously contracted revenues.

Company onboarded two new asset finance companies to use its recently launched product FLEX, which will further strengthen the recurring

revenues of the business.

Company concluded its discussions with an existing customer to generate additional service revenue of approximately $1.9 million

across the APAC region.

Company began a professional services project with the finance company of a current customer in China.

below are a few of NetSol’s highlights for the quarter ended December 31, 2023:

Company contracted with an auto captive finance company of a renowned US auto manufacturer based in China.

This contract is expected

to generate approximately $1 million in revenues for the business.

Company signed a professional services contract with a renowned IT consultancy firm based in the US which would generate approximately

$300K in revenues over the term of the contract.

to generate approximately $12 million over the next five years.

Company implemented modifications requested by several of its existing customers across multiple geographies to generate over $1.7

million in revenues.

went live in Taiwan with the Company’s NFS retail product.

& Dean Finance was onboarded on Flex, and Haydock, an existing Flex customer, purchased additional products within our ApexNow

Company hired and appointed Mr.

Erik Wagner as its Chief Marketing Officer.

Mr Wagner is a seasoned professional and brings diversified

experience of over sixteen years in the field of marketing with a special focus on the technology sector across different regions

of the globe.

has identified the following material trends affecting NetSol.

to S&P Global Mobility, new vehicles sales globally are expected to reach 84 million units in 2023 for a 5.6% increase.

sales volumes are expected to reach approximately 15 million units, an estimated increase of 8% from the projected 2022 levels.

inflation rate over the last few months to approximately 3.7% in 2023.

to PR Newswire, December 14, 2023, and the S&P Global Mobility, new vehicles sales globally are expected to reach 86 million

units in 2023 for an 8.9% increase over 2022 and forecasts 2024 auto sales at 88.3 million for a 2.8% increase over 2023.

automotive sales volumes are expected to reach approximately 15.5 million units, an estimated increase of 9% from the projected 2022

levels, and 2024 sales are expected to reach 15.9 million for an estimated increase of 2% compared to 2023.

inflation rate ended at 3.4% for 2023.

(CNN Business, January 11, 2024)

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

Chinese car market is expected to maintain its position as the world’s largest and fastest growing, projecting 10% sales

growth to 25.5 million units, with electric vehicles (EVs) representing nearly 35% of new sales.

Government incentives, reduced car

taxes, and preferential financing rates contributed to an 8.8% increase in Chinese auto sales in the first half of 2023, with total

vehicle sales, including trucks and buses, rising by 9.8% to 13.2 million.

Chinese car market is expected to maintain its position as the world’s largest and fastest growing, projecting 10% sales growth

to 25.5 million units, with electric vehicles (EVs) representing nearly 35% of new sales.

Government incentives, reduced car taxes,

and preferential financing rates contributed to an 8.8% increase in Chinese auto sales in the first half of 2023, with total vehicle

sales, including trucks and buses, rising by 9.8% to 13.2 million.

China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $65 billion investment, from the originally

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according to Precedence Research.

conflict escalating in the Middle East region has disturbed the entire area, which could cause higher global inflation amid growing

concerns over sharp rise in oil prices (Guardian, October 18, 2023).

Russell Index finished 2023 with a 15.1% gain after falling 21.6% in 2022.

(CBS News December 29, 2023)

real gross domestic product (GDP) for the US increased at an annual rate of 3.3% in the fourth quarter of 2023 according to the advance

estimate released by the Bureau of Economic Analysis.

In the third quarter, real GDP increased 4.9%.

(Bureau of Economic Analysis

- January 25, 2024)

conflict in Gaza has disrupted the entire Middle East region since October 7, 2023.

This has created uncertainty and has affected

the economies of the neighboring nations.

European Union Real GDP growth is at 0.7% annual growth rate per the World Economic Report October, 2023.

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affecting profitability.

and hostility between Russia and Ukraine continue to foster global uncertainty.

Russell 2000 index, a major benchmark for U.S.

stocks, turned negative for the year in late September 2023.

The index’s year-to-date

performance is a loss of 0.2%.

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

from the office might not return to pre-pandemic levels which may affect employee collaboration potentially lessening efficiency.

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

tensions between the U.S.

Pakistan political and economic environment will likely remain unsteady until new elections schedule on February 8, 2024.

the US-China bilateral summit exceeded expectations, the objective of the summit was risk management.

Continued trade tensions between

and China are causing some American companies to pull out of China and move their supply chain elsewhere.

(Business Insider, Aug.

(Business Insider,

Bookings, January 12, 2024).

IN FINANCIAL CONDITION

Ended September 30, 2023 Compared to the Quarter Ended September 30, 2022

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

Ended December 31, 2023 Compared to the Quarter Ended December 31, 2022

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

31, 2023 and 2022 as a percentage of revenues.

For the Three Months

Ended September 30,

Ended December 31,

Net Revenues:

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Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Other income (expense)

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Net income (loss) attributable to NetSol

$ (2,092,926 )

Net income (loss) per share:

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(Unfavorable)

Ended September 30,

Ended December 31,

Net Revenues:

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$ (3,046,514 )

revenues for the three months ended September 30, 2023 and 2022 are broken out among the segments as follows:

revenues for the three months ended December 31, 2023 and 2022 are broken out among the segments as follows:

North America

fees for the three months ended September 30, 2023 were $1,280,449 compared to $249,960 for the three months ended September 30, 2022

reflecting an increase of $1,030,489 with an increase in constant currency of $1,250,079.

During the three months ended September 30,

2023, we recognized approximately $1,142,000 related to the license renewal with an existing customer.

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 ® product.

and support fees for the three months ended September 30, 2023 were $6,512,243 compared to $6,016,834 for the three months ended September

fees for the three months ended December 31, 2023 were $2,990,453 compared to $15,884 for the three months ended December 31, 2022 reflecting

an increase of $2,974,569 with an increase in constant currency of $3,037,196.

During the three months ended December 31, 2023, we recognized

approximately $2,800,000 related to the sale of our NFS Ascent® CMS software to a renowned US auto manufacturer based in China.

and support fees for the three months ended December 31, 2023 were $6,827,781 compared to $6,502,669 for the three months ended December

31, 2022 reflecting an increase of $325,112 with an increase in constant currency of $293,133.

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fees to gradually increase as we implement both our NFS legacy products and NFS Ascent ® .

income for the three months ended September 30, 2023 was $6,449,489 compared to $6,439,325 for the three months ended September 30, 2022

reflecting an increase of $10,164 with an increase in constant currency of $76,595.

gross profit was $6,162,067, for the three months ended September 30, 2023 compared with $4,251,997 for the three months ended September

income for the three months ended December 31, 2023 was $5,419,707 compared to $5,871,805 for the three months ended December 31, 2022

reflecting a decrease of $452,098 with a decrease in constant currency of $470,501.

The decrease is due to the decrease in fees associated

with current implementations.

gross profit was $7,175,737, for the three months ended December 31, 2023 compared with $3,142.463 for the three months ended December

This is an increase of $4,033,274 with an increase in constant currency of $2,773,031.

The gross profit percentage for the three

months ended September 30, 2023 also increased to 43.3% from 33.5% for the three months ended September 30, 2022.

The cost of sales was

$8,080,164 for the three months ended September 30, 2023 compared to $8,454,122 for the three months ended September 30, 2022 for a decrease

of $373,958 and on a constant currency basis an increase of $1,165,567.

The gross profit percentage for the

three months ended December 31, 2023 also increased to 47.1% from 25.4% for the three months ended December 31, 2022.

The cost of sales

was $8,062,204 for the three months ended December 31, 2023 compared to $9,247,895 for the three months ended December 31, 2022 for a

decrease of $1,185,691 and on a constant currency basis an increase of $105,865.

As a percentage of sales, cost of sales decreased from

for the three months ended September 30, 2022 to 56.7% for the three months ended September 30, 2023.

and consultant fees decreased by $128,592 from $6,086,735 for the three months ended September 30, 2022 to $5,958,143 for the three months

ended September 30, 2023 and on a constant currency basis increased by $962,826.

The increase on a constant currency basis is due to

annual salary raises.

As a percentage of sales, salaries and consultant expense decreased from 47.9% for the three months ended September

30, 2022 to 41.8% for the three months ended September 30, 2023.

expenses were $660,367 for the three months ended September 30, 2023 compared to $392,345 for the three months ended September 30, 2022

74.6% for the three months ended December 31, 2022 to 52.9% for the three months ended December 31, 2023.

and consultant fees decreased by $1,038,809 from $6,942,171 for the three months ended December 31, 2022 to $5,903,362 for the three

months ended December 31, 2023 and on a constant currency basis decreased by $128,762.

As a percentage of sales, salaries and consultant

expense decreased from 56.0% for the three months ended December 31, 2022 to 38.7% for the three months ended December 31, 2023.

expenses were $748,072 for the three months ended December 31, 2023 compared to $635,298 for the three months ended December 31, 2022

for an increase of $112,774 with an increase in constant currency of $229,251.

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in travel as countries have been lifting travel restrictions.

As a percentage of sales, travel expense increased from 3.1% for the three

months ended September 30, 2022 to 4.6% for the three months ended September 30, 2023.

and amortization expense decreased to $392,983 compared to $654,049 for the three months ended September 30, 2022 or a decrease of $261,066

As a percentage of sales, travel expense decreased from 5.1% for the three

months ended December 31, 2022 to 4.9% for the three months ended December 31, 2023.

and amortization expense decreased to $264,374 compared to $693,278 for the three months ended December 31, 2022 or a decrease of $428,904

and on a constant currency basis a decrease of $361,721.

The decrease is primarily attributed to the full amortization of capitalized software costs

in the quarter ending September 30, 2023.

costs decreased to $1,068,671 for the three months ended September 30, 2023 compared to $1,320,993 for the three months ended September

30, 2022 or a decrease of $252,322 and on a constant currency basis a decrease of $45,984.

expenses were $5,811,388 for the three months ended September 30, 2023 compared to $6,148,188, for the three months ended September 30,

The decrease is primarily attributed to the full amortization of capitalized

software costs in the quarter ending December 31, 2023.

costs increased to $1,146,396 for the three months ended December 31, 2023 compared to $977,148 for the three months ended December 31,

2022 or an increase of $169,248 and on a constant currency basis an increase of $367,097.

expenses were $6,148,905 for the three months ended December 31, 2023 compared to $6,188,977, for the three months ended December 31,

2022 for a decrease of $40,072 and on a constant currency basis an increase of $521,827.

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50.0% to 40.4%.

The increase in operating expenses on a constant currency basis was primarily due to increases in selling and marketing

expenses, salaries and wages, professional services, and provision for doubtful debts, offset by a decrease in other general and administrative

expenses were $1,708,865 for the three months ended September 30, 2023 compared to $1,762,177, for the three months ended September 30,

2022 for a decrease of $53,312 and on a constant currency basis an increase of $155,473.

and administrative expenses were $3,586,301 for the three months ended September 30, 2023 compared to $3,725,430 for the three months

ended September 30, 2022 or a decrease of $139,129 and on a constant currency basis an increase of $161,886.

The increase in operating expenses on a constant currency basis was primarily due to increases in salaries and wages,

professional services, and other general and administrative expenses, offset by a decrease in selling and marketing expenses.

expenses were $1,784,510 for the three months ended December 31, 2023 compared to $2,007,462, for the three months ended December 31,

2022 for a decrease of $222,952 and on a constant currency basis a decrease of $52,890.

and administrative expenses were $3,858,195 for the three months ended December 31, 2023 compared to $3,510,389 for the three months

ended December 31, 2022 or an increase of $347,806 and on a constant currency basis an increase of $629,121.

During the three months

ended September 30, 2023, salaries increased by approximately $79,101 and increased $284,266 on a constant currency basis, and other

general and administrative expenses decreased approximately $218,230 or decreased by $122,380 on a constant currency basis.

and development cost was $378,419 for the three months ended September 30, 2023 compared to $469,627, for the three months ended September

30, 2022 for a decrease of $91,208 and on a constant currency basis an increase of $5,279.

ended December 31, 2023, salaries increased by approximately $154,192 and increased $350,096 on a constant currency basis, and other

general and administrative expenses increased approximately $193,6124 or increased by $279,025 on a constant currency basis.

and development cost was $341,411 for the three months ended December 31, 2023 compared to $472,904, for the three months ended December

31, 2022 for a decrease of $131,493 and on a constant currency basis a decrease of $44,230.

from Operations

from operations was $350,629 for the three months ended September 30, 2023 compared to a loss of $1,896,191 for the three months ended

September 30, 2022.

This represents an increase in income of $2,246,820 with an increase in income of $125,444 on a constant currency

basis for the three months ended September 30, 2023 compared with the three months ended September 30, 2022.

As a percentage of sales,

income from operations was 2.5% for the three months ended September 30, 2023 compared to loss of 14.9% for the three months ended September

from operations was $1,026,832 for the three months ended December 31, 2023 compared to a loss of $3,046,514 for the three months ended

December 31, 2022.

This represents an increase in income from operations of $4,073,346 with an increase in income from operations of

$2,251,204 on a constant currency basis for the three months ended December 31, 2023 compared with the three months ended December 31,

As a percentage of sales, income from operations was 6.7% for the three months ended December 31, 2023 compared to loss of 24.6%

for the three months ended December 31, 2022.

Income and Expense

income was $62,329 for the three months ended September 30, 2023 compared to $1,651,568 for the three months ended September 30, 2022.

income was $106,036 for the three months ended December 31, 2023 compared to $864,607 for the three months ended December 31, 2022.

This represents a decrease of $758,571 with a decrease of $738,519 on a constant currency basis.

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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 to the U.S.

dollar and the Euro.

During the three months ended September 30, 2023, we recognized a loss of $134,253 in foreign currency exchange

transactions compared to gain of $1,315,705 for the three months ended September 30, 2022.

During the three months ended September 30,

2023, the value of the U.S.

dollar increased 0.2% and the Euro decreased 2.6%, compared to the PKR.

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 December 31, 2023, we recognized a loss of $14,617 in

foreign currency exchange transactions compared to a gain of $657,223 for the three months ended December 31, 2022.

During the three

months ended December 31, 2023, the value of the U.S.

dollar decreased 2.8% and the Euro increased 1.5%, compared to the PKR.

the three months ended December 31, 2022, the value of the U.S.

dollar decreased 0.7% and the Euro increased 8.5%, compared to the

Non-controlling

the three months ended September 30, 2023, the net income attributable to non-controlling interest was $260,173, compared to $182,758

for the three months ended September 30, 2022.

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

of NetSol PK.

the three months ended December 31, 2023, the net income attributable to non-controlling interest was $574,499, compared to a net

loss attributable to non-controlling interest of $309,037 for the three months ended December 31, 2022.

The increase in

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

income (loss) attributable to NetSol

net income was $30,890 for the three months ended September 30, 2023 compared to a net loss of $620,729 for the three months ended September

This is an increase in income of $651,619 with an increase in loss of $835,295 on a constant currency basis, compared to the

For the three months ended September 30, 2023, net income per share was $0.003 for basic and diluted shares compared to net

loss per share of $0.06 for basic and diluted shares for the three months ended September 30, 2022.

net income was $408,316 for the three months ended December 31, 2023 compared to a net loss of $2,092,926 for the three months ended

December 31, 2022.

This is an increase in net income of $2,501,242 with an increase of $1,191,078 on a constant currency basis, compared

to the prior year.

For the three months ended December 31, 2023, net income per share was $0.04 for basic and diluted shares compared

to net loss per share of $0.19 for basic and diluted shares for the three months ended December 31, 2022.

Months Ended December 31, 2023 Compared to the Six Months Ended December 31, 2022

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

31, 2023 and 2022 as a percentage of revenues.

For the Six Months

Ended December 31,

Net Revenues:

Subscription and support

Total net revenues

Cost of revenues

Operating expenses:

Selling, general and administrative

Research and development cost

Total operating expenses

Income (loss) from operations

Other income and (expenses)

Interest expense

Interest income

Gain (loss) on foreign currency exchange transactions

Share of net loss from equity investment

Other income (expense)

Total other income (expenses)

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

$ (2,713,655 )

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.

We operate in several geographical regions

as described in Note 15 “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)

For the Six Months

Change due to

(Unfavorable)

Ended December 31,

Net Revenues:

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (4,942,705 )

revenues for the six months ended December 31, 2023 and 2022 are broken out among the segments as follows:

North America

fees for the six months ended December 31, 2023 were $4,270,902 compared to $265,844 for the six months ended December 31, 2022

reflecting an increase of $4,005,058 with an increase in constant currency of $4,037,015.

During the six months ended December 31,

2023, we recognized approximately $2,800,000 related to the sale of our NFS Ascent® CMS software to a renowned US auto

manufacturer based in China and we recognized approximately $1,142,000 related to the license renewal with an existing

During the six months ended December 31, 2022, we recognized approximately $188,000 related to a new agreement with the

Government of Khyber Pakhtunkhwa for the sale of our Ascent ® product.

and support fees for the six months ended December 31, 2023 were $13,340,024 compared to $12,519,503 for the six months ended December

31, 2022 reflecting an increase of $820,521 with an increase in constant currency of $792,292.

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 six months ended December 31, 2023 was $11,869,196 compared to $12,311,130 for the six months ended December 31, 2022

reflecting a decrease of $441,934 with a decrease in constant currency of $393,906.

The decrease is due to the decrease in fees associated

with current implementations.

gross profit was $13,337,754, for the six months ended December 31, 2023 compared with $7,394,460 for the six months ended December 31,

This is an increase of $5,943,294 with an increase in constant currency of $3,183,337.

The gross profit percentage for the six

months ended December 31, 2023 also increased to 45.2% from 29.5% for the six months ended December 31, 2022.

The cost of sales was $16,142,368

for the six months ended December 31, 2023 compared to $17,702,017 for the six months ended December 31, 2022 for a decrease of $1,559,649

and on a constant currency basis an increase of $1,271,432.

As a percentage of sales, cost of sales decreased from 70.5% for the six

months ended December 31, 2022 to 54.8% for the six months ended December 31, 2023.

and consultant fees decreased by $1,167,401 from $13,028,906 for the six months ended December 31, 2022 to $11,861,505 for the six months

ended December 31, 2023 and on a constant currency basis increased by $834,064.

The increase is due to annual salary raises.

As a percentage

of sales, salaries and consultant expense decreased from 51.9% for the six months ended December 31, 2022 to 40.2% for the six months

ended December 31, 2023.

expense was $1,408,439 for the six months ended December 31, 2023 compared to $1,027,643 for the six months ended December 31, 2022 for

an increase of $380,796 with an increase in constant currency of $618,393.

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

as countries begin lifting travel restrictions.

and amortization expense decreased to $657,357 compared to $1,347,327 for the six months ended December 31, 2022 or a decrease of $689,970

and on a constant currency basis a decrease of $502,138.

costs decreased to $2,215,067 for the six months ended December 31, 2023 compared to $2,298,141 for the six months ended December 31,

2022 or a decrease of $83,074 and on a constant currency basis an increase of $321,113.

The increase on a constant currency basis is

mainly due to increases in computer costs.

expenses were $11,960,293 for the six months ended December 31, 2023 compared to $12,337,165, for the six months ended December 31, 2022

for a decrease of $376,872 and on a constant currency basis an increase of $806,689.

As a percentage of sales, it decreased from 49.2%

The increase in operating expenses on constant currency basis was primarily due to increases in selling expenses, professional

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

expenses were $3,493,375 for the six months ended December 31, 2023 compared to $3,769,639, for the six months ended December 31, 2022

for a decrease of $276,264 and on a constant currency basis an increase of $102,583.

and administrative expenses were $7,444,496 for the six months ended December 31, 2023 compared to $7,235,819 for the six months ended December 31, 2022 or

an increase of $208,677 and on a constant currency basis an increase of $791,007.

During the six months ended December 31, 2023, salaries

increased by approximately $233,293 and increased $634,362 on a constant currency basis, and other general and administrative expenses

decreased approximately $24,616 and increased $156,645 on a constant currency basis.

and development cost was $719,830 for the six months ended December 31, 2023 compared to $942,531, for the six months ended December

31, 2022 for a decrease of $222,701 and on a constant currency basis a decrease of $38,951.

from Operations

from operations was $1,377,461 for the six months ended December 31, 2023 compared to a loss from operations of $4,942,705 for the six

months ended December 31, 2022.

This represents an increase in income from operations of $6,320,166 with an increase in income from operations

of $2,376,648 on a constant currency basis for the six months ended December 31, 2023 compared with the six months ended December 31,

As a percentage of sales, income from operations was 4.7% for the six months ended December 31, 2023 compared to loss from operations

of 19.7% for the six months ended December 31, 2022.

Income and Expense

income was $168,365 for the six months ended December 31, 2023 compared to $2,516,175 for the six months ended December 31, 2022.

This represents a decrease of $2,347,810 with a decrease of $2,308,740 on a constant currency basis.

The majority of the contracts

with NetSol PK are either in U.S.

dollars or Euros;

therefore, the currency fluctuations will lead to foreign currency exchange

gains or losses depending on the value of the PKR compared to the U.S.

dollar and the Euro.

During the six months ended December 31,

2023, we recognized a loss of $148,870 in foreign currency exchange transactions compared to a gain of $1,972,928 for the six months

ended December 31, 2022.

During the six months ended December 31, 2023, the value of the U.S.

dollar and the Euro decreased 2.6% and

1.2%, respectively, compared to the PKR.

During the six months ended December 31, 2022, the value of the U.S.

dollar and the Euro

increased 10.3% and 12.9%, respectively, compared to the PKR.

Non-controlling

the six months ended December 31, 2023, the net income attributable to non-controlling interest was $834,672, compared to a net loss

of $126,279 for the six months ended December 31, 2022.

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

net income of NetSol PK.

loss attributable to NetSol

net income was $439,206 for the six months ended December 31, 2023 compared to a net loss of $2,713,655 for the six months ended December

This is an increase of $3,152,861 with an increase of $355,783 on a constant currency basis, compared to the prior year.

the six months ended December 31, 2023, net income per share was $0.04 for basic and diluted shares compared to net loss per share of

$0.24 for basic and diluted shares for the six months ended December 31, 2022.

Financial Measures

31 unchanged sentences

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

GAAP measures for the three months ended September 30, 2023 and 2022 are as follows:

GAAP measures for the three and six months ended December 31, 2023 and 2022 are as follows:

For the Three Months

Ended September 30,

For the Six Months

Ended December 31,

Net Income (loss) attributable to NetSol

$ (2,092,926 )

$ (2,713,655 )

Non-controlling interest

2 unchanged sentences

Interest (income)

$ (1,397,950 )

$ (1,107,817 )

Non-cash stock-based compensation

Adjusted EBITDA, gross

$ (1,333,617 )

Less non-controlling interest (a)

Adjusted EBITDA, net

$ (1,326,254 )

$ (1,353,822 )

Weighted Average number of shares outstanding

1 unchanged sentence

Diluted adjusted EBITDA

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

(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

5 unchanged sentences

AND CAPITAL RESOURCES

cash position was $16,551,677 at September 30, 2023, compared to $15,533,254 at June 30, 2023.

cash provided by operating activities was $1,663,619 for the three months ended September 30, 2023 compared to $1,298,857 for the three

months ended September 30, 2022.

At September 30, 2023, we had current assets of $38,675,408 and current liabilities of $18,268,130.

We had accounts receivable of $6,870,956 at September 30, 2023 compared to $11,714,422 at June 30, 2023.

We had revenues in excess of

billings of $13,733,160 at September 30, 2023 compared to $12,377,677 at June 30, 2023 of which $724,875 and $nil is shown as long term

as of September 30, 2023 and June 30, 2023, respectively.

The long-term portion was discounted by $98,103 and $nil at September 30, 2023

and June 30, 2023, respectively, using the discounted cash flow method with an interest rate of 7.24%.

During the three months ended

September 30, 2023, 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 $3,487,983 from $24,092,099

at June 30, 2023 to $20,604,116 at September 30, 2023.

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

obligations amounted to $6,802,879 and $5,756,553, respectively at September 30, 2023.

Accounts payable and accrued expenses, and current

portions of loans and lease obligations amounted to $6,552,181 and $5,779,510, respectively, at June 30, 2023.

average days sales outstanding for the three months ended September 30, 2023 and 2022 were 144 and 165 days, respectively, for each period.

cash position was $15,659,516 at December 31, 2023, compared to $15,533,254 at June 30, 2023.

cash provided by operating activities was $604,684 for the six months ended December 31, 2023 compared to $1,689,543 for the six months

ended December 31, 2022.

At December 31, 2023, we had current assets of $40,077,006 and current liabilities of $17,812,164.

We had accounts

receivable of $5,975,716 at December 31, 2023 compared to $11,714,422 at June 30, 2023.

We had revenues in excess of billings of $17,033,684

at December 31, 2023 compared to $12,377,677 at June 30, 2023 of which $734,397 and $nil is shown as long term as of December 31, 2023

and June 30, 2023, respectively.

The long-term portion was discounted by $85,488 and $nil at December 31, 2023 and June 30, 2023, respectively,

using the discounted cash flow method with an interest rate of 7.24%.

During the six months ended December 31, 2023, our revenues in

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

totals for accounts receivable and revenues in excess of billings decreased by $1,082,699 from $24,092,099 at June 30, 2023 to $23,009,400

at December 31, 2023.

Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $6,713,920

and $5,982,466, respectively at December 31, 2023.

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

amounted to $6,552,181 and $5,779,510, respectively, at June 30, 2023.

average days sales outstanding for the six months ended December 31, 2023 and 2022 were 147 and 162 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 $370,400 for the three months ended September 30, 2023, compared to $893,994 for the three months

ended September 30, 2022.

We had purchases of property and equipment of $371,630 compared to $1,347,601 for the three months ended September

cash used in financing activities was $44,474 for the three months ended September 30, 2023, compared to $445,737 for the three months

ended September 30, 2022.

During the three months ended September 30, 2023, we had net payments for bank loans and finance leases of

$44,474 compared to $445,737 for the three months ended September 30, 2022.

We are operating in various geographical regions of the world

through our various subsidiaries.

Those subsidiaries have financial arrangements from various financial institutions to meet both their

short and long-term funding requirements.

These loans will become due at different maturity dates as described in Note 13 of the financial

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.

cash used in investing activities was $569,336 for the six months ended December 31, 2023, compared to $1,182,042 for the six months

ended December 31, 2022.

We had purchases of property and equipment of $570,584 compared to $1,252,325 for the six months ended December

cash used in financing activities was $27,359 for the six months ended December 31, 2023, compared to $537,180 for the six months ended

December 31, 2022.

During the six months ended December 31, 2023, we had net payments for bank loans and finance leases of $162,482 compared

to $537,180 for the six months ended December 31, 2022.

We are operating in various geographical regions of the world through our various

subsidiaries.

Those subsidiaries have financial arrangements from various financial institutions to meet both their short and long-term

funding requirements.

These loans will become due at different maturity dates as described in Note 13 of the financial statements.

are in compliance with the covenants of the financial arrangements and there is no default, which may lead to early payment of these

We anticipate paying back all these obligations on their respective due dates from its own sources.

2 unchanged sentences

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

As of September 30, 2023, we had approximately

As of December 31, 2023, we had approximately

$15.7 million of cash, cash equivalents and marketable securities of which approximately $14.5 million is held by our foreign subsidiaries.

45 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