What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-13 compared with 2024-11-13 · 567 added, 355 removed, 197 unchanged (82% 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, 2024.

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

our Annual Report on Form 10-K for the year ended June 30, 2024, and the Condensed Consolidated Financial Statements and notes thereto

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

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

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

Discussion and Analysis of Financial Condition and Results of Operations

The following

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

months ended December 31, 2024.

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

Report on Form 10-K for the year ended June 30, 2024, and the Condensed Consolidated Financial Statements and notes thereto included

elsewhere in this Quarterly Report on Form 10-Q.

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

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

Annual Reports on Form 10-K, Quarterly

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

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

Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings,

investor events, press and earnings releases, and blogs as part of our investor relations website and on social media platforms linked

to our corporate website.

Investors and others can receive notifications of new information posted on our investor relations website

by signing up for e-mail alerts.

Further corporate governance information, including our committee charters and code of conduct, is also

available on our investor relations website at https://netsoltech.com/about-us .

The content of our websites is not intended to

be incorporated by reference into this or in any other report or document we file with the SEC, and any references to our websites are

intended to be inactive textual references only.

Forward-Looking

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

Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor

events, press and earnings releases, and blogs as part of our investor relations website and on social media platforms linked to our

corporate website.

Investors and others can receive notifications of new information posted on our investor relations website by signing

up for e-mail alerts.

Further corporate governance information, including our committee charters and code of conduct, is also available

on our investor relations website at https://netsoltech.com/about-us .

The content of our websites is not intended to be incorporated

by reference into this or in any other report or document we file with the SEC, and any references to our websites are intended to be

inactive textual references only.

Forward-Looking Information

report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of its management

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The Company does not intend to update these forward-looking statements.

Technologies is a global leader in delivering state-of-the-art solutions for the asset finance and leasing industry, serving automotive

and equipment OEMs, auto captives and financial institutions across over 30 countries.

Since its inception in 1997, NETSOL has been at

the cutting edge of technology, pioneering innovations with its asset finance solutions and leveraging advanced AI and cloud services

to meet the complex needs of the global market.

Technologies is a global business services and asset finance solutions provider.

NETSOL delivers state-of-the-art solutions for the asset

finance and leasing industry, serving automotive and equipment OEMs, auto captives and financial institutions across over 30 countries.

Since its inception in 1997, NETSOL has been at the cutting edge of technology, pioneering innovations with its asset finance solutions

and leveraging advanced AI and cloud services to meet the complex needs of the global market.

for its deep industry expertise, customer-centric approach and commitment to excellence, NETSOL fosters strong partnerships with its

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around the globe.

primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of our suite of financial applications,

sources of revenues have been licensing, subscriptions, modification, enhancement and support of our suite of financial applications,

under the brand name Transcend™ Finance (formerly called NFS Ascent ® ) for leading businesses in the global finance

and leasing space.

clients include blue chip organizations, Dow-Jones 30 Industrials, Fortune 500 manufacturers, financial institutions, global vehicle

manufacturers and enterprise technology providers, all of which are serviced by our strategically placed support and delivery locations

around the globe.

are also committed to serving Tier-2 and Tier-3 banks and financial institutions.

We understand the unique challenges faced by these

institutions, which is why we offer innovative cloud implementation solutions without any license fees, rapid deployments and the ability

Further, our out-of-the-box, API-first products are designed to seamlessly integrate into existing systems, providing flexibility

and scalability that smaller institutions often need.

include blue chip organizations, Dow-Jones 30 Industrials, Fortune 500 manufacturers, financial institutions, global vehicle manufacturers

and enterprise technology providers, all of which are serviced by our strategically placed support and delivery locations around the

also committed to serving Tier-2 and Tier-3 banks and financial institutions.

We understand the unique challenges faced by these institutions,

which is why we offer innovative cloud implementation solutions without any license fees, rapid deployments and the ability to scale.

Further, our out-of-the-box, API-first products are designed to seamlessly integrate into existing systems, providing flexibility and

scalability that smaller institutions often need.

By prioritizing accessibility and ease of use, we empower smaller financial companies

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

California and Austin, Texas

Metropolitan area, Horsham and Flintshire

Karachi, Bangkok, Beijing, Tianjin, 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

North America

Encino, California and Austin, Texas

London Metropolitan area, Horsham and Flintshire

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

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

and mature global marketplace.

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careful cost arbitrage, subject matter expertise, domain experience, scalability and proximity with our global and regional customers.

expertise in enterprise technology and financial application development has helped us emerge as a global player in the finance and leasing

industry and enabled us to secure a broad footprint across the major markets of North America, Asia Pacific and Europe.

The Asia Pacific

region has particularly benefitted from the organic growth in the fast-developing leasing automation industry, which is still nascent

as per Western standards.

Our expertise

in enterprise technology and financial application development has helped us emerge as a global player in the finance and leasing industry

and enabled us to secure a broad footprint across the major markets of North America, Asia Pacific and Europe.

The Asia Pacific region

has particularly benefitted from the organic growth in the fast-developing leasing automation industry, which is still nascent as per

Western standards.

is a dynamic leader and has been able to accumulate a wealth of experience in the global asset finance and leasing industry.

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with Global and Regional Customers

have offices across the world, located strategically to maintain close contact and proximity with our customers in various key markets.

This has not only helped us strengthen our customer relationships, but also build a deeper understanding of local market dynamics.

offices across the world, located strategically to maintain close contact and proximity with our customers in various key markets.

has not only helped us strengthen our customer relationships, but also build a deeper understanding of local market dynamics.

Simultaneously,

we are able to extend services and support development through a combination of onsite and offsite resources.

This approach has allowed

us to offer blended rates to our customers by employing a unique and cost-effective global development model.

our business model is built around the development, implementation and maintenance of our suite of financial applications, we employ

the same facilities and competencies to extend our services to related segments, including but not limited to:

we can extend services and support development through a combination of onsite and offsite resources.

This approach has allowed us to

offer blended rates to our customers by employing a unique and cost-effective global development model.

business model is built around the development, implementation and maintenance of our suite of financial applications, we employ the

same facilities and competencies to extend our services to related segments, including but not limited to:

· Information

ML and data analytics

global operations are broken down into three primary regions:

technologies|

operations are broken down into three primary regions:

North America, Europe and Asia Pacific.

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lending portfolios, enabling them to thrive in hyper-competitive global markets.

on cutting-edge, modern technology, NETSOL’s unified Transcend™ Platform is an AI-powered digital retail and asset finance

solution for automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions.

AND SERVICES:

TRANSCEND™ PLATFORM

Transcend™ Platform, powered by NETSOL, is an AI-driven unified ecosystem that revolutionizes how assets are sold, financed and

Designed to automate and optimize every step - from sales to originations to servicing, Transcend™ leverages AI and ML

to drive predictive insights and smarter decision-making.

cutting-edge, modern technology, NETSOL’s unified Transcend™ Platform is an AI-powered digital retail and asset finance solution

for automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions.

PRODUCTS AND SERVICES:

The Transcend™

Platform, powered by NETSOL, is an AI-driven unified ecosystem that revolutionizes how assets are sold, financed and leased.

to automate and optimize every step - from sales to originations to servicing, Transcend™ leverages AI and ML to drive predictive

insights and smarter decision-making.

Retail (Formerly Known as Otoz®)

revolutionize auto and equipment retail with a fully digital, integrated platform that simplifies the entire customer journey.

purchasing to finance approval, Transcend™ Retail (formerly known as Otoz®) offers advanced retail and mobility solutions that

keep dealerships or OEMs at the cutting edge of consumer expectations.

We revolutionize

auto and equipment retail with a fully digital, integrated platform that simplifies the entire customer journey.

From online purchasing

to finance approval, Transcend™ Retail (formerly known as Otoz®) offers advanced retail and mobility solutions that keep dealerships

or OEMs at the cutting edge of consumer expectations.

Finance (Formerly Known as Ascent®)

streamline finance and leasing operations with a comprehensive solution for originations, servicing and wholesale finance.

Finance (formerly known as Ascent®) empowers automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and

financial institutions with end-to-end visibility and control, ensuring seamless workflows and accelerated business outcomes.

We streamline

finance and leasing operations with a comprehensive solution for originations, servicing and wholesale finance.

Transcend™ Finance

(formerly known as Ascent®) empowers automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial

institutions with end-to-end visibility and control, ensuring seamless workflows and accelerated business outcomes.

streamline the entire origination process, from submission to approval, with advanced features such as real-time, AI-powered credit decisioning,

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existing infrastructure.

Transcend™ Marketplace is a modular, API-first solution that addresses every aspect of finance and leasing

using tools for calculations, document generation, loan origination and lending configurations.

Transcend™ Marketplace is a modular, API-first solution that addresses every aspect of finance and

leasing using tools for calculations, document generation, loan origination and lending configurations.

is an API-first, ready-to-use calculation and quotation engine.

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It is an accumulation of all

the master setups, including asset catalog and inventory, programs, rates, and profiles for lenders, dealers and multiple partners,

in one centralized location for all business types.

Index™ can enhance delivery efficiency and program management for easy

integration into all systems.

the master setups, including asset catalog and inventory, programs, rates, and profiles for lenders, dealers and multiple partners, in

one centralized location for all business types.

Index TM can enhance delivery efficiency and program management for easy integration

into all systems.

is an advanced document generation tool that lets a company create accurate and professional-looking documents in just seconds.

Dock™’s template-based configuration, a company can set up placeholders for data, essentially simplifying the document creation

process and reducing the chance of human error.

Its API-first architecture ensures scalability, making it capable of handling any document

generation task, from single documents to millions, with ease.

Dock TM ’s template-based configuration, a company can set up placeholders for data, essentially simplifying the document

creation process and reducing the chance of human error.

Its API-first architecture ensures scalability, making it capable of handling

any document generation task, from single documents to millions, with ease.

offers a feature-rich, end-to-end order management system for asset leasing and loans and credit companies.

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With tailored solutions

that simplify applications and automate key processes, Link™ is designed to enhance customer relationships whilst making compliance effortless.

that simplify applications and automate key processes, Link TM is designed to enhance customer relationships whilst making

compliance effortless.

This results in faster approvals, enriched customer experiences and stronger loyalty via elevated customer satisfaction.

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Our team partners with businesses to create tailored solutions that drive innovation, efficiency and

are leading AI-driven innovation with our Transcend™ AI Labs, integrating advanced AI services into our product suite to solve

the unique challenges of BFSI, equipment and auto OEMs and dealerships.

Our tailored solutions drive industry-specific advancements,

helping companies stay ahead in a competitive market.

below are a few of NetSol’s highlights for the quarter ended September 30, 2024:

renewed a support contract with one of our existing clients in China for the next 5 years that will generate over $30 million in revenues.

signed a contract with an independent finance company operating in the UK, particularly across Northern Ireland and Scotland that

will generate approximately $600K in revenues over the next 5 years.

The client specializes in providing personal and commercial

asset finance products, serving various markets including motor, agricultural, insurance premium, and leisure finance.

signed contracts that are expected to generate approximately $225K in revenue from professional services for two of our customers

generated nearly $1.7 million in services revenues from modifications and enhancements for multiple customers across various regions.

successfully went live with our wholesale platform with a leading leasing company based in the Netherlands that is primarily focused

on small and medium-sized enterprises (SMEs).

business effectively rebranded and repositioned its products on the Transcend™ platform.

The platform is an AI-driven unified

ecosystem that revolutionizes how assets are sold, financed and leased.

Designed to automate and optimize every step - from sales

to originations to servicing, Transcend™ leverages AI and ML to drive predictive insights and facilitate smarter decision-making.

Company launched its new corporate website.

The new website represents a significant leap forward in unifying our products and

services under a single, cohesive platform.

The new corporate website facilitates a simplified customer journey and has our design

refreshed with a vibrant, modern and aesthetically appealing visuals and comes with an engaging and easy-to-understand

leading AI-driven innovation with our Transcend™ AI Labs, integrating advanced AI services into our product suite to solve the

unique challenges of BFSI, equipment and auto OEMs and dealerships.

Our tailored solutions drive industry-specific advancements, helping

companies stay ahead in a competitive market.

below are a few of NETSOL’s highlights for the quarter ended December 31, 2024:

generated nearly $1.6 million in services revenues from modifications and enhancements for

multiple customers across various regions.

our Transcend Consultancy banner, we entered into an agreement with a client for the development

of an application with a total contract value of $225,000.

entered into an agreement with a U.K.

based financial services provider to provide subscription

services under our Transcend Marketplace banner with an estimated contract value of $250,000.

continued to make significant progress in the implementation of our solution at the auto

captive finance company of a notable US manufacturer in China.

has identified the following material trends affecting NETSOL.

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 units for a 2.8% increase over 2023.

automotive sales volumes are expected to reach approximately 15.9 million units, in 2024 sales, an estimated increase of 2%

compared to 2023.

(S&P Global Mobility)

inflation rate decreased and ended at 2.4% at September 2024.

(US Inflation Rate – Trading Economics)

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

2024, China domestic auto sales are expected to be at approximately 31 million units, a 3% increase from 2023.

(China Passenger Car

China, domestic electric vehicles sales are up 73% compared to August 2023.

(Clean Technica 09/01/2024)

China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $65 billion from the originally planned $46

billion, in Pakistan energy and infrastructure sectors.

Last June, China authorized a new $2.3 billion loan at a discounted rate

to Pakistan as a short-term loan.

overall size of the mobility market in Europe and the United States is projected to increase over $425 billion combined, by 2035

or a compound CAGR of 5% from 2022.

(Deloitte Global Automotive Mobility Market Simulation Tool)

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

according to Precedence Research.

to S&P Global Mobility, the forecast for new vehicle sales worldwide in 2025 is 89.6

million units, which is a modest 1.7% year-over-year growth in light vehicle sales.

to S&P Global Mobility and Edmunds, the US automotive sales of new vehicles in 2025 are

expected to be around 16.2 million units, which is a 1.2% to 1.4% increase from 2024.

would be the highest annual sales figure since 2019.

of January 15, 2025, the U.S.

inflation rate was 2.89% which is lower than the long-term

average of 3.28%.

market remains strong and resilient for NETSOL to continue investing in building local

teams for its core offerings.

to recent forecasts, China’s auto sales in 2025 are expected to reach approximately

32 million units representing a 3% year-over-year increase.

(China Automobile Manufacturers

China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $65

billion from the originally planned $46 billion, in Pakistan energy and infrastructure sectors.

In June 2024, China authorized a new $2.3 billion loan at a discounted rate to Pakistan as

a short-term loan.

overall size of the mobility market in Europe and the United States is projected to increase

over $425 billion combined, by 2035 or a compound CAGR of 5% from 2022.

(Deloitte Global

Automotive Mobility Market Simulation Tool)

global automotive finance market accounted for $245 billion in 2022 and is expected to more

than double by 2035 at a CAGR of 7.4% according to Precedence Research.

economy grew at an annual rate of 3% for the second quarter of 2024.

This report reflects the U.S.

economy to be resilient despite

other pressures including inflation and higher interest rates.

This report reflects

economy to be resilient despite other pressures including inflation and higher interest

(Associated Press August 29, 2024)

Federal Reserve cut interest rates by half a point in September 2024 and another half point reduction is forecasted by December 2024.

Russell index has returned an average of 14.4% during 2024.

Federal Reserve cut interest rates by 50 basis points in September 2024 and by 25 basis points

in December 2024.

Russell Microcap index has returned an average of 13.7% during 2024.

(Royce Investment Partners)

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

The conflict has expanded to neighboring nations

such as Syria, Lebanon and Iran.

The unrest and turmoil in the region is negative for the regional business environment.

has expanded to neighboring nations such as Syria, Lebanon and Iran.

The unrest and turmoil

in the region is viewed unfavorably by the regional business community.

economic conditions in our geographic markets;

inflation, pending U.S.

elections, geopolitical tensions, including trade wars, tariffs

and/or sanctions in geographic areas;

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

the global economy.

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

and higher interest rates globally have greatly increased the cost of doing business, including salaries and benefits worldwide,

affecting profitability.

inflation, geopolitical tensions, including

trade wars, tariffs and/or sanctions in geographic areas;

and global conflicts or disasters

that impact the global economy or one or more sectors of the global economy.

imposition of tariffs on China and threatened tariffs on other US trading partners may affect

the price of consumer goods including vehicles amongst others, negatively affecting the profitability

of many of our customers.

monetary, and economic challenges and a higher inflation rate than other regional countries

impacting Pakistan exports.

and higher interest rates globally have greatly increased the cost of doing business, including

salaries and benefits worldwide, affecting profitability.

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

geo-political environment in South Asia will continue to influence Pakistan’s economic prospects.

Pakistan’s political

uncertainty has caused higher inflation with constant pressure on its currency being devalued against the US Dollar.

a report issued by the World Bank, while marginal economic growth is expected in Pakistan, implementing an ambitious and credibly

communicated economic reform plan is critical for a robust economic recovery.

geo-political environment in South Asia will continue to influence Pakistan’s economic

Pakistan’s political uncertainty has caused higher inflation with constant

pressure on its currency being devalued against the US Dollar.

According to a report issued

by the World Bank, while marginal economic growth is expected in Pakistan, implementing an

ambitious and credibly communicated economic reform plan is critical for a robust economic

There is no guarantee that such reforms will be implemented.

See Press Release, dated April 2, 2024, World Bank.

the US-China bilateral summit in January 2024 exceeded expectations, the tensions between the two countries continue.

EU have placed tariffs on a range of high-tech products from China including the US placing 100% tariffs on EV vehicles and 25% tariffs

on EV batteries imported from China.

See Press Release,

dated April 2, 2024, World Bank.

US and EU have placed tariffs on a range of high-tech products from China including the US

placing 100% tariffs on EV vehicles and 25% tariffs on EV batteries imported from China.

(Center for Strategic and International Studies June 28, 2024).

IN FINANCIAL CONDITION

Ended September 30, 2024 Compared to the Quarter Ended September 30, 2023

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

The US imposed additional

tariffs on China in February 2025 with retaliatory tariffs from China on US goods.

CHANGES IN FINANCIAL CONDITION

Quarter Ended December

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

The following

table sets forth the items in our unaudited condensed consolidated statement of operations for the three months ended December 31, 2024

and 2023 as a percentage of revenues.

the Three Months

September 30,

general and administrative

and development cost

For the Three Months

Ended December 31,

Net Revenues:

Subscription and support

Total net revenues

Cost of revenues

Operating expenses:

(loss) from operations

income and (expenses)

(loss) on foreign currency exchange transactions

other income (expenses)

income before income taxes

tax provision

Non-controlling

income attributable to NetSol

income per share:

income per common share

average number of shares outstanding

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

Total other income (expenses)

Net income before income taxes

Income tax provision

Non-controlling interest

Net income attributable to NetSol

$ (1,147,042 )

Net income per share:

Net income 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.

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.

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to monitor our overall expenditures given the economic uncertainties of our target markets.

In order to provide a framework for assessing

how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the changes in results from

one period to another period using constant currency.

In order to calculate our constant currency results, we apply the current period

results to the prior period foreign currency exchange rates.

In the table below, we present the change based on actual results in reported

currency and in constant currency.

the Three Months

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 Three Months

Change due to

(Unfavorable)

September 30,

(loss) from operations

Ended December 31,

Net Revenues:

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (1,415,652 )

revenues for the three months ended September 30, 2024 and 2023 are broken out among the segments as follows:

fees for the three months ended September 30, 2024 were $1,229 compared to $1,280,449 for the three months ended September 30, 2023 reflecting

$ (1,513,782 )

Net revenues for the three months

ended December 31, 2024 and 2023 are broken out among the segments as follows:

North America

fees for the three months ended December 31, 2024 were $72,688 compared to $2,990,453 for the three months ended December 31, 2023 reflecting

a decrease of $2,917,765 with a decrease in constant currency of $2,920,457.

During the three months ended September 30, 2023, we recognized

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

and support fees for the three months ended September 30, 2024 were $8,192,471 compared to $6,512,243 for the three months ended September

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.

Subscription and support

and support fees for the three months ended December 31, 2024 were $8,642,629 compared to $6,827,781 for the three months ended December

31, 2023 reflecting an increase of $1,814,848 with an increase in constant currency of $1,746,037.

The increase includes a one-time catch

up of approximately $639,000 upon signing a new contract with an existing customer in China.

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, 2024 was $6,404,798 compared to $6,449,489 for the three months ended September 30, 2023

reflecting a decrease of $44,691 with a decrease in constant currency of $147,175.

gross profit was $6,564,112, for the three months ended September 30, 2024 compared with $6,162,017 for the three months ended

September 30, 2023.

This is an increase of $402,095 with an increase in constant currency of $523,754.

The gross profit percentage

for the three months ended September 30, 2024 also increased to 45.0% from 43.3% for the three months ended September 30, 2023.

cost of sales was $8,034,386 for the three months ended September 30, 2024 compared to $8,080,164 for the three months ended

September 30, 2023 for a decrease of $45,778 and on a constant currency basis a decrease of $303,414.

As a percentage of sales, cost

of sales decreased from 56.7% for the three months ended September 30, 2023 to 55.0% for the three months ended September 30,

and consultant fees increased by $245,591 from $5,958,143 for the three months ended September 30, 2023 to $6,203,734 for the three months

ended September 30, 2024 and on a constant currency basis increased by $48,406.

up of approximately $1,000,000 from four of our customers.

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, 2024 was $6,821,344 compared to $5,419,707 for the three months ended December 31, 2023

reflecting an increase of $1,401,637 with an increase in constant currency of $1,286,921.

The increase is mainly due to implementation

services in US and Europe.

profit was $6,920,341, for the three months ended December 31, 2024 compared with $7,175,737 for the three months ended December 31,

This is a decrease of $255,396 with a decrease in constant currency of $275,703.

The gross profit percentage for the three months

ended December 31, 2024 also decreased to 44.5% from 47.1% for the three months ended December 31, 2023.

The cost of sales was $8,616,320

for the three months ended December 31, 2024 compared to $8,062,204 for the three months ended December 31, 2023 for an increase of $554,116

and on a constant currency basis an increase of $412,633.

As a percentage of sales, cost of sales increased from 52.9% for the three

months ended December 31, 2023 to 55.5% for the three months ended December 31, 2024.

and consultant fees increased by $811,075 from $5,903,362 for the three months ended December 31, 2023 to $6,714,437 for the three months

ended December 31, 2024 and on a constant currency basis increased by $701,239.

The increase is due to annual salary raises.

As a percentage

of sales, salaries and consultant expense increased from 41.8% for the three months ended September 30, 2023 to 42.5% for the three months

ended September 30, 2024.

expenses were $570,862 for the three months ended September 30, 2024 compared to $660,367 for the three months ended September 30, 2023

of sales, salaries and consultant expense increased from 38.7% for the three months ended December 31, 2023 to 43.2% for the three months

ended December 31, 2024.

expenses were $601,251 for the three months ended December 31, 2024 compared to $748,072 for the three months ended December 31, 2023

for a decrease of $146,821 with a decrease in constant currency of $155,834.

As a percentage of sales, travel expense decreased from

for the three months ended September 30, 2023 to 3.9% for the three months ended September 30, 2024.

and amortization expense decreased to $228,550 compared to $392,983 for the three months ended September 30, 2023 or a decrease of $164,433

4.9% for the three months ended December 31, 2023 to 3.9% for the three months ended December 31, 2024.

and amortization expense decreased to $237,882 compared to $264,374 for the three months ended December 31, 2023 or a decrease of $26,492

and on a constant currency basis a decrease of $30,214.

costs decreased to $1,031,240 for the three months ended September 30, 2024 compared to $1,068,671 for the three months ended September

decreased to $1,062,750 for the three months ended December 31, 2024 compared to $1,146,396 for the three months ended December 31, 2023

or a decrease of $83,646 and on a constant currency basis a decrease of $102,558.

expenses were $7,324,270 for the three months ended September 30, 2024 compared to $5,811,388, for the three months ended September 30,

expenses were $7,407,291 for the three months ended December 31, 2024 compared to $6,148,905, for the three months ended December 31,

2023 for an increase of $1,258,386 and on a constant currency basis an increase of $1,139,949.

2 unchanged sentences

The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and

wages, professional services, provision for doubtful accounts, and other general and administrative expenses.

expenses were $2,292,199 for the three months ended September 30, 2024 compared to $1,708,865, for the three months ended September 30,

wages, provision for doubtful accounts, and other general and administrative expenses.

expenses were $2,662,397 for the three months ended December 31, 2024 compared to $1,784,510, for the three months ended December 31,

2023 for an increase of $877,887 and on a constant currency basis an increase of $831,571.

3 unchanged sentences

expenses increased by approximately $108,000 due to the increase in marketing events.

and administrative expenses were $4,534,675 for the three months ended September 30, 2024 compared to $3,586,301 for the three months

ended September 30, 2023 or an increase of $948,374 and on a constant currency basis an increase of $848,669.

and administrative expenses were $4,411,225 for the three months ended December 31, 2024 compared to $4,022,984 for the three months

ended December 31, 2023 or an increase of $388,241 and on a constant currency basis an increase of $321,393.

During the three months

ended September 30, 2024, salaries increased by approximately $439,044 and increased $385,664 on a constant currency basis, and other

general and administrative expenses increased approximately $99,770 or increased by $69,090 on a constant currency basis.

and development cost was $359,949 for the three months ended September 30, 2024 compared to $378,419, for the three months ended September

ended December 31, 2024, salaries increased by $123,788 and increased $86,685 on a constant currency basis, bad debt expense increased

$117,355 and increased $114,936 on a constant currency basis, and other general and administrative expenses increased $147,098 or increased

by $119,772 on a constant currency basis.

and development cost was $333,669 for the three months ended December 31, 2024 compared to $341,411, for the three months ended December

31, 2023 for a decrease of $7,742 and on a constant currency basis a decrease of $13,015.

from Operations

from operations was $760,158 for the three months ended September 30, 2024 compared to income from operations of $350,629 for the three

months ended September 30, 2023.

This represents an increase in loss of $1,110,787 with an increase in loss of $821,791 on a constant

currency basis for the three months ended September 30, 2024 compared with the three months ended September 30, 2023.

operations was $486,950 for the three months ended December 31, 2024 compared to income from operations of $1,026,832 for the three months

ended December 31, 2023.

This represents an increase in loss of $1,513,782 with an increase in loss of $1,415,652 on a constant currency

basis for the three months ended December 31, 2024 compared with the three months ended December 31, 2023.

As a percentage of sales,

loss from operations was 3.1% for the three months ended December 31, 2024 compared to income from operations of 6.7% for the three months

ended December 31, 2023.

Income and Expense

Other expense

was $367,642 for the three months ended December 31, 2024 compared to other income of $106,036 for the three months ended December 31,

This represents an increase in other expense of $473,678 with an increase of $457,864 on a constant currency basis.

is primarily due to the foreign currency exchange transactions and interest income.

The majority of the contracts with NetSol PK are

either in U.S.

dollars or Euros;

therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending

on the value of the PKR compared to the U.S.

dollar and the Euro.

During the three months ended December 31, 2024, we recognized a loss

of $698,392 in foreign currency exchange transactions compared to a loss of $14,617 for the three months ended December 31, 2023.

the three months ended December 31, 2024, the value of the U.S.

dollar increased 0.4% and the Euro decreased 6.6%, compared to the PKR.

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

Non-controlling

three months ended December 31, 2024, the net loss attributable to non-controlling interest was $39,164, compared to net income of $574,499

for the three months ended December 31, 2023.

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

NetSol PK and NetSol Innovation.

income (loss) attributable to NetSol

loss was $1,147,042 for the three months ended December 31, 2024 compared to net income of $408,316 for the three months ended December

This is an increase in loss of $1,555,358 with an increase of net loss of $1,520,406 on a constant currency basis, compared

to the prior year.

For the three months ended December 31, 2024, net loss per share was $0.10 for basic and diluted shares compared to

net income per share of $0.04 for basic and diluted shares for the three months ended December 31, 2023.

Six Months Ended December

31, 2024 Compared to the Six Months Ended December 31, 2023

The following

table sets forth the items in our unaudited condensed consolidated statement of operations for the six months ended December 31, 2024

and 2023 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

Total other income (expenses)

Net income before income taxes

Income tax provision

Non-controlling interest

Net income attributable to NetSol

$ (1,076,247 )

Net income per share:

Net income 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

$ (1,247,108 )

$ (2,187,290 )

$ (2,624,569 )

Net revenues for the six months

ended December 31, 2024 and 2023 are broken out among the segments as follows:

North America

fees for the six months ended December 31, 2024 were $73,917 compared to $4,270,902 for the six months ended December 31, 2023 reflecting

a decrease of $4,196,985 with a decrease in constant currency of $4,199,708.

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 customer.

Subscription and support

and support fees for the six months ended December 31, 2024 were $16,835,100 compared to $13,340,024 for the six months ended December

31, 2023 reflecting an increase of $3,495,076 with an increase in constant currency of $3,371,069.

The increase includes a one-time catch

up of approximately $1,693,000 from five of our customers.

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, 2024 was $13,226,142 compared to $11,869,196 for the six months ended December 31, 2023

reflecting an increase of $1,356,946 with an increase in constant currency of $1,139,746.

The increase is mainly due to implementation

services in US and Europe.

profit was $13,484,453, for the six months ended December 31, 2024 compared with $13,337,754 for the six months ended December 31, 2023.

This is an increase of $146,699 with an increase in constant currency of $248,051.

The gross profit percentage for the six months ended

December 31, 2024 decreased to 44.8% from 45.2% for the six months ended December 31, 2023.

The cost of sales was $16,650,706 for the

six months ended December 31, 2024 compared to $16,142,368 for the six months ended December 31, 2023 for an increase of $508,338 and

on a constant currency basis an increase of $109,219.

As a percentage of sales, cost of sales increased from 54.8% for the six months

ended December 31, 2023 to 55.3% for the six months ended December 31, 2024.

and consultant fees increased by $1,056,666 from $11,861,505 for the six months ended December 31, 2023 to $12,918,171 for the six months

ended December 31, 2024 and on a constant currency basis increased by $749,645.

The increase is due to annual salary raises.

As a percentage

of sales, loss from operations was 5.2% for the three months ended September 30, 2024 compared to income from operations of 2.5% for the

three months ended September 30, 2023.

of sales, salaries and consultant expense increased from 40.2% for the six months ended December 31, 2023 to 42.9% for the six months

ended December 31, 2024.

expenses were $1,172,113 for the six months ended December 31, 2024 compared to $1,408,439 for the six months ended December 31, 2023

for a decrease of $236,326 with a decrease in constant currency of $260,082.

As a percentage of sales, travel expense decreased from

4.8% for the six months ended December 31, 2023 to 3.9% for the six months ended December 31, 2024.

and amortization expense decreased to $466,432 compared to $657,357 for the six months ended December 31, 2023 or a decrease of $190,925

and on a constant currency basis a decrease of $204,128.

decreased to $2,093,990 for the six months ended December 31, 2024 compared to $2,215,067 for the six months ended December 31, 2023

or a decrease of $121,077 and on a constant currency basis a decrease of $176,216.

expenses were $14,731,561 for the six months ended December 31, 2024 compared to $11,960,293, for the six months ended December 31, 2023

for an increase of $2,771,268 and on a constant currency basis an increase of $2,435,341.

As a percentage of sales, it increased from

40.6% to 48.9%.

The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages,

provision for doubtful accounts, and other general and administrative expenses.

expenses were $4,954,596 for the six months ended December 31, 2024 compared to $3,493,375, for the six months ended December 31, 2023

for an increase of $1,461,221 and on a constant currency basis an increase of $1,367,174.

The increase is mainly due to increases is

salaries and consultants of approximately $1,021,000, due to annual raises and the hiring of additional marketing personnel.

Other marketing

expenses increased by approximately $443,000 due to the increase in marketing events.

and administrative expenses were $9,083,347 for the six months ended December 31, 2024 compared to $7,747,088 for the six months ended

December 31, 2023 or an increase of $1,336,259 and on a constant currency basis an increase of $1,114,972.

During the six months ended

December 31, 2024, salaries increased by approximately $562,832 and increased $472,349 on a constant currency basis, bad debt expense

increased $445,981 and $430,243 on a constant currency basis, and other general and administrative expenses increased approximately $327,446

or increased by $212,380 on a constant currency basis.

and development cost was $693,618 for the six months ended December 31, 2024 compared to $719,830, for the six months ended December

31, 2023 for a decrease of $26,212 and on a constant currency basis a decrease of $46,805.

from Operations

operations was $1,247,108 for the six months ended December 31, 2024 compared to income from operations of $1,377,461 for the six months

ended December 31, 2023.

This represents an increase in loss of $2,624,569 with an increase in loss of $2,187,290 on a constant currency

basis for the six months ended December 31, 2024 compared with the six months ended December 31, 2023.

As a percentage of sales, loss

from operations was 4.1% for the six months ended December 31, 2024 compared to income from operations of 4.7% for the six months ended

December 31, 2023.

Income and Expense

income was $1,207,684 for the three months ended September 30, 2024 compared to $62,329 for the three months ended September 30, 2023.

This represents an increase of $1,145,355 with an increase of $1,095,873 on a constant currency basis.

The increase is primarily due

to the foreign currency exchange transactions and interest income.

was $840,042 for the six months ended December 31, 2024 compared to $168,365 for the six months ended December 31, 2023.

This represents

an increase of $671,677 with an increase of $638,009 on a constant currency basis.

The increase is primarily due to the foreign currency

exchange transactions and interest income.

The majority of the contracts with NetSol PK are either in 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.

dollars or Euros;

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

dollar and the Euro.

During the three months ended September 30, 2024, we recognized a gain of $542,545 in foreign

currency exchange transactions compared to a loss of $134,253 for the three months ended September 30, 2023.

During the three months

ended September 30, 2024, the value of the U.S.

dollar decreased 0.2% and the Euro increased 3.9%, compared to the PKR.

During the three

months ended September 30, 2023, the value of the U.S.

During the six months ended December 31, 2024, we recognized a loss of $155,847 in foreign currency exchange transactions

compared to $148,870 for the six months ended December 31, 2023.

During the six months ended December 31, 2024, the value of the U.S.

dollar increased 0.2% and the Euro decreased 2.9%, compared to the PKR.

the three months ended September 30, 2024, interest income was $769,867 compared to $414,718 for the three months ended September 30,

2023, for an increase of $355,149 and on constant currency basis an increase of $322,401.

During the six months ended December 31, 2023, the value of the

dollar and the Euro decreased 2.6% and 1.2%, respectively, compared to the PKR.

During the six months ended December 31, 2024, interest

income was $1,298,939 compared to $882,998 for the six months ended December 31, 2023, for an increase of $415,941 and on constant currency

basis an increase of $374,167.

The increase in interest income was driven by a higher balance of interest-bearing funds during the period.

Non-controlling

the three months ended September 30, 2024, the net income attributable to non-controlling interest was $146,914, compared to $260,173

for the three months ended September 30, 2023.

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

of NetSol Innovation.

six months ended December 31, 2024, the net income attributable to non-controlling interest was $107,750, compared to $834,672 for the

six months ended December 31, 2023.

The decrease in non-controlling interest is primarily due to the increase in net loss of NetSol PK

and NetSol Innovation.

income (loss) attributable to NetSol

net income was $70,795 for the three months ended September 30, 2024 compared to $30,890 for the three months ended September 30, 2023.

This is an increase in income of $39,905 with an increase of $153,796 on a constant currency basis, compared to the prior year.

three months ended September 30, 2024, net income per share was $0.006 for basic and diluted shares compared to net income per share

of $0.003 for basic and diluted shares for the three months ended September 30, 2023.

loss was $1,076,247 for the six months ended December 31, 2024 compared to net income of $439,206 for the six months ended December 31,

This is an increase in loss of $1,515,453 with an increase of $1,316,457 on a constant currency basis, compared to the prior year.

For the six months ended December 31, 2024, net loss per share was $0.09 for basic and diluted shares compared to net income per share

of $0.04 for basic and diluted shares for the six months ended December 31, 2023.

Financial Measures

3 unchanged sentences

of a non-GAAP financial measure.

define the non-GAAP measures as follows:

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

We define the non-GAAP measures

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.

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

investors regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for monitoring

our performance and evaluating it against industry peers.

The non-GAAP financial measures presented should be used in addition to, and

in conjunction with, results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures.

Management strongly encourages investors to review our consolidated financial statements in their entirety and not to rely on any single

financial measure in evaluating the Company.

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

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

by the weighted average shares outstanding and diluted shares outstanding.

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

regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for monitoring our performance

and evaluating it against industry peers.

The non-GAAP financial measures presented should be used in addition to, and in conjunction

with, results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures.

strongly encourages investors to review our consolidated financial statements in their entirety and not to rely on any single financial

measure in evaluating the Company.

The non-GAAP measures reflect

adjustments based on the following items:

We report EBITDA as a non-GAAP metric by excluding the effect of net interest expense, income tax expense, depreciation and amortization

12 unchanged sentences

and amortization and net interest expense attributable to the non-controlling interest to arrive at a net adjusted EBITDA.

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, 2024 and 2023 are as follows:

the Three Months

September 30,

Income (loss) attributable to NetSol

Non-controlling

and amortization

stock-based compensation

EBITDA, gross

non-controlling interest (a)

Weighted Average

number of shares outstanding

adjusted EBITDA

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

Income (loss) attributable to non-controlling interest

and amortization

stock-based compensation

EBITDA of non-controlling interest

AND CAPITAL RESOURCES

cash position was $24,525,956 at September 30, 2024, compared to $19,127,165 at June 30, 2024.

cash provided by operating activities was $5,517,745 for the three months ended September 30, 2024 compared to $1,663,619 for the three

months ended September 30, 2023.

At September 30, 2024, we had current assets of $46,533,702 and current liabilities of $22,372,380.

We had accounts receivable of $5,936,063 at September 30, 2024 compared to $13,049,614 at June 30, 2024.

We had revenues in excess of

billings of $13,609,959 at September 30, 2024 compared to $13,638,547 at June 30, 2024 of which $866,388 and $954,029 is shown as long

term as of September 30, 2024 and June 30, 2024, respectively.

The long-term portion was discounted by $133,867 and $152,446 at September

30, 2024 and June 30, 2024, respectively, using the discounted cash flow method with interest rates ranging from 7.3% to 17.5%.

the three months ended September 30, 2024, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing

requirements detailed in each contract.

The combined totals for accounts receivable and revenues in excess of billings decreased by $7,142,139

from $26,688,161 at June 30, 2024 to $19,546,022 at September 30, 2024.

Accounts payable and accrued expenses, and current portions of

loans and lease obligations amounted to $8,414,790 and $6,443,937, respectively at September 30, 2024.

Accounts payable and accrued expenses,

and current portions of loans and lease obligations amounted to $8,232,342 and $6,276,125, respectively, at June 30, 2024.

average days sales outstanding for the three months ended September 30, 2024 and 2023 were 150 and 144 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 $108,632 for the three months ended September 30, 2024, compared to $370,400 for the three months

ended September 30, 2023.

We had purchases of property and equipment of $100,737 compared to $371,630 for the three months ended September

cash provided by financing activities was $153,189 for the three months ended September 30, 2024, compared to net cash used in financing

activities of $44,474 for the three months ended September 30, 2023.

During the three months ended September 30, 2024, we had net payments

for bank loans and finance leases of $118,311 compared to $44,474 for the three months ended September 30, 2023.

We are operating in

various geographical regions of the world through our various subsidiaries.

Those subsidiaries have financial arrangements from various

financial institutions to meet both their short and long-term funding requirements.

These loans will become due at different maturity

dates as described in Note 12 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.

through our license, services, and subscription and support agreements,

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

As of September 30, 2024, we had approximately

$24.5 million of cash, cash equivalents and marketable securities of which approximately $22.8 million is held by our foreign subsidiaries.

As of June 30, 2024, we had approximately $19.1 million of cash, cash equivalents and marketable securities of which approximately $18.2

million is held by our foreign subsidiaries.

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

The focus will remain on continuously improving cash

reserves internally and reduced reliance on external capital raise.

a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans.

Although our requirements

for capital expenses vary from time to time, for the next 12 months, we anticipate needing $2.5 million for APAC, U.S.

and Europe new

business development activities and infrastructure enhancements, which we expect to provide from current operations.

UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($400,000) which requires that the aggregate amount of

invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days

old, will not be less than an amount equal to 200% of the facility.

The Pakistani subsidiary, NetSol PK has an approved facility for

export refinance from Askari Bank Limited amounting to Rupees 500 million ($1,800,504) and a running finance facility of Rupees 53 million

NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 900 million

Our reconciliation

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

for the three and six months ended December 31, 2024 and 2023 are as follows:

For the Three Months

Ended December 31,

For the Six Months

Ended December 31,

Net Income (loss) attributable to NetSol

$ (1,147,042 )

$ (1,076,247 )

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

LIQUIDITY AND CAPITAL RESOURCES

position was $21,270,642 at December 31, 2024, compared to $19,127,165 at June 30, 2024.

provided by operating activities was $369,716 for the six months ended December 31, 2024 compared to $604,684 for the six months ended

December 31, 2023.

At December 31, 2024, we had current assets of $42,953,392 and current liabilities of $19,955,153.

We had accounts

receivable of $7,829,823 at December 31, 2024 compared to $13,049,614 at June 30, 2024.

We had revenues in excess of billings of $11,438,977

at December 31, 2024 compared to $13,638,547 at June 30, 2024 of which $777,428 and $954,029 is shown as long term as of December 31,

2024 and June 30, 2024, respectively.

The long-term portion was discounted by $115,126 and $152,446 at December 31, 2024 and June 30,

2024, respectively, using the discounted cash flow method with interest rates ranging from 7.3% to 17.5%.

During the six months ended

December 31, 2024, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed

in each contract.

The combined totals for accounts receivable and revenues in excess of billings decreased by $4,508,691 from $26,688,161

at June 30, 2024 to $19,268,800 at December 31, 2024.

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

obligations amounted to $7,332,560 and $8,784,232, respectively at December 31, 2024.

Accounts payable and accrued expenses, and current

portions of loans and lease obligations amounted to $8,232,342 and $6,276,125, respectively, at June 30, 2024.

days sales outstanding for the six months ended December 31, 2024 and 2023 were 140 and 147 days, respectively, for each period.

days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and revenues

in excess of billings.

used in investing activities was $531,477 for the six months ended December 31, 2024, compared to $569,336 for the six months ended December

We had purchases of property and equipment of $568,134 compared to $570,584 for the six months ended December 31, 2023.

provided by financing activities was $2,637,763 for the six months ended December 31, 2024, compared to net cash used in financing activities

of $27,359 for the six months ended December 31, 2023.

During the six months ended December 31, 2024, we received bank proceeds of $2,676,932

compared to $135,123 during the six months ended December 31, 2023.

During the six months ended December 31, 2024, we had net payments

for bank loans and finance leases of $162,370 compared to $162,482 for the six months ended December 31, 2023.

Employees of the Company

exercised 200,00 options of common stock for $430,000.

NetSol PK, a subsidiary of the Company, paid a dividend of $306,799 to the non-controlling

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 12 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.

through our license, services, and subscription and support

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

As of December 31, 2024,

we had approximately $21.3 million of cash, cash equivalents and marketable securities of which approximately $20 million is held by

our foreign subsidiaries.

As of June 30, 2024, we had approximately $19.1 million of cash, cash equivalents and marketable

securities of which approximately $18.2 million is held by our foreign subsidiaries.

open to strategic relationships that would provide value added benefits.

The focus will remain on continuously improving cash reserves

internally and reduced reliance on external capital raise.

company, we have on-going capital expenditure needs based on our short term and long-term business plans.

Although our requirements for

capital expenses vary from time to time, for the next 12 months, we anticipate needing $2.5 million for APAC, U.S.

and Europe new business

development activities and infrastructure enhancements, which we expect to provide from current operations.

based subsidiary, NTE, has an approved overdraft facility of £300,000 ($375,000) which requires that the aggregate amount of invoiced

trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will

not be less than an amount equal to 200% of the facility.

The Pakistani subsidiary, NetSol PK has an approved facility for export refinance

from Askari Bank Limited amounting to Rupees 500 million ($1,793,915) and a running finance facility of Rupees 3.6 million ($12,740).

NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 1.3 billion ($4,664,180).

These facilities require NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1.

PK also has an approved export refinance facility of Rs.

NetSol PK also has

an approved export refinance facility of Rs.

380 million ($1,363,375) from Samba Bank Limited.

During the loan tenure, these

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

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

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

The maturity dates of the

borrowings of respective subsidiaries may accelerate if they do not comply with these covenants.

In case of any change in control in

subsidiaries, they may have to repay their respective credit facilities.

ACCOUNTING POLICIES

condensed consolidated financial statements are prepared applying certain critical accounting policies.

The SEC defines “critical

accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments.

Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to

variations and may significantly affect our reported results and financial position for the period or in future periods.

Changes in underlying

factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of

During the loan tenure, these two facilities

require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times,

and a debt service coverage ratio of 4 times.

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

The maturity dates of the borrowings

of respective subsidiaries may accelerate if they do not comply with these covenants.

In case of any change in control in subsidiaries,

they may have to repay their respective credit facilities.

CRITICAL ACCOUNTING POLICIES

Our condensed

consolidated financial statements are prepared applying certain critical accounting policies.

The SEC defines “critical accounting

policies” as those that require application of management’s most difficult, subjective, or complex judgments.

Critical accounting

policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may

significantly affect our reported results and financial position for the period or in future periods.

Changes in underlying factors,

assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations.

Our financial statements are prepared in accordance with U.S.

GAAP, and they conform to general practices in our industry.

We apply critical accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate

There have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K

for the fiscal year ended June 30, 2024.

ACCOUNTING PRONOUNCEMENTS

information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements,

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

We apply critical

accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate manner.

have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal

year ended June 30, 2024.

RECENT ACCOUNTING PRONOUNCEMENTS

For information

with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see

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

Quantitative and Qualitative Disclosures about Market Risks.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis