What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-12 compared with 2025-11-12 · 381 added, 200 removed, 352 unchanged (62% of the section changed)

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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, 2025.

the three months ended December 31, 2025.

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

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

● Information

ML and data analytics

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

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.

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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helping companies stay ahead in a competitive market.

below are a few of NetSol’s highlights for the quarter ended September 30, 2025:

generated approximately $1.6 million in revenue through major system enhancements and platform

modifications for multiple clients across diverse global regions.

entered into a strategic agreement with an existing client to not only have the annual maintenance

fee revised upwards but also to upgrade our legacy R1 platform, a project expected to generate

approximately $1.5 million in revenues.

launched Check AI, a groundbreaking AI-native credit decisioning engine integrated into our

Transcend platform, marking a major step forward in transforming automated underwriting through

faster decision-making and superior accuracy.

were selected by a Fortune 500 automotive and powersports dealership group in North America

to lead a discovery engagement with them focused on defining the roadmap for their next-gen

omnichannel digital retail platform to be powered by our Transcend Retail system.

finance arm of a leading Chinese construction equipment company in Indonesia successfully

went live with our Transcend Finance solution.

below are a few of NetSol’s highlights for the quarter ended December 31, 2025:

entered into a four-year contract extension valued at approximately $50 million with a long-standing customer and strategic partner.

The extension reinforces recurring revenue through ongoing maintenance and licensing fees and expands the customer’s continued

use of the Transcend™ Finance platform across multiple countries.

launched Check AI , an AI-powered credit decisioning engine within the Transcend™ Finance platform.

The solution automates

manual credit workflows, accelerates decision-making, and enhances underwriting accuracy through improved data aggregation, document

processing, and financial analysis.

signed a contract valued at approximately $1.75 million with a provincial government entity in Pakistan, funded by the World Bank,

to support the digitization of government workflows.

The project focuses on process automation and cross-departmental system integration

to improve operational efficiency and public service delivery.

successfully went live with a China-based captive automotive finance company, deploying a localized Transcend™ Finance platform

to support dealer and customer financing operations.

The implementation enables streamlined credit workflows, regulatory compliance,

and scalable growth.

Thailand-based captive finance company of a leading Japanese automotive manufacturer went live on the upgraded Transcend™ Wholesale

platform, automating wholesale financing, inventory management, and dealer credit processes and improving operational visibility.

UK-based multi-asset finance company successfully went live on the Transcend™ Finance Wholesale platform, enabling wholesale

loan origination, servicing, and digital dealer self-service across its European operations.

leading German automotive manufacturer in North America successfully completed a dealer portal pilot, enabling enhanced dealer self-service,

real-time financing workflows, and improved digital engagement.

The pilot represents a milestone toward broader rollout.

secured a third-party support services engagement with a global automotive captive finance company in China, generating approximately

$0.8 million in annual recurring revenue.

The engagement includes ongoing platform support and operational services.

generated approximately $1.5 million in incremental revenue through the delivery of platform modifications and enhancements requested

by multiple customers across various regions.

Institute of Artificial Intelligence entered into a strategic partnership with Pakistan’s national vocational and technical

training authority to train approximately 1,600 individuals in artificial intelligence, data science, and cybersecurity.

The initiative

is expected to generate over $1 million in revenue.

has identified the following material trends affecting NetSol.

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, and 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.

This would be the highest annual sales figure

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

32.9 million units, representing a 4.7% year-over-year increase.

Sales of New Energy Vehicles

(NEV) account for 48.7% of all new car sales in China.

(China Automobile Manufacturers Association).

China’s sales target for NEVs in 2025 is projected to reach 15.5 million units, amounting

to a 20% rise over 2024 figures (Fastmarkets, September 19, 2025).

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

to 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 size was valued at approximately $295.13 billion in 2024

and is projected to reach USD 451.71 billion by 2030, representing a compound annual growth

rate (CAGR) of 7.4% from 2025 through 2030 (Grandview Research).

global automotive market appears to be holding steady or growing, positively affecting our customers’ potential revenues and,

accordingly their willingness to spend on technology solutions:

the volatility of the 2025 automobile market, executives still pointed to critical opportunity areas for 2026, including the demand

for Battery Electric Vehicles (BEV) and Advanced Drive Assistance Systems (ADAS) (S&P Global Mobility, January 14, 2026).

to recent forecasts, China’s auto sales in 2025 are expected to reach approximately 32.9 million units, representing a 4.7%

year-over-year increase.

Sales of New Energy Vehicles (NEV) account for 48.7% of all new car sales in China.

(China Automobile Manufacturers

Association).

China’s sales target for NEVs in 2025 is projected to reach 15.5 million units, amounting to a 20% rise over

2024 figures (Fastmarkets, September 19, 2025).

OEMs have rapidly scaled exports globally, notably to Europe and emerging economies, selling approximately three million vehicles

per year to major regions since 2020.

Chinese vehicles provide significant cost advantages stemming from integrated supply chains,

innovative battery chemistries, concentrated mineral refining capabilities, advancements in local engineering capabilities, and high

competition among the rapidly expanding base of legacy and emerging OEMs (PWC, January 30, 2026).

forecasts project North American vehicle production volumes will return to mid-2019 levels by 2030, driven by capacity expansions

and reallocation toward BEV and HEV (Hybrid Electric Vehicle) vehicles.

Global players are investing heavily in expanding facilities

in North America, while others are repurposing BEV capacity for flexible manufacturing lines that can adapt to evolving demand (PWC,

January 30, 2026).

exports have grown rapidly, with Chinese manufacturers penetrating nearly all major global regions except the US—adding approximately

three million vehicles in exports since 2020.

This export surge targets primarily Europe, Latin America, and parts of Southeast Asia,

where Chinese OEMs such as BYD and Chery offer quality vehicles at low cost.

Localized production strategies and expanding EU dealerships

support this growth (PWC, January 30, 2026).

overall size of the mobility market in Europe and the United States is projected to increase to 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 size was valued at approximately $295.13 billion in 2024 and is projected to reach $451.71 billion

by 2030, representing a compound annual growth rate (CAGR) of 7.4% from 2025 through 2030 (Grandview

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

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

The unrest and turmoil

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

While recent ceasefire

efforts may signal a positive change to the volatility in the region, there is no guarantee

that the ceasefire will hold or that any outcome of the conflict will positively affect the

economic conditions in our geographic markets, inflation, economic uncertainty, and increased

operational costs are pressuring margins and leading companies to prioritize critical investment

and control spending.

cybersecurity faces unprecedented challenges as companies increasingly migrate critical functions

to cloud platforms.

Proliferation of AI tools within these platforms has created additional

attack vectors that require specialized security approaches beyond legacy protections (JOSYS.COM).

imposition of tariffs on China and 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.

the phase-out of the U.S.

federal tax credits for EVs, sales have declined and the outlook

for recovery in EV demand is poor in the near future (marklines.com).

The conflict has expanded to neighboring nations

such as Syria, Lebanon, and Iran.

The unrest and turmoil in the region are viewed unfavorably by the regional business community.

While recent ceasefire efforts may signal a positive change to the volatility in the region, there is no guarantee that the ceasefire

will hold or that any outcome of the conflict will positively affect the region.

Gulf markets remain cautious due to ongoing uncertainties

(CEO Today, October 10, 2025;

Reuters, December 17, 2025).

new-vehicle sales pace in the U.S.

in 2026 will decline to 15.8 million from 16.3 million in 2025.

Slower economic growth, softer

job creation, and the loss of EV tax incentives are all expected to weigh on demand (Cox Automotive, January 27, 2026).

economic conditions in our geographic markets, inflation, economic uncertainty, and increased operational costs are pressuring margins

and leading companies to prioritize critical investment and control spending.

cybersecurity faces unprecedented challenges as companies increasingly migrate critical functions to cloud platforms.

Proliferation

of AI tools within these platforms has created additional attack vectors that require specialized security approaches beyond legacy

protections (JOSYS.COM).

imposition of tariffs on China and 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.

IN FINANCIAL CONDITION

Ended September 30, 2025 Compared to the Quarter Ended September 30, 2024

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

Ended December 31, 2025 Compared to the Quarter Ended December 31, 2024

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

31, 2025 and 2024 as a percentage of revenues.

For the Three Months Ended September 30,

For the Three Months

Ended December 31,

Net Revenues:

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Total other income (expenses)

Net income before income taxes

Net income (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income attributable to NetSol

Net income (loss) attributable to NetSol

$ (1,147,042 )

Net income per share:

Net income per common share

Net income (loss) per share:

Net income (loss) per common share

Weighted average number of shares outstanding

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currency and in constant currency.

For the Three Months Ended September 30,

(Unfavorable)

Change due to

(Unfavorable)

For the Three Months

Favorable (Unfavorable) Change in

Favorable (Unfavorable) Change due to

Total Favorable (Unfavorable)

Ended December 31,

Net Revenues:

2 unchanged sentences

Income (loss) from operations

$ (1,838,706 )

$ (1,115,354 )

$ (1,078,548 )

revenues for the three months ended September 30, 2025 and 2024 are broken out among the segments as follows:

revenues for the three months ended December 31, 2025 and 2024 are broken out among the segments as follows:

North America

fees for the three months ended September 30, 2025 were $72,225 compared to $1,229 for the three months ended September 30, 2024 reflecting

fees for the three months ended December 31, 2025 were $117,482 compared to $72,688 for the three months ended December 31, 2024 reflecting

an increase of $44,794 with an increase in constant currency of $43,128.

and support fees for the three months ended September 30, 2025 were $8,960,555 compared to $8,192,471 for the three months ended September

and support fees for the three months ended December 31, 2025, were $9,079,783 compared to $8,642,629 for the three months ended December

31, 2024, reflecting an increase of $437,154 with an increase in constant currency of $515,085.

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, 2025 was $5,979,143 compared to $6,404,798 for the three months ended September 30, 2024

reflecting a decrease of $425,655, with a decrease in constant currency of $479,416.

Services revenue decreased compared to the prior

quarter primarily due to the timing and composition of implementation projects.

gross profit was $5,911,990 for the three months ended September 30, 2025 compared with $6,564,112 for the three months ended September

This is a decrease of $652,122 with a decrease in constant currency of $669,534.

The gross profit percentage for the three

months ended September 30, 2025 also decreased to 39.4% from 45.0% for the three months ended September 30, 2024.

The cost of sales was

$9,099,933 for the three months ended September 30, 2025 compared to $8,034,386 for the three months ended September 30, 2024 for an

increase of $1,065,547 and on a constant currency basis an increase of $1,157,815.

As a percentage of sales, cost of sales increased

from 55.0% for the three months ended September 30, 2024 to 60.6% for the three months ended September 30, 2025.

and consultant fees increased by $760,792 from $6,203,734 for the three months ended September 30, 2024 to $6,964,526 for the three months

ended September 30, 2025 and on a constant currency basis increased by $789,164.

Subscription and support fees for the

three months ended December 31, 2024, included approximately $1,000,000 related to a one-time catch-up from four customers.

and support fees begin once a customer has “gone live” with our product and are recurring in nature.

We anticipate these

fees to increase over time as we implement our Transcend TM products.

income for the three months ended December 31, 2025, was $9,611,213 compared to $6,821,344 for the three months ended December 31, 2024,

reflecting an increase of $2,789,869, with an increase in constant currency of $2,701,415.

Services revenue increased compared to the

prior quarter, primarily due to the timing and composition of the current implementation projects.

gross profit was $9,029,092 for the three months ended December 31, 2025, compared with $6,920,341 for the three months ended December

This is an increase of $2,108,751 with an increase in constant currency of $2,057,881.

The gross profit percentage for the

three months ended December 31, 2025, also increased to 48.0% from 44.5% for the three months ended December 31, 2024.

The cost of sales

was $9,779,386 for the three months ended December 31, 2025, compared to $8,616,320 for the three months ended December 31, 2024, for

an increase of $1,163,066 and on a constant currency basis an increase of $1,201,747.

As a percentage of sales, cost of sales decreased

from 55.5% for the three months ended December 31, 2024, to 52.0% for the three months ended December 31, 2025.

and consultant fees increased by $368,457 from $6,714,437 for the three months ended December 31, 2024, to $7,082,894 for the three months

ended December 31, 2025, and on a constant currency basis increased by $361,926.

The increase is due to annual salary raises.

As a percentage

of sales, salaries and consultant expense increased from 42.5% for the three months ended September 30, 2024 to 46.4% for the three months

ended September 30, 2025.

expenses were $498,172 for the three months ended September 30, 2025 compared to $570,862 for the three months ended September 30, 2024

for a decrease of $72,690 with a decrease in constant currency of $71,543.

As a percentage of sales, travel expense decreased from 3.9%

for the three months ended September 30, 2024 to 3.3% for the three months ended September 30, 2025.

and amortization expense decreased to $208,731 compared to $228,550 for the three months ended September 30, 2024 or a decrease of $19,819

of sales, salaries, and consultant expenses decreased from 43.2% for the three months ended December 31, 2024, to 37.7% for the three

months ended December 31, 2025.

expenses were $1,029,441 for the three months ended December 31, 2025, compared to $601,251 for the three months ended December 31, 2024,

for an increase of $428,190 with an increase in constant currency of $425,180.

As a percentage of sales, travel expense increased from

3.9% for the three months ended December 31, 2024, to 5.5% for the three months ended December 31, 2025.

Travel expenses increased due

to travel associated with new customer implementation projects.

and amortization expense decreased to $190,066 compared to $237,882 for the three months ended December 31, 2024, or a decrease of $47,816

and on a constant currency basis a decrease of $45,574.

costs were $1,428,504 for the three months ended September 30, 2025 compared to $1,031,240 for the three months ended September 30, 2024

costs were $1,476,985 for the three months ended December 31, 2025, compared to $1,062,750 for the three months ended December 31, 2024,

or an increase of $414,235, and on a constant currency basis an increase of $460,215.

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hardware and software costs of approximately $377,698 and hosting fees of approximately $79,881.

expenses were $7,750,696 for the three months ended September 30, 2025 compared to $7,324,270, for the three months ended September 30,

expenses were $7,729,360 for the three months ended December 31, 2025, compared to $7,407,291, for the three months ended December 31,

2024, for an increase of $322,069 and on a constant currency basis an increase of $306,264.

As a percentage of sales, it increased from

As a percentage of sales, it decreased from

47.7% to 41.1%.

1 unchanged sentence

offset by a decrease in other general and administrative expenses and the provision for doubtful accounts.

and marketing expenses were $3,116,953 for the three months ended September 30, 2025 compared to $2,292,199, for the three months ended

September 30, 2024 for an increase of $824,754 and on a constant currency basis an increase of $847,959.

and marketing expenses were $3,016,079 for the three months ended December 31, 2025, compared to $2,662,397 for the three months ended

December 31, 2024, for an increase of $353,682 and on a constant currency basis an increase of $356,319.

The increase is mainly due to

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Other marketing expenses increased by approximately $138,702 due to the increase in advertising and marketing events.

and administrative expenses were $4,419,400 for the three months ended September 30, 2025 compared to $4,672,122 for the three months

ended September 30, 2024 or a decrease of $252,722 and on a constant currency basis a decrease of $260,336.

and administrative expenses were $4,465,568 for the three months ended December 31, 2025, compared to $4,411,225 for the three months

ended December 31, 2024, or an increase of $54,343 and on a constant currency basis an increase of $32,746.

During the three months ended

September 30, 2025, salaries increased by $144,888 and increased $144,575 on a constant currency basis, bad debt expense decreased $338,089

and decreased $338,062 on a constant currency basis, and other general and administrative expenses decreased $59,521 and decreased by

$66,849 on a constant currency basis.

and development cost was $214,343 for the three months ended September 30, 2025 compared to $359,949, for the three months ended September

December 31, 2025, salaries increased by $289,749 and increased by $279,058 on a constant currency basis, bad debt expense decreased

by $46,621 and decreased by $47,447 on a constant currency basis, and other general and administrative expenses decreased by $188,785

and decreased by $198,865 on a constant currency basis.

and development cost was $247,713 for the three months ended December 31, 2025, compared to $333,669 for the three months ended December

31, 2024, for a decrease of $85,956 and on a constant currency basis a decrease of $82,801.

from Operations

from operations was $1,838,706 for the three months ended September 30, 2025 compared to $760,158 for the three months ended September

This represents an increase in loss of $1,078,548 with an increase of $1,115,354 on a constant currency basis for the three

months ended September 30, 2025 compared with the three months ended September 30, 2024.

As a percentage of sales, loss from operations

was 12.3% for the three months ended September 30, 2025 compared to a loss from operations of 5.2% for the three months ended September

from operations was $1,299,732 for the three months ended December 31, 2025, compared to a loss from operations of $486,950 for the three

months ended December 31, 2024.

This represents an increase in income of $1,786,682 with an increase of $1,751,617 on a constant currency

basis for the three months ended December 31, 2025, compared with the three months ended December 31, 2024.

As a percentage of sales,

income from operations was 6.9% for the three months ended December 31, 2025, compared to a loss from operations of 3.1% for the three

months ended December 31, 2024.

Income and Expense

expense was $162,884 for the three months ended September 30, 2025 compared to other income of $1,207,684 for the three months ended

September 30, 2024.

This represents a decrease in other income of $1,370,568 with a decrease of $1,371,569 on a constant currency basis.

The decrease is primarily due to the foreign currency exchange transactions.

The majority of the contracts with NetSol PK are either

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.

income was $142,501 for the three months ended December 31, 2025, compared to other loss of $367,642 for the three months ended December

This represents an increase in other income of $510,143 with an increase of $513,784 on a constant currency basis.

is primarily due to the foreign currency exchange transactions.

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.

dollar and the Euro.

During the three months ended September 30, 2025, we recognized a loss of

$286,917 in foreign currency exchange transactions compared to a gain of $542,545 for the three months ended September 30, 2024.

the three months ended September 30, 2025, the value of the U.S.

During the three months ended December 31, 2025, we recognized a gain of $46,074 in foreign

currency exchange transactions compared to a loss of $698,426 for the three months ended December 31, 2024.

During the three months ended

December 31, 2025, the value of the U.S.

dollar decreased 0.7% and the Euro decreased 0.7%, compared to the PKR.

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

During 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.

Non-controlling

the three months ended September 30, 2025, the net income attributable to non-controlling interest was $139,923, compared to $146,914

for the three months ended September 30, 2024.

the three months ended December 31, 2025, the net income attributable to non-controlling interest was $715,282, compared to the net loss

attributable to non-controlling interest of $39,164 for the three months ended December 31, 2024.

income (loss) attributable to NetSol

net loss was $2,357,288 for the three months ended September 30, 2025 compared to net income of $70,795 for the three months ended September

This is a decrease of $2,428,083 with a decrease of $2,509,233 on a constant currency basis, compared to the prior year.

the three months ended September 30, 2025, net loss per share was $0.20 for basic and diluted shares compared to net income per share

of $0.006 for basic and diluted shares for the three months ended September 30, 2024.

net income was $246,757 for the three months ended December 31, 2025, compared to a net loss of $1,147,042 for the three months ended

December 31, 2024.

This is an increase of $1,393,799 with an increase of $1,314,986 on a constant currency basis, compared to the prior

For the three months ended December 31, 2025, net income per share was $0.02 for basic and diluted shares compared to a net loss

per share of $0.10 for basic and diluted shares for the three months ended December 31, 2024.

Months Ended December 31, 2025 Compared to the Six Months Ended December 31, 2024

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

31, 2025 and 2024 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 (loss) before income taxes

Income tax provision

Net income (loss)

Non-controlling interest

Net income (loss) attributable to NetSol

$ (2,110,531 )

$ (1,076,247 )

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.

For the Six Months

Favorable (Unfavorable) Change in

Favorable (Unfavorable) Change due to

Total Favorable (Unfavorable)

Ended December 31,

Net Revenues:

Cost of revenues:

Operating expenses:

Income (loss) from operations

$ (1,247,108 )

revenues for the six months ended December 31, 2025 and 2024 are broken out among the segments as follows:

North America

fees for the six months ended December 31, 2025 were $189,707 compared to $73,917 for the six months ended December 31, 2024 reflecting

an increase of $115,790 with an increase in constant currency of $111,310.

and support fees for the six months ended December 31, 2025, were $18,040,338 compared to $16,835,100 for the six months ended December

31, 2024, reflecting an increase of $1,205,238 with an increase in constant currency of $1,031,209.

Subscription and support fees for

the six months ended December 31, 2024, included approximately $1,000,000 related to a one-time catch-up from four customers.

and support fees begin once a customer has “gone live” with our product and are recurring in nature.

We anticipate these

fees to increase over time as we implement our Transcend TM products.

income for the six months ended December 31, 2025, was $15,590,356 compared to $13,226,142 for the six months ended December 31, 2024,

reflecting an increase of $2,364,214, with an increase in constant currency of $2,221,999.

Services revenue increased primarily due to

the timing and composition of the current implementation projects.

gross profit was $14,941,082 for the six months ended December 31, 2025, compared with $13,484,453 for the six months ended December

This is an increase of $1,456,629 with an increase in constant currency of $1,100,907.

The gross profit percentage for the

six months ended December 31, 2025, slightly decreased to 44.2% from 44.8% for the six months ended December 31, 2024.

The cost of sales

was $18,879,319 for the six months ended December 31, 2025, compared to $16,650,706 for the six months ended December 31, 2024, for an

increase of $2,228,613 and on a constant currency basis an increase of $2,263,611.

As a percentage of sales, cost of sales increased

from 55.3% for the six months ended December 31, 2024, to 55.8% for the six months ended December 31, 2025.

and consultant fees increased by $1,129,249 from $12,918,171 for the six months ended December 31, 2024, to $14,047,420 for the six months

ended December 31, 2025, and on a constant currency basis increased by $1,151,090.

The increase is due to annual salary raises.

percentage of sales, salaries and consultant expenses decreased from 42.9% for the six months ended December 31, 2024, to 41.5% for the

six months ended December 31, 2025.

expenses were $1,527,613 for the six months ended December 31, 2025, compared to $1,172,113 for the six months ended December 31, 2024,

for an increase of $355,500 with an increase in constant currency of $353,637.

As a percentage of sales, travel expense increased from

3.9% for the six months ended December 31, 2024, to 4.5% for the six months ended December 31, 2025.

Travel expenses increased due to

travel associated with new customer implementation projects.

and amortization expense decreased to $398,797 compared to $466,432 for the six months ended December 31, 2024, or a decrease of $67,635

and on a constant currency basis a decrease of $61,851.

costs were $2,905,489 for the six months ended December 31, 2025, compared to $2,093,990 for the six months ended December 31, 2024,

or an increase of $811,499 and on a constant currency basis an increase of $820,735.

The increase is mainly due to an increase in third-party

hardware and software costs of approximately $749,100 and hosting fees of approximately $137,169.

expenses were $15,480,056 for the six months ended December 31, 2025, compared to $14,731,561, for the six months ended December 31,

2024, for an increase of $748,495 and on a constant currency basis an increase of $656,813.

As a percentage of sales, it decreased from

48.9% to 45.8%.

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

offset by a decrease in other general and administrative expenses and the provision for doubtful accounts.

and marketing expenses were $6,133,032 for the six months ended December 31, 2025, compared to $4,954,596, for the six months ended December

31, 2024, for an increase of $1,178,436 and on a constant currency basis an increase of $1,110,757.

The increase is mainly due to increases

in salaries and consultants of approximately $831,253, due to annual raises and the hiring of additional marketing personnel.

Other marketing

expenses increased by approximately $290,538 due to the increase in advertising and marketing events.

and administrative expenses were $8,884,968 for the six months ended December 31, 2025, compared to $9,083,347 for the six months ended

December 31, 2024, or a decrease of $198,379 and on a constant currency basis a decrease of $229,340.

During the six months ended December

31, 2025, salaries increased by $434,637 and increased by $423,633 on a constant currency basis, bad debt expense decreased by $384,710

and decreased by $385,509 on a constant currency basis, and other general and administrative expenses decreased by $248,306 and decreased

by $267,464 on a constant currency basis.

and development cost was $462,056 for the six months ended December 31, 2025, compared to $693,618 for the six months ended December

31, 2024, for a decrease of $231,562, and on a constant currency basis a decrease of $224,604.

from Operations

from operations was $538,974 for the six months ended December 31, 2025, compared to $1,247,108 for the six months ended December 31,

This represents a decrease in loss of $708,134 with a decrease of $444,094 on a constant currency basis for the six months ended

December 31, 2025, compared with the six months ended December 31, 2024.

As a percentage of sales, loss from operations was 1.6% for

the six months ended December 31, 2025, compared to a loss from operations of 4.1% for the six months ended December 31, 2024.

Income and Expense

expense was $20,383 for the six months ended December 31, 2025, compared to other income of $840,042 for the six months ended December

This represents a decrease in other income of $860,425 with a decrease of $857,790 on a constant currency basis.

is primarily due to lower interest income, driven by a reduction in interest rates from approximately 15.0%-19.6% for the six months

ended December 31, 2024, to approximately 8.9%-10.8% for the six months ended December 31, 2025.

Non-controlling

the six months ended December 31, 2025, the net income attributable to non-controlling interest was $855,205, compared to $107,750 for

the six months ended December 31, 2024.

income (loss) attributable to NetSol

net loss was $2,110,531 for the six months ended December 31, 2025, compared to $1,076,247 for the six months ended December 31,

This is an increase in net loss of $1,034,284 with an increase of $1,386,421 on a constant currency basis, compared to the

For the six months ended December 31, 2025, net loss per share was $0.18 for basic and diluted shares compared to net

loss per share of $0.09 for basic and diluted shares for the six months ended December 31, 2024.

Financial Measures

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define the non-GAAP measures as follows:

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

and amortization.

adjusted EBITDA is EBITDA plus stock-based compensation expense.

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

by the weighted average shares outstanding and diluted shares outstanding.

EBITDA is GAAP net income or loss before net interest expense,

income tax expense, depreciation and amortization.

Non-GAAP adjusted EBITDA is EBITDA plus stock-based compensation

Adjusted 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

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

GAAP measures for the three months ended September 30, 2025 and 2024 are as follows:

For the Three Months Ended September 30,

GAAP measures for the three and six months ended December 31, 2025 and 2024 are as follows:

For the Three Months

For the Six Months

Ended December 31,

Net Income (loss) attributable to NetSol

$ (1,147,042 )

$ (2,110,531 )

$ (1,076,247 )

Non-controlling interest

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Interest (income)

$ (1,783,347 )

Non-cash stock-based compensation

Adjusted EBITDA, gross

$ (1,637,947 )

Less non-controlling interest (a)

Adjusted EBITDA, net

$ (1,861,895 )

Weighted Average number of shares outstanding

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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

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AND CAPITAL RESOURCES

cash position was $22,690,618 at September 30, 2025, compared to $17,357,944 at June 30, 2025.

cash provided by operating activities was $5,303,561 for the three months ended September 30, 2025 compared to $5,517,745 for the three

months ended September 30, 2024.

At September 30, 2025, we had current assets of $46,592,989 and current liabilities of $21,659,278.

We had accounts receivable of $6,320,988 at September 30, 2025 compared to $7,527,572 at June 30, 2025.

We had revenues in excess of

billings of $14,875,704 at September 30, 2025 compared to $19,134,385 at June 30, 2025 of which $881,053 and $903,766 is shown as long-term

as of September 30, 2025 and June 30, 2025, respectively.

The long-term portion was discounted by $183,137 and $208,037 at September

30, 2025 and June 30, 2025, respectively, using the discounted cash flow method with interest rates ranging from 4.2% to 17.5%.

the three months ended September 30, 2025, 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 $5,465,265

from $26,661,957 at June 30, 2025 to $21,196,692 at September 30, 2025.

Accounts payable and accrued expenses, and current portions of

loans and lease obligations amounted to $9,191,552 and $8,330,243, respectively, at September 30, 2025.

Accounts payable and accrued

expenses, and current portions of loans and lease obligations amounted to $8,010,844 and $8,240,061, respectively, at June 30, 2025.

average days sales outstanding for the three months ended September 30, 2025 and 2024 were 147 and 150 days, respectively.

cash position was $18,132,086 at December 31, 2025, compared to $17,357,944 at June 30, 2025.

cash provided by operating activities was $554,881 for the six months ended December 31, 2025 compared to $369,716 for the six months

ended December 31, 2024.

At December 31, 2025, we had current assets of $46,412,511 and current liabilities of $19,995,825.

We had accounts

receivable of $7,776,096 at December 31, 2025 compared to $7,527,572 at June 30, 2025.

We had revenues in excess of billings of $17,844,091

at December 31, 2025 compared to $19,134,385 at June 30, 2025 of which $763,396 and $903,766 is shown as long-term as of December 31,

2025 and June 30, 2025, respectively.

The long-term portion was discounted by $170,629 and $208,037 at December 31, 2025 and June 30,

2025, respectively, using the discounted cash flow method with interest rates ranging from 4.2% to 17.5%.

During the six months ended

December 31, 2025, 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 $1,041,770 from $26,661,957

at June 30, 2025 to $25,620,187 at December 31, 2025.

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

obligations amounted to $8,059,205 and $8,509,841, respectively, at December 31, 2025.

Accounts payable and accrued expenses, and current

portions of loans and lease obligations amounted to $8,010,844 and $8,240,061, respectively, at June 30, 2025.

average days sales outstanding for the six months ended December 31, 2025 and 2024 were 142 and 140 days, respectively.

The days sales

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

cash used in investing activities was $443,198 for the three months ended September 30, 2025, compared to $108,632 for the three months

ended September 30, 2024.

We had purchases of property and equipment of $485,281 compared to $100,737 for the three months ended September

cash provided by financing activities was $191,218 for the three months ended September 30, 2025, compared to $153,189 for the three

months ended September 30, 2024.

During the three months ended September 30, 2025, we received bank proceeds of $242,421 compared to

$250,000 during the three months ended September 30, 2024.

During the three months ended September 30, 2025, we had net payments for

bank loans and finance leases of $115,350 compared to $118,311 for the three months ended September 30, 2024.

Employees of our subsidiary,

NetSol PK, exercised 278,455 options of common stock for $76,567, of which $64,147 was received during the quarter ended September 30,

2025 and $12,420 was received during the fiscal year ended June 30, 2025.

We are operating in various geographical regions of the world

through our various subsidiaries.

Those subsidiaries have financial arrangements with 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

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 $753,412 for the six months ended December 31, 2025, compared to $531,477 for the six months ended

December 31, 2024.

We had purchases of property and equipment of $856,330 compared to $568,134 for the six months ended December 31,

cash provided by financing activities was $724,853 for the six months ended December 31, 2025, compared to $2,637,763 for the six months

ended December 31, 2024.

During the six months ended December 31, 2025, we received bank proceeds of $792,484 compared to $2,676,932

during the six months ended December 31, 2024.

During the six months ended December 31, 2025, we had net payments for bank loans and

finance leases of $425,764 compared to $162,370 for the six months ended December 31, 2024.

Employees of our subsidiary, NetSol PK, exercised

1,346,330 options of common stock for $370,553, of which $358,133 was received during the six months ended December 31, 2025 and $12,420

was received during the fiscal year ended June 30, 2025.

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

subsidiaries.

Those subsidiaries have financial arrangements with 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.

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.

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

As of September 30, 2025, we had approximately

As of December 31, 2025, we had approximately

$18.1 million of cash, cash equivalents and marketable securities of which approximately $17.3 million is held by our foreign subsidiaries.

8 unchanged sentences

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 ($405,405) 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 600 million ($2,124,495) and a running finance facility of Rupees 4.1 million

NetSol PK has an approved facility for export refinance from Habib Metro Bank Limited amounting to Rupees 1.3 billion ($4,603,073)

and another export refinance facility amounting to Rupees 400 million ($1,416,331) from Bank Al-Habib.

These facilities require NetSol

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

NetSol PK also has an approved export refinance facility

380 million ($1,345,514) 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

following tables present financial covenants associated with our borrowings.

Financial Covenants / Conditions

trade receivables (≤90 days old, net of provisions, excluding intercompany) must be at least 200% of the facility balance

Bank – Export refinance

600 million ($2,140,029)

debt-to-equity ratio of 60:40;

Current ratio of at least 1:1

Bank – Running finance

4.1 million ($14,449)

Metro – Export refinance

1.3 billion ($4,636,730)

Al-Habib – Export refinance

400 million ($1,426,687)

Bank – Export refinance

380 million ($1,355,352)

Interest coverage ≥ 4x;

Leverage ratio ≤ 2x;

Debt service coverage ≥ 4x

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

21 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis