NETSOL TECHNOLOGIES INC 10-Q

Item 1. Financial Statements (Unaudited) NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) As of As of March 31, 2026 June 30, 2025 ASSETS Current assets: Cash and cash equivalents $ 14,744,392 $ 17,357,944 Accounts receivable, net of allowance of $ 92,025 and $ 355,464 16,646,299 7,527,572 Revenues in excess of billings, net of allowance of $ 256,812 and $ 34,496 18,163,507 18,230,619 Other current assets 2,767,578 3,203,468 Total current assets 52,321,776 46,319,603 Revenues in excess of billings, net - long term 2,824,298 903,766 Property and equipment, net 5,558,409 5,073,372 Right of use assets - operating leases 869,191 809,513 Other assets 7,189 32,331 Other intangible assets, net 1,039,989 - Goodwill 9,302,524 9,302,524 Total assets $ 71,923,376 $ 62,441,109 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 8,132,384 $ 8,010,844 Current portion of loans and obligations under finance leases 8,241,584 8,240,061 Current portion of operating lease obligations 479,751 433,242 Unearned revenue 10,184,195 3,029,850 Total current liabilities 27,037,914 19,713,997 Loans and obligations under finance leases; less current maturities 249,799 134,608 Operating lease obligations; less current maturities 363,430 333,374 Total liabilities 27,651,143 20,181,979 Stockholders’ equity: Preferred stock, $ .01 par value; 500,000 shares authorized; - - Common stock, $ .01 par value; 18,000,000 shares authorized; 12,785,940 shares issued and 11,846,909 outstanding as of March 31, 2026, 12,700,465 shares issued and 11,761,434 outstanding as of June 30, 2025 127,862 127,008 Additional paid-in-capital 129,631,529 129,529,901 Treasury stock (at cost, 939,031 shares as of March 31, 2026 and June 30, 2025) ( 3,920,856 ) ( 3,920,856 ) Accumulated deficit ( 42,098,647 ) ( 41,289,080 ) Other comprehensive loss ( 46,563,902 ) ( 46,613,208 ) Total NetSol stockholders’ equity 37,175,986 37,833,765 Non-controlling interest 7,096,247 4,425,365 Total stockholders’ equity 44,272,233 42,259,130 Total liabilities and stockholders’ equity $ 71,923,376 $ 62,441,109 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 3 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) 2026 2025 2026 2025 For the Three Months Ended March 31, For the Nine Months Ended March 31, 2026 2025 2026 2025 Net Revenues: License fees $ 4,728,411 $ 1,198 $ 4,918,118 $ 75,115 Subscription and support 8,810,115 7,888,360 26,850,453 24,723,460 Services 6,294,117 9,654,399 21,884,473 22,880,541 Total net revenues 19,832,643 17,543,957 53,653,044 47,679,116 Cost of revenues 8,804,001 8,802,184 27,683,320 25,452,890 Gross profit 11,028,642 8,741,773 25,969,724 22,226,226 Operating expenses: Selling, general and administrative 7,856,107 6,883,587 22,874,107 20,921,530 Research and development cost 166,384 304,788 628,440 998,406 Total operating expenses 8,022,491 7,188,375 23,502,547 21,919,936 Income from operations 3,006,151 1,553,398 2,467,177 306,290 Other income and (expenses) Interest expense ( 151,537 ) ( 194,742 ) ( 502,421 ) ( 689,347 ) Interest income 208,232 294,655 697,981 1,593,594 Gain (loss) on foreign currency exchange transactions ( 76,178 ) 321,622 ( 317,021 ) 165,741 Other income 109,203 10,831 190,798 202,420 Total other income (expenses) 89,720 432,366 69,337 1,272,408 Net income before income taxes 3,095,871 1,985,764 2,536,514 1,578,698 Income tax provision ( 781,243 ) ( 151,334 ) ( 1,477,212 ) ( 712,765 ) Net income (loss) 2,314,628 1,834,430 1,059,302 865,933 Non-controlling interest ( 1,013,664 ) ( 410,462 ) ( 1,868,869 ) ( 518,212 ) Net income (loss) attributable to NetSol $ 1,300,964 $ 1,423,968 $ ( 809,567 ) $ 347,721 Net income (loss) per share: Net income (loss) per common share Basic $ 0.11 $ 0.12 $ ( 0.07 ) $ 0.03 Diluted $ 0.11 $ 0.12 $ ( 0.07 ) $ 0.03 Weighted average number of shares outstanding Basic 11,823,170 11,683,408 11,795,818 11,531,365 Diluted 11,836,930 11,683,408 11,795,818 11,531,365 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 4 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) 2026 2025 2026 2025 For the Three Months Ended March 31, For the Nine Months Ended March 31, 2026 2025 2026 2025 Net income (loss) $ 1,300,964 $ 1,423,968 $ ( 809,567 ) $ 347,721 Other comprehensive income (loss): Translation adjustment ( 108,986 ) ( 94,339 ) 248,826 ( 352,436 ) Translation adjustment attributable to non-controlling interest ( 41,907 ) 28,486 ( 199,520 ) 34,433 Net translation adjustment ( 150,893 ) ( 65,853 ) 49,306 ( 318,003 ) Comprehensive income (loss) attributable to NetSol $ 1,150,071 $ 1,358,115 $ ( 760,261 ) $ 29,718 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 5 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) A statement of the changes in equity for the three months ended March 31, 2026, is provided below: Shares Amount Capital Shares Deficit Loss Interest Equity Other Additional Compre- Non Total Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders’ Shares Amount Capital Shares Deficit Loss Interest Equity Balance at December 31, 2025 12,753,209 $ 127,535 $ 129,545,854 $ ( 3,920,856 ) $ ( 43,399,611 ) $ ( 46,413,009 ) $ 5,998,656 $ 41,938,569 Exercise of subsidiary common stock options ( 12,953 ) - - - 42,020 29,067 Common stock issued for: - - - - Services 32,731 327 98,628 - - - - 98,955 Foreign currency translation adjustment - - ( 150,893 ) 41,907 ( 108,986 ) Net income - 1,300,964 1,013,664 2,314,628 Balance at March 31, 2026 12,785,940 $ 127,862 $ 129,631,529 $ ( 3,920,856 ) $ ( 42,098,647 ) $ ( 46,563,902 ) $ 7,096,247 $ 44,272,233 A statement of the changes in equity for the three months ended December 31, 2025, is provided below: Other Additional Compre- Non Total Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders’ Shares Amount Capital Shares Deficit Loss Interest Equity Balance at September 30, 2025 12,733,907 $ 127,342 $ 129,636,251 $ ( 3,920,856 ) $ ( 43,646,368 ) $ ( 46,402,374 ) $ 4,729,654 $ 40,523,649 Exercise of subsidiary common stock options ( 151,204 ) - - - 445,190 293,986 Common stock issued for: - - - - Services 19,302 193 60,807 - - - - 61,000 Foreign currency translation adjustment - - ( 10,635 ) 108,530 97,895 Net income - 246,757 - 715,282 962,039 Balance at December 31, 2025 12,753,209 $ 127,535 $ 129,545,854 $ ( 3,920,856 ) $ ( 43,399,611 ) $ ( 46,413,009 ) $ 5,998,656 $ 41,938,569 A statement of the changes in equity for the three months ended September 30, 2025 is provided below: Other Additional Compre- Non Total Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders’ Shares Amount Capital Shares Deficit Loss Interest Equity Balance at June 30, 2025 12,700,465 $ 127,008 $ 129,529,901 $ ( 3,920,856 ) $ ( 41,289,080 ) $ ( 46,613,208 ) $ 4,425,365 $ 42,259,130 Exercise of subsidiary common stock options - - ( 38,716 ) - - - 115,283 76,567 Common stock issued for: Services 33,442 334 145,066 - - - - 145,400 Foreign currency translation adjustment - - - - - 210,834 49,083 259,917 Net loss - - - - ( 2,357,288 ) - 139,923 ( 2,217,365 ) Balance at September 30, 2025 12,733,907 $ 127,342 $ 129,636,251 $ ( 3,920,856 ) $ ( 43,646,368 ) $ ( 46,402,374 ) $ 4,729,654 $ 40,523,649 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 6 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) A statement of the changes in equity for the three months ended March 31, 2025 is provided below: Other Additional Compre- Non Total Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders’ Shares Amount Capital Shares Deficit Loss Interest Equity Balance at December 31, 2024 12,589,046 $ 125,894 $ 129,194,697 $ ( 3,920,856 ) $ ( 45,288,560 ) $ ( 46,187,766 ) $ 4,592,554 $ 38,515,963 Exercise of common stock options 20,000 200 42,800 - - - - 43,000 Common stock issued for: Services 39,528 395 100,006 - - - - 100,401 Purchase of subsidiary treasury shares - - - - - - ( 1,503,662 ) ( 1,503,662 ) Adjustment in APIC for change in subsidiary shares to non-controlling interest - - 29,135 - - - ( 29,135 ) - Foreign currency translation adjustment - - - - - ( 65,853 ) ( 28,486 ) ( 94,339 ) Net income for the period - - - - 1,423,968 - 410,462 1,834,430 Balance at March 31, 2025 12,648,574 $ 126,489 $ 129,366,638 $ ( 3,920,856 ) $ ( 43,864,592 ) $ ( 46,253,619 ) $ 3,441,733 $ 38,895,793 A statement of the changes in equity for the three months ended December 31, 2024 is provided below: Other Additional Compre- Non Total Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders’ Shares Amount Capital Shares Deficit Loss Interest Equity Balance at September 30, 2024 12,383,872 $ 123,842 $ 128,709,890 $ ( 3,920,856 ) $ ( 44,141,518 ) $ ( 46,049,023 ) $ 5,017,675 $ 39,740,010 Exercise of common stock options 190,000 1,900 406,600 - - - - 408,500 Common stock issued for: Services 15,174 152 39,598 - - - - 39,750 Fair value of subsidiary options issued - - 7,605 - - - - 7,605 Acquisition of non-controlling interest in subsidiary - - 31,004 - - - ( 31,987 ) ( 983 ) Dividend to non-controlling interest - - - - - - ( 306,799 ) ( 306,799 ) Foreign currency translation adjustment - - - - - ( 138,743 ) ( 47,171 ) ( 185,914 ) Net loss - - - - ( 1,147,042 ) - ( 39,164 ) ( 1,186,206 ) Balance at December 31, 2024 12,589,046 $ 125,894 $ 129,194,697 $ ( 3,920,856 ) $ ( 45,288,560 ) $ ( 46,187,766 ) $ 4,592,554 $ 38,515,963 Page 7 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) A statement of the changes in equity for the three months ended September 30, 2024 is provided below: Other Additional Compre- Non Total Common Stock Paid-in Treasury Accumulated hensive Controlling Stockholders’ Shares Amount Capital Shares Deficit Loss Interest Equity Balance at June 30, 2024 12,359,922 $ 123,602 $ 128,783,865 $ ( 3,920,856 ) $ ( 44,212,313 ) $ ( 45,935,616 ) $ 4,694,418 $ 39,533,100 Balance 12,359,922 $ 123,602 $ 128,783,865 $ ( 3,920,856 ) $ ( 44,212,313 ) $ ( 45,935,616 ) $ 4,694,418 $ 39,533,100 Exercise of common stock options 10,000 100 21,400 - - - - 21,500 Common stock issued for: Services 13,950 140 39,610 - - - - 39,750 Fair value of subsidiary options issued - - 8,029 - - - - 8,029 Acquisition of non-controlling interest in subsidiary - - ( 143,014 ) - - - 135,119 ( 7,895 ) Foreign currency translation adjustment - - - - - ( 113,407 ) 41,224 ( 72,183 ) Net income - - - - 70,795 - 146,914 217,709 Net income (loss) - - - - 70,795 - 146,914 217,709 Balance at September 30, 2024 12,383,872 $ 123,842 $ 128,709,890 $ ( 3,920,856 ) $ ( 44,141,518 ) $ ( 46,049,023 ) $ 5,017,675 $ 39,740,010 Balance 12,383,872 $ 123,842 $ 128,709,890 $ ( 3,920,856 ) $ ( 44,141,518 ) $ ( 46,049,023 ) $ 5,017,675 $ 39,740,010 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 8 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) 2026 2025 For the Nine Months Ended March 31, 2026 2025 Cash flows from operating activities: Net income $ 1,059,302 $ 865,933 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 931,771 1,102,085 Provision for bad debts 337,493 1,062,515 Gain on sale of assets ( 87,463 ) ( 28,320 ) Stock based compensation 267,400 134,884 Changes in operating assets and liabilities: Accounts receivable ( 9,180,034 ) 6,408,397 Revenues in excess of billing ( 1,611,662 ) ( 1,411,983 ) Other current assets 936,453 ( 344,493 ) Accounts payable and accrued expenses 123,872 ( 1,136,533 ) Unearned revenue 6,437,518 ( 6,646,170 ) Net cash provided by (used in) operating activities ( 785,350 ) 6,315 Cash flows from investing activities: Purchases of property and equipment ( 1,379,262 ) ( 897,743 ) Sales of property and equipment 85,851 63,577 Investment in associates 25,396 - Purchase of subsidiary shares - ( 8,878 ) Increase in intangible assets ( 1,039,989 ) - Net cash used in investing activities ( 2,308,004 ) ( 843,044 ) Cash flows from financing activities: Proceeds from the exercise of stock options and warrants - 473,000 Proceeds from exercise of subsidiary options 387,200 - Dividend paid by subsidiary to non-controlling interest - ( 306,799 ) Purchase of subsidiary treasury stock - ( 1,503,662 ) Proceeds from bank loans 1,076,226 2,451,256 Payments on finance lease obligations and loans - net ( 1,093,671 ) ( 247,496 ) Net cash provided by financing activities 369,755 866,299 Effect of exchange rate changes 110,047 ( 381,996 ) Net increase (decrease) in cash and cash equivalents ( 2,613,552 ) ( 352,426 ) Cash and cash equivalents at beginning of the period 17,357,944 19,127,165 Cash and cash equivalents at end of period $ 14,744,392 $ 18,774,739 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 9 NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) For the Nine Months Ended March 31, 2026 2025 SUPPLEMENTAL DISCLOSURES: Cash paid during the period for: Interest $ 617,486 $ 619,451 Taxes $ 992,446 $ 1,185,546 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. Page 10 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The Company develops, licenses and supports enterprise software solutions for asset finance, leasing and digital retail, and provides related services. The Company’s customers include automotive and equipment OEMs, captive finance companies, dealerships and financial institutions worldwide. The Company also provides consulting, implementation and integration services. The consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, 2025. The Company follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods are not indicative of annual results. The accompanying consolidated financial statements include the accounts of the Company as follows: Wholly owned Subsidiaries NetSol Technologies Americas, Inc. (“NTA”) NetSol Connect (Private), Ltd. (“Connect”) NetSol Technologies Australia Pty Ltd. (“Australia”) NetSol Technologies Europe Limited (“NTE”) NetSol Technologies (Beijing) Co. Ltd. (“NetSol Beijing”) Tianjin NuoJinZhiCheng Co., Ltd (“Tianjin”) Ascent Europe Ltd. (“AEL”) Virtual Lease Services Holdings Limited (“VLSH”) Virtual Lease Services Limited (“VLS”) Virtual Lease Services (Ireland) Limited (“VLSIL”) Majority-owned Subsidiaries NetSol Technologies, Ltd. (“NetSol PK”) NetSol Innovation (Private) Limited (“NetSol Innovation”) NetSol Institute of Artificial Intelligence (Private) Limited (“NIAI”) NETSOL Ascent Middle East Computer Equipment Trading LLC (“NAMECET”) NetSol Technologies Thailand Limited (“NetSol Thai”) Otoz (Thailand) Limited (“Otoz® Thai”) Page 11 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) NOTE 2 – ACCOUNTING POLICIES Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas requiring significant estimates are the measurement of progress toward completion of long-term software implementation projects, the allocation of the transaction price in multiple performance obligations, expected credit loss on accounts receivable and revenues in excess of billings, provision for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, the determination of stock-based compensation expense, estimated contract costs and the capitalization and estimated useful lives of software development and internal-use software costs. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates. Concentration of Credit Risk Cash includes cash on hand and demand deposits in accounts maintained within the United States as well as in foreign countries. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash and restricted cash. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States. Balances at financial institutions within certain foreign countries are not covered by insurance, except balances maintained in China are insured for RMB 500,000 ($ 72,464 ) in each bank and in the UK for GBP 85,000 ($ 111,842 ) in each bank. The Company maintains three bank accounts in China and six bank accounts in the UK. As of March 31, 2026, and June 30, 2025, the Company had uninsured deposits related to cash deposits in accounts maintained within foreign entities of approximately $ 14,165,752 and $ 16,386,079 , respectively. The Company has not experienced any losses in such accounts. The Company’s operations are carried out globally. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments of each country and by the general state of the country’s economy. The Company’s operations in each foreign country are subject to specific considerations and significant risks not typically associated with companies in economically developed nations. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Internal-Use Software The Company capitalizes certain costs incurred in connection with the development and implementation of internal-use software in accordance with ASC 350-40, Internal-Use Software . Capitalized costs include external direct costs of materials and services, payroll and payroll-related costs for employees directly associated with the development of the software, and interest costs incurred during the application development stage, if applicable. Costs incurred during the preliminary project stage and post-implementation/operation stage, including training and maintenance, are expensed as incurred. Capitalization begins when the preliminary project stage is complete, management authorizes and commits to funding the project, and it is probable that the project will be completed and the software will be used as intended. Capitalized internal-use software costs are included within other intangible assets and are amortized on a straight-line basis over the estimated useful life of the software. Amortization commences when the software is placed into service. The Company evaluates capitalized internal-use software for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Page 12 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Fair Value of Financial Instruments The Company applies the provisions of Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amounts approximate fair value due to their relatively short maturities. The carrying amounts of the long-term debt approximate their fair values based on current interest rates for instruments with similar characteristics. The three levels of valuation hierarchy are defined as follows: Level 1: Valuations consist of unadjusted quoted prices in active markets for identical assets and liabilities and has the highest priority. Level 2: Valuations rely on quoted prices in markets that are not active or observable inputs over the full term of the asset or liability. Level 3: Valuations are based on prices or third party or internal valuation models that require inputs that are significant to the fair value measurement and are less observable and thus have the lowest priority. The Company’s financial assets that were measured at fair value on a recurring basis as of March 31, 2026, were as follows: SCHEDULE OF FAIR VALUE OF FINANCIAL ASSETS MEASURED ON RECURRING BASIS Level 1 Level 2 Level 3 Total Assets Revenues in excess of billings - long term $ - $ - $ 2,824,298 $ 2,824,298 Total $ - $ - $ 2,824,298 $ 2,824,298 The Company’s financial assets that were measured at fair value on a recurring basis as of June 30, 2025, are as follows: Level 1 Level 2 Level 3 Total Assets Revenues in excess of billings - long term $ - $ - $ 903,766 $ 903,766 Total $ - $ - $ 903,766 $ 903,766 The reconciliation from June 30, 2025 to March 31, 2026 is as follows: SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS RECONCILIATION Revenues in excess of billings - long term Fair value discount Total Balance at June 30, 2025 $ 1,111,803 $ ( 208,037 ) $ 903,766 Additions 2,521,608 ( 270,726 ) 2,250,882 Amortization during the period - 49,822 49,822 Transfers to short term ( 290,991 ) - ( 290,991 ) Effect of Translation Adjustment ( 97,693 ) 8,512 ( 89,181 ) Balance at March 31, 2026 $ 3,244,727 $ ( 420,429 ) $ 2,824,298 Page 13 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Management analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrants and option derivatives are valued using the Black-Scholes model. Recent Accounting Standards Not Yet Implemented : Income Taxes In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09 – Income Taxes (Topic ASC 740) Income Taxes . This ASU improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, as well as disaggregated income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024. For the Company, this corresponds to fiscal year 2026. The amendments will be applied on a prospective basis, although retrospective application for prior periods is permitted. The Company expects the adoption of this ASU to result in additional disclosures but does not anticipate any impact on its financial position, results of operations, or cash flows. Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. The standard requires disclosure of specified information about certain costs and expenses, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization from each relevant expense caption. The amendments are effective for annual reporting periods beginning after December 15, 2026, which corresponds to the Company’s fiscal year 2028 and interim periods beginning after December 15, 2027, which corresponds to the Company’s first quarter of fiscal 2029. Early adoption and retrospective application are permitted but not required. The Company plans to adopt the standard and make the required disclosures beginning in fiscal year 2028 for annual periods and in Q1 of fiscal 2029 for interim periods. The Company expects the adoption of this ASU to result in additional disclosures but does not anticipate any impact on its financial position, results of operations, or cash flows. Internal-Use Software In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software . This ASU eliminates references to “project stages” and clarifies the criteria for capitalizing costs related to internal-use software. The amendments apply to all entities subject to the guidance in Subtopic 350-40. The ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, which corresponds to the Company’s fiscal year 2029. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures. Interim Reporting In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which clarifies the application of interim reporting guidance, including the types of interim reporting and the form and content of interim financial statements under U.S. GAAP. The amendments are intended to clarify and improve the organization of existing interim reporting requirements and do not change the fundamental principles of interim reporting. The ASU is effective for interim reporting periods within fiscal years beginning after December 15, 2027, which corresponds to the interim periods within the Company’s fiscal year 2029. The Company is currently assessing the impact of this ASU on its consolidated financial statements and related disclosures. All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable. Page 14 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) NOTE 3 – REVENUE RECOGNITION The Company determines revenue recognition through the following steps: ● Identification of the contract, or contracts, with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when, or as, the Company satisfies a performance obligation. The Company records the amount of revenue and related costs by considering whether the entity is a principal (gross presentation) or an agent (net presentation) by evaluating the nature of its promise to the customer. Revenue is presented net of sales, value-added and other taxes collected from customers and remitted to government authorities. The Company has two primary revenue streams: core revenue and non-core revenue. Core Revenue The Company generates its core revenue from the following sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) subscription and support, which includes post-contract support, of its enterprise software solutions for the lease and finance industry. The Company offers its software using the same underlying technology via two models: a traditional on-premises licensing model and a subscription model. The on-premises model involves the sale or license of software on a perpetual basis to customers who take possession of the software and install and maintain the software on their own hardware. Under the subscription delivery model, the Company provides access to its software on a hosted basis as a service, and customers generally do not have the contractual right to take possession of the software. Non-Core Revenue The Company generates its non-core revenue by providing business process outsourcing (“BPO”), other IT services, and internet services. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract. The Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscription or licenses and a professional services engagement. License purchases generally have multiple performance obligations as customers purchase post-contract support and services in addition to the licenses. The Company’s single performance obligation arrangements are typically post-contract support renewals, subscription renewals and services engagements. For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance obligation using its best estimate for the SSP. Page 15 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Software Licenses Revenue from software licenses is recognized when control of the software license transfers to the customer, which is generally upon delivery of the software and when the customer has the ability to use and benefit from the software. Software licenses are generally provided as perpetual licenses deployed in customer-hosted or on-premise environments. The Company’s typical payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice. Subscription Subscription revenue is recognized ratably over the initial subscription period committed to by the customer commencing when the product is made available to the customer. The initial subscription period is typically 12 to 60 months. The Company generally invoices its customers in advance in quarterly or annual installments and typical payment terms provide that customers make payment within 30 days of invoice. Post Contract Support Revenue from support services and product updates, referred to as subscription and support revenue, is recognized ratably over the term of the maintenance period, which in most instances is one year. Software license updates provide customers with rights to unspecified software product updates and patches released during the term of the support period on a when-and-if available basis. The Company’s customers purchase both product support and license updates when they acquire new software licenses. In addition, most customers renew their support services contracts annually and typical payment terms provide that customers make payment within 30 days of invoice. Professional Services Revenue from professional services is typically comprised of implementation, development, data migration, training, or other consulting services. Consulting services are generally sold on a time-and-materials or fixed fee basis and can include services ranging from software installation to data conversion and building non-complex interfaces to allow the software to operate in integrated environments. The Company recognizes revenue for time-and-materials arrangements as the services are performed. In fixed fee arrangements, revenue is recognized as services are performed as measured by costs incurred to date, compared to total estimated costs to complete the services project. Management applies judgment when estimating project status and the costs necessary to complete the services projects. Several internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Services are generally invoiced upon milestones in the contract or upon consumption of the hourly resources and payments are typically due 30 days after invoice. BPO and Internet Services Revenue from BPO services is recognized based on the stage of completion which is measured by reference to labor hours incurred to date as a percentage of total estimated labor hours for each contract. Internet services are invoiced either monthly, quarterly, or half yearly in advance to the customers and revenue is recognized ratably overtime on a monthly basis. Disaggregated Revenue The Company disaggregates revenue from contracts with customers by category — core and non-core, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Page 16 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The Company’s disaggregated revenue by category is as follows: SCHEDULE OF DISAGGREGATED REVENUE BY CATEGORY 2026 2025 2026 2025 For the Three Months Ended March 31, For the Nine Months Ended March 31, 2026 2025 2026 2025 Core: License $ 4,728,411 $ 1,198 $ 4,918,118 $ 75,115 Subscription and support 8,810,115 7,888,360 26,850,453 24,723,460 Services 5,609,362 8,778,454 19,498,701 20,195,414 Total core revenue, net 19,147,888 16,668,012 51,267,272 44,993,989 Non-Core: Services 684,755 875,945 2,385,772 2,685,127 Total non-core revenue, net 684,755 875,945 2,385,772 2,685,127 Total net revenue $ 19,832,643 $ 17,543,957 $ 53,653,044 $ 47,679,116 Significant Judgments Due to the complexity of certain contracts, the actual revenue recognition treatment required under Topic 606 for the Company’s arrangements may be dependent on contract-specific terms and may vary in some instances. Judgment is required to determine the SSP for each distinct performance obligation. The Company rarely licenses or sells products on a stand-alone basis, so the Company is required to estimate the range of SSPs for each performance obligation. In instances where SSP is not directly observable because the Company does not sell the license, product, or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs. In making these judgments, the Company analyzes various factors, including its pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers. The most significant inputs involved in the Company’s revenue recognition policies are: The (1) stand-alone selling prices of the Company’s software license, and the (2) the method of recognizing revenue for installation/customization, and other services. The stand-alone selling price of the licenses was measured primarily through an analysis of pricing that management evaluated when quoting prices to customers. Although the Company has no history of selling its software separately from post-contract support and other services, the Company does have historical experience with amending contracts with customers to provide additional modules of its software or providing those modules at an optional price. This information guides the Company in assessing the stand-alone selling price of the Company’s software, since the Company can observe instances where a customer had a particular component of the Company’s software that was essentially priced separate from other goods and services that the Company delivered to that customer. The Company recognizes revenue from implementation and customization services using the percentage of estimated “person-days” that the work requires. The Company believes the level of effort to complete the services is best measured by the amount of time (measured as an employee working for one day on implementation/customization work) that is required to complete the implementation or customization work. The Company reviews its estimate of person-days required to complete implementation and customization services each reporting period. Revenue is recognized over time for the Company’s subscription, post contract support and fixed fee professional services that are separate performance obligations. For the Company’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. Several internal and external factors can affect these estimates, including labor rates, utilization, specification variances and testing requirement changes. Page 17 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) If a group of agreements is entered at or near the same time and so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single arrangement. The Company’s judgments about whether a group of contracts comprises a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on the results of operations for the periods involved. If a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company will consider all relevant facts and circumstances. Variable consideration will be estimated and included in the contract price only when it is probable that a significant reversal in the amount of revenue recognized will not occur. Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets (revenues in excess of billings), or contract liabilities (unearned revenue) on the Company’s Consolidated Balance Sheets. The Company records revenues in excess of billings when the Company has transferred goods or services but does not yet have the right to consideration. The Company records unearned revenue when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer. The revenues in excess of billings are transferred to receivables when the rights to consideration become unconditional, usually upon completion of a milestone. The Company’s revenues in excess of billings and unearned revenue are as follows: SCHEDULE OF REVENUES IN EXCESS OF BILLINGS AND UNEARNED REVENUE As of As of March 31, 2026 June 30, 2025 Revenues in excess of billings $ 20,987,805 $ 19,134,385 Unearned revenue $ 10,184,195 $ 3,029,850 The Company’s unearned revenue reconciliation is as follows: SCHEDULE OF UNEARNED REVENUE RECONCILIATION Unearned Revenue Balance at June 30, 2025 $ 3,029,850 Invoiced 30,142,397 Revenue Recognized ( 22,858,713 ) Adjustments ( 129,339 ) Balance at March 31, 2026 $ 10,184,195 During the three and nine months ended March 31, 2026, the Company recognized revenue of $ 362,000 and $ 2,697,000 , which was included in the unearned revenue balance at the beginning of the period. All other activity in unearned revenue is due to the timing of invoicing in relation to the timing of revenue recognition. Page 18 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Revenue allocated to the remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but unsatisfied performance obligations were approximately $ 19,381,000 as of March 31, 2026, of which the Company estimates to recognize approximately $ 17,876,000 in revenue over the next 12 months and the remainder over an estimated 3 years thereafter . Actual revenue recognition depends in part on the timing of software modules installed at various customer sites. Accordingly, some factors that affect the Company’s revenue, such as the availability and demand for modules within customer geographic locations, is not entirely within the Company’s control. In certain arrangements, the timing of revenue recognition differs from the timing of invoicing and cash collections, which may result in Revenue in Excess of Billings or Unearned Revenue balances. The Company evaluates its contracts to determine whether a significant financing component exists. In arrangements where payment terms are extended beyond one year and are determined to provide financing to the customer, the transaction price is adjusted to reflect the time value of money. The related financing component is recognized as interest income over the payment term using the effective interest method. For other arrangements, the primary purpose of the Company’s billing terms is to align invoicing with contractual milestones, customer acceptance provisions, or implementation schedules, and not to provide financing to customers or the Company. Unearned Revenue The Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment due at the start of the subscription or support term. Unpaid invoice amounts for non-cancelable licenses and services starting in future periods are included in accounts receivable and unearned revenue. Practical Expedients and Exemptions There are several practical expedients and exemptions allowed under Topic 606 that impact the timing of revenue recognition and the Company’s disclosures. The Company has applied the following practical expedients: ● The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer. ● The Company generally expenses sales commissions and sales agent fees when incurred when the amortization period would have been one year or less or the commissions are based on cash received. These costs are recorded within sales and marketing expense in the Consolidated Statement of Operations. ● The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements). Costs to Obtain a Contract The Company does not have a material amount of costs to obtain a contract capitalized at any balance sheet date. In general, the Company incurs few direct incremental costs of obtaining new customer contracts. The Company rarely incurs incremental costs to review or otherwise enter into contractual arrangements with customers. In addition, the Company’s sales personnel receive fees that are referred to as commissions, but that are based on more than simply signing up new customers. The Company’s sales personnel are required to perform additional duties beyond new customer contract inception dates, including fulfillment duties and collections efforts. NOTE 4 – EARNINGS PER SHARE Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards. Page 19 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The components of basic and diluted earnings per share were as follows: SCHEDULE OF DILUTIVE POTENTIAL COMMON SHARES For the three months ended March 31, 2026 For the nine months ended March 31, 2026 Net Income Shares Per Share Net Loss Shares Per Share Basic income (loss) per share: Net income (loss) $ 1,300,964 11,823,170 $ 0.11 $ ( 809,567 ) 11,795,818 $ ( 0.07 ) Effect of dilutive securities Stock options - 13,760 - - - - Diluted income (loss) per share $ 1,300,964 11,836,930 $ 0.11 $ ( 809,567 ) 11,795,818 $ ( 0.07 ) For the three months ended March 31, 2025 For the nine months ended March 31, 2025 Net Income Shares Per Share Net Income Shares Per Share Basic income per share: Net income $ 1,423,968 11,683,408 $ 0.12 $ 347,721 11,531,365 $ 0.03 Effect of dilutive securities Stock options - - - - - - Diluted income per share $ 1,423,968 11,683,408 $ 0.12 $ 347,721 11,531,365 $ 0.03 As of March 31, 2026, 50,000 options were outstanding. For the nine months ended March 31, 2026, the Company reported a net loss; accordingly, these options were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive. NOTE 5 – OTHER COMPREHENSIVE INCOME AND FOREIGN CURRENCY The following table represents the functional currencies of the Company and its subsidiaries: SCHEDULE OF FOREIGN CURRENCY TRANSLATION The Company and Subsidiaries Functional Currency NetSol Technologies, Inc. USD NTA USD NTE British Pound AEL British Pound VLSH British Pound VLS British Pound VLSIL Euro NetSol PK Pakistan Rupee Connect Pakistan Rupee NetSol Innovation Pakistan Rupee NIAI Pakistan Rupee NetSol Thai Thai Bhat Otoz Thai Thai Bhat Australia Australian Dollar NAMECET AED NetSol Beijing Chinese Yuan Tianjin Chinese Yuan Page 20 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange rate throughout the period. Accumulated translation losses classified as an item of accumulated other comprehensive loss in the stockholders’ equity section of the consolidated balance sheet were $ 46,563,902 and $ 46,613,208 as of March 31, 2026 and June 30, 2025, respectively. During the three and nine months ended March 31, 2026, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of $ 150,893 and a translation gain of $ 49,306 , respectively. During the three and nine months ended March 31, 2025, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation loss attributable to NetSol of $ 65,853 and $ 318,003 , respectively. NOTE 6 – MAJOR CUSTOMERS Revenue Concentration For the three months ended March 31, 2026, one customer accounted for 40.3 % of net revenues. For the nine months ended March 31, 2026, two customers accounted for 28.5 % and 14.6 % of net revenues. For the three months ended March 31, 2025, three customers accounted for 18.9 % , 18.1 % and 16.5 % of net revenues. For the nine months ended March 31, 2025, two customers accounted for 19.2 % and 18.7 % of net revenues. Accounts Receivable Concentration As of March 31, 2026, one customer accounted for 49.8 % of accounts receivable. As of June 30, 2025, three customers accounted for 16.8 % , 16.1 % , and 10.8 % of accounts receivable. Revenues in Excess of Billings Concentration As of March 31, 2026, four customers accounted for 20.1 % , 17.7 % , 11.5 % , and 10.9 % of revenues in excess of billings. As of June 30, 2025, four customers accounted for 24.2 %, 16.9 %, 15.9 %, and 11.9 % of revenues in excess of billings. NOTE 7 - OTHER CURRENT ASSETS Other current assets consisted of the following: SCHEDULE OF OTHER CURRENT ASSETS As of As of March 31, 2026 June 30, 2025 Prepaid Expenses $ 1,347,962 $ 1,760,321 Advance Income Tax 167,339 406,221 Employee Advances 371,884 151,355 Security Deposits 158,349 159,849 Other Receivables 371,752 410,489 Other Assets 350,292 315,233 Net Balance $ 2,767,578 $ 3,203,468 Page 21 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) NOTE 8 – REVENUES IN EXCESS OF BILLINGS – LONG TERM Revenues in excess of billings, net consisted of the following: SCHEDULE OF REVENUE IN EXCESS OF BILLING As of As of March 31, 2026 June 30, 2025 Revenues in excess of billings - long term $ 3,244,727 $ 1,111,803 Present value discount ( 420,429 ) ( 208,037 ) Net Balance $ 2,824,298 $ 903,766 Pursuant to revenue recognition for contract accounting, the Company has recorded revenues in excess of billings long-term for amounts billable after one year. During the three and nine months ended March 31, 2026, the Company accreted $ 12,504 and $ 49,822 , respectively, which were recorded in interest income for that period. During the three and nine months ended March 31, 2025, the Company accreted $ 18,099 and $ 54,833 , respectively, which were recorded in interest income for that period. The Company used the discounted cash flow method with interest rates ranging from 4.5 % to 6.6 % , for the period ended March 31, 2026. The Company used the discounted cash flow method with interest rates ranging from 4.2 % to 17.5 % , for the period ended June 30, 2025. NOTE 9 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following: SCHEDULE OF PROPERTY AND EQUIPMENT As of As of March 31, 2026 June 30, 2025 Office Furniture and Equipment $ 2,796,062 $ 2,437,002 Computer Equipment 9,663,469 9,513,181 Assets Under Capital Leases 140,213 145,197 Building 3,590,931 3,532,475 Land 910,300 894,698 Autos 2,088,849 1,603,271 Improvements 266,418 217,230 Subtotal 19,456,242 18,343,054 Property and Equipment, Gross 19,456,242 18,343,054 Accumulated Depreciation ( 13,897,833 ) ( 13,269,682 ) Property and Equipment, Net $ 5,558,409 $ 5,073,372 For the three and nine months ended March 31, 2026, depreciation expense totaled $ 307,416 and $ 931,771 , respectively. Of these amounts, $ 192,897 and $ 591,694 , respectively, are reflected in cost of revenues. For the three and nine months ended March 31, 2025, depreciation expense totaled $ 363,503 and $ 1,102,085 , respectively. Of these amounts, $ 240,444 and $ 706,876 , respectively, are reflected in cost of revenues. Page 22 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Following is a summary of fixed assets held under finance leases as of March 31, 2026 and June 30, 2025: SCHEDULE OF FIXED ASSETS HELD UNDER FINANCE LEASES As of As of March 31, 2026 June 30, 2025 Vehicles $ 140,213 $ 145,197 Total 140,213 145,197 Less: Accumulated Depreciation - Net ( 71,478 ) ( 47,807 ) Fixed assets held under finance leases, Total $ 68,735 $ 97,390 Finance lease term and discount rate were as follows: SCHEDULE OF FINANCE LEASE TERM AND DISCOUNT RATE As of As of March 31, 2026 June 30, 2025 Weighted average remaining lease term - Finance leases 1 Years 1.75 Years Weighted average discount rate - Finance leases 11.3 % 11.3 % NOTE 10 - LEASES The Company leases certain office space, office equipment and autos with remaining lease terms of one year to 10 years under leases classified as financing and operating. For certain leases, the Company has options to extend the lease term for additional periods ranging from one year to 10 years. The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at the commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value. The Company reviews the impairment of ROU assets consistent with the approach applied to the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts. Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a re-measurement of lease liabilities. The Company’s variable lease payments include payments for finance leases that are adjusted based on a change in the Karachi Inter Bank Offer Rate. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants. Page 23 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Supplemental balance sheet information related to leases was as follows: SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASE As of As of March 31, 2026 June 30, 2025 Assets Operating lease assets, net $ 869,191 $ 809,513 Liabilities Current Operating $ 479,751 $ 433,242 Operating lease liability, Current $ 479,751 $ 433,242 Non-current Operating 363,430 333,374 Operating lease liability, Noncurrent 363,430 333,374 Total Lease Liabilities $ 843,181 $ 766,616 The components of lease cost were as follows: SCHEDULE OF COMPONENTS OF LEASE COST 2026 2025 2026 2025 For the Three Months Ended March 31, For the Nine Months Ended March 31, 2026 2025 2026 2025 Amortization of finance lease assets $ 8,119 $ 7,584 $ 24,259 $ 29,181 Interest on finance lease obligation 3,040 2,839 9,083 8,833 Operating lease cost 166,901 97,891 430,389 296,229 Short term lease cost 84,737 51,551 242,166 161,591 Sub lease income ( 8,974 ) ( 8,406 ) ( 26,802 ) ( 25,326 ) Total lease cost $ 253,823 $ 151,459 $ 679,095 $ 470,508 Lease term and discount rate were as follows: SCHEDULE OF LEASE TERM AND DISCOUNT RATE As of As of March 31, 2026 June 30, 2025 Weighted average remaining lease term - Operating leases 2.05 Years 1.44 Years Weighted average discount rate - Operating leases 4.0 % 4.8 % Page 24 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Supplemental disclosures of cash flow information related to leases were as follows: SCHEDULE OF SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION RELATED TO LEASES 2026 2025 For the Nine Months Ended March 31, 2026 2025 Operating cash flows related to operating leases $ 536,206 $ 280,336 Operating cash flows related to finance leases $ 9,081 $ 8,833 Financing cash flows related finance leases $ 9,050 $ 12,122 Maturities of operating lease liabilities were as follows as of March 31, 2026: SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES Amount Within year 1 $ 509,095 Within year 2 257,984 Within year 3 118,487 Within year 4 118 Total Lease Payments 885,684 Less: Imputed interest ( 42,503 ) Present Value of lease liabilities 843,181 Less: Current portion ( 479,751 ) Non-Current portion $ 363,430 The Company is a lessor for certain office space leased by the Company and sub-leased to others under non-cancellable leases. These lease agreements provide for a fixed base rent and are currently on a month-by-month basis . All leases are considered operating leases. There are no rights to purchase the premises and no residual value guarantees. For the three and nine months ended March 31, 2026, the Company received lease income of $ 8,974 and $ 26,802 , respectively. For the three and nine months ended March 31, 2025, the Company received lease income of $ 8,406 and $ 25,326 , respectively. NOTE 11 – OTHER INTANGIBLE ASSETS Other intangible assets consist of capitalized costs of internally developed software. SCHEDULE OF OTHER INTANGIBLE ASSETS March 31, 2026 Balance at June 30, 2025 $ - Capitalized development costs 1,039,989 Amortization expense - Net carrying value at March 31, 2026 $ 1,039,989 Additions to internal-use software represent capitalized costs incurred during the application development stage under ASC 350-40, including direct labor and external development costs. Costs related to preliminary project activities, training and maintenance are expensed as incurred. Amortization begins when the software is placed into service and is recognized on a straight-line basis over the estimated useful lives. NOTE 12 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES As of As of March 31, 2026 June 30, 2025 Accounts Payable $ 1,038,978 $ 981,504 Accrued Liabilities 4,157,024 4,502,366 Accrued Payroll 1,454,487 1,313,127 Accrued Payroll Taxes 185,362 329,618 Taxes Payable 1,048,864 600,199 Other Payable 247,669 284,030 Total $ 8,132,384 $ 8,010,844 Page 25 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) NOTE 13 – DEBTS Notes payable and finance leases consisted of the following: SCHEDULE OF COMPONENTS OF NOTES PAYABLE AND CAPITAL LEASES As of March 31, 2026 Current Long-Term Name Total Maturities Maturities D&O Insurance (1) $ 211,439 $ 211,439 $ - Line of Credit (2) - - - Bank Overdraft Facility (3) - - - Loan Payable Bank - Export Refinance (4) 1,790,317 1,790,317 - Loan Payable Bank - Running Finance (5) - - - Loan Payable Bank - Export Refinance II (6) - - - Loan Payable Bank - Export Refinance III (7) 1,360,642 1,360,642 - Loan Payable Bank - Export Refinance IV (8) 4,654,827 4,654,827 - Sale and Leaseback Financing (9) 386,238 141,969 244,269 8,403,463 8,159,194 244,269 Subsidiary Finance Leases (10) 87,920 82,390 5,530 $ 8,491,383 $ 8,241,584 $ 249,799 As of June 30, 2025 Current Long-Term Name Total Maturities Maturities D&O Insurance (1) $ 119,542 $ 119,542 $ - Line of Credit (2) 405,000 405,000 - Bank Overdraft Facility (3) - - - Loan Payable Bank - Export Refinance (4) 1,759,634 1,759,634 - Loan Payable Bank - Running Finance (5) - - - Loan Payable Bank - Export Refinance II (6) - - - Loan Payable Bank - Export Refinance III (7) 1,337,322 1,337,322 - Loan Payable Bank - Export Refinance IV (8) 4,575,048 4,575,048 - Sale and Leaseback Financing (9) 76,618 29,660 46,958 8,273,164 8,226,206 46,958 Subsidiary Finance Leases (10) 101,505 13,855 87,650 $ 8,374,669 $ 8,240,061 $ 134,608 (1) The Company finances Directors’ and Officers’ (“D&O”) liability insurance and Errors and Omissions (“E&O”) liability insurance, for which the D&O and E&O balances are renewed on an annual basis and, as such, are recorded in current maturities. The interest rate on these financings ranged from 7.4 % to 7.8 % as of March 31, 2026, and 8.4 % to 11.6 % as of June 30, 2025. (2) The Company has an uncommitted discretionary demand line of credit up to an aggregate amount of $ 1,000,000 with HSBC, secured by a lien on the Company’s assets. The annual interest rate was 8.0 % as of March 31, 2026, and 7.75 % as of June 30, 2025. The Company paid down the full amount during the nine months ended March 31, 2026. The total outstanding balance as of June 30, 2025, was $ 405,000 . Page 26 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) (3) The Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £ 300,000 , or approximately $ 394,737 . The annual interest rate was 8.0 % as of March 31, 2026 and 8.5 % as of June 30, 2025. The total outstanding balance as of March 31, 2026 and June 30, 2025 was £ Nil . This overdraft facility 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. As of March 31, 2026, NTE was in compliance with this covenant. (4) The Company’s subsidiary, NetSol PK, has an export refinance facility with Askari Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every six months. The total facility amount is Rs. 600,000,000 or $ 2,148,382 at March 31, 2026 and Rs. 600,000,000 or $ 2,111,561 at June 30, 2025. NetSol PK used Rs. 500,000,000 or $ 1,790,317 at March 31, 2026 and Rs. 500,000,000 or $ 1,759,634 at June 30, 2025. The interest rate for the loan was 4.5 % at March 31, 2026 and 8.0 % at June 30, 2025. (5) The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s assets. The total facility amount is Rs. 4,050,937 or $ 14,505 and Rs. 4,050,937 or $ 14,256 , at March 31, 2026 and June 30, 2025, respectively. The balance outstanding at March 31, 2026 and June 30, 2025 was Rs. Nil . The interest rate for the loan was 13.5 % at March 31, 2026 and 13.2 % at June 30, 2025. (6) The Company’s subsidiary, NetSol PK, has an export refinance facility with Bank Al-Habib Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every six months. The total facility amount is Rs. 400,000,000 or $ 1,432,254 at March 31, 2026. NetSol PK has not used this facility at March 31, 2026. The interest rate for the loan was 4.5 % at March 31, 2026. This facility requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and a current ratio of 1:1. As of March 31, 2026, NetSol PK was in compliance with this covenant. (7) The Company’s subsidiary, NetSol PK, has an export refinance facility with Samba Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every six months. The total facility amount is Rs. 380,000,000 or $ 1,360,642 and Rs. 380,000,000 or $ 1,337,322 at March 31, 2026 and June 30, 2025, respectively. The interest rate for the loan was 4.5 % at March 31, 2026 and 8.0 % at June 30, 2025. During the tenure of the loan, the facilities from Samba Bank Limited 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. As of March 31, 2026, NetSol PK was in compliance with these covenants . (8) The Company’s subsidiary, NetSol PK, has an export refinance facility with Habib Metro Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every six months. The total facility amount is Rs. 1,300,000,000 or $ 4,654,827 and Rs. 1,300,000,000 or $ 4,575,048 , at March 31, 2026 and June 30, 2025, respectively. NetSol PK used Rs. 1,300,000,000 or $ 4,654,827 and Rs. 1,300,000,000 or $ 4,575,048 , at March 31, 2026 and June 30, 2025, respectively. The interest rate for the loan was 4.5 % at March 31, 2026 and 8.0 % at June 30, 2025. (9) The Company’s subsidiary, NetSol PK, availed sale and leaseback financing from First Habib Modaraba secured by the transfer of the vehicles’ title. As of March 31, 2026, NetSol PK used Rs. 107,868,491 or $ 386,238 of which $ 244,269 was shown as long term and $ 141,969 as current. As of June 30, 2025, NetSol PK used Rs. 21,771,042 or $ 76,618 of which $ 46,958 was shown as long-term and $ 29,660 as current. The interest rate for the loan was from 11.4 % to 12.3 % at March 31, 2026. The interest rate for the loan was from 12.3 % to 22.7 % at June 30, 2025. (10) The Company leases various fixed assets under finance lease arrangements expiring in various years through 2029. The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are secured by the assets themselves. Depreciation of assets under finance leases is included in depreciation expense for the three and nine months ended March 31, 2026 and 2025. Page 27 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Following are the aggregate minimum future lease payments under finance leases as of March 31, 2026: SCHEDULE OF AGGREGATE MINIMUM FUTURE LEASE PAYMENTS UNDER CAPITAL LEASES Amount Minimum Lease Payments Within year 1 $ 94,130 Within year 2 2,635 Within year 3 3,773 Total Minimum Lease Payments 100,538 Interest Expense relating to future periods ( 12,618 ) Present Value of minimum lease payments 87,920 Less: Current portion ( 82,390 ) Non-Current portion $ 5,530 The following are the aggregate future long-term debt payments as of March 31, 2026, which consist of “Sale and Leaseback Financing (9)”. SCHEDULE OF AGGREGATE FUTURE LONG TERM DEBT PAYMENTS Amount Loan Payments Within year 1 $ 141,970 Within year 2 159,201 Within year 3 85,067 Total Loan Payments 386,238 Less: Current portion ( 141,969 ) Non-Current portion $ 244,269 NOTE 14 - STOCKHOLDERS’ EQUITY During the three and nine months ended March 31, 2026, the Company issued 10,620 and 30,084 shares of common stock, respectively, to the independent Board of Directors as part of their board compensation. The grant date fair value was $ 36,000 and $ 108,000 , respectively, and was recorded as compensation expense in the accompanying consolidated financial statements. During the three and nine months ended March 31, 2026, the Company issued 14,943 shares of common stock to one officer of the Company for his accrued bonus for the fiscal year ended June 30, 2024 pursuant to the bonus policy of the Company. The grant date fair value of the shares was $ 37,955 , and was recorded as compensation expense in the consolidated financial statements for the fiscal year ended June 30, 2024. During the three and nine months ended March 31, 2026, the Company issued 7,168 and 20,448 shares of common stock to a consultant pursuant to the terms of its consultancy agreement. The grant date fair value of the shares was $ 25,000 and $ 75,000 , respectively, and was recorded as compensation expense in the accompanying consolidated financial statements. During the nine months ended March 31, 2026, the Company issued 20,000 shares of common stock to employees pursuant to the terms of their employment agreements. The grant date fair value was $ 84,400 and was recorded as compensation expense in the accompanying consolidated financial statements. Page 28 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) Stock Grants The following table summarizes stock grants awarded as compensation: SUMMARY OF UNVESTED STOCK GRANTS AWARDED AS COMPENSATION # Number of shares Weighted Average Grant Date Fair Value ($) Unvested, June 30, 2025 - $ - Granted 65,027 $ 3.54 Vested ( 65,027 ) $ 3.54 Unvested, March 31, 2026 - $ - For the three and nine months ended March 31, 2026, the Company recorded compensation expense of $ 61,000 and $ 267,400 , respectively. For the three and nine months ended March 31, 2025, the Company recorded compensation expense of $ 39,750 and $ 79,500 , respectively. The weighted average grant date fair value is determined by the Company’s closing stock price on the grant date. NOTE 15 – INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN Common stock purchase options consisted of the following: OPTIONS : SCHEDULE OF COMMON STOCK PURCHASE OPTIONS # of shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregated Intrinsic Value Outstanding and exercisable, June 30, 2025 50,000 $ 2.94 1.89 - Granted - - - Exercised - - - Expired / Cancelled - - - Outstanding and exercisable, March 31, 2026 50,000 $ 2.94 1.15 $ 22,500 The aggregate intrinsic value at March 31, 2026 represents the difference between the Company’s closing stock price of $ 3.39 on March 31, 2026 and the exercise price of the in-the-money stock options. Page 29 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The following table summarizes information about stock options outstanding and exercisable at March 31, 2026. SUMMARY OF STOCK OPTIONS OUTSTANDING Exercise Price Number Outstanding and Exercisable Weighted Average Remaining Contractual Life Weighted Average Exercise Price OPTIONS: $ 2.94 50,000 1.15 $ 2.94 Totals 50,000 1.15 $ 2.94 NOTE 16– OPERATING SEGMENTS The Company has identified three segments for its products and services: North America, Europe, and Asia-Pacific. The reportable segments are business units located in different global regions. Each business unit provides similar products and services: license fees for leasing and asset-based software, subscription and support fees, and implementation and IT consulting services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to its particular regional location. The Company’s chief operating decision maker (“CODM”) evaluates performance and allocates resources based on gross profit and income from operations. The Company has designated its Chief Executive Officer as the CODM. Segment assets include all assets attributable to operations within the respective geographic regions, including cash, accounts receivable, revenue in excess of billings, and property, plant, and equipment. Corporate assets, which primarily consist of cash and cash equivalents, goodwill, and assets associated with the Company’s corporate headquarters, are not allocated to the geographic segments and are shown separately. Prior year results have been restated to conform to the current year presentation, reflecting the use of gross profit and income from operations as the measures of segment performance evaluated by the CODM. Page 30 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The following tables present financial information by reportable segment for the three months ended March 31, 2026: SCHEDULE OF FINANCIAL INFORMATION BY REPORTABLE SEGMENT North America Europe Asia - Pacific Total For the Three Months Ended March 31, 2026 North America Europe Asia - Pacific Total Revenues License $ - $ 72,223 $ 4,656,188 $ 4,728,411 Subscription and support 1,277,238 1,235,332 6,297,545 8,810,115 Services 952,909 2,749,412 2,591,796 6,294,117 Intersegment revenues 1,462,892 1,462,892 Total revenue from reportable segments 2,230,147 4,056,967 15,008,421 21,295,535 Elimination of intersegment revenues - - - ( 1,462,892 ) Total consolidated revenues $ 19,832,643 Revenues from reportable segments 2,230,147 4,056,967 15,008,421 21,295,535 Salaries and consultants 362,061 980,168 4,992,420 6,334,649 Travel 55,091 64,850 694,640 814,581 Depreciation - - 192,897 192,897 Other (a) 699,177 1,156,131 1,069,458 2,924,766 Gross Profit 1,113,818 1,855,818 8,059,006 11,028,642 Selling and marketing 667,481 345,085 1,699,301 2,711,867 Depreciation 1,922 43,002 69,598 114,522 General and administrative 207,338 891,295 2,636,021 3,734,654 Income (loss) from operations - reportable segments $ 237,077 $ 576,436 $ 3,654,086 $ 4,467,599 Reconciliation: Income (loss) from operations - reportable segments $ 4,467,599 Corporate operating expenses ( 1,461,448 ) Interest expense ( 151,537 ) Interest income 208,232 Gain (loss) on foreign currency exchange transactions ( 76,178 ) Other income (expense) 109,203 Net income (loss) before income taxes $ 3,095,871 Page 31 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The following tables present financial information by reportable segment for the nine months ended March 31, 2026: North America Europe Asia - Pacific Total For the Nine Months Ended March 31, 2026 North America Europe Asia - Pacific Total Revenues License $ - $ 145,710 $ 4,772,408 $ 4,918,118 Subscription and support 4,130,268 4,267,844 18,452,341 26,850,453 Services 2,957,910 6,213,528 12,713,035 21,884,473 Intersegment revenues - - 3,767,724 3,767,724 Total revenue from reportable segments $ 7,088,178 $ 10,627,082 $ 39,705,508 $ 57,420,768 Elimination of intersegment revenues - - - ( 3,767,724 ) Total consolidated revenues $ 53,653,044 Revenues from reportable segments $ 7,088,178 $ 10,627,082 $ 39,705,508 $ 57,420,768 Salaries and consultants 1,375,584 3,218,227 15,788,258 20,382,069 Travel 335,749 234,912 1,771,533 2,342,194 Depreciation - - 591,694 591,694 Other (a) 1,963,155 2,912,187 3,259,745 8,135,087 Gross Profit 3,413,690 4,261,756 18,294,278 25,969,724 Selling and marketing 2,048,625 1,124,952 5,326,761 8,500,338 Depreciation 5,438 131,735 202,904 340,077 General and administrative 717,513 2,619,287 7,360,501 10,697,301 Income (loss) from operations - reportable segments $ 642,114 $ 385,782 $ 5,404,112 $ 6,432,008 Reconciliation: Income (loss) from operations - reportable segments $ 6,432,008 Corporate operating expenses ( 3,964,831 ) Interest expense ( 502,421 ) Interest income 697,981 Gain (loss) on foreign currency exchange transactions ( 317,021 ) Other income (expense) 190,798 Net income (loss) before income taxes $ 2,536,514 Page 32 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) North America Europe Asia - Pacific Total As of March 31, 2026 North America Europe Asia - Pacific Total Segment assets: Cash $ 281,565 $ 1,386,707 $ 12,779,045 $ 14,447,317 Accounts receivable, net of allowance 1,754,448 1,348,836 13,543,015 16,646,299 Revenue in excess of billings, net of allowance 779,211 3,520,414 16,688,180 20,987,805 Other segment assets (b) 174,331 1,090,773 8,637,092 9,902,196 Total segment assets $ 2,989,555 $ 7,346,730 $ 51,647,332 $ 61,983,617 Asset Reconciliation Total assets for reportable segments 61,983,617 Corporate assets 637,235 Goodwill not allocated to segments 9,302,524 Consolidated total $ 71,923,376 North America Europe Asia - Pacific Total For the Nine Months ended March 31, 2026 North America Europe Asia - Pacific Total Expenditures for property, plant and equipment $ 21,100 $ 118,565 $ 1,239,597 $ 1,379,262 Page 33 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The following tables present financial information by reportable segment for the three months ended March 31, 2025: North America Europe Asia - Pacific Total For the Three Months Ended March 31, 2025 North America Europe Asia - Pacific Total Revenues License $ - $ 1,198 $ - $ 1,198 Subscription and support 1,340,088 1,215,438 5,332,834 7,888,360 Services 2,529,815 4,678,504 2,446,080 9,654,399 Intersegment revenues 2,976,720 2,976,720 Total revenue from reportable segments 3,869,903 5,895,140 10,755,634 20,520,677 Elimination of intersegment revenues - - - ( 2,976,720 ) Total consolidated revenues $ 17,543,957 Revenues from reportable segments 3,869,903 5,895,140 10,755,634 20,520,677 Salaries and consultants 490,261 1,303,906 4,977,761 6,771,928 Travel 36,907 23,531 391,457 451,895 Depreciation - - 240,444 240,444 Other (a) 1,189,818 2,199,263 925,556 4,314,637 Gross Profit 2,152,917 2,368,440 4,220,416 8,741,773 Selling and marketing 522,804 395,273 1,387,619 2,305,696 Depreciation 824 41,357 80,878 123,059 General and administrative 169,173 871,821 2,520,281 3,561,275 Income (loss) from operations - reportable segments $ 1,460,116 $ 1,059,989 $ 231,638 $ 2,751,743 Reconciliation: Income (loss) from operations - reportable segments $ ( 170,786 ) $ 2,580,957 $ 2,751,743 Corporate operating expenses ( 1,198,345 ) Interest expense ( 194,742 ) Interest income 294,655 Gain (loss) on foreign currency exchange transactions 321,622 Other income (expense) 10,831 Net income (loss) before income taxes $ 1,985,764 Page 34 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The following tables present financial information by reportable segment for the nine months ended March 31, 2025: North America Europe Asia - Pacific Total For the Nine Months Ended March 31, 2025 North America Europe Asia - Pacific Total Revenues License $ - $ 75,115 $ - $ 75,115 Subscription and support 4,208,995 3,311,068 17,203,397 24,723,460 Services 5,736,842 8,265,423 8,878,276 22,880,541 Intersegment revenues - - 5,924,850 5,924,850 Total revenue from reportable segments $ 9,945,837 $ 11,651,606 $ 32,006,523 $ 53,603,966 Elimination of intersegment revenues - - - ( 5,924,850 ) Total consolidated revenues $ 47,679,116 Revenues from reportable segments $ 9,945,837 $ 11,651,606 $ 32,006,523 $ 53,603,966 Salaries and consultants 1,607,145 3,491,899 14,591,055 19,690,099 Travel 217,607 114,557 1,291,844 1,624,008 Depreciation - - 706,876 706,876 Other (a) 3,016,761 3,841,209 2,498,787 9,356,757 Gross Profit 5,104,324 4,203,941 12,917,961 22,226,226 Selling and marketing 1,664,063 1,001,807 4,389,843 7,055,713 Depreciation 1,894 154,216 239,099 395,209 General and administrative 544,054 2,732,908 7,171,524 10,448,486 Income (loss) from operations - reportable segments $ 2,894,313 $ 315,010 $ 1,117,495 $ 4,326,818 Reconciliation: Income (loss) from operations - reportable segments $ 4,326,818 Corporate operating expenses ( 4,020,528 ) Interest expense ( 689,347 ) Interest income 1,593,594 Gain (loss) on foreign currency exchange transactions 165,741 Other income (expense) 202,420 Net income (loss) before income taxes $ 1,578,698 Page 35 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) North America Europe Asia - Pacific Total As of June 30, 2025 North America Europe Asia - Pacific Total Segment assets: Cash $ 387,955 $ 1,138,048 $ 15,248,031 $ 16,774,034 Accounts receivable, net of allowance 581,872 1,084,418 5,861,282 7,527,572 Revenue in excess of billings, net of allowance 1,967,757 3,178,780 13,987,848 19,134,385 Other segment assets (b) 243,550 1,580,534 7,066,725 8,890,809 Total segment assets $ 3,181,134 $ 6,981,780 $ 42,163,886 $ 52,326,800 Asset Reconciliation Total assets for reportable segments 52,326,800 Corporate assets 811,785 Goodwill not allocated to segments 9,302,524 Consolidated total $ 62,441,109 North America Europe Asia - Pacific Total For the Nine Months ended March 31, 2025 North America Europe Asia - Pacific Total Expenditures for property, plant and equipment $ 17,331 $ 72,551 $ 807,861 $ 897,743 (a) Other costs of goods sold include computer costs, third-party hardware and software costs, repair and maintenance, insurance, utilities, and communication expenses. (b) Other assets include property and equipment, right of use of assets, internally developed software cost, advances, deposits, and prepayments. Page 36 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) NOTE 17 – NON-CONTROLLING INTEREST IN SUBSIDIARY The Company had non-controlling interests in several of its subsidiaries. The balance of non-controlling interest was as follows: SCHEDULE OF BALANCE OF NON-CONTROLLING INTEREST SUBSIDIARY Non-Controlling Interest % Non-Controlling Interest at March 31, 2026 NetSol PK 31.41 % $ 6,870,901 NetSol Innovation 31.41 % ( 792,749 ) NAMECET 31.41 % 1,034,542 NIAI 31.41 % ( 16,258 ) NetSol Thai 0.006 % ( 196 ) OTOZ Thai 0.01 % 7 Total $ 7,096,247 SUBSIDIARY Non-Controlling Interest % Non-Controlling Interest at June 30, 2025 NetSol PK 30.24 % $ 4,496,723 NetSol Innovation 30.24 % ( 637,529 ) NAMECET 30.24 % 567,819 NIAI 30.24 % ( 1,471 ) NetSol Thai 0.006 % ( 184 ) OTOZ Thai 0.01 % 7 Total $ 4,425,365 During the nine months ended March 31, 2026, employees of NetSol PK, a majority-owned subsidiary of the Company, exercised stock options to purchase an aggregate of 1,443,874 shares of the subsidiary’s common stock for total proceeds of $ 399,620 . Of this amount, $ 387,200 was received during the nine months ended March 31, 2026, and $ 12,420 was received during the fiscal year ended June 30, 2025. Due to this exercise, the non-controlling interest in NetSol PK, NetSol Innovation, NAMECET and NIAI increased from 30.24 % at June 30, 2025 to 31.41 % at March 31, 2026. The carrying amount of the non-controlling interest was increased by $ 602,493 , and the difference of $ 202,873 was recognized as a decrease in additional paid-in capital in the Company’s consolidated equity. Page 37 NETSOL TECHNOLOGIES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2026 (Unaudited) The following schedule discloses the effect on the Company’s equity due to the changes in the Company’s ownership interest. SCHEDULE OF CHANGE IN OWNERSHIP INTEREST 2026 2025 2026 2025 For the Three Months For the Nine Months Ended March 31, Ended March 31, 2026 2025 2026 2025 Decrease in paid-in capital for purchase of 177,558 shares of OTOZ Inc common stock - - - ( 112,010 ) Net income (loss) attributable to NetSol Transfer to (from) non-controlling interest $ 1,300,964 $ 1,423,968 $ ( 809,567 ) $ 347,721 Decrease in paid-in capital for purchase of 177,558 shares of OTOZ Inc common stock - - - ( 112,010 ) Increase in paid-in capital for purchase of 2,690,251 shares of common stock of NetSol PK from Open Market - 29,135 - 29,135 Decrease in paid-in capital for option exercise of 1,443,874 shares of common stock of NetSol PK by employees ( 12,953 ) ( 202,873 ) - Net transfer to (from) non-controlling interest ( 12,953 ) 29,135 ( 202,873 ) ( 82,875 ) Change from net income (loss) attributable to NetSol and transfer (to) from non-controlling interest $ 1,288,011 $ 1,453,103 $ ( 1,012,440 ) $ 264,846 NOTE 18– INCOME TAXES The current tax provision is based on taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for tax on income is calculated at the current rates of taxation as applicable after considering tax credit and tax rebates available, if any. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our effective tax rate will depend on the portion of our profits earned within and outside the United States. During the three and nine months ended March 31, 2026, the Company recorded an income tax provision of $ 781,243 and $ 1,477,212 , respectively. During the three and nine months ended March 31, 2025, the Company recorded an income tax provision of $ 151,334 and $ 712,765 , respectively. Page 38