UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

~~[X]~~☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, ~~2017~~2023

~~[ ]~~☐ For the transition period from __________ to __________

Commission file number: 0-22773

NETSOL TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

~~NEVADA~~nevada		95-4627685
(State or other Jurisdiction of		(I.R.S. Employer NO.)
Incorporation or Organization)

~~23975Park Sorrento,~~ 16000 Ventura Blvd., Suite ~~250, Calabasas,~~ 770, Encino, CA ~~91302~~
91436

(Address of principal executive offices) (Zip Code)

(818)222-9195 / (818) 222-9197

(Issuer’s telephone/facsimile numbers, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common Stock, $0.01 par value per share		NTWK		NASDAQ

Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by acheck mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated ~~filer.~~filer, a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ~~large accelerated filer”~~“emerging growth company” in Rule 12b-2 of the Exchange ~~Act.~~Act (Check ~~One)~~one):

	Large Accelerated Filer ~~[ ]~~☐	Accelerated Filer ~~[ ]~~☐
~~Non-Accelerated~~	Non-accelerated Filer ~~[ ]~~ ☒	~~Small Reporting Company [X]~~Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ~~[ ]~~ ☐ No ~~[X]~~ ☒

The issuer had ~~11,395,401~~12,329,919 shares issued and 11,390,888 outstanding of its $.01 par value Common Stock and no Preferred Stock ~~issued and~~ outstanding as of February ~~10, 2018.~~7, 2024.

NETSOL TECHNOLOGIES, INC.

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of December 31, ~~2017~~2023 and June 30, ~~2017~~2023	3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, ~~2017~~2023 and ~~2016~~2022	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended December 31, ~~2017~~2023 and ~~2016~~2022	5
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 2023 and 2022	6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, ~~2017~~2023 and ~~2016~~2022	68
Notes to the Condensed Consolidated Financial Statements	810
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3033
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4551
Item 4. Controls and Procedures	4651

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	4752
Item 1A Risk Factors	4752
Item 2. Unregistered Sales of Equity and Use of Proceeds	4752
Item 3. Defaults Upon Senior Securities	4752
Item 4. Mine Safety Disclosures	4752
Item 5. Other Information	4852
Item 6. Exhibits	4852

Page 2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(UNAUDITED)~~
Condensed Consolidated Balance Sheets

(Unaudited)

	As of December 31,			As of June 30,			As of			As of
	2017			2017			December 31, 2023			June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	10,004,650		$	14,172,954		$	15,659,516		$	15,533,254
Accounts receivable, net of allowance of $347,413 and $571,511		19,106,677			6,583,199
Accounts receivable, net - related party		2,582,403			1,644,942
Revenues in excess of billings		16,094,026			19,126,389
Revenues in excess of billings - related party		107,562			80,705
Convertible note receivable - related party		750,000			200,000
Accounts receivable, net of allowance of $421,288 and $420,354								5,975,716			11,714,422
Revenues in excess of billings, net of allowance of $137,406 and $1,380,141								16,299,287			12,377,677
Other current assets		2,819,183			2,463,886			2,142,487			1,978,514
Total current assets		51,464,501			44,272,075			40,077,006			41,603,867
Restricted cash		90,000			90,000
Revenues in excess of billings, net - long term		6,668,854			5,173,538			734,397			-
Property and equipment, net		18,443,494			20,370,703			5,665,699			6,161,186
Right of use assets - operating leases								1,659,622			1,151,575
Other assets		3,543,315			3,211,295			32,338			32,327
Intangible assets, net		14,810,605			17,043,151			-			127,931
Goodwill		9,516,568			9,516,568			9,302,524			9,302,524
Total assets	$	104,537,337		$	99,677,330		$	57,471,586		$	58,379,410

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	7,560,298		$	6,880,194		$	6,713,920		$	6,552,181
Current portion of loans and obligations under capitalized leases		10,133,100			10,222,795
Unearned revenues		10,082,346			3,925,702
Common stock to be issued		88,324			88,324
Current portion of loans and obligations under finance leases								5,982,466			5,779,510
Current portion of operating lease obligations								689,770			505,237
Unearned revenue								4,426,008			7,932,306
Total current liabilities		27,864,068			21,117,015			17,812,164			20,769,234
Loans and obligations under capitalized leases; less current maturities		250,883			366,762
Loans and obligations under finance leases; less current maturities								99,527			176,229
Operating lease obligations; less current maturities								1,022,361			652,194
Total liabilities		28,114,951			21,483,777			18,934,052			21,597,657
Commitments and contingencies

Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-
Common stock, $.01 par value; 14,500,000 shares authorized; 11,395,401 shares issued and 11,221,347 outstanding as of December 31, 2017 and 11,225,385 shares issued and 11,190,606 outstanding as of June 30, 2017		113,954			112,254
Preferred stock, $.01 par value; 500,000 shares authorized;								-			-
Common stock, $.01 par value; 14,500,000 shares authorized; 12,329,919 shares issued and 11,390,888 outstanding as of December 31, 2023; 12,284,887 shares issued and 11,345,856 outstanding as of June 30, 2023								123,301			122,850
Additional paid-in-capital		125,354,035			124,409,998			128,587,384			128,476,048
Treasury stock (At cost, 174,054 shares and 34,779 shares as of December 31, 2017 and June 30, 2017, respectively)		(1,055,330	)		(454,310	)
Treasury stock (at cost, 939,031 shares as of December 31, 2023 and June 30, 2023)								(3,920,856	)		(3,920,856	)
Accumulated deficit		(42,036,467	)		(42,301,390	)		(44,456,980	)		(44,896,186	)
Stock subscription receivable		(221,000	)		(297,511	)
Other comprehensive loss		(20,276,030	)		(18,074,570	)		(45,870,309	)		(45,975,156	)
Total NetSol stockholders’ equity		61,879,162			63,394,471			34,462,540			33,806,700
Non-controlling interest		14,543,224			14,799,082			4,074,994			2,975,053
Total stockholders’ equity		76,422,386			78,193,553			38,537,534			36,781,753
Total liabilities and stockholders’ equity	$	104,537,337		$	99,677,330		$	57,471,586		$	58,379,410

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)~~Condensed Consolidated Statements of Operations

For the Three Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016
Restated Restated
Net Revenues:
License fees $ 235,932 $ 3,769,557 $ 561,998 $ 9,223,352
Maintenance fees 3,568,448 3,588,899 7,042,173 7,112,696
Services 9,087,191 6,619,158 16,104,928 12,175,293
License fees - related party 217,105 - 261,513 246,957
Maintenance fees - related party 101,251 51,345 204,214 181,976
Services - related party 1,236,508 1,829,827 3,090,385 3,994,981
Total net revenues 14,446,435 15,858,786 27,265,211 32,935,255

Cost of revenues:
Salaries and consultants 5,362,092 5,979,804 10,826,252 11,873,153
Travel 287,901 836,240 801,013 1,548,135
Depreciation and amortization 1,168,103 1,318,764 2,341,216 2,649,636
Other 939,986 1,065,727 1,796,568 2,038,065
Total cost of revenues 7,758,082 9,200,535 15,765,049 18,108,989

Gross profit 6,688,353 6,658,251 11,500,162 14,826,266

Operating expenses:
Selling and marketing 1,932,140 2,713,478 3,643,436 5,057,516
Depreciation and amortization 222,785 271,485 468,658 540,582
Provision for bad debts - 1,026 - 1,026
General and administrative 4,026,706 3,932,387 7,814,264 8,551,583
Research and development cost 189,891 91,607 374,976 184,539
Total operating expenses 6,371,522 7,009,983 12,301,334 14,335,246

Income from operations 316,831 (351,732 ) (801,172 ) 491,020

Other income and (expenses)
Loss on sale of assets (8,939 ) (32,339 ) (16,069 ) (34,742 )
Interest expense (109,675 ) (62,127 ) (227,746 ) (116,602 )
Interest income 115,570 23,416 252,481 53,856
Gain (loss) on foreign currency exchange transactions 1,737,967 (621,887 ) 2,754,329 (1,036,783 )
Share of net loss from equity investment (203,336 ) - (270,898 ) -
Other income 14,511 6,823 15,610 28,383
Total other income (expenses) 1,546,098 (686,114 ) 2,507,707 (1,105,888 )

Net income (loss) before income taxes 1,862,929 (1,037,846 ) 1,706,535 (614,868 )
Income tax provision (200,927 ) (338,884 ) (225,798 ) (378,759 )
Net income (loss) 1,662,002 (1,376,730 ) 1,480,737 (993,627 )
Non-controlling interest (1,027,581 ) (791,664 ) (1,215,814 ) (1,560,878 )
Net income (loss) attributable to NetSol $ 634,421 $ (2,168,394 ) $ 264,923 $ (2,554,505 )

Net income (loss) per share:
Net income (loss) per common share
Basic $ 0.06 $ (0.20 ) $ 0.02 $ (0.24 )
Diluted $ 0.06 $ (0.20 ) $ 0.02 $ (0.24 )

Weighted average number of shares outstanding
Basic 11,159,075 10,877,446 11,115,346 10,783,685
Diluted 11,171,543 10,877,446 11,127,814 10,783,685

(Unaudited)

	2023			2022			2023			2022
	For the Three Months						For the Six Months
	Ended December 31,						Ended December 31,
	2023			2022			2023			2022
Net Revenues:
License fees	$	2,990,453		$	15,884		$	4,270,902		$	265,844
Subscription and support		6,827,781			6,502,669			13,340,024			12,519,503
Services		5,419,707			5,871,805			11,869,196			12,311,130
Total net revenues		15,237,941			12,390,358			29,480,122			25,096,477

Cost of revenues		8,062,204			9,247,895			16,142,368			17,702,017
Gross profit		7,175,737			3,142,463			13,337,754			7,394,460

Operating expenses:
Selling, general and administrative		5,807,494			5,716,073			11,240,463			11,394,634
Research and development cost		341,411			472,904			719,830			942,531
Total operating expenses		6,148,905			6,188,977			11,960,293			12,337,165

Income (loss) from operations		1,026,832			(3,046,514	)		1,377,461			(4,942,705	)

Other income and (expenses)
Interest expense		(290,322	)		(202,363	)		(566,339	)		(323,973	)
Interest income		468,280			309,906			882,998			741,763
Gain (loss) on foreign currency exchange transactions		(14,617	)		657,223			(148,870	)		1,972,928
Share of net loss from equity investment		-			5,133			-			5,133
Other income (expense)		(57,305	)		94,708			576			120,324
Total other income (expenses)		106,036			864,607			168,365			2,516,175

Net income (loss) before income taxes		1,132,868			(2,181,907	)		1,545,826			(2,426,530	)
Income tax provision		(150,053	)		(220,056	)		(271,948	)		(413,404	)
Net income (loss)		982,815			(2,401,963	)		1,273,878			(2,839,934	)
Non-controlling interest		(574,499	)		309,037			(834,672	)		126,279
Net income (loss) attributable to NetSol	$	408,316		$	(2,092,926	)	$	439,206		$	(2,713,655	)

Net income (loss) per share:
Net income (loss) per common share
Basic	$	0.04		$	(0.19	)	$	0.04		$	(0.24	)
Diluted	$	0.04		$	(0.19	)	$	0.04		$	(0.24	)

Weighted average number of shares outstanding
Basic		11,372,819			11,270,199			11,359,338			11,263,869
Diluted		11,372,819			11,270,199			11,359,338			11,263,869

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)~~

For the Three Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016
Restated Restated
Net income (loss) $ 634,421 $ (2,168,394 ) $ 264,923 $ (2,554,505 )
Other comprehensive income (loss):
Translation adjustment (2,453,890 ) (944,837 ) (3,279,634 ) 149,237
Translation adjustment attributable to non-controlling interest 841,009 276,575 1,078,174 (47,138 )
Net translation adjustment (1,612,881 ) (668,262 ) (2,201,460 ) 102,099
Comprehensive income (loss) attributable to NetSol $ (978,460 ) $ (2,836,656 ) $ (1,936,537 ) $ (2,452,406 )
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
2023 2022 2023 2022
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2023 2022 2023 2022
Net income (loss) $ 408,316 $ (2,092,926 ) $ 439,206 $ (2,713,655 )
Other comprehensive income (loss):
Translation adjustment 840,165 352,175 370,116 (3,799,344 )
Translation adjustment attributable to non-controlling interest (298,772 ) (82,380 ) (265,269 ) 1,151,089
Net translation adjustment 541,393 269,795 104,847 (2,648,255 )
Comprehensive income (loss) attributable to NetSol $ 949,709 $ (1,823,131 ) $ 544,053 $ (5,361,910 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 5

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~Condensed Consolidated Statement of Stockholders’ Equity
~~(UNAUDITED)~~
(Unaudited)
A statement of the changes in equity for the three months ended December 31, 2023 is provided below:
Shares Amount Capital Shares Deficit Loss Interest Equity
Common Stock Additional
Paid-in Treasury Accumulated Other
Comprehensive Non
Controlling Total
Stockholders’
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at September 30, 2023 12,311,850 $ 123,120 $ 128,536,132 $ (3,920,856 ) $ (44,865,296 ) $ (46,411,702 ) $ 3,201,723 $ 36,663,121
Common stock issued for: Services 18,069 181 39,569 - - - - 39,750
Fair value of subsidiary options issued - - 11,683 - - - - 11,683
Foreign currency translation adjustment - - - - - 541,393 298,772 840,165
Net income (loss) for the year - - - - 408,316 - 574,499 982,815
Balance at December 31, 2023 12,329,919 $ 123,301 $ 128,587,384 $ (3,920,856 ) $ (44,456,980 ) $ (45,870,309 ) $ 4,074,994 $ 38,537,534
A statement of the changes in equity for the three months ended September 30, 2023 is provided below:
Common Stock Additional
Paid-in Treasury Accumulated Other
Comprehensive Non
Controlling Total
Stockholders’
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at June 30, 2023 12,284,887 $ 122,850 $ 128,476,048 $ (3,920,856 ) $ (44,896,186 ) $ (45,975,156 ) $ 2,975,053 $ 36,781,753
Common stock issued for: Services 26,963 270 48,530 - - - - 48,800
Fair value of subsidiary options issued - - 11,554 - - - - 11,554
Foreign currency translation adjustment - - - - - (436,546 ) (33,503 ) (470,049 )
Net income (loss) for the year - - - - 30,890 - 260,173 291,063
Balance at September 30, 2023 12,311,850 $ 123,120 $ 128,536,132 $ (3,920,856 ) $ (44,865,296 ) $ (46,411,702 ) $ 3,201,723 $ 36,663,121
Page 6

For the Six Months
Ended December 31,
2017 2016
Restated
Cash flows from operating activities:
Net income (loss) $ 1,480,737 $ (993,627 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 2,809,874 3,190,218
Provision for bad debts - 1,026
Share of net loss from investment under equity method 270,898 -
Loss on sale of assets 16,069 34,742
Stock based compensation 833,530 1,525,775
Fair market value of warrants and stock options granted - 21,804
Changes in operating assets and liabilities:
Accounts receivable (13,231,059 ) 3,678,110
Accounts receivable - related party (1,637,829 ) 829,285
Revenues in excess of billing 602,676 (7,592,495 )
Revenues in excess of billing - related party (32,308 ) 285,791
Other current assets (524,547 ) 585,147
Accounts payable and accrued expenses 887,824 334,241
Unearned revenue 6,469,146 (1,830,619 )
Net cash provided by (used in) operating activities (2,054,989 ) 69,398

Cash flows from investing activities:
Purchases of property and equipment (543,123 ) (1,074,316 )
Sales of property and equipment 193,241 181,087
Convertible note receivable - related party (500,000 ) -
Investment in WRLD3D (50,000 ) (705,555 )
Net cash used in investing activities (899,882 ) (1,598,784 )

Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 215,311 429,452
Proceeds from exercise of subsidiary options 7,755 18,089
Purchase of treasury stock (601,020 ) (38,885 )
Dividend paid by subsidiary to non-controlling interest (417,853 ) (968,657 )
Proceeds from bank loans 708,457 -
Payments on capital lease obligations and loans - net (361,814 ) (69,998 )
Net cash used in financing activities (449,164 ) (629,999 )
Effect of exchange rate changes (764,269 ) 107,241
Net decrease in cash and cash equivalents (4,168,304 ) (2,052,144 )
Cash and cash equivalents, beginning of the period 14,172,954 11,557,527
Cash and cash equivalents, end of period $ 10,004,650 $ 9,505,383
NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
A statement of the changes in equity for the three months ended December 31, 2022 is provided below:
Common Stock Additional
Paid-in Treasury Accumulated Other
Comprehensive Non
Controlling Total
Stockholders’
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at September 30, 2022 12,209,230 $ 122,093 $ 128,420,519 $ (3,920,856 ) $ (40,273,167 ) $ (42,281,135 ) $ 4,279,113 $ 46,346,567
Common stock issued for: Services 13,755 138 39,612 - - - - 39,750
Fair value of subsidiary options issued - - 24,583 - - - - 24,583
Foreign currency translation adjustment - - - - - 269,795 82,380 352,175
Net income (loss) for the year - - - - (2,092,926 ) - (309,037 ) (2,401,963 )
Balance at December 31, 2022 12,222,985 $ 122,231 $ 128,484,714 $ (3,920,856 ) $ (42,366,093 ) $ (42,011,340 ) $ 4,052,456 $ 44,361,112
A statement of the changes in equity for the three months ended September 30, 2022 is provided below:
Common Stock Additional
Paid-in Treasury Accumulated Other
Comprehensive Non
Controlling Total
Stockholders’
Shares Amount Capital Shares Deficit Loss Interest Equity
Balance at June 30, 2022 12,196,570 $ 121,966 $ 128,218,247 $ (3,920,856 ) $ (39,652,438 ) $ (39,363,085 ) $ 5,450,389 $ 50,854,223
Balance 12,196,570 $ 121,966 $ 128,218,247 $ (3,920,856 ) $ (39,652,438 ) $ (39,363,085 ) $ 5,450,389 $ 50,854,223
Common stock issued for: Services 12,660 127 39,623 - - - - 39,750
Adjustment in APIC for change in subsidiary shares to non-controlling interest - - 120,565 - - - (120,565 ) -
Fair value of subsidiary options issued - - 42,084 - - - - 42,084
Foreign currency translation adjustment - - - - - (2,918,050 ) (1,233,469 ) (4,151,519 )
Net income (loss) for the year - - - - (620,729 ) - 182,758 (437,971 )
Balance at September 30, 2022 12,209,230 $ 122,093 $ 128,420,519 $ (3,920,856 ) $ (40,273,167 ) $ (42,281,135 ) $ 4,279,113 $ 46,346,567
Balance 12,209,230 $ 122,093 $ 128,420,519 $ (3,920,856 ) $ (40,273,167 ) $ (42,281,135 ) $ 4,279,113 $ 46,346,567
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 67

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)~~
~~(UNAUDITED)~~
For the Six Months
Ended December 31,
2017 2016
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 189,769 $ 123,682
Taxes $ 226,098 $ 77,414

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Provided services for investment in WRLD3D $ 553,678 $ 549,621
Assets acquired under capital lease $ 113,220 $ -
Condensed Consolidated Statements of Cash Flows
(Unaudited)
2023 2022
For the Six Months
Ended December 31,
2023 2022
Cash flows from operating activities:
Net income (loss) $ 1,273,878 $ (2,839,934 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 959,949 1,736,503
Provision for bad debts 29,191 (67,176 )
Share of net (gain) loss from investment under equity method - (5,133 )
Gain on sale of assets (98 ) (28,344 )
Stock based compensation 111,787 146,167
Changes in operating assets and liabilities:
Accounts receivable 5,722,791 3,772,091
Revenues in excess of billing (4,239,762 ) (702,812 )
Other current assets 329,171 (529,579 )
Accounts payable and accrued expenses 72,501 904,731
Unearned revenue (3,654,724 ) (696,971 )
Net cash provided by operating activities 604,684 1,689,543

Cash flows from investing activities:
Purchases of property and equipment (570,584 ) (1,252,325 )
Sales of property and equipment 1,248 70,283
Net cash used in investing activities (569,336 ) (1,182,042 )

Cash flows from financing activities:
Proceeds from bank loans 135,123
Payments on finance lease obligations and loans - net (162,482 ) (537,180 )
Net cash used in financing activities (27,359 ) (537,180 )
Effect of exchange rate changes 118,273 (2,987,396 )
Net increase (decrease) in cash and cash equivalents 126,262 (3,017,075 )
Cash and cash equivalents at beginning of the period 15,533,254 23,963,797
Cash and cash equivalents at end of period $ 15,659,516 $ 20,946,722
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 78

NETSOL TECHNOLOGIES, INC. AND SUBSIDIARIES
~~NOTES TO~~ CONDENSED CONSOLIDATED ~~FINANCIAL~~ STATEMENTS OF CASH FLOWS (CONTINUED)
~~DECEMBER~~(UNAUDITED)
For the Six Months
Ended December 31,
2023 2022
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 670,330 $ 226,271
Taxes $ 342,643 $ 395,710
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 9
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The Company designs, develops, markets, and exports proprietary software products to customers in the automobile financing and leasing, banking, and financial services industries worldwide.The Company also provides system integration, consulting, and IT products and services in exchange for fees from customers.
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, ~~2017.~~2023. 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 ~~condensed~~ consolidated financial statements include the accounts of ~~NetSol Technologies, Inc. and subsidiaries (collectively,~~ the ~~“Company”)~~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”)
~~NTPK (Thailand) Co. Limited (“NTPK Thailand”)~~
NetSol Technologies (Beijing) Co. Ltd. (“NetSol Beijing”)
~~NetSol Technologies (GmbH)~~Tianjin NuoJinZhiCheng Co., Ltd (“~~NTG”~~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 Ascent Middle East Computer Equipment Trading LLC (“Namecet”)
NetSol Technologies Thailand Limited (“NetSol Thai”)
~~Virtual Lease Services Holdings~~Otoz, Inc. (“Otoz”)
Otoz (Thailand) Limited (“~~VLSH”~~Otoz Thai”)
~~Virtual Lease Services Limited (“VLS”)~~
~~Virtual Lease Services (Ireland) Limited (“VLSIL”)~~
For comparative purposes, prior year’s condensed consolidated financial statements have been reclassified to conform to report classifications of the current period. Below is the table of reclassified amounts:
For the Three Months For the Six Months
Ended December 31, 2016 Ended December 31, 2016
Originally reported Reclassified Originally reported Reclassified

Net Revenues:
Services $ 6,984,084 $ 6,619,158 $ 12,790,801 $ 12,175,293
Services - related party 1,464,901 1,829,827 3,379,473 3,994,981
$ 8,448,985 $ 8,448,985 $ 16,170,274 $ 16,170,274

Operating expenses:
Provision for bad debts $ - $ 1,026 $ - $ 1,026
General and administrative 3,933,413 3,932,387 8,552,609 8,551,583
$ 3,933,413 $ 3,933,413 $ 8,552,609 $ 8,552,609
Page 810

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(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 provision for doubtful accounts, provision for taxation, useful life of depreciable assets, useful life of intangible assets, contingencies, assumptions used to determine the net present value of operating lease liabilities, and estimated contract 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.~~insurance except balances maintained in China are insured for RMB 500,000 ($70,621) in each bank and in the UK for GBP 85,000 ($107,595) in each bank. The Company maintains three bank accounts in China and nine bank accounts in the UK. As of December 31, ~~2017,~~2023, and June 30, ~~2017,~~2023, the Company had uninsured deposits related to cash deposits in accounts maintained within foreign entities of approximately ~~$8,463,863~~$14,517,520 and ~~$11,564,343,~~$13,524,518, 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.
Fair Value of Financial Instruments
The Company applies the provisions of ~~ASC~~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, ~~restricted cash,~~ 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.

Page 911

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~The Company’s financial assets that are measured at fair value on a recurring basis as of~~ December 31, ~~2017, are as follows:~~2023
Level 1 Level 2 Level 3 Total Assets
Revenue in excess of billing - long term $ - $ - $ 6,668,854 $ 6,668,854
Total $ - $ - $ 6,668,854 $ 6,668,854
(Unaudited)
The Company’s financial assets that were measured at fair value on a recurring basis as of ~~June 30, 2017,~~December 31, 2023, were as follows:
SCHEDULE OF FAIR VALUE OF FINANCIAL ASSETS MEASURED ON RECURRING BASIS
Level 1 Level 2 Level 3 Total Assets Level 1 Level 2 Level 3 Total Assets
Revenue in excess of billing - long term $ - $ - $ 5,173,538 $ 5,173,538
Revenues in excess of billings - long term $ - $ - $ 734,397 $ 734,397
Total $ - $ - $ 5,173,538 $ 5,173,538 $ - $ - $ 734,397 $ 734,397
The Company did not have any financial assets that were measured at fair value on a recurring basis at June 30, 2023.
The reconciliation from June 30, ~~2017~~2023 to December 31, ~~2017~~2023 is as follows:
SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS RECONCILIATION
Revenue in excess of billing - long term Fair value discount Total
Revenues in
excess of
billings - long term

Fair value
discount
Total
Balance at June 30, 2017 $ 5,483,869 $ (310,331 ) $ 5,173,538
Balance at June 30, 2023 $ - $ - $ -
Additions 1,469,379 $ (85,057 ) 1,384,322 827,853 (103,958 ) 723,895
Amortization during the period - 110,994 110,994 - 18,464 18,464
Balance at December 31, 2017 $ 6,953,248 $ (284,394 ) $ 6,668,854
Effect of Translation Adjustment (7,968 ) 6 (7,962 )
Balance at December 31, 2023 $ 819,885 $ (85,488 ) $ 734,397
~~The Company applied the discounted cash flow method to calculate the fair value and used NetSol PK’s weighted average borrowing rate, ranging from 3.93% to 4.43%.~~
Management analyzes all financial instruments with features of both liabilities and equity under ASC 480,“Distinguishing Liabilities ~~From~~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 ~~warrant~~warrants and option derivatives are valued using the Black-Scholes model.
~~New Accounting Pronouncements~~
Recent Accounting ~~Standards Adopted by~~Standards:
In October 2021, the ~~Company:~~
~~In November 2015, the Financial~~FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Accounting Standards ~~Board (FASB) issued~~Codification (“ASC”) 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. ASU ~~2015-17,~~~~Balance Sheet Classification of Deferred Taxes~~ ~~(ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and~~2021-08 is effective ~~for financial statements issued~~ for annual periods beginning after December 15, ~~2016, with early adoption permitted. ASU 2015-17 requires all deferred tax assets~~2022, and ~~liabilities to be classified as non-current.~~interim periods within those years, and was adopted by the Company on July 1, 2023. The adoption of ~~this guidance~~the new standard did not have a material impact on the Company’s ~~results of operations,~~consolidated financial ~~position or disclosures.~~statements.
In ~~March 2016,~~August 2023, the FASB issued ASU ~~2016-09,~~~~Improvements~~2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. ASU 2023-05 provides decision-useful information to ~~Employee Share-Based Payment Accounting. The guidance simplifies accounting for share-based payments, most notably~~a joint venture’s investors and reduces diversity in practice by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.
~~Page 10~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~Accounting Standards Recently Issued but Not Yet Adopted by the Company:~~
~~In May 2014, the (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,~~~~Revenue from Contracts with Customers~~, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date of thejoint venture apply a new revenue standard by one year, which will make it effective for the Company in the first quarter of its fiscal year ending June 30, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on its consolidated financial statements.
~~In January 2016, the FASB issued ASU 2016-01,~~~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ ~~(ASU 2016-01), which requires equity investments that are not accounted for under the equity method~~basis of accounting ~~to be measured~~upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with ~~changes recognized in net income and updates certain presentation and disclosure requirements.~~the business combinations guidance). ASU ~~2016-01~~2023-05 is effective ~~beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.~~
~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases~~~~, which requires lessees to recognize right-of-use assets and lease liabilities,~~prospectively for all ~~leases,~~joint ventures with ~~the exception of short-term leases, at the commencement~~a formation date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
~~In August 2016, the FASB issued ASU 2016-15,~~~~Clarification of Certain Cash Receipts and Cash Payments~~, which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
~~On November 17, 2016, the FASB issued Accounting Standards Update No. 2016-18,~~~~Statement of Cash Flows (Topic 230): Restricted Cash.~~ It is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The new standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Earlier adoption is permitted. The Company maintains restricted cash balances and will show restricted cash as part of cash and restricted cash equivalents in the statement of cash flows.
~~In January 2017, the FASB issued ASU No. 2017-01,~~~~Clarifying the Definition of a Business~~~~, which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively~~ on or after ~~the effective date. This update is effective for annual periods beginning after December 15, 2017,~~January 1, 2025, and ~~interim periods within those periods. Early~~early adoption is permitted for acquisition or deconsolidation transactions occurring before the issuance date or effective date and only when the transactions have not been reported in issued or made available for issuance financial statements.permitted. The Company does not expect the ~~adoption~~standard to have ~~any significant impact on its Consolidated Financial Statements.~~
~~In January 2017, the FASB issued ASU No. 2017-04,~~~~Simplifying the Test for Goodwill Impairment~~~~. Under the new standard, goodwill impairment would be measured as the amount by which~~ a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company will apply this guidance to applicable impairment tests after the adoption date.
~~Page 11~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~In May 2017, the FASB issued ASU 2017-09,~~~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,~~which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as a modification. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new standard will be effective prospectively for the Company for the fiscal year beginning July 1, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of the new standardmaterial effect on its consolidated financial ~~statements and related disclosures.~~statements.
~~In July 2017, the FASB issued ASU No. 2017-11,~~“Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact of the adoption of this standard on its consolidated financial statements.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
Page 12
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(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.
Software Licenses
Transfer of control for software is considered to have occurred upon delivery of the product to the customer. The Company’s typical payment terms tend to vary by region, but its standard payment terms are within 30 days of invoice.
Page 13
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
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. A number of 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 14
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
The Company’s disaggregated revenue by category is as follows:
SCHEDULE OF DISAGGREGATED REVENUE BY CATEGORY
2023 2022 2023 2022
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2023 2022 2023 2022
Core:
License $ 2,990,453 $ 15,884 $ 4,270,902 $ 265,844
Subscription and support 6,827,781 6,502,669 13,340,024 12,519,503
Services 4,114,077 4,818,461 9,088,631 10,239,827
Total core revenue, net 13,932,311 11,337,014 26,699,557 23,025,174

Non-Core:
Services 1,305,630 1,053,344 2,780,565 2,071,303
Total non-core revenue, net 1,305,630 1,053,344 2,780,565 2,071,303

Total net revenue $ 15,237,941 $ 12,390,358 $ 29,480,122 $ 25,096,477
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 “man-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 man-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. A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances and testing requirement changes.
Page 15
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
If a group of agreements are 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 comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on 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 DEFERRED REVENUE
As of As of

December 31,
2023

June 30,
2023

Revenues in excess of billings $ 17,033,684 $ 12,377,677

Unearned revenue $ 4,426,008 $ 7,932,306
The Company’s unearned revenue reconciliation is as follows:
SCHEDULE OF UNEARNED REVENUE RECONCILIATION

Unearned
Revenue

Balance at June 30, 2023 $ 7,932,306
Invoiced 7,323,061
Revenue Recognized (10,944,715 )
Adjustments 115,356
Balance at December 31, 2023 $ 4,426,008
During the three and six months ended December 31, 2023, the Company recognized revenue of $2,248,000 and $6,454,000 that 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 16
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
Revenue allocated to 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 $32,816,000 as of December 31, 2023, of which the Company estimates to recognize approximately $18,471,000 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 instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, and not to facilitate financing arrangements.
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 license 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 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 cashed 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 34 – 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~~During the three and six months ended December 31, 2023 and 2022, there were no outstanding ~~stock options, warrants, and stock awards.~~dilutive instruments.
Page 1217

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
~~The components of basic and diluted earnings per share were as follows:~~
For the three months ended
December 31, 2017 For the six months ended
December 31, 2017
Net Income Shares Per Share Net Income Shares Per Share
Basic income per share:
Net income available to common shareholders $ 634,421 11,159,075 $ 0.06 $ 264,923 11,115,346 $ 0.02
Effect of dilutive securities
Stock options - 12,468 - - 12,468 -
Diluted income per share $ 634,421 11,171,543 $ 0.06 $ 264,923 11,127,814 $ 0.02
For the three months ended
December 31, 2016 For the six months ended
December 31, 2016
Net Loss Shares Per Share Net Loss Shares Per Share
Restated Restated Restated Restated
Basic loss per share:
Net loss available to common shareholders $ (2,168,394 ) 10,877,446 $ (0.20 ) $ (2,554,505 ) 10,783,685 $ (0.24 )
Effect of dilutive securities
Stock options - - - - - -
Diluted loss per share $ (2,168,394 ) 10,877,446 $ (0.20 ) $ (2,554,505 ) 10,783,685 $ (0.24 )
~~The following potential dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.~~
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016

Stock Options - 480,133 - 480,133
Warrants - 11,075 - 11,075
Share Grants 285,956 629,258 285,956 629,258
285,956 1,120,466 285,956 1,120,466
NOTE 45 – OTHER COMPREHENSIVE INCOME AND FOREIGN ~~CURRENCY:~~CURRENCY
The accounts of NTE, VLSH and VLS use the British Pound; VLSIL and NTG use the Euro; NetSol PK, Connect, and NetSol Innovation use the Pakistan Rupee; NTPK Thailand and NetSol Thai use the Thai Baht; Australia uses the Australian dollar; and NetSol Beijing uses the Chinese Yuan asfollowing table represents the functional ~~currencies. NetSol Technologies, Inc.,~~currencies of the Company and its ~~subsidiary, NTA, use the U.S. dollar as the functional currency.~~ subsidiaries:
The Company and Subsidiaries Functional Currency
NetSol Technologies, Inc. USD
NTA USD
Otoz 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
NetSol Thai Thai Bhat
Otoz Thai Thai Bhat
Australia Australian Dollar
Namecet AED
NetSol Beijing Chinese Yuan
Tianjin Chinese Yuan
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 ~~$20,276,030~~$45,870,309 and ~~$18,074,570~~$45,975,156 as of December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, respectively. During the three and six months ended December 31, ~~2017,~~2023, comprehensive income (loss) in the consolidated statements of comprehensive income (loss) included a translation ~~loss~~gain attributable to NetSol of ~~$1,612,881~~$541,393 and ~~$2,201,460,~~$104,847, respectively. During the three and six months ended December 31, ~~2016,~~2022, comprehensive income (loss) in the consolidated statements of ~~operations~~comprehensive income (loss) included a $269,795 translation gain attributable to NetSol and a $(2,648,255)translation loss ~~of $668,262 and translation income of $102,099,~~attributable to NetSol, respectively.
~~Page 13~~
~~NETSOL TECHNOLOGIES, INC.~~NOTE 6 – MAJOR CUSTOMERS
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~NOTE 5 – RELATED PARTY TRANSACTIONS~~
~~NetSol-Innovation~~
~~In November 2004, the Company entered into a joint venture with 1insurer, formerly~~~~Innovation Group,~~ ~~called NetSol-Innovation. NetSol-Innovation provides support services to 1insurer.~~ During the three and six months ended December 31, ~~2017, NetSol Innovation provided services~~2023, revenues from Daimler Financial Services (“DFS”) were $3,945,061 and $7,632,692, representing 25.9% of ~~$796,757 and $1,928,513, respectively.~~revenues. During the three and six months ended December 31, ~~2016, NetSol-Innovation provided services of $1,401,144 and $2,956,619, respectively. Accounts receivable at December 31, 2017 and June 30, 2017 were $2,429,771 and $1,462,078, respectively.~~
~~Investec Asset Finance~~
In October 2011, NTE entered into an agreement with Investec Asset Finance to acquire VLS. NTE and VLS provide support services to Investec. During the three and six months ended December 31, 2017, NTE and VLS provided license, maintenance and services of $442,699 and $1,043,891, respectively. During the three and six months ended December 31, 2016, NTE and VLS provided license, maintenance and services of $115,102 and $851,787, respectively. Accounts receivable at December 31, 2017 and June 30, 2017 were $113,310 and $133,218, respectively.
~~WRLD3D~~
On May 31, 2017, Faizaan Ghauri, son of CEO Najeeb Ghauri, and an employee of the Company was appointed CEO of WRLD3D, Inc. (“WRLD3D”) a non-public company. On March 2, 2016, the Company purchased a 4.9% interest in WRLD3D for $1,111,111 and the Company’s subsidiary NetSol PK purchased a 12.2% investment in WRLD3D for $2,777,778 which will be earned over future periods by providing IT and enterprise software solutions. See Note 7 and Note 11.
~~G-FORCE~~
Najeeb Ghauri, CEO and Chairman of the Board, and Naeem Ghauri, Director, have a financial interest in G-Force, LLC, which purchased a 4.9% investment in WRLD3D, Inc. for $1,111,111. See Note 11 “Other Long-Term Assets”
~~NOTE 6 – MAJOR CUSTOMERS~~
~~The Company is a strategic business partner for~~2022, revenues from Daimler Financial Services ~~(which consists~~(“DFS”) were $3,478,077 and $7,069,884, representing 28.1% and 39.5% of ~~a group of many companies in different countries), which accounts for approximately 35.90% and 41.54% of revenue for the six months ended December 31, 2017 and 2016, respectively.~~revenues. The ~~revenue~~revenues from ~~this customer is~~DFS are shown in the Asia – Pacific segment.
Accounts receivable from DFS at December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, were ~~$12,761,829~~$1,014,503 and ~~$1,620,717,~~$4,368,881, respectively. ~~Revenue~~Revenues in excess of ~~billing~~billings at December 31, ~~2017 was $16,674,348, which included $6,668,854 shown as long term. Revenue in excess of billing at~~2023 and June 30, ~~2017 was $18,579,540, which included $5,173,538 shown as long term.~~2023, were $2,497,783 and $1,961,750, respectively.
On December 21, 2015, the Company entered into a 10-year contract with Daimler Financial Services to provide license, maintenance and services for 12 countries in the Asia Pacific Region. The implementation phase is expected to be over a five-year period with maintenance and support over 10 years. The contract is a fixed fee arrangement with total license and maintenance fees of approximately €71,000,000 (approximately $85,054,591) with services to be separately agreed upon and billed as they are performed. The customer will make fixed annual payments of €5,850,000 (approximately $7,008,019) for years 1-5 and €8,350,000 (approximately $10,002,899) for years 6-10. Under the terms of the contract, the customer has the right to withdraw from certain modules and terminate the agreement as to certain countries based on good cause or business reasons prior to the beginning of implementation.
On, September 4, 2017, the Company amended the agreement which provided for an additional €7,700,000 (approximately $9,277,108) to be earned over the remaining life of the contract. The amended agreement provides for €7,000,000 (approximately $8,433,735) to be paid in the current fiscal year with €100,000 (approximately $120,482) to be paid each year over the remaining seven years.
Page 1418

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~NOTE 7 – CONVERTIBLE NOTE RECEIVABLE – RELATED PARTY~~
The Company entered into an agreement with WRLD3D, whereby the Company was issued a Convertible Promissory Note (the “Convertible Note”) which was fully executed on May 25, 2017. The maximum principal amount of the Convertible Note is $750,000, and as of December 31, 2017, the Company had disbursed the full amount. The Convertible Note bears interest at 5% per annum and all unpaid interest and principal is due and payable upon the Company’s request on or after February 1, 2018. The Convertible Note is convertible into Series BB Preferred shares at the lesser of (i) the price paid per share for the equity security by the investors in the qualified financing and (ii) $0.6788 per share (adjusted for any stock dividends, combinations, splits, recapitalizations or the like with respect to WRLD3D’s Series BB Preferred Stock after the date of the Convertible Note). The Convertible Note is convertible upon the occurrence of the following events:2023
(Unaudited)
~~1. Upon a qualified financing which is an equity financing of at least $2,000,000.~~
~~2. Optionally, upon an equity financing less than $2,000,000.~~
~~3. Optionally after the maturity date.~~
~~4. Upon a change of control.~~
NOTE 87 - OTHER CURRENT ASSETS
Other current assets consisted of the following:
SCHEDULE OF OTHER CURRENT ASSETS
As of December 31, As of June 30, As of As of
2017 2017
December 31,
2023

June 30,
2023

Prepaid Expenses $ 660,417 $ 597,687 $ 1,300,059 $ 1,299,334
Advance Income Tax 979,296 1,052,935 251,817 144,428
Employee Advances 114,147 128,100 54,714 68,488
Security Deposits 84,934 103,255 187,546 177,148
Other Receivables 648,237 252,590 92,642 92,716
Other Assets 332,152 329,319 255,709 196,400
Total $ 2,819,183 $ 2,463,886
Net Balance $ 2,142,487 $ 1,978,514
NOTE 98 – ~~REVENUE~~REVENUES IN EXCESS OF BILLINGS – LONG TERM
~~Revenue~~Revenues in excess of billings, net consisted of the following:
SCHEDULE OF REVENUE IN EXCESS OF BILLING
As of As of

December 31,
2023

June 30,
2023

Revenues in excess of billings - long term $ 819,885 $ -
Present value discount (85,488 ) -
Net Balance $ 734,397 $ -
As of December 31, As of June 30,
2017 2017
Revenue in excess of billing - long term $ 6,953,248 �� $ 5,483,869
Present value discount (284,394 ) (310,331 )
Net Balance $ 6,668,854 $ 5,173,538
Pursuant to revenue recognition for contract accounting, the Company has recorded ~~revenue~~revenues in excess of billings long-term for amounts billable after one year. During the three and six months ended December 31, ~~2017,~~2023, the Company accreted ~~$59,272~~$12,309 and ~~$110, 994,~~$18,464, respectively, which iswas recorded in interest ~~income.~~income for that period. During the three and six months ended December 31, 2022, the Company accreted $9,288 and $18,657, respectively. The Company used the discounted cash flow method with an interest rate of 7.34% for the period ended December 31, 2023. The Company used the discounted cash flow method with interest rates ranging from ~~3.93%~~4.65% to ~~4.43%.~~6.25% for the period ended December 31, 2022.
Page 1519

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
NOTE 109 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
As of December 31, As of June 30, As of As of
2017 2017
December 31,
2023

June 30,
2023

Office Furniture and Equipment $ 3,908,883 $ 3,755,710 $ 2,427,955 $ 2,678,664
Computer Equipment 25,788,684 26,693,730 8,432,290 8,317,131
Assets Under Capital Leases 1,522,708 1,965,650 47,793 46,554
Building 8,794,381 9,243,866 3,586,175 3,497,913
Land 2,299,047 2,428,626 909,031 885,474
Autos 1,287,043 1,270,339 2,074,702 1,941,063
Improvements 534,900 592,652 212,978 205,289
Subtotal 44,135,646 45,950,573 17,690,924 17,572,088
Accumulated Depreciation (25,692,152 ) (25,579,870 ) (12,025,225 ) (11,410,902 )
Property and Equipment, Net $ 18,443,494 $ 20,370,703 $ 5,665,699 $ 6,161,186
For the three and six months ended December 31, ~~2017,~~2023, depreciation expense totaled ~~$707,668~~$429,163 and ~~$1,436,327,~~$833,908, respectively. Of these amounts, ~~$484,883~~$264,374 and ~~$967,669,~~$531,316, respectively, are reflected in cost of revenues. For the three and six months ended December 31, ~~2016,~~2022, depreciation expense totaled ~~$902,678~~$568,828 and ~~$1,801,981,~~$1,091,011, respectively. Of these amounts, ~~$631,193~~$370,606 and ~~$1,261,399,~~$701,835, respectively, are reflected in cost of revenues.
Following is a summary of fixed assets held under ~~capital~~finance leases as of December 31, ~~2017~~2023 and June 30, ~~2017:~~2023:
SUMMARY OF FIXED ASSETS HELD UNDER CAPITAL LEASES
As of December 31, As of June 30, As of As of
2017 2017
December 31,
2023

June 30,
2023

Computers and Other Equipment $ 236,518 $ 309,863
Furniture and Fixtures 65,084 227,914
Vehicles 1,221,106 1,427,873 $ 47,793 $ 46,554
Total 1,522,708 1,965,650 47,793 46,554
Less: Accumulated Depreciation - Net (568,087 ) (711,622 ) (22,607 ) (17,366 )
$ 954,621 $ 1,254,028
Fixed assets held under capital leases, Total $ 25,186 $ 29,188
~~NOTE 11 – OTHER LONG~~Finance lease term and discount rate were as follows:
SCHEDULE OF FINANCE LEASE TERM ~~ASSETS~~
As of As of
December 31, 2023 June 30, 2023

Weighted average remaining lease term - Finance leases 0.84 Years 1.21 Years

Weighted average discount rate - Finance leases 16.4% 16.4%
As of December 31, As of June 30,
2017 2017

Investment (1) $ 3,389,801 $ 3,057,020
Long Term Security Deposits 153,514 154,275
Total $ 3,543,315 $ 3,211,295
~~(1) Investment in WRLD3D~~
On March 2, 2016, the Company purchased a 4.9% interest in WRLD3D, a non-public company, for $1,111,111. The Company paid $555,556 at the initial closing and $555,555 on September 1, 2016. NetSol PK, the subsidiary of the Company, purchased a 12.2% investment in WRLD3D, for $2,777,778 which will be earned over future periods by providing IT and enterprise software solutions. Per the agreement, NetSol PK is to provide a minimum of $200,000 of services in each three-month period and the entire balance is required to be provided within three years of the date of the agreement. If NetSol PK fails to provide the future services, it may be required to forfeit the unearned shares back to WRLD3D. As of December 31, the investment earned by NetSol PK is $2,549,587.
Page 1620

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
~~In connection~~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 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 ~~investment,~~approach applied for 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.
Supplemental balance sheet information related to leases was as follows:
SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASE
As of As of

December 31,
2023

June 30,
2023

Assets
Operating lease assets, net $ 1,659,622 $ 1,151,575

Liabilities
Current
Operating $ 689,770 $ 505,237
Operating, Current $ 689,770 $ 505,237
Non-current
Operating 1,022,361 652,194
Operating, Non Current 1,022,361 652,194
Total Lease Liabilities $ 1,712,131 $ 1,157,431
Page 21
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
The components of lease cost were as follows:
SCHEDULE OF COMPONENTS OF LEASE COST
2023 2022 2023 2022
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2023 2022 2023 2022

Amortization of finance lease assets $ 2,365 $ 3,099 $ 4,661 $ 5,995
Interest on finance lease obligation 770 1,552 1,639 3,359
Operating lease cost 98,309 113,079 205,342 231,601
Short term lease cost 40,216 37,986 81,224 104,622
Sub lease income (8,199 ) (7,786 ) (16,605 ) (15,598 )
Total lease cost $ 133,461 $ 147,930 $ 276,261 $ 329,979
Lease term and discount rate were as follows:
SCHEDULE OF LEASE TERM AND DISCOUNT RATE
As of As of
December 31, 2023 June 30, 2023

Weighted average remaining lease term - Operating leases 2.41 Years 3.09 Years

Weighted average discount rate - Operating leases 4.6% 4.0%
Supplemental disclosures of cash flow information related to leases were as follows:
SCHEDULE OF SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION RELATED TO LEASES
2023 2022
For the Six Months
Ended December 31,
2023 2022

Operating cash flows related to operating leases $ 140,514 $ 236,311

Operating cash flows related to finance leases $ 1,638 $ 3,358

Financing cash flows related finance leases $ 16,424 $ 16,230
Page 22
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
Maturities of operating lease liabilities were as follows as of December 31, 2023:
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES
Amount
Within year 1 $ 763,409
Within year 2 565,341
Within year 3 347,701
Within year 4 108,548
Within year 5 81,529
Thereafter 236
Total Lease Payments 1,866,764
Less: Imputed interest (154,633 )
Present Value of lease liabilities 1,712,131
Less: Current portion (689,770 )
Non-Current portion $ 1,022,361
The Company is a lessor for certain office space leased by the Company and ~~NetSol PK received~~sub-leased to others under non-cancelable leases. These lease agreements provide for a ~~warrant~~fixed base rent and are currently on a month-by-month basis. All leases are considered operating leases. There are no rights to purchase ~~preferred stock of WRLD3D which included~~ the ~~following key terms~~premises and ~~features:~~
● ~~The warrants are exercisable into shares of the “Next Round Preferred”, only if and when the Next Round Preferred is issued by WRLD3D in a “Qualified Financing”.~~
● ~~The warrants expire on March 2, 2020.~~
● ~~“Next Round Preferred” is defined as occurring if WRLD3D’s preferred stock (or securities convertible into preferred stock) are issued in a Qualified Financing that occurs after March 2, 2016.~~
● ~~“Qualified Financing” is defined as financing with total proceeds of at least $2 million.~~
● ~~The total number of common stock shares to be issued is equal to $1,250,000 divided by the per share price of the Next Round Preferred.~~
● ~~The exercise price of the warrants is equal to the greater of~~
a) ~~70% of the per share price of the Next Round Preferred sold in a Qualified Financing, or~~
b) 25,000,000 divided by the total number of shares of common stock outstanding immediately prior to the Qualified Financing (on a fully-diluted basis, excluding the number of common stock shares issuable upon the exercise of any given warrant).
The Company had originally accounted for the investment under the cost method. On May 31, 2017, the Company determined that it met the significant influence criteria since the newly appointed CEO of WRLD3D is the son of the CEO, Najeeb Ghauri, and also an employee of the Company; therefore, the Company changed the accounting treatment from the cost method to the equity method.
~~During~~no residual value guarantees. For the three and six months ended December 31, ~~2017, NetSol PK provided services valued at $315,408~~2023, the Company received lease income of $8,199 and ~~$583,708,~~$16,605, respectively. ~~During~~For the three and six months ended December 31, 2016, NetSol PK provided services valued at $300,963 and $549,621, respectively. This revenue is recorded as services-related party. These services are recorded as accounts receivable until approved by WRLD3D after which the shares are released from restriction. Accounts receivable at December 31, 2017 and June 30, 2017 were $39,322 and $49,646, respectively. Revenue in excess of billing at December 31, 2017 and June 30, 2017 were $107,562 and $80,705, respectively. During the three and six months ended December 31, 2017, NetSol PK services valued at $285,378 and $553,678, respectively, were released from restriction. During the three and six months ended December 31, 2016, NetSol PK services valued at $300,963 and $549,621, respectively, were released from restriction. Under the equity method of accounting,2022, the Company ~~recorded its share~~received lease income of ~~net loss of $203,336~~$7,786 and ~~$270,898 for the three and six months ended December 31, 2017,~~$15,598, respectively.
NOTE 1211 - INTANGIBLE ASSETS
Intangible assets consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS
As of December 31, As of June 30, As of As of
2017 2017
December 31,
2023

June 30,
2023

Product Licenses - Cost $ 47,244,997 $ 47,244,997 $ 39,395,533 $ 47,244,997
Effect of Translation Adjustment (4,850,984 ) (3,134,488 ) (24,427,792 ) (24,756,959 )
Accumulated Amortization (27,583,408 ) (27,067,358 ) (14,967,741 ) (22,360,107 )
Net Balance $ 14,810,605 $ 17,043,151 $ - $ 127,931
~~(A)~~ Product Licenses
Product licenses include internally developed ~~original license issues, renewals, enhancements, copyrights, trademarks, and trade names.~~software cost. Product licenses are amortized on a straight-line basis over their respective ~~lives, and the unamortized amount of $14,810,605 will be amortized over the next 5.5 years.~~lives. Amortization expense for the three and six months ended December 31, ~~2017~~2023, was ~~$683,220~~$nil and ~~$1,373,547,~~$126,041, respectively. Amortization expense for the three and six months ended December 31, ~~2016~~2022, was ~~$687,571~~$322,672 and ~~$1,388,237,~~$645,492, respectively.
Page 1723

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
~~(B) Future Amortization~~
~~Estimated amortization expense of intangible assets over the next five years is as follows:~~
Year ended:
December 31, 2018 $ 2,630,334
December 31, 2019 2,630,334
December 31, 2020 2,630,334
December 31, 2021 2,630,334
December 31, 2022 2,630,334
Thereafter 1,658,935
$ 14,810,605
NOTE 1312 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As of December 31, As of June 30, As of As of
2017 2017
December 31,
2023

June 30,
2023

Accounts Payable $ 1,639,112 $ 1,466,265 $ 1,324,037 $ 1,114,915
Accrued Liabilities 5,086,258 4,498,958 3,600,742 3,695,091
Accrued Payroll & Taxes 488,491 520,719
Accrued Payroll 1,086,371 982,884
Accrued Payroll Taxes 161,143 170,063
Taxes Payable 167,994 174,485 121,212 195,491
Other Payable 178,443 219,767 420,415 393,737
Total $ 7,560,298 $ 6,880,194 $ 6,713,920 $ 6,552,181
Page 1824

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
NOTE 1413 – DEBTS
Notes payable and ~~capital~~finance leases consisted of the following:
SCHEDULE OF COMPONENTS OF NOTES PAYABLE AND CAPITAL LEASES
As of December 31, 2017 As of December 31, 2023
Current Long-Term Current Long-Term
Name Total Maturities Maturities Total Maturities Maturities

D&O Insurance (1) $ 105,023 $ 105,023 $ - (1) $ 120,533 $ 120,533 $ -
Bank Overdraft Facility (2) - - - (2) - - -
Loan Payable Bank - Export Refinance (3) 4,521,613 4,521,613 - (3) 1,787,821 1,787,821 -
Loan Payable Bank - Running Finance (4) 678,217 678,217 - (4) - - -
Loan Payable Bank - Export Refinance II (5) 3,165,130 3,165,130 - (5) 1,358,744 1,358,744 -
Loan Payable Bank - Running Finance II (6) 1,356,484 1,356,484 -
Loan Payable Bank - Export Refinance III (6) 2,502,951 2,502,951 -
Sale and Leaseback Financing (7) 256,921 157,394 99,527
Term Finance Facility (8) 3,392 3,392 -
Insurance Financing (9) 39,587 39,587 -
9,826,467 9,826,467 - 6,069,949 5,970,422 99,527
Subsidiary Capital Leases (7) 557,516 306,633 250,883
Subsidiary Finance Leases (10) 12,044 12,044 -
$ 10,383,983 $ 10,133,100 $ 250,883 $ 6,081,993 $ 5,982,466 $ 99,527
As of June 30, 2017 As of June 30, 2023
Current Long-Term Current Long-Term
Name Total Maturities Maturities Total Maturities Maturities

D&O Insurance (1) $ 87,485 $ 87,485 $ - (1) $ 89,823 $ 89,823 $ -
Bank Overdraft Facility (2) 221,379 221,379 - (2) - - -
Loan Payable Bank - Export Refinance (3) 4,776,461 4,776,461 - (3) 1,741,493 1,741,493 -
Loan Payable Bank - Running Finance (4) - - -
Loan Payable Bank - Export Refinance II (5) 1,910,585 1,910,585 - (5) 1,323,535 1,323,535 -
Loan Payable Bank - Running Finance II (6) 2,865,877 2,865,877 -
Loan Payable Bank - Export Refinance III (6) 2,438,089 2,438,089 -
Sale and Leaseback Financing (7) 321,113 148,264 172,849
Term Finance Facility (8) 13,356 13,356 -
Insurance Financing (9) - - -
9,861,787 9,861,787 - 5,927,409 5,754,560 172,849
Subsidiary Capital Leases (7) 727,770 361,008 366,762
Subsidiary Finance Leases (10) 28,330 24,950 3,380
$ 10,589,557 $ 10,222,795 $ 366,762 $ 5,955,739 $ 5,779,510 $ 176,229
(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 were ranging from 5.0% to 7.9% as of December 31, 2023 and June 30, 2023, respectively.
(1) The Company finances Directors’ and Officers’ (“D&O”) liability insurance, Errors and Omissions (“E&O”) liability insurance and some account payables, 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 were ranging from 4.8% to 7.69% as of December 31, 2017 and June 30, 2017.
(2) 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 $379,747. The annual interest rate was 9.5% as of December 31, 2023. The total outstanding balance as of December 31, 2023 and June 30, 2023 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 December 31, 2023, NTE was in compliance with this covenant.
(2) 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 $405,405. The annual interest rate was 4.75% as of December 31, 2017. Total outstanding balance as of December 31, 2017 was £Nil. Interest expense for three and six months ended December 31, 2017, was $5,991 and $8,045, respectively. Interest expense for three and six months ended December 31, 2016, 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 December 31, 2017, NTE was in compliance with this covenant.
(3) 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. Total facility amount is Rs. 500,000,000 or $4,521,613 at December 31, 2017 and June 30, 2017. The interest rate for the loans was 3% at December 31, 2017 and June 30, 2017. Interest expense for the three and six months ended December 31, 2017 was $35,533 and $71,431, respectively. Interest expense for the three and six months ended December 31, 2016 was $28,527 and $57,592, respectively.
(4) The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s assets. Total facility amount is Rs. 75,000,000 or $678,242, at December 31, 2017. NetSol PK used Rs. 74,997,233 or $678,217, at December 31, 2017. The interest rate for the loans was 8.16% at December 31, 2017.
Page 1925

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~This facility requires NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. As of~~ December 31, ~~2017, NetSol PK was in compliance with this covenant.~~2023
(Unaudited)
(3) 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 nine months. The total facility amount is Rs. 500,000,000 or $1,787,821 at December 31, 2023 and Rs. 500,000,000 or $1,741,493 at June 30, 2023. The interest rate for the loan was 19.0% and 17.0% at December 31, 2023 and June 30, 2023, respectively.
(4) 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. 53,000,000 or $191,654, at December 31, 2023. The balance outstanding at December 31, 2023 and June 30, 2023 was Rs. Nil. The interest rate for the loan was 23.5 and 24.9% at December 31, 2023 and June 30, 2023, respectively.
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 December 31, 2023, NetSol PK was in compliance with this covenant.
(5) 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 nine months. The total facility amount is Rs. 380,000,000 or $1,358,744 and Rs. 380,000,000 or $1,323,535 at December 31, 2023 and June 30, 2023, respectively. The interest rate for the loan was 19.0% and 18.0% at December 31, 2023 and June 30, 2023, respectively.
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 December 31, 2023, NetSol PK was in compliance with these covenants.
(6) 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 nine months. The total facility amount is Rs. 900,000,000 or $3,218,078 and Rs. 900,000,000 or $3,134,687, at December 31, 2023 and June 30, 2023, respectively. NetSol PK used Rs. 700,000,000 or $2,502,951 and Rs. 700,000,000 or $2,438,089, at December 31, 2023 and June 30, 2023, respectively. The interest rate for the loan was 19.0% and 18.0% at December 31, 2023 and June 30, 2023, respectively.
(7) 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 December 31, 2023, NetSol PK used Rs. 71,853,193 or $256,921 of which $99,527 was shown as long term and $157,394 as current. As of June 30, 2023, NetSol PK used Rs. 92,194,774 or $321,113 of which $172,849 was shown as long term and $148,264 as current. The interest rate for the loan was 9.0% to 16.0% at December 31, 2023, and June 30, 2023.
(8) In March 2019, the Company’s subsidiary, VLS, entered into a loan agreement. The loan amount was £69,549, or $88,037, for a period of 5 years with monthly payments of £1,349, or $1,708. As of December 31, 2023, the subsidiary has used this facility up to $3,392, which was shown as current. As of June 30, 2023, the subsidiary has used this facility up to $13,356, which was shown as current. The interest rate was 6.14% at December 31, 2023 and June 30, 2023.
(9) The Company’s subsidiary, VLS, finances Directors’ and Officers’ (“D&O”) liability insurance, and the $39,587 and $nil was recorded in current maturities, at December 31, 2023 and June 30, 2023, respectively. The interest rate on this financing ranged from 9.7% to 12.7% as of December 31, 2023 and June 30, 2023.
(10) The Company leases various fixed assets under finance lease arrangements expiring in various years through 2024. 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 months ended December 31, 2023 and 2022.
Page 26

(5) 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. Total facility amount is Rs. 350,000,000 or $3,165,130 and Rs. 200,000,000 or $1,910,585, at
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2017 and June 30, 2017, respectively. The interest rate for the loans was 3% at December 31, 2017 and June 30, 2017. Interest expense for the three and six months ended December 31, 2017 was $17,656 and $39,778, respectively. Interest expense for three and six months ended December 31, 2016, was $nil.2023
(Unaudited)
(6) The Company’s subsidiary, NetSol PK, has a running finance facility with Samba Bank Limited, secured by NetSol PK’s assets. Total facility amount is Rs. 150,000,000 or $1,356,484 and Rs. 300,000,000 or $2,865,877, at December 31, 2017 and June 30, 2017, respectively. The interest rate for the loans was 8.13% at December 31, 2017 and June 30, 2017, respectively. Interest expense for the three and six months ended December 31, 2017 was $35,626 and $79,721, respectively. Interest expense for three and six months ended December 31, 2016, was $nil.
During the tenure of 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 December 31, 2017, NetSol PK was in compliance with these covenants.
~~(6) The Company leases various fixed assets under capital lease arrangements expiring in various years through 2022. The assets and liabilities under capital leases~~Following 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 capital leases is included in depreciation expense for the three months ended December 31, 2017 and 2016.
~~Following is~~ the aggregate minimum future lease payments under ~~capital~~finance leases as of December 31, ~~2017:~~2023:
SCHEDULE OF AGGREGATE MINIMUM FUTURE LEASE PAYMENTS UNDER CAPITAL LEASES
Amount
Minimum Lease Payments
Due FYE 12/31/18 $ 336,546
Due FYE 12/31/19 220,855
Due FYE 12/31/20 36,412
Due FYE 12/31/21 5,182
Due FYE 12/31/22 -
Total Minimum Lease Payments 598,995
Interest Expense relating to future periods (41,479 )
Present Value of minimum lease payments 557,516
Less: Current portion (306,633 )
Non-Current portion $ 250,883
Amount
Minimum Lease Payments Within year 1 $ 13,005
Total Minimum Lease Payments 13,005
Interest Expense relating to future periods (961 )
Present Value of minimum lease payments 12,044
Less: Current portion (12,044 )
Current portion of loans and obligations under finance leases
Non-Current portion $ -
Loans and obligations under finance leases; less current maturities
Following are the aggregate future long term debt payments as of December 31, 2023 which consists of “Sale and Leaseback Financing (7)” and “Term Finance Facility (8)”.
SCHEDULE OF AGGREGATE FUTURE LONG TERM DEBT PAYMENTS
Amount
Loan Payments
Within year 1 $ 160,788
Within year 2 98,657
Within year 3 868
Total Loan Payments 260,313
Less: Current portion (160,786 )
Non-Current portion $ 99,527
NOTE 1514 - STOCKHOLDERS’ EQUITY
During the three and six months ended December 31, ~~2017,~~2023, the Company issued ~~26,136 shares of common stock for services rendered by officers of the Company. These shares were valued at the fair market value of $163,350.~~
~~During the six months ended December 31, 2017, the Company issued 9,699~~18,069 and 40,032 shares of common stock for services rendered by the independent members of the Board of Directors as part of their board compensation. These shares were valued at the fair market value of ~~$55,080.~~$39,750 and $79,500, respectively.
During the three and six months ended December 31, ~~2017,~~2023, the Company issued ~~98,408~~nil and 5,000 shares of ~~its~~ common stock tofor services rendered by the employees ~~pursuant to~~of the ~~terms~~company as part of their ~~employment agreements~~compensation. These shares were valued at ~~$605,107.~~the fair market value of $nil and $9,050.
Page 2027

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~During the six months ended~~ December 31, ~~2017, the Company collected subscription receivable of $76,511 related to the exercise of stock options in previous years.~~2023
(Unaudited)
~~During the six months ended December 31, 2017, the Company received $138,800 pursuant to a stock option agreement for the exercise of 35,773 shares of common stock at a price of $3.88 per share.~~
Stock Grants
~~During the six months ended December 31, 2017, the Company paid $601,020 to purchase 139,275 of shares of its common stock from the open market at an average price of $4.32 per share.~~
~~NOTE 16 - INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN~~
~~Common stock purchase options and warrants consisted of the following:~~
~~OPTIONS:~~
# of shares Weighted Ave Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregated Intrinsic Value

Outstanding and exercisable, June 30, 2016 610,133 $ 4.90 0.99 $ 799,030
Granted 79,838 $ 4.53
Exercised (84,838 ) $ 4.49
Expired / Cancelled (130,000 ) $ 7.50
Outstanding and exercisable, June 30, 2017 475,133 $ 4.20 1.05 $ 8,413
Granted - -
Exercised (35,773 ) $ 3.88
Expired / Cancelled (1,000 ) $ 16.00
Outstanding and exercisable, December 31, 2017 438,360 $ 4.20 0.57 $ 319,465
~~The following table summarizes information about stock options and warrants outstanding and exercisable at December 31, 2017.~~
Exercise Price Number Outstanding and Exercisable Weighted Average Remaining Contractual Life Weighted Ave Exercise Price
OPTIONS:

$ 3.88 384,898 0.49 $ 3.88
$ 6.50 53,462 1.10 $ 6.50
Totals 438,360 0.57 $ 4.20
~~Page 21~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
The following table summarizes stock grants awarded as compensation:
SUMMARY OF UNVESTED STOCK GRANTS AWARDED AS COMPENSATION
# of shares Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2016 630,228 $ 6.07
Granted 222,146 $ 5.92
Forfeited / Cancelled (5,000 ) $ 5.55
Vested (427,175 ) $ 5.90
Unvested, June 30, 2017 420,199 $ 6.07
Vested (134,243 ) $ 6.13
Unvested, December 31, 2017 285,956 $ 6.18

# Number of
shares

Weighted
Average Grant
Date Fair
Value ($)

Unvested, June 30, 2022 - $ -
Granted 58,317 $ 2.73
Vested (58,317 ) $ 2.73
Unvested, June 30, 2023 - $ -
Granted 45,032 $ 1.97
Vested (45,032 ) $ 1.97
Unvested, December 31, 2023 - $ -
For the three and six months ended December 31, ~~2017,~~2023, the Company recorded compensation expense of ~~$405,721~~$39,750 and ~~$833,530,~~$88,550, respectively. For the three and six months ended December 31, ~~2016,~~2022, the Company recorded compensation expense of ~~$682,640~~$39,750 and ~~$1,547,579,~~$79,500, respectively. The ~~compensation expense related to the unvested stock grants as of December 31, 2017 was $1,731,908 which will be recognized during the fiscal years 2018 through 2022.~~
~~NOTE 17 – TAXES~~
~~U.S. Tax Reform~~
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U. S. corporate income tax rates and implementing a territorial tax system. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years.
There are also certain transitional impacts of the Tax Act. As part of the transition to the new territorial tax system, the Tax Act imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. As of December 31, 2017, the provisional undistributed earnings of foreign subsidiaries were $22.8 million which the Company anticipates being able to offset fully with net operating loss carry forwards. In addition, the modified territorial tax system includes a new anti-deferral provision, referred to as global intangible low taxed income (“GILTI”), which subjects certain foreign income to current U.S. tax.
The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries.
In December 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Reform Act. Under SAB 118, companies are able to record a reasonable estimate of the impacts of the Tax Reform Act if oneweighted average grant date fair value is ~~able to be~~ determined and report it as a provisional amount during the measurement period. The measurement period is not to extend beyond one year from the enactment date. Impacts of the Tax Reform Act that a company is not able to make a reasonable estimate for should not be recorded until a reasonable estimate can be made during the measurement period.
~~We currently anticipate finalizing and recording any resulting adjustments~~ by the ~~end of our current fiscal year ending June 30, 2018.~~
~~Page 22~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
~~NOTE 18 – CONTINGENCIES~~
~~On April 7, 2017, Conister Bank Limited filed a complaint in~~Company’s closing stock price on the High Court of Justice Chancery Division, as claim no. HC-2017-001045 against our subsidiary, Virtual Lease Services Limited (“VLS”). The complaint alleges that VLS was in willful default of their agreements with Conister Bank Limited by failing to fulfill its obligations under the agreements with Conister. The complaint alleges damages in excess of £200,000 (approximately $270,270). VLS has responded to the complaint and its expenses are currently covered by available insurance. VLS denies all claims and intends to vigorously defend the action.grant date.
NOTE ~~19 –~~ 15– OPERATING SEGMENTS
The Company has identified three segments for its products and services; North America, Europe and Asia-Pacific. Our 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, related maintenance 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 their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation.
The following table presents a summary of identifiable assets as of December 31, ~~2017~~2023 and June 30, ~~2017:~~2023:
SUMMARY OF IDENTIFIABLE ASSETS
As of As of
December 31, 2023 June 30, 2023
Identifiable assets:
Corporate headquarters $ 1,059,682 $ 878,899
North America 6,409,946 7,344,122
Europe 9,301,556 8,716,656
Asia - Pacific 40,700,402 41,439,733
Consolidated $ 57,471,586 $ 58,379,410
Identifiable assets $ 57,471,586 $ 58,379,410
Page 28

As of December 31, As of June 30,
2017 2017
Identifiable assets:
Corporate headquarters $ 3,308,334 $ 2,922,514
North America 5,513,464 6,717,366
Europe 6,590,233 6,056,514
Asia - Pacific 89,125,306 83,980,936
Consolidated $ 104,537,337 $ 99,677,330
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
The following table presents a summary of ~~investment under equity method as of~~revenue streams by segment for the three months ended December 31, ~~2017~~2023 and ~~June 30, 2017:~~2022:
SUMMARY OF REVENUE STREAMS
As of December 31, As of June 30,
2017 2017
Investment in WRLD3D:
Corporate headquarters $ 1,033,486 $ 1,111,111
Asia - Pacific 2,356,315 1,945,909
Consolidated $ 3,389,801 $ 3,057,020
License fees Subscription and support Services Total License fees Subscription and support Services Total
2023 2022
License fees Subscription and support Services Total License fees Subscription and support Services Total

North America $ - $ 1,168,224 $ 296,997 $ 1,465,221 $ 14,000 $ 1,111,063 $ 472,789 $ 1,597,852
Europe 4,650 874,096 1,593,611 2,472,357 1,884 688,562 2,155,255 2,845,701
Asia-Pacific 2,985,803 4,785,461 3,529,099 11,300,363 - 4,703,044 3,243,761 7,946,805
Total $ 2,990,453 $ 6,827,781 $ 5,419,707 $ 15,237,941 $ 15,884 $ 6,502,669 $ 5,871,805 $ 12,390,358
The following table presents a summary of revenue streams by segment for the six months ended December 31, 2023 and 2022:
License fees Subscription and support Services Total License fees Subscription and support Services Total
2023 2022
License fees Subscription and support Services Total License fees Subscription and support Services Total

North America $ - $ 2,293,038 $ 580,798 $ 2,873,836 $ 28,000 $ 2,176,111 $ 519,029 $ 2,723,140
Europe 8,966 1,588,084 3,437,340 5,034,390 50,239 1,182,105 3,860,692 5,093,036
Asia-Pacific 4,261,936 9,458,902 7,851,058 21,571,896 187,605 9,161,287 7,931,409 17,280,301
Total $ 4,270,902 $ 13,340,024 $ 11,869,196 $ 29,480,122 $ 265,844 $ 12,519,503 $ 12,311,130 $ 25,096,477
Revenue $ 4,270,902 $ 13,340,024 $ 11,869,196 $ 29,480,122 $ 265,844 $ 12,519,503 $ 12,311,130 $ 25,096,477
Page 2329

NETSOL TECHNOLOGIES, INC.
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
~~DECEMBER~~December 31, ~~2017~~2023
~~(UNAUDITED)~~(Unaudited)
The following table presents a summary of operating information for the three and six months ended December 31:
SUMMARY OF OPERATING INFORMATION
2023 2022 2023 2022
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2023 2022 2023 2022
Revenues from unaffiliated customers:
North America $ 1,465,221 $ 1,597,852 $ 2,873,836 $ 2,723,140
Europe 2,472,357 2,845,701 5,034,390 5,093,036
Asia - Pacific 11,300,363 7,946,805 21,571,896 17,280,301
Revenues from unaffiliated 15,237,941 12,390,358 29,480,122 25,096,477
Revenue from affiliated customers
Asia - Pacific - - - -
Revenue from affiliated - - - -
Consolidated $ 15,237,941 $ 12,390,358 $ 29,480,122 $ 25,096,477
Revenue $ 15,237,941 $ 12,390,358 $ 29,480,122 $ 25,096,477

Intercompany revenue
Europe $ 100,100 $ 93,236 $ 200,417 $ 188,961
Asia - Pacific 2,865,277 2,545,098 5,485,596 4,544,876
Eliminated $ 2,965,377 $ 2,638,334 $ 5,686,013 $ 4,733,837
Revenue $ 2,965,377 $ 2,638,334 $ 5,686,013 $ 4,733,837

Net income (loss) after taxes and before non-controlling interest:
Corporate headquarters $ (922,670 ) $ (696,938 ) $ (1,226,392 ) $ 630,262
North America (13,278 ) 105,326 (69,225 ) 86,379
Europe (150,935 ) (163,633 ) (242,819 ) (483,388 )
Asia - Pacific 2,069,698 (1,646,718 ) 2,812,314 (3,073,187 )
Consolidated $ 982,815 $ (2,401,963 ) $ 1,273,878 $ (2,839,934 )
Net income (loss) after taxes and before non-controlling interest $ 982,815 $ (2,401,963 ) $ 1,273,878 $ (2,839,934 )

Depreciation and amortization:
North America $ 407 $ 727 $ 898 $ 1,209
Europe 57,758 66,431 120,659 141,602
Asia - Pacific 370,998 824,342 838,392 1,593,692
Consolidated $ 429,163 $ 891,500 $ 959,949 $ 1,736,503
Depreciation and amortization $ 429,163 $ 891,500 $ 959,949 $ 1,736,503

Interest expense:
Corporate headquarters $ 6,538 $ 5,912 $ 12,659 $ 8,392
North America - - - -
Europe 1,834 2,702 6,476 6,340
Asia - Pacific 281,950 193,749 547,204 309,241
Consolidated $ 290,322 $ 202,363 $ 566,339 $ 323,973
Interest Expense $ 290,322 $ 202,363 $ 566,339 $ 323,973

Income tax expense:
Corporate headquarters $ - $ - $ - $ (44,154 )
North America - - - 44,154
Europe (93,583 ) - (93,583 ) -
Asia - Pacific 243,636 220,056 365,531 413,404
Consolidated $ 150,053 $ 220,056 $ 271,948 $ 413,404
Income tax expense $ 150,053 $ 220,056 $ 271,948 $ 413,404
Page 30

For the Three Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016
Restated Restated
Revenues from unaffiliated customers:
North America $ 1,287,638 $ 1,513,997 $ 2,135,710 $ 3,355,428
Europe 1,661,213 1,298,037 3,109,037 1,888,578
Asia - Pacific 10,258,128 11,530,506 18,464,352 23,267,335
13,206,979 14,342,540 23,709,099 28,511,341
Revenue from affiliated customers
Europe 442,699 115,102 1,043,891 1,467,295
Asia - Pacific 796,757 1,401,144 2,512,221 2,956,619
1,239,456 1,516,246 3,556,112 4,423,914
Consolidated $ 14,446,435 $ 15,858,786 $ 27,265,211 $ 32,935,255

Intercompany revenue
Europe $ 139,228 $ 95,053 $ 241,703 $ 231,180
Asia - Pacific 768,431 1,462,603 1,145,368 1,922,554
Eliminated $ 907,659 $ 1,557,656 $ 1,387,071 $ 2,153,734

Net income (loss) after taxes and before non-controlling interest:
Corporate headquarters $ (1,258,717 ) $ (1,190,559 ) $ (2,296,641 ) $ (2,179,432 )
North America 65,194 (71,134 ) (230,452 ) (266,817 )
Europe 180,655 (698,364 ) 280,045 (1,293,771 )
Asia - Pacific 2,674,870 583,327 3,727,785 2,746,393
Consolidated $ 1,662,002 $ (1,376,730 ) $ 1,480,737 $ (993,627 )
NETSOL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 2023
(Unaudited)
The following table presents a summary of capital expenditures for the six months ended December 31:
SUMMARY OF CAPITAL EXPENDITURES
2023 2022
For the Six Months For the Six Months
Ended December 31, Ended December 31,
2017 2016 2023 2022
Capital expenditures:
North America $ - $ 41,275 $ - $ 4,880
Europe 123,335 273,794 417,104 -
Asia - Pacific 419,788 759,247 153,480 1,247,445
Consolidated $ 543,123 $ 1,074,316 $ 570,584 $ 1,252,325
Capital expenditures $ 570,584 $ 1,252,325
~~Page 24~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
NOTE 2016 – 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
December 31, 2017 Non-Controlling
Interest % Non-Controlling
Interest at
December 31, 2023

NetSol PK 33.83 % $ 12,386,620 32.38 % $ 4,512,908
NetSol-Innovation 49.90 % 1,749,551 32.38 % (335,457 )
VLS, VLSH & VLSIL Combined 49.00 % 407,132
NAMECET 32.38 % (12,125 )
NetSol Thai 0.006 % (79 ) 0.006 % (155 )
OTOZ Thai 5.60 % (25,787 )
OTOZ 5.59 % (64,390 )
Total $ 14,543,224 $ 4,074,994
SUBSIDIARY Non-Controlling Interest % Non-Controlling Interest at
June 30, 2017 Non-Controlling
Interest % Non-Controlling
Interest at
June 30, 2023

NetSol PK 33.80 % $ 12,887,938 32.38 % $ 3,314,659
NetSol-Innovation 49.90 % 1,599,734 32.38 % (223,504 )
VLS, VLHS & VLSIL Combined 49.00 % 311,502
NAMECET 32.38 % (5,384 )
NetSol Thai 0.006 % (92 ) 0.006 % (194 )
OTOZ Thai 5.60 % (23,572 )
OTOZ 5.59 % (86,952 )
Total $ 14,799,082 $ 2,975,053
~~NetSol PK~~NOTE 17– INCOME TAXES
During the six months ended December 31, 2017, employees of NetSol PK exercised 50,000 of options of common stock pursuant to employees exercising stock options and NetSol PK received cash of $7,755 resulting in an increase in non-controlling interest from 33.80% to 33.83%.
~~During the six months ended December 31, 2017, NetSol PK paid a cash dividend of $1,234,991.~~
~~NOTE 21 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS~~
~~During the preparation of the Company’s Form 10-Q~~The current tax provision is based on taxable income for the nine months ended March 31, 2017, misstatements were identified in the previous financial statements relating to the recording of revenue in the proper period. The restated financial statements for the periods affected were disclosed in Note 19 of the Notes to Condensed Consolidated Financial Statement contained in the Company’s Form 10-Q for the nine months ended March 31, 2017.
On December 21, 2015, the Company signed a 10-year contract for a 12-country installation of its NFS Ascent product which included a perpetual license, continued maintenance on the existing product and then maintenance on NFS Ascent upon installation. The Company did not appropriately apply the percentage-of-completion method for this arrangementyear determined in accordance with ~~ASC 605-35. As a result,~~the prevailing law for ~~quarter ended September 30, 2016, license revenue was understated by $1,953,935~~taxation of income. The charge for tax on income is calculated at the current rates of taxation as applicable after considering tax credit and ~~for~~tax rebates available, if any. We are subject to income taxes in the ~~quarter ended December 31, 2016, license revenue was overstated by $1,580,529.~~
~~The Company charges maintenance revenue~~U.S. and numerous foreign jurisdictions. Our effective tax rate is lower than the U.S. statutory rate primarily because of more earnings realized in countries that have lower statutory tax rates. Our effective tax rate in the future will depend on the ~~license value plus any additional customization that~~portion of our profits earned within and outside the ~~customer may require. For one customer,~~United States. Income from the ~~Company did not increase~~export of computer software and its related services developed in Pakistan is exempt from tax through June 30, 2025; however, tax at the ~~maintenance fee for~~applicable rates is charged to the ~~additional customization that was performed during the year. This resulted in an understatement of maintenance~~income from revenue ~~of $120,976 for the quarter ended September 30, 2016 and an overstatement of maintenance revenue of $198,797 for the quarter ended December 31, 2016.~~generated from other than core business activities.
~~The following tables present the restated financial statements for~~During the three and six months ended December 31, ~~2016.~~2023, the Company recorded an income tax provision of $150,053 and $271,948, respectively. During the three and six months ended December 31, 2022, the Company recorded an income tax provision of $220,056 and $413,404, respectively. The tax is derived from non-core business activities generated from NetSol PK.
Page 2531

~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
Balance Sheet
As of December 31, 2016
As Originally Amount of
Presented Restatement As Restated
ASSETS
Current assets:
Cash and cash equivalents $ 9,505,383 $ 9,505,383
Accounts receivable, net of allowance of $495,760 and $492,498 5,840,490 5,840,490
Accounts receivable, net - related party 4,303,380 4,303,380
Revenues in excess of billings 17,646,488 373,406 18,019,894
Revenues in excess of billings - related party 469,030 469,030
Other current assets 2,904,650 2,904,650
Total current assets 40,669,421 373,406 41,042,827
Restricted cash 90,000 90,000
Property and equipment, net 21,873,277 21,873,277
Other assets 2,054,938 2,054,938
Intangible assets, net 18,423,439 18,423,439
Goodwill 9,516,568 9,516,568
Total assets $ 92,627,643 $ 373,406 $ 93,001,049

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 7,373,097 $ 7,373,097
Current portion of loans and obligations under capitalized leases 4,368,930 4,368,930
Unearned revenues 2,806,804 77,821 2,884,625
Common stock to be issued 88,324 88,324
Total current liabilities 14,637,155 77,821 14,714,976
Long term loans and obligations under capitalized leases; less current maturities 501,554 501,554
Total liabilities 15,138,709 77,821 15,216,530
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized; - - -
Common stock, $.01 par value; 14,500,000 shares authorized;
10,993,054 shares issued and 10,958,275 outstanding as of December 31, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016 109,931 109,931
Additional paid-in-capital 123,019,215 123,019,215
Treasury stock (34,779 shares and 27,279 shares) (454,310 ) (454,310 )
Accumulated deficit (40,074,755 ) 196,890 (39,877,865 )
Stock subscription receivable (450,220 ) (450,220 )
Other comprehensive loss (18,628,395 ) (18,628,395 )
Total NetSol stockholders’ equity 63,521,466 196,890 63,718,356
Non-controlling interest 13,967,468 98,695 14,066,163
Total stockholders’ equity 77,488,934 295,585 77,784,519
Total liabilities and stockholders’ equity $ 92,627,643 $ 373,406 $ 93,001,049
~~Page 26~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Three Months For the Six Months
Ended December 31, 2016 Ended December 31, 2016
As Originally Amount of As Originally Amount of
Presented Restatement As Restated Presented Restatement As Restated
Net Revenues:
License fees $ 5,350,086 $ (1,580,529 ) $ 3,769,557 $ 8,849,946 $ 373,406 $ 9,223,352
Maintenance fees 3,787,696 (198,797 ) 3,588,899 7,190,517 (77,821 ) 7,112,696
Services 6,984,084 6,984,084 12,790,801 12,790,801
License fees - related party - - 246,957 246,957
Maintenance fees - related party 51,345 51,345 181,976 181,976
Services - related party 1,464,901 1,464,901 3,379,473 3,379,473
Total net revenues 17,638,112 (1,779,326 ) 15,858,786 32,639,670 295,585 32,935,255

Cost of revenues:
Salaries and consultants 5,979,804 5,979,804 11,873,153 11,873,153
Travel 836,240 836,240 1,548,135 1,548,135
Depreciation and amortization 1,318,764 1,318,764 2,649,636 2,649,636
Other 1,065,727 1,065,727 2,038,065 2,038,065
Total cost of revenues 9,200,535 - 9,200,535 18,108,989 - 18,108,989

Gross profit 8,437,577 (1,779,326 ) 6,658,251 14,530,681 295,585 14,826,266

Operating expenses: ��
Selling and marketing 2,713,478 2,713,478 5,057,516 5,057,516
Depreciation and amortization 271,485 271,485 540,582 540,582
General and administrative 3,933,413 3,933,413 8,552,609 8,552,609
Research and development cost 91,607 91,607 184,539 184,539
Total operating expenses 7,009,983 - 7,009,983 14,335,246 - 14,335,246

Income (loss) from operations 1,427,594 (1,779,326 ) (351,732 ) 195,435 295,585 491,020

Other income and (expenses)
Loss on sale of assets (32,339 ) (32,339 ) (34,742 ) (34,742 )
Interest expense (62,127 ) (62,127 ) (116,602 ) (116,602 )
Interest income 23,416 23,416 53,856 53,856
Loss on foreign currency exchange transactions (621,887 ) (621,887 ) (1,036,783 ) (1,036,783 )
Other income 6,823 6,823 28,383 28,383
Total other income (expenses) (686,114 ) - (686,114 ) (1,105,888 ) - (1,105,888 )

Net income (loss) before income taxes 741,480 (1,779,326 ) (1,037,846 ) (910,453 ) 295,585 (614,868 )
Income tax provision (338,884 ) (338,884 ) (378,759 ) (378,759 )
Net income (loss) from continuing operations 402,596 (1,779,326 ) (1,376,730 ) (1,289,212 ) 295,585 (993,627 )
Non-controlling interest (1,388,272 ) 596,608 (791,664 ) (1,462,183 ) (98,695 ) (1,560,878 )
Net income (loss) attributable to NetSol $ (985,676 ) $ (1,182,718 ) $ (2,168,394 ) $ (2,751,395 ) $ 196,890 $ (2,554,505 )

Net income (loss) per share:

Net income (loss) per common share
Basic $ (0.09 ) $ (0.11 ) $ (0.20 ) $ (0.26 ) $ 0.03 $ (0.24 )
Diluted $ (0.09 ) $ (0.11 ) $ (0.20 ) $ (0.26 ) $ 0.03 $ (0.24 )

Weighted average number of shares outstanding
Basic 10,877,446 10,877,446 10,877,446 10,783,685 10,783,685 10,783,685
Diluted 10,877,446 10,877,446 10,877,446 10,783,685 10,783,685 10,783,685
~~Page 27~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Three Months
Ended December 31, 2016
As Originally Amount of
Presented Restatement As Restated
Net income (loss) $ (985,676 ) $ (1,182,718 ) $ (2,168,394 )
Other comprehensive income (loss):
Translation adjustment (944,837 ) - (944,837 )
Comprehensive income (loss) (1,930,513 ) (1,182,718 ) (3,113,231 )
Comprehensive income (loss) attributable to non-controlling interest (276,575 ) - (276,575 )
Comprehensive income (loss) attributable to NetSol $ (1,653,938 ) $ (1,182,718 ) $ (2,836,656 )
For the Six Months
Ended December 31, 2016
As Originally Amount of
Presented Restatement As Restated
Net income (loss) $ (2,751,395 ) $ 262,469 $ (2,488,926 )
Other comprehensive income (loss):
Translation adjustment 149,237 - 149,237
Comprehensive income (loss) (2,602,158 ) 262,469 (2,339,689 )
Comprehensive income (loss) attributable to non-controlling interest 47,138 - 47,138
Comprehensive income (loss) attributable to NetSol $ (2,649,296 ) $ 262,469 $ (2,386,827 )
~~Page 28~~
~~NETSOL TECHNOLOGIES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~DECEMBER 31, 2017~~
~~(UNAUDITED)~~
For the Six Months
Ended December 31, 2016
As Originally Amount of
Presented Restatement As Restated
Cash flows from operating activities:
Net income (loss) $ (1,289,212 ) $ 295,585 $ (993,627 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 3,190,218 3,190,218
Provision for bad debts 1,026 1,026
Loss on sale of assets 34,742 34,742
Stock issued for services 1,525,775 1,525,775
Fair market value of warrants and stock options granted 21,804 21,804
Changes in operating assets and liabilities:
Accounts receivable 3,678,110 3,678,110
Accounts receivable - related party 829,285 829,285
Revenues in excess of billing (7,219,089 ) (373,406 ) (7,592,495 )
Revenues in excess of billing - related party 285,791 285,791
Other current assets 585,147 585,147
Accounts payable and accrued expenses 334,241 334,241
Unearned revenue (1,908,440 ) 77,821 (1,830,619 )
Net cash used in operating activities 69,398 - 69,398

Cash flows from investing activities:
Purchases of property and equipment (1,074,316 ) (1,074,316 )
Sales of property and equipment 181,087 181,087
Purchase of treasury stock (38,885 ) (38,885 )
Investment (705,555 ) (705,555 )
Net cash used in investing activities (1,637,669 ) - (1,637,669 )

Cash flows from financing activities:
Proceeds from the exercise of stock options and warrants 429,452 429,452
Proceeds from exercise of subsidiary options 18,089 18,089
Dividend paid by subsidiary to Non controlling interest (968,657 ) (968,657 )
Payments on capital lease obligations and loans - net (69,998 ) (69,998 )
Net cash provided by financing activities (591,114 ) - (591,114 )
Effect of exchange rate changes 107,241 107,241
Net decrease in cash and cash equivalents (2,052,144 ) - (2,052,144 )
Cash and cash equivalents, beginning of the period 11,557,527 11,557,527
Cash and cash equivalents, end of period $ 9,505,383 $ - $ 9,505,383
~~Page 29~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist in an understanding of the Company’s financial position and results of operations for the three and six months ended December 31, ~~2017.~~2023. The following discussion should be read in conjunction with the information included within our Annual Report on Form 10-K for the year ended June 30, ~~2017,~~2023, and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Our website is located at www.netsoltech.com, and our investor relations website is located at https://ir.netsoltech.com. The following filings are available through our investor relations website after we file with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders. These filings are also available for download free of charge on our investor relations website. We also provide a link to the section of the SEC’s website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements and other ownership related filings. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website and on social media platforms linked to our corporate website. Investors and others can receive notifications of new information posted on our investor relations website by signing up for e-mail alerts. Further corporate governance information, including our committee charters and code of conduct, is also available on our investor relations website at https://netsoltech.com/about-us. The content of our websites is not intended to be incorporated by reference into this or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
Forward-Looking Information

This report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of its management as well as assumptions made by and information currently available to its management. When used in this report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, and similar expressions as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management’s current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. The Company’s realization of its business aims could be materially and adversely affected by any technical or other problems in, or difficulties with, planned funding and technologies, third party technologies which render the Company’s technologies obsolete, the unavailability of required third party technology licenses on commercially reasonable terms, the loss of key research and development personnel, the inability or failure to recruit and retain qualified research and development personnel, or the adoption of technology standards which are different from technologies around which the Company’s business ultimately is built. The Company does not intend to update these forward-looking statements.
Page 32

Business Overview
NetSol Technologies, Inc. (NasdaqCM: NTWK) is a worldwide provider of IT and enterprise software solutions. We believe that our solutions constitute mission critical applications for clients, as they encapsulate end-to-end business processes, facilitating faster processing and increased transactions.
~~The Company’s~~Our primary ~~source~~sources of ~~revenue is the~~revenues have been licensing, ~~customization,~~subscriptions, modification, enhancement and ~~maintenance~~support of ~~its~~our suite of financial applications, under the brand name ~~NFS™ (NetSol Financial Suite) and~~ NFS Ascent^TM® for leading businesses in the global ~~lease~~finance and ~~finance industry.~~leasing space. With constant innovation being a major part of our DNA, we have enabled NFS Ascent^® deployment on the cloud with several implementations already live and some underway. This shift to the cloud will enable our new customers to opt for a subscription-based pricing model rather than the traditional licensing model.
~~NetSol’s~~Our clients include blue chip organizations, Dow-Jones 30 Industrials, ~~and~~ Fortune 500 manufacturers, ~~and~~ financial institutions, global vehicle manufacturers and enterprise technology providers, all of which are serviced by ~~NetSol~~our strategically placed support and delivery locations around the globe.
Founded in 1997, NetSol is headquartered in ~~Calabasas,~~Los Angeles County, California. While the Company follows a global strategy for sales and delivery of its portfolio of solutions and services, it continues to maintain regional offices in the following locations:
● North America ~~Los Angeles Area~~Encino, California and Austin, Texas
● Europe London Metropolitan area and Horsham, Flintshire
● Asia Pacific Lahore, Karachi, Bangkok, Beijing, Tianjin, Shanghai, Jakarta and Sydney
● Middle East Dubai
~~NetSol’s~~We believe that our strong technology solutions offer our customers a return on their investment and allows us to thrive in a hyper competitive and mature global marketplace. Our solutions are bolstered by our people. We believe that people are the drivers of success; therefore, we invest heavily in our hiring, training and retention of outstanding staff to ensure not only successful selling, but also the ongoing satisfaction of our clients. Taken together, this “selling and attentive servicing” approach creates a distinctive advantage for us and a unique value for our customers. We continue to underpin our proven and effective business model which is a combination of careful cost arbitrage, subject matter expertise, domain experience, scalability and proximity with our global and regional customers.
Our primary offerings include ~~its flagship global solution, NFS™. A robust suite of five software applications, it is an end-to-end solution for~~ the ~~lease and finance industry covering~~following:
NFS Ascent^®
Covering the complete ~~leasing~~finance and ~~financing~~leasing cycle starting from quotation origination through ~~end of~~ contract ~~transactions. The five software applications under NFS™ have been~~settlements, NFS Ascent^® is designed and developed for a highly flexible setting and ~~are capable of dealing~~can deal with multinational, multi-company, multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. ~~Each application is a complete system in itself and can be used independently to address specific sub-domains of the leasing/financing cycle. When used together, they~~The solution fully ~~automate~~automates the entire ~~leasing/financing~~financing/leasing cycle for companies of any size, ~~company,~~ including those with multi-billion-dollar portfolios. NFS Ascent^®empowers financial institutions to effectively manage their complex lending portfolios, enabling them to thrive in hyper-competitive global markets.
~~Page 30~~
NFS ~~Ascent™~~Ascent^® is built on cutting-edge, modern technology that enables auto, equipment and big-ticket finance companies, alongside banks, to run their retail and wholesale finance business with ease. With comprehensive domain coverage and powerful configuration engines, it is well architected to empower finance and leasing companies with a platform that supports their growth in terms of business volume and transactions.
~~NFS Ascent™ is the Company’s next-generation~~Our next generation platform ~~offering~~offers a technologically advanced solution for the ~~auto and equipment~~asset finance and leasing industry. NFS ~~Ascent’s™~~ Ascent’s^®architecture and user interfaces were designed based on ~~the Company’s~~our collective experience with blue chip organizations and global Fortune 500 companies over the past ~~30 years.~~40 years combined with modern UX design concepts. The platform’s framework allows auto captive and asset finance companies to rapidly transform legacy driven technology into a state-of-the-art IT and business process environment.
Page 33
At the core of the NFS ~~Ascent™~~Ascent^® platform, is a lease accounting and contract processing engine, which allows for an array of interest calculation methods, as well as robust accounting ~~of multibillion dollar~~for multi-billion-dollar lease portfolios ~~under~~in compliance with various ~~generally accepted accounting principles (GAAP), as well as international financial reporting standards (IFRS).~~regulatory standards. NFS ~~Ascent™~~Ascent^®, with its distributed and clustered deployment across parallel application and high-volume data servers, enables finance companies to process voluminous data in a hyper speed environment. ~~NFS Ascent™~~
Our premier solution has been developed using the latest tools and technologies and its n-tier SOA architecture allows the system to greatly improve a myriad of areas including, but not limited to, scalability, performance, fault tolerance and security. NFS Ascent^®empowers users with:
● Improvement in overall productivity within the delivery organization:
○ The features of the integrated Business Process Manager, Workflow Engine, Business Rule Engine and Integration Hub provide flexibility to our clients allowing them to configure certain parts of the application themselves rather than requesting customization.
○ The NFS Ascent^® platform and the SOA architecture allow us to develop portals and mobile applications quickly by utilizing our existing services.
○ The n-tier architecture allows us to intelligently distribute processing and eases application maintenance. The loose coupling between various modules and layers reduces the risk of regression in other parts of the system as a result of changes made in one part of the system and follows proven and accepted SOA principles.
● Amplified customer satisfaction:
○ NFS Ascent^® and NFS Digital empower not only the finance company and dealerships, but the end customer as well with self-service digital tools allowing a seamless customer experience throughout the customer journey from origination through contract maturity.
NFS ASCENT^®CONSTITUENT APPLICATIONS
Omni Point of Sale (Omni POS)
A highly agile, easy-to-use, web-based application - also accessible through mobile devices - Ascent’s Omni POS system delivers an intuitive user experience, with features that enable rapid data capture. Information captured at the point of sale can be made available to anyone in an organization at any point in the lifecycle of each transaction.
Contract Management System (CMS)
Ascent’s Contract Management System (CMS) is a powerful, highly agile, functionally rich application for managing and maintaining detailed credit contracts throughout their lifecycle – from pre-activation and activation through customer management, asset financial management, billing and collections, finance and accounting, restructuring and maturity.
Wholesale Finance System (WFS)
The Ascent Wholesale Finance System (WFS) provides a powerful, seamless and efficient system for automating and managing the entire lifecycle of wholesale finance. With floor planning, dealer and inventory financing, it is ideal for a culture of collaboration. Dealers, distributors, partners and anyone in the supply chain are empowered to realize the benefits of financing – and leverage the advantages of real-time business intelligence. The system also supports asset and non-asset-based financing.
Dealer Auditor Access System (DAAS)
DAAS is a web-based solution that can be used in conjunction with WFS or any third-party wholesale finance system. It addresses the needs of dealer, distributor, and auditor access in a wholesale financing arrangement.
Page 34

NFS ~~Digital~~Ascent^®deployed on the cloud
~~NetSol launched~~Our premier, next generation solution NFS ~~digital in 2014. It enables a sales force~~Ascent^® is also available on the cloud. With swift, seamless deployments and easy scalability, it is an extremely adaptive retail and wholesale platform for the global finance and leasing ~~company across different channels such as point~~industry. This cloud-version of ~~sale, field investigation~~NFS Ascent^® is offered via flexible, value-driven subscription-based pricing options without the need to pay any upfront license fees. Clients further benefit from a rapid deployment process and ~~auditing,~~the ability to scale on demand.
NFS Digital
NetSol is the pioneer in the global finance and leasing industry providing a full suite of digital transformation solutions. NFS Digital is a combination of our core strengths, domain, and technology. Our insight into the evolving landscape together with our valuable experience led us to define sound digital transformation strategies and compliment them with smart digital solutions so that our customers always remain competitive and relevant to the dynamic environment. Our digital transformation solutions are extremely robust and can be used with or without our core, next-gen solution (NFS Ascent^®) to effectively augment and enhance our customer’s ecosystem.
■ Self-Point of Sale
Our Self POS portal allows customers to go through the complete buying and financing process online and on their mobile devices including car configuration, generating quotations, and filling out applications. It is the ultimate origination application that enables users to compare, select and configure an asset using a mobile device anywhere, at any time and submit an accompanying financial product application.
■ Mobile Account
mAccount is a powerful, self-service mobile solution. It empowers the dealer with a powerful backend system and allows ~~end customers~~the customer to ~~access~~setup a secure account and view information 24/7 to keep track of contract status, resolve queries and make payments, reducing inbound calls for customer queries and improving turnaround time for repayments.
■ Mobile Point of Sale
The mPOS application is a web and mobile-enabled platform featuring a customizable dashboard along with menu selling, application submission, loan calculator, work queues and detailed reporting. mPOS empowers the dealer to make the origination process quick and seamless, increasing overall productivity and system-wide efficiency.
■ Mobile Dealer
mDealer provides more visibility and control over inventories – with minimal effort. Dealers can view their ~~contract details~~use of floor plan facility, stock status and financial conditions, while entering settlement requests or relocating assets.
■ Mobile Auditor
mAuditor schedules visits, records audit exceptions and tracks assets for higher levels of transparency. It also enables the auditor to conduct audits and submit results in real-time through ~~a self-service mobile application. NFS digital includes mAccount, mPOS, mDealer, mAuditor,~~quick audit processing tools, providing visibility and saving significant time.
■ Mobile Collector
mCollector empowers collections teams to do more, with an easy-to-use interface and intelligent architecture. The tool exponentially increases the productivity of field teams by enabling them to carry out all collection related tasks on the go.
■ Mobile Field Investigator
By using Mobile Field Investigator (mFI)., the applicant has access to powerful features that permit detailed applicant field verifications on the go. The application features a reporting dashboard that displays progress stats, action items and the latest notifications, enabling the client to achieve daily goals while tracking performance.
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~~LeasePak~~
Otoz^TMDigital Auto Retail and Mobility Orchestration
~~In North America, NTA has~~
Otoz^TMprovides a white-label SaaS platform to OEMs, finance companies, dealers, and ~~continues to develop~~start-ups that enables short and long-term on-demand mobility models (subscriptions, rental and car-sharing) and digital retail.
Our turn-key platform helps automotive companies make a move into the ~~LeasePak CMS product. LeasePak streamlines the lease management lifecycle, enabling superior lease~~digital era, addressing a range of customer segments with evolving needs by offering them a seamless, omni-channel, end-to-end car buying and ~~loan portfolio management, flexible financial products (lease or loan terms) and sophisticated financial analysis and management to reducing operating costs and improve profits.~~usage experience. It is scalable from a basic offering to a collection of highly specialized add on modules for systems, portfolios and accrual methods for virtually all sizes and varying complexity of operations. It is part of the vehicle leasing infrastructure at leading Fortune 500 banks and manufacturers,enables both direct-to-consumer transactions as well as traditional dealer models with the option to add peer-to-peer marketplace functionalities for ~~some~~the future of EV pay-per-use and mobility orchestration.
Digital auto-retail is not a one-size-fits-all. Otoz^TM offers a flexible, configurable, and scalable platform along with a proven launch strategy framework for auto companies that intend to launch and grow digital retail and mobility businesses quickly and seamlessly.
Otoz^TMEcosystem
Otoz^TMis built on state-of-the-art technology, offering open Application Programming Interfaces (APIs) and ecosystem partner integrations that are crucial to digital retail and mobility operations including finance and insurance providers, trade-in tools, KYC and fraud detection tools, CRM systems, website providers (Tier 1 – Tier 3), marketing toolkits, inventory feeds, pricing engines, tax engine, payment processors, an insurance marketplace and vehicle delivery logistics providers.
In addition, Otoz^TM is equipped with intelligent lead generation and product analytics capabilities, empowering dealerships with the tools to track customer journeys, personalize customer engagements, and convert qualified leads.
Otoz^TMPlatform
A fully digital, white-label platform for digital auto retail and mobility orchestration that delivers an intuitive and elegant user experience, both online and offline.
Otoz^TMexpands into a comprehensive in-life subscription and rental platform that empowers in-life and end-of-life management of such contracts. The platform’s seamless handling of complex tax rules and contract management processes are compliant with local and state standards for jurisdictions it operates in across the U.S.
Otoz^TMplatform consists of two portals:
● Dealer/Admin Tool
● Customer Portal
Dealer/Admin Tool
■ Account creation
■ Order management work queue
■ User roles and rights
■ Tax configurator
■ Customer KYC reports
■ Vehicle delivery scheduling
■ Payment gateways
■ Inventory management
■ Finance and insurance products feed and prioritization
■ Accessories/add-on management and association
■ Dealer fee management
■ Ecosystem APIs
■ DMS integrations
■ Send referral
■ Deal builder
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Customer Portal
■ Inventory search and selection
■ Multi-lender capabilities
■ Deal builder and personalized pricing for purchase, lease, finance, subscription, and rentals
■ Dealer-Customer-Chat tool
■ Buy finance and insurance products including collision & liability insurance via integrated provider marketplaces
■ Buy accessories
■ License checks (paperless)
■ Vehicle options and finance and insurance products
■ Trade-in valuation
■ Credit application and decision
■ Paperless contracts and e-signing
■ Digital payments
■ Vehicle delivery and pick-up scheduling
AppexNow
NetSol introduced AppexNow - the first marketplace for API-first products specifically for the global credit, finance, and leasing industry. Two products have been launched under the umbrella of the ~~industry’s leading independent lessors.~~AppexNow marketplace until now; i.e., Flex and Hubex. NetSol will introduce and launch further products and services under this marketplace in the future.
AppexNow: Flex
The first product offering from the AppexNow marketplace, Flex is an API-based, ready-to-use calculation engine. It ~~handles every aspect~~is a pure play SaaS product that is cloud-based and can be integrated seamlessly into an organization’s products, services, and ecosystem. The calculation engine intelligently adapts to demand by monitoring usage to maintain reliable and predictable performance at desired costs. It is a one-stop solution that guarantees precise calculations at all stages of the ~~lease or loan~~contract lifecycle including credit application origination, credit adjudication, pricing, documentation, booking, payments, customer service, collections, midterm adjustments, and end-of-term options and asset disposition. through various calculation types.
It is ~~also integrated with important partners~~a comprehensive solution which creates an ecosystem of value across multiple functions, systems and industries to fuel growth and propel businesses into the future by increasing delivery efficiency and product management, centralization through a connected ecosystem resulting in a higher ROI and a larger market share.
Flex proves versatility by covering all the ~~asset-finance ecosystem, such as Vertex Series O.~~calculation aspects ranging from the pricing for the end customer at inception, in-life financial modifications, the re-creation of the repayment plan, termination, amortizations/re-amortizations, among other calculation types. All the calculations are parameter-driven, which helps perform simple, multi-dimensional, or complex calculations based on the needs.
~~LeasePak-SaaS~~AppexNow: Hubex
~~NTA also offers~~Hubex is an API library that enables companies to standardize all their API integration procedures across multiple API services through a single integration. Hubex is NetSol’s second product offering from the LeasePak Software-as-a-Service (“SaaS”) business line, which provides high performance with a reduced total cost of ownership. SaaS offers a proven deployment option whereby customers only require access to the internet to use the software. With an elastic cloud price, revenue stream predictability and improved return on investment for customers, management believes that its SaaS customers will experience the performance, the reliability and the speed usually associated with a highly scalable private cloud. LeasePak-SaaS targets small and mid-sized leasing and finance companies.AppexNow marketplace following Flex.
~~LeaseSoft~~
In addition to traditional lending companies, Hubex can also streamline the operations of dealerships, vendors, and consultants through an API library. With a ready-to-use service, Hubex makes it easy for businesses to seamlessly connect with multiple APIs and achieve their desired outcomes. Pre-integrated services in the Hubex library include, but are not limited to, payment processing, bank account authentication, finance and insurance products, fraud check, KYC service, driver license verification, address validation, vehicle valuation and notification service.
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Professional Services
We offer professional services to organizations in different regions to enable them to meet their business objectives. These services primarily consist of technical consultancy, web development, app development, digital marketing, cloud services, outsourcing and co-sourcing.
Pertaining to our professional services offerings, our highly skilled and experienced professionals include skilled software programmers, well-versed business analysists, competent quality assurance engineers, technical and solution architects, project managers, cloud native developers and architects, mobile/web app developers and automation specialists.
We enable businesses to employ the industry’s best talent to help them develop and refine their technology strategy, innovate, execute their roadmap, and optimize service quality.
Amazon Web Services
We have expanded our footprint in the cloud services domain by offering ~~NFS Ascent™~~services to the ~~European market, NTE~~AWS community. We aim for our cloud services to be well recognized, expanding our reach to relevant prospects. Since AWS is the most comprehensive and highly adopted cloud offering, we are leveraging its power to ensure lower costs, increased agility, a secure environment, and innovative solutions across all domains.
Our AWS customer offerings include: analytics, data pipeline and big data services; application modernization services; database migration and modernization; development operations; managed services; and, information security services.
Artificial Intelligence
A dedicated team is under the leadership of Dr. Ali Ahmed, Chief Data Scientist at NetSol, to develop artificial intelligence and machine learning solutions. With experience in machine learning, scientific computing and computer vision, Dr. Ahmed has ~~some regional offerings, including LeaseSoft~~extensive experience in developing and ~~LoanSoft. LeaseSoft is~~implementing algorithms for industrial solutions in predictive maintenance.
Our AI team seeks to deploy AI solutions leveraging cutting-edge technologies to enable clients to optimize production, decrease downtime and provide a full lifecycle lease and finance system aimed predominantly at the UK funder market, including modules to support web portals and an electronic data interchange manager to facilitate integration between funders and introducers. LoanSoft is similar to LeaseSoft, but optimized for the consumer loan market.holistic view of their business processes.
Highlights
Listed below are a few of NetSol’s ~~major successes achieved in~~highlights for the ~~six months~~quarter ended December 31, ~~2017:~~2023:
● ~~We amended the 12 countyNFSAscent™~~The Company contracted with an auto captive finance company of a renowned US auto manufacturer based in China. This contract ~~securing €7.7~~is expected to generate approximately $12 million ~~Euros (approximately $9.3 million) in future revenues in addition to what was previously projected from the customer. The revenue will be recognized~~ over the ~~contract term as the support services are performed.~~next five years.
● ~~Pursuant to the 12 countryNFSAscent™ contract, we successfully implemented the Loan Origination System and the Wholesale Financial System in Thailand and Korea, respectively.~~
● ~~Pursuant~~The Company implemented modifications requested by several of its existing customers across multiple geographies to generate over $1.7 million in revenues.
● DFS went live in Taiwan with the ~~12 country~~Company’s NFS~~Ascent™ contract, we delivered~~ retail product.
● Charles & Dean Finance was onboarded on Flex, and Haydock, an existing Flex customer, purchased additional products within our ApexNow solution.
● The Company hired and appointed Mr. Erik Wagner as its Chief Marketing Officer. Mr Wagner is a seasoned professional and brings diversified experience of over sixteen years in the ~~first major release~~field of ~~NFS Ascent™ to China.~~marketing with a special focus on the technology sector across different regions of the globe.
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● An increase in software modification requests from some of our existing customers spread across the various regions contributed reasonably to the revenues for the quarter. A trend which is believed will be continued in the following quarters.
● We signed a chargeable proof of concept agreement with one of the oldest and largest banks in Australia. The proof of concept project will add to our revenues and assist us in making further progress in the selection process for our NFS Ascent™ product.
● ~~Mizhou Balimore, a Japanese bank in Indonesia, went live with the first phase of its NFS Ascent™ digital solution.~~
● Our existing customer, an auto finance company of a leading bank in Indonesia, kicked off its leasing project. We believe that this is likely to help increase revenues in the following quarters of the current fiscal year. This kick off has further strengthened our relationship with this Indonesian business partner paving the way for further success in the market. Additionally, all the branches of the same business partner successfully went live with NFS Ascent™ during the first quarter of the current fiscal year culminating into a maturing and long-standing delivery commitment.
● NFS Ascent™ and Ascent Digital continue to generate interest across all major regions and industries as some significant new prospects have come through the pipeline, further strengthening projections and forecasts. Revenue could also be boosted as customization requests grow in addition to new business volume.
Our success, in the near term, will depend, in large part, on the Company’s ability to continue to grow revenues and improve profits, adequately capitalize for growth in various markets and verticals, make progress in the North American and European markets and, continue to streamline sales and marketing efforts in every market we operate. However, management’s outlook for the continuing operations, which has been consolidated and has been streamlined, remains optimistic.
Management has identified the following material trends affecting NetSol.
Positive trends:
● ~~Improving U.S. economy generally,~~According to PR Newswire, December 14, 2023, and ~~particularly~~the S&P Global Mobility, new vehicles sales globally are expected to reach 86 million units in 2023 for an 8.9% increase over 2022 and forecasts 2024 auto ~~and banking markets.~~sales at 88.3 million for a 2.8% increase over 2023.
● ~~According~~
● U.S. automotive sales volumes are expected to ~~Automotive World December 2017 publication,global demand~~reach approximately 15.5 million units, an estimated increase of 9% from the projected 2022 levels, and 2024 sales are expected to reach 15.9 million for ~~light weight trucks~~an estimated increase of 2% compared to 2023.
● The U.S. inflation rate ended at 3.4% for 2023. (CNN Business, January 11, 2024)
● The U.S. market remains strong and resilient for NetSol to continue investing in building local teams for its core offerings.
● The Chinese car market is expected to ~~reach~~maintain its position as the world’s largest and fastest growing, projecting 10% sales growth to 25.5 million units, with electric vehicles (EVs) representing nearly 35% of new sales. Government incentives, reduced car taxes, and preferential financing rates contributed to an ~~all-time high~~8.8% increase in ~~2018.~~Chinese auto sales in the first half of 2023, with total vehicle sales, including trucks and buses, rising by 9.8% to 13.2 million.
● ~~Total industry sales of more than 20 million vehicles annually by 2018, according to John Murphy, an analyst for Bank of America Merrill Lynch annual industry outlook.~~
● ~~Robust Chinese markets as asset based leasing and finance sector are far from maturity levels.~~
● ~~Latin American markets, primarily in Mexico, remain largely untapped.~~
● Pakistan economy growth in gross domestic product reached 4.7% in 2016, according to the Pakistan Bureau of Statistics; and improved credit ratings by Bloomberg, S&P, Moody’s and Forbes Pakistan security and geopolitical environment has improved.
● The China ~~investment or CPEC (China~~ Pakistan Economic ~~Corridor)~~Corridor (CPEC) investment, initiated by China, has exceeded ~~$50~~$65 billion investment, from the originally planned $46 billion, in Pakistan on energy and infrastructure ~~projects.~~sectors. Last June, China authorized a new $2.3 billion loan at a discounted rate to Pakistan as a short-term loan.
● ~~New emerging markets~~
● The overall size of the mobility market in the Europe and ~~IT destinations~~the United States is projected to increase over $425 billion combined, by 2035 or a compound CAGR of 5% from 2022. (Deloitte Global Automotive Mobility Market Simulation Tool)
● The global automotive finance market accounted for $245 billion in ~~Thailand, Malaysia, Indonesia,~~2022 and is expected to more than double by 2035 at a CAGR of 7.4% according to Precedence Research.
● The Russell Index finished 2023 with a 15.1% gain after falling 21.6% in 2022. (CBS News December 29, 2023)
● The real gross domestic product (GDP) for the US increased at an annual rate of 3.3% in the fourth quarter of 2023 according to the advance estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%. (Bureau of Economic Analysis - January 25, 2024)
Negative trends:
● The conflict in Gaza has disrupted the entire Middle East region since October 7, 2023. This has created uncertainty and has affected the economies of the neighboring nations.
● The European Union Real GDP growth is at 0.7% annual growth rate per the World Economic Report October, 2023.
● General economic conditions in our geographic markets; inflation, geopolitical tensions, including trade wars, tariffs and/or sanctions in geographic areas; and, global conflicts or disasters that impact the global economy or one or more sectors of the global economy.
● A global recession fear impacts the future expansions and budgets in every country and every sector. The World Bank forecasts that global growth will slow to 1.7% in 2023, down from 3% forecasted last June.
● Continued interest rate increases by the U.S. Federal Reserve Board in 2023 restricting buying power for consumers.
● Political, monetary, and economic challenges and higher inflation rate than other regional countries impacting Pakistan exports.
● Inflation and higher interest rates globally have greatly increased the cost of doing business, including salaries and benefits worldwide, affecting profitability.
● War and hostility between Russia and Ukraine continue to foster global economic uncertainty.
● Working from the office might not return to pre-pandemic levels which may affect employee collaboration potentially lessening efficiency.
● The Pakistan political and economic environment will likely remain unsteady until new elections schedule on February 8, 2024.
● While the US-China bilateral summit exceeded expectations, the objective of the summit was risk management. Continued trade tensions between the U.S. and China are causing some American companies to pull out of China and ~~Australia.~~
● ~~Continued interest from Fortune 500 multinational auto captives and global companies in NetSol Ascent™~~move their supply chain elsewhere. (Business Insider, Aug. 28, 2023; Bookings, January 12, 2024).
● ~~Continuing interest from existing clients in the NFS™ legacy systems in emerging and developing markets.~~
● ~~Growing demand and traction for upgrading to NFS Ascent™ by existing tier one auto captive clients.~~
● ~~Increased visits to NetSol PK by senior executives of existing clients and potential new customers.~~
~~Negative trends:~~
● ~~Continued Global terrorism and extremism threats in European countries.~~
● ~~Geopolitical unrest in the Middle East and potential terrorism and the disruption risk it creates.~~
● ~~Restricted liquidity and financial burden due to tighter internal processes and limited budgets might cause delays in the receivables from some clients.~~
● The threats of conflict between in the Middle Eastern countries could potentially create volatility in oil prices, causing readjustments of corporate budgets and consumer spending slowing global auto sales.
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CHANGES IN FINANCIAL CONDITION
Quarter Ended December 31, ~~2017 compared~~2023 Compared to the Quarter Ended December 31, ~~2016~~2022
The following table sets forth the items in our unaudited condensed consolidated statement of operations for the ~~quarter~~three months ended December 31, ~~2017~~2023 and ~~2016~~2022 as a percentage of revenues.
For the Three Months For the Three Months
Ended December 31, Ended December 31,
2017 %
2016
Restated
% 2023 % 2022 %
Net Revenues:
License fees $ 235,932 1.63 % $ 3,769,557 23.77 % $ 2,990,453 19.6 % $ 15,884 0.1 %
Maintenance fees 3,568,448 24.70 % 3,588,899 22.63 %
Subscription and support 6,827,781 44.8 % 6,502,669 52.5 %
Services 9,087,191 62.90 % 6,619,158 41.74 % 5,419,707 35.6 % 5,871,805 47.4 %
License fees - related party 217,105 1.50 % - 0.00 %
Maintenance fees - related party 101,251 0.70 % 51,345 0.32 %
Services - related party 1,236,508 8.56 % 1,829,827 11.54 %
Total net revenues 14,446,435 100.00 % 15,858,786 100.00 % 15,237,941 100.0 % 12,390,358 100.0 %

Cost of revenues:
Salaries and consultants 5,362,092 37.12 % 5,979,804 37.71 %
Travel 287,901 1.99 % 836,240 5.27 %
Depreciation and amortization 1,168,103 8.09 % 1,318,764 8.32 %
Other 939,986 6.51 % 1,065,727 6.72 %
Total cost of revenues 7,758,082 53.70 % 9,200,535 58.02 %

Cost of revenues 8,062,204 52.9 % 9,247,895 74.6 %
Gross profit 6,688,353 46.30 % 6,658,251 41.98 % 7,175,737 47.1 % 3,142,463 25.4 %
Operating expenses:
Selling and marketing 1,932,140 13.37 % 2,713,478 17.11 %
Depreciation and amortization 222,785 1.54 % 271,485 1.71 %
Provision for bad debts - 0.00 % 1,026 0.01 %
General and administrative 4,026,706 27.87 % 3,932,387 24.80 %
Selling, general and administrative 5,807,494 38.1 % 5,716,073 46.1 %
Research and development cost 189,891 1.31 % 91,607 0.58 % 341,411 2.2 % 472,904 3.8 %
Total operating expenses 6,371,522 44.10 % 7,009,983 44.20 % 6,148,905 40.4 % 6,188,977 49.9 %

Income (loss) from operations 316,831 2.19 % (351,732 ) -2.22 % 1,026,832 6.7 % (3,046,514 ) -24.6 %
Other income and (expenses)
Loss on sale of assets (8,939 ) -0.06 % (32,339 ) -0.20 %
Interest expense (109,675 ) -0.76 % (62,127 ) -0.39 % (290,322 ) -1.9 % (202,363 ) -1.6 %
Interest income 115,570 0.80 % 23,416 0.15 % 468,280 3.1 % 309,906 2.5 %
Gain (loss) on foreign currency exchange transactions 1,737,967 12.03 % (621,887 ) -3.92 % (14,617 ) -0.1 % 657,223 5.3 %
Share of net loss from equity investment (203,336 ) -1.41 % - 0.00 % - 0.0 % 5,133 0.0 %
Other income 14,511 0.10 % 6,823 0.04 %
Other income (expense) (57,305 ) -0.4 % 94,708 0.8 %
Total other income (expenses) 1,546,098 10.70 % (686,114 ) -4.33 % 106,036 0.7 % 864,607 7.0 %

Net income (loss) before income taxes 1,862,929 12.90 % (1,037,846 ) -6.54 % 1,132,868 7.4 % (2,181,907 ) -17.6 %
Income tax provision (200,927 ) -1.39 % (338,884 ) -2.14 % (150,053 ) -1.0 % (220,056 ) -1.8 %
Net income (loss) 1,662,002 11.50 % (1,376,730 ) -8.68 % 982,815 6.4 % (2,401,963 ) -19.4 %
Non-controlling interest (1,027,581 ) -7.11 % (791,664 ) -4.99 % (574,499 ) -3.8 % 309,037 2.5 %
Net income (loss) attributable to NetSol $ 634,421 4.39 % $ (2,168,394 ) -13.67 % $ 408,316 2.7 % $ (2,092,926 ) -16.9 %

Net income (loss) per share:
Net income (loss) per common share
Basic $ 0.04 $ (0.19 )
Diluted $ 0.04 $ (0.19 )

Weighted average number of shares outstanding
Basic 11,372,819 11,270,199
Diluted 11,372,819 11,270,199
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A significant portion of our business is conducted in currencies other than the U.S. dollar. We operate in several geographical regions as described in Note 1915 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening 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. dollar. 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. dollar. 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.
Favorable Favorable Total Favorable Favorable Total
For the Three Months (Unfavorable) (Unfavorable) Favorable (Unfavorable) (Unfavorable) Favorable
Ended December 31, Change in Change due to (Unfavorable) For the Three Months Change in Change due to (Unfavorable)
2016 Constant Currency Change as Ended December 31, Constant Currency Change as
2017 % Restated % Currency Fluctuation Reported 2023 % 2022 % Currency Fluctuation Reported

Net Revenues: 14,446,435 100.00 % 15,858,786 100.00 % (1,506,082 ) 93,731 (1,412,351 ) $ 15,237,941 100.0 % $ 12,390,358 100.0 % $ 2,878,896 $ (31,313 ) $ 2,847,583

Cost of revenues: 7,758,082 53.70 % 9,200,535 58.02 % 1,473,242 (30,789 ) 1,442,453 8,062,204 52.9 % 9,247,895 74.6 % (105,865 ) 1,291,556 1,185,691

Gross profit 6,688,353 46.30 % 6,658,251 41.98 % (32,840 ) 62,942 30,102 7,175,737 47.1 % 3,142,463 25.4 % 2,773,031 1,260,243 4,033,274

Operating expenses: 6,371,522 44.10 % 7,009,983 44.20 % 730,914 (92,453 ) 638,461 6,148,905 40.4 % 6,188,977 49.9 % (521,827 ) 561,899 40,072

Income (loss) from operations 316,831 2.19 % (351,732 ) -2.22 % 698,074 (29,511 ) 668,563 $ 1,026,832 6.7 % $ (3,046,514 ) -24.6 % $ 2,251,204 $ 1,822,142 $ 4,073,346
Net revenues for the ~~quarter~~three months ended December 31, ~~2017~~2023 and ~~2016~~2022 are broken out among the segments as follows:
2023 2022
2017 2016 Revenue % Revenue %
Revenue % Revenue
Restated %
North America $ 1,287,638 8.91 % $ 1,513,997 9.55 % $ 1,465,221 9.6 % $ 1,597,852 12.9 %
Europe 2,103,912 14.56 % 1,413,139 8.91 % 2,472,357 16.2 % 2,845,701 23.0 %
Asia-Pacific 11,054,885 76.52 % 12,931,650 81.54 % 11,300,363 74.2 % 7,946,805 64.1 %
Total $ 14,446,435 100.00 % $ 15,858,786 100.00 % $ 15,237,941 100.0 % $ 12,390,358 100.0 %

Revenues
License fees
License fees for the three months ended December 31, ~~2017~~2023 were ~~$235,932~~$2,990,453 compared to ~~$3,769,557~~$15,884 for the three months ended December 31, ~~2016~~2022 reflecting ~~a decrease~~an increase of ~~$3,533,625~~$2,974,569 with ~~a change~~an increase in constant currency of $3,556,109. The decrease in license revenue for the fiscal three months ended December 31, 2017 compared to 2016 is primarily due to the decrease of license revenue recognized for the 12 country NFS Ascent™ contract.$3,037,196. During ~~the current quarter, we had license revenues through sales of our regional offerings in the U.S. and the U.K.~~
~~Page 34~~
~~License fees – related party~~
~~License fees from related party for~~ the three months ended December 31, ~~2017 were $217,105 compared~~2023, we recognized approximately $2,800,000 related to ~~$Nil for~~ the ~~three months ended December 31, 2016 reflecting an increase~~sale of ~~$217,105 with~~our NFS Ascent® CMS software to a ~~change~~renowned US auto manufacturer based in ~~constant currency of $210,400.~~China.
Page 41

~~Maintenance fees~~
Subscription and support
~~Maintenance~~
Subscription and support fees for the three months ended December 31, ~~2017~~2023 were ~~$3,568,448~~$6,827,781 compared to ~~$3,588,899~~$6,502,669 for the three months ended December 31, ~~2016~~2022 reflecting ~~a decrease~~an increase of ~~$20,451~~$325,112 with ~~a change~~an increase in constant currency of ~~$51,595. Maintenance~~$293,133. Subscription and support fees begin once a customer has “gone live” with our product. ~~The decrease was due to some customers not renewing their maintenance agreements. We~~Subscription and support fees are recurring in nature, and we anticipate ~~maintenance~~these fees to gradually increase as we implement both our NFS legacy ~~product~~products and NFS ~~Ascent™~~Ascent^®.
~~Maintenance fees – related party~~Services
Maintenance fees from related party for the three months ended December 31, 2017 were $101,251 compared to $51,345 for the three months ended December 31, 2016 reflecting an increase of $49,906 with a change in constant currency of $44,670. The decrease was due to the fluctuation in usage of active users.
~~Services~~
Services income for the three months ended December 31, ~~2017~~2023 was ~~$9,087,191~~$5,419,707 compared to ~~$6,619,158~~$5,871,805 for the three months ended December 31, ~~2016~~2022 reflecting ~~an increase~~a decrease of ~~$2,468,033~~$452,098 with a ~~change~~decrease in constant currency of ~~$2,451,053.~~$470,501. The ~~services revenue increase was~~decrease is due to ~~an increase~~the decrease in ~~services revenue~~fees associated with ~~new implementations and change requests. Services revenue is derived from services provided to both~~ current ~~customers as well as services provided to new customers as part of the implementation process.~~implementations.
~~Services – related party~~Gross Profit
~~Services income from related party~~The gross profit was $7,175,737, for the three months ended December 31, ~~2017 was $1,236,508~~2023 compared ~~to $1,829,827~~with $3,142.463 for the three months ended December 31, 2016 reflecting a decrease of $593,319 with a change in constant currency of $604,501. The decrease in related party service revenue is due to a decrease in revenue from our joint venture with 1insurer.
~~Gross Profit~~
~~The gross profit was $6,688,353, for the three months ended December 31, 2017 as compared with $6,658,251 for the three months ended December 31, 2016.~~2022. This is an increase of ~~$30,102~~$4,033,274 with ~~a decrease~~an increase in constant currency of ~~$32,840.~~$2,773,031. The gross profit percentage for the three months ended December 31, ~~2017~~2023 also increased to ~~46.30%~~47.1% from ~~41.98%~~25.4% for the three months ended December 31, ~~2016.~~2022. The cost of sales was ~~$7,758,082~~$8,062,204 for the three months ended December 31, ~~2017~~2023 compared to ~~$9,200,535~~$9,247,895 for the three months ended December 31, ~~2016~~2022 for a decrease of ~~$1,442,453~~$1,185,691 and on a constant currency basis ~~a decrease~~an increase of ~~$1,473,242.~~$105,865. As a percentage of sales, cost of sales decreased from ~~58.02%~~74.6% for the three months ended December 31, ~~2016~~2022 to ~~53.70%~~52.9% for the three months ended December 31, ~~2017.~~2023.
Salaries and consultant fees decreased by ~~$617,712~~$1,038,809 from ~~$5,979,804~~$6,942,171 for the three months ended December 31, ~~2016~~2022 to ~~$5,362,092~~$5,903,362 for the three months ended December 31, ~~2017~~2023 and on a constant currency basis decreased ~~$629,888. The decrease in salaries and consultant fees is due to the right sizing of technical employees at key locations including Pakistan, Thailand, China, UK and North America.~~by $128,762. As a percentage of sales, salaries and consultant expense decreased from ~~37.71%~~56.0% for the three months ended December 31, ~~2016~~2022 to ~~37.12%~~38.7% for the three months ended December 31, ~~2017.~~2023.
~~Depreciation and amortization expense decreased to $1,168,103 compared to $1,318,764~~Travel expenses were $748,072 for the three months ended December 31, ~~2016~~2023 compared to $635,298 for the three months ended December 31, 2022 for an increase of $112,774 with an increase in constant currency of $229,251. The increase in travel expense is due to the increase in travel as countries have been lifting travel restrictions. As a percentage of sales, travel expense decreased from 5.1% for the three months ended December 31, 2022 to 4.9% for the three months ended December 31, 2023.
Depreciation and amortization expense decreased to $264,374 compared to $693,278 for the three months ended December 31, 2022 or a decrease of ~~$150,661~~$428,904 and on a constant currency basis a decrease of ~~$143,439. Depreciation and~~$361,721. The decrease is primarily attributed to the full amortization ~~expense decreased as some products became fully amortized.~~of capitalized software costs in the quarter ending December 31, 2023.
~~Page 35~~
~~Operating Expenses~~
~~Operating expenses were $6,371,522~~Other costs increased to $1,146,396 for the three months ended December 31, ~~2017~~2023 compared to ~~$7,009,983,~~$977,148 for the three months ended December 31, ~~2016~~2022 or an increase of $169,248 and on a constant currency basis an increase of $367,097.
Operating Expenses
Operating expenses were $6,148,905 for the three months ended December 31, 2023 compared to $6,188,977, for the three months ended December 31, 2022 for a decrease of ~~9.11% or $638,461~~$40,072 and on a constant currency basis an increase of $521,827. As a percentage of sales, it decreased from 50.0% to 40.4%. The increase in operating expenses on a constant currency basis was primarily due to increases in salaries and wages, professional services, and other general and administrative expenses, offset by a decrease in selling and marketing expenses.
Selling expenses were $1,784,510 for the three months ended December 31, 2023 compared to $2,007,462, for the three months ended December 31, 2022 for a decrease of $222,952 and on a constant currency basis a decrease of 10.43% or $730,914. As a percentage of sales, it decreased from 44.2% to 44.1%. The decrease in operating expenses was primarily due to decreases in selling and marketing expenses, salaries and wages, and depreciation.$52,890.
Page 42

Selling and marketing expenses decreased by $781,338 or 28.79% and on a constant currency basis a decrease of $816,557 or 30.09%. The decrease in selling and marketing expenses is due to reduction in staff, decrease in our salaries and commissions, travel expenses, and business development costs to market and sell NFS Ascent™ globally.
General and administrative expenses were ~~$4,026,706~~$3,858,195 for the three months ended December 31, ~~2017~~2023 compared to ~~$3,933,413 at~~$3,510,389 for the three months ended December 31, ~~2016~~2022 or an increase of ~~$93,293 or 2.37%~~$347,806 and on a constant currency basis an increase of ~~$42,545 or 1.08%.~~$629,121. During the three months ended December 31, ~~2017,~~2023, salaries ~~decreased~~increased by approximately ~~$155,400 or $174,016 on a constant currency basis due to the decrease in the number of employees, minimal annual raises, less share grants~~$154,192 and ~~options, offset by an increase in professional services of approximately $73,308 or $69,760~~increased $350,096 on a constant currency basis, and other general and administrative expenses ofincreased approximately ~~$176,411~~$193,6124 or ~~$147,827~~increased by $279,025 on a constant currency basis.
~~Income/Loss from Operations~~
~~Income from operations~~Research and development cost was ~~$316,831~~$341,411 for the three months ended December 31, ~~2017~~2023 compared to ~~loss of $351,732~~$472,904, for the three months ended December 31, ~~2016.~~2022 for a decrease of $131,493 and on a constant currency basis a decrease of $44,230.
Income/Loss from Operations
Income from operations was $1,026,832 for the three months ended December 31, 2023 compared to a loss of $3,046,514 for the three months ended December 31, 2022. This represents an increase in income from operations of ~~$668,563~~$4,073,346 with an increase in income from operations of ~~$698,074~~$2,251,204 on a constant currency basis for the three months ended December 31, ~~2017~~2023 compared with the three months ended December 31, ~~2016.~~2022. As a percentage of sales, income from operations was ~~2.19%~~6.7% for the three months ended December 31, ~~2017~~2023 compared to a loss of ~~2.22%~~24.6% for the three months ended December 31, ~~2016.~~2022.
Other ~~income~~Income and ~~expense~~Expense
Other income was ~~$1,546,098~~$106,036 for the three months ended December 31, ~~2017~~2023 compared ~~with a loss of $686,114~~to $864,607 for the three months ended December 31, ~~2016.~~2022. This represents ~~an increase~~a decrease of ~~$2,232,212~~$758,571 with ~~an increase~~a decrease of ~~$2,243,765~~$738,519 on a constant currency basis. The ~~increase~~decrease is primarily due to the foreign currency exchange transactions. The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the ~~Pakistan Rupee (“PKR”)~~PKR compared to the U.S. dollar and the Euro. ~~In December 2017, Pakistan’s central bank withdrew its support of the PKR, which caused the PKR to drop in value.~~ During the three months ended December 31, ~~2017,~~2023, we recognized a ~~gain~~loss of ~~$1,737,967~~$14,617 in foreign currency exchange transactions compared to a ~~loss~~gain of ~~$621,887~~$657,223 for the three months ended December 31, ~~2016.~~2022. During the three months ended December 31, ~~2017,~~2023, the value of the U.S. dollar decreased 2.8% and the Euro increased ~~4.30% and 5.76%~~1.5%, ~~respectively,~~ compared to the PKR. During the three months ended December 31, ~~2016,~~2022, the value of the U.S. dollar ~~increased 1.08%~~decreased 0.7% and the Euro ~~decreased 5.14%~~increased 8.5%, compared to the PKR.
Non-controlling Interest
For the three months ended December 31, ~~2017 and 2016,~~2023, the net income attributable to non-controlling interest was ~~$1,027,581 and $791,664, respectively.~~$574,499, compared to a net loss attributable to non-controlling interest of $309,037 for the three months ended December 31, 2022. The increase in non-controlling interest is primarily due to the increase in net income of NetSol ~~PK offset by a decrease in net~~PK.
Net income ~~of NetSol Innovation.~~
~~Net Income / Loss~~(loss) attributable to NetSol
~~Net~~The net income was ~~$634,421~~$408,316 for the three months ended December 31, ~~2017~~2023 compared to a net loss of ~~$2,168,394~~$2,092,926 for the three months ended December 31, ~~2016.~~2022. This is an increase in net income of ~~$2,802,815~~$2,501,242 with an increase of ~~$2,843,590~~$1,191,078 on a constant currency basis, compared to the prior year. For the three months ended December 31, ~~2017,~~2023, net income per share was ~~$0.06~~$0.04 for basic and diluted shares compared to anet loss per share of ~~$0.20~~$0.19 for basic and diluted shares for the three months ended December 31, ~~2016.~~2022.
Page 3643

Six Months Ended December 31, ~~2017 compared~~2023 Compared to the Six Months Ended December 31, ~~2016~~2022
The following table sets forth the items in our unaudited condensed consolidated statement of operations for the six months ended December 31, ~~2017~~2023 and ~~2016~~2022 as a percentage of revenues.
For the Six Months
Ended December 31, For the Six Months
2016 Ended December 31,
2017 % Restated % 2023 % 2022 %
Net Revenues:
License fees $ 561,998 2.06 % $ 9,223,352 28.00 % $ 4,270,902 14.5 % $ 265,844 1.1 %
Maintenance fees 7,042,173 25.83 % 7,112,696 21.60 %
Subscription and support 13,340,024 45.3 % 12,519,503 49.9 %
Services 16,104,928 59.07 % 12,175,293 36.97 % 11,869,196 40.3 % 12,311,130 49.1 %
License fees - related party 261,513 0.96 % 246,957 0.75 %
Maintenance fees - related party 204,214 0.75 % 181,976 0.55 %
Services - related party 3,090,385 11.33 % 3,994,981 12.13 %
Total net revenues 27,265,211 100.00 % 32,935,255 100.00 % 29,480,122 100.0 % 25,096,477 100.0 %

Cost of revenues:
Salaries and consultants 10,826,252 39.71 % 11,873,153 36.05 %
Travel 801,013 2.94 % 1,548,135 4.70 %
Depreciation and amortization 2,341,216 8.59 % 2,649,636 8.04 %
Other 1,796,568 6.59 % 2,038,065 6.19 %
Total cost of revenues 15,765,049 57.82 % 18,108,989 54.98 %

Cost of revenues 16,142,368 54.8 % 17,702,017 70.5 %
Gross profit 11,500,162 42.18 % 14,826,266 45.02 % 13,337,754 45.2 % 7,394,460 29.5 %
Operating expenses:
Selling and marketing 3,643,436 13.36 % 5,057,516 15.36 %
Depreciation and amortization 468,658 1.72 % 540,582 1.64 %
Provision for bad debts - 0.00 % 1,026 0.00 %
General and administrative 7,814,264 28.66 % 8,551,583 25.96 %
Selling, general and administrative 11,240,463 38.1 % 11,394,634 45.4 %
Research and development cost 374,976 1.38 % 184,539 0.56 % 719,830 2.4 % 942,531 3.8 %
Total operating expenses 12,301,334 45.12 % 14,335,246 43.53 % 11,960,293 40.6 % 12,337,165 49.2 %

Income (loss) from operations (801,172 ) -2.94 % 491,020 1.49 % 1,377,461 4.7 % (4,942,705 ) -19.7 %
Other income and (expenses)
Loss on sale of assets (16,069 ) -0.06 % (34,742 ) -0.11 %
Interest expense (227,746 ) -0.84 % (116,602 ) -0.35 % (566,339 ) -1.9 % (323,973 ) -1.3 %
Interest income 252,481 0.93 % 53,856 0.16 % 882,998 3.0 % 741,763 3.0 %
Gain (loss) on foreign currency exchange transactions 2,754,329 10.10 % (1,036,783 ) -3.15 % (148,870 ) -0.5 % 1,972,928 7.9 %
Share of net loss from equity investment (270,898 ) -0.99 % - 0.00 % - 0.0 % 5,133 0.0 %
Other income 15,610 0.06 % 28,383 0.09 %
Other income (expense) 576 0.0 % 120,324 0.5 %
Total other income (expenses) 2,507,707 9.20 % (1,105,888 ) -3.36 % 168,365 0.6 % 2,516,175 10.0 %

Net income (loss) before income taxes 1,706,535 6.26 % (614,868 ) -1.87 % 1,545,826 5.2 % (2,426,530 ) -9.7 %
Income tax provision (225,798 ) -0.83 % (378,759 ) -1.15 % (271,948 ) -0.9 % (413,404 ) -1.6 %
Net income (loss) 1,480,737 5.43 % (993,627 ) -3.02 % 1,273,878 4.3 % (2,839,934 ) -11.3 %
Non-controlling interest (1,215,814 ) -4.46 % (1,560,878 ) -4.74 % (834,672 ) -2.8 % 126,279 0.5 %
Net income (loss) attributable to NetSol $ 264,923 0.97 % $ (2,554,505 ) -7.76 % $ 439,206 1.5 % $ (2,713,655 ) -10.8 %

Net income (loss) per share:
Net income (loss) per common share
Basic $ 0.04 $ (0.24 )
Diluted $ 0.04 $ (0.24 )

Weighted average number of shares outstanding
Basic 11,359,338 11,263,869
Diluted 11,359,338 11,263,869
Page 3744

A significant portion of our business is conducted in currencies other than the U.S. dollar. We operate in several geographical regions as described in Note 1915 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening 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. dollar. 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. dollar. 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.
Favorable Favorable Total Favorable Favorable Total
For the Six Months (Unfavorable) (Unfavorable) Favorable (Unfavorable) (Unfavorable) Favorable
Ended December 31, Change in Change due to (Unfavorable) For the Six Months Change in Change due to (Unfavorable)
2016 Constant Currency Change as Ended December 31, Constant Currency Change as
2017 % Restated % Currency Fluctuation Reported 2023 % 2022 % Currency Fluctuation Reported

Net Revenues: 27,265,211 100.00 % 32,935,255 100.00 % (5,650,244 ) (19,800 ) (5,670,044 ) $ 29,480,122 100.0 % $ 25,096,477 100.0 % $ 4,454,769 $ (71,124 ) $ 4,383,645

Cost of revenues: 15,765,049 57.82 % 18,108,989 54.98 % 2,269,770 74,170 2,343,940 16,142,368 54.8 % 17,702,017 70.5 % (1,271,432 ) 2,831,081 1,559,649

Gross profit 11,500,162 42.18 % 14,826,266 45.02 % (3,380,474 ) 54,370 (3,326,104 ) 13,337,754 45.2 % 7,394,460 29.5 % 3,183,337 2,759,957 5,943,294

Operating expenses: 12,301,334 45.12 % 14,335,246 43.53 % 2,097,944 (64,032 ) 2,033,912 11,960,293 40.6 % 12,337,165 49.2 % (806,689 ) 1,183,561 376,872

Income (loss) from operations (801,172 ) -2.94 % 491,020 1.49 % (1,282,530 ) (9,662 ) (1,292,192 ) $ 1,377,461 4.7 % $ (4,942,705 ) -19.7 % $ 2,376,648 $ 3,943,518 $ 6,320,166
Net revenues for the six months ended December 31, ~~2017~~2023 and ~~2016~~2022 are broken out among the segments as follows:
2023 2022
2017 2016 Revenue % Revenue %
Revenue %
Revenue Restated
%
North America $ 2,135,710 7.83 % $ 3,355,428 10.19 % $ 2,873,836 9.7 % $ 2,723,140 10.9 %
Europe 4,152,928 15.23 % 3,355,873 10.19 % 5,034,390 17.1 % 5,093,036 20.3 %
Asia-Pacific 20,976,573 76.94 % 26,223,954 79.62 % 21,571,896 73.2 % 17,280,301 68.9 %
Total $ 27,265,211 100.00 % $ 32,935,255 100.00 % $ 29,480,122 100.0 % $ 25,096,477 100.0 %
Revenues
License fees
License fees for the six months ended December 31, ~~2017~~2023 were ~~$561,998~~$4,270,902 compared to ~~$9,223,352~~$265,844 for the six months ended December 31, ~~2016~~2022 reflecting ~~a decrease~~an increase of ~~$8,661,354~~$4,005,058 with ~~a change~~an increase in constant currency of $8,683,204. The decrease in license revenue for the fiscal six months ended December 31, 2017 compared to 2016 is primarily due to the decrease of license revenue recognized for the 12 country NFS Ascent™ contract.$4,037,015. During ~~the current quarter, we had license revenues through sales of our regional offerings in the U.S. and the U.K.~~
~~Page 38~~
~~License fees – related party~~
~~License fees from related party for~~ the six months ended December 31, ~~2017 were $261,513 compared~~2023, we recognized approximately $2,800,000 related to ~~$246,957 for~~the sale of our NFS Ascent® CMS software to a renowned US auto manufacturer based in China and we recognized approximately $1,142,000 related to the license renewal with an existing customer. During the six months ended December 31, ~~2016 reflecting an increase~~2022, we recognized approximately $188,000 related to a new agreement with the Government of ~~$14,556 with a change in constant currency~~Khyber Pakhtunkhwa for the sale of ~~$7,851.~~our Ascent^® product.
Page 45

~~Maintenance fees~~
Subscription and support
~~Maintenance~~
Subscription and support fees for the six months ended December 31, ~~2017~~2023 were ~~$7,042,173~~$13,340,024 compared to ~~$7,112,696~~$12,519,503 for the six months ended December 31, ~~2016~~2022 reflecting ~~a decrease~~an increase of ~~$70,523~~$820,521 with ~~a change~~an increase in constant currency of ~~$80,252. Maintenance~~$792,292. Subscription and support fees begin once a customer has “gone live” with our product. ~~The decrease was due to some customers not renewing their maintenance agreements. We~~Subscription and support fees are recurring in nature, and we anticipate ~~maintenance~~these fees to gradually increase as we implement both our NFS legacy ~~product~~products and NFS ~~Ascent™~~Ascent^®.
~~Maintenance fees – related party~~Services
Maintenance fees from related party for the six months ended December 31, 2017 were $204,214 compared to $181,976 for the six months ended December 31, 2016 reflecting an increase of $22,238 with a change in constant currency of $17,002. The increase was due to the fluctuation in usage of active users.
~~Services~~
Services income for the six months ended December 31, ~~2017~~2023 was ~~$16,104,928~~$11,869,196 compared to ~~$12,175,293~~$12,311,130 for the six months ended December 31, ~~2016~~2022 reflecting ~~an increase~~a decrease of ~~$3,929,635~~$441,934 with a ~~change~~decrease in constant currency of ~~$3,987,343.~~$393,906. The ~~services revenue increase was~~decrease is due to ~~an increase~~the decrease in ~~services revenue~~fees associated with ~~new implementations and change requests. Services revenue is derived from services provided to both~~ current ~~customers as well as services provided to new customers as part of the implementation process.~~implementations.
~~Services – related party~~Gross Profit
~~Services income from related party~~The gross profit was $13,337,754, for the six months ended December 31, ~~2017 was $3,090,385~~2023 compared ~~to $3,994,981~~with $7,394,460 for the six months ended December 31, ~~2016 reflecting a decrease~~2022. This is an increase of ~~$904,596~~$5,943,294 with ~~a change~~an increase in constant currency of ~~$898,984. The decrease in related party service revenue is due to a decrease in revenue from our joint venture with the company, 1insurer.~~
~~Gross Profit~~
The gross profit was $11,500,162, for the six months ended December 31, 2017 as compared with $14,826,266 for the six months ended December 31, 2016. This is a decrease of $3,326,104 with a change in constant currency of $3,380,474.$3,183,337. The gross profit percentage for the six months ended December 31, ~~2017 decreased~~2023 also increased to ~~42.18%~~45.2% from ~~45.02%~~29.5% for the six months ended December 31, ~~2016.~~2022. The cost of sales was ~~$15,765,049~~$16,142,368 for the six months ended December 31, ~~2017~~2023 compared to ~~$18,108,989~~$17,702,017 for the six months ended December 31, ~~2016~~2022 for a decrease of ~~$2,343,940~~$1,559,649 and on a constant currency basis an increase of $1,271,432. As a percentage of sales, cost of sales decreased from 70.5% for the six months ended December 31, 2022 to 54.8% for the six months ended December 31, 2023.
Salaries and consultant fees decreased by $1,167,401 from $13,028,906 for the six months ended December 31, 2022 to $11,861,505 for the six months ended December 31, 2023 and on a constant currency basis increased by $834,064. The increase is due to annual salary raises. As a percentage of sales, salaries and consultant expense decreased from 51.9% for the six months ended December 31, 2022 to 40.2% for the six months ended December 31, 2023.
Travel expense was $1,408,439 for the six months ended December 31, 2023 compared to $1,027,643 for the six months ended December 31, 2022 for an increase of $380,796 with an increase in constant currency of $618,393. The increase in travel expense is due to the increase in travel as countries begin lifting travel restrictions.
Depreciation and amortization expense decreased to $657,357 compared to $1,347,327 for the six months ended December 31, 2022 or a decrease of $689,970 and on a constant currency basis a decrease of ~~$2,269,770. As a percentage of sales, cost of sales increased from 54.98%~~$502,138.
Other costs decreased to $2,215,067 for the six months ended December 31, ~~2016~~2023 compared to ~~57.82%~~$2,298,141 for the six months ended December 31, ~~2017.~~2022 or a decrease of $83,074 and on a constant currency basis an increase of $321,113. The increase on a constant currency basis is mainly due to increases in computer costs.
~~Salaries and consultant fees decreased by $1,046,901 from $11,873,153~~Operating Expenses
Operating expenses were $11,960,293 for the six months ended December 31, ~~2016~~2023 compared to ~~$10,826,252~~$12,337,165, for the six months ended December 31, ~~2017~~2022 for a decrease of $376,872 and on a constant currency basis ~~decreased $972,201. The decrease in salaries and consultant fees is due to the right sizing~~an increase of ~~technical employees at key locations including Pakistan, Thailand, China, UK and North America.~~$806,689. As a percentage of sales, ~~salaries~~it decreased from 49.2% to 40.6%. The increase in operating expenses on constant currency basis was primarily due to increases in selling expenses, professional services and ~~consultant expense increased from 36.05%~~general and administrative expenses offset by a decrease in research and development costs.
Selling expenses were $3,493,375 for the six months ended December 31, ~~2016~~2023 compared to ~~39.71%~~$3,769,639, for the six months ended December 31, ~~2017.~~2022 for a decrease of $276,264 and on a constant currency basis an increase of $102,583.
Page 46

~~Depreciation~~
General and ~~amortization expense decreased to $2,341,216 compared to $2,649,636~~administrative expenses were $7,444,496 for the six months ended December 31, ~~2016~~2023 compared to $7,235,819 for the six months ended December 31, 2022 or an increase of $208,677 and on a constant currency basis an increase of $791,007. During the six months ended December 31, 2023, salaries increased by approximately $233,293 and increased $634,362 on a constant currency basis, and other general and administrative expenses decreased approximately $24,616 and increased $156,645 on a constant currency basis.
Research and development cost was $719,830 for the six months ended December 31, 2023 compared to $942,531, for the six months ended December 31, 2022 for a decrease of ~~$308,420~~$222,701 and on a constant currency basis a decrease of ~~$283,783. Depreciation and amortization expense decreased as some products became fully amortized.~~$38,951.
~~Page 39~~
~~Operating Expenses~~Income/Loss from Operations
~~Operating expenses were $12,301,334~~Income from operations was $1,377,461 for the six months ended December 31, ~~2017~~2023 compared to ~~$14,335,246,~~a loss from operations of $4,942,705 for the six months ended December 31, 2016 for a decrease of 14.19% or $2,033,912 and on a constant currency basis a decrease of 14.63% or $2,097,944. As a percentage of sales, it increased from 43.53% to 45.12%. The decrease in operating expenses was primarily due to decreases in selling and marketing expenses, salaries and wages and depreciation.
Selling and marketing expenses decreased by $1,414,080 or 27.96% and on a constant currency basis a decrease of $1,445,637 or 28.58%. The decrease in selling and marketing expenses is due to reduction in staff, decrease in our salaries and commissions, travel expenses, and business development costs to market and sell NFS Ascent™ globally.
General and administrative expenses were $7,814,264 for the six months ended December 31, 2017 compared to $8,552,609 at December 31, 2016 or a decrease of $738,345 or 8.63% and on a constant currency basis an increase of $768,732 or 8.99%. During the six months ended December 31, 2017, salaries decreased by approximately $1,052,356 or $1,043,147 on a constant currency basis due to the decrease in the number of employees, minimal annual raises, less share grants and options, offset by2022. This represents an increase in ~~other general and administrative expenses of approximately $249,382 or $213,461 on a constant currency basis and professional services approximately $65,655 or $61,980 on constant currency bases.~~
~~Loss from Operations~~
~~Loss~~income from operations ~~was $801,172 for the six months ended December 31, 2017 compared to~~of $6,320,166 with an increase in income from operations of ~~$491,020 for the six months ended December 31, 2016. This represents a decrease of $1,292,192 with a decrease of $1,282,530~~$2,376,648 on a constant currency basis for the six months ended December 31, ~~2017~~2023 compared with the six months ended December 31, ~~2016.~~2022. As a percentage of sales, ~~loss~~income from operations was ~~2.94%~~4.7% for the six months ended December 31, ~~2017~~2023 compared to ~~income~~loss from operations of ~~1.49%~~19.7% for the six months ended December 31, ~~2016.~~2022.
Other Income and Expense
Other income was ~~$2,507,707~~$168,365 for the six months ended December 31, ~~2017~~2023 compared ~~with a loss of $1,105,888~~to $2,516,175 for the six months ended December 31, ~~2016.~~2022. This represents ~~an increase~~a decrease of ~~$3,613,595~~$2,347,810 with ~~an increase~~a decrease of ~~$3,641,001~~$2,308,740 on a constant currency basis. ~~The increase is primarily due to the foreign currency exchange transactions.~~ The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared to the U.S. dollar and the Euro. ~~In December 2017, Pakistan’s central bank withdrew its support of the PKR, which caused the PKR to drop in value.~~ During the six months ended December 31, ~~2017,~~2023, we recognized a ~~gain~~loss of ~~$2,754,329~~$148,870 in foreign currency exchange transactions compared to a ~~loss~~gain of ~~$1,036,783~~$1,972,928 for the six months ended December 31, ~~2017.~~2022. During the six months ended December 31, ~~2017,~~2023, the value of the U.S. dollar and the Euro ~~increased 5.63%~~decreased 2.6% and ~~10.77%~~1.2%, respectively, compared to the PKR. During the six months ended December 31, ~~2016,~~2022, the value of the U.S. dollar and the Euro ~~decreased 0.69%~~increased 10.3% and ~~5.93%~~12.9%, respectively, compared to the PKR.
Non-controlling Interest
For the six months ended December 31, ~~2017 and 2016,~~2023, the net income attributable to non-controlling interest was ~~$1,215,814 and $1,560,878, respectively.~~$834,672, compared to a net loss of $126,279 for the six months ended December 31, 2022. The decrease in non-controlling interest is primarily due to the decrease in net income of NetSol ~~Innovation.~~PK.
Net ~~Income / Loss~~loss attributable to NetSol
~~Net~~The net income was ~~$264,923~~$439,206 for the six months ended December 31, ~~2017~~2023 compared to a net loss of ~~$2,554,505~~$2,713,655 for the six months ended December 31, ~~2016.~~2022. This is an increase of ~~$2,819,428~~$3,152,861 with an increase of ~~$2,851,849~~$355,783 on a constant currency basis, compared to the prior year. For the six months ended December 31, ~~2017,~~2023, net income per share was ~~$0.02~~$0.04 for basic and diluted shares compared to anet loss per share of $0.24 for basic and diluted shares for the six months ended December 31, ~~2016.~~2022.
Page 47

Non-GAAP Financial Measures
Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of adjusted EBITDA and adjusted EBITDA per basic and diluted share meet the definition of a non-GAAP financial measure.
We define the non-GAAP measures as follows:
● EBITDA is GAAP net income or loss before net interest expense, income tax expense, depreciation and amortization.
● Non-GAAP adjusted EBITDA is EBITDA ~~less~~plus stock-based compensation expense.
● Adjusted EBITDA per basic and diluted share – Adjusted EBITDA allocated to common stock divided by the weighted average shares outstanding and diluted shares outstanding.
~~Page 40~~
We use non-GAAP measures internally to evaluate the business and believe that presenting non-GAAP measures provides useful information to investors regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for monitoring our performance and evaluating it against industry peers. The non-GAAP financial measures presented should be used in addition to, and in conjunction with, results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure in evaluating the Company.
The non-GAAP measures reflect adjustments based on the following items:
EBITDA: We report EBITDA as a non-GAAP metric by excluding the effect of net interest expense, income tax expense, depreciation and amortization from net income or loss because doing so makes internal comparisons to our historical operating results more consistent. In addition, we believe providing an EBITDA calculation is a more useful comparison of our operating results to the operating results of our peers.
Stock-based compensation expense: We have excluded the effect of stock-based compensation expense from the non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA per basic and diluted share calculations. Although stock-based compensation expense is calculated in accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense which generally requires cash settlement by NetSol, and therefore is not used by us to assess the profitability of our operations. We also believe the exclusion of stock-based compensation expense provides a more useful comparison of our operating results to the operating results of our peers.
Non-controlling interest: We add back the non-controlling interest in calculating gross adjusted EBITDA and then subtract out the income taxes, depreciation and amortization and net interest expense attributable to the non-controlling interest to arrive at a net adjusted EBITDA.
Page 48

Our reconciliation of the non-GAAP financial measures of adjusted EBITDA and non-GAAP earnings per basic and diluted share to the most comparable GAAP measures for the three and six months ended December 31, ~~2017~~2023 and ~~2016~~2022 are as follows:
For the Three Months For the Six Months
Ended December 31, Ended December 31,
2023 2022 2023 2022

Net Income (loss) attributable to NetSol $ 408,316 $ (2,092,926 ) $ 439,206 $ (2,713,655 )
Non-controlling interest 574,499 (309,037 ) 834,672 (126,279 )
Income taxes 150,053 220,056 271,948 413,404
Depreciation and amortization 429,163 891,500 959,949 1,736,503
Interest expense 290,322 202,363 566,339 323,973
Interest (income) (468,280 ) (309,906 ) (882,998 ) (741,763 )
EBITDA $ 1,384,073 $ (1,397,950 ) $ 2,189,116 $ (1,107,817 )
Add back:
Non-cash stock-based compensation 51,433 64,333- 111,787 146,167
Adjusted EBITDA, gross $ 1,435,506 $ (1,333,617 ) $ 2,300,903 $ (961,650 )
Less non-controlling interest (a) (710,154 ) 7,363 (1,109,577 ) (392,172 )
Adjusted EBITDA, net $ 725,352 $ (1,326,254 ) $ 1,191,326 $ (1,353,822 )

Weighted Average number of shares outstanding
Basic 11,372,819 11,270,199 11,359,338 11,263,869
Diluted 11,372,819 11,270,199 11,359,338 11,263,869

Basic adjusted EBITDA $ 0.06 $ (0.12 ) $ 0.10 $ (0.12 )
Diluted adjusted EBITDA $ 0.06 $ (0.12 ) $ 0.10 $ (0.12 )

(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 $ 574,499 $ (309,037 ) $ 834,672 $ (126,279 )
Income Taxes 75,407 68,406 111,784 128,316
Depreciation and amortization 109,748 255,584 251,082 493,917
Interest expense 91,295 62,736 177,184 100,132
Interest (income) (144,578 ) (93,012 ) (272,669 ) (225,501 )
EBITDA $ 706,371 $ (15,323 ) $ 1,102,053 $ 370,585
Add back:
Non-cash stock-based compensation 3,783 7,960 7,524 21,587
Adjusted EBITDA of non-controlling interest $ 710,154 $ (7,363 ) $ 1,109,577 $ 392,172
Page 4149

Three Months Six Months
Three Months Ended Six Months Ended
Ended December 31, 2016 Ended December 31, 2016
December 31, 2017 Restated December 31, 2017 Restated

Net Income (loss) before preferred dividend, per GAAP $ 634,421 $ (2,168,394 ) $ 264,923 $ (2,554,505 )
Non-controlling interest 1,027,581 791,664 1,215,814 1,560,878
Income taxes 200,927 338,884 225,798 378,759
Depreciation and amortization 1,390,888 1,590,249 2,809,874 3,190,218
Interest expense 109,675 62,127 227,746 116,602
Interest (income) (115,570 ) (23,416 ) (252,481 ) (53,856 )
EBITDA $ 3,247,922 $ 591,114 $ 4,491,674 $ 2,638,096
Add back:
Non-cash stock-based compensation 405,721 660,319 833,530 1,547,579
Adjusted EBITDA, gross $ 3,653,643 $ 1,251,433 $ 5,325,204 $ 4,185,675
Less non-controlling interest (a) (1,562,303 ) (1,550,729 ) (2,264,167 ) (3,183,972 )
Adjusted EBITDA, net $ 2,091,340 $ (299,296 ) $ 3,061,037 $ 1,001,703

Weighted Average number of shares outstanding
Basic 11,159,075 10,877,446 11,115,346 10,783,685
Diluted 11,171,543 10,877,446 11,127,814 10,939,177

Basic adjusted EBITDA $ 0.19 $ (0.03 ) $ 0.28 $ 0.09
Diluted adjusted EBITDA $ 0.19 $ (0.03 ) $ 0.28 $ 0.09

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

Net Income attributable to non-controlling interest $ 1,027,581 $ 791,664 $ 1,215,814 $ 1,560,878
Income Taxes 29,945 23,907 40,423 37,781
Depreciation and amortization 465,138 730,672 932,320 1,556,538
Interest expense 34,463 12,991 73,535 31,333
Interest (income) (36,918 ) (34,947 ) (82,075 ) (51,397 )
EBITDA $ 1,520,209 $ 1,524,287 $ 2,180,017 $ 3,135,133
Add back:
Non-cash stock-based compensation 42,094 26,442 84,150 48,839
Adjusted EBITDA of non-controlling interest $ 1,562,303 $ 1,550,729 $ 2,264,167 $ 3,183,972
LIQUIDITY AND CAPITAL RESOURCES
Our cash position was ~~$10,004,650~~$15,659,516 at December 31, ~~2017,~~2023, compared to ~~$14,172,954~~$15,533,254 at June 30, ~~2017.~~2023.
Net cash ~~used in~~provided by operating activities was ~~$2,054,989~~$604,684 for the six months ended December 31, ~~2017~~2023 compared to ~~net cash provided by operating activities of $69,398~~$1,689,543 for the six months ended December 31, ~~2016.~~2022. At December 31, ~~2017,~~2023, we had current assets of ~~$51,464,501~~$40,077,006 and current liabilities of ~~$27,864,068.~~$17,812,164. We had accounts receivable of ~~$21,689,080~~$5,975,716 at December 31, ~~2017~~2023 compared to ~~$8,228,141~~$11,714,422 at June 30, ~~2017. The increase in accounts receivable includes $8,433,735 due to billing for the code split per the amended DFS contract of which approximately $4,216,737 was received in January 2018.~~2023. We had revenues in excess of billings of ~~$22,870,442~~$17,033,684 at December 31, ~~2017~~2023 compared to ~~$24,380,632~~$12,377,677 at June 30, ~~2017~~2023 of which ~~$6,668,854~~$734,397 and ~~$5,173,538~~$nil is shown as long term as of December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, respectively. The long-term portion iswas discounted by ~~$284,394~~$85,488 and ~~$310,331~~$nil at December 31, ~~2017~~2023 and June 30, ~~2017,~~2023, respectively, using the discounted cash flow method with an interest ~~rates ranging from 3.93% to 4.43% which is NetSol PK’s weighted average borrowing rate.~~rate of 7.24%. During the six months ended December 31, ~~2017,~~2023, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and revenues in excess of billings ~~increased~~decreased by ~~$11,950,749~~$1,082,699 from ~~$32,608,773~~$24,092,099 at June 30, ~~2017~~2023 to ~~$44,559,522~~$23,009,400 at December 31, ~~2017. The increase is due to recognition of revenue according to progress of contracts and billing for the amended DFS contract.~~2023. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to ~~$7,560,298~~$6,713,920 and ~~$10,133,100,~~$5,982,466, respectively at December 31, ~~2017.~~2023. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to ~~$6,880,194~~$6,552,181 and ~~$10,222,795,~~$5,779,510, respectively, at June 30, ~~2017.~~2023.
~~Page 42~~
The average days sales outstanding for the six months ended December 31, ~~2017~~2023 and ~~2016~~2022 were ~~260~~147 and ~~145~~162 days, respectively, for each period. The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and ~~revenue~~revenues in excess of billings.
Net cash used in investing activities was ~~$899,882~~$569,336 for the six months ended December 31, ~~2017,~~2023, compared to ~~$1,598,784~~$1,182,042 for the six months ended December 31, ~~2016.~~2022. We had purchases of property and equipment of ~~$543,123~~$570,584 compared to $1,074,316 for the comparable period last fiscal year. For the six months ended December 31, 2017, we invested $500,000 in a short-term convertible note receivable from WRLD3D. For the six months ended December 31, 2017, we invested $50,000 in WRLD3D compared to $705,555$1,252,325 for the six months ended December 31, ~~2016.~~2022.
Net cash used in financing activities was ~~$449,164, compared to $629,999~~$27,359 for the six months ended December 31, ~~2017, and 2016, respectively. The~~2023, compared to $537,180 for the six months ended December 31, ~~2017 included the cash inflow of $215,311 from the exercising of stock options and warrants compared to $429,452 for the same period last year.~~2022. During the six months ended December 31, 2017, we purchased 139,275 shares of our common stock from the open market for $601,020 compared to 7,500 shares of common stock for $38,885 for the same period last year. During the six months ended December 31, 2017,2023, we had net payments for bank loans and ~~capital~~finance leases of ~~$361,814~~$162,482 compared to ~~$69,998~~$537,180 for the six months ended December 31, ~~2016.~~2022. We are operating in various geographical regions of the world through our various subsidiaries. Those subsidiaries have financial arrangements from various financial institutions to meet both their short and long-term funding requirements. These loans will become due at different maturity dates as described in Note 1413 of the financial statements. We are in compliance with the covenants of the financial arrangements and there is no default, which may lead to early payment of these obligations. We anticipate paying back all these obligations on their respective due dates from its own sources.
We typically fund the cash requirements for our operations in the U.S. through our license, services, and ~~maintenance~~subscription and support agreements, intercompany charges for corporate services, and through the exercise of options and warrants. As of December 31, ~~2017,~~2023, we had approximately ~~$10~~$15.7 million of cash, cash equivalents and marketable securities of which approximately ~~$8.46~~$14.5 million is held by our foreign subsidiaries. As of June 30, ~~2017,~~2023, we had approximately ~~$14.17~~$15.5 million of cash, cash equivalents and marketable securities of which approximately ~~$11.56~~$13.5 million is held by our foreign subsidiaries. The Tax Act, which was passed on December 22, 2017, imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. As of December 31, 2017, the provisional undistributed earnings of foreign subsidiaries were $22.8 million which we anticipate being able to offset fully with net operating loss carry forwards.
We remain open to strategic relationships that would provide value added benefits. The focus will remain on continuously improving cash reserves internally and reduced reliance on external capital raise.
As a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans. Although our requirements for capital expenses vary from time to time, for the next 12 months, we anticipate needing $2$1.5 million for APAC, U.S. and Europe new business development activities and infrastructure enhancements, which we expect to provide from current operations.
Page 50

While there is no guarantee that any of these methods will result in raising sufficient funds to meet our capital needs or that even if available will be on terms acceptable to us, we will be very cautious and prudent about any new capital raise given the global market uncertainties. However, we are very conscious of the dilutive effect and price pressures in raising equity-based capital.
Financial Covenants
Our UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($~~405,405)~~397,747) which requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. The Pakistani subsidiary, NetSol PK has an approved facility for export refinance from Askari Bank Limited amounting to Rupees 500 million ($~~4,521,613)~~1,787,821) and a running finance facility of Rupees 7553 million ($~~678,217) which requires~~191,654). NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 900 million ($3,218,078). These facilities require NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. NetSol PK also has an approved export refinance facility of Rs. ~~350~~380 million ($~~3,165,130) and a running finance facility of Rs. 150 million ($1,356,484)~~1,358,744) from Samba Bank Limited. During the loan tenure, ~~of loan,~~ these two facilities require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.
~~Page 43~~
As of the date of this report, we are in compliance with the financial covenants associated with our borrowings. The maturity dates of the borrowings of respective subsidiaries may accelerate if they do not comply with these covenants. In case of any change in control in subsidiaries, they may have to repay their respective credit facilities.
CRITICAL ACCOUNTING POLICIES
Our condensed consolidated financial statements are prepared applying certain critical accounting policies. The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments. Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect our reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations. Our financial statements ~~and accompanying notes~~ are prepared in accordance with ~~accounting principles generally accepted~~U.S. GAAP, and they conform to general practices in the United States (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management��s application of accounting policies. Criticalour industry. We apply critical accounting policies ~~for us include revenue recognition~~consistently from period to period and ~~multiple element arrangements, intangible assets, software development costs, and goodwill.~~
~~REVENUE RECOGNITION~~
The Company derives revenues from the following sources: (1) software licenses, (2) services, which include implementation and consulting services, and (3) maintenance, which includes post contract support.
The Company recognizes revenue from license contracts without major customization when a non-cancelable, non-contingent license agreement has been signed, delivery of the software has occurred, the fee is fixed or determinable, and collectability is probable. Delivery is considered to have occurred upon electronic transfer of the license keyintend that ~~provides immediate availability of the product to the purchaser. Determining whether and when some of these criteria~~any change in methodology occur in an appropriate manner. There have been ~~satisfied often involves assumptions~~no significant changes to our accounting policies and ~~judgments that can have a significant impact~~estimates as discussed in our Annual Report on ~~the timing and amount of revenue the Company reports.~~
If an arrangement does not qualify for separate accounting of the software license and consulting transactions, then new software license revenue is generally recognized together with the consulting services based on contract accounting using either the percentage-of-completion or completed contract method. Contract accounting is applied to any arrangements: (1) that include milestones or customer specific acceptance criteria that may affect collection of the software license fees; (2) where services include significant modification or customization of the software; (3) where significant consulting services are provided for in the software license contract without additional charge or are substantially discounted; or (4) where the software license payment is tied to the performance of consulting services.
Revenue from consulting services is recognized as the services are performed for time-and-materials contracts. Revenue from training and development services is recognized as the services are performed.
~~Revenue from maintenance agreements is recognized ratably over the term of the maintenance agreement, typically one year.~~
~~Multiple Element Arrangements~~
The Company may enter into multiple element revenue arrangements in which a customer may purchase a number of different combinations of software licenses, consulting services, maintenance and support, as well as training and development.
Vendor specific objective evidence (“VSOE”) of fair value for each element is based on the price for which the element is sold separately. The Company determines the VSOE of fair value of each element based on historical evidence of the Company’s stand-alone sales of these elements to third-parties or from the stated renewal rateForm 10-K for the elements contained in the initial software license arrangement. When VSOE of fair value does not exist for any undelivered element, revenue is deferred until the earlier of the point at which such VSOE of fair value exists or until all elements of the arrangement have been delivered. The only exception to this guidance is when the only undelivered element is maintenance and support or other services, then the entire arrangement fee is recognized ratably over the performance period.fiscal year ended June 30, 2023.
~~INTANGIBLE ASSETS~~
Intangible assets consist of product licenses, renewals, enhancements, copyrights, trademarks, trade names, and customer lists. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.
~~Page 44~~
~~SOFTWARE DEVELOPMENT COSTS~~
Costs incurred to internally develop computer software products or to enhance an existing product are recorded as research and development costs and expensed when incurred until technological feasibility for the respective product is established. Thereafter, all software development costs are capitalized and reported at the lower of unamortized cost or net realizable value. Capitalization ceases when the product or enhancement is available for general release to customers.
The Company makes on-going evaluations of the recoverability of its capitalized software projects by comparing the amount capitalized for each product to the estimated net realizable value of the product. If such evaluations indicate that the unamortized software development costs exceed the net realizable value, the Company writes off the amount which the unamortized software development costs exceed net realizable value. Capitalized and purchased computer software development costs are being amortized ratably based on the projected revenue associated with the related software or on a straight-line basis.
~~STOCK-BASED COMPENSATION~~
Our stock-based compensation expense is estimated at the grant date based on the award’s fair value as calculated by the Black-Scholes-Merton (BSM) option pricing model and is recognized as expense over the requisite service period. The BSM model requires various highly judgmental assumptions including expected volatility and expected term. If any of the assumptions used in the BSM model changes significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience and our expectations regarding future pre-vesting termination behavior of employees. To the extent our actual forfeiture rate is different from our estimate; stock-based compensation expense is adjusted accordingly.
~~GOODWILL~~
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase businesses combination. Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.
RECENT ACCOUNTING PRONOUNCEMENTS
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risks.
None.
~~Page 45~~
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Financial Officer and Chief Executive Officer concluded that our disclosure controls and procedures were ~~ineffective.~~effective.

~~The material weakness relates to the lack of qualified Internal Audit resources dedicated to documenting and testing legacy accounting systems and Corporate functions.~~
The Company is in the process of remediating the material weakness, including, but not limited to, by continuing the implementation of a leading cloud-based global ERP system, as approved by the Company’s Board in fiscal year 2016, which is already live in certain locations, and is expected to be completed by June 30, 2018. Further, the Company engaged an internal audit consulting firm to advise and assist with the remediation and internal control improvements, including to assist with the expansion and training of the Company’s internal audit function, and to augment corporate oversight and internal audit coverage.
Changes in Internal Control over Financial Reporting
~~Except for progress made in the remediation actions described above, there~~There were no changes in our internal controls over financial reporting during the three months ended December 31, ~~2017,~~2023, that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)).
Page 4651

PART II OTHER INFORMATION
Item 1. Legal Proceedings
On April 7, 2017, Conister Bank Limited filed a complaint in the High Court of Justice Chancery Division, as claim no. HC-2017-001045 against our subsidiary, Virtual Lease Services Limited (“VLS”). The complaint alleges that VLS was in willful default of their agreements with Conister Bank Limited by failing to fulfill its obligations under the agreements with Conister. The complaint alleges damages in excess of £200,000 (approximately $270,270). VLS has responded to the complaint and its expenses are currently covered by available insurance. VLS denies all claims and intends to vigorously defend the action.NA
Item 1A. Risk Factors
~~None.~~As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 30, 2023, filed with the SEC on September 22, 2023. Any of such factors could result in a significant or material adverse effect on our result of operations or financial conditions. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
~~The repurchases provided in the table below were made through the quarter ended December 31, 2017:~~None.
Issuer Purchases of Equity Securities (1)
Month Total Number of Shares Purchased Average
Price Paid
Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that may be Purchased Under the Plans or Programs
Jul-17 20,247 $ 4.32 20,247 -
Aug-17 91,533 $ 4.51 111,780 -
Sep-17 - $ - 111,780 -
Oct-17 27,495 $ 3.65 139,275 -
Nov-17 - $ - - -
Dec-17 - $ - - -
Total 139,275 $ 4.32 139,275 1,000,000
On July 18, 2017, the Company announced that it had authorized a stock repurchase program permitting the Company to repurchase up to 1,000,000 of its shares of common stock through December 15, 2017. The shares were to be repurchased from time to time in open market transactions or privately negotiated transactions in the Company’s discretion. The repurchase plan expired on its own terms on December 15, 2017.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
~~Page 47~~
Item 5. Other Information
On February 9, 2018, the Board of Directors of the Company amended and restated the bylaws of the Company. The Company has attached a copy of the Amended and Restated Bylaws of NetSol Technologies, Inc. dated February 9, 2018 (the “Bylaws”) in its entirety as Exhibit 3.10. The Bylaws were amended and restated to consolidate into one comprehensive document all prior amendments and to reflect prior amendments to the Articles of Incorporation relevant to the Bylaws. This document is further amended as follows:
● ~~To change the Company’s name in the Bylaws from NetSol International, Inc. to NetSol Technologies, Inc consistent with the Company’s Articles of Incorporation.~~
● ~~Article II, Section 2 and Section 4, amending to clarify that the minimum and maximum number of board members to 3 and 9, respectively, and to confirm the board’s ability to fill board vacancies.~~
● ~~Article IV, Section 2 amending the date of the annual shareholders meeting to be in line with the Company’s current fiscal year end and practices.~~
Item 6. Exhibits
~~3.10~~31.1 ~~Amended and Restated Bylaws of NetSol Technologies, Inc. dated February 9, 2018.~~
~~31.1~~ Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO)
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO)
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO)
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO)
101. INS Inline XBRL Instance Document
101. SCH Inline XBRL Taxonomy Extension Schema Document
101. CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101. DFE Inline XBRL Taxonomy Extension definition Linkbase Document
101. LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101. PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
Page 4852

SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NETSOL TECHNOLOGIES, INC.
Date: February 13, ~~2018~~2024 /s/ Najeeb U. Ghauri
NAJEEB U. GHAURI
Chief Executive Officer
Date: February 13, ~~2018~~2024 /s/Roger K. Almond
ROGER K. ALMOND
Chief Financial Officer
Principal Accounting Officer
Page 4953

	Shares		Amount		Capital		Shares			Deficit			Loss			Interest		Equity
	Common Stock				Additional Paid-in		Treasury			Accumulated			Other Comprehensive			Non Controlling		Total Stockholders’
	Shares		Amount		Capital		Shares			Deficit			Loss			Interest		Equity
Balance at September 30, 2023		12,311,850	$	123,120	$	128,536,132	$	(3,920,856	)	$	(44,865,296	)	$	(46,411,702	)	$	3,201,723	$	36,663,121
Common stock issued for: Services		18,069		181		39,569		-			-			-			-		39,750
Fair value of subsidiary options issued		-		-		11,683		-			-			-			-		11,683
Foreign currency translation adjustment		-		-		-		-			-			541,393			298,772		840,165
Net income (loss) for the year		-		-		-		-			408,316			-			574,499		982,815
Balance at December 31, 2023		12,329,919	$	123,301	$	128,587,384	$	(3,920,856	)	$	(44,456,980	)	$	(45,870,309	)	$	4,074,994	$	38,537,534

	For the Three Months				For the Six Months
	Ended December 31, 2016				Ended December 31, 2016
	Originally reported		Reclassified		Originally reported		Reclassified

Net Revenues:
Services	$	6,984,084	$	6,619,158	$	12,790,801	$	12,175,293
Services - related party		1,464,901		1,829,827		3,379,473		3,994,981
	$	8,448,985	$	8,448,985	$	16,170,274	$	16,170,274

Operating expenses:
Provision for bad debts	$	-	$	1,026	$	-	$	1,026
General and administrative		3,933,413		3,932,387		8,552,609		8,551,583
	$	3,933,413	$	3,933,413	$	8,552,609	$	8,552,609


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.

	Level 1		Level 2		Level 3		Total Assets
Revenue in excess of billing - long term	$	-	$	-	$	6,668,854	$	6,668,854
Total	$	-	$	-	$	6,668,854	$	6,668,854

	Revenue in excess of billing - long term		Fair value discount			Total		Revenues in excess of billings - long term			Fair value discount			Total
Balance at June 30, 2017	$	5,483,869	$	(310,331	)	$	5,173,538
Balance at June 30, 2023								$	-		$	-		$	-
Additions		1,469,379	$	(85,057	)		1,384,322		827,853			(103,958	)		723,895
Amortization during the period		-		110,994			110,994		-			18,464			18,464
Balance at December 31, 2017	$	6,953,248	$	(284,394	)	$	6,668,854
Effect of Translation Adjustment									(7,968	)		6			(7,962	)
Balance at December 31, 2023								$	819,885		$	(85,488	)	$	734,397

●	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.

	As of		As of
	December 31, 2023		June 30, 2023

Revenues in excess of billings	$	17,033,684	$	12,377,677

Unearned revenue	$	4,426,008	$	7,932,306

	Unearned Revenue

Balance at June 30, 2023	$	7,932,306
Invoiced		7,323,061
Revenue Recognized		(10,944,715	)
Adjustments		115,356
Balance at December 31, 2023	$	4,426,008

	●	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 cashed 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).

	For the three months ended December 31, 2017						For the six months ended December 31, 2017
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
Basic income per share:
Net income available to common shareholders	$	634,421		11,159,075	$	0.06	$	264,923		11,115,346	$	0.02
Effect of dilutive securities
Stock options		-		12,468		-		-		12,468		-
Diluted income per share	$	634,421		11,171,543	$	0.06	$	264,923		11,127,814	$	0.02

	For the three months ended December 31, 2016								For the six months ended December 31, 2016
	Net Loss			Shares		Per Share			Net Loss			Shares		Per Share
	Restated					Restated			Restated					Restated
Basic loss per share:
Net loss available to common shareholders	$	(2,168,394	)		10,877,446	$	(0.20	)	$	(2,554,505	)		10,783,685	$	(0.24	)
Effect of dilutive securities
Stock options		-			-		-			-			-		-
Diluted loss per share	$	(2,168,394	)		10,877,446	$	(0.20	)	$	(2,554,505	)		10,783,685	$	(0.24	)

The Company and Subsidiaries		Functional Currency

NetSol Technologies, Inc.		USD
NTA		USD
Otoz		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
NetSol Thai		Thai Bhat
Otoz Thai		Thai Bhat
Australia		Australian Dollar
Namecet		AED
NetSol Beijing		Chinese Yuan
Tianjin		Chinese Yuan

	Amount
Within year 1	$	763,409
Within year 2		565,341
Within year 3		347,701
Within year 4		108,548
Within year 5		81,529
Thereafter		236
Total Lease Payments		1,866,764
Less: Imputed interest		(154,633	)
Present Value of lease liabilities		1,712,131
Less: Current portion		(689,770	)
Non-Current portion	$	1,022,361

	●	~~The warrants are exercisable into shares of the “Next Round Preferred”, only if and when the Next Round Preferred is issued by WRLD3D in a “Qualified Financing”.~~
	●	~~The warrants expire on March 2, 2020.~~
	●	~~“Next Round Preferred” is defined as occurring if WRLD3D’s preferred stock (or securities convertible into preferred stock) are issued in a Qualified Financing that occurs after March 2, 2016.~~
	●	~~“Qualified Financing” is defined as financing with total proceeds of at least $2 million.~~
	●	~~The total number of common stock shares to be issued is equal to $1,250,000 divided by the per share price of the Next Round Preferred.~~
	●	~~The exercise price of the warrants is equal to the greater of~~

	a)	~~70% of the per share price of the Next Round Preferred sold in a Qualified Financing, or~~

	b)	25,000,000 divided by the total number of shares of common stock outstanding immediately prior to the Qualified Financing (on a fully-diluted basis, excluding the number of common stock shares issuable upon the exercise of any given warrant).

Year ended:
December 31, 2018	$	2,630,334
December 31, 2019		2,630,334
December 31, 2020		2,630,334
December 31, 2021		2,630,334
December 31, 2022		2,630,334
Thereafter		1,658,935
	$	14,810,605

		As of December 31, 2017							As of December 31, 2023
				Current		Long-Term					Current		Long-Term
Name		Total		Maturities		Maturities			Total		Maturities		Maturities

D&O Insurance	(1)	$	105,023	$	105,023	$	-	(1)	$	120,533	$	120,533	$	-
Bank Overdraft Facility	(2)		-		-		-	(2)		-		-		-
Loan Payable Bank - Export Refinance	(3)		4,521,613		4,521,613		-	(3)		1,787,821		1,787,821		-
Loan Payable Bank - Running Finance	(4)		678,217		678,217		-	(4)		-		-		-
Loan Payable Bank - Export Refinance II	(5)		3,165,130		3,165,130		-	(5)		1,358,744		1,358,744		-
Loan Payable Bank - Running Finance II	(6)		1,356,484		1,356,484		-
Loan Payable Bank - Export Refinance III								(6)		2,502,951		2,502,951		-
Sale and Leaseback Financing								(7)		256,921		157,394		99,527
Term Finance Facility								(8)		3,392		3,392		-
Insurance Financing								(9)		39,587		39,587		-
			9,826,467		9,826,467		-			6,069,949		5,970,422		99,527
Subsidiary Capital Leases	(7)		557,516		306,633		250,883
Subsidiary Finance Leases								(10)		12,044		12,044		-
		$	10,383,983	$	10,133,100	$	250,883		$	6,081,993	$	5,982,466	$	99,527

		As of June 30, 2017							As of June 30, 2023
				Current		Long-Term					Current		Long-Term
Name		Total		Maturities		Maturities			Total		Maturities		Maturities

D&O Insurance	(1)	$	87,485	$	87,485	$	-	(1)	$	89,823	$	89,823	$	-
Bank Overdraft Facility	(2)		221,379		221,379		-	(2)		-		-		-
Loan Payable Bank - Export Refinance	(3)		4,776,461		4,776,461		-	(3)		1,741,493		1,741,493		-
Loan Payable Bank - Running Finance								(4)		-		-		-
Loan Payable Bank - Export Refinance II	(5)		1,910,585		1,910,585		-	(5)		1,323,535		1,323,535		-
Loan Payable Bank - Running Finance II	(6)		2,865,877		2,865,877		-
Loan Payable Bank - Export Refinance III								(6)		2,438,089		2,438,089		-
Sale and Leaseback Financing								(7)		321,113		148,264		172,849
Term Finance Facility								(8)		13,356		13,356		-
Insurance Financing								(9)		-		-		-
			9,861,787		9,861,787		-			5,927,409		5,754,560		172,849
Subsidiary Capital Leases	(7)		727,770		361,008		366,762
Subsidiary Finance Leases								(10)		28,330		24,950		3,380
		$	10,589,557	$	10,222,795	$	366,762		$	5,955,739	$	5,779,510	$	176,229

	Amount
Minimum Lease Payments
Due FYE 12/31/18	$	336,546
Due FYE 12/31/19		220,855
Due FYE 12/31/20		36,412
Due FYE 12/31/21		5,182
Due FYE 12/31/22		-
Total Minimum Lease Payments		598,995
Interest Expense relating to future periods		(41,479	)
Present Value of minimum lease payments		557,516
Less: Current portion		(306,633	)
Non-Current portion	$	250,883

	Amount
Minimum Lease Payments Within year 1	$	13,005
Total Minimum Lease Payments		13,005
Interest Expense relating to future periods		(961	)
Present Value of minimum lease payments		12,044
Less: Current portion		(12,044	)
Current portion of loans and obligations under finance leases
Non-Current portion	$	-
Loans and obligations under finance leases; less current maturities

	Amount
Loan Payments
Within year 1	$	160,788
Within year 2		98,657
Within year 3		868
Total Loan Payments		260,313
Less: Current portion		(160,786	)
Non-Current portion	$	99,527

	# of shares			Weighted Ave Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregated Intrinsic Value

Outstanding and exercisable, June 30, 2016		610,133		$	4.90		0.99	$	799,030
Granted		79,838		$	4.53
Exercised		(84,838	)	$	4.49
Expired / Cancelled		(130,000	)	$	7.50
Outstanding and exercisable, June 30, 2017		475,133		$	4.20		1.05	$	8,413
Granted		-			-
Exercised		(35,773	)	$	3.88
Expired / Cancelled		(1,000	)	$	16.00
Outstanding and exercisable, December 31, 2017		438,360		$	4.20		0.57	$	319,465

Exercise Price		Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life		Weighted Ave Exercise Price
OPTIONS:

$	3.88		384,898		0.49	$	3.88
$	6.50		53,462		1.10	$	6.50
Totals			438,360		0.57	$	4.20

	# of shares			Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2016		630,228		$	6.07
Granted		222,146		$	5.92
Forfeited / Cancelled		(5,000	)	$	5.55
Vested		(427,175	)	$	5.90
Unvested, June 30, 2017		420,199		$	6.07
Vested		(134,243	)	$	6.13
Unvested, December 31, 2017		285,956		$	6.18

	# Number of shares			Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2022		-		$	-
Granted		58,317		$	2.73
Vested		(58,317	)	$	2.73
Unvested, June 30, 2023		-		$	-
Granted		45,032		$	1.97
Vested		(45,032	)	$	1.97
Unvested, December 31, 2023		-		$	-

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at December 31, 2017			Non-Controlling Interest %			Non-Controlling Interest at December 31, 2023

NetSol PK		33.83	%	$	12,386,620			32.38	%	$	4,512,908
NetSol-Innovation		49.90	%		1,749,551			32.38	%		(335,457	)
VLS, VLSH & VLSIL Combined		49.00	%		407,132
NAMECET								32.38	%		(12,125	)
NetSol Thai		0.006	%		(79	)		0.006	%		(155	)
OTOZ Thai								5.60	%		(25,787	)
OTOZ								5.59	%		(64,390	)
Total				$	14,543,224					$	4,074,994

SUBSIDIARY	Non-Controlling Interest %			Non-Controlling Interest at June 30, 2017			Non-Controlling Interest %			Non-Controlling Interest at June 30, 2023

NetSol PK		33.80	%	$	12,887,938			32.38	%	$	3,314,659
NetSol-Innovation		49.90	%		1,599,734			32.38	%		(223,504	)
VLS, VLHS & VLSIL Combined		49.00	%		311,502
NAMECET								32.38	%		(5,384	)
NetSol Thai		0.006	%		(92	)		0.006	%		(194	)
OTOZ Thai								5.60	%		(23,572	)
OTOZ								5.59	%		(86,952	)
Total				$	14,799,082					$	2,975,053

	Balance Sheet
	As of December 31, 2016
		As Originally			Amount of
		Presented			Restatement		As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	9,505,383				$	9,505,383
Accounts receivable, net of allowance of $495,760 and $492,498		5,840,490					5,840,490
Accounts receivable, net - related party		4,303,380					4,303,380
Revenues in excess of billings		17,646,488			373,406		18,019,894
Revenues in excess of billings - related party		469,030					469,030
Other current assets		2,904,650					2,904,650
Total current assets		40,669,421			373,406		41,042,827
Restricted cash		90,000					90,000
Property and equipment, net		21,873,277					21,873,277
Other assets		2,054,938					2,054,938
Intangible assets, net		18,423,439					18,423,439
Goodwill		9,516,568					9,516,568
Total assets	$	92,627,643		$	373,406	$	93,001,049

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	7,373,097				$	7,373,097
Current portion of loans and obligations under capitalized leases		4,368,930					4,368,930
Unearned revenues		2,806,804			77,821		2,884,625
Common stock to be issued		88,324					88,324
Total current liabilities		14,637,155			77,821		14,714,976
Long term loans and obligations under capitalized leases; less current maturities		501,554					501,554
Total liabilities		15,138,709			77,821		15,216,530
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 500,000 shares authorized;		-			-		-
Common stock, $.01 par value; 14,500,000 shares authorized;
10,993,054 shares issued and 10,958,275 outstanding as of December 31, 2016 and 10,713,372 shares issued and 10,686,093 outstanding as of June 30, 2016		109,931					109,931
Additional paid-in-capital		123,019,215					123,019,215
Treasury stock (34,779 shares and 27,279 shares)		(454,310	)				(454,310	)
Accumulated deficit		(40,074,755	)		196,890		(39,877,865	)
Stock subscription receivable		(450,220	)				(450,220	)
Other comprehensive loss		(18,628,395	)				(18,628,395	)
Total NetSol stockholders’ equity		63,521,466			196,890		63,718,356
Non-controlling interest		13,967,468			98,695		14,066,163
Total stockholders’ equity		77,488,934			295,585		77,784,519
Total liabilities and stockholders’ equity	$	92,627,643		$	373,406	$	93,001,049

●	North America		~~Los Angeles Area~~Encino, California and Austin, Texas
●	Europe		London Metropolitan area and Horsham, Flintshire
●	Asia Pacific		Lahore, Karachi, Bangkok, Beijing, Tianjin, Shanghai, Jakarta and Sydney
●	Middle East	Dubai