Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

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 months ended December 31, 2025. 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, 2025, and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Our website is located at https://netsoltech.com/, and our investor relations website is located at https://ir.netsoltech.com. The following filings are available through our investor relations website after we file with the SEC: 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.govthat 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://ir.netsoltech.com/all-sec-filings. 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.

Business Overview

NetSol Technologies is a global business services and asset finance solutions provider. NetSol delivers state-of-the-art solutions for the asset finance and leasing industry, serving automotive and equipment OEMs, auto captives and financial institutions across over 30 countries. Since its inception in 1997, NetSol has been at the cutting edge of technology, pioneering innovations with its asset finance solutions and leveraging advanced AI and cloud services to meet the complex needs of the global market.

Renowned for its deep industry expertise, customer-centric approach and commitment to excellence, NetSol fosters strong partnerships with its clients, ensuring their success in an ever-evolving landscape. With a rich history of innovation, ethical business practices and a focus on sustainability, NetSol is dedicated to empowering businesses worldwide, securing its position as the trusted partner for leading firms around the globe.

Our primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of our suite of financial applications, under the brand name Transcend™ Finance (formerly called NFS Ascent^®) for leading businesses in the global finance and leasing space.

Our clients include blue chip organizations, Dow-Jones 30 Industrials, Fortune 500 manufacturers, financial institutions, global vehicle manufacturers and enterprise technology providers, all of which are serviced by our strategically placed support and delivery locations around the globe.

We are also committed to serving Tier-2 and Tier-3 banks and financial institutions. We understand the unique challenges faced by these institutions, which is why we offer innovative cloud implementation solutions without any license fees, with rapid deployments and the with ability to scale. Further, our out-of-the-box, API-first products are designed to seamlessly integrate into existing systems, providing flexibility and scalability that smaller institutions often need. By prioritizing accessibility and ease of use, we empower smaller financial companies to enhance their service offerings and streamline operations, positioning ourselves as a trusted partner in their digital transformation journey.

Founded in 1997, NetSol is headquartered in Encino, 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		Encino, California and Austin, Texas
	●	Europe		London Metropolitan area, Horsham and Flintshire
	●	Asia Pacific		Lahore, Karachi, Bangkok, Beijing, Tianjin, Jakarta and Sydney
	●	Middle East		Dubai

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 top-notch 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.

Expertise

Our expertise in enterprise technology and financial application development has helped us emerge as a global player in the finance and leasing industry and enabled us to secure a broad footprint across the major markets of North America, Asia Pacific and Europe. The Asia Pacific region has particularly benefitted from the organic growth in the fast-developing leasing automation industry, which is still nascent as per Western standards.

Domain Experience

NetSol is a dynamic leader and has been able to accumulate a wealth of experience in the global asset finance and leasing industry. We have built a large knowledge base which is regularly refined and updated to ensure the most up-to-date best practices and business solutions for the benefit of our clients and partners. We have a strong presence in the captive asset-finance domain. We have had continual operations for nearly three decades in Asia Pacific and Europe and over four decades in North America.

Proximity with Global and Regional Customers

We have offices across the world, located strategically to maintain close contact and proximity with our customers in various key markets. This has not only helped us strengthen our customer relationships, but also build a deeper understanding of local market dynamics. Simultaneously, we can extend services and support development through a combination of onsite and offsite resources. This approach has allowed us to offer blended rates to our customers by employing a unique and cost-effective global development model.

While our business model is built around the development, implementation and maintenance of our suite of financial applications, we employ the same facilities and competencies to extend our services to related segments, including but not limited to:

	●	Information security
	●	Digital solutions
	●	AI, ML and data analytics
	●	Generative AI
	●	Policy and strategy
	●	Emerging technologies|
	●	Cloud services
	●	Data engineering

Our global operations are broken down into three primary regions: North America, Europe and Asia Pacific. All of the subsidiaries are seamlessly integrated to function effectively with global delivery capabilities, cross selling to multinational asset finance companies, leveraging the centralized marketing and pre-sales organization, and a network of employees connected across the globe to support local and global customers and partners.

OUR PRODUCTS AND SERVICES

Covering the complete finance and leasing lifecycle starting from quotation origination through contract settlements, our products are designed and developed for highly flexible settings and are capable of dealing with multinational, multi-company, multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. Our solutions empower financial institutions to effectively manage their complex lending portfolios, enabling them to thrive in hyper-competitive global markets.

Built on cutting-edge, modern technology, NetSol's unified Transcend™ Platform is an AI-powered digital retail and asset finance solution for automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions.

PRODUCTS AND SERVICES: TRANSCEND™ PLATFORM

The Transcend™ Platform, powered by NetSol, is an AI-driven unified ecosystem that revolutionizes how assets are sold, financed and leased. Designed to automate and optimize every step - from sales to originations to servicing, Transcend™ leverages AI and ML to drive predictive insights and smarter decision-making.

Transcend™ Retail (Formerly Known as Otoz®)

We revolutionize auto and equipment retail with a fully digital, integrated platform that simplifies the entire customer journey. From online purchasing to finance approval, Transcend™ Retail (formerly known as Otoz®) offers advanced retail and mobility solutions that keep dealerships or OEMs at the cutting edge of consumer expectations.

Transcend™ Finance (Formerly Known as Ascent®)

We streamline finance and leasing operations with a comprehensive solution for originations, servicing and wholesale finance. Transcend™ Finance (formerly known as Ascent®) empowers automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions with end-to-end visibility and control, ensuring seamless workflows and accelerated business outcomes.

Originations

We streamline the entire origination process, from submission to approval, with advanced features such as real-time, AI-powered credit decisioning, automated deal flows and more.

Servicing

We enable financial institutions to attain real-time insights into portfolio performance, delinquencies and losses, enabling proactive portfolio management and strategic decision-making.

Wholesale finance

Our wholesale finance solution empowers customers to gain a competitive edge by automating their wholesale finance and floor planning operations effortlessly.

Transcend™ Marketplace (Formerly Known as Appex Now)

Transcend™ Marketplace (formerly known as Appex Now) offers a suite of flexible, component-based solutions that integrate seamlessly with the customer's existing infrastructure. Transcend™ Marketplace is a modular, API-first solution that addresses every aspect of finance and leasing using tools for calculations, document generation, loan origination and lending configurations.

Flex™

Flex is an API-first, ready-to-use calculation and quotation engine. It is a one-stop solution that guarantees precise calculations at all stages of the contract lifecycle through various calculation types. All the calculations are parameter-driven, which helps perform simple, multi-dimensional or complex calculations based on the needs of a business. Flex™ has a lightning-fast onboarding process, which can take place in mere minutes.

Hubex™

Hubex™ is an API library that enables companies to standardize all their API integration procedures across multiple API services through a single integration. In addition to traditional lending companies, Hubex™ can also streamline the operations of dealerships, vendors and consultants. 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, know your customer (KYC) service, driver license verification, address validation, vehicle valuation and notification service.

Index™

Index™ is a cloud-based parameter storage that smoothly runs all of a company's core lending operations. It is an accumulation of all the master setups, including asset catalog and inventory, programs, rates, and profiles for lenders, dealers and multiple partners, in one centralized location for all business types. Index^TM can enhance delivery efficiency and program management for easy integration into all systems.

Dock™

Dock™ is an advanced document generation tool that lets a company create accurate and professional-looking documents in just seconds. With Dock^TM's template-based configuration, a company can set up placeholders for data, essentially simplifying the document creation process and reducing the chance of human error. Its API-first architecture ensures scalability, making it capable of handling any document generation task, from single documents to millions, with ease.

Lane™

Lane™ offers a feature-rich, end-to-end order management system for asset leasing and loans and credit companies. Our platform covers all aspects, from conducting end-to-end sales to performing dealer and partner-related tasks and marketing-related activities. The system offers a variety of dashboards that provide vital information for dealers and partners while enabling quick order management and providing a way for users to record and submit a complete credit application for their clients.

Link™

Link is a purpose-built platform designed for brokers, lenders, dealers and borrowers to work seamlessly together. With tailored solutions that simplify applications and automate key processes, Link^TM is designed to enhance customer relationships whilst making compliance effortless. This results in faster approvals, enriched customer experiences and stronger loyalty via elevated customer satisfaction.

Intermediary portals:

Broker portals

Efficiency and effectiveness are paramount for any broker. Managing disparate systems and processes can be cumbersome and time-consuming, often leading to inefficiencies and missed opportunities. NetSol offers a solution to these challenges by consolidating disparate processes into a single unified interface, revolutionizing the way a brokerage operates.

Lender portals

NETSOL's lender-specific portals are designed to transform the lending process by enhancing risk management and driving profitability. Our advanced tools not only streamline loan origination, but also facilitate seamless communication and collaboration with the lending ecosystem. We empower a company's lending process with intuitive and efficient lender portals designed for a seamless user experience.

Dealer portals

In the competitive automotive industry, dealers need efficient and comprehensive solutions to manage their operations effectively. NetSol's intermediary portals serve as digital command centers, providing dealers with a wide array of tools, resources and services to optimize every aspect of their business, from inventory management to sales and marketing.

Transcend™ Consultancy

Empowering businesses with Transcend™ Consulting Services, we offer expert guidance across critical areas like information security, data engineering and cloud services. Our team partners with businesses to create tailored solutions that drive innovation, efficiency and growth.

Transcend™ AI Labs

We are leading AI-driven innovation with our Transcend™ AI Labs, integrating advanced AI services into our product suite to solve the unique challenges of BFSI, equipment and auto OEMs and dealerships. Our tailored solutions drive industry-specific advancements, helping companies stay ahead in a competitive market.

Highlights

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

	●	We entered into a four-year contract extension valued at approximately $50 million with a long-standing customer and strategic partner. The extension reinforces recurring revenue through ongoing maintenance and licensing fees and expands the customer's continued use of the Transcend™ Finance platform across multiple countries.
	●	We launched Check AI, an AI-powered credit decisioning engine within the Transcend™ Finance platform. The solution automates manual credit workflows, accelerates decision-making, and enhances underwriting accuracy through improved data aggregation, document processing, and financial analysis.
	●	We signed a contract valued at approximately $1.75 million with a provincial government entity in Pakistan, funded by the World Bank, to support the digitization of government workflows. The project focuses on process automation and cross-departmental system integration to improve operational efficiency and public service delivery.
	●	We successfully went live with a China-based captive automotive finance company, deploying a localized Transcend™ Finance platform to support dealer and customer financing operations. The implementation enables streamlined credit workflows, regulatory compliance, and scalable growth.
	●	A Thailand-based captive finance company of a leading Japanese automotive manufacturer went live on the upgraded Transcend™ Wholesale platform, automating wholesale financing, inventory management, and dealer credit processes and improving operational visibility.
	●	A UK-based multi-asset finance company successfully went live on the Transcend™ Finance Wholesale platform, enabling wholesale loan origination, servicing, and digital dealer self-service across its European operations.
	●	A leading German automotive manufacturer in North America successfully completed a dealer portal pilot, enabling enhanced dealer self-service, real-time financing workflows, and improved digital engagement. The pilot represents a milestone toward broader rollout.
	●	We secured a third-party support services engagement with a global automotive captive finance company in China, generating approximately $0.8 million in annual recurring revenue. The engagement includes ongoing platform support and operational services.
	●	We generated approximately $1.5 million in incremental revenue through the delivery of platform modifications and enhancements requested by multiple customers across various regions.
	●	NETSOL Institute of Artificial Intelligence entered into a strategic partnership with Pakistan's national vocational and technical training authority to train approximately 1,600 individuals in artificial intelligence, data science, and cybersecurity. The initiative is expected to generate over $1 million in revenue.

Management has identified the following material trends affecting NetSol.

Positive trends:

●

The global automotive market appears to be holding steady or growing, positively affecting our customers' potential revenues and, accordingly their willingness to spend on technology solutions:

○

Despite the volatility of the 2025 automobile market, executives still pointed to critical opportunity areas for 2026, including the demand for Battery Electric Vehicles (BEV) and Advanced Drive Assistance Systems (ADAS) (S&P Global Mobility, January 14, 2026).

	○	According to recent forecasts, China's auto sales in 2025 are expected to reach approximately 32.9 million units, representing a 4.7% year-over-year increase. Sales of New Energy Vehicles (NEV) account for 48.7% of all new car sales in China. (China Automobile Manufacturers Association). China's sales target for NEVs in 2025 is projected to reach 15.5 million units, amounting to a 20% rise over 2024 figures (Fastmarkets, September 19, 2025).
	○	Chinese OEMs have rapidly scaled exports globally, notably to Europe and emerging economies, selling approximately three million vehicles per year to major regions since 2020. Chinese vehicles provide significant cost advantages stemming from integrated supply chains, innovative battery chemistries, concentrated mineral refining capabilities, advancements in local engineering capabilities, and high competition among the rapidly expanding base of legacy and emerging OEMs (PWC, January 30, 2026).
	○	Current forecasts project North American vehicle production volumes will return to mid-2019 levels by 2030, driven by capacity expansions and reallocation toward BEV and HEV (Hybrid Electric Vehicle) vehicles. Global players are investing heavily in expanding facilities in North America, while others are repurposing BEV capacity for flexible manufacturing lines that can adapt to evolving demand (PWC, January 30, 2026).
	○	China's exports have grown rapidly, with Chinese manufacturers penetrating nearly all major global regions except the US-adding approximately three million vehicles in exports since 2020. This export surge targets primarily Europe, Latin America, and parts of Southeast Asia, where Chinese OEMs such as BYD and Chery offer quality vehicles at low cost. Localized production strategies and expanding EU dealerships support this growth (PWC, January 30, 2026).

	●	The overall size of the mobility market in Europe and the United States is projected to increase to over $425 billion combined by 2035 or a compound CAGR of 5% from 2022 (Deloitte Global Automotive Mobility Market Simulation Tool).
	●	The global automotive finance market size was valued at approximately $295.13 billion in 2024 and is projected to reach $451.71 billion by 2030, representing a compound annual growth rate (CAGR) of 7.4% from 2025 through 2030 (Grandview Research).

Negative trends:

	●	The conflict in Gaza has disrupted the entire Middle East region since October 7, 2023. The conflict has expanded to neighboring nations such as Syria, Lebanon, and Iran. The unrest and turmoil in the region are viewed unfavorably by the regional business community. While recent ceasefire efforts may signal a positive change to the volatility in the region, there is no guarantee that the ceasefire will hold or that any outcome of the conflict will positively affect the region. Gulf markets remain cautious due to ongoing uncertainties (CEO Today, October 10, 2025; Reuters, December 17, 2025).
	●	The new-vehicle sales pace in the U.S. in 2026 will decline to 15.8 million from 16.3 million in 2025. Slower economic growth, softer job creation, and the loss of EV tax incentives are all expected to weigh on demand (Cox Automotive, January 27, 2026).
	●	General economic conditions in our geographic markets, inflation, economic uncertainty, and increased operational costs are pressuring margins and leading companies to prioritize critical investment and control spending.
	●	SaaS cybersecurity faces unprecedented challenges as companies increasingly migrate critical functions to cloud platforms. Proliferation of AI tools within these platforms has created additional attack vectors that require specialized security approaches beyond legacy protections (JOSYS.COM).
	●	The imposition of tariffs on China and on other US trading partners may affect the price of consumer goods, including vehicles, amongst others, negatively affecting the profitability of many of our customers.

CHANGES IN FINANCIAL CONDITION

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

The following table sets forth the items in our unaudited condensed consolidated statement of operations for the three months ended December 31, 2025 and 2024 as a percentage of revenues.

		For the Three Months
		Ended December 31,
		2025				%				2024				%
Net Revenues:
License fees		$	117,482				0.6	%		$	72,688				0.5	%
Subscription and support			9,079,783				48.3	%			8,642,629				55.6	%
Services			9,611,213				51.1	%			6,821,344				43.9	%
Total net revenues			18,808,478				100.0	%			15,536,661				100.0	%
Cost of revenues			9,779,386				52.0	%			8,616,320				55.5	%
Gross profit			9,029,092				48.0	%			6,920,341				44.5	%
Operating expenses:
Selling, general and administrative			7,481,647				39.8	%			7,073,622				45.5	%
Research and development cost			247,713				1.3	%			333,669				2.1	%
Total operating expenses			7,729,360				41.1	%			7,407,291				47.7	%
Income (loss) from operations			1,299,732				6.9	%			(486,950	)			-3.1	%
Other income and (expenses)
Interest expense			(176,273	)			-0.9	%			(236,386	)			-1.5	%
Interest income			208,775				1.1	%			529,072				3.4	%
Gain (loss) on foreign currency exchange transactions			46,074				0.2	%			(698,426	)			-4.5	%
Other income			63,925				0.3	%			38,098				0.2	%
Total other income (expenses)			142,501				0.8	%			(367,642	)			-2.4	%
Net income (loss) before income taxes			1,442,233				7.7	%			(854,592	)			-5.5	%
Income tax provision			(480,194	)			-2.6	%			(331,614	)			-2.1	%
Net income (loss)			962,039				5.1	%			(1,186,206	)			-7.6	%
Non-controlling interest			(715,282	)			-3.8	%			39,164				0.3	%
Net income (loss) attributable to NetSol		$	246,757				1.3	%		$	(1,147,042	)			-7.4	%
Net income (loss) per share:
Net income (loss) per common share
Basic		$	0.02							$	(0.10	)
Diluted		$	0.02							$	(0.10	)
Weighted average number of shares outstanding
Basic			11,797,068								11,484,298
Diluted			11,797,068								11,484,298

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 15 "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.

		For the Three Months																Favorable (Unfavorable) Change in				Favorable (Unfavorable) Change due to				Total Favorable (Unfavorable)
		Ended December 31,																Constant				Currency				Change as
		2025				%				2024				%				Currency				Fluctuation				Reported
Net Revenues:		$	18,808,478				100.0	%		$	15,536,661				100.0	%		$	3,259,628			$	12,189			$	3,271,817
Cost of revenues:			9,779,386				52.0	%			8,616,320				55.5	%			(1,201,747	)			38,681				(1,163,066	)
Gross profit			9,029,092				48.0	%			6,920,341				44.5	%			2,057,881				50,870				2,108,751
Operating expenses:			7,729,360				41.1	%			7,407,291				47.7	%			(306,264	)			(15,805	)			(322,069	)
Income (loss) from operations		$	1,299,732				6.9	%		$	(486,950	)			-3.1	%		$	1,751,617			$	35,065			$	1,786,682

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

		2025								2024
		Revenue				%				Revenue				%
North America		$	2,749,668				14.6	%		$	3,207,273				20.6	%
Europe			3,265,798				17.4	%			3,261,180				21.0	%
Asia-Pacific			12,793,012				68.0	%			9,068,208				58.4	%
Total		$	18,808,478				100.0	%		$	15,536,661				100.0	%

Revenues

License fees

License fees for the three months ended December 31, 2025 were $117,482 compared to $72,688 for the three months ended December 31, 2024 reflecting an increase of $44,794 with an increase in constant currency of $43,128.

Subscription and support

Subscription and support fees for the three months ended December 31, 2025, were $9,079,783 compared to $8,642,629 for the three months ended December 31, 2024, reflecting an increase of $437,154 with an increase in constant currency of $515,085. Subscription and support fees for the three months ended December 31, 2024, included approximately $1,000,000 related to a one-time catch-up from four customers. Subscription and support fees begin once a customer has "gone live" with our product and are recurring in nature. We anticipate these fees to increase over time as we implement our Transcend^TM products.

Services

Services income for the three months ended December 31, 2025, was $9,611,213 compared to $6,821,344 for the three months ended December 31, 2024, reflecting an increase of $2,789,869, with an increase in constant currency of $2,701,415. Services revenue increased compared to the prior quarter, primarily due to the timing and composition of the current implementation projects.

Gross Profit

The gross profit was $9,029,092 for the three months ended December 31, 2025, compared with $6,920,341 for the three months ended December 31, 2024. This is an increase of $2,108,751 with an increase in constant currency of $2,057,881. The gross profit percentage for the three months ended December 31, 2025, also increased to 48.0% from 44.5% for the three months ended December 31, 2024. The cost of sales was $9,779,386 for the three months ended December 31, 2025, compared to $8,616,320 for the three months ended December 31, 2024, for an increase of $1,163,066 and on a constant currency basis an increase of $1,201,747. As a percentage of sales, cost of sales decreased from 55.5% for the three months ended December 31, 2024, to 52.0% for the three months ended December 31, 2025.

Salaries and consultant fees increased by $368,457 from $6,714,437 for the three months ended December 31, 2024, to $7,082,894 for the three months ended December 31, 2025, and on a constant currency basis increased by $361,926. The increase is due to annual salary raises. As a percentage of sales, salaries, and consultant expenses decreased from 43.2% for the three months ended December 31, 2024, to 37.7% for the three months ended December 31, 2025.

Travel expenses were $1,029,441 for the three months ended December 31, 2025, compared to $601,251 for the three months ended December 31, 2024, for an increase of $428,190 with an increase in constant currency of $425,180. As a percentage of sales, travel expense increased from 3.9% for the three months ended December 31, 2024, to 5.5% for the three months ended December 31, 2025. Travel expenses increased due to travel associated with new customer implementation projects.

Depreciation and amortization expense decreased to $190,066 compared to $237,882 for the three months ended December 31, 2024, or a decrease of $47,816 and on a constant currency basis a decrease of $45,574.

Other costs were $1,476,985 for the three months ended December 31, 2025, compared to $1,062,750 for the three months ended December 31, 2024, or an increase of $414,235, and on a constant currency basis an increase of $460,215. The increase is mainly due to an increase in third-party hardware and software costs of approximately $377,698 and hosting fees of approximately $79,881.

Operating Expenses

Operating expenses were $7,729,360 for the three months ended December 31, 2025, compared to $7,407,291, for the three months ended December 31, 2024, for an increase of $322,069 and on a constant currency basis an increase of $306,264. As a percentage of sales, it decreased from 47.7% to 41.1%. The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages, offset by a decrease in other general and administrative expenses and the provision for doubtful accounts.

Selling and marketing expenses were $3,016,079 for the three months ended December 31, 2025, compared to $2,662,397 for the three months ended December 31, 2024, for an increase of $353,682 and on a constant currency basis an increase of $356,319. The increase is mainly due to increases in salaries and consultants of approximately $167,714, due to annual raises and the hiring of additional marketing personnel. Other marketing expenses increased by approximately $138,702 due to the increase in advertising and marketing events.

General and administrative expenses were $4,465,568 for the three months ended December 31, 2025, compared to $4,411,225 for the three months ended December 31, 2024, or an increase of $54,343 and on a constant currency basis an increase of $32,746. During the three months ended December 31, 2025, salaries increased by $289,749 and increased by $279,058 on a constant currency basis, bad debt expense decreased by $46,621 and decreased by $47,447 on a constant currency basis, and other general and administrative expenses decreased by $188,785 and decreased by $198,865 on a constant currency basis.

Research and development cost was $247,713 for the three months ended December 31, 2025, compared to $333,669 for the three months ended December 31, 2024, for a decrease of $85,956 and on a constant currency basis a decrease of $82,801.

Income/Loss from Operations

Income from operations was $1,299,732 for the three months ended December 31, 2025, compared to a loss from operations of $486,950 for the three months ended December 31, 2024. This represents an increase in income of $1,786,682 with an increase of $1,751,617 on a constant currency basis for the three months ended December 31, 2025, compared with the three months ended December 31, 2024. As a percentage of sales, income from operations was 6.9% for the three months ended December 31, 2025, compared to a loss from operations of 3.1% for the three months ended December 31, 2024.

Other Income and Expense

Other income was $142,501 for the three months ended December 31, 2025, compared to other loss of $367,642 for the three months ended December 31, 2024. This represents an increase in other income of $510,143 with an increase of $513,784 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. During the three months ended December 31, 2025, we recognized a gain of $46,074 in foreign currency exchange transactions compared to a loss of $698,426 for the three months ended December 31, 2024. During the three months ended December 31, 2025, the value of the U.S. dollar decreased 0.7% and the Euro decreased 0.7%, compared to the PKR. During the three months ended December 31, 2024, the value of the U.S. dollar increased 0.4% and the Euro decreased 6.6%, compared to the PKR.

Non-controlling Interest

For the three months ended December 31, 2025, the net income attributable to non-controlling interest was $715,282, compared to the net loss attributable to non-controlling interest of $39,164 for the three months ended December 31, 2024.

Net income (loss) attributable to NetSol

The net income was $246,757 for the three months ended December 31, 2025, compared to a net loss of $1,147,042 for the three months ended December 31, 2024. This is an increase of $1,393,799 with an increase of $1,314,986 on a constant currency basis, compared to the prior year. For the three months ended December 31, 2025, net income per share was $0.02 for basic and diluted shares compared to a net loss per share of $0.10 for basic and diluted shares for the three months ended December 31, 2024.

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

The following table sets forth the items in our unaudited condensed consolidated statement of operations for the six months ended December 31, 2025 and 2024 as a percentage of revenues.

		For the Six Months
		Ended December 31,
		2025				%				2024				%
Net Revenues:
License fees		$	189,707				0.6	%		$	73,917				0.2	%
Subscription and support			18,040,338				53.3	%			16,835,100				55.9	%
Services			15,590,356				46.1	%			13,226,142				43.9	%
Total net revenues			33,820,401				100.0	%			30,135,159				100.0	%
Cost of revenues			18,879,319				55.8	%			16,650,706				55.3	%
Gross profit			14,941,082				44.2	%			13,484,453				44.7	%
Operating expenses:
Selling, general and administrative			15,018,000				44.4	%			14,037,943				46.6	%
Research and development cost			462,056				1.4	%			693,618				2.3	%
Total operating expenses			15,480,056				45.8	%			14,731,561				48.9	%
Income (loss) from operations			(538,974	)			-1.6	%			(1,247,108	)			-4.1	%
Other income and (expenses)
Interest expense			(350,884	)			-1.0	%			(494,605	)			-1.6	%
Interest income			489,749				1.4	%			1,298,939				4.3	%
Gain (loss) on foreign currency exchange transactions			(240,843	)			-0.7	%			(155,881	)			-0.5	%
Other income			81,595				0.2	%			191,589				0.6	%
Total other income (expenses)			(20,383	)			-0.1	%			840,042				2.8	%
Net income (loss) before income taxes			(559,357	)			-1.7	%			(407,066	)			-1.4	%
Income tax provision			(695,969	)			-2.1	%			(561,431	)			-1.9	%
Net income (loss)			(1,255,326	)			-3.7	%			(968,497	)			-3.2	%
Non-controlling interest			(855,205	)			-2.5	%			(107,750	)			-0.4	%
Net income (loss) attributable to NetSol		$	(2,110,531	)			-6.2	%		$	(1,076,247	)			-3.6	%
Net income (loss) per share:
Net income (loss) per common share
Basic		$	(0.18	)						$	(0.09	)
Diluted		$	(0.18	)						$	(0.09	)
Weighted average number of shares outstanding
Basic			11,782,439								11,456,996
Diluted			11,782,439								11,456,996

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 15 "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.

		For the Six Months																Favorable (Unfavorable) Change in				Favorable (Unfavorable) Change due to				Total Favorable (Unfavorable)
		Ended December 31,																Constant				Currency				Change as
		2025				%				2024				%				Currency				Fluctuation				Reported
Net Revenues:		$	33,820,401				100.0	%		$	30,135,159				100.0	%		$	3,364,518			$	320,724			$	3,685,242
Cost of revenues:			18,879,319				55.8	%			16,650,706				55.3	%			(2,263,611	)			34,998				(2,228,613	)
Gross profit			14,941,082				44.2	%			13,484,453				44.7	%			1,100,907				355,722				1,456,629
Operating expenses:			15,480,056				45.8	%			14,731,561				48.9	%			(656,813	)			(91,682	)			(748,495	)
Income (loss) from operations		$	(538,974	)			-1.6	%		$	(1,247,108	)			-4.1	%		$	444,094			$	264,040			$	708,134

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

		2025								2024
		Revenue				%				Revenue				%
North America		$	4,858,031				14.4	%		$	6,075,934				20.2	%
Europe			6,570,115				19.4	%			5,756,466				19.1	%
Asia-Pacific			22,392,255				66.2	%			18,302,759				60.7	%
Total		$	33,820,401				100.0	%		$	30,135,159				100.0	%

Revenues

License fees

License fees for the six months ended December 31, 2025 were $189,707 compared to $73,917 for the six months ended December 31, 2024 reflecting an increase of $115,790 with an increase in constant currency of $111,310.

Subscription and support

Subscription and support fees for the six months ended December 31, 2025, were $18,040,338 compared to $16,835,100 for the six months ended December 31, 2024, reflecting an increase of $1,205,238 with an increase in constant currency of $1,031,209. Subscription and support fees for the six months ended December 31, 2024, included approximately $1,000,000 related to a one-time catch-up from four customers. Subscription and support fees begin once a customer has "gone live" with our product and are recurring in nature. We anticipate these fees to increase over time as we implement our Transcend^TM products.

Services

Services income for the six months ended December 31, 2025, was $15,590,356 compared to $13,226,142 for the six months ended December 31, 2024, reflecting an increase of $2,364,214, with an increase in constant currency of $2,221,999. Services revenue increased primarily due to the timing and composition of the current implementation projects.

Gross Profit

The gross profit was $14,941,082 for the six months ended December 31, 2025, compared with $13,484,453 for the six months ended December 31, 2024. This is an increase of $1,456,629 with an increase in constant currency of $1,100,907. The gross profit percentage for the six months ended December 31, 2025, slightly decreased to 44.2% from 44.8% for the six months ended December 31, 2024. The cost of sales was $18,879,319 for the six months ended December 31, 2025, compared to $16,650,706 for the six months ended December 31, 2024, for an increase of $2,228,613 and on a constant currency basis an increase of $2,263,611. As a percentage of sales, cost of sales increased from 55.3% for the six months ended December 31, 2024, to 55.8% for the six months ended December 31, 2025.

Salaries and consultant fees increased by $1,129,249 from $12,918,171 for the six months ended December 31, 2024, to $14,047,420 for the six months ended December 31, 2025, and on a constant currency basis increased by $1,151,090. The increase is due to annual salary raises. As a percentage of sales, salaries and consultant expenses decreased from 42.9% for the six months ended December 31, 2024, to 41.5% for the six months ended December 31, 2025.

Travel expenses were $1,527,613 for the six months ended December 31, 2025, compared to $1,172,113 for the six months ended December 31, 2024, for an increase of $355,500 with an increase in constant currency of $353,637. As a percentage of sales, travel expense increased from 3.9% for the six months ended December 31, 2024, to 4.5% for the six months ended December 31, 2025. Travel expenses increased due to travel associated with new customer implementation projects.

Depreciation and amortization expense decreased to $398,797 compared to $466,432 for the six months ended December 31, 2024, or a decrease of $67,635 and on a constant currency basis a decrease of $61,851.

Other costs were $2,905,489 for the six months ended December 31, 2025, compared to $2,093,990 for the six months ended December 31, 2024, or an increase of $811,499 and on a constant currency basis an increase of $820,735. The increase is mainly due to an increase in third-party hardware and software costs of approximately $749,100 and hosting fees of approximately $137,169.

Operating Expenses

Operating expenses were $15,480,056 for the six months ended December 31, 2025, compared to $14,731,561, for the six months ended December 31, 2024, for an increase of $748,495 and on a constant currency basis an increase of $656,813. As a percentage of sales, it decreased from 48.9% to 45.8%. The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages, offset by a decrease in other general and administrative expenses and the provision for doubtful accounts.

Selling and marketing expenses were $6,133,032 for the six months ended December 31, 2025, compared to $4,954,596, for the six months ended December 31, 2024, for an increase of $1,178,436 and on a constant currency basis an increase of $1,110,757. The increase is mainly due to increases in salaries and consultants of approximately $831,253, due to annual raises and the hiring of additional marketing personnel. Other marketing expenses increased by approximately $290,538 due to the increase in advertising and marketing events.

General and administrative expenses were $8,884,968 for the six months ended December 31, 2025, compared to $9,083,347 for the six months ended December 31, 2024, or a decrease of $198,379 and on a constant currency basis a decrease of $229,340. During the six months ended December 31, 2025, salaries increased by $434,637 and increased by $423,633 on a constant currency basis, bad debt expense decreased by $384,710 and decreased by $385,509 on a constant currency basis, and other general and administrative expenses decreased by $248,306 and decreased by $267,464 on a constant currency basis.

Research and development cost was $462,056 for the six months ended December 31, 2025, compared to $693,618 for the six months ended December 31, 2024, for a decrease of $231,562, and on a constant currency basis a decrease of $224,604.

Income/Loss from Operations

Loss from operations was $538,974 for the six months ended December 31, 2025, compared to $1,247,108 for the six months ended December 31, 2024. This represents a decrease in loss of $708,134 with a decrease of $444,094 on a constant currency basis for the six months ended December 31, 2025, compared with the six months ended December 31, 2024. As a percentage of sales, loss from operations was 1.6% for the six months ended December 31, 2025, compared to a loss from operations of 4.1% for the six months ended December 31, 2024.

Other Income and Expense

Other expense was $20,383 for the six months ended December 31, 2025, compared to other income of $840,042 for the six months ended December 31, 2024. This represents a decrease in other income of $860,425 with a decrease of $857,790 on a constant currency basis. The decrease is primarily due to lower interest income, driven by a reduction in interest rates from approximately 15.0%-19.6% for the six months ended December 31, 2024, to approximately 8.9%-10.8% for the six months ended December 31, 2025.

Non-controlling Interest

For the six months ended December 31, 2025, the net income attributable to non-controlling interest was $855,205, compared to $107,750 for the six months ended December 31, 2024.

Net income (loss) attributable to NetSol

The net loss was $2,110,531 for the six months ended December 31, 2025, compared to $1,076,247 for the six months ended December 31, 2024. This is an increase in net loss of $1,034,284 with an increase of $1,386,421 on a constant currency basis, compared to the prior year. For the six months ended December 31, 2025, net loss per share was $0.18 for basic and diluted shares compared to net loss per share of $0.09 for basic and diluted shares for the six months ended December 31, 2024.

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 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.

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.

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, 2025 and 2024 are as follows:

		For the Three Months								For the Six Months
		Ended December 31,								Ended December 31,
		2025				2024				2025				2024
Net Income (loss) attributable to NetSol		$	246,757			$	(1,147,042	)		$	(2,110,531	)		$	(1,076,247	)
Non-controlling interest			715,282				(39,164	)			855,205				107,750
Income taxes			480,194				331,614				695,969				561,431
Depreciation and amortization			299,746				372,585				624,352				738,582
Interest expense			176,273				236,386				350,884				494,605
Interest (income)			(208,775	)			(529,072	)			(489,749	)			(1,298,939	)
EBITDA		$	1,709,477			$	(774,693	)		$	(73,870	)		$	(472,818	)
Add back:
Non-cash stock-based compensation			61,000				47,355				206,400				95,134
Adjusted EBITDA, gross		$	1,770,477			$	(727,338	)		$	132,530			$	(377,684	)
Less non-controlling interest (a)			(868,111	)			(61,529	)			(1,092,059	)			(207,310	)
Adjusted EBITDA, net		$	902,366			$	(788,867	)		$	(959,529	)		$	(584,994	)
Weighted Average number of shares outstanding
Basic			11,797,068				11,484,298				11,782,439				11,456,996
Diluted			11,812,098				11,484,298				11,782,439				11,456,996
Basic adjusted EBITDA		$	0.08			$	(0.07	)		$	(0.08	)		$	(0.05	)
Diluted adjusted EBITDA		$	0.08			$	(0.07	)		$	(0.08	)		$	(0.05	)
(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		$	715,282			$	(39,164	)		$	855,205			$	107,750
Income Taxes			95,791				102,414				135,583				173,001
Depreciation and amortization			69,777				92,546				144,862				181,681
Interest expense			51,081				68,636				99,908				147,828
Interest (income)			(63,820	)			(165,365	)			(143,499	)			(408,012	)
EBITDA		$	868,111			$	59,067			$	1,092,059			$	202,248
Add back:
Non-cash stock-based compensation			-				2,462				-				5,062
Adjusted EBITDA of non-controlling interest		$	868,111			$	61,529			$	1,092,059			$	207,310

LIQUIDITY AND CAPITAL RESOURCES

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

Net cash provided by operating activities was $554,881 for the six months ended December 31, 2025 compared to $369,716 for the six months ended December 31, 2024. At December 31, 2025, we had current assets of $46,412,511 and current liabilities of $19,995,825. We had accounts receivable of $7,776,096 at December 31, 2025 compared to $7,527,572 at June 30, 2025. We had revenues in excess of billings of $17,844,091 at December 31, 2025 compared to $19,134,385 at June 30, 2025 of which $763,396 and $903,766 is shown as long-term as of December 31, 2025 and June 30, 2025, respectively. The long-term portion was discounted by $170,629 and $208,037 at December 31, 2025 and June 30, 2025, respectively, using the discounted cash flow method with interest rates ranging from 4.2% to 17.5%. During the six months ended December 31, 2025, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and revenues in excess of billings decreased by $1,041,770 from $26,661,957 at June 30, 2025 to $25,620,187 at December 31, 2025. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $8,059,205 and $8,509,841, respectively, at December 31, 2025. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $8,010,844 and $8,240,061, respectively, at June 30, 2025.

The average days sales outstanding for the six months ended December 31, 2025 and 2024 were 142 and 140 days, respectively. The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and revenues in excess of billings.

Net cash used in investing activities was $753,412 for the six months ended December 31, 2025, compared to $531,477 for the six months ended December 31, 2024. We had purchases of property and equipment of $856,330 compared to $568,134 for the six months ended December 31, 2024.

Net cash provided by financing activities was $724,853 for the six months ended December 31, 2025, compared to $2,637,763 for the six months ended December 31, 2024. During the six months ended December 31, 2025, we received bank proceeds of $792,484 compared to $2,676,932 during the six months ended December 31, 2024. During the six months ended December 31, 2025, we had net payments for bank loans and finance leases of $425,764 compared to $162,370 for the six months ended December 31, 2024. Employees of our subsidiary, NetSol PK, exercised 1,346,330 options of common stock for $370,553, of which $358,133 was received during the six months ended December 31, 2025 and $12,420 was received during the fiscal year ended June 30, 2025. We are operating in various geographical regions of the world through our various subsidiaries. Those subsidiaries have financial arrangements with various financial institutions to meet both their short and long-term funding requirements. These loans will become due at different maturity dates as described in Note 12 of the financial statements. 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 subscription and support agreements, intercompany charges for corporate services, and through the exercise of options and warrants. As of December 31, 2025, we had approximately $18.1 million of cash, cash equivalents and marketable securities of which approximately $17.3 million is held by our foreign subsidiaries. As of June 30, 2025, we had approximately $17.4 million of cash, cash equivalents and marketable securities of which approximately $16.4 million is held by our foreign subsidiaries.

We remain open to strategic relationships that would provide value added benefits. The focus will remain on continuously improving cash reserves internally and reducing reliance on external capital raises.

As a growing company, we have ongoing 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 $1.5 million for APAC, the U.S. and Europe's new business development activities and infrastructure enhancements, which we expect to provide from current operations.

Financial Covenants

The following tables present financial covenants associated with our borrowings.

Subsidiary		Bank / Facility		Facility Amount		Key Financial Covenants / Conditions
NTE (UK)		Overdraft facility		£300,000 ($405,405)		Eligible trade receivables (≤90 days old, net of provisions, excluding intercompany) must be at least 200% of the facility balance
NetSol PK		Askari Bank - Export refinance		PKR 600 million ($2,140,029)		Long-term debt-to-equity ratio of 60:40; Current ratio of at least 1:1
NetSol PK		Askari Bank - Running finance		PKR 4.1 million ($14,449)
NetSol PK		Habib Metro - Export refinance		PKR 1.3 billion ($4,636,730)
NetSol PK		Bank Al-Habib - Export refinance		PKR 400 million ($1,426,687)
NetSol PK		Samba Bank - Export refinance		PKR 380 million ($1,355,352)		Current ratio ≥ 1:1; Interest coverage ≥ 4x; Leverage ratio ≤ 2x; Debt service coverage ≥ 4x

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 are prepared in accordance with U.S. GAAP, and they conform to general practices in our industry. We apply critical accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate manner. There have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

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.