Netsol Technologies Inc: Form 10-K for the period ended Jun 30, 2025

GENERAL OVERVIEW

NETSOL Technologies’ solutions and services enable original equipment manufacturers (OEMs), dealerships and financial institutions to sell, finance and lease assets. The company serves customers across over 30 countries. 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.

NETSOL’s primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of its suite of financial applications to leading businesses in the global finance and leasing space as well as automotive digital retail.

The Company’s clients include blue-chip organizations, Dow Jones 30 Industrials, Fortune 500 companies, global vehicle manufacturers through their captive finance companies (“auto captives”), unrelated automotive finance companies (“non-captives”), equipment finance and leasing companies, automotive and equipment OEMs, commercial lenders, dealers, brokers, banks and other financial institutions – all of which are serviced by NETSOL’s strategically located support and delivery centers across the globe.

Founded in 1996, NETSOL is headquartered in Encino, California. The company follows a global strategy for sales and delivery of its portfolio of solutions and services through its offices in the following locations:

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OUR BUSINESS

Company Business Model

NETSOL specializes in providing AI-powered, scalable and customizable technology solutions primarily to the global asset finance and leasing industry. The Company also empowers OEMS, dealer groups and dealerships with a digital retail platform that transforms how they sell, finance and deliver cars. Our value proposition lies in delivering innovative technologies that enhance operational efficiency and productivity. Further, NETSOL also provides a range of services that are not limited to the financial services industry. We reach our customers through a combination of direct sales efforts, strategic partnerships with associations, a robust online presence, participation in industry events and a variety of targeted marketing channels.

The Company generates its core revenue from the following primary 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 technology solutions for the industry. The Company offers its solutions 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 or solution(s).

Expertise

Our expertise in enterprise technology and financial application development has positioned us as a global player in AI-powered asset finance and digital retail solutions, enabling us to establish a strong footprint across key markets in North America, Europe and Asia-Pacific.

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 alongside the automotive digital retail space. 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 market. We have had continual operations for over two and a half 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 are able to extend services and support development through a combination of onsite and offsite resources. This approach has allowed us to offer blended rates to our customers by employing a unique and cost-effective global development model.

Our global operations are broken down into the following primary regions: North America, Europe, Asia Pacific and the Middle East. All of the subsidiaries are seamlessly integrated to function effectively with global delivery capabilities, cross selling to multinational asset finance companies, automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers, banks and other financial institutions, 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

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

Our solutions 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. They empower our customers to effectively manage their complex operations, enabling them to thrive in hyper-competitive global markets.

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

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 offers advanced retail and mobility solutions that keep dealerships and OEMs at the cutting edge of consumer expectations.

Transcend™ Finance

We streamline finance and leasing operations with a comprehensive solution for originations, servicing and wholesale finance. Transcend™ Finance 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

Transcend™ Marketplace offers a suite of flexible, component-based solutions that integrate seamlessly with the customer’s existing infrastructure. Transcend™ Marketplace contains modular, API-first solutions that address every aspect of finance and leasing using tools for calculations, document generation, loan origination and lending configurations.

Flex™

Flex is an application program interface (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. IndexTM 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 DockTM’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 as well as 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, LinkTM 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.

IMPLEMENTATION PROCESS

The implementation process of our technology can span up to fifteen months depending upon the methodology, complexity and scope. The implementation process may also include related software services such as configuration, data migration, training, gaps development and any other additional third-party interfaces. Even after implementation, customers regularly seek enhancements and additions to improve their business processes and have changing requirements addressed at mutually agreed rates.

Post implementation, our consultants may remain at the client site to assist the customer with smooth operations. After this phase, the regular maintenance and support services phase for the implemented technology begins in exchange for agreed subscriptions or support fees. In addition to the daily rate paid by the customer for each consultant engaged, the customer also pays for all visa and transportation-related expenses, boarding of the consultants and a living allowance. Our involvement in all the above steps is suitably priced to bring value to our customers and increase our profitability.

Cloud-enabled solutions are offered via seamless and rapid deployments. The swift speed of implementation for our cloud-ready products enables businesses to be more responsive and attain a competitive advantage. For example, certain API-first, SaaS products of ours via TranscendTM Marketplace can be integrated into a customer’s ecosystem within mere minutes.

PRICING AND REVENUE STREAMS

Our revenue streams are the outcome of the following four main areas:

• Product licensing
• Subscription-based pricing
• Implementation and customization-related services
• Post implementation, support-related services

License fees can range up to a multi-million-dollar fee for single or multiple module implementations. License revenue is realized with traditional, non-SaaS-based agreements, whereas SaaS-based agreements do not contain license fees and are offered via flexible, value-driven, subscription-based pricing. There are various attributes which determine the level of pricing complexity, a few of which are: number of contracts, size of the portfolio, IT budgets, business strategy of the customer, internal business processes followed by the customer, number of business users, amount of customization required, the complexity of data migration and branch network of the customer.

We recognize revenue from license contracts when the software has been delivered to the customer. Implementation-related services, including customization, configuration, data migration, training and third-party interfaces are recognized as the services are performed. Post-implementation support services are then provided on a continued basis. The annual support fee, typically an agreed upon percentage of overall monetary value of the license, then becomes an ongoing revenue stream realized yearly. Revenue from software services includes fixed price and time, and materials-based contracts and is recognized as the services are performed.

In order to avoid lumpiness in our revenues and to ensure a predictable revenue base over coming years, the business has shifted to a pricing strategy whereby the business offers its cloud-ready products at SaaS/subscription-based pricing models. Rapid deployments coupled with affordable prices/payment schedules is expected to lead the business towards volume-based selling. Moreover, this value-driven pricing plan is intended to decrease the initial buy-in cost for new customers by eliminating heavy license fees, reducing the sales cycles and providing an alternative to current customers seeking lower software usage and maintenance costs.

MARKETING AND SELLING

Our global marketing activities aim to establish and maintain a strong preference and loyalty for NETSOL and its offerings. Marketing activities are conducted both at the global and regional levels. The Global Marketing department oversees all communication, advertising, public relations and manages all digital platforms, including the Company’s website, social media channels and partnerships within the industry.

As part of our lead-generation activities, our regional representatives represent NETSOL as the Company sponsors, exhibits at, and attends annual industry-leading conferences, conventions, seminars, summits and other events. The company maintains its presence at these events to demonstrate our product and service offerings and for important networking purposes. NETSOL also takes part in webinars, podcasts and holds private briefings with associations and individual companies.

GROWTH PROSPECTS

We are eyeing key international markets for growth in sales for NETSOL’s Transcend™ Platform. Our sales strategy not only focuses on expansion into new geographic markets, but within existing markets into new verticals with targeting of Tier 2 and Tier 3 prospects as well.

Growth in North America and Europe is expected to come from the potential market for replacement of legacy systems as well as acquisition of new customers. Our finance and leasing platform Transcend™ Finance is aimed at providing a highly flexible and robust solution based on the latest technology and advanced architecture for North American and European customers looking to replace their legacy systems. We believe that the product can provide substantial competitive disruption to the market’s lagging technology provided by incumbent vendors. The existing customer base may also represent latent demand for increased service and support revenues by offering business process optimization, customization and upgrade services. With a market-ready product with successful implementations, the prospects for Transcend™ Finance in the regions are positive.

Further traction in North America and Europe will come from Transcend™ Finance deployed on the cloud, which will continue to allow catering to not only larger organizations, but also small and medium sized companies. Currently, in the United Kingdom, a number of banks and other financial institutions are utilizing our Transcend™ Marketplace solutions offered via subscription-based pricing and swift deployments.

Our product strategy has grown significantly in recent years, which includes the recent launch of our broker and lender portals, which marks a key step forward in delivering more value to our partners.

Growth in our traditionally strong base in Asia Pacific is expected through diversification across market segments to include new customers in related banking and commercial lending areas. At the same time, the existing customer base is tapped for increased service and support revenues by offering enhanced features and new solutions to emerging customer needs. In addition, there is also potential for Transcend™ Finance in Asia Pacific in the form of existing customers who are looking for replacement of their current system. In China, we are a leader in the auto finance enterprise solution domain. We will continue strengthening our position within existing multinational auto manufacturers, as well as local Chinese captive finance and leasing companies. It is pertinent to mention that these Chinese automakers and finance companies are growing rapidly outside of the country and that our solutions assist them in this growth. Our sales strategy focuses on supporting Chinese manufacturers in expanding their presence in the EU and other regions of APAC.

We believe our digital retail platform presents significant growth opportunities in the evolving digital marketplace. Transcend™ Retail is currently used by major customers in the United States, including some of the largest and most recognized dealership networks. We foresee further adoption of the platform in the region. Our digital retail solution transforms how OEMs, dealer groups and dealerships sell, finance and deliver cars, enabling them to provide personalized, fast and transparent car-buying experiences across all digital and in-store touchpoints.

Beyond our products, we also anticipate demand for our services that empower our clients to excel in the competitive global economy. Through Transcend™ Consultancy, we offer expertise across critical areas such as information security, data engineering and cloud services, helping businesses design tailored solutions for innovation and growth.

THE MARKETS

We deliver our comprehensive suite of technology solutions and services across major markets worldwide, positioning ourselves as a leading provider in the financial services, and particularly, the global asset finance and leasing sector. Leveraging our extensive global footprint, we offer scalable and innovative solutions tailored to meet the unique needs of clients in diverse geographic regions. Our strategic presence in key markets enables us to effectively address local regulations and market dynamics, thereby enhancing customer satisfaction and fostering long-term partnerships.

PEOPLE AND CULTURE

We believe that our growth and success are attributable in large part to the high caliber of our global team and our commitment to maintain the values on which our success has been based. We support gender diversity on a global basis. We are an equal opportunity employer with a large workforce of approximately 1460 employees, promoting a culture of diversity and inclusion.

NETSOL stands as a beacon of innovation, excellence and dedication to customer success. We value transparency and integrity, ensuring that honesty guides our interactions. We are renowned for innovation, expertise and a customer-centric approach.

We believe we should give back to the community and our employees as much as possible. Certain subsidiaries are located in regions where basic services are not readily available. Where possible, we act to not only improve the quality of life of our employees, but also the standard of living in these regions. Examples of such programs are as follows:

Literacy program: Launched to educate children of our support staff, the main objective of this program is to enable them to acquire basic reading, writing and arithmetic skills.

Higher education and science and research institutions: In order to support higher education in Pakistan, we have contributed endowments to NUST, Forman Christian College and a few other universities who are focused on science and engineering.

Noble cause fund: A noble cause fund has been established to meet medical and education expenses of the children of our support staff. Our employees voluntarily contribute a fixed amount every month to the fund and NETSOL matches the employee subscriptions with an equivalent contribution amount. A portion of this fund is also utilized to support social needs of certain institutions and individuals outside of NETSOL.

Preventative health care program: In addition to the comprehensive outpatient and in-patient medical benefits, preventive health care has also been introduced. This phased program focuses on vaccination of our employees against such diseases as Hepatitis – A/B, Tetanus, Typhoid, Flu and COVID-19 on a routine basis.

There is significant competition for employees with the skills required to perform the services we offer. We run an elaborate training program for different cadres of employees to cover technical skills and business domain knowledge alongside communication, management and leadership skills. We believe we have been successful in our efforts to attract and retain the highest level of talent available, partly because of our emphasis on core values, training and professional growth. We intend to continue to recruit, hire and promote employees who share our vision.

COMPETITION

A number of companies offer products and services that overlap and are competitive with those offered by us. Some of NETSOL’s main competitors for its finance and leasing technology include Alfa, Constellation Financial Software, FIS Global, LTI Technology Solutions, Odessa, Solifi, Soft4 and Sopra Banking Software. The Company’s competitors for digital retail include Tekion and CDK Global. Most of our major competitors are based in North America and Europe, with a smaller presence in APAC and the Middle East.

CUSTOMERS

NETSOL’s solutions and services cater to a broad spectrum of finance and leasing businesses, from automotive captive finance companies to equipment finance and leasing companies to large regional banks, as well as its customers for digital retail, including OEMs, dealer groups and dealerships.

A number of NETSOL’s customers include world renowned auto manufacturers through their finance arms. NETSOL is a strategic business partner for Daimler and BMW (which consists of a group of many companies in different countries), which accounts for approximately 19.1% and 16.1%, respectively, of our revenue for our fiscal year ended June 30, 2025. Other globally renowned auto captives that are customers of the company include Toyota, Nissan, Ford and FIAT.

Other customers include equipment finance and leasing companies, banks and other financial institutions worldwide. Some of these clients include MINI Financial Services, BMO, Bank of Hawaii, First Hawaiian Leasing, Genpact, SCI Lease Corp, Aldermore, Investec, Close Brothers, Haydock Finance, Charles and Dean, Maple Commercial Finance, among many others.

Information regarding financial data by geographic areas is set forth in Item 7 and Item 8 of this Annual Report on form 10-K. See note 17 of Notes to Consolidated Financial Statements under Item 8.

INTELLECTUAL PROPERTY

NETSOL relies upon a combination of non-disclosure and other contractual arrangements, as well as common law trade secret, copyright and trademark laws to protect its proprietary rights. NETSOL enters into confidentiality agreements with its employees, generally requires its consultants and clients to enter into these agreements, and limits access to and distribution of its proprietary information. The NETSOL “N” logo and name has been copyrighted and trademark registered in Pakistan. The NETSOL “N” logo has been registered with the U.S. Patent and Trademark Office. NFS Ascent® has been registered with the U.S. Patent and Trademark Office. OTOZ® was registered with the U.S. Patent and Trademark Office. The Company intends to trademark and copyright its intellectual property as necessary and in the appropriate jurisdictions.

GOVERNMENTAL APPROVAL AND REGULATION

Current Company operations do not require specific governmental approvals. Like all companies, including those with multinational subsidiaries, we are subject to the laws of the countries in which we maintain subsidiaries and conduct operations. Governments in which our subsidiaries are located, including our largest subsidiary in Pakistan, may require approval for the repatriation of investments.

AVAILABLE INFORMATION

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.gov (http://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 Annual Report on Form 10-K 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. 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/csr. The content of our websites is not intended to be incorporated by reference into this Annual Report on Form 10-K 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.

Pakistan

The political and economic environment in Pakistan may negatively affect our business.

Despite a recent general election, the government remains unstable. The political unsteadiness delays governmental functions. If such unsteadiness continues in the long term, it could result in difficulty in necessary interactions with the government as it relates to government contracts and personnel access to necessary government functions. While there is no guarantee, we anticipate that the new government policies may lead to macroeconomic stability.

While the devaluation of the Pakistan Rupee in comparison to the US Dollar has stabilized, the higher-than-average inflation rate in Pakistan may continue to negatively impact our largest subsidiary and accordingly the Company’s financials as a whole.

General Economic Conditions

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 have negative impacts on our ability to acquire new business to and deliver on new business when contracted.

Inflation and higher interest rates globally have greatly increased the cost of doing business, including salaries and benefits worldwide, affecting our profitability. If inflation does not stabilize, our profitability can be impacted.

Cybersecurity Risk Management and Strategy

We face various cyber risks, including, but not limited to, risks related to unauthorized access, misuse, customer data theft, computer viruses, system disruptions, ransomware, malicious software and other intrusions. We utilize a multilayered, proactive approach to identify, evaluate, mitigate and prevent potential cyber and information security threats through our cybersecurity risk management program 24/7. Our cybersecurity risk management program is designed to identify, assess, prioritize and mitigate risks across the organization to enhance our resilience and support the achievement of our strategic objectives. This integrated approach helps ensure that cyber risks are not viewed in isolation, but are assessed, prioritized and managed in alignment with the Company’s operational, financial and strategic risks, assisting the Company in more effectively managing interdependencies among risks and enhancing risk mitigation strategies.

We devote resources to protecting the security of our computer systems, software, networks and other technology assets. Our efforts are designed to adapt to the evolution of information security risks and appropriate best practices and include physical, administrative and technical safeguards. Our cybersecurity risk management program is designed to help coordinate the Company’s identification of response to and recovery from cybersecurity incidents across all consolidated entities. This includes rapid identification, assessment, investigation and remediation of incidents, as well as complying with applicable legal obligations, communicated promptly and effectively.

Our internal audit team assesses regularly the effectiveness of our internal controls relating to cybersecurity and updates as necessary. Our management team also engages, at times when needed, certain outside advisors and consultants to assist in the identification, oversight, evaluation and management of cybersecurity risks, as well as to advise on specific topics. As part of our overall risk mitigation strategy, the Company also maintains cyber insurance coverage; however, such insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

We have various processes and procedures in place to evaluate cybersecurity threats associated with third parties. We have not identified any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, performance, results of our operations, or financial condition.

Cybersecurity Governance and Oversight

The Company’s cybersecurity risk management program is supervised by our Senior Manager of Information Security (SMIS), who reports directly to the Company’s Chief Operating Officer (“COO”) in Pakistan. The SMIS and his team are responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture and processes. Our current SMIS received his bachelor’s in computer sciences and has over 20 years of cybersecurity experience, including relevant prior senior leadership experience at our Company. Furthermore, he has also achieved globally recognized information security certifications, including CISSP (Certified Information Systems Security Professional), CISA (Certified Information Systems Auditor), CISM (Certified Information Security Manager), CRISC (Certified in Risk and Information Systems Control), CompTIA Security+, ISO 27001 Lead Auditor, CEH (Certified Ethical Hacker), CHFI (Computer Hacking Forensic Investigator), among others.

The SMIS attends and is invited to all Company Cybersecurity Committee meetings, a cross-functional management committee that drives awareness, ownership and alignment across broad governance for effective cybersecurity risk management. The Cybersecurity Committee is composed of senior leaders from our legal, information technology, cybersecurity, and audit sections. Subject matter experts are also invited, as appropriate. The Cybersecurity Committee meets at least quarterly and has responsibility for oversight and validation of the Company’s cybersecurity strategic direction, risks and threats, priorities, and resource allocation. The SMIS and his team, as well as the Cybersecurity Committee, are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents in accordance with the Company’s cyber incident response plan.

The Board of Directors receives regular reports from the SMIS and Cybersecurity Committee on, among other things, the Company’s cyber risks and threats, the status of projects to strengths of the Company’s information security systems, assessments of the Company’s security program, insurance, and the emerging threat landscape. In accordance with our cyber incident response plan, the Cybersecurity committee s promptly informed by SMIS’s team of cybersecurity incidents that could adversely affect the Company or its information systems and is also regularly updated about incidents with less impact potential. The Board of Directors and Audit committee are informed of any incidents that could adversely affect the Company by the Cybersecurity committee and SMIS’s team.

In an effort to detect and defend against cyber threats, the Company annually, and, periodically as needed, provides its employees with various cybersecurity and data protection training programs. These programs cover timely and relevant topics, including social engineering, phishing, password protection, confidential data protection, asset use and mobile security, and educate employees on the importance of reporting all incidents promptly to the Company’s centrally managed cyber defense and security operations.

Our corporate headquarters are located in Encino, California where we lease approximately 2,400 square feet of office space. We own our Lahore Technology Campus which consists of approximately 140,000 square feet of computer and general office space. This includes two adjacent five story buildings having a covered area of approximately 90,000 square feet with the capacity to house approximately 1,000 resources. In addition, we maintain leased office spaces in the UK, China, Australia, Thailand and a shared office in Indonesia. Our NTA office is located in Austin, Texas. We believe our existing facilities, both owned and leased, are in good condition and suitable for the conduct of our business.

The following discussion is intended to assist in understanding our financial position and results of operations for the year ended June 30, 2025. It should be read together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.

Listed below are a few of NetSol’s highlights for the Year ended June 30, 2025:

• We signed a multi-year agreement with the captive finance arm of a leading Japanese automotive manufacturer to implement its flagship Transcend™ Finance platform across both retail and wholesale operations in Australia and New Zealand. The agreement, structured with a five-year total cost of ownership of approximately $21 million, reflects the client’s strategic commitment to deploying a unified, next-generation solution. The platform implementation is aimed at driving enterprise-wide operational efficiencies, supporting digital transformation objectives, and enhancing long-term scalability and regulatory readiness across the Australia/New Zealand finance ecosystem.
• We successfully executed a binding, multi-year maintenance and technical upgrade agreement with the captive finance arm of a leading Japanese automotive manufacturer. The agreement, with a total cost of ownership exceeding $4 million, governs the upgrade and extended support of the client’s retail finance platform through 2027. The scope includes comprehensive system upgrades, implementation of enhanced security protocols, performance optimization, and full-cycle testing.
• We broadened our revenue base and expanded our managed service portfolio by securing three new client engagements covering audit, business process outsourcing (BPO), and standby services. One of these clients is already live on our redesigned standby platform. Collectively, these contracts are expected to contribute nearly $400,000 in incremental revenues over their respective terms, pursuant to the terms and service levels defined in each executed agreement.
• We formalized an agreement with the captive finance division of a prominent North American automotive retailer to conduct a structured discovery and assessment phase. This engagement, projected to generate approximately $800,000 in revenue, is aimed at evaluating current platform capabilities, identifying custom development opportunities, and defining the scope for a future technology solution. The outcome of this phase will inform a potential omnichannel transformation strategy focused on enhancing customer experience and operational efficiency.
• We have generated approximately $6.1 million in revenue through the successful implementation of client-approved platform modifications and enhancement requests. These initiatives were executed across multiple regional markets in accordance with the terms of individual service orders, ensuring continuity, improved performance, and alignment with evolving business needs.
• We entered into an agreement with a Chinese leasing company to deploy our Transcend™ Finance Suite, including Omni POS, Contract Management System, and a customized funding platform compliant with local regulations. The contract is expected to generate approximately $2.7 million in revenue during the contract term.
• We partnered with Sindbad Management SPC to implement Transcend™ Finance Platform (Point-of-Sale, Credit Underwriting, Contract Management) under a scalable pricing model, supporting high-value asset financing and regional growth. The contract is expected to generate $1.7 million in revenue during the contract term.
• We secured $1 million in additional revenue for the ongoing Transcend™ Retail Platform implementation for a U.S. auto manufacturer, driven by customizations to meet their evolving business needs.
• We amended an agreement with an existing UK/EU client that will provide additional revenue of €3 million, further strengthening the long-term partnership.
• We hired a Vice President of Artificial Intelligence, who has 15+ years in fintech, insurance, and entertainment, to lead Transcend™ AI Labs, accelerating our AI-first strategy in asset finance.
• We announced the go-live of our Transcend™ Finance platform for the Australian operations of a leading Japanese equipment finance company, building on our existing partnership in New Zealand and enhancing their regional operations with additional digital self-service solutions.

Marketing and Business Development Activities

We continue to pursue a series of strategic marketing and business development initiatives to capitalize on favorable market conditions and drive growth across our business lines. These efforts reflect our commitment to building a stronger market presence, expanding our customer base and maintaining a careful focus on profitability. These efforts include: repositioning our brand and messaging; brand strengthening and awareness; raising industry expertise through speaking engagements and participation in awards and recognitions; accelerating digital campaigns focused on content marketing; leveraging analytics and marketing automation tools to improve campaign effectiveness and optimize marketing return on investment; creating comprehensive go-to-market plans for new launches and feature upgrades; customer centric sales enablement; targeting new global and product markets; using AI to enhance productivity; expanding market reach through participation in industry associations; and, adopting practices that strengthen leadership and talent retention.

MATERIAL TRENDS AFFECTING NETSOL

Management has identified the following material trends affecting NETSOL.

Positive trends:

• According to S&P Global Mobility, the forecast for new vehicle sales worldwide in 2025 is 89.6 million units, which is a modest 1.7% year-over-year growth in light vehicle sales. And the US automotive sales of new vehicles in 2025 are expected to be around 16.2 million units, which is a 1.2% to 1.4% increase from 2024. This would be the highest annual sales figure since 2019.
• The annual inflation rate remained steady for the U.S. at 2.7% for the 12 months ending July 2025. (USinflationcalculator.com)
• 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 account of 48.7% of all new car sales in China. (China Automobile Manufacturers Association)
• The China-Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $65 billion from the originally planned $46 billion, in Pakistan’s energy and infrastructure sectors. In June 2024, China authorized a new $2.3 billion loan at a discounted rate to Pakistan as a short-term loan.
• The overall size of the mobility market in Europe and the United States is projected to increase over $425 billion combined, by 2035 or a compound CAGR of 5% from 2022. (Deloitte Global Automotive Mobility Market Simulation Tool)
• The global automotive finance market accounted for $378,957 billion in 2024 and is expected to increase to $798,657 billion by 2035 at a CAGR of 7.7% according to Global Growth Insights.

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.
• 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.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted 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. Critical accounting policies for us include revenue recognition and multiple element arrangements, intangible assets, software development costs, and goodwill.

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 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 standard-alone 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.

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.

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.

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, maintenance releases 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, a majority of 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.

Significant Judgments

More judgments and estimates are required under Topic 606 than were required under Topic 605. 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 (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.

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.

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-cancellable 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 cash received. These costs are recorded within sales and marketing expense in the Consolidated Statement of Operations.
• The Company does not disclose the value of unsatisfied performance obligations for contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed (applies to time-and-material engagements).

Costs to Obtain a Contract

The Company does not have a material amount of costs to obtain a contract capitalized at any balance sheet date. In general, we incur few direct incremental costs of obtaining new customer contracts. We rarely incur incremental costs to review or otherwise enter into contractual arrangements with customers. In addition, our sales personnel receive fees that we refer to as commissions, but that are based on more than simply signing up new customers. Our sales personnel are required to perform additional duties beyond new customer contract inception dates, including fulfillment duties and collections efforts.

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. The Company recognizes compensation expense net of actual forfeitures as they occur. Accordingly, no estimate is made for the future forfeitures at the time of grant.

GOODWILL

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business 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. In conducting its annual impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that the fair value of the reporting unit is less than its carrying amount, the Company performs a quantitative assessment, and the fair value of the reporting unit is determined by analyzing the expected present value of future cash flows. If the carrying value of the reporting unit continues to exceed its fair value, the fair value of the reporting unit’s goodwill is calculated and an impairment loss equal to the excess is recorded.

Recent Accounting Pronouncement

See Note 2 “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, for a full description of recent accounting pronouncements, including the expected dates of adoption.

RESULTS OF OPERATIONS

THE YEAR ENDED JUNE 30, 2025 COMPARED TO THE YEAR ENDED JUNE 30, 2024

The following table sets forth the items in our consolidated statement of operations for the years ended June 30, 2025 and 2024 as a percentage of revenues.

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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 17 “Segment Information and Geographic Areas” within the Notes to the 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.

Net revenues for the years ended June 30, 2025 and 2024 by segment are as follows:

Revenues

License Fees

License fees for the year ended June 30, 2025 were $598,633 compared to $5,449,991 for the year ended June 30, 2024 reflecting a decrease of $4,851,358 with a change in constant currency of $4,855,917. In the fiscal year ended June 30, 2025, we recognized approximately $487,000 from a new customer in Indonesia. In the fiscal year ended June 30, 2024, we recognized approximately $2,800,000 related to the sale of our NFS Ascent® CMS software to a renowned US auto manufacturer based in China, and we recognized approximately $1,142,000 related to the license renewal with an existing customer, and we recognized approximately $465,000 related to the additional sale of our NFS Ascent® CMS software to a renowned German auto manufacturer based in China, and we recognized approximately $610,000 related to selling licenses of our digital applications to a current Indonesian customer.

Subscription and Support

Subscription and support fees for the year ended June 30, 2025, were $32,934,648 compared to $27,952,768 for the year ended June 30, 2024 reflecting an increase of $4,981,880 with an increase in constant currency of $4,788,597. The increase includes a one-time catch up of approximately $1,693,000 from five of our customers. Subscription and support fees are recurring in nature, and we anticipate these fees to gradually increase as we increase our SaaS customer base and implement NFS Ascent®.

Services

Services income for the year ended June 30, 2025, was $32,554,948 compared to $27,990,332 for the year ended June 30, 2024, reflecting an increase of $4,564,616 with an increase in constant currency of $4,160,167. The increase is mainly due to implementation services in APAC, the U.S. and Europe.

Gross Profit

The gross profit was $32,574,532 for the year ended June 30, 2025, compared with $29,284,870 for the year ended June 30, 2024. This is an increase of $3,289,662 with an increase in constant currency of $3,177,383. The gross profit percentage for the year ended June 30, 2025, increased to 49.3% from 47.7% for the year ended June 30, 2024. The cost of sales was $33,513,697 for the year ended June 30, 2025, compared to $32,108,221 for the year ended June 30, 2024, for an increase of $1,405,476 and on a constant currency basis an increase of $1,007,408. As a percentage of sales, cost of sales decreased from 52.3% for the year ended June 30, 2024, to 50.7% for the year ended June 30, 2025.

Salaries and consultant fees increased by $2,174,558 from $23,622,907 for the year ended June 30, 2024, to $25,797,465 for the year ended June 30, 2025, and on a constant currency basis increased by $1,869,462. The increase is due to annual increases in salary. As a percentage of sales, salaries and consultant expense increased from 38.5% for the year ended June 30, 2024, to 39.0% for the year ended June 30, 2025.

Travel decreased by $879,931 from $2,943,442 for the year ended June 30, 2024, to $2,063,511 for the year ended June 30, 2025, and on a constant currency basis decreased by $901,699. The decrease in travel expense is due to the decrease in travel for the current implementations. As a percentage of sales, travel expense decreased from 4.8% for year ended June 30, 2024, to 3.1% for the year ended June 30, 2025.

Depreciation and amortization expense decreased to $952,331 compared to $1,144,809 for the year ended June 30, 2024, or a decrease of $192,478 and on a constant currency basis a decrease of $202,630.

Other costs increased to $4,700,390 for the year ended June 30, 2025, compared to $4,397,063 for the year ended June 30, 2024, or an increase of $303,327 and on a constant currency basis an increase of $242,275. The increase is mainly due to increase in third party hardware costs of approximately $267,000.

Operating Expenses

Operating expenses were $29,072,814 for the year ended June 30, 2025, compared to $25,791,315, for the year ended June 30, 2024, for an increase of $3,281,499 and on a constant currency basis an increase of $3,452,110. As a percentage of sales, it increased from 42.0% to 44.0%. The increase in operating expenses was primarily due to increases in selling expenses, general and administrative expenses and research and development costs.

Selling and marketing expenses increased by $2,742,951 and on a constant currency basis increased by $2,603,499. The increase is mainly due to increases in salaries of approximately $2,200,000, travel of approximately $257,000 and other selling expenses of approximately $288,000.

General and administrative expenses were $17,501,610 for the year ended June 30, 2025, compared to $16,836,339 at June 30, 2024, or an increase of $665,271, and on a constant currency basis an increase of $992,703. During the year ended June 30, 2025, salaries increased by approximately $687,000 or increased by approximately $574,000 on a constant currency basis, due to increases in salaries including bonuses, medical costs and subsidiary options granted to staff in NetSol PK. The provision for doubtful accounts increased by approximately $496,000 and on a constant currency basis increased by approximately $477,000. Other general and administrative costs decreased by approximately $518,000 and on a constant currency basis a decrease of approximately $58,000.

Research and development costs decreased by approximately $127,000 and on a constant currency basis a decrease of approximately $144,000.

Income/Loss from Operations

Income from operations was $3,501,718 for the year ended June 30, 2025, compared to $3,493,555 for the year ended June 30, 2024. This represents a slight increase of $8,163 with a decrease of $274,727 on a constant currency basis for the year ended June 30, 2025, compared with the year ended June 30, 2024. As a percentage of sales, income from operations was 5.3% for the year ended June 30, 2025, compared to 5.7% for the year ended June 30, 2024.

Other Income and Expense

Other income was $2,545,539 for the year ended June 30, 2025, compared to other expense of $270,108 for the year ended June 30, 2024. This represents an increase of $2,815,647 with an increase of $2,796,342 on a constant currency basis. The increase is primarily due to the foreign currency exchange transactions.

During the year ended June 30, 2025, we recognized a gain of $1,301,613 in foreign currency exchange transactions compared to a loss of $1,187,320 for the year ended June 30, 2024. 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 year ended June 30, 2025, the value of the U.S. dollar and the Euro increased 2.1% and 11.9%, respectively, compared to the PKR. During the year ended June 30, 2024, the value of the U.S. dollar and the Euro decreased 3.1% and 4.6%, respectively, compared to the PKR.

Non-controlling Interest

For the year ended June 30, 2025, and 2024, the net income attributable to non-controlling interest was $1,647,686 and $1,394,056, respectively. The increase in non-controlling interest is primarily due to the increase in net income of NetSol PK.

Net Income (Loss) Attributable to NetSol

Net income was $2,923,233 for the year ended June 30, 2025, compared to $683,873 for the year ended June 30, 2024. This is an increase in income of $2,239,360 with an increase of $1,678,200 on a constant currency basis, compared to the prior year. For the year ended June 30, 2025, net income per share was $0.25 for basic and diluted shares. For the year ended June 30, 2024, net income per share was $0.06 for basic and diluted shares.

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 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 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 years ended June 30, 2025, and 2024 are as follows:

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LIQUIDITY AND CAPITAL RESOURCES

Our cash position was $17,357,344 at June 30, 2025, compared to $19,127,165 at June 30, 2024.

Net cash provided by operating activities was $447,267 for the year ended June 30, 2025, compared to $2,909,388 for the year ended June 30, 2024. At June 30, 2025, we had current assets of $46,319,603 and current liabilities of $19,713,997. We had accounts receivable of $7,527,572 at June 30, 2025, compared to $13,049,614 at June 30, 2024. We had revenues in excess of billings of $19,134,385 at June 30, 2025, compared to $13,638,547 at June 30, 2024, of which $903,766 and $954,029 are shown as long term as of June 30, 2025, and 2024, respectively. The long-term portion was discounted by $208,037 and $152,446 at June 30, 2025, and 2024, respectively, using the discounted cash flow method with interest rates ranging from 4.2% to 17.5%, for the year ended June 30, 2025, and 2024 respectively. During the year ended June 30, 2025, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and revenues in excess of billings decreased by $26,204 from $26,688,161 at June 30, 2024, to $26,661,957 at June 30, 2025. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $8,010,844 and $8,240,061, respectively, at June 30, 2025. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $8,232,342 and $6,276,125, respectively, at June 30, 2024. The average days sales outstanding for the years ended June 30, 2025, and 2024 were 147 and 151 days respectively. The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and revenue in excess of billings.

Net cash used by investing activities amounted to $1,274,865 for the year ended June 30, 2025, compared to $291,538 for the year ended June 30, 2024. We had net purchases of property and equipment of $1,265,987 compared to $291,538 for the comparable period last fiscal year.

Net cash provided by financing activities was $822,881 compared to $239,551, for the years ended June 30, 2025, and 2024, respectively. During the year ended June 30, 2025, we received bank proceeds of $2,920,149 compared to $756,936 during the year ended June 30, 2024. During the year ended June 30, 2025, we had net payments for bank loans and capital leases of $773,535 compared to $517,385 for the year ended June 30, 2024. During the year ended June 30, 2025, Company employees exercised 220,00 options of common stock for $473,000, NetSol PK, a subsidiary of the Company, paid a dividend of $306,799 to the non-controlling shareholders, and NetSol PK purchased 2,690,251 shares of its common stock from the open market for $1,503,662. We are operating in various geographical regions of the world through our various subsidiaries. Those subsidiaries have financial arrangements from various financial institutions to meet both their short and long-term funding requirements. These loans will become due at different maturity dates as described in Note 12 of the financial statements. We are in compliance with the covenants of the financial arrangements and there is no default which may lead to early payment of these obligations. We anticipate paying back all these obligations on their respective due dates.

We typically fund the cash requirements for our operations in the U.S. through our license, services, and maintenance agreements, intercompany charges for corporate services, and through the exercise of options. 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. As of June 30, 2024, we had approximately $19.1 million of cash, cash equivalents and marketable securities of which approximately $18.2 million was 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.

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 working capital of $1.5 to $2 million for APAC, U.S. and European new business development activities and infrastructure enhancements.

Financial Covenants

Our UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($410,959) which requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. The Pakistani subsidiary, NetSol PK has an approved facility for export refinance from Askari Bank Limited amounting to Rupees 600 million ($2,111,561) and a running finance facility of Rupees 4.1 million ($14,256). NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 1.3 billion ($4,575,048). 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. 380 million ($1,337,322) from Samba Bank Limited. During the loan tenure, these two facilities require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times.

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.

Dividends and Redemption

It has been our policy to invest earnings in growth rather than distribute earnings as common stock dividends. This policy, under which common stock dividends have not been paid since our inception is expected to continue but is subject to regular review by the Board of Directors.

Contractual Obligations

Our contractual obligations are as follows:

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

We are exposed to financial market risks, including changes in currency exchange rates and interest rates.

Foreign Currency Exchange Risk

Economic Exposure

We transact business in various foreign currencies and have significant international revenues, as well as costs denominated in foreign currencies. This exposes us to the risk of fluctuations in foreign currency exchange rates. Since the majority of the Company’s operations are based in the Asia Pacific region where the Pakistan Rupee is continuously losing its value against the US Dollar and we don’t have any imports; therefore, we believe it is counter-productive to hedge this exposure. The devaluation of the Pakistan Rupee results in a foreign exchange gain to the Company.

Transaction Exposure

Our exposure to foreign currency transaction gains and losses is the result of certain net receivables due from our foreign subsidiaries and customers being denominated in currencies other than the functional currency of the subsidiary, primarily the Euro, Yuan, Baht and the Pakistan Rupee. Our foreign subsidiaries conduct their businesses in local currency. Since the majority of the Company’s operations are based in the Asia Pacific region where the Pakistan Rupee is continuously losing its value against the US Dollar and we don’t have any imports; therefore, we believe it is counter-productive to hedge this exposure.

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 Annual Report on Form 10-K. Based upon that evaluation, the Chief Financial Officer and Chief Executive Officer concluded that our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Our management has the responsibility to establish and maintain adequate internal controls over our financial reporting, as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934. Our internal controls are designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our external financial statements in accordance with generally accepted accounting principles (GAAP).

Due to inherent limitations of any internal control system, management acknowledges that there are limitations as to the effectiveness of internal controls over financial reporting and therefore recognize that only reasonable assurance can be gained from any internal control system. Accordingly, our internal control system may not detect or prevent material misstatements in our financial statements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and participation of management, including the Chief Executive Officer and Chief Financial Officer, we have performed an assessment of the effectiveness of our internal controls over financial reporting as of June 30, 2025. This assessment was based on the criteria established in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of our assessment, the Company has determined that as of June 30, 2025, the Company’s internal control over financial reporting is effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting during the fourth quarter of fiscal year 2025, 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)).