Netsol Technologies Inc: Form 10-K for the period ended Jun 30, 2026

GENERAL OVERVIEW

NetSol Technologies, Inc. (“NetSol” or the “Company”) is a global provider of AI-enabled solutions and services powering OEMs, dealerships and financial institutions to sell, finance and lease assets.

The Company is headquartered in Encino, California and operates through three reportable geographic segments: North America, Europe and Asia-Pacific, serving customers in more than 30 countries. NetSol generates revenues primarily through software licensing, subscription fees, implementation services and ongoing maintenance and support. The Company’s solutions and services are marketed under the Transcend™ Platform brand.

Corporate history

NetSol was incorporated in 1997 and listed on the Nasdaq Stock Market in 1999, where it continues to trade under the ticker symbol NTWK. While the Company’s incorporation dates to 1997, its asset finance and leasing domain expertise extends more than 40 years through acquired operations.

The Company has grown both organically and through strategic acquisitions. In 2005, NetSol acquired CQ Systems Ltd., a UK-based provider of asset-based financial solutions, which established the Company’s presence in the UK asset finance market. In 2006, the Company acquired McCue Systems, Inc., a California-based provider of lease and loan portfolio management software with more than 30 years of industry experience, strengthening NetSol’s North American operations. In 2011, the Company jointly acquired Virtual Lease Services Ltd. (“VLS”) with Investec Asset Finance Plc, expanding its end-to-end service capabilities for the asset finance market.

Over subsequent years, NetSol transitioned from its legacy product suite to its current unified Transcend™ Platform: a cloud-deployed, AI-enabled, API-first ecosystem that today serves as the foundation for all of the Company’s current generation product and service offerings.

Industry and market

The Company serves two complementary markets: the global asset finance and leasing industry, and digital retail for vehicle sales, where the Company’s current focus is the United States.

The global finance and leasing market represented approximately $1.5 trillion in new business volume in 2024 according to the World Leasing Yearbook 2026, having grown approximately 63% over the prior decade. The market is characterized by long-term customer relationships, significant regulatory complexity and demand for specialized technology capable of supporting multi-entity, multi-currency and multi-jurisdiction operations. Growth drivers include the expansion of electric vehicle financing, the migration of asset finance from ownership to subscription and mobility-as-a-service models, and increasing demand for embedded finance across dealer, direct-to-consumer and third-party channels. The Company’s Transcend™ Finance platform serves this market globally, with customers across more than 30 countries.

The digital retail market reflects the ongoing shift in how consumers purchase vehicles, spanning both online and in-store transaction environments. According to the National Automobile Dealers Association (NADA), U.S. new light-vehicle sales totaled 16.2 million units in 2025, an increase of 2.4% year over year. According to Cox Automotive’s 2025 Digitization of Car Buying Study, 65% of car buyers now perform some or all of the purchase process online, while most transactions continue to be completed in the dealership, driving demand for technology that connects the two environments. The Company’s Transcend™ Retail platform serves this market with a current commercial focus on the United States, where its customers include automotive OEM programs, franchised dealer groups and recreational vehicle retailers.

Business and growth strategy

NetSol’s strategy centers on the continued transformation of its business model. Historically, the Company generated the majority of its revenues from software implementation and related services. Through the development of the Transcend™ Platform and the transition of its commercial model toward cloud-deployed, subscription-based arrangements, the Company is building a growing base of recurring revenue. Recurring subscription and support revenues have grown consistently across recent fiscal periods, and the Company expects this mix shift to continue as new customers adopt subscription arrangements and existing customers migrate to the Transcend™ Platform. The Company believes this transition supports greater revenue durability and visibility, improved margins over time, and a business profile increasingly consistent with enterprise software platform companies.

Against that backdrop, the Company’s strategy is organized around the following priorities:

Support global OEM expansion. A growing number of OEMs, particularly Chinese OEMs and their captive finance operations, are expanding into new international markets. The Company provides the finance and leasing technology these customers require to launch and scale operations in new jurisdictions and has supported market entries across Asia-Pacific and other regions. The Company believes its multi-country delivery experience and configurable, multi-jurisdiction platform position it well to serve this expansion cycle.

Extend leadership in originations and wholesale finance. The Company continues to invest in its originations and wholesale finance capabilities, where it believes its platform compares favorably to legacy competitor systems. As financial institutions and captives replace aging technology, the Company is positioned to compete for displacement opportunities across its global markets.

Migrate the installed base to Transcend™ and grow recurring revenue. The Company is transitioning customers from its legacy product suite onto the Transcend™ Platform. These migrations modernize the customer’s technology foundation, deepen multi-product relationships, and convert legacy arrangements to recurring subscription-based commercial models.

Embed artificial intelligence across products and operations. The Company is integrating AI capabilities into its platform, including AI-enabled credit decisioning within Transcend™ Finance, to improve customer outcomes in financing and retail operations. Internally, the Company is applying AI to its own development, delivery, and go-to-market processes to improve productivity and operating margins.

Scale Transcend™ Retail across the U.S. dealer market. The Company is pursuing digital retail growth through three coordinated channels: direct engagement with dealer groups, where a single commercial relationship can enable deployment across a large number of rooftops; OEM certification programs, which streamline the Company’s ability to sell to franchised dealerships within certified brand networks; and OEM-level programs, in which the Company’s platform is deployed across an OEM’s dealer network. The Company also intends to extend Transcend™ Retail into adjacent dealer-based vehicle categories, including recreational vehicles, powersports and marine.

Expand through partnerships. The Company uses strategic partnerships with regional advisory and technology firms to extend its market reach, add local market knowledge, and accelerate customer acquisition in markets where it does not maintain a large direct sales presence, particularly in Europe. The Company expects partner-led channels to remain a meaningful component of its go-to-market strategy.

Strengthen operating discipline. The Company is focused on improving margins through disciplined budgeting, pricing and deal governance, and incentive structures aligned with profitable growth.

Strategic Transactions. In addition to organic initiatives, the Company may from time to time evaluate selective acquisitions and other strategic opportunities that complement its platform capabilities or accelerate its market position.

Operations and geographic presence

The Company maintains offices in the following locations:

• North America: Encino, California and Austin, Texas
• Europe: London Metropolitan Area, Horsham and Flintshire
• Asia-Pacific: Sydney, Bangkok, Beijing, Shanghai, Tianjin, Jakarta, Dubai, Lahore and Karachi

Through a combination of organic growth and acquisitions, the Company’s operating history extends more than 40 years in North America, more than 30 years in Europe and more than 25 years in Asia-Pacific.

The Company employs a global delivery model that combines onsite and offshore resources, designed to support customers across multiple geographies, currencies, languages and regulatory environments.

Products and services

NetSol delivers its solutions through the Transcend™ Platform, a unified, API-first technology platform for the asset finance, leasing and automotive retail markets. The platform is designed for deployment in the cloud or in customer-managed environments, to integrate with existing customer and third-party systems through open APIs and to operate under the regulatory, audit and data-residency requirements applicable to financial institutions. Artificial intelligence is embedded within the platform and is applied in capabilities such as credit decisioning, document processing, portfolio analytics, collection intelligence and lifecycle servicing. The platform also enables customers to develop and deploy these agents that operate on their own data within their own environments, subject to the same access, audit and data-residency controls that apply across the platform.

The Company’s principal offerings are as follows:

Transcend™ Retail

Transcend™ Retail is a digital retail platform for vehicle sales. It gives the buyer a single continuous purchase experience, from configuring a vehicle and valuing a trade-in to reviewing transparent payment and finance options and completing the transaction, whether that takes place online, in the showroom or across both. The buyer and the dealership work on the same deal in parallel rather than in separate systems, and either side can pick up where the other left off. The platform is configured to the brand standards of the manufacturer or dealer group and provides visibility and administrative control across the retail network. It is used by automotive manufacturers and dealer groups.

Transcend™ Finance

Transcend™ Finance is the Company’s platform for lenders and lessors. It comprises three core solutions: Originations, Servicing and Wholesale Finance. Together these span the finance and leasing lifecycle from application through end of contract, and support auto, equipment, fleet and receivables portfolios across both retail and commercial products. The platform operates multiple legal entities, currencies and jurisdictions on a single system, and is configured to each customer’s products, pricing and credit policy rather than custom-built. Partner-facing portals extend origination and servicing to the intermediaries in a customer’s distribution network.

Revenue model

The Company generates revenues through the following primary streams:

• Subscription and support - recurring fees for an access license to and use of the Company’s technology solutions under its Transcend™ Platform through cloud-based subscription arrangements, along with ongoing fees for maintenance, updates and technical support provided to customers post-deployment
• License fees - non-recurring fees for perpetual license agreements granting customers the right to use the Company’s technology solutions on-premise
• Services - fees for implementation, configuration, customization, training and other services provided in connection with the deployment of the Company’s solutions

The Company is transitioning its commercial model toward a higher proportion of recurring subscription-based arrangements, as described under “Business and growth strategy.” The mix of recurring and non-recurring revenues may vary from period to period depending on the nature and timing of new customer engagements, contract renewals and the recognition of license fees.

Sales, marketing and customer concentration

The Company’s customers include multinational automotive OEMs, auto and equipment captive finance companies, dealer groups, dealerships, commercial banks, brokers and financial institutions. NetSol serves a diverse customer base across more than 30 countries. However, a limited number of large customers have historically accounted for a significant portion of the Company’s revenues. The loss of one or more of these customers, or a material reduction in the scope of their engagement with the Company, could have a material adverse effect on the Company’s revenues and operating results. The Company monitors customer concentration as part of its ongoing risk management processes.

Competition

The market for asset finance and leasing software is competitive and fragmented across regions. The Company’s principal competitors include specialized asset finance software providers such as Alfa Financial Software, Sofico, Solifi and Odessa; large enterprise software and financial technology vendors, including FIS, that offer asset finance capabilities within broader product portfolios; regional providers in individual markets; and in certain cases, in-house systems developed and maintained by financial institutions and captive finance companies. The principal competitive factors in this market include depth of domain expertise, breadth and functionality of product offerings, the ability to support multi-entity, multi-currency and multi-jurisdiction operations, implementation capability and track record, total cost of ownership and quality of ongoing support.

The market for digital retail technology is also competitive. The Company competes with dedicated digital retailing providers such as AutoFi and CarNow; dealer management system and automotive retail technology vendors, including Cox Automotive, CDK Global and Tekion, that offer digital retail capabilities within broader product portfolios; and, in certain cases, proprietary solutions developed by OEMs and large dealer groups. The principal competitive factors in this market include omnichannel capability, integration with existing dealer management and financing systems, speed of deployment and the ability to support a seamless customer journey across online and in-store retail environments.

The Company believes it competes favorably on the basis of its more than four decades of asset finance domain expertise, its operating and delivery presence across more than 30 countries, its long-tenured relationships with tier-one automotive OEMs and captive finance companies, and the unified, API-first architecture of its Transcend™ Platform, which supports both financing and retail operations on a common foundation. Some of the Company’s competitors have greater financial resources, larger sales organizations or broader name recognition, which may affect the Company’s ability to compete in certain markets or segments.

Intellectual property

NetSol’s offerings, including the Transcend™ Platform and its component solutions and services, are proprietary. The Company relies on a combination of copyright, trademark and trade secret protections, as well as contractual arrangements, to protect its intellectual property rights. The Transcend™ brand and related marks are registered trademarks of NetSol.

The Company enters into license agreements with customers that restrict the use, reproduction and distribution of its technology solutions. Employees, contractors and business partners with access to proprietary technology and confidential information are required to enter into confidentiality and non-disclosure agreements.

The Company does not believe its business is materially dependent on any single patent, trademark, license or other intellectual property right.

Human capital resources

As of June 30, 2026, the Company employed approximately 1,370 full-time employees globally. The workforce is distributed across its three operating segments, with the majority of its technical and development personnel located in its Asia-Pacific operations. Sales, client management and senior leadership functions are concentrated in North America and Europe.

NetSol considers the attraction, development and retention of skilled technology and domain professionals to be a key operational priority. The Company invests in employee training and professional development programs and seeks to maintain competitive compensation structures across its operating regions.

Regulatory environment

NetSol’s operations and its customers’ use of its products and services are subject to a range of regulatory requirements across the jurisdictions in which they operate.

Data privacy and protection

The Company and its customers are subject to data privacy and protection regulations, including the General Data Protection Regulation (GDPR) in the European Union and United Kingdom, the California Consumer Privacy Act (CCPA), and equivalent frameworks in other jurisdictions in which the Company or its customers operate.

Financial services regulations

The Company’s customers are subject to a range of financial services regulatory obligations, including consumer finance disclosure requirements, anti-money laundering (AML) and know-your-customer (KYC) requirements, Basel III capital and liquidity standards applicable to banking customers, the Payment Services Directive 2 (PSD2) in the European Union, and the Digital Operational Resilience Act (DORA) governing operational resilience for financial institutions in the European Union.

Information security and cybersecurity; Artificial Intelligence

The Company’s products and operations are subject to applicable cybersecurity frameworks across its key markets. The Company holds ISO 27001, ISO 22301 and ISO 20000 certifications, and has completed SOC 2 Type 2 examinations under the Trust Services Criteria established by the American Institute of Certified Public Accountants, and applies these standards across its operations.

The Company’s solutions are designed to support customers in meeting their regulatory compliance obligations in the markets in which they operate. The Company monitors regulatory developments across its key markets and incorporates relevant compliance requirements into its product development and operational processes. Changes in applicable laws and regulations may require the Company to modify its products or operations, which could result in additional costs or otherwise affect the Company’s business.

The Company has an internal use of Artificial Intelligence (AI) Platforms and Protection of Customer and Company Confidential Information standards for the responsible use of AI to safeguard customer data, information and proprietary information.

Available information

The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other information with the U.S. Securities and Exchange Commission (SEC). These filings are available free of charge on the Company’s investor relations website at ir.netsoltech.com and on the SEC’s website at www.sec.gov (http://www.sec.gov). The Company’s principal executive offices are located at 16000 Ventura Boulevard, Suite 770, Encino, California 91436, and the Company’s main telephone number is +1 (818) 222-9195.

Information contained on or accessible through the Company’s website is not incorporated by reference into this Annual Report on Form 10-K.

Pakistan

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

According to Pakistan Network, April 23, 2026, and as identified by the BTI Transformation Index, Pakistan Country Report 2026 the current government has focused on economic stabilization, infrastructure development, and maintaining relationships with key international partners. However, internal pressures within the coalition remain a constant challenge. The Pakistani economy has shown cautious signs of recovery. Key economic indicators include gradual stabilization of the Pakistani Rupee, improved foreign exchange reserves, and a modest uptick in industrial production. However, unemployment remains a pressing concern, particularly among the youth population. 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 continue to 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 and ability of our customers to spend on new and/or upgraded projects 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 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 strengthen 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 is 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 employees. In addition, we maintain leased office spaces in the UK, China, Australia, Thailand, UAE, 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, 2026. 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, 2026:

• 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 executed an agreement with the captive finance arm of a leading Japanese commercial vehicle manufacturer in Thailand to migrate its contract management system from the legacy R1 platform to the next-generation Transcend Finance platform. The agreement carries a total contract value exceeding $12 million and underscores the client’s commitment to modernizing its core finance technology while strengthening our long-standing partnership.
• We generated approximately $6.6 million in revenue through major system enhancements and platform modifications for multiple clients across diverse global regions.
• We entered into a strategic agreement with an existing client to not only have the annual maintenance fee revised upwards but also to upgrade our legacy R1 platform, a project expected to generate approximately $1.5 million in revenue.
• We were selected by a Fortune 500 automotive and powersports dealership group in North America to lead a discovery engagement with them focused on defining the roadmap for their next-gen omnichannel digital retail platform to be powered by our Transcend Retail system.
• We launched 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 completed several significant customer go-lives across key international markets, including deployments of our Transcend™ Finance and Transcend™ Wholesale platforms for captive and multi-asset finance companies in China, Thailand and the United Kingdom. These implementations support a range of retail and wholesale finance operations, including credit workflows, loan origination and servicing, inventory management, dealer credit processes and digital dealer self-service.
• 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.
• Our subsidiary, 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.
• We entered into a multi-million-dollar extension agreement with an existing customer to provide continued support for our legacy product platform.
• We entered into a strategic partnership with a Stockholm-based fintech advisory and IT services firm to accelerate our expansion across the Nordics. By combining our Transcend Finance platform and decades of asset finance expertise with the partner’s deep local market knowledge and transformation consulting capabilities, the partnership will help banks, finance companies, and specialist lenders modernize their core technology platforms.
• Three U.S. automotive dealerships successfully went live with the Transcend Retail platform, including a multi-brand dealer group, a digital-first luxury and exotic vehicle dealership, and a recreational vehicle dealer. The deployments enable a connected and transparent digital retail experience spanning the entire customer journey from initial engagement through credit application and deal completion while further expanding Transcend Retail’s footprint across the U.S. automotive retail market.
• We successfully upgraded one of our long-standing captive finance clients in Thailand, serving the Asia-Pacific automotive sector for more than two decades, to the latest version of its Wholesale Finance System, a core module of the Transcend Finance platform. The implementation transitioned the client to an AI-enabled, API-first architecture featuring a modular and scalable framework that integrates OEMs, dealers, brokers, credit bureaus, and ERP systems into a unified data ecosystem.

Marketing and Business Development Activities

We continue to pursue a series of strategic marketing and business development initiatives to strengthen market presence and support 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.

Industry trends affecting our business

Management believes the following trends and uncertainties may have a material, favorable or unfavorable impact on the Company’s business.

Interest rate environment and credit conditions

Interest rate levels and broader monetary policy conditions continue to influence borrowing costs, credit availability and financing activity across consumer and commercial lending markets, including automotive finance. Sustained elevated rates may temper near-term financing volumes among customers, while creating demand for technology investments that support operational efficiency and risk management. (Board of Governors of the Federal Reserve System, Monetary Policy Report, July 2026.)

Electrification of the automotive industry

The automotive industry continues its transition toward electrified vehicles, supported by regulatory developments and long-term manufacturer strategies. Chinese automotive manufacturers have become significant participants in the electric vehicle segment, with EVs now accounting for nearly 55% of new vehicle sales in China and Chinese EV exports reaching record levels, intensifying competition across the global automotive landscape. The Company’s established presence and customer base in China may support participation in this growth, while shifts in market share among traditional automotive OEMs could affect technology investment patterns across the Company’s broader customer base. (International Energy Agency (IEA), ‘Global EV Outlook 2026’.)

Digital and omnichannel automotive retail

OEMs and dealers continue to adopt digital tools and omnichannel retail approaches, integrating online and physical channels across vehicle research, configuration and transaction processes. Continued investment in digital retail capabilities by automotive OEMs and dealerships may support demand for the Company’s Transcend Retail platform, although adoption pace and implementation timing vary across customers and regions. (McKinsey & Company, ‘Auto retail productivity in the digital era’, January 2025.)

Digital transformation in financial services

Financial institutions and captive finance companies continue to invest in digital transformation initiatives, including cloud adoption, data infrastructure modernization and automation of operational processes. Continued investment in these areas may support demand for the Company’s Transcend Finance platform. The pace and scale of customer transformation initiatives vary based on internal priorities, budget cycles and the complexity of replacing or integrating with existing core systems. (PwC, ‘What will be left of financial services tomorrow?’, PwC FS Survey, July 2025.)

Global regulatory and compliance environment

Financial institutions continue to operate within an evolving global regulatory environment, including banking supervision and capital adequacy frameworks, which may influence compliance requirements and operational processes. The Company’s platform supports risk management, audit and compliance reporting workflows that may help customers address evolving requirements. At the same time, regulatory uncertainty and compliance-related investment may extend customer decision-making timelines or shift technology priorities toward maintenance and remediation initiatives. (Bank for International Settlements, ‘Basel Committee on Banking Supervision, Basel III Monitoring Report’, March 2026.)

Geopolitical and trade policy developments

Ongoing geopolitical developments, including the conflict in the Middle East and its impact on global energy markets, alongside evolving trade policy between major economies, may influence cross-border technology deployment, currency dynamics and client investment decisions in markets where the Company operates, including China. The Company’s platform architecture, designed to operate across multiple jurisdictions and regulatory environments, may help mitigate some of this exposure, though continued volatility could affect the pace of customer technology investment decisions in affected regions. (International Monetary Fund, ‘World Economic Outlook Update’, July 2026.)

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, stock-based compensation, 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 subscriptions or licenses and a professional services engagement. License purchases generally have multiple performance obligations as customers purchase post-contract support and services in addition to the licenses. The Company’s single performance obligation arrangements are typically post-contract support renewals, subscription renewals and services engagements.

For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the contract’s transaction price to each performance obligation using its best estimate for the SSP.

Subscription

Subscription revenue is recognized ratably over the initial subscription period committed 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. For fixed-fee implementation and customization services that are satisfied over time, revenue is recognized using an input method based on person-days incurred relative to total estimated person-days required to complete the services. 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 over time on a monthly basis.

Significant Judgments

Due to the complexity of certain contracts, the revenue recognition treatment under Topic 606 for the Company’s arrangements may depend 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 standalone 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 judgments and estimates involved in the Company’s revenue recognition policies are: (1) determining standalone selling prices of the Company’s software licenses, and (2) measuring progress toward satisfaction of performance obligations for implementation, customization, and other services.

The standalone selling price of the licenses is measured primarily through an analysis of pricing that management evaluates 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 standalone 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 separately from other goods and services that the Company delivered to that customer.

The Company recognizes revenue from implementation and customization services using the percentage of estimated “person-days” that the work requires. The Company believes the level of effort to complete the services is best measured by the amount of time (measured as an employee working for one day on implementation/customization work) that is required to complete the implementation or customization work. The Company reviews its estimate of person-days required to complete implementation and customization services each reporting period.

If a group of agreements is entered into at or near the same time and so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant judgment to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single arrangement. The Company’s judgments about whether a group of contracts comprises a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on 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 it expects to be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company considers all relevant facts and circumstances. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

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, or contract liabilities on the Company’s Consolidated Balance Sheets. The Company records contract assets when the Company has transferred goods or services but does not yet have the right to consideration. The Company records contract liabilities when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer.

Contract Liabilities

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 licenses and services starting in future periods are included in accounts receivable and contract liabilities.

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, 2026 COMPARED TO THE YEAR ENDED JUNE 30, 2025

The following table sets forth the items in our consolidated statement of operations for the years ended June 30, 2026 and 2025 as a percentage of revenues.

15

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 18 “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, 2026 and 2025 by segment are as follows:

Revenues

License Fees

License fees for the year ended June 30, 2026 were $4,954,378 compared to $598,633 for the year ended June 30, 2025 reflecting an increase of $4,355,745 with a change in constant currency of $4,345,711. In the fiscal year ended June 30, 2026, we recognized approximately $4,656,000 of software license revenue associated with the renewal and amendment of an existing customer agreement for our TranscendTM software platform. The license revenue relates to additional license consideration associated with expanded portfolio usage under the customer arrangement. Revenue associated with maintenance and support services under the arrangement will continue to be recognized over the contractual service period. In the fiscal year ended June 30, 2025, we recognized approximately $487,000 from a new customer in Indonesia.

Subscription and Support

Subscription and support fees for the year ended June 30, 2026, were $35,799,842 compared to $32,934,648 for the year ended June 30, 2025 reflecting an increase of $2,865,194 with an increase in constant currency of $2,318,648. 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 Transcend®.

Services

Services income for the year ended June 30, 2026, was $33,617,160 compared to $32,554,948 for the year ended June 30, 2025, reflecting an increase of $1,062,212 with an increase in constant currency of $599,717. The increase is mainly due to implementation services in APAC and Europe.

Gross Profit

The gross profit was $39,147,343 for the year ended June 30, 2026, compared with $32,574,532 for the year ended June 30, 2025. This is an increase of $6,572,811 with an increase in constant currency of $5,646,496. The gross profit percentage for the year ended June 30, 2026, increased to 52.6% from 49.3% for the year ended June 30, 2025. The cost of sales was $35,224,037 for the year ended June 30, 2026, compared to $33,513,697 for the year ended June 30, 2025, for an increase of $1,710,340 and on a constant currency basis an increase of $1,617,580. As a percentage of sales, cost of sales decreased from 50.7% for the year ended June 30, 2025, to 47.4% for the year ended June 30, 2026.

Salaries and consultant fees decreased by $100,129 from $25,797,465 for the year ended June 30, 2025, to $25,697,336 for the year ended June 30, 2026, and on a constant currency basis decreased by $227,030. The decrease is due to capitalization of software development costs off set by annual increases in salary. As a percentage of sales, salaries and consultant expense decreased from 39.0% for the year ended June 30, 2025, to 34.6% for the year ended June 30, 2026.

Travel increased by $746,181 from $2,063,511 for the year ended June 30, 2025, to $2,809,692 for the year ended June 30, 2026, and on a constant currency basis increased by $731,534. The increase in travel expense is due to the increase in travel for the current implementations. As a percentage of sales, travel expense increased from 3.1% for year ended June 30, 2025, to 3.8% for the year ended June 30, 2026.

Depreciation and amortization expense decreased to $783,692 compared to $952,331 for the year ended June 30, 2025, or a decrease of $168,639 and on a constant currency basis a decrease of $165,806.

Other costs increased to $5,933,317 for the year ended June 30, 2026, compared to $4,700,390 for the year ended June 30, 2025, or an increase of $1,232,927 and on a constant currency basis an increase of $1,278,882. The increase is mainly due to increase in third party hardware costs of approximately $1,015,865.

Operating Expenses

Operating expenses were $32,200,678 for the year ended June 30, 2026, compared to $29,072,814, for the year ended June 30, 2025, for an increase of $3,127,864 and on a constant currency basis an increase of $2,792,086. As a percentage of sales, it decreased from 44.0% to 43.3%. The increase in operating expenses was primarily due to increases in selling expenses, general and administrative expenses offset by a decrease in research and development costs.

Selling and marketing expenses increased by $1,692,136 and on a constant currency basis increased by $1,518,546. The increase is mainly due to increases in salaries of approximately $956,109, travel of approximately $307,028 and other selling expenses of approximately $428,999.

General and administrative expenses were $19,431,136 for the year ended June 30, 2026, compared to $17,501,610 at June 30, 2025, or an increase of $1,929,526, and on a constant currency basis an increase of $1,761,860. During the year ended June 30, 2026, salaries increased by approximately $2,058,745 or increased by approximately $1,955,668 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 decreased by approximately $165,930 and on a constant currency basis decreased by approximately $177,581. Other general and administrative costs increased by approximately $36,711 and on a constant currency basis a decrease of approximately $16,227.

Research and development costs decreased by approximately $493,798 and on a constant currency basis a decrease of approximately $488,320.

Income from Operations

Income from operations was $6,946,665 for the year ended June 30, 2026, compared to $3,501,718 for the year ended June 30, 2025. This represents an increase of $3,444,947 with an increase of $2,854,410 on a constant currency basis for the year ended June 30, 2026, compared with the year ended June 30, 2025. As a percentage of sales, income from operations was 9.3% for the year ended June 30, 2026, compared to 5.3% for the year ended June 30, 2025.

Other Income and Expense

Other income was $279,214 for the year ended June 30, 2026, compared to $2,545,539 for the year ended June 30, 2025. This represents a decrease of $2,266,325 with a decrease of $2,182,442 on a constant currency basis. The decrease is primarily due to lower interest income, driven by a reduction in interest rates from approximately 10.0%-19.5% for the year ended June 30, 2025, to approximately 8.9% to 10.8% for the year ended June 30, 2026. The decrease is also due to 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 year ended June 30, 2026, we recognized a loss of $389,814 in foreign currency exchange transactions compared to a gain of $1,301,613 for the year ended June 30, 2025. During the year ended June 30, 2026, the value of the U.S. dollar and the Euro decreased 2.1% and 4.9%, respectively, compared to the PKR. 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.

Non-controlling Interest

For the year ended June 30, 2026, and 2025, the net income attributable to non-controlling interest was $2,645,150 and $1,647,686, respectively. The increase in non-controlling interest is primarily due to the increase in net income of NetSol PK and NAMECET.

Net Income (Loss) Attributable to NetSol

Net income was $2,950,353 for the year ended June 30, 2026, compared to $2,923,233 for the year ended June 30, 2025. This is an increase in income of $27,120 with a decrease of $489,366 on a constant currency basis, compared to the prior year. For the year ended June 30, 2026, net income per share was $0.25 for basic and diluted shares. For the year ended June 30, 2025, net income per share was $0.25 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 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 and adjusted for foreign currency gains and losses.

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. 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 that generally requires cash settlement by NetSol, and therefore is not included in certain measures by management to evaluate operating performance. 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.

Foreign currency exchange gains and losses: We have excluded the effect of foreign currency exchange gains and losses from non-GAAP adjusted EBITDA. As a multinational company, we are exposed to fluctuations in foreign currency exchange rates, which may result in significant gains or losses from period to period. Although foreign currency exchange gains and losses are reflected in our results in accordance with GAAP and may recur in future periods, we exclude these amounts from our non-GAAP measures because they are affected by changes in foreign currency exchange rates and are not considered by management to be indicative of the underlying operating performance of our business. We believe excluding foreign currency exchange gains and losses provides investors with additional information regarding our operating performance and facilitates period-to-period comparisons of our results.

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 adjusted EBITDA attributable to NetSol.

Our reconciliation of the non-GAAP financial measures of adjusted EBITDA to the most comparable GAAP measures for the years ended June 30, 2026, and 2025 is as follows:

19

LIQUIDITY AND CAPITAL RESOURCES

Our cash position was $27,123,955 at June 30, 2026, compared to $17,357,944 at June 30, 2025.

Net cash provided by operating activities was $13,884,176 for the year ended June 30, 2026, compared to $447,267 for the year ended June 30, 2025. The increase in operating cash flows was primarily attributable to changes in working capital and net income. During fiscal year 2026, contract liabilities increased by $6.5 million compared to a decrease of $6.3 million in fiscal year 2025, resulting in a significant year-over-year improvement in operating cash flows. The increase in contract liabilities during fiscal 2026 primarily reflects cash collections in advance of the recognition of the related revenue. Operating cash flows also benefited from a $0.6 million decrease in contract assets during fiscal year 2026 compared to a $5.2 million increase in fiscal year 2025. These favorable changes were partially offset by a $2.8 million increase in accounts receivable during fiscal year 2026 compared to a $5.5 million decrease in fiscal year 2025.

At June 30, 2026, we had current assets of $56,861,176 and current liabilities of $27,629,756. We had accounts receivable of $10,286,342 at June 30, 2026, compared to $7,527,572 at June 30, 2025. We had contract assets of $18,707,582 at June 30, 2026, compared to $19,134,385 at June 30, 2025, of which $2,467,018 and $903,766 are shown as long-term as of June 30, 2026, and 2025, respectively. The long-term portion was discounted by $373,219 and $208,037 at June 30, 2026, and 2025, respectively, using the discounted cash flow method with interest rates ranging from 4.5% to 6.6%, for the year ended June 30, 2026, and interest rates ranging from 4.2% to 17.5% for the year ended June 30, 2025, respectively.

During the year ended June 30, 2026, our contract assets were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and contract assets increased by $2,331,967 from $26,661,957 at June 30, 2025, to $28,993,924 at June 30, 2026. Accounts payable and accrued expenses, and current portions of loans and lease obligations amounted to $8,708,029 and $8,187,170, respectively, at June 30, 2026. 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 years ended June 30, 2026, and 2025 were 137 and 147 days, respectively. The days sales outstanding have been calculated by taking into consideration the average combined balances of accounts receivable and contract assets.

Net cash used by investing activities amounted to $4,581,969 for the year ended June 30, 2026, compared to $1,274,865 for the year ended June 30, 2025. We had net purchases of property and equipment of $1,920,120 compared to $1,265,987 for the comparable period last fiscal year. We invested $2,686,392 in capitalization of software development cost for the year ended June 30, 2026 compared to $nil in prior period.

Net cash provided by financing activities was $269,080 compared to $822,881, for the years ended June 30, 2026, and 2025, respectively. During the year ended June 30, 2026, we received bank proceeds of $1,044,523 compared to $2,920,149 during the year ended June 30, 2025. During the year ended June 30, 2026, we had net payments for bank loans and capital leases of $1,188,684 compared to $773,535 for the year ended June 30, 2025. During the year ended June 30, 2025, Company employees exercised 220,000 options of common stock for $473,000. Employees of our subsidiary, NetSol PK, exercised 1,543,987 options of common stock for $425,661, of which $413,241 was received during the year ended June 30, 2026 and $12,420 was received during the fiscal year ended June 30, 2025. 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 13 of the financial statements. We are in compliance with the covenants of the financial arrangements and there is no default that 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, 2026, we had approximately $27.1 million of cash, cash equivalents and marketable securities of which approximately $26.5 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 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 ongoing capital expenditure requirements to support our short-term and long-term business plans. Over the next 12 months, we expect to incur approximately $2.0 to $2.5 million in capital expenditures across our APAC, U.S. and European operations.

Financial Covenants

The following tables present financial covenants associated with our borrowings.

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, 2026. 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, 2026, 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 2026, 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)).